THE ESSENTIAL THING

LGUs – accounting at turnover, part 2

Ma Merceditas N Gutierrez, Ombudsman

In last column I mentioned about what had recently happened to Angeles City Hall.  Its electricity was cut off, for failure to pay its 3 months outstanding bill to the local power supplier.  Was the reason the lack of money with which to pay the obligation?  If yes, what has happened to that city’s revenue collections (business taxes, permits, real estate payments, etc.) and how were these disbursed?  I then proposed that the Commission on Audit (COA), the government agency tasked with ensuring that all public funds are accounted for, study issuing a circular on the preparation of appropriate financial statements by every outgoing local government administration.  The idea is for the incoming one to know how much it is inheriting from its predecessor, and incidentally to prevent the depraved practice by some local leaders, who have lost their re-election bids or are prohibited by law from running again, to bilk the treasury dry just before they leave their posts.

I mentioned the Memorandum Circular issued in April 2010 by the Department of Interior and Local Government (DILG) which enjoins the creation in the local government unit (LGU) of a transition team whenever there is a change of local administration.  But I pointed out that while it is true that the main function of the team is to inventory all real estate holdings of the LGU, all infrastructure facilities, machineries, movables like vehicles, office equipment and supplies, the circular concerned itself mostly with the inventory of property.  It was not about the “inventory” or accounting of money or funds that the LGU had received and expect to receive during an identified period of time, and the actual or planned disbursements of these funds.  I said that this accounting of the LGU’s financial affairs is important for the incoming leadership, which must from day one know whether his town, city or province is liquid or bankrupt, to enable him to know what to do.       

I am told however that there really is no necessity for such end-of-term financial accounting to be made.  It is claimed that the accounting of an LGU’s receipts and expenditures - basically what comes in and what comes out - is a continuous activity that is already found in the LGU’s various books prepared and kept by the different fiscal officers operating therein.  For example, accounting department has a record of what items were purchased at any given time, while the general services department keeps tab on what equipment or supply earlier purchased was issued to whom and when.  Besides, there is already an inventory that must be prepared at the end of every year – the mandatory inventory of property by the Inventory Committee in the LGU concerned.  But my core question remains.  If these are sufficient devices for proper accounting, why does something like what had transpired recently at Angeles City Hall happen at all?  Surely all is not revealed by these accounting activities.

My real purpose in asking these questions is to eventually gain an inside view of the financial operations of LGUs in order to find out what is in their structural set up and systems that makes for the commission of financial anomalies.  It is, for instance, entirely possible to issue checks that have no supporting vouchers at all as long as certain key players, such as the local chief executive, the accountant, the treasurer, agree on certain basic mode of cooperation (translation: kuntsabahan).  It would then take the COA or any succeeding set of fiscal officers in the LGU several months more to find out what had happened to the local funds before they assumed office.  By then those responsible for illegal disbursements will have fled to other countries or died, leaving government lawyers with evidence-based charges but no one to charge.  

When this happens, it provides one more example of officials treating the agencies and LGUs they are supposed to be serving in like personal fiefdoms where they are for the most part free to do what they want.  Even steal its last centavo and blame the exhaustion of funds in the local coffers to, say, unexpected shortfalls in revenue collection, or else to a botched system of priorities in the payment of obligations, such as preferring payments to projects pursued to utilities payments.  Everything is blamed, except corruption on the part of outgoing officials, or their reckless mismanagement of the LGUs’ financial affairs.

Original published in the July 9-10, 2010 issue of Business Mirror.