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The Commission on Audit (COA) has raised concerns over Baguio City's financial management, highlighting the city's substantial idle funds amid outstanding obligations and unimplemented priority development projects.
Excessive Idle Funds
As of December 2023, Baguio City held approximately ₱4.43 billion in time deposits and high-yield savings accounts (HYSA). This amount significantly exceeds the authorized idle funds of ₱695 million, as stipulated by COA Circular Nos. 92-382 and 92-382-A, which permit local government units (LGUs) to invest only idle funds in such instruments. The excess of ₱3.7 billion, representing 537% over the authorized limit, has raised concerns about the city's fund management practices.
Impact on Financial Obligations
The placement of these funds in time deposits and HYSAs has led to the accumulation of liabilities, including unpaid obligations to suppliers and contractors, unsettled dues to officers and employees, and unremitted amounts to other government agencies. This situation suggests that funds intended for current liabilities and operating expenses have been diverted to investments, potentially compromising the city's financial stability and its ability to meet immediate financial commitments.
Unimplemented Priority Projects
The audit also revealed that a portion of the idle funds, approximately ₱1.877 billion, was allocated for priority development projects. However, only ₱293 million of this amount was utilized in 2023, indicating a significant underutilization of funds earmarked for essential city development initiatives. This underperformance in project implementation raises questions about the efficiency and effectiveness of the city's development planning and execution processes.
Interest Rates and Compliance Issues
Additionally, the interest rates on the time deposits and HYSAs ranged from 0.65% to 1.75%, which are below the minimum agreed-upon rate of 7.5% as per Sangguniang Panlungsod Resolution No. 282 issued in 2001. This discrepancy highlights potential non-compliance with established financial agreements and suggests that the city may not be maximizing returns on its idle funds.
City Government's Response
In response to the COA's findings, the Baguio City government has expressed its intention to comply with the audit recommendations. The city plans to utilize the excess funds in time deposits to settle existing liabilities and unpaid obligations. However, the city has requested an extension to allow the accounts to mature before termination, indicating a need for careful management of these financial instruments.
Implications for Financial Management
The COA's audit underscores the importance of prudent financial management for LGUs. Excessive idle funds not only represent missed opportunities for investment in community development but also pose risks to financial stability. It is imperative for local governments to adhere to established financial guidelines, ensure timely implementation of development projects, and optimize the use of available funds to serve the public effectively.
For a detailed overview of the COA's findings and recommendations, refer to the Commission on Audit's Executive Summary for Baguio City in 2023.
In conclusion, while Baguio City has accumulated significant funds through time deposits and HYSAs, the COA's audit highlights critical issues related to fund management, project implementation, and compliance with financial agreements. Addressing these concerns is essential for enhancing the city's financial health and ensuring that resources are effectively utilized for the benefit of its residents.
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