EXECUTIVE SUMMARY

A. Introduction
The Department of Budget and Management (DBM), created under Executive
Order No. 25 dated April 25, 1936, is mandated under this Order and by subsequent
issuances to promote the sound, efficient and effective management and utilization of
government resources (i.e., technological, manpower, physical and financial) as
instrument in the achievement of national socioeconomic and political development
goals.
By 2016, the DBM envisions to be: a champion of results-oriented budget and
management policies and practices that enable the government to steer the country
towards meaningful development that empowers the poor and the marginalized; an
implementer of world-class budget and management systems that enhance transparency,
accountability and public participation in governance; an institution composed of highly
competent and motivated public servants who observe the highest standards of
professionalism and integrity.
It shall lead public expenditure management to ensure the equitable, prudent,
transparent and accountable allocation and use of public funds to improve the quality of
life of each and every Filipino.
Furthermore, following are the general functions of the Department:

Formulates the overall resource application strategy to match the governments

macro-economic policy;

Prepares the medium-term expenditure plan, indicating the programming,

prioritization, and financing of capital investment and current operating
expenditure requirements of medium-term sectoral development plans;

Undertakes the formulation of the annual national budget in a way that ensures
the appropriate prioritization and allocation of funds to support the annual
program of government;

Develops and administers a national accounting system essential to fiscal

management and control;

Conducts a continuing study of the bureaucracy and assesses as well as makes

policy recommendation on its role, size, composition, structure and functions to
establish a government bureaucracy imbued with a spirit of public service;

Establishes the rules and procedures for the management of government

organization resources i.e., physical, manpower and other resources, formulates
standards of organizational program performance; and undertakes or provides
services in work simplification or streamlining of systems and procedures to
improve efficiency and effectiveness in government operations;

Conceptualizes and administers the governments compensation and position

classification plan; and

Monitors and assesses the physical as well as the financial operations of local
government units and government-owned and/or controlled corporations.

B. Financial Highlights
The comparative financial highlights for Funds 101, 171, 103, and 104 for
Calendar Years (CYs) 2013 and 2012 are as follows:
Fund 101
Allotment Received
Continuing
Appropriations
Obligations Incurred
Unexpended Balance
Total Assets
Total Liabilities
Government Equity
Total Income
Total Expenses
Excess of Income over
Expenses

Increase
(Decrease)
P461,115,907
41,587,966

2013
P1,344,014,403
268,744,760

2012
P882,898,496
227,156,794

1,569,600,847
43,158,316

932,765,416
277,023,714

636,835,431
(233,865,398)

1,247,885,650
38,802,336
1,209,083,314

1,384,751,297
32,926,611
1,351,824,686

(136,865,647)
5,785,726
(142,741,372)

969,735,248
948,368,290

951,484,067
1,121,645,174

18,251,181
(173,276,884)

21,366,958

(170,161,107)

191,528,065

2013
P 91,731,403
12,139,978

2012
P 180,870,345
189,830

Increase
(Decrease)
P(89,138,942)
11,950,148

89,394,857
14,476,133

192,454,832
11,774,317

(103,059,975)
2,701,816

Fund 171

Allotment Received
Continuing
Appropriations
Obligations Incurred
Unexpended Balance

2013
Total Assets
Total Liabilities
Government Equity

Increase
(Decrease)

2012

P3,361,045
52,425
3,308,620

P2,967,827
143,039
2,825,788

392,218
(90,615)
482,832

Total Income
90,413,998
Total Expenses
89,958,652
Excess of Income over
Expenses
455,346

197,785,534
191,884,800

(107,371,536)
(101,926,148)

5,900,734

(5,445,388)

Fund 103
2013

2012

Allotment Received P319,193,087,733

Continuing
3,807,081,570
Appropriations
Obligations Incurred
319,513,095,896
Unexpended Balance
3,487,073,407
Total Assets
Total Liabilities
Government Equity

485,741,670
1,281,601,157
(795,859,487)

Total Income
318,917,286,307
Total Expenses
319,149,794,047
Excess of Income over
Expenses
(232,507,740)

Increase
(Decrease)

P297,367,431,253 P21,825,656,480
3,190,971,237
616,110,333
299,196,921,895
1,361,480,595

20,316,174,001
2,125,592,812

722,630,242
1,223,694,793
(501,064,551)

(236,888,572)
57,906,364
(294,794,936)

299,992,937,382 18,924,348,925
299,488,018,831 19,661,775,216
504,918,551

737,426,291

Fund 104
2013

Allotment Received
Obligations Incurred
Unexpended Balance

2012

P 0.00
0.00
0.00

Increase
(Decrease)

P3,461,684,817 P(3,461,684,817)
3,461,684,817 (3,461,684,817)
0.00
0.00

There was no transaction for Fund 104 for CY 2013.

