Professional Documents
Culture Documents
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
TABLE OF CONTENTS
Page No
EXECUTIVE SUMMARY
i - vi
1-3
8 - 30
31 - 76
76 - 80
80 - 85
85 - 88
88 - 89
90 - 91
91 - 97
98 - 111
112 - 115
EXECUTIVE SUMMARY
A.
Introduction
Philippine National Railways (PNR)
1.
2.
The PNR provides one of the oldest and thriving mass transport systems in the country.
The agency survived through the years, from the steam engine era to dieselization
period, enduring world wars, revolutions, and calamities that caused interruption on
railroad operations. Its term of existence was extended for another 50 years after
expiration last June 20, 2014. Republic Act No. 10638 was approved by the President
of the Philippines on June 16, 2014, amending RA 4156.
3.
To contribute in the rapid growth of the Philippine economy, the role of the PNR is to
provide mobility in transport system at minimum passenger and freight prices possible.
In 2014, the PNR operated the Metro Manila Commuter Service (MMCS) with service
routes from Tutuban to Alabang running average of 52 trips daily. Train service was
extended from Bian to Calamba City in Laguna with two trips per day. It also served
the Bicol Commuter providing transportation service to train passengers between Naga
City and Sipocot, Camarines Sur using one train set of 3-rail cars in four trips per day.
With 21,777 train trips in year 2014 compared to 20,218 trips in year 2013, PNR was
able to carry 24,671,954 passengers during the year as against 19,968,784 in the
previous year thus, posting an increase in ridership by 23.55%.
The audit covered the transactions, accounts and operations of the PNR for CY 2014.
The audit was conducted to determine (a) the level of assurance that may be placed on
the assertions of Management on the financial statements; (b) the propriety of
transactions and compliance with existing rules and regulation as well as managements
policies; and, (c) the extent of implementation of prior years audit recommendations. .
5.
The audit involved performing procedures to obtain audit evidence to determine the
fairness of presentation of the financial statements and the propriety of the financial
transactions, in accordance with the Philippine Standards of Auditing, applicable laws,
rules and regulations. We identified the following accounts as thrust of audit conducted
on a test basis: Plant Property and Equipment including Construction in Progress,
Rental Receivable with related account of Income from Lease of Property, Subsidy from
the National Government, taxes on fuel Due to Bureau of Internal Revenue, Honoraria,
Per Diems, statutory deductions on salaries due for remittance to the GSIS, Philhealth
and Pag-Ibig and Cash in Bank.
B.
Assets
Liabilities
Equity/Capital Deficiency
2014
As restated
2013
Increase /
(Decrease)
51,896,055,986
52,824,149,901
(928,093,915)
361,440,272
(1,289,534,187)
1.8
1.4
20.7
26,476,042,530
25,420,013,456
26,114.602,258
26,709,547,643
Results of Operations
C.
2014
As restated
2013
Increase/
(Decrease)
515,500,949
102,773,148
401,023,352
99,198,000
114,477,597
3,575,148
28.5
3.6
789,394,898
288,200,327
153,146,827
178,808,276
332,912,321
567,912,203
225,307,544
(25,669,591)
254,605,291
262,458,695
221,482,695
62,892,783
178,816,418
(75,797,015)
70,453,626
39.0
27.9
696.6
(29.8)
26.8
Auditors Opinion
An adverse opinion was rendered by the Auditor on the fairness of presentation of the
financial statements of the PNR as of December 31, 2014 because:
1. Physical inventory of Property, Plant and Equipment (PPE) was not undertaken to
establish the existence of the assets consisting the account. Moreover, the carrying
value of PPE amounting to P50.98 billion as of December 31, 2014, comprising
98.2% of Total Assets of P51.90 billion was misstated with the value of Land under
PPE recognized at zonal value. Managements disclosure in supplemental Note 5 to
the Financial Statements (FS) that Land was carried in the books at zonal value did
not correct the misstatement of the balance of PPE as under Philippine Accounting
Standards (PAS) No.16, the generally accepted valuation of PPE was either at cost
or appraised value determined by an independent appraiser. Furthermore, building
structures carried in the books at estimated cost of P31.05 million were not
derecognized in the books upon demolition which was accomplished without adhering
to prescribed rules.
2. The reported year-end balance of the Construction-in-Progress (CIP) account was not
correctly stated as it included P213.31 million costs of bridges and P26.99 million
building stations and P2.69 million related costs of other projects already completed.
Also, borrowing cost capitalized of P414.61 million on loan funded projects already
completed was still carried under the CIP account. There were also unaccounted
ii
charges of P379.58 million comprising the beginning balance of the account; and,
improper charges of recoupment of advances to Contractors of P6.93 million.
3. The accuracy of the reported Rental Receivable-TPI of P361.86 million under Note 9
of the FS was uncertain as consisting of rental arrears of more than P316.68 million
which had remained uncollected for a long period of time due to unresolved issue on
escalation rate whether compounded or simple rate. . On the other hand, Rental
Receivable-Other Lessees of P156.26 million as of December 31, 2014 included
unconfirmed accounts totalling P71.96 million and double recording of accounts
amounting to P1.68 million..
4. The year-end balance of Cash In Bank account included dormant bank accounts with
balances totaling P1.89 million and long outstanding reconciling items of unrecorded
disbursements amounting to P6.15 million
For the significant accounting deviations and other deficiencies cited above, the Auditor
recommended compliance with the provisions of PAS No. 16 and conduct of physical
inventory. Further, Management should undertake appropriate actions to correct and present
fairly the balances of accounts in the financial statements as of reporting date.
D.
iii
Recommendation:
Attach the required supporting documents to vouchers for the payment of honoraria
prescribed in COA Circular No. 2012-001 dated June 14, 2012 to prevent
suspension/disallowance of the transactions in audit; and, require the refund of the
honoraria paid to hire and fire personnel designated as administrative support staff
to the BAC Secretariat amounting to P189,000.
6. After the lapse of four years, the computerization project embarked by the PNR at
reduced contract cost of P31.57 million has, to date, not attained its objective of
providing efficient and effective computerized Payroll and Property Management
Systems.
Despite awaiting for the approval by the Commission on Audit of the petition for
payment based on quantum meruit filed by the contractor in June 2014, five
disbursement vouchers were paid totalling P8.5 million to the contractor, from June
9, 2014 to February 16, 2015, for the Board approved compromised balance of
P14.52 million.
Recommendations:
a. Considering the rapid change in information technology, immediately formulate
solutions in order that the computer system procured would be more productive
and effective before it becomes obsolete and/or unserviceable; and
b. Submit explanation why payments were made to the Contractor in the total
amount of P8.5 million even if the petition for money claim of PC Craft was still
pending for review and approval of COA to determine the reasonableness of the
reduced contract cost P31.57 million.
7. Internal control weaknesses in Real Estate Management were observed rendering it
difficult to determine the accuracy of collections on lease and the reasonableness of
the lease rate imposed. There was no clear policy in the determination of the fair
rental rate and what was authorized was not consistently applied. There were
instances of overlapping rights on the leased premises and lack of manpower and will
to effectively manage the vast parcels of real property of the PNR.
Recommendations:
a. With the immeasurable parcels of real property which the PNR is unable to
manage effectively, thoroughly review the Inventory List of PNR Real Property
and determine which property would no longer be used in the expansion or
rehabilitation of lines in the rail transportation system. Management may consider
sale of the assets in order to generate much needed fund for the efficient delivery
of rail transportation service by the PNR.
b. Issue clear policy in the determination of the reasonable rate of lease; and
c. Reassess the use of zonal value in determining the proper lease rate in the
leasing of real property instead of the prevailing rental rate in the vicinity which
generally is considered reasonable and fair value.
v
8. The PNR failed to withhold 5% final VAT estimated at P16.14 million and 1%
creditable income tax of approximately P3.23 million or a total of P19.36 million on
bulk purchase of fuel for locomotives from CY 2011 to 2014 in the total amount of
P361.47 million (inclusive of 12% VAT).
Recommendation:
Provide explanation/s for not adhering to the established rules prescribed in BIR
Revenue Memorandum Orders issued to implement the provisions of the National
Internal Revenue Code.
9. PNR Management did not comply with the requirements of COA Circular No. 2009001 dated February 12, 2009 on the timely submission of copies of perfected
contracts and Purchase Orders including supporting documents thereby holding back
conduct of review and audit.
Recommendations:
a. Submit explanation/s on its failure in year 2014 to strictly comply with the
requirements of COA Circular 2009-001 as it hindered the conduct of auditorial
review; and
b. Submit all lacking supporting documents to the contracts submitted to avoid
suspension of related disbursement transactions.
10. Turnover by Collecting Officers to the Cashier of cash collections due for deposit on
the following day averaging more than P1 million daily was done without official
document to indicate transfer of accountability on collections.
Recommendation:
Require each accountable officer to accomplish separate DPN for collections for
deposit, considering that the amount of collections per bank statement is shown by
collecting officer and not in lump-sum, thus rendering turnover of cash by the
collecting officers to the depositor in-charge unnecessary.
E.
vi
COMMISSION ON AUDIT
Other Matter
We likewise draw attention to the May 2014 Supplement to Contract of Lease executed with
SM Primeholdings, Inc. with contract price of approximately P4.41 billion for period of 25
years the propriety and legality of which were found questionable considering (a) the major
changes from the 1983 Original Contract of Lease; (b) the original contract was
unimplemented for more than 31 years; and, (c) transfer of rights and obligations had been
made by the Lessee. Also, P150.00 million of the unearned income from lease due for the
first 12 years of the contract had been collected in advance even if the supplemental contract
has not been ratified by the PNR Board of Directors. In the computation of the present value
of the fixed annual rental due for the 1st 12 years collected in advance, the provision on
escalation at 10% every four years at compounded rate was not considered, thus the
computed total unearned income from lease was deficient in amount by more than P190.42
million.
We wish to give emphasis on the internal control weaknesses in Real Estate Management
rendering it difficult to determine the accuracy of collections on lease and the
reasonableness of the lease rate imposed. There was no clear policy in the determination of
the fair rental rate and what was authorized was not consistently applied. There were
instances of overlapping rights on the leased premises and lack of manpower and will to
effectively manage the vast parcels of real property of the PNR.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Management of the PNR has not presented the supplementary information on taxes, duties
and license fees required for purposes of filing with the BIR. Such information is not required
part of the basic financial statements.
COMMISSION ON AUDIT
By:
MAYOLA PAREDES-SALITA
Supervising Auditor
Notes
2014
6, 33
7
50,978,107,037
15,968,849
52,038,834,453
15,968,849
50,994,075,886
52,054,803,302
192,545,988
468,183,254
148,641,593
82,836,721
5,858,560
3,913,984
186,117,996
381,180,583
148,395,751
40,901,604
9,143,741
3,606,924
901,980,100
769,346,599
51,896,055,986
52,824,149,901
2,168,734,993
385,050,494
2,586,993,082
205,688,450
2,553,785,487
2,792,681,532
23,065,327,054
278,128,462
164,166,584
157,491,993
90,838,441
64,998,115
42,768,689
31,591,369
27,221,252
(8,897,707)
8,622,791
22,703,082,124
258,791,997
0
73,526,433
85,125,927
64,998,115
36,906,862
32,712,895
46,451,616
(3,126,149)
23,450,906
23,922,257,043
23,321,920,726
Equity
25,420,013,456
26,709,547,643
51,896,055,986
52,824,149,901
ASSETS
Non-Current Assets
Property, plant and equipment
Other assets
Total Non-Current Assets
Current Assets
Cash and cash equivalents
Accounts receivable
Due from officers and employees
Prepaid expenses
Materials and supplies inventory
Guaranty deposits
8
9
10
11
12
13
14
15
16
14
17
18
19
20
21
22
23
24
25
Notes
REVENUE
Operating revenue
Commuter/passenger
Discount, refund and commission
Non-operating revenue
Rental income
Miscellaneous income
313,805,934
(5,880)
Total Revenue
EXPENSES
Personal services
Maintenance and other operating expenses
Financial expenses
26
27
28
Total Expenses
NET LOSS FROM OPERATIONS
OTHER INCOME (EXPENSES)
Gain (loss) on foreign exchange
Gain on sale of assets
Interest income
29
2014
30
2013
235,831,973
0
197,770,730
3,930,165
163,679,508
1,511,871
515,500,949
401,023,352
102,773,148
789,394,898
288,200,327
99,198,000
567,912,203
225,307,544
1,180,368,373
892,417,747
(664,867,424)
(491,394,395)
150,626,408
1,630,028
890,391
(27,715,568)
0
2,045,977
153,146,827
(25,669,591)
(511,720,597)
178,808,276
(517,063,986)
254,605,291
(332,912,321)
(262,458,695)
(332,912,321)
(262,458,695)
Notes
CAPITAL STOCK
31
2014
As restated
2013
1,500,000,000
1,500,000,000
903,287
903,287
40,655,182,085
0
40,699,651,481
(44,469,396)
40,655,182,085
40,655,182,085
DEFICIT
Balance at beginning of year
Prior-period adjustments
Net profit loss
(15,446,537,729)
(956,621,866)
(332,912,321)
(15,054,032,512)
(130,046,522)
(262,458,695)
(16,736,071,916)
(15,446,537,729)
25,420,013,456
26,709,547,643
33
EQUITY
See accompanying Notes to Financial Statements.
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from operations
Subsidy from the National Government
Interest income
Payment of operating expenses
2013
618,491,975
178,808,276
890,391
(696,840,169)
349,768,604
254,605,291
2,055,576
(653,067,986)
101,350,473
46,638,515
5,367,232
1,630,028
(90,733,828)
13,371,051
0
(94,132,186)
(83,736,568)
(80,761,135)
164,088,319
(115,626,744)
(56,271,739)
(3,375,749)
0
(6,559,831)
(4,561,527)
0
(11,185,913)
(11,121,358)
6,427,992
186,117,996
(138,521,008)
324,639,006
192,545,988
186,117,996
1. CORPORATE INFORMATION
The Philippine National Railways (PNR) was created on June 20, 1964 by virtue of
Republic Act 4156 with primary function of serving the best interest of the public by
ensuring that railway transport service is rendered at optimum level with reasonable
passenger fare and minimum cost of freight. It is the instrumentality of the Government of
the Philippines in providing a nationwide railroad and transport system. The PNR, attached
to the Department of Transportation and Communication (DOTC) for national policy and
program coordination, replaced the old Manila Railroad Company after assuming all of its
assets and liabilities.
Republic Act 6366 issued on August 20, 1971 amended certain provisions of R.A. 4156 in
order to ensure the extensive rehabilitation and modernization of the agencys transport
facilities. Presidential Decree (PD) No. 741 issued on July 3, 1975 re-amended several
provisions of the Corporate Charter. Among the significant revision is the increase in the
agencys authorized capital stock from six hundred fifty million pesos (P650,000,000) to one
billion five hundred million pesos (P1,500,000,000). PD 741 also converted the corporate
liabilities of the PNR with government banks and financial institutions into paid-up shares of
stocks.
The corporate powers of the Corporation are vested to its Board of Directors composed of
the Chairman, who is appointed by the President, the General Manager as Vice Chairman
and seven (7) members. Aside from the General Manager and Assistant General Manager,
top management in the Organizational Structure of the PNR as rationalized in 2008 is
comprised of four department managers, one each for Administrative and Finance,
Transportation, Engineering and the Rolling Stock Maintenance.
Human resources as of December 31, 2014 consisted of a total of 215 permanent
employees and 1,263 job order employees. The Corporations registered office address is
at PNR Executive Building, Mayhaligue Street, Tondo, Manila.
