DETAILED AUDIT FINDINGS AND RECOMMENDATIONS
Financial and Compliance Audit
1.0 Deficiencies noted in the audit of Property and Equipment (PPE) accounts
1.1 Non-compliance with the prescribed policies and procedures in the
recording, reporting and maintenance of records for PPE account.
In order to meet and satisfy the standard requirements for an efficient and
effective property and supply management, the Office of the City Administrator,
thru the Acting City Administrator, issued Office Order No. 345-12A dated
November 5, 2012, reconstituting the Inventory Section under the Supply and
Management Division and designating certain General Services Office
employees as Inventory Team and authorizing them to conduct periodic
inventory of supplies, property, plant and equipment.
While the Report of Physical Count of PPE (RPCPPE) was prepared at the end
of the year by the Inventory Team, the validity and accuracy of the PPE accounts
presented in the financial statements could not be determined due to the
following:
a. Unreconciled variance of P36.714 million between the RPCPPE and
accounting records for the PPE account.
Our review of the accounting and property records of the PPE of the City
disclosed a net variance of P36,714,174.16 between the result of the
physical inventory count amounting to P3,626,036,998.95, and the recorded
PPE of the City amounting to P3,662,751,173.11 as at December 31, 2012.
We also noted that the inventory items in the RPCPPE were not presented in
accordance with their proper account classifications.
Despite the use of the Property Management System developed by the GSO
to facilitate the centralized recording of all property of the City and the
adoption of the Accounting Office of the electronic New Government
Accounting System (eNGAS), which facilitates the recording of PPE
accounts, the Inventory Team was not able to reconcile the results of
inventory count with the property and accounting records, contrary to the
following provision of Section C.3, Chapter V of the Manual on Property
Custodianship:
“After the physical inventory taking, the Inventory Committee shall
reconcile the results of the count with the property and accounting
records. The inventory listing of the supplies and materials shall
be checked against the stockcards maintained by the Accounting
and finally against the control accounts. On the other hand, the
inventory listing of the equipment shall be checked with the
property card maintained by the Property as against the
equipment ledger cards maintained by the Accounting and total
therefore shall be compared with those in the general ledger.”
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The non-reconciliation of the inventory count with the property and
accounting records rendered the PPE account balances as of December 31,
2012 unreliable.
b. PPE totalling P692.857 million recognized in the books of accounts
under account Reconciling Items.
Verification of the accounting records disclosed that P692,856,824.40 worth
of various property, plant and equipment were recorded under account
Reconciling Items, which is not in conformity with the provision of Section 111
of P.D. 1445 which states that:
“The accounts of an agency shall be kept in such detail as is
necessary to meet the needs of the agency and at the same
time be adequate to furnish the information needed by fiscal or
control agencies of the government.”
Interview with a personnel of the Accounting Office disclosed that way back
2004, these reconciling items were not recorded in their proper PPE
classification due to the absence of PPE Ledger Cards, thus, their breakdown
cannot be determined . The presence of these reconciling items of various
PPE accounts enumerated in Table 1 contributed to the cause of the nonreconciliation of the RPCPPE and the accounting records.
Table 1:
Reconciling items per PPE
accumulated depreciation
Particulars
category
with
Acquisition Cost
General Fund
Land
Land Improvements
Office Buildings
School Buildings
Market and Slaughterhouse
Other Structures
Office Equipment
Watercrafts
Total
Special Education Fund
School Buildings
Other Structures
Office Equipment
IT Equipment and Software
Other Machineries and Equipment
Other Transportation Equipment
Other Property, Plant and Equipment
Construction in Progress-Other
Public Infrastructure
Total
Totals
27
corresponding
Accumulated
Depreciation as
of Dec. 31, 2012
268,371,312
225,105,056
116,034,657
5,475,119
6,712,410
14,253,501
3,281,764
1,095,303
640,329,122
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6,071,369
849,363
271,835
92,240
267,252
478,000
14,602,726
0.00
0.00
0.00
0.00
0.00
0.00
1,683.00
29,894,917
52,527,702
0.00
1,683.00
692,856,824
1,683.00
The accumulated depreciation amounting to P1,683.00 as of December 31,
2012 for the above PPE categories are understated since the reconciling
items, which are part of the PPE, were not depreciated since 2004 for the
reason that their details cannot be identified. The net book value of these
PPE accounts is overstated due to the unapplied amount of depreciation.
The yearly income and depreciation expense is likewise overstated and
understated, respectively.
c. Basis of valuation of Buildings and Land not uniformly applied by the
GSO and Accounting Office
The basis of costing of the GSO for buildings and land is the Fair Market
Value (FMV) per tax declaration of property while the basis of the Accounting
Office is the acquisition cost.
We noted a discrepancy of P92,868,703.00 between the RPCPPE and
accounting records for the sampled buildings detailed in Table 2:
Table 2:
Comparison of value of properties between RPCPPE and
accounting records.
Description
Office Building:
Marikina Hotel Bldg – Concepcion II
School Building
City Schools – Three Storey building, Nangka
City Schools – Three Storey building, Sta. Elena –
Dep-Ed Building
Three Storey School Building, Marikina High School,
Concepcion I
Three Storey School Building, Concepcion High School
Sub-total
Markets
Markets
Three Storey Public Market, Sta. Elena
Sto. Nino - Market Mall
Sta. Elena - Market Mall @ P Dela Paz St.
Sta. Elena - Market Mall @ Kapt. Venciong
Sta. Elena - Market Mall @ E. Jacinto St.,
Sta. Elena - Wet & Dry Section of Marikina
Public Market
Sta. Elena - Market Mall @ M. Cruz St., Sto. Niño
and Sta. Elena, Marikina City
Sta. Elena - Market Mall @ Villalon St., Sto. Niño
and Sta. Elena, Marikina City
Sta. Elena - Function Hall Phase I @ 3rd Flr. of
Market Mall
Sub-total
Other Structures
DOJ Building
One Storey Gym Building, Marikina Sports Center
Sub-total
Total
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Per Accounting
Records
Per RPCPPE
65,881,847
65,684,047
197,800
30,709,318
30,559,318
150,000
18,816,387
33,761,896
(14,945,509)
7,915,050
6,804,378
130,126,980
4,666,500
63,796,685
198,468,446
3,248,550
(56,992,307)
(68,341,466)
85,198,742
(224,250)
477,900
84,974,491
85,198,742
(224,250)
58,562,718
7,755,600
66,318,318
281,419,789
68,351,854
22,269,451
90,621,305
374,288,493
(9,789,136)
(14,513,851)
(24,302,987)
(92,868,703)
Difference
27,720,000
14,521,092
19,757,994
3,344,587
1,097,087
500,000
12,270,471
5,285,361
Inquiry conducted disclosed that the GSO relied on the FMV of properties per
tax declaration since they were not furnished with copies of the documents
for the acquisition, renovation, major repairs/rehabilitation of buildings, as well
as the acquisition of land and land improvements.
The differing basis of valuation of properties and the lack of coordination
between the Offices of the City also contributed to the causes of
discrepancies and to the non-reconciliation of their records.
d. Tangible assets worth P.965 million with estimated serviceable life of
more than one year but small enough to be considered as PPE were
classified in the books of accounts as PPE.
COA Circular No. 2005-002 dated April 14, 2005, provides the list of small
tangible assets with corresponding estimated useful life which shall be
recorded as inventories upon acquisition and expense upon issuance.
Our audit revealed that several tangible assets totalling P965,438.75 detailed
in Table 3, with estimated serviceable life of more than one year but small
enough to be considered as PPE, were included in the inventory report and
still classified in the books of accounts as PPE instead of the
inventory/expense account.
Table 3: Tangible assets with serviceable life of more than one year but
small enough to be considered as PPE
PPE Account
Total
Acquisition
Cost
General Fund
Office Equipment
75,940.00
Furniture and
Fixtures
630,999.96
IT Equipment &
Software
159,223.29
Medical, Dental &
Laboratory Equipt
4,462.50
Military and Police
Equipment
3,900.00
Other PPE
73,184.00
Total
947,709.75
Special Education Fund
IT Equipment and
Software
16,309.00
Other PPE
1,420.00
Total
17,729.00
Totals
965,438.75
Dental &
laboratory
supplies
Office
supplies
Inventory classification
Other
Police
Other
inventory
supplies
supplies
items
72,600.00
-
-
-
-
-
470.00
-
Hardware &
construction
supplies
Monoblock
furniture
2,870.00
630,999.96
159,223.29
4,462.50
72,600.00
1,600.00
6,062.50
3,900.00
3,900.00
159,693.29
40,360.00
40,360.00
31,224.00
34,094.00
630,999.96
1,420.00
1,420.00
41,780.00
34,094.00
630,999.96
16,309.00
72,600.00
6,062.50
3,900.00
16,309.00
176,002.29
The non-reclassification to the correct account of the said items overstated
the PPE account by the net book value of these items worth
P965,438.75 and understated the Government Equity account by the same
amount.
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We have recommended that Management:
a. prioritize the reconciliation of the results of the inventory count with the
property and accounting records;
b. continuously analyze the reconciling items in the PPE account and
accordingly prepare correcting journal entries to reflect the correct
balances of the affected accounts;
c. adopt a uniform valuation of properties in the GSO and the Accounting
records. The basis of valuation should be the cost of acquisition,
renovation, improvement, and major repairs of buildings; and cost of
acquisition of land and land improvements. Likewise, the Accounting
Office furnish the GSO the documents needed to update their records;
and
d. reclassify to proper Inventory account tangible assets with estimated
useful life of more than one year but small enough to be considered and
recorded as PPE. An Inventory Custodian Slip (ICS) shall be prepared
upon issuance of small tangible items for monitoring, control and
accountability.
Management commented that a continuous reconciliation is being done by
the inventory team of GSO and Accounting Office regarding PPE to identify
the cause of the discrepancy. The inventory team will again look into the
reconciling items PPE account and see if there are still properties found
existing which are not yet classified to their proper account.
Management further commented that the acquisition cost will be used by the
GSO for the valuation of land and building. With respect to the valuation of
other real properties which were donated, the same shall be subjected to
appraisal to determine the cost.
The reclassification of the tangible assets will also be effected upon
verification of the account. Necessary adjustments will be made by the GSO
and Accounting Office.
