2011 annual audit report for iloilo city
DESCRIPTION
This document exposes how Jed Patrick E. Mabilog overpriced the items of work for the New Iloilo City Hall building project.TRANSCRIPT
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PART II – DETAILED FINDINGS AND RECOMMENDATIONS
Financial and Compliance Audit
1. Property, Plant and Equipment of P820,848,827.34 is disclosed in subsidiary
ledgers as unreconciled due to the absence of supporting PPE records, thus
35% of the total PPE of P2,339,113,086.34 is of doubtful accuracy and
existence.
This is a reiteration of our audit finding embodied in the Annual Audit
Reports for CYs 2008, 2009 and 2010.
The financial records for Property, Plant and Equipment (PPE) as of
December 31, 2011 totaled P2,339,113,086.34, broken down by funds as
presented below (Please see Annex III.a for the detailed breakdown) :
Fund Total PPE Unreconciled % Unreconciled to:
PPE Total Per Fund
General P1,797,722,380.88 649,616,106.94 27.78 36.13
Spec. Educ 338,316,451.94 90,177,819.78 3.85 26.65
Trust Fund 203,074,253.52 81,054,900.62 3.46 39.91
- - -
Total P 2,339,113,086.34 820,848,827.34 35.09 or 35%
Our review of the PPE subsidiary ledgers disclosed the following:
a. Of the total General Ledger balance of PPE of P2,339,113,086.34,
35.09% is disclosed in their subsidiary ledgers as unreconciled with
27.77% from the General Fund, 3.85% from the Special Education
Fund and 3.40% from the Trust Fund.
b. Of this total General Ledger balance, the percentage of
unreconciled per fund is 36.13%, 26.65%, and 39.91% of the
general, special education and trust fund, respectively. As to PPE
classification 31.96% pertains to Land, 85.08% to Land
Improvements, 76.62% to Office Buildings, 39.70% to School
Buildings, 74.69% to Furniture & Fixtures, 49.20% to Other
Machineries and Equipment and 48.79% to Technical and Scientific
Equipment.
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c. Construction in Progress – Flood Controls under the General Fund
indicated an abnormal balance (P667,761.54). PPE, being an asset
account, normally should have a positive debit balance.
The unreconciled PPE, represented account balances without identified
supporting records, was determined after the City computerized its accounting
system using the electronic New Government Accounting System (e NGAS) in
July 2006.
This year’s unreconciled balance of PPE of P820,848,827.34 decreased
by P126,516.49 compared to last year’s balance of P820,975,343.83.
The problem of unreconciled balances was brought about by inadequacy
of property records and the non-reconciliation with accounting records.
We appreciate the efforts of the GSO in the conduct of physical
inventory. While we consider this as an initial step to address the problem,
documentation and maintenance of complete property records should be equally
given importance to lessen the unreconciled difference.
Recommendation
We recommend that the General Services Office complete and enhance
their property records and coordinate with the Accounting Office in reducing
if not totally eliminating the unreconciled difference between their records.
2. The contract for the Supplemental Works on the Construction of the
Updated Plans of the New Iloilo City Hall Building amounting to
P224,171,752.59 is wanting of essential information necessary for its proper
review and evaluation, thus resulting in the delay of auditorial review of
the contract.
We have reviewed Supplemental Agreement No. 1 Re: Construction of
the Updated Plans of the New Iloilo City Hall in the amount of P224,171,752.59,
as itemized below and observed the following:
Items proposed in the Supplemental
Contract
Amount Remarks
(1) Ground Floor:
Relocate City Health, Library and Office of
6,544,698.87
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Senior Citizen to Second Floor
Reserve the area as bank space
Second Floor:
Space for ramp area will be
Converted to City Health, Library and
OSCA Offices
Additional billeting room and shower room
at Crisis Management Division
Electrical works
Sanitary Works
Mechanical Works
(2) Third Floor:
Provide toilet and future areas to the
occupants
Provide space for connecting pedestrian
bridge way from parking building
Architectural Works
Sanitary Works
4,087,613.17
(3) Provide additional fire exit stairs from the
ground floor to third floor
1,398,911.49
(4) Use modular system furniture with seating
system instead of plywood low partition
Low partition and worktop
38,184,003.72
(5) Install power cables, distribution
transformers and generator set to
accommodate additional load
-power cables
-distribution transformers
-generator set
20,979,607.55
(6) Provide pump, motors and pressure tanks
for water distribution system
9,664,347.00
(7) Provide additional passenger elevator, 2
new units and upgrade 2 units
13,814,077.33
(8) Install inverter type air conditioning system
(11,400sqm.)
- Inverter units of air conditioning
- Centralized air con monitoring
system
55,945,324.54
(9) Provide space for cafeteria with counter 15,597,376.01
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and seating system
- Provide additional areas for
executive use.
- Complete with folding wall partition
at the roof deck
(10) Provide roll-up curtain blinds for all
windows
11,156,861.62
(11) Use of homogenous ceramic tiles for all
executive offices instead of vinyl tiles.
Use of carpet tiles for Mayor’s Office.
19,427,113.05
(12) Sanitary/Plumbing works
-(2) waterline system- potable and non-
potable
-separate water system for potable and non-
potable
5,935,536.37
(13) Use T5 lighting fixtures instead of ordinary
fluorescent tube lights
1,988,494.74
(14) Provide vault for Legal and Mayor’s Office 197,656.25
(15) Install solar assisted air conditioning units
on the 7th
floor Mayor’s Office and
Cafeteria area
9,446,640.50
(16) Provide drainage outfall from STP to river 2,891,940.29
(17) Provide insulation on all gypsum dry wall 618,017.40
(18) Other electrical works 5,867,500.54
(19) Additional partitions at the 7th
floor 426,032.16
Total Amount 224,171,752.60
1. The Contract - Supplemental Agreement No. 1 covering the construction of
the Updated Plans of the New Iloilo City Hall Building did not mention the
mode of procurement that was opted to by the Iloilo City Government.
2. No document was submitted to show that a public bidding was conducted on
the supplemental works, considering the materiality of the project cost,
neither was there a BAC Resolution had any of the alternative modes of
procurement was resorted to by the City Government.
3. There was no proof that the Notice of Award for the Supplemental Works was
posted in the PHILGEPS website.
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4. The provision on the payment to the same contractor of the 15%
mobilization expenses for the supplemental works was contrary to COA
Cir. 82-177 dated March 04, 1982, since mobilization had already been paid
to the same contractor. The stated Circular provides that the advance
payment covers the cost of mobilizing equipment to the job site. Considering
that this is a supplemental agreement and the scope of works do not require
heavy equipment, the payment of the additional 15% for mobilization is no
longer necessary.
5. The submission of the subject Contract to this Office was not compliant to
COA Cir. 2009-001 dated February 12, 2009. Audited agencies should
furnish the auditor with copies of perfected contracts within 5 working days
upon approval together with the supporting documents for review. While the
contract was perfected on July 22,2011, the same was submitted to COA
only on August 22,2011.
The noted observations were brought to the attention of LGU
management on October 05, 2011 thru a Memorandum dated October 03,
2011. However , no reply or management comment was received. We have issued
Audit Observation Memorandum (AOM) No. 11-010 dated December 12, 2011
on this audit finding, however no management comment was advanced in
this regard.
Recommendation
We recommend that the LGU management cause the submission of the
necessary information/ documents to facilitate the auditorial review and
evaluation of the contract covering the Supplemental Works on the
Construction of the Updated Plans of the New Iloilo City Hall Building so that the
necessary audit action can be rendered on time.
3. Completed infrastructure projects totaling to P204,546,952.04 had no
warranty security against Structural Defects and Failures after the one (1)
year defects liability period as stipulated in the conditions of the contract
contrary to Sec. 62.2.3.3 of the Revised Implementing Rules and Regulations
of Republic Act No. 9184.
We have observed that the LGU did not impose warranty security
against Structural Defects and Failures to contractors of completed infrastructure
projects totaling P204,546,952.04, after the one (1) year defects liability period as
stipulated in the conditions of the contract contrary to Sec. 62.2.3.3 of the Revised
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Implementing Rules and Regulations of Republic Act No. 9184, thus
responsibilities of the contractors during the applicable warranty periods are not
guaranteed.