FOR ITS OPERATION was approved by the President of the Philippines on June 16,
2014. It extended the corporate life of the PNR for another 50 years commencing on June
20, 2014.
a. Manila to Alabang
b. Manila to Sta. Rosa
c. Manila to Mamatid
d. Manila to Calamba
Period
No of trips
TYPE OF SERVICE
Metro Manila Commuter Service
Tutuban to Alabang
Tutuban to Bian
Tutuban to Sta. Rosa
Tutuban to Mamatid
Tutuban to Calamba
Lond Distance Train (Bicol Express)
Bicol Commuter Service
TOTAL
900 22,351,847
(713)
659
790,560
677
951,228
54
106,845
(18)
471,474
1,559 24,671,954
18,326,296 4,025,551
1,156,825 (1,156,825)
790,560
951,228
106,845
485,663
(14,189)
19,968,784 4,703,170
1,724
1,832
2,204
1,960
1,911
1,616
1,629
1,495
1,474
1,569
1,465
1,468
1,419
1,309
1,341
1,400
1,656
1,628
1,747
1,567
1,624
1,678
1,642
1,759
305
523
863
560
255
(12)
(118)
(72)
(150)
(109)
(177)
(291)
1,990,331
1,946,926
2,237,895
1,961,039
2,123,792
1,940,516
1,996,850
1,944,596
1,939,519
2,019,675
2,069,880
2,029,461
1,295,826
1,259,182
1,310,314
1,402,142
1,510,952
1,544,324
1,803,348
1,594,445
1,788,830
1,916,512
1,952,672
2,104,574
694,505
687,744
927,581
558,897
612,840
396,192
193,502
350,151
150,689
103,163
117,208
(75,133)
20,347
18,770
1,577 24,200,480
19,483,121
4,717,359
120
112
124
120
124
120
108
124
120
124
120
114
120
112
120
120
124
120
124
124
120
124
116
124
4
(16)
4
(10)
39,495
37,621
40,635
35,025
40,631
39,114
34,278
41,063
43,480
40,365
42,999
36,768
35,859
34,894
40,693
36,921
42,732
40,462
41,318
40,334
46,827
42,381
40,060
43,182
3,636
2,727
(58)
(1,896)
(2,101)
(1,348)
(7,040)
729
(3,347)
(2,016)
2,939
(6,414)
1,430
1,448
(18)
471,474
485,663
(14,189)
10
Location
Contract
Amount (ABC)
in pesos
Date
Started
No.
of Ex
tensi
ons
Target
Completion
Date
Project Status
% of
Completion
Total Cost
Incurred to
date
171,607,118
Remarks
Calamba,
Laguna
Original
Contract
Amount:
247,335,590
Revised
Contract
Amount:
204,876,131
December
22, 2008
Original Contract
Duration - April
21, 2010 (485
CD)
Revised
Contract
Duration August 31, 2014
98.28
Design and
Construction
of Travesia
Bridge
Guinobata
n, Albay
Original
Contract
Amount:
116,927,339
Revised
Contract
Amount:
71,880,680
December
22, 2008
Original Contract
DurationDecember 22,
2009 (365 CD)
Revised
Contract
Duration August 31, 2014
100
Supply and
Delivery of
Various
Communicatio
n Equipment
Manila
Area
1,493,440
May 30,
2014
100
Supply and
Distribution of
Ballast
PlaridelGumaca
Quezon
17,970,807
March 15,
2014
100
May 08,
2014
100
69,320,276
1,493,440
17,970,807
12,464,657
Project
Implementation
was suspended
since
December 16,
2011 after 95%
accomplishmen
t.
Implementation
resumed on
June 2, 2014
after execution
of
Supplemental
Agreement.
100 %
Accomplished
Completed
PS-DBM
conducted
bidding and
Contract
Implementation
Completed
PS-DBM
conducted
bidding and
Contract
Implementation
Completed
PS-DBM
conducted
bidding and
Contract
Implementation
11
Project /
Program /
Activity
Name
Supply of
Huck Bolt
Tools and
Equipment
including
Accessories
and Huck
Bolts
Location
No.
of Ex
tensi
ons
Target
Completion
Date
March 10,
2014
5,360,677
June 20,
2014
5,915,731
Contract
Amount (ABC)
in pesos
Date
Started
2,768,613
Alabang to
Calamba
Project Status
% of
Completion
Total Cost
Incurred to
date
100
2,768,613
Original:
October 03,
2014
Revised:
October 30,
2014
96.50
June 23,
2014
Original:
October 06,
2014
Revised:
October 12,
2014
100
Renovation of
Polangui
Station
Polangui,
Albay
Retrofitting of
Piers &
Abutments
Quezon
Area
9,798,510
April 11,
2014
100
Painting of
Thirty One
(31) Steel
Bridge
Superstructur
es
Hondagua
Area
2,764,100
April 17,
2014
Original:
July 11, 2014
Revised:
July 19, 2014
65.00
Painting of
Thirteen (13)
Steel Bridge
Superstructur
es
Painting of
Thirty Four
(34) Steel
Bridge
Superstructur
es
Lucena
Area
2,970,806
April 30,
2014
100
May 16,
2014
Original:
August 24, 2014
Revised:
October 02,
2014
100
Replacement
of Concrete
Bridge Slab
Deck
Laguna
Area
May 21,
2014
Original:
August 19, 2014
Revised:
September 04,
2014
96.67
June 20,
2014
Original:
August 04, 2014
Revised:
August 14, 2014
75.5
Retrofitting of
Pier No.2 and
Pier No.3 of
Quilbay
Bridge
Naga Area
Del
Gallego,
Camarine
s Sur
Original
Contract
Amount:
3,518,865
Revised
Contract
Amount:
3,754,408
7,415,054
17,046,889
Remarks
Completed
PS-DBM
conducted
bidding and
Contract
Implementation
3,768,153
Under Contract
Implementation
2,686,527
100%
Accomplished
4,675,521
100%
Accomplished
414,615
2,970,806
2,272,835
Under Contract
Implementation
Completed
100%
Accomplished
7,118,452
Under Contract
Implementation
5,589,735
Under Contract
Implementation
12
Project /
Program /
Activity
Name
Location
Contract
Amount (ABC)
in pesos
Date
Started
No.
of Ex
tensi
ons
Target
Completion
Date
Project Status
% of
Completion
Total Cost
Incurred to
date
Remarks
Quezon
Area
Renovation of
Travesia
Station
Travesia,
Albay
Renovation of
Ligao Station
Ligao,
Albay
Renovation of
Iriga Station
Iriga,
Camarine
s Sur
Regirdering of
Two (2) Steel
Bridge
Superstructur
es
Laguna
Area
9,115,654
June 23,
2014
Original:
August 22, 2014
Revised:
August 31, 2014
99.31
July 10,
2014
November 7,
2014
91.50
July 14,
2014
October 27,
2014
96.06
July 18,
2014
Original:
October 31,
2014
Revised:
November 25,
2014
92.44
7,852,320
July 21,
2014
September 19,
2014
55.32
Manila &
Naga
89,494,000
June 30,
2014
February 10,
2015
64.57
Main Line
South
8,190,052
July 07,
2014
Original:
September 25,
2014
Revised:
October 25,
2014
72.17
Main Line
South
51,888,000
July 08,
2014
Original:
November 05,
2014
Revised:
December 15,
2014
100
8,284,729
5,737,820
Original
Contract
Amount:
5,591,317
Revised
Contract
Amount:
5,701,024
5,656,000
6,535,880
Under Contract
Implementation
Under Contract
Implementation
4,856,522
Under Contract
Implementation
4,268,033
Under Contract
Implementation
1,177,848
Under Contract
Implementation
Supply of
1,000 pcs
37kg. X 20
meter Rails
Including Rail
Fishplates
And
Trackbolts
39,046,232
Under Contract
Implementation
1,228,506
Under Contract
Implementation
51,888,000
Completed
13
14
When assets are sold, retired or disposed, the cost and related accumulated depreciation
are removed from the account and any resulting gain or loss is credited or charged to
current operations.
Depreciation
Depreciation commences once the asset is use in operations. It is computed using the
straight-line method over the following estimated useful lives of the assets with 10%
residual value considered in determining the depreciable cost.
Item of Property
Railways/Tracks
Passenger Train Cars
Commuter Train Cars
Locomotives
Station Buildings
Bridges
Land Improvement
Plant & Equipment
Office Equipment
Inventories
Inventory of diesel fuel, accountable forms and supplies and materials is valued at cost and
is charged to expense upon issuance using the first-in, first-out (FIFO) method of costing.
Foreign Exchange Transactions
Transactions in foreign currencies are recorded using the exchange rates prevailing at the
date of the transactions. Liabilities denominated in foreign currencies are restated using
the Bangko Sentral ng Pilipinas (BSP) guiding rate of exchange as of reporting date.
Foreign exchange differences resulting from restatement of outstanding loan balances and
in settlements are recognized in the period in which they arise as gain or loss on foreign
exchange.
Events after the Financial Reporting Date
Post year-end events up to date of the audit report that provide additional information about
the Corporations position at financial reporting date (adjusting events) are reflected in the
financial statements. Post year-end events that are not adjusting events are disclosed in the
notes to the financial statements when material.
15
Buildings, Roads,
Transportation
Other Assets
Equipment,
Equipment
Furnitures
Construction in
Progress
Total
40,015,811,072
0
0
40,015,811,072
9,189,157,150
11,755,141
1,098,396,525
10,299,308,816
4,565,240,059 315,479,502
16,605,250
0
103,435,871 (268,222,642)
4,685,281,180
47,256,860
2,619,633,988
70,032,072
(1,798,305,455)
891,360,605
56,705,321,771
98,392,463
(864,695,701)
55,939,018,533
2,823,606
0
0
2,823,606
1,634,554,152
56,209,657
160,582,855
1,851,346,664
2,760,888,944 268,220,616
138,776,862
0
207,075,418 (268,220,616)
3,106,741,224
0
0
0
0
0
4,666,487,318
194,986,519
99,437,657
4,960,911,494
NETCARRYING AMOUNT
DECEMBER 31, 2014
40,012,987,466
8,447,962,152
1,578,539,956
47,256,860
891,360,605
50,978,107,037
40,012,987,466
7,554,602,999
1,804,351,115
47,258,886
2,619,633,988
52,038,834,453
ACCUMULATED
DEPRECIATION
January 01, 2014
Depreciation
Adjustments
December 31, 2014
_____________________________________________________________________________
7. OTHER ASSETS
This account consists of:
2014
2013
9,009,972
6,958,877
15,968,849
9,009,972
6,958,877
15,968,849
16
Cash in banks
Cash on hand
Cash with collecting officers
Cash with disbursing officers
Total
2014
181,578,202
2013
175,828,166
9,998,638
969,148
10,967,786
192,545,988
9,376,539
913,291
10,289,830
186,117,996
2014
2013
5,619,926
3,715,901
248,336
5,619,926
3,715,901
248,336
9,584,163
(9,584,163)
9,584,163
(9,584,163)
9. RECEIVABLES
This account includes the following:
Receivables trade
Accounts receivable RP & US Government
Receivables commercial
Receivables others
Less: Allowance for doubtful accounts
0
Intra-agency and Other Receivables
Rental receivable Tutuban Properties, Inc.
Rental receivables other lessees
Due from DBM Procurement Service
Due from other GOCC (LRTA)
Receivables - others
Receivables - utilities
Receivable La Mallorca Transit
Receivable - sale of land
Less: Allowance for doubtful accounts
361,864,988
156,261,552
16,981,407
4,162,500
2,068,444
1,689,903
1,320,000
692,546
287,381,048
157,855,478
0
7,031,250
2,068,444
1,689,903
1,320,000
692,546
545,041,340
(76,858,086)
458,038,669
(76,858,086)
468,183,254
468,183,254
381,180,583
381,180,583
17
The details of the trade receivables remained unknown despite utmost effort by
management to identity the debtors, the particulars and dates when the transactions
transpired, and most importantly the documents that would support any legal claim of the
PNR. Management shall request for the approval of the Commission on Audit for the writeoff of the accounts pursuant to applicable government rules on dormant accounts.
Advances to contractors
Prepaid expenses
2014
2013
53,114,472
29,722,249
82,836,721
24,027,445
16,874,159
40,901,604
2014
2013
4,064,058
1,794,502
5,858,560
7,349,239
1,794,502
9,143,741
18
Loan
Amount
In Foreign
Currency
Outstanding Balance
In Peso
2014
2013
409,724,832
217,926,598
1,313,602,948
379,286,552
126,322,525
572,856,692
287,648,209
1,391,265,554
446,208,330
147,806,294
2,446,863,455
2,845,785,079
Current Portion
(278,128,462)
(258,791,997)
Long-Term Portion
2,168,734,993
2,586,993,082
JBIC-PH-P98
JBIC-PH-P119
EDCF/Korea
KEXIM-II
RZB Austria
2.70
2.70
2.50
5.62
2.99
Y 1,105,605,000
588,055,000
W32,353,581,000
$
8,500,942
2,219,043
The following are the Bangko Sentral ng Pilipinas guiding rates of exchange which were
used in the restatement of the outstanding balances of foreign loans as of reporting date:
Foreign Currency
Japanese Yen (Y)
United States Dollar ($)
Korean Won (W)
European Euro ()
Y1.00
$1.00
W1.00
1.00
=
=
=
=
2014
2013
$0.008306
P44.617
$0.000910
P54.339
$0.009545
P44.414
$0.000944
P60.8161
19
___________________________________________________________________________
15. DEFERRED CREDITS
This account includes the amount of income received before it is earned or realized, as
follows:
Advance rental-SMPHI
Deferred income-sale of land
Advance rental-Tutuban Properties, Inc.
Deferred credits to income
Advance rental-Pabahay sa Riles Property
Advance rental-SM
Other deferred credits
2014
2013
168,000,000
131,300,988
35,119,569
20,186,815
15,834,375
700,000
13,908,747
385,050,494
0
128,802,505
35,119,569
11,323,254
15,834,375
700,000
13,908,747
205,688,450
Deferred income sale of land pertains to installment payments received on property sold,
for transfer and conveyance to homeowners associations by the PNR that are covered with
Memorandum of Agreement involving repayment period of 10 to 15 years.
2014
2013
12,738,245,937
9,997,552,614
329,528,503
23,065,327,054
12,566,852,268
9,826,583,821
309,646,035
22,703,082,124
2014
18,000,000
8,607,217
4,889,828
91,654
2013
18,000,000
9,753,963
4,883,053
73,209
2,670
31,591,369
2,670
32,712,895
21
2014
2013
7,686,936
806,010
129,845
0
8,622,791
7,468,115
806,010
622,318
14,554,463
23,450,906
Other payables - trust liabilities are deductions on salaries of personnel for employees
union, savings association, cooperative dues and insurance premiums.
___________________________________________________________________________
26. PERSONAL SERVICES
The breakdown of the account follows:
2014
2013
68,152,419
6,720,006
5,111,783
3,193,273
65,592,356
6,378,278
4,837,537
3,174,484
22
2014
1,065,000
1,061,500
1,043,500
884,500
0
15,541,167
102,773,148
2013
1,020,000
995,000
207,900
140,000
695,900
16,156,545
99,198,000
2014
2013
208,443,420
194,769,519
163,662,695
118,323,258
52,944,230
16,236,343
6,729,967
6,601,458
6,449,227
2,230,963
1,685,075
1,648,332
1,262,200
1,221,236
1,027,775
758,193
743,177
549,500
342,971
332,154
195,822
136,271
0
3,101,112
789,394,898
19,431,655
170,646,147
182,377,384
100,716,089
46,811,294
17,247,269
6,564,989
5,150,768
4,499,682
2,907,097
1,480,266
1,519,337
1,261,000
24,107
821,310
1,200,784
673,026
0
369,097
810,077
0
12,792
4,000
3,384,033
567,912,203
23
2013
2013
170,968,792
84,610,129
19,882,468
9,836,854
2,902,084
288,200,327
102,692,992
103,462,961
18,753,836
397,755
0
225,307,544
24
Percentage of Ownership
94.07
2.37
1.83
1.73
100
Amount
1,411,050,000
35,550,000
27,450,000
25,950,000
1,500,000,000
32. TAXES
In the opinion of the PNR, it is exempt from payment of value-added taxes as provided in its
Charter, RA 4156, as amended. Being formed under a special law, exemption is expressly
recognized under Section 109 (K) of RA 9337 which took effect on July 1, 2005. The PNR
sought the affirmation on tax exemption in the letter dated November 5, 2014, addressed to
the Honorable Commissioner, Bureau of Internal Revenue.
25
Nature/Status
Breach of Contract with
Damages
Enforcement of Constitutional
Guarantee
Initial presentation of plaintiffs
evidence on June 25,2014
Sum of money with damages
Supreme Court
Unlawful detainer
Injunction
RTC-Manila Branch 06
Foundation Specialist,
Inc. vs PNR
Court of Appeals
Consignation
Court of Appeals
Kanlaon Construction vs
PNR
Financial Consequence
Injunction
The petition for review filed by
the foundation Specialist was
dismissed by the CA. FSI filed a
Motion for Reconsideration
which was denied. Petition for
review filed with SC dismissed.
