OBSERVATIONS AND RECOMMENDATIONS

A. FINANCIAL AND COMPLIANCE

Unremitted funds to the National Treasury 1. Unutilized Cash-NT/MDS, refunds of cash advances, fund transfers, performance bond/bid security posted by contractors and sale of bid documents in OSEC and four regions totaling P130,747,514.35 were not remitted to the National Treasury, of which P130,247,515.98 or 99.61% was deposited in the Cash in Bank-LCCA and P499,998.37 or .39% was kept by the Special Collecting Officer-Designate. This is in violation of DBM and DepEd Joint Circular No. 2004-1 and pertinent provisions of the 2011 GAA whereby the government was deprived of the much needed funds to support priority programs and projects. Section 4.6 of Joint Circular No. 2004-01 dated January 1, 2004 of the DBM and DepEd states, All existing Cash-in-Bank balances, net of outstanding checks, shall be remitted to the Bureau of the Treasury (BTR) in accordance with National Budget Circular (NBC) No. 488 dated May 22, 2003. A maximum of six (6) months from the date of the latest outstanding checks issued shall be allowed after which the remaining Cash-in-Bank balances shall be closed The General Provisions of RA No 10147 or the General Appropriations Act for 2011 provide, among others: Section 3 - All fees, charges, assessments, and other receipts or revenues collected by departments, bureaus, offices or agencies in the exercise of their functions, xxx , shall be deposited with the National Treasury and shall accrue to the General Fund pursuant to Section 44, Chapter 5, Book VI of EO No 292 and Section 65 of PD No 1445 xxx Section 7 - Performance Bonds and deposits filed or posted by private persons or entities with agencies of the government shall be deposited with the National Treasury as trust receipts under the name of the agency concerned in accordance with EO No 338, as implemented by COA-DBM-DOF Joint Circular No. 1-97 dated January 2, 1997. xxx. The Cash in Bank-LCCA disclosed unremitted/undeposited amounts to the National Treasury by the Office of the Secretary (OSEC) and the Regional Offices (ROs) consisting of accounts as shown in the Table 1.

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Table 1. - Summary of unremitted/undeposited collections/receipts

Name of Office OSEC Cash Balance P 99,791,267.57 Remarks P79,380,729.30 (80%) pertains to refund of excess performance enhancement incentives for CY 2010. P4,573,931.33 (56%) pertains to excess collection of registration / seminar fees. P1,132,615.99 (60%) pertains collections for the year 2010. to other

NCR-ROP NCRCaloocan City NCRPasay City RO VMasbate RO VNaga City RO IXDapitan City RO XIIIAgusan del Sur DO DO

8,151,770.93 1,872,746.19 14,514,679.38

represents transfer of funds from CashNational Treasury, MDS account to Cash in Bank-LCCA. collections from canteen rental, petty cash fund and miscellaneous fees. collections of performance bond. MOOE of the Division in CY 2009 and for the Palarong Pambansa in CY 2011. P2,195,033.59 (70%) pertains to receipts from DepED RO, financial assistance from LGUs, and registration fees.

DO DO DO DO

13,431.70 499,998.37 2,774,722.65 3,128,897.56

P130,747,514.35

Management explained that said funds were intended to augment/defray urgent/relevant expenses not covered by regular MOOE funds. Also, management asserted that the unutilized Notices of Cash Allocations (NCAs) were deposited in the current account to avoid lapsing and reversion to the National Treasury as these NCAs were received towards end of the month and there are still unsettled obligations. We recommended and Management of concerned Offices agreed to: remit all unutilized/excess funds to the National Treasury; stop the practice of depositing the collections received from any sources and/or transferring unused balances of NCAs to the agencys current account; and implement a sound cash management system in strict adherence with the above-mentioned rules and regulations.

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2.

The unauthorized retention in the Cash in Bank-LCCA account for Payroll Fund of the DepEd NCR ROP of savings from Personal Services (PS) amounting to P171,618,718.24 to pay for the newly-hired teachers salaries for FY 2012 is contrary to Section 3.9.1.2 of NBC No. 528. The delayed remittance thereof to the National Treasury may have also affected the efficient programming of the cash resources of the national government. Section 3.9.1.2 of NBC No. 528 provides, Appropriations under FY 2011 GAA, R.A. 10147 shall be available for release and obligation up to December 31, 2012 with exception of PS which shall lapse at the end of 2011. For CY 2011, the Division Offices (DOs) and Operating Units (OUs) remitted cash to the NCR-Regional Office Proper (ROP) for the salaries and allowances of teachers, which the latter deposited to the its current accounts for payroll fund since the payrolls are prepared and paid by the ROP. Audit disclosed that the Cash-LCCA balance of the DepEd NCR ROP at year-end includes savings from PS in the amount of P171,618,718.24 with expired validity of appropriation and, therefore, not anymore allowable for obligation in FY 2012. The Regional Accountant in NCR explained that the amount was set aside to pay the newly-hired teachers salaries for FY 2012, pending receipt of the Special Allotment Release Order (SARO) and NCA requested by the DOs and OUs in the total amount of P191,359,702.46 as of February 2012. The unauthorized retention of savings in the current accounts with expired validity of appropriations is contrary to Section 3.9.1.2 of NBC No. 528, hence, may affect the validity and regularity of the transactions funded out of this account. Our verification on the 2012 transactions of the ROP showed, however, that the amount of P171,618,718.24 and the interests thereon totaling P1,992,689.27 from the 4th quarter of 2011 to 3rd quarter of 2012 were already remitted to the BTr as of October 31, 2012. We recommended that Management stop the practice of retaining savings in the Cash in BankLCCA, otherwise, this shall constitute neglect of duty and shall be a ground for administrative disciplinary action, as stated in Section 127 of PD 1445, and ensure that excess funds or savings are remitted promptly to the National Treasury for proper disposition.

Delayed /non-submission of Bank Reconciliation Statements (BRSs) 3. The accuracy of Cash in Bank-LCCA with an aggregate amount of P2,796,446,605.29 in eleven offices could not be ascertained due to delayed/non-submission of BRS, non-maintenance of the necessary subsidiary ledgers for each bank account, and non-recording of reconciling items, contrary to Sections 74 of PD 1445.
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Section 74 of PD No. 1445, otherwise known as the Government Auditing Code of the Philippines provides that the head of agency shall see to it that reconciliation is made between the balance shown in the reports of the depositories and the balance found in the books of the agency. Section 2.1.4 of the COA Circular No. 92-125A states that the accounting units shall submit the original BRSs within 15 days after the end of the month to the COA Resident Auditor. The Cash in Bank - LCCA accounts of the following offices and their balances are shown in Table 2: Table 2. - Summary of Cash in Bank LCCA account balances
Name of Office OSEC NCR-DO Caloocan City RO I-ROP and DOs Urdaneta and Pangasinan I RO II RO III RO IV A RO V RO VI RO IX-ROP and DO Zamboanga del Norte Total Per Books P1,118,881,796.50 1,872,746.19 104,578,977.65 216,869,852.69 6,807,232.59 62,623,757.10 540,526,446.97 566,793,810.44 177,491,985.16 P2,796,446,605.29

For the OSEC alone, the bank balances are deposited in eleven banks, of which the authority or basis for the opeining of bank accounts have not been provided. Interview with the Accounting Section revealed that there were no information on the authority per their available records on file. All the above balances were not reconciled with the balances presented in the bank statements due to: Delayed/non-preparation and submission of BRSs in OSEC, RO I-ROP and DOs Urdaneta and Pangasinan I, ROs II, IV-A, V and VI, and RO IXDO Zamboanga del Norte; Failure to maintain/update subsidiary ledgers in OSEC, RO II, and RO IXDO Zamboanga del Norte; Unrecorded deposits and cancelled checks in DO Caloocan City;
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Unrecorded book reconciling items and non and/or erroneous recording of deposits in RO I; and Long outstanding and unreconciled items in the BRS of RO III.

Interview with the concerned Accountants disclosed that bank statements were not furnished promptly by the depository banks. Hence, the validity and correctness of the above cash balances cannot be properly ascertained We recommended that Management: require the respective Accountants/Bookkeepers to prepare and submit regularly and within the prescribed period the BRSs in compliance with Section 2.1.4 of the COA Circular No. 92-125A; cause the suspension of payment of salaries for failure on the part of the officials concerned to submit the required reports pursuant to Section 122 of PD 1445; and coordinate closely with the depository banks by requesting them to deliver promptly the monthly bank statements so that Accountants can prepare the BRSs on time.

Outright utilization of collections and non recording of related expenses 4. The proceeds of collections from seminar and conference fees were utilized to defray the related seminar/conference expenses of the CAR-DO Abra, contrary to sound internal control system on cash. Furthermore, the transaction was not recorded in the books of accounts resulting in the overstatement of Cash-Collecting Officers and understatement of the related expense accounts due to non-recording of expenses amounting to P547,700.00. Section 9 of the CY 2011 GAA also states, among others: Departments, bureaus, offices or agencies which conduct training programs in relation to their mandated functions are authorized to collect seminar and conference fees xxx. The proceeds xxx may be used for the conduct of seminars, conferences and trainings, subject to pertinent budgeting, accounting and auditing rules and regulations: PROVIDED, That any excess shall be deposited with the National Treasury and shall accrue to the General Fund pursuant to Section 44, Chapter 5, Book VI of E.O. No. 292: PROVIDED, FURTHER, That upon the conclusion of the seminar or conference, the office authorized to conduct the same shall submit to the DBM a report of the fees collected and of the expenses incurred.
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Sound internal control system over cash dictates that collections be promptly and fully deposited in an authorized government depository bank and disbursements properly accounted for. Registration fees for trainings and seminars conducted by the CAR-DO Abra in 2011 amounted to P401,000.00, of which P386,789.00 was immediately utilized for expenses incurred during these trainings and seminars. The Cash-Collecting Officers account has a balance of P548,288.12 in the financial statement at year-end December 31, 2011. Post-audit of the Report of Collections and Deposits (RCD) revealed that all collections were duly accounted for and all cash in the custody of the Cashier were deposited, except the amount of P547,700.00, which were expended for the seminars and trainings and were not recorded in the books. This resulted in the overstatement of the CashCollecting Officers account and understatement of the related expense account/s. The outright utilization of collections from trainings and seminars and depositing only the excess after all expenses for these activities have been accounted may result in possible mishandling of funds. Also, the failure to record expenses incurred resulted in the overstatement of the Cash-Collecting Officer account and understatement of expenses by P547,700.00. We recommended that Management of DO Abra: require the Accountant to record all collections and deposits in the books of accounts promptly and prepare a Journal Entry Voucher (JEV) to take up the adjusting entry, if necessary; and henceforth, deposit intact to the agencys bank account all collections from training and seminar fees upon collection, disburse funds through check or cash advance, and deposit all excess collections to the National Treasury.

The Cashier explained that training and seminar fees were used because of the persistence of the Supervisor-Coordinators to immediately provide for the food and materials needed during these trainings and seminars, but assured the Audit Team that she will comply with the recommendation. The Accountant of DO Abra also admitted that the non-recording of all collections, deposits and disbursements of the Cashier, particularly during the latter part of the previous year, was due to delayed submission of the RCDs. She, however, assured the immediate adjustment of the account.

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Non cancellation of stale checks 5. Checks issued to private lending and insurance institutions and various teachers totalling P4,005,125.99 by the DepEd NCR and ROs XII and XIII became stale but were neither cancelled nor reported in the List of Unreleased Checks contrary to Section 52 of the MNGAS Volume I. This had also deprived the employees of the benefits thereof. Section 52 of the Manual on the New Government Accounting System (MNGAS), Volume I states the checks may be cancelled when they become stale. The depository bank considers a check stale, if it has been outstanding for over six months from the date of issue or as prescribed. A stale check shall be marked cancelled on its face and reported as follows: Unclaimed stale checks which are still with the cashier shall be cancelled and reported in the List of Unreleased Checks as cancelled.. The List of Unreleased Checks is attached to the Report of Checks Issued (RCI). Audit of the RCIs of the three ROs disclosed checks totaling P4,005,125.99 issued during the year which became stale, as shown below. Region NCR XII XIII Total Amount P1,235,304.53 1,945,836.04 823,985.42 P 4,005,125.99

The reason, among others, for the stale checks is due to the failure of the Private Lending Institutions (PLIs) to pick-up the check representing monthly collections of loan remittance and/or authorized deduction of employees and teachers. Records showed that it took an average of two years for the PLIs to request for replacement of staled checks. Further, the PLIs did not submit written justification/request to replace the staled checks since 2007, hence the accumulation of the amount. In DepEd RO XII, the P1,945,836.04 consisted of 254 staled checks which were issued in CY 2010 and early CY 2011. Said checks were neither cancelled nor included in the List of Unreleased Checks attached to the RCI, contrary to Section 52 of the MNGAS Volume I.

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The Cashier explained that authorized representatives of the PLIs opted not to pick up the checks because the cost of their transportation is higher than the amount of check involved, thus not worth the effort. Management further explained that they cannot just delete these deductions in the payroll because there is a MOA between the DepEd OSEC and the lending institutions on the grant of automatic payroll deduction for loans extended to DepEd teachers/personnel, which provides, among others 2. Roles and Responsibilities of the Lender 2.2 The Lender shall pick-up the monthly collections from DepEd and correspondingly issue Official Receipt thereof. In case of failure to pick up the collection checks within the period of six (6) months, the Lender shall not impose any interest/penalty/surcharges against the DepEd borrowers. 3 Responsibilities of the DepEd 3.3 The DepEd may replace stale remittance checks only once for a particular check on the basis of written justification from the Lender acceptable to DepEd. However, it was noted that the MOA did not provide sanctions to Lender in case they fail to pick-up the monthly collections from DepEd to prevent stale checks. The above deficiency may deprive the employees of the benefits due them and may entail the payment of additional interest for late payments. On the other hand, the stale checks amounting to P823,985.42 of RO XIII, covering 1,006 pieces of checks issued on December 20, 2010, January 10, 2011 and March 7, 2011, covering refunds to teachers of the various DOs of DepEd RO. Of this amount, only P59,384.50 or 6.72% were claimed by the payees while the remaining P823,985.42 or 93.28% was unclaimed and not yet restored to the cash account as of December 31, 2011. We recommended and Management of concerned ROs agreed to: require the Cashier to cancel the staled checks and report the same in the List of Unreleased Checks as cancelled; require the Accountant to prepare the necessary JEV to take up the staled checks in the books of accounts;

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make representation with DepEd OSECCO officials to revisit the provisions of the MOA, specifically items 2 and 3 and possibly include the provision that in case of failure of private insurance institutions to pick up the checks, the insurance coverage and prospective benefits therefrom shall not be adversely affected; inform the teachers concerned of the termination of the loans and insurance deductions until both parties have agreed on a mechanism for the prompt collection of the checks; confirm with SEC if the concerned PLIs are still active. If no longer active or not eager to collect the remittance, study the possibility of refunding the amount to the teachers and employees concerned to settle the accountability and responsibility of DepED to its employees; and in RO XIII, ensure that the list of payees/teachers with unclaimed checks is widely disseminated to all DOs and schools as a means of informing the concerned payees.

Unliquidated Cash Advances (CAs) 6. Cash advances totaling P796,416,808.15 granted to officers and staff remained outstanding for at least 30 days to more than ten years as of December 31, 2011 and additional CAs were granted despite existing unliquidated balances, thus, violating Section 89 of PD 1445, among others. This resulted in the overstatement and understatement of cash advances and affected expenditure accounts, respectively. Section 89 of PD 1445 and Section 4.1.3 of COA Circular Nos. 97-002 dated February 10, 1997, provides among others, that a CA shall be reported on and liquidated as soon as the purpose for which it was given has been served. No additional CA shall be allowed to any official or employee unless the previous CA given to him is first settled or an accounting thereof is made. COA Circular No. 97-002 dated February 10, 1997 provides further:

aa aa

No CA shall be given unless for a legally specific The CA shall be used solely for the specific legal purpose for which it was granted. Under no circumstance, shall it be used for encashment of checks or for liquidation of a previous CA; The Accountant shall obligate all CAs granted. He shall see to it that CAs for a particular year are not used to pay expenses of other years; and

aa

52

aa

CA for official travel shall be liquidated within thirty days after return to the permanent official station as provided for in EO 248 as amended by EO 298 and COA Circular 96-004.

