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7/22/2019 DEPED COA2011 OBSERVATION RECOMMENDATION
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OBSERVATIONS AND RECOMMENDATIONS
A. FINANCIAL AND COMPLIANCE
Unremitted funds to the National Treasury
1. Unutilized Cash-NT/MDS, refunds of cash advances, fund transfers,
performance bond/bid security posted by contractors and sale of bid
documents in OSEC and four regions totaling P130,747,514.35 were notremitted to the National Treasury, of which P130,247,515.98 or 99.61% was
deposited in the Cash in Bank-LCCA and P499,998.37 or .39% was kept by
the Special Collecting Officer-Designate. This is in violation of DBM and
DepEd Joint Circular No. 2004-1 and pertinent provisions of the 2011 GAA
whereby the government was deprived of the much needed funds to support
priority programs and projects.
Section 4.6 of Joint Circular No. 2004-01 dated January 1, 2004 of theDBM and DepEd states, All existing Cash-in-Bank balances, net of outstanding
checks, shall be remitted to the Bureau of the Treasury (BTR) in accordance with
National Budget Circular (NBC) No. 488 dated May 22, 2003. A maximum of six(6) months from the date of the latest outstanding checks issued shall be allowed
after which the remaining Cash-in-Bank balances shall be closed
The General Provisions of RA No 10147 or the General AppropriationsAct for 2011 provide, among others:
Section 3 - All fees, charges, assessments, and other receipts
or revenues collected by departments, bureaus, offices oragencies in the exercise of their functions, xxx , shall be
deposited with the National Treasury and shall accrue to theGeneral Fund pursuant to Section 44, Chapter 5, Book VI of
EO No 292 and Section 65 of PD No 1445 xxx
Section 7 - Performance Bonds and deposits filed or postedbyprivatepersons or entities with agencies of the government
shall be depositedwith the National Treasury as trust receipts
under the name of the agency concerned in accordance withEO No 338, as implemented by COA-DBM-DOF Joint
Circular No. 1-97 dated January 2, 1997. xxx.
The Cash in Bank-LCCA disclosed unremitted/undeposited amounts to the
National Treasury by the Office of the Secretary (OSEC) and the Regional
Offices (ROs) consisting of accounts as shown in the Table 1.
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Table 1. - Summary of unremitted/undeposited collections/receipts
Name of Office Cash Balance Remarks
OSEC P 99,791,267.57 P79,380,729.30 (80%) pertains to refund of
excess performance enhancement incentivesfor CY 2010.
NCR-ROP 8,151,770.93 P4,573,931.33 (56%) pertains to excess
collection of registration / seminar fees.
NCR- DO
Caloocan City
1,872,746.19 P1,132,615.99 (60%) pertains to other
collections for the year 2010.
NCR- DO
Pasay City
14,514,679.38 represents transfer of funds from Cash-
National Treasury, MDS account to Cash in
Bank-LCCA.
RO V- DOMasbate 13,431.70 collections from canteen rental, petty cashfund and miscellaneous fees.
RO V- DO
Naga City
499,998.37 collections of performance bond.
RO IX- DO
Dapitan City
2,774,722.65 MOOE of the Division in CY 2009 and for the
Palarong Pambansa in CY 2011.
RO XIII- DO
Agusan del Sur
3,128,897.56 P2,195,033.59 (70%) pertains to receipts from
DepED RO, financial assistance from LGUs,
and registration fees.
P130,747,514.35
Management explained that said funds were intended to augment/defray
urgent/relevant expenses not covered by regular MOOE funds. Also, managementasserted that the unutilized Notices of Cash Allocations (NCAs) were deposited in
the current account to avoid lapsing and reversion to the National Treasury as
these NCAs were received towards end of the month and there are still unsettledobligations.
We recommended and Management of concerned Offices agreed to:
remit all unutilized/excess funds to the National Treasury;
stop the practice of depositing the collections received from any sources
and/or transferring unused balances of NCAs to the agencys current
account; and
implement a sound cash management system in strict adherence with the
above-mentioned rules and regulations.
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2. The unauthorized retention in the Cash in Bank-LCCA account for Payroll
Fund of the DepEd NCR ROP of savings from Personal Services (PS)
amounting to P171,618,718.24 to pay for the newly-hired teachers salaries
for FY 2012 is contrary to Section 3.9.1.2 of NBC No. 528. The delayed
remittance thereof to the National Treasury may have also affected the
efficient programming of the cash resources of the national government.
Section 3.9.1.2 of NBC No. 528 provides, Appropriations under FY2011 GAA, R.A. 10147 shall be available for release and obligation up to
December 31, 2012 with exception of PS which shall lapse at the end of 2011.
For CY 2011, the Division Offices (DOs) and Operating Units (OUs)remitted cash to the NCR-Regional Office Proper (ROP) for the salaries and
allowances of teachers, which the latter deposited to the its current accounts for
payroll fund since the payrolls are prepared and paid by the ROP.
Audit disclosed that the Cash-LCCA balance of the DepEd NCR ROP at
year-end includes savings from PS in the amount of P171,618,718.24 withexpired validity of appropriation and, therefore, not anymore allowable for
obligation in FY 2012. The Regional Accountant in NCR explained that the
amount was set aside to pay the newly-hired teachers salaries for FY 2012,
pending receipt of the Special Allotment Release Order (SARO) and NCArequested by the DOs and OUs in the total amount of P191,359,702.46 as of
February 2012.
The unauthorized retention of savings in the current accounts with expiredvalidity of appropriations is contrary to Section 3.9.1.2 of NBC No. 528, hence,
may affect the validity and regularity of the transactions funded out of this
account.Ourverification on the 2012 transactions of the ROP showed, however,
that the amount of P171,618,718.24 and the interests thereon totalingP1,992,689.27 from the 4th quarter of 2011 to 3 rd quarter of 2012 were already
remitted to the BTr as of October 31, 2012.
We recommended that Management stop the practice of retaining savings in
the Cash in BankLCCA, otherwise, this shall constitute neglect of duty and
shall be a ground for administrative disciplinary action, as stated in Section
127 of PD 1445, and ensure that excess funds or savings are remitted
promptly to the National Treasury for proper disposition.
Delayed /non-submission of Bank Reconciliation Statements (BRSs)
3. The accuracy of Cash in Bank-LCCA with an aggregate amount of
P2,796,446,605.29 in eleven offices could not be ascertained due to
delayed/non-submission of BRS, non-maintenance of the necessary
subsidiary ledgers for each bank account, and non-recording of reconciling
items, contrary to Sections 74 of PD 1445.
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Section 74 of PD No. 1445, otherwise known as the Government
Auditing Code of the Philippinesprovides that the head of agency shall see to it
that reconciliation is made between the balance shown in the reports of thedepositories and the balance found in the books of the agency.
Section 2.1.4 of the COA Circular No. 92-125A states that the accountingunits shall submit the original BRSs within 15 days after the end of the month to
the COA Resident Auditor.
The Cash in Bank - LCCA accounts of the following offices and their
balances are shown in Table 2:
Table 2. - Summary of Cash in Bank LCCA account balances
Name of Office Per Books
OSEC P1,118,881,796.50NCR-DO Caloocan City 1,872,746.19
RO I-ROP and DOs Urdaneta and Pangasinan I 104,578,977.65
RO II 216,869,852.69
RO III 6,807,232.59
RO IV A 62,623,757.10
RO V 540,526,446.97
RO VI 566,793,810.44
RO IX-ROP and DO Zamboanga del Norte 177,491,985.16
Total P2,796,446,605.29
For the OSEC alone, the bank balances are deposited in eleven banks, of
which the authority or basis for the opeining of bank accounts have not beenprovided. Interview with the Accounting Section revealed that there were no
information on the authority per their available records on file.
All the above balances were not reconciled with the balances presented inthe bank statements due to:
Delayed/non-preparation and submission of BRSs in OSEC, RO I-ROP
and DOs Urdaneta and Pangasinan I, ROs II, IV-A, V and VI, and RO IX-DO Zamboanga del Norte;
Failure to maintain/update subsidiary ledgers in OSEC, RO II, and RO IX-
DO Zamboanga del Norte;
Unrecorded deposits and cancelled checks in DO Caloocan City;
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Unrecorded book reconciling items and non and/or erroneous recording of
deposits in RO I; and
Long outstanding and unreconciled items in the BRS of RO III.
Interview with the concerned Accountants disclosed that bank statementswere not furnished promptly by the depository banks. Hence, the validity and
correctness of the above cash balances cannot be properly ascertained
We recommended that Management:
require the respective Accountants/Bookkeepers to prepare and submit
regularly and within the prescribed period the BRSs in compliance with
Section 2.1.4 of the COA Circular No. 92-125A;
cause the suspension of payment of salaries for failure on the part of the
officials concerned to submit the required reports pursuant to Section122 of PD 1445; and
coordinate closely with the depository banks by requesting them to
deliver promptly the monthly bank statements so that Accountants can
prepare the BRSs on time.