Breach of contract with
damages.
26
Court Case
Sitio de Asis
Homeowners Association
United Residents of
Balabag Abandoned Line
Homes vs PNR
Nature/Status
RTC ordered PNR the alleged
deficiency of delivery of 53,572
kilos of crap rails and bridges
and to pay P25,000 Attys fees,
pending appeal in the CA.
Financial Consequence
Reconveyance of structureand
damages
The pending incident is plaintiffs
Motion to admit third amended
complaint.
Damages arising from the illegal
and unauthorized demolition of
improvements owned by Ms.
Certeza.
The counsel for the plaintiff
earlier terminated his direct
examination
Consignation.
Defendant through counsel
moved for the dismissal of the
case for violation of forum
shopping/ litis pendentia and
lack of cause of action.
Civil case for damages on train
accident filed by an injured
Passenger.
The next hearing set on April
23,2014 fsentation ointiffs third
witness
Specific performance and
damages.
The case is submitted for
resolution.
Paranaque City
Heirs of Francisco Papa,
Heirs of Nazareno vs
PNR
Naic, Cavite
27
Court Case
Nature/Status
Financial Consequence
Declaratory Relief
Declaratory Relief.
___________________________________________________________________
35. LANDS WITH RESTRICTIONS
Tutuban Properties, Inc.
On August 23, 1989, the PNR as Lessor and Gotesco Investment, Inc. as Lessee entered
into a 25 year Contract of Lease of the Tutuban Terminal Compound measuring 20
hectares, more or less. The financial consideration for the lease includes a guaranteed
minimum annual rental of P52.5 million plus an amount equivalent to 1% of gross sales and
15% of income derived from sublease of any part of the leased premises other than those
directly operated by the Lessee. The guaranteed annual rental of P52.5 million shall be
escalated at 10% every two years.
By virtue of a Deed of Assignment dated August 28, 1990, Gotesco Investment, Inc.
assigned unto the Tutuban Properties Inc. all its rights, obligations, title and interest in and
over the leased premises. On August 16, 1993 an agreement was entered into by the PNR
and the TPI which provided for other terms and conditions of the original Contract.
An advance renewal of the lease contract was executed on December 22, 2009 or about 5
years before the expiration of the original contract on September 4, 2014. Due however to
the existence of contentious issues surrounding the renewed lease agreement, the current
management informed the TPI that PNR shall treat the lease contract on a month to month
basis after the expiration date on September 4, 2014.
28
Twenty Seven (27) Land Titles covering a land area of 312,256.90 square meters with a
total Zonal Valuation of P5,938,714,864 were with inscriptions dated March 24, 1992 on the
encumbrance or claim against the property. The encumbrance restricted free use other
than the lease in favor originally of Gotesco Investments, Inc. which subsequently was
assigned to Tutuban Properties, Inc.
29
30
PNR as Lessor executed a Contract of Lease with Shoemart, Inc. (SMI) as Lessee
on March 22, 1982 which was revised, signed anew and notarized on August 5,
1983. The intention of the contracting parties PNR and SMI as stated in the contract
under Paragraph No. 1 on Purpose were:
a. The leased property shall be used as a site for commercial shopping
center in an integrated and controlled development program.
b. SMI shall construct and deliver free of charge a railroad station
adjacent to the leased premises.
c. SMI may sublease or sublet part of the spaces banks, airline offices,
drugstores, beauty salons and dental clinics and other entities.
1.2
Ten years after the execution of the Original Contract, another Contract of
Lease, duly notarized on September 14, 1993, was executed with the PNR as
LESSOR and Land Project Managers Affiliates, Inc. (LPMAI) as
LESSEE. As contained therein, the 1993 Contract of Lease was a
confirmation and ratification of the March 22, 1982 Contract of Lease by and
between the PNR and SMI which contract had been assigned by SMI in
favour of LPMAI.
We were provided a copy of the undated Deed of Assignment with SMI as
ASSIGNOR and LPMAI as ASSIGNEE. The original 1983 Contract of
Lease specifically involving the Transfer of Rights provided that, no right, title
31
1.2.3
1.2.4
1.2.5
PNR
SMI
Lessor Lessee
SMI
LPMAI
Assignor Assignee
Contract of Lease
March 22, 1982
1983Sept. 14, 1993
Undated Deed
of Assignment
B
32
SMI
Sublessee /
Assignee
LPMAI
Sublessor /
Assignor
Sublease Agreement
July 12, 1994
LPMAI
PNR
Lessor
SMPHI
Lessee
Supplement to Contract of
Lease dated May 2, 2014
December 8, 1995
1.2.6
PNR
Lessor
LPMAI
Lessee
Contract of Lease
Sept. 14, 1993
PNR
Lessor
LPMAI
Lessee
Contract of Lease
December 8, 1995
33
1.3.2
Distinct from the 1995 Lease Contract, the Supplement to Contract of Lease
no longer provided for the payment by the LESSEE of a percentage rental
based on gross receipts to be received from sale of goods and services which
was not favourable to the government.
34
1.3.3
1.3.4
We inquired from Management on how the lease rate of P960 per square
meter was determined, and how the threshold of P1.0 billion was arrived at as
the present value of the rental due for the 1st 12 years of the lease payable in
advance by the Lessee. The parcel of land in Caloocan City submitted for
appraisal with area of 125,226 square meters was valued at P24,000 per
square meter or equal to P3,005,420,000. The fair rental value determined by
the appraiser hired by PNR was 4% of the appraised value of P3.0 billion or
equal to P120,220,000 or P960 per square meter per annum and P80 per
square meter per month. In the computation of the maximum limit of P1.0
billion, Management provided the following tabulated computations (A):
A. Computation Made
B. Escalated Rental
(1,000,000,000)
1
2
3
4
5
6
7
8
9
10
11
12
Total
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
99,020,160
1,188,241,920
NPV of 12 yr cashflows
1,000,038,826
Difference
2.76%
99,020,160
99,020,160
99,020,160
108,922,176
108,922,176
108,922,176
119,814,394
119,814,394
119,814,394
131,795,833
131,795,833
131,795,833
1,378,657,689
190,415,769
190,415,769190,415,767
1.3.5
The amount of P150.0 million or 15% of the maximum limit of P1.0 billion was
received in CY2014 and gradually spent for operating expenses. Based on the
above tables, Management did not apply the provision on the escalation of
35
lease to be collected at 10% compounded rate every four years. The amount
used as basis of computing the net present value of the rental due for the 1 st
12 years of the lease was understated as shown in the above table.
During the exit conference conducted prior to issuance of this report,
Management informed that the Supplement to the Contract of Lease had not
been ratified by the PNR Board of Directors. However, lease income not yet
earned had been collected.
1.4
1.5
1.4.2
The area covered by the revised 1983 Contract of Lease totalled 39,000
square meters; while, in the 1993 and 1995 Contracts the three parcels of
land totalled only 35,334 square meters, with option to lease any or all
adjacent parcels of land totalling 67,812 square meters. The Supplement to
Contract of Lease expanded the covered area or Leased Premises to 103,146
square meters including the adjacent areas.
1.4.3
In the best interest of the government and taking into consideration the above
quoted provision on Right of First Refusal, the PNR should have invited other
proponents for the infrastructure or development project.
We also reviewed the provision on the approval of the Contract of Lease by higher
government authorities and we observed that:
1.5.1
36
1.6
1.5.2
Management furnished a copy of the letter dated May 11, 1995 of the then
Executive Secretary, Office of the President, suggesting that all provisions in
the Lease Contract with reference to the approval by the Office of the
President be deleted, in compliance with Section 7 of Executive Order 301 s.
1987 and Section 534, Chapter 2, Book III of the GAAM. The jurisdiction or
authority over lease contracts in determining the reasonableness of the terms
of the lease and rental rates lies with the agency head without need of prior
approval of higher authorities. The attention of Management was also called
upon on the requirement of Section 531 of the GAAM wherein revenue
generating contracts should be publicly bidded.
1.5.3
In the Memorandum dated June 30, 2000 from the Office of the President
which was subsequently issued and disseminated in COA Memorandum No.
2000-089 dated August 11, 2000, all government offices including
Government Owned and Controlled Corporations are directed that
henceforth, all dispositions of government land, whether by lease or sale,
regardless of amount, duration or legal nature, shall be submitted to the Office
of the President for review and further consideration.
1.5.4
The contract entered into by and between the PNR and SMPHI is no ordinary
Contract of Lease whereby the PNR leased out a government property. It is
equated to a Build-Operate-Transfer contract involving a contractual
arrangement wherein the LESSEE shall undertake the construction including
financing of the shopping complex and the PNR Grand Central Station;
thereafter, operate and maintain it for a fixed term during which it will be
allowed to collect rents from sub-lessees, fees and charges in order to recover
its investment. As provided in Section 19 of the 1995 Contract, upon
termination of the lease, the LESSOR becomes the owner of all the
improvements free from any liens and encumbrances.
1.5.5
1.6.2
Without taking into consideration the following: a) compliance with the terms
and conditions of the existing contract; b) the condition of the assets on the
leased premises; c) the value of financial considerations; and, d) other factors,
the automatic renewal with the same terms appears not favourable to the
government.
37
1.7
We believe that the Supplement to Contract of Lease dated May 2, 2014 should have
passed review and approval of higher authorities due to the following considerations:
a) the development project did not materialize; b) more than 30 years since the
original contract was entered into with SMI; c) an amended Contract of Lease with
LPMAI was executed involving assignment of rights, interest, and obligations; d) the
increase in area for development and lease; e) the significant changes in the financial
consideration of the contract.
1.8
In the Memorandum dated May 20, 2014 issued by the Undersecretary for Planning
and Project Development, approval by the Secretary of the Department of
Transportation and Communications of the Supplemental Contract subject to
adoption of amendments was recommended.
We have not received document
showing that the Supplemental Contract passed the approval of the DOTC Secretary.
1.9
1.10
It is informed that any amount of under collection of income due for payment
by the Lessee as a result of erroneous computation or non-application of the
provisions of the contract shall be issued with Notice of Charge to the persons
responsible.
1.11
38
2. The reported year-end balance of the Construction-in-Progress account was not fairly
presented as it included:
a. P213.31 million costs of bridges completed and ready for operations;
b. P26.99 million building stations and P2.69 million related costs of other
projects already completed;
c. P414.61 borrowing cost capitalized with projects funded by the loan also
completed;
d. Unaccounted beginning balance of the account of P379.58 million; and
e. Improper charges of recoupment of advances to Contractors of P6.93
million.
2.1
2.2
The PNR reported the balance of CIP account at P891,360,604 as of December 31,
2014. Audit disclosed that the balance of CIP consisted of the following:
Particulars
Amount
379,581,720
414,607,224
213,312,689
26,989,034
2,686,527
(6,927,354)
35,349,485
(205,547,303)
31,308,581
P 891,360,604
39
October 20, 2005; however, the costs of the project which accumulated to
P414,607,224 was not yet reclassified from CIP to the proper PPE accounts.
The project cost comprised 46.51% of the balance of CIP account of
P861,360,604.
c. In the percentage of completion method of accounting it is recommended that
if the outcome of a construction contract can be estimated reliably, revenue
and costs should be recognized in proportion to the stage of completion of the
contract activity. Section 8.2 on Liquidated Damages of the Revised
Implementing Rules and Regulations of RA 9184 provides that, A project or
portion thereof may be deemed usable when it starts to provide the desired
benefits as certified by the targeted end-users and the concerned procuring
entity.
d. In the Notes to Financial Statement No. 3 on the Status of Projects Being
Undertaken as of December 31, 2014, disclosed the following information on
the bridge projects:
Bridge
Project
Revised
Contract
Amount
Cost
Revised Target
% of
Incurred to
Date of Completion Completion
date
Amount per
books
a. San
Cristobal
P 204,876,131
98%
171,607,118
150,485,028
b. Travesia
71,880,680
100%
69,320,276
62,827,661
240,927,394
213,312,689
Total
P276,756,811
27,614,705
240,927,394
240,927,394
As shown above, the cost incurred for the projects as disclosed in Note 3
amounted to P240,927,394. However, the accumulated costs for the projects
charged to CIP per books totalled P213,312,689 showing a difference of
P27,614,705. Considering however, that the projects had been completed, the
charges to CIP actually overstated the CIP account by P213,312,689 and
understated the affected PPE accounts by the same amount.
e. In the Annual Audit Report for CY 2013 (Audit Observation No. 10, Part II), we
invited the attention of Management on the costs of PNR stations listed below
which are already 100% completed but not yet recognized in the books as
Station Buildings and other proper PPE account:
Location of Station
Building
Reconstructed
a. Cabuyao station
Percentage
of
Completion
100%
October 1, 2013
Amount
Charged
to CIP Account
P
3,002,623
Certified Date
of Completion
b. Mamatid station
100%
October 1, 2013
3,066,533
c. Bian station
100%
8,306,823
100%
October 1, 2013
6,242,456
40
e. Calamba station
100%
December 1, 2013
6,370,299
Total
P 26,989,034
Progress
Claim
First Claim
First Claim
Amount Credited to
CIP Account
P
( 9,720,606)
( 6,492,615)
( 4,469,622)
( 6,927,363)
Total
Third Claim
P (27,610,206)
The accounting entries recorded in the books as credits to CIP that decreased the
reported cost of construction of PNR projects by P27,610,206 were adjusted except
for the last item amounting to P6,927,363..
2.3
41
2.4
The Manager of the Engineering Department informed that they will comply with the
requirements of the Controllership Division to assist them in updating the Accounting
records.
3. PNR Management did not consider periodic physical inventory of Property, Plant and
Equipment (PPE) account a priority concern contrary to COA Circular No 80-124 and
despite the misstated balance of PPE account with carrying value of P50.98 billion as
of December 31, 2014 which comprised 98.2 % of PNRs Total Assets of P51.90 billion.
3.1
In the Annual Audit Report (AAR) for the last five years (from CY2009 to CY 2013),
we repeatedly disclosed the absence of physical inventory of assets comprising the
PPE account and reconciliation of the results thereof with the property and
accounting records.
COA Circular 80-124 dated January 18, 1980 emphasized that physical inventory
taking is an indispensable procedure for checking the integrity of property
custodianship and should be made at least once a year. This in fact was among the
primary bases in the rendition of adverse opinions in the AARs of prior years due to
the inability of the Auditor to ascertain the fairness of the reported balance of PPE in
the financial statements (FS) presented by PNR Management as of reporting date.
3.2
PPE is a material element in the FS of the agency. Its net carrying value of P50.98
billion as of December 31, 2014 comprised 98.2 % of PNRs Total Assets of P51.90
billion. Significant components of PPE are Land with zonal valuation of P40.02
billion; and, Road, Building, Equipment and Machineries with net carrying value of
P8.45 billion.
3.3
PNR Office Order No. 330, series of 2014 dated August 10, 2014 was issued for the
creation of an Inventory Team that would conduct physical inventory taking and
ensure that inventory reports shall be properly reconciled with accounting and
inventory records of the PNR. An inventory report was required to be consolidated
and submitted to the Office of the General Manager not later than October 15, 2014.
There was no invitation to the auditing unit for a representative to witness an
inventory taking activity nor was there an Inventory Report furnished in audit.
3.4
Through the years, PNR Management did not consider complete physical inventory
taking of fixed assets a priority concern despite its significance. The existence of the
assets comprising PPE could not be confirmed and the financial information in
accounting records and reports could not be relied upon. No alternative procedures
were done by Management to establish the validity, accuracy and proper valuation of
PPE.
3.5
Management likewise did not give due importance in monitoring and safeguarding of
assets. There is no designated property custodian of machineries and equipment,
unserviceable assets including salvage or waste materials. There was no check and
balance as the Accounting Units as well as the Property Office did not maintain
complete Supplies Ledger Cards/Stock Cards by stock number and PPE Equipment
Ledger Cards/Property Cards by category of PPE.