1.2 Various Construction-in-Progress accounts totalling P98.923 million
remained dormant for at least 2 years
The New Government Accounting System defines Construction-in-Progress
(CIP) account as the cost or accumulated value of the assets that are still
under construction. Hence, projects that are not yet completed at the end of
the period are reported in the books of accounts as CIP. As soon as the
project is completed, the CIP for agency assets is closed to the appropriate
asset account and for public infrastructures funded out of regular income, the
CIP is transferred to the Public Infrastructures account which is closed to the
Government Equity at the end of the year.
30
Analysis of the CIP accounts showed that various projects totalling
P98,922,813 had remained dormant since 2009 and 2010. Construction of
some of these projects started three (3) years ago as shown in Table 4.
Table 4: Dormant Construction in Progress accounts
Sub-account
Amount
Agency asset
Roads, highways & bridges
Irrigation, canals and laterals
Total
67,693,087
15,537,651
15,692,075
98,922,813
Year
Started
2005-2010
2004-2010
2004-2010
Dormant
since
2009-2010
2004-2010
2009-2010
The absence of monitoring on the completion of these projects and the nonsubmission by the City Engineering Office to the Accounting Office of the
documents needed in updating the status of completion caused the nontransfer of these projects from the Construction-in-Progress accounts to the
affected PPE accounts and Registry of Public Infrastructures, as the case
may be. This resulted in the understatement of the affected PPE and their
corresponding accumulated depreciation accounts, and Registry for Public
Infrastructures, while overstating the CIP and Government Equity accounts.
We have recommended and Management concurred that the status of
completion of these projects be verified to reflect the correct balances of the
affected accounts. Likewise, the City Engineering Office is to provide the
Accounting Office with copies of the report on completed projects and
conduct periodic monitoring to validate the completeness of the abovesubject properties.
2. Deficiencies noted in the audit of Income accounts
2.1 Inaccurate recording of collections
Under the Conceptual Framework for Financial Reporting as to qualitative
characteristics of financial statements, all financial data presented shall be both
relevant and faithfully represented. It shall include the ingredients of a faithful
representation which pertain to the attributes of a complete and free from error
financial information.
For CY 2012, the total income reflected in the books of the City amounted to
P1,562.007,832.90. We noted that the City records its income on a monthly
basis net of the 5 per cent contribution earmarked for MMDA instead of the gross
amount. As shown in Table 5, the amount of P37,724,712.63 represents the
total deductions from the income accounts for the 5 per cent contribution to
MMDA which is recorded in the Due to Other NGAs account.
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Table 5: Gross income collected in CY 2012- General Fund
Income
Classification
Local Taxes
Permits and
Licenses
Service Income
Business Income
Other Income
Total
Per Audit
795,608,677.70
15,702,296.84
Per Books
Understatement
763,611,863.70
31,996,814.00
14,854,789.35
847,507.49
88,333,593.51
84,136,238.71
103,913,605.29
103,729,973.09
596,174,372.19
595,674,968.05
1,599,732,545.53 1,562,007,832.90
4,197,354.80
183,632.20
499,404.14
37,724,712.63
The practice of recording income net of MMDA contribution is incorrect which
resulted in understated income as of December 31, 2012 by P37,724,712.63.
We have recommended that the Accounting Office effect the necessary correcting
entries and record the income at gross amount to effect accurate and reliable
financial data.
Management agreed that recording of income will be at gross.
2.2 Non-declaration of correct gross sales/receipts of taxpayers as bases for
computation of Business Taxes.
Section 23, Chapter 3 of the 1995 Revenue Code of Marikina City states that:
“a. Any person who shall establish, operate or conduct any business,
trade or activity mentioned in the Code shall first obtain the
necessary permit from the Business Permits and Licensing Office
and shall pay the corresponding tax imposed in the Code. Xxx
b. Any person engaged in a business shall within the first twenty (20)
days of January of each year submit a sworn statement of his gross
sales and/or receipts for the preceding calendar year. xxx”
Comparison between the actual payments made by the City to the 174 sampled
suppliers/contractors that have transacted with the City in 2012, against the
amount of gross sales/receipts declared by them revealed that the declared gross
sales/receipts of 46 of these suppliers/contractors were found in order because
they were in the Master list of Business Establishments for 2012 with
proportionately high declared gross receipts from the previous year. The
remaining 128 suppliers/contractors have zero or low gross receipts declared
which resulted in the none/under payment of business taxes, as shown in Table 6.
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Table 6: Sales with No Business Tax Paid/Under Paid Business Tax categorized
per type of business
Type of Business
Pharmaceutical
Retailer
Caterer/Eatery
Franchise
Services
Contractor-Building
Total
No. of
suppliers
21
56
11
4
33
3
128
Payments made
by the City
2,364,648
18,713,021
4,530,632
202,980
10,273,149
4,286,644
40,371,074
Declared
Gross
Receipts/
Sales
0
3,045,000
1,752,166
0
180,000
350,000
5,327,166
Sales with No
Business Tax
Paid
2,364,648
8,228,605
1,038,107
202,980
10,030,063
3,593,582
25,457,985
Sales with
UnderPaid
Business Tax
7,439,416
1,740,359
63,086
343,062
9,585,923
Of the 128 suppliers/contractors, 118 did not declare their gross receipts while
the remaining ten had declared low gross receipts from the payments made to
them by the City. Accordingly, those who did not pay their business taxes have
no business permits issued by the City for CY 2012.
We also noted that despite having no business permits for CY 2012, the City still
engaged or contracted the services or procured materials from these
suppliers/contractors notwithstanding whether their businesses were located
within or outside the City.
The non-payment of business taxes and regulatory fees by suppliers/contractors
conducting business with Marikina City is not in accordance with its Revenue
Code. There is no assurance that these businesses without permits were
regulated and controlled by the Office of the City Mayor. Also, these unpaid
business taxes understated the City’s revenue that could have been used to
finance more city projects.
We have recommended that the City Treasurer enforce the collection of the
underpayment of business taxes for the year from these suppliers/contractors
including penalties and surcharges, if applicable, pursuant to the rates provided
in the City’s Revenue Ordinance.
Likewise, implement the review and
examination of books of accounts and records of businesses operating in the City
as provided for in Section 213 of the City’s Revenue Code.
We also enjoined the Chief, BPLO to conduct a thorough tax mapping of all
businesses operating in the City and to request from the City Accountant and
City Treasurer for a List of Payments made by the City to suppliers/contractors
as basis in the assessment of business taxes.
Management replied that they will ensure that all contractors and suppliers will be
required to pay the obligatory business tax. A close coordination between the
Accounting and Treasury Offices will be required.
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3.0 Utilization of Priority Development Assistance Fund (PDAF)
National Budget Circular No. 537 dated February 20, 2012 prescribes the guidelines
on the release of funds chargeable against PDAF for FY 2012. The PDAF shall be
used to fund priority development programs and projects identified by the Members
of Congress from the PDAF project menu in accordance with the said Circular.
The receipt of PDAF allocation is taken up in the books as Due to Other NGAs under
the Trust Fund with a balance of P27,358,912.95 as of December 31, 2012.
We noted the following in the audit of PDAF funds:
3.1 PDAF not fully implemented and/or utilized
Various PDAF extended to the City from 2009 to 2012 with a balance of
P9,637,562.02 as of year-end were not fully implemented or utilized for the
programs/projects it was intended.
The allocation for various intended
programs/projects not fully implemented and/or utilized ranges P3,685.44 to
P2,278,676.97.
3.2 Unutilized and/or unimplemented PDAF
We also noted that the City of Marikina was not able to implement/utilize at all
various PDAF totalling P17,593,155.17 which were granted in 2009 to 2012. Of
the P17,593,155.17, project proponents for PDAF granted in 2009 in the total
amount of P112,603.99 could no longer be identified. The unimplemented
programs/projects initiated by various proponents for the PDAF ranges in the
amounts from P12,603.99 to P3,200,000.
More programs/projects could have been extended to the constituents of
Marikina City had the PDAF been fully utilized and used as intended.
3.3 Utilization of the fund does not conform with its intended purpose.
We noted that fund releases were covered with Special Allotment Release
Orders (SAROs). Review of SAROs revealed that the intended purposes of
PDAF were clearly stated as follows:
a. Assistance to indigents and displaced families
b. Sports development program
c. Scholarship program
However, verification of expenses charged to PDAF disclosed that some were
not among the stated purpose for the PDAF, such as printing of various
tarpaulins for various activities, financial assistance for employees of national
office, purchase of battery pack and charger, reimbursement of expenses for
supplies for various activities, printing of t-shirts, purchase of trophies, various
appliances for Christmas gifts to various communities and various services
rendered for Christmas party of various organizations in the total amount of
P3,759,242.67.
34
We have recommended that for those PDAF received with no available data as to
the purpose, the specific purpose be inquired from the proponent legislator or
from DBM as basis for their implementation.
We have also recommended that Management ensure and monitor the proper
utilization of PDAF releases to implement the priority programs and projects in
accordance with the covering SARO.
Further, we have reiterated our previous year’s recommendation that
Management utilize fully the PDAF granted to the City, otherwise, if the purpose
of a certain PDAF is completed or is no longer needed, the City may request for
realignment with the concurrence of the proponent legislator as provided for
under National Budget Circular No. 537 dated February 20, 2012.
Management replied that they are compliant to the guidelines, and will continue
to comply. Contrary to the allegation that some of the expenses incurred and
charged to the PDAF were not among the purposes intended for the PDAF, the
fact is that all the expenses identified in the audit fall under the purposes of the
PDAF.
Our rejoinder:
The noted expenses do not conform to the intended purpose of PDAF releases
stated in the SAROs.
4.0 Implementation of projects under the 20% Development Fund
4.1 Projects programmed for implementation under the City’s Local
Development Plan (LDP) not initiated by the Local Development Council
(LDC)
Section 106 of RA 7160 provides that each local government unit shall have a
comprehensive multi-sectoral development plan to be initiated by its
development council and approved by its sanggunian. For this purpose, the
development council at the provincial, city, municipal, or barangay level, shall
assist the corresponding sanggunian in setting the direction of economic and
social development, and in coordinating development efforts within its territorial
jurisdiction.