Outright utilization of collections and non recording of related expenses
4. The proceeds of collections from seminar and conference fees were utilized to
defray the related seminar/conference expenses of the CAR-DO Abra,
contrary to sound internal control system on cash. Furthermore, thetransaction was not recorded in the books of accounts resulting in the
overstatement of Cash-Collecting Officers and understatement of the related
expense accounts due to non-recording of expenses amounting to
P547,700.00.
Section 9 of the CY 2011 GAA also states, among others:
Departments, bureaus, offices or agencies which conduct
training programs in relation to their mandated functions are
authorized to collect seminar and conference fees xxx. The
proceeds xxx may be used for the conduct of seminars,
conferences and trainings, subject to pertinent budgeting,accounting and auditing rules and regulations: PROVIDED,
That any excess shall be deposited with the National Treasuryand shall accrue to the General Fund pursuant to Section 44,
Chapter 5, Book VI of E.O. No. 292: PROVIDED, FURTHER,
That upon the conclusion of the seminar or conference, theoffice authorized to conduct the same shall submit to the DBM
a report of the fees collected and of the expenses incurred.
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Sound internal control system over cash dictates that collections bepromptly and fully deposited in an authorized government depository bank and
disbursements properly accounted for.
Registration fees for trainings and seminars conducted by the CAR-DO
Abra in 2011 amounted to P401,000.00, of which P386,789.00 was immediately
utilized for expenses incurred during these trainings and seminars.
The Cash-Collecting Officers account has a balance of P548,288.12 in the
financial statement at year-end December 31, 2011. Post-audit of the Report of
Collections and Deposits (RCD) revealed that all collections were duly accountedfor and all cash in the custody of the Cashier were deposited, except the amount
of P547,700.00, which were expended for the seminars and trainings and were
not recorded in the books. This resulted in the overstatement of the Cash-Collecting Officers account and understatement of the related expense account/s.
The outright utilization of collections from trainings and seminars anddepositing only the excess after all expenses for these activities have been
accounted may result in possible mishandling of funds. Also, the failure to record
expenses incurred resulted in the overstatement of the Cash-Collecting Officer
account and understatement of expenses by P547,700.00.
We recommended that Management of DO Abra:
require the Accountant to record all collections and deposits in the books
of accounts promptly and prepare a Journal Entry Voucher (JEV) to
take up the adjusting entry, if necessary; and
henceforth, deposit intact to the agencys bank account all collections
from training and seminar fees upon collection, disburse funds through
check or cash advance, and deposit all excess collections to the National
Treasury.
The Cashier explained that training and seminar fees were used because of
the persistence of the Supervisor-Coordinators to immediately provide for thefood and materials needed during these trainings and seminars, but assured the
Audit Team that she will comply with the recommendation.
The Accountant of DO Abra also admitted that the non-recording of all
collections, deposits and disbursements of the Cashier, particularly during the
latter part of the previous year, was due to delayed submission of the RCDs. She,however, assured the immediate adjustment of the account.
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Non cancellation of stale checks
5. Checks issued to private lending and insurance institutions and various
teachers totalling P4,005,125.99 by the DepEd NCR and ROs XII and XIII
became stale but were neither cancelled nor reported in the List ofUnreleased Checks contrary to Section 52 of the MNGAS Volume I. This had
also deprived the employees of the benefits thereof.
Section 52 of the Manual on the New Government Accounting System(MNGAS), Volume I states the checks may be cancelled when they become stale.
The depository bank considers a check stale, if it has been outstanding for over
six months from the date of issue or as prescribed. A stale check shall be markedcancelled on its face and reported as follows:
Unclaimed stale checks which are still with the cashier shall
be cancelled and reported in the List of Unreleased Checks ascancelled.. The List of Unreleased Checks is attached to the
Report of Checks Issued (RCI).
Audit of the RCIs of the three ROs disclosed checks totaling
P4,005,125.99 issued during the year which became stale, as shown below.
Region Amount
NCR P1,235,304.53
XII 1,945,836.04
XIII 823,985.42
Total P 4,005,125.99
The reason, among others, for the stale checks is due to the failure of thePrivate Lending Institutions (PLIs) to pick-up the check representing monthly
collections of loan remittance and/or authorized deduction of employees and
teachers. Records showed that it took an average of two years for the PLIs torequest for replacement of staled checks. Further, the PLIs did not submit written
justification/request to replace the staled checks since 2007, hence the
accumulation of the amount.
In DepEd RO XII, the P1,945,836.04 consisted of 254 staled checks which
were issued in CY 2010 and early CY 2011. Said checks were neither cancelled
nor included in the List of Unreleased Checks attached to the RCI, contrary toSection 52 of the MNGAS Volume I.
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The Cashier explained that authorized representatives of the PLIs opted
not to pick up the checks because the cost of their transportation is higher than theamount of check involved, thus not worth the effort. Management further
explained that they cannot just delete these deductions in the payroll because there
is a MOA between the DepEd OSEC and the lending institutions on the grant ofautomatic payroll deduction for loans extended to DepEd teachers/personnel,
which provides, among others -
2. Roles and Responsibilities of the Lender
2.2 TheLender shall pick-up the monthly collections from
DepEd and correspondingly issue Official Receiptthereof. In case of failure to pick up the collection
checks within the period of six (6) months, the Lender
shall not impose any interest/penalty/surcharges against
the DepEd borrowers.
3 Responsibilities of the DepEd
3.3 The DepEd may replace stale remittance checks only
once for a particular check on the basis of written
justification from the Lender acceptable to DepEd.
However, it was noted that the MOA did not provide sanctions to Lender
in case they fail to pick-up the monthly collections from DepEd to prevent stalechecks.
The above deficiency may deprive the employees of the benefits due themand may entail the payment of additional interest for late payments.
On the other hand, the stale checks amounting to P823,985.42 of RO XIII,covering 1,006 pieces of checks issued on December 20, 2010, January 10, 2011
and March 7, 2011, covering refunds to teachers of the various DOs of DepEd
RO. Of this amount, only P59,384.50 or 6.72% were claimed by the payees while
the remaining P823,985.42 or 93.28% was unclaimed and not yet restored to thecash account as of December 31, 2011.
We recommended and Management of concerned ROs agreed to:
require the Cashier to cancel the staled checks and report the same in the
List of Unreleased Checks as cancelled;
require the Accountant to prepare the necessary JEV to take up thestaled checks in the books of accounts;
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make representation with DepEd OSECCO officials to revisit theprovisions of the MOA, specifically items 2 and 3 and possibly include the
provision that in case of failure of private insurance institutions to pick
up the checks, the insurance coverage and prospective benefits therefrom
shall not be adversely affected;
inform the teachers concerned of the termination of the loans andinsurance deductions until both parties have agreed on a mechanism for
the prompt collection of the checks;
confirm with SEC if the concerned PLIs are still active. If no longeractive or not eager to collect the remittance, study the possibility of
refunding the amount to the teachers and employees concerned to settle
the accountability and responsibility of DepED to its employees; and
in RO XIII, ensure that the list of payees/teachers with unclaimed checksis widely disseminated to all DOs and schools as a means of informing the
concerned payees.
Unliquidated Cash Advances (CAs)
6. Cash advances totaling P796,416,808.15 granted to officers and staff
remained outstanding for at least 30 days to more than ten years as of
December 31, 2011 and additional CAs were granted despite existing
unliquidated balances, thus, violating Section 89 of PD 1445, among others.
This resulted in the overstatement and understatement of cash advances and
affected expenditure accounts, respectively.
Section 89 of PD 1445 and Section 4.1.3 of COA Circular Nos. 97-002dated February 10, 1997, provides among others, that a CA shall be reported onand liquidated as soon as the purpose for which it was given has been served. No
additional CA shall be allowed to any official or employee unless the previous
CA given to him is first settled or an accounting thereof is made.
COA Circular No. 97-002 dated February 10, 1997 provides further:
a a No CA shall be given unless for a legally specific
a a The CA shall be used solely for the specific legal
purpose for which it was granted. Under no circumstance,
shall it be used for encashment of checks or for liquidationof a previous CA;
a a The Accountant shall obligate all CAs granted. Heshall see to it that CAs for a particular year are not used to
pay expenses of other years; and
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a a CA for official travel shall be liquidated within
thirty days after return to the permanent official station asprovided for in EO 248 as amended by EO 298 and COA
Circular 96-004.
Review of the reports and records of the different offices showed that thefollowing agencies had repeatedly violated the regulations on CAs and previous
deficiencies noted had not been rectified that resulted in the accumulation and/or
increase of long outstanding accounts in the books, which had amounted toP796,416,808.15as of December 31, 2011. The breakdown is shown in Table 3.
