Mindanao Daily

II. Value for Money Audit:
6. The rates of the tax ordinance of the City Government had been unadjusted for almost 15 years depriving millions of collections which may have been utilized for developmental projects.

Sec. 191 of  R.A. 7160, which provides authority to Local Government Units to adjust  rates  of  Tax  Ordinances, states that:
“Local  government  units  shall  have  the authority to adjust the tax rates as prescribed herein not oftener than once every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the rates fixed under this Code.
Review of  revenues collected by the City Government of Pagadian from CY 1994 to CY 2008,  disclosed that the tax rates used  in the  assessment, collection, and  payment of taxes, fees, charges and other  impositions  for services rendered were still based on City Ordinance No. 93-117  which  was  approved on December 29, 1993.    This  City  Ordinance  had  been implemented  without revision for already 15 years now.
The approximate income of this Office should the same been adjusted providing the allowable 10 percent increase of tax rates in every after five years should have been millions. This fund could had been used to develop city streets, alleys, improved garbage maintenance and other developmental priorities of the City.
When we had a talked with the City Treasurer, this Office was informed that the proposed revision of the City Revenue Code had been unacted in the legislature for already six years. However, we have knowledge that the present Sangguniang Panlungsod is undergoing public hearing regarding the revision of the 1993 Revenue Code. The same issue was also taken up in the Executive Legislative Agenda formulation held on October 2-4, 2008.

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Management comments:
The City Treasurer during the exit conference on February 12, 2009 admitted that the tax rate of the City Government had not been adjusted for almost 15 years. A tax measure is now discussed by the Sannguniang Panlungsod, increasing the rates of taxes. It is already on its third reading. Public hearing was already conducted. If this Tax Ordinance will be approved business taxes and other taxes will be implemented definitely
this year. The City Treasurer said that for Real Property Taxes, the increase will be implemented on staggered basis, 30% increase will be implemented this year, 60% on its second year, until the 100% increase will be fully implemented.
Recommendation to Pagadian City Government:
Make representation with the Sangguniang Panlungsod for the soonest approval of the Revenue Code. Provide some technical assistance by assigning knowledgeable personnel from the City Treasurer’s Office to assist the lawmakers in the solution of some difficult issues.

DETAILED FINDINGS AND RECOMMENDATIONS

5.  The Bids and Award Committee (BAC) missed to require the complete  submission of  some eligibility documents for the infrastructure projects aggregating to P33,962,537.87 hence, a deviation from Section 23,  Rule VIII, R.A. 9184 and IRR-A.
Section 23. Eligibility Requirements for the Procurement of Goods and Infrastructure Projects
23.1 The  eligibility   requirements  statements shall be submitted to the BAC in the form  prescribed in Section 23.6 of this IRR-A  and in the Instructions to Bidders,  in a sealed  eligibility  envelope  duly  marked as such:   Provided,  however,  That the minimum requirements provided for in  this IRR-A shall be complied with. The eligibility envelopes of prospective bidders for the procurement of  infrastructure projects shall be submitted on or before the deadline specified in the Invitation to Apply for Eligibility and to Bid, and shall be opened before the dates of the pre-bid conference and bid opening to determine eligibility of prospective bidders, who shall then be allowed to acquire or purchase the relevant bidding documents from the procuring entity.
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23.2 In relation to Section 25 on submission and receipt of  bids, and subject to the provisions  of Section  21.3 of this IRR-A, the BAC shall determine if each prospective bidder is eligible to participate in the bidding by examining the completeness of each prospective bidder’s eligibility requirements or statements against a checklist of requirements, using a non-discretionary “pass/fail” criteria,  as stated in the Invitation to Apply for Eligibility and to Bid, and shall
be determined as either “eligible” or  “ineligible.”   If a prospective bidder submits the specific eligibility document required, it shall be rated “passed” for that particular requirement.   In this regard, failure to submit a requirement, or an incomplete or patently insufficient submission, shall be considered “failed” for the particular eligibility requirement concerned,   If a prospective bidder is rated “passed” for all the eligibility requirements, it shall be considered eligible to participate in the bidding, and the BAC shall mark the set of eligibility documents of the prospective bidder concerned as “eligible.”  If a prospective bidder is rated “failed” in any of the eligibility requirements, it shall be considered ineligible to participate in the bidding, and the BAC shall mark the set of eligibility documents of the prospective bidder concerned as “ineligible.” In either case, the markings shall be countersigned by the BAC chairperson or duly designated authority.
23.3 The BAC shall inform an eligible prospective bidder that it has been found eligible to participate in the bidding.  On the other hand, the BAC shall inform an ineligible prospective bidder that it ha s been found   ineligible to participate in the bidding, and the grounds for its ineligibility.
Post-audit on the procurement of various infrastructure projects implemented through contract for the period January to November, 2008, disclosed that the BAC missed to require the submission of some eligibility documents from contractors.
Others were deficient in substance. The value of these contracts with this deficiency amounted to P33,962,537.87.
The following bidding documents were not submitted, and if submitted, we have observed these deficiencies to wit:
1.  Letter of Intent (IRR Section 21.3)
2. Eligibility Requirements were not complete and not appropriate.  The      Eligibility Requirements of some winning bidders  for  Legal, Technical and Financial documents were submitted only after the biddings were awarded as shown on  the dates indicated in the transmittal letter  of the eligibility requirements submitted to the BAC  and the dates as   shown in the bidding documents which were attached   to the disbursement vouchers.