Review of the reports and records of the different offices showed that the following agencies had repeatedly violated the regulations on CAs and previous deficiencies noted had not been rectified that resulted in the accumulation and/or increase of long outstanding accounts in the books, which had amounted to P796,416,808.15 as of December 31, 2011. The breakdown is shown in Table 3. Table 3. - Summary of unliquidated cash advances
Amount of Cash Advance (in million PhP) 30-90 91-365 Over 1 to Total days days 10 years 263.724 115.250 378.973 Nature/ Purpose Salaries & wages, MOOE, and timebound undertaking Special and travel purposes Not Specified

Office RO IX-ROP, DOs Zamboanga City, - del Norte, - Sibugay, - del Sur, & Dipolog City OSEC RO X-ROP, DOs Cag. de Oro, Misamis Occ./ Oriental, Malaybalay, Bukidnon, Gingoog, Iligan, Ozamis, Tangub CAR-DOs Abra, Apayao & Flora NHS, Baguio, Benguet, Ifugao & NHS, Mt. Province & NHS NCR-DOs QC, Pasay, Caloocan, Taguig/ Pateros, Pasig/San Juan, Marikina, Muntinlupa and NHS RO XIII

12.530 No

21.213 Aging

79.354

113.096 79.377

37.960

14.303

52.264

Salaries and wages, MOOE, travel allowances, various trainings & seminars and other programs. Trainings/seminars, travels, internet, payroll fund, SBM, office supplies, other activities/ programs. Salaries & wages, SBM, travel & other time-bound activities Salaries, benefits, travel & training expenses

51.052

6.159

6.349

27.513

40.022

RO V

23.966

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Office RO I- DOs Ilocos Norte, Laoag City, San Carlos City, Pangasinan I BALS Bureau of Elementary Education (BEE) Bureau of Secondary Education (BSE) RO II

Amount of Cash Advance (in million PhP) 30-90 91-365 Over 1 to Total days days 10 years 22.862

Nature/ Purpose Not Specified

4.744 1.745

2.200 0.633

12.936 0.010

19.880 4.308

Training & travel expenses Official travel & time- bound undertakings Official travel & time-bound undertakings Supplies & materials registration fees, gas, cater services, landscaping, athletic equipment, Palarong Pambansa, CAVRAA, travel expenses, etc. Orientation Seminar/Worksho ps Special and travel purposes MOOE allocations Training & travel expenses Not Specified Official travels and time-bound undertakings Not specified Salaries, wages, other benefits and travel expenses

0.810

0.146

2.890

3.846

13.560

SHNC

3.542

OSEC-LCC RO III EDPITAF NEAP RO XII 0.666 0.621

2.400 2.094 1.673 1.287 1.245

RO IV A RO VI

0.044

0.110

0.238

0.392 75.677

Total

796.417

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The reasons, among others, for the recurring problem are the following: AOs were granted multiple cash advances or allowed additional advances even if previous ones were not yet settled; Employees were allowed to retire or resign without first settling their accountabilities; Processing and recording of liquidation documents in the books was delayed; Liquidation, refund, and adjustments were either not or erroneously recorded; Liquidation was not matched properly to the specific cash advance; Subsidiary ledgers (SLs) were not accurately and completely maintained; Monitoring and enforcement of submission of reports not strictly observed; Misposting of liquidation and improper use of accounts, which eventually resulted to negative balances of accounts; Officials and employees opted to avail of the cash advances for fear that the allocated amount will be reverted to the National Treasury; thus, they could no longer make use of the amount; and, Officers lacked the technical knowledge on the time table to liquidate the cash advance.

The timely submission of liquidation reports is necessary so that expenses can be recognized during the year these were incurred in accordance with the accounting principle of proper matching of cost against revenue. Likewise, the receivable or asset account can be correspondingly adjusted. We recommended and Management agreed to ensure the following: comply strictly with the pertinent provisions of Section 89 of PD 1445 and COA Circular No. 97-002, specifically on the grant of additional cash advances unless the previous cash advance has been liquidated. Impose appropriate sanctions necessary under the circumstances; demand immediate liquidation or settlement of the unliquidated cash advances from those AOs who have retired or transferred, otherwise, hold liable the signatories who granted clearance to those concerned; and strengthen the internal control and monitoring procedures on the grant and liquidation of cash advances.

Excessive cash advances 7. In OSEC, excessive cash advances for special purposes were granted resulting in refunds totaling P11,652,451.73 or 14 % of total cash advances of
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P80,665,930.60, thereby, losing the opportunity to finance other activities and exposing the funds to possible loss or personal use.

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Section 5.7 of COA Circular No. 97-002 states that when a cash advance is no longer needed or has not been used for a period of two months, it must be returned to or refunded immediately to the collecting officer. During the year, refunds of cash advances for trainings, seminars, and other related activities amounted to P11,652,451.73. Refunds ranged from 1 to 100 % of the cash advances, with a minimum of P4,000.00 to P900,000.00 per individual cash advance. Five cash advances totalling P555,490.00 were fully refunded while P8,497,343.54 were refunds of P50,000.00 or more per cash advance, and P128,605.41 were less than P50,000.00 but at least 50 percent of the cash advance. It can be construed that the project implementers did not properly plan the activities. The unused cash advances were not immediately refunded and have remained in the hands of the disbursing officers for a period of 8 days to more than 4 years from the time the cash advances were granted, as shown below, thus exposing the funds to possible misuse or personal use. No. of days in the hands of AO 30 days or Less 31 - 180 days 181 to 364 Days 1 year or more but less than 5 years Total P Unused/Excess CA P 1,518,987.79 6,615,796.58 2,153,345.15 1,364,322.21 11,652,451.73

We recommended that Management ensure the following: comply strictly with the provisions of COA Circular No. 97-002 on the refund of unused CAs; henceforth, demand immediate refund and/or return of unused balances from the AOs concerned; and Direct the project implementers to observe prudence in planning a project or activity, taking into consideration the proper budgeting, timing and previous data, among others, to minimize grant of excess CAs.

The Chief Accountant explained that they had been implementing certain measures in the pre-audit of budget estimates of every activity to minimize the excess cash advance.

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Reporting Difference 8. Reporting differences/disparities totalling P667,297,522.64 were noted between the GL and SL balances of the Due from NGAs account, as well as erroneous accounting entries, which resulted in the net overstatement of P2,280,170.60. EO No. 40, s. 2007 provides that common-use supplies, materials and equipment shall be procured from DBM-Procurement Service. The Due from NGAs account includes unliquidated fund transfers to the Department of Public Works and Highways (DPWH) and the Department of National Defense (DND) for the implementation of the School Building Program; and the amount transferred to the DBM-Procurement Services for the purchase of common-use supplies, office equipment, IT equipment and software, etc. Section 12 of the MNGAS, Vol. II states that the Subsidiary Ledger (SL) is a book of final entry containing the details or breakdown of the balance of the controlling account appearing in the General Ledger (GL). Postings to the SL generally come from the source documents. The totals of the SL balances shall be reconciled with their respective control account regularly or at the end of each month. Schedules shall be prepared periodically to support the corresponding controlling GL accounts. Verification disclosed that the SL of the Due from NGAs account amounting to P2,735,537,429.63 did not tally with the GL balance of P2,068,239,906.99, or a difference of P667,297,522.64 as shown on the next table. This could be attributed to the failure to update and reconcile regularly the SL with its corresponding control account. Implementing Agency DBM Procurement Service Department of Public Works and Highways DepEd Autonomous Region in Muslim Mindanao Department of National Defense TOTAL SL Balance P2,465,339,204.50 195,547,795.06 58,340,600.16 16,309,829.91 P2,735,537,429.63

An overstatement of P4,028,476.00 was also noted due to double recording of the amount on advances paid to the DBM-PS. Per JEV No. 2011-018322 dated 1/31/11. The transaction was first recorded in the January LDDAP under JEV No. 2011-03-2562 dated January 31, 2011 and another entry was made upon payment of check to the DBM-PS under JEV no 2011-03-2562 dated March 03, 2011.
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In addition, there was an understatement of P1,748,305.40 due to erroneous recording of liquidation reports from ARMM on the basis of the contract amount per report and not the actual payments made, thus understating and overstating the Due from NGAs and Prior Years Adjustment accounts. The liquidations pertain to the CAs granted/fund transfers for the implementation of the School Building Program and the School Furniture Program (SFP). In view of the foregoing deficiencies, the Due from NGAs account has a net overstatement of P2,280,170.60, and the existence and validity of the account cannot be established due to the unreconciled SL and GL balances. We recommended that Management require the Accountant/Bookkeeper to investigate the differences and prepare the necessary entries to reflect the correct balances of the accounts. Moreover, maintain properly the SL for the account to facilitate reconciliation and verification. The Chief Accountant commented that efforts have been exerted to reconcile/fully account for the funds transferred to the DBM PS. Funds transferred to other NGAs, such as the DND and DPWH, are being closely monitored through the regular issuance of demand letters. Liquidation reports being submitted from time to time are reviewed and immediately recorded once evaluated to be in order. Long Outstanding Accounts 9. Due from ROs and OUs of P29,126,210.00 and uncollected/unremitted income due the NETRC totalling P3,812,643.24 have long been outstanding in the books of accounts of the Center since 1980/1983. As a result, the validity and accuracy of the accounts were doubtful. As prescribed under the MNGAS, the Due from ROs/Staff Bureaus (Account 136) and Due from OUs (Account137) shall be used to record interoffice transactions in the books of CO/OUs or that of CO/RO. As of year-end, the ledger balances of the Due from ROs and OUs amounted to P1,051,341.65 and P28,074,868.35, respectively, or a total of P29,126,210.00. These represent the unsettled accountability/liability of ROs and ORs for the cost of Philippine Examination Placement Test (PEPT) application forms as of December 31, 2012 entrusted to the different ROs, and the unliquidated financial subsidy in the administration of different examinations covering the period CY1980-2011.

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The previous practice was to debit the Due from OUs account for the total cost of application forms given to the different DOs for PEPT examination and to credit the corresponding income account. Upon remittance of collections to the NETRC, the account of ROs and DOs are credited. Hence, the receivable account was established based on the actual cost of registration forms received and not on the actual number of forms utilized. This system appears to be in consistent with the accounting principle of recognizing income, where the long outstanding accounts can be attributed. The data provided by the Accounting Unit showed unremitted PEPT registration fees, totalling P3,812,643.24. However, this amount was based on the actual cost of registration forms entrusted to the different ROs, and not the actual number of issued/utilized forms. The balance of the accounts also include the amount of unsettled accounts representing financial subsidy granted to the different DOs for the administration of the different examinations conducted by the Center. As of December 31, 2011, the established balance of unsettled accounts for financial subsidy amounted to P24,480,385.17, which were sourced from the report of the Accounting Unit. This is a reiteration of the previous years audit recommendation to conduct verification and reconciliation of records and demand settlement of accounts from the concerned official which management failed to implement. We recommended that Management: send demand letters to concerned officials for the immediate settlement of outstanding accounts and request the assistance of the concerned regional directors, when necessary, for the settlement of these accounts; impose appropriate sanctions to compel immediate compliance and to deter the practice; and request for the writing-off of accounts after exhausting all the possible remedies available in accordance with the conditions set forth in the guidelines for write-off. Management, in their reply dated May 23, 2012, disclosed that several measures are now being undertaken to address the issues, such as regular sending of demand letters to concerned officials of DO/OUs and institutionalization of the recent policy of Schools Superindent obtaining clearance at the CO upon retirement as an effective tool for the DO/OUs to settle their unliquidated balances.

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Unreconciled balances of reciprocal accounts 10. The Due from/to accounts in both the CO and RO Books showed unreconciled balances totalling P2,272,592,688.74 while the Due from/to accounts in both the RO and OU Books have unreconciled balances totalling P678,763,024.76, casting doubts on the reliability of the account balances as presented in the FSs. Section 3.2 (a and b) of GAFMIS Circular Letter No. 2003-007 provides that in the process of consolidation, the Regional Accountants shall eliminate the reciprocal accounts between the RO and the OUs while the CO Chief Accountant shall eliminate the reciprocal accounts between the CO and the ROs, and between the CO and the Provincial Offices/OUs, if any. The reciprocal accounts to be eliminated in the consolidation of the financial statements (FS) at year-end are, as follows: a) Central Office
Particulars Transfer of funds to RO for centrallymanaged projects Transfer of funds to OU for centrallymanaged projects Transfer of funds from OU to CO pertaining to salary deductions CO Due from RO Due from OU RO Due to CO OUs

1 . 2 . 3 .

Due to CO

b) Regional Office
Particulars 1. Issuance of Summary of Cash Disbursements Report (SCDR) 2. Transfer of funds from RO to OU for RO managed projects 3. Transfer of other funds from OU to RO of payroll funds Due to OU Due from RO RO Due from OU OUs Due to RO

The reporting differences resulting from elimination of the reciprocal accounts between the CO and RO books of accounts and between the RO and OUs books of accounts are shown on the next page.

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CO Books Due from RO/OU Due to RO P2,505,172,640 Due to CO 624,000

RO Books P390,676,222 158,720,270

Difference P2,114,496,419 158,096,270 P2,272,592,689

Due from CO

RO Books Due from OUs Due to OU P 685,776,548 180,123,432

OUs Books Due to RO Due from RO P 26,789,152 160,347,804 P 658,987,396 19,775,629 P 678,763,025

*rounded off to the nearest peso.

The reasons, among others, for the unreconciled balances are as follows: non-recording/non-reconciliation of the billed net pay, salary deductions and cancelled payroll checks by the CO, RO and OUs prior to the decentralization of the processing of payrolls; and by the RO and OUs after its decentralization; non-recording of receipt/liquidation of funds transferred by the CO/RO, Staff Bureaus to RO, Staff Bureaus/OUs; and, recording under the Due from OUs account, the downloading of MOOE funds by the DOs to elementary schools without complete set of books of accounts.

We recommended that concerned DepEd Accountants: conduct a regular periodic/quarterly reconciliation of reciprocal accounts to immediately correct any discrepancies noted; and, draw a Journal Entry Voucher to take up the reconciling items noted to correct the balances of the accounts affected after reconciliation.

Uncollected Accounts Receivable 11. Receivable Accounts totalling P13,134,988.00 from the business operations of the BTC, NEAP and Region II remained uncollected for one year to over 30 years, due to the failure of management to monitor long outstanding receivables and leniency to oblige debtors and concerned employees to settle their obligations. Sound accounting principles emphasize the basic requirements that accounts and reports of an agency reflect its actual financial condition and operation. As much as the FSs are useful tools of management for planning and budgeting, these reports need to provide complete and accurate information regarding the affairs of the agency.
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Section 64 of the GAAM, Volume I, provides, among others, that, Quarterly, each agency accounting unit shall prepare a statement scheduling overdue accounts receivables. The agency head, or his authorized representative, shall review and sign this statement as an indication that he has examined the list of overdue accounts and has instituted, or will institute, action for their collection. Item III. 8.10 of COA Circular No. 97-001 dated February 05, 1997 provides that if the analysis/review of the accounts is not possible due to absence of records, the agency head concerned should request for write-off and/or adjustment of account balances from the COA, supported by the following documents: List of available records and extent of validation made on the accounts; and Certification and reasons why the books of accounts/records, financial statements/schedules and supporting vouchers/documents cannot be located.

Further, COA Circular No. 93-404 dated October 18, 1993 provides the reporting requirements in case of losses of documents evidencing financial transactions and/or records of accountabilities. The Circular states that no request for the write-off of accountabilities shall be reviewed/evaluated by the Commission unless accompanied by the following documents: Copy of the report and/or notice of loss to the COA Auditor; and Copy of the investigation report narrating the cause(s) of loss of the documents or records, and pinpointing the official/s and employee/s liable therefor.

The receivable accounts of Region II, Baguio Teachers Camp (BTC) and National Educators Academy of the Philippines (NEAP) operations showed long outstanding receivables or uncollected income accounts of P13,134,987.74 as of December 31, 2011. Aging of the accounts are as follows:
Amount by Age (in PhP) Over 1 Over 2 to3 year Years 118,850 266,328 4,405,050 4,523,900 266,328

Agency Region II NEAP BTC Total

Less than 1 year 96,316 96,316

Over 5 Years 8,248,444 8,248,444

Total 118,850 266,328 12,749,810 13,134,988

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The reasons for the past due accounts are as follows: The lodgers failed to settle their accounts regularly (Region II); No monitoring of the receivables or follow-up on their collection from the concerned debtors/persons liable was done; hence, the receivables remained uncollected ( NEAP); The Philippine Sports Commission (PSC) continues to use the BTC facilities from October 2007 up to the present without renewed contract and without paying any rental fee, including its arrears; and, The PSC did not honor the Lessor-Lessee Agreement entered into between the PSC and the then Department of Education, Culture and Sports (DECS) on August 31, 1998 in the amount of P7.032M.

