THE Commission on Audit (COA) has raised concerns over several financial transactions of the Lapu-Lapu City Government in its 2023 audit report.
The report highlights issues with the City’s handling of petty cash and the implementation of the City Hall Complex project.
SunStar Cebu tried to reach Mayor Junard Chan on Saturday, Aug. 10, 2024, for his comments, but to no avail.
In a portion of the compliance audit, COA disclosed that Lapu-Lapu did not properly comply with existing accounting policies, outlining several issues such as the Petty Cash Fund (PCF) was not managed correctly under the required imprest system.
According to Section 48 of the Manuals on the New Government Accounting System for local government units, disbursements from the fund shall be through the Petty Cash Voucher (PCV) with the signature of the payee to acknowledge receipt.
The official receipt shall also be attached to the PCV.
However, upon review of the monthly PCF/RF replenishments it showed that payments were not made using the PCV, instead these were documented with official receipts that were directly attached to the Report of Disbursements (RODs).
Item 3.3 in the COA report also stipulated that funding was insufficient for monthly expenses and replenishments were submitted only when the fund was nearly used or above 75 percent by the PCF/RF custodian.
Additionally, the fund was used for office supplies and other materials with frequent purchases violating procurement laws.
COA Circular 97-002 cited that payments for PCF cannot exceed P15,000 per transaction, but it was found that multiple purchases ranging from P29,000 to P147,000 were made from the same merchant.
The practice of splitting transactions violated both the COA Manual and procurement laws.
State auditors found that sales invoices used for disbursements showed inconsistencies with the use of different pen colors or handwritings, raising doubts about the authenticity of the transactions.
It was also found that one supplier listed on the invoices could not be found at the provided address.
State auditors also saw that medicines and medical supplies worth P153,657.50 were not turned over, and only P112,517.40 out of P223,385 worth of supplies were handed in.
Recommendation
State auditors recommended that the PCF/RF custodian should manage the fund using an imprest system and request replenishments when 75 percent of the fund is used. They also recommended avoiding frequent emergency purchases of medical supplies.
They said the City should also stop using the fund for office and other supplies, increase the fund to cover monthly expenses and explain any irregularities in disbursements and questionable invoices.
Additionally, the custodian must account for any medicines and supplies not fully turned over to the pharmacy section. The city accountant should verify all supporting documents for replenishments and ensure the PCF/RF is closed at year-end and renewed at the start of the new year.
In response, the chief of hospital addressed that there was no intention to split the disbursements. Purchases were made separately due to anticipated supply needs and available funds.
For sales invoices, the chief asserted that sales invoices issued by the supplier were valid and showed photo evidence of the pharmacy located in a different place other than the address indicated in the sales invoice.
Lastly, the chief explained to the audit team that some medicines and supplies not fully turned over were used in two free medical events in late 2023. Other unused items were distributed to clinical areas for immediate use or storage.
But in a rejoinder, the audit team stressed that the chief of hospital did not explain why there were multiple sales invoices of the same supplier with the same dates.
The chief also did not provide any explanation for the discrepancies noted, while stating that sales invoices were valid and legal.
State auditors stated that most of the unaccounted or partially accounted medicines and supplies were bought after the supposed free medical mission, contradicting the claim that they were used during those events. Additionally, the claim lacks supporting evidence.
The audit team asserts that splitting transactions was done intentionally to evade regulations, as indicated by the audit findings.
City Hall complex
The City Government received from the Department of Budget and Management a total of P17.5 million for the implementation of the improvement of the Lapu-Lapu City Hall Complex.
The project was awarded to a contractor with an original contract of P16,995,964.33 with a contract duration of 120 days from Aug. 15, 2022 to Dec. 12 of the same year.
However, the project’s implementation was extended by 195 days and the contract cost was revised to P11,865,238.87.
State auditors found that before the expiration of the original contract, the City issued a time extension for 60 days due to “unfavorable weather conditions” which was the same reason for the succeeding time extensions.
Thus, contrary to the revised implementing rules and regulations (RIRR) of Republic Act (RA) 9184, or the Government Procurement Reform Act, which states that, “no extension of contract time shall be granted to the contractor due to (a) ordinary unfavorable weather conditions.”
The COA audit also reported that the project was only 40 percent completed on Dec. 14, 2022. If no time extension was granted, the contractor could have already incurred a slippage of 60 percent even after the expiration of the original contract on Dec. 12 of that year.
It added that the City should have sanctioned or terminated the contractor after a slippage of more than 15 percent.
The law also states that detailed engineering shall proceed only based on the feasibility or preliminary engineering study.
State auditors recommended that the city engineer submit to the audit team an explanation or justification for the extension, incurrence of negative slippage, non-conduct of thorough detailed engineering and non-issuance or delayed issuance of Change Order to the contractor for COA’s evaluation.
For the City’s response: officials cited misunderstanding of legal provisions and claimed weather-related delays were supported by Philippine Atmospheric, Geophysical and Astronomical Services Administration reports.
The 2023 COA report also noted a deficit of documentation in consultancy services and various disbursements through cash advances.
Disbursements for consultancy services totaling P5,045,000 were not supported with complete required documents under the provisions of RIRR of RA 9184 and item 9.1.2 of COA Circular No. 2012-001.
The audit team recommended that the city accountant submit the lacking documents required for evaluation.
In response, the City Government submitted the available additional lacking documents but other supporting documents are currently not available at the bids and awards committee (BAC) secretariat.
The BAC members have instructed the secretariat to have complete documentation and to coordinate for the requirements of their consultants. / DPC