Sec. 62.2.3.3 of the Revised IRR of R.A. No. 9184 provides:
“To guarantee that the contractor shall perform his
responsibilities as prescribed in Sec. 62.2.3.1 (a) of this IRR, it
shall be required to post a warranty security in accordance with
the following schedule:
Form of Warranty Security
Amount of Warranty Security
(Equal to Percentage of the
Total Contract Price)
a) Cash or Letter of Credit issued by
a Universal or Commercial Bank:
Provided, however, that the LC
shall be confirmed or
authenticated by a Universal or
Commercial Bank, if issued by a
foreign bank.
Five percent (5%)
b) Bank guarantee confirmed by a
Universal or Commercial Bank
Ten percent (10%)
c) Surety bond callable upon demand
issued by GSIS or a surety or
insurance company duly certified
by the Insurance commission as
authorized to issue such security
Thirty percent (30%)
For biddings conducted by LGUs, the contractor may also submit
warranty securities in the form of bank guarantee or letter of credit
from other banks certified by the BSP as authorized to issue such
financial instrument.”
Sec. 62.2.3.1(a) reads as follows:
“The following shall be held responsible for Structural Defects”,
i.e., major faults/flaws/deficiencies in one or more key structural
elements of the project which may lead to structural failure of the
completed elements or structure, or “Structural Failures”, i.e.,
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where one or more key structural elements in an infrastructure
facility fails or collapses, thereby rendering the facility or part
thereof incapable of withstanding the design loads, and/or
endangering the safety of the users or the general public:
a) Contractor – Where Structural Defects/Failures arise due to faults
attributable to improper construction, use of inferior
quality/substandard materials, an any violation of the contract
plans and specifications, the contractor shall be held liable;”
Infrastructure projects under the General Fund, Special Education Fund
and Trust Fund totaling P204,546,952.04 were reported by the LGU as completed
and paid as of December 31, 2010 (Annex III.b). However, the LGU had not
finally accepted the projects in 2011 after the defects liability period of one (1)
year from project completion in 2010. The projects should have been finally
accepted already provided there were no repair works to be undertaken thereon so
that the stipulated warranty in the conditions of the contract against structural
defects and failures as provided under Sec. 62.2.3.3 of the Revised IRR of R.A.
No. 9184 could be imposed to the contractors starting from the date of final
acceptance. The contractors should post warranty securities for two (2), five (5) or
fifteen (15) years from final acceptance depending on the type of the projects,
except those occasioned by force majeure and those caused by other parties.
Had the projects been finally accepted, the following warranty securities
should have been required to be posted by the contractors in 2011:
Form of Warranty Security Amount
a) In case of cash or Letter of Credit issued by a
Universal or Commercial Bank: Provided,
however, that the LC shall be confirmed or
authenticated by a Universal or Commercial
Bank, if issued by a foreign bank.
P10,227,347.62
b) In case of bank guarantee confirmed by a
Universal or Commercial Bank
P20,454,695.20
c) In case of Surety bond callable upon demand
issued by GSIS or a surety or insurance
company duly certified by the Insurance
commission as authorized to issue such
security
P61,364,085.61
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Since above mentioned warranty securities were not posted by the
contractors, their responsibilities during the applicable warranty periods are not
guaranteed. They should be held liable for structural defects and failures which
may arise due to faults attributable to improper construction, use of inferior
quality/substandard materials, and any violation of the contract plans and
specifications.
An Audit Observation Memorandum No. 12-002 dated March 7, 2012
was issued in order to bring the matter to the attention of the City of Iloilo. In
response, the OIC City Engineer agreed with the COA finding and showed
willingness to adhere with the imposition of such in notable projects such as the
New Iloilo City Hall Building and the like. However, projects costing Two
Million and below were somehow given consideration regarding the imposition
of warranty security so that the City Government would be able to eliminate any
deterrent factors in the expeditious delivery of public services and benefits to the
people. The OIC City Engineer also assured the COA that they are closely
monitoring the implementation of the programs of the City Government to be able
to give quality and excellent projects to its constituents.
Recommendation
We recommend that the applicable warranty security against structural
defects and failures be imposed from the contractors after final acceptance of the
infrastructure projects. The types of the projects should be classified by the Office
of the City Engineer as permanent structures, semi-permanent structures or other
structures in order to determine the applicable warranty period of fifteen (15)
years, five (5) years or two (2) years, respectively. The Office of the City
Accountant should ensure that the contractors post the warranty security covering
the full amount in the first year and renew the same every year thereafter, subject
to reduction every year by the amount of depreciation on a straight line basis. The
warranty security should be returned only after the lapse of the applicable
warranty period.
The City Mayor should create a committee to conduct inspection of the
infrastructure projects after the 1 year defects liability period. In the event that any
of the infrastructure projects will be damaged due to faults attributable to the
contractors, they should be obliged to undertake the necessary repair works at
their own expense before they are issued Certificates of Acceptance by the LGU.
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The Bids and Awards Committee should require contractors to support
the Statement of Completed Government and Private Contracts with Certificates
of Acceptance, if applicable.
4. As of December 31, 2011, audit disallowances summed up to P60,715,912.27
of which P495,497.75 have already been refunded while P258,134.57 of the
total audit suspensions of P939,054.77, have been settled.
The Auditor’s responsibility in the issuance of the Notices of
Suspensions, Disallowances & Charges is in line with the Commission’s
constitutional mandate under the Philippine Constitution which is to examine,
audit and settle all accounts pertaining to the revenues and receipts of and the
expenditures and uses of funds and property, owned or held in trust by, or
pertaining to, the Government, or any of its subdivisions, agencies or
instrumentalities, including government-owned and controlled corporations.
Total disallowances and suspensions issued as a result of post audit on
the accounts of the City Government totaled P60,715,912.27 and P939,054.77,
respectively.(Annex III.c)
Of the total disallowances, P59,541,716.35 pertain to CY 2010
transactions; P384,041.50 for CY 2009; P38,885.46 for CY 2008; P26,968.96
for CY 2007, and the rest date back prior to CY 2005. The disallowances issued
for CY 2010 are still under appeal and no Notice of Finality of Decision had been
issued hence the same are not recorded in the agency books as Receivables-
Disallowances/Charges.
The disallowances of P59,541,716.35 for CY 2010 consist of Personnel
Enhancement Incentive of P46,424,328.24 granted to officials and employees of
the City of Iloilo, Financial Assistance of P5,270,000 given to different barangays
of Iloilo City and Cash Allowance of P7,847,388.11 of National Government
officials and employees assigned to the City of Iloilo.
Of the total suspensions of P939,054.77, P258,134.57 has already been
settled, leaving a balance of P680,920.20.
Recommendation
We recommend that the LGU Management faithfully adhere to the
prescribed government laws rules and regulations, ensure economy, efficiency
and effectiveness in their operations and require adequate documentation of its
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financial transactions to avoid disallowances and suspensions in the post audit of
their accounts by the COA Auditor.
5. The City of Iloilo paid Cash allowances to officials and personnel of DILG,
DepEd-Division of Iloilo City, Internal Affairs Service and City and Regional
Prosecutor’s Office totaling to P3,406,723.66 out of the unexpended balance
of the FY 2010 Calamity Fund contrary to item b.4 of the IRR of R.A. No.
8185, thus depriving the constituents of the use of the fund in case of
calamity.
We have audited the FY 2010 4th
Quarter City Cash Allowance released
by the City of Iloilo on January, 2011 to officials and personnel of DILG, DepEd-
Division of Iloilo City, Internal Affairs Service and City and Regional
Prosecutor’s Offices totaling P3,406,723.66, covered by the following reference
documents and particulars:
Check No.
