Election Result of IGACOS
July 6, 2010
MAYOR of DAVAO (DAVAO DEL NORTE) – ISLAND GARDEN CITY OF SAMAL
Candidate Party Votes Percentage
ANTALAN, Aniano P. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 18375 44.22%
OBENZA, Austerio F. INDEPENDENT 11823 28.45%
AMIT, Orly A. LIBERAL PARTY 5761 13.86%
SAÑANO, Armando B. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 5595 13.46%
Statistics
Total number of Voters who actually voted 42732
VICE-MAYOR of DAVAO (DAVAO DEL NORTE) – ISLAND GARDEN CITY OF SAMAL
Candidate Party Votes Percentage
UY, Al David T. LIBERAL PARTY 13241 33.87%
VILLABRILLE, Wilmer S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 9308 23.81%
VILLAS, Lorenza C. INDEPENDENT 8280 21.18%
BANTILLO, Ruel H. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 8268 21.15%
Statistics
Total number of Voters who actually voted 42732
MEMBER, SANGGUNIANG PANLUNGSOD of DAVAO (DAVAO DEL NORTE) – ISLAND GARDEN CITY OF SAMAL – KAPUTIAN DIST
Candidate Party Votes Percentage
ESDRELON, Nieljun C. LIBERAL PARTY 5562 13.42%
MARA, Godofredo M. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4599 11.10%
GONATO, Metodio D. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4566 11.02%
ROSARIO, Samuel C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4124 9.95%
ESTRERA, Noel F. INDEPENDENT 3040 7.34%
ESTEBAN, Alfredo Jr L. LIBERAL PARTY 2703 6.52%
ESPIRITU, Lydia M. INDEPENDENT 2691 6.49%
REYES , Anelina D. INDEPENDENT 2225 5.37%
SILAWAN, Rolando B. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 2077 5.01%
GUJOL, Joel A. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 2002 4.83%
ACCION, Lowel A. INDEPENDENT 1521 3.67%
MATRO, Fidencio B. LIBERAL PARTY 1315 3.17%
PRIETO, Jeffrey S. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 1176 2.84%
DASALLA, Henry B. LIBERAL PARTY 1169 2.82%
SAMSON, Romulieto D. INDEPENDENT 866 2.09%
DELCAMPO, Arnold C. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 863 2.08%
WAGAS, Rolando M. INDEPENDENT 854 2.06%
LANORIAS, Rodrigo P. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 81 0.20%
Statistics
Total number of Voters who actually voted 13320
MEMBER, SANGGUNIANG PANLUNGSOD of DAVAO (DAVAO DEL NORTE) – ISLAND GARDEN CITY OF SAMAL – SAMAL DIST
Candidate Party Votes Percentage
COLMENARES, Glenn C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4693 11.61%
ANTALAN, Teresita B. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4644 11.48%
OLDEN, Guillermo E. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 4614 11.41%
REQUINA, Isidro Sr. P. LIBERAL PARTY 4310 10.66%
BARING, Lebrico Jr. C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 3226 7.98%
BATIANCILA, Samuel T. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 2709 6.70%
OLIVARES, Joel L. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 2651 6.56%
OBENZA, Consuelo A. LIBERAL PARTY 2571 6.36%
JOSE, Reynaldo M. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 2207 5.46%
ZAMBARRANO, Mahelinde B. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 1867 4.62%
SOLAMO – ANTONIO, Isabelita B. LIBERAL PARTY 1847 4.57%
AMBRONA, Al Ray V. INDEPENDENT 1768 4.37%
PALCONIT, Jose B. INDEPENDENT 1584 3.92%
LAWAS, Edwin Sr. B. PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN 955 2.36%
DELA CERNA, Ariel B. INDEPENDENT 792 1.96%
Statistics
Total number of Voters who actually voted 12280
MEMBER, SANGGUNIANG PANLUNGSOD of DAVAO (DAVAO DEL NORTE) – ISLAND GARDEN CITY OF SAMAL – BABAK DIST
Candidate Party Votes Percentage
GUINDOLMAN, Richard A. INDEPENDENT 9303 16.57%
VILLARICA, Napoleon P. LIBERAL PARTY 7855 13.99%
PICHON, Jaime A. LIBERAL PARTY 7032 12.52%
VALERA, Gaspar R. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 6916 12.32%
ANTALAN, Gemma S. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 5878 10.47%
ROBLEDO, Michael Sr. D. LIBERAL PARTY 5329 9.49%
BANGGAT, Vicky M. INDEPENDENT 3947 7.03%
LACORTE, Arnulfo L. LIBERAL PARTY 3118 5.55%
BASTASA, Quirino E. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 3100 5.52%
DAQUIPEL, Rodrigo R. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 1599 2.85%
TORCULAS, Richel A. PARTIDO DEMOKRATIKO SOSYALISTA NG PILIPINAS 1499 2.67%
HOPKINS, Myrna C. LAKAS KABALIKAT NG MALAYANG PILIPINO CHRISTIAN MUSLIM DEMOCRATS 570 1.02%
Statistics
Total number of Voters who actually voted 17132
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IGACOS 2007 COA Audit 8
July 4, 2010
Value for Money Audit –
20% Development Fund
The 20% Development Fund constitutes twenty percent (20%) of the annual internal revenue allotment (IRA) shares of every local government unit concerned for development projects. It is a statutory item of appropriation. Provisions of Section 287 of the Local Government Code is crystal clear on the matter, thus:
“Sec. 287. Local Development Projects. – Each local government unit shall appropriate in its annual budget no less than twenty (20%) of its annual internal revenue allotment for development projects. Copies of the development plans of local government units shall be furnished by the Department of Interior and Local Government.”
The General Policies as stated in the Joint Memorandum Circular No. 1, s. 2005 dated September 30, 2005 of the DILG and DBM on the use of the 20% Development Fund, provides as follows:
1. Development projects identified by the LGUs shall be consistent with the priorities under the local development plan and complement the overall national goals and aspirations in order that they may contribute to the improvement and attainment of socio-economic development and environmental management outcomes.
2. LGUs are encouraged to implement projects that directly support the national development agenda. Projects to be implemented shall, likewise, partake the nature of investment and capital expenditures; and take into consideration cost recovery and entrepreneurship.
3. Pursuant to Section 6 of Administrative Order No. 103 dated 31 August 2004, the provincial governors, city or municipal mayors and punong barangays concerned shall endeavor to maximize the use of the 20% of their internal revenue allotment, for development projects.
As mandated under Section 17(g) of the Local Government Code, the development projects that may be funded from the 20% of the IRA are as follows:
1.0 Social Development
1.1 Establishment or rehabilitation of Productivity Enhancement Center for out-of-school youths, women, minors, differently- abled persons and older persons.
1.2 Establishment of rehabilitation of Manpower Development Center.
1.3 Construction of 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.
2.0 Economic Development
2.1 Implementation of a livelihood/ entrepreneurship development program or project.
2.2 Construction/rehabilitation of communal irrigation or water impounding system and purchase of post harvest facilities such as farm or hand tractor with trailer, thresher, mechanical direr and the like.
