Monday, September 29, 2008 COA questions City's P22-million loan By Edmund B. Sestoso
THE Commission on Audit (COA) has questioned the move of Mayor Agustin Perdices's administration to avail of a loan worth P16 million pesos with the Land Bank of the Philippines (LBP).
Government auditors, in their report, said no reason was specified for the loan, and that the city stands to pay P5 million in interest for a period of seven years.
COA also found out that Perdices agreed to terms in the loan that are disadvantageous to the government.
Also, according to COA, the City Government did not maintain a special account for the loans, and worse, it defaulted on the first payment and had to pay the penalty.
In September 2006, the City Government entered into a loan agreement with Land Bank amounting to P22 million pesos, which could be availed either in lump sum or installment. The city's receivables, in the form of the Internal Revenue Allotment from the Department of Budget and Management (DBM), were made security for the loan.
From 2006 to 2007, Land Bank released a total of P16 million to the city.
COA said documents showed that no single project or purpose was given for the loan, and that the city obtained P10 million from Land Bank in September 2006.
Since then and up to December 2006, the City Council passed 11 resolutions appropriating for various development projects, including the purchase of a 12-seater van as a service vehicle for the city tourism office.
The COA auditors also found out that the following year 2007, the council passed 14 resolutions for the same reasons.
Government auditors said the City Government incurred interest and financial expenses of almost half a million pesos from 2006 to 2007 and is expected to incur up to almost P5 million pesos in seven years.
Auditors showed Perdices their discovery, and the city chief executive reasoned out that the loan was drawn out with the late release of the IRA and added that he believed it is more advantageous than the other alternative forms of monetization.
"He (Perdices) is of the opinion that the loan was properly utilized," stressed the COA auditors after talking with the mayor.
The auditors also observed that the loan agreement required collateral of P27.5 million, exceeding by P5.5 million pesos the loan amount, and did not provide for a reduction for payments made.
The city also defaulted on its first annual amortization, which was due on May 31, 2007. This led the bank to debit the city's deposit account on June 1, 2007. The city could have been charged a penalty of almost P7 million pesos.
Findings of irregularities made by the COA can be used by any private citizen or taxpayer in filing a case against a group or individual.
While the COA could not file cases, it has warned the City Government that it should borrow when it is certain that funds are not enough to implement priority projects or to meet its operating activities in order to avoid the incurrence of unnecessary interest.