Table 3. - Summary of unliquidated cash advances
Office
Amount of Cash Advance (in million PhP)Nature/
Purpose30-90
days
91-365
days
Over 1 to
10 yearsTotal
RO IX-ROP, DOsZamboanga City, - del
Norte, - Sibugay, - del
Sur, & Dipolog City
263.724 115.250 378.973 Salaries & wages,MOOE, and time-
bound undertaking
OSEC 12.530 21.213 79.354 113.096 Special and travel
purposes
RO X-ROP, DOs Cag.
de Oro, Misamis Occ./
Oriental, Malaybalay,
Bukidnon, Gingoog,
Iligan, Ozamis, Tangub
No Aging 79.377 Not Specified
CAR-DOs Abra,
Apayao & Flora NHS,Baguio, Benguet,
Ifugao & NHS, Mt.
Province & NHS
37.960 14.303 52.264 Salaries and wages,
MOOE, travelallowances, various
trainings &
seminars and other
programs.
NCR-DOs QC, Pasay,
Caloocan, Taguig/
Pateros, Pasig/San
Juan, Marikina,
Muntinlupa and NHS
51.052 Trainings/seminars,
travels, internet,
payroll fund, SBM,
office supplies,
other activities/
programs.
RO XIII 6.159 6.349 27.513 40.022 Salaries & wages,SBM, travel &
other time-bound
activities
RO V 23.966 Salaries, benefits,
travel & training
expenses
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Office
Amount of Cash Advance (in million PhP)Nature/
Purpose30-90
days
91-365
days
Over 1 to
10 yearsTotal
RO I- DOs Ilocos
Norte, Laoag City, San
Carlos City,Pangasinan I
22.862 Not Specified
BALS 4.744 2.200 12.936 19.880 Training & travel
expenses
Bureau of Elementary
Education (BEE)
1.745 0.633 0.010 4.308 Official travel &
time- bound
undertakings
Bureau of Secondary
Education (BSE)
0.810 0.146 2.890 3.846 Official travel &
time-bound
undertakings
RO II 13.560 Supplies &materials
registration fees,
gas, cater services,
landscaping,
athletic equipment,
Palarong
Pambansa,
CAVRAA, travel
expenses, etc.
SHNC 3.542 Orientation
Seminar/Worksho
ps
OSEC-LCC 2.400 Special and travel
purposes
RO III 2.094 MOOE allocations
EDPITAF 1.673 Training & travel
expenses
NEAP 0.666 0.621 1.287 Not Specified
RO XII 1.245 Official travels
and time-bound
undertakings
RO IV A 0.044 0.110 0.238 0.392 Not specifiedRO VI 75.677 Salaries, wages,
other benefits and
travel expenses
Total 796.417
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The reasons, among others, for the recurring problem are the following:
AOs were granted multiple cash advances or allowed additional
advances even if previous ones were not yet settled;
Employees were allowed to retire or resign without first settling their
accountabilities; Processing and recording of liquidation documents in the books was
delayed;
Liquidation, refund, and adjustments were either not or erroneously
recorded;
Liquidation was not matched properly to the specific cash advance;
Subsidiary ledgers (SLs) were not accurately and completely
maintained;
Monitoring and enforcement of submission of reports not strictly
observed;
Misposting of liquidation and improper use of accounts, which
eventually resulted to negative balances of accounts;
Officials and employees opted to avail of the cash advances for fear
that the allocated amount will be reverted to the National Treasury;
thus, they could no longer make use of the amount; and,
Officers lacked the technical knowledge on the time table to liquidate
the cash advance.
The timely submission of liquidation reports is necessary so that expensescan be recognized during the year these were incurred in accordance with the
accounting principle of proper matching of cost against revenue. Likewise, the
receivable or asset account can be correspondingly adjusted.
We recommended and Management agreed to ensure the following:
comply strictly with the pertinent provisions of Section 89 of PD 1445 andCOA Circular No. 97-002, specifically on the grant of additional cash
advances unless the previous cash advance has been liquidated. Impose
appropriate sanctions necessary under the circumstances;
demand immediate liquidation or settlement of the unliquidated cashadvances from those AOs who have retired or transferred, otherwise,
hold liable the signatories who granted clearance to those concerned; and
strengthen the internal control and monitoring procedures on the grantand liquidation of cash advances.
Excessive cash advances
7. In OSEC, excessive cash advances for special purposes were granted
resulting in refunds totaling P11,652,451.73 or 14 % of total cash advances of
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P80,665,930.60, thereby, losing the opportunity to finance other activities
and exposing the funds to possible loss or personal use.
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Section 5.7 of COA Circular No. 97-002 states that when a cash advance
is no longer needed or has not been used for a period of two months, it must be
returned to or refunded immediately to the collecting officer.
During the year, refunds of cash advances for trainings, seminars, and
other related activities amounted to P11,652,451.73. Refunds ranged from 1 to100 % of the cash advances, with a minimum of P4,000.00 to P900,000.00 per
individual cash advance. Five cash advances totalling P555,490.00 were fully
refunded while P8,497,343.54 were refunds of P50,000.00 or more per cashadvance, and P128,605.41 were less than P50,000.00 but at least 50 percent of the
cash advance. It can be construed that the project implementers did not properly
plan the activities.
The unused cash advances were not immediately refunded and have
remained in the hands of the disbursing officers for a period of 8 days to more
than 4 years from the time the cash advances were granted, as shown below, thus
exposing the funds to possible misuse or personal use.
No. of days in the hands of AO Unused/Excess CA
30 days or Less P 1,518,987.79
31 - 180 days 6,615,796.58
181 to 364 Days 2,153,345.15
1 year or more but less than 5 years 1,364,322.21
Total P 11,652,451.73
We recommended that Management ensure the following:
comply strictly with the provisions of COA Circular No. 97-002 on therefund of unused CAs;
henceforth, demand immediate refund and/or return of unused balancesfrom the AOs concerned; and
Direct the project implementers to observe prudence in planning aproject or activity, taking into consideration the proper budgeting, timing
and previous data, among others, to minimize grant of excess CAs.
The Chief Accountant explained that they had been implementing certain
measures in the pre-audit of budget estimates of every activity to minimize the
excess cash advance.
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Reporting Difference
8. Reporting differences/disparities totalling P667,297,522.64 were noted
between the GL and SL balances of the Due from NGAs account, as well as
erroneous accounting entries, which resulted in the net overstatement of
P2,280,170.60.
EO No. 40, s. 2007 provides that common-use supplies, materials and
equipment shall be procured from DBM-Procurement Service.
The Due from NGAs account includes unliquidated fund transfers to theDepartment of Public Works and Highways (DPWH) and the Department of
National Defense (DND) for the implementation of the School Building Program;
and the amount transferred to the DBM-Procurement Services for the purchase ofcommon-use supplies, office equipment, IT equipment and software, etc.
Section 12 of the MNGAS, Vol. II states that the Subsidiary Ledger (SL)
is a book of final entry containing the details or breakdown of the balance of thecontrolling account appearing in the General Ledger (GL). Postings to the SL
generally come from the source documents. The totals of the SL balances shall bereconciled with their respective control account regularly or at the end of each
month. Schedules shall be prepared periodically to support the corresponding
controlling GL accounts.
Verification disclosed that the SL of the Due from NGAs account
amounting to P2,735,537,429.63 did not tally with the GL balance of
P2,068,239,906.99, or a difference of P667,297,522.64 as shown on the nexttable. This could be attributed to the failure to update and reconcile regularly the
SL with its corresponding control account.
Implementing Agency SL Balance
DBM Procurement Service P2,465,339,204.50
Department of Public Works and Highways 195,547,795.06
DepEd Autonomous Region in MuslimMindanao
58,340,600.16
Department of National Defense 16,309,829.91
TOTAL P2,735,537,429.63
An overstatement of P4,028,476.00 was also noted due to double
recording of the amount on advances paid to the DBM-PS. Per JEV No. 2011-01-8322 dated 1/31/11. The transaction was first recorded in the January LDDAP
under JEV No. 2011-03-2562 dated January 31, 2011 and another entry was
made upon payment of check to the DBM-PS under JEV no 2011-03-2562 datedMarch 03, 2011.
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In addition, there was an understatement of P1,748,305.40 due to
erroneous recording of liquidation reports from ARMM on the basis of thecontract amount per report and not the actual payments made, thus understating
and overstating the Due from NGAs and Prior Years Adjustment accounts. The
liquidations pertain to the CAs granted/fund transfers for the implementation ofthe School Building Program and the School Furniture Program (SFP).
In view of the foregoing deficiencies, the Due from NGAs account has anet overstatement of P2,280,170.60, and the existence and validity of the account
cannot be established due to the unreconciled SL and GL balances.
