CARELESS WITH PEOPLE’S FUNDS: COA calls out Capitol for lax handling of fund transfers to LGUs

THE Iloilo provincial government (IPG) under Gov. Arthur Defensor Sr. failed to establish and impose controls and policies in granting fund transfers to local government units (LGUs), exposing public funds to misuse.

This is one of the findings of the Commission on Audit (COA) in its 2017 annual audit report on the Capitol’s finances and transactions.

COA has issued Audit Observation Memorandum (AOM) No. 2018-025 dated March 7, 2018, to inform the capitol of the deficiencies.

The report also pointed out that the Capitol failed to strictly monitor the timelines of various Programs/Projects/Activities (PPAs) implemented by LGUs that received funds from the provincial government.

Also, the Capitol fell short in keeping tabs of the liquidation/fund utilization reports of recipient LGUs as stipulated in the memoranda of agreement (MOA) between the provincial government and the recipients.

In fact, the Defensor administration kept on releasing money to LGUs that failed to satisfy the liquidation report requirement, which is a clear violation of the MOA.

COA said this particular practice of the Defensor administration “increased the balance of the Due from Other LGUs to P203,275,580.33, casting doubt that the funds are actually used for the intended purposes.”

Based on COA’s review of the Subsidiary Ledger on Due from Other LGUs, the balance of P203.2 billion “consists of the fund transfers while the remaining amount is the over remittance of the Sand and Gravel Share to other LGUs.”

Further analysis of the fund transfers showed that at the beginning of 2017, the unliquidated balance totaled P134,430,396.15.

But COA noted that the Capitol made additional fund transfers to LGUs totaling P130,328,583.49 without fully monitoring the liquidation which only amounted to P62,374,608.54. This increased the balance by 67,953,975.18 (50.55%) to P202,384,371.33 as of December 31, 2017.

The audit agency also found that the Defensor capitol continued the fund transfers “despite the fact that the recipients have unliquidated balances for over one year, thus accumulating the unliquidated fund transfers to its present balance.”

The finding prompted COA to inquire with the Provincial Accounting Office the observed deficiency and later found out that “the IPG has no written policy on fund transfers.

“It was just agreed that fund transfers can be granted as long as the purpose of the fund is different from what was previously granted. Further, monitoring of the liquidation was assigned to the PPDO (Provincial Planning and Development Office), and it was noted that no demand was issued to liquidate the fund transfers,” the audit report added.

While COA recognized that it is reasonable for the IPG to grant subsequent fund transfers for other purposes, the Defensor administration ought to control the practice to avoid malversation or misuse of public funds.

“It (fund transfers) should be controlled and regulated, otherwise it can be exploited just by renaming the project title and modifying the purpose, when in reality the same or related project will be undertaken.”

The audit report also noted that the LGUs that received funds from the capitol lacked the sense of urgency and project designs that could have prevented the possible exposure of public funds to misuse and abuse.

“Given that the recipient-LGUs have requested the fund, it is expected that they already have the program of work or project design with specific timelines for implementation. Thus, it follows that upon the receipt of funds, PPAs will be implemented and liquidation/utilization report prepared and submitted. However, based on the SL, it appears that recipient-LGUs have not properly planned the purpose of the requested fund. There is the absence of urgency, for the funds remain unutilized and PPAs are not yet implemented,” the COA report added.

The report noted that the capitol defeated its own purpose of hastening project completion and improving the lives of its constituents because of lax handling of public funds.

“The IPG should formulate controls, policies, and guidelines in the grant of fund transfers and regulate the increasing balance. By allowing the subsequent grant of fund transfers to various LGUs despite its unusual/uncharacteristic accumulation, implementation of PPAs will be delayed, thus defeating the purpose of the IPG in simultaneously granting various fund transfers to fast-track the completion of projects for the purpose of improving the socio-economic conditions and general welfare of its constituents.”

COA said that without the liquidation reports, “there will be no basis to ascertain the propriety of fund utilization.”

The audit agency said the Defensor capitol should:

• require the submission of liquidation/utilization reports as pre-requisite to the release of subsequent funds to reduce the balance of unliquidated fund transfers and avoid the risk of misapplication or loss;

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• there should be strong monitoring for the timeline of implementation and submission of liquidation/utilization report so that timely demand can be made and accountability against the erring/faulting recipient LGU can be imposed.

The agency also recommended that:

• the Local Chief Executive put on hold/stop the release of fund transfers for those recipients who have not implemented the PPAs and submitted liquidation/utilization reports within the prescribed period stated in the Memorandum of Agreement (MOA) and require the concerned LGUs to refund the unimplemented and unutilized fund beyond the timeline;

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• the OIC-Provincial Accountant demand from the recipient-LGUs to submit liquidation/utilization reports, review and evaluate the propriety of utilization; and the Internal Audit Services to formulate controls, policies, and guidelines in the grant of fund transfers and the timely submission of liquidation/utilization reports.

In response, the Capitol informed COA that the PPDO and the Provincial Accounting Office “were directed to reconcile their records of fund transfers to various LGUs and PPAs covered so that demand can be prepared and sent.”

Also, the Capitol held “in abeyance the release of fund transfers to LGUs which have not submitted their Liquidation/Fund Utilization Report and henceforth, will implement the policy that no fund transfer will be made unless the previous fund transfers were liquidated.

SOURCE: The Daily Guardian

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