Section 107 (b) of the same Act provides the composition of Local Development
Councils, as follows:
“The city or municipal development council shall be headed by the
mayor and shall be composed of the following members:
1. All punong barangays in the city or municipality;
2. The chairman of the committee on appropriations of the
sangguniang panlungsod or sanggunian bayan concerned;
35
3. The congressman or his representative; and
4. Representatives of non-governmental organizations operating in
the city or municipality, as the case may be, who shall constitute
not less than one-fourth (1/4) of the members of the fully
organized council.”
Our verification, however, showed that the members of the LDC, who also
compose the City Development Council (CDC) Executive Committee, is not in
accordance with the above-cited provision of RA 7160. The composition of
which are the City Mayor, Executive Assistant, DILG Director, Budget Officer,
Former City Engineer, General Services Officer, City Treasurer, City Planning
Officer and the City Accountant.
There are also no available documents that would show that the Development
Plan was initiated by the LDC and approved by the Sangguniang Panlungsod.
As a result, the body that formulated the projects funded out of the 20%
Development Fund do not represent the different sectors outlined in RA 7160.
4.2 Partial and non-compliant programmed projects
The City’s Local Development Plan for CY 2012 approved by the CDC Executive
Committee under Resolution No. 01 dated February 9, 2012 shows the different
projects programmed for implementation under the 20% Development Fund’s
current year’s budget and continuing appropriations available for reprogramming
in the amount of P109,925,687.20 and P27,372,062.29, respectively, or a total
appropriation of P137,297,749.49.
Section 3 of DILG and DBM Joint Memorandum Circular (JMC) No. 2011-1 dated
April 13, 2011 specifically enumerates the different development projects which
may be funded out of the 20% development fund, categorized namely as social,
economic and environmental development.
Out of the total appropriations of P137,297,749.49, projects amounting to
P12,000,000 (8.74%) and P96,760,000 (70.47%)showed partial and noncompliance, respectively, with the above-cited JMC. The P12,000,000 partial
compliance refers to the program for rehabilitation and repair of City Health
Centers which is compliant with the said JMC. However, most of the projects
under the programs listed in the City’s Local Development Plan for 2012 shown
in Table 7 do not fall among the priority projects categorized per said JMC.
36
Table 7: Compliance of projects funded from the 20% Development Fund to
DILG-DBM JMC No. 2011-1.
DILG-DBM Joint
Memorandum Circular No. 2011-1
1.
2.
3.
4.
5.
Local Development
Plan for 2012
Programs
Amount
Full
Compliance
Kalusugan
Kapayapaan
Kaayusan
Kabuhayan
Kalikasan
P 2,000,000 P12,000,000 P19,000,000
0
0
5,760,000
26,537,749
0
20,000,000
0
0
36,000,000
0
0
16,000,000
Total
Equivalent %
P 33,000,000
5,760,000
46,537,749
36,000,000
16,000,000
P137,297,749
100.00%
P28,537,749
20.79%
Partial
Compliance
P12,000,000
8.74%
NonCompliance
P96,760,000
70.47%
Moreover, out of the total projects of P42,562,831.44 implemented as of
December 31, 2012, P38,727,524.33 or 90.99% represents the amount utilized
for projects which are not in accordance with the above-cited Circular, like office
supplies, construction and heavy equipment, printing and binding expenses,
training expenses and repairs and maintenance and others. The improper
utilization of the said 20% Development Fund resulted in the non-achievement of
the purpose for which the said Fund was established to the disadvantage of the
intended beneficiaries.
4.3 20% Development Fund not optimally utilized
The responsibility of the local chief executive cited in Section 5.0 of DILG-DBM
JMC No. 2011-1 dated April 13, 2011, states that:
“It is the responsibility of every Provincial Governor, City and
Municipal Mayor and Punong Barangay to ensure that the 20% of the
IRA is optimally utilized to help achieve desirable socio-economic
development and environmental outcomes.
xxx. Further, all
concerned local chief executives are hereby reminded that utilizing
such fund, whether willfully or through negligence, for any purpose
beyond those expressly prescribed by law or public policy shall be
subject to the sanctions provided under the Local Government Code
and under such other applicable laws.” (Emphasis ours)
For CY 2012, the different projects programmed for implementation under the
20% Development Fund is from the current year’s budget and continuing
appropriations available for reprogramming in the amount of P109,925,687.20
and P27,372,062.29, respectively, or a total of P137,297,749.49. However,
notwithstanding the result discussed under the above finding no. 5.2, on the
improper utilization of the said Fund, it was noted that only P42,562,831.44 or
31% was utilized during the year thereby leaving a balance of P94,734,918.05 or
69%, which remained unutilized at the end of the year. Due to the failure of the
City to fully implement its projects for the 20% Development Plan, its constituents
were deprived of the vital services and benefits due them had the same been
fully and properly implemented.
37
4.4 Non-compliance with the proposed Annual Investment Plan (AIP) Form
prescribed by DBM.
Section 3.1.2 of the Local Budget Circular (LBC) No. 70 dated March 14, 2000,
issued by DBM states that:
“The AIP shall be prepared by using AIP Form No. 1 and shall be
submitted to the Sanggunian for approval.”
Review of the AIP for CY 2012 of the City showed that the AIP form used is not
the prescribed form and was prepared by the officers, whose offices are
apparently involved with the activities and projects, instead of by the City
Planning and Budget Officers. This does not conform to the above-cited LBC.
As required under said LBC, the Planning and Budget Officers are authorized to
prepare the AIP as one of the duties provided under Republic Act No. 7160 for
the former is to integrate and coordinate all sectoral plans and studies
undertaken by the different functional groups or agencies while the latter is to
coordinate with the planning and development coordinator in the formulation of
the local government unit development plan.
As a result, the information required in the prescribed AIP was not completely
presented. The programs, activities and projects with their brief description were
not clearly given and the current year quarterly cost requirement was not
specified. Also, the preparing officers may not be able to provide the accurate
and complete information in identifying the programs, activities and projects of
the City to be funded out of the 20% Development Fund.
We have recommended that Management:
1. prepare a comprehensive multi-sectoral development plan that shall be
initiated by the Local Development Council and its composition shall be in
accordance with Section 107 (b) of RA 7160. Said plan shall be approved by
the Sangguniang Panlungsod;
2. allocate the 20% Development Fund for development projects that shall
contribute to the attainment of desirable socio-economic development and
environmental management outcomes and shall partake the nature of
investment or capital expenditures. Said Fund shall be utilized to finance the
priority development projects and programs, as embodied in the duly
approved local development plan that directly support the Philippine
Development Plan, the Medium-Term Public Investment Program and the
Annual Investment Program;
3. maximize the utilization of the 20% Development Fund allocated for the
implementation of various projects, programs and activities that are
envisioned to help in the attainment of social, economic and environmental
development and optimally utilize the 20% Development Fund to help
achieve desirable socio-economic development and environmental
outcomes; and
38
4. prepare the AIP using the form prescribed by DBM under Section 3.1.2 of
Local Budget Circular No. 70 dated March 14, 2000, and shall be prepared by
the Planning and Budget Officers.
Management agreed to undertake the following courses of actions:
a. The newly completed Comprehensive Development Plan for the City will be
submitted to the City Council for its appropriate action;
b. The allocation of the 20% Development Fund for 2012 will be reviewed to
ensure that it supports the AIP, and to justify the projects and programs
included therein;
c. To transfer/adjust charging of transactions which are found to be noncompliant and/or unjustifiable; and
d. A supplemental budget will be prepared to provide appropriation in support of
the transfer/adjustment of funds.
Our rejoinder:
The preparation of a supplemental budget for the provision of an appropriation to
support the transfer/adjustment of funds is no longer necessary.
The
appropriations for the 20% Development Fund were already provided in the
Annual Budget for CY 2012 and its expenses already recognized in the books
during the year. The necessary adjusting entries should, however, be effected.
5.0 Deficiencies noted in the audit of the 5% statutory contribution for the
Metropolitan Manila Development Authority (MMDA)
5.1 The amount appropriated for 5% MMDA contribution was short by P8.225
million
Section 10 of RA 7924, otherwise known as An Act Creating the Metropolitan
Manila Development Authority, states that:
“Five percent (5%) of the total annual gross revenue of the preceding
year, net of the internal revenue allotment, of each local government
unit mentioned in Section 2 hereof, shall accrue and become payable
monthly to the MMDA by each city or municipality. xxx”
Review of the City Budget for CY 2012 showed that the above provision was not
strictly complied with, hence, the amount appropriated for the 5% statutory
contribution to MMDA was short by P8.225 million, computed as follows:
39
Total Operating Income for CY 2011
Add: Discount on Real Property Tax
Total Gross Revenue for CY 2011
Less: IRA realized for CY 2011
Total Gross Revenue Net of IRA for CY 2011
Section 10 of RA 7924
5% Subsidy to MMDA for CY 2012:
Per Audit
Per Annual Budget
Short in Appropriation
P1,392,793,668
132,812,695
P1,525,606,363
577,071,771
P 948,534,592
5%
P
P
47,426,730
39,201,922
8,224,808
Although the five percent contribution to MMDA was already deducted by the
DBM from the Internal Revenue Allotment of the City, the corresponding
appropriation should be correctly applied to reflect the true budget and for the
accurate allocation of the City’s resources.
5.2 Improper use of account Due to NGAs for the 5 percent MMDA
contributions resulted in the overstatement of liabilities and
understatement of expenses both by P45.864 million
COA Circular No. 2003-001 dated June 17, 2003 prescribing the Chart of
Accounts under the New Government Accounting System described the Liability
account Due to Other National Government Agencies (NGAs), with credit as its
normal balance, as the amount received from other national government
agencies for the implementation of specific programs/projects subject to
liquidation. Also, the description provided by the same Circular to the Expense
account Subsidy to National Government Agencies, with debit as its normal
balance, was to record the amount transferred to NGAs pursuant to a provision
of law, memorandum of agreement, etc.
Our audit of the payments for the five per cent contributions to MMDA totalling
P45,864,000.00 deducted by the DBM from the City’s IRA for CY 2012 showed
that the same were treated by the City as a debit to Due to Other NGAs account
upon collection of IRA shares. The account is credited based on the deduction
from the City’s current year’s regular income computed proportionately on the
five per cent monthly collection accruing to MMDA.
The use of account Due to NGAs is improper as the above regulations provided
the specific use of account Subsidy to NGAs. The practice resulted in the
overstatement of liabilities and understatement of expenses both by P45.864
million.
