Solution to Exercise 2.

2-A ABC Diagraming Tool – CNA Incentive

Suggested Topic Sentence: The payments for the Collective Negotiation Agreement (CNA) Incentive of NFA-NCR officials and employees
amounting to P13.338 million in CY 2015 charged to the savings in CY 2014, were not supported by existing valid CNA, contrary to Item 4.1
of DBM Budget Circular No. 2014-2. Thus, the propriety of the expenses could not be fully assessed.

CRITERIA
 Item 4, DBM Budget Circular No. 2014-2 dated December 2,
2014
 Sections 1 and 3, Article XIX, 3rd CNA dated December 23,
2005 and Article XXI of the 4th CNA dated June 9, 2015
 Section 11 of PSLMC No. 2 s. 1991
 Amended Rules And Regulations of EO No. 180

Cause
Disregard of the contents of the letter
of the Civil Service Commission
Director, Human Resource Relations
Office dated September 21, 2014 to
the NFAEA President on the
registration of the 4th CAN and the
comments on the specific provisions
thereof.

Condition Effect
The agency paid the CAN incentives to its officials and The propriety of the expenses
employees without an existing valid CAN; incurred could not be fully assessed.
There was erroneous accounting entry at NDO which recorded
the 2014 CNA Incentive granted in CY 2015 as part of current
year expenses

Recommendation Evidence Recommendation

Require the NDO Accountant to adjust
in the books the payment of CNAI to
Prior Years Adjustments account;
Adhere strictly to the DBM guidelines
on the grant of CAN Incentives
 Disbursement Vouchers (DVs)
 Journal entry Vouchers (JEVs)
1
In coordination with the NFA-CO,
cause the submission of existing and
valid CAN to support the grant of
CAN Incentive.
 Solution to Exercise 2.2-2-Diagraming Tool – Rice Importation

Suggested Topic Sentence: The gap on policies to address the recurring short landing on rice importation disregarded accountability
inherent to its operation and financial transactions, resulting in unaccounted stocks and loss of funds from government coffers and
deprivation of availability of NFA rice to its intended consumers. In CY 2015, the customs duties of P9.812 million was subsidized by the
government on the 1,586.714 metric tons short landing.

Criteria


 Section 4.0 of DILG-DBM Joint Memorandum
Circular No. 2011-1 dated April 13, 2011

Effect
Condition  Recurring shortlanding and
Cause
No agency policy on who shall be accountable for the unaccounted stocks;
Disregard of inherent accountability cost of customs duties for short landed rice stocks in  Loss of funds from
on rice importation operation and rice importation using the CIF-DAP Incoterms government coffers
financial transactions  Deprivation of availability of
No copy of importation documents NFA rice to intended
consumers

Recommendation Evidence Recommendation

Re-visit the established policies in the
rice importation operations and  Certificates of Complete Delivery and Receipts Consider the inclusion of specific
financial transactions to identify  Shipping and importation documents terms and condition on
critical processes without or with  Customs Duties per vessel based on shipping shortlanding in the MOA with
ineffective embedded controls. documents supplies
Re-design controls specific to the
critical processes with the end in view
of established accountability on rice 2
importation operations and financial
transactions
 Solution to Exercise 2.2-2-Diagraming Tool – Charging of PY Obligations in Current year (3)

Suggested Topic Sentence: There were unaccounted filler transactions at the NCR CPO warehouses, equivalent to approximately 874 bags,
due to undocumented/unidentified filler transactions, resulting in erroneous stock reports and inaccurate balance of the stocks at any given
month and the Merchandise Inventory account.

CRITERIA
Sections 336 and 350 of the Local Government
Code of the Philippines

CAUSE CONDITION EFFECT

 Improper charges against the The total amount of P 7,113,388.42 Affected the pace of
approved budget. representing claims for calendar year implementation of current
 Improper budget preparation 2012 were charged against the year’s programs/projects/
 Charging of expenditures current appropriations. activities.
without approved (Note: Finding during the year)
supplemental budget for prior
year’s claims.

