OBSERVATIONS AND RECOMMENDATIONS

A. Value for Money Audit

Uncollected Fishpond Lease Rentals in 11 regions P225.778 million 1. The National Government (NG) could have generated an estimated additional income of P225.778 million had the bureau intensified the collection of Fishpond Lease Agreement (FLA) rentals in 11 regions pursuant to the provisions of Fisheries Administrative Order (FAO) No. 197, Series of 2000; thus, depriving the government additional income. FLA is an agreement entered into by and between the Secretary of Agriculture and a qualified fishpond applicant for the use of public land for fishpond development purposes. Areas leased for fishpond purposes shall be no more than 50 hectares for individuals, and 250 hectares for corporation or fisher folk organizations. Any branch of the government, person or association who will engage in fishpond development for scientific research or educational purposes may be granted an area not exceeding ten hectares through a gratuitous permit. The lease shall be for a period of 25 years and renewable for another 25 years. Fisheries Administrative Order No. 197, Series of 2000 provides the rules and regulations governing the lease of public lands for fishpond development. Further, Section 14 of FAO No. 197 prescribes the rates of annual FLA rentals per hectare for years 2000 and thereafter. The rate for CYs 2005 to 2011 is P1,000.00 per hectare or a fraction thereof. Verification of reports submitted by the Regional Field Offices (RFOs) revealed low collection of rentals, as shown in the table below:
RFO I II III IV - A IV - B V VI VII X XII XIII Total Actual Collections P 2,732,574.00 98,400.00 335,950.00 3,352,564.00 2,790,769.00 2,528,340.00 11,106,514.72 842,440.80 178,000.00 856,460.00 P 24,822,012.52 Uncollected Rentals P 6,444,426.00 173,620.00 2,984,670.00 41,631,608.00 Undetermined 79,535,294.00* 37,780,045.65 38,286,646.70 undetermined 5,929,944.30 13,012,024.00 P 225,778,278.65

1.1

1.2

1.3

*April to December 2011 not yet included

50

1.4

Moreover, other observations were noted in the audit of FLA rentals (details in Annex A): Some awardees/lessees who are not from the province, pay their rentals in the Central Office without the regional office being informed; thereby, resulting in the unreliability of the records of outstanding collectibles; provisions of FAO No. 197, series of 2000 regarding the penalties and cancellation of contract for failure to pay rentals were not strictly enforced; no physical inventory of fishponds was conducted to determine its actual condition and existence; collections were not made from some FLA holders due to the fishponds already being titled, foreclosed by banks, occupied by squatters or with court cases. Also, losses were incurred in the operation of fishponds because of natural calamities; and low collection of FLA rentals due to inaccessible payment centers.

1.5

We recommended that management: a. intensify collection of FLA rentals and cancel/terminate lease agreements of lessees who failed to pay the rentals and surcharges for two consecutive years or have committed any of the grounds stated in FAO No. 197 in RFOs I, II, III, IV-A and B, V, VI, VII, X, XII and XIII; and b. require RFO I to coordinate with BFAR Central Office to update the account ledgers of the lessees who paid directly to the latter and to reflect accurately the collection in the two offices.

Fingerlings Dispersal not fully attained in two regions 2. Dispersal of Fish Fingerlings in two regions were not fully attained due to the (a) non-compliance with the Guidelines on the Dispersal/Distribution of Fish Fingerlings and Broodstocks; and (b) lack of regular monitoring to determine the effectiveness of the implemented projects; thus, deprived the intended beneficiaries of the income/benefits derived from the projects. The Fingerlings Dispersal is a continuing project of the BFAR, designed to ensure social-economic upliftment of subsistence of fisherfolk and the private sector through improved aquaculture productivity and substitute income
51

2.1

opportunity. It is being implemented through grants to LGU cooperators and sale to private business-owners. Livelihood and technical assistance is also provided and/or extended in the form of training on proper handling and care of fingerlings and broodstocks. LGUs undertaking fish distribution to backyard fishponds coordinate with BFAR Regional Offices by requesting assistance through filing of Fingerlings Request Forms and provision of the Masterlist of intended beneficiaries, to be liquidated upon the submission of duly signed acknowledgement receipts evidencing acceptance of intended beneficiaries. The municipal/provincial technicians of the BFAR shall validate all requests as to its project viability in the proposed site. Input and technical assistance shall also be rendered by the BFAR fishery stations/Regional Offices with proper monitoring on the culture management of the project. 2.2 For CY 2011, the BFAR RFO VI received an allotment amounting to P545,000.00 and utilized the same for the production and distribution of quality tilapia fingerlings in Regional Outreach Stations (ROS) at Nanga, Pototan, Iloilo and Technology Outreach Stations (TOS) at Malandog, Hamtic, Antique. RFO XIII, likewise, allocated a total budget of P7 million for the Input Assistance or Pipeline Projects and the Livelihood Support for Calamity Affected Fisherfolk in Caraga Region. The amount allocated was used to support calamity affected fisherfolk in Caraga by providing various fishing gears and disperse seaweed propagules, prawn fry and tilapia and fingerlings; rehabilitation of fish sanctuaries and provision of technical assistance to various fisherfolk individuals and organizations. Validation of fingerlings dispersal project accomplishment in RFOs VI and XIII disclosed several deficiencies in the project implementation, discussed as follows: a) non-compliance with the Guidelines on the Dispersal/Distribution of Fish Fingerlings and Broodstocks

2.3

2.4

2.5

In RFO VI, distribution of free fingerlings to private sector for backyard and home consumption projects went beyond the required ceiling of 500 pieces per beneficiary contrary to Section B of Fisheries Office Order No. 71 dated February 18, 2009. It was noted that some request for free fingerlings were not duly approved by the Regional Director and several forms were not duly acknowledged by the recipients. Moreover, recipients of free fingerlings did not provide the BFAR Station with the production data after each cropping for monitoring purposes as required by the above mentioned fisheries office order.

2.6

2.7

52

2.8

In RFO XIII, the Agencys Input Assistance projects and dispersal of tilapia and bangus fingerlings under the Livelihood Support for Calamity Affected Fisherfolk in Caraga Region disclosed that a total of 61 individuals received bangus fingerlings in excess of the limit of 3,000 pieces. The excess ranges from 200 to 12,000 pieces per beneficiary or a total of 240,600 pieces and costing approximately P721,800.00. A total of 34 individuals, also received tilapia fingerlings in excess of the maximum quantity of 5,000 pieces allowed per beneficiary. The excess ranges from 500 to 20,000 pieces or a total of 169,500 pieces and costing approximately P84,750.00. Excess of fingerlings dispersal totalled 410,100 pieces with an equivalent amount of P806,550.00. We recommended that management validate/assess the sites of fish nurseries identified by LGUs to determine/ascertain its suitability and ensure that the fingerlings/broodstocks are given only to qualified fisherfolk/beneficiaries. Management of RFO XIII commented that distribution was delayed due to the late release of funds; hence, at the time of delivery, some of the listed beneficiaries have already stocked their fishpond or fish cages with fish fingerlings prior to BFARs dispersal. They also explained that the beneficiaries who received more than 5,000 pieces of tilapia fingerlings in the province of RFO XIII were representatives of organizations or cooperatives with at least three fish cages which can accommodate 12,000 pieces of fingerlings. b) lack of regular monitoring to determine the effectiveness of the implemented projects

2.9

2.10 2.11

2.12

2.13

2.14

The Memorandum of Agreement entered into by and between BFAR VI, LGUs and cooperators explicitly states that progress reports should be submitted for proper monitoring and evaluation of the projects. Verification disclosed that monthly status/progress reports were not submitted by project cooperators to RFO VI; hence, monitoring and evaluation on the effectiveness of the various Fish Culture Projects were not conducted. We recommended that management monitor regularly the recipient/beneficiaries to check whether they need assistance for sustainability of the project and to address immediately problems that maybe encountered in the implementation of the project.

2.15

2.16

53

Mariculture Park Project not attained in two regions 3. The objectives of the Mariculture Park Project were not attained due to delayed turnover of fish cages in RFO III. Fisheries Office Order No. 317, series of 2006 provided the Implementing Guidelines and Procedures in the establishment and maintenance of Mariculture Park/Zone. The primary objective of the Park is to increase fish production in order to meet the increasing needs of the Filipino people for fish protein. In Region III, the Mariculture Park project, implemented in the province of Aurora, specifically aims to increase production of valuable fish marine species through a sustainable environment on aquaculture technology. As of December 31, 2011, 32 wooden fish cages costing P6,000,000.00 were procured to be used in the Mariculture Park and subsequently donated to LGUs or other government agencies, which were willing to shoulder the feeds to be used in bangus and other fish production. The wooden fish cages were procured starting June 2010 up to September 2011. However, as of December 31, 2011, the wooden fish cages were not yet awarded or issued to the identified beneficiaries and were still stationed and located in Casiguran, Aurora. It was noted that out of the 32 cages containing bangus fingerlings, ten were damaged by the typhoons that occurred in 2011, particularly typhoons Pedring and Quiel. The agency was able to recover and repair six cages. Four fish cages costing P954,684.00, however, were totally destroyed. The remaining 28 cages are still in good condition. Interview with concerned agency officials disclosed that indeed, there was delay in the awarding of the fish cages due to the problem that arose in the selection of beneficiaries because of the financial capabilities of the identified LGUs and barangay beneficiaries with regard to the feed requirements of the fish cages. This problem, however, is being remedied by the concerned elected officials of the province of Aurora in coordination with the BFAR RFO III officials. The delay in the awarding/distribution of the fish cages intended for livelihood opportunities of the people of Casiguran was a clear manifestation that the purchase of the fish cages did not contribute to the attainment of the objectives of this project. Furthermore, if the fish cages are allowed to remain unproductive and be idle it will eventually result to waste of government funds. These might be destroyed again by typhoons and strong winds as the place where these are located are prone to such kind of natural calamities.

3.1

3.2

3.3

3.4

3.5

3.6

54

3.7

We recommended that management in RFO III award/issue the fish cages immediately to the intended beneficiaries. These should not be left idle to deteriorate due to exposure to natural elements and other factors.

Use of funds without approval from the proper agency P3.119 million 4. Utilization of funds totalling P3.119 million for the operationalization of Multi-Species Finfish Hatchery in RFO IV-A was not within the purpose for which these were appropriated contrary to Section 87 of Presidential Decree (PD) No. 1177. Utilization of fund for purposes other than that for which it was appropriated is tantamount to misuse of funds pursuant to Section 87 of PD 1177. The sub-allotment of P10,600,000 was released to BFAR RFO IV-A for the operationalization of Multi-Purpose Hatchery in Unisan, Quezon which was covered by ASA No. 2011-03 dated January 31, 2011. It was noted that disbursements totalling P3,119,077.13 was not within the purpose of the said ASA. Management justified that per MOA signed among BFAR-Central Office (CO), BFAR IV-A and Unlad Foundation at Unisan, the total amount of fund for the Unisan Hatchery project was P6,589,900. BFAR CO released the ASA in the amount of P10,600,000 with an excess of P4,010,100; hence, all other expenses were charged to the excess of allotment. We believe however, that the Unisan Hatchery project is not yet in full operation. Management should seek first the approval from the source agency (BFAR CO) on the use of excess allotments for expenses other than for which it was intended. Without the approved authority, said disbursements are improper charges and that Agency officials shall be made liable for the misuse of the fund. We recommended and management agree to seek for authority from the DBM to utilize the excess allotment for the operationalization of the Unisan Hatchery Project for purpose other than for which it was appropriated. We also recommended that management administer the disbursements of funds arising from ASAs to the intended purposes indicated therein.

4.1

4.2

4.3

4.4

4.5

Unimplemented projects P12.757 million 5. Various projects in RFO VI under the National Fisheries Program totalling P12.757 million were not implemented/completed as of

55

December 31, 2011; hence, the benefits to be derived from the projects were not fully enjoyed by intended beneficiaries. 5.1 The National Fisheries Program being implemented by BFAR is designed to provide for an environment which can support the fisheries industrys sustainable development aimed to: a. Contribute to national food security at all times; b. Ensure the national and sustainable development, management and conservation of fishery and aquatic resources in the region; c. Reduce poverty incidence in the coastal areas; and d. Enhance people empowerment in the fisheries sector 5.2 Total funds amounting to P12,757,304.00 were downloaded to RFO VI in the last quarter of CY 2011 for the implementation of various projects, details are as follows:
ASA No. 010 012 014 Date August 22, 2011 September 13, 2011 October 11, 2011 Name of Project Stock Assessment of Marine Fisheries Status of Portunus Pelagicus in Selected Visayan Sea Mangrove Plantation Projects Purchases of 3,000 units of concreted jackstone structure for deployment of Diwal Growing Areas Technology verification of Organic Tilapia and Milkfish Farming Information and Education Campaign Project Procurement of Patrol Boats in the Province of Iloilo Implementation of various fisheries programs and projects Resource Conservation and Livelihood Support Project to Fisherfolk of Barotac Viejo, Iloilo Conduct of Training and Hiring of COS for Aquasilviculture Projects Amount P 1,335,500 2,300,000 3,147,000

015 018 019 020

November 10, 2011 November 25, 2011 December 2, 2011 December 12, 2011

1,557,000 1,459,254 1,250,000 525,000

022

December 15, 2011

560,000

024 Total

December 29, 2011

623,280 P 12,757,034

5.3

Based on inquiry with management, the Audit Team found that these projects were not included in the Regional Operational Plan for CY 2011 of RFO VI. These should have been implemented in the national level; however, due to lack of time and delays in the schedule, these were instead downloaded to the region.
56

5.4

Further, the dates when these funds were transferred to the region were already near year-end. Hence, the agency did not have much time to fully utilize the funds and implement the projects. The late transfer of funds caused the delays in the execution of the projects and these were unprogrammed in the regional level; hence, cannot be properly put into operation based on the agencys work plan. We recommended that BFAR-CO download the funds for project implementation promptly so that the project can be accomplished based on plans and targets and that the intended beneficiaries can fully enjoy its benefits.

5.5

5.6

Loss due to Indirect Procurement of Gasoline/Diesel - P2.095 million 6. BFAR-CO could have saved a total amount of P2.095 million representing five percent discount for CYs 2007 to 2011 on the procurement of gasoline/diesel had it directly contracted with Shell Philippines, Inc., instead of to Carldril, Incorporated. Section 3.1.A of COA Circular 85-55A dated September 8, 1985 provides that purchase of items from jobbers or middlemen is in violation of government policy. Republic Act No. 9184 or the Government Procurement Reform Act also provides that purchases should be done directly from the suppliers. Analysis of the billing statements attached to the disbursement vouchers showed that the Pilipinas Shell Petroleum Corporation grant a five percent (5%) discount to Carldril, Inc. on petroleum products after deducting value added tax (VAT). Had BFAR directly contracted Pilipinas Shell Petroleum Corporation (Shell) instead of Carldril, Inc., for the provision of its fuel requirements, the five percent discount for CYs 2007 to 2011 or a total of P2,095,379.32 granted to the latter could have been availed of by BFAR, computed as follows.
Period January November 2011 CY 2010 CY 2009 CY 2008 CY 2007 Total Amount of Gasoline/Diesel Paid P 7,260,387.87 5,945,052.87 5,065,398.58 13,737,696.76 9,899,050.32 P 41,907,586.40 5% Discount P 363,019.39

6.1

6.2

6.3

6.4

297,252.64 253,269.93 686,844.84 494,952.52 P 2,095,379.32

57

6.5

Scrutiny of the MOA entered into by and between the BFAR and Carldril, Inc., disclosed the following deficiencies: a. no indication that the contract was awarded in accordance with the prescribed mode of procurement which is public bidding; Carldril, Inc. is just a middleman or an agent of Pilipinas Shell, considering that the products was served by the latter; duration of the contract and the penalty clause/s were not specified/provided therein; and no date of perfection of the contract, only the date notarized was indicated in the MOA which was on March 12, 2007.

b.

c.

d. 6.6

We recommended that management consider contracting directly with Pilipinas Shell Petroleum Corporation or other providers for the petroleum product requirements to avail of the prices most advantageous to the agency, in compliance with the provisions of RA 9184.

B. Financial and Compliance Audit

Unreliable cash balances due to various deficiencies and accounting errors P230.099 million 7. The reported cash account balance totaling P230.099 million were unreliable due to the (a) net overstatement by P6.294 million due to various accounting errors; (b) unliquidated payroll fund of P4.212 million; (c) delayed/non-submission of Bank Reconciliation Statements (BRSs) in BFAR CO, RFOs VI and IX and RFTC IX with cash balance totaling P42.239 million. Audit of the cash accounts revealed accounting errors and deficiencies. a) 7.2 net overstatement of cash accounts P6.294 million

7.1

Section 111 (2) of PD 1445 requires that the highest standard of objectivity and consistency shall be observed in the keeping of accounts to safeguard against inaccurate or misleading information while Section 112 provides that each government agency shall record its financial transactions and operations in conformity with generally accepted accounting principles and in accordance with pertinent laws and regulations.