It is worth mentioning that the CY 2010 audit report disclosed that the details and validity of said accounts could not be fully ascertained due to lack or unavailability of supporting documents. Despite the materiality of the findings, management did not take any appropriate action on the audit recommendations. Managements inaction had resulted in the accumulation of receivables with missing or incomplete documentation, which rendered the validity and collectibility of the receivables totaling P8,248,443.75, aging 13 to over 30 years, doubtful. Management informed that a letter regarding the PSC receivables was sent thru fax to the Office of the Undersecretary for Finance and Administration last September 06, 2011; however, no information or feedback was received yet by management to date. We recommended and concerned Management officials agreed to ensure the following: instruct the dorm manager to intensify collection of fees from lodgers so that the amount can be used to improve the facilities of the dormitory (RO II); exert all efforts to collect past due accounts from concerned debtors/ persons liable by sending demand/follow-up letters. Advise the Accountant to prepare a quarterly report/Statement of Overdue Receivables and submit the same to the agency head or his authorized representative so that appropriate action for the collection of said receivables could be instituted as required under Section 64 of the GAAM, Volume I (NEAP); and
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adopt the following corrective measures (BTC): o intensify collection efforts and institute legal remedies, if warranted. Seek the assistance of the DepEd CO in the collection of long outstanding receivables, especially from the NGAs, namely, the NEAP, NFE-CAR, DAR-CAR, DepEd and from the concerned LGUs; o exert all efforts to locate the records of receivables which remained uncollected so that appropriate action could be undertaken. Determine the persons responsible for the loss of documents evidencing financial transactions and records of accountabilities; o see to it that accounts on credit are properly documented and supported with billing statements/contracts, and that these bills/ contracts contain all the necessary information, such as the contact person and complete addresses, to facilitate monitoring and enforcement of collection of receivables; o consider renegotiating the terms of the expired Memorandum of Understanding (MOU) between the PSC and BTC for the staggered or full settlement of the account prior to continued use of the BTC premises and cottages thereof; and, o issue periodic statements of accounts/billing statements on the outstanding current receivables to serve as a reminder and to prevent the accounts from becoming past due.

Dormant Receivable Accounts 12. Dormant or non-moving receivable account balances of ROs I and III and SHNC totaling P15,887,720.67 remained in the books for more than five years resulting from program/projects which had long been finished/terminated. Collectivity or settlement of these accounts is no longer feasible due to lapse of time or absence of record as provided under COA Circular No. 97-001 dated February 25, 1997. COA Circular No. 97-001 dated February 6, 1997 provides guidelines on the Agencys proper disposition/closure of dormant funds and/or accounts of NGAs/projects. Dormant accounts refer to individual or group of accounts with balances which remained non-moving for more than five (5) years. Audit of accounts showed the following funds/accounts had been nonmoving for more than five years since their settlement are no longer achievable due to absence of records and lapse of time:

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Office Region I Due from BTr Due from NGA Region III Due from LGU SHNC Due from BTr Total

Amount

Remarks

10,038,666.3 Dormant since CY 5 2006 111,584.30 Dormant since CY 2004 605,259.05 Dormant since CY 1998 5,132,210.97 Dormant since CY 2007 15,887,720.6 7

We recommended and Management agreed to direct the concerned Accountant/s to strictly comply with the provision of COA Circular No. 97001 dated February 6, 1997; make necessary evaluation of dormant accounts to establish the validity of claims; and enforce the collection and effect the final adjustments in the books of accounts, when appropriate. Deficiencies affecting the accuracy and existence of inventory accounts 13. The non conduct of physical inventory, absence of RPCI and non maintenance of records of inventory account totaling P711,392,519.09, unrecorded issuances of inventory amounting to P18,578,239.74, direct charges to expense of purchases totaling P12,602,990.84, and unreconciled difference of P15,606,611.60 between the physical count as against the inventory records had affected the accuracy and existence of the Inventory Accounts balances. Under the MNGAS, purchases and issuances of supplies and materials are accounted for in the books of accounts as follows: Section 43, Vol. 1 provides that upon purchase, it shall be recorded as Inventory account and recognized as expense upon issuance of Report of Supplies and Materials Issued (RSMI). Section 4 provides that liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received. Section 46 provides that the Supply Officer shall be the one to prepare the RSMI and submitted to the accounting every end of the month as the basis of the bookkeeper in preparing the JEV to record the issuances of supplies and materials. The RSMI shall be prepared daily and in two copies, one for accounting unit and the other copy as Supply Officers file.
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Section 65, Volume II requires the preparation and submission of the RPCI every six (6) months, certified by the Inventory Committee and approved by the Head of Agency.

Also under COA Circular No. 2005-002 dated April 14, 2005, small tangible items or Property, Plant and Equipment (PPE) of small value with estimated life of more than one year shall also be recorded as Inventories upon acquisition and as expense upon issuance. The Inventory Custodian Slip (ICS) is prescribed to be used upon issuance of these items. Textbooks and instructional materials are among the items considered as small tangible items with estimated life of more than one year. These items should be recorded as inventories upon acquisition. The accuracy of the inventory accounts balances was affected by several deficiencies as summarized in Table 4. Table 4. - Summary of deficiencies in accounting for inventories
Unsubmitted RPCI / No inventory records 23,956,294* Deficiencies Direct Unrecorde charges to d issuances expense accounts Reporting differences between GL and RPCI 6,294,156 2,777,808 1,931,348 1,611,094 5,435,591 5,291,800 2,832,232 4,912,822 174,825,132 3,542,961 4,218,833 2,504,028 14,094,425 782,740 5,964,029 62,212,373 203,655,205 30,472,236 9,057,251 9,077,141 105,794 2,750,478

Office/DOs

OSEC BSE BEE NEAP EDPITAF SHNC CAR-DO Abra, Baguio NHS Baguio Teachers Camp NCR DO Quezon City DO Caloocan City DO Muntinlupa City DO Marikina City DO Navotas-Kaunlaran HS I-ROP, DOs San Carlos, La Union ROP, DOs Dagupan City, Pangasinan I II-ROP III-DO Zambales V-DO Camarines Sur DO-Iriga City DO-Catanduanes DO-Sorsogon Province DO-Legaspi City

16,768,688 3,377,141

148,957

8,096,149

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Office/DOs DO Sorsogon Province Bagamanoc Rural Devt. HS, Viga Rural Devt. HS VI-ROP IX-ROP, DOs Dapitan, Zamboanga del Sur/del Norte and Basilan NHS XIII-SDOs Agusan/Surigao del Sur and Sibagat NHS Total

Unsubmitted RPCI / No inventory records

Deficiencies Direct Unrecorde charges to d issuances expense accounts

Reporting differences between GL and RPCI 2,209,464

1,607,407 125,997,237

21,669,546 711,392,519 18,578,240 12,602,991 15,606,612

*Textbooks and Instructional Materials We recommended that Management : create an Inventory Committee to conduct physical inventory and prepare the Report of Physical Count of Inventory (RPCI) pursuant to Section 65 of the MNGAS Vol. I and coordinate with the Accounting Section for the reconciliation of the said account and submit the same to the Audit Team within the prescribed period; require the Supply Officers concerned to submit regularly the RSMI which is the basis of the Accounting Unit in recording the supplies expenses for the period as required in Section 46 of the MNGAS Vol. I. Maintain stock cards and reconcile them periodically with the supplies ledger cards and other records of the Accounting Unit; require the Accountant/Bookkeeper to record the purchase of supplies and materials as inventories upon acquisition and record the related expense accounts upon issuance thereof based on the RSMI in accordance with Section 43 of the NGAS Manual and COA Circular No. 2005-002; and direct the Accountant and the Supply Officer to monitor and reconcile their records and make the necessary adjustments on the discrepancies noted to reflect the correct and actual balances of the Inventory accounts in the FSs.

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Management comments/action taken are as follows: a. The management of OSEC and BSE will like to request approval from COA to write-off the unaccounted prior years balances of dormant accounts. b. RO II, Baguio Teachers Camp, DOs Caloocan, Muntinlupa, Surigao del Norte will comply with the audit recommendations. Deficiencies affecting the accuracy and existence of PPE accountsPPE accounts 14. The absence of RPCPPE, property cards and property ledger cards of recorded PPEs with balances of P14,040,803,535.29; unreconciled difference of P44,771,439.86 between RPCPPE and books of accounts; unrecorded PPEs of P1,230,465,191.92; misclassification of accounts totaling P2,218,334,194.32 and error in recording resulting in a net understatement of P2,057,379.00; and lack of documentation to establish ownership of the Land and Other PPE accounts totaling P7,043,543,612.24, had affected the accuracy and existence of the PPE accounts recorded in the books of OSEC, Bureaus, ROs, DOs and Schools as well as the reliability of the balances presented in the FSs. The following rules and regulations, as prescribed under the MNGAS, Volume II, govern the proper accounting for and safeguarding of PPEs: Section 66 The Report on the Physical Count of Property, Plant and Equipment (RPCPPE) shall be used to report the physical count of PPE by type as of a given date. It shows the balance of property and equipment per cards and per count and shortage/overage, if any. Section 41 PPEs acquired through purchase/donation are recorded in the books of accounts as assets. Section 43 - The Accounting Unit shall maintain perpetual inventory records, such as xxx the PPE Ledger Cards (PPELC) for each category of PPE including work and other animals, livestock, etc. The SL cards shall contain the details of GL accounts.

For check and balance, the Property and Supply Officer/Unit shall maintain Property Cards (PC) for PPE xxx. The balance in quantity per PC and SC should always reconcile with the ledger cards of the Accounting Unit Section 12 - The PPELC shall be kept by the Accounting Unit for each specific item to record promptly the acquisition, description, estimated life, depreciation, disposal; accumulated maintenance expenses incurred other information about the asset.
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The following deficiencies were noted in the audit of the PPE accounts of the DepEd: a. Absence of RPCPPE/PCs/PPELCs The PPE accounts totalling P14,040,803,535 of the OSEC and various DepEd ROs and DOs have no RPCPPE and PCs, rendering difficulty in the reliance on accuracy and existence of the balances of the PPE accounts. Details are Table 5. Table 5. Breakdown of PPE account balances with deficiencies
Office OSEC NETRC NEAP EDPITAF NCRDO Pasay DO Las Pinas DO Caloocan DO Muntinlupa DO Malabon BEE BSE RO I RO II-ROP, DO Tuguegarao CAR RO III RO V- DO Camarines Sur DO Catanduanes RO IX RO X- DO Cagayan de Oro, Bukidnon, Iligan City, Ozamis City, Camiguin RO XIII-ROP, Dos Agusan del Sur, Dinagat Islands, Siargao and Surigao del Sur Total Balance Per Books P 2,164,512,128.16 8,832,527.74 16,768,687.70 110,384,323.00 99,046,570.38 153,039,320.14 1,078,805,180.84 188,608,993.40 408,740,905.07 5,608,713.03 8,085,808.10 1,729,201,466.76 74,214,879.22 19,452,607.84 2,842,191,697.56 599,975,830.75 136,020,776.55 670,521,022.31 2,017,126,962.85 1,709,665,133.89

P14,040,803,535.29

b. Unreconciled balances between property and accounting records Comparative analysis of the GL balances of the PPE accounts and the RPCPPE of the BEE, Ros I and II and CAR revealed a difference of P44,771,440. The reasons, among others, for the difference are: (a) nonrecording of properties in the books including donated equipment, (b) nonrecording of purchases and transfer of properties to other OUs, (c) no
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inventory reports prepared, and (d) non-reconciliation of the property and accounting records. c. Unrecorded Land and other PPE Accounts Verification of the PPE accounts of the following Dos and National High Schools in four Ros of DepEd and NETRC showed that Land and Other PPE accounts with total cost of P1,230,465,191.92 were not yet recorded in the books. Details are as follows: Table 6. - Summary of unrecorded PPEs
Office NCRDO Malabon DO Quezon City Account Land Amount (in PhP) Not specified Remarks Ownership yet to be established

Land

2,826,460 Cost of property not included nor dropped from the books of the School for Crippled Children upon transfer to Sta. Lucia ES 182,863,122 School Building transferred by the DO to different NHS 887,968,805 Not included in the list of properties 120,000 Donated by PTA in CY 2003 152,299 Procured out of cash advances for training, seminars or workshops 13,650,210 A total of 33 lots being used as school sites acquired by the different DOs thru purchase and donations were not recorded in the books due to failure of e management to pursue titling 36,550,061 School buildings constructed by DPWH-Engineering District of Bataan from 2000 up to 2008 not yet booked up due to absence of coordination between the DPWH-ED and the Division 1,877,041 Donation from the IWILL Project and other donors

School Building DO Caloocan DO TAPAT NETRC RO III School Building Motor Vehicle IT/Office Equipment Land

School Buildings

CAR- NHSs: Equipment Conner Central, Namilinga, and Hingyon RO IDO Dagupan School Buildings

70,660,754 Major repairs of schools which was not recorded as addition to the costP8,887,629.48; Other Structures in ESs not taken up in the booksP61,773,124.17

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Office

Account

Amount (in PhP)

Remarks

DO Pangasinan I School Buildings CAR- Hingyon NHS School Buildings

29,938,009 Donated properties 3,858,432 Unrecorded donations 1,230,465,192

Total

d. Misclassification of or Error in recording and non recording of accounts Misclassifications of PPE accounts amounting to P2,218,334,194.32 and errors in recording and/or non-recording of transactions were noted resulting in net understatement of P2,057,379.00: Table 7. - Summary of deficiencies in recording of PPEs
Office NEAP CAR RO XIII NCRDO Quezon City CAR-ROP, Tublay NHS Total Erroneous recording of the cost of the transferred school buildings Completed buildings not yet reclassified from Construction in Progress Misclassification Non-reclassification of unserviceable equipment Amount (in PhP) 183,856.39 469,271.75 2,892,689.70 2,193,626,454.72 21,161,921.76 2,218,334,194.32

Office RO IDO Dagupan CARDO Apayao Eastern Bontoc NAVHS

Errors Demolished building not dropped from the books

(Overstatement)/ Understatement (600,000.00)

Internet facilities recorded as internet expenses Major repair of school building recorded as repair and maintenance School building which needs repair but still being used, erroneously dropped from the books

662,700.00 724,679.00 1,270,000.00

Total Understatement

2,057,379.00

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e. Ownership over recorded Land and Other PPE accounts not established A general accounting principle stipulates that one of the conditions for an asset to be recognized is when the entity has control over the same. To establish ownership, it is necessary that these are covered by authentic Transfer Certificates of Title (TCT) issued by the Land Registration Authority (LRA) and registered with the Registry of Deeds in the province/city where the property is situated. Verification of the Land and Building accounts in the books of the OSEC, BEE and NCR disclosed a total of P7,043,543,612.24 without valid documentation to establish ownership, breakdown as shown below. Office OSEC BEE NCR Total Land 6,941,417,000.00 7,287,973.24 94,800,000.00 7,043,504,973.24 38,639.00 Building/Land Improvement Total 6,941,417,000.00 7,326,612.24 94,800,000.00 38,639.00 7,043,543,612.24

There were no TCTs and other documents conveying ownership of the properties and not even in the name of the agency, thus absolute ownership over the properties cannot be rightfully claimed by the DepEd. Also, there is no basis for recording the land in the books of accounts. We recommended that concerned Management officials ensure the following: direct their Accountants to maintain and update PPELCs and property cards; require their Accountants to prepare a JEV to reclassify and adjust the misclassified accounts to the appropriate account/s; conduct regular physical count of PPEs, prepare and submit the RPCPPE, and reconcile with the accounting records to ensure completeness and accuracy of the recorded PPE accounts; and exert efforts for the titling of the acquired land thru purchase and donation to establish absolute ownership over these properties.