Date
Amount of
Check
Amount
Disallowed
--------------- ---------- ------------------ -------------------
0034260557 1/3/11 P 3,600.00 P 3,600.00
0034260569 1/4/11 3,542,874.46 2,668,548.14
0034260579 1/6/11 1,009,125.00 280,606.42
0034260588 1/7/11 1,174,162.37 411,832.24
0034260604 1/10/11 806,670.82 22,936.86
0034260620 1/12/11 452,096.48 3,600.00
0034260654 1/17/11 126,187.78 3,600.00
0034260720 1/27/11 721,847.11 12,000.00
Total P3,406,723.66
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The LGU provided funds for the City Cash Allowance of national
government officials and personnel concerned from the unexpended balance of
the FY 2010 Calamity Fund through Appropriations Ordinance No. 2010-108
(Supplemental Budget No. 8) which was enacted by the Honorable Members of
the Sangguniang Panlungsod on December 20, 2010 and later approved by the
Honorable City Mayor on December 21, 2010 (Annex III.d). In the review dated
January 10, 2011 (Annex III.e) of such budget, the Department of Budget and
Management (DBM) Region VI, Iloilo City, declared the expenditure items in the
appropriations ordinance, including the City Cash Allowance, inoperative
effective immediately in view of item b.4 of the IRR of R.A. No. 8185 which
states:
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“Any unexpended balance of the Calamity Fund at the end of
the Current Year shall revert to the Unappropriated Surplus for
re-appropriation during the succeeding budget year.”
Under Section 353 of the Local Government Code of 1991, the official
fiscal year of local government units shall be the period beginning with the first
(1st) day of January and ending with the thirty-first (31
st) day of December of the
same year.
The total amount of P3,406,723.66 was disallowed in audit because the
use of FY 2010 Calamity Fund for the City Cash Allowance was contrary to item
b.4 of the IRR of R.A. No. 8185, as pointed out by the DBM Region VI in the
aforementioned budget review. We have issued ND No. 12-001-100-(11) dated
February 1, 2012, in this regard.
Recommendation
We recommend that the Iloilo City Government observe strictly the
laws rules and regulations on the use of calamity fund to ensure that the
desired services and benefits can be delivered to its constituents in times
of calamities.
We also recommend that the Local Chief Executive direct the persons
liable to settle the said disallowance.
6. The rate of project implementation of 48.60% funded from the 20%
Development Fund could have been increased to a higher level had there
been proper coordination among the project beneficiaries and the officials
involved in planning, execution and monitoring.
We have evaluated the status of implementation of the projects
funded out of the CY 2011 - 20% Development Fund and noted the following
observation:
The 2011 Annual Development Plan and Investment Program (ADPIP)
embodies the list of sectoral programs, projects and activities with their
corresponding budgets designed to help address Iloilo City’s development needs
and concerns for CY 2011. These developmental concerns are among the
priorities of the LGU in pursuing its vision of becoming a Premier City by
2015.
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Local plans and programs were classified into three categories,
namely: General Public Services, Social Services and Economic Services
with a corresponding share of the budget of 12.76%, 63.37% and 23.87%,
respectively.
As the City’s concern for development was impressively presented
in the ADPIP, actual project implementation did not speak so well of the
desired output. The percentage of project implementation was only 48.60%
by the end of 2011. (Annex III.f) For CY 2011, the agency appropriated a
sum of P 122,311,761.00 for development projects to be funded from the 20%
Development Fund. Evaluation of project implementation showed the relative
accomplishments per category, viz: General Public Services - 9.87%; Social
Services 51.21% and Economic Services 62.36%. At the end of the year
only P59,438,451.00 of the appropriated amount of P122,311,761.00 or
48.60% was expended for implemented projects. We also noted that
numerous projects from the CY 2010 Development Fund were only
implemented in CY 2011.
While budget consideration is not a deterrent factor in project
implementation, the desired services/benefits could have been delivered to
the City’s constituents on time and to the optimum level had there been
proper coordination among the project beneficiaries and the officials
involved in planning, execution and monitoring of such projects. Moreover,
the rate of project implementation could have been increased had monitoring
mechanisms been put in place in gauging the efficiency of implementation in
real time so that whatever deficiencies/ shortfall which may have been noted
along the way, the same could have been rectified within the time frame of
implementation. It is thru feed-back that inputs for efficiency and further
improvement are drawn.
We issued AOM No. 2012-003 dated March 8, 2012 for this finding. In
response, the City Budget Officer replied that the delay in implementation was
due to a change in administration during the first semester of CY 2010 that
necessitated the observance of a transition period so that the new administration
may appraise the existing programs and projects of the City, it being subject to the
approval and clearance of the City Mayor. In addition, the ADPIP is being
prepared by the City Development Council with the City Engineer’s Office as the
primary implementing office. Monitoring of implementation thereof rests with
them. Meanwhile, the City Budget Office releases allotments based on request of
the end-user and approved by the Local Chief Executive. Nevertheless, the City
Budget Office gave an assurance to take note of the audit recommendations and
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shall undertake to give sound advice to the concerned offices/departments with
regard to these matters, particularly the Local Chief Executive.
The OIC City Engineer also justified that numerous projects from CY
2010 Development Fund were only implemented in 2011 due to the domino
effect of sixty (60) days (before and after) banning period of the Commission on
Election on construction projects in line with the 2010 National Election and
forty five (45) days (before and after) on Local Election. It took the City until
September 2011 to start implementing the 2011 projects. Nevertheless, the OIC
City Engineer made assurance that the projects for CY 2012 will be implemented
as scheduled.
Recommendation
We recommend that the rate of implementation of projects funded
from the 20% Development be enhanced so that the desired services and
benefits which go with these projects be delivered to the constituents of the
City without unnecessary delay.
We further recommend that regular monitoring mechanisms be
employed in assessing the rate of progress of project implementation and
that a closer coordination among the officials involved in planning,
execution and monitoring be enhanced to achieve the desired level of
efficiency.
7. Due to the absence of proper monitoring controls, payments for garbage
collection and transport services totaling to P46,708,593.75 were not
supported with official trip tickets contrary to the contract’s term of
reference; thus, the propriety of disbursements were not ensured.
We have audited the payments to JS Layson & Co., Inc. for garbage
collection and transport services totaling P46,708,593.75 for the period December
1, 2010 to March 31, 2011 and found out that official trip tickets were not made to
support the claims for payment contrary to the contract’s terms of reference, thus
proper monitoring controls were not put in place to ensure the propriety of
disbursements.
The terms of reference of the Contract for Garbage Collection and
Transport Services dated March 24, 2010 stipulates:
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“xxx, the Office of Public Services shall provide official trip
ticket forms to be filled up by driver/collection crew, signed by the
Contractor’s foreman and approved by the LGU designated
inspector and by the LGU Officer in charge of garbage collection.
Xxx
The Office of Public Services shall keep all records of collection
trips and complete the same for the required monthly
accomplishment report, which shall form part of the documents for
its billing purposes. ”
Details of billings and corresponding payments are as follows:
Date Check No. Gross Taxes Net Period Days Trips Rate
1/6/11 0034260582 P4,231,500.00 P264,468.75 P3,967,031.25 12/1-31/10
31 78 P1,750
2/04/11 0034260784 4,231,500.00 264,468.75 3,967,031.25 1/1-31/11 31 78 1,750
3/03/11 0034261034 3,822,000.00 238,875.00 3,583,125.00 2/1-28/11 28 78 1,750 4/13/11 0035906335 4,231,500.00 264,468.75 3,967,031.25 3/1-31/11 31 78 1,750
5/10/11 0035906567 4,095,000.00 255,937.50 3,839,062.50 4/1-30/11 30 78 1,750 6/08/11 0035906877 4,231,500.00 264,468.75 3,967,031.25 5/1-31/11 31 78 1,750
7/07/11 0035907149 4,095,000.00 255,937.50 3,839,062.50 6/1-30/11 30 78 1,750
8/04/11 0035907466 4,231,500.00 264,468.75 3,967,031.25 7/1-31/11 31 78 1750 9/05/11 0035907715 4,231,500.00 264,468.75 3,967,031.25 8/1-31/11 31 78 1,750
10/7/11 0037605667 4,095,000.00 255,937.50 3,839,062.50 9/1-30/11 30 78 1,750
11/8/11 0037605882 4,231,500.00 264,468.75 3,967,031.25 10/1-31/11
31 78 1,750
12/5/11 0037606179 4,095,000.00 255,937.50 3,839,062.50 11/1-
30/11
30 78 1,750
------------------ ----------------- -------------------
Total P49,822,500.00 P3,113,906.25 P46,708,593.75
------------------ ----------------- -------------------
The use of aforementioned official trip tickets was not observed because
the Office of the City General Services has not yet come up with and provided
forms to be accomplished by contractor’s personnel for approval by the
designated LGU personnel.