40
5.3 Unreconciled amount of P1.563 million for the account of MMDA deducted
by DBM from IRA and appropriated amount
Section 10 of RA 7924 states that:
“xxx. In case of failure to remit the said fixed contribution, the DBM
shall cause the disbursement of the same to MMDA chargeable
against the IRA allotment of the city or municipality concerned, the
provision of Section 286 of RA 7160 to the contrary notwithstanding.”
For CY 2012, total deductions made by DBM for the account of MMDA amounted
to P45,864,000.00 while total appropriations per audit was computed at
P47,426,730, as shown in finding no. 6.1. This is due to the inaccurate amount
applied as basis in computing the five percent statutory contribution by
MMDA/DBM hence, the difference of P1,562,730.00.
We have recommended that Management:
1. for Budget Year 2013, recompute the appropriation for the MMDA share to
ensure full compliance of RA 7924;
2. effect the necessary correcting entry and to take up the contributions to
MMDA as Subsidy to NGAs account as provided under COA Circular No.
2003-001 dated June 17, 2003;
3. close to PYA account/Government Equity account the adjusted balance of
P28,017,558.49 as of December 31, 2012 of the Due to Other NGAs
subsidiary account for MMDA, after effecting the correcting entries
recommended in finding no. 3.1 and 6.2; and
Particular
Balance as of Dec. 31, 2012
Correcting entries underFinding No. 3.1
Finding No. 6.2
Adjusted Balance as of Dec. 31, 2012
Debit
Credit
19,878,271.12
37,724,712.63
45,864,000.00
28,017,558.49
4. reconcile total payments by the City with the books of accounts of MMDA.
Any unpaid balance should be appropriated and correspondingly remitted to
MMDA.
Management replied that the proposed adjusting entries would result in totally
closing Due to Other NGAs account as of December 31, 2012, whereas
remittance to MMDA through IRA deduction is not being made on the actual
month income is earned, the amount of P19,878,271.12 is the actual balance of
Due to Other NGAS account and still due to MMDA as of December 2012.
Monthly deduction from IRA, as remittance to MMDA, does not correspond to 5%
of Income as MMDA share for that particular month, hence, every month there is
still an amount due to them. If recommended adjusting entries will be reflected,
this would mean understatement of liabilities (Due to Other NGAs account) as of
December 31, 2012.
41
Management decided not to reflect said adjustments for the reason that effecting
the first two entries and reflecting the amount of P19,878,271.12 as remaining
balance would result in zero adjustments to Prior Year Adjustments and Due to
Other NGAs accounts.
Nevertheless, in compliance to the recommendations, Management proposed
the following entries for CY 2013 to ensure that all accounts are recorded in an
accurate, reliable and truthful manner.
1. Set up of 5% share to MMDA (with OBR)
Subsidy to NGAs
xxx
Due to Other NGAs
xxx
2. Upon receipt of NFCI from DBM
Due to Other NGAs
xxx
IRA
xxx
Our rejoinder:
The credits to the liability account is based on the deduction from the City’s
current regular income computed proportionately on the five percent monthly
collection accruing to MMDA. A recomputation of the liability account balance
should be made based on the actual income of the preceding year to determine
the balance due as of December 31, 2012.
There is a need to close the Due to Other NGAs account for the subsidiary
account five percent MMDA because the contribution is considered as expense.
Reflecting the proposed adjusting entries will not result in zero adjustments to
PYA. It will show that after effecting the recommended adjusting entries, there
will be an increase in the PYA account amounting to P19,878,271.12 which
represents the following:
1. unrecorded income for CY 2012 totaling P37,724,712.63 due to the
inaccurate recording of collections;
2. unrecorded expense totaling P45,864,000.00 due to the improper use of the
Due to Other NGAs account; and
3. unrecorded income of previous years, net of contribution to MMDA amounting
to P28,017,558.49.
The liability account may no longer be taken up as the Obligation Request is
prepared by the Budget Office once the Notice of Funding Checks Issued is received
by the City. However, if Management opts to set up the liability for the said
contribution, the appropriate account should be used, as the Due to Other NGAs
does not apply to the said transaction.
42
6.0 Audit of Overtime and Night Pay
DBM Budget Circular No. 10 dated March 29, 1996, was issued to prescribe and
update the rules and regulations on the payment of authorized overtime services of
government personnel. Section 4 of the Circular enumerates the government
personnel who are exempted from payment of overtime services with pay and
exempting among others “Other appointive officials whose equivalent rank is higher
than a chief of division”. Section 8 thereof specifies the funding source of overtime
which specifically states that “Agencies are hereby authorized to pay overtime
services out from the following sources namely: The amounts specifically
appropriated in the agency budget for overtime pay” (underscoring ours)
We noted the following in our audit of the overtime and night pay of City officials and
employees in CY 2012:
6.1 Officials not authorized to receive overtime pay
Payments of overtime services were granted to officials whose rank is higher
than a chief of division such as the City Government Assistant Department Head
(CGADH) and City Government Department Head (CGDH) or position with salary
grade (SG) higher than SG 22. This practice is contrary to Section 4.1 of the
aforecited Circular.
The Manual on Position Classification and Compensation specifically provides
the highest position below the rank of an assistant department head, which is SG
22. Hence, officials with SG higher than 22 are not entitled for overtime pay.
During the year, overtime services totalled P4,776,180.94, of which P788,077.60
was paid to officials whose rank is higher than the chief of the division or higher
than SG 22.
6.2 Incomplete supporting documents
The claims for payment of overtime services to personnel whose rank is below
the chief of the division were not supported by overtime work program and
quantified overtime accomplishment duly signed by the employee and
supervisor. There were also cases wherein Daily Time Records were not
attached to the Payroll.
6.3 Overtime Payment Without Appropriation
We noted that the amount of P2,390,275.96 was expended for overtime services
in the absence of appropriation in the Annual Budget. The same were charged
against the current appropriations for personal services and maintenance and
other operating expenses (MOOE), particularly, Salaries and WagesCasual/Contractual and Other MOOE, contrary to Section 8 of the aforecited
Circular.
Overtime services with pay may be charged to savings if the following conditions
provided in Section 8 of the same Circular have been met:
43
“8.1.2 Savings from released allotments for current operating expenditures
subject to the following limitations:
8.1.2.1 All authorized mandatory expenses shall have been paid first;
and
8.1.2.2 Total overtime payments in a given calendar year shall not
exceed five percent (5%) if the total salaries authorized
positions of the agency.”
We have recommended that Management:
1. stop the payment of overtime services to officials/employees of the City
whose rank is higher than a chief of division without prejudice to the refund of
the overtime pay given them;
2. attach the following documents to support the claims for overtime services
with pay:




Overtime work program,
Quantified overtime accomplishment,
Duly signed and approved DTR/Proof of attendance or time logs
Authority to render overtime
3. refrain from paying authorized overtime services without appropriation; and
4. strictly comply with the rules and regulations on the payment of authorized
overtime services of government personnel provided by DBM Budget Circular
No. 10.
Management replied that while the persons mentioned in the audit observation
are not entitled to overtime pay, considering that they are not covered by DBM
Budget Circular No. 10 dated March 29, 1996, Management submits that the
policy on overtime pay has certain exceptions in cases when unforeseen events
and emergency situations will result in any of the following:
a. Cause financial loss to the government or its instrumentalities;
b. Embarrass the government due to its inability to meet its commitments; or
c. Negate the purposes for which the work or activity was conceived. (par.
2.0 sub.par. 2,1, Ibid)
Management also commented that the overtime performed by the department
heads and assistant department heads do not depart from the meaning of
unnecessary expenditures as provided in COA Circular No. 2012-13 dated
October 29, 2012. In fact, the work they performed beyond the regular working
hours were dictated by the demands of good government in order to meet the
mission and thrusts of the agency when, if not immediately acted upon, will either
create financial loss or embarrassment to the City or to the City Mayor himself if
his commitment will not be fulfilled or the programs of the City will fail.
44
One justification is Executive Order No. 014, Series of 2012, creating the Shoe
Festival Committee where the department heads concerned worked beyond the
regular office hours in order to complete the project within a specific time. In sum,
the department heads performed their duties beyond the regular working hours in
good faith and in the exigency of service, hence, are entitled to overtime pay if
not for services they have rendered which redound to the advantage and benefit
of the City Government.
Our rejoinder:
The exemptions presented by Management are the exemptions to the general
rule of the policy on overtime prescribed in the DBM Circular, which states,
“Overtime work should be avoided by adequate planning of work
activities. It should not be resorted to in the performance of
regular routine work and activities. xxx”.
The said Circular on prescribing and updating the guidelines and procedures on
the rendition of overtime services with pay to government personnel does not
cover the subject officials. In fact, they were explicitly enumerated in 4.1 of the
Circular as those government personnel who are not covered by the policy, thus,
we have reiterated our recommendation that Management stop the payment of
overtime services to officials/employees of the City whose rank is higher than a
chief of division without prejudice to the refund of the overtime pay received by
them.
7.0 Inappropriate funding and incomplete documentation for payment of Honoraria
to Members of Bids and Awards Committee (BAC), BAC Secretariat and
Technical Working Group (TWG)
Section 15 of the Implementing Rules and Regulations (IRR) of R.A 9184 states that,
“The procuring entity may grant payment of honoraria to the BAC members in an
amount not to exceed twenty five percent (25%) of their respective basic monthly
salary subject to availability of funds. For this purpose, the DBM shall promulgate
the necessary guidelines. The procuring entity may also grant payment of honoraria
to the BAC Secretariat and the TWG members, subject to the relevant rules of the
DBM.”
As mandated by the above-cited law, DBM Budget Circular No. 2007-3 dated
November 29, 2007, was promulgated to provide guidelines on the grant of honoraria
and overtime pay to government personnel involved in the government procurement,
particularly, Section 3 of the said Circular, provides that:
“3.1
The amount necessary for payment of honoraria and overtime pay
authorized under BC No. 2004-5A dated October 7, 2005 shall be
sourced from the following:
3.1.1 Collections from successfully completed procurement projects
limited, however, to activities prior to awarding of contracts to
winning bidders: Proceeds from sale of bid documents; Fees
from contractor/supplier registry; Fees charged for copies of
45
3.2
3.3
3.5
minutes of bid openings, BAC resolutions and other BAC
documents; Protest fees; and Proceeds from bid security
forfeiture.
xxx
3.1.4 In the case of LGUs, savings from the local budget approved
by their respective Sanggunian subject to the pertinent
provisions of R.A 7160 (Local Government Code of 1991).
