July 2, 2010
6. Unserviceable vehicles and heavy equipments with a total book value of P6,006,786.00 were not properly disposed nor protected from further pilferage and weather elements resulting to further deterioration, thus placing the LGU at a disadvantaging situation.
Section 162 of COA Circular 92-386 provides that when supplies or property of any local government unit have become unserviceable for any cause or are no longer needed, the same shall be disposed of in accordance with the procedures prescribed in the rules and regulations.
The City General Services Office shall be responsible for the disposal of supplies or property of the local government unit.
Section 165 of the same Circular also provides that supplies or property which have become unserviceable or are no longer needed shall be sold, whenever applicable, at public auction, subject to applicable rules and regulations.
In addition, Section 145 of said circular mentioned that the person in actual physical possession of or entrusted with the custody or control of the property shall be responsible for the proper use and care of the same and shall exercise due diligence in the utilization and safekeeping thereof.
Random inventory and inspection had been conducted jointly by the Commission on Audit and the City General Services Office last February 4, 2009. The following observations were noted on unserviceable vehicles and heavy equipments with a net book value of P6,006,786.00.
1. Toyota Land Cruiser Van with plate no. SGK – 490 issued to Felipe P. Sabaldan, Jr. of the City General Services Office, with major repair located at the compound of the CGSO unsheltered parking area exposed to bad weather elements.
2. Mitsubishi Delica Pass Van with plate no. SGK – 480 issued to SPO Salazar located at the unsheltered parking area of CGSO-exposed to bad weather elements.
3. Mitsubishi Delica Pass Van with plate no. SGS – 861 issued to Dr. Brenda M. Estrella of the City Health Office was turned-over to the CGSO for major repair located at the unsheltered area of the CEO-Motorpool.
4. Mitsubishi L-300 plate no. SEY – 201 issued to Engr. Jovino J. Requina, jr. located at the City Engineering Office – Motorpool, with dilapidated body and high cost of repair, parked at unsheltered parking area, exposed to bad weather elements.
5. Isuzu Dump truck plate no. SGR – 501 issued to Engr. Gilbert P. Abugan of the City Engineering Office Motorpool with major repair caused by accident located at the CEO – Motorpool unsheltered parking area, exposed to bad weather elements.
6. Bulldozer D9H Caterpillar plate no. BCTI issued to Engr. Jovino J. Requina, Jr. for reconditioning with high cost of repair, parked at the unsheltered compound of the CEO – Motorpool.
7. Isuzu Dump truck (10 wheelers) plate no. SGN – 442 issued to Engr. Gilbert P. Abugan, heavily cannibalized, parked at the unsheltered compound of the CEO – Motorpool exposed to bad weather elements.
8. Compactor Truck 8 cu. m., JICA plate no. SDV – 216 issued to Tito Dequiño of the City Engineering Office, unrepairable unit which is highly cannibalized located at the unsheltered parking area of the CEO – Motorpool, expose to bad weather elements.
9. Hino Compactor Truck 8. cu. m. JICA plate no. SDV – 210 issued to Mr. Tito Dequiño of the CEO, heavily cannibalized and unrepairable, due to phase out model, located at the unsheltered parking area of the CEO – Motorpool compound exposed to bad weather elements which causes further deterioration of the unit.
10. Mitsubishi Delica Pass Van plate no. SGR – 510 issued to COA which was turned-over to the CGSO for repair but could no longer be repaired due to unavailability of spare parts, old model parked at the unsheltered parking area of the CEO – Motorpool.
11. Mitsubishi Delica Pass Van plate no. SGY – 109 issued to SPO VMO located at the unsheltered parking area of the CEO – Motorpool without engine assy. and heavy cannibalized.
12. Road Roller plate no. MUC – 40 issued to Engr. Jovino J. Requina, Jr. located at the unsheltered parking area of the CEO – Motorpool for engine assy. replacement.
13. Hino Dump Truck DT8 cu. m. JICA plate no. SDV – 217 issued to Mr. Tito Dequiño located at the Solid Waste Management Office unserviceable of major repair.
14. Mitsubishi Delica Pass Van plate SGY – 110 issued to Ms. Epitacia C. Bernales turned-over to GSIS due accident.
15. Ford Fiera plate no. SBU – 748 issued to Engr. Jovino J. Requina located at the unsheltered parking area of the CEO – Motorpool with major repair.
16. Fuso Fighter Dump Truck 6 wheelers plate no. SEY – 348 issued to Mr. Tito Dequiño located at the unsheltered parking area of the CEO – Motorpool for major repair.