2.3 Construction/rehabilitation of farm to market road.
2.4 Construction/rehabilitation of local road or bridges; and
2.5 Other programs or projects of similar nature.
3.0 Environmental Management
3.1 Construction/rehabilitation of sanitary landfill or controlled dumpsite and purchase of a garbage truck or related equipment.
3.2 Community reforestation or urban greening projects.
3.3 Flood control programs or projects such as de-clogging of canals or de-silting of rivers.
3.4 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.
For Calendar Year 2007, the Annual Investment Plan of the Island Garden City of Samal distributed an amount of P41,468,958.00 under the 20% Development Fund to the following Sectors, viz:
Such amount of P41,468,958.00, however, was increased to P50,894,017.10 the reason being there was a Supplemental Budget No. 1, which appropriated among others, an additional amount of P 9,425,059.10 for the 20% Development Fund. This is aptly illustrated in this matrix as follows:
The projects identified by the Implementing Agencies/Departments (AOM#2008-03 dated January 30, 2008) and as collated by the person in charge in the City Planning Office identified the following Programs and Projects under the 20% Development Fund, viz:
Audit Findings:
8.1 There was a discrepancy of amounts between the approved appropriation of P50,894,017.10 as against the reported amount of P32,393,046.06 by the implementing agencies on the programs and projects identified under the 20% Development Fund, or only 64% had been accounted for or reported by the implementing agencies. Thus, rendering the report incomplete and inaccurate.
A condensed reiteration of the factual background is as follows:
Our scrutiny on the status report of LGU’s 20% Development Fund revealed several discrepancies: (1) the programs and projects as enumerated in the Annual Investment Plan of the LGU were not fully accounted for. Only 64% had been monitored and reported; (2) the total amount utilized as reported by the implementing agencies did not equal to the amount obligated per Status of Appropriations, Allotments and Obligations (SAAOB) or there was a difference of P3,355,870.97 (P8,355,044.14 minus P4,999,173.17); from the foregoing discrepancy of amounts, it can be surmised that the implementing agencies had other bases or source/s of data or did not know the exact amount utilized for the projects; (3) as can be gleaned from the detailed report, (Annex A), entries under column, ‘Date Implemented’ were not specific since the exact date of implementation was not stated; (4) under the ‘REMARKS’ column, several implementing agencies did not submit the status of projects implemented. Likewise, they did not submit data on the amounts spent for the projects although they reported that the projects were accomplished; (5) the report lacked information as to how many or what project had been completed and/or not been completed; (6) in the course of our verification on the programs and projects, between reports, we noted that code referencing could not be appreciated since the reference code used by the Planning Department was dissimilar to the Budget Department. Moreover, the Completed Projects as reported by the City Engineer did not bear any reference code; (7) the columns, ‘Appropriated Amount’ and ‘Amount Utilized per SAAOB’ were obtained and cross-referenced from the SAAOB of the Budget Department. Cross-referencing was made difficult when the Budget and the Planning Departments used dissimilar reference codes. It should be noted that the term ‘reference’ presupposes connection or linkages between two objects.
The foregoing audit observations were communicated to management through our Audit Observation Memorandum No. 2008-03 dated January 30, 2008.
Management commented that they are poised to conduct a Project Management Workshop by end of March, 2008, wherein the monitoring system and evaluation system will have one final output that generates a clearer picture of LGU’s accomplishments.
Recommendation for Island Garden City of Samal Government:
1.1 Strictly monitor the Status Report on Programs/Projects funded out of 20% Development Fund by assigning a full-time employee who can give focus for a timely, complete, accurate and reliable report.
1.2 Require the implementing agencies to submit timely, complete, accurate and reliable reports on the Status of 20% Development Fund and on a regular basis.
1.3 Establish linkages by using similar reference codes in the identification of programs and projects in the Status Reports of the Budget, Planning and Engineering Departments. One reference code should be assigned per project.
8.2. Forty-eight percent (48%) or P24,509,238.65 worth of development projects was not implemented as of year-end, an indication of management’s slow delivery of services to its constituents thus depriving the people of the benefits due them.
At the end of December 31, 2007, we noted that the total amount appropriated and allotted for 20% Development Fund, both amounted to P50,894,017.10, viz:
STATUS OF APPROPRIATIONS, ALLOTMENTS AND OBLIGATIONS
Current Legislative Appropriations
For the month ended December 31, 2007
We also noted that the total amount of appropriations of P50,894,017.10 tallied with the total Annual and Supplemental Budgets for CY 2007. However, at year-end, only 51% or P26,284,778.45 of the total allotments had been obligated, thereby leaving an allotment balance of 48% or P24,509,238.65.
Equally stated, the allotment balance of 48% or P24,509,238.65 represents the unimplemented projects at the end of the current year.
Management’s Consolidated Status Report of Programs/Projects Under the 20% Development Fund for CY 2007 is summarized below:
From the foregoing summary data, the programs/projects categorized as ‘Unimplemented’ and ‘On-going’ totaled to P22,601,462.00 which represent 44% of the total budget. The slight difference of 4% (48% minus 44%) is attributable to cost of projects surplus.
The foregoing audit observations were communicated to management through our Audit Observation Memorandum No. 2008-03 dated January 30, 2008.
Implementing agencies commented that some projects were not implemented due to factors beyond their control.
Recommendation for Island Garden City of Samal Government:
Identify the cause/s and or factors for non-implementation of the development projects.
8.3 Special accounts in the General Fund were not maintained for the 20% Development Fund in violation of Section 313 of the Local Government Code and Sections 105, 106, 107, 108 and 110, Vol. I of the Manual on the New Government Accounting System for the LGUs thereby, information as to their assets, liabilities and equity were not adequate.
Consistent with the national development agenda, LGUs are encouraged to implement projects that partake the nature of investment and capital expenditures; and take into consideration cost recovery and entrepreneurship.
Section 313 of the Local Government Code likewise states that LGUs shall maintain special accounts in the General Fund for development projects funded out of the 20% Development Fund, viz:
“Section 313. Special Accounts to be Maintained in the General Fund. – Local government units shall maintain special accounts in the general fund for the following:
(a) Public Utilities and other economic enterprises;
(b) Loans, interests, bond issues, and other contributions for specific purposes; and
(c) Development projects funded from the share of the local government unit concerned in the internal revenue allotment and such other special accounts which may be created by law or ordinance.”
The rationale for the accounting procedures adopted in the operations of the special accounts are as follows:
Section 106. Objectives for the Maintenance of Special Accounts. – Accounting procedures for the operation of the special accounts are adopted in order to:
a. …….
b. Provide adequate information as to the assets, liabilities and equity of each special account.”
