EXECUTIVE SUMMARY

A. Introduction

The Fiber Industry Development Authority (FIDA) was created under

Executive Order No. 709 dated July 27, 1987 as a result of the merger of the
abolished Abaca Industry Development Authority (PD No. 1208 of 1977) and the
Bureau of Fiber and Inspection Service (PD No. 652 of 1975) to consolidate and
integrate the development of all the aspects of the fiber industry.

On August 1, 2013, Department Order No. 02 series of 2013 was signed by

Secretary Proceso J. Alcala of the Department of Agriculture (DA) for the
consolidation of the Fiber Industry Development Authority (FIDA) and the Cotton
Development Administration (CODA) into the Philippine Fiber Industry
Development Authority (PhilFIDA).

The said Department Order was issued pursuant to Executive Order No. 366
dated October 4, 2004 re: Rationalization of the Functions and Agencies of the
Executive Branch and also due to the approval of the Rationalization Plan (RP)
covering the consolidation of the FIDA and CODA on May 29, 2013. As stated
therein, the FIDA and CODA shall transfer to PhilFIDA all functions and powers
vested to them by law.

As stated in the DA Rationalization Plan, the functions of PhilFIDA are

(a) research and development; (b) production support; (c) extension; (d) market
development; (e) regulation; and (f) planning and advocacy. The offices of the
Authority are the (a) Office of the Director; (b) seven divisions (Planning Services,
Administrative and Finance, Research, Extension Services, Fiber Technology,
Regulatory and Market Development and Statistics); and (c) nine Regional Technical
Offices (RTOs) I, IV, V, VII, VIII, IX, X, XI and XIII.

PhilFIDA is now headed by Mr. Eduardo B. Holoyohoy, Officer-in-Charge

(OIC) Executive Director. Based on PhilFIDAs plantilla, the Deputy Executive
Director is Ms. Shandy M. Hubilla. However, she is still with the Department of
Agriculture (DA) handling special projects.

As of December 31, 2013, PhilFIDA has a total of 461 existing plantilla

positions, of which 295 are filled-up and 166 are still vacant. In addition, it has 71
job-order employees.

B. Financial Highlights

During the year, the FIDA and CODA continued to record separately their
financial transactions. The following are solely the FIDAs financial condition, results

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 of operation, and sources and application of funds for the year compared with that of
the previous year:

Percentage
Particulars 2013 2012 Increase/(Decrease)
Financial Condition
Assets P 127,460,176.67 P 101,258,617.94 25.88
Liabilities 18,612,693.03 12,714,547.23 46.39
Government Equity P 108,847,483.64 P 88,544,070.71 22.93
Results of Operation
Income P 302,058,109.32 P 247,962,540.67 21.82
Expense 279,210,715.94 244,892,155.20 14.01
Net Income P 22,847,393.38 P 3,070,385.47 644.12
Sources and Application of Funds
Allotment Received P 267,404,113.41 P 248,127,217.27 7.77
Obligations Incurred 254,742,578.39 245,606,340.39 3.72
Balance P 12,661,535.02 P 2,520,876.88 402.27

C. Operational Highlights

The major accomplishments for the year 2013 as reported by FIDA

management which were verified by the audit team on a sampling basis are given
below.

Performance % of
Activities Targets Actual Remarks
Indicator Accomp.
MFO 1 Modernized fiber
development support services
provided
Production Support
Seedbanks and research experiment
stations maintained nos. 7 7 100
Abaca planting materials distributed nos. in 000 218 85.587 39.26 The low distribution of
abaca planting materials
from the seedbanks was
attributed to quarantine
order issued by the Bureau
of Plant Industry that
prohibits the movement of
abaca planting materials due
to fusarium wilt.
Abaca samples tested nos. in 000 6.097 7.124 116.84
Tissue cultured plantlets distributed nos. in 000 129.695 122.628 94.55 Continuously maintained
and operationalized in
Albay, Catanduanes,
Sorsogon, Leyte and Davao
City
Research and Development
Design and development of fiber nos. of
extraction machines researches 4 4 100
Development of technologies on fiber nos. of
processing and utilization researches 4 4 100

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 Performance % of
Activities Targets Actual Remarks
Indicator Accomp.
Provision of technical services to
fiber crop producers
Abaca rehabilitation has. 600 1,432.25 238.71
Abaca disease eradication has. 5,000 5,592 111.84
Production facilities maintained no. of sites 91 100 109.89
Extension support, education and
training
Participants trained nos. 2,000 5,980 299
Extension personnel nos. 50 0 0 This training has been
deferred due to approved
rationalization plan.
PhilFIDA will pursue this
training as soon as new
technical personnel have
been appointed/hired to new
technical positions.
Training and training related events nos. 60 202 336.67
conducted
IEC materials disseminated nos. 5,000 5,854 117.08
MFO 2 Regulations developed,
implemented, monitored and
enforced
Primary certificate of fiber inspection nos. 3,019 2,479 82.11
Bales inspected and approved nos. in 000 709.308 503.638 71
Permit to transport fiber nos. 4,950 4,345 87.78
Licenses issued nos. 1,159 869 74.98
License fees collected P000 1,425.75 1,137.72 79.80
MFO 3 Plans and policies
developed, implemented, monitored
and evaluated
National agriculture and fishery plans nos. 4 5 125
formulated and distributed
Reports disseminated nos. 20 22 110
Programs/projects endorsed and nos. 3 5 166.67
approved for funding
Public stakeholders consultations nos. 2 4 200
conducted

D. Scope of Audit

The audit covered the accounts and operations of the FIDA for CY 2013. The
audit was conducted to (a) ascertain the level of assurance that may be placed on
managements assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior
years audit recommendations.

