Liga Aom Gabaldon - 09 26 17.docx

Republic of the Philippines COMMISSION ON AUDIT Local Government Sector Nueva Ecija B – Audit Team No. 27 ===================================================================== AOM No. 2017- 001 (LnB) Date: September 152031, 2017 AUDIT OBSERVATION MEMORANDUM (AOM)

For:

THE BOARD OF DIRECTORS Liga ng mga Barangay - Gabaldon Chapter

Attention

For:

:

HON. ANDY D. MERADIOS Liga ng mga Barangay, President

HON. FRANKLIN C. BOCALERE Liga ng mga Barangay, Treasurer 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. The Federation of Liga ng mga Barangay – GabaldonBongabon Chapter did not issue official receipts for collectionsenjoined its members to remit dues that is more than the set threshold of P2,000.00; its remittances were not supported with receipts from the Liga ng mga Barangay – Provincial Chapter and collections werthereof e not deposited to Authorized Government Depository Bank in violation of the pertinent provisions of Presidential Decree No. 1445 and the the Liga ng mga Barangay Constitution and By-laws of the Liga ng mga Barangay. 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

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1.2 Thus, with wide range of powers and authority vested to this recognized government organization, it is also incumbent to their officialsem 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 auditing rules.”, giving the Commission on Audit (COA) the jurisdiction to audit their accounts.

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1.2

1.3 In relation thereto, an evaluation of management for collections/receipts and disbursement on the operations of the Liga ng mga Barangay- Bongabon Gabaldon Chapter for three calendar years CYs 2014, 2015 and 2016, was undertaken to determine their compliance with existing rules and regulations. Ounderstand 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 Our evaluation, reveiew and inquiry disclosed the following:

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a. Excessive Annual Membership Dues for each barangay - ₱5,000.00Failure to issue Official Receipts Article XIII. Section 1 of the Constitution and By-Laws states that the Liga in all levels may derive its funds through the following means: a. Regular fees and dues from its members; b. Fund raising campaigns or activities; c. Contributions, donations, grants and other forms of aid from local government units; and d. Proceeds realized from their corporate activities.

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Review of the pertinent records revealed thatThe Liga ng mga Barangay – Gabaldon Bongabon Chapter earned most of its revenues as operational funds from sharing scheme (annual for collected membership dues form barangays) in accordance with the pertinent provisions of its Constitution and By-Laws. The dues collected from its members complied with the amount of P2,000.00 as provided by Section 2 of the Constitution and By-Laws, to wit provides::We noted, however, that the amount sanctioned from its members exceeded the amount of P2,000.00 as therein provided. in the Liga ng mga Barangay Constitution and By-Laws. Our inquiry disclosed that the dues was increased to ₱5,000.00 in CY 2015.

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Section 2 of the Constitution and By-Laws provides:

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Fees and Dues. Annual membership dues in the amount of TWO THOUSAND PESOS two thousand pesos(P 2,00.00) or such amount as maybe determined by the National Liga Executive Board shall be collected

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from each Sangguniang Barangay throughout the country every first (1) quarter of the year xxx (emphasis ours) We noted, however, aside from the annual membership sanctioned from its member barangays, the Liga Chapter received the following financial assistance: a. Financial Assistance from Provincial Government of Nueva Ecija ₱160,000.00 Date September 15, 2014 June 01, 2015

OR Number 2613801

Amount

2613811

Total

80,000.00 80,000.00 ₱ 160,000.00

b. Liga’s Trust Fund from Member Barangays - ₱ 120,000.00 The Liga President explained that the Chapter is allowed to request financial assistance or aid from local government units particularly on member Barangays, provided that the members Punong Barangay agreed and said agreement was duly supported by a resolution. We asked the copy of the basis or the resolution on this matter but he failed to provide one as of this writing. c. Unreceipted contributions or donations from the Punong Barangay ranging from ₱1,000 up to ₱5,000 The Liga President explained said that most of the personal contributions given by the Punong Barangay were intended to help and support their constituents particularly via death benefits. He argued that collections were not properly receipted because the financial support where directly given to the intended beneficiaries. Chapter is 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. We asked the copy of the basis or the resolution in this matter but he failed to provide one as of this writing. Even assuming that there was in fact a resolution, the same would be void as the preceding provision states that the power to determine the amount of membership dues rests with the National Liga Executive Board, and not to the local chapter.

b. Annual Membership Dues were not properly receipted upon remittances thereof 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 3

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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: Formatted: Font: (Default) Times New Roman, 12 pt, Italic

In case of Component City or Municipal Chapter:  Municipal/City Chapters – 50%  Provincial or Metropolitan Chapters 25%  Regional 12.5%  National Liga ng mga Barangay 12.5% In case of City (HUC/ICC) Chapters:  City Chapters  Regional Chapter  National Liga ng mga Barangay -