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In partial compliance with above recommendations JEV No. OSEC 201205-233 dated May 21, 2012 was drawn by the OSEC to effect the necessary adjustment of the Land account based on the assessed value indicated in the Declaration of Real Property. Management also informed that the value of the property in Fort Bonifacio, Makati, C5 was not yet adjusted awaiting submission by the Property Division of the TCT in the name of the DepEd. Uninsured Properties 15. Properties totalling P251,507,980.15 were not insured with the General Insurance Fund, which resulted to inadequate protection coverage in case of loss or damage. RA No. 656 (Property Insurance Law) provides, among others, under Section 11, that each government shall include in its annual appropriation the amount necessary to cover the premiums for the insurance of its properties during each fiscal period and remit immediately to the System (GSIS). Properties in four Regions with a total book value of P251,507,980.15 were not insured with the General Insurance Fund of the GSIS contrary to the provisions of RA No. 656; thus, insurable interest of the government is not amply protected in case of loss or damage. Region II V IX XIII Total P P Amount 97,904,904.61 102,430,245.12 20,621,620.80 30,551,209.62 251,507,980.15

We recommended and management agreed to insure all government properties with the General Insurance Fund of the GSIS. Unreliable balances of liability accounts 16. The validity and reliability of the liability account balances cannot be ascertained due to: (a) non-reversion of long outstanding payable accounts without valid claims in three Regions totalling P12,722,969.99; (b) unreconciled difference ; amounting to P5,331,058.37 between the SL and GL due to unsupported claims in OSEC; and, (c) overstatement amounting P1,214,542.26 due to accounting error in one Region.
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Section 98 of PD No 1445 provides,The Commission upon notice to the head of agency concerned may revert to the unappropriated surplus of the general fund of the national government, any unliquidated balance of accounts payable in the books of the national government, which has been outstanding for two years or more and against which no actual claim, administrative or judicial, has been filed or which is not covered by perfected contracts on record xxx. Under DBM. Circular Letter No. 2005-02 dated January 28, 2005, accounts payable refers to valid and legal obligations/commitments of NGAs, for which goods/services/projects have been delivered/rendered/completed and accepted. In our verification of the liability accounts, several deficiencies were noted which affected the accuracy and reliability of balances presented in the FS. a. Non-reversion of payable accounts without valid claims - P12,722,970 Payables totalling P12,722,969.99 have been outstanding in the books of accounts for more than two years and validity of the claims could not be established due to absence of supporting documents, as summarized below. Region/DO CAR-DO Abra RO I-ROP, DO Urdaneta RO IV-A RO IX-DO Zamboanga del Sur Total Accounts Payable 29,439.92 6,492,271.34 2,340,691.5 7 88,472.1 5 8,950,874.98 Due to Officers and Employees 1,661,396.73 2,014,515.71 94,450.00 Due to National Treasury 1,732.57

3,770,362.44

1,732.57

b. Unreconciled difference between SL and GL- P5,331,058.37 Section 12 of the MNGAS, Vol. II states, among others, that the SL balances shall be reconciled with their respective control account regularly or at the end of each month. Schedules shall be prepared periodically to support the corresponding controlling GL accounts. In OSEC, the Schedule and Aging of Accounts Payable for various contractors showed a total of P98,051,852.77 while the GL showed a
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balance of P92,720,794.40 or a difference of P5,331,058.37, which can be attributed to the lack of supporting records on retention fees payable.

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The Chief Accountant stressed that they have exercised due diligence in the review of accounts and that these were duly supported with documentary requirements to establish existence. In reply, the Audit Team recognized that due diligence may have been exercised, but emphasized that the audit was based on the records and reports prepared and submitted by the Accounting Division. The Audit Team acknowledged managements compliance with some of their audit recommendations. c. Overstatement due to accounting error - P1,214,542.26 In CAR, paid payrolls for employees benefits and allowances were still recorded as payable and refunded bidders bond was not adjusted at year-end, resulting in overstatement of P995,913.99 and P218,628.27, respectively, in the Due Officers and Employees and Bidders Bond payable accounts. We recommended that concerned Management direct their Accountants to:: review the legality and validity of obligations to warrant payment and effect reversion for those long outstanding accounts if without existing valid claims; reconcile the deficiencies and make necessary adjustments to reflect the correct balance of Accounts Payable (OSEC); and prepare the necessary adjusting entry to correct the accounting errors affecting the Due to Officers and Employees and Bidders Bonds Payable accounts (DO Abra and EBNAVS).

Non Remittance of GSIS Deductions and Government Share 17. DO Dipolog City failed to remit to the GSIS within the prescribed period, contributions deducted from the salaries of some employees and the government share amounting to P2,151,495.73. Likewise, the personal share for compulsory contributions on Life and Retirement Gratuity of Malangas NHS employees in the amount of P200,971.36 were not deducted from their regular salaries and salary differentials contrary to the provisions of RA 8291. Section 5 (c) of RA 8291 states, It shall be mandatory and compulsory for all employers to include the payment of contributions in their annual appropriations. Penal sanctions shall be imposed upon employers who fail to include the
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payment of contributions in their annual appropriations or otherwise fail to remit the accurate/exact amount of contributions on time, or delay the remittance of premium contributions to the GSIS. The heads of offices and agencies shall be administratively liable for non-remittance or delayed remittance of premium contributions to the GSIS. Section 6 (b) likewise states, Each employer shall remit directly to the GSIS the employees and employers contributions within the first ten (10) days of the calendar month following the month to which contributions apply. The remittance by the employer of the contribution to the GSIS shall take priority over and above the payment of any and all obligations, except salaries and wages of its employees. Section 7 further provides, Agencies which delay the remittance of any and all monies due to the GSIS shall be charged interests as may be prescribed by the Board but not less than two percent simple interest per month. Such interest shall be paid by the employers concerned. It was noted that the outstanding balance of the account Due to GSIS as of December 31, 2010 was P2,151,495.73. There were no remittances or adjustments made until August, 2011 although there were GSIS deductions made from salaries every month. Failure to remit the contributions within the prescribed period is detrimental to the welfare of the employees concerned since they may not be able to fully avail of the benefits offered by the GSIS due to defaulting payments through no fault of their own. Relative to Malangas NHS, post-audit disclosed payments of salary differentials and 1st salary and regular salaries of its officials and employees did not consider the mandatory deductions for life and retirement pursuant to RA 8291. Payments were made at a gross amounts without deductions which may adversely affect the retirement gratuity of the officials and employees concerned. Computation showed that the undeducted personal share amounted to P200,971.36. We recommended that Management officials concerned require their accountants to: remit to the GSIS the employees contributions and the corresponding government share pursuant to RA 8291 is requested (DO Dipolog City); and

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collect GSIS contributions from the concerned employees and remit the same to the GSIS (Malangas NHS).

Management committed to give preferential attention to address this observation. Payment of Professional Fees Not Proper 18. Professional fees totalling P7,907,634.41 paid to consultants, officers and staff by OSEC, NETRC and SHNC for services rendered and activities during orientation/training, seminar-workshop, and other similar activities conducted within their mandated functions is contrary to Section 7 of EO No. 366 dated October 4, 2004 and Budget Circulars No. 2007-1 and 2007-2. Section 7 of EO No. 366 Prohibition on Hiring/Rehiring of Personnel During Plan Preparation, states, Except for newly created agencies, the hiring of additional personnel (permanent, temporary, contractual or casual), and the renewal of contracts/appointments of all employees hired on contractual, casual or temporary basis is hereby prohibited during the preparation of Rationalization Plan. Paragraph 4.5 of Budget Circular No. 2007-1 dated April 23, 2007 also states, Honoraria shall not be granted to the designated lecturers, resource persons and facilitators within their respective sponsoring agencies as such services are deemed part of the duties and responsibilities of their appointive positions to disseminate information, to clarify issues and concerns and to interact with clients and/or implementers of agency mandates. Moreover, Budget Circular No. 2007-2 dated October 1, 2007 provides the following guidelines on the entitlement of honorarium: Government personnel who are on part-time assignment to a special project which entails rendition of work in addition to or over and above their regular workload may be entitled to honoraria. The amount of honoraria shall be based on the nature of their work assignments in a special project, the level of difficulty of the duties and responsibilities thereat, the extent of their productivity and quality of performance measured in terms of completed and accepted deliverables in accordance with the timeframes set per project component of a special project plan approved. Payment of honorarium to be made only upon completion of the project and acceptance by the agency head of the deliverable per project component.

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No overtime pay or other allowances shall be paid nor any Compensatory Time-off be granted to the same personnel for the period that honoraria are granted.

Review of the liquidation reports submitted by the OSEC, NETRC and SHNC for CY 2011 showed a total of P7,907,634.41 were disbursed for the honoraria of officers and staff personnel who participated in various Agencysponsored training/seminars, either as speakers, facilitators or support staff. These activities were found to be in line with their respective Agencys primary mandate/ function. The amount of P7,388,234.41 or approximately 93% represents professional fees and honoraria paid to 36 consultants hired under the different offices of the DepEd OSEC. Despite the previous years audit observations, the DepEd renewed the contracts of the consultants and hired seven of them in CY 2011 although the offices have also assigned personnel under contract of service as summarized in Table 8. Table 8. - Breakdown of consultants and contractuals assigned by the DepEd per office
OFFICE OSEC-Proper USEC For Legal Affairs USEC for Programs and Projects USEC for Muslim Affairs USEC for Regional Operations Property Division Information and Communications Technology Physical Facilities Schools and Engineering Divison (PFSED) Communications Unit Internal Audit Service GSIS Concerns Unit Adopt-A-School Secretariat Total CONSULTANTS 12 1 1 1 1 3 1 6 6 1 1 2 36 CONTRACTUALS 7 6 14 2 2 9 231 5 4 6 286

In the case of PFSED, verification disclosed that the functions performed by the consultants can be provided by the existing regular and contractual personnel thereat. It was gathered that the 286 contractuals include the 79 Project Engineers hired in 2011.

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In the case of Bureaus under the DepEd, the orientation/training, seminarworkshop, and other similar activities/programs in the different areas of Luzon, Visayas and Mindanao were found to be within the Agencys primary mandate. Furthermore, the activities were usually attended by its officers and selected staff and some of its contractual personnel. We recommended that Management: stop the payment of professional fees/honoraria/incentives to officers and employees performing regular activities, which are within their mandated functions; comply strictly with existing rules and regulations on grant of honoraria; and institute the refund, without prejudice to the accountability/liability of the Agency Head under Section 7 of DBM Circular 2007-1.

NETRC Management commented that: Services of these personnel are necessary given the magnitude of programs and projects viz a viz the current manpower complement of the Department. Granting of honoraria during the orientation day/testing center preparation and conduct/administration of the 2011 Philippine Education Placement Test (PEPT) was authorized per approved authority from the DepEd dated October 11, 2011. Section 50, RA No. 10147 of the GAA for FY 2011 is the basis of granting the honoraria which states that The respective agency appropriations for honoraria shall only be paid to the following: o Those who act as lecturers, resource persons, coordinators and facilitators in seminars, training programs, and other similar activities in training institutions, including those conducted by entities for their officials and employees wherein no seminar fee are collected from participants; Said activities specifically orientation of personnel involved in the conduct and administration of the PEPT are similar in nature, thus, said honoraria can be considered legal and compensatory of the services rendered.

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The Management has committed to submit the required documents.

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The following are the NETRC Audit Teams rejoinder: Laws and regulations are created for uniformity and common observance. Officers of the government are expected to observe and enforce the law. Any authority or implementing guidelines must be in accordance with governing laws, or else they can also be held secondarily or primary liable on their actions depending on the circumstances. Guidelines on the granting of honorarium and for those who are entitled thereof are very specific, hence, we cannot just conclude any activity by analogy.

Hiring of legal consultants with no prior approval of OSG and written COA concurrence 19. Hiring of 14 Legal consultants was without prior approval of the OSG and written concurrence of COA, and considered excessive because of the existence of 28 OSG lawyers already engaged by the DepEd to address the legal cases of the agency, thus resulting in incurrence of ineligible professional fees amounting to P4,063,064.51. COA Circular No. 98-002 dated June 9, 1998 states: Public funds shall not be utilized for payment of the services of a private legal counsel or law firm to represent government agencies and instrumentalities, including GOCCs and LGUs in court or to render legal services for them. In the event that such legal services cannot be avoided or is justified under extraordinary or exceptional circumstances for government agencies and instrumentalities, including GOCCs, the written conformity and acquiescence of the solicitor General or the Government Corporate Counsel, as the case may be, and the written concurrence of the Commission on audit shall first be secured before the hiring or employment of a private lawyer or law firm. In CY 2011, the DepEd OSEC hired the services of 14 private lawyers under the Contract for Legal Consultancy and Services for P4,063,064.51 without the written concurrence by the COA. Of the P4,063,064.51 payment, P1,844,333.96 was disallowed in audit under Notice of Disallowance No. 11-020-101-(11) dated October 18, 2011, while the balance of P2,218,730.55 was held in abeyance pending resolution of the managements request for COAs concurrence dated October 17, 2011 to the contracts of the 13 Legal consultants who were hired by the DepEd in July 2011. The said request and pertinent documents were returned to management for compliance of requirements.
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Management explained that: a. The DepEd, being the biggest government organization in the Philippines, administers 17 regions, 200 divisions, 43,204 Public Elementary and High Schools and 15,841 public pre-schools, not to mention, the more than 1,000 personnel in the CO. b. At present, DepEd CO has only three Legal Officers in its Legal Division, thus, considering the volume of work assigned to them plus the conduct of fact-finding investigations, there is an imperative need to hire Legal Consultants to handle all legal and legislative concerns of the central and field offices of the Department. c. The legal services provided by the Legal Consultants cannot be avoided and is justified under extraordinary and exceptional circumstances. They are precisely hired to provide consulting services to top officials, to render legal opinion and advice on all matters affecting the government and propriety functions of the Department. d. They serve as Special Prosecutors in Motu Proprio cases and members of the fact finding investigation committees in various administrative cases against DepEd officials. It is worthy to mention that, aside from the 14 private lawyers hired, records disclosed that the DepEd also engaged the legal services of 28 OSG Lawyers as the OSG-DepEd Task Force per MOA between the OSG and DepEd dated September 28, 2009 to address all the legal problems of the agency. In CY 2011, the DepEd paid P3,148,200.00 in allowances to OSG Lawyers. We recommended that Management: review judiciously the need for hiring private lawyers considering the number of OSG lawyers already engaged by DepEd; ensure that all payments to private lawyers are supported both with the written conformity of the Solicitor General and the written concurrence of the COA; and cause the settlement of the audit disallowance and notice of suspension or make an appeal with the COA in accordance with the Revised Rules on the Settlement of Accounts (RRSA).

Non-compliance with RA 9184 20. The DepEd OSEC and Region V did not did not comply strictly with the requirements of RA 9184 and its IRR in the procurement of goods and services.
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Section 3 of RA 9184 and its IRR states the governing principles on government procurement. Furthermore, Section 18 of the Revised IRR provides that specifications for procurement of goods shall be based on relevant characteristics and/or performance requirements. Reference to brand names shall not be allowed. Review of contracts disclosed several lapses manifesting the procuring entitys non-adherence to the set standards of RA 9184, among others, as follows: The brand names of six items procured totaling P1,877,788.00 were indicated in the Technical Specifications, purchase requests, annual procurement program and approved budget for the contracts, contrary to Section 18 of the Revised IRR of RA 9184, and thus precluding other prospective suppliers-carrying other brands of equipment from participating in the public bidding, to the prejudice of the government (Region V); Non-observance of the prescribed timelines or period of action on procurement activities where delays were noted from the BAC Resolution recommending the award of contracts to the LCRB/HRRB or SCRB/SRRB up to issuance of the Notice to Proceed (NTP), as well as from the date of the bid openings up to issuance of the NTP; The date of signing by the Head of the Procuring Entity (HOPE) of the BAC Resolution recommending the award of contracts is not indicated; thus, it cannot be determined whether the immediate and non-extendible issuance of the Notice of Award (NOA) complies with the prescribed period (Section 37.1.3 in relation to Section 37.1.2). While the date of signing may be traced from the date of issuance of the NOA, if the issuance was beyond the prescribed period of seven calendar days which is non-extendible, it is not traceable whether it is the omission of the HOPE or that of the Receiving Section; Bids were not accompanied by a sworn affidavit of disclosure of no relations signed by all its officers, directors, and controlling stockholders in case the bidder is a corporation; by all its officers and members in case of partnership; or by the bidder himself in case of an individual or single proprietorship; and, The Tax Clearance, Certificate of PhilGEPS Registration, latest income and business tax returns were undated. The dates are vital to determine whether bidders are disqualified for award, and whether bid securities are forfeited for failure to submit such requirements not within 3 calendar days from receipt by the bidder of the Notice from the BAC that the bidders have the LCB/HRB.
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We recommended that: The Procuring Entity and the BAC comply strictly with the requirements of RA 9184; Management oblige the BAC to fully discuss in pre-bid conferences all components of the contract to be bidded with approved budget of P1 million or more to give all prospective bidders opportunity to compete and for the supplemental bids to be properly availed by them; and Management require the BAC to submit a written justification why the subject IT Equipment procured, carrying brand names should not be disallowed in audit.