The contractor consistently billed the LGU for 78 trips per day at P1,750
per trip based on the contract’s scope of work. The apparent disregard of the
pertinent terms of reference of the contract on the use of official trip tickets shows
that monitoring controls are not in place to ensure that the desired services have
been rendered and payments of claims are sufficiently supported with complete
documentation.
We have issued AOM No. 11-009 dated December 7, 2011 on this
observation. In reply to the audit memorandum, the LGU management claimed
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that they have been consistently monitoring the daily number of trips rendered by
the contractor through their Garbage Monitoring report at the Calajunan Disposal
Facility. The reports are part of the attachments in every claim/payment to the
service contractor. In compliance to the auditor’s recommendation, the LGU
management would be implementing the use of monitoring reports/official trip
tickets at the dispatch area in every district after giving due information to the
personnel involved and the service contractor as soon as possible.
Recommendation
We recommend that the Office of the City General Services (GSO)
implement the use of official trip tickets to facilitate the monitoring of daily
number of trips rendered by the contractor and to verify the accuracy of its billing
statements. The concerned employees of the GSO should be made aware of their
responsibilities as specified in the contract on garbage collection and transport
services to ensure that the LGU derives the desired services and value for money
being expended for the purpose.
We commend management for implementing this recommendation
effective January 2012.
8. In the procurement of materials for the improvement /installation of
street lighting of the different barangays of Iloilo City and instructional
materials charged against Special Education Fund aggregating to
P12,921,529.00, the Agency failed to adhere to Rule II, Section7 of the
Revised Implementing Rules and Regulations; thus, causing piecemeal
purchases and splitting of Requisitions and Purchase Orders contrary to
COA Circular 76-41 dated July 30, 1976.
Rule II, Section 7 of the Revised Implementing Rules and Regulations
of Republic Act 9184 sets forth the initial steps of the procurement process
wherein the end-users are required to prepare their respective Program
Project Management Plan (PPMP) for consolidation into the proposed Annual
Procurement Plan (APP) of the Agency. This APP serves as a vital tool to
the agency in the management and phasing of their procurement needs.
Commission on Audit Circular No. 76-41 dated July 30, 1976 deals on
the prohibition against splitting of requisitions, purchase orders, vouchers and
others. Within the sphere of Government procurement, splitting is associated
with requisitions, purchase orders, deliveries and payments in the form of:
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a. Non-consolidation of requisitions for one or more items needed
at or about the same time by the requisitioner (splitting of
requisitions);
b. Issuance of two or more purchase orders based on two or more
requisitions for the same or at about the same time by different
requisitioners (splitting of P.O.); and
c. Making two or more payments for one or more items involving
one purchase order (splitting of payments).
In the review of Purchase Orders, we noted numerous deviations
from the given criteria summarized in the tables presented below:
Table A. Procurement of Electrical Supplies from Topmost Dev. Corp.
P.O. No. Date Supplier Amount Items Purchased 11-08-0540 08/24/2011 Topmost Dev. Corp. 199,243.00
Electrical Supplies
11-08-0561 08/10/2011 Topmost Dev. Corp. 49,783.00 Electrical Supplies
11-08-0562 08/10/2011 Topmost Dev. Corp. 49,799.00 Electrical Supplies
11-08-0563 08/10/2011 Topmost Dev. Corp. 50,704.00
Electrical Supplies
11-08-0564 08/10/2011 Topmost Dev. Corp. 50,717.00 Electrical Supplies
11-04-0193 04/20/2011 Topmost Dev. Corp. 749,514.00 Electrical Supplies
11-04-0244 04/27/2011 Topmost Dev. Corp. 74,076.00 Electrical Supplies
Total 1,223,836.00
17
Table B. Procurement of Instructional Materials from St. Augustine Publishing
The given data show that similar goods needed at about the same
time are procured from the same supplier in several transactions instead of
consolidating the same in one single procurement
Evidently, (2) two among the (3) three conditions of splitting are
manifested in these transactions. The circular further states that in whatever
form splitting has been resorted to, the idea is to do away with and circumvent
control measures promulgated by the government. As evidently noted in the given
transactions, the pertinent provisions of R.A. 9184 were not observed at the very
onset of the procurement process. The needs of the different departments as
reflected in their respective Project Procurement Management Plan (PPMP)
were not consolidated and contained in an Annual Procurement Plan.
Procurement needs are still being catered on a per purchase request basis
making the process more tedious and inefficient.
P.O. No. Date Supplier Amount Items
Purchased
11-05-0321 06/28/2011 St. Augustine
Publications
999,845.00
Textbooks
11-05-0323 06/28/2011 St. Augustine Publications
499,895.00 Textbooks
11-05-0328 05/25/2011 St. Augustine
Publications
499,920.00 Instructional
Materials
11-08-0536 09/02/2011 St. Augustine
Publications
499,848.00 Various textbooks
11-08-0538 09/02/2011 St. Augustine
Publications
699,975.00 Various textbooks
11-08-0537 09/02/2011 Various textbooks 699,865.00 Various textbooks
11090633 11/03/2011 St. Augustine
Publications
799,784.00 Instructional
Materials
11100696 11/03/2011 St. Augustine
Publications
1,499,685.00 Instructional
Materials
11100698 11/03/2011 St. Augustine
Publications
1,499,370.00 Instructional
Materials
11100700 11/03/2011 St. Augustine
Publications
1,999,656.00 Instructional
Materials
11-10-0701
11/03/2011
St. Augustine
Publications
999,880.00 Instructional
Materials
11100702 11/03/2011 St. Augustine
Publications
499,985.00 NAT Reviewer
11090664 11/03/2011 St. Augustine
Publications
499,985.00 NAT Reviewer
Total P11,697,693.00
18
The existing practice had resulted in: (a) increased consumption of
office supplies as the same set of documents are being attached to several
vouchers covering the purchase of similar goods from the same supplier at
about the same time; (b) added man-hours in processing the same claims
from the same suppliers being split into several P.O.s and disbursement
vouchers and (c) non-availment of volume discounts for bulk purchase.
While this deficiency deals more on procedural flaws and not
intended to circumvent control measures, this could be a pre -disposing
factor to splitting which is not acceptable under procurement laws. This
finding was previously brought to the attention of management. It is sad to
note however that the same remain unaddressed.
An Audit Observation Memorandum No. 12-004 dated March 2, 2012
was issued to call on the attention of the LGU management.
Recommendation
We recommend that management consider the strict observance of
Rule II, section 7 RA 9184 and Commission on Audit Circular No. 76-41 as
well as the imposition of control measures to ensure that procurement is
effected in an efficient, economical and effective manner that is most
advantageous to the government and to prevent possible disallowances for
such violation.
9. Proper liquidations of financial assistance granted to government and non-
government organizations totaling to P11,843,500.00 were not complied with
contrary to prescribed accounting and monitoring controls, thereby resulting
in untimely verification of financial records and reports and evaluation of
project implementation.
We have audited the financial assistance granted to government and
non-government organizations totaling P11,843,500.00, and observed that proper
liquidation of funds were not complied with contrary to prescribed accounting and
monitoring controls, thereby resulting in untimely verification of financial records
and reports and evaluation of project implementation.
1. Iloilo Dinagyang Foundation, Inc. (IDFI) - P7,673,500.00
The LGU released the following financial assistance totaling
P7,673,500.00 to the IDFI:
19
Date
Check No.
