PHILIPPINE INSTITUTE OF TRADITIONAL AND ALTERNATIVE HEALTH CARE

ANNUAL AUDIT REPORT FOR CY 2014

EXECUTIVE SUMMARY

INTRODUCTION

The Philippine Institute of Traditional and Alternative Health Care (PITAHC) was created under
RA 8423 otherwise known as the Traditional and Alternative Medicine Act (TAMA) of 1997
authored by Senator Juan Flavier and approved on December 9, 1997. It became a turning
point in the history of the Philippine Traditional Medicine that the herbal plants became a
priority. Henceforth, the ten priority plants namely: Lagundi, Ulasimang Bato, Bayabas,
Bawang, Yerba Buena, Sambong, Ampalaya, Niyug-niyogan, Tsaang-gubat and Akapulko are
now being promoted.

The PITAHC is a government owned and controlled corporation attached to the Department of
Health (DOH). Its mission is to uphold the right of every Filipino for better health through the
provision of safe, effective and affordable traditional and alternative health care products,
services and technologies.

At present, the PITAHC has four commercial scale plants as follows:

1. The Cotabato Herbal Pharmaceuticals Processing Manufacturing and Research

Plant (CHPPMRP) located at L.R. Sebastian Road, 9600 Cotabato CRMC
Compound, Cotabato City is the first, commercial scale government facility
established for the production of medicinal plants in dosage forms. The Plant was
inaugurated on November 15, 1988 by President Corazon C. Aquino. The
CHPPMRP facility consists of buildings, machineries and equipment for drying and
processing raw materials, dosage manufacturing, quality control and animal
pharmacological studies. At present, the Plant has the capacity to produce 15,000
pieces of soap per month such as Bayabas Soap, Carrot Soap, Akapulko Soap,
Labanos Soap, and Papaya Soap.

2. The Davao Herbal Research and Processing Plant (DHRPP) is located inside the
DOH compound in Bajada, Davao City. The Plant became operational in March
1983 and has a plant capacity to produce one million Sambong Tablet (250 gms.)
and Tsaang Gubat per month.

3. The Tacloban Herbal Pharmaceutical Processing and Manufacturing Plant

(THPPMP) opened in July 1989 in Barangay Bagacay, Tacloban City. The Plant has
a land area of 22 hectares, 11 of which are planted to first batch of the five (5)
priority plants to supply the plant with raw materials specifically sambong and lagundi
plants. The land was donated to PITAHC by DOH on August 7, 2003. Its present
plant capacity is 2.7 million Sambong Tablets (250 mg.) and Lagundi Tablets (300
mg.) per month.

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 4. The Cagayan Valley Herbal Processing Plant (CVHPP) located in a 1.6 hectare lot
owned by the Plant at Carig, Tuguegarao City was opened in July 1991. At present,
CVHPP is capable of manufacturing about 2.4M Lagundi tablets per month.

On September 13, 2012, the Governance Commission for Government Owned or Controlled
Corporations (GCG) issued Memorandum Order No. 2012-10 classifying the PHITAHC as a
research institution with the primary purpose and objective of gathering information for the
education of all people for the specific field of traditional and alternative health care.

The Institute has a total manpower of 79 filled positions, distributed as follows:

PITAHC – Head Office 26

Cagayan Valley Herbal Processing Plant (CVHPP) 18
Cotabato Herbal Pharmaceuticals Processing Manufacturing
And Research Plant 9
Davao Herbal Research and Processing Plant (DHRPP) 13
Tacloban Herbal Pharmaceutical Processing and Manufacturing
Plant (THPPMP) 13
Total 79

PITAHC is managed by a Board of Trustees, composed of the following members as of

December 31, 2014

Board of Trustees:

Chairman
Dr. Janette L. Garin - Secretary of the Department of Health

Members:
Dr. Jaime C. Montoya
Dr. Vivencio R. Mamaril
Dr. Ella Cecilia Naliponguit
Dr. Leonida S. Calagui
Dr. Theresa Mundita S. Lim
Dr. Angel C. Alcala
Ms. Bernadette E. Arellano
Dr. Martin DG. Camara
Dr. Fabian M. Dayrit
Dr. Warren David Sarmiento
Dr. Isidro C. Sia
- Department of Science and Technology
- Department of Agriculture
- Department of Education
- Director IV, NCR - Commission on Higher Education
- Department of Environment and Natural Resources
- representative of environmental sector organization
- representative of natural/organic food industry sector
- physician, practitioner of traditional and alternative
health care
- representative of academe and research institution
sector
- President, Sta. Lucia Health Care Center
Allopathic/Western Medical Practitioner
- Director General

The Institute’s Central Office is located at PITAHC Building, East Avenue Medical Center
Compound, Matapang St., Barangay Central, Quezon City.

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FINANCIAL HIGHLIGHTS

PITAHC’s financial condition and results of operations are presented below:

Comparative Financial Condition (in Philippine Peso)

2013
2014
(As Restated)
Assets 382,150,107 334,829,243
Liabilities 26,429,593 22,742,944
Surplus 355,720,514 312,086,299

Results of Operation (in Philippine Peso)

2013
2014
(As Restated)
Income 60,402,994 60,702,774
Expenses 77,706,506 79,961,749
Net Income/(Loss) (17,303,512) (19,258,975)
Subsidy from NG 49,800,000 40,000,000
Income/(Loss) after subsidy from NG 32,496,488 20,741,025

SCOPE OF AUDIT

The audit covered the operations of the PITAHC for CY 2014. The audit involved performing
procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depended on the auditor’s judgment, including the
assessment of the risks or material misstatement of the financial statements, whether due to
fraud or error.