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1. Class  “A”  Documents
Legal Documents
a. ) Mayor’s permit/ business permit was not appropriate,  since,   there   were  procurement of infrastructure projects awarded in CY 2007, but the business permit  submitted was for CY 2008.
Financial Documents
a) Some of the audited financial statements were not stamped “received” by the BIR. The financial statements submitted were not the prior year, but for the current year, since the transactions were made during the previous year.
b) Some winning bidders did not submit audited financial statements, but only an Income Tax Return.
3.  Minutes of the Opening of Bids were not submitted (IRR Section 29)
4. The Abstract of Bids as Read and As Calculated prepared by the BAC was          consolidated in one (1) bidding document, while, the prescribed form by the GPPB, should be the Abstract of Bid as Read is Standard Form-INFRA-57  and the Abstract of  Bid as Calculated  is SFN-INFRA-59, since, the Abstract of Bids as  Read is used during the preliminary examination of bids, while the Abstract of Bids as Calculated, is used when the bids are evaluated and ranked.
5. Notice of Eligibility/Ineligibility of bidders
6. Post-Qualification Evaluation Report (SF-INFRA-61)
7. Notice of Post-qualification/Disqualification  (SF-INFRA–62).
Further, it was observed that there were bidding forms used which were not the same as the standard forms prescribed by the Government Procurement Policy Board (GPPB). Machine copies of eligibility requirements were not authenticated by the BAC Secretariat.
The non-conformity in implementing some of the provisions of R.A. 9184 and the IRR-A may turn out to have a disallowable transaction of P33,962,537.87, the law being transgressed.
Recommendation to Pagadian City Government:
Advised the BAC and the City Accountant to implement strictly the provisions of R.A 9184 and the IRR-A especially on the eligibility requirements in order to have an effective competitive bidding of the City’s infrastructure projects.
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Management comments:
Engr. Ray P Virtudez, the BAC Chairman, admitted that there were bidders who submitted incomplete, or late & not updated eligibility requirements during the prequalification, but promised to submit the same, the BAC also considered their request, further, the BAC Chairman admitted that the BAC Secretariat was very lax in the verification of eligibility requirements of winning bidders.
The BAC Chairman further said that, since they have already received the Audit Observation Memorandum, they promised to comply with the requirements of R. A. 9184 in the procurement of infrastructure projects.

DETAILED FINDINGS AND RECOMMENDATIONS

4. Infrastructure projects of CY 2008 costing P42,265,658.77 were prosecuted without the Project Procurement Management Plan (PPMP) deviating Section 7, IRR-A of R. A 9184, hence, maybe the cause of disallowing same projects.
Implementing Rules and Regulations of Republic Act No. 9184 (The Government Procurement Reform Act) provides:
“Rule II-Procurement Planning
Section 7. Procurement Planning and Budgeting Linkage
7.1 All procurement should be within the approved budget of the procuring entity and should be meticulously and judiciously planned by the procuring entity concerned. No government procurement shall be undertaken unless it is in accordance with an approved Annual Procurement Plan (APP). X x x.
7.2 Each procuring entity shall judiciously prepare, maintain and update an APP for all its procurement, that shall include for each individual project, a Project Procurement Management Plan (PPMP). X x x.

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7.3 The PPMP shall include: a) the type of contract to be employed; b) the extent/size of contract scopes/packages; c) the procurement methods to be adopted, and indicating if the procurement task are to be outsourced as provided in Section 53(e) of this IRR-A; d) the time schedule for each procurement activity; and e) the estimated budget for the general components of the contract e.g, civil works, goods and consultancy services. X x x.
7.4 The preparation and updating of the PPMP shall be the responsibility of the respective Project Management Offices (PMOs) or end-user units of the procuring entities, while the consolidation of these PPMPs into an APP shall be lodged with the BAC Secretariat of that procuring entity. These units may avail of the services of technical experts to review the individual PPMPs.
7.5 Updating of the individual PPMPs and the consolidated APP for each procuring entity shall be undertaken every six (6) months or as often as may be required by the head of the procuring entity. X x x.”
Worthy of stress is the fact that for CY 2008, the City Government had prosecuted sixty one (61) infrastructure projects costing P42,265,658.77. After verification from the Annual Budget of CY 2008, there were projects identified and others were not, but all of these were prosecuted without PPMP and were not included in the Annual Procurement Plan (APP), hence, deviated from the provision of law cited.
What had happened was that, from now and then the Chief Executive identified and prioritized projects, then, relate them to the City Engineer for detailed engineering and the preparation of the program of works. After which, the corresponding bidding processes pursuant to R. A. 9184 were scheduled.
The law mandates under Section 7, paragraph 5, IRR-A, R. A. 9184, “Implementation of any project not included in the APP shall not be allowed”, thereby, the infrastructure projects prosecuted for CY 2008 valued at P42,265,658.77 may be disallowable in post-audit.
When we had a dialogue with the BAC on January 29, 2009, the Chairman informed us that the BAC had prepared the APP for goods. The City Engineer, BAC member, told us that they will prepare the PPMP for CY 2009, after these projects be identified and prioritized by the Chief Executive.
Management comments:
The City Engineer informed us that it is very difficult to prepare the PPMP, since, during the preparation of the budget, the projects indicated in the Annual Investment Plan (AIP),is on lumpsum, and there are priority projects which the City Mayor wanted to implement from time to time.
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The City Mayor also justified that, if the projects will be identified including its location, there are instances when the implementation of the said projects have to be deferred or cancelled because some problems are encountered in the area, so, they have to look for another areas/location where the same kind of project will be implemented.