Purpose
Amount
Submission of
liquidation
No. of days
Liquidated
No. of
days Delayed
--------- --------------- ---------------------------------- ----------------- ----------------- -------------- ------------
1/7/11 003687391 2011 Iloilo Dinagyang Festival,
January 14-23, 2011
P1,000,000.00 11/8/11 289 229
1/14/11 0034260646 2011 Iloilo Dinagyang
Festival,
January 14-23, 2011
4,313,500.00 11/8/11 289 229
1/18/11 0034260664 Iloilo-Panay Badminton
Club,
1st Mayor Jed Patrick E. Mabilog Dinagyang
Badminton Cup,
January 20-21, 2011
160,000.00 11/14/11 297 237
1/18/11 0034260663 Panay Anglers Association Inc.,
Mayor’s Cup Dinagyang
Tournament, January 22-23, 2011
100,000.00 11/14/11 295 235
1/20/11 003687394 2011 Iloilo Dinagyang
Festival, January 14-23,
2011
1,000,000.00 11/8/11 289 229
1/25/11 003260708 Practical Shooting
Association, Inc.,
1st Mayor Jed Patrick E. Mabilog Dinagyang
Shooting Competition,
January 21-23, 2011
30,000.00 12/23/11- 334 274
4/15/11 0035906360 Aliwan Festival, April 14-
17, 2011
1,070,000.00 12/13/11 240 180
----------------- Total P7,673,500.00
==========
As shown in the records, liquidation documents and reports of financial
assistance were submitted by the IDFI to the LGU after 289 to 334 days from
completion of each activity. Item 5.4 of COA Circular No. 2007-001 dated
October 25, 2007 states:
“Within sixty (60) days after completion of the project, the
NGO/PO shall submit the final Fund Utilization Report certified
by its Accountant and approved by its President/Chairman to the
GO, together with the inspection report and certificate of project
completion rendered/issued by the GO authorized representative,
list of beneficiaries with their acceptance/acknowledgment of the
project/funds/goods/services received. The validity of these
documents shall be verified by the internal auditor or equivalent
official of the GO and shall be the basis of the GO in recording
20
the fund utilization in its books of accounts. These documents
shall support the liquidation of funds granted to the NGO/PO.”
The IDFI was delayed by 180 to 274 days in submitting the liquidation
documents and reports. As a consequence of its failure to submit the required
reports, it was precluded from receiving funds to support its promotional
marketing of the Dinagyang Festival at the Independence Day Celebrations in
New York and Washington D.C., U.S.A. last June, 2011. Despite the City
Accountant’s reminder to the Foundation to liquidate the previous financial
assistance as embodied in a letter dated October 24, 2011, the same was not
complied with before the delegation left for the U.S.
Timely submission was not facilitated because the Memorandum of
Agreement (MOA) dated October 19, 2010 entered into by and among the LGU,
IDFI and San Jose Parish Placer did not specifically stipulate the 60-day
reglementary period nor did it require liquidation of prior financial assistance
before the release of a new one. The delayed submission of utilization reports
from November to December 2011 has deterred the LGU from promptly verifying
actual expenditures before the forthcoming 2012 Iloilo Dinagyang Celebration
scheduled on January 20 to 22, 2012. To date, such utilizations are not yet
credited to the account of the IDFI and recorded in the books of the LGU because
verification has not been completed.
While we recognize that some controls are in place, there is still a need
to impose tighter controls particularly in the setting up of the terms and conditions
of the MOA and the reglementary period for liquidations so that future events
needing financial assistance will not be adversely affected.
It was also noted that the 1st Mayor Jed Patrick E. Mabilog Dinagyang
Badminton Cup of the Iloilo Badminton Club, Mayor’s Cup Dinagyang
Tournament of the Panay Anglers Association, Inc. and 1st Mayor Jed Patrick E.
Mabilog Dinagyang Shooting Competition of the Practical Shooting Association,
Inc. were not included in the 2011 Iloilo Dinagyang Festival Factsheet, Budget
and in the Schedule of Activities. However, financial assistance totaling
P290,000.00 were extended to the IDFI for such purposes for the use of the
respective sports associations. This scheme circumvented COA Circular No.
2007-001 which requires the submission of eligibility documents by the
concerned sports associations to qualify for financial assistance.
2. Brgy. Mohon – P170,000.00
21
The LGU granted financial assistance totaling P170,000.00 to Brgy.
Mohon, Iloilo City for the Arevalo District Fireworks Contest held on January 16,
2011, to wit:
Date Check No. Amount
---------- --------------- ----------------
1/12/11 0034260625 P120,000.00
1/13/11 0034260637 50,000.00
---------------
Total P 170,00.00
=========
However, liquidation of the aforesaid financial assistance was not
required contrary to item 4.6 of COA Circular No. 94-013 dated December 13,
1994 which provides:
“Within ten (10) days after the end of each month/end of the
agreed period for the project, the IA shall submit the Report of
Checks Issued (RCI) and the Report of Disbursement (RD) to
report the utilization of funds. Only actual project expenses shall
be reported. The reports shall be approved by the Head of the
IA.”
The City Accountant explained that submission of liquidation report was
relinquished because verification of actual expenditures out of the financial
assistance was all done at the barangay level. This practice, however, did not
facilitate monitoring and recording of related actual expenditures in the books of
the LGU.
An Audit Observation Memorandum No.12-001 dated January 2, 2012
was issued to call the attention of the City Government. Consequently, the City
Accountant endorsed the said memorandum to the concerned personnel in charge
of these activities. In a letter from the President of the Iloilo Dinagyang
Foundation, Inc. dated February 8, 2012, he promised timely submission of
liquidation on subsequent activities and that they have already fully liquidated and
complied with to their best efforts the documentary requirements that COA is
requesting on the subject audit observation memorandum. A justification was also
received from the Sports Development Officer stating that the three sports
activities namely, the 1st Mayor Jed Patrick E. Mabilog Dinagyang Badminton
Cup, Mayor’s cup Dinagyang Fishing Tournament and 1st Mayor Jed Patrick E.
22
Mabilog Shooting Competition were included in the official calendar of activities
as part of the 2011 Dinagyang Celebration. These were excluded from the 2011
Dinagyang Factsheet and budget because as agreed with the City Tourism and
IDFI, the sports division of the City Mayor’s Office will shoulder the expenses of
the different sports activities that will request inclusion in the celebration’s special
events due to lack of budget on the part of the City Tourism and IDFI.
As to delayed submission of liquidation reports, the Sports Development
Officer assured that additional controls were already made by his office to correct
the matter in the 2012 Dinagyang Celebration and that disciplinary actions will be
instilled to those who will fail to follow the guidelines on proper liquidation.
Recommendation
We recommend that the LGU consider incorporating in the MOA the
requisites in granting additional financial assistance, the liquidation terms and
required monitoring and project accomplishment reports.
We further recommend that a Memorandum of Agreement requiring
submission of a liquidation report be executed prior to the release of funds. It
should be the responsibility of the barangay to return unused balance to the LGU
upon completion of the purpose and refund audit disallowance, if any.
10. Collection of light fees from six (6) public markets for the period
December 2010 to September 2011 fall short by P6,305,496.17 or 34.14%
compared to the actual cost of electric consumption paid by Iloilo City
amounting to P18,473,638.66, indicating that the Local Economic Enterprise
has not fully attained the desired economic viability.
We have reviewed the monthly electric bills of the six (6) public markets
from December 2010 to September 2011 and observed that the collected light fees
were lesser by P6,305,496.17 compared with the actual cost of the electric
consumption paid by Iloilo City which runs counter to the principle of economic
viability of local economic enterprises.
The public markets were established as local economic enterprises under
Regulation Ordinance No. 2009-316 of the City of Iloilo. As an economic
enterprise, each public market should exist on its own funds, satisfy both the
economic and social objectives of the local government concerned and generate
income while improving the delivery of basic goods or services to the people.
23
For the duration of the 10-month period, the public markets consumed
2,123,207 kwh of electricity costing P18,473,638.66 (Annex III.g). However, the
collection of light fees from market lessors in the same period amounted to
P12,168,142.49 only, a shortfall in collection of P6,305,496.17 or 34.13% which
had been subsidized by the funds of the Office of the Local Economic Enterprise
(LEE) coming from other sources.
The payments of light fees by market lessors were stipulated in the lease
contracts but the rate of light fees was not categorically stated therein. In the
absence of a prescribed rate, the Office of the LEE billed light fees to market
lessors based on their actual consumption at the prevailing monthly rate of PECO
per kwh. The electric consumption of the communal areas, facilities,
administrative offices of the public markets and any related overhead costs were
not considered in the billing of the light fees. In addition, the electric consumption
of the public markets included that of the legislative offices located at the Iloilo
Terminal Market. As a result, actual expenses for electricity exceeded the actual
collection for the same period.
An Audit Observation Memorandum No. 12-006 dated March 28, 2012
was issued to call the attention of the management on this deficiency. A reply
received from the City Treasurer stated that they are considering the COA
recommendations to address the issue at hand.
