THE Commission on Audit (COA) has questioned the placement of some P717 million from the city’s trust funds into time deposits and high-yield savings accounts.
Among the funds transferred include some P699.86 million intended for projects that have not been implemented.
Accounting and Auditing Rules and Regulations based on the Local Government Code of 1991 allow local governments to deposit funds into such accounts in designated government banks, but only if the funds qualify as idle funds.
Idle funds are funds that are in excess of a local government unit’s (LGU) normal operating requirements, and may be invested in government securities and fixed-term deposits.
Section 94 of the New Government Accounting System (NGAS) Manual for LGUs disallows trust funds from being considered idle funds as these funds are slated for exclusive use for intended purposes and transfer.
In its review of 2021, the auditors noted that 97 percent of the P717 million of supposed idle funds were from government agencies earmarked for specific projects.
P438.75 million came from the Department of Information and Communications Technology (DICT), P204.84 million from the Office of the President (OP), P50 million from the Philippine Amusement, and Gaming Corporation (Pagcor), and P6.28 million from the National Assistance to LGUs (NALGU).
Records indicate that the NALGU fund was set up in 2006, but was then transferred to a special savings or time deposit account at the Development Bank of the Philippines (DBP) in 2012.
“Our audit team’s verification disclosed that the above-listed money placements were invested at .65 percent to 1.75 percent current rate with maturity dates of 65 to 183 days after placement,” the COA said.
The Pagcor fund and the DICT funds were received by the city government in December 2021 and were then transferred to high yield special accounts “within the same month.”
The COA also flagged the transfer of interest earned from the funds transferred to high yield special accounts and time deposits into the city’s general fund.
“Since the interest income was generated through investment of the trust fund case in fixed term money placements, the interest income should still form part of the trust fund,” the COA said.
The COA also said that as the funds are for Baguio projects, they must be used for the benefit of the public rather than the plan to generate revenue through interest in deposits.
The local government meanwhile defended their transfer to time deposits and high yield savings accounts as interest in regular savings accounts are “negligible or none at all.”
The city treasurer also suggested that the COA review the applicability of the definition of idle funds, stating that the current definition is antiquated.