Auditor’s Rejoinder:
The PPMP can be amended or revised as often as necessary. The City Mayor instructed the City Engineer to prepare the PPMP for CY 2009 and submit it to the BAC Secretariat, for consolidation in the APP.
Recommendation to Pagadian City Government:
We advised the City Mayor to identify the priority projects to be funded from the Annual Budget of CY 2009. The projects identified shall be sanctioned with the Sangguniang Panlungsod. The same proposed projects shall be endorsed to the City Engineer for detailed engineering and preparation of individual PPMP. After which, the same PPMPs be forwarded to the BAC chairman for consolidation, and the preparation of the APP.
Should the City Mayor or maybe the  Sangguniang Panlungsod changed their priorities within the year the PPMP affected maybe updated in adherence to an allowance of changes every six months or as often as necessary.

DETAILED FINDINGS AND RECOMMENDATIONS

3.  Inappropriate charges to Other Maintenance and Operating Expenses (969) account of P17,869,832.99 were made contrary to COA Circular No. 2004-008 dated September 20, 2004 resulting to an overstatement and understatement of affected expense accounts.
COA Circular No. 2004-008 dated September 20, 2004,  provides  for the updated description of accounts under the New Government Accounting System (NGAS), to facilitate identification of transactions which fall under the specific accounts.
Other Maintenance and Operating Expenses Account ( 969)
Description : Expenses not otherwise classified under the specific maintenance and other operating expense accounts..
Likewise, Section 305(a), R.A. 7160, Local Government Code of 1991, states:
“No money shall be paid out of the local treasury except in pursuance of an appropriation ordinance or law.”
The Annual Budget of CY 2008 provided an appropriation under Other Maintenance and Operating Expenses (969) of P1,802,750.00 while the Supplemental Budget under Appropriation Ordinance No. 01-08-2008 amounting to P26,503,691.00 did not include provision for Other Maintenance and Operating Expenses(969). Also there were no Executive Order and Legislative Order transferring appropriations from one object of expenditures of MOOE to OMOE (969)
The expenses charged against (969) account for the period January to December, 2008, totaled P19,344,298.76. It included expenditures totaling P17,869,832.99, which are not within the description of account 969  as classified hereunder:
Salaries & Wages – Casuals
P      5,130,800.95
Honoraria
7,218,876.85
Travelling Expenses-Local
148,629.32
Med. &Dental & Lab. Supplies
5,097.80
Consultancy
108,000.00
RATA
64,000.00
Training Expenses
6,800.00
Overtime & Night Pay
90,854.74
Advertising Expense
729,176.66
Representation Expenses
979,091.36
Office Equipment
9,050.00
Other Property, Plant & Equipment
110,000.00
Salaries & Wages -  Part Time
296,738.83

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Representation Allowance
5,400.00
Office Supplies Expenses
96,250.00
Cable, Satellite, Telegraph & Radio Exp
2,800.00
Rent Expenses
578,000.00
Survey Expenses
259,000.00
Repairs & Maintenance- Electrification,
Power and Energy Structures
66,861.00
Repairs & Maintenance – Other Structures
422,160.00
Repairs & Maintenance – Motor Vehicles
406,231.58
Repairs & Maintenance – Other
Transportation   Equipment
11,105.00
Repairs & Maintenance – Other Property,
Plant & Equipment
23,000.00
Repairs & Maintenance – Other Public
Infrastructures
106,568.00
Subsidy  to National Government
25,000.00
Taxes, Duties and Licenses
2,000.00
Agricultural Supplies Expense
3,000.00
Other Supplies Expenses
500,028.26
Telephone Expense-Mobile
6,314.63
Membership Dues and Contributions to Organizations
200,000.00
Repairs & Maintenance-Office Buildings
25,015.00
Donations
129,925.00
Internet Expenses
11,299.60
Transportation & Delivery Expenses
42,898.41
Gasoline, Oil & Lubricants
1,860.00
Productivity & Incentive Allowance
48,000.00
Grand Total
P    17,869,832.99

It was also observed that the procurement of three (3) units of transformers costing P110,000.00 were not capitalized and booked as PPE account.
As a result of the misclassification, the accounts Other Property Plant and Equipment and Other Maintenance and Operating Expenses were overstated while other expense accounts were understated.
Management comments:
The City Budget Officer commented during the exit conference that the inappropriate charges to Other Maintenance and Operating Expenses (969) was because these expenditures were already identified on the project profile, during the preparation of the budget as charged under account 969. Further, she also justified that it was already their practice to charge other expense accounts to this account.
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The City Accountant also justified that the Office of the Budget Officer prepares the Obligation Request and in the recording of transactions he just follow the expense accounts recorded on the Obligation Request made by the City Budget Officer.
The City Treasurer said that if the honoraria of the Barangay Health workers, Bantay Dagat and other workers will be charged against the Personal Services as mandated under DILG Memorandum Circular. The City Government will exceed the 45% Personal Services (PS) limitation, thus will affect the benefits which are due to employees.
Auditor’s Rejoinder:
The Project profile phase be prepared according to the specific object of expenditures. The account 969 shall only be utilized in case there is no account as classified in COA Circular No. 2004-008 dated September 20, 2004.
Recommendation to Pagadian City Government:
Require the City Budget Officer to prepare the Annual Budget based on the proper accounts as mandated under NGAS.

