Tagum City 2008 COA Audit 3
July 4, 2010
3. The interest charges amounting to P1,727,059.70 or 7.57% of the P22,803,000.00 loan used to purchase the 64,693 square meter lot for the City Employees’ Village or City Homes were not capitalized but charged to the different responsibility centers under the General Fund. This resulted to understatement of the total cost of the project which is envisioned to be recovered from the employee-beneficiaries of the City. Likewise, the funds available for the delivery of basic services of the responsibility centers were reduced by the interest expenses.
City Ordinance No. 233, S-2006 is the ordinance which promulgated the guidelines for the establishment of the City Employees’ Village to be known as “City Homes”.
The City loaned the amount of P22,803,000.00 to acquire from Mr. Herminigildo Baluyot the 64,693 square meter lot located in Tipaz Magugpo East. The purchase price was P22,642,550.00 or P350.00 per square meter.
Section 6 of City Ordinance No. 233, S-2006 stipulates the Terms and Conditions of the Conditional Contract To Sell the lots to the qualified City employees. The employee-beneficiaries will purchase the lot at P727.00 per square meter. The total price is payable in equal monthly installment for five (5) years through payroll deduction commencing on January 2007 and ending on December 2011.
Loan ledger of the Employees’ Village showed that the City had paid the loan interests and amortization of principal as follows:
Date Interest Yearly Renewal Principal Balance Remarks 1/01/07 P22,803,000.00 Loan release
1/04/07
P 441,991.06
22,803,000.00 Interest charged to CEO Administrative
4/ /07
330,447.65
22,803,000.00 P316,182.20 taken up as other payables and P14,265.45 as interest charged to
CEO Administrative
7/04/07
274,741.95
22,803,000.00 Interest charged to City Treasurer’s Office
9/26/07
256,404.53
P159,861.00
22,803,000.00 P256,404.53 interest and P159,831.00 bank charges charged to the
City Mayor’s Office
10/16/07
24,422.01
22,803,000.00 Interest charged to the City Mayor’s Office
12/13/07
399,052.50
1,425,187.50
21,377,812.50 Interest charged to City Engineer’s Office Totals P1,727,059.70 P159,861.00 P1,425,187.50
The different responsibility centers where the loan interests were charged are the City Engineer’s Office (CEO), Administrative; the City Treasurer’s Office and the City Mayor’s Office.
The City Homes project will incur more interest charges until the loan is fully paid. These financial expenses should be capitalized to form part of the total cost of the project so the City can quantify how much benefits will redound to its employees who will avail of the program. The opportunity given to the employees to acquire the lot at lesser cost is already a benefit the City has accorded to them. If interest charges for the loan used to acquire the City Homes are charged to the different responsibility centers, this will drain the funds available for the projects of these offices. Consequently, this will affect the delivery of basic services to the other beneficiaries of the City.
During the exit conference, the City Administrator stated that the price of P350 per square meter was indeed very low considering that the current selling price of lots around the Employees’ Village ranged from P1,000 to P1,500 per square meter. He added that the area is very near the new site of the Tagum City Hall. That once the new City hall rises, the price will be more. However, the City has come up with a plan to utilize a portion of the village for commercial use. The said plan deviated from its original plan of utilizing the area exclusively for the housing units of the City employees because many of these employees lacked the capacity to pay the monthly amortization. The Accountant stated that interest charges pertaining to the City Homes loan will be capitalized in CY 2008.
Recommendation for Tagum City Government:
Capitalize as part of the cost of the lot the interest expenses incurred for the loan used to acquire the City Homes. The P727.00 selling price per square meter should be reevaluated to ensure that the City will recover the total cost of paying off the loan in five (5) years. Ensure that the total cost of developing the area and the costs of borrowing are carefully evaluated to determine whether or not the current selling price will be advantageous on the part of the City and its employee-beneficiaries as well.
Tagum City 2008 COA Audit 2
July 4, 2010
2. Controls over cash advances were deficient, as payment of expenses incurred out of cash advances were not reported by the accountable officer, whose cash advances of P5,183,341.02 have remained unliquidated, contrary to the provisions of COA Circular No. 97-002, thereby overstating the cash and understating the expenditure accounts.
Paragraph 5 of COA Circular No. 97-002 dated February 10, 1997, provides the rules on the liquidation of cash advances hereby quoted as follows:
1. When a cash advance is no longer needed or has not been used for a period of two (2) months, it must be returned to or refunded immediately to the collecting officer.
2. All cash advances shall be fully liquidated at the end of each year. Except for petty cash fund, the accountable officer shall refund any unexpended balance to the Cashier/Collecting Officer who will issue the necessary official receipt.
3. Official Travel – Within sixty (60) days after return to the Philippines in case of foreign travel or within 30 days after return to this permanent official station in the case of local travel, as provided for in EO 248 and COA Circular No. 96-004.
Failure of the Accountable Officer to liquidate his cash advances within the prescribed period shall constitute a valid cause for the withholding of his salary and the institution of other sanctions as provided for under paragraph 9.2 and 9.3 hereof.
In addition, Section 89 of Presidential Decree No. 1445, provides that:
“No cash advances shall be given unless for legally authorized specific purpose”. A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.
Financial records disclosed an outstanding balance of cash advances granted to officials and employees in the amount of P5,291,133.29 as of December 31, 2007 (Annex 6).
Moreover, the audit revealed that the purpose of all these expenses were already served but concerned accountable officers failed to liquidate their cash advances.
As a result, expenses were unreported and unrecorded thus, overstating the cash and understating the expenditure accounts.
The issue of unliquidated cash advances of officials and employees has been one of the areas discussed in the yearly audit reports. Likewise, demand letters were sent to every official and employee concerned. However, officials and employees who had failed to settle their account and outstanding cash advances were still granted additional cash advances, resulting in the existence of numerous unliquidated cash advances.