42
3.6
Balance
as of 12/31/14
Tracks
Station, Office & General Buildings
Bridges
Machineries and Equipment
Communication System
Furniture and Fixtures
P 7,258,060,535
1,530,971,989
966,661,034
421,438,610
108,291,094
13,885,553
Total
P 10,299,308,816
Accumulated
Depreciation
Net
Book Value
P 516,032,391 P 6,742,028,144
646,830,099
884,141,890
441,408,742
525,252,293
195,832,052
225,606,559
50,234,953
58,056,141
1,008,428
12,877,125
P 1,851,346,664
P 8,447,962,152
Recording Estimated
Economic
Dates
Book Value
Useful Life
1985-2002
1981-1990
1988-2002
1981-1998
10 years P 88,978,037
20 years
11,657,186
10 years
119,261,000
5 years
6,744,517
Total
P 252,986,968
Recording
Dates
2010 - 2013
P 1,399.818
Communication System
1988 - 2001
1,038,317
1978 - 2014
933,009
1981
486,658
P 3,857,802
43
3.7
3.8
4. There was no sufficient legal basis in billing Tutuban Properties Inc. monthly rental of
P11.35 million after the expiration of the Contract of Lease on September 4, 2014.
Further, the Lease Receivable arrears of P316.68 million as of expiration date
remained uncollected.
4.1
The 25-year Contract of Lease originally entered into on August 23, 1989 by the PNR
with Gotesco Investment, Inc. which was subsequently assigned to Tutuban
Properties, Inc. (TPI) expired last September 4, 2014.
4.2
In the implementation of the Contract of Lease, the following issues cropped up which
remained unresolved until the expiration date of the contract:
a. Advance renewal of the contract on December 22, 2009 with terms and
conditions tend to favour the TPI.
b. Ownership of improvements introduced during the term of the lease such as
the PNR Executive Building with original estimated cost of P75 million which is
not yet recognized in the books as asset despite expiration of lease in
September 2014 and beneficial use by the PNR.
44
c. Rental receivables based on compounded rate of 10% every two years which
were regularly billed and recorded in the books but, PNRs right to collect was
not asserted. As of maturity date of the contract on September 4, 2014, the
uncollected rental amounted to P316,683,881 in the books of the PNR.
d. The obligation to pay real estate taxes on the leased property which is the
subject of Civil Case No. 13-129381entitled, PNR versus the City of Manila
before Branch 30 of the Regional Trial Court of Manila.
4.3
4.4
For CY2014, the computed billings for fixed rentals escalated at compounded rate
every two years as provided in the agreement, and, the collections from the TPI were
shown as follows:
Date
Bill No.
03/31/14
23133
Period
Covered
Jan-Mar14
06/11/14
25463
Apr-Jun14
Amount
Billed
34,042,870
*279,441,912
34,042,870
*298,062,896
Date
OR No.
03/31/14
6721286
07/10/13
6722513
to 16
Amount
Collected **
14,650,791
14,650,791
45
10/10/14
25488
10/10/14
25491
11/11/14
25510
12/15/14
25515
01/07/15
25519
02/12/15
25535
02/12/15
25536
03/04/15
25539
Jul 1 to
Sept 4,2014
Sept. 5 to
Oct. 4,2014
Oct. 5 to
Nov.4,2014
Nov. 5 to
Nov.30,2014
Dec. 1 to
Dec.31,2014
Jan. 1 to
31, 2015
Feb. 1 to
28, 2015
Mar. 1 to
31,2015
24,208,263
*316,683,881
11,298,816
* no billing
11,396,430
*336,769,076
9,834,607
*336,769,076
11,347,623
*336,769,076
11,347,623
*353,925,851
11,347,623
*365,273,474
11,347,623
*376,621,098
10/10/14
for period
Jul-Sept.
2014
6722542
to 45
14,650,791
11/28/14
for period
Oct-Dec
2014
4667027
to 30
14,650,791
4.5
As shown above, PNR billed TPI, after expiration of the term of original contract on
September 4, 2014, the amount of P136,171,479 per year was P11,347,623 per
month over the actual number of days covered by the billing period. The amount of
P136,171,479 was the guaranteed minimum annual rental of P52,500,000 agreed
upon in the August 16, 1993 Agreement with TPI subject to escalation of 10%
compounded every two years. The Chief, Legal Division in her letter dated October
10, 2014, instructed the Asset Management Division to bill TPI based on the terms of
the expired contract and that the renewal of the lease contract shall be on a monthly
basis.
4.6
Review of related documents showed that on August 22, 2014, the PNR informed the
TPI that although the lease contract was extended five years earlier the contentious
issues raised have yet to be resolved and pending final resolution thereof, the lease
contract shall be renewed on a monthly basis after expiration date.
4.7
In the letter dated August 29, 2014, the President of the TPI agreed to an exploratory
meeting with the PNR. The TPI stated its position that:
a. In the Memorandum of Understanding between the parties dated September
14, 2009 which was cited in Board Resolution No. 86-2009, the parties
identified, clarified and resolved all issues in the 1989 lease contract and
thereafter renewed in advance the lease contract.
b. PNR has failed to comply with its obligations particularly on the eviction of
illegal occupants, annotation of the renewal of the contract of lease in the
titles to the property, delivery PNRs Master Development Plan, and failure
to answer TPIs letter discussing the issue on rental arrearages.
c. PNR is liable to pay for the real estate taxes on the land leased to TPI.
46
We wish to state that the TPI may not use the opinion of the former Auditor to prevent
the renegotiation or review of the 2009 Renewal of Contract of Lease which was
executed in advance. Even settled accounts are re-opened by the Commission if
found with error of calculation, tainted with fraud or collusion or when new material
evidence are discovered.
4.9
4.10
In the letter dated February 26, 2015, the PNR accepted the schedule of payments
on the rentals withheld by TPI subject to the following conditions:
4.11
a.
PNR and TPI shall review the terms of the lease agreement upon
implementation of the Memorandum of Understanding (MOU) among the
Department of Transportation and Communications (DOTC), PNR and TPI
for the North-South Commuter Railway Project.
b.
Cooperate in the resolution of the issues in the letter of the Office of the
Solicitor General (OSG) and the 2013 COA Audit Findings
In the letter dated March 16, 2015, the President of TPI replied as follows:
a. On rental rate i. The current rental rate of TPI has already been increased under the
Renewal Contract of Lease dated December 22, 2009 covering the lease
period from September 2014 to September 2039. Rent in the original
contract of lease totalled to P1.608 billion compared to P3.918 billion in the
Renewal Contract of Lease of 2009.
ii. In view of PNRs inability to turn over Phase II to TPI, there was
overpayment in the rental for Phase II of P702.9 million in the 1st 25 years
of lease and P47.4 million from September 2014 to June 2015 plus the
incremental rent on land for phase IIA from January 2012 to August 2014,
47
Though efforts are being exerted to resolve the matters extrajudicially, there is noted
delay in resolving the issues which had already been overtaken by significant events.
We raised the issues to the attention of PNR Management as early as year 2010 prior
to maturity date of the original contract in September 2014. After expiration date,
there appears no sufficient legal basis on the term and amount or rent being billed to
TPI. There is no meeting of minds between the Lessor PNR and the Lessee TPI. The
TPI is firm on its position and asserted that it was pursuant to the 2009 Renewal of
Contract of Lease; whereas, the PNR requested review/renegotiation of the
provisions for amendment thereof, if deemed necessary.
4.13
We recommended that the PNR exert more efforts for the prompt settlement of
the other issues aside from the release of the P148.04 million rentals withheld
by the TPI.
4.14
Management commented that the PNR negotiated for the release of the fund and as
stated above the TPI agreed premised on PNRs recognition of TPIs contractual
rights under the Renewal of Contract of Lease dated 22 December 2009 and a
confirmation of TPIs position....
4.15
Management furnished a copy of their latest communication dated May 12, 2015 to
the Office of the Solicitor General, PNRs statutory counsel, requesting assistance on
the unresolved issues with TPI. It is stated therein that:
a. There is danger of losing a major source of revenue with the issuance of a
warrant of levy to PNR to auction the property currently leased by TPI for nonpayment of Real Property Tax.
PNR and the DOTC Secretary tried to
convince the City of Manila to defer the auction to give chance to PNR to pay
its obligations. At the time of the original lease agreement, the property was
not yet subject to tax. Upon passage of the Local Government Code, the City
of Manila imposed taxes on the property being used by TPI, a taxable entity.
48
5.2
The table below summarizes the balances of the depository accounts comprising
Cash in Bank per books, the results of confirmation from depository banks, and the
balances reflected in the Cash Position Report of the Budget and Cash Division for
the year ended December 31, 2014.
Bank Accounts
General Fund
DBP C/A 0410-029743030 107R-19
PVB C/A 0006-008165001 107R-21
LBP S/A 371-100-1084
107-T
DBP TD - 0410-029743100 107-U
DBP C/A - 0630029743-030 107R-27
LBP TD - 3711-0013-60
107-L
Per
Books
Per Bank
Confirmation
Adjusted
Book/Bank
Balance
1,472,512
2,189,722
2,517,781
2,236,321
194,266
194,400
194,400
194,400
148,502
148,591
148,591
148,591
50,469,335
50,469,335
50,469,335
50,469,335
599,640
987,770
987,181
987,181
50,044,723
50,044,723
50,007,636
50,044,723
49
3,489,476
3,486,093
3,363,693
41,421,440
41,425,006
41,425,006
41,425,006
4,693,567
4,697,627
4,697,627
4,697,627
1,911,032
11,890,986
13,182,370
11,890,986
19,711
19,412
19,612
19,412
4,580,192
4,582,533
4,582,533
4,582,533
2,764,438
3,093,300
3,093,300
3,093,300
6,458,674*
161,763,839.82
179,691,557.12
Subsidy Fund
PVB C/A 0060-007220001 107R-15
DBP C/A 0410-028252030 107R-18
LBP C/A 371-210-0051
107S
Subsidy Fund for Operations
LBP C/A 371-210-0248
107-V
Project Fund
DBP C/A 0410-030119030 107R-20
Re-Opening of Bicol Lines
PVB C/A 0006-007629001 107R-17
Subtotal
174,811,466.02
0.00
173,153,109.02
Acct. Code
107F-14
107F-12
107X
107W
107F-8
107-Y
Sub total
Total
Per Books
1,389
20,280
126,395
2,796
1,477,678
258,107
-
Per Passbook
367,111
Adjusted Balance
closed acct.
closed acct.
126,395
2,796
closed acct.
closed acct.
-
1,886,645
129,191
181,578,202
174,811,466
5.3
Management should likewise look into the remaining dormant accounts with
balances in the total amount of P1,886,645, as of December 31, 2014.
5.3.2
5.3.3
GL Code
107F-8
Particulars
Balance, Dec. 31, 2013
Less: Recorded in JEV 2014-01-25
Add: Recorded in JEV 2014-01-24
Balance, Dec. 31, 2013
Less: Recorded inJEV 2014-01-26
Less: Recorded in JEV 2014-01-24
Balance, Dec. 31, 2013
Less: Recorded in Apr. 2014 (CRJ)
Balance, Dec. 31, 2013
Less: Recorded in JEV 2014-443
Balance
Remaining Balance for Reconciliation as of December 31, 2014
Balance
11,440,245
(9,959,567)
3,000
1,477,678
1,685,462
(1,430,355)
(3,000)
258,107
24,149
(3,868)
20,280
330
(330)
0
P1,756,064.96
The accounting entry recorded per JEV 2014-01-25 that decreased the
balance of CA-276-058-40001-9 by P9,959,567.11 was:
Prior Years Adjustment
Cash in Bank (107-F8)
5.3.4
9,959,567
9,959,567
Verification of the details of the entry recorded showed that it was composed
of unrecorded disbursements in year 2010, mostly, involving payments of
unused leave credits of PNR employees who retired from service. However,
we noted that the accounting entry journalized in the Disbursement Vouchers
supporting the JEV was a debit to Accounts Payable and a corresponding
credit to Cash in Bank thereby, casting doubts on the propriety of charging the
account Prior Years' Adjustment.
51
5.3.5
5.4
52
5.4.2
Had the checks prepared and issued been properly recorded in the CkDR and
RCI, unrecorded disbursements could have been avoided. The unrecorded
disbursements were reported on the following bank accounts:
Account
PNB C/A No. 464161500-058
Description
Close Account
Total
Amount *
20,280
125,783
6,002,177
6,148,240
5.4.3
5.4.4
53
5.4.5
5.5
Management commented that unrecorded disbursements on DBP C/A 20014108 relate to the overpayments made on the Modified Disbursement
Scheme. The issue on overpayment remained unsettled as of December 31,
2014 and the disbursement vouchers were not yet forwarded to the
Controllership Division for recording. Other reconciling items shall be
recorded as soon as supporting documents are duly accounted for.
The Budget and Cash Division still reflected in the Daily Cash Position Report a
bank account with balance of P0.37 million placed under receivership, which
was no longer carried in the books of the Controllership Division.
5.5.1
The Cash Position Report as of December 31, 2014 prepared by the Budget
and Cash Division reported a separate account with description of Southern
Line Deposits with a balance of P367,111, as of December 31, 2014. The
amount represents the balance of the cash in bank of the PNR not covered by
the insurance on bank deposits by Philippine Deposit Insurance Company
(PDIC). The original balance of the account in the beginning amounted to
P617,111. Audit showed that, on July 05, 2013, the PNR received P250,000
from PDIC as indemnity on deposit maintained with the Municipal Rural Bank
of Del Gallego (Camarines Sur), Inc. under S/A 2946 and 3182, which was
deposited directly to the General Fund kept under DBP S/A No. 0410029743-030. The rural bank was placed under receivership by the Bangko
Sentral ng Pilipinas.
5.5.2
The proceeds of P250,000.00 was taken up in books with the following journal
entry under JEV No 2013-07-291.
Cash in Bank (107R-19)
Prior Years Adjustment (681B)
5.5.3
250,000
250,000
5.5.4
The Budget and Cash Division has initiated actions if there are
possibilities to recover the balance of P367,111.
b.
54
Paragraph 6.2 of DBM Circular No. 2013-16 dated December 23, 2013 states that,
Starting January 1, 2014, A/Ps due creditors/payees shall be credited thru the
Expanded Modified Direct Payment Scheme chargeable against the NCAs credited
under the regular MDS sub-account (Common Fund) of NGA.
6.2
In relation therewith, DBM Circular Letter No. 2013-12 dated November 21, 2013
provides that the Notice of Cash Allocations(NCA) for crediting to NGAs/Operating
units (OUs) regular MDS sub-accounts for any month of a given quarter, shall be
valid until the last working day of the 3rd month of that quarter. Also, paragraph 6.3 of
the said Circular states that, All NGAs/OUs shall use the List of Due and
Demandable Accounts Payable with Advice to Debit Account (LDDAP-ADA) in
processing payment of A/Ps under the ExMDPS.
6.3
Gross
Amount
Witholding Taxes
(2%EWT for Services, 1%
for Goods, 5%Final VAT)
4,243,512
1,568,341
1,959,988
1,825,987
3,750,457
3,209,609
2,721,854
3,366,000
22,645,746
318,263
127,163
158,918
102,712
312,538
* 358,346
** 351,138
247,500
1,976,578
Net Amount
Payable
per LDDAP-ADA
3,925,248
1,441,178
***2,118,906
1,723,275
3,437,919
2,851,262
2,370,716
3,118,500
20,987,004
The Advice of NCAs Issued stated that all taxes withheld shall be remitted to the
Bureau of Internal Revenue through a Tax Remittance Advice pursuant to the
provisions of DOF-DBM-Joint Circular No. 1-2000A dated July 31, 2001.
6.4
Verification of transactions reflected in the Bank Statement for the MDS account
showed that the amounts charged or debited to the bank account involving payments
to contractors were mostly at gross amount inclusive of withholding taxes which
should be settled thru Tax Remittance Advices. Thus the amount of cash
credited/transferred to the contractors/payees bank accounts were overstated by the
amount of withholding taxes applicable to the above transactions.
6.5
In the pre-audited and recorded disbursement vouchers submitted to the DBM for
funding, the amounts determined payable to the contractors was actually net of
withholding taxes, 10% retention money and 15% recoupment on advances made.