DETAILED FINDINGS AND RECOMMENDATIONS

2. Unadjusted loans payable-domestic due to deviation in the budget preparation overstated cash in bank of P11,293,480.10 in contrary to Articles 401, 408 and 419 of the Implementing Rules and Regulations of Republic Act No. 7160.
“Article 401 of the Implementing Rules and Regulations of Republic Act No. 7160. Remedies and Sanctions.- states, “LGUs shall appropriate in their respective annual budgets such amounts as are sufficient to pay the loans and other endebtedness xxx.
Any LGU, through its local chief executive and upon authorization by the sanggunian concerned, may authorized the National Government to deduct or withhold a portion of its IRA share for the payment of its contractual obligation, x x x”
Article 419 of same law on Budgeting Requirements provides.-“The budgets of LGU for any fiscal year shall comply with the following requirements:
(a) x x x
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(b) Full provision shall be made for all statutory and contractual obligations of the LGU concerned provided that the amount of appropriations for debt servicing shall not exceed twenty percent (20%) of the regular income of the LGU concerned.”
Article 408 of same law on Form and Content, states.-“The budget document shall contain:
x x x
(c) Summary of Financial Statements setting forth:
(1) The actual income and expenditures during the immediately preceding year;
(2) The actual income and expenditures of the first two (2) quarters and the estimates of income and expenditure for the last two (2) quarters of the current fiscal year;”

The Certified Statement of Income in CY 2008 Annual Budget for Fish Port Operation showed these data:

Past Year CY 2006
Subsidy from Other Funds
P 2,000,000.00
Current Year CY 2007
7,288,860.00
Budget Year (CY 2008)
40,615,000.00

The appropriation for Fish Port Operation in CY 2008 Annual Budget also showed these amount:

Past Year CY 2006
P        -0-
Current Year CY 2007 (Estimates)

-Personal Services
4,757,860.00
-MOOE
531,000.00
Budget Year (CY 2008)
-Personal Services
10,321,000.00
-MOOE
785,000.00
-Loan Amortization
27,000,000.00

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The Certified Statement of Income for CY 2008 as reflected in the Annual Budget for Fish Port Operation deviated from the budgeting system. The estimated income of CY 2008 for P40,615,000.00 which was appropriated for loan amortization of P27,000,000.00 had no historical facts. It is because the preceding actual income of CY 2006 was only P2,000,000.00 and the estimated income for CY 2007 was P7,288,860.00
For the CY 2008, the actual collection for Fish Port Operations amounted only P3,394,320.58 with current operating expenses of P3,394,320.58
On the other hand, the Bank Reconciliation Statement as of October 31, 2008, for Philippine National Bank (PNB) account, showed an items requiring adjustment by the agency of P11,293,480.10. These were automatic deductions of IRA by the bank for Fish Port loan.
The same amount cannot be adjusted in view of the absence of Allotment, the basis of approving Obligation Request.
Hence, overstated the cash in bank of P11,293,480.10 representing unrecorded loan amortization.  It maybe stated that the allotment system for LGUs provides that allotment can only be released with appropriation and actual collection. In this instance, there was no actual collection from Fish Port operation, thereby, allotment cannot be released.
Recommendation to Pagadian City Government:
Direct the City Budget Officer to submit an Advice of Allotment for approval of the City Mayor. The approval shall be based on the actual collection of the General Fund Proper. The Obligation Request shall be approved by the City Mayor and to have the loan amortization of Fish Port Operation included in CY 2009 Annual Budget of the General Fund Proper not from the economic enterprise.
Instruct the City Accountant to make adjustment of loans payable account on the strength of the approved Obligation Request, by a debit and a credit to cash in bank.
The Local Finance Committee shall certify only actual collections-the basis of appropriations.
Management comments:
The City Budget assured us that for CY 2009, payment for loan amortization for the Fish Port operation shall be made from the appropriations of the General Fund Proper.