Management comments and justifications are as follows: a. The Head of the BAC Secretariat and a BAC Member justified that if the brand name is not indicated, they usually settled for sub-standard, low quality and low priced items compared to branded equipment which usually last longer, thus more advantageous to the government; b. On contracts not entered into within the prescribed period of 10 calendar days upon receipt of NOA where the sanction is the forfeiture of bid security, Management reasoned that the delay is due to processing of contracts which passed through the Offices. c. On non-compliance with Section 47 of the IRR stating that all bids should be accompanied by a sworn affidavit of disclosure of no relationship, the Management in its comment just asked the opinion of GPPB which opined that Omnibus Sworn Statement shall suffice without making arguments as to the validity of its sufficiency. The Management commented that the presence of the Secretary`s Certificate validates the duly authorized representative as signatory against the Omnibus Sworn Statement where provisions on disclosure have just been incorporated therein instead of making a separate form called Affidavit of Disclosure of no relation; d. Section 6.2 of the IRR provides that once issued by the GPPB, the use of the GPMs, PBDs, and other standard forms shall be mandatory upon all procuring entity. The Non-Policy Memorandum of the GPPB numbered NPM-08-2011 dated April 25, 2011 provides that the submission of the Omnibus Sworn Statement signed by the duly authorized/designated representative of the corporation sufficiently satisfies the requirement for a Sworn Affidavit on Disclosure of Relations under Section 47 of the IRR and a separate Sworn Affidavit signed by all the directors, officers, and stockholders of such corporation is not necessary.

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As a rejoinder, the Audit Team emphasized the following: Under the pertinent provisions of RA 9184 and its IRR, the lowest bid is not the sole consideration for awarding of the contract and that the goods or items conformed with the specifications of the procuring entity. The GPPB in prescribing statements/information and promulgating necessary guidelines, among others, should always take into account the Constitutional and Legal principles, that under RA 386, otherwise known as the Civil Code of the Philippines, stated under Article 7 is the requirement of consistency to the law or the Constitution every administrative or executive act, order, and regulations. GPPBs act in declaring that Omnibus Sworn Statement sufficiently satisfies the requirement for a Sworn Affidavit on disclosure of no relation is inconsistent with the law or RA 9184; thus, not valid. Section 6.2 on Standardization of Procurement Process and Forms, invoked by the Management should not be strictly interpreted in view of the restriction provided by law or RA 386 under Article 7 of the Civil Code. GPPB`s act runs counter to RA 9184, Rule XV on Disclosure of Relations because it totally abandons such provision. The power of the GPPB to issue generic procurement manuals and bidding documents, and other standard forms does not carry with it the power to change any provision of law as in this case where the provisions on such disclosure was just incorporated against Omnibus Sworn Statement. Section 3e) of the IRR on Governing Principles on Government Procurement restricts the acts of the GPPB. The GPPB should be governed by Section 3e) on Governing Principles on Government Procurement, to wit: Public monitoring of the procurement process and the implementation of awarded contracts with the end in view of guaranteeing that these contracts are awarded pursuant to the provisions of the Act and this IRR. Therefore, the BAC is under obligation to follow the law by ensuring that the procuring entity abides by the standards set forth by the Act.

B.

VALUE FOR MONEY AUDIT

Inefficiency in the DepEd Internet Connectivity Project 21. The objective of the DepEd Internet Connectivity Project to provide the students with high-tech communication was not fully achieved in three regions due to the absence of proper supervision, monitoring and poor

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coordination/ implementation of the project, thus depriving the targeted student-beneficiaries of the intended benefits.

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DepEd Order No. 50, s. 2009 was issued prescribing the guidelines on the availment of internet connectivity. Expenses incurred in connection with this undertaking shall be charged against the MOOE fund for the DICP under the DepEd Computerization Program. As provided therein, the allotted budget for internet subscription is P48,000.00 per annum per school, which shall be downloaded by the DepEd CO Budget Division directly to the high schools. Paragraph 5(a) of DepEd Order 112, s. 2010 dated November 18, 2010 clearly states that: The schools which can only be connected through satellite technology shall be guided by the following steps for the transfer of funds under the DepEd Internet Connectivity Project (DICP): a. Schools (those with official School ID based on the official list of the Basic Education Information System or BEIS of the Central Office) shall directly subscribe to their local Internet Service Providers in accordance to RA No. 9184. Observations were noted in the following Regions:
Region RO XIII DOAgusan del Norte CAR Observations 21 secondary schools revealed insufficient performance of internet access due to technical malfunctioning which in totality associated with unsatisfactory line connection No preliminary survey conducted prior to the installation of the satellite discs to determine the schools accessibility to available cell sites as schools are located in different places Only one computer at the Supply Office was connected to the satellite disc and the internet speed is very much slower compare d to the existing internet connections provided by Smart and Digitel Telecommunications. RO V Failure to conduct competitive bidding to provide internet services to recipient secondary schools.

We recommended that Management of concerned ROs: re-evaluate and re-assess the implementation of internet connectivity to ascertain the actual condition of the internet connections; formulate corrective measures in order to efficiently and effectively carry out the program implementation to achieve the purpose; require the Division ICT Coordinator to monitor/assess the quality of service of the contracted internet service provider, gather feedback from the end-users and submit a report thereon; and
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conduct competitive bidding to obtain the lowest and advantageous price to the government in RO V.

Impropriety in the Use of Government Property 22. Two OPSCAN-heavy-duty OMR Machines procured by NETRC in CY 2006 and 2009 from Syrex Corporation, costing P2,224,107.15 and P2,350,000.00 respectively, were brought to the contractors warehouse and gave them full access to use/utilize the machines to facilitate/comply with their scanning/ printing contract with the Agency, resulting in unlawful use of government property by private individual, an act disadvantageous to the government. Article 217, Revised Penal Code provides: Malversation of Public Funds or Property is an offense committed by any Officer who, by reason of the duties of his office, is accountable for public funds or property, shall appropriate the same, or shall take or misappropriate or shall consent, or through abandonment or negligence, shall permit any other person to take such public funds or property, wholly or partially, or shall otherwise be guilty of the misappropriation or malversation of such funds or property. Section 102 of PD 1445 also provides: The head of any agency of the government is immediately and primarily responsible for all government funds and property pertaining to his agency. Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him without prejudice to the liability of either party to the government.

Section 105 further provides that: Every officer accountable for government property shall be liable for its money value in case of improper or unauthorized use or misapplication thereof, by himself or any person for whose acts he may be responsible. He shall likewise be liable for all losses, damages, or deterioration occasioned by negligence in the keeping or use of the property, whether or not it be at the time in his actual custody.

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Every officer accountable for government funds shall be liable for all losses resulting from the unlawful deposit, use, or application thereof and for all losses attributable to negligence in the keeping of the funds.

Section 106 also provides that: No accountable officer shall be relieved from liability by reason of his having acted under the direction of a superior officer in paying out, applying, or disposing of the funds or property with which he is chargeable, unless prior to that act, he notified the superior officer in writing of the illegality of the payment, application or disposition. The officer directing any illegal payment or disposition of the funds or property shall be primarily liable for loss, while the accountable officer who fails to serve the required notice shall be secondarily liable. Property Custodianship refers to the guardianship of government property by the person accountable. This includes the receipt of supplies, materials and equipment, the safekeeping, issuance, repair and maintenance. Likewise, it includes the accountability, responsibility and liability of accountable or responsible officers arising from loss, misuse, damage or deterioration of government property due to fault or negligence in the safekeeping. It may be physical/actual or constructive. Issuance of equipment for official use of officials and employees other than the regular property officer shall be supported with duly accomplished ARE. Property not covered by AREs shall be considered the direct responsibility of the property officer who shall be accountable to the head of the agency. The NETRC is tasked by the DepEd to administer the conduct of the following assessment/placement examination, among others: National Achievement Test (NAT) for grade 3, grade 6 and 2nd Year students National Career Assessment Examination (NCAE) Philippine Evaluation and Placement Test (PEPT)

The foregoing examinations have been conducted regularly, and the necessary activities such as printing, delivery and retrieval of test materials and answer sheets were contracted to different private contractors, where Syrex Corporation was noted to be a regular participating bidder and was usually awarded one or two contracts in a year. Based on records, Syrex Corporation was a regular contractor of the NETRC since CY 2006, and the latest contracts awarded are shown on the next page.
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Contract No. 2009-02010

Package Item Description No. 1 Scannable Answer Sheets (NAT 2009) NAT Grade Three NAT Grade Six NAT HS Year Two 2 School Headers 3 Computerized processing of Exam test results Grade Six 4 Certificate of Ratings NAT Grade Six NAT Year Two 4

Amount P 8,142,000 7,788,000 7,434,000 354,000 0,890,000 6,160,000 5,880,000 P 46,648,000

2009-04022

2010-07008

2011-08034

4 2011-10047 3 4

Printing, Labeling, Batching, Accounting, Sorting, Editing, Cleaning, Proof Reading P 12,880,000 and Processing of the SY 2009-2010 NCAE Scannable Answer Sheets, School Headers and Certificate of Ratings. Printing, packaging, labeling, batching, P 4,017,400 accounting, sorting, editing, cleaning, proof reading, processing and warehousing of Scannable Answer Sheets and School Headers and Printing, packaging, labeling and processing of Certificate of Ratings for the SY 2010-2011 National Career Assessment Examination (NCAE) Printing, packaging, labeling, and P 3,956,750 warehousing of Scannable Answer Sheets and School Headers for 2011-2012 NCAE. Printing, Packaging, labeling, Batching, Accounting, Sorting, Editing, Cleaning, Proof Reading and Processing of Scannable Answer Sheets, School Headers, 1 Certificate of Ratings and Statistical/Data 10,128,000 Output Requirements. P 14,084,750 Printing, packaging, labeling of Scannable P 311,850 Answer Sheets for PEPT. Printing, processing and packaging of Certificate of Ratings (COR) and Processing or Individual Test Result and Data Output 352,800 Requirements. P 664,650

Moreover, in CYs 2006 and 2009, Heavy Duty Optical Mark Reader (OMR) Machine was also procured from Syrex Corporation bearing Serial Nos. 1500125 and 1500156, respectively. Procurement was done through direct contracting, as Syrex Corporation was certified to be the exclusive distributor of OMR machines in the Country, at a unit cost of P2,224,107.15 and P2,350,000.00, respectively. Funding requirement was taken from the Agencys Trust Fund Account.
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It was learned that said equipment has a speed capacity of 10,000 sheets per hour. Aside from these two units, the Agency has two other existing OMR machines for its testing programs which were disclosed to be operational and in good condition per ocular inspection and interview conducted with concerned NETRC personnel. It was observed however, that the use of these machines may not be maximized since major activities pertaining to the Agencys testing programs were contracted with private printing companies. The procured equipments were only utilized mostly for walk-in PEPT applicants/examinees which are seldom and few. This condition gives way or provides an opportunity for the improper or unauthorized utilization of the equipments by Syrex Corporation, which appears to be with the consent of the NETRC officials, as can be observed from the documents weve obtained. Audit of the documents obtained showed that the newly procured OMR machine with Serial No. 1500156 delivered by Syrex Corporation on May 27, 2009, was pulled-out and transported to the Office facility of Syrex Corporation upon order/instruction of the NETRC Director to facilitate the scanning of the NAT for Grade Three Scannable Answer Sheets in her Memorandum dated June 5, 2009, addressed to the Head, Security Unit of the DepEd. The equipment was released to Syrex Corporation per Gate Pass No. H-21 dated June 5, 2009. Simultaneously on those period, there were four packages awarded to Syrex Corporation for the CY 2009 NAT examination with a total contract cost of P46,648,000.00, embodied under Contract No. 2009-02-010. To achieve/undertake the said four packages contract, Syrex Corporation required to use the machines same as those pulled-out and brought to the office facility of the contractor. Likewise, on August 17, 2011, Gate Pass Number X-62 was signed by the NETRC Director, requesting the same machine to be brought to Syrex Corporation, allegedly for maintenance check-up, but without the recommendation from the Property officer/custodian. Based on the inquiry conducted with the end-user, it was informed that the machine was in good operating condition when pulled-out by Syrex Corporation. At this point, it has to be stressed that with regard to maintenance check-up, it is not necessary or not even usual to pull-out the machine from the office premises. The said machine was returned by Syrex Corporations on September 8, 2011 as shown in the Delivery Receipt. However, it can be noticed that the delivery receipt already showed two OMR machines with Serial Nos. 1500125 and 1500156. As previously cited, Gate Pass Number X-62 only covers OMR machine with Serial No. 1500156, therefore based on the circumstance, it is our view that the other OMR machine was already in the premise of same contractor prior to August 17, 2011.

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During those times, packages 3 and 4 were awarded to Syrex Corporation for the 2011-2012 NCAE in the total amount of P14,084,750.00, embodied under Contract No. 2011-08-034. The foregoing facts and circumstances showed a very high probability that Syrex Corporation may have defrauded the government through utilizing government facilities to comply with their contractual obligations, an act disadvantageous and inimical to the best interest of the government. However, such thing could not happen if the NETRC Director had exercised her authority in accordance with law , rules and regulations, with utmost due care to protect the interest of the government. Apparently, the government was not fully benefited in the procurement of these equipment but rather its supplier, Syrex Corporation. This case, demonstrated an apparent violation of law, rules and regulations on the proper use or utilization of government property, that may constitute a crime of malversation, an offense punishable under Article 217 of the Revised Penal Code. We recommended that DepEd Management: order the conduct of further investigation to determine the persons liable/responsible and institute appropriate and necessary sanctions; blacklist the supplier from participating in any procurement transactions of the agency; and consider the services of government-accredited printing services or fully utilize available printing facilities.

The Audit Team furnished the OSEC with a copy of the AOM issued, but as of this report, no action has been taken to address the recommendations. Nevertheless, the NETRC management had given their comments on the issue in their reply dated December 7, 2011 and January 20, 2012. However, the Audit Team is still stand on their audit observations that when the OMR machine was allowed to be transported to the contractors premise on June 5, 2009 and on August 11, 2011, it timely coincides with the period were four contract packages for NAT and NCAE examinations were awarded to Syrex and were still in progress to achieve/undertake the said four packages contract, Syrex Corporation that require the use of the machines same as those pulled-out and brought to the office facility of the contractor. Hence, entrusting the custody of the machine to Syrex Corporation in those period for almost one month without a valid and justifiable cause can be considered as a negligent act, and only showed managements laxity in the custody of government properties.
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Deficiency in the Management of Textbooks

23.