58

7.3

Audit revealed that the following accounting errors resulted in the net overstatement of the cash account:
Nature of Error Unrecorded interest income Stale checks recorded as outstanding checks Unrecorded Credit Memo Unrecorded disbursement for payroll fund Net Overstatement Over/(Under) statement P (175,334.89) (13,800.00) (32,849.38) 6,515,570.80 P 6,293,586.53

7.4

We recommended that management instruct the OIC, Chief Accountant of BFAR-CO to make the necessary adjusting entries to reflect the correct balances of the affected accounts. b) unliquidated payroll fund already past due P4.212 million

7.5

Section 4.2 of COA Circular 97-002 states that cash advance for salaries, wages, allowances, honoraria and other similar payments shall be equal to the net amount of the payroll for a pay period. Section 5.1 of the same circular states that the same shall be liquidated within five (5) days after each fifteen (15) day/end of the month pay period. Scrutiny of records revealed that the total amount of P4,212,064.76 was already aged more than a month from the day from which it was granted and were already due for liquidation/refund at year-end, as follows:
Office BFAR-CO RFO IV-B Total Due for Liquidation/ Refund P 3,394,483.07 817,581.69 P 4,212,064.76

7.6

7.7

RFO IV-B management assured that the cause of the non-liquidation would be determined and they would require the concerned accountable officers to submit to the Accounting Unit the necessary documents for the liquidation of cash advances for payrolls. BFAR CO management was amenable to the observation and will require strict compliance with COA Circular 97-002 henceforth. We recommended that management instruct the concerned OIC, Chief Accountant to require the accountable officers to liquidate the cash advances for payroll already past due.

7.8 7.9

59

c) 7.10

delayed/non-submission of BRSs

Section 3.2 of COA Circular No. 96-011 dated October 2, 1996 provides that the Accountant shall within ten days from receipt of the Bank Statements, reconcile the same with the General Ledger (GL) and prepare the BRS. Section 3.3 of the same circular requires the Accountant to draw journal vouchers to record all valid reconciling items that require adjustment and correction in the GL, while Section 3.4 requires that the duplicate and quadruplicate copies of the BRS, including paid checks, original copies of debit/credit memos, shall be submitted to the Auditor concerned on or before the 15th of the succeeding month. The reliability of the balance of the Cash in Bank accounts of the Bureau as of year-end with a total of P206.649 million was doubtful due to the delayed/non-submission of BRSs. The following observations were noted regarding the submission of BRS:
Office BFAR-CO RFO VI RFO IX RFTC IX Total Bank Account Local Currency, Current Account Local Currency, Savings Account Local Currency, Current Account Local Currency, Current Account Local Currency, Current Account Book Balance P 27,893,896.04 6,663,369.74 6,992,349.94 643,622.65 45,554.43 P 42,238,792.8 Observation BRS submitted six months or more after the close of the month No BRS prepared by the Chief Accountant

7.11

7.12

7.13

This resulted to unrecorded reconciling items found in the BRSs, which require adjustment. Moreover, errors found were not adjusted before closing the books of accounts at year-end. We recommended that management instruct the concerned OIC, Chief Accountant to regularly and promptly prepare the BRS at the end of each month to identify errors and reconciling items and effect the necessary adjustments, if any.

7.14

Unreliable Due from Officers and Employees account P2.531 million 8. The reported balance of account Due from Officers and Employees as of year-end totaling P2.531 million was inaccurate and unreliable due to the inclusion (a) in the subsidiary ledger (SLs) of BFAR-CO of unreconciled items amounting to P1.493 million; and (b) receivables of P972,872.21 aged more than two years. Section 47 of the Government Accounting and Auditing Manual (GAAM), Volume III provides that documentation of transactions and other significant events should be timely, complete and accurate and should facilitate tracing of

8.1

60

a transaction or event from its occurrence in processing until completion of recording in summary records. 8.2 Records showed that out of the total P2,531,046.79 balance of the Due from Officers and Employees account, P2,450,053.20 or 97% of this amount comes from the books of BFAR CO. However, P1,493,152.99 or 60.94% are classified as E, Unreconciled in the subsidiary ledger. The account also includes receivables of P969,459.01 from a permanent employee of BFAR currently assigned at BFAR Fisheries Regulatory and Quarantine Division (BFAR-FRQD). The amount was charged to him for his non-compliance with the Scholarship Service Contract; hence, salaries and other emoluments paid to him during the school year 2003 2004 were required to be refunded in the letter, by the then BFAR Director dated February 10, 2009. The balance also includes receivables from various BFAR officials and employees totaling P3,413.20 representing personal telephone call charges for the period since June 2006. The total amount of P972,872.21 is the personal liability of the BFAR officials and employees which were already aged more than two years but were not yet fully recovered. We recommended that BFAR-CO management demand the immediate payment of receivables due from BFAR officials and employees, otherwise, consider withholding the salaries and/or other benefits of those who failed to settle such collectibles. Collections were already made on some receivable accounts and demand letters were already sent to officers and employees with personal liabilities. For CY 2012, the total amount of P75,800 was collected from the BFARFRQD employee and the amount of P3,000 is being deducted monthly from his salary to settle the whole amount. Adjusting entries were also made on accounting errors. However, management is finding difficulty in reconciling the beginning balance recorded as E, Unreconciled. Accounting personnel are still in the process of retrieving files to reconcile all data.

8.3

8.4

8.5

8.6

8.7

Misstated Due from NGAs P293.589 million 9. The balance of the Due from NGAs account of P293.589 million was misstated due to the (a) unsupported balances of CY 2005 and prior years purchases of various equipment and supplies from the Procurement Service (PS) totaling P1.254 million; (b) unliquidated/undelivered supplies, materials and equipment by the PS aged one to more than five

61

years in the amount of P31.495 million; and (c) unliquidated NFRDI fund transfers to various NGAs, aged one to three years for projects/programs that were already completed at year-end totaling P1.323 million. 9.1 Audit of the Due from NGAs account disclosed several deficiencies and accounting errors. a) unsupported balances of CY 2005 and prior years purchases of various equipment and supplies from the PS P1.254 million

9.2

Section 47 of the GAAM, Volume III provides that documentation of transactions and other significant events should be timely, complete and accurate and should facilitate tracing of a transaction or event from its occurrence in processing until completion of recording in summary records. The balance of the Due from NGAs account is broken down as follows:
Office Central Office RFO III RFO IV-A RFO V RFO X RFO XII NFRDI Total Amount P 283,144,762.70 3,433,589.23 84,549.43 1,025,041.40 77,940.00 33,425.96 5,789,323.53 P 293,588,632.25

9.3

9.4

Out of the P283,144,762.70 recorded in the books of the BFARCO, P37,211,621.24 or 13% represents payment of purchases of various equipment and supplies from the PS. Accounting records showed that as of year-end, total deposits of P59,425,512.49 was made by the BFAR to the PS for the payment of office and IT equipment, various office supplies and materials, etc., for the official use of the Bureau. The balance in CY 2005 and prior years of P1,253,877.17 is not supported with a breakdown or list of items; hence, the validity of the same is doubtful. We recommended that BFAR-CO management (a) require the OIC, Property/Supply Officer to reconcile with the PS the balances of deposits from CY 2005 to CY 2011; (b) instruct both the Property Officer and the OIC-Chief Accountant to update their records and to effect adjustments of unrecorded deliveries, if any. Make representation with the PS to refund the amount of the corresponding undelivered items, if there are any.

9.5

9.6 9.7

9.8

62

b)

unliquidated/undelivered balance supplies, materials and equipment by the PS aged one year to more than five years - P31.5 million

9.9

Section 112 of PD 1445 provides that each government agency shall record its financial transactions and operations in conformity with generally accepted accounting principles and in accordance with pertinent laws and regulations. Moreover, sound internal control requires that financial transactions should be well documented in order to, among others, establish their validity/reliability and adherence to prescribed policies and procedures. Of the total audited balance of P37,232,291.24, 84.59% or P31,495,456.46 was aged one to more than five years. Aging of the account is presented as follows:
Deposits P5,896,469.36 18,238,622.55 18,274,258.60 3,246,578.07 2,842,577.71 6,883,603.71 4,043,402.49 P59,425,512.49 Percentage Balance as of 12.31.2011 P5,736,834.78 15,902,419.44 7,663,947.41 1,042,978.32 773,029.86 4,859,204.26 1,253,877.17 P37,232,291.24 100% P5,736,834.78 15.41% P15,902,419.44 42.71% P7,663,947.41 P6,675,212.44 P31,495,456.46 20.58% 17.93% 84.59% < 1 year P5,736,834.78 P15,902,419.44 P7,663,947.41 P1,042,978.32 773,029.86 4,859,204.26 P1,253,877.17 P1,253,877.17 3.37% 1 year to 2 years > 2 years to 3 years > 3 years to 5 years > 5 years

9.10

9.11

CY 2011 2010 2009 2008 2007 2006 2005 & PYs Total

9.12

The significant amount of balances of deposits to PS is due to the delayed recording of the deliveries and/or non-deliveries of items procured by the Bureau from PS. Due to limited data/information of these procurements, validation as to the accuracy and completeness of recording of acquired PPEs/supplies was difficult. Liquidations/deliveries made by PS were not immediately credited to the account of PS. There were delays in recording of more than six months to almost a year after the deliveries have been made. Control over the deposits made to PS was weak due to lack of coordination between the accounting section and property section as well as the FIMC who is in-charge of the information technology system of the BFAR. There was also no monitoring of the status of the undelivered supplies, materials and equipment to update the account with PS. Further verification disclosed that information as to the check number, official receipts and agency procurement request were not indicated in the particular section of the JEV when recording the liquidation to properly identify what particular deposit it pertains to.

9.13

9.14

9.15

63

9.16

We recommended that BFAR-CO management instruct the Property Officer to prepare regularly and on time all liquidation reports pertaining to the deliveries made by PS to avoid accumulation of balances and to coordinate with the Accounting Unit to properly establish the correctness of the balances appearing in the books of account and check all records if all deliveries have been taken up in the books. In BFAR CO, management commented that the Accounting Section will make proper coordination with the Property Unit to reconcile the Due from NGAs PS account. Liquidation reports are now being prepared for those delivery receipts which were in the possession of the Property Unit and will forward the same to the Accounting Section for proper recording. c) unliquidated NFRDI fund transfers to various NGAs P1.323 million

9.17

9.18

COA Circular No. 94-013 provides the Rules and Regulations in the Grant, Utilization and Liquidation of Funds Transferred to Implementing Agencies (IA).Paragraph 4.6 states that Within ten (10) days after the end of each month/end of the agreed period for the Project, the IA shall submit the Report of Checks Issued (RCI) and the Report of Disbursement (RD) to report the utilization of the funds. Only actual project expenses shall be reported. The reports shall be approved by the Head of the IA. Fund transfers made by NFRDI to various national government agencies (NGAs) were for the implementation of various fishery programs/projects of the Bureau which was debited to Due from NGAs account in the books of BFAR. The unliquidated fund transfer made by the NFRDI as of year-end amounted to P5,789,323.53, as shown below:
Agency Procurement Services Philippine Council for Aquatic and Marine Research and Development (PCAMRD) Three Summit Proceedings Aklan State University Various BFAR Regional Field Training Centers Various BFAR Regional Field Offices Total P Amount 31,053.41 32,857.50 152,535.00 178,490.00 2,360,924.65 3,033,462.97 P5,789,323.53

9.19

9.20

Aging of the total balance of NFRDI of P5,789,323.53 is shown below:

Balance as of 12.31.2011 P5,789,323.53 100% Less than 1 year P4,994,868.34 86.3% 1 year to 2 years P572,287.69 9.9% Over 2 years to 3 years P222,167.50 3.8%

9.21

Further verification disclosed that although 86.3% or P4,994,868.34 of the unliquidated balances were aged less than a year, a total of P528,825 were
64

already due for liquidation considering that the projects/programs were already completed as of year-end, details shown below:
Check Agency/Office RFTC VII RFO 2 Total Date 08.23.2011 09.30.2011 No. 2223714 2224104 Amount of Fund transfer P199,825.00 329,000.00 Duration of Projects August 22-26, 2011 October 4-7, 2011 Balance as of 12.31.2011 P199,825.00 329,000.00 P528,825.00

9.22

Considering the lapse of time and the fact that the fund transfers are aged more than a year to more than five years, the total amount of P1,323,280.19 (P572,287.69+P222,167.50 + P528,825.00) should have been liquidated by the IAs. The accuracy of the account balance is therefore affected and proper accounting could not be made due to the IAs non-compliance with the required submission of Report of Disbursements and/or Fund Utilization Report with supporting documents to account for the utilization of said transferred fund. We recommended that NFRDI management instruct the OIC-Chief Accountant to request the concerned IAs to submit their audited liquidation reports and/or return the unused fund to the NFRDI particularly those programs/projects that were already completed and make the necessary adjustments to reflect the correct balances of the affected accounts.

9.23

9.24

Incorrect Due from NGOs/POs P35.258 million 10. The balance of the Due from NGOs/POs account of P35.258 million was incorrect due to the (a) net overstatement of P2.937 million due to accounting errors affecting the Southeast Asian Fisheries Development Center (SEAFDEC) account; (b) expended fund transfers to SEAFDEC aged one year to more than five years but remained unliquidated as of year-end totaling P10.658 million; and (c) unliquidated fund transfers made by NFRDI totaling P283,122.50 aged one year to three years. Section 112 of PD 1445 provides that each government agency shall record its financial transactions and operations in conformity with generally accepted accounting principles and in accordance with pertinent laws and regulations. Section 5.4 of COA Circular 2007-001 dated October 25, 2007 provides that the NGO/PO shall submit the final Fund Utilization Report certified by its Accountant and approved by its President/Chairman within 60 days after the completion of the project. This shall be verified by the Government

10.1

10.2

65

Organizations (GO) internal auditor and shall be the basis of the GO in recording the fund utilization in its books of accounts. 10.3 The Due from NGOs/POs account is broken down as follows:
Office Central Office NFRDI Total Amount P34,739,119.20 519,372.50 P35,258,491.70

10.4

Review of the Due from NGOs/POs account disclosed accounting errors and deficiencies, as follows: a) net overstatement due to accounting errors affecting the SEAFDEC account P2.937 million

10.5

Analysis of SEAFDECs account revealed an overstatement of P2,937,075.51, as shown below:

Period Covered CY 2009 CY 2009 Nature Unrecorded liquidation Overstatement of recorded liquidation of fund transfer granted per check no. 720201 dated April 7, 2009 250,000.00 187,075.51 Over/(Under) statement P3,000,000.00

As recorded Should be Net Overstatement

(62,924.49) P2,937,075.51

10.6

We recommended that BFAR-CO management instruct the OIC-Chief Accountant to make the necessary adjusting entries to correct the overstatement of P2.937 million. The overstated recorded liquidation for SEAFDEC of P62,924.49 was already adjusted per JEV No. 2012-01-001936 dated January 30, 2012, while the unrecorded liquidation report amounting to P3 million was already credited to the account of SEAFDEC per JEV No. 2012-04-005100 dated April 1, 2012. b) expended fund transfers to SEAFDEC aged one year to more than five years P10.658 million

10.7

10.8

Out of the total fund transfers of P26.858 million granted by BFAR to the SEAFDEC, only 31.28% or P8,400,115.51 were liquidated leaving an unliquidated balance of P18,457,846.75 as of December 31, 2011.

66

10.9

Aging of the remaining unliquidated balance of P18,457,846.75 as of December 31, 2011 is shown below:
Age More than five years More than two year but less than three years One year to two years One year One year to more than five years Eight months Five months Current Total Unliquidated Fund Transfer P 435,000.00 62,924.49 5,159,922.26 5,000,000.00 10,657,846.75 2,800,000.00 5,000,000.00 7,800,000.00 P 18,457,846.75 % to Total 2.36% 0.34% 27.95% 27.09% 57.74% 15.17% 27.09% 42.26% 100.00%

10.10 The accumulation of unliquidated fund transfers was due to the continuous release of additional funds by BFAR to the SEAFDEC even if the previous releases were not yet liquidated by the latter. Moreover, BFAR failed to exert efforts to compel and require SEAFDEC to settle and account for the fund releases as required, nor identify the reasons of the failure of the SEAFDEC to liquidate the fund transfers. 10.11 Due to the failure of SEAFDEC to liquidate the fund transfer on time, the Due from NGOs/POs account was not credited for the disbursements of fund transfers; thereby, overstating the total reported receivables of BFAR as at year-end. Moreover, expenses were not recognized during the period it was incurred which is in violation of Section 4, Chapter 2, Volume I of the NGAS Manual. 10.12 The expenses incurred by SEAFDEC out of the unliquidated fund could not be fully evaluated and accounted for as to its validity, necessity or usefulness to the project for lack of liquidating documents as basis for evaluation. 10.13 Inquiry from the accounting personnel revealed that the liquidation report for fund transfer granted in CY 2005 in the amount of P435,000 had already been submitted but not yet credited to the account of SEAFDEC due to lack of supporting requirements. 10.14 We recommended that BFAR-CO management monitor the project implementation and request SEAFDEC to submit the liquidation documents and/or refund unused balances of fund transfers for completed projects particularly those aged more than one year; and stop the release of additional funds until previous releases are fully liquidated.

