Baguio City grilled on P4.4B time, high-yield deposits

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GOVERNMENT auditors are seeking an explanation from the Baguio City government regarding its P4.429 billion cash placements in time deposits and several high-yield savings accounts (HYSA) as of December 31, 2023.

Based on the city’s Schedule of Cash in Bank – Local Currency obtained by the Commission on Audit, there were 17 accounts with the Land Bank of the Philippines and 7 accounts with the Development Bank of the Philippines.

The DBP accounts hold a total of P1.112 billion while the Landbank accounts contained P3.317 billion in combined deposits.

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The figures were revealed in Baguio City’s 2023 audit released by the COA on December 1, 2024.

“Records show that the City Government had repeatedly placed/roll over large amounts of cash under Time Deposit/High Yield Savings Account for the past several years. The comparative year-end balances …as reported in the financial statements in CY 2018 to 2023 has significantly increased,” the audit team said.

From P2.721 billion in 2018, the city time deposit placements increased by P566.98 million to P3.288 billion in 2019.

This grew by P378.907 million to P3.667 billion in 2020 and, despite the challenges of the COVID-19 pandemic, went up another P246.607 million to settle at P3.914 billion as of yearend 2021.

In 2022, the total deposits showed only a slight uptick of P19.122 million but soared by P495.92 million in 2023 to end at P4.429 billion.

Auditors noted that Baguio City’s money placement was invested in a .65 percent to 1.75 percent current rate with maturity dates of 63 to 182 days.

“The interest rates …were way lower than the minimum agreed interest of 7.5 percent required under Sangguniang Panlungsod Resolution No. 282, series of 2001,” the COA noted.

At the same time, the audit team said the city only had a specified limit of P695,005,426.93 classified as Idle Fund authorized to be invested for the first semester of 2024. This meant the city government exceeded the limit by P3.734 billion.

“The funds placed under HYSA/ time deposit totaling P4,428,998,741.46 as of December 31, 2023, is in excess by P3,733,993,314.53 or 537 percent over the idle fund of P695,005,426.93,” the COA said.

Auditors said the deposited funds were obtained from “funds intended for payment/settlement of Current Liabilities and funds to cover the budgeted regular and recurring operating expenses for CY 2024.”

“Such condition attributed to the accumulation of liabilities to suppliers/contractors, unsettled obligations to officers/employees and unremitted amounts in favor of other government agencies,” the commission added.

In addition, the source of the P1.877 billion portion of the fund was traced to the 20 percent Development Fund that was supposed to finance the city government’s priority development projects.

While the city’s cash was tied up and earning interests, auditors said total payment for the construction and purchases relative to local development projects in 2023 only amounted to P293.358 million which they tagged as “quite insignificant” compared to P1.877 billion Development Funds placed under time deposit.

The city government acknowledged the audit observations and gave a commitment to comply with the recommendation to unload the excess investment in time deposits to settle liabilities and unpaid obligations.

However, it appealed to the COA to be given more time so that the time deposit accounts could be terminated only upon maturity.

It informed the COA that notice of termination of the accounts had been sent to the banks. 

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