We recommended that Management require the Accountant/Bookkeeper to
investigate the differences and prepare the necessary entries to reflect the
correct balances of the accounts. Moreover, maintain properly the SL for
the account to facilitate reconciliation and verification.
The Chief Accountant commented that efforts have been exerted to
reconcile/fully account for the funds transferred to the DBM PS.
Funds transferred to other NGAs, such as the DND and DPWH, are being
closely monitored through the regular issuance of demand letters. Liquidationreports being submitted from time to time are reviewed and immediately recorded
once evaluated to be in order.
Long Outstanding Accounts
9. Due from ROs and OUs of P29,126,210.00 and uncollected/unremitted
income due the NETRC totalling P3,812,643.24 have long been outstanding
in the books of accounts of the Center since 1980/1983. As a result, the
validity and accuracy of the accounts were doubtful.
As prescribed under the MNGAS, the Due from ROs/Staff Bureaus
(Account 136) and Due from OUs (Account137) shall be used to record inter-
office transactions in the books of CO/OUs or that of CO/RO.
As of year-end, the ledger balances of the Due from ROs and OUs
amounted to P1,051,341.65 and P28,074,868.35, respectively, or a total ofP29,126,210.00. These represent the unsettled accountability/liability of ROs and
ORs for the cost of Philippine Examination Placement Test (PEPT) application
forms as of December 31, 2012 entrusted to the different ROs, and theunliquidated financial subsidy in the administration of different examinations
covering the period CY1980-2011.
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The previous practice was to debit the Due from OUs account for the total
cost of application forms given to the different DOs for PEPT examination and tocredit the corresponding income account. Upon remittance of collections to the
NETRC, the account of ROs and DOs are credited. Hence, the receivable account
was established based on the actual cost of registration forms received and not onthe actual number of forms utilized. This system appears to be in consistent with
the accounting principle of recognizing income, where the long outstanding
accounts can be attributed.
The data provided by the Accounting Unit showed unremitted PEPT
registration fees, totalling P3,812,643.24. However, this amount was based on
the actual cost of registration forms entrusted to the different ROs, and not theactual number of issued/utilized forms.
The balance of the accounts also include the amount of unsettled accounts
representing financial subsidy granted to the different DOs for the administrationof the different examinations conducted by the Center. As of December 31, 2011,
the established balance of unsettled accounts for financial subsidy amounted toP24,480,385.17, which were sourced from the report of the Accounting Unit.
This is a reiteration of the previous years audit recommendation toconduct verification and reconciliation of records and demand settlement of
accounts from the concerned official which management failed to implement.
We recommended that Management:
send demand letters to concerned officials for the immediate settlement ofoutstanding accounts and request the assistance of the concerned regional
directors, when necessary, for the settlement of these accounts;
impose appropriate sanctions to compel immediate compliance and to
deter the practice; and
request for the writing-off of accounts after exhausting all the possible
remedies available in accordance with the conditions set forth in the
guidelines for write-off.
Management, in their reply dated May 23, 2012, disclosed that severalmeasures are now being undertaken to address the issues, such as regular sendingof demand letters to concerned officials of DO/OUs and institutionalization of the
recent policy of Schools Superindent obtaining clearance at the CO upon
retirement as an effective tool for the DO/OUs to settle their unliquidatedbalances.
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Unreconciled balances of reciprocal accounts
10. The Due from/to accounts in both the CO and RO Books showed
unreconciled balances totalling P2,272,592,688.74 while the Due from/to
accounts in both the RO and OU Books have unreconciled balances totalling
P678,763,024.76, casting doubts on the reliability of the account balances aspresented in the FSs.
Section 3.2 (a and b) of GAFMIS Circular Letter No. 2003-007 providesthat in the process of consolidation, the Regional Accountants shall eliminate the
reciprocal accounts between the RO and the OUs while the CO Chief Accountant
shall eliminate the reciprocal accounts between the CO and the ROs, and betweenthe CO and the Provincial Offices/OUs, if any.
The reciprocal accounts to be eliminated in the consolidation of the
financial statements (FS) at year-end are, as follows:
a) Central Office
Particulars CO RO OUs
1
.
Transfer of funds to RO for centrally-
managed projects
Due from
RO
Due to
CO
2
.
3
.
Transfer of funds to OU for centrally-
managed projects
Transfer of funds from OU to CO
pertaining to salary deductions
Due from
OU
Due to
CO
b) Regional Office
Particulars RO OUs
1.
2.
Issuance of Summary of Cash
Disbursements Report (SCDR)
Transfer of funds from RO to OU for
RO managed projects
Due from OU Due to RO
3. Transfer of other funds from OU to RO
of payroll funds
Due to OU Due from RO
The reporting differences resulting from elimination of the reciprocalaccounts between the CO and RO books of accounts and between the RO and
OUs books of accounts are shown on the next page.
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CO Books RO Books Difference
Due from RO/OU P2,505,172,640 Due to CO P390,676,222 P2,114,496,419
Due to RO 624,000 Due from CO 158,720,270 158,096,270
P2,272,592,689
RO Books OUs Books
Due from OUs P 685,776,548 Due to RO P 26,789,152 P 658,987,396
Due to OU 180,123,432 Due from RO 160,347,804 19,775,629
P 678,763,025
*rounded off to the nearest peso.
The reasons, among others, for the unreconciled balances are as follows:
non-recording/non-reconciliation of the billed net pay, salary
deductions and cancelled payroll checks by the CO, RO and OUs prior
to the decentralization of the processing of payrolls; and by the ROand OUs after its decentralization;
non-recording of receipt/liquidation of funds transferred by the
CO/RO, Staff Bureaus to RO, Staff Bureaus/OUs; and,
recording under the Due from OUs account, the downloading of
MOOE funds by the DOs to elementary schools without complete set
of books of accounts.
We recommended that concerned DepEd Accountants:
conduct a regular periodic/quarterly reconciliation of reciprocal accounts
to immediately correct any discrepancies noted; and,
draw a Journal Entry Voucher to take up the reconciling items noted to
correct the balances of the accounts affected after reconciliation.
Uncollected Accounts Receivable
11. Receivable Accounts totalling P13,134,988.00 from the business operations of
the BTC, NEAP and Region II remained uncollected for one year to over 30
years, due to the failure of management to monitor long outstanding
receivables and leniency to oblige debtors and concerned employees to settletheir obligations.
Sound accounting principles emphasize the basic requirements thataccounts and reports of an agency reflect its actual financial condition and
operation. As much as the FSs are useful tools of management for planning and
budgeting, these reports need to provide complete and accurate information
regarding the affairs of the agency.
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Section 64 of the GAAM, Volume I, provides, among others, that,
Quarterly, each agency accounting unit shall prepare a statement scheduling
overdue accounts receivables. The agency head, or his authorized representative,shall review and sign this statement as an indication that he has examined the list
of overdue accounts and has instituted, or will institute, action for their
collection.
Item III. 8.10 of COA Circular No. 97-001 dated February 05, 1997
provides that if the analysis/review of the accounts is not possible due to absenceof records, the agency head concerned should request for write-off and/or
adjustment of account balances from the COA, supported by the following
documents:
List of available records and extent of validation made on the accounts;
and
Certification and reasons why the books of accounts/records, financialstatements/schedules and supporting vouchers/documents cannot be
located.
Further, COA Circular No. 93-404 dated October 18, 1993 provides the
reporting requirements in case of losses of documents evidencing financial
transactions and/or records of accountabilities. The Circular states that no requestfor the write-off of accountabilities shall be reviewed/evaluated by the
Commission unless accompanied by the following documents:
Copy of the report and/or notice of loss to the COA Auditor; and
Copy of the investigation report narrating the cause(s) of loss of the
documents or records, and pinpointing the official/s and employee/s
liable therefor.
The receivable accounts of Region II, Baguio Teachers Camp (BTC) and
National Educators Academy of the Philippines (NEAP) operations showed longoutstanding receivables or uncollected income accounts of P13,134,987.74 as of
December 31, 2011. Aging of the accounts are as follows:
Agency
Amount by Age (in PhP)
TotalLess than 1
year
Over 1
year
Over 2 to3
Years
Over 5
Years
Region II 118,850 118,850
NEAP 266,328 266,328
BTC 96,316 4,405,050 8,248,444 12,749,810
Total 96,316 4,523,900 266,328 8,248,444 13,134,988
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The reasons for the past due accounts are as follows:
The lodgers failed to settle their accounts regularly (Region II);
No monitoring of the receivables or follow-up on their collection from
the concerned debtors/persons liable was done; hence, the receivablesremained uncollected ( NEAP);
The Philippine Sports Commission (PSC) continues to use the BTC
facilities from October 2007 up to the present without renewedcontract and without paying any rental fee, including its arrears; and,
The PSC did not honor the Lessor-Lessee Agreement entered into
between the PSC and the then Department of Education, Culture andSports (DECS) on August 31, 1998 in the amount of P7.032M.
