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CEBU CITY, Philippines ? The Naga City government used at least P2.5 million or 20 percent of the Local Development Funds (LDF) to service its debts and fund other expenses, which could have been charged to regular fund sources, state auditors said.
Because of this, the auditors from the Commission on Audit in Central Visayas (COA-7) told the Naga City government to observe the proper use of the city's LDF to ensure that this allocation would be spent for the purpose that it was set aside for.
The auditors said the LDF was supposed to be used to implement development and socio-economic projects and not to pay the city?s debts.
After a post audit of the city's 2007 property inventory and financial records, the auditors found that of the P2.5 million taken from the LDF, P2.2 million was used for debt servicing.
Only P268,000 was used for the implementation of the Early Child Development program and P8,160 for sports development program.
The state auditors said the P2.2 million should have been taken from the regular found sources and not from the LDF.
?Management justified that loan payments to the bank were charged to the 20 percent of the Local Development Fund because it (such an agreement) was stipulated in the loan agreement,? the COA report said.
The audit report communicated to (Naga Mayor) Valdemor Chiong on May 30, 2008, did not specify the amount of the Land Bank of the Philippines loan except that the loan was used for the construction of the public market which the city government considers to be a ?capital expenditure.?
The auditors also called the attention of the city government about their failure to immediately furnish COA with the monthly bank reconciliation statements.
They said that this practice ?casts doubt on the accuracy of (the city's) cash in bank account reflected on its financial statement.?
Naga City's financial statement shows that the city has bank deposits of P48 million. These are broken into three different accounts: general fund, P30.7 million; Special Education Fund, P7.3 million; and Trust Fund, P10 million.