67

c)

unliquidated fund transfers made by NFRDI aged one year to three years P283,122.50

10.15 The outstanding balance of Due from NGOs/POs on NFRDI as of December 31, 2011 totaling P519,372.50 is broken down as follows:
Agency Kaibigan Dagat Calamina, Inc. The Worldfish Center Total Amount P283,122.50 236,250.00 P519,372.50 Percentage 54.51% 45.49% Age Less than a year Over 2 years to 3 years

10.16 Considering the lapse of time and the fact that the fund transfers are aged more than a year to more than five years, the total amount of P10,940,969.25 (P10,657,846.75 + P283,122.50) should have been liquidated by the IAs. 10.17 We recommended that BFAR-CO management thru NFRDI management to instruct the OIC-Chief Accountant to require the concerned NGO/PO to submit audited liquidation reports and/or return the unused fund to the NFRDI particularly those programs/projects that were already completed and make the necessary adjustments to reflect the correct balances of the accounts.

Overstatement of Due from National Treasury and Due to National Treasury Accounts P6.218 million 11. The reported balances of the accounts Due from National Treasury of P52.053 million and Due to National Treasury of P83.707 million were both overstated by P6.199 million and P6.218 million, respectively, due to the erroneous recording of remittances of BFAR-CO to the Bureau of Treasury under Fund 151. Fund 151 was set-up as a Special Account in the General Fund in November 4, 2009 for the Wildlife Management Fund pursuant to Fisheries Administrative Order No. 233, series 2010. This fund shall be used to record collections of fees, charges, fines, penalties and other revenues generated from wildlife related activities and the same to be remitted to the Bureau of Treasury (BTr). A Special Budget Request to the Department of Budget and Management (DBM) shall be made to withdraw the amount to be used exclusively for expenditures related to the rehabilitation or restoration of habitats affected by acts committed in violation of RA 9147 otherwise known as the Wildlife Resources Conservation and Protection Act.

11.1

68

11.2

As of December 31, 2011, the only transactions that were recorded under Fund 151 are collections and remittances with the following journal entries:
As Recorded Particulars Cash - Collecting Officer Due to National Treasury To record collection of fees, charges, fines, penalties and other revenues Due from National Treasury Cash - Collecting Officer To record remittance of collections Debit xxx xxx Credit Should be Particulars Cash - Collecting Officer Due to National Treasury To record collection of fees, charges, fines, penalties and other revenues Due to National Treasury Cash - Collecting Officer To record remittance of collections Debit xxx xxx Credit

xxx xxx

xxx xxx

11.3

It can be observed in the preceding entries that the account Due to National Treasury was credited for collections; however, it was not debited upon remittance. This caused the account to accumulate to P6,218,088.37. This amount represents liabilities/payables, which were already remitted to the BTr. The Due from National Treasury account was erroneously debited instead of the Due to National Treasury account which caused its overstatement by P6,199,506.37. This should not have been debited to represent receivables from the BTr since the submission of a Special Budget request as supported by a list of collections does not guaranty that the total amount collected and remitted will be granted upon said request. The difference of P18,582.00 (P6,218,088.37 less P6,199,506.37) which represents unremitted collections was also understated due to understatement of collections in 2010 by P2,150 and understatement of deposits by P118. We recommended that BFAR-CO management instruct the OIC, Chief Accountant to make the necessary adjusting entries to properly reflect the remittance of collections to the BTr and record the net understatement of Due to National Treasury account. Adjustments had already been made in March 2012 per JEV Nos. 2012-03002252; 2012-03-0022254; 2012-03-00290 and 2012-03-000291.

11.4

11.5

11.6

11.7

Understated Receivables Disallowances/Charges account P69.458 million

12. The reported balance of the account Receivables - Disallowances/Charges of P69.458 million was understated due to an unrecorded disallowance of P7.842 million in BFAR-CO.

69

12.1

Section 22.6, Chapter V of COA Circular No. 2009-006 dated September 15, 2009 Prescribing the use of the Rules and Regulations on Settlement of Accounts provides that the Chief Accountant shall, on the basis of the Notice of Finality of Decision (NFD), record in the books of accounts, the disallowance and/or charge as a receivable. In BFAR CO, Notice of Disallowance (ND) No. 2005-018 dated April 22, 2005 was issued on the payment to Subic International Air Charter, Inc. and V.G. Productions for airplane usage and aviation fuel, and radio airings for BFARs information campaign, respectively, amounting to P7,842,125.54. An appeal was made by the Bureau, however, this was subsequently denied under LSS Decision No. 2009-258 dated June 23, 2009 and the denial was sustained under LSS No. 2010-007 dated January 19, 2010, confirming the finality of the disallowance. Review of the pertinent documents revealed that said disallowance was not recorded in the books despite, the disallowance became final and executory since CY 2010. This understated the account Receivables Disallowances/Charges and understated the Government Equity account by the said amount. We recommended that management instruct the OIC, Chief Accountant to record the disallowance of P7,842,125.54.

12.2

12.3

12.4

12.5

Unreliable Advances to Officers and Employees account P30.183 million 13. The reported balance of the account Advances to Officers and Employees of P30.183 million was unreliable due to the (a) overdue unliquidated cash advances for more than 90 days amounting to P15.954 million; and (b) various accounting errors resulting to a net overstatement of P160,315.37 in BFAR-CO. These are in violation of Section 89 of PD 1445, COA Circular 97-002 and Section 4.a of the NGAS Manual. Audit of the account Advances to Officers and Employees revealed the following: a) 13.2 overdue unliquidated cash advances P15.954 million

13.1

Executive Order No. 248 provides that cash advances for travel should be liquidated within 60 days after the officials return to the Philippines in case of official travel abroad, or within 30 days of his return to his permanent official station. Further, COA Circular No. 97-002 states that cash advances

70

for operating requirements shall be liquidated as soon as the purpose for which it was granted is achieved. 13.3 With the lapse of time, the cash advances should have been liquidated by the accountable officers. The expenses charged to these cash advances were not recorded/recognized during the period when they were incurred due to lack of liquidation documents contrary to Section 4.a Chapter 2 of the Manual on NGAS. Audit of account Advances to Officers and Employees showed unliquidated balance of P30,183,055.46 as of December 31,2011, summarized as follows:
Agency Central Office RFO I * RFO CAR RFO IV-A * RFO IV-B RFO V RFO VI RFO VII RFO VIII RFO IX RFO X RFO XI RFO XII RFO XIII * RFTC II * RFTC IV RFTC V RFTC VII RFTC VIII RFTC IX RFTC XI NFRDI Total Amount P 15,649,109.60 350,755.00 4,000.00 1,267,298.73 721,521.00 2,620,182.11 422,977.60 86,691.26 476,921.35 3,000.00 2,258,484.51 900,539.46 315,985.00 2,118,782.90 391,316.60 83,922.00 99,812.20 11,623.02 19,960.00 338,490.00 96.00 2,041,587.12 P 30,183,055.46 100.00% Less than 90 days P 5,783,910.17 4,000.00 414,045.00 539,825.88 136,588.60 2,989.32 279,071.66 3,000.00 841,843.24 621,109.00 269,525.00 91-365 days P 4,217,621.26 40,098.00 248,189.06 69,165.00 83,701.94 191,324.69 579,057.00 372,419.00 46,460.00 Over 1 year P 5,647,578.17 267,378.00 1,832,167.17 217,224.00 6,525.00 837,584.27 248,690.00 -

13.4

83,922.00 99,812.20 19,960.00 338,490.00 96.00 1,004,832.00 P 10,443,020.07 23.86%

Percentage *No data submitted

11,623.02 925,329.16 111,425.96 P 6,773,365.11 P 9,180,195.59 P 15,953,560.70 22.44% 30.42% 52.86%

13.5

Out of the reported Advances to Officers and Employees, P15,953,560.70 or 52.86% is already more than 90 days. The balance in BFAR-CO also includes unliquidated cash advances of the former BFAR Director amounting to P77,732.84 representing cash advance for foreign travel which was not liquidated prior to his retirement despite the issuance of AOM No. 11-025 dated August 22, 2011.

71

13.6

The former BFAR Director was able to secure a clearance from the Accounting Section despite having unliquidated cash advance. The Accounting Section should not have cleared the said Officer or this could have also been deducted on his claim of terminal leave. We recommended that management instruct the Accounting Section to demand immediately the liquidation of the long outstanding cash advances and the immediate refund of the unused cash advances from the concerned accountable officers. b) net overstatement due to various accounting errors P160,315.37

13.7

13.8

Pursuant to Accounting Circular No. 2006-001 dated November 9, 2006, Cash advances granted for travel and other special time-bound undertaking shall be accounted for as Advances to Officers and Employees to establish the accountability of the recipient. This shall be liquidated or settled immediately after the travel or completion of the undertaking for which it was granted. Hence, the account is credited when the accountable officer submits a complete set of liquidating documents. BFAR-COs balance of the account was overstated by a total of P160,315.37 due to the following accounting errors:
Nature of Error As Recorded Advances to Officers and Employees Should Be Advances to Officers and Employees Over/(Under) statement P (1,132.90)

13.9

Overstatement of recorded liquidation reports for traveling expenses Amount recorded Should be Understatement P408,643.35 407,510.45 P (1,132.90)

Set-up of Petty Cash Fund erroneously recorded as Advances to Officers and Employees Erroneous recording of refund of petty cash Erroneous recording of refund of cash advance Erroneous recording payroll fund of refund of

Advances to Officers and Employees Advances to Officers and Employees Payroll Fund Advances to Officers and Employees Advances to Officers and Employees

Petty Cash Fund

200,000.00

Petty Cash Fund Advances to Officers and Employees Payroll Fund Advances to Officers and Employees

(5,722.84) 3,346.46 (8,225.00) (27,950.35)

Double recording of refund of unused cash advance Amount recorded Should be Understatement Net Overstatement P(55,900.70) (27,950.35) P(27,950.35)

P 160,315.37

72

13.10 We recommended that management direct the OIC-Chief Accountant to prepare adjusting entries of the affected accounts. Unreliable Inventory account P94.452 million 14. The balance of the Inventory accounts totaling P94.452 million was unreliable due to the unreconciled difference between the accounting records and the inventory reports totaling P2.249 million. Section 43 of the NGAS Manual Volume I prescribes the perpetual inventory of supplies and materials wherein regular purchases shall be recorded under the inventory account and issuances thereof shall be recorded based on Report of Supplies and Materials Issued (RSMI). The Accounting Unit and the Property Office shall maintain Supplies Ledger Cards (SLC) and Stock Cards (SC), respectively. The balance in quantity per SC should always reconcile with the SLC of the Accounting Unit. Section 65 of the Manual on NGAS Volume II requires the preparation and submission of the Report on Physical Count of Inventories (RPCI) which shall be used to report the physical count of supplies by type of inventory as of a given date. It shows the balance of inventory items per cards and per count and shortage/overage, if any. Comparison of the inventory account balances in RFOs IV-A and B as of December 31, 2011 between the inventory reports and accounting records showed a difference of P2,249,283.07 due to failure to reconcile both records, as follows:
Office RFO IV-A Inventory Account Office Supplies Accountable Forms Agricultural Supplies Office Supplies Accountable Forms Agricultural Supplies Per Books P2,019,615.99 25,785.00 1,528,789.42 159,559.10 30,600.00 599,131.00 Per Inventory Report P997,810.00 23,130.00 927,304.78 163,065.54 9,900.00 Difference P1,021,805.99 2,655.00 601,484.64 3,506.44 20,700.00 599,131.00 P2,249,283.07

14.1

14.2

14.3

RFO IV-B Difference

14.4

We recommended that management instruct the Property and Accounting Officers to exert efforts to reconcile the accounting and property records to reflect the correct inventory account balances in the financial statements.

Deficiencies in the release of the Fishery Loan and Guarantee Fund - P100 million 15. Various deficiencies were noted in the release of funds by BFAR - CO to the Land Bank of the Philippines (LBP) amounting to P100 million
73

representing trust deposit as authorized by Section 110 of Republic Act No. 8550. Moreover, the Audit Team was not furnished with the copy of the Implementing Rules and Regulations for the said project/program. This was also erroneously recorded as Due from GOCCs instead of Guaranty Deposit, resulting to overstatement and understatement of the said accounts, respectively. 15.1 A Trust Agreement was entered into by and between the BFAR CO represented by the BFAR National Director and LBP represented by Atty. Felix L. Manlangit, Vice President/Officer-in-Charge pursuant to Section 110 of Republic Act No. 8550 otherwise known as The Philippine Fishery Code of 1998 - An Act Providing for the Development, Management and Conservation of the Fisheries and Aquatic Resources, Integrating All Laws Pertinent Thereto and for Other Purposes quoted as follows: Section 110.Fishery Loan and Guarantee Fund Pursuant to Section 7, Article XIII of the Constitution, there is hereby created a Fishery Loan and Guaranty Fund with an initial of One hundred million pesos (P100,000,000.00), which shall be administered by the Land Bank of the Philippines. The fund shall be made available for lending to qualified borrowers to finance the development of the fishery industry under a program to be prescribed by the Department. For the same purpose, the Department may seek financial assistance from any source and may receive any donation therefrom. 15.2 A transfer of fund was made by the Bureau to Land Bank of the PhilippinesTrust Banking Group (LBP-TBG) covered by Check No. 939096 dated December 22, 2011 in the amount of P100 million, however, the account Due from GOCCs was debited instead of Guaranty Deposit. The amount is a guarantee fund up to 100% to cover principal loan exposures of LBP against the risk of default of borrowers in accordance with the IRR We noted that the following information and/or documents were not provided/submitted: a. Implementing Rules and Regulations (IRR) jointly approved by the LBPTBG and BFAR and mechanics of the project; b. Mechanics on the implementation of the project by the LBP;

15.3

74

c. Provision for the accounting entry relative to the transfer/remittance of fund by BFAR to LBP-TBG and creditor if ever and the corresponding accounting entry to be made by LBP-TBG in its books of accounts; d. Approving authority of the loan to be granted; e. Composition of the Governing Board and copy of Resolutions, if any. f. Signatory and/or authorized approving officials on all transaction made by LBP-TBG; and g. Under Section 1 of Article II of subject Trust Agreement, the LBP is given the discretionary power to invest and reinvest a portion of the Fund in government securities and/or open and maintain a saving account. Section 110 of RA 8550, does not give the LBP said power except to administer the said fund for lending purposes to qualified borrowers to finance the development of fishery industry. 15.4 We recommended that the OIC Chief Accountant adjust the accounts by debiting Guaranty Deposit account and crediting Due from GOCCs. Moreover, furnish the Audit Team with a copy of the IRR to properly evaluate the transactions. Reclassification of account had already been made in March 2012 per JEV No. 2012-03-002255. Preparation of the IRR is now on it final stage.

15.5

Overstatement of Other Prepaid Expenses P24.908 million 16. The Other Prepaid Expense (OPE) account with a balance of P39.371 million was unreliable due to the (a) unrecorded delivery of Gasoline, Oil and Lubricants (GOL) amounting to P24.775 million; and (b) overstatement of P132,470.18 due to various accounting errors. Debits to the Other Prepaid Expenses account represent prepayment made to suppliers of items prior to delivery. Section 61 of the NGAS Manual, Volume III states that account Other Prepaid Expenses (165) is used to record other prepaid expenses not included in any specific prepaid accounts. This account is credited for the expired portion of the other prepaid expenses at the end of the accounting period. Verification of the abovementioned account disclosed that the Other Prepaid Expense account is overstated by P24,907,555.04 due to the following:

16.1

16.2

16.3

75

a)

overstatement due to unrecorded delivery of GOL aged more than a year P24.775 million

16.4

In BFAR-CO and RFO X, P38,227,408.94 or 97% of the total balance of the OPE account represents procured GOL; P24,775,084.86 or 65% of which represents unrecorded delivery of items for more than a year, presented as follows:
Office BFAR-CO Year 2011 Prior years Total Payments P 13,836,120.43 159,737,808.68 173,573,929.11 Total Recorded Deliveries P 561,451.15 135,273,012.65 135,834,463.80 Other Prepaid Expenses for Gasoline, Oil and Lubricants P 13,274,669.28 24,464,796.03 37,739,465.31

RFO X

2011 Prior years

177,654.80 310,288.83 487,943.63 14,013,775.23 160,048,097.51 P174,061,872.74

177,654.80 310,288.83 487,943.63 13,452,324.08 24,775,084.86 P38,227,408.94

Total

2011 Prior years Total

P 561,451.15 135,273,012.65 P135,834,463.80

16.5

We recommended that management require the concerned division/section chief to submit the required documents to the Accounting Unit and the OIC Chief Accountant to record the delivery upon reconciliation with the records of the concerned division. Management already instructed the unit/personnel who is in-charge in the procurement of gasoline to reconcile their records with the balance appearing in the accounting record and make necessary adjustment. To date, delivery of gasoline, oil and lubricants amounting to P4,855,183.29 was already recorded in the books in January 2012 per JEV No. 2012-01-002132. b) overstatement due to various accounting errors P132,470.18

16.6

16.7

Review of the Other Prepaid Expense account disclosed an overstatement of P132,470.18, as follows:
Office/Region CO Nature Erroneous computation of expired portion of prepayments IV-B Unrecorded expired portion of prepayments Total Overstatement Amount P 56,470.18 76,000.00 P132,470.18

16.8

Prepayments for various procurements of GOL and maintenance and service agreements were not adjusted at the end of the year to reflect expiration and consumption contrary to Section 61 of the NGAS Manual Volume III.