In RO XIII, Bukidnon High School and DO Surigao del Sur, deficiencies were noted in the management of textbooks, supplementary reading and instructional materials and non-print materials costing P4,642,995.70, P1,463,909.32, and P106,465.88, respectively, depriving school children of the benefits that could be derived therefrom and it is a waste of government funds. The guidelines for the supply, allocation, delivery and distribution of centrally-procured instructional materials for priority schools under DepEd Order No. 62, s. of 2010, provides that in keeping with the aspirations of the DepEd to achieve quality education for all, the Instructional Materials Council Secretariat (IMCS), in collaboration with the BEE and the BSE will provide instructional materials to priority schools based on the latest results of the NAT. The distribution to the respective schools shall be managed by the DOs. Item No. 5 of DepEd Order No. 48 states that ROs and DOs shall monitor the utilization of these materials and their contribution to the pupils or students performance, and such information shall be included in the School Report Card. Item No.3 of the DepEd Order requires all concerned officials and personnel to exercise judicious care in the procurement of supplementary materials in order to maximize the benefits for the school children. Results of confirmation sent to the Audit Team Leaders of the different DOs in RO XIII and Bukidnon High School and random inspection of stockrooms in some nearby schools and district offices revealed the undistributed supplementary and instructional materials, non print materials and textbooks in Region XIII, DO Surigao del Sur and Bukidnon High School in the total amount of P6,213,370.90. The details are shown in Table 9. Table 9. - Status of distribution of instructional materials and textbooks

Particulars Undistributed/eaten by termites supplementary and instructional materials Undistributed nonprint materials Undisposed textbooks

RO XIII

DO Surigao del Sur

Bukidnon High School

Totals (in PhP) 4,642,995.70

1,255,669.70 3,387,326.00

106,465.88 1,463,909.32 95

106,465.88 1,463,909.32

Total

1,362,135.58 3,387,326.00

1,463,909.32

6,213,370.90

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In RO XIII, the most common reason for the above condition, as explained by the Property Custodians, was the non-availability of vehicles to transport the instructional materials from the DO to the District Office and from the latter, to the recipient schools. They further explained that they have not yet informed the teachers of the said materials as there was also no specific order and request from their district office yet. Some of these are already excess inventory, which were just stored in the library. In Bukidnon High School, the Supply Officer reasoned out that due to the voluminous work, she was not able to prepare necessary reports for submission to the Auditor as a requirement in the request for disposal. Said deficiency was already pointed out in last years audit report. We recommended and Management agreed to: require the Property Custodians of all DOs, District Offices and schools to facilitate immediate distribution of instructional materials to identified schools or to other schools who need them most;

conduct monitoring and close coordination with the recipient schools to ensure efficient distribution and effective utilization of various instructional materials and provide the necessary measures on the issues that hinder the immediate distribution of instructional materials;

ensure strict compliance with policies and procedures on the receipt, distribution and utilization of various instructional materials; and

dispose unusable textbooks.

Management will abide with all the recommendations and will advise all Schools Division Superintendents to immediately distribute the reading materials and ensure that proper monitoring will be undertaken. Non-adherence to the DepEd Order on repairs and/or demolition of buildings 24. The Gabaldon building at Galas Elementary School, Dipolog City in Region IX was partially demolished and/or renovated/repaired without adhering to the guidelines and procedures required under DepEd Order No. 107 series of 2010 and other pertinent laws on the matter. Section f.a of DepEd Order No. 107 series of 2010 states that:

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In the case of Gabaldon school buildings, structures marked as cultural property , and structures dating at least fifty (50) years old, the SDS, through the regional director, shall forward the request for demolition, together with the supporting documents to Department of Education-Physical Facilities and Schools Engineering Division (DepEd-PFSED) for further evaluation; and clearance by the National Commission for Culture and the Arts (NCCA) or its affiliated cultural agency. After the issuance of clearance by the NCCA, the DepEd-PFSED shall recommend approval of demolition to the SDS who shall approve the request for demolition. Moreover, Section 1.02.03 of the National Building Code (RA 6541) requires that: (a) Any person, firm, or corporation, including any department, office, bureau, agency of instrumentality of the government intending to construct, alter, repair, move, convert or demolish any building or structure, or cause the same to be done, shall obtain a building permit from the Building Official for whichever of such work is proposed to be undertaken for the building or structure, before any such work is started. Verification revealed that the repair/renovation or demolition of the Gabaldon building at Galas Elementary School was done without clearance from the NCCA and there was no proper prior approval from concerned officials for the repair/renovation/demolition of the same, which is in violation of the abovestated DepEd Order. Likewise, the Principal could not produce any permit to do the repair and/or demolition of the Gabaldon building. It is worthy to mention that the legislative inquiry conducted by the City Government of Dipolog revealed that the repair/renovation or demolition of the Gabaldon building at Galas Elementary School was done through the initiative of the Principal of the said school without proper coordination with higher authorities in the DO or in the RO. The Head Office of the DepEd did not even know that the repair of the building was on-going. It was also noted that there was no Report of Waste Materials submitted by the Principal to the DO or to the COA Office as required by existing regulations. We recommended that Management: require the Principal of Galas Elementary School to explain in writing the circumstances surrounding the repair/renovation/demolition of the Gabaldon building in his school; require the PFSED to closely monitor all on-going repairs and/or construction of buildings under the jurisdiction of the DO;

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direct all school heads to strictly follow the procedures/processes in the repair and/or demolition of school buildings; and henceforth, require the Principals to closely coordinate and seek first the approval of the DO/higher authorities before commencing any work on any building/structure of their respective schools.

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The School Principal, in his reply to the above-mentioned observations explained that: a) As early as June 15, 2009, the undersigned has already requested the School Division Superintendent for the repair of the old Gabaldon building as it posed hazard to the school children. As practiced by heads of schools, whenever the request for repair of school buildings could not be acted upon by DepEd due to lack of funds, as in this case, the concerned heads of schools will be the one to initiate for the repair seeking assistance from local government officials, PTCA and other private individuals. b) The clearance from the NCCA or its affiliated cultural agency is only proper when a Gabaldon school building, structures marked as cultural property and structures dating at least 50 years old would be condemned or demolished. The Gabaldon building in Galas Elementary School was never condemned nor demolished but was only repaired/renovated, through the funds from the Provincial Government of Zamboanga del Norte. c) The undersigned requested approval of the Chief of the City Building Office, Dipolog City to implement the demolition of some buildings of Galas Elementary School. This was granted in April 14, 2011. d) The Gabaldon building of Galas Elementary School is not anymore the same Gabaldon building as we know it. Prior to the repair of the said Gabaldon building, it had undergone several major and minor repairs in the past. Since then, the Gabaldon building has lost its identity as such considering that most, if not all, of its original materials were already replaced with new materials in an effort to make the building usable. e) As early as June 1, 2011, all lumber materials, salvaged or otherwise, which were removed from the Gabaldon building, were properly accounted for and now in the custody of the school for proper disposition. As a rejoinder of the Audit Team to the replies of the Principal: a) The DO PFSED, in his status report, stated that the DO discovered that there is already an on-going repair when the Physical Facilities Coordinator conducted an assessment of Galas ESs school buildings for the preparation of program of works for the rehabilitation of billeting classrooms for 2011 Palarong Pambansa delegations being one of the billeting schools. This was sometime in April 2011. The principal did not inform the DO of the work which had commenced and no program of work were submitted for concurrence. Further, the explanation did not indicate any information sent to the Superintendent advising her of any repair/demolition to be made on the buildings. Communications sent to the
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DO only requested for repair, the shifting of classes, and request for approval to vacate the old buildings. On May 24, 2011, the Principal requested for additional classrooms and informed that the H. E. building was demolished. There was no mention of the Gabaldon building. b) The Inspection Report of the COA Technical Inspector requested to inspect the building states that: As to the question of whether demolition was done or the Gabaldon building was only repaired, it is clear that there was a demolition done because dismantling/destruction of a building in whole or in part is considered demolition. But apparently the demolition was done to give way for the alteration and repair works to be done. c) There was a demolition permit from the City Building Official which supported our observation that what was done was a demolition, not a repair, therefore DepEd Order 107 series of 2010 should have been followed. There was no permit for the repair/renovation, if such is the contention of the Principal. d) Regardless of who initially reconstructed and altered the Gabaldon building, it is still a fact that the building was originally a Gabaldon building and the DepEd orders regarding repair and/or demolition of the same should have been followed. e) The repair/demolition started in April 2011 per status report of the PFSED so the Report of Waste Materials should have already been submitted by then, not only on June 1, 2011. Inefficiency in the Utilization of School Building Program Fund 25. Failure to optimize the utilization of allotted funds totalling P20,471,135.00 to address the shortages in school buildings/classrooms and furniture in CAR and DO Baguio City for the school year 2011 to 2012, affected the delivery of quality education to the students. Likewise, the late release of funds amounting to P2,855,203.00 resulted in the non implementation of the School Building Repairs and Maintenance Scheme (SBRMS). In line with the thrust of the Department to provide school facilities to improve quality education, DepEd Order No. 94, s. 2011, dated November 29, 2011, was issued providing for the Guidelines on the Implementation of the Basic Educational Facilities Funds (BEFF). The BEFF of the DepEd shall be utilized to address the classroom, water and sanitation facilities, and furniture shortages based on the Basic Education Information System (BEIS), the repair and rehabilitation of classrooms including heritage buildings as well as water and sanitation facilities.

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Enclosure No. 1 of the same order provides for the Guidelines on the Implementation of School Building Program for Areas experiencing Classroom Shortages and Enclosure No. 3 provides for the Guidelines on the Implementation of the School Furniture Program. DepEd Order No. 3, s. 2011, dated January 14, 2011, provides for the Guidelines for the Implementation of CY 2011 Regular School Building Program. To ensure that the school buildings can be used by the start of SY 2011-2012, procurement shall immediately commence once the SARO is released by the DBM. For SY 2011, the DO reported that there were shortages of standard size instructional classrooms to wit: Based on 1:45 classrooms pupil ratio
Particulars Public Elementary Schools Public Secondary Schools Totals Qty. of Affected Schools 17 10 27 Total Enrollment 12,369 11,988 24,357 Existing Classroom s 239 218 457 Classroom Shortage 59 50 109

Based on 1:50 classrooms pupil ratio

Particulars Public Elementary Schools Public Secondary Schools Totals Qty. of Affected Schools 13 6 19 Total Enrollment 6,870 3,306 10,176 Existing Classroom s 123 51 174 Classroom Shortage 33 16 49

Moreover, the DO reported shortages in desks and armchairs for both Public Elementary and Secondary schools based on the total enrollment for SY 2011 to 2012, to wit:
Particulars Public Elementary Schools Public Secondary Schools Totals Qty of Affected Schools 39 19 58 Total Enrollment 33,354 19,226 52,580 Total Seats 26,397 17,100 43,497 Seats Shortage 6,957 2,126 9,083

Records showed that for 2011, the school received SAROs in the total amount of P25,999,997.75 from the DBM for the following purposes: (a) the procurement of school furniture; (b) the completion of school buildings/classrooms; and (c) the implementation of the SBRMS. However, of the amount, only 47.77 percent or P12,419,930.87 was utilized, leaving an
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unutilized balance of P13,580,066.88 at year end which remained unutilized because of the following reasons:
SARO No. and Date Purpose Amount (in PhP) Unutilized as of Utilized 12.31.11 979,762.00 136,747.00 Reason for Nonutilization Management procured: 1,148 tablet armchairs for elementary and secondary schools; and three sets of teachers tables and chairs. The furniture procured was not sufficient to cover the shortage in the school furniture. The unutilized balance represents savings and would be requested for use in the ensuing year.

Capital Outlay Prior Year Budget OSECCAR-11214 01.17.11 Procurement of school furniture

Totals Capital Outlay Current Year OSECProcurement of CAR-11school furniture 1690 and fixtures for 06.21.11 2011 OSECProcurement of CAR-11School Furniture 4128 and Fixtures for 11.28.11 2011 OSECCAR-111253 05.20.11 OSECCAR-112139 08.01.11 OSECCAR-113041 10.24.11 Completion of school buildings/ classrooms Repair/Rehabilitati on of typhoondamaged school buildings Rehabilitation of Gabaldon building at Rizal ES; repair of school buildings; and construction of toilets with hand wash facilities and septic vaults of various schools

979,762.00 0.00

136,747.00 468,979.50 Delay in the procurement process.

0.00

1,088,171.25

Amount not utilized in 2011 pending the survey of schools that most need additional furniture and fixtures. The balance would be requested for school repairs in the ensuing year.

9,516,029.87

380,131.63

1,924,139.00

15,861.00

0.00

8,634,973.50

Program of Work (POW) was prepared late due to oversight. However, the conduct of biddings for the contracts was already completed in February 2012.

Sub-Totals

11,440,168.87

10,588,116.88

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SARO No. and Date

Purpose

Amount (in PhP) Unutilized as of Utilized 12.31.11 0.00 2,855,203.00

Reason for Nonutilization

MOOE CY SAROSBRMS 2011 CAR-110022004 10.03.11 Sub-Totals Grand Totals

Funds were received only on 12.27.11

0.00 12,419,930.87

2,855,203.00 13,580,066.88

Consequently, the objectives of the DO to address the shortages in school buildings/classrooms and furniture, as well as repair/rehabilitate school buildings were not fully attained. The school children were also deprived of the timely use of additional facilities necessary for the delivery of quality education. We recommended that DepED CAR and DO-Baguio City Management: ensure optimum utilization of funds for procurement of school buildings/ classrooms and fixtures, and completion or repair/rehabilitation of school buildings to address shortages thereof for the benefit of school children and to improve the quality of education; and hasten the identification of priority schools that need additional furniture and fixtures and expedite the procurement process, strictly complying with the guidelines under the IRR of RA 9184, for the timely delivery of benefits from the use of said facilities by the affected school children.

Unfinished and Abandoned School Building 26. The school building constructed by the DPWH in NCR -DO TAPAT with three storey-six classrooms under the regular School Building Program and with a total project cost of P5,000,000.00 remained unfinished and abandoned due to lack of funds for its completion to its intended purpose causing danger and risk to the life and safety of the school children and further resulting in waste of government resources. DepEd Order No. 28, series of 2008, implemented the Joint DepEdDPWH Memorandum on the Amended Guidelines for the Coordination and Monitoring of DPWH Constructed School Buildings with the following objectives: Further ensure the delivery of quality and complete school buildings for public school children;

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Make contractors more responsive to clients need; Establish benchmark on good quality workshop by DPWH and DepEd; Strengthen the awareness and vigilance of end-user in the monitoring and acceptance of school buildings; Provide factual and timely reports to DepEd and DPWH management on the status of implementation of school buildings; and Provide essential data in the booking up and recording of completed school buildings.

The audit team conducted inspection of constructed school buildings at Simplicio Manalo High School implemented by the DPWH and observed the Children playing in the unfinished and abandoned school building, as evidenced by the photo taken on January 16, 2012, the date of site inspection. There was no signage that the building is a government property nor the word NO TRESSPASSING, no fence and no security guard on duty. Per interview with the principal, the value of the first stage of construction of building is P5 million per certificate of acceptance, which was signed by her and she had no information when the building will be completed due to lack of funds allocated for the purpose. We recommended that the concerned school Principal: coordinate with the Division Physical Facilities Coordinator to resolve the problem of the project and to implement the school building program according to DepEd Order No. 28, s. 2008; exert all efforts to secure the property by placing a signage that the building is a government property and indicating the word NO TRESSPASSING, and assign a security personnel to safeguard the said school building.

Deficiencies in the Procurement of School Furniture 27. Timelines on procurement and utilization of school furniture during the years 2009 to 2011 were not met in DepEd OSEC, Region IV-A, and in four DOs due to: (a) late deliveries by contractor/s, (b) deficiencies in the workmanship and materials used on the delivered items, and (c) nonconformity with prescribed designs under the DepEd SFP, to the disadvantage of intended beneficiaries.

