Liga Aom Collections.docx

Republic of the Philippines COMMISSION ON AUDIT Local Government Sector Nueva Ecija B – Audit Team No. 27 ===================================================================== AOM No. 2017- 001 (LnB) Date: August 31, 2017 AUDIT OBSERVATION MEMORANDUM (AOM)

For:

HON. MICHAEL F. SARMIENTO Liga ng mga Barangay, President Liga ng mga Barangay - Bongabon Chapter

Attention

:

HON. NELSON C. MORALES Liga ng mga Barangay, Treasurer

1. Several deficiencies were noted in the collections made by the Federation of Liga ng mga Barangay – Bongabon Chapter on its operation for CY 2014, 2015 & 2016 such as (a) annual membership dues have exceeded the allowable threshold amounting to P2,000.00 for each Barangay (b) remittances of the proceeds thereof are not supported with receipts and (c) other collections are not deposited to Authorized Government Depository Bank in violation of the pertinent provisions of the Constitutions and By-laws of the Liga ng mga Barangay and P.D. 1445. 1.1 As the basic political unit, the barangay serves as the primary planning and implementing unit of government policies, plans, programs, projects and activities in the community, and as a forum wherein the collective views of the people may be expressed, crystallized and considered, and where disputes may be amicably settled. On the other hand, the Liga ng mga Barangay is the organization of all barangays, vested with the same powers and authority, whose purpose is the ventilation, articulation, and crystallization of issues affecting barangay government administration and securing solutions thereto, through proper and legal means. (Sec. 491 of R.A. 7160) 1.2 Thus, with wide range of powers and authority vested to this recognized government organization, it is also incumbent to them to comply with applicable laws, rules and regulations. Hence, the Local Government Code of 1991 expressly states that “All funds of the leagues shall be deposited as trust funds with the treasurer and shall be disbursed in accordance with the board of directors; resolutions subject to pertinent accounting and

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auditing rules.”, giving the Commission on Audit (COA) the jurisdiction to audit their accounts. 1.3 In relation thereto, an initial evaluation on the operations of the Liga ng mga BarangayBongabon Chapter for three calendar years 2014, 2015 and 2016, was undertaken to understand the nature of its existence, purpose and how it is being managed by its officers and board of directors. With that, we found out that said League did not comply with the pertinent rules and regulations provided by laws particularly in its collection of funds. Thus, review of the auditee’s pertinent compliance in collection of funds disclosed the following: a. Excessive Annual Membership Dues for each barangay Review on the compliance by Liga ng mga Barangay – Bongabon Chapter revealed that the most of its operational funds were came from sharing scheme for collected membership dues in accordance with the pertinent provisions of its Constitution and ByLaws. However, collections of the said annual membership dues for each 28 component barangays had increase to ₱5,000.00 for calendar years 2015 and 2016, exceeded the allowable amount stated its Constitution and By-Laws as follows: “Section 2. Fees and Dues. Annual membership dues in the amount of TWO THOUSAND PESOS (P 2,00.00) or such amount as maybe determined by the National Liga Executive Board shall be collected from each Sangguniang Barangay throughout the country every first (1) quarter of the year…” When the audit team consulted this matter, the Liga ng mga Barangay – Bongabon Chapter President said that they were allowed to collect more than what was stated in the Constitution and By-Laws, provided that the members Punong Barangay agreed and said agreement was duly supported by a resolution. However, when the audit team asked the Liga President to provide the basis on that particular matter as well as the copy of said resolution, no legal basis and copy of the resolution was sent/furnished to the office as of this writing.

b. Remittances of the Annual Membership Dues were not properly receipted Pursuant to Art. XIII, Sec. 3 of the Constitution and By-Laws of the National Liga ng mga barangay which is made suppletory to the pertinent chapter of the Local Government Code, all barangays are to pay membership dues to the National Liga ng mga Barangay, Regional, Provincial and Municipal Chapter, throughout the country every first (1st) quarter of the year, and the proceeds shall be distributed as follows: In case of Component City or Municipal Chapter: 2

   

Municipal/City Chapters – Provincial or Metropolitan Chapters Regional National Liga ng mga Barangay -

In case of City (HUC/ICC) Chapters:  City Chapters  Regional Chapter  National Liga ng mga Barangay -