C. Operational Highlights
Executive Order (E.O.) No. 43 signed by President Aquino in May 2011 aims to
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orient and direct government programs, projects, and activities toward the attainment of
five key priority areas (KRAs) of the Administrations Social Contract: (1) Transparent,
accountable, and participatory governance; (2) Poverty reduction and empowerment of
the poor and vulnerable; (3) Rapid, inclusive, and sustained economic growth; (4) Just
and lasting peace and the rule of law; and (5) Integrity of the environment and climate
change adaptation and mitigation.
Under the General Appropriations Act for FY 2013 (Republic Act No. 10352), the
Department of Budget and Management (DBM)s total appropriation for the programs
and specific activities pegged at P928,219,000, details as follows:
Program/Project
A. PROGRAMS
I. General Administration Support
a. General Administration and Support Services
II. Support to Operations
a. Budget and Management Support Services
III. Operations
a. Budget Policy and Management
b. Budget Operations, Accounting and Finance
c. Regional Operations
Sub-total
TOTAL PROGRAMS
B. PROJECTS
I. Locally-funded Projects (s)
1. Budget Improvement Projects
2. Philippine Government Electronic Procurement
Systerm (PHILGEPS)
Sub-total
TOTAL PROJECTS
TOTAL NEW APPROPRIATIONS

Amount
P 389,950,000
47,139,000
30,088,000
116,231,000
121,390,000
267,709,000
704,798,000

99,302,000
124,119,000
223,421,000
223,421,000
P928,219,000

Among others, the amount allocated for programs of the DBM operations
particularly on budget policy and management, and budget operations, accounting and
finance amounted to P30,088,000 and P116,231,000, respectively. Based on the
information/data provided by the Budget Officer under the Financial Management
Service (FMS) and the OIC-Director of the Corporate Planning and Reforms Service
(CPRS), presented hereunder are the performance targets vis--vis the actual
performance as to physical and financial output/accomplishments of the DBM for
Calendar Year 2013. Details are as follows:

TARGETS

ACTUAL
Accomplishments

PERFORMANCE INDICATORS
Physical
Per
CPRS
Per Qty.
MFO 1: Budget and Management Policy Services
1. Conduct of fiscal policy research and planning,
formulation of medium-term fiscal plan, development
of fiscal budgeting framework, indicative annual
budget ceilings, sectoral composition of the budget
and macro cash program
Zero-Based Budget (ZBB)
No. of Zero-Based Budget studies contracted and

Financial
per
GAA/ABM
Amount

Physical
Per
CPRS
Per Qty.

P30,088,000

Financial
Per
FMS
Amount
P 463,753,000

9,979,000
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recommendations submitted 10 days before the

start of ERB

2. Conduct of continuing studies on the entire

government bureaucracy for purposes of instituting
long-term
reforms/innovations,
including
the
development and installation of improved techniques
and procedures on public expenditure management
and undertaking of researches/studies on governmentwide restructuring, work simplification, cost reduction
and other productivity-related activities
Systems & Productivity improvement policies,
standards and guidelines

10,018,000

No. of systems and productivity improvement

policies, standards and guidelines issued;
No. of departments where the NGICS/PGIAM
was rolled out;

3. Formulation of policies and development of

standards and guidelines on organization, staffing,
compensation and position classification and physical
resources management pertaining to equipment, and
administration and maintenance of a unified
compensation and position classification system for
the entire bureaucracy

1.

10,091,000
12
20
6

No. of issuances
No. of issuances to NGAs & GOCCs
No. of issuances to LGUs

MFO 2: Agency Budget and Management Services

Review and evaluation of the funding requirements
of government agencies, including their respective
foreign-assisted projects, and preparation and issuance
of release documents therefor, monitoring of fund
utilization and analysis of accountability reports of
agencies to determine commitments (actual
performance vis-a-vis targets), and development of
the organization and staffing

8
37
9
116,231,000
99,626,000

444,617,000

TARGETS

ACTUAL
Accomplishments

PERFORMANCE INDICATORS
Physical
Per
CPRS
Per Qty.

Financial
per
GAA/ABM
Amount

structure of agencies
Submission of Budget Documents

Physical
Per
CPRS
Per Qty.