During the exit conference, the Special Disbursing Officer for the Intelligence Fund stated that the necessary liquidation had been sent to COA Central Office. She promised to furnish our office a copy of the transmittal letter. The City Treasurer, on the other hand, assured us that he will follow up the liquidation of the cash advances of the concerned accountable officers.
Recommendation for Tagum City Government:
Demand the immediate liquidation of all outstanding cash advances as of December 31, 2007 by directing the City Accountant to send demand letters to the employees concerned.
In case of non-compliance, the local chief executive should direct the City Accountant to withhold salaries of the official or employee until such time that the cash advances made have been fully liquidated in compliance with COA Circular No. 97-002, without prejudice to the filing of appropriate charges for failure to settle accounts.
Adherence to Section 89 of PD 1445 is strongly recommended so that unreasonable balances of cash advance at the end of the month shall be avoided.
Tagum City 2008 COA Audit 1
July 4, 2010
Detailed Findings and Recommendations
A. Financial and Compliance Audit
1. The failure of the Assistant City Treasurer to remit her collections on time required under Section 29 of the Manual on the New Government Accounting System exposed government funds amounting to P161,296.75 to possible loss through theft, misappropriation and/or misapplication.
The aforecited Section of the NGAS states that:
“Reporting for Collections and Deposits. – Collectors/tellers shall issue a receipt to acknowledge collections made. The receipt maybe in the form of pre-numbered Official Receipts, or cash tickets and the like. At the close of each business day, these collectors/tellers shall accomplish the Report of Collections and Deposits (RCD) in four copies. The original and two copies, together with the duplicates of the official receipts issued shall be submitted to the treasurer/cashier to whom the cash collected shall be turned over. The fourth copy of the RCD shall be retained by the collector/teller concerned”.
x x. x. x. x.
An examination was conducted on the cash and accounts of Mr. Edgar C. de Guzman, City Treasurer, on June 18, 2007. Actual cash count and verification of unissued accountable forms was made on all the collectors, disbursing officers and other accountable officers of the Office of the City Treasurer.
One of the Accountable Officers su
bjected to cash count was Ms. Dolores W. Fiesta, Assistant City Treasurer. Upon demand, she presented no cash/collections during that time and informed the Auditor that she had no unissued accountable forms in her possession. She then signed the Certification on the General Forms 74(A), Report of Cash Examination.
Verification made on the Report of Accountability for Accountable Forms as of cash count, June 18, 2007, revealed that Accountable Forms No. 51 with Serial Nos. 0237801-850 and 0207722-0207750 were included in the balances of unissued accountable forms as of that date. Further verification showed that AF 51 SN 0237801-850 and SN 0207701-750 were issued to Ms. Dolores W. Fiesta, on July 12, 2005 and July 20, 2005, respectively. Her latest Report of Collections and Deposits (RCD) was dated December 2, 2005 when she turned over the amount of P141,160.79 representing her collections for AF 51 SN 0207716-721. Thus, as of June 18, 2007, her accountability for these accountable forms, was as follows:
AF 51 SN 0237801-850 50 pcs. 0207722-750 29 pcs.
—–
Total 79 pcs.
===
In view hereof, a Demand Letter dated June 21, 2007 was issued to her demanding that she produce immediately the missing accountable forms and to submit a written explanation on the reason/s for her failure to turn-over said official receipts.
In her reply, Ms. Fiesta stated that she had allowed a casual clerk, Ms. Mona Garcia, to liquidate her collections and that she could not locate anymore the missing accountable forms. She further stated that all of these issued accountable forms were for bidder’s bond and that she is willing to pay whatever amount due for those lost accountable forms.
Verification of the records of the City Accountant’s Office revealed that 44 of the 79 accountable forms which were declared missing had been presented to the City Treasure’s Office for refund, totaling P161,296.75 (Annex 5). The other 35 pieces remained unlocated and not presented for refund.
On June 27, 2007, we issued a second Demand Letter to Ms. Fiesta. But it was only on July 12, 2007 when we received her reply, wherein she promised to pay in installment basis, at least P5,000.00 a month starting July 2007 and also to withhold one-half of the bonus due her. However, that same date, she again wrote us to inform that she will not be paying in installment but in lumpsum from the loan proceeds of her parcel of land.
A month after her reply dated July 12, 2007, our office followed up on whether Ms. Fiesta has already made the payment. It was learned that no payment was made.
Such being the scenario, Ms. Fiesta can be liable for malversation of public funds pursuant to provisions of Article 217 of the Revised Penal Code hereby quoted as follows:
“Any public officer who, by reason of the duties of his office, is accountable for public funds or property, shall appropriate the same, or shall take or misappropriate or shall consent, or through abandonment or negligence, shall permit any other person to take such public funds, or property, wholly/partially, shall otherwise be guilty of the misappropriation or malversation of such funds or property.”
However, during the exit conference, the City Treasurer stated that Ms. Fiesta had made partial payments and also promised to pay in installments the balance of her accountability.
We informed him and the other department heads who were present during the exit conference that we can not allow the mode of repayment that Ms. Fiesta desired. Ms. Fiesta has to remit all her remaining accountability sooner to avoid legal complications bearing this issue.
Recommendation for Tagum City Government:
Require Ms. Dolores W. Fiesta, Assistant City Treasurer, to immediately restitute the amount of P161,296.75.
Direct the Treasurer to monitor the liquidation of daily collections and deposit the same to authorized depository banks in the manner and within a period prescribed by Section 29, 32 and 33 of the Manual on the New Government Accounting System, Volume I.
The City Treasurer should take action against those collectors assigned in the office who had always been delayed in turning-over their collections. He should see to it that collections are promptly turned-over as required.