76

16.9

We recommended that management instruct the Accounting Unit to adjust accordingly the expired portion of the Other Prepaid Expenses account.

Unreliable balance of Property, Plant and Equipment accounts P3.008 billion 17. The balance of the Property, Plant and Equipment accounts with a book balance of P3.008 billion could not be relied upon due to the (a) net overstatement due to various accounting errors totaling P665.907 million; (b) unreconciled difference between the accounting records and the Report on the Physical Count of PPE (RPCPPE) of P24.175 million; and (c) non-submission of the RPCPPE with a book balance of P2.043 billion. In addition, PPE ledger cards were not maintained by the accounting unit and Acknowledgement Receipts for Equipment (ARE) were not renewed every three years or when there was a change in accountability. a) 17.1 overstatement due to various accounting errors P665.907 million

Section 112 of PD 1445 provides that each government agency shall record its financial transactions and operations in conformity with generally accepted accounting principles and in accordance with pertinent laws and regulations. Audit of the PPE accounts of the bureau revealed the following errors:
Observation Net understatement in the recorded accumulated depreciation Non-recording of accumulated depreciation Non-dropping of disposed PPE from the books of accounts Small expendable items recorded as PPE instead of Inventory Unrecorded donated PPE from Japan International Cooperation Agency (JICA) Unrecorded land, land improvements, office buildings and other structures Total Overstatement Offices Affected Central Office NFRDI Central Office RFO III NFRDI RFO VI RFO XII Overstatement P 658,958,206.61 1,278,066.53 355,230.71 5,315,771.95 Understated by undetermined amount Understated by undetermined amount P 665,907,275.80

17.2

17.3

We recommended that management instruct the OIC, Chief Accountant to re-compute the recorded Accumulated Depreciation in the books and make the necessary adjustments and to drop from the books of account the recorded PPE which were already disposed, donated, transferred or sold; make the necessary representation to the proper authorities regarding the titling of untitled lands and to make the proper adjustments in the books of accounts.

77

b)

unreconciled difference between the balances per book and the RPCPPE in three regions P24.175 million

17.4

Section 43 of the NGAS Manual Volume I requires that the Accounting Unit shall maintain Property, Plant and Equipment Ledger Cards (PPELCs) for each category of PPE. For check and balance, the Property and Supply Office shall maintain Property Cards (PCs) for PPE. The balance in quantity per PC should always reconcile with the PPELCs of the Accounting Unit. Comparison of the balances appearing in the RPCPPE submitted by the Property Unit and the balance of PPE accounts recorded in the books disclosed a discrepancy of P24,174,993.96 in three regions, as follows:
Region RFO IV-A RFO IV-B RFTC XI Total Per Books P 59,897,316.72 68,230,522.04 16,133,188.28 Per RPCPPE P 55,712,613.15 49,633,736.91 17,526,693.54 Difference P4,184,703.57 18,596,785.13 1,393,505.26 P24,174,993.96

17.5

17.6

We recommended that management require the Property and the Accounting Units to reconcile periodically the RPCPPE with the accounting records for a reliable and accurate balance of the assets of the agency. c) non-submission of RPCPPE in BFAR-CO and four Regional Offices

17.7

Section 66 of the Manual on NGAS requires the submission of the RPCPPE. This shall be used to report on the physical count of PPE items by type as of a given date. It shows the balance of property and equipment per cards and per account and shortage/overage, if any. This report shall be submitted yearly to the Office of the Auditor not later than January 31 of each year. It was noted that in BFAR Central Office and four regions did not submit the RPCPPE contrary to the foregoing provision.
Region BFAR-CO PPE Balance per Book P1,698,265,613.58 Remarks Actual physical count of PPE is already on-going in some National Centers. Management reconstituted the Property and Inventory Committee per Special Order No. 16 dated 6 October 2011, however, as of date, no physical inventory was undertaken. The Inventory Committee conducted the inventory of government property of RFO X sometime in September 2010 to December 2010, but encoding and reconciling the reports is still on-going. Physical count is still on-going.

17.8

RFO VI

80,363,660.37

RFO X RFO XI

91,616,903.06 104,460,849.48

78

Region RFO XIII Total

PPE Balance per Book 68,607,435.89 P2,043,314,462.38

Remarks Inquiry from the management revealed that they have not conducted physical inventory for a number of years and they could not even recall the last inventory conducted.

17.9

Non-submission of this report makes the recorded assets in the abovementioned offices doubtful since there is no report of physical count to validate the existence of the reported PPEs as of year-end.

17.10 We recommended that management instruct the concerned Property Officer to conduct physical inventory of all PPEs, and to submit the RPCPPE as basis for the reconciliation with the accounting records. 17.11 There were also other observations in RFO IV-A and B, as follows:
Region RFO IV-A and IV-B Observation PPELCs were not maintained in the accounting unit, which is inconsistent with Section 43 of the Manual on the NGAS contributing to the non-systematic recording and monitoring of the inventories and items of PPE. Absence of the updated ledger cards affected the determination of the completeness of the agencys costs of PPE items. AREs were not renewed every three years or whenever there was a change of accountability, which is not in accordance with the procedures in the requisition and issuance of equipments resulting in the poor monitoring of their existence and custodianship contrary to the Manual of NGAS, Vol. II Appendix 53.

RFO IV-B

17.12 We recommended that management require the Accountant to maintain and update the PPELCs in compliance with Section 43 Volume I of the Manual on the NGAS; and direct the Property and Supply Unit to cause the renewal of the AREs every January of the third year after issue or whenever there was a change of accountability, determine the end-users of the equipment covered by AREs issued to former employees already deceased as well as those separated from the service; and issue the corresponding AREs to end-users. 17.13 Management commented that the ledger cards were not updated due to manpower constraints. Overstated Due to Officers and Employees account P21.031 million 18. The account Due to Officers and Employees of P21.031 million was overstated by P9.553 million because of various accounting errors. Analysis of the account in BFAR CO revealed that liabilities were set-up for obligations to agencys personnel; however, the corresponding payment was
79

18.1

not debited to the Due to Officers and Employees account resulting to the overstatement of the said account amounting to P9,553,274.99.
Particulars CNA Incentives of BFAR Employees CY 2010 per ObR no. MOOE-11-02-0860 Wages of BFAR Regular Employees for the month of August 2011 Salaries of Casual Employees for the period Oct. 16-31, 2010 Salaries of Casual Employees for the period April 1-15, 2010 Salaries of Casual Employees for the period April 16-30, 2010 Salaries of Casual Employees, December 16-31, 2011 Total Overstatement Accounting Errors Double recording of MOOE for payment of CNA Unrecorded disbursements out of Fund 101-ATM As Recorded MOOE Should Be Due to Officers and Employees Due to Officers and Employees Amount P4,602,000.00

4,819,859.61 32,263.83

Unrecorded disbursements out of Fund 101-ATM

Due to Officers and Employees

36,819.51 32,127.34 30,204.70 P9,553,274.99

18.2

The foregoing accounting errors resulted in misstatement of the following accounts:

Account Government Equity Due to Officers and Employees Cash in Bank - Local Currency, Savings Account Over/(Under) statement P(4,602,000.00) 9,553,274.99 4,951,274.99

18.3

We recommended that management instruct the OIC, Chief Accountant to make the necessary adjusting entries and to be more cautious in recording transactions. Adjustment had already been made in March 2012 per JEV Nos. 2012-03002206, 2012-03-002209 to 002212 and 2012-03-002229.

18.4

Overpayment of CNA Incentives and payment of other benefits without legal basis P72.827 million 19. The payment of Collective Negotiation Agreement (CNA) Incentives totalling P102.980 million for CY 2011 includes (a) overpayment totaling P72.827 million; (b) grant of CNA incentives to Job Order employees amounting to P2.845 million; and (c) monetary incentives and retirement benefits of retirees of P2.45 million. These are not in accordance with Budget Circular Nos. 2006-1 and 2011-5 dated February 1, 2006 and December 26, 2011.

80

a) 19.1

overpayment of CNA Incentives P72.827 million

Payment of CNA was in excess of P25,000 limit for each employee despite the provision in Item 3.5 of Budget Circular No. 2011-5 dated December 26, 2011, which provides that The CNA Incentive for FY 2011 shall be determined based on the amount of savings generated by an agency following the guidelines herein, but not to exceed P25,000 per qualified employee. Out of the Collective Negotiation Agreement (CNA) Incentive for CY 2011 totaling P102,979,716.48, P72,826,952.44 was in excess of the P25,000.00 per qualified employee, contrary to Budget Circular No. 2011-5, as shown below.
Office/Region Central Office RFO II RFO III RFO IV-A RFO IV-B RFO VII RFO VIII RFO X RFO XI RFO XII RFO XIII RFTC V RFTC VII RFTC XI NFRDI Total Amount Paid P 21,060,000.00 1,890,000.00 5,742,604.00 11,270,000.00 6,002,499.93 8,907,107.51 8,292,100.00 8,988,620.00 8,196,001.04 4,721,000.00 7,679,252.00 2,790,000.00 1,786,340.00 2,160,000.00 3,494,192.00 P 102,979,716.48 Allowed P 8,775,000.00 650,000.00 1,225,000.00 2,347,916.67 1,765,441.16 3,425,810.58 1,794,826.84 2,523,500.00 2,773,505.31 1,573,666.67 925,000.00 300,000.00 398,096.81 375,000.00 1,300,000.00 P30,152,764.04 In Excess of P25,000 P12,285,000.00 1,240,000.00 4,517,604.00 8,922,083.33 4,237,058.77 5,481,296.93 6,497,273.16 6,465,120.00 5,422,495.73 3,147,333.33 6,754,252.00 2,490,000.00 1,388,243.19 1,785,000.00 2,194,192.00 P72,826,952.44

19.2

19.3

Moreover, the claims were not supported with the following documents/information/ justification embodied under Budget Circular No. 2006-1 dated February 1, 2006: i. Guidelines/criteria to be followed in the grant of CNA Incentive prepared by the employees union/organization; Written resolution signed by the employees union/organization and noted by the head of agency showing the computation/breakdown of the total amount of savings which were realized out of the cost-cutting measures and systems improvement identified in the CNAs and supplements thereto, which were the results of the joint effort of labor and management; Copy of the Report on the Utilization of Savings for the Payment of CNA Incentives and Report of Accomplishment for the year submitted to the Department of Budget and Management (DBM); and

ii.

iii.

81

iv.

Justification why the CNA was granted before year-end when savings were not yet fully determined.

19.4

Management explained that CNA incentives were paid not as one time grant because the savings can only be determined after the accomplishment of each project/activity being planned. Cash allocation is released by the DBM in monthly basis thru MDS and considering that December is the last month of the year. Management explained that the amount of CNA given to each regular employee exceeded the P25,000.00 because the Budget Circular dated December 26, 2011 which stipulates the ceiling was only downloaded on January 17, 2012. While it is true that cash allocation is released by the DBM on a monthly basis, savings on the allotments during the year can only be determined at the end of the year upon evaluation of the accomplishments of the agency. b) CNA Incentives of Job Order employees without legal basis P2.854 million

19.5

19.6

19.7

Civil Service Commission (CSC) Resolution No. 02-0790 dated June 5, 2002 provides that Contract of Service Workers are not entitled to benefits enjoyed by government employees such as ACA, PERA and RATA and other benefits given by the agency such as mid-year bonus, productivity incentive, Christmas bonus and cash gifts. In three regions, CNA incentives totalling P2,853,501.04 were extended to job orders employees, which are not among those enumerated under Item 3.0 of DBM Budget Circular No. 2006.1.
Region RFO X RFO XI RFTC V Total Amount P 1,248,500.00 1,300,001.04 305,000.00 P 2, 853,501.04

19.8

c)

monetary incentives and benefits of retirees without legal basis P2.450 million

19.9

The Implementing Rules and Regulations (IRR) of Executive Order (EO) 180 dated June 1, 1987 prescribes the rules governing the exercise of the right of government employees to self-organization.

19.10 Rule XII Collective Negotiations of the said IRR clarifies the subjects which can be negotiated under the CNA. Section 3 thereof specifically provides that allowances, travel expenses, and other benefits which are specifically
82

provided by law are not negotiable. Since CSC rules and regulations and the GSIS law already cover retirement benefits, the grant of such retirement benefits under the CNA has no legal basis. 19.11 BFAR-CO and five regions paid the various retired employees monetary incentives and retirement benefits totaling P2,450,000 for CY 2011 as provided under the Collective Negotiations Agreement (CNA) between BFAR and the BFAR- Employees Union even without legal basis. Details as follows:
Office/Region Central Office RFO II RFO IV-A RFO X RFO XI RFTC V Total Amount P 1,920,000 not stated 160,000 80,000 230,000 60,000 P 2,450,000

19.12 We recommended that management strictly follow the provisions of DBM Budget Circulars on the grant of CNA Incentives and require the refund of the amount of P72.827 million for excess CNA Incentives, P2.45 million representing payment of retirement and monetary incentives of retired BFAR officials and employees and the P2.854 million granted to Job Order employees due to lack of legal basis. 19.13 Management commented that the payment made to retired BFAR officials and employee is in accordance with DBM Circular No. 2006-01 and they believed that they made their action in good faith while the incentive given to BFAR officials and employees/retirees was in recognition of the loyalty and valuable contribution. 19.14 After a careful review and evaluation of the circumstances and documents submitted, the fact remains that the granting of said retirement benefits to the concern retired BFAR officials and employees under the CNA, has no legal basis and therefore unauthorized under the following grounds: a. The rules in retirement laws and or benefits are governed by RA 8291 otherwise known as the GSIS Act of 1997. However, those in the service before June 1, 1977 shall have the option to choose among the modes of retirement under RA 660, RA 1616 or Presidential Decree (PD) 1146. Such being the case, any payments of retirement benefits made to BFAR retirees by virtue of the CNA cannot be countenance for lack of legal basis. To grant double gratuity is unwarranted. In the absence of an expressed provision of law, a retiree from the government service is prohibited from receiving double or additional benefits for exactly the same service.

83

b. The CNA entered into by the DA-BFAR and the BFAR-EU is a different and distinct instrument guaranteed under the 1987 Constitution granting government workers the right to self-organization. By virtue of which, DBM Budget Circular No. 2006-1 dated February 1, 2006 was issued. Under DBM Circular 2006-1, all existing cash incentives in the CNAs in the form of allowances and benefits, such as staple food allowance, rice subsidy, grocery allowance, inflation allowance, relocation allowance, SONA bonus, bonuses other than the year-end benefit authorized under RA 6686, as amended by RA 8441, etc., shall be consolidated into a single cash incentive, and shall be referred to and collectively paid as CNA Incentive. The same shall be sourced solely from savings from released MOOE. It does not in a manner, gives the impression to include retirement benefits or incentives. 19.15 A Notice of Disallowance on the payment made to retired employees of BFAR had already been issued in the Central Office per ND No. 12-002-101 (11) dated February 15, 2012 in the amount of P1,920,000.00. 19.16 Notice of Disallowance No. 12-01-003-101 (2011) dated January 31, 2012 was issued to BFAR RFO VII for the payment of CNA Incentives. The excess CNA incentives amounting to P72,826,952.44 will be disallowed in 2013. Irregular Payment of Other Allowances and Incentives P7.551 million 20. Payment of allowances/benefits/incentives to the officers and employees in five regions totaling P7.551 million were irregular due to non-compliance with laws, such as (a) Fish Production and Financial Assistance of P400,000; (b) GAD incentives of P87,000; (c) commutable representation and travelling allowance of P2.143 million; (d) medical and dental, calamity and anniversary bonus of P3.6 million; (e) 13th month pay and cash gift of P1.233 million extended to job orders; and (f) cultural allowance of P87,600. Section 3.1.A of COA Circular 85-55A dated September 8, 1985 provides that payment of allowances and other forms of additional compensation without proper authority is in violation of government policy. Audit of disbursements in five regions disclosed that the grant of allowances/benefits/incentives in five regions totaling P6.947 million was without legal basis, as follows:
RFO II II VII Nature a. Fish Production Incentive and Financial Assistance b. Unauthorized GAD Incentives c. Unauthorized Commutable Amount P 400,000.00 87,000.00 2,143,200.00

20.1

20.2

84

RFO and X VIII X

XIII Total

Nature Representation and Transportation Allowance d. Medical, Dental, Calamity and Anniversary Bonus without legal basis e. Unauthorized Cash Gift Benefits and 13th Month Pay extended to Job Order Employees f. Cultural Allowance without relevant activity

Amount

3,600,000.00

1,233,252.27 87,600.00 P7,551,052.27

a)

grant of Fish Production Incentive and Financial Assistance without legal basis P400,000

20.3

Fish Production Incentive and Financial Assistance amounting to P390,000 and P10,000, respectively, were paid to BFAR RFO II employees contrary to paragraph 5.0 of Budget Circular No. 2006-1 dated February 1, 2006. Paragraph 5.0 of Budget Circular No. 2006-1 on the grant of CNA Incentive provides, among others, to wit: The form of the CNA Incentive shall be simplified and rationalized as follows: 5.4.1 All existing cash incentives in the CNAs in the form of allowances and benefits, such as staple food allowance, rice subsidy, grocery allowance, inflation allowance, relocation allowance, SONA bonus, bonuses other than the year-end benefit authorized under RA No. 6686, as amended by RA 8441, etc., shall be consolidated into a single cash incentive, and shall be referred to and collectively paid as the CNA Incentive. Henceforth, all CNAs and supplements thereto shall only provide for the CNA Incentive as the cash incentive.