17. Honda MC plate no. SK 8758 issued to SPO Cejoco, damaged by accident, located at the unsheltered parking area of the CEO – Motorpool.
18. Isuzu City Bus plate no. SHA – 642 issued to BISCEA/Jamora, J. located at the unsheltered parking area of the CEO – Motorpool for major repair.
19. Asia Rocsta Jeep plate no. SGE – 775 issued to GSO/Sabaldan, Jr. located at the unsheltered parking area of the CEO – Motorpool for major repair.
The following items are with condemnation/disposal found during ocular inspection
1. One (1) unit Mazda without registration issued to Engr. Jovino J. Requina, Jr. located at the CEO – Motorpool for condemnation due to unavailable spare parts in the market.
2. Dump Truck 6 wheelers plate no. SBU – 754 issued to Brgy. Mangagoy Council, Mangagoy, Bislig City located at Brgy. Mangagoy, dilapidated body with no engine for condemnation.
The list of unserviceable vehicles and heavy equipments submitted by CGSO to COA are all subject for condemnation without properly identifying the other parts whether serviceable/usable.
The local government unit lost the opportunity to generate additional income thru sale or public auction of these unserviceable properties.
Section 167 of COA Circular No. 92-386, dated October 20, 1992, otherwise known as the Rules and Regulations on Supply and Property Management in the Local Government Unit, provides that when the supplies or property of a local government unit have become unserviceable from any cause, or are no longer needed, the officer immediately accountable therefore shall return the same to the head of the department or office who shall cancel the corresponding Memorandum Receipt. If no longer needed in the department, the head of the department or office shall return the same to the general services officer. Through the local chief executive, the general services officer shall file an application for its disposal with the Provincial, City or Municipal Auditor who shall conduct an inspection and determination whether the subject property is with or without value.
Section 169 of the same circular provides that the provincial, city or municipal auditor shall inspect the supplies or property to be disposed of, the determination whether the same are with value or without value. He shall indicate his findings on the Inventory, Inspection and Appraisal form and shall forward the same to the Committee on Awards with his recommendation. If the supplies or property are found to be with value, he shall recommend the sale thru public auction; otherwise, he shall recommend the destruction in his presence.
Section 170 of COA Circular No. 92-386 further provides that upon receipt of the Inventory, Inspection and Appraisal Form, the Committee on Awards shall appraise the supplies or property recommended by the provincial, city or municipal auditor to be disposed of which appraisal shall be considered as the lowest price in the public auction to be conducted for the purpose under the supervision of said the committee.
Further, ocular inspection of unserviceable property at the City Engineer’s Office Motorpool and City General Services Office compound revealed the following observations:
a. Waste Materials and unserviceable properties of the City had long been stored at the unsheltered CEO – Motorpool and CGSO parking area, most of which have been there for more than 5 years instead of having them disposed in accordance with the procedures prescribed under Section no. 167 and 170 of COA Circular No. 92-386.
b. Unserviceable heavy equipment and other items are left at the unsheltered parking area of the CEO – Motorpool compound, exposing said properties to bad weather element. These properties could have been salvaged by proper care and management, auction sale of which at an earlier time would have demanded higher values.
‘ 3. The following items are with undetermined value found
during ocular inspection.
Items Estimated Quantity
a. Scrap Iron 5 Tons
b. Tires 80 pieces
During the exit conference, the General Services Officer justified that they have complied with Section 167 and 169 of R.A. 7160 as recommended by the Committee on Award. The Chairman of the Committee on Awards, present during the exit conference, promised to convene the said Committee per our recommendation.
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
Require the City General Services Officer to dispose unserviceable property of the Local Government in accordance with Section 167, 169 and 170 of COA Circular No. 92-386 dated October 20, 1992.
Identify those parts of the unserviceable properties that are usable/serviceable as reported in the list of unserviceable properties.
Require the Committee on Awards to convene for the appraisal of the unserviceable properties pursuant to Section 170 of Republic Act. No. 7160.
July 2, 2010
VALUE FOR MONEY AUDIT
5. The management did not consider the cost-benefit of maintaining old vehicles and heavy equipments which led to huge amount of expenditures for repair amounting to P3,198,000.00 considering the total acquisition cost of P1,815,000.00 and is presently stored at the City Motorpool awaiting for the repair and replacement of spare parts.