DETAILED FINDINGS AND RECOMMENDATIONS
I. Financial and Compliance Audit:
1.  Cash in the possession of the Disbursing Officers, Special Disbursing Officers and Other Officers of P3,744,032.30  and Advances to Officers and Employees Account (148) of the three (3) funds totaling to P26,146,151.06 remained unliquidated as of December 31, 2008 in violation to COA Circular Nos. 97-002 and 96-004 and Section 89 of P.D. No. 1445, resulting to overstatement of assets and understatement of the expense accounts.
Section 4 of COA Circular No. 97-002 dated February 10, 1997, states that:
“Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.1 No cash advance shall be given unless for a legally specific purpose.
4.1.2 No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the purpose for which it was given has been served.
4.1.4 Only permanently appointed officials shall be designated as disbursing officers. Elected officials may be granted a cash advance only for their official traveling expense.
4.1.5 Only duly appointed or designated disbursing officers may perform disbursing functions. Officers and employees who are given cash advances for official travel need not be designated as Disbursing Officers.
4.1.6 Transfer of cash advance from one Accountable Officer (AO) to another shall not be allowed.
4.1.7 The cash advance shall be used solely for specific legal purpose for which it was granted. Under no circumstances shall it be used for encashment of checks or for liquidation of a previous cash advance.
4.1.8 The Accountant shall obligate all cash advances granted. He shall see that cash advances for a particular year are not used to pay expenses of other years.
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5. Liquidation of Cash Advances
5.1 The accountable officer shall liquidate his cash advances as follows:
Salaries, Wages, etc.-within five (5) days after each fifteen (15) day/ end of the month pay period.
Petty Operating Expenses and Field Operating Expenses-within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.
Paragraphs 2.2 and 3.1.2.1 of COA Circular No. 96-004 dated April 19, 1996, provides that:
“No cash advance shall be granted to any official or employee unless a proper accounting of the previous cash advance for travel given to him is first liquidated and/or settled.
3.1.2.1 The cash advance for travel shall be liquidated by the official/employee concerned strictly within thirty (30) days after his return to his permanent official station as required under Section 16 of EO 248 as amended otherwise, payment of his salary shall be suspended until he complies therewith.”
In addition, Section 89 of Presidential Decree (P.D.) 1445 provides that:
“x x x. A cash advance shall be reported on and liquidated as soon as the purpose for which it was granted has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”
“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 deposited immediately to the Bank before the year end.”
Verification of the Financial Statements of the three (3) funds of the Cash on Hand accounts as of December 31, 2008 disclosed the following:

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GF                     TF              SEF               Total
Cash in Vault
P           28.75
P       124.48
P          153.23
Petty Cash Fund
534,256.00
4,500.00
P      1,900.00
540,656.00
Payroll Fund
2,991,287.32

211,935.75
3,203,223.07
Grand total
P3,525,572.07
P     4,624.48
P  213,835.75
P3,744,032.30

Further verification of the Financial Statements of the three (3) funds: General Fund, Trust Fund and Special Education Fund as of December 31, 2008 disclosed that Advances to Officers and Employees account (148) representing cash advances granted to officials and employees  had a total balance of P26,146,151.06, as shown below;
General Fund                   -             P  21,415,055.44
Trust Fund                      -                                                             2,038,299.23
Special Education Fund -                 2,692,796.39
Grand Total                                   P 26,146,151.06
In spite of the fact that these outstanding cash advances are already of alarming level, there was slackness in the management control on the grant of cash advance as well as monitoring for its immediate liquidation. Subsequent cash advances were still granted even if the previous cash advance is not yet liquidated resulting to the accumulation of the cash advance of one (1) person.
The failure to liquidate or settle these cash advances overstated the asset and understated the expense accounts. Further, if unexpended, it deprived the City of the use of these funds, which could have financed their development projects.
Management comments:
The City Treasurer informed us that Cash Advances of Special Disbursing Officers and Other Officers still amounted to P2,699,822.26 as of November 30, 2009, due to the unliquidated cash advances for the lakbay-aral which was only liquidated on December, 2008. There were also cash advances for the procurement of National Food Authority (NFA) rice for the City’s employees. These are still unliquidated because the employee who is in-charged in the preparation of the liquidation reports did not follow up the necessary supporting papers for liquidation. The City Treasurer further commented that the liquidation vouchers were not processed in the accounting office, because some documents are missing.
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The City Accountant assured the team that these cash advances will be reduced by December, 2008.
Auditor’s Rejoinder:
It bears stress that cash advances shall only be granted unless the previous cash advances were liquidated. Hence, the cash advances intended for the rice of City employees be settled first before another cash advance for the same purpose is granted. The settlement includes the responsibility of looking into the necessary documents.
Recommendation to Pagadian City Government:
Direct the City Accountant to closely monitor the liquidation of cash advances by sending within ten (10) days before the expiration of the 30 or 60 day period specified under Section 15 of EO 248 a written reminder under signature of the Head of the Agency or his duly authorized representative enjoining the official or employee concerned to liquidate his cash advance for travel. If the official or employee concerned fails to liquidate his cash advance within the prescribed period, his shall be deleted from the subsequent payroll until such time that the travel cash advance has been fully liquidated.
Henceforth, additional cash advance shall be granted unless the previous cash advance is first settled or a proper accounting thereof is made.
DETAILED FINDINGS AND RECOMMENDATIONS
I. Financial and Compliance Audit:
1.  Cash in the possession of the Disbursing Officers, Special Disbursing Officers and Other Officers of P3,744,032.30  and Advances to Officers and Employees Account (148) of the three (3) funds totaling to P26,146,151.06 remained unliquidated as of December 31, 2008 in violation to COA Circular Nos. 97-002 and 96-004 and Section 89 of P.D. No. 1445, resulting to overstatement of assets and understatement of the expense accounts.
Section 4 of COA Circular No. 97-002 dated February 10, 1997, states that:
“Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.1 No cash advance shall be given unless for a legally specific purpose.
4.1.2 No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the purpose for which it was given has been served.
4.1.4 Only permanently appointed officials shall be designated as disbursing officers. Elected officials may be granted a cash advance only for their official traveling expense.
4.1.5 Only duly appointed or designated disbursing officers may perform disbursing functions. Officers and employees who are given cash advances for official travel need not be designated as Disbursing Officers.
4.1.6 Transfer of cash advance from one Accountable Officer (AO) to another shall not be allowed.
4.1.7 The cash advance shall be used solely for specific legal purpose for which it was granted. Under no circumstances shall it be used for encashment of checks or for liquidation of a previous cash advance.
4.1.8 The Accountant shall obligate all cash advances granted. He shall see that cash advances for a particular year are not used to pay expenses of other years.
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5. Liquidation of Cash Advances
5.1 The accountable officer shall liquidate his cash advances as follows:
Salaries, Wages, etc.-within five (5) days after each fifteen (15) day/ end of the month pay period.
Petty Operating Expenses and Field Operating Expenses-within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.
Paragraphs 2.2 and 3.1.2.1 of COA Circular No. 96-004 dated April 19, 1996, provides that:
“No cash advance shall be granted to any official or employee unless a proper accounting of the previous cash advance for travel given to him is first liquidated and/or settled.
3.1.2.1 The cash advance for travel shall be liquidated by the official/employee concerned strictly within thirty (30) days after his return to his permanent official station as required under Section 16 of EO 248 as amended otherwise, payment of his salary shall be suspended until he complies therewith.”
In addition, Section 89 of Presidential Decree (P.D.) 1445 provides that:
“x x x. A cash advance shall be reported on and liquidated as soon as the purpose for which it was granted has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”
“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 deposited immediately to the Bank before the year end.”
Verification of the Financial Statements of the three (3) funds of the Cash on Hand accounts as of December 31, 2008 disclosed the following:

