Republic of the Philippines

COMMISSION ON AUDIT
Local Government Sector
Nueva Ecija B – Audit Team No. 27
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AOM No. 2017- 001 (LnB)
Date: September 20, 2017

AUDIT OBSERVATION MEMORANDUM (AOM)

For: THE BOARD OF DIRECTORS

Liga ng mga Barangay - Bongabon Chapter

Attention : HON. MICHAEL F. SARMIENTO

Liga ng mga Barangay, President

HON. NELSON C. MORALES

Liga ng mga Barangay, Treasurer

1. The Federation of Liga ng mga Barangay – Bongabon Chapter enjoined its members to
remit dues that is more than the set threshold of P2,000.00; its remittances are not
supported with receipts from the Liga ng mga Barangay – Provincial Chapter and other
collections are not deposited to Authorized Government Depository Bank in violation of
the pertinent provisions of Presidential Decree No. 1445 and the Liga ng mga Barangay
Constitution and By-laws of the Liga ng mga Barangay.

1.1 As the basic political unit, the barangay serves as the primary planning and implementing
unit of government policies, plans, programs, projects and activities in the community, and as
a forum wherein the collective views of the people may be expressed, crystallized and
considered, and where disputes may be amicably settled. On the other hand, the Liga ng mga
Barangay is the organization of all barangays, vested with the same powers and authority,
whose purpose is the ventilation, articulation, and crystallization of issues affecting barangay
government administration and securing solutions thereto, through proper and legal means.
(Sec. 491 of R.A. 7160)

1.2 Thus, with wide range of powers and authority vested to this recognized government
organization, it is also incumbent to their officials to comply with applicable laws, rules and
regulations. Hence, the Local Government Code of 1991 expressly states that “All funds of
the leagues shall be deposited as trust funds with the treasurer and shall be disbursed in
accordance with the board of directors; resolutions subject to pertinent accounting and
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auditing rules.”, giving the Commission on Audit (COA) the jurisdiction to audit their
accounts.
1.3 In relation thereto, an evaluation of management for collections/receipts of the Liga ng
mga Barangay- Bongabon Chapter for three calendar years CYs 2014, 2015 and 2016, was
undertaken to determine their compliance with existing rules and regulations our evaluation,
review and inquiry disclosed the following:

a. Annual Membership Dues are more than the set threshold - ₱5,000.00

Article 8. Section 1 of the Constitution and By-Laws states that the Liga in all levels may
derive its funds through the following means:
a. Regular fees and dues from its members;
b. Fund raising campaigns or activities;
c. Contributions, donations, grants and other forms of aid from local government
units; and
d. Proceeds realized from their corporate activities.

Review of the pertinent records revealed that Liga ng mga Barangay – Bongabon Chapter
earned most of its revenues as operational funds from sharing scheme (annual
membership dues form barangays) in accordance with the pertinent provisions of its
Constitution and By-Laws. We noted, however, that the amount sanctioned from its
members exceeded the amount of P2,000.00 as therein provided. Our inquiry disclosed
that the dues were increased to ₱5,000.00 starting calendar year 2015.

Section 2 of the Constitution and By-Laws provides:

Fees and Dues. Annual membership dues in the amount of two thousand
pesos(P 2,00.00) or such amount as maybe determined by the National Liga
Executive Board shall be collected from each Sangguniang Barangay
throughout the country every first (1) quarter of the year xxx (emphasis ours)

The Liga ng mga Barangay – Bongabon Chapter President explained that the Chapter is
allowed to collect more than what was stated in the Constitution and By-Laws, provided
that the members Punong Barangay agreed and said agreement was duly supported by a
resolution. We asked the copy of the basis or the resolution in this matter but he failed
to provide one as of this writing. Even assuming that there was in fact a resolution, the
same would be void as the preceding provision states that the power to determine the
amount of membership dues rests with the National Liga Executive Board, and not to
the local chapter.

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b. Annual Membership Dues were not properly receipted upon remittances

Pursuant to Art. XIII, Sec. 3 of the Constitution and By-Laws of the National Liga ng
mga barangay which is made suppletory to the pertinent chapter of the Local Government
Code, all barangays are to pay membership dues to the National Liga ng mga Barangay,
Regional, Provincial and Municipal Chapter, throughout the country every first (1st)
quarter of the year, and the proceeds shall be distributed as follows:

In case of Component City or Municipal Chapter:

 Municipal/City Chapters – 50%
 Provincial or Metropolitan Chapters - 25%
 Regional - 12.5%
 National Liga ng mga Barangay - 12.5%

In case of City (HUC/ICC) Chapters:

 City Chapters - 75%
 Regional Chapter - 12.5%
 National Liga ng mga Barangay - 12.5%

Clearly, the Barangays are required to pay their membership dues while the Ligas are
mandated to remit the allocated percentages of collections to the Provincial, Regional and
National Liga ng mga Barangay. However, upon verification, no official receipts as proof
of the remittances for CY 2014, 2015 & 2016 was furnished to the audit team, hence the
audit cannot ascertain whether the remittances were actually delivered, thus, leaving
doubts as to its completeness.