It is worth mentioning that the CY 2010 audit report disclosed that thedetails and validity of said accounts could not be fully ascertained due to lack orunavailability of supporting documents. Despite the materiality of the findings,
management did not take any appropriate action on the audit recommendations.
Managements inaction had resulted in the accumulation of receivables
with missing or incomplete documentation, which rendered the validity and
collectibility of the receivables totaling P8,248,443.75, aging 13 to over 30 years,doubtful.
Management informed that a letter regarding the PSC receivables was sent
thru fax to the Office of the Undersecretary for Finance and Administration lastSeptember 06, 2011; however, no information or feedback was received yet by
management to date.
We recommended and concerned Management officials agreed to ensure the
following:
instruct the dorm manager to intensify collection of fees from lodgers so
that the amount can be used to improve the facilities of the dormitory
(RO II);
exert all efforts to collect past due accounts from concerned debtors/persons liable by sending demand/follow-up letters. Advise the
Accountant to prepare a quarterly report/Statement of Overdue
Receivables and submit the same to the agency head or his authorized
representative so that appropriate action for the collection of said
receivables could be instituted as required under Section 64 of the
GAAM, Volume I (NEAP); and
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adopt the following corrective measures (BTC):
o intensify collection efforts and institute legal remedies, if warranted.
Seek the assistance of the DepEd CO in the collection of long
outstanding receivables, especially from the NGAs, namely, the
NEAP, NFE-CAR, DAR-CAR, DepEd and from the concerned LGUs;
o exert all efforts to locate the records of receivables which remained
uncollected so that appropriate action could be undertaken.
Determine the persons responsible for the loss of documents
evidencing financial transactions and records of accountabilities;
o see to it that accounts on credit are properly documented and
supported with billing statements/contracts, and that these bills/
contracts contain all the necessary information, such as the contact
person and complete addresses, to facilitate monitoring and
enforcement of collection of receivables;
o consider renegotiating the terms of the expired Memorandum of
Understanding (MOU) between the PSC and BTC for the staggered
or full settlement of the account prior to continued use of the BTC
premises and cottages thereof; and,
o issue periodic statements of accounts/billing statements on the
outstanding current receivables to serve as a reminder and to prevent
the accounts from becoming past due.
Dormant Receivable Accounts
12. Dormant or non-moving receivable account balances of ROs I and III and
SHNC totaling P15,887,720.67 remained in the books for more than five
years resulting from program/projects which had long been
finished/terminated. Collectivity or settlement of these accounts is no longer
feasible due to lapse of time or absence of record as provided under COA
Circular No. 97-001 dated February 25, 1997.
COA Circular No. 97-001 dated February 6, 1997 provides guidelines on
the Agencys proper disposition/closure of dormant funds and/or accounts of
NGAs/projects. Dormant accounts refer to individual or group of accounts withbalances which remained non-moving for more than five (5) years.
Audit of accounts showed the following funds/accounts had been non-
moving for more than five years since their settlement are no longer achievable
due to absence of records and lapse of time:
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Office Amount Remarks
Region I
Due from BTr
Due from NGA
10,038,666.3
5
111,584.30
Dormant since CY
2006
Dormant since CY2004
Region III
Due from LGU 605,259.05 Dormant since CY
1998
SHNC
Due from BTr 5,132,210.97 Dormant since CY
2007
Total 15,887,720.6
7
We recommended and Management agreed to direct the concernedAccountant/s to strictly comply with the provision of COA Circular No. 97-
001 dated February 6, 1997; make necessary evaluation of dormant accounts
to establish the validity of claims; and enforce the collection and effect the
final adjustments in the books of accounts, when appropriate.
Deficiencies affecting the accuracy and existence of inventory accounts
13. The non conduct of physical inventory, absence of RPCI and non
maintenance of records of inventory account totaling P711,392,519.09,
unrecorded issuances of inventory amounting to P18,578,239.74, direct
charges to expense of purchases totalingP
12,602,990.84, and unreconcileddifference of P15,606,611.60 between the physical count as against the
inventory records had affected the accuracy and existence of the Inventory
Accounts balances.
Under the MNGAS, purchases and issuances of supplies and materials are
accounted for in the books of accounts as follows:
Section 43, Vol. 1 provides that upon purchase, it shall be recorded as
Inventory account and recognized as expense upon issuance of Report of
Supplies and Materials Issued (RSMI).
Section 4 provides that liability shall be recognized at the time goods andservices are accepted or rendered and supplier/creditor bills are received.
Section 46 provides that the Supply Officer shall be the one to prepare the
RSMI and submitted to the accounting every end of the month as the basis
of the bookkeeper in preparing the JEV to record the issuances of supplies
and materials. The RSMI shall be prepared daily and in two copies, onefor accounting unit and the other copy as Supply Officers file.
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Section 65, Volume II requires the preparation and submission of the
RPCI every six (6) months, certified by the Inventory Committee and
approved by the Head of Agency.
Also under COA Circular No. 2005-002 dated April 14, 2005, small
tangible items or Property, Plant and Equipment (PPE) of small value withestimated life of more than one year shall also be recorded as Inventories upon
acquisition and as expense upon issuance. The Inventory Custodian Slip (ICS) is
prescribed to be used upon issuance of these items. Textbooks and instructionalmaterials are among the items considered as small tangible items with estimated
life of more than one year. These items should be recorded as inventories upon
acquisition.
The accuracy of the inventory accounts balances was affected by several
deficiencies as summarized in Table 4.
Table 4. - Summary of deficiencies in accounting for inventories
Office/DOs
Deficiencies
Unsubmitted
RPCI / No
inventory
records
Unrecorde
d issuances
Direct
charges to
expense
accounts
Reporting
differences
between GL
and RPCI
OSEC 23,956,294* 6,294,156
BSE 2,777,808
BEE 1,931,348
NEAP 16,768,688 1,611,094
EDPITAF 3,377,141
SHNC 5,435,591CAR-DO Abra, Baguio
NHS
5,291,800
Baguio Teachers Camp 2,832,232
NCR 4,912,822
DO Quezon City 174,825,132 2,750,478
DO Caloocan City 3,542,961
DO Muntinlupa City 4,218,833
DO Marikina City 2,504,028
DO Navotas-Kaunlaran HS 148,957
I-ROP, DOs San Carlos, La
Union
14,094,425
ROP, DOs Dagupan City,Pangasinan I 782,740
II-ROP 5,964,029 105,794
III-DO Zambales 62,212,373
V-DO Camarines Sur 203,655,205
DO-Iriga City 30,472,236
DO-Catanduanes 9,057,251
DO-Sorsogon Province 9,077,141
DO-Legaspi City 8,096,149
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Office/DOs
Deficiencies
Unsubmitted
RPCI / No
inventory
records
Unrecorde
d issuances
Direct
charges to
expense
accounts
Reporting
differences
between GL
and RPCI
DO Sorsogon Province
Bagamanoc Rural Devt.
HS, Viga Rural Devt.
HS
2,209,464
VI-ROP 1,607,407
IX-ROP, DOs Dapitan,
Zamboanga del Sur/del
Norte and Basilan NHS
125,997,237
XIII-SDOs Agusan/Surigao
del Sur and Sibagat NHS
21,669,546
Total 711,392,519 18,578,240 12,602,991 15,606,612
*Textbooks and Instructional Materials
We recommended that Management :
create an Inventory Committee to conduct physical inventory and
prepare the Report of Physical Count of Inventory (RPCI) pursuant to
Section 65 of the MNGAS Vol. I and coordinate with the Accounting
Section for the reconciliation of the said account and submit the same to
the Audit Team within the prescribed period;
require the Supply Officers concerned to submit regularly the RSMI
which is the basis of the Accounting Unit in recording the supplies
expenses for the period as required in Section 46 of the MNGAS Vol. I.
Maintain stock cards and reconcile them periodically with the supplies
ledger cards and other records of the Accounting Unit;
require the Accountant/Bookkeeper to record the purchase of supplies
and materials as inventories upon acquisition and record the related
expense accounts upon issuance thereof based on the RSMI in
accordance with Section 43 of the NGAS Manual and COA Circular No.
2005-002; and
direct the Accountant and the Supply Officer to monitor and reconcile
their records and make the necessary adjustments on the discrepancies
noted to reflect the correct and actual balances of the Inventory accounts
in the FSs.
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Management comments/action taken are as follows:
a. The management of OSEC and BSE will like to request approval fromCOA to write-off the unaccounted prior years balances of dormant
accounts.
b. RO II, Baguio Teachers Camp, DOs Caloocan, Muntinlupa, Surigao delNorte will comply with the audit recommendations.
