The 2019 COA Audit Reports:

Audit team disputes Virac LGU acquisition of P40-M farm land

(Part 1)

The Commission on Audit has flagged the acquisition by the Virac municipal government of a three-hectare agricultural land for P40 million in 2019 as “improperly documented” and questionable as far as the its price is concerned.

In its annual audit report for said year, the auditors noted that on March 28, 2019, the municipal government procured the land from Deborah Farms, Inc, intended for commercial and institutional building and other future development projects of the municipality.

The review showed that there was no certificate of title entered in favor of Virac LGU and there was no lot survey, DBP appraisal report, Independent Appraisal Report and certification as to the BIR Zonal Valuation to determine the value of the property.

It said that the Sangguniang Bayan found merit in the project and granted authority to the local chief executive to enter into contract with the vendor even though some provisions of the contract were questionable, to wit: payment of Capital Gains Tax to be shouldered by the LGU; b) no appropriation for payment of documentary stamp tax, capital gains tax, transfer fees, survey and others; and, reasonableness of price was not evaluated by comparing the fair market value per tax declaration, appraisal report of the DBP, and the contract price.

According to the report, the DBP appraisal saw the value of the land at P30 million and accordingly released only that amount under the financing agreement with the LGU.

The balance was charged by the LGU to the CY 2018 continuing appropriations.

The audit also stated that the computation of the Documentary Stamp Tax (DST) and Capital Gains Tax (CGT) was erroneous and resulted in an estimated underpaid tax of P1.5 million.

Justifying the sale, the members of the Sangguniang Bayan and other officials said that the property concerned is an agricultural area whose surroundings have developed into residential properties where the prevailing price for adjacent lots is between P2,000 to P3,500 per square meter.

They said that the lot is a viable investment for the local government as there is no other contiguous land area in the vicinity proximate to educational institutions, large subdivisions, government agencies, businesses and the airport.

In its rejoinder, the COA stressed that it was not questioning the plan of the LGU to acquire the lot as a future business hub.

“No matter how good the intention of the Executive and Legislative department on the acquisition of the 30,000 sq. m. land, all applicable laws must be observed so that the LGU would not be put in a disadvantage,” the report said.

The team also discovered that pit of the 50 lots owned by the LGU, only two (2) had titles in its name.

As for cash advances, the COA verified that such advances for 2019 totaling P2.54 million for travels were totally liquidated as of yearend, the third straight year the LGU managed the feat. It commended the LGU management for directing all officials and employees to settle their unliquidated cash advances for travel.

Also coming under scrutiny was a contract the LGU entered into with Taishan Heavy Industries, Inc. for the supply and delivery of two units six-wheeler dump trucks for a total of P3.7 million charged to a loan agreement with DBP.

Taishan delivered two dump trucks in June 2019 and the LGU accordingly executed a promissory note for the release of P3.7 million in loan proceeds from DBP.

However, payment was withheld after the LGU found that the trucks’ specifications were not met and Taishan failed to replace the equipment.

Thus, the LGU was charged with interest amounting to P129,887 for the year for the unutilized loan.
The COA recommended that the supplier be required to deliver the units with correct specifications, with the LGU to impose liquidated damages on the transaction and negotiate with DBP for the condonation of interest on the unused loan.

In the same report, the auditors bewailed the Virac LGU’s lack of comprehensive plan for Solid Waste Management (SWM) and the final disposition of residual solid waste, as well as its failure to institutionalize SWM with the creation of a Municipal SWM Board.

Thus, it noted, there was no separate budget for its operation or detailed appropriation for expenses for SWM operations, which is administered under the Office of the Mayor.

The team discovered that some barangays had Material Recovery Facilities but waste segregation was not practiced, with wastes directly collected without segregation in urban barangays.

A shredding machine for plastic and leaves which could have been used as mixtures for hollow block making and fertilizers remained unutilized, it said.

Citing a Jan. 14, 2020 letter from DENR-EMB regional office enjoining the LGU to cease operating the open dumpsite at Casoocan and Magnesia del Sur and rehabilitate it, the COA urged the local government to prepare the proposed sanitary landfill and institutionalize the SWM program by creating a separate office with its own budget and permanent appointed official.

(to be continued)

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