Inquiry to this matter disclosed that according to Bongabon Chapter Liga President
himself, most of the remittances were personally done by him to the Office of the Liga
nga mga Barangay – Provincial Chapter but no receipts were issued to him upon handing
the cash remittances. However, he already asked the Provincial Chapter to provide them
receipts or certification that will prove their remittances.

c. Collections were not deposited in the Authorized Government Depository Bank

Further review of records revealed that the Federation of Liga ng mga Barangay –
Bongabon Chapter disclosed that collections were not deposited regularly and intact to its
authorized government depository bank in violation from the requirements of Section 69
of PD 1445 which states:

Section 69. Deposit of moneys in the treasury.

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 1. Public officers authorized to receive and collect moneys arising from
taxes, revenues, or receipts of any kind shall remit or deposit intact the
full amounts so received and collected by them to the treasury of the
agency concerned and credited to the particular accounts to which the
said moneys belong.
2. xxx

3. Pending remittance to the proper treasury, collecting officers may

temporarily deposit collections received by them with any treasury,
subject to regulations of the Commission.

4. The respective treasuries of those agencies shall in turn deposit with

the proper government depository the full amount of the collections not
later than the following banking day.

Aside from membership dues, registration fees for various seminars, which according to
the Liga Chapter President were sponsored/conducted by the DILG, were also receipted
using Liga Official Receipt.

A total of ₱ 1,633,600.00 worth of Registration Fees, as shown in Appendix A, from its

component barangays were collected for calendar years 2014, 2015 & 2016 but all said
collections were not deposited intact to its authorized government depository bank
despite the ORs used were under the accountability of the League.

The Liga President disclosed that collections and receipts were not properly accounted
and the official receipts of the Liga ng mga Barangay were likewise not properly utilized
to reflect total funds collected by the League as the official receipts were not kept by the
Liga ng mga Barangay Treasurer but by a staff under the Office of the DILG – Bongabon
which uses the Liga’s accountable forms (OR) in acknowledging receipts of registration
fees on seminars it initiated. The said collections from DILG-sponsored seminars were
not remitted to the Liga Treasurer. Neither had it shared information on the accounting
thereof including the disbursement and disposition.

In fact, when the audit team requested the Liga President to submit pertinent
documents/reports including the Liga ORs, he failed to comply immediately and begged
for an extension of time as the ORs were in the custody of the Office of the DILG and its
staff was in the process of preparing reports as requested by the audit team, including the
Financial Statements.

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Thus foregoing situation denied the Liga Treasurer to perform his duties and establish the
commensurate accountability.

d. The designated collecting officer was (a) unaware e with her functions as League’s
Treasurer and maintenance of records and reports for collections as well as
accountable forms, and (b) not properly bonded in accordance with law.

As provided for under Section 493 of RA 7160, it is the board of directors who shall
appoint its secretary and treasurer.

Moreover, Section 505 (b) of RA 7160 provides that the treasurer shall be bonded in an
amount to be determined by the board of directors.

In addition thereto, Article VIII of the Liga ng mga Barangay’s Constitution and By-laws
designates the following powers and duties to the local chapter’s board and its officers, to
wit:

d.) The Treasurer

1. xxx
2. To collect and receive fees, contributions, donations, money, materials and
all other resources accorded to the Liga Treasury, for which he/she issue
the corresponding official receipts;
3. xxx;
4. To render monthly report to the Board of Directors during monthly meetings
or whenever called upon by the Board to do so;
5. To submit to the President an audited annual financial statement duly
certified by him/her;
6. To certify the availability of funds whenever necessary;
7. To post bond for the faithful performance of duties; and

The above rules and regulations expressly dictate the duties, responsibilities &
accountabilities of the Treasurer of the League delineated by its own Constitutions and
By-laws, however, the same were not effectively exercised by the said officer, and hence
the following deficiencies and non-compliance as can be gleaned from the following:

 Authority to receive collections

Our inquiry disclosed that some of the collections of the Leagues, particularly those
pertaining to Registration Fees, were not being received by the Treasurer himself but

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 rather a staff under the DILG office and latter issued official receipts corresponding
thereto. His actuations were clearly unauthorized and encroaching the functions
assigned to the Liga Treasurer. There was no written appointment designating anyone
to receive the payment other than the treasurer.

 Treasurer’s bond not established

No records would show that the board set the amount of bond for the Liga’s treasurer
or that the treasurer himself caused the required steps to secure a bond.

