CEBU CITY—Despite its “dwindling” resources, the Cebu City government spent more than what it could afford last year, resulting in a cash “overdraft” of close to P1 billion, according to the Commission on Audit (COA).
State auditors warned the city government against suits that may arise if it fails to settle its debts with creditors.
In a report dated April 30, Cymbeline Celia Chiong-Uy, state auditor IV, reminded Mayor Michael Rama of the need to “exercise prudence in the use of the [city’s] limited resources.”
“Stop the practice of incurring obligations without the corresponding cash backup to avoid penalties, surcharges and most of all legal implications in case the city is unable to meet its obligations,” said the report.
Not bankrupt
City Administrator Jose Marie Poblete said the report should not be used as basis to conclude that the city is bankrupt.
Poblete said city officials are ready to explain some expenses to correct the COA findings. He, however, admitted that the city needed to collect more taxes.
City treasurer’s office records showed that the city government has P1.023-billion cash on hand and in bank as of May 24. But only P403.9 million is listed under the item general fund.
The city’s general fund includes P165.3 million placed in a five-year time deposit at Philippine Veterans Bank and a P43-million deposit at Philippine Postal Bank, which was tied in a court case involving the city.
Last year, the city council approved a P5.2-billion budget and P426 million in supplemental appropriations.
But the COA report said the city overspent by P965.5 million, indicating that “trust collections were misapplied, adversely affecting cash flow.”
Profligate
Auditors said that the city’s cash balance of P1.06 billion as of Dec. 31, 2012, is not enough to settle debts worth P1.98 billion.
“Based on the above analysis, moneys due to the national government agencies, local government agencies and GOCCs (government-owned and -controlled corporations), particularly GSIS and other corporations for premiums, loan and amortization, etc., were not remitted on time,” said the COA report.
Its review of the city’s finances showed that “officers concerned failed to determine the capability of the city” to spend.
“There is an urgency for the city government to implement corrective measures to ensure adequacy of cash,” said the report.
Collect taxes
Auditors also asked Rama and city officials to monitor the city’s use of cash and refrain from using trust funds for other purposes.
The city government was also asked to “direct the enforcement of collection of taxes due to the city for it to be able to augment its dwindling resources.”
The report also asked the city to “design strategies to ensure that what is due to the city can be collected for it to be able to undertake its operations in normal condition.”
Uy told the city government to inform the COA of the corrective measures that have been taken within five days after receipt of the report.