Provisions of Section 79 of P.D. 1445, otherwise known as the State Audit
Code of the Philippines, provides;
“Destruction or sale of unserviceable property – When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefore, be inspected by the head of the Agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unserviceable it may be destroyed in their presence, if found to be valuable, it may be sold at public auction to the highest bidder xxx.”
Ocular inspection with the Engineer of the City Motorpool of Bislig was conducted on January 23, 2009 to determine the condition of the unserviceable vehicle and heavy equipments stored at the City Motorpool.
Records showed that there are four (4) units of old vehicle and two (2) units of heavy equipments stored at the City Motorpool of Bislig which are unserviceable, waiting for repair and replacement of spare parts. The said vehicles and heavy equipments were stored for several years already due to lack of budget for the repair and purchase of spare parts this may result to further deterioration and will incur more than the estimated cost of repair, considering the estimated useful life of the vehicles and heavy equipments which is seven (7) years pursuant to COA Circular NO. 2003-007.
The following are the determining factors in the disposal of property.
1. Property, when can no longer be repaired or reconditioned;
2. Property whose maintenance costs of repair more than outweighs the benefits and services that will be derived from its continued use;
3. Property that has become obsolete or outmoded because of changes in technology;
4. Serviceable property that has been rendered unnecessary due to change in Agency’s function or mandate;
5. Unused supplies, materials and spare parts that were procured in excess of requirements; and
6. Unused supplies and materials that has become dangerous to use because of long storage or use of which is determined to be hazardous.
Verification of records showed the four (4) vehicles and two (2) heavy equipments of the City Government are fully depreciated.
The repair history of these motor vehicles and heavy equipments disclosed that its costs of repair and maintenance had exceeded its acquisition cost.
Audit Observation Memorandum were issued to the Honorable Mayor to inform the result on the ocular inspection conducted for the management to comment before the exit conference had been conducted which the City General Services Officer explained that the cost-benefit in the acquisition of vehicles equipment is foremost task of the City Government. However, due to its meager resources appropriated for the purpose. In the meantime, repair cost history is being done for future assessments of its cost-benefit until such time that the City’s revenue will improve.
During the exit conference, the management showed support to implement our audit findings and recommendations.
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
We recommend for the disposal of fully depreciated vehicles and heavy equipments including those which are costly to maintain and source funds needed for its replacement.
July 2, 2010
4. The Agency still failed to submit the annual physical inventory report of its fixed assets amounting to P500,252,558.95 and reconcile the physical count with accounting records in violation of provisions of Section 124 of the NGAS Manual, Volume I, thus, the existence, condition, and whereabouts and validity of the Property, Plant and Equipment account could not be ascertained.
Physical inventory taking is an indispensable method of checking the existence and condition of property and the determination of the accuracy of balances as recorded in the books.
Provisions of Section 124, Volume I of the New Government Accounting System states;
“The Local Chief Executive shall require periodic physical inventory of supplies and property. Physical count of Property, Plant and Equipment by type shall be made annually and reported on the Report on the Physical Count of Property, Plant and Equipment (RPCPPE). This shall be submitted to the Auditor concerned not later than January 31st of each year.”
Aside from the annual physical inventory taking, the Chief of agency shall also direct a running or test inventory of all properties at any other time during the fiscal year for the possible losses occasioned by fire, theft or other casualty, or incident.
Any discrepancies or losses that may be disclosed thereby should be reported to the COA for appropriate action as provided for under the provisions of Section 73 of PD 1445.
Due to non-submission of the results of the inventory-taking and the non-reconciliation with the accounting records the validity of the Property, Plant and Equipment valued in the books at P500,252,558.95 as of December 31, 2008 cannot be ascertained.
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
The Local Chief Executive, as the head of the agency who is immediately and primarily responsible for all government funds and property pertaining to his agency, should direct the General Services Officer to find ways and means for the early submission of the report, so as to determine the existence, condition and whereabouts of all properties of the City. Corresponding reports thereon should be submitted to the auditor concerned.
The inventory count should be reconciled with the accounting records. Discrepancies noted showed correspondingly be adjusted.
July 2, 2010
3. Delayed submission of accounts and other reports precluded the Auditor of the timely evaluation of the condition and results of operations thereby depriving the management information necessary for decision making contrary to the provisions of the Revised Manual on Certificate of Settlement and Balances and COA Circular No. 91-368.
Transactions must be promptly recorded to maintain the relevance and the value of the information to agency management in controlling operations and making decisions.