STATE AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

The Auditor rendered an unmodified opinion on the fairness of the presentation of the financial
statements of the PITAHC for the year 2014.

SUMMARY OF SIGNIFICANT OBSERVATIONS AND RECOMMENDATIONS

Below is the summary of the significant audit findings and recommendations for CY 2014 as
detailed in Part II of the Report.

PITAHC – Central Office

1. There were deficiencies in the implementation of research projects awarded during

Calendar Year (CY) 2014 and in prior period amounting to P37.337 million and P14.416
million, respectively.

 Research projects awarded in CY 2014 with a total contract price of P3.449 million
did not undergo competitive bidding contrary to the Implementing Rules and
Regulations (IRR) of Republic Act (RA) 9184.

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  Contract amounting to P1.199 million was awarded to a Non-Government
Organization (NGO) despite non-accreditation by the Bids and Awards Committee
(BAC) contrary to COA Circular No. 2007-001 dated October 25, 2007 and Section 2
of Presidential Decree 1445.

 Research project with a contract price of P23 million was not included in the Annual
Procurement Plan (APP) for CY 2014, while research projects with a total contract
price of P10.888 million exceeded the Approved Budget for the Contract (ABC) by
P7.488 million.

 Projects contracted with government and private proponents amounting to P14.416

million were completed beyond the agreed project duration resulting in delayed
implementation of research projects.

We recommended that Management:

 conduct competitive bidding in the selection of proponents that will undertake its
research projects, as required under RA 9184 and its IRR;

 submit documents on the accreditation of the NGO by the BAC as required under
COA Circular No. 2007-001;

 ensure that all procurements are within the ABC and in accordance with the APP;

 monitor the proper implementation of the projects and ensure that projects are
completed and funds are liquidated within the specified time frame.

PITAHC – Davao Herbal Processing Plant

2. For CY 2014, the Agency sold P3.273 million worth of products on account to private
institutions/clients contrary to PITAHC Memorandum No. 10 dated November 15, 2010.
Likewise, it did not impose penalties on collection of accounts receivable on delayed
payments totaling P2.377 million for the period December 2010 to December 2014.

We recommended that Management:

 strictly implement PITAHC Memorandum No. 10, s. 2010 dated November 15, 2010
regarding sales of herbal products and imposition of penalty on delayed payments to
avoid losses on uncollected receivables and increase income through penalties on
delayed payments.

 exhaust all remedies to intensify collection of long overdue receivables from private
clients.

PITAHC – Cagayan Valley Herbal Processing Plant

3. Accounts Receivable from government agencies amounting to P1.895 million as of

December 31, 2014 were subjected to Allowance for Bad Debts, contrary to the Manual on
New Government Accounting System.
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 We recommended that the Accountant prepare the necessary adjusting entries to reflect the
correct Allowance for Bad Debts balance.

PITAHC – Cotabato Herbal Processing Plant

4. The recorded Receivables from Disallowances/Charges of P0.438 million remained

unsettled due to the inability of Management to enforce their collection despite the issuance
of the Final Order of Adjudication (FOA) and Notice of Finality of Decision (NFD) by the
Commission on Audit (COA).

We recommended that Management:

 enforce the immediate settlement of the reported/recorded disallowances by issuing

demand letters to those employees who are still connected with the government
service and to those whose whereabouts can be located, to settle their equally
shared obligations; and

 instruct the Chief Accountant to facilitate the collection of the unsettled balances and
to coordinate with the Agency Head of the other involved government offices so that
settlements submitted by concerned officials and employees can be immediately
recorded in the account Receivable-Disallowances/Charges in the ensuing year.

PITAHC – Tacloban Herbal Processing Plant

5. The accuracy, reliability and collectibility of Accounts Receivable amounting to P3.098

million could not be ascertained due to the variance in the amount of P0.557 million between
the General Ledger (GL) and the Subsidiary Ledgers (SL) and existence of long outstanding
account balances amounting to P1.906 million, contrary to Sec. 12 of the NGAS Manual,
Vol. II and PITAHC Memorandum No 11 s. 2010.

We recommended that the Accountant maintain subsidiary ledgers for every customer,
analyze and reconcile the variance between the Accounts Receivable general ledger
balance with its subsidiary records and effect the necessary adjustments. Also, we
suggested that Management exert more effort to collect the long outstanding receivables by
sending collection/demand letters. Likewise, enforce the collection of employees account
through salary deduction.

SUMMARY OF TOTAL SUSPENSIONS, DISALLOWANCES AND CHARGES

As of December 31, 2014 PITAHC has an unsettled suspension of P4,120.00 and an unsettled
disallowance in the amount of P3,294,191.18 under ND No. 2009-001 dated January 5, 2009
representing claim for COLA back pay. A Notice of Finality of Decision dated July 21, 2010 was
issued but the Institute filed an appeal with the Commission Proper. The appeal was denied per
COA Decision No. 2013-09 dated January 30, 2013. The decision was again appealed on April
04, 2013. On January 26, 2015 the Commission Proper en banc issued a resolution dismissing
the motion for reconsideration for failure to raise new matter or show sufficient ground to justify
reconsideration on the assailed Decision.

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Status of Implementation of Prior Year’s Recommendations

Of the seven audit recommendations embodied in the previous year’s Annual Audit Report, two
were fully implemented and five were partially implemented.

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