The difference on the cash debited by the bank and the recorded decrease in cash in
55
Date
Payee
Amount Debited
per Bank
Statement*
Amount
Payable
per DV & OR
3,925,248
318,263
3,925,248
1,568,341
1,568,341
1,441,178
1,959,988
1,959,988
2,118,906
7,771,840
7,453,577
318,263
7,485,332
4,243,512
Over
payment
Net Amount
Per LDDAP-ADA
Payee
Amount Debited
per Bank
Statement *
Amount
Payable
per DV
Over
payment
Per Payees
Official Receipt
3,750,457
3,437,919
312,538
3,437,919
3,366,000
3,118,500
247,500
3,118,500
560,038
57
Date
Payee
Debited
per Bank
Statement *
JV Ascutia
Construction
3,209,609
Corp.
JV Ascutia
06/30/2014 Construction
2,721,851
Corp.
Total Overpayment to Contractors
6/30/2014
Amount
Payable
per DV
Over
payment
Per Payees
Official Receipt
2,851,262
358,346
No O.R. provided
2,370,716
351,138
No O.R. provided
709,484
6.6.1.7 The taxes due for remittance to the BIR per LDDAP-ADA No. PNRADA-101-06-005-2014 totaling P709,484 were different with the total
amount of taxes computed in the pre-audited DVs, as follows:
Date
Payee
6/30/2014
6/30/2014
Total
Per
LDDAP-ADA
358,346
351,138
709,484
Per DV
231,183
192,220
423,404
Difference
127,163
158,918
286,081
6.7
We found the above transactions not in order, hence, Notice of Suspension No.
14004-107-(14) dated December 15, 2014 was issued relative to the
overpayment in the amount of P2,146,994 requiring compliance of documentary
requirements.
6.8
58
c. The BIR informed that the PNR is not among the entities listed to pay thru the
Tax Remittance Advice (TRA) hence, under the current checkless system the
amount payable to the supplier is credited directly to their account; while, a
check is drawn against the account where the LDDAP is credited by the DBM
in favor of the BIR for the applicable taxes.
7. Buildings and structures covered by the Lease Agreement with Manila North Tollways
Corporation was demolished without adhering to the guidelines on disposal of
government property. Also, derecognition of the assets carried in the books at a cost
of P31.05 million was not made.
7.1
7.2
7.3
A Contract of Lease with Reference No. 14402 was entered into by and between the
PNR and the Manila North Tollways Corporation (MNTC) which was notarized on April
29, 2014. The purpose of the lease is to provide MNTC with a site for pre-construction,
construction and early operation activities of the Segment 10 Project involving the
connection of the Manila North Expressway Project (NLEX) and the South Luzon
Expressway (SLEX) using the alignment of PNRs rail right-of-way (Connector Road
Project).
7.4
As provided in the lease contract, the PNR was obliged to immediately clear and
remove from the Leased Premises all structures and improvements therein upon
execution of the contract, including the immediate relocation of occupants and
informal settlers.
We were informed that in December 2014, three (3)
structures/warehouses were demolished initially to abide with the provisions of the
Contract. We were not informed of the activities undertaken nor the actual date/s or
period of demolition. However, Demolition Permit No. D-108 issued by the Office of
the Building Official of the DPWH at the City of Caloocan was dated July 2, 2014.
7.5
A copy of the Lease Contract was not furnished the Office of the Resident Auditor
within five days after execution; and, in the demolition of the warehouses proper
notification on the scheduled demolition was not made in violation of the above stated
provisions of PD 1445 and COA Circular 89-296. In the Memorandum dated
February 16, 2015 of the PNR General Manager addressed to the Supervising
59
Auditor, a representative from the auditing unit was requested to coordinate with the
Office of the Manager, Engineering Department, only, to oversee, direct and ensure
the transfer of the contents of the warehouse that was provided for COAs use when
the PNR Office was situated in Caloocan City.
7.6
Based on our review of Accounting records, the structures located in Caloocan City
affected by the MNTC Lease Agreement that were still carried in the books as of
December 31, 2014 cost P31,049,728. We did not find any accounting entry dropping
from the books the disposed assets. We were not furnished copies of Inventory and
Inspection Reports including an inventory list of assets with or without salvage value
found inside the warehouses.
7.7
In case the destruction of the assets took place subsequent to December 31, 2014,
the reporting date of the Statement of Financial Condition, proper disclosure should
be made in accordance with the Philippine Accounting Standards (PAS) No. 10.
Section 21 of PAS No. 10 requires that, If non-adjusting events after the balance
sheet date are material, non- disclosure could influence the economic decisions of
users taken on the basis of the financial statements. Accordingly, an entity shall
disclose the following for each material category of non-adjusting event after the
balance sheet date:
a) the nature of the event, and
b) an estimate of its financial effect, or a statement that such an
estimate cannot be made.
7.8
To date, the leased premises of the MNTC had been cleared of all structures and the
Lessee had started its constructing activities.
7.9
7.10 We have not received a reply from Management on the audit observations.
60
A contract agreement was entered into on September 15, 2015 by and between the
PNR and Miescorrail, Inc. and Desco, Inc. Joint Venture (MDJV) for the General
Overhauling and Upgrading of Diesel Electric Locomotives (DEL) Nos. 918, 919 and
921 with contract cost of P149,999,808. Alternative mode of negotiated procurement
was resorted to by the PNR after two failed biddings. Advance payment of
P22,499,971 or equivalent to 15% of the contract price was paid under Check No.
01245 dated November 27, 2014.
8.2
62
d. It was resolved in Board Resolution No. 030-2014 dated April 10, 2014 that
negotiations by the PNR BAC shall be with the supplier nominated by General
Electric Transportation USA (GETS - USA), however, the nomination document
was not furnished.
e. The procedural guidelines for negotiated procurement are prescribed under
Section 53 of the Revised IRR of RA No. 9184.
We noted that in the
negotiated procurement for the contract on general overhauling and upgrading
of locomotives, the following activities were undertaken:
Date
April 10, 2014
April 12, 2014
May 9, 2014
May 13, 2014
June 3, 2014
June 4, 2014
June 25, 2014
Activity
PNR BOD approved the negotiated procurement thru BR
No. 030-2014;
Posting at PhilGEPS portal for schedule of submission
and opening of bids;
Submission and opening of bids. MDJV was the lone
bidder but disqualified for non-payment of bidders fee;
Another posting at PhilGEPS portal for a second negotiated
bidding;
Submission and opening of re-bids. MDJV was the lone
bidder and quoted a bid price of P149,999,808.38;
Results of the evaluation of bids and declaration of MDJV
as the bidder with the lowest calculated bid;
Negotiations and agreement among and between PNR,
DESCO (one of the partners of MDJV) and General Electric
(GE) representatives on the scope of work and changes in
terms of reference (TOR);
The Notice of Award (NOA) was received by the Heads of
the MDJV and submission of performance security was
requested;
Contract signing between the Head of the Agency
(HOPE) and the respective Heads of the partners in the
Joint Venture (JV).
There were no documents submitted to prove that the BAC sent invitation to
sufficient number of suppliers to ensure competition aside from posting in the
PHilGEPS and bulletin boards.
f.
63
g. In the Manual of Procedures for the Procurement of Goods and Services, the
financial envelope shall contain the financial proposal submission sheet
indicating the bid prices and the bill of quantities and the applicable price
schedules. We noted that the cost breakdown for the project amounting to
P149,999,808 was dated October 14, 2014 already. The breakdown on cost
should have been accomplished and included with other documents in the
financial envelope which was submitted December 10, 2013 prior to the
submission and opening of bids.
h. Memorandum Order No. 15 dated May 9, 2011 authorized advance payment
for contracts awarded thru public bidding upon submission of an irrevocable
letter of credit or bank guarantee. The MDJV requested for advance payment
equivalent to fifteen percent (15%) of the total contracted price. The check
payment of P22,499,971 was passed in pre-audit and paid even if the
documents necessary
to establish the propriety and regularity of the
transaction were incomplete.
8.3
i.
Section 2.1 of COA Circular No. 2013 - 004 dated January 30, 2013 requires
the quarterly submission of a list of all on-going government Projects/Programs/
Activities (PPA) including those that are to be implemented during the year.
We noted in the reports submitted by PNR for year 2014 that the project
General Overhauling and Upgrading of Diesel Electric Locomotives (DEL) Nos.
918, 919 and 921 project was not included.
j.
64
f.
Explain why the breakdown of cost on the project was submitted later on
October 14, 2014 and not submitted as an integral part of the financial
envelope;
8.4
i.
j.
Explain why the contract was awarded to the Joint Venture considering
that the bid proposal of Miescorrail, Inc. was evaluated non-compliant
and that Miescorrail and Desco did not meet the requirement on
completed similar contracts/projects.
On April 16, 2015, the Manager of the Rolling Stocks Maintenance Department and
the Chairman of the PNR BAC submitted the following comments:
a. Failure to submit the contract for review within the prescribed period was due
to lack of personnel in the PNR BAC Secretariat.
b. The breakdown on cost was not required an integral part of the financial
requirement as stated in the Bid documents. It was required submitted on
October 14, 2014 with detailed breakdown tallied to the total amount of bid
offered.
c. Copy of the performance bond was submitted to the Office of the General
Manager before the issuance of the contract, Notice to Proceed and advance
payment.
d. Fund for the project was included in the P238 million repair budget for rolling
stock for CY 2013 MOOE. Project implementation started in October 22,
2014.
e. Comparative cost analysis was submitted to the GM but not provided to the
auditing unit.
f.
The documents necessary to explain the matter are still for searching as the
person in charge in safekeeping the document was not yet available.
On June 11, 2015, the General Manager submitted an Original Secretarys Certificate
from Mrail, Inc. notarized June 9, 2015 stating among others that:
On June 10, 2009, the Miescor-GTC Joint Venture was incorporated and
registered with the SEC as Miescorrail, Inc. to engage in the business of
general construction, development, operation and maintenance of railway
systems, industrial facilities, related infrastructures and consultancy services;
65
On March 29 2012, Mr. Joseph Allan C. Dilay and Mrs. Gina G. Dilay tendered
their resignation as members of the Corporations Board of Directors, which
resignation was duly accepted and approved by the Corporation; and
On March 22, 2015, the SEC approved and change in the Corporations
corporate name from Miescorrail, Inc. to MRail, Inc.
9. The propriety of the increase in per diems of the Board of Directors as a result of
reclassification of the PNR by the GCG as GOCC under Classification E to
Classification D is disputable since based on increased Total Assets in the
Statement of Financial Condition or Balance Sheet where the Auditor rendered
adverse opinion on the fairness of presentation.
9.1
On December 23, 2013, PNR requested for the approval of the Governance
Commission for Government Owned and Controlled Corporations (GCG) for a
retroactive increase in the per diems of the Board of Directors from the amount of
P3,500 per Regular and Special Meeting and P2,100 for Committee Meetings
attended to the next higher level under the rules of the Governance Commission. In
the letter dated June 2, 2014 of the Chairman, GCG, it was informed that after reevaluation, the classification of the PNR was elevated from Class E to D.
9.2
Based on the COA-Audited Financial Statements for CYs 2010, 2011 and 2012, the
GCG determined that PNR was under Classification D and the per diems the PNR
Board of Directors are entitled for actual attendance of meeting effective January 2,
2014 was as follows:
Board Meetings *
Committee Meetings
Max. Per
Max. per
Max. Per
Max. per
Meeting (P)
Year (P)
Meeting
Year (P)
D
10,000
240,000
6,000
144,000
* up to 20% premium allowed for the Chairman of the PNR Board
Class
9.3
Total Max.
(P)
384,000
Re-classification of the PNR was based on the following three-year comparative data
on financial condition and operational performance:
A. Balance Sheet Accounts
Particulars
(Amounts in thousand pesos)
Assets
Liabilities
Net Worth
2010
13,471,699
24,959,213
(11,487,514)
Historical
2011
13,621,810
25,607,009
(11,985,199)
2012
53,102,554
25,956,031
27,146,523
B. Revenue Streams
(In P)
Rail Revenue
Non-Rail Revenue
Other Income
Gain on Sale of Assets
2010
101,985,564
139,611,417
819,826
222,300
2011
185,992,271
168,250,990
2,450,373
0
2012
227,885,189
169,755,406
567,572,498
290,006,752
Average
171,954,341
159,205,938
190,280,899
66
(In P)
Gain on Forex
Interest Income
Subsidy from Natl. Govt.
Total Revenues
Total Revenues Net of
Subsidy and Unrealized
Forex Gain
9.4
597,526
98,655,625
341,072,432
242,416,807
2011
0
2,450,373
779,995340
1,136,688,974
356,693,634
2012
272,476,644
5,089,102
128,653,096
1,093,866,189
692,736,449
Average
335,768,020
857,209,198
430,615,630
The increase in per diems of the Members of the Board of Directors, from P3,500 to
P10,000 for Board Meetings and from P2,100 to P6,000 for Committee Meetings,
resulted in the increase of expense for per diems under personal services by 502% in
2014 compared to 2013, as follows:
2014
1,043,500
9.5
2010
2013
207,900
2012
268,800
Section 6 of Executive Order No. 24 provides that GOCCs shall be classified by size
based on assets from the audited Balance Sheet of the previous year and the
average of revenues in the Income Statements for the last three years shall be the
basis of the GCG in the reclassification. Based on financial data GOCCs are
classified as follows:
Classification
A
B
C
D
E
>
>
>
>
<
Assets (P)
100 billion
25 billion and < 100 billion
5 billion and < 25 billion
1 billion and < 5 billion
1 billion
>
>
>
>
<
Revenues (P)
10 billion
2.5 billion and < 10 billion
500 million and < 2.5 billion
100 million and < 500 million
100 million
9.6
The PNR was reclassified as GOCC under Classification D after posting Total
Assets of P53,102,554 as at December 31, 2012 and average total revenue in three
years from year 2010 to 2012 of P430,615,630.
9.7
However, we have doubts on the propriety of the reclassification from GOCC under
E to D. Among the conditions set under Section 6 of EO 24 is that, GOCCS must
meet both the asset and revenue criteria. The re-evaluation was based on COAAudited Financial Statements; however, as stated in Audit Finding No. 1 in the CY
2012 Annual Audit Report, the huge leap in the book value of Land from P704.01
million to P40.05 billion thereby, resulting in significant increase in Total Assets was
the result of revaluation based on zonal value of PNR lands. In accounting for PPE,
in-house appraisal is generally not acceptable as the appraisal results may be
biased. Moreover the revaluation or appraisal is required to be undertaken by an
independent appraiser for independent check of financial data.
9.8
The revaluation made was not in accordance with generally accepted accounting
principle (GAAP) on Plant, Property and Equipment (PPE) prescribed under
67
Philippine Accounting Standards No. 16 which requires that in the revaluation model
method of accounting and reporting for PPE, fair market value and not zonal value
should be used. . Because of the significant effect of the in house revaluation of PNR
lands on the Financial Statements, the Auditor rendered an adverse opinion that the
financial statements of PNR did not present fairly its financial position.
10.
9.9
9.10
9.11
Management informed that the PNR may not review the decision of the GCG but
could only implement it. Management asserted that even without the revaluation
undertaken in 2012 PNR still posted total assets of P13 billion hence may be
classified as under Classification C, D or E depending on average revenues.
9.12
9.13
As a rejoinder, although Total Assets of P13 billion was reported prior to revaluation
of Land, a disclaimer of opinion was rendered in the Auditors Report in the CY 2011
Annual Audit Report. Property Plant and Equipment (PPE) account with then net
carrying value of P12.8 billion comprising 94% of Total Assets could not be
substantiated due non-completion of physical inventory initiated by Management to
establish existence of the assets, and absence of complete records or detailed
schedules on the components of the assets classified as PPE. Even then, it was
uncertain if Total Assets was fairly presented in the Balance Sheet presented by the
PNR.
Payment of honoraria to the members of the PNR Bids and Awards Committee (BAC),
Technical Working Group and members of the BAC Secretariat were not supported
with documents required in COA Circular No. 2012-001. Also, hire and fire
68
10.2
10.3
Honoraria totaling P189,000 was paid to job order personnel where there was
no employee-employer relationship.
10.3.1 Four Job Order Personnel (JOs) hired by the PNR on contractual basis of
three months were designated permanent members of the PNR-BAC
Secretariat. Their function was to assist and provide administrative support to
the BAC as authorized by Office Order No. 57 dated December 16, 2013 and
Office Order No.07, s of 2014 dated January 24, 2014. In CY2014, total
honoraria paid to the hire and fire personnel amounted to P189,000 based
on successfully awarded procurement projects/contracts.
