2021 COA Annual Audit Report:

Capitol’s P242-M in time deposits could have funded dev’t projects

By the end of 2021, the provincial government of Catanduanes had Time Deposit accounts with a total amount of P242 million, which the Commission on Audit said could have been used to finance development projects.

In its 2021 Annual Audit Report, the COA said the audit revealed that the province has 12 Time Deposit accounts with a total amount of P242,313,845.23 lying idle in three local banks as of Dec. 31, 2021.

“Investing cash in Time Deposit accounts restricts the immediate use thereof because the cash deposits are not readily available for disbursements and could not be immediately used to finance funds for programs intended for the delivery of basic services,” the report stated.

It added that the provincial government could have minimized the acquisition of loans from banks by using the cash deposits in the implementation of various programs and projects.

“The interest expense paid by the agency for the acquisition of bank loans is much higher compared to the interest earned from time deposits,” the audit team pointed out.

For the entire year, the provincial government earned a total of P1,236,000.76 in interest income from three Time Deposit accounts with the Development Bank of the Philippines (DBP), five accounts with Land Bank of the Philippines (LBP) and four accounts with the Philippine National Bank (PNB).

In contrast, the LGU paid a total of P4,058,501.74 as interest expense for 2021 for bank loans acquired from PNB for seven development projects and from LBP for two projects.

The projects and interest paid included the Expansion and Rehabilitation of Seven (7) Hospitals (P1.3 million), Construction of Convention Center cum Evacuation Center (P1.2 million).

“Although the amount of cash deposit may not be equal to the bank loans availed, the interest rates of the loans are higher than the deposit,” the COA stressed. “Therefore, the Province could have saved a substantial amount of funds if the cash deposits were used to finance some of the projects instead of depositing the same on time deposits.”

Emphasizing that sound management and fiscal administration should be observed in the use of government funds, it advised the province to always choose the most beneficial or advantageous to the government when faced with different choices on how to manage, expend and utilize government resources.

“The placing of cash in time deposits restricted the immediate use thereof and caused the agency to incur higher costs through acquisition of bank loans instead of utilizing the idle funds for its programs and projects, thus, an indication of underutilization of available financial resources,” the government watchdog said.

It recommended that the local chief executive direct the Provincial Planning and Development Officer or other competent provincial official to conduct thorough study of the need to maintain time deposits considering the insufficiency of funds to finance the province’s other priority programs intended for delivery of basic services and for economic development.

Specifically, the COA urged, the study shall focus on the advantages of using the cash in time deposits instead of applying for loans to finance programs.

Hence, there is the need to determine whether the interest income derived from the time deposits would compensate or be more than the amount of the monthly loan amortization and interest to be paid out of the province’s Internal Revenue Allocation, it stressed.

The audit report said that the same audit observation was noted by the provincial government in 2020 and it addressed the same by appropriating P111 million in the same year using cash from time deposit accounts.


(to be continued)

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