The Commission on Audit has asked the city government of Baguio to return a total of P717,550,826.31 it invested in time deposits (TD) and high-yield savings accounts (HYSA) to current account and to implement the projects these funds were intended for.
Of the total amount, P699,863,514.15 were from national government agencies that are supposed to be used for various projects.
In the COA’s 2021 audit for Baguio, state auditors said the city government’s investing these amounts in TDs and HYSAs is contrary to COA Circular 92-382 or the government Accounting Rules and Guidelines, which regulate the investment of public (or even private) funds by local governments.
The circular allows provinces, municipalities, and cities to invest in time deposits or government securities only if the funds come from the general fund and if these funds are considered “idle” or those in excess of the LGU’s normal operating funds.
The circular also states that investing has to have the approval of the sanggunian and the chief executive.
In the case of the assailed amount, the COA said these funds do not qualify as idle as these have already been appropriated for various projects.
As of Dec. 31, 2021, the city government has eight trust accounts in the Landbank of the Philippines and Development Bank of the Philippines. These money placements have interest rates of .65 percent and 1.75 percent current rate with maturity dates of 65 to 183 days.
The amounts deposited in various accounts were broken down as: P6,278,165.38 which was a national allotment to the local government units (Nalgu); P204,835,348.77 from the Office of the President; P50M from the Philippine Amusement and Gaming Corporation; P438,750,000 deposited in three separate accounts from the Department of Information and Communications Technology; and P5,548,005.46 and P12,139,306.70 from an unidentified source but which available records show have been in the bank since Oct. 31, 2006.
The COA said public or private monies which have been entrusted to a local government as trustee, agent or administrator shall only be used for the specific purpose for which it was created or for which it came into the possession of the LGU.
The COA said interests accrued from these deposits should not be transferred to the general fund but should continue to be part of the main amount.
In the report, the local finance committee (LFC) reasoned investing in HYSA can be additional sources of revenue compared to the negligible interest rate if deposited only in the current account.
The LFC was also quoted to have appealed to the COA to revisit its 1992 circular so that it will include trust funds as idle accounts.
The COA said it recognizes the resourcefulness and initiative of the city government in generating additional sources of revenue but it maintained that the primary purpose for the transfer of funds from national government agencies is to implement projects that would benefit the public.
“Such primary purpose should outweigh and take precedence over the prospect of generating revenue through interest from investment in time deposit/HYSA,” it said.
Further, the COA said its accounting and auditing guidelines which have been issued in 1994 is still relevant and has in fact been updated in 2018 by the Department of Finance.
“The audit team emphasizes that a LGU is a service-oriented entity with primary purpose of providing services for or implementing programs that would redound to the benefit of the constituents. Hence, utmost compliance with laws, rules, and regulations should take precedence over earning interest income,” the COA said in its report.
The COA recommended for the city government to immediately implement the P699,863,514.15 worth projects which covers the Smart City and phase 1 of the City Disaster and Risk Reduction Management Office command center.
For the Nalgu funds, the city government was told to coordinate with the national government for the remittance of the unexpended balance of the amount to the Bureau of Treasury.
As to the P5M and P12M funds with unknown sources, the city government was tasked to trace the national government agency where these funds came from, and if found, coordinate for the disposition of unexpended balances.
A request may also be sent to the source national government agency for the transfer of the unexpended balances to the general fund for disposition.
The COA also recommended that in the future, investments should have the prior authority of the sanggunian and the approval of the local chief executive.
The LFC has committed to implement the COA’s recommendations. – Rimaliza A. Opiña
April 19, 2024