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75% 12.5% 12.5%

Clearly, the Barangays are required to pay their membership dues while the Ligas are mandated to remit the allocated percentages of collections to the Provincial, Regional and National Liga ng mga Barangay. However, upon verification, no official receipts as proof of the remittances for CY 2014, 2015 & 2016 were presented to the audit team. We could not ascertain whether the remittances were actually delivered, thus, leaving doubts as to its completeness. Inquiry to this matter disclosed that the most of the remittances were personally done by the Bongabon Chapter Liga President himself to the Office of the Liga nga mga Barangay – Provincial Chapter but no receipts were issued to him upon handing the cash remittance hence the audit cannot ascertain whether the remittances were actually deliveredmade, thus, the leaving doubts as to its completenessexistence. Formatted: Space After: 10 pt, Line spacing: At least 1 pt

c. Collections were not deposited in the Authorized Government Depository Bank Further review of records revealed that the Federation of Liga ng mga Barangay – Bongabon Gabaldon Chapter disclosed that collections 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 4

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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. 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. Aside from membership dues, registration fees for various seminars , which according to the Liga President sponsored/conducted by the DILG, were also receipted using Liga Official Receipt. A total of ₱ 1,145,800.00 2,989,600.00 worth of registration fees, as shown in Appendix A from its component barangays were collected for CYsrom calendar yearscalendar years 2014, 2015 & 2016, but all the said collections were not deposited intact to authorized government depository bank despite the collection were under the accountability of the League. Referring the above situation, the Liga President averred disclosed that he did not know who has the control of Liga ORs (procured from Provincial League) and from whom the ORs attached to the disbursement vouchers of the barangays came from. In fact, according to him, the Liga purchased AF51 from the MTO of Gabaldon for its exclusive use and never issued any Liga ORs. Formatted: Line spacing: At least 1 pt

Further verification revealed that the as the official receipts were not i keptssued by the Liga ng mga Barangay Treasurer but by a staff under thethe Local DILG Office of the DILG – Bongabon who uses the Liga’s accountable forms (OR) in acknowledging receipts of registration fees on seminars. Official Receipts were distributed at the venue of the seminar. The said collections from DILG-sponsored seminars were not remitted to the Liga Treasurer. Neither he had information on the accounting thereof including the disbursement and disposition. In fact, when the audit team requested the Liga President to submit pertinent documents/reports including the Liga ORs, he failed to comply immediately and begged for an extension of time as the ORs were in the custody of the Office of the DILG and its staff was in the process of preparing reports as requested by the audit team, including the Financial Statements. Thus foregoing situation denied the Liga Treasurer to perform his duties and establish the commensurate accountability. and thus might result to possible misappropriation and misuse of the said funds d. The designated collecting officer was (a) unaware ofnot awar herits functions as

League’s Treasurer and maintaining records and reports for collections as well as accountable forms, and (b) not properly bonded in accordance with law. , and (c) unaware of the proper maintenance of records and reports for collections as well as accountable forms 5

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d.

As provided for under Section 493 of RA 7160, it is the board of directors who shall appoint its secretary and treasurer. Moreover, Section 505 (b) of RA 7160 provides that the treasurer shall be bonded in an amount to be determined by the board of directors. In addition thereto, Article VIII of the Liga ng mga Barangay’s Constitution and By-laws designates the following powers and duties to the local chapter’s Treasurer, to wit: d.) The Treasurer 1. To be the custodian of all Liga Chapter’s assets, properties, funds and securities, and to submit to the Board of Directors, through the President, an annual inventory thereof at the end of the year and for the above purpose, to maintain a bank account, if necessary, with the President as cosignatory, in the name of the Liga Chapter;xxx 2. To collect and receive fees, contributions, donations, money, materials and all other resources accorded to the Liga Treasury, for which he/she issue the corresponding official receipts; 3. To disburse funds, under the authority of the President, in accordance with standard accounting and auditing proceduresxxx; 4. To render monthly report to the Board of Directors during monthly meetings or whenever called upon by the Board to do so; 5. To submit to the President an audited annual financial statement duly certified by him/her; 6. To certify the availability of funds whenever necessary; 7. To post bond for the faithful performance of duties; and 8. Article VIII of the Liga ng mga Barangay’s Constitution and By-laws designates the following powers and duties to the local chapter’s board and its officers The above rules and regulations expressly dictate the duties, responsibilities & accountabilities of the Treasurer of the League delineated by its own Constitutions and By-laws. The same were not effectively exercised by the said officer, hence the following deficiencies and non-compliance were noted: were noted based on the foregoing: 

Authority to receive collections Our inquiry disclosed that some of the collections of the Leagues, particularly those pertaining to Registration Fees, were not being received not by the Treasurer himself or by his designated employee who is not a punong barangay, but rather a staff under the DILG office and latterhe?they issued official receipts corresponding thereto. HisTheir actuations were clearly unauthorized and encroaching the functions assigned 6

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to the Liga Treasurer. There was no written appointment designating anyone to receive the payment other than the treasurer. 