In the course of our audit, financial information as to the assets, liabilities and equity on the 20% Development Fund was lumped in the General Fund and the accounts did not have their own complete set of subsidiary legers contrary to provisions of Section 108 Vol. I of the NGAS which states that “special account shall have its own and complete set of subsidiary ledgers.”
Further, we did not find a specific number or Sub-Code “18” assigned in each subsidiary ledger. The post-closing trial balance and the following financial statements were also not prepared, viz:
a. Balance Sheet
b. Statement of Income and Expenses
c. Statement of Cash Flows.
The foregoing audit observations were communicated to management through our Audit Observation Memorandum No. 2008-03 dated January 30, 2008.
Management commented that they will address the audit observation.
Recommendation for Island Garden City of Samal Government:
Maintain special accounts in the General Fund for the 20% Development Fund to ensure that such fund had been appropriated and disbursed only for the purpose/s for which they are intended, and to have adequate and reliable information as to the assets, liabilities and equity.
Ensure that the Balance Sheet, Statement of Income and Expenses and Statement of Cash Flows for the 20% Development Fund shall be prepared and submitted to the Office of the Auditor monthly.
8.4 Had the water systems been operated by the barangays, a yearly income of P6.8M could have been recognized and could have aided the financing of the capital expenditures and/or investment under the cost-recovery scheme of the LGU.
Of the projects enumerated under the 20% Development Fund, the development of water systems in the barangays caused irresolute concerns as to their operations the reason being there were misinterpretation in the policy on the establishment of water systems in the barangays.
Existing policy culled from file of the LGU, dated back on October 13, 1998 during the Session of the IGACOS Sangguniang Panglungsod’s 1st City Council, which approved, among others, Resolution No. 148-A Series of 1998, viz:
“NOW, THEREFORE:
Pursuant to the provisions of Title II of PD 198 and in order to provide the much needed safe, sufficient and potable water supply, this Body in session assembled, do hereby adopt and approve this Resolution that affirms:
3. That operation of existing Rural Waterworks and other Water Associations shall be respected and their organizations/associations shall not be dissolved, annexed or forced to join unless they opt to integrate or merge with the IGCS Water District.”
Other than the government or the water district for that matter, any operations and/or ownership of any Associations or Cooperatives in the water systems of barangays, should not have been allowed as this is not in accordance with the provisions of Article 339 of the Civil code which states that “property of public ownership is: (1) that destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and banks, shores, roadsteads, and that of a similar character.” Further, provisions of Article 344 of said code provides that “property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by the said towns or provinces.”
Likewise, provisions of Article 3 of the the Water Code of the Philippines (PD 1067 dated December 31, 1976) is explicit in its declaration thus:
“a. All waters belong to the State.
b. All waters that belong to the State cannot be the subject to acquisitive prescription.
c. The State may allow the use of development of waters by administrative concession;
d. The utilization, exploitation, development, conservation and protection water resources shall be subject to the control and regulation of the government;
e. Preference in the use and development of waters shall consider current usage and be responsive to the changing needs of the country”
In the course of our audit, some water systems in the barangays were operated and/or managed by private associations or cooperatives which in effect, had not contributed to the cost-recovery and or investments scheme as contemplated under provisions of Sections 313 and 325 of RA 7160. The revenues generated out of these projects did not even accrue to the bourse of the government.
The data below shows some information on the operations and management of water systems in the barangays as well a the no. of households and the income that could have accrued to the coffers of the government, viz:
Moreover, during the audit, we found out that there were 29 water systems projects in the total amount of P5,745,000.00 appropriated under the 20% Development Fund for CY 2007, viz:
This means that, when it comes to repairs and regular maintenance of the water system, the LGU will finance and to some extent, subsidize the barangays, but, when it comes to profits, these were raked-in and enjoyed by private individuals/association and not the barangays.
The yearly income of P6,864,000.00 enjoyed by private associations could be understated and more income could have been recognized if these were efficiently monitored and properly accounted for. Even so, the figure already surpassed the annual appropriations of P5,745,000.00 for water system development projects. This could have been a clear case of cost-recovery and profitable business on the part of the government.
That, if the foregoing private operations of the water systems, continued to exist in the barangays and remained unchecked by proper authorities, this would contravene also to the fundamental principles governing the financial transactions and operations of any government agency, viz:
“It is the declared policy of the State that all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned (Sec. 2 PD 1445).”
This state policy focuses on how the resources of government shall be handled by those given the public trust to manage, spend or use such resources. The first requirement is compliance with law and regulations. The second is to safeguard it against loss or wastage, to protect the interest of the government, the public officials being expected to act always in the public interest. The third is a result-oriented expectation. In the evaluation of programs of government, it should be ultimately asked whether the implementing entity or official managed or utilized its resources in an economical and efficient manner and whether the desired goals or results ere effectively achieved.
The foregoing audit observations were communicated to management through our Audit Observation Memorandum No. 2008-03 dated January 30, 2008.
Management commented that the water system of the City is already in the Legislative Agenda of the Sangguniang Panlungsod. It is even considering that the water systems of barangays be finally turned-over to the IGACOS Water District.
Recommendation for Island Garden City of Samal Government:
Call for the Sangguniang Panlungsod to promulgate policies attuned to effectively and efficiently regulate the utilization of public resources i.e., water systems in the barangays.
Require barangays to submit separate financial reports on the operations of water systems, including collection efficiency reports on a monthly basis.
IGACOS 2007 COA Audit 7
July 4, 2010
7. Findings on Information Systems Audit
7.1 The absence of an Information Technology (IT) Strategic Plan that should embody IGACOS long and short-range plans resulted in the LGU’s unclear IT direction vis-à-vis Real Property Tax Administration System.
The IT Strategic Plan is both long and short-range plans which is aligned with the mission and business strategies of the LGU. It helps management to adequately plan the use of its IT and to assess its current IT in terms of degree of functionality, stability, complexity, costs, strengths and weaknesses. It sets the LGU’s objectives into motion and helps ensure an efficient and effective organization.
In the course of our evaluation on the LGU’s Real Property Tax System (RPTS), we found out that there was no ITSP formulated despite the issuance of an Executive Order No. 2002-011 by the City Mayor that could have paved the way for the creation of an ITSP Management Committee tasked with the formulation of ITSP of IGACOS. The absence of ITSP was evident when we observed that in the critical operations of the LGU such as tax assessment, billing, collection and accounting, the computerized systems were distinct and independent from each other.
The City Assessor’s Office (CAO) is currently using the RPTS, developed by the City of Cagayan de Oro, for its tax assessment. The City Treasurer’s Office (CTO) is using ECPAC System, an outside source, for its billing and collection while the Accounting Office is using e-NGAS for recording and accounting processes. There were no linkages that could be established among the three computerized systems and the utilization of the RPT systems had not been maximized.
The incompatibility between the RPTS used by the CAO and the CTO made it difficult to generate a reliable report on the correct total assessed values of the real property subject to taxation as of a given date. The CAO and the CTO had different databases the Real Property Units of IGACOS. These Offices had not updated and reconciled their databases yet.