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Section 68 on Liquidated Damages under the Revised IRR of RA 9184 provides: All contracts executed in accordance with the Act and this IRR-A shall contain a provision on liquidated damages which shall be payable in case of breach thereof. For the procurement of goods, infrastructure projects and consulting services, the amount of the liquidated damages shall be at least equal to one-tenth of one percent of the cost of the unperformed portion for every day of delay. Once the cumulative amount of liquidated damages reaches ten percent (10%) of the amount of the contract, the procuring entity shall rescind the contract, without prejudice to other courses of action and remedies open to it. The design and specifications under the DepEd School Furniture Program (SFP) provides: (a) tables and chairs, armchairs and teachers table and chair shall be manufactured in accordance with the DepEd standard designs and specifications; and, (b) the DOs will determine the materials to be used for the school furniture to be bidded in their respective divisions. (DepEd Order No. 58, s. 2007 dated August 26, 2007) One of the governing principles on government procurement provided in Section 3, RA 9184 states that all awarded contracts be performed or implemented strictly according to specifications. The DepEd OSEC procured school furniture made of wood and steel combination, all wood, and all steel materials which should be in accordance with the technical specifications and standard designs prescribed in DepEd Order No. 43, s. 2009 dated April 30, 2009. Also, Region IV-A and DOs Quezon City, Las Pinas, Manila and Pasig procured school furniture and fixtures totalling P26,026,176.07 in 2011 in accordance with the DepEd SFP under DepEd Order No. 43, s. 2009 and DepEd Order No. 33 s. 2010 dated April 16, 2010. a. Late deliveries by contractors Under the 2010 SFP, the DO Manila noted that the contract was granted 15 days of extension and the delivery receipts (DRs) undated. Also, in Region IV-A, it was observed that the armchairs were delivered beyond the contract period of 120 calendar days, erasures on the date of the DRs/ARE were noted, and specifications not complied. b. Deficiencies in workmanship and materials and non conformity with prescribed designs Ocular inspection of the delivered school furniture showed defects/ deficiencies, either in workmanship or materials used, as well as nonconformity with the specifications under the DepEd SFP. These were
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documented by the result of random inspections conducted by the COA technical specialists and audit teams on the deliveries duly inspected and accepted by the DOs Property officials and by the schools Property Custodians based on the signed delivery receipts and Acknowledgement Receipt for Equipment (ARE)/Inventory Custodian Slips (ICS). In addition, there are schools where the DepEd OSEC teams visited, mostly in the far flung areas that are in need of crucial resources and are best addressed if management can get real-time data from their end rather than rely from the data submitted by the offices having jurisdiction over them. The random inspections conducted suggest common defects/deficiencies present in some items which, if not promptly reported by recipient schools and corrected/rectified by contractors, will diminish the quality and life expectancy of the furniture. Non-conformity with the specifications under the DepEd SFP is an issue on cost reasonableness and acceptability of design. Details of deficiencies noted are shown in Table 10. Table 10. - Summary of deficiencies on delivered school furnitures
Procuring Office/ No. of schools validated OSEC/ 7 Regions covering 122 selected recipient schools in 25 DOs a)

Deficiencies Delivered armchairs and sets of teachers table and chair were defective, ranging from 5% to 95% of the total deliveries. b) Deviations from the prescribed specifications in DepEd Order No. 43, s. 2009, as follows: The wood parts were not fully smooth, wood used is of poor quality not kiln or sun-dried and were infested with weevil, and coated with one coat natural varnish instead of maple finish; The steel parts were rough, fully welded and painted with only one coat of black enamel, without metal primer; The writing boards were ordinary ply-board instead of solid wood; Book Rack-the spotted joints between angles were on the lower part and not fully welded thus, easily detached; No prescribed markings at the back of the armchairs and teachers chair and on one side of the teachers table; Teachers tables-not fully varnished, ruler guide of the drawer not heavy duty and drawer is difficult to open; Knots and bolts were loose and lacking; c) Delivery Receipts (DRs) and Inspection and Acceptance Reports (IARs) were undated. The Property Custodians or Principals claimed that they were instructed by the supplier not to fill up the dates. d) Screws on armchairs beneath the writing board which connect the steel to the wood were not properly installed as they were protruding and installed in slanting manner which might cause injuries to users.

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Procuring Office/ No. of schools validated e) f) g)

Deficiencies The armrests of the chairs were easily removed due to loosethreading of the screws. Some chairs were already rusty. 50% to 100% of the chairs were not comfortable to use due to the ff: too high for grade school where their feet cannot reach the floor; the rust stains the school uniform of the students; flaking paints stick to the uniform of the students; rough finish that can damage the students uniform, among others. Teachers complained that the chairs cause undesirable noise. Some schools have excess stocks, such that deliveries were not accepted, instead were delivered/transferred to other schools. Some DOs werent informed of deliveries that took place on summer or weekend; hence, barangay officials received the deliveries. There were schools in Cavite that place the new deliveries in the social hall as ordered by the District Supervisor. There were deliveries in some schools in NCR which were not allocated for the particular schools. The chairs were not properly maintained in some schools and were placed outside the classroom/under the tree.

h) i) j) k) l) m) DO Quezon City/ 2 recipient schools

a) Some of the wood were already detached from the armchairs; b) The woods used are rough, not straight and broken; c) The wood screw are not concealed and putted to tablet surface of counter sunk hole; d) The finishing is not smooth with less coats of varnish. The roughness of the wood is very glaring. e) There are holes on woods. f) The type of wood used is weak and soft that resulted to loosened screw and early deterioration of the furniture. g) Some of the teachers table and chairs had no proper markings. a) The science laboratory stools have no aluminum trimming; b) The elementary and secondary armchairs were not applied primer paint. Many were found rusty with flaking. c) The height of the secondary work bench is 800mm. instead of 900mm.; and d) Sales Invoice and Inspection and Acceptance Report are undated. a) b) c) d) The DRs and IARs were undated; The ES armchairs had no proper markings; and One school accepted delivered armchairs without varnish; and Armchairs delivered were not provided with property number or inventory tags.

DO Las Pinas/ all recipient schools

DO Pasig/San Juan/ 15 ES and 5 NHS out of 22 Recipient Schools

We recommended that Management of DepEd OSEC, Region IV-A and in four DOs:

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instruct/inform the Principals, Property Custodians and other DepEd officials concerned to reject defective deliveries, and advise them to indicate the date of receipt of deliveries, properly fill up the IAR, and keep record on file for future reference; notify the concerned contractors to either rectify the defects or replace the defective items delivered following the standard DepEd specifications and the Regional/DO requirements for materials to be used, if any; and impose sanctions and applicable liquidated damages on claims for payment for the late deliveries.

In DO Quezon City, the SDS has tasked the BAC and its Technical Working Group for Goods to submit their report so as to adequately provide her with the facts and basis in the action that shall be undertaken. The BAC has already summoned the suppliers officer for the subject armchairs and they had acceded to the directive of the BAC to make the necessary repairs within a nonextendible period of 30 days. Deficiencies in the Teachers Cooperative and School Managed Canteens 28. Deficiencies were noted in the audit of teachers cooperative- and schoolmanaged canteens in various schools in NCR and RO I, such as: (a) under/ delayed/non-remittance of school shares; (b) delayed/non-submission of financial reports and non-issuance of acknowledgement receipt of remittances; (c) absence/violations of MOA; (d) improper utilization of income allocation; (e) non preparation of annual budget; and, (f) nonrecording of canteen transactions, among others, contrary to the provisions of DepEd Order No. 8, s. 2007. DepEd Order No. 8, s. of 2007 dated February 6, 2007 prescribed implementing guidelines to rationalize the operation and management of school canteens in public elementary and secondary schools. School canteens are of two types: (1) School-Managed Canteen; and (2) Teachers Cooperative-Managed Canteen, both of which shall adhere to the guidelines embodied in the DepEd Order. Audit of School Canteens revealed that certain provisions in the guidelines were not adhered to, among others on: (a) prohibition on sub-leasing thereof to concessionaires; (b) submission of reportorial requirements to the DepEd and/or CDA, whichever is applicable; (c) maintenance of books of accounts and statement of sales and disbursements for recording daily transactions; (d) utilization of the net income derived from the operation of the School-Managed Canteens; and, (e) deposit of earnings and cash received from canteen operations daily in the nearest government depository bank.
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Audit of school canteen operations disclosed the following observations: a. Teachers Cooperative-Managed Canteen:
Region/DO/School NCR DO Quezon CityQuezon City Science HS DO Makati- Makati HS DO MalabonMalabon ES DO ValenzuelaGen. T. De Leon ES Deficiencies/Causes

1.) Under/Delayed/Non remittance of school shares Under remittance due to error in P 81,506.93 computation of the sharing which was based on the net profit instead of the gross margin Under remittance due to error in 395,857.46 computation /non remittance of income and delayed remittance of school share Non remittance since start of operation in 278,958.29 1996 Delayed remittance of schools monthly shares

2.) Delayed/Non-preparation and submission of Financial Reports NCR Non-submission of the monthly FS from January to DO Quezon CityDecember, 2012 to determine accuracy of total remittance of Ramon Magsaysay P387,000.00 HS DO Makati-Makati Non-submission of financial reports HS and Fort Bonifacio High School 3.) Non-issuance of Acknowledgment Receipt for the remittance NCR DO Quezon CityQuezon City Science HS No acknowledgment receipts duly signed by the principal for the remittance.

4.) Non-maintenance of books of accounts DO Quezon CityNo books of accounts maintained Quezon City Science HS 5.) Absence of MOA NCR No approved copy of MOA. MOA expired in 2006 and DO Makatiineffective DO MalabonNo approved contract/MOA from the start of operation Malabon ES 6.) Deficiencies of executed MOA NCR DO ValenzuelaTerm of MOA was for a period of five years instead of only Gen. T. De three Leon ES No. of members for the operation of Teachers Cooperative was short of the requirement

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b. School-Managed Canteen Operations

Region/DO/School Deficiencies/Causes 1) Under/Delayed/Non remittance of school shares RO I DOs Ilocos Sur, 20% share from gross profit not remitted Pangasinan II & Urdaneta 2) Delayed/Non-preparation and submission of Financial Reports DO Caloocan-24 Did not comply with the preparation and submission of books of Schools accounts, reports and statements of daily income and expenses RO I DOs, Ilocos Sur, Reports of operations as well as other financial documents were San Carlos City, not submitted for proper accounting and auditing of funds. Pangasinan I, Alminos City & Urdaneta RO V DO Camarines Failure to prepare and submit the financial reports SurCeferino Arroyo NHS DO MasbateCataingan NHS, Aroroy NHS 3) Non-maintenance of books of accounts DO Camarines Failure to maintain the books of accounts SurCeferino Arroyo NHS DO MasbateCataingan NHS, Aroroy NHS 4) Improper Utilization of Income Allocation NCR DO MalabonUtilization of sharing of income allocation was not strictly Malabon ES implemented in accordance with the itemized nature of expenses. Allocation for Supplementary Feeding Program was paid for inappropriate expenses while School Clinic expenses include those for inappropriate beneficiaries like for SLAC and non-related expenditures DO Quezon CityPaid food expenses for food on entertaining visitors and Quezon City SHS, gasoline expenses charged to the allocation for feeding Ramon Magsaysay amounted to P352,432.66. HS DO CaloocanThe money collected from the concessionaire was all used for various schools the school's expenses, including mandatory expenses and were utilized without the necessary/approval from the Canteen Committee . Also, disbursements were not properly supported with documents. DO Makati Canteen funds were not utilized strictly in accordance with the itemized nature of expenses while Revolving Fund was not fully utilized due to limitation on the use thereof. 5) Non preparation of Annual Budget

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Region/DO/School Deficiencies/Causes NCR DO MalabonThe Principal did not prepare the annual budget at the start of Malabon ES the school year DO Makati The schools do not prepare annual budget for SY 2010-2011 6) Non-recording of Canteen Transactions NCR DO MalabonRecording of transactions for remittances and disbursements Malabon ES were not made on a daily basis and made at the option of the Canteen Manager 7) Sub-leasing DO MalabonSeveral stalls by concessionaires such as: Milo, Ice Cream Malabon ES (Creamline) and Koolee were found operating within the vicinity. DO Taguig and Sub-leasing the whole or part of the school canteen premises or Pateros-Signal sub-contracting the operations of the school canteen to Village NHS, concessionaires Macapagal HS, R. Papa MHS-Main 8) Inefficient management of Canteen Funds DO Makati-various Canteen earnings were not deposited in full and intact; schools remained in the hands of the canteen managers; Maintained several bank accounts and passbooks under the personal account of the canteen manager Bank accounts were neither in the name of the principal nor the canteen manager as joint signatories DO MalabonCollections of school share from various stalls were kept in the Malabon ES vault Bank/ accounts were still under the name of the previous principals DO CaloocanSilang ES- 4th Canteen Fund not deposited daily Ave., Sto. Nio ES 9) Inadequate management supervision and monitoring DO Malabon- Monitoring conducted relates only to food safety standards and Malabon ES hygienic practices 10) Canteen managers not bonded DO CaloocanSome of the Principals were not aware about the bonding of canteen managers

We recommended that DepEd CO management require the principals/ school heads and canteen managers of the respective schools to strictly enforce compliance and impose sanctions pursuant to the provisions of DepEd Order No. 8, s. of 2007 as regards the operation and management of Teachers Cooperative-Managed and School-Managed Canteens; and ensure the proper implementation of the said DepEd Order. Also, we recommended that concerned principals/school heads apply for the bond of their canteen managers in accordance with law. Management committed that they will make representation with the school officials about the rules and regulations on Canteen Operations and will cause them to comply with the requirements.
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Long Outstanding Provident Fund29. Provident Fund Loan Receivable totaling P13,515,317.73 in OSEC and three DOs in RO I remained uncollected for almost two months to eight years due to, among others, the failure of the agency to deduct from the borrowers salary their monthly installments, contrary to Section x.10 of DepEd Order 36, s. 2007, and unreliable borrowers SLs. Section x.10 of DepEd Order 36, s. 2007 specifically states in part, viz: x xx The borrower may opt for a repayment schedule of (12, one (1) year) up to a maximum period of (60, five (5) years) equal monthly installments. In all cases, repayment of loans shall be through automatic deduction from the borrowers salary, either by agency payroll or PSD-IBM deduction. Likewise, pursuant to Administrative Order No. 279, Provident Fund was established to provide among others, officials and employees of DepEd loan facility in case of emergency. The interest is 6% and a co-maker is required for all the borrowers. The payment of the loan is made in equal monthly installments applied through automatic deduction from the salary of the borrower. Audit of the Provident Fund disclosed past/overdue accounts totalling P13,515,317.73, consisting of the following:
Office OSEC RO I - Dagupan City Pangasinan II Urdaneta City TOTAL P Amount of Past Due Accounts P 2,241,611.25 4,200,455.33 5,072,175.32 2,001,075.83 13,515,317.73

Relative to the OSEC account of P2,241,611.25, the Schedule of Accounts Receivable submitted revealed overdue accounts, ranging from two months to eight years. Collection of the repayments is difficult because the borrowers can no longer be located. They were either on AWOL status or on leave, and have deceased, resigned or transferred to other regions/offices. Also, some are still in the service but were not regularly deducted loan amortization. For RO I, the receivable accounts amounting to P11,273,706.48 were from three Dos, the accounts of which were not posted in the Borrowers Ledger Cards. Non-strict compliance with management result to non collection of past due Loans Receivable of the Provident Fund, thus, depleting the funds available for loan application.
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We recommended that Management: revisit DepED Order No. 36 s. 2007 and study the possibility of providing stricter sanction or penalty for borrowers who are on default in the repayment of their loans; enforce the monthly deduction of payment from the salaries of the comakers in case of non-payment by the principal borrower; post the transactions to the subsidiary records of the borrowers concerned relative to loans granted and repayments made; coordinate with the Regional Payroll Service Unit (RPSU) for the updating of deductions on loans; and strictly enforce collection of loans through payroll deductions in compliance with the existing rules and regulations of the Provident Fund.