Treasurer’s bond not established No records would show that the board set the amount of bond for the Liga’s treasurer or that the treasurer himself caused the required steps to secure a bond. In an inquiry, The Liga Treasurer however responded that he He did not ’nt know that he was also required to be bonded too.

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Maintenance of reports of collections and accountable forms The receivers of accountable forms issued receipts for collections but they ignored the preparation, maintenance and submission of corresponding collection reports.

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Non-preparation of reports of the Federation of Liga ng mga Barangay The foregoing provisions require the Liga to produce, among others, the following records/reports: 1. Plans, programs or budget 2. Disbursement vouchers 3. Annual audited financial statements 4. Annual inventory 5. Other reports Our verification disclosed that the management did not comply with the established rules and practices that brought about the non-preparation and non-maintenance of the above documents and reports. The treasurer was in short of consciousness and efforts to conduct their respective official function as provided for by their own regulations.

e. Maintainance of savings account with the New Rural Bank of San Leonardo – Bongabon Branch The State Audit Code expressly provides the indispensible requirement of Public officers authorized to receive and collect moneys arising from taxes, revenues, or receipts of any kind “to 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.”(Sec 69. PD 1445) Section 129 of GAAM Vol. 1 prescribes that local treasurers shall maintain depository accounts in the name of their respective local government units with banks, preferably government-owned, located in or nearest to their respective areas of jurisdiction.

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Deposits to a qualified private bank may only be done if the nearest AGDB to the agency concerned is inaccessible by ordinary means of transportation and transporting /withdrawing the government funds to and from the said office is impractical or risky, but still shall seek the approval of the Monetary Board as prescribed under Section 5(3) of BSP Circular No. 110. Review of The Liga ng mga Barangay – Bongabon Chapter compliance on this matter revealed that the said league maintains savings account with the New Rural Bank of San Leonardo – Bongabon Branch which is neither an Authorized Government Depository Bank (AGDB) nor a qualified Government Financial Institutions (GFIs). Such practice is a violation of Section 129 of GAAM Vol. 1. Details of the account are as follows: Account Name: Account No. Account Type

Liga ng mga Barangay Bongabon Chapter 51-00993-3 Savings Account

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This practice of the League exposes to danger government funds in case of insolvency or permanent closure of the bank. As a possible consequence, the accountable officers liable thereof shall not be relieved from accountability for they have violated rules and regulations. Moreover, they maintain a savings account instead of a current account, thus payment of disbursements were made in the form of cash which violates Section 172(b) of the Government Accounting and Auditing Manual (GAAM) Volume 1 which prescribes that all payments must be made by check. In certain cases when it may be very difficult, impractical or impossible to make payments by check. In such a case, payments may be made by the disbursing officer in the form of cash through cash advances. The Liga President however, explained that the account was created on April 2014, which then had no government banks within the locality nor its nearest town. Formatted: Line spacing: At least 1 pt

1.6 Considering that funds of the Liga are all sourced from annual dues and others payments made by its member barangays, it is but proper to put a high regard on how funds are managed and spent. Thus, the State Audit Code specifically provides the accountability lies with the Head of the Agency under its Section 2. Declaration of Policy, to wit: “It is the declared policy of the State that all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned.” The foregoing lapses may become the reason as well as an opportunity to public officers to commit fraud and negligence and ultimately may result in loss or wastage through illegal or 8

improper disposition of government fund, thereby prejudicing the interest of the government and the league. Formatted: Line spacing: At least 1 pt

With the observations noted above we recommend that: a. The Liga ng mga Barangay President refrain from assessing its members barangays and collecting annual membershipother dues that are morenot that the authorized amount. b. The Liga ng mga Barangay President abstain from the cashiering functions and let the appointed Treasurer to perform her duties and responsibilities whch include the (i) the issuance of official receipts for all collections and reporting of accountability for funds and accountable forms; (ii) maintenance of banks accounts for Liga’s monies; and (iii) the accounting and reporting of funds disbursements or expenditures. c. The Liga President and the Treasurer safekeep and maintain the Liga’s accountable forms and records in their possession to the exclusion of other offices including the local DILG which may not be held liable in case of loss or wastage of Liga’s funds. d. The Liga Treasurer adhere strictly on the preparation of records and reports relevant to the status, condition, and operations of the Liga including the accountability of accountable forms; and determine the amount of bond which would be the basis in procuring Treasurer’s insurance.

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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 9

PROOF OF SERVICE OF COPIES OF AOM Name 1. Michael SarmientoAndy Meradios 2. Nelson MoralesFranklin Bocalere

Position/Office LnB, President

LnB, Treasurer

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Received by (Signature )

Date