Recommendation
We recommend that the existing policy on the rate of the light fees being
collected at the public markets be reviewed and control measures be set to ensure
sustainability of operations. The entire funding requirements for the electric
consumption may be sourced from the collection of light fees in order that
electricity expenses would be self-liquidating. The LGU may consider imposing
fixed or variable electric charges to market lessors for the electric consumption of
communal areas, facilities, administrative offices of the public markets and any
related overhead costs in addition to their actual usage. The rate of light fees
should be specified and expressly authorized by an ordinance pursuant to Sec.
305(c) of R.A. 7160.
We further recommend that the electric consumption of the regular
offices of the LGU located at the Iloilo Terminal Market should be segregated
from the electric bill of the public markets to be paid by the General Fund in view
of the “matching principle” of accounting.
24
11. Payments for conference and membership fees made to Regional Association
of Treasurers and Assessors in Region VI (REGATA VI), Inc. and Philippine
Association of Assessing Officers (PAAO) amounting to P84,100.00 and
P4,500.00 were inconsistent with the guidelines embodied in the Bureau of
Local Government Finance (BLGF) Regional Circular No. 01-2001 dated
January 13, 2011 and National Budget Circular (NBC) No. 442 dated
November 29, 1995.
We have audited the payment to the Regional Association of Treasurers
and Assessors in Region VI (REGATA VI), Inc. and Philippine Association of
Assessing Officers (PAAO) totaling P84,100.00 and P4,500.00, respectively, and
observed the following deficiencies/errors:
1. The payment by the LGU of conference fees totaling P75,600.00 to REGATA
VI during the Annual Performance Conference-Workshop and General
Assembly of Provincial, City, Municipal Assessors & Treasurers and Ranking
Personnel of Treasury & Assessment Offices held at Iloilo Grand Hotel, Iloilo
City on January 25 to 27, 2011 were not consistent with the Bureau of Local
Government Finance (BLGF) Regional Circular No. 01-2001 dated January
13, 2011. (Annex III.h)
While said conference was called for by BLGF Region VI, Iloilo
City through Regional Circular No. 01-2001 dated January 13, 2011, payment
of conference fees were made in favor of REGATA VI, a private organization.
The circular and the nature of its purpose implied that the Bureau, which is
tasked to supervise and coordinate the conduct of local treasury and
assessment operations of the provinces, cities and municipalities within the
region for proper implementation of laws, decrees, rules and regulations and
administrative issuances of the Department of Finance, has the responsibility
for the conduct of such conference, in which case it is deemed proper that the
payments should have been made to and receipted by BLGF Region VI.
Considering that the conference is an annual undertaking by the
BLGF Region VI, as observed, substantial amount of government funds are
being expended for the purpose without the benefit of COA audit in the
context of treating the collections as public funds.
2. Checks issued for the payment of conference fees were dated January 27,
2011 while the covering official receipts were dated January 25, 2011.
25
3. The LGU paid REGATA VI and Association of Assessing Officers (PAAO) a
total of P13,000.00 to settle membership fees and CY 2011 annual dues of
personnel, contrary to National Budget Circular (NBC) No. 442 dated
November 29, 1995. (Annex III.h)
Department of Budget and Management NBC No. 442 dated March
29, 1995 re: Cost of Participation of Government Officials and Employees in
Conventions, Seminars, Conferences, Symposia and Similar Gatherings states:
“Membership and similar fees paid for personal or individual
membership in private organizations shall be for the account of
the member concerned and shall not be charged to government
funds. However, institutional membership fees, i.e., agency
membership may be charged to government funds.”
The payments were authorized by BLGF Region VI through the
same Regional Circular No. 01-2011 as chargeable against the appropriation
of the LGU subject to accounting and auditing requirements. However, such
authorization appeared inconsistent with NBC No. 442. The LGU could have
saved the amount for the payment of fees and dues had NBC No. 442 been
observed.
We issued AOM No. 11-008 dated November 28, 2011 on these
deficiencies. In reply, City Treasurer and the City Assessor commented:
1. The conference was authorized by BLGF, Region VI in view of the request
for authority dated January 11, 2011 by the President of REGATA VI to
conduct the same and that the letter of the REGATA VI President also
requested for the inclusion of BLGF personnel to act only as secretariat and at
the same time facilitate the circularization of a regional memorandum to
ensure more attendance of the REGATA VI members. The Bureau is
responsible only in providing technical guidance in the conduct of said
training pursuant to the Bureau’s existing mandate while the
conference/assembly itself is being run/conducted by REGATA VI in which
members’ registration fees were made to and receipted by the association.
Expenses for supplies and materials, snacks and lunch, honorarium of
lecturers and speakers and other necessary expenses were shouldered by
REGATA VI.
2. It is a common practice in the organization that Official Receipt is issued on
the first day of the conference/seminar to persons who registered. Trust and
26
confidence is reposed by REGATA VI upon all its members and it is always
presumed that those who registered are paying participants. However, it so
happened that the processing of voucher was delayed, hence, the issuance of
check for the purpose was also delayed and was dated only January 27, 2011,
just in time before the seminar ends.
3. The City Treasurer and City Assessor are fervently requesting for a re-
consideration for the payment of membership fees and promise that the same
will not be committed again.
Recommendation
We recommend that the conference fees be paid to Bureau of Local
Government Finance Region VI.
We recommend that the LGU refrain from paying the membership fees
and annual dues of personnel concerned to REGATA VI and PAAO.
12. Non-consolidation of procurement needs and the non-observance of
procurement procedures in violation of Rule II, Section 7.3.4 of the revised
IRR of RA 9184 and Sec. 22 of the Manual on the New Government
Accounting System for Local Government Units had resulted in piece-meal
purchases of jetmatic pumps in varying prices at almost the same time
aggregating to P1,428,718.60.
In the post-audit of disbursements on procurement, particularly the
acquisition of jetmatic pumps, we noted the following observations:
1. The City paid a total of P 1,428,718.60 for the procurement of
422 units jetmatic pumps in five separate transactions,
P1,140,218.60 of which were not supported with actual
distribution lists duly signed by the respective recipients.
(Annex III.i)
2. A perusal of the pertinent documents showed that the same items
procured at about the same time were differently priced since the
pricing was closely pegged against the individual cost estimates
of each end-user. To cite a concrete example, Purchase Orders
numbered 110-60385 dated June 09, 2011 and 110-60394 dated June
22, 2011, showed a relative price difference of P1,400.00 and
27
P1,199.80 per unit, respectively as compared to our canvassed
price of P 2,400.00 (Annex III.j). Comparative analysis between
the prices set by end-users in the Purchase Requests and the
actual purchase prices per Purchase Orders showed that the cost
estimates set by end-users were made as the bases of the
Approved Budget for the Contract.
Consequently, it follows that the higher the cost estimates, the
higher are the actual purchase prices. The absence of review
mechanisms to serve as control measures for establishing the
price reasonableness of the items procured, coupled with the
non-consolidation of quarterly procurement needs had resulted to
the aforementioned conditions.
3. A comparative evaluation of Purchase Orders Numbered 107-
0325 and 107-0365 further revealed a downward trend in pricing
from P3,398.00 in December 16, 2010 to P2,885.00 in February 07,
2011, or a drop in price of P513.00 per unit, considering that the
estimated price set by the requesting office was P2,900.00. As shown
in Annex B, the latter has the lowest price difference of P485.00
against the canvass price of P2,400.00, among the five transactions.
We analyzed the root cause of variable pricing as earlier cited in the
sample transactions and noted that the condition emanated from the different
cost estimates set by different end-users in their purchase requests which
were not subjected to review and consolidation prior to procurement. Instead,
each Purchase Request was catered on a piece-meal basis.
Section 122 of the Manual on the New Government Accounting System
for Local Government Units require that the Office of the General Services
Office (GSO) is responsible for the preparation of the Purchase Request for
supplies and materials needed for the quarter based on the approved Annual
Procurement Program (APP). This is based on the premise that the Project
Procurement Management Plans (PPMPs) of the respective end-users had
been reviewed and consolidated by the BAC Secretariat pursuant to Rule II,
Sec.7.3.4 of the revised Implementing Rules and Regulations (IRR) of Republic
Act. (RA) No. 9184.
28
We brought this matter to the attention of management, through Audit
Observation Memorandum No. 12-007 dated March 30, 2012. No management
response was given on this finding.
