COA Warns City Over P1 Billion Cash Overdraft

The Commission on Audit (COA) warned the Cebu City Government of possible violations for incurring potential cash overdraft of close to P1 billion pesos last year.

In her Audit Observation Memorandum (AOM) to Mayor Michael Rama, City Auditor Cymbeline Celia Chiong Uy said the continuous incurrence of obligations by the city government even with insufficient cash availability as of last December resulted in the potential cash overdraft of close to a billion pesos.

She said there is a possibility that those revenues that are being placed in trust funds were used to pay the other obligations thereby violating the provisions under Section 305 (e) and 337 of the Local Government Code and the Government Accounting and Auditing Manual (GAAM).

The law provides that trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or fund received.

The accounting and auditing manual also states that “trust funds shall be available and maybe spent only for the specific purpose for which the trust was created or the funds received.”

Section 337 of the Local Government Code also sets limitations of disbursements where the local government unit is allowed to appropriate more than the amount in the approved annual budget but the amount of total disbursements shall not exceed 50 percent of the uncollected estimated revenue “accruing to such local fund in addition to theactual collections.”

But the law strictly provides that “no cash overdraft in any local fund shall be incurred at the end of the year.”

The Cebu City Government has a total of 1.06 billion cash balance in banks but has a total obligation of more than P2.9 billion as of December last year. Of the P1 billion available cash, P748 million was placed under time deposits in different banks.

It was learned that the city has a deficit of about P1 billion last year because it failed to meet the P5.3 billion annual budget.

COA said the city government should quickly implement corrective measures to ensure adequacy of cash to meet its obligations.

It also recommended for city officials to exercise prudence in the use of its limited cash resources.

“Stop the practice of incurring obligations without the corresponding cash back-up to avoid penalties, surcharges and most of all legal implications in case the city would be unable to meet its obligations,” the COA memorandum reads.

The state auditors also recommended that the mayor should strictly enforce the collection of taxes due to the city “for it to be able to augment its dwindling resources and design strategies to ensure that what is due to the city can be collected for it to be able to undertake its operation in normal conditions.”

City Administrator Jose Marie Poblete who is designated as the Officer-in-Charge (OIC) said they will answer all the issues discussed in the audit memorandum.

“Wala man kana magpasabot nga nakahimo na kami og sala kay amo pa nga tubagon ang tanan nila nga gi-discuss nga issue,” said Poblete.