Savings refer to portions or balances of agencies’ budgets as referred
to in items 3.1.2, 3.1.3 and 3.1.4 above, free from any obligation or
encumbrance which are:
3.2.1 Still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the
appropriation is authorized;
3.2.2 Arising from unpaid compensation and related costs pertaining
to vacant positions and leaves of absences without pay; and
3.2.3 Realized from the implementation of collective negotiation
agreements which resulted in improved systems and
efficiencies and thus enabled an agency to meet and deliver
the required or planned targets, programs and services at
lesser cost.
In the use of savings, priority shall be given to augmentation of the
amount set aside for mandatory expenditure items provided under the
General provisions of the General Appropriations Act (GAA). It is
understood that the use of agency savings for payment shall be made
only after satisfying said mandatory expenditure items.
xxx
In cases of deficiency in collections from procurement activities and
non-availability of agency savings, the amount of honoraria and
overtime pay shall be adjusted proportionately for all those entitled
thereto.”
Our audit of honoraria granted to members of the BAC, BAC Secretariat and TWG
revealed that the payments of honoraria were charged against the 2012 Annual
Budget (AB) of the City, which is sourced merely on estimated revenue and not on
savings and collections from successfully completed procurement projects, limited
however, to activities prior to awarding of contracts to winning bidders, which should
have been identified and set aside for the purpose of granting honoraria to BAC,
BAC Secretariat and TWG in the AB.
As of December 31, 2012, the amount of P1,220,071 have been paid to members of
the BAC, BAC Secretariat and TWG sourced out of the regular appropriations for
2012.
It was noted that payments of honoraria were not supported with the following
documents namely: Office Order creating and designating the BAC composition and
authorizing the members to collect honoraria; Minutes of BAC Meeting; Notice of
Award to the winning bidder of procurement activity being claimed; Certification that
the procurement involves competitive bidding; and Attendance Sheet listing names
of attendees to the BAC meeting.
46
We have recommended that the City stop the payment of honoraria that are to be
funded out from the regular appropriations of the City and should be from savings
and proceeds from sale of bid documents, fees from contractor/supplier registry, fees
charged for copies of minutes of bid openings, BAC resolutions and other BAC
documents, protest fees and other proceeds from bid security forfeiture.
Moreover, we have recommended strict compliance with the regulations provided in
R.A 9184 and DBM Budget Circular No. 2007-3 on the grant of honoraria to
officers/employees involved in government procurement and claims for honoraria be
supported with the aforecited documents.
8.0 Grant of Honoraria to various committees of the City without legal basis
Section 95 of the R.A No. 7160 states that “No elective or appointive local official or
employee shall receive additional, double or indirect, compensation, unless
specifically authorized by law, nor accept without the consent of Congress, any
present, emoluments, office, or title of any kind from foreign government. xxx”
(Emphasis ours)
Under item 2.1 of Budget Circular No. 2007-2 dated October 1, 2007, honorarium is
defined as a form of compensation given as a token of appreciation of reward for
gratuitous services on account of one’s broad and superior knowledge or expertise in
a field for which, going by custom, tradition or propriety, no fixed price is set.
Moreover, Section 2.2 of the above-cited Circular, prescribes the guidelines on the
grant of honoraria due to assignment in the government special projects. A special
project is a duly authorized inter-office or intra-office undertaking of a composite
group of government officials and employees which is not among the regular and
permanent functions of their respective agencies. Such undertaking may be locallyfunded or foreign-assisted, is reform-oriented or developmental in nature, and is
contributory to the improvement of service delivery and enhancement of the
performance of the core functions of an agency or member agencies.
In recognition of the important functions performed by the members of the
committees of the City Council and other composite groups other than the committee
of the City Council and as encouragement for them to become active and efficiently
productive, various ordinances were enacted to authorize the grant of honoraria to
the members of the 29 committees of the City Council and 8 other composite groups.
The following are the standing committees of the City Council and other composite
groups:
Committees of the City Council on:
1. Appropriation
2. Barangay Affairs
3. Cooperatives
4. Communication and
Information Technology
5. Culture and Arts
6. Dangerous Drugs
7. Disaster Preparedness,
20. People’s Participation
21. Rules & Codification of Laws
22. Senior Citizen & Persons with
Disability Affairs
23. Tourism
24. Trade, Commerce & Industry
25. Transportation & Traffic
26. Ways & Means
47
Mitigation and Management
8. Education
9. Parks and Development
10. Footwear & Leather craft
Industry
11. Games & Amusements
12. Government Affairs, Ethics &
Accountabilities
13. Health and Sanitation
14. Housing, Zoning, Community
Development & Urban Planning
15. Human Rights & Justice
16. Infrastructure
17. Labor & Capital Relations
18. Environmental Protection
19. Peace and Order, Public Safety & Security
27. Women & Family Affairs
28. Youth & Sports Development
29. Inter-Government Affairs
Other Composite Groups
1. City Appraisal Committee
2. Public Auction Committee
3. City Peace & Order Committee
4. Local Development Council
5. Stall and Market Awards
Committee
6. Public Utility Franchising and
Regulatory Board
7. Complaints and Ethics Board
8. GAD Management Team
It was noted that the enactment of various Ordinances were not consistent with the
above-cited provisions of the R.A. 7160 and DBM Budget Circular No. 2007-2. The
programs/functions of the Committees are not special projects that have specific time
frame to accomplish. These are part of the regular functions of the City, which are
continuously implemented, monitored, evaluated and enhanced. Hence, the payment
of honoraria to the members of various committees of the City Council and other
composite groups other than the committee of the City Council is tantamount to
additional compensation or double compensation.
Our audit of the payments of honoraria during the year disclosed that a total of
P6,847,500 were paid to the Chairmen of the various committees of the City Council
and members of other composite groups, contrary to Sections 95 and 2.2 of the R.A
7160 and DBM Budget Circular No. 2007-2, respectively.
In the absence of a legal basis, we have recommended that the City stop the
granting of honoraria to the Chairmen of the various committees of the City Council
and members of other composite groups without prejudice to the refund of the
honorarium received by them in the above-mentioned period and any amounts
pertaining thereto, thereafter. Further, the enactment of Ordinances should be
aligned with applicable and existing laws.
Management gave the following comments:
1. Pursuant to Article 170 and Section (f) of Article 405 of RA 7160, it is apparent
that the City Government of Marikina has the authority to determine the
compensation of elective officials and employees whether as regards to their
basic salary or the allowances they are entitled to receive, subject only to the
limitation of the law, that is, in disbursing of public funds it must be based on
appropriations ordinance or law.
2. When the City Government passed into law the Ordinances giving chairmen of
the various committees of the City Council and other composite groups
allowances, the same are valid acts of the City for they are in accordance with
the Local Government Code.
48
3. Under Section 95 of RA 7160, the grant of allowances to officials and employees
is GENERALLY NOT PROHIBITED as long as there is a law, such as an
ordinance, allowing the same as may be gleaned in Section 95 of R.A. 7160.
4. The listed committees of the City of Marikina are all creations of the respective
Ordinances enacted by the City Council pursuant to the exercise of its delegated
legislative powers under Sec. 458 of the Local Government Code. There is,
therefore, no dispute that the City Council of Marikina has the power to create
and fund offices, including committees and boards mentioned in the audit report.
5. Thus, the receipt by the officials and employees concerned of the subject
allowances should not be disallowed by COA as they are disbursed to them in
accordance with the law, that is, the Ordinances in question.
Our rejoinder:
We maintain our finding that the grant by the City of Marikina, through Ordinances, of
honoraria to all the chairmen of the various committees of the City Council and
members of the composite groups violated the provisions of Section 95 of RA No.
7160 and DBM Circular No. 2007-2.
The power of the Sangguniang Panlungsod to determine the positions and salaries,
wages, allowances and other emoluments and benefits of officials and employees
paid wholly or mainly from City funds and provide for expenditures necessary for the
proper conduct of programs, projects, services, and activities of the City Government
is not without limit. The pronouncement of the Supreme Court in the case of Veloso
vs. Commission on Audit is enlightening, thus:
“However, as correctly held by the COA, the above power is not without
limitations. These limitations are embodied in Section 81 of RA 7160, to
wit:
Sec. 81. Compensation of Local Officials and Employees.
The
compensation of local officials and personnel shall be determined by the
sanggunian concerned: Provided, that the increase in compensation of
elective local officials shall take effect only after the terms of office of
those approving such increase shall have expired: Provided further, That
the increase in compensation of the appointive officials shall take effect
as provided in the ordinance authorizing such increase: Provided
however, That said increase shall not exceed the limitations on budgetary
allocation for personnel services provided under Title Five, Book II for this
Code: Provided finally, That such compensation may be based upon
the pertinent provision of Republic Act Numbered Sixty-seven fiftyeight (R.A. No. 6758), otherwise known as the “Compensation and
Position Classification Act of 1989.”
Under Administrative Order No. 42 dated March 3, 1993, the President reiterated the
provision of RA No. 6758 that the DBM shall be the Administrator of the Unified
Position Classification and Compensation System of the government. The DBM was
mandated to undertake the following:
49
1. Provide guideline on the classification of local government positions and on the
specific rates of pay thereof;
2. Provide criteria and guidelines for the grant of all allowances and additional forms
of compensation to local government employees;
3. Advise and assist LGUs on matters of position classification and compensation of
local government personnel; and
4. Provide technical expertise in the training of local government personnel to
enable them to administer and maintain the compensation and position
classification system.
As the sole Administrator of the Unified Position Classification and Compensation
System of the government, it was well within the power of the DBM to promulgate
Budget Circular No. 2007-2 prescribing the guidelines on the grant of honoraria due
to assignment in government special projects and to include local government units
(LGU) within its coverage. These guidelines similarly constitute a limitation on the
powers, duties, functions and compensation provided under Section 458 (viii) of the
Local Government Code.
Honoraria represent payments for services rendered by the government personnel
performing activities or discharging duties in addition to, or over and above their
regular functions, and payment for services of personnel with expertise or
professional standing in recognition of his broad and superior knowledge in specific
fields. Thus, under item 2.1 of Budget Circular No. 2007-2, honorarium is defined as
a form of compensation given as a token of appreciation of reward for gratuitous
services on account of one’s broad and superior knowledge or expertise in a field for
which, going by custom, tradition or propriety, no fixed price is set.