A Value for Money (VFM) Audit was conducted on the Development of

Virus Resistant Abaca Cultivars (Musa textilis Nee) Using Modern Biotechnology
Project. The main goal of the project is to develop abaca varieties with resistance to
viral diseases using modern biotechnology.

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E. Independent Auditors Report

The audit team rendered a qualified opinion on the fairness of the presentation
of the CY 2013 financial statements of FIDA because of the following errors and
deficiencies in the receivable and PPE accounts:

1. The year-end balances of the accounts Due from National Government Agencies
(NGAs) and Non-Governmental Organizations/Peoples Organizations (NGOs/
POs) totaling P3,810,274.88 and P299,000.00, respectively, were unreliable due
to the inclusion of unliquidated fund transfers to (a) NGAs amounting to
P2,361,446.93 which were aged over one to forty years; and (b) NGOs/POs
amounting to P299,000.00 which were aged over four years, the purposes of
which have already been completed. (Observation No. 2)

2. Of the total cash advances of P9,204,789.73 granted to officers and employees of

FIDA, (a) P2,197,659.94 for special time-bound undertakings aged more than a
year to over two years; and (b) P291,474.28 for travels aged 31 days to over two
years, and the purposes of which were already served/completed, remained
unliquidated. The non-liquidation of the cash advances the purposes of which
have been completed/terminated overstated the balance of Advances to Officers
and Employees account by P2,489,134.22 and understated the current and prior
years expenses by their respective amount as of year-end. (Observation No. 3)

3. The Prepaid Rent account balance in the amount of P965,822.88 was overstated
by P386,937.90 or 40% due to the non-recording of the application of the security
deposit of FIDA Central Office with its former lessor that was deducted from the
last rental payment of the former in CY 2010. (Observation No. 4)

4. The reported balances of Property, Plant and Equipment (PPE) and Other Assets
accounts totaling P174,294,127.42 and P3,074,905.00, respectively, were
unreliable due to (a) unreconciled difference of P56,871,229.60 between the
balances of the accounts per books and per physical inventory of assets; (b) non-
reclassification of completed projects amounting to P290,391.24 from
Construction-in-Progress (CIP)-Agency Assets account to the proper PPE
accounts; and (c) non-provision of the allowance for depreciation for items
purchased in CYs 2011 to 2013 amounting to P37,895,724.02. (Observation
No. 5)

For the above observations, we recommended that the Accountant:

send demand letters to the concerned NGAs and University of the Philippines
Los Baos Foundation Incorporated (UPLBFI) for the immediate liquidation
of funds received; and conduct reconciliation of account balances with the
concerned NGAs;

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 issue demand letters to the officials and employees for the immediate
liquidation/settlement of their cash advances; monitor strictly the liquidation
of cash advances to prevent the accumulation of the same; and review and
reconcile the entries made which resulted in the negative balances of the
accountable officers cash advances and adjust accordingly;

record the application of the security deposit to reflect the correct balance of
the Prepaid Rent account; and

exert efforts to locate documents for the reclassification of the cost of the
completed projects to the proper PPE accounts; assign a personnel to do the
analysis, updating and reconciliation of PPE accounts; and provide the
necessary depreciation for the procured assets.

We also recommended that the Accountant and the Property Officer determine the
causes of the disparity of their records and adjust accordingly; and conduct regular
reconciliation of their records

F. Other Significant Observations and Recommendations

1. The Development of Virus Resistant Abaca Cultivars (Musa textilis Nee) Using
Modern Biotechnology Project continues to have zero accomplishment from
CYs 2012 to 2013 for failure of FIDA to submit requested reports/documents by
Bureau of Agricultural Research (BAR), the funding agency, as of end of 2012
which caused the delay in the issuance of the Advice of Notice of Cash Allocation
(NCA) amounting to P1,870,000.00 from the Department of Budget and
Management (DBM) for the funding of the extension and completion of the
project. (Observation No. 1)

We recommended that the (a) Project Leader make a follow-up to the DBM on
their request for reconsideration for the release of the P1,870,000.00 so that the
amount can be used for the completion of the project; and (b) Accountant
henceforth, submit financial reports/documents to BAR within timeliness to avoid
the delayed issuance of NCA.

2. The balance of the Receivables Disallowances/Charges account amounting to

P1,463,000.15 remained unsettled as of year-end contrary to Section 10.4 of COA
Circular No. 2009-006 dated September 15, 2009. (Observation No. 10)

We recommended that the (a) Chief Accountant enforce the immediate settlement
of the same in compliance with Section 10.4 of COA Circular No. 2009-006 dated
September 15, 2009; and (b) OIC Executive Director request from COA the
settlement of disallowances on installment basis.

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 The observations and recommendations were discussed with the agency
officials concerned during the exit conference conducted on May 5, 2014.
Management comments were incorporated in the report, where appropriate.

G. Implementation of Prior Years Audit Recommendations

Out of the eight prior years audit recommendations, two were fully
implemented while six were partially implemented. The details are discussed in Part
III of this report.

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