Considering the fact that the database of RPUs in the CTO, where the assessed values are stored and used as the basis for the computation of tax due, was not updated and not reconciled yet with the CAO, the RPT and SET Receivable Accounts in the Financial Statements of IGACOS were not accurate and therefore unreliable.
Accent should be laid on the fact that the CAO’s RPTS could no longer be enhanced or upgraded due to constraints beyond the control of the LGU. The developers of CAO’s RPTS could hardly be contacted the reason being they were no longer connected with the City Government of Cagayan.
Such being the scenario, the above situations and conditions could have been addressed had top management developed its IT Strategic Plan.
In a futile attempt to elide and gloss over on an obvious mistake, management commented that “ the LGU have already developed an IT Strategic Plan before it actually started automation of its systems. On the contrary, however, this was not presented for adoption to the Sangguniang Panglungsod, as an ISSP is not obligatory for LGUs.”
The approach appears to be misdirected and the reliance misplaced. We maintain that it is still management’s responsibility to ensure that the provision of all IT hardware, software, methods and resources be attuned to the strategic direction of the LGU’s operations and achievement of competitive advantage.
Recommendation for Island Garden City of Samal Government:
a. Develop an IT Strategic Plan that would define the LGU’s technological direction.
b. Establish an electronic linkage between the Real Property Tax System of the City Assessor’s Office and the City Treasurer’s Office to maximize the use of the computerized system.
c. Review thoroughly the existing computerized systems, identify the present needs, and align the computerization plans with the LGU’s IT direction.
The IT Strategic Plan must embody the IT long and short-range plans to guide management in assessing whether the use of its IT is aligned with the LGU’s mission and goals. It must describe the strategic thrusts/programs, strategic concerns for IT use, critical information systems, linkages and other significant issues concerning IT. The ITSP will also serve as a tool in evaluating the efficiency and effectiveness of the systems.
An electronic linkage between the RPTS of the CAO and the CTO will not only save time, costs and manpower; it will also generate timely and pertinent reports that are reliable and accurate.
7.2 Top Management was not able to formulate an Information Systems Security Policy (ISSP) that would protect the LGU’s information assets against all types of risks, intentional or unintentional.
An ISSP is a formal specification of the rules by which system users are given access to a computer system to read and change information and to use computing resources. The components of the ISSP include among others;
> the access philosophy;
> access authorization;
> review of access authorization;
> security awareness; and
> the role of security administrator.
The formulation of this policy is the responsibility of the top management, which delegates implementation to the appropriate level of management with permanent control.
Our evaluation revealed that top management was not able to formulate an ISSP. The absence of such, resulted in the giving of access rights to some user-personnel in the systems without authorizations or office orders. Access authorization was given impliedly based on the job function of the user.
In view of the fact that there were no rules and policies relative to password and its use, many if not a few personnel knew the passwords of some users, thus exposing same to unauthorized access. It was also noted that personnel responsible for backups were not properly identified.
The absence of an ISSP also contributed to the weaknesses cited in Finding No. 4 as a result of the lack of authentication and access mechanisms that should prevent unauthorized personnel from accessing computer programs and data files.
Management commented that “The Information Technology Section with the guidance and assistance of the Internal Controls Section shall prepare a written Manual for each system which would include access and authorizations, policies, procedures, sanctions, etc.”
The formulation of an ISSP will not only protect the data against all types of risks but also determine area/s of weaknesses in the security systems.
Recommendation for Island Garden City of Samal Government:
Formulate an Information Security Systems Policy, which would point out user responsibilities for maintaining data/system integrity and confidentiality; institute disciplinary measures in case the security policies and procedures are being violated; and define access philosophy, which is to be authorized by top management.
The ISSP should contain among others, the following:
> access authorization/rights
> review of access authorization
> password management
> security awareness
> compliance with relevant legislation ands regulation
> role of security administrator
> security committee
> other relevant policies, rules and procedures to assure both the logical and physical security of the agency’s information assets.
7.3 IGACOS lacked backup plan, facilities and policies that would ensure continuous service in the event of major disruption brought about by man-made/natural threats and other destructive contingencies.
It is management’s responsibility to establish controls to make sure that IT services are available as required and to ensure a minimum business impact in the event of major disruption. Moreover, Information services management should create a recovery/contingency framework and continuity plan, which would define the roles and responsibilities and the approach and methodology to be adopted.
Base on the foregoing, the salient point emerge:
During our evaluation of the RPTS, we have learned that there was no backup plan that would embody the LGU’s plan of action to be able to continue operations in case of disruption in the information systems support activities and to survive even if disastrous event occurs. Further, there was no off-site backup storage that would house the data/information assets of the LGU.
We also noted that the frequency of performing backup of data and the backup of the software being used were not defined. There was no backup of the CTO’s data files as confirmed by the IT personnel when we conducted our evaluation. It was only after we inquired about the matter on backup policies that the IT personnel on a weekly basis, backed up and stored the data in his house.
Management commented that “At present the CTO personnel is doing a daily data back up and these data are uploaded every Saturday in the main server then downloaded to the removable tape for safekeeping in the IT personnel’s house. This is the best option we have for the moment but we are still studying on coming up with better storage alternatives. The controls, methodology and the overall recovery/contingency plan shall be included in the Systems Manual.”
We are unswayed by this contention, the lack of backup plan, facilities and policies would not ensure continuous services on the part of the LGU, and it could not offer at least a minimum impact on the LGU’s operations, in the event of major disruption or catastrophe.
Recommendation for Island Garden City of Samal Government:
a. Develop a continuity plan that would strengthen the backup procedures and policies of IGACOS.
b. Identify the frequency of backup activities, the backup of software being used, and the on site and off site storage of data/information assets of the LGU.
c. Explore the possibility of entering into a mutual agreement with the Province of Davao del Norte for the storage of backups.
7.4 The RPT Systems of IGACOS lacked logical access mechanisms that should prevent unauthorized personnel from accessing computer resources thereby exposing the programs and data files to intentional or unintentional manipulation, alteration and destruction.
The logical access to information and the use of information service functions should be restricted by implementing an adequate authentication mechanism associated with access rules to safeguard information against unauthorized use, disclosure or modification, damage or loss.
We observed that the RPT Systems of IGACOS did not have built-in control mechanisms that will automatically deactivate the window after several unsuccessful access attempts and a disconnect log-on session after a certain period of inactivity (Annex 1). Also, there was no activity log that will provide management information and trail of the activities performed during processing of data.
We also noted that one can gain access to the RPTS of the City Assessor’s Office (CAO) by logging in the user name and the password, which were already known to all personnel in the said Office.
In the City Treasurer’s Office (CTO), however, one can easily gain access to the system because there was no user’s login window that would ask the user’s name before a user could access the system. The password was the only key to gain entry to the system.