69
10.3.2 The contracts of service of the JOs specifically stated that, This shall not
create an employer-employee relationship between PNR and above name
employees shall not be entitled to benefits (PERA, COLA, BONUSES and
other all allowances) except PHILHEALTH benefits in compliance with
Republic Act No. 7875. We
10.3.3 The JOs should not have been designated permanent members of the BAC
Secretariat, and were not entitled to the grant of honoraria there being no
existing employee-employer relationship.
10.3.4 Section 5.9 of Budget Circular 2004-5A on the Guidelines on the Grant of
Honoraria to Government Personnel involved in Government Procurement
actually permits payment of overtime for the administrative staff in lieu of
Honoraria if procurement activities rendered are in excess of official working
hours and should be in accordance with existing policy on overtime.
10.3.5 Also, in Office for Legal Affair (OLA) Opinion No. 226 s.2015 issued by the
Civil Service Commission in reply to our Audit Query seeking clarification on
the designation of a PNR hire and fire employee as permanent member of
the BAC Secretariat, it was stated that based on the provisions under Section
6(e), Rule III of the Revised Omnibus Rules on Appointments and Personnel
Actions, only those employees holding permanent appointments to career
positions may be imposed such additional duties. Consequently, one who
works under a Contract of Service (COS) may not be validly designated.
10.4 We recommended that Management:
a. Attach the required supporting documents to vouchers for the payment
of honoraria prescribed in COA Circular No. 2012-001 dated June 14, 2012
to prevent suspension/disallowance of the transactions in audit; and
b. Require the refund of the honoraria paid to hire and fire personnel
designated as administrative support staff to the BAC Secretariat
amounting to P189,000.
10.5 Management commented that the lacking supporting documents shall be submitted
the soonest possible. With inadequate permanent/plantilla positions in the Legal
Division where most of the members of the BAC Secretariat emanates and the hefty
workload in procurement activities, PNR is left with no other recourse but to designate
Legal Division Job Order personnel. Management recognizes the valuable support
JOs contributed in procurement activities. Hence, due to the absence of any provision
in the IRR of RA 9184 showing restriction on membership except for the Head, PNR
management designated JOs in the BAC Secretariat and allowed them to receive
honoraria. The honoraria paid were sourced from the sale of bidding documents.
10.6 As our rejoinder, there may be no provision restricting membership of JOs in the BAC
Secretariat however, the guidelines issued by the DBM on the payment of Honoraria
prohibits payment thereof to the administrative support to the BAC. Besides, their
contracts of service provided that they were not entitled to payments of benefits. The
70
proceeds from sale of bid documents are government fund, other income which should
be utilized in accordance with the prescribed government rules.
11.
Result of Confirmation
No Confirmation Reply but
Confirmation Letter was received
on 3/21/15 per Post Office
Registry Return Slip.
-do-do-
Lessee
Address
Nestor G. Dioquino
Lourdes Santos
c/o Carolina Nicolas
Lourdes Santos
c/o Carolina Nicolas
Edward Potenciano
Edward Potenciano
Engracia Malig
c/o Jose Malig
Engracia Malig
c/o Jose Malig
Pedro Balingit
Pedro Balingit
Pedro Balingit
Amount of
Receivable
P 327,526
14,500
299,802
622,244
253 Heroes del 96, Cal
City
253 Heroes del 96, Cal
City
253 Heroes del 96, Cal
City
687,720
272,950
579,317
579,317
315,941
315,941
537,791
935,650
734,654
71
Result of Confirmation
No Confirmation Reply but
Confirmation Letter was received
by Nilo Cardenas per Post Office
Registry Return Slip .
-do-
Dominador M.
Cardenas
Florante Roque
Malolos, Bulacan
780,925
93 Celery Street
Valle Verde 5, Pasig City
182,385
Maurita Villacruzes
No available record
from AMD
340,053
Maurita Villacruzes
Maurita Villacruzes
-DO-DO-
-do-
Nilo M. Cardenas
-do-
Amount of
Receivable
193,279
Florante Roque
-do-
Address
Dominador
Cardenas
Dominador
Cardenas
Nilo Cardenas
-do-
Total
Lessee
Romeo M. Cardenas
Romeo M. Cardenas
970,316
452,362
675,780
308,947
313,947
254,577
780,925
570,352
287,552
P12,334,753
11.2
11.3
72
Registry Return Slip but the lessees did not send confirmation replies, as of May 8,
2015.
11.4
The following lessees had accounts recorded twice that overstated the balance of
Rental Receivable by P1,676,183:
Name
Amount
No of Lessee
in the Schedule
Edward Potenciano
Edward Potenciano
Engracia Malig
Engracia Malig
P 579,317
579,317
315,941
315,941
42
45
43
46
Florante Roque
Florante Roque
780,925
780,925
P 3,352,366
164
181
11.5
Result of Confirmation
Confirmation Letter was
received but no reply sent
- doDeceased
Deceased
Unable to confirm because with
incomplete mailing address
-do-
The Schedule on Aging of Rental Receivable for CY 2014 still included the accounts
of the following lessees who informed in their confirmation replies in year 2013 that
they no longer have outstanding accounts with the PNR:
Lessee
Amount
11.6
12.
The PNR was not able to comply with the requirements of the Property Insurance
Law (R. A. 656) posing imminent risk of non-recovery of costs of properties in case of
occurrence of natural and man-made calamities.
12.1
Republic Act No. 656 dated June 16, 1951 and Administrative Order (AO) No. 33,
series of 1987 prescribed the law and guidelines for the insurance of all the
government property, contracts, rights of action and other insurance risks of the
government including those wherein the government has insurable interest. As
required therein, the insurance of government property including those of the
Government Owned and Controlled Corporations (GOCCs) should be with the
General Insurance Fund (GIF) of the Government Service Insurance System (GSIS).
12.2
The PNR reported the following Property, Plant and Equipment (PPE) totaling
P51,474,065,448 in its financial statements as of September 30, 2014:
Balance per
Books
P 40,012,987,466
10,255,984,332
3,378,538,756
6,877.445,576
4,677,391,181
1,524,468,564
3,152,922,617
47,256,860
47,256,860
Construction-In-Progress
1,383,452,929
1,383,452,929
P56,379,896,374
P4,905,830,926
P51,474,065,448
Total
2,823,606
P40,015,811,072
Recorded
Depreciation
PNR Management did not comply with the requirements of COA Circular No. 2009-001
dated February 12, 2009 on the timely submission of copies of perfected contracts and
Purchase Orders including supporting documents thereby holding back conduct of
review and audit.
13.1
COA Circular 87-278 requires the submission of the perfected contract and all its
supporting documents, within five days after approval. COA Memorandum 2005-027
provides the basic documentary requirements and checklists for each specific kind of
contract. To facilitate systematic and effective technical review and evaluation, these
guidelines were again reiterated in COA Circular 2009-001 dated February 12, 2009..
13.2
13.3
However, it was noted that the contract for the project involving General Overhauling
and Upgrading of Diesel Electric Locomotives in the amount of P149,999,808 and
approved on September 15, 2014 was not submitted for review. Copy of the contract
was attached to the disbursement voucher covering advance payment to the
Contractor made on November 27, 2014 minus bidding and other documents forming
integral part thereof.
13.4
Initial review showed that the contracts submitted were not completely supported with
the basic documentary requirements listed in Section 3.1.2 of COA Circular 2009001, that are necessary to establish compliance with RA 9184 or the Procurement
Law. As a result timely submission for review and evaluation of technical aspect of
the contracts by the Technical Service Office was not made possible.
13.5
We value the issuance by the PNR General Manager, three days after the release of
the aforementioned AOM, of a Memorandum addressed to all concerned officials and
the BAC Committee reiterating compliance with the requirements of COA Circular
2009-001.
75
13.6
13.7
We have not received a written reply to our Audit Observation Memorandum but we
were furnished Memorandum dated March 26, 2015 requiring henceforth, compliance
by all concerned with the prescribe provisions of COA Circular 2009-001.
B.
14.
After the lapse of four years, the computerization project embarked by the PNR at
reduced contract cost of P31.57 million has, to date, not attained its objective of
providing efficient and effective computerized Payroll and Property Management
Systems.
Despite awaiting for the approval by the Commission on Audit of the petition for
payment based on quantum meruit filed by the contractor in June 2014, five
disbursement vouchers were paid totalling P8.50 million to the contractor, from June
9, 2014 to February 16, 2015, for the Board approved compromised balance of P14.52
million.
14.1
Section 58 of PD 1445 on the Audit of assets requires that, The examination and
audit of assets shall be performed with a view to ascertaining their existence,
ownership, valuation ; ascertaining if the assets were utilized economically,
efficiently and effectively; and .Accordingly, Section 27 on the Audit of Assets in
Volume III of the Government Accounting and Auditing Manual provides for the
following:
e. Economy and efficiency that assets are acquired, utilized and disposed of to
full advantage, and that internal controls are adequate and operating
effectively;
f. Effectiveness that results from the use of the assets contribute to the
achievement of the agency goals and mission.
14.2 In October 2009, the PNR embarked into a Computerization Project and hired an IT
Consultant who documented an Information System Strategic Plan (ISSP) for the
agency. Bidding for Phase 1 of the ISSP involving IT infrastructure plus the
development and implementation of Payroll and Property Management Systems was
conducted on March 10, 2010 with the Approved Budget for the Contract (ABC) of P50
million. Only PC Craft Computer Technologies, Inc. participated who was eventually
awarded the contract on May 14, 2010 at a total contract price of P43,500,374.
14.3 From July to August 2010 PC Craft constructed an IT room and delivered all hardware
in accordance with the terms of the contract. A full time employee was also provided
by PC Craft starting June 2010. For goods delivered and service provided partial
76
payments were made in August 2010 and January 2011 in the total amount of
P17,049,099 (inclusive of VAT).
14.4 In the implementation of the computerization program the Situational Report of the
Consultant, Audit Board Committee reported on the following issues that resulted in
non-settlement of the balance payable to PC Craft amounting to P26,451,275:
14.4.1
Lack of funds to pay for the balance on the contractual obligation a. The Corporate Operating Budget (COB) of the PNR including the
proposed funding for the computerization program was submitted for
approval to the Department of Budget and Management (DBM) on July
10, 2010.
However, the proposed budget for capital outlay of
P1,422,279,000 in the CY 2010 COB was reduced by the DBM to
P752,529,000 or by P668,750,000. Included in the disallowed items was
the budget for computerization due to lack of funding source.
b. The Certification as to availability of fund was issued despite the absence
of the approved COB. The Manager, Budget and Cash Division signed
Box B of the disbursement voucher and effected partial payment of the
contract price.
14.4.2 Non-approval of the Information System Strategic Plan (ISSP) ISSP was not approved by the National Computer Center (NCC). According
to the former General Manager, PNR Management was not aware of this
requirement.
14.4.3 Un-utilization of the Property Management and Payroll SystemsAs per the situational report of the Internal Audit Consultant submitted on April
18, 2011, four desktops were connected via a Local Area Network with real
estate data starting 2008 uploaded at the Real estate Management Division;
at the Controllership Division three desktops were installed on LAN and
master file data of personnel uploaded. Only the hardware were being utilized
while, the software or program on property management and payroll systems
developed by PC Craft were reportedly not adequate to address the
requirements.
14.4.4 No Manpower Resource
There was no PNR unit or even an employee designated as oversight in the
implementation of the project.
14.5 There was no Certificate of Final Acceptance and Final Accomplishment Report duly
signed by authorized agency officials. The succeeding Management of the PNR
doubted the reasonableness of the contract price entered into by the previous PNR
General Manager.
77
The lack of DBM approved budget for the project and authority to appropriate and pay
for the obligation with PC Craft was disclosed in the CY 2010 Annual Audit Report.
14.6 On July 18, 2011, the former PNR General Manager inquired from the auditing unit if
the conduct of pre-audit of the partial payment made to PC Craft effectively cured the
purported defects, such as, the lack of available funds to pay for the obligation. Also,
the General Manager queried if PNR through its Board of Directors may allot corporate
funds for the payment of the goods already delivered based on quantum meruit and
substantial justice.
In reply, the currently assigned Supervising Auditor opined that:
a. The disallowance by the DBM of the budget for capital outlay as per the
belatedly approved COB for FY 2010 rendered the transaction illegal and
irregular. Furthermore, the purported defect was not resolved upon passing of
the transaction in pre-audit as the then Supervising Auditor acted on the basis
of the representations and supporting documents provided by the PNR
Management.
b. The PNR Board of Directors may be held responsible for ratification of the ABC
involving the computerization project without an approved Corporate Operating
Budget (COB) for CY 2010. The ABC for the procurement of the computer
system was approved January 21, 2010 per Board Resolution 2010-003;
whereas, the COB was ratified by the Board later on June 29, 2010.
Misrepresentation was made by the Manager of the Budget and Cash Division
for certifying the availability of fund; while, the Manager of the Controllership
Division misrepresented that the documents supporting the transaction were
complete and proper.
14.7 The General Manager requested the Department of Justice (DOJ) for legal opinion
and in the letter dated December 6, 2012, the DOJ Secretary stated that:
a. The DOJ agreed with the COA finding that without the approved budget, the
contract is void having been rendered illegal and irregular.
b. The Resident Auditor is correct in that the purported defect of lack of funding
was not resolved upon passing of the transaction in pre-audit.
c. Without appropriation, the PNR cannot lawfully pay PC Craft Technologies.
d. However, payment of goods delivered and installed may still be made on the
principle of quantum meruit
14.8 On November 22, 2013, PC Craft Technologies was informed that a new PNR IT
Team was organized with the task of reviewing the works done by it and a
representative of the Company was invited in the conduct of inventory of the items
delivered by them. An Evaluation Report was submitted by the IT Inventory Team on
February 18, 2014 to which the President of PC Craft conformed.
78
In Board Resolution 015-2015 issued March 5, 2014, it was made known that after
joint evaluation by PC Craft and the PNR, the IT equipment delivered and operating
systems installed were valued at P31,569,405; and, it was jointly agreed that the
unpaid balance amounted to P14,520,306 which the PNR Board authorized for final
payment.
14.9 On June 5, 2014, the PC Craft Technologies filed a Petition for Money Claim with the
COA, with the ANSWER submitted by PNR Management on August 5, 2014.
However, even if the petition for payment based on quantum meruit was still under
evaluation by the Commission, payments of the compromised unpaid balance of
P14.520 million had been effected by PNR under the following documents in the total
amount of P8,500,000.00.
Date
06/09/14
07/23/14
10/23/14
11/18/14
02/16/15
Total
DV No.
OGM-2014-06-962
OGM-2014-07-1295
OGM-2014-10-2911
OGM-2014-11-3068
OGM-2015-02-165
Amount
3,000,000
3,000,000
1,000,000
1,000,000
500,000
P 8,500,000
P
14.10 In the Memorandum dated February 15, 2015 of the IT Consultant who conducted
inventory and evaluation of compliance with the supply and service contract, it was
informed that estimated stage of completion on unpaid items delivered was 59.6%
equivalent to P8,654,129 of the P14.52 million outstanding balance. Hence, the
remaining balance based on percentage completion amounted to only P15,129.
14.11 After the lapse of more than four years as of year-end 2014, PNRs Computer System
has not been utilized to full advantage, an indication of waste of government
resources. The objective of providing efficient and effective computerized Payroll and
Property Management Systems has not been achieved to date.
14.12 At the time of ocular inspection, we observed that the computer mainframe and
installed system is operated continuously to prevent machine breakdown, consuming
electric power and manned by two co-terminus employees assigned by the Office of
the General Manager and with an IT Consultant incurring cost of salaries and
consultancy fees amounting to a total of P70,852 per month. The system installed is
now being used for Electric Data Management System (EDMS) to keep track of
documents routed or issued and received by department offices of the PNR. The main
objective/goal which is the development and implementation of payroll and property
management was not attained by the PNR.
14.13 In the Memorandum dated February 20, 2015, the new Manager of the Administrative
and Finance Department informed that a dry run for the Biometric Attendance System
commenced last February 23, 2015 to assess and evaluate the system aside from
monitoring of personnel attendance.