5.4.2

20.4

Audit of disbursements covering December 2010 to February 2011 disclosed that the agency paid Fish Production Incentive of P15,000 per employee for a total of P390,000. Likewise Financial Assistance amounting to P10,000 was also paid. It was noted that payment made was supported by a request from the President, BFAR-Employees Union, which request was approved by the BFAR National Director. The request made by the President of BFAR-EU was anchored on the provision of Section 10, Article VIII of the BFAR Employees Union Collective Negotiations Agreement which took effect on June 15, 2009.
85

20.5

20.6 20.7

The incentives paid were deemed consolidated with the CNA Incentive; hence, is no longer allowed. We recommended that RFO II management require the refund of fish production incentive and financial assistance received under the CNA as it has no legal basis. b) unauthorized GAD Incentives - P87,000

20.8

Gender and Development (GAD) Incentive amounting to P87,000 was paid by BFAR RFO II without express authority, contrary to Administrative Order No 103. Section 3 of Administrative Order No. 103 in so far pertinent states that All NGAs, SUCs, GOCCs, GFIs and OGCEs, whether exempt from Salary Standardization Law or not, are hereby directed to: (a) xxx (b) Suspend the grant of new or additional benefits to fulltime employees and officials, except for (i) Collective Negotiation Agreement (CNA) Incentives which are agreed to be given in strict compliance with the provisions of Public Sector Labor-Management Council Resolutions, and (ii) those expressly provided by presidential issuance. (emphasis ours)

20.9

Audit revealed that Gender and Development Incentive amounting to P87,000 was paid to GAD Focal Point Members in 2010. The special order creating the GAD Focal Point for BFAR Region II stated, among others, that the members shall perform the GAD activities in addition to their regular functions.

20.10 GAD incentive is a form of additional benefits articulated in Administrative Order 103. There having no authority expressly provided by Presidential issuance, the same is construed as an irregular expenditure; hence, is not allowed to be paid out of government funds. 20.11 GAD is a program in all government agencies, and activities related thereto are considered regular activities, therefore additional benefits should not be paid to GAD Focal Point members. 20.12 We recommended that management require the refund of benefits paid in the form of GAD Incentive totaling P87,000, contrary to Administrative Order 103.

86

c)

unauthorized Commutable Representation and Transportation Allowance P2.143 million

20.13 Section 47 of the General Provisions of the General Appropriations Act (GAA) for FY 2010 authorized monthly commutable representation allowance at rates indicated below: P5,500 for Assistant Bureau Regional Directors; and P4,000 for Chief of Divisions, identified as such in the Personal Services Itemization and Plantilla of Personnel. (Underscoring supplied) 20.14 Further, Commission on Audit Circular No. 81-90C dated November 12, 1981 which corrected the COA Circular No. 80-90-A dated July 31, 1980 with respect to sub-paragraph 1.0 of Compensation Policy Guidelines No. 80-2 of the Ministry of Budget reads as follows: "1.0 Officers-in-charge who are fully designated by the appointing authority to perform duties and responsibilities of positions without regular incumbent shall be entitled to the allowances of each position on reimbursable basis."(Emphasis provided) 20.15 COA Circular No. 80-90A dated July 31, 1980 with respect to sub-paragraph 2.0 of Compensation Policy Guidelines 80-2 of the Ministry of Budget provides that Officers-in-Charge who are duly designated by an appointing authority to perform duties and responsibilities of positions while the regular incumbents thereof are on an authorized attendance, on official time, in a training, scholarship grant, seminar or similar activity, or on official leave shall be entitled to the regular allowances of the position on reimbursable basis provided that the regular incumbent is no longer collecting the same allowances. (Underscoring provided) 20.16 BFAR RFO VII and X paid the Officers-in-Charge commutable representation and transportation allowance amounting to P516,000 and P1,627,200, respectively, even when such offices/divisions are not in the Personal Services Itemization and Plantilla of Personnel contrary to Section 47 of the General Provisions of the GAA resulting in the unauthorized payment of subject allowance by P2,143,200. 20.17 Perusal of the Personnel Services Itemization and Plantilla of Personnel (PSIPOP) of BFAR-RFU X disclosed that there are no Divisions identified in the PSIPOP, and that there is only one personnel with division chief position,

87

the Chief Aquaculturist who is designated as OIC Fisheries Resources Management Division. It is also disclosed that there is only one director position, Director I, which is occupied by the Regional Director. 20.18 Without Divisions in the Plantilla and with only one Directors position, the requirements in the grant of representation allowance to Officers-In-Charge (OICs) are not met. As such, the OICs mentioned above, except for the Office of the ARD, are not authorized to receive representation allowance. The Chief Aquaculturist designated as the OIC of the Office of the ARD is entitled to representation allowance only at the rate authorized for division chief, by virtue of her item being under the compensation classification of Salary Grade 24. 20.19 Examination of disbursement vouchers further showed that aside from their representation allowance, the ARD and the Division Chiefs claimed reimbursements for the cost of meals, groceries, fruits, vegetables, delicacies, tokens, etc. that were served and given to visitors, and for the cost of meals and snacks of staff during monitoring, general cleaning and venue preparation. Further, employees who are not authorized under the GAA to claim for representation made reimbursements for similar purposes. Such reimbursements amounted to P147,173.53 and recorded in the books of accounts as representation expenses. It becomes unnecessary for them to receive fixed representation allowance anymore. 20.20 It was also observed that when the Regional Director of BFAR RFO X reported back to office on February 22, 2011 from an official leave of absence on January 2011, she was paid her RATA for February 2011. However, the ARD, who was designated OIC during the RDs absence, was also paid of RATA for the same period at the RDs rate of P12,600.00. The excess amount of P1,600.00 received by the ARD from the usual rate she receives as such is, therefore, disallowable in audit as provided in the earlier cited COA Circular No. 80-90A. The same principle is applied to the OIC-FMRD who was designated as Assistant ARD during the period, which excess is P3,000.00. The ARD and the OIC-FRMD may, however, collect subject RATA on reimbursable basis subject to the approval of DBM for funding purposes. 20.21 Premises considered, out of the P2,124,400.00 representation and transportation allowance paid by BFAR-X management to its officials for the two-year period January 2010 to December 31, 2011, P1,627,200.00 were unauthorized and without appropriate funding. 20.22 The payment of the unauthorized RATA was sourced from the allotment for other maintenance and other operating expenses of the agency, since the approved PS budget for the two year periods was only P501,800.00.

88

20.23 BFAR RFO X informed that they granted the Officers-In-Charge representation allowance to augment the low salaries of these personnel and considering further that they are designated not only as OICs of divisions but also as OICs of sections or units due to inadequate staff. 20.24 When this observation was initially communicated to management in August 2011, they have, henceforth, stopped the payment of unauthorized RATA to the OICs of the agency. 20.25 We recommended that management stop the charging of expenses for RATA without approved appropriation or funding pursuant to Section 4 of DBM National Compensation Circular No. 67 dated January 1, 1992. d) Medical, Dental, Calamity and Anniversary Bonus without legal basis P3.6 million

20.26 Section 16 of the General Provisions of the General Appropriation Act of 2011 provides: Restrictions on the Use of Government Funds. No government funds shall be utilized for the following purposes: xxx (e) Grant of honoraria and other allowances except those specifically authorized by law. x xx 20.27 On the other hand, one fundamental principle governing financial transactions and operations of any government agency provided in Section 4 of PD 1445 states that No money shall be paid out of any public treasury of depository except in pursuance of an appropriation law or other specific statutory authority. 20.28 Administrative Order No. 263 issued on March 28, 1996 authorized the grant of anniversary bonus to officials and employees of government entities. Relevant section are as follows: Section 2.3 - The anniversary bonus authorized under this Order shall be granted during milestone years. Section 2.4 - A milestone year refers to the 15th anniversary and to every fifth (5th year) thereafter). Section 2.5 - Payment of the anniversary bonus shall be in an amount not exceeding P3,000 each employees provided that the

89

employee has rendered at least one (1) year service in the same agency as of the date of the milestone year. 20.29 BFAR RFO VIII granted various benefits to its employees aggregating P3,600,000 or P60,000 per employee without legal basis contrary to Section 16(e) of the General Provision of the GAA, Section 4(a) of PD 1445 and Administrative Order No. 263. 20.30 Review of the disbursements showed that RFO VIII paid the following benefits:
Name of Allowance Medical & Dental Calamity Assistance 64thyear Anniversary Allowance Total Date Granted March 15, 2011 May 23, 2011 July 15, 2011 Amount P 600,000 1,200,000 1,800,000 P 3,600,000 Amount per Employee P 10,000 20,000 30,000 P 60,000

20.31 Verification disclosed that one of the supporting documents attached to the disbursement voucher was Corporate Health Care Program Contract between MEDOCare Health Systems, Inc. and BFAR Employees Union (EU) represented by its National President. 20.32 Based on the above, it was apparent that BFAR has granted its employees additional health care benefits on top of the Philhealth government contribution which has no legal basis. 20.33 In May 2011, calamity assistance of P20,000 each was granted to BFAR RFO VIII employees. The payment was based on a Memorandum from the BFAR Regional Director addressed to the BFAR Director thru the President of BFAR EU dated April 28, 2011, requesting for financial assistance. Said request was recommended for approval by the President of BFAR EU and approved by the Officer-in-Charge of BFAR. Attached also to the claim were Sangguniang Panlalawigan Resolutions of Leyte, Easter and Northern Samar declaring the areas as calamity areas. The grant still has no legal basis. 20.34 Anniversary bonus of P30,000 was granted to each BFAR employees in July 2011. Based on AO 263, 64th year is not a milestone year; hence, payment made has no legal basis. 20.35 We recommended that RFO VIII management stop the granting of Medical, Dental, Calamity, and Anniversary Bonus without legal basis and to refund the amount of P3.6 million.

90

e)

unauthorized grant of Cash Gift Benefits and 13th Month Pay to Contract of Service Workers P1.233 million

20.36 DBM Budget Circular No. 2010-1 provides, among others, the coverage of subject Year-End Bonus and Cash Gift which exclude the laborers hired through job orders (pakyaw) and those paid on piecework bases. 20.37 Civil Service Commission (CSC) Resolution No. 02-0790 dated June 5, 2002 also provides that Contract of Service Workers are not entitled to benefits enjoyed by government employees such as ACA, PERA and RATA and other benefits given by the agency such as mid-year bonus, productivity incentive, Christmas bonus and cash gifts. 20.38 Examination of CY 2011 financial records showed that RFO X paid 13th Month Pay and Cash Gift Benefits to its Contract of Service Workers (CSWs) in the aggregate amount of P1,233,252.27, contrary to Section 55 of the General Provisions of RA 10147, otherwise known as the General Appropriations Act of 2011 and DBM Budget Circular No. 2010-1, thus constitutes an irregular expenditure as defined in COA Circular No. 85-55A. 20.39 The payment of said benefits to CSWs contravened Section 55 of General Provisions of CY 2011 GAA (R.A. 10147) and Paragraph 4.4 of DBM Budget Circular No. 2010-1; hence, constitutes an irregular expenditure as defined in COA Circular No. 85-55A and are, therefore, disallowable in audit. 20.40 We recommended that RFO X management (a) cause the refund of benefits amounting to P1.233 million paid to CSWs and henceforth desist from paying similar benefits; (b) refund the unauthorized representation and transportation allowance paid to the Officers-In-Charge of divisions and request appropriate funding from the DBM, who shall identify the divisions or the chief of division positions in the Personal Itemization and Plantilla of BFAR RFO X Personnel; and (c) limit its representation expenses to the amounts authorized for representation allowance in the General Appropriations Act. f) Cultural Allowance P87,600 20.41 Section 27 and 28 of the General Provisions of Republic Act Nos. 9970 and 10147, the General Appropriation Act of 2010 and 2011 respectively, provides as follows: Culture and Athletic Activities. Out of the appropriations authorized in this Act for MOOE of each department, bureau, office or agency, an annual amount not exceeding One Thousand Two Hundred Pesos (P1,200.00) per employee-participant may

91

be used for the purchase of costume or uniform, and other related expenses in the conduct of cultural and athletic activities. 20.42 The RFO XIII released a total amount of P87,600.00 to its personnel as Cultural Allowance even without relevant activity conducted in violation of Section 27 and 28 of the General Provisions of Republic Act Nos. 9970 and 10147, the General Appropriation Act of 2010 and 2011, respectively, thus, incurring irregular disbursements of the same amount. 20.43 Verification of the transaction for CY 2010 showed that the RFO XIII issued LBP Check Nos. 671330 - 671365 dated October 19, 2010 in the amount of P1,200.00 each or a total of P43,200.00 as culture allowance of the 36 permanent employees. Likewise, transaction as of October, 2011 also showed issuance of LBP Check No. 704719 dated October 18, 2011 in the amount of P44,400.00 as cultural allowance for the 37 permanent employees at P1,200.00 each employee or a grand total of P87,600.00. Apparently, there was no cultural or athletic activity that took place and no supporting official receipts of the related expenses. 20.44 The grant of this allowance was not within the context of the aforementioned provisions. It was clearly stated that the amount allowed shall be used by the employee-participant for the purchase of costume or uniform and other related expenses in the conduct of cultural and athletic activities. This resulted to irregular disbursements of the agency as these did not comply with the existing guidelines. 20.45 We recommended that RFO XIII management require the concerned personnel to refund the cultural allowance received in the amount of P2,400 each and for future claim of allowances, verify first the legality of the claim before its release to avoid disallowances in audit.

Overpayment/Irregular/Unconscionable Traveling Expenses - P1.488 million 21. Travelling expenses totalling P1.488 million paid by BFAR-CO and RFO XI were not in accordance with Executive Order (EO) No. 298, Section 331 of the Government Accounting and Auditing Manual (GAAM), Volume I, and Section 2 of PD 1445, thereby resulting to overpayment/irregular expenses. Moreover, approval of travel and pertinent documents for BFAR CAR personnel was signed by the same officer, thereby showing weak internal control, contrary to Section 50 (a) of the GAAM, Volume III. EO No. 298 provides the guidelines on the rates of allowable travel expenses. It also provides that the allowable per diem of P800.00 includes hotel and lodging (50%), meals (30%), and incidental expenses (20%).

21.1

92

21.2

Section 331 of the GAAM, Volume I, states that Travel expenses of private individuals are allowed only if authorized by law, rules and regulations. Moreover, Section 2 of Presidential Decree No. 1445, provides that it is the declared policy of the State that all resources of the government shall be managed, expended, or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned. Audit of travelling expenses in BFAR-CO and RFO XI disclosed an overpayment of P1,488,081.64 as follows:
Region BFAR-CO Criteria EO 298 Observation/Deficiency Overpayment by P731,637.28 representing payment of per diem considering that hotels and meals for activities being attended were inclusive or shouldered by the BFAR and/or other implementing agencies conducting the conferences/workshop/training/seminars. Traveling expenses from July to November 2011 totaling P498,699 paid to members of the Law Enforcement - Quick Response Team (LE-QRT) who were hired without employeremployee relationship. The duties and responsibilities as specified in their contracts such as combating illegal fishing, assisting in the implementation of the national fishery management plans and projects related to conservation and protection of fisheries, and providing assistance during disasters affecting the fishing communities, among others, were not reflected in their accomplishment reports and their travels were mostly for messengerial functions and other office work related activities. The attendance of eight region-based personnel to the seminar conducted at Subic in April 2011 when the same course was scheduled in Davao City in May 2011 incurred additional expenses of P124,659.00 for the Marine Mammal Stranding Response Training funds. Interviews conducted showed that the two seminars were basically the same, except for the live dolphins that were used during the training in Subic. Management could have saved the said amount, had the RFO XI personnel were not authorized for the same Amount P 731,637.28

21.3

21.4

Section 331 GAAM Volume I

498,699.00

RFO XI

Section 2 of PD 1445 and COA Circular No. 8555A

124,569.00

93

Region

Criteria

Section 2 of PD 1445 and COA Circular No. 8555A

Observation/Deficiency Training at Subic, Olongapo City on April 27 to 29, 2011, and instead attended the scheduled training in Davao City. Travel expenses of P133,176.36 were spent unnecessarily as changes in schedules were made frequently. Personnel who were not authorized by Central Office were allowed to attend meetings thereat. Had the seminars/trainings and meetings been properly planned by BFAR Central and regional offices and a closer coordination between the offices, the government could have saved the said amount which was unnecessarily spent.