Unlike the RPTS used by CAO, which required the user’s name and password before one could access the various menu, the CTO’s RPTS required password to only two file names, namely: the Information File under the File Menu, and the Posting File under the Posting Menu. Most of the Files in the CTO’s RPTS did not require a password hence easy access to the data files could be done by any unauthorized user (Annex 1).
Considering the fact that there were no rules and policies relative to logon ids and passwords, many if not a few personnel know the ids and passwords, thus exposing the data to unauthorized access.
Management commented that “ECPAC developers already agreed to integrate this requirement relative to logon IDs, passwords and access to data files and menus, within this month.
Recommendation for Island Garden City of Samal Government:
Enhance the logical access rules, policies and procedures to keep authentication and access mechanisms effective and to ensure security of the RPT Systems. The standards and policies relative to logical access should include the following:
> A user ID and a password should be required before a user can access the opening screen of the system;
> Users should be required to change their passwords periodically;
> Password length should be defined;
> User access should be based on written authorization and given on a need-to-know basis;
> A workstation should be disabled automatically after a short period of inactivity;
> All unsuccessful logon attempts should be logged on the computer system;
> A User Master File should be created to store the names and other data of authorized users.
The above policies and other policies relative to password management and the strengthening of access controls should form part of the ISSP to be formulated by the LGU.
7.5 The inability of the RPT systems in both CAO and CTO to reject or deny the editing made on the assessed value of the real property and the applicable period may affect the reliability of the RPT system of CTO to supply the correct tax due which might result in the overstatement or understatement of RPT collection.
One of the features of the RPTS in the City Treasurer’s Office (CTO) is the automatic computation of real property tax due based on the assessed value already stored in the database.
It is apt to observe that our evaluation of the RPTS in the City Assessor’s Office (CAO) and the CTO revealed that both systems allow a user to edit some data, which are already in the permanent files.
In the CAO, the encoder of the FAAS could alter the data already stored in the Tax Declaration file. Moreover, the same encoder could edit the assessed values found in the Information File. These assessed values are the bases for the computation of real property and special education taxes. It is because of this existing weakness of the LGSP System that the generated data cannot be relied upon.
Our simulation tests in the CTO showed that the one who prepared the bill and the one who issued the computerized official receipt could edit the assessed values and the applicable period stored in the Information File (Annex 2). The fact that the computation of Real Property Tax (RPT) and Special Education Tax (SET) was already built in the system, any change in the assessed values and applicable period could either increase or decrease the corresponding tax.
It was learned that there was an instance in the past that the assessed value was altered reducing the RPT and SET paid by the taxpayer. The error was discovered when payments were posted in the RPTAR (Annex 3).
Although this weakness existed in the RPTS of CTO, it was gathered that the developer ECPAC Systems Corporation gave an assurance that the controls in the RPTS of CTO can be strengthened. However, ECPAC should develop the RPTS of the CTO to create a linkage with the CTO’s RPTS thus existing controls can be enhanced.
The weaknesses of the system cited above are disadvantageous to the LGU. These may result to great losses of income; hence the assessed values of real properties, applicable period and other critical data in the computation of tax due should be protected from any unauthorized alteration.
Management commented that “Since CAO uses another system incompatible to the one used by the CTO, there is a need for CTO to re-encode date on RPUs. This weakness can be addressed when the CAO will discard the present RPT system they’re using and temporarily make use of the ECPAC systems. The City Assessor had initial discussions with ECPAC last week and they plan to change their existing system by November.
Recommendation for Island Garden City of Samal Government:
Enhance the RPT System to include controls that will prevent and detect any unauthorized alteration on the assessed value of real properties, the applicable period and other critical data in the computation of tax due to safeguard the LGU’s income.
7.6 The RPTS in the CTO could not capture cancelled Official Receipts (OR) and the mode of payments of taxes collected which might result in the difficulty of verifying issued official receipts and of validating/ verifying collections received.
The facility to capture cancelled official receipts will facilitate verification of ORs issued. It will yield a complete report as to official receipts issued hence the completeness of input control wherein all transaction/data must be recorded in the computer files is strengthened.
The inclusion of the field for mode of payment of taxes in the system will facilitate the validation and verification of payments made by the taxpayers especially when problem arises relative to dishonored checks. It will also prevent irregularities such as cashing of private checks, and will facilitate the preparation of daily collection reports.
Our evaluation of the Collection Module revealed that no fields were provided in the system to capture the type of payment received by the collector (Annex 4).
Moreover, there was no facility in the system to capture and store cancelled official receipts in a permanent file. The system accepted official receipts even if there were gaps in the series (Annex 5).
The Abstract of Real Property Collection, which was generated by the system monthly showed that there were missing official receipts in the series of ORs issued.
This was confirmed when we conducted duplicate test on the Official Receipts Issued (Annex 6). Verification of missing ORs revealed that these were cancelled. However, these were reported and attached to the Report of Collection and Deposit of the collector concerned.
Management commented that “To date, the CTO RPT incharges are now saving data on cancelled receipts. The creation of fields for mode of payment of taxes will also be affected by ECPAC developers within the month.”
Recommendation for Island Garden City of Samal Government:
Enhance the RPT System to include a facility, feature or control that will accept the cancelled official receipts and the mode of payments of taxes collected so that verification of issued official receipts and of payments received will be facilitated, and the report that would be generated relative to official receipts will be complete.
Implement a division of roles and responsibilities, which should exclude the possibility for a single individual to subvert a critical process. It must ensure that no one person has complete control over a transaction throughout its initiation, authorization, recording, processing and reporting.
7.7 The RPT systems of CAO and CTO did not have routines to process General Revision of Real Property Assessment thus the LGU might resort to manual revision process which is tedious and may result to inaccurate and inconsistent assessment.
Provisions of Section 219 of RA 7160 provides that the City Assessor shall undertake a general revision of real property assessments every three years.
The audit team were informed by the City Assessor’s Office that in 2008 a general revision would be implemented.
In our interview with the CAO and CTO, we learned that the RPT Systems of IGACOS were not equipped with the facility or routine to process the forthcoming revision hence it is already expected that both Offices will resort to manual processing of new RPT assessments.
However, we have learned from the ECPAC Systems Corporation that the RPTS could be enhanced to accommodate or facilitate the general revision in 2008.
The assessment of real property is a critical function of the LGU. Top management must address the problem immediately before the implementation of the General Revision in 2008.
Management commented that “The City Assessor had initial discussions with ECPAC and they plan to change their existing system by November. Routines to process General Revisions of Real Property Assessment shall be integrated in the program.”
Recommendation for Island Garden City of Samal Government:
Avail of the RPT system that would link the Offices of the City Assessor and the City Treasurer to maximize the use of the system; to save time, costs and resources; and, to generate reliable, accurate and timely reports.
7.8 The Schedule of Tax Receivable generated by the RPTS of the City Treasurer’s Office could not be used as basis by the City Accountant’s Office in setting-up the RPT/SET Receivables for the current year in the LGU’s books.
