COA to Toledo City: End contract with hotel management

CEBU, Philippines - The management of a hotel in Toledo City has failed to pay the city government the monthly rental and the monthly share on gross revenue totaling to P1.8 million, excluding the eight percent share on gross sales for 2013.

This prompted the Commission on Audit to ask the Toledo City government to terminate the Contract of Lease between the management of the hotel.

The city government of Toledo entered into a contract of lease with the management company in 2011, renting out the city-owned hotel.

In its 2013 audit report, COA also recommended the immediate collection of overdue rentals and the monthly share on gross revenue and other receivables such as but not limited to taxes, assessments, insurance premiums, reimbursements and other collectibles from the management so that the city could use the generated revenue for its planned projects, programs and activities.

The Local Finance Committee had already recommended to Mayor John Henry “Sonny” Osmeña that the contract be terminated and the operation of the hotel building be controlled by the city.

The lease shall cover the area of  6,000 square meters, more or less for a period of ten years starting with the monthly rent of P80,000 for the first year; P120,000 for the second year and successively increasing in the following years until the tenth year with a rent of P225,136.

The contract also provides for the monthly percentage of gross total revenue such as eight percent per month for first and second year, ten percent for the third up to the tenth year.

The contract states that “failure or non-payment of the hotel to remit on the agreed date the full amount representing fixed monthly rental payments and/or monthly shares on gross revenues and other payables such as but not limited to taxes, assessments, insurance premiums, reimbursements and other payables chargeable to the Exclusive Hotel shall be cause for automatic termination of this Contract of Lease.”

COA stressed that the same finding was noted in 2012 and the hotel failed to pay its monthly rental and monthly share on gross revenue totaling to P1.1 million.

The accountant stated in their reply to COA’s query that out of the P1,107,673.30 unpaid obligation by the hotel in 2012, the amount of P670,000.00 was paid in 2013 leaving an unpaid balance of P437,673.30.

On 2013 the amount of unpaid fixed monthly rental would total to P1,440,000.00 (P120,000.00/month x 12 months) while the amount of the share on gross revenue for the said year cannot be determined yet as the report on gross sales from January to December 2013 were not yet submitted by the hotel to the city. —/ATO (FREEMAN)