Amount

133,176.36

Total

P1,488,081.64

21.5

Other deficiencies noted in the review of transactions are enumerated below:

a. Approved Itinerary of Travel attached to the DVs does not indicate the time of arrival to and departure from the point of destination, which information is necessary in the determination of allowable traveling expenses; officials and employees who act as resource person/speaker to a certain activity does not indicate information whether travelling expenses will be shouldered by the inviting agency; travelling expenses of employees assigned in the regional field office claimed their travelling expenses in the BFAR Central Office; thereby, defeating transparency; and approved Travel Orders (TO) were unnumbered and some TOs were dated ahead of the other.

b.

c.

d.

21.6

In BFAR CAR, several claims for travel expenses of a certain officer were approved by the same officer indicating the lack of check and balance in these particular transactions. Audit of expenditures showed that BFAR CAR incurred travelling expenses amounting to P1.66 million for the period ended December 31, 2011. Examination of the Disbursement Vouchers and supporting documents for travelling expenses paid in 2011 showed that there were five travel claims of the Assistant Regional Director (ARD), which she also approved as detailed below:
Check Number Date 963336 02.10.11 963457 03.04.11 963742 04.13.11 963831 04.25.11 Travel Period Feb 2-4, 2011 Feb 25-26, 2011 Apr 3-5, 2011 Apr 14-16, 2011 Destination Manila Manila Mountain Province Apayao Documents Approved by the ARD for each claim Travel Order Itinerary of Travel Certificate of Travel

21.7

94

Check Number Date 964534 08.08.11

Travel Period

Destination Nueva Ecija & Apayao Abra

Documents Approved by the ARD for each claim Completed Disbursement Voucher

Jul 28-30, 2011 Aug 2-4, 2011

21.8

The approval by the ARD of her own Travel Orders, Itineraries of Travel, Certificates of Travel Completed and Disbursement Vouchers was contrary to the check and balance under existing rules, the applicable portions of which are as follows:
Basis Document Rule Travels of officials and employees of the National Government Agencies for less than thirty days and payment of travel expenses therefore shall be approved by the head of office/bureau or equivalent. The Itinerary shall in all cases be approved by the agency head or his duly authorized representative. The portion "On evidence and information of which I have knowledge, the travel was actually undertaken" to be signed by Supervisor.

EO 248 as amended by EO 298, Section 5

Travel Order Disbursement Voucher

GAAM Volume I, Section 346(a)

Itinerary of Travel

GAAM Volume I, Section 346(i)

Certificate of Travel Completed (Appendix 21)

21.9

Section 50(a) of the Government Accounting and Auditing Manual, Volume III, provides that To ensure that effective check and balance exists . . ., no one person or department should be in complete control over a transaction.

21.10 We recommended that management (a) strictly comply with the provisions of EO No. 298 on payment of travel expenses; and (b) require the officials and employees concerned to refund the travelling expenses paid not in accordance with EO 298 totaling P731,637.28. 21.11 Management agreed with the recommendations and would ensure that compliance with EO 298 will be observed by strictly implementing the rules on travel. 21.12 In BFAR CO, Notice of Disallowance No. 12-004-101(11&12) dated October 1, 2012 was already issued.

95

Irregular Payment for the BFAR Local Scholarship Program P2.879 million 22. Out of the P3.866 million paid for the scholarship benefits to BFAR Employees as well as to the Iloilo State College of Fisheries (ISCOF) who availed of the Scholarship Grant under the Local Scholarship Program (LSP), P2.879 million was irregular because of (a) overpayment of tuition and matriculation fees (TMF) for 15 BFAR scholars amounting to P126,640.00; (b) payment of TMF of P363,300 for CY 2009 which was not supported with official receipts; (c) double payment of TMF for eight scholars for first Trimester 2009-2010 totalling P243,100; and (d) acceptance of nine unqualified applicants for the Program with a total expenditure of P2.146 million. Moreover, other specific documentary requirements for the LSP were not complied with to complete the evaluation of the qualifications and performance of the scholars, in violation of Memorandum Circular No. 11 dated April 16, 2002 and Fisheries Office Order No. 319 series of 2000 dated November 13, 2000. A Career Development and Professionalization of BFAR Personnel was proposed in line with the continuing program for career and personnel development of the Bureau as provided in EO 292 and RA 8435 of the Agricultural and Fisheries Modernization Act (AFMA). The main goal is to develop a highly competent and professional workforce in BFAR for better public service and build up human resource capabilities in the field of fisheries technology integrated with rural development to pump prime the countrys economic development. The objectives of the program are as follows: a. Help BFAR technical personnel cope with the new mandates, functions and responsibilities of the new BFAR and keep focus on the future requirements of the industry; Build a pool of highly motivated and advanced level of manpower in fisheries and marine sciences technology and allied fields to enhance optimum productivity; Upgrade the existing expertise of BFAR in the training of state-of-the art entrepreneurial and technology-based fisheries manpower; Develop innovative managerial expertise to enhance both the technological and administrative leadership capabilities of executives and community resource development workers of BFAR; and Equip BFAR personnel with advance perception and methodologies to ensure the delivery of exemplary quality public service.

22.1

22.2

22.3

b.

c.

d.

e.

96

22.4

The program shall provide post-graduate (Ph.D.) courses in Fisheries Technology (DFTech) to its qualified technical personnel and in order to implement the program, a joint program on advanced studies for its personnel was made with the Iloilo State College of Fisheries (ISCOF) thru a Memorandum of Agreement. Total budget required per student amounted to P401,650, broken down as follows:
a. Tuition fee (P300 per unit x 60 units) b. Miscellaneous & other fees (P3,950 x 7 trimester) c. Instructional materials (P300/subject x 20 subjects) d. Stipend (P5,000 x 29 months) e. Book Allowance (P5,000/sem. x 7 trimester) f. Thesis/Dissertation Support g. Graduation Support Total per Student P 18,000 27,650 6,000 145,000 35,000 150,000 20,000 P401.650

22.5

22.6

BFAR personnel requested an authority to pursue graduate studies effective the first semester of school year 2009. In turn, authorities were granted to 31 and 29 BFAR personnel to pursue MFTech and DFTec, respectively, coming from the Central Office, BFAR National Centers, regional offices and regional field training centers. The authority stated that tuition fee and other school fees shall be borne by their respective Offices chargeable against the Staff Development Funds. For calendar years 2009, 2010 and 2011, the Bureau paid the amount of P807,300, P222,000 and P2,836,220, respectively or a total of P3,865,520 for eight PhD Scholars and seven Masters Degree Scholars, summarized below:
Particulars Totals Stipend (P8,000/ month) Book Allowance (P5,000/semester /summer) Tuition & Matriculation Fees

22.7

22.8

CY 2009 Doctor of Fisheries Technology P405,000 P192,000 P30,000 P183,000* Master of Fishery Technology 402,300 192,000 30,000 180,300* Sub-total 807,300 384,000 60,000 363,300* CY 2010 Doctor of Fisheries Technology 222,000 192,000 30,000 Sub-total 222,000 192,000 30,000 CY 2011 Doctor of Fisheries Technology 1,415,240 576,000 90,000 749,240 Master of Fishery Technology 1.420.980 672,000 105,000 643,980 Sub-total 2,836,220 1,248,000 195,000 1,393,220 Total P3,865,520 P1,824,000 P285,000 P1,756,520 *Already disallowed in audit per ND No. 2010-001-101 (10) dated February 22, 2010

97

22.9

Review/verification of the disbursement vouchers and other pertinent documents on the program disclosed the following observations: a) overpayment of tuition and matriculation fees P126,640

22.10 The total difference of P126,640 represents overpayment of tuition and matriculation fees for 15 BFAR scholars which were paid directly by the Bureau to ISCOF, shown as follows:
Check issued by BFAR Date 11.26.2009 No. 799400 OR Issued by ISCOF Particulars Date none No. 1st Trimester 2009-2010 (Sept-Dec. 2009) 1st Trimester 2009-2010 (Sept-Dec. 2009) 2nd Trimester 2009-10 Summer 2010 1st Semester SY 2010-11 1st Trimester 2009-10 Amount Paid to ISCOF P183,000 Total Amount per Attached Assessment P183,000

Difference -

Remarks No Official Receipt acknowledging the amount paid No Official Receipt acknowledging the amount paid

11.26.2009

799401

none

180,300

180,300

11.17.2011 11.17.2011 11.17.2011 11.17.2011

937671 937672 937673 937674

11.19.2011 11.19.2011 11.19.2011 11.19.2011

0199025 0199023 0199027 0199022

252,400 252,400 61,110 183,330

189,300 189,300 61,110 183,000

P63,100 63,100 3301. There was a discrepancy on the period of payment between the OR issued by ISCOF as against the DV/ObR, to wit: 2. ISCOF 1st Official Trimester Receipt 09-10 DV & 1st ObR Semester 2010 110 Payment for Scholars 1 to 4 was for 1st Semester 2010-2011 @ P30,105 each and Scholars 5 & 6 was for 1st Trimester 2009-2010 @ P30,050 or total of P180,520, hence a difference of P110 Per OR issued by ISCOF, payment was intended for 1st Semester 2010-2011

11.17.2011 11.17.2011 11.17.2011

937675 937676 937677

11.19.2011 11.19.2011 11.19.2011

0199021 0199026 0199024

Summer 2010 2nd Trimester 2009-10 1st Semester 2010-11

185,700 185,700 180,630

185,700 185,700 180,520

11.17.2011 11.17.2011 11.17.2011

937678 937679 937680

11.19.2011 11.19.2011 11.19.2011

0199030 0199028 0199029

Summer 2010 1st Trimester 2010 2nd Trimester 2010-11

30,950 30,050 30,950

30,950 30,050 30,950

Per attached Assessment of Fees, payment was intended for 2nd Trimester 2009-2010

Total

P1,756,520

P1,629,880

P126,640

98

b)

no Official Receipts issued for the payment of tuition and matriculation fees P363,300.

22.11 Based on our examination of disbursements, the payment of tuition and matriculation fees in CY 2009 to ISCOF totaling P363,300 was not supported with Official Receipts acknowledging the receipt of payment, shown below:
Check No. 799400 799401 Total Date 11.26.2009 11.26.2009 Amount P183,000.00 180,300.00 P363,300.00

c)

double payments of tuition and matriculation fees P243,100.00

22.12 Tuition and miscellaneous fees of P243,100 for 1st Trimester 2009-2010 were paid twice to eight scholars. d) age requirement for scholars were not complied

22.13 Item A.1.h of Fisheries Office Order No. 319, Series of 2000 dated November 13, 2000 entitled Amending the Revised Rules and Guidelines on Scholarships/Training/Study Grants of the Bureau of Fisheries and Aquatic Resources (BFAR) states that applicants eligible for the LSP should not be more than 40 years old for MS and not more than 50 years for PhD. 22.14 Our audit showed that for its Doctorate Course on Fishery Technology, six of eight scholars would have been disqualified because they were above the age limit of 50. Total payment made for those unqualified was P1,403,060. Likewise, for the Masteral Course on Fisheries Technology, three of seven scholars would not have qualified again because of exceeding its age limit. Total payments amounted to P743,060. e) scholarship granted despite documentary requirements were not complied

22.15 Review and evaluation of the LSP revealed that scholarship was granted to applicants despite non-submission of the necessary documents for evaluation, as follows: i. results of evaluation undertaken by PDC per scholar showing therein that every scholar complied with all the requirements embodied in the FOO issued by BFAR based on MC No. 11 issued by the Civil Service Commission;

99

ii.

accomplished Item A.1.d of said FOO, showing the following columns: a. b. c. d. e. BFAR Scholar School attended (Undergrad/Graduate) General weighted average Qualified Disqualified

iii. iv. v.

photocopy of Curriculum for each course (PhD and MS); photocopy of assessment for every semester/trimester/summer; photocopy of Certificate presentation of the original; of Registration/enrollment and upon

vi.

certification of subjects taken with the corresponding grades for every semester/trimester/summer; report on the results of the monitoring conducted by the Bureau for every grantee to determine his/her progress or academic performance; and

vii.

viii. report on the evaluation conducted on the effectiveness of the program or result of assessment on the benefit gained from the scholarship investment. 22.16 Based on the Memoranda to the individual Scholars all dated June 09, 2009 duly signed by Atty. Benjamin Felipe S. Tabios, Jr., all scholar applicants were accepted to the BFAR-ISCOF Fisheries Scholarship Program effective Third Trimester (September - December 2009) except for authority of Ms. Marites B. Chiuco whose Memo was unsigned. 22.17 Further the following documents/information and/or explanation/ justification were likewise not submitted: a. why above transactions will not be disallowed in audit despite noncompliance with the MC No. 11 dated April 16, 2002 and FOO No. 319 Series of 2000 dated November 13, 2000; b. coverage of each trimester/semester and summer (months);and c. nature of College Executive Program Schedule Fees particularly the Administrative Cost of P5,000 and Immersion and other Learning related expenses of P13,780 collected every enrollment.

100

22.18 We recommended that management, particularly the LSP evaluation and monitoring team submit immediately to the audit team the specific documents/information to complete the review and evaluation of the implementation of the LSP. 22.19 We recommended also that management cause the refund of the: a. difference of P126,640 on tuition and matriculation fees paid to ISCOF between the amount disbursed by BFAR and the amount claimed by scholars; and b. double payment of tuition and matriculation fees of P243,100 to eight scholars. 22.20 To date, management already partially submitted the documents required and it is now being evaluated by the Audit Team. A Notice of Suspension will be issued in the event that the documents submitted do not suffice.

Irregular expenditure of funds for the Lanao del Norte Mariculture and AquaTourism Project P25.467 million 23. Lanao del Norte Mariculture and Aqua-Tourism Project with a total project cost of P25.467 million was not constructed in accordance with the implementing guidelines contrary to COA Circular No. 85-55A. Paragraph 3.1 of COA Circular No.85-55A dated September 8, 1985 dealing on the rules and regulations for the prevention of irregular, unnecessary, excessive, or extravagant (IUEE) expenditures or uses of government funds and property defined "irregular expenditure" as those expenditure incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law. A transaction conducted in a manner that deviates or departs from, or which does not comply with standards set is deemed irregular. In February 26, 2010, a MOA was entered into by and between the BFARRFO X and the Provincial Local Government Unit of Lanao del Norte for the Establishment of Lanao del Norte Mariculture and Aqua-Tourism Project amounting to P25,467,200.00 of which 10% or P2,546,720.00 will be the PLGU counterpart.