Honorarium is granted to certain government officials and employees concerned
precisely because they are assigned in special projects or tasks which are not
included among the regular and permanent functions of their respective offices.
Stated otherwise, said officials and employees may not receive honorarium for
performing work which form part of their regular duties.
By their own admission, “The honoraria received by the Sangguniang Panlungsod
and the City officials and employees as chairman and member of their concerned
committees are not due to their assignment in special projects, but honoraria
for rendering services for the activities they have participated in, which are
relevant to the fulfillment of their official duties as chairman of a particular
committee in the City Council of Marikina or just being a member thereof.”
The committee chairmanship or membership in the City Council is necessarily
included in, and forms part of, the official duties of the city officials and employees
concerned. As a regular duty and function, the services rendered are already paid
by the regular compensation, allowances and benefits attached to their respective
positions. Granting honorarium over and above the regular compensation and
allowances for the same services rendered breaches the limitations, particularly
DBM Budget Circular No. 2007-2, which allows the payment of honorarium only for
50
special projects, the latter being considered services rendered over and above the
regular functions of the officials and employees involved. Disregarding this limitation
and typifying the same as an unnecessary interference in local affairs grants the
Sangguniang Panlungsod the unrestricted discretion to grant compensation,
allowances and benefits as it may deem convenient and gratuitously ignore
compensation policies issued by the national government under the cloak of local
autonomy.
There is indeed nothing wrong with the local government granting additional benefits
to the officials and employees. In so doing, however, the LGU must be guided by
existing laws and administrative issuances regulating the grant of compensation,
allowances and benefits.
It being established that the services for which the honorarium was granted are in
fact part of the regular duties already compensated by the emoluments attached their
respective positions, the receipt of honorarium is likewise contrary to Section 95 of
RA 7160, which reads:
“Sec. 95. No elective or appointive official or employee shall receive
additional, double or indirect compensation, unless specifically
authorized by law, nor accept without the consent of Congress, any
present, emoluments, office, or title of any kind from foreign
government.”
The attendance of the City officials and employees in committee meetings by reason
of their chairmanship or membership therein is actually a performance or fulfillment
of their regular functions as elective and appointive officials and employees of the
City. These services are already paid for and covered by the compensation attached
to their respective positions. Unless convincingly shown that the honorarium they
receive is within the parameters outlined in Budget Circular No. 2007-2, the same
constitutes additional, double or indirect compensation proscribed by Section 95 of
RA No. 7160.
Accordingly, we reiterate our position that the honorarium paid to members of
various committees of the City is without legal basis and should be discontinued.
9.0 Hiring of consultants
As provided in Section 77 of R.A 7160, otherwise known as the Local Government
Code of 1991, the local chief executive of every local government may employ
emergency or casual employees or laborers paid on a daily wage or piecework basis
and hire through job orders for local projects authorized by the sanggunian
concerned, without need of approval or attestation by the Civil Service Commission,
provided that the period of employment of emergency or casual laborers shall not
exceed six (6) months.
Anchored from this provision, the City hired casual employees and
consultants/project based. As of December 31, 2012, the City has a total of 2,485
personnel, composed of 564 permanent employees, 1,631 casual employees, 156
project-based and 134 consultants. The hiring of casual employees and consultants
51
are supported by a contract signed by the City Mayor or the Vice Mayor and the
consultant himself.
The following were noted in our audit of the contracts of consultants hired by the City
and expenses paid to them:
a. Duties and Functions not prepared by the City
The services to be rendered by the consultants are not specifically stated in the
contract and the man hours to be rendered are also not indicated therein. The
duties and functions of the consultants are written in separate sheets, which were
attached to the contracts.
b. Duties and Functions do not require expertise
Evaluation of the duties and functions provided by the consultants revealed that
their duties and functions do not require expertise in a particular field or area of
specialization, contrary to the definition provided by the General Principles on
Consulting Services, which states that
“Consultant is a natural or juridical person, qualified by appropriate
education, training and relevant experience to render any or all of
the types and fields of consulting services such as: 1) Advisory
and Review Services, 2) Pre-Investment or Feasibility Studies, 3)
Design, 4) Construction Supervision, 5) Management and Related
Services, and 6) Other Technical Services or Special Studies.”
The duties and functions performed by the consultants employed by the City are
ordinary/regular services that can be carried out by permanent and casual
employees; hence, the services performed by consultants are no longer
necessary considering the existence of 1,631 casual employees as support staff
to the 564 regular employees of the City. The employment of casual employees,
which outnumbered the regular employees, is adequate to perform the basic
functions of the City.
c. Family members were hired
Since qualification as to appropriate training and experience is not considered in
hiring these consultants, there were cases wherein family members of some
elected officials of the City were hired. In the absence of time logs and
accomplishment report, it is uncertain that these consultants had rendered their
services.
d. No accomplishment reports
During the year, the City expended a total amount of P5,888,203 as salaries of
the consultants. The said expenditure was not supported by accomplishment
reports or even a document showing time logs as proof of actual discharge of
their functions. Hence, it is uncertain that the cost of employing these
consultants is equated by their actual performance.
52
e. Regular renewal of employment
The salaries of consultants were paid regularly on a monthly basis for more than
6 months and were recorded in the financial reports as Salaries and WagesContractual. The employment of these consultants is considered regular since
most of them were hired a long time ago.
Had the City revisited its services and staff requirements before hiring
consultants, there could have been additional funds for other relevant projects
that have long-term impact for its constituents and the utilization of its permanent
and casual employees could have been maximized.
In view of the foregoing, we have recommended that the City:
1. specify the consultants’ duties/functions in the contracts as bases in the
enforcement of their deliverables with the end in view to maximizing the
worth of hiring said consultants and minimizing monetary losses to the
City.
2. consider the desired expertise, which is not available among the regular
staff, in hiring consultant; and
3. avoid hiring family members or relatives within the fourth degree of civil
degree of consanguinity or affinity. Evaluate and utilize the skills and
talents of their regular employees to cut cost and to boost their morale;
4. require the submission of accomplishment reports as basis for payment.
Utilize the services of the casual employees in discharging
regular/ordinary services to compensate and maximize the costs of
their employment;
5. revisit its organizational structure, staffing pattern and service
requirements to assess the necessity of hiring consultants;
Management gave the following comments:
1. Hiring of consultants is a necessity and not disadvantageous to the City.
2. The duties and functions of the consultants are prepared by the City. The
separate sheet of paper wherein the duties and functions are stated is forwarded
to the City Personnel Office (CPO) for entry in the contract. The CPO, perhaps,
due to its voluminous tasks and duties, merely attached the same to the contract
instead of having it entered into the contract. And assuming that the mechanical
act of writing the duties and functions were personally prepared by the
consultants, said duties and functions were determined, emanated and supplied
by the Offices concerned.
3. The permanent and casual employees need to be augmented by consultants
who are experts in the field that they are assigned and that the determination of
expertise and the need of consulting is a Management prerogative.
53
4. No family members of the elected officials of the City were appointed as
consultants, as defined in Section 79 of the Local Government Code which states
that “No person shall be appointed in the career service of the local government
if he is related within the fourth civil degree of consanguinity or affinity to the
appointing authority or recommending authority.”
5. No instruction was received by Management from the CPO for the consultants to
submit their accomplishment report on a regular basis.
10.0 Audit of Gender and Development (GAD)
10.1 Non-reconstitution of the existing Gender and Development Focal Point
System of the City
The Philippine Commission on Women (PCW) issued Memorandum Circular
(MC) No. 2011-11 dated October 21, 2011 to provide the guidelines for the
creation, strengthening and institutionalization of the Gender and
Development Focal Point System (GDFPS). Under Section 4.2 of the same
Memorandum Circular, agencies with existing GDFPS or similar mechanisms
were required to reconstitute and strengthen said mechanisms based on the
provision of Republic Act No. 9710, its implementing rules and regulations
and said MC. Sections 5.1 and 5.3 of the same MC also define the structure
and composition of the GDFPS as well as the roles and responsibilities,
respectively.
Executive Order No. 006 dated February 25, 2011, created the City’s Gender
and Development (GAD) Management Team, as the appropriate body to
orchestrate the implementation of GAD in realizing the City’s objective of
making Marikina governance gender responsive. However, it was noted that
the responsibilities that correspond to the role of each member of the GAD
Team were not clearly defined in the said Executive Order. As such, it may
not be able to function as a mechanism for catalyzing and accelerating
gender mainstreaming in the agency towards the promotion of Gender
Equality and Women’s Empowerment.
Also, the City was not able to reconstitute its existing GDFPS, which is the
GAD Management Team, as required under the above-cited Section 4.2 of
PCW Memorandum Circular No. 2011-11.
Table 8 shows the comparison and dissimilarities of the structure and
composition of the existing GDFPS created under E.O No. 006 against PCW
MC No. 2011-01.
54
Table 8:
Structure and composition of the existing GDFPS.
Executive Order No. 006
dated February 25, 2011
GAD Management Team composed
of the following:
1. Chairperson (City Mayor)
2. Vice Chairperson (Councilor
Chair of Women and Family
Affairs Committee)
3. Members (Heads or alternates
of each department)
4. Secretariat
PCW Memorandum Circular No. 201101 dated October 21, 2011
GAD Focal Point System compose of the
following:
1. Chairperson or Head of Agency
2. Executive Committee (with Head either
the undersecretary or its equivalent)
3. Technical Working Group/ Secretariat
(members are representatives from
each division or offices, with Head
outside of the executive committee or
member of the executive committee)
4. Secretariat-may designated by the
Technical Working Group
We had recommended and Management concurred that the City Mayor
reconstitute and strengthen the existing GDFPS based on the guidelines set
under PCW Memorandum Circular No. 2011-01 and clearly define the roles and
responsibilities of each member of the reconstituted GDFPS.
10.2 Non-compliance with Section 36.a of Republic Act (RA) 9710, otherwise
known as The Magna Carta of Women
To promote women empowerment and pursue equal opportunities for women
and men, equal access to resources and development outcome, and elimination
of any forms of discrimination and inequality, the City needs to develop plans,
programs and mechanisms to realize these endeavours. To achieve these, there
should be fund to be utilized for this purpose.
