• COA: Manila spent Pagcor funds for projects not under guidelines

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    Financial assistance to the City of Manila from the Philippine Amusement and Gaming Corp. (Pagcor) totaling P213.6 million was spent for projects that were not in line with their purpose, state auditors said.

    This was among the observations in a 2014 audit report by the Commission on Audit (COA) on the City of Manila.

    “Financial Assistance from Pagcor totaling P213.602 million was allocated to the City Mayor and the members of the City Council without legal basis, and appeared to have been co-mingled with other funds of the city, and spent, without the required joint approval of the City Mayor and the City Council, for projects which were not in line with the specific purpose for which these were granted in violation of Section 309 (b) of RA [Republic Act] 7160, Section 94, Volume I of NGAS [New Government Accounting System] Manual, and the guidelines governing the handling and utilization of said fund,” the audit report said.

    The auditors said under Section 309 (b) of RA 7160 or the Local Government Code as well as the NGAS Manual, “a trust fund shall only be used for the specific purpose for which it was created or for which it came into the possession of the local government unit.”

    Under the guidelines on the use of the Pagcor funds, based on the audit report, projects that may be supported include: self-sustainable economic livelihood projects preferably on the grassroot level, infrastructure projects which are essential to the community, projects connected with the delivery of basic health services and other projects designed to prevent widespread disease or epidemics, projects related to the improvement of peace and order in the locality, projects involving the giving of emergency assistance to victims of natural disasters and calamities and such other projects that will socially ameliorate the poor.

    But the auditors said the “Pagcor funds were used for projects that are not under any of the projects that may be supported per Pagcor’s directive.”

    Upon review, they found that the Pagcor funds were used to finance the following classes of transactions: (a) Purchase of medicines, medical and other supplies including purchase and minor repair of hospital equipments; (b) Cash reward for outstanding police officers (Manila Police District or MPD); (c) Financial Assistance (allowance) for training of police officers (Mayor’s security); (d) Financial Assistance for the burial of a deceased police officer; (e) Gas, food and office supplies of police office (MPD); (f) Financial Assistance to crime victims (rape with homicide); (g) Financial Assistance for victims of LPG explosion; (h) PhilHealth premium payment for Point-of-Care enrollment facility; (i) Financial Assistance for chemotherapy, factor infusion and other specialized medical treatment for persons confined in hospitals other than the hospitals owned by the city; (j) Grocery items given to constituents, and; (k) Demolition and transportation for informal settlers.

    “Initial assessment based on available documents showed that only transactions in letter [a]may be considered as conforming with the guidelines as it may fall under item 1.3 [projects connected with the delivery of basic health services],” the auditors said.

    As to the other projects, they noted that “[i]tem [b]to [e]has no direct impact on the improvement of peace and order in the city.”

    “Item [f], and [g]cannot be considered as giving emergency assistance to victims of natural disasters or calamities as the circumstances therein are not ‘natural,’” the auditors saidd.

    They also found that Item (h) and (i) were not connected with the delivery of basic health services under the guidelines.

    “Item [h]is connected with the payment for the health services rendered and not with the delivery. Item [I] is for specialized treatment for patients, not with the delivery of basic health services,” the auditors explained.

    Further, they said item (j) cannot be considered as projects which will socially ameliorate the poor.

    “While the giving of grocery items will help the beneficiaries survive for a day, it will not socially ameliorate them,” the auditors said.

    They added that the demolition and transportation of informal settlers from demolition site to resettlement area is not among the projects listed in No. 1 of the guidelines.

    The guidelines also provide, among others, that the funds shall not be co-mingled with the general and other funds of the city, and that the project as well as the amount of funding required shall be jointly approved by the City Mayor and the City Council through a city ordinance.

    “In conformity with the above guidelines, funds received from Pagcor are deposited in a bank account separate from the general and other funds of the city. In calendar year 2014, financial assistance received by the city from Pagcor amounted to P159,520,000.00 out of which, P133,143,411.10 was utilized,” the auditors said.

    They, however, noted that the trust liability account for Pagcor funds was divided into two accounts—executive and legislative—which, they said, was contrary to Section 309(b) of RA 7160.

    The executive account had P146,509,975.30 while the legislative account had P67,091,542.56 for a total of P213,601,517.86, based on the audit report.

    The legislative account was further subdivided among councilors, each of whom receives a monthly allocation of P90,000, according to the audit report.

    “However, no provision indicates that the city may divide the financial assistance from Pagcor. The division is inconsistent with the statements contained in the September 19, 1988 letter of Pagcor which calls for the City Mayor and the City Council to work together. It also gives an ill impression that these funds are under the absolute control of the officials under whose names the funds were allocated where in fact, control should be shared between the mayor and the City Council as a body,” the auditors said.

    They were referring to a letter dated September 19, 1988 addressed to the then-mayor wherein the chairman and chief executive officer of Pagcor said handling and use of Pagcor funds were subject to the above-mentioned guidelines.

    Further, the audit report stated that there were expenses charged to Pagcor that were paid using Landbank of the Philippines, Current Account-Proper (LBP-CA-Proper) while expenses chargeable to the Philippine Charity Sweepstakes Office (PCSO) were paid using LBP-CA-Pagcor.

    The audit report stated that the financial assistance from Pagcor was used for projects that were not jointly approved by the mayor and the City Council.

    It also stated that City Council members request approval in implementation of the projects and “encroached [into]the jurisdiction of the executive” in alleged violation of the separation of powers, as provided in Section 455 (b) (1) and (2) in relation to Section 458 (a) of RA 7160.

    The auditors then told the city government to consolidate the Trust Liability for Pagcor funds into a single account and “stop the allocation to individual City Council members.”

    Another recommendation was for the City Treasurer to ensure that the checks issued to pay Pagcor-funded expenditures are from LBP-CA-Pagcor and that these checks are not used to pay expenditures that are not funded by Pagcor.

    They also recommended that the mayor and the City Council jointly approve the project to be funded and the amount of funding required.

    The auditors told the city government “[t]o ensure that projects to be funded by Pagcor funds will fall in at least one of the six items enumerated in the guidelines, the City Council and the City Mayor must consider the list of projects that may be funded when identifying and approving projects. This can be achieved by indicating in the joint approval, the particular item on the list under which the approved project belongs to.” Reina Tolentino

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