79
C.
15.
80
15.1.1 The lease of small parcels of land involved a term of one to five years, subject
to renewal of the lease contract upon expiration. Based on available records,
the Asset Management Division (AMD) entered into 38 lease contracts with
various Lessees in CY2014. Excluded is the Supplemental Contract of Lease
by and between the PNR and SM Prime Holdings, the subject matter of Audit
Observation No. 1. From the 38 contracts executed in CY 2014, total cash
collected from lease amounted to P 19,033,690 with 52.55% of which was
accounted as advance rental received from Manila North Tollways
Corporation (MNTC) amounting to P10,056,981 .
15.1.2 Verification of the rental rates contracted with the lessees revealed that the
PNR used as basis the zonal value per square meter of the property leased
out or the rate computed and prescribed in the PNR Rental Rates Schedule,
whichever is higher.
15.1.3 In the Memorandum dated May 12, 1993 of the then PNR General Manager
addressed to the Board of Directors, the proposed rental rates effective
January 1, 1992 were to be increased every year up to the next review period
by 20% for residential sites and 10% based on fair values for commercial
sites. Review period shall at the most be every five years. In the Computations
of Rental Rates since CY 2005, however, we noted that the escalation rates
for both residential and commercial sites were at 10% up to year 2014.
15.2
The authorized lease rate was not consistently and uniformly applied
15.2.1 The use of the zonal value as basis for the lease rate was dated approved
November 20, 2009 under Board Resolution No. 2010-002 per the
recommendation of the then Real Estate Technical Working Committee. As
stated in Board Resolution No. 2010-001, 7% of the Zonal Value as Tariff
Rate for Lease of PNR Real Estate; Provided that Big Ticket Lease shall be
treated individually relative to the location of the property classification, and
the like; the local government units classification of the location whether
residential or commercial, shall be the basis of the nature of the use of the
property; and that the computation of the incremental increase of rental rates
shall also be based upon the adjustment of zonal valuation; Subject ...
However, review of the zonal values used as basis for rental rates for CY
2014 revealed that the zonal valuation in leasing the PNR properties dated
back from 2002 to 2010.
15.2.2 We also noted that the rate of P23.01 per square meter for parcels of land
measuring 36,422.5 square meters or P838,082 per month on property leased
by the PNR to MNTC for a period of 24 months was even lower than the zonal
value in the vicinity at Caloocan City.
15.3
Lease contracts are being issued for short term period and the lessees
continue to occupy the leased property without renewing the contract and
paying the annual rentals.
Ejectment suits were not initiated by PNR against lessees who failed to
pay rentals.
15.4.2 In its bid to undergo reformation and generate increased non-rail revenue, the
AMD recommended Task Force Sukat Singil for improved real estate
management the General Manager issued Memorandum dated March 3, 2014
containing clear set of policy guidelines and procedures that would govern the
leasing activities of the corporation. However, we noted that the guidelines in
the Memorandum did not contain standards in determining the
reasonableness of the terms of lease contract and the rental rates that would
be imposed.
15.4.3 Although earning non-rail revenue to support business operations, the leasing
of government property is not the mandate of the PNR. As mentioned above
problems on informal settlers in PNR right of way even caused major
problems that hindered PNRs performance of its principal mandate which is
to deliver efficient service in the rail transportation system.
15.4.4 Lapses in real estate management were observed and disclosed in Audit
Observation No. 3 in the CY 2011 Annual Audit Report. AMD furnished the
auditing office 24 pages listing various lessees on PNR real property located
in various areas in Luzon with an aggregate land area of 422,264 square
meters. With the significant number of occupants, we are not certain if those
who continued to occupy the premises were informal settlers or paying rent to
the PNR.
15.5
With the immeasurable parcels of real property which the PNR is unable to
manage effectively, we recommend that Management thoroughly review the
Inventory List of PNR Real Property and determine which property would no
longer be used in the expansion or rehabilitation of lines in the rail
transportation system. Management may consider sale of the assets in order
to generate much needed fund for the efficient delivery of rail transportation
service by the PNR.
Clear policy to be adopted in the determination of the reasonable rate of lease
should be issued. Management should reassess the use of zonal value in
determining the proper lease rate in the leasing of real property instead of the
prevailing rental rate in the vicinity which generally is considered reasonable
and fair value.
15.6.
16.
16.2
In line with the deposit pickup arrangement with the depository bank, Mr. Eduardo
M. Garcia, Cashier C, Budget and Cash Division who is designated as payroll
disbursing officer also acted as Collecting Officer, in-charge of the deposit of
collections for pick up by the roving teller of the DBP.
16.3 We noted that the authorization letter of Mr. Garcia to deposit collections with the
depository bank was dated February 5, 2009. It was issued by the Manager of the
Budget and Cash Division and was not approved by the General Manager who is the
duly authorized representative of the PNR as far as the depository bank DBP is
concerned.
16.4 We were informed that the collections of the various PNR Collecting Officers, after
bank cut-off time were turned over to Mr. Garcia every afternoon for safekeeping and
deposit on the following day. We noted that receipt of the collections was not thru
officially prescribed form but in columnar books kept by each of the collecting officers
for personal security.
16.5 The practice of transferring cash collections by four Collecting Officers to the
Paymaster for safekeeping and deposit on the following day is contrary to Item No. 11
of the Laws and Rules Relevant in Cash Examinations involving Accountability which
specifically quote Section 77 of P.D. 1445 stating that, Transfer of government funds
from one officer to another shall, except as allowed by law or regulation, be made only
upon prior direction or authorization of the Commission or its representative.
16.6 We were informed that the collections for pick-up by the DBP roving teller are actually
counted in the presence and tallied against the deposit slips accomplished by each of
the collecting officers which are thereafter validated by the depository bank. In the
accomplished Deposit Pick-Up Notice (DPN) which constitutes summary of the
deposits made by the tellers, Mr Garcia signed as Depositor present upon counting of
the fund. On the other hand, the pick-up teller of the DBP signed to acknowledge
receipt of the cash deposited presented in the DPN.
16.7 In the Accounting records and the Report of Collection and Deposit of the PNR, the
concerned collecting officer signed as the depositor and was considered the officer
accountable for the collections deposited. Mr. Garcia was not recognized in PNR
books as accountable custodian and depositor of the fund turned over by the
collecting officers.
16.8 We learned that Ms. Ana Liza N. Estrella, a Collecting Officer in the absence of Mr.
Garcia had access of the cash vault of Mr. Garcia. We were also informed that the
collecting officers were provided separate vaults for safekeeping of cash.
16.9 With the foregoing procedures, there may be risks of loss and misappropriation in the
transfer of cash collections due to improper transfer of accountability on the collections
due for deposit on the following day averaging more than P1 million daily.
16.10 We recommended that Management require each accountable officer to
accomplish separate DPN for collections for deposit, considering that the
amount of collections per bank statement is shown by collecting officer and not
84
D.
17.
The PNR failed to withhold 5% final VAT estimated at P16.14 million and 1% creditable
income tax of approximately P3.23 million or a total of P19.36 million on bulk purchase
of fuel for locomotives from CY 2011 to 2014 in the total amount of P361.47 million
(inclusive of 12% VAT).
17.1
Revenue Memorandum Order No. 23-2014 dated June 20, 2014 of the Bureau of
Internal Revenue, on Obligations of Government Agencies, Bureaus, and
Instrumentalities as Withholding Agents provides that government agencies has the
obligation to withhold on purchases of goods and services the following:
a. Withholding of Creditable Income Tax
85
17.2
17.3
The recorded entries in the index cards of the Controllership Division were traced to
the source documents. The verified cost of diesel procured accounted for the
following percentage of the cost of fuel and lubricants disclosed in the Notes to
Financial Statements:
Particular
17.4
CY2011
CY2012
CY2013
CY2014
P86,986,094
75,353,600
86.6%
P112,234,683
106,657,228
95.0%
P100,716,089
64,959,800
64.5%
P118,323,258
114,501,700
96.8%
17.5
In the breakdown of the fuel cost in several of the Sales Invoices, the Output VAT of
the suppliers at 12% was reflected. The final withholding VAT on sales of fuel or
petroleum products to the government was only 5% which if deducted the remaining
86
7% should have effectively accounted the standard input VAT for sales of goods to
the government. The amount of final VAT at 5% which was not deducted on the
gross sales of P361.472 million (inclusive of 12% VAT) from CY 2011 to 2014 was
estimated at P16,137,157.50; whereas, the creditable income tax of 1% was
approximately P3,227,431.50 or a total of P19,364,589.00.
17.6
In accordance with Revenue Memorandum Circular No. 23-2012 dated February 14,
2012, taxes withheld are due for remittance on the 10th day of the following month of
the period covered except for December which is due for remittance on the 15th day
of the following year. For failure to withhold tax, 20% interest pursuant to Section 249
of the Tax Code shall be imposed in addition to the amount due for collection.
17.7
17.8
17.9
87
may be the reasons why the issue on withholding tax was no longer tackled in
the AOMs of the then Auditor and in AOM No. 2011-015 issued on June 4,
2011.
c. The PNR is embattled in various tax problems and Management is doing its
best to rectify errors and to faithfully and zealously comply with obligations as
taxpayer. Also, the diesel procuring personnel had been instructed to inform
the suppliers upon canvass, that withholding taxes are not part of their expense
but are considered as advances of their tax liabilities which could be used to
offset any tax obligations upon filing applicable tax returns.
17.10 As our rejoinder, AOM No. 2011-015 dated June 4, 2011 was issued to inform
Management on the observations where the focus of audit was non-conduct of public
bidding on bulk purchases of fuel, splitting of fuel purchases, inconsistency in
accounting for fuel purchased for use at Tutuban, Manila and Naga area, and other
lapses noted in Fuel Management. Further, the alleged suggestion of the then
Auditor should not have prevented PNR Management from performing its obligations
to comply with the tax regulations issued by the BIR.
E.
The results of audit of the fund allotted to promote gender sensitivity follows:
Particulars
Compliance / Non-Compliance
1.
Accomplishment Report
GAD Accomplishment
submitted
Report
for
CY
2013
88
Particulars
Appropriation
of
Adoption
System
GAD
GAD PAPs should be supportive of The specified GAD PAPs of the PNR were
the Gender issues in the Agency
supportive of gender issues.
10
11
F.
Compliance / Non-Compliance
b)
Training expenses
c)
d)
Travelling expenses
Honoraria
Focal
Amount
P29,100
9,398
8,000
Lacking Document
Office Order authorizing the participants
Certificates of Attendance
Travel itineraries
Certificates of travel completed
Course syllabus/programs of lecture
Compliance with the IRR of RA 8291 or the GSIS Act of 1997, the National Health
Insurance Act of 2013 and the PAG-IBIG Fund.
19.
During the year, the PNR complied with the Implementing Rules and Regulations
(IRR) of RA 8291 and the National Health Insurance Act of 2013.
89
19.1
The IRR on RA 8291 (GSIS Act of 1997), provides under paragraph 4.1.1,
Section 4, one of the basic principles under the Policy Governing Membership
Administration, as follows:
Membership in the GSIS carries with it the legal obligation to
promptly remit the required monthly premium contributions.
Thus the extent of the benefits to which a member is entitled
will depend upon the level of compliance in the remittance of
his premium contributions. (Underscoring supplied)
Agencies of the government are prohibited from incurring delay in the
remittance of collections to the GSIS including the employer/government
share which should be paid, within the first ten (10) days of the calendar
month following the month to which the contributions apply. The remittance
shall take priority over and above the payment of any and all obligations,
except salaries and wages of its employees. The amount due and payable to
the GSIS is part of the budgeted fund for Personal Services in the approved
Corporate Operating Budget and once withheld from salaries of employees
should not be utilized for other purposes; instead, this should be remitted
immediately to the GSIS.
19.2
Because of failure to comply in the previous years with the above quoted rule,
the PNR incurred arrearages on premium contributions which it had to settle
with the GSIS. To settle the obligations, the PNR and the GSIS entered into a
Memorandum of Agreement (MOA) on December 5, 2013 wherein, the
balance of unpaid premium contributions of P1,140,356 plus 50% of
P11,638,322, the balance of arrearages on interest for the period covering
October 31, 2006 to October 31, 2013, or equivalent to P5,819,161 were
restructured in the total amount of P6,959,517. The restructured obligation
with interest of 12% per annum based on diminishing balance shall be paid by
the PNR in 72 monthly instalments beginning January 2014 up to December
2019.
In 2014, the PNR paid the monthly instalments on the restructured obligation
totalling P1,496,659; and remitted the premium contributions of employees of
P6,113,022; as well as, government share of P8,152,345 including loan
amortizations of P78,788 deducted from the salaries of employees or an
aggregate of P15,840,814.
19.3
19.4
90
20.2
On the other hand, audit charges substantially consisted of those issued before the
RRSA amounting to P118,454,114 and the balance of P20,924,097 after its issuance
resulting in a total of P139,378,211.
Transactions requiring explanations/justifications and/or submission of documentary
requirements which were suspended in audit per notices issued from December 2010
to December 15, 2014 totalled to P2,744,994.
20.3
20.4
Below is the tabular presentation of the above data with the breakdown thereof
presented in succeeding pages:
Audit Action
Suspensions
Balance
Dec. 31, 2013
Amount
Amount
Issued in 2014 Settled in 2014
Balance
Dec. 31, 2014
P 121,521,364
218,853,985
337,630,355
65,650,892
11,048
11,048
65,650,892
Charges
139,497,028
118,817
139,378,211
Total
P 326,669,284
218,865,033
337,760,220
P 207,774,097
Disallowances
2,744,994
91
Beginning
Balance
Audit Action
Date
Reference No.
Jan. 1, 2014
Issued
Settled
Ending
Balance
Dec. 31, 2014
Status
As of December 31, 2014
2,146,994
The
suspended
transactions
involved fund transferred to the
accounts of the contractors which
was inclusive of the amount of taxes
for remittance to the Bureau of
Internal Revenue (BIR). The account
was partially settled by P1,366,795
on March 4, 2015. A request was
made that the balance of P780,199
be deducted from the Contractors
final billing which had been
submitted
to
the
PNR
for
processing.
Suspensions:
12/15/2014 NS 14-004-107-(14)
08/27/2014
10/20/2014
05/04/2014
08/27/2014
04/24/2014
08/18/2014
07/09/2013
03/31/2014
07/09/2013
03/31/2014
03/06/2012
11/24/2014
03/06/2012
11/24/2014
03/06/2012
11/24/2014
03/06/2012
NS 14-003-107-(14)
NSSDC-2014-008
NS 14-002-107-(13)
NSSDC-2014-007
NS 14-001-107-(13)
NSSDC-2014-006
NS 13-001-401-(12)
NSSDC-2014-004
NS 13-001-401-(12)
NSSDC-2014-002&003
NS 12-006-107-(10-11)
NSSDC-2014-009
NS 12-005-107-(10-11)
NSSDC-2014-009
NS 12-004-107-(10-11)
NSSDC-2014-009
NS 12-003-107-(10-11)
P 2,146,994 P
22,048
22,048
215,684,943 215,684,943
1,000,000
1,000,000
329,807
329,807
119,897,557
119,897,557
96,000
96,000
96,000
96,000
96,000
96,000
96,000
96,000
92
Audit Action
Date
Reference No.
NSSDC-2014-009
11/24/2014
02/28/2012
11/24/2014
02/27/2012
11/24/2014
12/30/2010
NS 12-002-107-(10-11)
NSSDC-2014-009
NS 12-001-107-(10-11)
NSSDC-2014-009
NS 2010-05
12/30/2010 NS 2010-04
Total
Beginning
Balance
Jan. 1, 2014
Issued
Settled
Ending
Balance
Dec. 31, 2014
156,000
156,000
156,000
156,000
276,000
276,000
322,000
322,000
Status
As of December 31, 2014
2,744,994
Disallowances:
10/20/2014 ND 14-001-107-(14)
11/24/2014 NSSDC-2014-010
07/01/2013 ND 13-001-107-(13)
06/30/2012 ND 12-008-107-(11)
11,048
49,802,995
3,783,314
11,048
49,802,995
3,783,314
93
Audit Action
Date
Reference No.