Deficiencies affecting the accuracy and existence of PPE accountsPPE accounts
14. The absence of RPCPPE, property cards and property ledger cards of
recorded PPEs with balances ofP14,040,803,535.29; unreconciled difference
of P44,771,439.86 between RPCPPE and books of accounts; unrecorded
PPEs of P1,230,465,191.92; misclassification of accounts totaling
P2,218,334,194.32 and error in recording resulting in a net understatement
of P2,057,379.00; and lack of documentation to establish ownership of the
Land and Other PPE accounts totaling P7,043,543,612.24, had affected theaccuracy and existence of the PPE accounts recorded in the books of OSEC,
Bureaus, ROs, DOs and Schools as well as the reliability of the balances
presented in the FSs.
The following rules and regulations, as prescribed under the MNGAS,Volume II, govern the proper accounting for and safeguarding of PPEs:
Section 66 The Report on the Physical Count of Property,
Plant and Equipment (RPCPPE) shall be used to report the physicalcount of PPE by type as of a given date. It shows the balance of
property and equipment per cards and per count and
shortage/overage, if any.
Section 41 PPEs acquired through purchase/donation are
recorded in the books of accounts as assets.
Section 43 - The Accounting Unit shall maintain perpetual
inventory records, such as xxx the PPE Ledger Cards (PPELC) for
each category of PPE including work and other animals, livestock,
etc. The SL cards shall contain the details of GL accounts.
For check and balance, the Property and Supply Officer/Unit shall
maintain Property Cards (PC) for PPE xxx. The balance in quantity per PCand SC should always reconcile with the ledger cards of the Accounting
Unit
Section 12 - The PPELC shall be kept by the Accounting Unit
for each specific item to record promptly the acquisition,
description, estimated life, depreciation, disposal; accumulatedmaintenance expenses incurred other information about the asset.
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The following deficiencies were noted in the audit of the PPE accounts of
the DepEd:
a. Absence of RPCPPE/PCs/PPELCs
The PPE accounts totalling P14,040,803,535 of the OSEC and
various DepEd ROs and DOs have no RPCPPE and PCs, renderingdifficulty in the reliance on accuracy and existence of the balances of the
PPE accounts. Details are Table 5.
Table 5. Breakdown of PPE account balances with deficiencies
Office Balance Per Books
OSEC P 2,164,512,128.16
NETRC 8,832,527.74
NEAP 16,768,687.70
EDPITAF 110,384,323.00
NCR-DO Pasay
DO Las Pinas
DO Caloocan
DO MuntinlupaDO Malabon
99,046,570.38
153,039,320.14
1,078,805,180.84
188,608,993.40408,740,905.07
BEE 5,608,713.03
BSE 8,085,808.10
RO I 1,729,201,466.76
RO II-ROP, DO Tuguegarao 74,214,879.22
CAR 19,452,607.84
RO III 2,842,191,697.56
RO V- DO Camarines SurDO Catanduanes
599,975,830.75136,020,776.55
RO IX 670,521,022.31
RO X- DO Cagayan de Oro, Bukidnon,
Iligan City, Ozamis City, Camiguin
2,017,126,962.85
RO XIII-ROP, Dos Agusan del Sur,
Dinagat Islands,
Siargao and Surigao del Sur
1,709,665,133.89
Total P14,040,803,535.29
b. Unreconciled balances between property and accounting records
Comparative analysis of the GL balances of the PPE accounts and
the RPCPPE of the BEE, Ros I and II and CAR revealed a difference of
P44,771,440. The reasons, among others, for the difference are: (a) non-recording of properties in the books including donated equipment, (b) non-
recording of purchases and transfer of properties to other OUs, (c) no
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inventory reports prepared, and (d) non-reconciliation of the property and
accounting records.
c. Unrecorded Land and other PPE Accounts
Verification of the PPE accounts of the following Dos and
National High Schools in four Ros of DepEd and NETRC showed thatLand and Other PPE accounts with total cost of P1,230,465,191.92were
not yet recorded in the books. Details are as follows:
Table 6. - Summary of unrecorded PPEs
Office AccountAmount
(in PhP) Remarks
NCR-
DO Malabon
Land Not specified Ownership yet to be established
DO QuezonCity
Land 2,826,460 Cost of property not included nor dropped from the books of the School
for Crippled Children upon transfer to
Sta. Lucia ES
School
Building
182,863,122 School Building transferred by the DO
to different NHS
DO Caloocan School
Building
887,968,805 Not included in the list of properties
DO TAPAT Motor Vehicle 120,000 Donated by PTA in CY 2003
NETRC IT/Office
Equipment
152,299 Procured out of cash advances for
training, seminars or workshopsRO III Land 13,650,210 A total of 33 lots being used as school
sites acquired by the different DOs
thru purchase and donations were not
recorded in the books due to failure of
e management to pursue titling
School
Buildings
36,550,061 School buildings constructed by
DPWH-Engineering District of Bataan
from 2000 up to 2008 not yet booked
up due to absence of coordination
between the DPWH-ED and the
Division
CAR- NHSs:Conner Central,
Namilinga, and
Hingyon
Equipment 1,877,041
Donation from the IWILL Project andother donors
RO I-DO Dagupan
SchoolBuildings
70,660,754 Major repairs of schools which was notrecorded as addition to the cost-
P8,887,629.48; Other Structures in ESs
not taken up in the books-
P61,773,124.17
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Office AccountAmount
(in PhP) Remarks
DO Pangasinan I SchoolBuildings
29,938,009 Donated properties
CAR- Hingyon
NHS
School
Buildings
3,858,432 Unrecorded donations
Total 1,230,465,192
d. Misclassification of or Error in recording and non recording of
accounts
Misclassifications of PPE accounts amounting toP2,218,334,194.32 and errors in recording and/or non-recording of
transactions were noted resulting in net understatement of P2,057,379.00:
Table 7. - Summary of deficiencies in recording of PPEs
Office MisclassificationAmount
(in PhP)
NEAP Non-reclassification of unserviceable equipment 183,856.39
CAR 469,271.75
RO XIII 2,892,689.70
NCR-
DO Quezon City
Erroneous recording of the cost of the transferred
school buildings
2,193,626,454.72
CAR-ROP,
Tublay NHS
Completed buildings not yet reclassified from
Construction in Progress
21,161,921.76
Total 2,218,334,194.32
Office Errors (Overstatement)/
Understatement
RO I-
DO Dagupan
Demolished building not dropped from the books (600,000.00)
CAR-
DO Apayao
Eastern Bontoc
NAVHS
Internet facilities recorded as internet expenses
Major repair of school building recorded as repair
and maintenance
School building which needs repair but still being
used, erroneously dropped from the books
662,700.00
724,679.00
1,270,000.00
Total Understatement 2,057,379.00
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e. Ownership over recorded Land and Other PPE accounts not
established
A general accounting principle stipulates that one of the conditions
for an asset to be recognized is when the entity has control over the same.To establish ownership, it is necessary that these are covered by authentic
Transfer Certificates of Title (TCT) issued by the Land Registration
Authority (LRA) and registered with the Registry of Deeds in theprovince/city where the property is situated.
Verification of the Land and Building accounts in the books of the
OSEC, BEE and NCR disclosed a total of P7,043,543,612.24 withoutvalid documentation to establish ownership, breakdown as shown below.
Office LandBuilding/Land
ImprovementTotal
OSEC 6,941,417,000.00 6,941,417,000.00
BEE 7,287,973.24 38,639.00 7,326,612.24
NCR 94,800,000.00 94,800,000.00
Total 7,043,504,973.24 38,639.00 7,043,543,612.24
There were no TCTs and other documents conveying ownership ofthe properties and not even in the name of the agency, thus absolute
ownership over the properties cannot be rightfully claimed by the DepEd.
Also, there is no basis for recording the land in the books of accounts.
We recommended that concerned Management officials ensure the
following:
direct their Accountants to maintain and update PPELCs and property
cards;
require their Accountants to prepare a JEV to reclassify and adjust the
misclassified accounts to the appropriate account/s;
conduct regular physical count of PPEs, prepare and submit the
RPCPPE, and reconcile with the accounting records to ensure
completeness and accuracy of the recorded PPE accounts; and
exert efforts for the titling of the acquired land thru purchase and
donation to establish absolute ownership over these properties.
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In partial compliance with above recommendations JEV No. OSEC 2012-
05-233 dated May 21, 2012 was drawn by the OSEC to effect the necessaryadjustment of the Land account based on the assessed value indicated in the
Declaration of Real Property. Management also informed that the value of the
property in Fort Bonifacio, Makati, C5 was not yet adjusted awaiting submissionby the Property Division of the TCT in the name of the DepEd.
Uninsured Properties
15. Properties totalling P251,507,980.15 were not insured with the General
Insurance Fund, which resulted to inadequate protection coverage in case of
loss or damage.
RA No. 656 (Property Insurance Law) provides, among others, under
Section 11, that each government shall include in its annual appropriation the
amount necessary to cover the premiums for the insurance of its properties duringeach fiscal period and remit immediately to the System (GSIS).
