By Joseph B.A. Marzan
Unliquidated damages and cash advances as well as unremitted taxes from the Jalaur River Multipurpose Project II (JRMP-II) and the National Irrigation Administration-Region 6 (NIA-6) were flagged by the Commission on Audit (COA) in the 2020 annual audit report on the agency.
According to the audit report released on August 13, 2021, JRMP II terminated two projects worth P82.33 million, but no liquidated damages (LD) were imposed for the delays caused by these terminations. The contractors were also neither suspended nor blacklisted.
The exact description and nature of these expired projects, however, were not mentioned in the audit reports.
Annex E of the Revised Implementing Rules and Regulations of Republic Act No. 9184 (Government Procurement Reform Act) states that liquidated damages shall be imposed upon the contractor when the contract duration expires, including extensions granted, and they refuse or fail to satisfactorily complete the work.
Liquidated damage is equal to at least one-tenth (1/10) of 1 percent of the cost of the unperformed portion of the works for every day of delay.
The COA said in its report that the damages suffered by the JRMP II, among other projects by the NIA, on the delay or non-completion of the contracts or projects within the timelines, might not be recovered due to the non-imposition of LDs and non-forfeiture of performance securities against the contractors.
They added that this was “an indication of laxity in enforcing the stipulations specified in the contracts to the disadvantage of the government.”
COA made the following recommendations:
– Require the Accounting Divisions or Sections of the Regional Office (RO) to immediately impose liquidated damages to contractors that fail to complete the works within the specified contract time, ensure that payments for infrastructure projects are duly supported with complete documentation, and strictly implement the withholding of 10 percent retention money from the payments of infrastructure projects pursuant to the Government Procurement Policy Board (GPPB) Manual of Procedures for the Procurement of Infrastructure Projects, Volume 3;
– Consider rescinding or terminating the contracts and forfeit the contractor’s performance security for projects with negative slippages of more than 15 percent resulting from contractor’s fault or negligence and initiate the immediate take over process of the terminated projects to facilitate its completion;
– File appropriate charges against erring/defaulting contractors; and
– Require the contractors to regularly submit progress billings and status of work accomplishments as allowed under the contract.
The COA noted that the JRMP II management did not have any other comments but merely “agreed” to their recommendations.
UNLIQUIDATED CASH ADVANCES
COA also found unliquidated cash advances (CA) in JRMP-II as of the end of Calendar Year (CY) 2020, which were granted for specific purposes not elaborated in the audit report.
Unliquidated CAs of NIA’s regional and project offices totaled to P7.117 million as of December 31, 2020, which the COA said “exposed funds to possible misuse”.
The JRMP-II’s unliquidated CA decreased to P425,173 (2020) from P1,624,081 (2019), while the regional office’s unliquidated CA was at P13,254 (2020), also down from P1,353,880 (2019).
But the audit agency noted that NIA Region 6’s outstanding balance has been “for more than 3 years” as of CY 2019. The regional office failed to liquidate P316,555 worth in CAs, with delays ranging from 20 to 114 days.
The unliquidated CAs, state auditors said, were contrary to Section 14 of Executive Order (EO) No. 298 series of 2004, COA Circular Nos. 2012-004 and 97-002.
Section 14 of EO No. 298 provided that every official or employee shall render an account of the cash advance received by him in accordance with the applicable rules and regulations within 60 days after returning to the country (in the case of official travel abroad) or within 30 days of returning to their permanent official station (in the case of official local travel).
Item 2.0 of COA Circular No. 2012-004 states that a cash advance is settled and liquidated either by:
– Returning the money advanced if unspent; or
– Presenting regularly accomplished vouchers with satisfactory details of the items paid for, in accordance with the purpose of the cash advance, and also supported by proper receipts and other evidence of payment, subject to the results of the post-audit done by the concerned auditor.
Items 4.1.3, 5.8 and 5.13 of COA Circular No. 97-002 dated February 10, 1997 on the Guidelines in the granting, utilization and liquidation of cash advances, state that:
– A cash advance shall be reported as soon as it has served its purpose;
– All cash advances shall be fully liquidated at the end of each year. The Accountable Officer (AO) shall refund any unspent balance (except for petty cash funds) to the Cashier or Collecting Officer who issues the official receipt.
– Failure of the AO to liquidate the cash advance within the prescribed period shall constitute a valid cause to withhold their salary and impose other sanctions as provided by the law.
The COA recommended the concerned ROs’ Accounting Divisions or Sections to:
– Direct and remind AOs to submit their liquidation reports within the prescribed period and refund excess of their CAs in a timely manner, otherwise enforce collection through deduction from the AOs’ payrolls and from other benefits;
– Send demand letters to the officers and employees concerned who have long outstanding CAs, to support requests for write-off of accounts, if warranted; and
– Strictly adhere to the rules and regulations on the liquidation of CAs.
In its Management Comment, the NIA stated that a total of P2.730 million had already been liquidated by the concerned AOs but did not provide any breakdowns of the liquidations per regional or project offices. Demand letters have already been sent to AOs with unliquidated CAs.
They also agreed with the recommendation to strictly observe the timely liquidation of the CAs.
Both JRMP II and NIA-6 were also tagged by COA for unremitted balances to the Bureau of Internal Revenue (BIR) as of December 31, 2020.
The audit report stated that NIA-6 failed to remit up to P1.15 million in withheld taxes, while the JRMP II also failed to remit P265,941, in withheld taxes, based on its remittances in 2020 and in January 2021.
NIA-6 had withholding taxes of P71.65 million but remitted only P70.50 million for 2020, consisting of P69.76 million (2020) and P735,746 (January 2021).
The JRMP II, meanwhile, remitted P6.25 million in 2020 out of P6.52 million in taxes withheld, and did not remit in January 2021.
These constitute a total of P210.732 million of total unremitted taxes by NIA regional and project offices across the country. The COA did note that there was partial compliance by the NIA.
The COA also observed that majority of the unremitted balances pertain to transactions from previous years that were not aged, and details of remittance due dates and composition of the items such as Expanded Withholding Taxes, Franchise Tax, Final Tax, Withholding Tax, among others, were not disclosed.
The unremitted withholding taxes ran contrary to Section 272 of the Internal Revenue Code of 1997, which mandated the government to deduct, withhold, and remit any internal revenue tax, as well as Section 2.81 of Revenue Regulation No. 2-98, as amended, which gave responsibility to employers in withholding and remitting the correct amount of tax.
The COA said that the non-remittance of these taxes withheld within the prescribed period “deprived the government of additional income and exposed the same income to risks of misappropriation or unauthorized use”.
The audit agency reiterated their previous year’s recommendations that the NIA should direct offices concerned to continue analyzing and reconciling the composition of the unremitted taxes for appropriate adjustments and immediate remittance to the BIR within the prescribed period as provided by regulations to avoid incurring interests, penalties, and charges.
They further recommended that the NIA should identify the personnel who incurred or caused the delays and late remittances of the taxes withheld, and direct them to refund the amount paid to the BIR for any possible interests, penalties, and charges.
The NIA central office commented that some regional offices already remitted their dues to the BIR while others are still in the process of reconciling previous years’ transactions. They also assured that all taxes withheld in the current year will be remitted to the BIR, and committed that all necessary adjustments will be implemented.