EVIDENCE RECOMMENDATION
RECOMMENDATION
 Prepare a balanced budget
 Subsidiary ledgers Recover the amount and
for PS, MOOE and Capital
outlay  Disbursement vouchers implement the PAPS of the
 Prepare a supplemental  Schedules currents year’s appropriation as
programmed.
budget for prior year’s
claim and have approved
by the Sanggunian
 Stop charging prior year’s
obligation against the
current year’s budget;
 Reclassify these expenses 3
as prior year’s adjustment.
 Solution to Exercise 2.2-2-Diagraming Tool – Buffer Stocking

Suggested Topic Sentence: The rice inventory levels at NCR warehouses from May to December 2015 were way above the mandated buffer
stock requirements of 15 days in each month, except July 1 with 30 days and December with 22 days, ranging from 25.71 to 40.36 days, due
to low distribution rate and receipts of imported rice allocation in preparation for El Niño, thereby exposing the stocks to damage,
deterioration and higher carrying/maintenance cost of the stocks on hand.

CRITERIA
NFA’s mandate to maintain food security stocks at any given time in order to effectively and
immediately respond during disaster/emergency situations which include natural or man-made
calamities.
Memo AO-2K13-02-037 dated 18 February 2013 provided the guidelines on food security
policy

CAUSE CONDITION EFFECT

 The overstocking was attributed to low rice distribution level region- CY 2015 Stock Reports showed Higher stock piles at the warehouses reaching almost the roof
wide at 67.06 percent vis-à-vis distribution target based on the revised trusses; some reaching 38 bags in the piles due to lack of
substantial excess of stocks level space
NCR MP in July and October 2015;
 Abundant stocks available in the market offering price per kilo at par over buffer stock requirements,
Such inventory levels exposed the stocks to risks on damage
with the standard price of NFA rice. specifically for the month-end of May and deterioration and higher carrying/maintenance cost of the
 Continuous receipt of imported rice allocated to NCR and the grant of until December. stocks on hand.
import permits to private importers through the Minimum Access
Volume (MAV) contributed further to the increased the level of stocks
in the warehouses. The stocks ranged from 2,766,731 to
 FIFO was not strictly implemented in disposing inventories.
4,343,600 bags equivalent to 25.71
to 40.36 days. The surplus stocks RECOMMENDATION
ranged from 5.18 to 22.46 days  Detailed evaluation and analysis of rice demand and
RECOMMENDATION during the same months supply, including environmental factors and rice
 Ensure that warehousing policies and procedures are strictly observed and smuggling, as basis for mapping a more realistic
require Warehouse Supervisors to strictly implement the FIFO method of marketing plan; and
selling/disposing inventories to avoid further damage/deterioration of stocks  General assessment of actual stocks inventory on hand
and eventual losses to NFA; vis-à-vis level of inventory needed to maintain stocks in
 Stocks are disposed/dispersed immediately to other NFA offices needing the cases of calamities and other factors, as basis for
same. EVIDENCE determining the volume augmentation through rice
 Assist the NCR Regional Office and Head Office, in case of excess inventory importation and more realistic and relevant plan of rice
levels on a regional and/or national scale, to strategically plan for the Marketing Plan; Daily Consumption procurement and allocation aligned with the mandate
on buffer stocks and responsive to the
allocation/importation of rice to avoid over-allocation to and/or over- Rate; Stock Reports; Pile Lay out; needs/preferences and buying capacity of majority of the
importation;
 Propose to top Management the assessment of the effects of granting import
Memo NCR-ERS-F-98 dated June 29, rice consumers to avoid the occurrence of excess stocks
2015 4 over buffer requirement to avoid overstocking, stocks
permits to private importers through MAV;
deterioration and additional carrying/maintenance costs.
 Strategize the accreditation of more/new retailers and the sale of rice,
specifically the ageing stocks, through the different market distribution outlets
and schemes to avoid excess inventories;