An audit report has revealed that the City Government of Tagbilaran failed to properly contract intermediaries for electronic collections of government transactions, potentially exposing the city to financial losses.
The Commission on Audit (COA) found that e-collections for government transactions with intermediaries were not contracted in compliance with Republic Act No. 9184 and COA Circular No. 2021-014.
The oversight means intermediaries were not required to post bond, leaving the city government vulnerable to potential losses if collections are not deposited in time.
According to the audit report, Section 5.1.2 of the COA circular requires contracting intermediaries under a Collect-Aggregate-Remit system to comply with RA 9184.
COA said intermediaries should post a bond to cover any amounts collected in case of failure to deposit within the prescribed period.
The city has been adapting to modern changes brought on by the COVID-19 pandemic, embracing digital transformation in government services.
Several laws were enacted to support this shift, including the Ease of Doing Business Act of 2018 and the National Payment System Act.
In response to these changes, Tagbilaran acknowledged the need for reliable payment systems.
The city government, under the administration of Mayor Jane Yap (wife of former City Mayor Baba Yap), recognized the necessity of having a Merchant Account from payment gateway providers complying with regulations set by the Bangko Sentral ng Pilipinas.
Two payment solution providers, PAYMAYA PHILIPPINES INC. and G-XCHANGE, INC., were identified as leading Payment Solution Providers in the market.
Both are registered with the BSP as licensed remittance agents and e-money issuers, offering services such as electronic money issuance, remittance, and mobile payment solutions.
To further modernize its financial transactions, Tagbilaran City passed Ordinance No. C-250 in 2016, establishing the use of electronic payment systems.
The move aims to provide more efficient and effective payment and collection services for residents.
In the actual implementation, the city government signed a Memorandum of Agreement with G-Xchange, Inc. (GCash) on September 7, 2021. The agreement paves the way for an electronic payment portal, enhancing convenience for taxpayers and streamlining business transactions.
Despite these progressive steps, the COA report uncovered a critical oversight in the contracting process.
The failure to properly contract intermediaries and require bonds poses a potential risk to the city’s finances, COA said.
The situation could leave the government exposed if intermediaries fail to deposit collections within the prescribed timeframe, COA pointed out.
The city government, under the administration of Mayor Jane Yap, has not yet issued a public response to the audit findings.
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