COA raps Caloocan gov't over lack of contract, non-payment of lease by biz complex tenants

The Commission on Audit (COA) has taken the Caloocan City government to task over its supposed failure to collect P3.7 million in unpaid rentals and utilities from tenants of the city’s commercial complex and issue lease contracts to 17 business establishments operating in the area in 2015.

In its audit report, COA said the unpaid rentals and utilities of the complex’s tenants rose by 167 percent in a span of one year from P1.4 million in 2014 due to the local government’s failure to intensify collections of receivables from tenants and to strictly enforce the terms of the lease contract.

Records of payments of delinquent tenants also showed that the period of delay ranged from 60 to 360 days, and most of the time the payments were not made in full.

State auditors said that despite the delay in payment or non-payment of tenants in full, the complex administrators did not impose the corresponding penalties and surcharges.

The amount of penalties and surcharges that could be collected was pegged at approximately P86,727.65.

“Had the Complex Administration collected its outstanding receivables and imposed penalties/surcharges on the delayed payment of delinquent tenants, additional funds could have been raised that can be utilized in the maintenance and improvement of the Complex’s facilities,” COA said.

In its defense, the building administration said it has been “zealous” in collecting rentals or receivables from the tenants by issuing demand letters to delinquent tenants and seeking the Legal Office’s assistance to enforce the terms and conditions of the contracts, and if necessary, to file the appropriate legal action against them.

Aside from failing to collect rent payments, COA discovered that 17 tenants of the commercial complex did not have lease contracts.

“The only basis or authority of said tenants in occupying the leased premises is a certification issued by the Complex Officer-in-Charge awarding them designated stall spaces in the Complex, indicating the area covered and the corresponding amount of monthly rental,” the audit report read.

Unlike a duly executed lease contract, COA said the certification does not state the duration of the lease, the manner and designated time of payment, the rights and obligations of the city government and lessee, and other relevant and significant terms and conditions necessary to ensure that the interest of both parties are protected.

COA said the City General Services Officer (CGSO) explained that the concerned tenants had previous contracts with the city, but which has since expired.

While negotiation for the lease renewal is still under negotiation, the official said “several intervening events” occurred which led to the suspension of the process.

The CGSO, however, said the tenants “were made to understand that they are bound under the law to renew their contract on month to month basis pending execution of the renewal contract.”

For COA, the continued absence of lease contracts between the local government and the 17 tenants show “weak internal control” in protecting the city’s interest since it will be difficult to enforce verbal terms and conditions that both parties have agreed upon in case of violation or non-compliance by the lessee.

During the exit conference following the audit, COA said the CGSO vowed to demand from the tenants the timely payment of their rentals and utilities, as well as enforce the necessary penalties and surcharges after they complete the process of reconciling its records relative to the collection of the tenants’ rental and the penalties to be imposed for late payments.

The CGSO added that the administration has already executed renewal lease contracts, and will complete execution for the rest of the 17 tenants, and will consequently do the same for tenants with expired contracts in the future. —KBK, GMA News