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GF                     TF              SEF               Total
Cash in Vault
P           28.75
P       124.48
P          153.23
Petty Cash Fund
534,256.00
4,500.00
P      1,900.00
540,656.00
Payroll Fund
2,991,287.32

211,935.75
3,203,223.07
Grand total
P3,525,572.07
P     4,624.48
P  213,835.75
P3,744,032.30

Further verification of the Financial Statements of the three (3) funds: General Fund, Trust Fund and Special Education Fund as of December 31, 2008 disclosed that Advances to Officers and Employees account (148) representing cash advances granted to officials and employees  had a total balance of P26,146,151.06, as shown below;
General Fund                   -             P  21,415,055.44
Trust Fund                      -                                                             2,038,299.23
Special Education Fund -                 2,692,796.39
Grand Total                                   P 26,146,151.06
In spite of the fact that these outstanding cash advances are already of alarming level, there was slackness in the management control on the grant of cash advance as well as monitoring for its immediate liquidation. Subsequent cash advances were still granted even if the previous cash advance is not yet liquidated resulting to the accumulation of the cash advance of one (1) person.
The failure to liquidate or settle these cash advances overstated the asset and understated the expense accounts. Further, if unexpended, it deprived the City of the use of these funds, which could have financed their development projects.
Management comments:
The City Treasurer informed us that Cash Advances of Special Disbursing Officers and Other Officers still amounted to P2,699,822.26 as of November 30, 2009, due to the unliquidated cash advances for the lakbay-aral which was only liquidated on December, 2008. There were also cash advances for the procurement of National Food Authority (NFA) rice for the City’s employees. These are still unliquidated because the employee who is in-charged in the preparation of the liquidation reports did not follow up the necessary supporting papers for liquidation. The City Treasurer further commented that the liquidation vouchers were not processed in the accounting office, because some documents are missing.
19
The City Accountant assured the team that these cash advances will be reduced by December, 2008.
Auditor’s Rejoinder:
It bears stress that cash advances shall only be granted unless the previous cash advances were liquidated. Hence, the cash advances intended for the rice of City employees be settled first before another cash advance for the same purpose is granted. The settlement includes the responsibility of looking into the necessary documents.
Recommendation to Pagadian City Government:
Direct the City Accountant to closely monitor the liquidation of cash advances by sending within ten (10) days before the expiration of the 30 or 60 day period specified under Section 15 of EO 248 a written reminder under signature of the Head of the Agency or his duly authorized representative enjoining the official or employee concerned to liquidate his cash advance for travel. If the official or employee concerned fails to liquidate his cash advance within the prescribed period, his shall be deleted from the subsequent payroll until such time that the travel cash advance has been fully liquidated.
Henceforth, additional cash advance shall be granted unless the previous cash advance is first settled or a proper accounting thereof is made.
DETAILED FINDINGS AND RECOMMENDATIONS
I. Financial and Compliance Audit:
1.  Cash in the possession of the Disbursing Officers, Special Disbursing Officers and Other Officers of P3,744,032.30  and Advances to Officers and Employees Account (148) of the three (3) funds totaling to P26,146,151.06 remained unliquidated as of December 31, 2008 in violation to COA Circular Nos. 97-002 and 96-004 and Section 89 of P.D. No. 1445, resulting to overstatement of assets and understatement of the expense accounts.
Section 4 of COA Circular No. 97-002 dated February 10, 1997, states that:
“Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.1 No cash advance shall be given unless for a legally specific purpose.
4.1.2 No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the purpose for which it was given has been served.
4.1.4 Only permanently appointed officials shall be designated as disbursing officers. Elected officials may be granted a cash advance only for their official traveling expense.
4.1.5 Only duly appointed or designated disbursing officers may perform disbursing functions. Officers and employees who are given cash advances for official travel need not be designated as Disbursing Officers.
4.1.6 Transfer of cash advance from one Accountable Officer (AO) to another shall not be allowed.
4.1.7 The cash advance shall be used solely for specific legal purpose for which it was granted. Under no circumstances shall it be used for encashment of checks or for liquidation of a previous cash advance.
4.1.8 The Accountant shall obligate all cash advances granted. He shall see that cash advances for a particular year are not used to pay expenses of other years.
17
5. Liquidation of Cash Advances
5.1 The accountable officer shall liquidate his cash advances as follows:
Salaries, Wages, etc.-within five (5) days after each fifteen (15) day/ end of the month pay period.
Petty Operating Expenses and Field Operating Expenses-within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.
Paragraphs 2.2 and 3.1.2.1 of COA Circular No. 96-004 dated April 19, 1996, provides that:
“No cash advance shall be granted to any official or employee unless a proper accounting of the previous cash advance for travel given to him is first liquidated and/or settled.
3.1.2.1 The cash advance for travel shall be liquidated by the official/employee concerned strictly within thirty (30) days after his return to his permanent official station as required under Section 16 of EO 248 as amended otherwise, payment of his salary shall be suspended until he complies therewith.”
In addition, Section 89 of Presidential Decree (P.D.) 1445 provides that:
“x x x. A cash advance shall be reported on and liquidated as soon as the purpose for which it was granted has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”
“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 deposited immediately to the Bank before the year end.”
Verification of the Financial Statements of the three (3) funds of the Cash on Hand accounts as of December 31, 2008 disclosed the following:

18
GF                     TF              SEF               Total
Cash in Vault
P           28.75
P       124.48
P          153.23
Petty Cash Fund
534,256.00
4,500.00
P      1,900.00
540,656.00
Payroll Fund
2,991,287.32

211,935.75
3,203,223.07
Grand total
P3,525,572.07
P     4,624.48
P  213,835.75
P3,744,032.30

Further verification of the Financial Statements of the three (3) funds: General Fund, Trust Fund and Special Education Fund as of December 31, 2008 disclosed that Advances to Officers and Employees account (148) representing cash advances granted to officials and employees  had a total balance of P26,146,151.06, as shown below;
General Fund                   -             P  21,415,055.44
Trust Fund                      -                                                             2,038,299.23
Special Education Fund -                 2,692,796.39
Grand Total                                   P 26,146,151.06
In spite of the fact that these outstanding cash advances are already of alarming level, there was slackness in the management control on the grant of cash advance as well as monitoring for its immediate liquidation. Subsequent cash advances were still granted even if the previous cash advance is not yet liquidated resulting to the accumulation of the cash advance of one (1) person.
The failure to liquidate or settle these cash advances overstated the asset and understated the expense accounts. Further, if unexpended, it deprived the City of the use of these funds, which could have financed their development projects.
Management comments:
The City Treasurer informed us that Cash Advances of Special Disbursing Officers and Other Officers still amounted to P2,699,822.26 as of November 30, 2009, due to the unliquidated cash advances for the lakbay-aral which was only liquidated on December, 2008. There were also cash advances for the procurement of National Food Authority (NFA) rice for the City’s employees. These are still unliquidated because the employee who is in-charged in the preparation of the liquidation reports did not follow up the necessary supporting papers for liquidation. The City Treasurer further commented that the liquidation vouchers were not processed in the accounting office, because some documents are missing.
19
The City Accountant assured the team that these cash advances will be reduced by December, 2008.
Auditor’s Rejoinder:
It bears stress that cash advances shall only be granted unless the previous cash advances were liquidated. Hence, the cash advances intended for the rice of City employees be settled first before another cash advance for the same purpose is granted. The settlement includes the responsibility of looking into the necessary documents.
Recommendation to Pagadian City Government:
Direct the City Accountant to closely monitor the liquidation of cash advances by sending within ten (10) days before the expiration of the 30 or 60 day period specified under Section 15 of EO 248 a written reminder under signature of the Head of the Agency or his duly authorized representative enjoining the official or employee concerned to liquidate his cash advance for travel. If the official or employee concerned fails to liquidate his cash advance within the prescribed period, his shall be deleted from the subsequent payroll until such time that the travel cash advance has been fully liquidated.
Henceforth, additional cash advance shall be granted unless the previous cash advance is first settled or a proper accounting thereof is made.
DETAILED FINDINGS AND RECOMMENDATIONS
I. Financial and Compliance Audit:
1.  Cash in the possession of the Disbursing Officers, Special Disbursing Officers and Other Officers of P3,744,032.30  and Advances to Officers and Employees Account (148) of the three (3) funds totaling to P26,146,151.06 remained unliquidated as of December 31, 2008 in violation to COA Circular Nos. 97-002 and 96-004 and Section 89 of P.D. No. 1445, resulting to overstatement of assets and understatement of the expense accounts.
Section 4 of COA Circular No. 97-002 dated February 10, 1997, states that:
“Granting and Utilization of Cash Advances
4.1 General Guidelines
4.1.1 No cash advance shall be given unless for a legally specific purpose.
4.1.2 No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.
4.1.3 A cash advance shall be reported on as soon as the purpose for which it was given has been served.
4.1.4 Only permanently appointed officials shall be designated as disbursing officers. Elected officials may be granted a cash advance only for their official traveling expense.
4.1.5 Only duly appointed or designated disbursing officers may perform disbursing functions. Officers and employees who are given cash advances for official travel need not be designated as Disbursing Officers.
4.1.6 Transfer of cash advance from one Accountable Officer (AO) to another shall not be allowed.
4.1.7 The cash advance shall be used solely for specific legal purpose for which it was granted. Under no circumstances shall it be used for encashment of checks or for liquidation of a previous cash advance.
4.1.8 The Accountant shall obligate all cash advances granted. He shall see that cash advances for a particular year are not used to pay expenses of other years.
17
5. Liquidation of Cash Advances
5.1 The accountable officer shall liquidate his cash advances as follows:
Salaries, Wages, etc.-within five (5) days after each fifteen (15) day/ end of the month pay period.
Petty Operating Expenses and Field Operating Expenses-within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.
Paragraphs 2.2 and 3.1.2.1 of COA Circular No. 96-004 dated April 19, 1996, provides that:
“No cash advance shall be granted to any official or employee unless a proper accounting of the previous cash advance for travel given to him is first liquidated and/or settled.
3.1.2.1 The cash advance for travel shall be liquidated by the official/employee concerned strictly within thirty (30) days after his return to his permanent official station as required under Section 16 of EO 248 as amended otherwise, payment of his salary shall be suspended until he complies therewith.”
In addition, Section 89 of Presidential Decree (P.D.) 1445 provides that:
“x x x. A cash advance shall be reported on and liquidated as soon as the purpose for which it was granted has been served. No additional cash advance shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.”
“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 deposited immediately to the Bank before the year end.”
Verification of the Financial Statements of the three (3) funds of the Cash on Hand accounts as of December 31, 2008 disclosed the following:

