Ordinances that re-align scholarship funds to loan repayments

The City Council has approved the request to re-align a portion of scholarship savings to pay the loan interest for this soon-to-rise Lipa Public Market Parking Building [photo by Marlon Luistro]

The City Council has approved the request to re-align a portion of scholarship savings to pay the loan interest for this soon-to-rise Lipa Public Market Parking Building [photo by Marlon Luistro]

LIPA CITY—When funds for loan repayments are drying up, there’s a scholarship fund to save the day.

A recently-approved ordinance allowed the realignment of some P769,422.54 worth of savings from the city government’s scholarships funds to repay interest to a loan for the construction of the Lipa Public Market Parking Building.

Appropriations committee chairman Councilor Virgilio Macasaet, Jr. said Ordinance 2014-21 was “necessary” to re-align the savings from the scholarship program in order to repay the four month interest for a P50 million loan for the said building, covering the period September to December 2014.

Philippine Veterans Bank released the said loan to the city last September, and payment for interest accruements already begins.

The P50 million was part of the total P300 million which the city borrowed last year to finance the said parking building project. The P300 million loan is payable in 10 years, with a 12-month grace period on principal.

Those who voted to approve the ordinance were Councilors Mark Aries Luancing, Joel Pua, Pacita Leviste, Donato Linatoc, Nonato Monfero and Macasaet. Voting against it were opposition councilors Maria Concepcion Hernandez–Beloso, Nilo Catipon and Bibong Mendoza.

 

History of re-alignments

The ordinance marks the second time that the city council has re-aligned scholarship funds for other purposes.

Less than a month after approving Ordinance 2014-21 last Oct. 20, the council approved Ordinance No. 2014-16 last Sept. 29 that amended an existing ordinance no. 2014-05. Ordinance 2014-16 allots P3,324,625.88 from scholarship funds that are payable under mandatory and statutory obligations for the city government to repay the real property tax refund of Littlefuse Philippines, Inc.

Earlier, a 2013 Commission on Audit report divulged that the city government’s electricity, water and tuition fee expense amounted to P23.06 million that year.

This was the second time that the city council has re-aligned scholarship funds for other purposes.

On Sept. 29, the council approved Ordinance No. 2014-16, which amends an existing ordinance and allots P3,324,625.88 from scholarship payable under mandatory and statutory obligations to pay the real property tax refund of Littlefuse Philippines, Inc.

Earlier, a 2013 Commission on Audit report published in its website divulged that the city government’s tuition fee expenses with different colleges through the MAS (Meynardo A. Sabili) College Scholarship Program, as well as electricity and water expenses, “were not recognized as accounts payable.”

The 2013 expense totaling P23,062,848.41 was not recognized as “liability,” the 2013 COA report added, “due to (the) lack of appropriation resulting from unexpected power rate hike and increase in water consumption during the last month of the year.”

But an earlier audit report for 2012 on the city government’s finances showed “unrecorded obligations” of electricity, water and tuition fees with different colleges totaling P120,738,420.00, where P27,470,703.23 pertains to CY 2012 and P93,267,724.77 were prior years’, for lack of appropriation.

COA then verified the city government’s Status of Appropriations, Allotments, Obligations and Balances (SAAOB) as of December 31, 2013, finding out that electricity expenses had total annual appropriations of P20 million, water expenses of P2.5 million and the MAS College Scholarship Program P67 million.

But COA’s further verification showed electricity and water “had been short of appropriation as of end of October 2013 while the scholarship program was as of December 2013.”

“No reason was given on the unobligated tuition fees. We noted, however, that there was no set limit on the number of students/scholars to be accepted / added per year,” COA wrote.

Lipa City government’s accounts payable of P34,658,016.30 did not include prior years’ obligations of P95,640,282.89 and current year’s expense on electricity of P7,656,068.48, water expense of P520,424.75 and tuition fees with different colleges under the MAS Scholarship Program of P14,886,355.18 totaling P118,703,131.30.

COA found out from city government records showed that there were realignments of funds totaling P28,511.500 using the line item on maintenance and other operating expenditures (MOOE). “However, electricity, water and MAS scholarship program were not given priority in the allocation thereof. Thus, the continuous failure of the City Government of Lipa to provide sufficient appropriation thereof resulted in the understatement/overstatement of liability/equity accounts,” COA wrote in its report.

COA then recommended that the city government of Lipa “give priority in the mandatory obligations such as electricity and water” and “set (a) limit on the number of scholars to be accepted during the year, taking into consideration the available funds/appropriation for the MAS program, and the cost of the tuition fees and allowances of the existing scholars.”

After hearing these observations at an exit conference with COA auditors, Sabili instructed Budget Officer Elvie Lingao “see to it that there should be enough appropriations in succeeding budgets for electricity, power and MAS scholarship program.” And in case of short appropriation due to unforeseen events, providing enough appropriations “will be given priority in the supplemental or re-alignment of funds,” COA’s report wrote.

Debates

Ordinance 2014-21 was approved after hours of debate in which opposition councilors questioned the practicality of re-aligning the budget from the scholarship progam’s savings just to pay the loan interest.

Why get from the scholarship fund “when we have many other sources of fund to pay interest for the P300 million loan,” Catipon asked.

Opposition councilors also sought clarifications as to the city government’s loan terms with the bank, the payment schedule and the amount of interest to be paid.

Meanwhile, Mendoza raised concerns as to the schedule of payment for the loan and the total amount of interest to be paid based on the city’s loan terms with the bank.

There was also confusion whether the building contractor would be paid in full only after the project was completed or the city government would already pay them with P50 million and the remaining P250 million will be released later in tranches.

Mendoza likewise asked Sanggunian Secretary Micah Maralit to request copies of documents from the Philippine Veterans Bank for them to know the specific details on the parking building loan and the schedule of payment.

“We may not know they will just request from us, we will again pay interest. We don’t even know how much money is being released and how much is being paid to the contractor,” the councilor said.

“Like the case right now when the chairman of the appropriation (committee) told that too many people are wondering why (the government) will already pay interest when (the building) is not yet finished,” he added.

Macasaet meanwhile clarified that the city government will only pay interest for the P50 million loan that was released in September and not the whole P300 million loan.

The loan’s annual interest rate could reach up to 7.5 percent and Macasaet said that payment to the building contractor will be in a form of “progress billing.”

The building’s already “20 percent finished,” Macasaet said.

It was also learned that the city will be paying a monthly interest of about P188,000 for the P300 million loan.

Macasaet was assured by City Administrator Leo Latido that the city “still has enough or excess funds” to pay its existing loan repayment obligations for the year 2014.

But the city is also scheduled to pay for the scholarships next year, and the forthcoming approval of the city’s annual investment plan—or the city budget for the calendar year—will reflect those amounts to be paid..

Based on the 2014 annual budget, the city government had to pay mandatory obligations worth P8,797,182.03 for the construction of the Lipa Public Market. Other mandatory obligations include separate loans of P17.15 million, P5.85 million and P27 million for the Ospital ng Lipa’s construction and hospital equipment.

 

About Jeremaiah Opiniano