23.1

23.2

101

23.3

Details of the project per approved implementing rules and regulations of the MOA are as follows:
Lanao del Norte Mariculture and Aqua Tourism Project Project Cost Estimates Particular Amount Total Amount Municipality of Tubod Culture Fisheries P2,302,400 Capture Fisheries 1,050,000 1 unit working platform with shade 250,000 High-value Fish Stocking, 4,000 grouper 320,000 Total - Phase 1 P3,922,400 Municipalities : Kolambugan 2,342,000 Culture Fisheries 1,292,000 Capture Fisheries 1,050,000 Maigo 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Total - Phase 2 4,402,400 Municipalities of Baroy and Lala Baroy 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Lala 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Total - Phase 3 4,120,800 Municipalities of Kapatagan and Bacolod Kapatagan P 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Bacolod 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Total - Phase 4 P 4,120,800 Municipality of Sultan Naga Dimaporo Culture Fisheries 3,730,000 Capture Fisheries 1,050,000 Total - Phase 5 4,780,000 Municipalities of Kauswagan and Linamon Kauswagan 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000 Linamon 2,060,400 Culture Fisheries 1,010,400 Capture Fisheries 1,050,000. Total - Phase 6 4,120,800 P25,467,200

Phase 1

Total Project Cost

23.4

Allotment released for the project totalled P25,467,200.00 covered by ASA No. 2010-02-001 dated February 2, 2010 and ASA No. 2010-03-005 dated
102

March 1, 2010 in the amount of P21,544,800.00 and P3,922,400.00, respectively. Total fund released to PLGU as of December 31, 2011 amounted to P22,348,600.00, representing 97.50% of the total amount to be released to PLGU of P22,920,480.00. Audit of the funds released disclosed the following:
DV No. 101-10-02-5038 101-10-12-5048 101-11-05-1431 Check Date No. 02.14.2010 0314470 12.29.2010 06.30.2011 0325580 0327815 Amount P12,348,600 5,000,000 5,000,000 Remarks No approved POW/DED but with approved Project Proposal No attached SWA Reportedly 85.57% but not in accordance with the original scope of the Project as per approved MOA

Total CAF - Certificate of Availability of Fund DED - Detailed Engineering Design

P22,348,600 POW- Program of Works SWA - Statement of Work Accomplished

23.5

Moreover, audit of the disbursement voucher and supporting documents for the payment of the second tranche amounting to P10,000,000.00 paid in two equal installments, revealed that the reported project accomplishment of 80.77% was based on a revised program of works, which Project Cost is now reduced to P25,000,000.00, and not on the original scope of works as approved in the MOA. The details of the work accomplished are as follows.
Item of Work/ Activity Qty./ Unit 195 units Unit Cost P75,000.00 Amount P14,625,000 Physical Accomp. 180 % Accomp. 92.30

Fish Cage Assembly made of Wood, 4m L x 4m W x 4m D with accessories Imported High-value Fish Stocking / Grouper Fingerlings Operation Cost for Growout of Grouper for one year Total

60,000 pcs.

130.00

7,800,000

60,000

100

12 mos.

214,583.33

2,575,000 P25,000,000

50 80.77

23.6

It was noted in the Project Fund and Implementing Guidelines and Procedures for the Establishment of the Project, the required Project Counterpart Fund of the PLGU is 10% of the total project cost which is equivalent to P2.6 million. The payment of the first tranche (50%) to PLGU amounting to P12,348,600 was not supported with the CAF representing the 10% counterpart of the PLGU which is a prerequisite for the release of the first tranche. The attached supporting document/instrument that accordingly changed the entire scope and specifications of the Project was a Supplemental Agreement dated October 1, 2010, about eight months after the receipt of the first tranche

23.7

103

by the PLGU, practically modifying the major conditions contained in the MOA, as presented below:
Per MOA dated February 19, 2010 Project Cost:P25,467,200.00 Project Lanao del Norte Mariculture and Aqua Tourism Project for the following MunicipalitiesPhase 1 - Tubod Phase 2 Kolambugan and Maigo Phase 3 Baroy and Lala Phase 4 Kapatagan and Bacolod Phase 5 - Sultan Naga Dimaporo Phase 6 Kauswagan and Linamon Per Supplemental Agreement (SA) dated October 1, 2010 P25,000,000.00 Establishment of Mariculture and Aqua Tourism Project located at Coastal Areas along Panguil Bay, Illana Bay and Iligan Bay of Lanao del Norte After due evaluation and sample testing of the sea waters of LDN, the winning bidder for the implementation of the Project has recommended for the vital revisions of some aspects of the project design to ensure profitable return of investments at the same time achieve the target of fisherfolk training. Reason for Modification

First Variation Sec. 2.3 - BFAR X shall supervise the implementation of the project in accordance with the approved Development Plan and Work and Financial Plan. By the nature of the Project design, as a Techno-demo Project, the project implementation shall be in six (6) Phases. Other affected Provisions of MOA: Par. F Item II of Annex A of MOA (a) Implementation of the project shall be duly covered with MOA stating the functions and obligations of BFAR and the PLGU (b) The PLGU in return shall enter into contract with the MLGU stating the functions and obligations of the latter. Second Variation - Scope as contained in Annex B of the MOA Construction of Culture and Capture Fish Cages to include: Construction on Fish Aggregating Device (PAYAO), Gill Net, Fish Pot, Handline, Working Platforms complete with mooring for ceremonial sticking, Modified Shallow Cage with Fish Corral and Circular Fish Cages The Construction of the Techno-Demo Project shall be implemented in the Municipality of Kolambugan. Thereafter the model fish cages shall be physically transferred to the other identified beneficiary towns.

Scope per SA Construction of Floating Cages made of First Class Wood (Hardwood Lumber) and Plastic Drums with Imported Nets and other materials. Procurement of first-class fingerlings of export (High-value Fish Stocking) quality, purchase of necessary feeds and medicines up until the age of maturity; which shall be procured by the winning bidder. Increase quantity of fingerlings to be procured from 4,000 groupers to 60,000 groupers to be cultured in the Floating Fish Cages.

104

23.8

The Audit Team is of the view that the scope of work as contained in the MOA cannot anymore be a subject of a major modification via a Supplemental Agreement, especially eight months after the 50% fund was already released, inasmuch as the (a) Pre-Rapid Area Assessment, and (b) Conduct of Bathymetric Investigation is presumed to have been accomplished. An in-depth study of the viability of the project at their supposed sites would have been done and result thereof was considered in the preparation of POW and DED. To entertain the recommendation of the winning bidder, therefore, is tantamount to saying that there has been no pre-detailed engineering and planning of the Project made.

23.9

23.10 Having no approved POW, DED, and CAF, the fund transfer of the first tranche representing 50% of the TPC was, therefore, found to be irregular. 23.11 Further, there was no proof that RFO X monitored and evaluated the implementation of the Project and validated accomplishments and provided feedback to ensure that implementation is in accordance to plans, budget, criteria and standards set forth for the Project as provided in Paragraph B, Item III of Annex A of the MOA. 23.12 Otherwise, they could have provided the necessary technical assistance and consultancy services to ensure that the project is technically acceptable and that, in case the technical expertise of the regional office is not available, consultation with BFAR-CO may be made. 23.13 Furthermore, Paragraph F.b, Item II of Annex A of the MOA provides that the PLGU, in return, shall enter into contract with the MLGU stating the functions and obligations of the latter. The provision emphasized the extent of involvement/ participation of the MLGU being the main beneficiaries of the Project. 23.14 Considering the impropriety of the circumstances surrounding the Project, the fund transfers to the PLGU in the total amount of P22,348,600, is deemed irregular, having departed from the conditions set forth in the implementing rules and regulations prescribed in the MOA. 23.15 In its reply to the AOM issued, management provided the Team a copy of the letter of the Bureau Director to the PLGU Governor dated October 4, 2010 interposing no objection to the revision of the POW, with certain provision. 23.16 In view of these, we recommended that RFO X management secure the necessary legal authority from appropriate body or bodies to deviate from or re-align the project from what it is now. Such bodies include not only BFAR-CO which approved the project at its original program/scope

105

of works; but also from DBM which anchored the fund released for the project to the AWFP submitted by BFAR on the basis of the P25,467,200.00 project cost as originally programmed; and the local chief executive officers of the various municipalities involved in the project as stipulated in Paragraph F.b, Item II, Annex A of the MOA as required in Sec. 63 of the General Provisions of RA 10147, otherwise known as the General Appropriations Act of 2011.

Compliance with RA 9184 24. Various observations contravening Republic Act 9184, otherwise known as the Government Procurement Reform Act and its Implementing Rules and Regulations were found, such as (a) procurement of common-use supplies from outside suppliers instead of from the Procurement Service (PS) of P3.483 million; (b) issues regarding the Approved Budget for the Contract (ABC); (c) improper procurement through alternative modes instead of bidding; (d) bidding or notices of award were not posted in the PhilGEPS; and (e) other observations from different regions as discussed below. a) non-procurement of common-use supplies from Procurement Service (PS-DBM) P3.483 million

24.1

Purchases of common-use supplies totaling P3.194 million were not made from the Procurement Service of the Department of Budget and Management (PS-DBM) in violation of RA9184 as reiterated in Section 4 of Administrative Order No. 17 dated July 28, 2011. Section 53 (e) of Republic Act 9184 otherwise known as the Government Procurement Reform Act states that: purchases of goods from another agency of the government such as the PS-DBM, which is tasked with a centralized procurement of commonly used goods for the government in accordance with Letter of Instruction No. 755 and Executive Order No. 359, series of 1989.

24.2

24.3

Furthermore, Section 4 of Administrative Order No. 17 provides: Procurement of Common-Use Supplies. Common-use supplies shall be procured directly from the PS or its depots without need for public bidding as provided in Section 53.5 of the Implementing Rules and Regulations of RA 9184.

106

24.4

Common-use supplies is defined as those which refer to goods, materials and equipment that are used in the day-to-day operations of procuring entities in the performance of their functions. Review of purchases of commonly used goods and supplies revealed that there were minimal purchases from the PS-DBM, most of the purchases were made from outside suppliers, as shown below.
Procured Common-use Supplies From PSFrom Outside Total DBM Suppliers P 849,267.15 P7,754.80 P 841,512.35 2,352,525.10 2,352,525.10 289,096.16 289,096.16 P3,490,888.41 P7,754.80 P3,483,133.61 Period January to June 2011 August to December 2011 CY 2011

24.5

Region RFO XI RFO XII RFTC IX Total

24.6

This practice was contrary to the above-cited law requiring all agencies to directly purchase commonly used goods from the PS-DBM and deprived the agency of probable savings which may otherwise have been generated and, also, deprived the PS-DBM of possible income. In RFO XI, the said purchases from outside suppliers were made without the requisite certification issued by the PS-DBM that the items procured were not available at the time of purchase or the quarterly price list issued by the PSDBM. Inquiries made disclosed that the Supply and Property Officer was not aware that purchases in small quantities are still covered by the regulation and should be procured from the PS-DBM. RFO XII management commented that since their office was still located in General Santos City, they deemed it practical to purchase office supplies at various suppliers/dealers at General Santos City considering the distance of PS-DBM situated in Koronadal City. However, they promised to purchase the said supplies from PS-DBM starting year 2012 because BFAR RFO XII is now located at Koronadal City. We recommended that management comply with Section 53(e) of RA 9184 requiring purchase of commonly used goods from the PS-DBM. b) issues in the Approved Budget for the Contract (ABC) in RFO XI and CAR

24.7

24.8

24.9

24.10 Section 31.1 of RA 9184 states: The ABC shall be the upper limit or ceiling for acceptable bid prices. If a bid price, as evaluated and calculated in accordance with this IRR, is higher than the ABC, the bidder

107

submitting the same shall be automatically disqualified. There shall be no lower limit or floor on the amount of the award. 24.11 Based on the random sampling as presented in the following table, bidders whose bid prices were more than the Approved Budget for the Contract (ABC) as indicated in the Purchase Requests were still included and awarded the contracts. 24.12 In RFO XI, various procurements in the total amount of P248,550.00 was P96,850.00 more than the amount in the Approved Budget for the Contract (ABC) of P151,700.00 in violation of Section 31.1 of RA 9184.
Particulars Items Qty Total Amount Estimated Amount in Purchase Request P 2,700 or 10% Total Amount Of Difference

Remarks Per PR the total amt. for trevally is only P29,700 or P5.50 per piece Contract of labor more than the ABC-P4,000

Trevally

Fingerlings

5400 pcs @ P6.00

P 32,400

P 29,700

Labor for the fabrication of 10x10 x 4m bamboo frame marine fishcage @ P16,000.00/ Unit-MP IGACOS Labor for the fabrication of 10x10 x 4m bamboo frame marine fishcage @ P4,200.00 per unit Wooden Banca with Gasoline Engine 6.5 HP with accessories Labor for the fabrication of 10x10 x 4m bamboo frame marine fishcage @ P4,200.00 per unit - (full) Empty Sacks PE Net 14 double width @ P17600 each

5 Units

80,000

60,000 or 300%

20,000

3 Units

12,600

600 or 5% 2,950 or 11% 400 or 5% 15,000 or 43% 15,200 or 76% P 96,850

12,000

Contract price -more than the PR Amount more than ABC Contract price -more than the PR Per PR only P7.00 per piece Per PR only P10,000 per roll

1 Unit

29,950

27,000

2 units

8,400

8,000

5000 pcs 2 rolls

50,000 35,200 P 248,550

35,000 20,000 P 151,700

24.13 Moreover, perusal of the Purchase Requests showed that majority of the amounts were written in pencil which can readily be erased, thereby integrity of information is not assured. It behooves officials tasked to review and approve these transactions to pause and view pencil markings as red flags and investigate the surrounding circumstances. 24.14 In BFAR CAR, the ABC for the two units windmill and the four other projects did not provide for all cost components needed in the implementation of the projects contrary to the GPPB Manual of Procedures for the Procurement of Infrastructure Projects. Thus, the ABC and the contract prices of these projects may not be realistic.

108

24.15 Under the GPPB Manual of Procedures for the Procurement of Infrastructure projects, preparation of the ABC is one of the works under detailed engineering. Thus, the GPPB prescribed that: The approved budget for the contract to be bid must also specify for each major work item, such as earthwork, roadwork, and massive concreting. It must also specify the components for equipment, rentals, fuel, labor materials and overhead, including cost of the approved construction safety and health program and security premiums, taxes, profit, cost of money, inflation, contingencies, etc. 24.16 In the GPPB Sample Forms for the Procurement of Civil Works, the standard form in the preparation and computation of the Approved Budget for the Contract provides for Estimated Direct Cost and Indirect Cost. Indirect Cost composed of the following: Overhead, Contingencies and Miscellaneous; Profit; Mobilization and demobilization; Value added tax.

24.17 Review of the ABC prepared by BFAR CAR for the following projects showed that indirect costs were not fully provided for.
Name of Project Procurement & Installation of 2-units Windmill Drilling of Exploratory/ Production Well Construction of Fish Laboratory Bldg., Phase I Construction of Pond Dike and Pond Division Construction of Tilapia Hatchery Indirect Cost provided No indirect cost Value added tax of 10.5% Value added tax of 10.5% 6% - no breakdown Value added tax of 10.5%

24.18 Under DPWH Department Order No. 29 series of 2011, which provides for the guidelines on the preparation of Approved Budget for the Contract, indirect costs are set as follows:
Estimated Direct Cost (EDC) Up to P5 million Above P5 M to P50 M Above P50 M to P150 M Above P150 M Indirect Cost OCM Profit (% of EDC) (% of EDC) 12 12 9 8 7 8 6 8 Total Indirect Cost (% of EDC) 24 17 15 14

24.19 Considering that the Department of Agriculture and BFAR do not have guidelines on the preparation of cost estimates for infrastructure projects, and considering further the requirements of the GPPB in the preparation and
109

computation of the ABC as mentioned in Paragraph 19 hereof, it is suggested that BFAR adopt the DPWH guidelines in the preparation of the ABC. 24.20 The insufficient provision for indirect cost in the ABC indicates that the ABC and the contract prices were not realistic. As such, accomplishments in these projects may be below standard or works may not be performed completely. 24.21 BFAR CAR management informed that the engineering section was instructed to adopt the DPWH guidelines in the preparation of the ABC. 24.22 It was also observed in BFAR CAR that the Approved Budget for the Contract for the construction of fish laboratory building amounted to P3.36 million even when the allotment received by them for the project was only P2.6 million. Thus, P901,016.92 of the contract price was charged against the allotment for the construction of shed contrary to the purpose of the allotment. 24.23 Perusal of the project proposal for the establishment of fish health laboratory showed that the budget proposed for the project amounted to P2.6 million. The allotment received by BFAR CAR for the project also amounted to P2.6 million. The Approved Budget for the Contract for this project, however, was P763,596.59 more than the proposed budget and the allotment received as the ABC amounted P3,363,596.59. This was contrary to Section 7.5 of the IRR of RA 9184 which states that The ABC as reflected in the APP or PPMP shall be at all times consistent with the appropriations for the project authorized in the GAA, continuing, and automatic appropriations, for the corporate budget, and the appropriation ordinance, as the case may be. 24.24 Review of the Registry of Allotments and Obligations disclosed that the Contract of BFAR CAR with MP Villegas Construction for the Construction of the 3-Storey Fish Laboratory Building (Phase I) amounting to P3,211,481.72 was charged against the following:
Advise of Sub-allotment Number Date 2010-06-011 June 21, 2010 2010-07-013 July 05, 2010 T o t al Account Code 211 215 Amount Charged P2,310,464.80 901,016.92 P3,211,481.72 Percentage 71.94 28.06 100.00

24.25 Verification showed that the above-listed allotments were authorized for the following purposes:
Allotment Number 2010-06-011 2010-07-013 Purpose Buildings - Establishment of Fish Health Laboratory Other Structures - Establishment of hatcheries Other Structures - Provision of Shed Agricultural, Fishery and Forestry Equipment - Drilling Account Code 211 215 215 227 Amount P2,600,000.00 5,000,000.00 1,000,000.00 1,000,000.00