Recommendation
We recommend strict compliance to Rule II, Section 7.3.4 of the
revised IRR of RA 9184 and Section 122 of the Manual on the New
Government Accounting System for Local Government Units and a valid
justification for the material unit price variances found in audit. Review
mechanisms over purchases particularly on cost estimates and actual purchase
cost should be installed so as to ensure that financial resources can be maximally
utilized.
We further recommend that a distribution list duly signed and dated
by the identified beneficiaries be submitted as one of the supporting
documents of the paid vouchers covering payments for the purchase of
jetmatic pumps.
13. The management of rentals on the use of public plazas is lodged with
the Association of Barangay Captains (ABC) which is not in accord with
City Ordinance No. 40, Series of 1972, thus depriving the City of a
potential source of income.
A perusal of City Ordinance No. 40, Series of 1972, entitled “ An
Ordinance Imposing Fees for the Use of Public Places Owned or Administered
by the City of Iloilo revealed the following observations:
1. The said Ordinance was enacted on February 24, 1972, 40 years ago
and has not been subjected to any updating;
2. The rates fixed in the ordinance is no longer suited to the current
economy;
3. The provisions of the Ordinance have not been strictly enforced,
and;
4. The City Treasure’s Office has not been collecting the rental rates
pursuant to the Ordinance.
29
It was learned through interviews and queries that it is the
Association of Barangay Captains (ABC), a private organization registered
with the Securities and Exchange Commission (SEC) that manages the stall
rentals of public plazas including the collection, disbursement and
accounting of income derived from such rentals which are not being
subjected to audit. This policy is not provided in the existing ordinance.
While Executive Orders of the City Mayor numbered 49-A and 77-A,
both series of 2011, dated September 5 and December 13, respectively,
authorized and designated the ABC Jaro District headed by its President
Rammy J. Guintibano to manage and maintain the 2012 Jaro Agro-Industrial Fair
at Jaro Plaza, Iloilo City, the said Order did not spell out in particular the
financial aspect detailing the proper use and accounting of income derived
therefrom.
In the absence of an updated City Ordinance relative to Ordinance No.
40, control measures in managing and accounting for income derived from
the use of public plazas and other public places are not put in place to the
advantage of the LGU. Rental rates should likewise be amended to suit the
current economy. There should be an appropriate sharing scheme of income
derived from stall rentals between the association being authorized to
manage and the City Government considering that the use of public plazas
is one potential source of income to the City.
We have issued Audit Observation Memorandum No. 12-005 dated
March 20, 2012 for this deficiency.
According to the City Mayor during the exit conference, public
plazas will no longer be rented out to private entrepreneurs during fiestas
and trade fairs as there is a plan to develop and beautify the same.
Recommendation
We recommend that City Ordinance No. 40, series of 1972 be
amended/revised to suit the current economic conditions. Pending such
amendment/revision, the Ordinance shall remain enforceable.
We further recommend that there shall be a sharing scheme of
income between the City and the concerned Association of Barangay
Captains to ensure that what should accrue to the LGU must be earned.
30
14. Assets donated by other government and private entities to the City of Iloilo
were not covered with Deeds of Donation and Acceptance of Donations
pursuant to the pertinent provisions in the Handbook on Property and
Supply Management hence these were not recorded in the books of accounts
as donated assets in accordance with the financial statement assertion on
completeness, thus understating the Property, Plant and Equipment
accounts.
The financial statement assertion of completeness requires that all
transactions that should be recorded have been recorded. On the other hand, the
pertinent provision in the Handbook on Property and Supply Management System
requires a Deed of Donation and an Acceptance of Donation as attachment papers
of the donated assets.
Moreover, Section 23 of the Local Government Code of 1991 states:
“Local chief executives may, upon authority of the sanggunian,
negotiate and secure financial grants or donations in kind, in
support of the basic services or facilities enumerated under
Section 17 hereof, from local and foreign assistance agencies
without necessity of securing clearance or approval thereof from
any department, agency, or office of the National Government or
from any higher local government unit; Provided, that projects
financed by such grants or assistance with national security
implications shall be approved by the national government
agency concerned: Provided, further, that when such national
agency fails to act on the request for approval within thirty (30)
days from receipt thereof, the same shall be deemed approved.
The local chief executive shall, within thirty (30) days upon
signing of such grant agreement or deed of donation, report the
nature, amount, and terms and of such assistance to both Houses
of Congress and the President.”
Donated assets were obtained by the LGU from various donors. These
assets remain unrecorded in the books of accounts as of December 31, 2011 due
to lack of documentation.
Donations are usually received by the City Mayor’s Office. However,
the corresponding donation papers were not obtained/prepared.
31
Ideally, all donations should be covered by Deeds of Donation. After
execution of the Deeds of Donation, the City General Services Office should be
furnished with a copy thereof for recording in the property records and thereafter,
the City Accountant for booking-up the same in the books of accounts.
In the absence of the deeds of donation, the assets remain unrecorded in
the property records and in the accounting books, thus understating the Property,
Plant and Equipment accounts.
We have issued AOM No. 12-011 dated May 16, 2012 on this
deficiency.
Recommendation
We recommend that the City Mayor’s Office document every donated
asset by executing a deed of donation duly signed by the donor and donee,
reflecting thereon the type of asset being donated, the related cost/s, the intent for
the use of the said donation and to furnish the City General Services Office and
the City Accountant with copies thereof for recording purposes.
The City General Services Office and the City Accountant shall record
all donated assets in the property and accounting records, respectively, based on
the deeds of donations being furnished by the City Mayor’s Office. These Offices
should coordinate to ensure compliance with regulations on donated assets.
For donations without value, the City Mayor may create a committee to
appraise the value of the donated asset for proper recording in the books of
accounts.
15. Collection of parking fees on public areas pursuant to Sec. 133 of Tax
Ordinance No. 2007-016, which could have increased the revenue collections
of the City, has not been imposed.
Sec. 133 of Tax Ordinance No. 2007-016 provides:
“(a) Night Parking. – for using street, sidewalk or public place in
front of their houses or in places of business as their garage or
parking space during night time:
1) For cars and jeepneys per quarter or fraction thereof.....P350.00
2) For buses and trucks per quarter……………………….. 500.00
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3) For container vans/travel per night or fraction thereof….. 50.00
Stickers shall be issued by the City Treasurer to vehicle upon
payment of the above mentioned Night Parking Fees.
Vehicle found night parking without stickers shall be
impounded and kept in the City Motor Pool at the expense of the
owner.
b) Day Parking Fee – For all owners/drivers of private motor vehicle
using designated parking area of the PNP as parking places between
the hour of 7:00 o’clock in the morning to 5:00 o’clock in the
afternoon shall pay the following fees:
1) For cars and jeepneys per hour or fraction thereof ..……..P5.00
2) For all container vans/trailers per hour or fraction thereof.. 5.00
3) For buses and trucks per hour or fraction thereof..……….. 5.00
The Office of the City Treasurer shall assign collectors for
the purpose of collecting day private motor vehicle and shall be
responsible for the issuance of official receipts or cash ticket for such
payment.”
The City of Iloilo has not been collecting the night and day parking fees
since the effectivity of Tax Ordinance No. 2007-016 on January 1, 2008 due to
non-implementation of the parking regulation which is still wanting of
implementing guidelines as there is no particular office directed under the
ordinance to undertake the same.
We sent an audit query to solicit management comments on the
observation. While we recognize the constraints given by management for the
non-implementation, the same may be addressed by setting strategies,
mechanisms and well defined implementing guidelines to that effect.
An Audit Observation Memorandum No. 12-009 dated was issued on
this deficiency.
In a letter reply from the City Treasurer, she informed that a conference
was called by the Honorable City Mayor on April 30, 2012 and discussed
issuance of the following directives:
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1. City Police Director Marito Valerio- To coordinate with Iloilo City’s
Transportation Management and Traffic Regulation Office
(TMTRO) in identifying areas in the city as parking spaces for
submission to the Sangguniang Panlungsod for designation.
2. OIC-City Engineer Karl Quimsing- To prepare the signage for
parking spaces identified by PNP-TMTRO and designated by the
Sangguniang Panlungsodthrough an ordinance.
3. City Treasurer Katherine T. Tingson – To prepare the assignment of
treasury personnel/collectors of Parking Fees upon approval by the
Sangguniang Panlungsod of the parking spaces.
The City Government is currently considering the option to submit in a
competitive bidding the towage requirement of Night Parking Fee to companies in
Iloilo City with towage trucks and/or similar vehicles.
