GOVERNMENT auditors have questioned Baguio City government’s placement of P717.55 million from its trust funds into time deposits and high yield savings accounts, including P699.86 million intended for specific projects that have not been implemented.
Accounting and Auditing Rules and Regulations based on the Local Government Code of 1991 allow provinces, cities, and municipalities to deposit money in designated government banks but only if these fall under the category of idle funds.
Idle funds are defined as money in excess of the LGU’s normal operating requirements that may be invested in government securities and fixed-term deposits.
Section 94 of the New Government Accounting System (NGAS) Manual for LGUs specifically barred trust funds from being tapped for such transactions as these are to be used exclusively for the intended purpose of its creation and transfer.
However, in its 2021 report released last April 4, the audit team noted that 97 percent of the money placements came from government agencies and were earmarked for specific projects.
According to the breakdown provided in the audit report, 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).
Earliest records found showed the NALGU cash fund was set up way back in 2006 but was transferred to a special savings/time deposit at the Development Bank of the Philippines (DBP) in August 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 P50 million from Pagcor and the P438.75 million from DICT were received by the city government in December 2021 and were immediately placed into HYSA “within the same month.”
Likewise flagged was the city government’s transfer of interest earned to its 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.
It added that since the funds were meant to be spent on programs that will benefit Baguio City residents, this purpose should take precedence over the city’s plan to generate additional revenue through interest earned from time deposits and high yield accounts.
The city government explained that it decided to place the money in time deposits because they provide better returns compared to placing the fund in regular savings deposits whose interests are “very negligible or none at all.”
The City Treasurer suggested that the COA review the applicability of the Circular that defined “idle cash,” saying the definition is now antiquated.