Financial
Per
FMS
Amount

11

No. of budget documents submitted within the

prescribed period
No. of NGAs and GOCCs trainings conducted
No. of LGUs trainings conducted

283
285

142
196

Technical assistance to agencies to

implement reforms;
o Percentage of departments and
agencies with OPIF-based budget
proposal;
o No. of LGU trainings conducted on
procurement reforms under RA
9184 & its IRR
No. of NGAs with approved Rationalization
Plans (RPs)
No.
of
GOCCs
with
approved
Rationalization Plans (RPs)
Technical advice on budget, organization,
staffing and compensation for NGAs,
GOCCs and LGUs
o Percentage of required budget
consultations/fora conducted
o Percentage of Corporate Operating
Budgets (COBs) reviewed within 90
days from date received;
o Percentage of LGU budgets
reviewed within 90 days from date
received

100%
100%
1,426
1,239
58
53

107.14%
100%

100%

100%
100%
100%

317,806,000

MFO 3: Budget Releases Services

1. Development
of
standards, guidelines and
operating procedures for budget execution and
accountability, determination of the cash program at
the department/agency level, consolidated tracking
and analysis of all budget releases and agency
performance and planning and management of the
annual budget preparation process
Fund release documents
o No. of days before start of period
covered within which release
documents are issued to NGAs and
GOCCs
o No. of days before start of period
covered within
which release
documents are issued to LGUs
o Variance of Total Allotment release

16,605,000

0%

0%

TARGETS

ACTUAL
Accomplishments

PERFORMANCE INDICATORS
Physical
Per
CPRS
Per Qty.
to Total Allotment Release Program
(ARP) / General Appropriations Act
(GAA)
MFO 4: Performance Monitoring and Evaluation
Services
1. Review and evaluation of the funding requirements
of government agencies

Percentage of agencies whose

performance are reviewed under the Agency
Performance Review (APR)

Percentage
of
budget
preparation and execution forms and
reporting
systems
simplified/
developed/harmonized with OPIF

Financial
per
GAA/ABM
Amount

Physical
Per
CPRS
Per Qty.

Financial
Per
FMS
Amount

306,750,000

100%

100%

100%

100%

D. Scope of Audit
The audit was conducted on the accounts and operations of the DBM-Central
Office and its Regional Office (RO) Nos. I, II, III, NCR, IV-A, IV-B, V, VI, VII, IX, X,
XI, XII, XIII and CAR for Calendar Year 2013.The Management Letter for RO VIII was
not submitted to date. It was aimed to ascertain the propriety of the financial
transactions and determine the fairness of the presentation of the financial statements
and to ascertain compliance with laws, rules and regulations.
E. Auditors Report on the Financial Statements
The Auditor rendered a qualified opinion on the fairness of the presentation of
the financial statements of DBM- Funds 101 (General Fund) and 171 (Grants) due to the
audit observations which are hereunder presented, the details of which are shown in
Part II of the report:
1. RO V did not restore to the cash account balance the unreleased check as of
December 31, 2013 amounting to P953,971.87. This contravened Sections 31, 33
and 34 of the MNGAS, Volume 1 and GAFMIS Circular No. 2002-01 dated
December 16, 2002 and understated both the cash and the liability accounts by the
same amount.
We recommended and Management agreed that, prospectively, the Cashier and
Accountant restore to the cash balance all unreleased checks as at year end in
accordance with the prescribed procedures.
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2. The validity, existence and accuracy of the balances of the receivable accounts
totaling P81,459,764.34 is doubtful due to (a) unreconciled difference of
P29,761,529.28 between the book balance and amounts confirmed by the NGAs;
and (b) dormant accounts of P1,581,899.65.
We recommended and Management agreed that the Chief Accountant reconcile fully
the foregoing difference of P29,761,529.28. We further recommended and
Management agreed that the Accountants of the CO and NCR exert extra efforts to
locate the documents and review, analyze and reconcile with the BTr and the GSIS
the Due from National Treasury and the Due from GOCCs accounts, respectively
and make necessary adjustments, if any. Otherwise request for the write off from the
books the dormant receivable accounts following the guidelines prescribed in COA
Circular No. 97-001.
3. The Office Supplies Inventory account balance of P7,414,950.07 is inaccurate and
unreliable due to (a) unrecorded issuances of supplies amounting to P1,570,889.53
at the NCR; (b) presence of unusable, expired, obsolete and/or damaged items in the
books of the ROs IVB, VII and NCR totaling P71,695.38; (c) items procured for
P434,397.85 in RO V were recorded as outright expense instead of inventories; and
(d) failure of RO V to conduct physical count of inventory. Moreover, the Property
Officer of RO VI was not bonded in violation of Treasury Circular No. 02-2009
dated August 6, 2009.
We recommended and Management agreed to:
a.
b.

c.

d.

Require the Property Officer of NCR to complete the preparation of RSMI and
the Accountant to record the items issued from stock as indicated therein;
Instruct ROs IVB, VII and NCR Property Officers to closely monitor the
condition of stocks, promptly dispose of the unusable/expired/obsolete/ damaged
supplies and report the disposal to the Accountants as basis in dropping them
from the accounts;
Oblige RO V to record as inventories the purchases of supplies and materials,
instead of directly recording the expense account; and regularly conduct physical
count of inventories and reconcile the result with the recorded accountabilities;
and
Direct the Regional Director to ensure that the Property Officer is properly
bonded.