Properties in four Regions with a total book value of P251,507,980.15were not insured with the General Insurance Fund of the GSIS contrary to the
provisions of RA No. 656; thus, insurable interest of the government is not amply
protected in case of loss or damage.
Region Amount
II P 97,904,904.61
V 102,430,245.12
IX 20,621,620.80
XIII 30,551,209.62
Total P 251,507,980.15
We recommended and management agreed to insure all government
properties with the General Insurance Fund of the GSIS.
Unreliable balances of liability accounts
16. The validity and reliability of the liability account balances cannot be
ascertained due to: (a) non-reversion of long outstanding payable accounts
without valid claims in three Regions totalling P12,722,969.99; (b)
unreconciled difference ; amounting to P5,331,058.37 between the SL and
GL due to unsupported claims in OSEC; and, (c) overstatement amounting
P1,214,542.26 due to accounting error in one Region.
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Section 98 of PD No 1445 provides,The Commission upon notice to the
head of agency concerned may revert to the unappropriated surplus of thegeneral fund of the national government, any unliquidated balance of accounts
payable in the books of the national government, which has been outstanding for
two years or more and against which no actual claim, administrative or judicial,has been filed or which is not covered by perfected contracts on record xxx.
Under DBM. Circular Letter No. 2005-02 dated January 28, 2005,accounts payable refers to valid and legal obligations/commitments of NGAs, for
which goods/services/projects have been delivered/rendered/completed and
accepted.
In our verification of the liability accounts, several deficiencies were noted
which affected the accuracy and reliability of balances presented in the FS.
a. Non-reversion of payable accounts without valid claims - P12,722,970
Payables totalling P12,722,969.99 have been outstanding in thebooks of accounts for more than two years and validity of the claims could
not be established due to absence of supporting documents, as summarized
below.
Region/DOAccounts
Payable
Due to
Officers and
Employees
Due to
National
Treasury
CAR-DO Abra 29,439.92 1,661,396.73
RO I-ROP, DO
Urdaneta
6,492,271.34 2,014,515.71 1,732.57
RO IV-A 2,340,691.5
7
94,450.00
RO IX-DOZamboanga del Sur
88,472.15
Total 8,950,874.98 3,770,362.44 1,732.57
b. Unreconciled difference between SL and GL-P5,331,058.37
Section 12 of the MNGAS, Vol. II states, among others, that the
SL balances shall be reconciled with their respective control account
regularly or at the end of each month. Schedules shall be prepared
periodically to support the corresponding controlling GL accounts.
In OSEC, the Schedule and Aging of Accounts Payable for various
contractors showed a total of P98,051,852.77 while the GL showed a
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balance of P92,720,794.40 or a difference of P5,331,058.37, which can be
attributed to the lack of supporting records on retention fees payable.
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The Chief Accountant stressed that they have exercised due
diligence in the review of accounts and that these were duly supportedwith documentary requirements to establish existence.
In reply, the Audit Team recognized that due diligence may havebeen exercised, but emphasized that the audit was based on the records
and reports prepared and submitted by the Accounting Division. The
Audit Team acknowledged managements compliance with some of theiraudit recommendations.
c. Overstatement due to accounting error - P1,214,542.26
In CAR, paid payrolls for employees benefits and allowances
were still recorded as payable and refunded bidders bond was not adjusted
at year-end, resulting in overstatement of P995,913.99 and P218,628.27,
respectively, in the Due Officers and Employees and Bidders Bondpayable accounts.
We recommended that concerned Management direct their Accountants to::
review the legality and validity of obligations to warrant payment andeffect reversion for those long outstanding accounts if without existing
valid claims;
reconcile the deficiencies and make necessary adjustments to reflect thecorrect balance of Accounts Payable (OSEC); and
prepare the necessary adjusting entry to correct the accounting errorsaffecting the Due to Officers and Employees and Bidders Bonds Payable
accounts (DO Abra and EBNAVS).
Non Remittance of GSIS Deductions and Government Share
17. DO Dipolog City failed to remit to the GSIS within the prescribed period,
contributions deducted from the salaries of some employees and the
government share amounting to P2,151,495.73. Likewise, the personal share
for compulsory contributions on Life and Retirement Gratuity of Malangas
NHS employees in the amount ofP200,971.36 were not deducted from theirregular salaries and salary differentials contrary to the provisions of RA
8291.
Section 5 (c) of RA 8291 states, It shall be mandatory
and compulsory for all employers to include the payment ofcontributions in their annual appropriations. Penal sanctions
shall be imposed upon employers who fail to include the
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payment of contributions in their annual appropriations or
otherwise fail to remit the accurate/exact amount of
contributions on time, or delay the remittance of premiumcontributions to the GSIS. The heads of offices and agencies
shall be administratively liable for non-remittance or delayed
remittance of premium contributions to the GSIS.
Section 6 (b) likewise states, Each employer shall
remit directly to the GSIS the employees and employerscontributions within the first ten (10) days of the calendar
month following the month to which contributions apply. The
remittance by the employer of the contribution to the GSIS
shall take priority over and above the payment of any and allobligations, except salaries and wages of its employees.
Section 7 further provides, Agencies which delay the
remittance of any and all monies due to the GSIS shall becharged interests as may be prescribed by the Board but not
less than two percent simple interest per month. Such interestshall be paid by the employers concerned.
It was noted that the outstanding balance of the account Due to GSIS as ofDecember 31, 2010 was P2,151,495.73. There were no remittances or
adjustments made until August, 2011 although there were GSIS deductions made
from salaries every month.
Failure to remit the contributions within the prescribed period is
detrimental to the welfare of the employees concerned since they may not be able
to fully avail of the benefits offered by the GSIS due to defaulting paymentsthrough no fault of their own.
Relative to Malangas NHS, post-audit disclosed payments of salarydifferentials and 1st salary and regular salaries of its officials and employees did
not consider the mandatory deductions for life and retirement pursuant to RA
8291. Payments were made at a gross amounts without deductions which may
adversely affect the retirement gratuity of the officials and employees concerned.Computation showed that the undeducted personal share amounted to
P200,971.36.
We recommended that Management officials concerned require their
accountants to:
remit to the GSIS the employees contributions and the corresponding
government share pursuant to RA 8291 is requested (DO Dipolog City);
and
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collect GSIS contributions from the concerned employees and remit the
same to the GSIS (Malangas NHS).
Management committed to give preferential attention to address this
observation.
Payment of Professional Fees Not Proper
18. Professional fees totalling P7,907,634.41 paid to consultants, officers and
staff by OSEC, NETRC and SHNC for services rendered and activities
during orientation/training, seminar-workshop, and other similar activities
conducted within their mandated functions is contrary to Section 7 of EO No.
366 dated October 4, 2004 and Budget Circulars No. 2007-1 and 2007-2.
Section 7 of EO No. 366 Prohibition on Hiring/Rehiring of PersonnelDuring Plan Preparation, states, Except for newly created agencies, the hiring of
additional personnel (permanent, temporary, contractual or casual), and the
renewal of contracts/appointments of all employees hired on contractual, casualor temporary basis is hereby prohibited during the preparation of RationalizationPlan.
Paragraph 4.5 of Budget Circular No. 2007-1 dated April 23, 2007 alsostates, Honoraria shall not be granted to the designated lecturers, resource
persons and facilitators within their respective sponsoring agencies as such
services are deemed part of the duties and responsibilities of their appointivepositions to disseminate information, to clarify issues and concerns and to
interact with clients and/or implementers of agency mandates.
Moreover, Budget Circular No. 2007-2 dated October 1, 2007 provides the
following guidelines on the entitlement of honorarium:
Government personnel who are on part-time assignment to a
special project which entails rendition of work in addition to orover and above their regular workload may be entitled to
honoraria.
The amount of honoraria shall be based on the nature of their work
assignments in a special project, the level of difficulty of the duties
and responsibilities thereat, the extent of their productivity and
quality of performance measured in terms of completed and
accepted deliverables in accordance with the timeframes set perproject component of a special project plan approved.
Payment of honorarium to be made only upon completion of the
project and acceptance by the agency head of the deliverable per
project component.
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No overtime pay or other allowances shall be paid nor any
Compensatory Time-off be granted to the same personnel for the
period that honoraria are granted.
Review of the liquidation reports submitted by the OSEC, NETRC and
SHNC for CY 2011 showed a total of P7,907,634.41 were disbursed for thehonoraria of officers and staff personnel who participated in various Agency-sponsored training/seminars, either as speakers, facilitators or support staff. These
activities were found to be in line with their respective Agencys primary
mandate/ function.
The amount of P7,388,234.41 or approximately 93% represents
professional fees and honoraria paid to 36 consultants hired under the differentoffices of the DepEd OSEC. Despite the previous years audit observations, the
DepEd renewed the contracts of the consultants and hired seven of them in CY
2011 although the offices have also assigned personnel under contract of serviceas summarized in Table 8.
