The local government of Davao City "inappropriately charged" P6.4 million against the 20 percent Development Fund (DF) for 2022, the Commission on Audit (COA) said in its compliance audit report.

The DF "is a required allocation of the LGUs (local government units) out of their respective annual Internal Revenue Allotment (IRA)" for priority development projects.

In it report, COA highlighted the highlighted the Department of Budget and Management - Department of Finance - Department of the Interior and Local Government (DBM-DOF-DILG) Joint Memorandum Circular No. 1 dated Nov. 4, 2020 which revised the guidelines and policies on the utilization of the 20 percent DF to enable LGUs to better address the constantly evolving development needs of their respective constituents.

COA said the expenditures charged against the 20 percent DF of Davao City pertained to development projects, except for "immaterial" amounts of expenditures, which are administrative in nature.

"Expenditures totaling P6.454 million were inappropriately charged against the 20 percent DF not in accordance with the guidelines set forth under DBM-DOF-DILG Joint Memorandum Circular No. 1, thereby defeating the purpose for which the fund has been established and the optimal utilization of the fund was not achieved," it said. 

It pointed out that in the program "Honoring Centenarians in the City of Davao," P125,000 worth of Representation Expenses paid to Grand Menseng Hotel was charged to the DF for food and catering services for the activity honoring the centenarians in Davao City.

It said that P83,000 was charged for Supplies and Materials Expenses paid to GMZ Printing Services, while P4,285 and P3,200,000 were charged for Representation Expenses and Other Maintenance and Operating Expenses paid to Marlisa A. Gallo and Marres D. Garol, respectively. The P3,200,000 was for the financial assistance given to the "First Centenarian Award in Davao City" for the month of October, it also said.

For the "Sports Development Program," Davao City charged P1,528,000 for prizes paid to Cindy A. Cruz and another P346,500 was charged for prizes paid to Agnes E. Gulanes, COA said. 

The city also charged to DF P110,760 for Office Supplies and Materials Inventory paid to Davao Knights Tailoring; P802,964 for Rent Expense Donations paid to Cindy A. Cruz; P51,328 for Office Supplies and Materials  paid to Oyet Arts and Crafts Manufacturing; P128,000 for Rent Expense paid to the City Treasurer's Office; five separate transactions of P1,600 for Other Maintenance and Operating Expenses paid to five different individuals; P9,850.58 for Office Supplies and Materials Expenses paid to Sharon R. Cuenca; and P56,700 for Rent Expenses paid to Smash 'N Drop Co., it added.

COA noted that when its audit team asked the City Budget Office (CBO) and City Accountant Office (CAO) why these were inappropriately charged to the DF, they explained that there was a "misinterpretation" of the provision, since they believed that the said expenditures were allowed.

"As a result, the purpose for which the fund has been established was defeated, and the optimal utilization of the fund was not achieved," COA stressed. 

"Had the management properly identified the specific projects and carefully evaluated the corresponding expenditure items and ensured that these are allowed to be charged against the 20 percent DF, the foregoing ineligible disbursements could have been avoided and said fund could have been used to finance the other priority projects of the city government of Davao," it pointed out. 

In its report, COA recommended that Davao City stop charging ineligible expenditures against the 20 percent DF, and direct its CBO to review carefully the expenditure items included in the proposed programs budgeted under the 20 percent DF to prevent the disbursement of disallowable items. 

At the same time, it recommended that the Davao City's City Planning Development Office to review all its plans and programs to ensure that what is planned and programmed is in compliance with the mandated use of DF.