Section 36.a of the Magna Carta for Women or R.A. No. 9710 authorizes
government agencies and local government units to allocate at least five percent
(5%) of the agency’s or the local government unit’s total budget appropriations,
which reads as follows:
“xxx. The cost of implementing GAD programs shall be the
agency’s or the local government unit’s GAD budget which shall
be at least five percent (5%) of the agency’s or the local
government unit’s total budget appropriations.”
Our audit of the GAD disclosed that the amount appropriated for CY 2012 was
short by P80,743,882 or 93.63 percent as follows:
55
Particulars
Total Appropriations per Annual Budget for CY 2012
Section 36.a of RA 9710
AppropriationsPer Audit
Per Budget
Difference
Amount
P1,724,803,326
5%
P
P
86,240,166
5,496,284
80,743,882
This is due to the said City Budget Office’s non-compliance with Section 36.a of
RA 9710 in the formulation of the budget for GAD. As a result, the said budget
for GAD may be inadequate to address various gender issues since the
resources are limited for the City to prioritize and devote for the
institutionalization of the said gender issues to plans, policies and programs
hence, its pursuit to gender equality and women empowerment could not be fully
attained.
We have recommended that the City Budget Office appropriate the correct
amount to ensure that the budget for the GAD is adequate to address various
gender issues. Moreover, we have recommended that strict compliance with
Section 36.a of RA 9710 be observed.
Management replied that the amount of P5,496,284 was included in the annual
budget as a provision for Gender and Development Programs, which amount
was assigned for the GAD Team to allot to its plans and programs. The various
GAD programs, projects and activities were mainstreamed and/or integrated with
other offices’ programs, projects and activities (PAPs). Some of these activities
are the following: livelihood programs, provision of social protection service
welfare, maternal and child care and nutrition classes, information dissemination,
Re: Social protection among government employees, conduct of seminars to
create awareness on women empowerment; free legal services for women and
children who are victims of violence.
Our rejoinder:
We, however, noted that the above-mentioned PAPs were not incorporated in the
Project Procurement Management Plan of each office and the costs allocated for
each program was not specified. Hence, it is uncertain if the City Budget Office
had allotted 5% of the total Budget Appropriations of the City pursuant to Section
36.a of R.A No. 9710, otherwise known as The Magna Carta for Women.
Likewise, the said PAPs were not included in the City’s Annual GAD Plan and
Budget. In view thereof, we have recommend that the cost allocated for each of
the above-mentioned PAPs be specified and the same PAPs be incorporated in
the Annual GAD Plan and Budget for CY 2012 to ensure compliance with the
above-mentioned provision.
10.3 Non-inclusion of vital information in the GAD Plan and Budget for CY 2012
Section 5.1 of DBM-NEDA-NCRFW Joint Circular No. 2004-1 dated April 5, 2004
prescribed the form to be used in the preparation of the Annual GAD Plan and
Budget. Said form provides vital information necessary to determine if the
56
promotion of gender-responsive governance, protection and fulfilment of
women’s human rights, and promotion of women’s economic empowerment were
properly addressed.
Review of the GAD Plan of the City duly approved by the City Mayor only
showed the programs/activities and the cost to be allocated for the same. It did
not include the corresponding gender issue/concern, objective, target and
performance indicator of each program/activity/project, as required under Section
5.1 of the afore-mentioned Joint Circular, which are vital information necessary
for proper evaluation and monitoring of projects and programs concerning gender
development.
We have recommended that the GAD Plan should conform with the format and
procedure prescribed in Annex A of Section 5.1 of DBM-NEDA-NCRFW Joint
Circular No. 2004-1 dated April 5.
Management subsequently submitted a revised GAD Plan, however, it still did
not comply with the prescribed format.
11.0 Audit of the Local Disaster Risk Reduction and Management
11.1 Non-submission of the Local Risk Reduction and Management Plan to
the Office of the Civil Defense
One of the powers and functions vested in the Office of Civil Defense (OCD),
in partnership and in coordination with member agencies and in consultation
with key stakeholders, as may be applicable, as provided under Section 9 (e)
of RA No. 10121 is as follows:
“Review and evaluate the local Disaster Risk Reduction and
Management Plans (LDRRMPs), in coordination with
concerned agencies and or instrumentalities, to facilitate the
integration of disaster risk reduction measures into the local
Comprehensive Development Plan (CDP) and Comprehensive
Land-Use Plan (CLUP).”
Our review of the City’s LDRRMP for the period covering 2012 to 2013
showed that said Plan remained not submitted to the OCD for its review and
evaluation; thus, the integration of the disaster risk reduction measures into
the local Comprehensive Development Plan (CDP) and Comprehensive
Land-Use Plan (CLUP) was not facilitated to comply with the above provision
and to the disadvantage of the City.
11.2 Projects programmed by the Disaster Risk Reduction and Management
Council (DRRMC) totalling P7.206 million not supportive to disaster risk
management activities
Section 21 of RA 10121 provides that:
57
“xxx. Not less than five percent (5%) of the estimated
revenue from regular sources shall be set aside as the
LDRRMF to support disaster risk management activities
such as, but not limited to, pre-disaster preparedness
programs including training, purchasing life-saving rescue
equipment, supplies and medicines, for post-disaster activities,
and for the payment of premiums on calamity insurance. xxx”
(Emphasis ours)
For the year 2012, the City set aside in its annual budget the amount of
P76,250,000.00 representing five percent of the estimated revenue from
regular sources as its LDRRMF of which the amount of P53,375,000.00
representing 70 percent thereof was allocated as its preparedness and
mitigation fund. On February 21, 2012, the DRRMC passed Resolution No. 1
for the proposed programming to be funded by the said 70 percent allocation
together with the continuing appropriations amounting to P70,155,046.31, or
a total appropriation of P123,530,046.31, which was duly approved by the
City Council under Ordinance No. 37 on July 17, 2012.
Our review of the projects programmed by the DRRMC for implementation
showed that out of the total appropriations of P123,530,046.31, projects
totalling P7,206,046.00 or 5.83 percent are not supportive to risk
management activities, hence, are not compliant with the above-cited
provision as shown in Table 9. Accordingly, the purpose for which the Fund
was created may be defeated insofar as the stated projects are concerned.
Table 9: Projects not supportive to risk management activities
Projects
Setting up of DRRM Office (Civil Works)
Kitchen Area @ MSP
For use of DRRM Office:
Office Supplies
Conference Room Microphone/Speaker
Conference Table & Chairs
Executive Chair & Table
Staff Table & Chairs
Total
Amount
P 6,000,000
670,046
200,000
150,000
87,000
54,000
45,000
P 7,206,046
11.3 Improper utilization of the 30% Quick Response Fund (QRF) of the
LDRRMF totalling P1.231 million
1. Overtime pay totalling P1.010 million during Habagat disaster
operations.
COA Circular No. 2012-002 dated September 12, 2012 provides the
following:
58
“3.0 Purposes of the LDRRMF
The LDRRMF shall be used to support disaster risk
management activities such as, but not limited to the following:
3.1 Pre-disaster preparedness programs such as training of
personnel, and purchase of life saving and rescue
equipment, and supplies and medicines;
3.2 Post-disaster activities such as repair and rehabilitation of
public infrastructures and purchase of office/school
equipment damaged by calamities during the budget year;
3.3 Payment of insurance premiums on property if indemnity
includes damages or loss due to fire, earthquake, storm or
other casualties and on the personnel accident insurance
of Accredited Community Disaster Volunteers; and
3.4 Relief and recovery programs in communities or areas
stricken by disasters, calamities, epidemics or complex
emergencies.”
During the year, the City of Marikina has been gravely affected by the
constant rains and floods caused by southwest moonsoon or Habagat,
which placed many areas in the City under water. The City Council has
then issued Resolution No. 097 dated August 8, 2012 declaring the City
of Marikina in state of calamity.
City personnel were tapped to assist in disaster operations such as relief
and flood calamity response operations and were compensated with
overtime pay totalling P1,010,136.51 for services rendered which were
charged to the 30% QRF of the LDRRMF. While said personnel rendered
their services during the relief and flood calamity response operations,
payment of overtime services cannot be considered as part of the
program for relief and recovery because it does not fall within the scope
of application provided under the above-cited Section 3.4 of COA Circular
No. 2012-002. Overtime pay should not be charged to the said Fund but
to the regular budget of the City.
2. Assistance totalling P220,368 granted to the fire victims
The same Circular also provides that the release and use of the LDRRMF
shall be supported by Local Sanggunian Resolution and the declaration of
state of calamity for the QRF.
For CY 2012, assistance totalling P220,368 was granted by the City to
the fire victims residing at Barangay Tumana. We noted that the QRF
was released and used in the absence of City Council Resolution and the
declaration of state of calamity for the said QRF, which is not in
accordance with the above-cited Circular.
59
We have recommended that Management:
1. submit the LDRRMP for 2012-2013 to the OCD for review and
evaluation;
2. program the projects for the 70% Preparedness and Mitigation Fund
that are supportive to disaster risk management activities as provided
under Section 21 of RA 10121 and Section 3.0 of COA Circular No.
2012-002 dated September 12, 2012;
3. refund the amount of P1,010,136.51 paid for overtime services from
the General Fund- Proper to the Trust Fund under the Trust LiabilityDRRM account;
4. refund the assistance granted to the fire victims totalling P220,368
from the General Fund- Proper to the Trust Fund under the Trust
Liability- DRRM account; and
5. be cautious in charging expenditures to the LDRRMF.
Management replied that they have already furnished the Office of Civil
Defense a copy of the Local Disaster Risk Reduction and Management Plan
CY 2012-2018 last April 4, 2013.
12.0 Inaccurate computation of the distribution of proceeds from Internal
Revenue Allotment (IRA) for General Fund (GF)-Proper and 20%
Development Fund (DF).
The DBM is the agency in charge of enforcing the release of IRA to the local
government units. For CY 2012, proceeds from IRA released by the DBM to the
City distributed for the GF-Proper and 20% DF amounted to P423,805,770.00 and
P94,485,444.00, respectively, or a total of P518,291,214.00.
Analysis of the distribution of proceeds from IRA showed that the share of 80
percent GF-Proper and 20% was computed by DBM at net of the five percent
statutory contribution for MMDA. The appropriations for MMDA is under the GFProper, hence, distribution of proceeds from IRA for the 80 percent GF- Proper and
20% DF should have been computed at gross amount of IRA and that the five
percent contribution for MMDA should be deducted from the 80 percent share of
the GF –Proper. As a result, the share of the GF-Proper and 20% DF, which were
deposited to the bank accounts of the said Funds, are overstated and understated,
respectively, by P9,172,798.80 as presented in Table 10.
