BY GEROME DALIPE IV
ILOILO City – The city government has been flagged by the Commission on Audit (COA) for failing to remit approximately P27.689 million in withheld taxes to the Bureau of Internal Revenue (BIR) by the end of the year.
The non-remittance is attributed to an ongoing reconciliation process between the amounts withheld and those remitted.
In its annual audit report, COA pointed out that this failure to remit taxes did not comply with Section 251 of Republic Act No. 8424, also known as the Tax Reform Act of 1997.
The auditors explained the city’s non-compliance has deprived the National Government of resources that could have been utilized for the timely implementation of public projects.
Section 251 of the Tax Reform Act specifies that any individual or entity required to withhold, account for, and remit taxes but who fails to do so shall face penalties.
These penalties include a fine equivalent to the total amount of tax not withheld, accounted for, or remitted, in addition to other legal consequences.
A review of the General Ledgers (GLs) as of Dec. 31, 2023, revealed a total unremitted balance of P27.689 million in the due to BIR account across all funds.
This balance included taxes withheld from the salaries of City Hall employees and payments to contractors and suppliers.
The GLs showed that by January 31, 2024, a total of P19.024 million had been remitted to the BIR, leaving an outstanding balance of P8.665 million. The remaining balance was attributed to mispostings of transactions from prior years.
As of the remaining balance of P8.665 million, the city accountant confirmed that an additional P1.619 million was remitted in February 2024, reducing the outstanding amount. She also clarified that the unremitted balance primarily consists of the current year’s withheld taxes.
Further examination of the schedule of subsidiary ledger balances as of Dec. 31, 2023, revealed that an unreconciled amount, which has been present in the books since 2006, remained unadjusted at year-end.
The delay or non-remittance of the taxes withheld to the BIR has led to an understatement of the National Government’s income, depriving it of funds that could have been utilized for the timely implementation of public projects.
The auditors noted the delay undermines the efficiency of government operations and potentially delays essential services and initiatives for the general public.
Additionally, the presence of unreconciled balances in the subsidiary ledgers of the due to BIR account points to errors in transaction recording, raising concerns about the accuracy of the affected accounts in the city government’s financial statements.
Audit Observation Memorandum No. 2024-013, dated March 22, 2024, was issued to address the audit finding regarding the unremitted taxes and unreconciled balances in the due to BIR account.
In response to the audit, the city accountant explained that the accounting office had recently completed the migration of data from eNGAS version 1 to eNGAS version 2.
Due to the heavy workload involved in meeting the year-end submission deadlines for the financial reports, the review and reconciliation process of the accounts was impacted.
Regarding the unreconciled balances, the city accountant noted that these accounts had been established long before the implementation of the New Government Accounting System (NGAS).
She further stated that a request to write off these accounts would be pursued once the necessary supporting documentation is gathered and completed.
In response to the audit findings, the COA also recommended to the city accountant to work back and trace the source documents.
The auditors said the city accountant should trace the source documents to determine and identify the unremitted amount in the Due to BIR account.
Once the unremitted amount is identified and reconciled, the auditors said that immediate action should be taken to remit or adjust the balance accordingly.
The auditors also directed the city accountant to continuously review and trace back the transactions related to the unreconciled Subsidiary Ledger balances.
Necessary adjustments should be made to ensure that the correct balance of the due to BIR account is reflected in the financial statements, the auditors noted.
The auditors also said city accountant must follow the COA guidelines when writing off unreconciled amounts, ensuring that the process is done appropriately and in a manner that results in a correct and reliable balance of the due to BIR account./PN