18
GF                     TF              SEF               Total
Cash in Vault
P           28.75
P       124.48
P          153.23
Petty Cash Fund
534,256.00
4,500.00
P      1,900.00
540,656.00
Payroll Fund
2,991,287.32

211,935.75
3,203,223.07
Grand total
P3,525,572.07
P     4,624.48
P  213,835.75
P3,744,032.30

Further verification of the Financial Statements of the three (3) funds: General Fund, Trust Fund and Special Education Fund as of December 31, 2008 disclosed that Advances to Officers and Employees account (148) representing cash advances granted to officials and employees  had a total balance of P26,146,151.06, as shown below;
General Fund                   -             P  21,415,055.44
Trust Fund                      -                                                             2,038,299.23
Special Education Fund -                 2,692,796.39
Grand Total                                   P 26,146,151.06
In spite of the fact that these outstanding cash advances are already of alarming level, there was slackness in the management control on the grant of cash advance as well as monitoring for its immediate liquidation. Subsequent cash advances were still granted even if the previous cash advance is not yet liquidated resulting to the accumulation of the cash advance of one (1) person.
The failure to liquidate or settle these cash advances overstated the asset and understated the expense accounts. Further, if unexpended, it deprived the City of the use of these funds, which could have financed their development projects.
Management comments:
The City Treasurer informed us that Cash Advances of Special Disbursing Officers and Other Officers still amounted to P2,699,822.26 as of November 30, 2009, due to the unliquidated cash advances for the lakbay-aral which was only liquidated on December, 2008. There were also cash advances for the procurement of National Food Authority (NFA) rice for the City’s employees. These are still unliquidated because the employee who is in-charged in the preparation of the liquidation reports did not follow up the necessary supporting papers for liquidation. The City Treasurer further commented that the liquidation vouchers were not processed in the accounting office, because some documents are missing.
19
The City Accountant assured the team that these cash advances will be reduced by December, 2008.
Auditor’s Rejoinder:
It bears stress that cash advances shall only be granted unless the previous cash advances were liquidated. Hence, the cash advances intended for the rice of City employees be settled first before another cash advance for the same purpose is granted. The settlement includes the responsibility of looking into the necessary documents.
Recommendation to Pagadian City Government:
Direct the City Accountant to closely monitor the liquidation of cash advances by sending within ten (10) days before the expiration of the 30 or 60 day period specified under Section 15 of EO 248 a written reminder under signature of the Head of the Agency or his duly authorized representative enjoining the official or employee concerned to liquidate his cash advance for travel. If the official or employee concerned fails to liquidate his cash advance within the prescribed period, his shall be deleted from the subsequent payroll until such time that the travel cash advance has been fully liquidated.
Henceforth, additional cash advance shall be granted unless the previous cash advance is first settled or a proper accounting thereof is made.