Manila City Hall virtually bankrupt, has more debts than cash — COA

MANILA, Philippines — The administration of Manila Mayor Alfredo Lim has dragged city hall in a deep financial hole, according to a Commission on Audit report, which claims that the local government unit has not enough cash to pay off its debts due to a bloated workforce.

In its latest report uploaded on its website recently, the COA said the Manila city government has unpaid debts of P3.553 billion or more than three times its cash holdings of P1.006 billion.

State auditors said that Manila’s payroll exceeded the mandatory spending limit of 45 per cent of the total annual income from regular sources realized in the next preceding fiscal year.

COA estimated that Manila city hall should have forked out only P2.458 billion in 2011 based on its P5.462-billion in income in 2010. But city leaders actually shelled out P3.424 billion in salaries and retirement benefits on top of the P260.95 million worth of  “financial assistance” granted to city officials and employees.  COA said these were erroneously recorded under  the maintenance and other operating expenses  account when they should have been classified under personal services.

Aside from its tax dues to the Bureau of Internal Revenue, COA said that city government was unable to remit the contributions collected from its employees to the Government Service Insurance System, Home Development Mutual Fund (Pag-IBIG) and the Philippine Health Insurance Corp (PhilHealth).

Manila’s unraveling finances have also led to delays in the turnover of  the revenue share of the city’s 896 barangay (villages) worth P511.391 million. “Hence, the delivery of basic services and implementation of the proposed development projects and programs for their constituents were hampered,” COA said.

Amid the weak cash position, the COA questioned the decision of city leaders to collect penalties, surcharges and interest on 6,126 delinquent tax payers, and give them P40.812 million in tax payment discounts without any legal basis, which further reduced the city revenues.

“Had the subject tax discounts been recovered, it could have been appropriated to finance other priority programs and projects of the City during the year. The City Treasurer gave the assurance that the subject tax discounts granted without legal basis shall be included in the computation of the business taxes, fees and charges due the concerned taxpayers in the succeeding year,” said the COA in its report.

Aside from a shaky balance sheet, the COA also questioned Manila’s accounting policies. It said an annual physical count of Manila’s property, plant and equipment yielded only an inventory worth P6.718 billion or P7.060 billion  of its supposed total asset holding with an acquisition cost of P13.778 billion. This includes the P2.814-billion purchase of land by the Manila city government.  The COA said the purchase has not been fully accounted for “because the corresponding titles to the said properties have not been transferred in the name of the City Government.”
In reaction, an official of the Manila City Hall said the latest COA report is yet to be reviewed by concerned departments, but he categorically denied not having remitted contributions collected from employees for their benefits.

“I still have to check with the treasurer,” Manila City Administrator Jay Marzan told the INQUIRER.net in a phone interview.

But as to the report that Manila’s payroll exceeded its mandatory spending limit, Marzan confirmed the information, but added that the city government has addressed the problem.

Without citing exact figures, Marzan said the Manila City Hall has let go of some of its employees since March or April this year, adding that the city hall remitted the contributions of all of its workers to the Government Service Insurance System, Home Development Mutual Fund (Pag-IBIG) and the Philippine Health Insurance Corp. (PhilHealth).

But the problem, Marzan said, is that the three agencies were slow in updating their records.

Particularly with GSIS, he said that some of their men have visited the GSIS office last year following observations that GSIS’ posting of contributions were “slow.”