Recommendation
We recommend that parking fees on public places be imposed by
implementing the night and day parking regulations. Necessary amendments
should be made on Sec. 133 of Tax Ordinance No. 2007-016 to operationalize the
collection of the parking fees. Specific office should be mandated to come up with
the implementing rules and regulations, setting forth the apprehension of parking
violators that includes the impounding and towing of vehicles.
16. Payroll preparation and processing of the different departments , offices
and sections was not in accordance with the prescribed guidelines set forth
under Section 261 of the Government Accounting and Auditing Manual,
Volume I, thereby resulting in duplication of the workload and incurrence of
additional man-hours and cost of supplies.
We have reviewed the procedures in the preparation and payment of
payrolls by the City of Iloilo for the year ended December 31, 2011 and observed
the following:
1. The different departments, offices and sections of the LGU
prepared and processed payrolls of regular personnel for the 1st
and 2nd
quincena of the month separately contrary to the
prescribed guidelines under Sec. 261 of the Government
Accounting and Auditing Manual (GAAM) Vol. I, thereby
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resulting in duplication of the workload, added man-hours and
incurrence of additional supplies costs.
Under Sec. 261 of the GAAM Vol. I, government
offices may make payment of salaries and allowances to
government officials and employees twice a month, first on the
15th
and the second on the last day of the month. The following
guidelines shall be observed in the preparation of the General
Payroll:
a. For each month, the payroll shall be prepared in two (2) sets
– one (1) for the first half and one for the second half.
b. The payroll for the first half of the month shall reflect the
basic monthly salary, all allowances and itemized monthly
deductions.
c. Net pay for the first half and second half shall be computed
as follows: Basic salary plus all allowances less total
deductions divided by two (2).
The different departments, offices and sections of the LGU prepared and
processed their respective payrolls for the payment of salaries and allowances of
1,689 regular personnel. Separate payrolls were prepared and processed for the 1st
and 2nd
quincena of the month. The net pays of personnel for the two (2) pay days
during the month were not of equal amounts because different sets of deductions
were made on each pay period. More than 50% of the salaries of personnel were
accrued on the 1st half of the month in order to accommodate bigger salary
deductions during this pay period. Moreover, payment of the Personnel Economic
Relief Allowance (PERA) was deferred to the end of the month.
Based on Sec. 261 of the GAAM Vol. I, there should only be one (1)
payroll every month for each of the different departments, offices and sections of
the LGU. The payroll should reflect the basic salary plus allowances less
deductions divided by two in order to arrive at the equal net pay for the 1st and 2
nd
quincena of the month. The monthly payroll should be prepared in two (2) sets to
support the payments made for each quincena.
It has been the practice of the LGU to prepare and process payrolls twice
a month instead of once a month. Such practice duplicated the monthly workload,
man-hours and office supplies in accomplishing the task. The total number of paid
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payrolls of about 2,859 for the year ended December 31, 2011 could have been
reduced by 1,429 had the monthly scheme been observed.
Moreover, monthly salaries and allowances of about 170 LGU
employees chargeable to the Special Education Fund (SEF), semi-monthly wages
of 2,638 job order hires, 289 Transportation Management and Traffic Regulation
Services (TMTRO), 85 Barangay Peacekeeper Acting Team (BPAT), 268
Coordinated Executive Sangguniang Panlungsod Efforts for Development of
Iloilo City (CESPEDIC) and 124 Legislative Support Program (LSP) personnel
and quarterly honorarium of 2,379 Department of Education (DEpEd), 643
Philippine National Police (PNP), 85 Bureau of Jail Management and Penology
(BJMP) and 95 Bureau of Fire Protection (BFP) employees were paid through
cash advances drawn by disbursing officers for the purpose. This practice
involved additional man-hours to disbursing officers and long queuing of
personnel concerned at the Office of the City Treasurer in claiming their
emoluments as compared to payments through ATM accounts. The time spent
could have been used more productively in the actual performance of the
personnel’s respective functions.
We have issued AOM No. 12-008 dated April 3, 2012 on this
deficiency. The recommendation earned the appreciation of the City
Accountant. She assured that the payroll makers, payroll clerks and other
employees concerned will undergo orientation on proper preparation and
processing of payrolls of permanent employees on a monthly basis which take
effect on May 2012. As for the salaries of non-regular employees, the City Mayor
has already taken into consideration the payment scheme recommended and will
implement it in the succeeding month. As to our recommendation on
centralization and computerization of payroll system, this is one project that is
being considered for the year after the implementation of the biometrics system
for time keeping.
Recommendation
We recommend that the payrolls of regular personnel be prepared and
processed on a monthly basis. These payrolls should be prepared in two (2) sets,
reflecting both the 1st and 2
nd quincena of the month. The net pay should be
arrived at by adding the basic salary and all allowances less total deductions
divided by two (2). The payroll proof list showing the semi-monthly net pay
credited to the personal bank accounts of the personnel should form part of the
supporting documents of the Auto Debit Advice (ADA) issued to the bank by the
LGU.
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The payroll preparation should include the monthly payslips to be
distributed to every employee at least one (1) day before the 15th
of the month. It
should be indicated in the payslip that the employee’s net pay has been credited to
his/her bank account.
We further recommend that the payrolls of SEF, job order, TMTRO,
BPAT, CESPEDIC, LSP, DepEd, PNP, BJMP and BFP personnel totaling 6,776
be paid through Automated Teller Machines (ATM) to save on man-hours, avoid
queuing of personnel during paydays, promote ease and convenience of personnel
in claiming their emoluments and optimize personnel productivity.
Likewise, the LGU may consider adopting a centralized and
computerized payroll system to promote effectiveness and efficiency in the
payment of salaries, allowances, wages and other benefits to personnel.
17. The minimum net monthly take home pay of P3,000.00 as mandated
under Section 43 of the General Provisions of the General Appropriations
Act of 2011 were not implemented and complied with by 352 employees
of the City as of December 31, 2011.
Sec. 43 of the General Provisions of the General Appropriations Act of
2011 provides:
“Deductions from salaries, emoluments or other benefits
accruing to any government employee chargeable against the
appropriations for Personal Services may be allowed for the payment
of individual employee’s contributions or obligations due the
following:
(a) The BIR, GSIS, HDMF and PHILHEALTH;
(b) Mutual benefits associations, thrift banks and non-stock
savings and loan associations duly operating under existing
laws which are managed by and /or for the benefit of
government employees;
(c) Associations/cooperatives/provident funds organized and
managed by government employees for their benefit and
welfare;
(d) Duly licensed insurance companies accredited by national
government agencies; and
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(e) Organizations and companies such as banks, non-bank
financial institutions, financing companies and other similar
entities that have authority to engage in lending and mutual
benefits or mutual aid system as stated in their respective
constitutions and by-laws approved by government regulating
bodies such as the Securities and Exchange Commission
(SEC), Insurance Commission (IC), Banko Sentral ng Pilipinas
(BSP) and Cooperative Development authority (CDA).
PROVIDED, That such deductions shall not reduce the
employee’s monthly net take home pay to an amount lower than
Three Thousand Pesos (P3,000.00), after all authorized deduction:
PROVIDED, FURTHER, That in the event total authorized
deductions shall reduce net take home pay to less than Three
Thousand Pesos (P3,000.00), authorized deductions under item (a)
shall enjoy first preference, those under item (b) shall enjoy second
preference, and so forth.”
There were 352 employees receiving a monthly net take home pay of
less than P3,000.00 as of December 31, 2011. The LGU allowed these employees
to contract loans with the government and private lending institutions to the extent
of reducing their net take home pay below P3,000.00 in violation of the aforecited
criteria. Furthermore, preference of authorized deductions should have been
applied.
An AOM No. 12-010 dated May 9, 2012 was issued to call the attention
of the management regarding this violation for which a positive response was
given. Considering that most of the City Government Employees have existing
loans payable for more than a year, an appeal was made to give them time until
these accounts are settled, then the implementation.
Recommendation
We recommend that the prescribed minimum employee’s monthly net
take home pay under the GAA be observed. Effective January 1, 2012, the
P3,000.00 minimum limit was increased to P5,000.00 pursuant to Sec. 37 of the
General Provisions of the current GAA of 2012.