Beginning
Balance
Jan. 1, 2014
Issued
Settled
Ending
Balance
Dec. 31, 2014
12/06/2010 ND 2010-003
41,168
41,168
01/14/2009 ND 2009-001
11,220,857
11,220,857
06/04/2007 ND 2007-001
802,558
802,558
Total
65,650,892
11,048
11,048
Status
As of December 31, 2014
65,650,892
94
Audit Action
Date
Reference No.
Beginning
Balance
Jan. 1, 2014
Issued
Settled
Ending
Balance
Dec. 31, 2014
Charges:
12/05/2013 NC 13-001-107-(12)
20,359,447
20,359,447
08/11/2010 NC 2010-001
564,650
564,650
11/06/2007 NC 2007-010
414,370
414,370
06/30/2007 NC 2007-005
1,840,982
1,840,982
06/08/2007 NC 2007-004 A
8,579,374
8,579,374
Status
As of December 31, 2014
Audit Action
Date
05/30/2007
03/31/2014
05/30/2007
03/31/2014
05/30/2007
03/31/2014
Reference No.
NC 2007-009
NSSDC-2014-005
NC 2007-008
NSSDC-2014-005
NC 2007-007
NSSDC-2014-005
05/30/2007 NC 2007-006
03/31/2014 NSSDC-2014-005
Beginning
Balance
Jan. 1, 2014
Issued
Settled
Ending
Balance
Dec. 31, 2014
120,015
24,003
96,012
106,800
21,360
85,440
148,875
29,775
119,100
174,715
43,679
131,036
05/17/2007 NC 2007-002
139,750
139,750
02/22/2007 NC 2007-001
71,250
71,250
Status
As of December 31, 2014
Audit Action
Date
Reference No.
Total
Grand Total
Beginning
Balance
Jan. 1, 2014
Issued
Settled
106,976,800
139,497,028
Ending
Balance
Dec. 31, 2014
106,976,800
Status
As of December 31, 2014
118,817 139,378,211
97
Observations
Recommendations
Status of Implementation
98
Ref
Observations
Recommendations
Status of Implementation
e. Comply
with
our e. Not implemented. No Manuals
recommendation in the CY
on Approval and Operating
2010 Annual Audit Report that
Procedures completed in 2014.
Management develop a Manual
Only loose guidelines and office
of Approvals that would define
orders on signatories on certain
limits of approving authority and
transactions were issued.
Manual of Standard Operating
Procedures as guide in carrying
out business operations and
financial transactions. To date
the Manuals have not been
completed.
4.
2
We recommended that, by
remaining firm on its ground that
the receivables from lease of
property
had
not
been
compromised and should be
computed
at
escalated
compounded
rate,
PNR
immediately
pursue
the
appropriate action. It should
assert its right and enforce
collection of the P263.153 million
receivables instead of merely
issuing
and
recording
bills
involving lease receivables from
TPI.
5.
recommended
that
3 6. Vague provisions on the We
lease agreement with the Management:
TPI, which pertained to the
(a) ownership of building a. Act speedily in order to clarify
improvements on leased
the vague provisions on the
property covered by the
contract of lease with TPI, as
original contract; (b) the
non-settlement of the issues
fairness of percentage share
early
may
weaken
the
of the government from the
negotiating position of the PNR
income derived by the TPI
as it might be overtaken by the
from third parties; (c) liability
forthcoming implementation of
on real property taxes during
the renewed contract of lease
the term of the lease had to
effective on September 5, 2014;
be clarified immediately.
and
Also,
the
disclosure
requirement of PAS No. 17 b. Comply with the disclosure
on lease arrangements as of
requirement of PAS 17on lease
reporting date regarding the
arrangements as of reporting
contract with the TPI was not
date regarding the contract with
complied with.
the TPI.
99
Ref
Observations
Recommendations
Status of Implementation
7.
8.
4
Implemented.
100
Ref
9.
Observations
Recommendations
PNR
incurred
constructive/committed
obligations to the contractor
Hanjin Heavy Industries and
Construction Co. Ltd. and
consultant
Yooshin
Engineering Corporation in
the implementation of the
Northrail-Southrail
Linkage
Project I in the total amount
of P484.105 million, and, to
Jadphil and Associates Inc.,
in
relation
to
the
Improvement
and
Modernization of Commuter
Line South Project payable at
compromised amount of
P17.046
million.
These
obligations can be settled on
the basis of quantum
meruit, the resolution of
which is through filing money
claim with the COA pursuant
to Rule VIII of the 2009
Revised Rules of Procedure
of the Commission on Audit.
Status of Implementation
resolution by the task group.
Initiated. The 5 titles covering area
sold to various homeowners and/or
the NHA will also be included in
the items to be investigated and
resolved by the task group.
Implemented.
Not implemented.
Not
yet
implemented.
The
obligations shall be recognized in
the books once the source
documents are submitted to the
Controllership Division.
101
Ref
10.
6
Observations
Recommendations
Status of Implementation
We
recommended
Management:
that
b. Accounts
Receivable
amounting
to
P29.508
million had been dormant
for 15 and up to 37 years.
76
87
Unreconciled
discrepancy We
recommended
that
ofP12.748 million existed as Management:
at year-end between Cashin-Bank balance of P175.828 a. Require
the
accountable
million and the results of
officers concerned to account
confirmation
with
the
for the noted discrepancy
Not Implemented
Partially implemented
102
Ref
99
Observations
Recommendations
We
recommended
that
Management
either
consider
preparing the Remittance List for
the Pay Period with the names of
PNR personnel in alphabetical
order by Department/Office similar
to the Monthly Payroll Summary
instead of Corporate- wide without
regard to work of assignment; or
submit to the bank the soft copy of
the pre-audited payroll with
additional column indicating the
corresponding
bank
account
number of each employee.
Status of Implementation
Implemented.
Partially Implemented.
Partially Implemented.
Partially
Implemented.
To
ascertain that the first and second
half payrolls including the time
reports/sheets are submitted on
time, the same were required to be
submitted to the Controllership to
form part of the attachments of the
JEV booking the payroll.
103
Ref
Observations
Recommendations
12
Status of Implementation
the AOM that bank remittance
should be per department in
accordance with the payrolls.
Not Implemented.
Not Implemented.
104
Ref
Observations
Recommendations
Status of Implementation
reported
year-end
1113 The
balance
of
Land
Transportation Equipment at
P4.565
billion
was
overstated by P2.865 billion,
representing the value of
assets reportedly acquired
from 1948 to 2002 without
supporting inventory reports
to prove their existence. In
consideration
of
PNRs
policy on the estimated
useful lives of PPE, these
Transportation Equipment no
longer qualify as part of the
account since the same were
no longer used in operations
as
they
were
already
unserviceable,
nonoperational, or considered
for disposal, and these
should be presented instead
as Non-current Assets Held
for Sale and Discontinued
Operations, in accordance
with PFRS No. 5
14
12
In
view
of
the
foregoing
observations, we recommended
the following:
c. Adjust
the
entries
on
restatement of foreign loans
debited to Land Transportation
Equipment in accordance with
PAS 8 on Accounting Policies,
The
balance
of
Land
Changes
in
Accounting
Transportation
Equipment
Estimates and Errors.
included items valued at
P2.049 million which were
below
the
capitalization
benchmark of P10,000 or the
minimum value of items to
be categorized as Property,
Plant
and
Equipment
prescribed in COA Circular
No. 97-005.
Likewise,
transactions amounting to
P53.592
million
were
erroneously charged to the
account.
The
exact
amount
of
Receivables from Sale of
Non-Core
Property
on
qualifies as an asset or an
expense following the guidelines
quoted in the AOM.
We
recommended
Management:
Not Implemented.
that
105
Ref
Observations
Recommendations
the
discrepancy
instalment payment basis a. Verify
amounting to P45.370 million
could not be determined due
on the amount received from
to the absence of records to
vendees based on available
establish the actual amounts
records and the amount which
already paid by vendees.
should have been collected as
Moreover, the PNR did not
stipulated in the agreements;
enforce the provisions on
terms of payment provided in b. Reconcile the records of the
Asset Management Division for
the
Memorandum
of
each vendees with the records
Agreements and Conditional
of
the
Homeowners
Contracts to Sale including
Associations;
the imposition of penalties on
delayed payments by the
c. Ensure that the Associations
vendees.
maintain general and individual
ledgers of its member buyers
15
indicating payments made to
the PNR as provided in the
MOA;
13
Status of Implementation
Partially
Implemented.
The
Controllership and the Asset
Management
Division
have
already started reconstructing the
records on payment made by the
various homeowners association.
Partially Implemented.
Partially Implemented.
Management likewise considering
the computerization of the records
on sale of non-core properties.
Partially Implemented.
Partially Implemented.
recommended
that
Subsidy Fund of P33.09 We
Management:
million earmarked to finance
specific and programmed
a. Submit justification to the DBM
expenditures was utilized
on utilizing the programmed
instead to pay for the cost of
subsidy fund to reimburse the
security
services,
and
general fund used to cover
reimbursement
of
fund
other
operating
expenses
including obligations settled in
derived from the proceeds of
the previous year; and
PNR Hospital which was
utilized to pay for expenses
b. Henceforth,
refrain
from
in the preceding year. The
juggling and utilizing restricted
utilization
of
fund
for
subsidy fund other than for
purposes other than intended
which granted by the National
was improper and contrary to
Government to avoid penal
sanctions that may be imposed
Section 4 of PD 1445.
as this in effect constitutes
technical
malversation
of
Partially Implemented.
Request
for
realignment
now
being
submitted to the DBM.
Implemented. No similar
finding observed in 2014.
106
audit
Ref
Observations
Recommendations
Status of Implementation
government funds.
14
15
Deficiencies
and
noncompliance with the rules
and regulations governing
the grant, utilization and
liquidation of cash advances
were noted on Special Cash
Advances
issued
to
Paymasters or Disbursing
Officers on payrolls for
salaries of PNR employees
which totalled to P12.66
million in CY 2013.
We
recommended
that
Management submit explanation
why the authorized one-time
payment of the AdCom benefit to
the retirees was not given priority
over the payments involving
monetization of the unused leave
credits, COLA, and Productivity
Enhancement Incentives of active
employees including the check off
transactions involving remittances
to Philamlife, employees union
and cooperative.
We
recommended
that
Management submit the lacking
documents to avoid suspension of
the transactions in audit. Also,
Management was advised to
strictly adhere with the rules and
regulations on the liquidation of
cash
advances
to
avoid
suspensions and disallowances in
audit.
Implemented.
107
Ref
Observations
Recommendations
Status of Implementation
Partially
Implemented.
Daily
transactions are not only hand
written on the appropriate Journal
Books, but are further encoded in
excel format for easy monitoring,
calculation, referencing and data
retrieval.
b. Use
Cashbook
or
Cash
Receipts Record prescribed for
use of designated Accountable
Officers; observe the rules on
the handling, custody and
disposition of the cashbook
provided in COA Circular 97002 dated February 10, 1997;
reconcile the cashbook balance
with the cash on hand daily;
foot and close the books at the
end of each month and
reconcile the account with the
Controllership
Division
quarterly;
Partially Implemented.
Partially Implemented
Implemented
Implemented
108
Ref
Observations
Recommendations
Status of Implementation
17
Implemented.
b. Henceforth,
include
as
supporting document to OT
claims a duly accomplished
Overtime Work Program in
compliance
with
the
requirements of COA Circular
No. 2012-001;
Implemented
Implemented
Implemented.
Partially Implemented
109
Ref
Observations
contributions
of
P1.140
million plus 50% of P11.638
million, the balance of
arrearages on interest for the
period covering October 31,
2006 to October 31, 2013, or
equivalent to P5.819 million,
in the total amount of P6.960
million.
Recommendations
Status of Implementation
amortizations or instalments on
restructured obligations to avoid
unfavorable effects in case of
breach per Art. IV of the MOA.
19
2020 The amount of payable
under Due to BIR reported
by Management in the
financial statements as of
December 31, 2013 was
understated by at least
P240.720
million
representing the unpaid and
unrecorded
surcharges,
We
recommended
that
Management strictly follow the
IRR of the National Health
Insurance Act of 2013 to ensure
the grant of health insurance
benefits to its employees and
avoid penalties or sanctions that
may be imposed for noncompliance therewith.
110
Ref
Observations
Recommendations
Status of Implementation
Implemented
22
We
recommended
that
Management
undertake
appropriate actions to ensure the
settlement of the disallowances
and charges which had been
decided with finality; and comply
with
the
requirements
for
transactions suspended in audit.
Partially
Implemented.
Sent
demand letters to persons liable
and deducted the accountabilities
from last claims of former officials
and employees.
22
111
Annex A
2. Delivery of Premises
3. Relocation
Within six (6) months from the final approval of this Contract by
the Office of the President of the Philippines, the LESSOR shall
with the assistance of the LESSEE cause the site clearing and
relocation .... The LESSEE agrees to contribute an amount not
exceeding ONE MILLION (P1,000,000.00) PESOS to the LESSOR as
expenses for the cost of relocation of the squatters families
within the leased premises. In the event that the said amount
shall not be sufficient for such purpose, the LESSEE shall advance
such additional amount as may needed provided that said
additional expenses shall be deductible from the fixed rental due
to the LESSOR for the first seven (7) years of the lease as defined
in par. 7 hereof. Any further amount still required for that
purposes shall be advance by the LESSEE and deductible from
rental for such number of years required as may be mutually
Within six (6) months from the execution of this Contract within
such time as the same way may be feasible and practical based
on the circumstances prevailing, the LESSOR shall with the
assistance of the LESSEE cause the site clearing and relocation
.... The LESSEE agrees to contribute an amount not exceeding
ONE MILLION (P1,000,000.00) PESOS to the LESSOR as
expenses for the cost of relocation of the squatters families
within the leased premises. Both parties hereto agree to impose
a ceiling of PESOS: SEVENTY MILLION (P70,000,000.00) as the
maximum amount to be spent for the relocation of squatters
families inclusive of the P1,000,000.00 contribution by the
LESSEE, for that purpose, which maximum amount shall be
advanced by the LESSEE, provided that such amount shall be
reimbursed by and deductible from the fixed rental due to the
112
LESSOR for the first fifteen (15) years of the Lease as defined in
Provision No. 7 hereof. Any further amount beyond the
maximum amount imposed which may still be required for that
purpose shall be for the sole account of, and borne by the
LESSEE without right of reimbursement from the LESSOR.
These ...
The LESSOR and the LESSEE mutually agree that, in the site
clearing and relocation of squatter families within the leased
premises, they hereto adapt, as far as practicable, the systems
and procedures which the National Government might have
previously effected in relocating squatter families similarly
situated. For this purpose, close coordination shall be effected
by both the LESSOR and the LESSEE with the local and national
government units concerned with such relocation, utilizing said
procedures hereto adapted.
4. Construction Period
The LESSEE shall submit to the LESSOR its plans and specifications
for the proposed development of the commercial shopping center
within six months from the time it shall have been informed in
writing by the LESSOR that the Contract of Lease has been
approved by the Office of the President.
From
7. Rental
The LESSEE shall upon the commencement of the term of the The LESSEE shall upon the commencement of the term of the
lease as defined in par. 6 pay the LESSOR, by way of rental fee for lease as defined in par. 6 pay the LESSOR, by way of rental fee
the premises, in cash, a fixed annual rental equivalent to TWO for the premises, in cash, a fixed annual rental equivalent to
113
12. Insurance
The LESSEE, at its sole cost and expense leased property insued
against destruction or damage by fire and extended coverage
risks and with such insurance company or companies acceptable,
to the LESSOR, in an amount equal to the maximum insurable
value
Reconstruction
In case the building Partial damage to or destruction of any In case the building Partial damage to or destruction of any
P1.0M to P200.0M
201.0M to 400.0M
401.0M to 600.0M
601.0M to P1.0B
1% of Gross Sales
P2.0M plus % of any increment
over & above P200.0M up to P400.0 M
P3.5M plus % of any increment
over & above P400.0M up to P600.0 M
P4.5M plus % of increment
over & above P600.0M up to P1.0B
In addition
.
For this purpose, the LESSOR shall allow the LESSEE a
maximum period of fifteen (15) years to effect said deductions
of advances from the fixed rental portion of the lease on the
area subject of this contract.
114
1. Effectivity
The parties
The parties
.
.
This contract shall be subject to approval by higher (deleted)
government authorities.
115