One of the most important reports that the RPT system in the City Treasurer’s Office should have generated is the Report/List of Taxpayers with the amount due and collectible for the current year which will be used by the City Accountant’s Office as basis in setting up the RPT/SET Receivable for the current year as required under Section 20 of the NGAS Manual.
Verification of the various reports disclosed that the data in the Schedule of Tax Receivable could have been used by the City Accountant’s Office as basis in setting up the RPT/SET Receivable. However, the said schedule was not considered because according to the CTO the data were not updated and incomplete. The CTO’s database as to the number and assessed values of Real Property Units was not reconciled yet with that of CAO’s hence the Schedule of Tax Receivable generated by the RPTS System of CTO was unreliable.
In our interview with the City Accountant, it was learned that the RPT/SET Receivables for the current year were not set up in the books yet due to the failure of the CTO to provide the City Accountant’s Office with the required report/list.
This problem, if remained unsolved, has a material effect on the financial statements.
In line with this problem, it is important to point out that the current trend in Relational Database Technology is gearing towards the importance of sharing data to various users in the organization to promote efficiency and effectiveness of the system.
Management commented that “Updating of record is ongoing and the CTO is committed to finish it on October 21, 2007.”
Recommendation for Island Garden City of Samal Government:
Link the RPTS of the City Assessor’s Office with the City Treasurer’s Office in order that data can be shared to insure efficient, accurate and reliable data capture thereby the problem of bloated Accounts Receivable could be eliminated.
7.9 Collection reports generated by the RPT System of the City Treasurer’s Office were not used as bases by the City Accountant’s Office in recording collections in the books of the LGU thus the maximum utilization of the system was not achieved.
One of the objectives of installing any computerized system is to generate reports that are relevant to the users. In generating these reports the controls in place should provide reasonable assurance that the data delivered to users will be presented, formatted and delivered in a consistent, relevant and secure manner.
Our evaluation of the RPTS of the CTO revealed that not even one report generated by the system had been used by the City Accountant’s Office in recording collections in the LGU’s books.
An accounting personnel recorded the collections by encoding first every official receipt in an excel form and importing the same to the e-NGAS.
Based on our interview with the accounting personnel, we took note some of the reasons why they resorted to this practice:
> Untimely generation of the Abstract
> Advance payment cannot be captured in the report since the RPTS had no facility to treat advance payments
> The notion that the data are unreliable
The present practice of recording collections by the City Accountant’s Office is a manifestation that the RPTS of the CTO had not been fully utilized; that it was not facilitative as regards the requirements of the City Accountant’s Office.
Management commented that “The City Accountant and the Assistant City Accountant had a meeting with ECPAC developers last October 5, 2007. According to the developers, ECPAC RPT System used by the CTO can generate excel reports. According to the Assistant City Accountant, this function would be tested at the end of this month.”
Recommendation for Island Garden City of Samal Government:
Initiate a joint meeting wherein parties concerned specifically state their concerns and requirements to be presented to ECPAC to address the issues.
Reevaluate the use of RPTS, lay down the requirements of parties concerned, address the deficiencies noted and discuss with ECPAC to be able to come up with a common system.
7.10 The absence of checking mechanism on the billing procedure of the City Treasurer’s Office before tax payment is received by the collector may result to over or underassessment of real property thus, affecting the tax collections of the LGU.
It is very important that only valid data are processed by the computer and authorized by management to be written to the master files, printed reports or incorporated in the records. Thus, all data shall be properly authorized and checked. Validity controls are so vital in preventing computer fraud that could occur from unauthorized transactions being entered or processed in the system.
The existing policy of the City Treasurer’s Office is to require the taxpayer to secure a Bill Statement or Notice of RPT Delinquency from the Billing Section of CTO before payment is accepted by the collector.
The Bill Statement is generated by the RPT System. It has the “Verified by” portion to be signed by the billing personnel and the “Certified Correct” portion to be signed by the City Treasurer.
In our interview with Mr. Enanoria, the billing in-charge, we found out that any personnel in the Billing Section could prepare a billing statement or notice of RPT delinquency in one copy to be given to the taxpayer before making payment to the collector.
It was found out further that the procedure where the City Treasurer certifies as to the correctness of the bill was not practiced. It was already enough that the preparer signed the bill.
Upon presentation of the Bill, the Collector retrieves the Taxpayer’s file from the computer and checks data with the bill, then accepts payment. The taxpayer retains the bill.
The absence of checking mechanism in the billing procedure invites opportunities for collusion, computer fraud and similar forms of irregularities that might understate the tax collections of the LGU.
Our review and ratiocination based on the records yield that the RPT systems in CAO and CTO lacked editing controls the reason being the assessed values and the applicable period can be altered by the user, the possibility that bill statement might be manipulated is very high hence the checking mechanism must be in place.
This manual checking mechanism, however, could be replaced by an automatic computerized checking mechanism if the RPTS in City Assessor’s Office and the City Treasurer’s Office are already linked, and considering the fact that these Offices are still using RPTS distinct from each other, the certification of the City Treasurer or any authorized designated personnel in the CTO as to the correctness of the bill will add reliability to the data and provides deterrent to the commission of irregularities.
Management commented that “This weakness can be addressed when the CAO will discard the present RPT system they’re using and temporarily make use of the ECPAC systems.
Recommendation for Island Garden City of Samal Government:
Adopt a checking or review mechanism on the billing procedures in the City Treasurer’s Office to safeguard the accuracy and reliability of the data.
The bill statement must be prepared in two copies, one for the Taxpayer’s file and one to be retained by the Billing Section for future reference particularly if problems arise and for audit purposes.
7.11 The non-segregation of incompatible functions might affect the reliability and integrity of the LGU’s data.
It was also noted that the personnel who encodes the manually issued official receipts is also responsible for reviewing and approving the computerized issued official receipts. She is also in-charge with the generation of the various reports. Aside from said duties, she is also acting as the system administrator of the CTO who is authorized to add a user to the system, to prepare and encode Journal Entry Vouchers, and to correct the penalty parameter and edit the tax rates and the applicable period.
The above practices are contrary to sound internal control principles. Segregation of duties must be maintained between incompatible functions cited above to prevent the commission of irregularities.
Management commented that “The Information Technology Section with the guidance and assistance of the Internal Controls Section shall prepare a written Manual for each system which would include access and authorizations, policies, procedures, sanctions,etc…”
Recommendation for Island Garden City of Samal Government:
Implement a policy on division of roles and responsibilities, which should exclude the possibility for a single individual to subvert a critical process. Ensure that no one person has complete control over a transaction throughout its initiation, authorization, recording, processing and reporting.
IGACOS 2007 COA Audit 6
July 4, 2010
6. Audit of Prepayment Account
6.1 The failure to place strategically the idle P1.846 million non-interest-bearing marginal deposits on Letters of Credit in high- yielding interest deposit with LBP since 2004, deprived IGACOS an estimated interest income of P138,456.54.
