COA flags Baguio gov’t over P4.43-B savings amid unpaid obligations

 Where did the time deposit interest go?

BAGUIO CITY -- The Commission on Audit (COA) has flagged the city government of Baguio for having P4.43 billion in time deposits and several high yield savings accounts (HYSA) amid unpaid obligations and unimplemented priority development projects.

In a 2023 audit report on Baguio, the COA said the funds, placed under HYSA/time deposit and approximately totaling P4.45 billion as of December 2023, were in excess by P3.7 billion or 537 percent of idle funds amounting to P695 million.

The audit breakdown showed that 17 of the HYSA/time deposit accounts were with the Land Bank of the Philippines and have a yearend balance of P3.32 billion.

Seven other accounts were with the Development Bank of the Philippines, with a total yearend balance of P1.11 billion.

Based on COA Circular Nos. 92-382 and 92-382-A, only idle funds of local government units (LGUs) can be placed in time deposits and HYSAs.

The audit body said a review of the city government’s financial statement showed Baguio has idle funds of only P695 million as of December 2023, which should have been placed under time deposit during the first quarter of 2024.

“Apparently, the fund placed under time deposits were obtained from funds intended for payment or settlement of current liabilities and to cover the budgeted regular and recurring operating expenses for calendar year 2024,” the COA said.

It said that such conditions resulted in the accumulation of liabilities to suppliers and contractors, unsettled obligations to officers and employees, and unremitted amounts in favor of other government agencies.

This, as City Treasurer Alex Cabarrubias said the COA audit observation memorandum (AOM) questioning the city's time deposits was an old issue that had been properly answered by the city,.

Cabarrubias said that on April 22, 2024, he had answered COA's 2023 audit report contained in COA AOM No. 2024-006 which informed of the city's "non-adherence" to COA Circular 92-382 dated July 3, 1992 by placing in time deposits and high yield savings account (HYSA) funds that are not considered as idle.

"In my reply, I already put forward our justification for our decision that we only had the best intentions for the city as the interest earned from that period of 2018 to 2023 were put to good use infused to projects and programs that are beneficial to our constituents," Cabarrubias said.

In his April 22, 2024 letter to Supervisor Auditor Atty. Nover Bate and Audit Team Leader Alicia Estibar, the city treasurer said he was aware of the COA Circular 92-382 provisions but with the huge amount under current accounts of the city, he was tempted to place amounts not considered as idle into time deposits taking advantage of the high interests offered.

"Having in mind the objective of the Circular, we set the longest period of the time deposits at 180 days or six months, way shorter than the average (time required for) the implementation of projects, the fund cover of which, is the bulk of the time deposits," Cabarrubias wrote the auditors.

The city treasurer also assured auditors that in availing the time deposits, they saw to it that "the City Government is financially stable and could satisfy its financial obligation on time."

"No payment of whatever kind has been denied or even delayed for non-availability of cash by reason of the time deposit placements."

Cabarrubias then promised to comply with the recommendations in the AOM but appealed to deposits be terminated only upon maturity.

As of now, only P1.13 billion out of the P4.43 billion remains in time deposit, according to him.

He also told the auditors that as a result of the placements, the city realized an estimated P323 million in interest income for the period 2018-2023.

Cabarrubias said the proceeds were infused in various city programs, projects and activities with amounts spread out in the city budget.

Cabarrubias said that to this date, the city has not yet received a reply or dissenting information from the COA on his letter. With reports from Elizabeth Marcelo and Aileen P. Refuerzo