Isabela City 2008 COA Audit 3
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
3. The value of property, plant and equipment recorded in the books at
P 153,268,543.96 as of December 31, 2008 was overstated by approximately P15.327 million due to the failure of the City Accountant to take up depreciation on a number of depreciable assets, contrary to Section 04 (O) of the Manual on the New Government Accounting System (NGAS) Volume I for Local Government Units.
Sec. 04 (O) of Volume I of the Manual on NGAS for LGUs provides:
“Basic features and Policies. – The new government accounting system has the following basic features and policies, to wit:
O. Depreciation. The straight-line method of depreciation shall be used. A residual value equivalent to ten (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.”
Verification of the financial statements showed no depreciation provided on the value of property, plant and equipment in the total amount of P 153,268,543.96 resulting in the overstatement of the affected PPE accounts. (See Annex “B“)
The Report of Inventory of PPE submitted by the City General Services Office as of December 31, 2008, does not provide date and cost of acquisition to a number of property plant and equipment which contributed to the inability of the City Accountant to provide the corresponding depreciation.
Management Comment:
* The City General Services Officer reasoned out in the difficulty of providing date and cost of acquisition on PPE acquired long time ago but still existing to date.
Recommendations:
* Require the City General Services Officer to provide date and cost of acquisition on all property, plant and equipment in the inventory report to facilitate recognition of depreciation of affected PPE accounts.
* Existing obsolete PPEs considered to have no more value should be dropped from PPE account and be accounted under Other Assets.
* Require the City Accountant to provide depreciation on all property plant, and equipment accounts in accordance with Section 4 (O) of the NGAS Volume I to establish their true valuation in the financial statements.
Isabela City 2008 COA Audit 2
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
2. The City Government failed to effectively and efficiently collect Real Property Taxes (RPT) and did not enforce the remedies available for the collection of Real Property Taxes as mandated under Article 347 of the Rules and Regulations Implementing the Local Government Code of 1991, thus resulted to an outstanding RPT receivables balance of P 18,460,568.14 as of December 31, 2008.
Based on our verification of the financial statements as of December 31, 2008, it showed that the agency has a material balance of RPT Receivables of P18,460,568.14 under the general fund. This has increased by P2,514,717.60 or 15.77% compared to the balance reported as of December 31, 2007 of P15,945,850.54. Out of the P18,460,568.14 RPT Receivables for the calendar year 2008, only P11,264,154.85 was collected as of December 31, 2008 or 61.02% collection efficiency of Real Property Taxes. This performance showed the leniency of the City Government in collecting RPT Receivables. Had the LGU enforced the remedies available for the collection of Real Property Taxes, it could have generated more revenues to implement more projects for the benefit of its constituents.
Details of Real Property Tax Receivables are shown as follows:
Calendar Year Amount
2002 (P 795,392.56)
2003 5,094,675.82
2004 2,709,422.39
2005 1,565,887.95
2006 1,110,204.90
2007 3,056,163.63
2008 5,719,586.01
Total P 18,460,568.14
Furthermore, the City Government did not enforce the remedies available for the collection of Real Property Taxes, as required in Article 347 of the Rules and Regulations Implementing the Local Government Code of 1991, which states as follows:
“Remedies for the Collection of Real Property Tax –
For the collection of the basic real property tax and any other tax levied under this Rule, LGU may avail of remedies by administrative or judicial action. The administrative remedies which are summary in nature are:
a) Levy on real property, and
b) Sale of Real Property at public auction.
The judicial remedy is availed of in the court of appropriate jurisdiction. These remedies are cumulative, simultaneous and unconditional, that is, any or use or all of these remedies or combination thereof may be resorted to and the use or non-use of one remedy shall not be a bar against the institution of the others. Formal demand for the payment of the delinquent taxes and penalties due is not a pre-requisite to such remedies. The notice of delinquency required in Article 346 of this Rule shall be sufficient for the purpose.
Had the City, through the Office of the City Treasurer, availed of the remedies provided for under Article 347 of the Implementing Rules and Regulations of the Local Government Code of 1991 in enforcing tax collection, it could have enforced taxpayers to settle their tax obligations due to the LGU and could have generated material increase in tax collections during the calendar year, thus, it will substantially reduce the balance of RPT receivables as of December 31, 2008. Moreover, an increase in RPT collections could have provided funds for the implementation of additional projects for the people of Dipolog City.
Management Comments:
* The balance of real property tax receivable has already been reduced due to the payment of real property tax by Zamboanga del Norte Electric Cooperative (ZANECO) in the amount of P5,553,848.79 during the year of audit.
* Judicial and administrative remedies will be enforced only after exhausting all possible measures without prejudice of the taxpayers’ right to settle amicably.
Auditor’s Rejoinder:
* Basically, payment of real property taxes by ZANECO has indeed increased RPT revenues to the agency, but neither had it significantly reduced RPT Receivables because a balance of P7,196,413.29 or 38.98% is still quite material.
* Interview with the City Assessor revealed that there were still lot of RPT delinquents after the tax amnesty expired last year. So, it is high time for the City Government to avail of the judicial and administrative remedies and sanctions in order to attain the estimated revenues.
Recommendation to Dipolog City Government:
* The City Government through the Office of the City Treasurer should intensify its effort to efficiently and effectively collect Real Property Taxes and avail of the remedies provided for in article 347 of the Rules and Regulations Implementing the Local Government Code of 1991. Improved collection efficiency of RPT will benefit the City Government and its constituents.
Isabela City 2008 COA Audit 1
July 1, 2010
DETAILED FINDINGS AND RECOMMENDATIONS
1. Huge amount of cash advances and receivables totalling P21,337,668.15 remained unliquidated and/or unsettled at the end of December 2008, not only adversely affected both the cash and income accounts of the agency, but also a gross violation of Section 37 of P.D. No. 1445, otherwise known as the “Auditing Code of the Philippines”.
Section 37 of P.D. No. 1445, provides that:
“Retention of money for satisfaction of indebtedness to government. – When any person is indebted to any government agency, the Commission may direct the proper officer to withhold the payment of any money due such person or his estate to be applied in satisfaction of the indebtedness.”
It has been observed that most of the cash advances and receivables have been outstanding for five years and beyond, without giving even partial payment. This greatly placed the city government at a disadvantage position or wisely put, those involved, have enjoyed the benefits at the expense of the agency. (See Annex “A”)
If there had been sincerity in complying with the recommendations embodied in the previous COA Annual Audit Reports, these advances and receivables could have been settled speedily, if not full.
Further, we observed that refunds of these cash advances are usually made only upon retirement from government service of the concerned officer or employee.
Management Comment:
* Management promised to improve its collection efforts to reduce these unliquidated cash advances and receivables.
Recommendation to Dipolog City Government:
* Immediate settlement of these cash advances and receivables should be intensified through the joint action of the City Accountant and City Treasurer to withhold payment of any money due to all concerned officers and employees pursuant to Section 37 of P.D. No. 1445.