C. 30.

GENDER AND DEVELOPMENT (GAD) Implementation of GAD programs was not fully achieved and delivered due to non-formulation of GAD plan and budget as required under EO No. 273 and Joint Circular No. 2004-1 dated April 5, 2004 of the DBM, NEDA and the NCRFW, now PCW, thus the requirements of law was not fully complied with and the people were denied of the benefits to be derived therefrom. Section 32 of the General Provisions of RA No. 9970 (GAA for FY 2010) provides that agencies shall formulate a GAD plans and to implement the same by utilizing at least five percent of their total budget appropriations for the year. The GAD plan and budget is a systematically designed set of programs, projects and activities carried out by agencies to address gender issues and concerns within their sector or mandate. Joint Circular No. 2004-1 dated April 5, 2004 of the DBM, NEDA and NCRFW requires the preparation by agencies of an Annual GAD Plan which should include activities that are either client-focused or organization-focused. Further, EO No. 273 (applying and adopting the Philippines Plan for Gender Responsive Development, 1995-2025) mandates agencies to institutionalize GAD efforts in government by incorporating GAD concerns in their Annual Budget Proposals and Work and Financial Plans. Review of GAD activities implemented by the department, as a whole, revealed the following observations:
Observations Non-formulation of GAD Plans/ Activities/No Budget Allocation Offices RO IX-DOs Dapitan City, Zamboanga Sibugay, Zamboanga City and its Implementing Units RO VI; CAR-DO Baguio, BCNHS,PCNHS,INHS;

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Observations

Offices National Museum; OSEC; NCR-DO Navotas

No coordination among ROs/ DOs/ schools on GAD implementation Allocated amount for GAD activities not fully utilized or used for other purposes GAD Plan prepared is not within the required format

NCR-DOs Malabon and Valenzuela

ROs I and II, CAR-DO Baguio, NCR-ROP and DO Quezon City, OSEC NCR-DOs Malabon, Las Pinas, Muntinlupa,

In OSEC, validation of accomplishments on GAD-related activities for CY 2011, revealed that the required GAD Plan was not prepared, however, the Staff Development Division (SDD)-HRDS reported its accomplishments in observance of the Womens Month Celebration during the whole month of March 2011. Actual expenditures incurred amounted to P270,665.28 for the ten activities involving 662 participants. It is clear that the five percent allocation of DepEds budget was not utilized for GAD-related activities, an indication that there is less importance given to the advocacy of the government in recognizing the role of women in nation building and providing women rights and opportunities equal to that of men. The Chief, of the SDD-HRDS of OSEC informed that the previous office in-charge of GAD may have missed preparing a GAD Plan because 2010 (which is the budget preparation year for 2011) was a transition period due to election processes. For 2012, the SDD-HRDS having been designated again as GAD Secretariat, prepared and submitted a GAD plan which was reviewed and approved by the Philippine Commission on Women (PCW). Relatively, the bureaus under the department, such as BALS, BEE, BSE, EDPITAF, SHNC, NETRC did not clearly specify their own activities in line with the GAD Program nor any specific budget was set aside for the said program. It was informed, however, that the SDDHRDS of the DepEd is primarily tasked to design and implement programs relative to the gender thrusts of the department wherein those of the bureaus/offices are already integrated. Kaunlaran High School in DO-Navotas conducted GAD-related activities charged against the School MOOE since no budget was allocated specifically for GAD program/activities. The preparation and submission of annual GAD Plans and Annual GAD Accomplishment Reports shall be guided by the above-cited Joint Circular. However, in DO-Las Pinas and Muntinlupa, no GAD Plan and Budget was

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prepared instead a Project Proposal was prepared and submitted for the conduct of related seminar/trainings.

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Several ROs and its DOs prepared a budget of P321,588,021.81 for GAD Activities, however, the total amount of related expenses was only P10,993,908.44, leaving an unutilized amount of P310,594,113.37. Details are as follows:
Regional/DOs I II CAR-DO Baguio DepED-NCR DO-Malabon DO-Quezon City Total Amount Allocated P46,127,329.96 1,105,750.00 29,122,541.43 64,309,850.42 28,455,500.00 152,467,050.00 P321,588,021.81 Amount Disbursed P8,571,342.24 768,222.45 532,793.50 752,425.25 151,725.00 217,400.00 P10,993,908.44 Unutilized Amount P37,555,987.72 337,527.55 28,589,747.93 63,557,425.17 28,303,775.00 152,249,650.00 P310,594,113.37

According to the Accountant of the DO-Malabon and DO-Valenzuela, the required five per cent allocation to be based from the total agency appropriations is very enormous and if applied religiously, many program/projects will not be carried out. They were, likewise, made to understand in one of the seminars conducted by DepED-NCR that the application was only for the budget for MOOE and not on the total agency appropriations. We recommended that Management: comply strictly with the provisions of EO 273 requiring government agencies to incorporate GAD concerns in at least 5% of the appropriation in their Annual Budget Proposals and Work and Financial Plans; ensure proper coordination among each interdependent office and clear designation of focal persons that should handle the implementation of GAD activities; require preparation of GAD Plan and Budget in accordance with the guidelines prescribed in the GAA for FY 2011 and in Joint Circular No. 2004-01 dated April 5, 2004 of the DBM, NEDA and NCRFW; ensure that GAD activities are implemented in accordance with the approved GAD plan utilizing the funds allotted therefore to address gender issues within the agency or its mandate; and see to it that an Annual GAD Accomplishment Report with the corresponding amount spent thereon is prepared and submitted for validation purposes as mandated under EO No. 273.
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D. 31.

SENIOR CITIZENS AND DIFFERENTLY ABLED PERSONS The implementation of programs and projects to address the concerns of Senior Citizens and Differently-abled persons was only partially delivered due to non- formulation of an approved plan and failure of some DepEd attached offices and DOs to allocate budget contrary to the provisions of Republic Act No. 10147, thus the said persons did not derive benefits therefrom. Section 32 of General Provisions of RA 10147, the GAA for FY 2011, on Programs/Projects Related to Senior Citizens and the Differently-Abled, states: The plans, programs and projects intended to address the concerns of senior citizens and differently-abled persons shall be integrated in the regular activities of the agencies, which shall be at least one percent (1%) of their respective budgets. Review of Senior Citizens and Differently-Abled Persons activities implemented by the department, as a whole, revealed the following observations:
Observations Promotes conducts activities for the Senior Citizens and Differently-Abled Persons Promotes the needs of differently-abled persons thru activities under the Special Needs Education Program (SPED) and ALS programs but no allocation conducted to address the concerns of senior citizens No specific programs and projects for the senior citizens and differently-abled persons Offices BEE, BSE, DOs Valenzuela, Navotas, Quezon City, Caloocan OSEC, BALS, DOs Muntinlupa, Las Pinas, Makati, Mandaluyong

NETRC and Manila

In BEE and BSE, they conducted the following activities: a) Production of Braille Materials for the blind and large print materials for children with low vision in the elementary levels; b) Scholarship Training Program in which 331 teachers of children with hearing impairment, visual impairment, children with multiple disabilities and children with intellectual disability are trained; c) Thirty SPED teachers completed the scholarship Program Package for Children with Autism Spectrum Disorder; d) Developed a handbook on school sports for children with disabilities; e) Conducted the SPED Caravan which aimed on ensuring that the education services for children with special needs are brought to "the communities where they reside where a total of 910 children with special needs were identified. f) Validation of the Modified Curriculum for Individuals with Moderate Disabilities;
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g) Training of SPED Teachers on hearing impairment; and h) SPED National Conference Workshop which was participated by 378 education supervisors, principals, guidance counselors, and teachers to address pertinent issues on special education. Also in DO Quezon City, the amount of P3,340,000.00 was used to fund the Teachers/Staff Development, Pupil/Student Development and Networking and community linkages. They have 32 public elementary schools and 12 secondary schools offering special education classes for the differently-abled person. Relatively, the DepEd OSEC and NETRC have no activities to address the concerns of senior citizens and differently-abled persons conducted by DepEd during the year. However, it was noted that the DepEd OSEC complied with Section 7 of the Special Provisions of the same Act, which states: Provision for Educational Facilities. xxx. PROVIDED, FURTHERMORE, That twenty five percent (25%) of the amount released shall be set aside for the purchase of school furniture and fixtures manufactured and fabricated by cooperatives: PROVIDED, FINALLY, That ten percent (10%) out of this twenty five percent (25%) shall be allocated to cooperatives of persons with disabilities, and the remaining fifteen percent (15%) to other types of cooperatives. During the year, the DepEd OSEC awarded the contract worth P75,113,803.89 to two cooperatives for the Project: Supply and Delivery of School Furniture to Selected Elementary and Secondary Schools Nationwide Under the 10% CY 2010 Allocation for Cooperatives of Persons With Disability. We recommended that Management: comply strictly with the provisions of RA 10147 requiring government agencies to allocate at least one percent (1%) of their respective budgets to implement plans, programs and projects intended to address the concerns of senior citizens and differently-abled persons; ensure proper coordination among offices to designate focal persons that should handle the implementation of said programs; require each office to prepare or formulate plans and programs intended for the senior citizens and differently-abled persons; and, ensure that activities for said programs or projects are implemented in accordance with approved plan on utilization of funds allotted therefor.

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During the exit conference, the DepEd OSEC management agreed to include activities in their plans and programs to address the concerns of senior citizens and differently-abled persons in compliance with the abovementioned provisions of law. E. 32. COMPLIANCE WITH TAX LAWS There were unremitted taxes of P41,500,713.04 by DepEd attached offices, ROs and DOs in violation of revenue regulations and non-withholding of taxes totaling P1,330,320.23. The withholding of taxes by government agencies as withholding agents are based from regulations issued by the BIR, some of which are as follows: Revenue Regulations (RR) No. 2-98 issued on May 17, 1998 dwells on the regulations on the Withholding of Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable Value-Added Tax and Other Percentages Taxes. Likewise, Joint Circular No. 1-2000 dated January 3, 2000 of the DOF, DBM and COA provides for the Guidelines in the remittance of all taxes withheld by the NG - to the BTr thru the use of TRA and the ADA issued by the DBM. BIR RR No. 10-2008, specifically Section 5 (2) as amended, provides that the employer who is required to collect, account for and remit any tax imposed by the NIRC, as amended, who willfully fails to collect such tax, or account for and remit such tax or willfully assist in any manner to evade any payment thereof, shall in addition to other penalties provided for in the Code, as amended, be liable, upon conviction, to a penalty equal to the amount of tax not collected nor accounted for or remitted.

Under the above mentioned Circulars, all taxes withheld and payable to the BIR shall be remitted on or before the 10th day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be filed on or before the 15th day of the succeeding year. For 2011, the following DepEd Offices and ROs and 9 DOs of NCR complied with tax laws and regulations as follows:
Region/Division/Bureaus OSEC BALS BEE BSE Total Tax Withheld and Remitted P76,991,744.80 2,723,899.72 1,956,703.41 1,901,498.20

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Region/Division/Bureaus NCR DO-Caloocan, Malabon, Manila, Makati, Navotas, Pasay, Pasig, Quezon City and Valenzuela City IV-A IV-B IX X

Total Tax Withheld and Remitted 799,230,806.45

4,830,211.79 3,203,718.40 478,033,156.01 1,953,072.07

However, unremitted taxes totaling P41,500,713.04 as of December 31, 2011 were shown in the following Offices//Bureaus:
Office SHNC NETRC BALS NCR: DO Malabon DO Manila DO Navotas DO Quezon City DO Valenzuela Region IX Region X Region XIII TOTAL 749,474.23 1,778,111.54 2,483.22 8,162,662.73 905,791.77 23,839,356.32 456,156.73 21,038.60 P41,500,713.04 Amount P 672,751.37 3,921,710.03 991,176.50

While in CAR, post audit of transactions revealed that payments totalling P1,330,320.23 of electricity bills, communication and internet services, water utilities and overtime services were not deducted with expanded withholding taxes, VAT and tax from compensation contrary to the above provisions. We recommended that Management: require the Accountants of concerned offices to immediately remit the balances of taxes withheld per books of accounts; ensure that penalties due to late remittances shall be borne by responsible officials of the agency and not by the government; and see to it that taxes withheld are remitted on or before the 10th day of the month following the month of withholding except for taxes withheld for the month of December, which shall be filed on or before the 15 th day of the succeeding year, pursuant to pertinent Revenue Regulations.
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F. 33.

SETTLEMENT OF ACCOUNTS Out of total suspensions and disallowances of P390,579,751.31 and P289,662,858.20 issued by ten regions, OSEC, NETRC, SHNC, BALS, BEE, and BSE, only P119,687,582.64 were settled leaving a balance of P272,232,284.83 and P288,322,742.04, respectively, as of year-end. The table below shows the summary of Notices of Suspensions and Disallowances (NS/ND) issued before and upon effectivity of the Rules and Regulations for Settlement of Accounts (RRSA): Audit Suspensions and disallowances before effectivity of the Rules and Regulations on the Settlement of Accounts (RRSA):
ISSUED AS OF SEPTEMBER 30, 2009 NS ND P29,377,120.00 P 99,602.00 801.00 8,373,961.96 197,256.16 117,862.66 23,592,319.23 9,984,104.60 3,438,007.86 P66,707,471.51 SETTLED BALANCES AS OF DECEMBER 31, 2011 NS ND P29,377,120.00 P 99,602.00 801.00 7,148,862.07 197,256.16 P7,248,464.0 7 117,862.66 23,592,319.23 9,984,104.60 3,198,426.26 P66,467,889.91

REGION/ OFFICE OSEC NCR

DO/ SCHOOL PASAY CALOOCAN

1,225,099.89 239,581.60 P1,464,681.4 9

NEAP II IX CARAGA TOTAL

P8,473,563.96

REGION / OFFICE

Audit Suspensions and Disallowances issued upon effectivity of the RRSA:

ISSUED from Oct. 1, 2009 to Dec. 31, 2011 NS ND P1,158,432.99 2,092,475.86 1,196,055.29 109,974.40 1,383,025.75 143,350.00 542,368.54 95,572.50 1,880.00 562,457.89 1,880.00 562,457.89 105,800.00 461,268.85 81,099.69 95,572.50 1,383,025.75 37,550.00 16,657.00 1,196,055.29 109,974.40 BALANCES AS OF DECEMBER 31, 2011 NS P21,868,531.33 P2,075,818.86 ND

DO/SCHOOL

SETTLED

OSEC

P23,026,964.32

NETRC SHNC BALS BEE BSE

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REGION / OFFICE

DO/SCHOOL VIGAN CITY SAN CARLOS PANGASINAN I

ISSUED from Oct. 1, 2009 to Dec. 31, 2011 NS 4,140,002.92 3,457,390.20 3,202,657.09 500,055.32 2,867,049.26 3,355,748.00 1,769,728.00 43,958.00 6,189,229.59 1,710,477.82 28,094.00 21,509,455.39 180,000.00 2,550,578.52 176,584,166.56 190,346,744.54 7,246,457.77 940,926.76 6,524,863.56 18,479,126.45 ND

SETTLED

BALANCES AS OF DECEMBER 31, 2011 NS 4,140,002.92 3,457,390.20 3,202,657.09 500,055.32 2,867,049.26 ND

PANGASINAN II LA UNION SAN FERNANDO ALAMINOS CITY

120,237.00 21,143.81 3,126,294.16 2,175.00 21,509,455.39 151,000.00 21,513.00 6,135.00 243,950.00 16,311.00 6,513,001.08 12,307.08 15,280.00 349,800.00 318,456.54 98,015.43

3,235,511.00 1,769,728.00 22,81 4.19 3,062,935.43 1,710,477.82 25,919.00 29,000.00 2,550,578.52 176,562,653.56 190,340,609.54 7,002,507.77 924,615.76 11,862.48 18,466,819.37 11,500.00 41,248.54 23,764.95 302,943.75 62,680.79 1,639.56 246,858.09

II III IV-B V IX XII CARAGA ROP BENGUET CAR KALINGA BAGUIO ALEJO M. PACALSO MNHS NEAP CALOOCAN MALABON MANDALUYONG NAVOTAS PASAY QUEZON CITY TAGUIG/PATEROS PASIG TOTAL COMBINED TOTAL P112,036,879.97

11,500.00 56,528.54 349,800.00 23,764.95 621,400.29 160,696.22 1,639.56 246,858.09 85,770.00 P60,990.00 80,154.25 99,000.00 120,000.00 3,999,346.10 4,160.00 1,491,660.04 3,801,991.51 409,409.24 54,320.59 564,870.39 382,106,187.35 P390,579,751.31 222,955,386.69 P289,662,858.20

83,212,321.13 P11,319.60

P28,824,558.84

3,999,346.10

85,770.00 P49,670.40 80,154.25 99,000.00 120,000.00 4,160.00

NCR

2,524.21 615,390.64 114,112.24

1,489,135.83 3,186,600.87 295,297.00 54,320.59 564,870.39

118,222,901.15 P119,687,582.64

264,983,820.76 P272,232,284.83

221,854,852.13 P288,322,742.04

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The NS and ND issued as of September 30, 2009 or before the revised rules took effect had remaining unsettled accounts of P73,716,353.98 while those issued from October 1, 2009 to December 31, 2011 covered by RRSA, had an ending balance of P486,838,672.89. The foregoing balances as of December 31, 2011 pertaining to audit suspensions and disallowances shall continue to be monitored and enforced, pursuant to Section 28.3 of COA Circular No. 2009-006 dated September 15, 2009. The total balances of NS and ND issued before and upon effectivity of RRSA amounted to P390,579,751.31 and P289,662,858.20, respectively. Concerned persons responsible thereof made settlements amounting to P119,687,582.64 through compliance of audit requirements and submission of documents and refunds, ably complying the provisions of the RRSA. Thus, combined balances of unsettled accounts amounted to P560,555,026.87. We recommended that Management exhaust all possible means requiring the persons found or determined to be liable to immediately settle their suspensions and disallowances.

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