Table 8. - Breakdown of consultants and contractuals assigned by the DepEd
per office
OFFICE CONSULTANTS CONTRACTUALS
OSEC-Proper 12 7
USEC For Legal Affairs 1 6
USEC for Programs and Projects 1 14
USEC for Muslim Affairs 1 2
USEC for Regional Operations 1 -
Property Division 3 2Information and Communications
Technology
1 9
Physical Facilities Schools and
Engineering Divison (PFSED)
6 231
Communications Unit 6 -
Internal Audit Service 1 5
GSIS Concerns Unit 1 4
Adopt-A-School Secretariat 2 6
Total 36 286
In the case of PFSED, verification disclosed that the functions performed
by the consultants can be provided by the existing regular and contractual
personnel thereat. It was gathered that the 286 contractuals include the 79 ProjectEngineers hired in 2011.
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In the case of Bureaus under the DepEd, the orientation/training, seminar-
workshop, and other similar activities/programs in the different areas of Luzon,
Visayas and Mindanao were found to be within the Agencys primary mandate.
Furthermore, the activities were usually attended by its officers and
selected staff and some of its contractual personnel.
We recommended that Management:
stop the payment of professional fees/honoraria/incentives to officers and
employees performing regular activities, which are within their mandated
functions;
comply strictly with existing rules and regulations on grant of honoraria;
and
institute the refund, without prejudice to the accountability/liability ofthe Agency Head under Section 7 of DBM Circular 2007-1.
NETRC Management commented that:
Services of these personnel are necessary given the magnitude of
programs and projects viz a viz the current manpower complement of the
Department.
Granting of honoraria during the orientation day/testing center preparation
and conduct/administration of the 2011 Philippine Education Placement
Test (PEPT) was authorized per approved authority from the DepEd datedOctober 11, 2011.
Section 50, RA No. 10147 of the GAA for FY 2011 is the basis of
granting the honoraria which states that The respective agencyappropriations for honoraria shall only be paid to the following:
o Those who act as lecturers, resource persons, coordinators and
facilitators in seminars, training programs, and other similar activitiesin training institutions, including those conducted by entities for their
officials and employees wherein no seminar fee are collected from
participants;
o Said activities specifically orientation of personnel involved in
the conduct and administration of the PEPT are similar in nature, thus,
said honoraria can be considered legal and compensatory of the
services rendered.
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The Management has committed to submit the required documents.
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The following are the NETRC Audit Teams rejoinder:
Laws and regulations are created for uniformity and common observance.
Officers of the government are expected to observe and enforce the law.
Any authority or implementing guidelines must be in accordance with
governing laws, or else they can also be held secondarily or primary liableon their actions depending on the circumstances.
Guidelines on the granting of honorarium and for those who are entitled
thereof are very specific, hence, we cannot just conclude any activity byanalogy.
Hiring of legal consultants with no prior approval of OSG and written COA concurrence
19. Hiring of 14 Legal consultants was without prior approval of the OSG and
written concurrence of COA, and considered excessive because of the
existence of 28 OSG lawyers already engaged by the DepEd to address thelegal cases of the agency, thus resulting in incurrence of ineligible
professional fees amounting to P4,063,064.51.
COA Circular No. 98-002 dated June 9, 1998 states:
Public funds shall not be utilized for payment of the services
of a private legal counsel or law firm to represent government
agencies and instrumentalities, including GOCCs and LGUs in
court or to render legal services for them. In the event thatsuch legal services cannot be avoided or is justified under
extraordinary or exceptional circumstances for governmentagencies and instrumentalities, including GOCCs, the writtenconformity and acquiescence of the solicitor General or the
Government Corporate Counsel, as the case may be, and the
written concurrence of the Commission on audit shall first besecured before the hiring or employment of a private lawyer or
law firm.
In CY 2011, the DepEd OSEC hired the services of 14 private lawyers
under the Contract for Legal Consultancy and Services for P4,063,064.51 without
the written concurrence by the COA.
Of the P4,063,064.51 payment, P1,844,333.96 was disallowed in audit
under Notice of Disallowance No. 11-020-101-(11) dated October 18, 2011, while
the balance of P2,218,730.55 was held in abeyance pending resolution of themanagements request for COAs concurrence dated October 17, 2011 to the
contracts of the 13 Legal consultants who were hired by the DepEd in July 2011.
The said request and pertinent documents were returned to management forcompliance of requirements.
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Management explained that:
a. The DepEd, being the biggest government organization in the Philippines,administers 17 regions, 200 divisions, 43,204 Public Elementary and High
Schools and 15,841 public pre-schools, not to mention, the more than
1,000 personnel in the CO.
b. At present, DepEd CO has only three Legal Officers in its Legal Division,
thus, considering the volume of work assigned to them plus the conduct offact-finding investigations, there is an imperative need to hire Legal
Consultants to handle all legal and legislative concerns of the central and
field offices of the Department.
c. The legal services provided by the Legal Consultants cannot be avoided
and is justified under extraordinary and exceptional circumstances. They
are precisely hired to provide consulting services to top officials, to render
legal opinion and advice on all matters affecting the government andpropriety functions of the Department.
d. They serve as Special Prosecutors in Motu Proprio cases and members of
the fact finding investigation committees in various administrative cases
against DepEd officials.
It is worthy to mention that, aside from the 14 private lawyers hired,
records disclosed that the DepEd also engaged the legal services of 28 OSG
Lawyers as the OSG-DepEd Task Force per MOA between the OSG and DepEddated September 28, 2009 to address all the legal problems of the agency. In CY
2011, the DepEd paid P3,148,200.00 in allowances to OSG Lawyers.
We recommended that Management:
review judiciously the need for hiring private lawyers considering thenumber of OSG lawyers already engaged by DepEd;
ensure that all payments to private lawyers are supported both with thewritten conformity of the Solicitor General and the written concurrence
of the COA; and
cause the settlement of the audit disallowance and notice of suspension ormake an appeal with the COA in accordance with the Revised Rules on
the Settlement of Accounts (RRSA).
Non-compliance with RA 9184
20. The DepEd OSEC and Region V did not did not comply strictly with the
requirements of RA 9184 and its IRR in the procurement of goods and services.
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Section 3 of RA 9184 and its IRR states the governing principles on
government procurement. Furthermore, Section 18 of the Revised IRR provides
that specifications for procurement of goods shall be based on relevantcharacteristics and/or performance requirements. Reference to brand names shall
not be allowed.
Review of contracts disclosed several lapses manifesting the procuring
entitys non-adherence to the set standards of RA 9184, among others, as follows:
The brand names of six items procured totaling P1,877,788.00 were
indicated in the Technical Specifications, purchase requests, annual
procurement program and approved budget for the contracts, contrary to
Section 18 of the Revised IRR of RA 9184, and thus precluding otherprospective suppliers-carrying other brands of equipment from
participating in the public bidding, to the prejudice of the government
(Region V);
Non-observance of the prescribed timelines or period of action on
procurement activities where delays were noted from the BAC Resolution
recommending the award of contracts to the LCRB/HRRB orSCRB/SRRB up to issuance of the Notice to Proceed (NTP), as well as
from the date of the bid openings up to issuance of the NTP;
The date of signing by the Head of the Procuring Entity (HOPE) of the
BAC Resolution recommending the award of contracts is not indicated;
thus, it cannot be determined whether the immediate and non-extendible
issuance of the Notice of Award (NOA) complies with the prescribed
period (Section 37.1.3 in relation to Section 37.1.2). While the date ofsigning may be traced from the date of issuance of the NOA, if the
issuance was beyond the prescribed period of seven calendar days whichis non-extendible, it is not traceable whether it is the omission of the
HOPE or that of the Receiving Section;
Bids were not accompanied by a sworn affidavit of disclosure of no
relations signed by all its officers, directors, and controlling stockholders
in case the bidder is a corporation; by all its officers and members in case
of partnership; or by the bidder himself in case of an individual or singleproprietorship; and,
The Tax Clearance, Certificate of PhilGEPS Registration, latest income
and business tax returns were undated. The dates are vital to determinewhether bidders are disqualified for award, and whether bid securities are
forfeited for failure to submit such requirements not within 3 calendar
days from receipt by the bidder of the Notice from the BAC that thebidders have the LCB/HRB.
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We recommended that:
The Procuring Entity and the BAC comply strictly with the requirementsof RA 9184;
Management oblige the BAC to fully discuss in pre-bid conferences allcomponents of the contract to be bidded with approved budget of P1
million or more to give all prospective bidders opportunity to compete
and for the supplemental bids to be properly availed by them; and
Management require the BAC to submit a written justification why thesubject IT Equipment procured, carrying brand names should not be
disallowed in audit.
Management comments and justifications are as
Recommended