50% 25% 12.5% 12.5%

75% 12.5% 12.5%

In view of this, all Liga Chapter Presidents and Punong Barangay are required to remit religiously a certain percentage of its annual dues to the Provincial, Regional and National Liga ng mga Barangay. However, inquiry to this matter disclosed that the most of the remittances were personally done by the Bongabon Chapter Liga President himself but no receipts were issued to him upon handing the cash remittance hence the audit cannot ascertain the remittances made, the leaving doubts as to its existence. c. Collections are not deposited to Authorized Government Depository Bank Further evaluation of the collections made by the Federation of Liga ng mga Barangay – Bongabon Chapter disclosed that aside from Barangay Annual Membership Dues, Registration Fees from component barangays for various seminars were also collected and receipted by the Leagues. However, Collections from calendar year 2014, 2015 and 2016, pertaining to the latter were not deposited regularly and intact to its authorized government depository bank in violation from the requirements of Section 69 of PD 1445 which states: Section 69. Deposit of moneys in the treasury. 1. Public officers authorized to receive and collect moneys arising from taxes, revenues, or receipts of any kind shall remit or deposit intact the full amounts so received and collected by them to the treasury of the agency concerned and credited to the particular accounts to which the said moneys belong. 2. xxx 3. Pending remittance to the proper treasury, collecting officers may temporarily deposit collections received by them with any treasury, subject to regulations of the Commission.

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4. The respective treasuries of those agencies shall in turn deposit with the proper government depository the full amount of the collections not later than the following banking day. A total of ₱ 2,989,600.00 worth of Registration Fees, as shown in Appendix A, from its component barangays were collected from calendar 2014, 2015 & 2016 but all the said collections were not deposited intact to its authorized government depository bank. Thus, the foregoing situation might result to possible misappropriation and misuse of the said funds. Consulting the matter to Liga ng mga Barangay disclosed that collections and receipts were not properly accounted and the official receipts of the Liga ng mga Barangay were likewise not properly used to reflect total collections and receipts of the League Funds, since the official receipts were not kept by the Liga ng mga Barangay Treasurer but rather at the custody of the Office of the DILG – Bongabon which uses it in acknowledging receipts of registration fees on seminars initiated by the same office. The said receipts from DILG-sponsored seminars were not remitted to the Liga Treasurer and no proper accounting and recording thereof as to the proceeds and disposition, casting doubts as to the regularity of the said transaction. In fact, when the audit team wrote a letter to the Liga President requesting submission of the pertinent documents/reports including the Liga ORs, needed to effect the conduct of audit. The Liga President did not outright furnish the documents/reports requested but rather came to the Office together with the Liga Treasurer, requesting for an extension of time, since the accordingly, the ORs were still at the Office of the DILG and a staff therefrom, were still doing the reports requested by the audit team, including the Financial Statements. 1.4 The foregoing situations may become the reason as well as an opportunity to commit fraud and negligence and ultimately may result in loss or wastage through illegal or improper disposition of government funds. 1.5 All above noted deficiencies were attributed to lack of interest and knowledge as to management of the Leagues thereby resulting to absence of Operating Manual or Operating Guidelines as to management of its collections and even disbursements. Although there was a Constitution and By-Laws, it did not however provide specific accounting procedures and reporting policies to facilitate efficient and effective operations of the organization. 1.6 Considering that funds of the Liga were all sourced from annual dues and others appropriated from the barangays and various expenditures directly from various government offices, it is but proper to put a high regard on how funds are managed and spent. With the weak internal control and lacks interest in formulating the same, the foregoing situations may become the reason as well as an opportunity to commit fraud and negligence and ultimately 4

may result in loss or wastage through illegal or improper disposition of government fund, thereby prejudicing the interest of the government and the league. 1.7 With the observations noted above we recommend that: a. The Liga ng Barangay Officers and Board should prescribed Manuals of Operations to the Liga ng mga Barangay giving emphasis on operating guidelines together with accounting rules and regulations on receipt and disposition of funds in compliance to pertinent provisions of P.D. 1445. b. The Liga ng mga Barangay President refrain from collecting Annual Membership Dues from its members component barangay, the allowable amount prescribed by the Constitutions and By-laws of the Liga ng mga Barangay. c. The Liga ng mga Barangay should not allow the DILG to use the official receipt of the liga ng mga barangay as proof of payment for the registration fees on seminars it sponsored and conducted and refrain from having custody of said Official Receipts. d. All files, documents and reports pertaining to Liga ng mga Barangay operations should be kept and maintained at its designated Liga Office. May we have your comments on the foregoing observation within fifteen (15) calendar days from receipt hereof.

EVELYN S. MANANGKIL Audit Team Leader

ATTY. ANTONIO F. MARZAN OIC-Supervising Auditor

PROOF OF SERVICE OF COPIES OF AOM Name

Position/Office

1. Michael Sarmiento

LnB, President

2. Nelson Morales

LnB, Treasurer 5

Received by (Signature )

Date

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