In an inquiry, The Liga Treasurer responded that he did not know that he was also
required to be bonded too.

 Maintenance of reports of collections and accountable forms

The receivers of accountable forms issued receipts for collections but they ignored the
preparation, maintenance and submission of corresponding collection reports.

e. Maintainance of savings account with the New Rural Bank of San Leonardo –
Bongabon Branch

The State Audit Code expressly provides the indispensible requirement of Public officers
authorized to receive and collect moneys arising from taxes, revenues, or receipts of any
kind “to remit or deposit intact the full amounts so received and collected by them to the
treasury of the agency concerned and credited to the particular accounts to which the
said moneys belong.”(Sec 69. PD 1445)

Further, Section 129 of GAAM Vol. 1 prescribes that local treasurers shall maintain
depository accounts in the name of their respective local government units with banks,
preferably government-owned, located in or nearest to their respective areas of
jurisdiction.

Deposits to a qualified private bank may only be done if the nearest AGDB to the agency
concerned is inaccessible by ordinary means of transportation and transporting
/withdrawing the government funds to and from the said office is impractical or risky, but
still shall seek the approval of the Monetary Board as prescribed under Section 5(3) of
BSP Circular No. 110.

The Liga ng mga Barangay – Bongabon Chapter maintains savings account with the New
Rural Bank of San Leonardo – Bongabon Branch which is neither an Authorized
Government Depository Bank (AGDB) nor a qualified Government Financial Institutions
(GFIs). Such practice is a violation of Section 129 of GAAM Vol. 1.

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 Details of the account are as follows:

Account Name: Liga ng mga Barangay Bongabon Chapter

Account No. 51-00993-3
Account Type Savings Account

This practice of the League exposes to danger government funds in case of insolvency or
permanent closure of the bank. As a possible consequence, the accountable officers liable
thereof shall not be relieved from accountability for they have violated rules and
regulations.

Moreover, they maintain a savings account instead of a current account, thus payment of
disbursements were made in the form of cash which violates Section 172(b) of the
Government Accounting and Auditing Manual (GAAM) Volume 1 which prescribes that
all payments must be made by check. In certain cases when it may be very difficult,
impractical or impossible to make payments by check. In such a case, payments may be
made by the disbursing officer in the form of cash through cash advances.

The Liga Chapter President however, explained that the account was created on April
2014, which then had no government banks within the locality or its nearest town.

1.6 Considering that funds of the Liga are all sourced from annual dues and others payments
made by its member barangays, it is but proper to put a high regard on how funds are
managed and spent. Thus, the State Audit Code specifically provides the accountability lies
with the Head of the Agency under its Section 2. Declaration of Policy, to wit:

“It is the declared policy of the State that all resources of the government shall be
managed, expended or utilized in accordance with law and regulations, and
safeguarded against loss or wastage through illegal or improper disposition, with
a view to ensuring efficiency, economy and effectiveness in the operations of
government. The responsibility to take care that such policy is faithfully adhered
to rests directly with the chief or head of the government agency concerned.”

The foregoing lapses may become the reason as well as an opportunity to public officers to
commit fraud and negligence and ultimately may result in loss or wastage through illegal or
improper disposition of government fund, thereby prejudicing the interest of the government
and the league.

1.7 With the observations noted above we recommend that:

a. The Liga ng mga Barangay President refrain from assessing its members
barangays and collecting annual membership dues that are more that the
authorized amount.

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 b. The Liga ng mga Barangay President abstain from the cashiering functions and
let the appointed Treasurer to perform her duties and responsibilities whch
include the (i) the issuance of official receipts for all collections and reporting of
accountability for funds and accountable forms; (ii) maintenance of banks
accounts for Liga’s monies; and (iii) the accounting and reporting of funds
disbursements or expenditures.

c. The Liga President and the Treasurer safekeep and maintain the Liga’s
accountable forms and records in their possession to the exclusion of other
offices including the local DILG which may not be held liable in case of loss or
wastage of Liga’s funds.

d. The Liga Treasurer adhere strictly on the preparation of records and reports
relevant to the status, condition, and operations of the Liga including the
accountability of accountable forms; and determine the amount of bond which
would be the basis in procuring Treasurer’s insurance.

e. Transfer of funds to an authorized government depository bank in the name of

the League to protect government funds as required under Section 129 of
GAAM Vol. 1, while all payments must be made by check in compliance with
Section 172(b) of the same Manual.

May we have your comments on the foregoing observation within fifteen (15) calendar
days from receipt hereof.

EVELYN S. MANANGKIL
Audit Team Leader

ATTY. ANTONIO F. MARZAN

OIC-Supervising Auditor

PROOF OF SERVICE OF COPIES OF AOM

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 Received by
Name Position/Office Date
(Signature )
1. Michael Sarmiento LnB, President
2. Nelson Morales LnB, Treasurer