In our audit of Prepayment account, we were able to confirm from the Landbank of the Philippines that IGACOS had Deposits on Letters of Credit (LC) in the amount of P1,846,087.07 as of December 31, 2007. This amount corresponded to the importation of heavy equipment sometime in 2004. The bank had already paid the supplier and the equipment was already delivered to IGACOS in 2004. The equipment and the corresponding long-term payable were also taken up in the books.
Further, the bank informed us that as early in October, 2004, this amount was ready for release to IGACOS the reason being the bank had already paid the supplier. However, due to another plan of importing more equipment, management deferred the withdrawal of said deposit.
The P1.846 million LC deposit with LBP is non-interest bearing. It had been with LBP for more than three years. The plan of management to import more equipment did not materialize, hence, it should have been transferred to a high yielding interest deposit.
Our conservative computation of the interest income that IGACOS could have earned for three years had the P1.846 million been placed in time deposit (using straight-line method, not compounded monthly), yielded an amount of P138,456.54, shown as follows:
Amount of deposit P 1,846,087.07
Rate of interest per annum 2.5%
Annual interest P 46,152.18
X 3 years
Estimated interest for 3 years P _138,456.54
The estimated interest income could have financed some priority or development projects that eventually benefit the constituents of IGACOS.
Management commented that as soon as they receive the AOM, they immediately requested LBP to transfer the said LC to a high-yielding interest bearing note/account.
Recommendation for Island Garden City of Samal Government:
Direct the City Treasurer to withdraw and place the P1.846 million LC in time or other interest –bearing deposits in order that it would generate additional revenue for the City.
IGACOS 2007 COA Audit 5
July 4, 2010
5. Uncancelled Stale Checks
5.1 Stale checks amounting to P171,673.51 remained unadjusted in the books thereby understating the Cash in Bank – Local Currency Current Account, General Fund by the same amount as at year-end.
Dispositive portion of the provisions of Section 59, Vol. I of the Manual on the New Government Accounting System for Local Government Units reads as follows:
“Sec. 59. Spoiled and Stale Checks – Checks may be cancelled when they become spoiled or stale. A check is stale, if it has been outstanding for over six months from date of issue or as prescribed by the depository bank. At least one month before a check becomes stale, the Treasurer shall send a written notice to the payee of the existence of the check
2. For stale checks which have been unclaimed and thus, the original DV and supporting documents are still with the Treasurer, the cancelled check shall be presented in the RCI after the last check issued for the period indicated in the report. The original DV and supporting documents shall be returned to the Accountant who shall prepare a JEV to record the transaction as Accounts Payable.
3. For checks which became spoiled or stale at the hands of the payee and which require replacement, a new check may be issued upon submission of the spoiled or stale check to the Treasurer. A certified copy of the DV shall be requested from the Auditor for presentation to the Administrator/Local Chief Executive who shall countersign the check. The cancelled check shall be reported and attached to the RCI prepared at the period of cancellation. The replacement check shall also be reported chronologically in the RCI.”
The latest Bank Reconciliation Statement submitted to the City Auditor’s Office for the current account in the General Fund is as of October 31, 2007. The List of Outstanding Checks attached to it showed checks dated from July 1, 2005 to May 4, 2007 with a total amount of P171,673.51, viz:
These checks if unclaimed must be cancelled and the Accountant will record these as accounts payable and/or due to LGUs. If some of these checks necessitate replacements, “a new check may be issued upon submission of the spoiled or stale check to the Treasurer. A certified copy of the DV shall be requested from the Auditor for presentation to the Administrator/Local Chief Executive who shall countersign the check.”
Management was informed of the above observation through our Audit Observation Memorandum No. 2008-01 dated January 21, 2007 and it will soon draw a JEV for the proper accounting treatment of stale checks.
Recommendation for Island Garden City of Samal Government:
Direct the City Accountant to prepare the appropriate adjusting journal entries taking up the stale checks as Accounts Payable and Due to LGUs in accordance with Section 59, Vol. I of the Manual on NGAS.
IGACOS 2007 COA Audit 4
July 4, 2010
4. Insufficient Collections for the Real Property Tax Delinquency
4.1 For the year 2007, the City Treasurer’s Office reported a total real property tax collections of P2,406,371.98 or 8% only of the total P28,435,487 Real Property Tax Delinquency as of December 31, 2007 thus indicating a very low collection efficiency rate which is detrimental to the revenue generation efforts of management.
Included in the 2007 Financial Reports submitted to the City Auditor’s Office is the Barangay RPT Collection Efficiency as of December 31, 2007 of the three Districts of IGACOS signed by the City Treasurer, as follows:
District Current Tax Collectible Collection 2007
Babak 1,794,765.63 986,483.49
Samal 1,500,420.70 789,193.80
Kaputian 2,549,211.40 630,694.69
Total 5,844,397.73 2,406,371.98
However, the List of RPT Delinquency Per Barangay as of December 31, 2007 certified correct also by the City Treasurer disclosed the following data:
District Total Amount of Delinquency
Babak P 5,856,515.14
Samal 3,890,745.21
Kaputian 18,688,227.47
Total P 28,435,487.00
On the other hand, the Statement of Income and Expenses for 2007 showed total Real Property Tax Revenue of P2,439,272.66. According to the City Accountant, this amount includes collection of current and delinquent real property tax accounts.
We compared the 2007 RPT Collection Report of the CTO data with the previous year, as follows:
Real Property Tax Collections
We noted that that there was a drop in collection rate by 8.30% or P199,803.03 from this year’s RPT Collections of P2,406,371.98 compared to last year’s P2,606,175.01. The decrease in collection is quite alarming considering the huge amount of delinquency in the total amount of P28,435,487.00.
It was also noted that RPT collections of P2,406,371.98, was pale in comparison with the business taxes collections of P3,683,890.86. Considering the huge amount of real property tax delinquency, it should have been next to Internal Revenue Allotment (IRA) in terms of revenue generation.
From the foregoing data, it can be deduced that the collection efficiency rate on the real property tax during the current year was very low thus depriving the populace of the benefits that could have been derived from the increased collection.
The City Treasurer commented that huge establishment like the Echran Berhad, is already insolvent and its delinquency of P26M is not possible to collect as of the moment. Though the City Treasurer’s Office sent demand letters to delinquent taxpayers, the letters didn’t usually reach the addressees since the addresses are either incorrect or the taxpayers are already residing abroad.
Management also commented that this problem is being addressed in view of the fact that the ECPAC computer system is made operational in both the Assessor and the Treasurer’s Offices.
Recommendation for Island Garden City of Samal Government:
Direct the City Treasurer to develop strategies to improve/increase the real property tax collection and reduce the delinquent accounts thus contributing to the augmentation of revenues for developmental projects.