4. The PPE account balances was unreliable due to (a) accounting errors that resulted
in the net overstatement of the PPE balances by P323,974.22; and (b) failure by the
agency to conduct or complete physical inventory of PPE and reconcile the result
with the recorded accountabilities.
We recommended that Management:
a.

Direct the concerned accountants to record the correcting entries for the
foregoing accounting errors;
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b.

c.

d.

e.

Ensure the transfer of assets among and between DBM offices are recorded
promptly based on the JEV drawn by the source office and properly
accomplished Invoice Receipts of Property (IRP);
Direct the accountable officers to produce the missing laptops and firearms
otherwise settle their accountability for these items. Likewise, strengthen
controls over tracking of PPE to ensure that missing or lost items are readily
detected and the settlement for the liability thereof is immediately enforced;
Direct the Accountant and Property Officer of NCR, RO XIII and CAR to
coordinate in resolving the difference between the PPE balances per books and
RPCPPE; and
Direct the Property Officer of CO and RO V to conduct/complete the physical
count of PPE and reconcile the result with the recorded accountabilities.

F. Other Observations and Recommendations

Fund 103
1. The IRA share for CY 2013 of the Local Government Units (LGUs) in the national
taxes amounting to P302,806,286,459.00, were not automatically released to LGUs
but maintained under DBM Administered Funds (Fund 103) in violation of Section
6, Article X, General Provisions of the 1987 Philippine Constitution.
We recommended that the DBM study the possibility of directly releasing IRA to
LGUs and for the LGUs to maintain separate books of accounts and submit
Financial Accountability Reports (FARs) so that expenses can be included in the
overall expenditures in the National Government just like other NGAs.
2. The transfer of DBM Administered Funds to LGUs and other government agencies
totaling P167,052,837,290.68 was not supported with the required documents in
violation of Section 3.1.2 of COA Circular No. 2012-001 dated June 14, 2012 and
paragraph 2.4 of COA Circular No. 96-006.
We recommended that Management submit the documents required in paragraph 2.4
of COA Circular No. 96-006 and Section 3.1.2 of COA Circular 2012-001, to wit:
(a) Report on the Allotments, Expenditures/Obligations Incurred and
Disbursements/Obligations Liquidated; (b) Copy of Official Receipts (ORs) or its
equivalent evidencing receipt of funds by the LGUs; (c) List of Recipients LGUs
supporting the subject amount of fund transfers.
Regular Agency Books- Fund 101 and 171
3. The CO, ROs IVB, VI, XII and XIII failed to dispose of unserviceable, obsolete or
unneeded properties valued at P16,802,520.68 as required in Section 12 of the
General Provisions of the General Appropriations Act, FY 2013 Republic Act No.
10352.
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We recommended and Management agreed to complete without delay the disposal of

all unserviceable PPE in accordance with the prescribed guidelines.
4. The NCR and ROs III, V,VI, X, XI and XIII either failed to submit or submitted to
the Auditor their financial reports and/or documents beyond the prescribed deadline
thus the benefit of timely and reliable financial information brought about by prompt
review and early detection and correction of error were bypassed.
We recommended and Management agreed to instruct the concerned Accountants to
submit without delay all the aforementioned financial reports and documents and
implement measures that will effectively ensure the regular submission of all
financial reports and documents within the prescribed deadline.
National Government- Appropriation and Allotment
5. The DBM did not submit the Registry of Appropriations and Allotment (RAPAL)
and Registry of Allotments and NCA Issued (RANCAI) which prevented the Audit
Team to validate whether: (a) the allotment releases were within the authorized
appropriation of P2,572,792,371,000.00; and (b) that NCAs issued were covered by
allotments released to agencies for CY 2013 in violation of COA Circular No. 2002002 dated June 18, 2001.
We recommended that Management submit to the Auditor the following documents
relating to the FY 2013 appropriation of P2,572,792,371,000.00:
a.
b.

RAPAL and RANCAI or their equivalent; and

Photocopies of SAROs and NCAs and the attached supporting documents which
are the basis of the releases submitted to the Records Division, including those
releases needing clearance/for later release, adjustment/realignments as well as
those governed by the specific provisions of the GAA.

The aforementioned observations and the corresponding recommendations were

discussed with Management during the exit conference on August 28, 2014. Management
views and comments were incorporated in the report, where appropriate.
G. Status of Implementation of Prior Years Audit Recommendations
Of the 47 audit recommendations contained in the CYs 2012, 2011, 2010 and 2009
Annual Audit Reports, 8 were implemented, 32 were partially implemented and 7 were
not implemented, details of which are shown in Part III.

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