Pursuant to the mandate of the provisions of Section 347 of Republic Act No. 7160 otherwise known as “The 1991 Local Government Code of the Philippines” “the local treasurer, accountant and other accountable officers shall render their accounts within such time, in such form, style, and content under such regulations as the COA may prescribe.”
COA Circular No. 91-368 and Manual on Certificate of Settlement and Balances provides:
1. The Chief Accountant, Bookkeeper or other authorized official performing accounting and/or bookkeeping functions of the audited agency shall ensure that the reports as submitted by the accountable officers are immediately recorded in the books of accounts and submitted to the Auditor within ten (10) days from such receipts (Section 8 of the Revised Manual on Certificate of Settlement and Balances).
2. The accountable officer shall submit within five (5) days after the end of each month the monthly reports to the chief accountant for recording in the books of accounts (Section 7, ibid).
3. A Trial Balance of the accounts appearing in the ledgers shall be prepared monthly, quarterly and annually. The monthly trial balance shall be submitted not later than the twentieth day after the end of the month and the quarterly trial balance shall be submitted on or before the twentieth day of the month following the end of the quarter (Section 490, Government Accounting and Auditing Manual, Volume II).
Verification of records showed that the required reports were not submitted to the office of the Auditor within the period prescribed under the above-cited COA regulations.
As of December 31, 2008, the latest submitted reports were as follows:
Name of Reports Period Covered Date Submitted
1. Trial Balance -
General Fund January to March, 2008 October 6, 2008
Trust Fund January to March, 2008 October 6, 2008
Special Education Fund January to March, 2008 October 6, 2008
2. City Accounts
Disbursement Vouchers January to June, 2008 January 28, 2009
Disbursement Vouchers July to December, 2008 not yet submitted
Official Receipts January to June, 2008 January 28, 2009
Official Receipts July to December, 208 not yet submitted
3. Report of Collection
and Deposits January to June, 2008 January 28, 2009
July to December, 2008 not yet submitted
Accordingly, such failure of the accounting officials concerned to submit the reports regularly precluded the Auditor of the timely evaluation and verification of the agency’s financial condition and in determining the reliability and propriety of the above-mentioned accounts/reports. Likewise, the accounting officials deprived the valuable information necessary for the policy/decision making of management.
The matter was referred to the City Accountant by issuance of Audit Observation Memorandum No. 2009-005 dated January 27, 2009 soliciting their comments thereto. (Annex )
The City Accountant justified that “the delay in the submission of accounts to the Office of the City Auditor for CY 2008 was caused by the delay in the recording of financial transactions. We could not segregate, file, and transmit the accounts on time because the transactions had first to be recorded and accounted for. It was in July 2008 only that we have started recording the financial transactions for CY 2008 because it was the time that we have completed the CY 2007 year-end reports using the e-NGAS.”
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
Require the City Accountant and the City Treasurer to submit and render reports regularly and strictly in accordance with the prescribed existing auditing rules and regulations set forth under COA Circular No. 91-368 and Manual on Certificate of Settlement and Balances in order to maintain the relevance and value of the information to agency management in controlling operations and making decisions.
July 2, 2010
2. The City Engineering Office incurred unauthorized withdrawal of 11,766.43 liters amounting to P440,064.48 diesel from stock due to the failure to establish effective internal control system in the issuance and withdrawal of the same.
Section 2 of the provisions of Presidential Decree No. 1445 provides that;
“It is the declared policy of the state that all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhere to rests directly with the Chief or head of government agency concerned.”
Interviews made with the City Engineer revealed that the usual practice of the City Engineering office is to purchase fuels in bulk from accredited fuel stations in Mangagoy, Bislig City on the fuel requirements of infrastructure projects undertaken by the City Engineering Office as the field operation requires. The fuel was gradually withdrawn thru withdrawal slips duly approved by the authorized signing official in the City Engineering Office, the approved withdrawal slips would be presented to the fuel station for the actual issuance of fuel to the vehicle equipment needing the same, the fuel station then issues the requested fuel and covers it with appropriate charge invoice for purposes of monitoring, chargeable to the specific project concerned.
In the later part of Calendar Year 2007, the City Engineering Office undertook and handled the Barangay Lawigan Road Graveling Project, for which the City Government purchased from Mangagoy Shell Service Station diesel fuel totaling 35,730 liters and paid the amount of P1,336,302.00 at P37.40/liter for the said project wherein Engr. Laila P. Manclucob, Engineer III and Engineer Butalid of the CEO was designated by City Engineer Jovino J. Requina, Jr. to closely monitor and manage the withdrawal of diesel fuel for the said project.