IGACOS 2007 COA Audit 3
July 4, 2010
3. Overstatement/Understatement of Accounts
3.1 The Real Property Tax (RPT) and Special Education Tax (SET) Receivable were not set up during the year in violation of provisions of Section 20, Volume 1 of the New Government Accounting System (NGAS) Manual thus understating the Receivable and the Deferred Income accounts as at year-end.
Decretal portion of provisions of Section 20, Volume 1 of NGAS Manual is hereby reproduced as follows, thus:
“Real Property Tax Receivables/Special Education Tax Receivables shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s index card. At the beginning of the year, the Treasurer shall furnish the Chief Accountant of a duly certified list showing the name of taxpayers and the amount due and collectible for the year. xxx”
Verification of the accounts revealed that there was no addition in the current year due to the non-setting up of the RPT and SET Receivable, however, the balance was reduced because of the collections received during the year. The Subsidiary Ledger shows the following information:
RPT Receivable
Balance, January 1, 2007 P 19,500,552.87
Addition: -
Less: Collections 3,265,859.87
Balance, December 31, 2007 P 16,234,693.00
SET Receivable
Balance, January 1, 2007 P 19,333,982.35
Addition: -
Less: Collections 3,386,334.21
Balance, December 31, 2007 P 15,947,648.14
============
In her reply to our Audit Observation Memorandum No. 2008-001 dated January 21, 2008, the City Accountant attributed the non-setting up of RPT and SET Receivable to the failure of the City Treasurer to submit a certified list of taxpayers with corresponding tax due as required by the NGAS Manual.
The City Treasurer, on the other hand, attributed the non-submission of the certified list to the difficulty of the current RPT system to generate the required report/list. This was also identified when the COA Information Systems (IS) Audit Team conducted an IS audit during the year.
Despite the inability of the RPT system to generate the required report/list, we still requested from the City Treasurer’s Office a List of RPT/SET Delinquency Per Barangay as of December 31, 2007. We noted a significant difference between the RPT and SET Receivable per books and the amount reported by the City Treasurer, as shown below:
The marked differences were indicative of the unreliability of the RPT and SET Receivables that were recorded in the books. No reconciliation of data had been done among the offices concerned, namely: the City Treasurer’s Office, the City Accountant’s Office, and the City Assessor’s Office.
Management recognizes the deficiencies of the three offices concerned. Hence, at the behest and assistance of the City Administrator’s Office – Internal Operations, the City Assessor’s Office began updating its database using the RPT System of the City Treasurer’s Office to keep the data online.
Recommendation for Island Garden City of Samal Government:
1. Implement the recommendations of the COA Information Systems Audit Team relative to the installation of a Real Property Tax System that is accessible by the City Treasurer’s Office and the City Assessor’s Office in order that a common database of real property units would be used.
2. Direct the City Assessor to hasten the encoding of real property units to the new real property tax system.
3. Direct the City Treasurer to submit to the City Accountant the required certified list of taxpayers with corresponding tax due.
4. Direct the City Accountant to reconcile the RPT and SET Receivables with the City Treasurer’s report and make the necessary adjusting entries in the books so that a reliable receivable account would be reflected in the financial statements.
IGACOS 2007 COA Audit 2
July 4, 2010
2. Non-reconciliation of accounts
2.1 The reliability and accuracy of the Cash in Bank, Local Currency- Current Account balance per trial balance under the Trust Fund amounting to P4,422,606.29 as of December 31, 2007 could not be ascertained due to non-reconciliation of the balances as recorded in the books, as reported in the bank reconciliation statements and, as confirmed by the bank.
One of the specific objectives in the audit of ‘Cash’ accounts in the trial balance is to establish the accuracy of the cash balances appearing in the related records of the LGU. Hence, reconciliation of accounts is done to determine whether the amounts have been correctly recorded and fully accounted for in accordance with laws, rules and regulations.
The data below shows the varied balances of the Cash in Bank, Local Currency Current Account in the Trust Fund as of December 31, 2007:
Our review and analysis of the Bank Reconciliation Statements (BRS) for LBP CA 2562-1003-10 showed that there were discrepancies of amounts between the book balance as reported in the BRS totaling to P3,197,656.44 and the book balance as posted in the Trial Balance totaling to P3,559,534.90. Further, the bank balance did not reconcile with either the balances of books per trial balance or the bank reconciliation statements.
For LBP Current Account Nos. 2562-1012-60 and 1013-25, the City Accountant did not prepare the bank reconciliation statements.
The discrepancies of amounts and the non-preparation of the bank statements casted doubts as to the reliability and accuracy of the cash balance reported as at year-end.
The herein observations were communicated to Management through our Audit Observation Memorandum No. 2008-004 dated February 1, 2008.
Management commented that only one checkbook under C/A # 1003-10 was used for the three current accounts. There were transfers of fund from C/A# 1003-10 to other C/A# 1012-60 and C/A# 1013-25. Also, there were charges made to C/A# 1012-60 and 1013-25 from C/A# 1003-10 thus, reconciliation was even harder to do. Though, the City Treasurer commented that a checkbook was already secured from the bank for other C/As but the City Accountant was not aware of the newly purchased check books in the name of other C/As.
Recommendation for Island Garden City of Samal Government:
1. Direct the City Accountant and the City Treasurer to determine the cause of the discrepancies and to perform monthly reconciliation of the cash in bank accounts.
2. Direct the City Accountant to make the necessary adjusting journal entries in the books so that a correct cash balance is reflected in the financial statements.
IGACOS 2007 COA Audit 1
July 4, 2010
Detailed Findings and Recommendations
I. Financial and Compliance Audit
1. Unreconciled Property, Plant and Equipment Account
1.1 Of the total P384,704,540.99 Property, Plant and Equipment and Other Assets accounts, the amount of P149,496,075.08 or 44% of P343,090,033.77 under the General Fund books were not included in the Physical Inventory Report of the City General Services Office thus casting doubt on the existence, accuracy and reliability of the accounts.
The comparative table below shows the totals per books of various accounts as compared to the Physical Inventory Report of the CGSO:
One of the objectives in the audit of these accounts is to determine the existence and/or ownership, as well as the accuracy/correctness, of the reported amounts.
We have already sent letters to the City Assessor, City Veterinarian, City Agriculturist and City Engineer (see attached) requesting for status and/or inventory reports that would assist us in determining the existence and accuracy of the reported accounts.
Worthy of special note is the fact that this was one of the findings in the 2006 Annual Audit Report and management committed to reconcile both reports.
The continued non-reconciliation of said accounts would cast doubt on the reliability of the accounts reported in the financial statements thereby misleading the users thereof.
Management commented that it will reconstitute the inventory committee to help the CGSO in its effort to reconcile balances of PPE account. Other concerns for account codes 281 and 282 will be reviewed specifically on its dispersal scheme for an effective reconciliation of records with the Accounting Office.
Recommendation for Island Garden City of Samal Government:
Direct the Offices concerned to submit inventory and/or status report of the accounts as requested in order that reconciliation with the books could be done and appropriate adjusting entries could be taken up.