110

24.26 As observed, the purpose of ASA No. 2010-07-013 with account code 215 was for the provision or construction of shed, and not for the construction of fish laboratory. 24.27 The Advice of Sub-allotment provides, among others, that it is the primary responsibility of the Regional Director to keep expenditures within the limits of the amounts sub-allotted as stated in the Advice. With this limitation, charges to the allotment outside of the purpose are deemed unauthorized. In the case of the fish laboratory building, the P901,016.92 charged against ASA No. 2010-07-013 was deemed unauthorized. Section 4.1 of PD 1445 further provides that no money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. Payments to MP Villegas corresponding to P901,016.92 charged against the allotment for the construction of shed under ASA No. 2010-07-013 was, therefore, prohibited. 24.28 The utilization of allotment for purposes other than those authorized resulted in the non-implementation of the project construction or provision of shed. Thus, the objective or the purpose of this project was not attained. 24.29 In its comments, management stated thus: The regional office, after due consideration, decided on combining the two amounts or allotments: namely the allotment for the building and the allotment for the shed; in order to fully maximize the use of land and fund and to optimize the use of space available. At the same time provide a better parking area for the proposed reefer truck on the region, rather than having a separate shed for the said vehicle. As per initial plans of this office, the parking shed would have been constructed at the side of the proposed fish health laboratory. However, upon evaluation of the available area for the two projects, it was deemed more pragmatic for the two projects to be combined, thus giving more emphasis on area usage and better laboratory building facilities. The same was purely a management decision and further, the same was undertaken with the primary reason for providing out clientele better quality service through better facilities. 24.30 We recommended BFAR CAR management to (a) include in the Approved Budget for the Contract not only labor and materials but also all indirect costs of infrastructure projects; (b) use the standard form prescribed by the GPPB for the calculation of the ABC; and (c) to limit the ABC of procurement projects to the amounts of allotments received for such projects. c) improper procurement through alternative modes instead of public bidding 24.31 Section 10, Rule V of the Revised Implementing Rules and Regulations of Republic Act No. 9184, otherwise known as the Government Procurement

111

Reform Act, states that all procurement shall be done through competitive bidding, except as provided in Rule XVI of the same IRR. 24.32 Rule XVI of the cited law, rules and regulations provides for the alternative modes of procurement where Section 52 of the Rule specifically provides, in substance, that Shopping as a method of procurement shall be employed in (b) procurement of ordinary or regular office supplies and equipment not available in the Procurement Services involving an amount not exceeding P500,000.00 (prescribed in Annex H of the Revised IRR). 24.33 In RFO X, management procured their fuel and other petroleum requirements through Shopping despite that the annual fuel requirement of the agency amounts to more than P500,000 contrary to the abovementioned rules. 24.34 In RFO XI, based on the documents submitted, the Purchase Requests prepared by the different Divisions and Provincial/City Fishery Offices within Region XI were not consolidated as the requirement of the whole office for procurement during the year as indicated in the Annual Procurement Plan. By not consolidating all the requirements of the different end-users as indicated in the PRs, BAC did not consider the total Approved Budget for the Contract (ABC) and allowed the use of the alternative mode of procurement, which was Shopping instead of public bidding, thus Section 52 of RA 9184 and Annex H of the IRR were not complied. 24.35 We recommended management in RFO XI to instruct the BAC to strictly comply with the provisions of Section 31.1 of RA 9184; to require the BAC that the Purchase Requests be filled up in permanent ink and that the BAC refer to the Annual Procurement Plan; look into the possibility of manipulation and investigate the circumstances when pencil markings are on public documents and procedures are not complied; and to comply with the procurement process prescribed by RA 9184 in the procurement of goods, services and civil works. Accordingly, the members of the BAC should evaluate conditions under which public bidding or the alternative modes of procurement like shopping or small value procurement may be applied. d) bidding or notice of award were not posted in the PhilGEPS

24.36 Issues regarding the use of the Philippine Government Electronic Procurement System (PhilGEPS) were found in RFO XI and RFTC IX, thereby, violating Sections 8.2.1.a, 12.2 and 54.3 of RA9184 and DBM Circular Letter No. 2011-6A. Section 8.2.1.a The PhilGEPS shall have a centralized electronic bulletin board for posting procurement opportunities, notices, awards and reasons for award. All Procuring Entities are

112

required to post all procurement opportunities, results of bidding and related information in the PhilGEPS bulletin board. (emphasis ours) Section 54.3 In all instances of alternative methods of procurement, the BAC, through the Secretariat, shall post, for information purposes, the notice of award in the PhilGEPS website, the website of the procuring entity concerned, if available, and at any conspicuous place reserved for this purpose in the premises of the procuring entity. (emphasis ours) 24.37 In RFO XI, the results of bidding or notices of award were not posted in the PhilGEPS, BAC Resolution recommending the award was not prepared and required reports were not submitted. 24.38 In RFTC IX, it was found that the agency is not registered with the PhilGEPS; consequently, all of its procurement activities during CY 2011 amounting to P289,096.16 were not posted in the System, contrary to the abovementioned provisions of RA 9184. Thus, the agency was unable to fully benefit from the services offered by this Electronic Procurement System. 24.39 We recommended that management post in the PhilGEPS all the results of all biddings conducted by them for purposes of information and transparency and for RFTC IX to cause the immediate registration with the PhilGEPS to be able to obtain the full benefits from the services offered by them. e) other observations noted contrary to RA 9184

24.40 Other observations found in the audit and review of transactions regarding procurements are as follows:
Region CAR Observations The Bidding Documents for certain procurement projects issued by the Bids and Awards Committee (BAC) did not contain the information necessary for the prospective bidders to prepare their bids. Detailed engineering activities for the procurement of the two units windmill and four infrastructure projects were not sufficiently carried out. The BAC required the submission by prospective bidders of their eligibility documents and evaluated such documents prior to the receipt and opening of bids There were procurements of goods which were not included in the Annual Procurement Plan (APP). The agency failed to prepare, formulate and submit the Annual Procurement Plan (APP) within the first quarter of the year. Purchases amounting to P4,470,898.37 for the period January to June 2011 were made despite the absence of a quorum or the Chairman or

a.

b.

c.

RFO II RFO VI RFO XI

d. e. f.

113

Region

Observations the Vice-Chairman during the opening of bids. g. Purchases amounting to P170,119 were delivered even prior to the opening of bids indicating that the biddings were simulated. BAC Resolutions recommending the award were not prepared by the BAC The Procurement Monitoring Reports (PMR) covering all procurement activities specified in the APP whether on-going or completed were not prepared and submitted fourteen (14) days after each semester by the agency in printed and electronic copies to the GPPB An Office Memorandum issued for the re-organization of the Centers Bids and Awards Committee (BAC) do not fix a period of one (1) year from the time of its effectivity.

h.

i.

RFTC XI

j.

24.41 We recommended management require the BAC to be familiar with the procurement process and to strictly comply with the provisions of RA 9184. Deviations from the prescribed process are grounds for the institution of penal sanctions provided for in the law. The Head of the Procuring Entity and the members of the BAC are responsible for the applied processes to be compliant with laws, rules and regulations.

Compliance with tax laws 25. NFRDI and RFO VI were unable to remit taxes totaling P77,740.84 contrary to the National Internal Revenue Code (NIRC) and its Implementing Rules and Regulations which requires remittances of withheld taxes within the tenth day of the following month. BIR rules and regulations prescribe that remittance of taxes withheld shall be on or before the tenth (10th) day of the month following the month the withholding was made. There were unremitted withholding taxes of the following offices, summarized as follows:
Agency NFRDI RFO VI Total Due for Remittance P56,167.74 21,573.10 P77,740.84

25.1

25.2

25.3

In NFRDI, audit disclosed that as of December 31, 2011, the reported balance of account Due to BIR amounting to P684,611.81 includes the amount of P56,167.74 representing taxes withheld from November 2011 and prior year/months deducted from contractors/suppliers for various procurements

114

and consultancy services for the implementation of NFRDI programs/projects and from NFRDI official and employees. Details are shown below:
Source of Tax Withheld Private Individuals including Suppliers and Job Order Employees NFRDI Employees Total Per Books Tax Withheld in December 2011 P501,509.10 126,934.97 P628,444.07 Already Due for Remittance 91- 365 31- 90 days Over 1 Year days P13,591.49 P13,591.49 P2,498.56 P2,498.56 P56,167.74 P24,307.76 15,769.93 P40,077.69

P541,906.91 142,704.90 P684,611.81

25.4

Likewise, in RFO VI, there was failure to remit taxes amounting to P21,573.10. Taxes withheld for the period January to December 2011 had been remitted to the BIR within the reglementary period. However, examination of Due to BIR balances for CY 2011 showed that there were variances in the remittance of taxes withheld, as shown below:
Month (2011) January February March April May June July August September October November December Total Per Books P121,797.38 262,986.00 317,534.54 231,106.20 241,172.21 288,100.75 276,523.01 312,875.34 246,403.22 221,849.11 255,899.84 475,197.76 P3,251,445.36 Remittance P123,867.77 254,938.85 306,385.44 229,384.90 243,070.51 280,851.69 276,743.06 301,576.61 252,750.49 225,526.38 258,898.66 475,877.99 P3,229,872.35 Variance P (2,070.39) 8,047.15 11,149.10 1,721.30 (1,898.30) 7,249.06 (220.05) 11,298.73 (6,347.27) (3,677.27) (2,998.82) (680.23) P21,573.01

25.5

We commend the management of Central Office, RFOs I, II, III, IV-A and B, IX, X, XIII and RFTC V for the awareness of the governments drive towards strong revenue generation. The agencies have been consistently withholding tax, contractors tax and expanded withholding tax. These were remitted to the Bureau of Internal Revenue on a regular basis. The balance of taxes withheld as of year-end of these regions will be remitted on January 2012 pursuant to the rule that taxes withheld shall be remitted on or before the 10th day of the succeeding month. In view of the foregoing, we recommended that: a. NFRDI, cause the remittance of taxes already due; and

25.6

25.7

115

b.

RFO VI reconcile the records to determine the cause of the variances between taxes withheld and taxes remitted and to remit immediately to BIR all identified unremitted taxes withheld

25.8

We commend the management of RFOs I, II, III, IV-A, IV-B, IX, X, XIII and RFTC V for their compliance with BIR tax laws. RFO VI management commented that the variance erroneously taken up in the books as Due to BIR should have been recorded as Due to GSIS.

25.9

Gender and Development (GAD) 26. RFOs II and VI failed to allocate 5% of the total annual appropriations for CY 2011 for GAD activities contrary to the Section 31 of the General Provisions of the General Appropriations Act CY 2011. Pursuant to Executive Order No. 273, Approving and Adopting the Philippine Plan for Gender Responsive Development, (1995-2025), agencies are mandated to institutionalize Gender and Development (GAD) efforts in government by incorporating GAD concerns in their planning, programming and budgeting processes. It also mandates agencies to incorporate and reflect GAD concerns in their annual budget proposals and work and financial plans. Moreover, Sec. 31 of the General Appropriation Act for CY 2011 states that all departments, bureaus, offices, agencies, SUCs, GOCCs, and LGUs shall formulate a GAD Plan designed to address gender issues within their concerned sectors or mandate and implement applicable provisions in the Convention on the Elimination of All Forms of Discrimination Against Women, the Beijing Platform for Action, the Millennium Development Goals (2000-2015), the Philippine Plan for Gender-Responsive Development (1995-2025), and the Framework Plan for Women. The GAD Plan shall be integrated in the regular activities of the agencies, which shall be at least five percent (5%) of their respective budgets. The development of the GAD Plan shall proceed from the conduct of gender analysis, the generation and review of sex-disaggregated data, and consultations with gender advocates and women clientele. Its implementation shall contribute to poverty alleviation, the economic empowerment especially of marginalized women, the protection, promotion, and fulfilment of women's human rights, and the practice of genderresponsive governance. Utilization of the GAD budget shall be evaluated based on the GAD performance indicators identified by said agencies.

26.1

26.2

26.3

26.4

116

26.5

The preparation and submission of annual GAD Plans and annual GAD Accomplishment Reports shall be guided by Joint Circular No.2004-01 dated April 5, 2004 issued by the DBM, NEDA, and Philippine Commission on Women (formerly the National Commission on the Role of Filipino Women), as well as other guidelines on GAD Planning and Budgeting that may be issued by the appropriate oversight agencies. RFOs I, III, IV-A and B, IX, X, XI, RFTC V recognized the need to address gender issues within the organization, they allocated 5% of their total budget appropriations for Gender and Development programs for CY 2011. The annual GAD Accomplishment Report showed that the agency has effectively implemented the GAD-related activities and programs contained in the annual GAD Plan. In RFOs II and VI, however, the required allocation of at least 5% of the total appropriation for GAD activities was not complied with contrary to the General Provisions of the General Appropriation Act for CY 2011. We commend RFOs I, III, IV-A and B, IX, X, XI, RFTC V for the continued compliance with EO 273. We recommended that RFOs II and VI management ensure compliance with the fund allocation to GAD related activities as provided by law in order to accomplish all GAD planned activities.

26.6

26.7

26.8 26.9

Unsettled Suspensions and Disallowances 27. Audit suspensions and disallowances amounting to P10.781 million and P7.315 million, respectively, remained unsettled due to non-enforcement of management of Section 7 Chapter I of the RSSA contrary to COA Circular 2009-006. COA Circular 2009-006 prescribe the use of the Rules and Regulations on Settlement of Accounts (RRSA), to wit: 7.1.1 The head of the agency, who is primarily responsible for all government funds and property pertaining to his agency, shall ensure that (a) x xx (b) the settlement of disallowances and charges is made within the prescribed period and (c) the requirements of transactions suspended in audit are complied with; and (d) x xx

27.1

117

27.2

The balance of disallowances and suspensions are summarized as follows:

Disallowance Suspension Ending Balance P 621,477.00 485,119.43 48,000.00 1,069,540.75 4,951,445.15 87,600.00 52,160.00 P7,315,342.33 Beginning Balance 1/1/2011 P 936,638.98 285,518.22 3,620,340.67 P4,842,497.87 Issued for CY 2011 P 490,754.43 353,844.47 5,093,800.00 P5,938,398.90 Ending Balance P 1,427,393.41 285,518.22 3,620,340.67 353,844.47 5,093,800.00 P10,780,896.77 Beginning Balance 1/1/2011 P 621,477.00 1,172,675.63 869,411.00 P2,663,563.63

Agency CO RFO III RFO IV-B RFO VI RFO X RFO XIII NFRDI Total

Issued for CY 2011 P 99,453.90 1,406,082.84 48,000.00 4,082,034.15 87,600.00 52,160.00 P5,775,330.89 P

Settled for CY 2011 99,453.90 920,963.41 103,134.88 P1,123,552.19

27.3 27.4

In RFO III, the balance of disallowance of P485,119.43 is under appeal. We recommended that management intensify the collection of disallowances, especially those receivables from other creditors, other government agencies, and former BFAR employees including those already retired and detailed to other government agencies. A memorandum was already issued to the NFRDI management to deduct the disallowances from the salaries and wages of the concerned officers and employees.

27.5

Delayed Submission of Reports, Purchase Orders and Contracts 28. Delayed or non-submission of required financial reports, schedules, and program/ project status reports by RFOs X, XIII and RFTC V management contrary to Sections 39 and 122 of PD 1445 and Section 7 of COA Circular No. 2009-006; thereby, causing difficulty in rendering the mandated tasks of the Audit Team. Section 7.1.1 of COA Circular 2009-006 dated September 15, 2009 provides that the Head of the Agency is primarily responsible for all government funds and property pertaining to his agency and he shall insure that the required financial and other reports and statements are submitted by the concerned agency officials in such form and within the period prescribed by the Commission. In addition, Section 7.2.1 (a) of COA Circular No. 2009-006 dated September 15, 2009 provides that, the reports and supporting documents submitted by the accountable officers are immediately recorded in the books of accounts and submitted to the Auditor within the first ten (10) days of the ensuing month.

28.1

28.2

118

28.3

In CY 2011, the Team found difficulties in rendering its mandated tasks as mentioned in the cited laws due to managements delayed or non-submission of the following reports, to wit:
Office RFO VI Documents/Reports not Submitted on Time Financial Reports with supporting documents Letter Orders issued for catering services during conduct of trainings a. List of NTAs/NCAs; b. Statement of Allotments, Obligations, and Balances (SAOB) with their corresponding schedules c. Annual Work and Financial Plan for CY 2011; d. Status of Infrastructure Projects; and other e. Program/Accomplishment Reports, including the Status of Rental Payments per FLAs. Monthly reports pertaining to disbursements and liquidation of cash advances. a. Purchase Orders b. Job Orders c. Contracts of Services a. b.

RFO X

RFO XIII RFTC V

28.4 28.5

The failure of the agency to abide with the aforesaid rules and regulation prevented the timely review/audit of the said documents. We recommended that management submit, henceforth, all the required reports, schedules, and other documents that are necessary in the evaluation, examination, and audit of obligations, disbursements, and of other activities relating to financial operations of the agency so that the audit team can discharge its functions efficiently and effectively.

119