City told to use development fund rightly

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Sunday, March 9, 2014

THE Commission on Audit (COA) reminded the Mandaue City Government to use its development fund properly after it noticed City Hall spent P7.9 million for projects where the fund should not be used.

State auditors also want the Mandaue City Government to speed up the processing of payments to its suppliers and contractors, saying the slow process may discourage bidders in future City Hall projects.

In its 2012 audit report, the COA noted that City Hall wrongly used its development fund for 15 projects, which included the construction of the City Veterinary Office and repair of the session hall.


A joint memorandum of the Department of Budget Management and the Department of Interior and Local Government provides a list of projects for which a local government unit can use its development fund, which is equivalent to 20 percent of its Internal Revenue Allotment.

The fund should be used for projects that promote social and economic development, and enhance environmental management. Among the disallowed expenditures are the repair of administrative offices and purchase of office furniture, appliances and equipment.

State auditors, however, noticed that City Hall took an amount from the development fund to renovate offices, build barangay halls and buy materials like ceramic tiles and curtains.


City officials, in an exit conference with state auditors, promised to correct the problem and observe the regulations related to the use of the development fund.

Also, COA noted that it took the City two months to more than a year to pay some of its suppliers and contractors, violating a provision under the Anti-Red Tape Act of 2007. Under the law, payments should be made within 10 days.

City officials, in an exit conference with state auditors, vowed to cut down the processing time by, among others, adding two personnel in the City Accounting Office.

State auditors took 12 samples from City Hall’s December 2012 disbursements to determine if it observed the required time to facilitate payments.

Five suppliers were paid between 50 and 100 days; four were paid between 101 and 200 days; two received their payments between 201 and 300 days; and one was paid after more than 400 days.

“The foregoing conditions in the processing of payments for delivered goods and services and completed infrastructure projects leave a lasting impression that the City of Mandaue is not offering a good environment for business as far as settlement or payment of claims is concerned,” the COA report said.


State auditors warned that the slow processing of payments may lead to an “alarming dearth of suppliers.”

“Only those with sufficient funds and (who) have adapted with the disturbing system of the late payment of claims may be able to sustain (their) business relationship with the City…” the report read.

City officials have committed to address the problem. During the exit conference, the heads of the Department of General Services and the City Engineering Office agreed to submit all supporting documents immediately to the City Accounting Office for the preparation of disbursement vouchers.

The problem will also be corrected by the City’s implementation of the Performance Governance System (PGS), a performance management tool that enables a government agency to be more efficient and effective in delivering public services and achieving its vision.

The City is implementing the PGS with the help of the Institute for Solidarity in Asia. (RSB)

Published in the Sun.Star Cebu newspaper on March 10, 2014.

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