Records disclosed that in the review of the approved withdrawal slips and charge invoice it appears that there were several withdrawals which were not signed by either Engineer Manlucob nor Engineer Butalid but signed by unauthorized official in the City Engineering Office, Ms. Jenna L. Moreno.
The unauthorized withdrawals slips which were signed by Ms. Moreno covering the months of March, April, May, June, July and August,2008, were periods wherein, there was no operation of that project.
Upon discovery of the unauthorized withdrawals, the City Engineer filed immediately a case with the Regional Trial Court Branch 13 at Bislig City before the audit have been conducted.
The unauthorized withdrawal of diesel would not have reached a total of 11,766.43 liters if monitoring had been performed regularly by the designated official in the City Engineering Office.
In the verification of the withdrawal slips and the charged invoices, it appeared that several approved withdrawal slips signed by Ms. Jenna L Moreno above the name of Engineer Requina, Jr., City Engineer were unauthorized withdrawals with total of 11,766.43 liters amounting to P440,064.48 covering the period from March to August, 2008, as follows:
March to August, 2008
Less: withdrawals with
Audit Observation Memorandum were issued to the Honorable Mayor, copy furnished the City Engineer of the City Engineering Office wherein the City Engineer explained that the monitoring and supervision on the issuances of diesel from stock was delegated to his staff, Engineer Manlucob and Engineer Butalid.
COA Circular No. 77-61 dated September 26, 1977, prescribing the use of Manual on Audit for fuel consumption provides that;
“Before an authorized driver can procure gasoline for the agency’s storage tank, see to it that a duly approved RIV or equivalent bearing the plate no. of the vehicle to be utilized is presented to the gasoline control officer, no issuance of gasoline from the agency storage tank shall be allowed without an approved RIV or equivalent for the purpose.
The RIV or equivalent when properly accomplished and duly approved be the basis of procuring gasoline and oil from a gasoline service station normally supplying the agency with its fuel needs, or for requisitioning gasoline for use of motor vehicles operated and maintained by an agency when it maintains a storage tank to service its fuel needs.”
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
Require the City Engineering Office to establish a sound internal control system to check and monitor the withdrawals of fuel from stock from the storage in the gasoline station and adhere strictly to the provisions of COA Circular No. 77-61 and Section 2 of Presidential Decree no. 1445.
July 2, 2010
FINANCIAL AND COMPLIANCE AUDIT
1. The refund of unused cash advances for traveling expenses were not issued with corresponding official receipts for failure of the concerned officials and employees to return immediately to the collecting officer the unused part of the cash advance after completion of travel in violation of paragraph 5.7 of COA Circular No. 97-002, which resulted to the unliquidated balance of P1,019,544.19 as of December 31, 2008.
Paragraph 5.7 of COA Circular No. 97-002, provides that;
“When a cash advance is no longer needed or has not been used for a period of two (2) months, it must be returned to or refunded immediately to the collecting officer.”
Records disclosed that officials and employees with cash advances for travel, returned the unused part through installment by payroll deduction without the issuance of a corresponding official receipt, thus a violation to the provisions of COA Circular No. 97-002 and which resulted to the unliquidated balance of P1,019,544.19 as of December 31, 2008.
Audit Observation Memorandum (AOM) was issued to the Honorable City Mayor, inviting attention to the City Accountant asking explanation on the actual practice made on the refund of the unused cash advances of officials and employees. The City Accountant explained that majority of officials and employees with excess cash out of the cash advance, after completion of travel, were used for personal purposes and refunded only through payroll deduction.
Most of the time, unused cash advances could not be refunded intact by issuance of an official receipt. To expedite settlement of cash advances, they resorted to payroll deduction. However, they committed to adhere to the provisions of COA Circular No. 97-002 and will no longer deduct from the payroll the return of unused cash advances, but they will require the refund through issuance of official receipt.
RECOMMENDATION FOR BISLIG CITY GOVERNMENT:
Direct the officials and employees with cash advances for travel to return immediately to the collecting officer the balance of their Cash Advance upon return to the official station as required in the above stated provision. Payment of his/her salary shall be suspended until he/she complies therewith.
Adhere strictly to the provisions of paragraph 5.7 of COA Circular No. 002 in order to avoid misappropriation of funds.
Discourage payroll deduction for unliquidated cash advances, refund must be directly returned to the collecting officer in full amount of the unused balance to avoid accumulation of unliquidation cash advance.