60
Table 10: Analysis on the distribution of proceeds from IRA
Bank
Account No.
0435021897-030
0435021899-030
Per Books
General Fund
Per Audit
80% for GF-Proper:
●Net of 5% for MMDA
●5% for MMDA
Total
P337,941,770
45,864,000
P423,805,770
P368,768,971
45,864,000
P414,632,971
P 9,172,799
20% Development Fund
Total IRA
94,485,444
P518,291,214
103,658,242
P518,291,214
(9,172,799)
P
0
Particulars
Over/(Under)
P 9,172,799
Consequently, the programs/projects programmed for implementation which are
funded from the 20% Development Fund are affected.
We have recommended that Management:
1. adjust and transfer the amount of P9,172,798.80 from the bank accounts of the
GF-Proper to 20% Development Fund; and
2. re-compute all releases of the distribution of proceeds from IRA credited to the
respective accounts of the GF-Proper and 20% DF and discrepancies noted be
accordingly adjusted.
Management referred the matter to the DBM for comment/opinion of which the
Regional Director for DBM-NCR concurred with the audit recommendation for the
adjustment in the recording of the IRA in the books of the City to reflect the correct
amounts of the General and Development Funds. The basis in the determination
of the 80 percent General Fund and 20% Development Funds should be the gross
IRA allocation notwithstanding that the actual fund transferred to the City is net of
the said contribution.
13.0 Review of the City’s Revenue Code
The City Council of Marikina passed in 1995, Ordinance No. 224 providing for the
Marikina Revenue Code which shall govern the taxing powers of Marikina.
We noticed the absence of some important information/data in the documents and
reports pertaining to the assessment/collection of business taxes, which could be
improved.
13.1 Non-inclusion of appropriate provisions for revisions
The exemption from Idle Lands Tax in Section 13 of the Revenue Code did
not provide for the rules/regulations on how to avail of the exemption from
idle land tax. Moreover, the following city ordinances adopted from RA 7160
are not yet included in the Code:
 Ordinance No.19, series 2011 establishing the Marikina Trade Fair Center
and prescribing rates of rental/lease for its use;
61
 Ordinance No. 41, series of 2011, a portion of which states that “(4)
Regulate activities relative to the use of land, buildings and structures within
the city in order to promote the general welfare and for said purposes shall:
(i) declare, prevent or abate any nuisance”; and
 Ordinance No. 72, series of 2011 providing for the classification of
businesses subject to issuance of Barangay clearance and rates imposed.
13.2 Non-inclusion
of
appropriate
revisions/amendments
classification/tax rates for new business
in
the
The City’s Revenue Code categorized and defined fifteen business
establishments and required for the imposition of tax and regulatory fees to
any person who shall establish, operate or conduct any business, trade or
activity within Marikina and that they shall first obtain the necessary permit
from the Business Permits and Licensing Office and shall pay the
corresponding tax imposed in the Code.
We noted in the master list of business establishments for CY 2012 from
Business Permits and Licensing Office that there were some businesses
categorized as Other-Business. Inquiry revealed that peculiar businesses
were classified as such because the Revenue Code does not provide for their
specific classification. These business activities or operation are relatively
new in the market which were unheard of at the time the Code took effect in
1995, hence, could not be identified immediately at the time of filing or
processing of their business application.
They were not categorized
accordingly as to the common use or activity; consequently, these are
encoded as Other- Business in the taxpayer’s Payment Records or until the
Code could provide their specific industry classification.
As a result, these businesses are not uniformly classified as to industry and
levied with the appropriate rates of business tax. Also, the absence of clear
and standard classification of business opened the possibility of dispute and
confusion among users/taxpayers. Table 11 presents some instances
wherein similar nature of business had different classification which has an
effect in tax rates.
Table 11: List of business establishments with similar nature but with
different classification
Name
1) Millenium Audit & Collection
Services
2) Actiones Credit
Collection Services Inc.
3) ATC Mktg.
4) Celebes Mktg.
5) RS Canteen & Catering
Classified as
Other Business
Other Contractor
Other-Retailer
Other-Wholesaler
Eatery-Food caterer
62
Gross
Sales
Amount
of
Tax/Fees
75,000
2,665
1,700,000
2,520,000
0
300,000
13,799
30,278
1,083
12,125
6) Queen J Catering & Food Service
7) Fire Master Import & Export
8) Multi-Lift Sales Corp.
Other Business
Other Wholesaler
Retailer-Import/Export
500,000
124,051,022
43,783,641
9,085
627,050
447,762
The computerized system of the Business Permits and Licensing Office is
unable to present/segregate in the master list, the computation for business
tax from regulatory fees, thus, the taxes on businesses could not be
compared with the annual rates in the Revenue Code.
In our sample below, establishments with the same nature of business and
gross sales show differing amounts of taxes and fees. Inquiry with the BPLO
disclosed that segregation of the computation of business taxes and
regulatory fees is not possible because it is already imbedded in the
computerized system of business tax, hence, the master list of business
establishments submitted showed the totality of these levies. Table 12 gives
the detailed listings.
Table 12: Detailed list of businesses with same nature and gross sales but
with different amount of taxes and fees
GT II PROPERTY MANAGEMENT
Lessor - Space for Rent
P5,000,000
Taxes
and
Fees
P 26,700
JACINTO'S SPACE FOR RENT
Lessor - Space for Rent
5,000,000
101,550
CARMELLETES SHOES, INC.
Manufacturer - Shoes Ladies
5,000,000
31,025
ESSENZA ENTERPRISES
Manufacturer - Shoes Ladies
5,000,000
14,957
AJIE'S PANDESAL HOUSE
Retailer - Bakery
144,000
3,668
BERNWIN BAKERY
Retailer - Bakery
144,000
4,005
CHERRY MAY'S BAKESHOP.
Retailer - Bakery
144,000
4,741
726 SKY.NET CAFÉ
Amusement - Computer Rental Shop
150,000
5,239
A - SIX INTERNET CAFÉ
Amusement - Computer Rental Shop
150,000
2,570
CCC ONLINE CYBER HUB
Amusement - Computer Rental Shop
150,000
5,675
DEEP SEA NET CAFÉ
Amusement - Computer Rental Shop
150,000
1,736
FIREMAX INTERNET ZONE
Amusement - Computer Rental Shop
150,000
4,105
KEN – J
Amusement - Computer Rental Shop
150,000
3,582
LEVIAN COMPUTER SHOP
Amusement - Computer Rental Shop
150,000
2,300
NOTNOT (DOT NET) INTERNET CAFÉ
Amusement - Computer Rental Shop
150,000
2,018
PC SURF NET
Amusement - Computer Rental Shop
150,000
6,103
Business Name
Nature of Business
Gross Sales
The uniformity of tax rates applied to similar businesses may not be
consistently applied on the rest of the population/business operating in the
City.
We likewise noticed that the City has not codified its Revenue Ordinance No.
224, series of 1995 in order to preserve its pages and serve as handbook to
all stakeholders of the City for information of rates of taxes/fees imposed and
collection period.
63
We have recommended that Management consider revising the Revenue
Code of 1995 and possibly include the appropriate revisions/amendments in
the classification/tax rates for new businesses operating in the City; and the
rules and regulations adopted from pertinent sections in RA 7160 for a clearcut responsibilities of its city officials and taxpayers and uniform
implementation of the City’s Revenue Code.
Likewise, we have recommended that the concerned Offices such as
Treasury and BPLO provide the City Mayor and City Council with information
and complete listings of all businesses operating in the City including rates of
business taxes and fees being imposed by its neighboring 1st class cities as
their basis in amending the Code. Moreover, a regular review/update of the
businesses enumerated in the Code that would specifically identify all kinds
of trade and commercial activities of businesses and applicable tax rate and
regulatory fees be conducted. This could provide a uniform revenue base
and update the Code for the information and benefit of its taxpayers and
other users.
We have also enjoined the BPLO to provide separate information on the
assessment for tax due and regulatory fees for monitoring and review of
business taxes.
Management replied that they have submitted proposals for the revision of
the Revenue Code as early as the first quarter of 2009 and started studying
how to improve procedure initially through Revenue Ordinance Guidelines in
the Processing of Business Permit and License (An Employee Manual).
13.3 Non-adjustment of stale checks amounting to P144,567 in the General
Fund
A bank reconciliation is a process that uncovers any possible discrepancy
between the bank balance shown in the bank statement prepared by the
bank and the book balance recorded in the accounting records. Any
reconciling item between these two separate records should be analyzed,
investigated and accordingly adjusted in the books of accounts.
Our review of the December 2012 Bank Reconciliation Statement (BRS) for
the General Fund, Current Account showed outstanding checks amounting to
P27,953,272. Of this amount, P144,567 were outstanding for more than six
(6) months as shown below.
Nature of Transactions
Financial/Medical
assistance
Food & drinks served
Honorarium
Allowances
Per Diem
Cash prizes
Meals
CY
2010
P10,000
7,000
28,000
1,000
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CY
2011
CY
2012
P14,000
P 2,000
5,800
20,000
3,000
8,900
8,500
6,400
1,000
Total
P 26,000
7,000
33,800
28,500
9,400
9,900
1,000
PLDT
Reimbursement
Publication
Total
4,200
P46,000
22,767
2,000
P76,467
P22,100
4,200
22,767
2,000
P144,567
Comparison of these outstanding checks with the records from the
Treasurer’s Office disclosed that these checks have already been released to
its claimants and included in the pertinent Report of Checks Issued, hence, it
is unusual for these checks to remain outstanding and not be presented to
the bank by its claimants for a long time.
The outstanding checks of more than six (6) months could no longer be
classified as mere items requiring adjustments from bank as these checks will
not be honored by the bank and could have already been replaced but were
not adjusted and recorded in the books.
We have recommended and Management agreed to exhaust all means to
reconcile these outstanding checks against valid checks deducted from the
City’s current account and accordingly adjust the books to reflect the correct
account balance. We have also recommended that Management verify and
match the particular disbursement vouchers pertaining to these checks if
indeed recorded. A copy of the BRS should be given to the City Treasurer for
reconciliation of all checks already issued but remained outstanding.
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