TACLOBAN CITY — The Commission on Audit flagged the placement of ₱85.8 million in education and trust funds into time deposits, saying the city government failed to secure prior Sangguniang Panlungsod approval and to adequately establish that the funds were available for investment.

The amount consisted of ₱11 million from accumulated, unexpended Special Education Fund (SEF) appropriations and ₱74.8 million from Trust Funds, according to COA’s 2025 Annual Audit Report.

While city officials explained that the placements were intended to earn higher interest, auditors emphasized that timely implementation of public programs takes precedence over investment earnings.

What the Special Education Fund is meant to do

The Special Education Fund is a dedicated source of local funding that supplements the needs of public schools. It comes from an additional one-percent tax on the assessed value of real property, separate from the basic real property tax. Cities retain their SEF collections for local education needs.

Under the Local Government Code, the fund supports public school operations and maintenance; construction and repair of school buildings; facilities and equipment; educational research; books and periodicals; and sports development.

Despite its name, the SEF is not exclusively for special education programs or learners with disabilities. Its purpose covers broader public education needs, subject to applicable laws and spending guidelines.

How the education budget is prepared

The SEF has its own annual budget, prepared through the Local School Board. In a city, the mayor and the city schools superintendent serve as co-chairpersons. Its membership includes representatives from the city council, treasury, parents, teachers, non-teaching personnel, and the youth sector.

Under the Local Government Code, the schools superintendent prepares the proposed school board budget, supported by programs, projects, and activities for the coming fiscal year. Approval requires the affirmative vote of a majority of all board members.

The process should connect identified school needs with available resources: determine priorities, establish available funding, cost the proposed activities, approve the budget, and monitor implementation.

Approval of the SEF budget by the Local School Board is distinct from the prior Sangguniang Panlungsod authority that COA said was required for the time-deposit placements.

Why the unused balances matter

In Tacloban’s case, COA found a gap in that planning process: prior years’ unexpended SEF balances were not considered when preparing the Income and Expenditure Estimates.

This meant accumulated resources were not incorporated into decisions on available appropriations. Instead, ₱11 million from those balances was placed in time deposits.

The finding makes the Local School Board’s planning and oversight central to the accountability issue. The question is whether available education resources were properly assessed against school needs and programmed for timely use.

An unspent balance does not automatically mean that the entire amount can be used to finance new activities. Existing obligations and ongoing projects must first be reconciled to avoid double allocation of funds.

For parents, teachers, and learners, the practical question is: What portion of the accumulated balance remains available, which school needs will it address, and when will the benefits reach classrooms?

Education funds accumulated outside spending plans

COA traced the ₱11 million SEF placement to unused appropriations from previous years that had accumulated over time.

Auditors found that the Local School Board did not consider these prior-year balances when preparing its Income and Expenditure Estimates. Consequently, unused funds continued to accumulate without being reprogrammed and were instead placed in time deposits.

The audit also observed that SEF spending largely supported maintenance and operating expenses, including subsidies, supplies, and security services, with limited investment in school infrastructure and facilities.

The finding raises an accountability question for education planning: How will accumulated funds be incorporated into budgets that address public school needs?

The audit observation does not identify any specific classroom repairs, facilities, or purchases that were delayed specifically because of the placements.

Trust funds carry specific obligations

The ₱74.8 million Trust Fund placement involved eight time-deposit accounts. COA stressed that trust funds are received for specific programs, projects, or activities, usually with defined implementation timelines.

Having money in the bank does not automatically establish that it is available for investment.

Auditors noted delays in the utilization of entrusted funds and said the city had not sufficiently verified that the balances exceeded normal operating requirements.

The observation does not identify the specific programs or funding sources that comprise the ₱74.8 million. A detailed accounting remains necessary to establish which obligations were attached to these deposits and whether implementation schedules were affected.

Higher interest was the city’s explanation

Management told auditors that time deposits generated higher interest than regular current accounts and that the earnings could support future projects.

COA responded that government programs should not depend on earnings from temporary financial placements. Meeting implementation schedules and addressing the community’s educational, social, and economic needs should take priority.

Most of the deposits had 30-day terms, while ₱10 million of the SEF was placed in an 180-day deposit.

Auditors warned that the placements could restrict immediate access to funds for programmed activities, potentially contributing to delays, rising project costs, or eventual non-implementation.

These were risks identified by COA; the observation did not quantify actual financial losses attributable to the deposits.

Officials acknowledged lapses

According to the audit report, management acknowledged that the placements lacked prior council approval and proper validation that the funds were idle and unrestricted.

The Acting City Treasurer committed to terminating existing deposits upon maturity, to stop similar placements without authority, and to secure the required approval for future investments.

The City Accountant committed to requiring certifications of fund availability and Sanggunian resolutions as supporting documents. The Local School Board also pledged stronger coordination in planning and prioritizing the use of SEF.

These commitments do not, by themselves, establish that corrective action has been completed.

For public accountability, the next questions concern implementation: Were the deposits terminated? Were unused education balances incorporated into spending plans? And were the entrusted funds delivered to their intended programs on time?

The audit finding does not establish that the ₱85.8 million was missing or stolen. It documents failures in authorization, fund assessment, and planning involving resources intended to support public services.

Source: COA 2025 Annual Audit Report on Tacloban City, Observation 3, printed pages 104–107. Balances are as of December 31, 2025; subsequent corrective actions require verification.