EXECUTIVE SUMMARY A.

INTRODUCTION

The Department of Science and Technology (DOST) is the premiere science and technology governing agency in the country with the mandate of providing central direction, leadership and coordination of all scientific and technological activities, and of formulating policies, programs and projects to support national development. Originally established as the ational Science Development !oard ( SD!) on "une #$, #%&', it was later reorgani(ed on )arch #*, #%'+ to become the ational Science and Technology ,uthority ( ST,) vested with a broader policy ma-ing and program implementing functions in order to be more effective and responsive to the technological needs of the country. On "anuary $., #%'*, ST, was elevated to the Department of Science and Technology (DOST) under /0ecutive Order o. #+'. DOST1s functions and responsibilities were e0panded to enable it to effectively pursue the declared state policy of supporting local scientific and technological efforts, developing local capability to achieve technological self2reliance, promoting public and private sector partnership in science and technology activities and encouraging the private sector to ta-e greater role in research and development activities. The DOST is headed by the 3onorable Secretary )ario 4. )ontejo who is appointed by the 5resident to e0ercise authority and responsibility for the mandate, and for supervision and control of the Department. The Secretary is assisted by three ($) 6ndersecretaries for7 (a) 8esearch and Development, (b) 8egional Operations, and (c) Science and Technology Services 2 who also have supervision over the 9nstitutes under their respective areas of responsibility. The Secretary is also assisted by three ($) ,ssistant Secretaries for7 (a) Strategic 5lans and 5rograms, (b) Technology Transfer, and (c) :inance, ,dministrative and ;egal ,ffairs. The Department has four (<) Staff Services, namely7 (a) ,dministrative and ;egal Service which provides the Department with services relating to personnel, records, property procurement and management, collection, disbursement, archiving, general services, and legal matters= (b) :inancial and )anagement Service which provides advice and assistance on budgetary, financial and management improvement matters= (c) 9nternal ,udit Service which assists the management in achieving efficient and effective fiscal administration and performance of its affairs and functions= and (d) 5lanning and /valuation Service which provides services relating to policy development and planning, program coordination and monitoring, and Science > Technology resource assessment and evaluation matters. i

DOST is composed of the following councils and agencies7

1. Three ($) sectoral planning councils responsible for7 formulating policies,

plans, programs, projects and strategies for S>T development= programming and allocating funds= monitoring of research and development projects= and generating e0ternal funds.
2. Seven (*) research and development institutes concerned with basic and

applied researches on various fields. $. /ight (') S>T service institutes rendering science and technology2related services. <. Two (+) collegial bodies with mandated functions of assistance, recognition, advisory and establishment of international lin-ages. &. Si0teen (#?) 8egional Offices headed by a 8egional Director and seventy2nine (*%) 5rovincial S>T @enters (5ST@s) manned by 5ST@ Officers. The 8egional Directors are under the supervision of the 6ndersecretary for 8egional Operations. ,s per DOST ,dministrative Order o. ..+ Series of #%'% (,nne0 ..'), the DOST 8egional Offices serve as focal points for the planning and implementation of S>T programs and projects in their respective regions in consonance with the national S>T 5lan. They provide S>T services to the local populace and coordinate with other government agencies and other sta-eholders on S>T matters. B. FINANCIAL HIGHLIGHTS

The following are the Department1s comparative total assets, liabilities and government eAuity, together with the sources and application of funds7 Particulars ,ssets ;iabilities 4overnment /Auity R$sults &' O($rati&#s Total 9ncome Total /0penses /0cess of 9ncome over /0penses S&urc$s%Us$s &' Fu#)s ,llotment received Sub2,llotments ii !" !"" I#cr$as$% D$cr$as$ *&%,.*$ %%,%'? ?&%,.'* (#,*%#,+%') %%,%$< (#,'%#,+$+) (#,?#&,'<#) (+?+,&.+)

(In Thousand Pesos) ?,.#',?&& &,+&%,&'+ +%#,$#$ #%#,$+* &,*+*,$<+ &,.?',+&& #,%$.,'.< %*$,<+' %&*,$*? +,<$#,*?* <#',.#+ (<#',.#+) $,*++,#.+ '*$,<%< +,'<',?.' <,.<*,?.' +?+,&.+

Obligations incurred 6ne0pended balance C. SCOPE OF AUDIT

+,.#%,#.' <#+,?&%

$,?&*,##+ #+*,%%<

(#,?$',..<) +'<,??&

The audit covered the accounts and operations of the Department of Science and Technology @entral Office and 8egional Offices for @B +.#+. The objectives of the audit were to ascertain the fairness and reliability of the agency1s financial statements and results of operations, determine the validity and propriety of the financial transactions, and ascertain compliance with laws, rules and regulations. D. AUDIT OPINION ON THE FINANCIAL STATEMENTS

The ,uditor rendered a Aualified opinion on the fairness of the presentation of the financial statements of the DOST for @B +.#+ due to accounting errors and deficiencies, which are discussed in detail in 5art 99 of the report and summari(ed in the )atri0 on the ,nalysis of the /ffects of the )isstatements on the :inancial Statements mar-ed as ,nne0 +. )anagement ensures that these errors and deficiencies are rectified immediately for a fair presentation of the financial statements E. SIGNIFICANCT OBSERVATIONS AND RECOMMENDATIONS

The following were the significant audit observations in additions to the accounting errors and deficiencies, which were discussed in detail with )anagement and officials concerned during the e0it conference held on September $., +.#$, details of which were discussed in this report. )anagement views and comments were incorporated in the report, where appropriate. #) There was inadeAuate feedbac- and monitoring system to evaluate program implementation progress and whether completed S/T265 5rojects of proponents valued at ##*,'&$,''#.&. attained the program objectives of increase productivity and competitiveness including job generation. *$ r$c&++$#)$) t,at DOST-SET-UP O''ic$ t&. /i0 a)&(t a#) $sta1lis, a# $''$cti2$ '$$)1ac3 a#) +&#it&ri#4 s5st$+ t& $#sur$ t,at t,$ (r&6$cts ar$ i+(l$+$#t$) i# acc&r)a#c$ 7it, t,$ a((r&2$) 1u)4$t8 t$r+s a#) c&#)iti&#s8 (r&6$ct +il$st&#$s8 ($r'&r+a#c$ $9($ctati&#s a#) +a9i+i:ati&# &' )$sir$) 1$#$'its; /ii0 )$2$l&( a# $arl5 7ar#i#4 a#) r$s(&#s$ +$c,a#is+ t& (r$)ict%)$t$ct (&ssi1l$ (r&4ra+ 'ailur$s; a#) /iii0 4$#$rat$ accurat$8 r$lia1l$8 c&+(r$,$#si2$ iii

a#) ti+$l5 (r&4ra+%(r&6$ct )ata &r i#'&r+ati&# #$$)$) t& )$2$l&( strat$4ic (&lic5 r$s(&#s$s t& all i)$#ti'i$) issu$s &# (r&4ra+s%(r&6$cts i+(l$+$#t$). +) 9nadeAuate planning and evaluation of project proposals and the selection of Aualified recipientsCbeneficiaries of eAuipment under the DOST S/T2 5rogram resulted in the accumulation of pulled out eAuipment for releases amounting to <,&.%,?$#.?., thus defeating the program1s objective of improving its beneficiaries1 productivity through technology transfer and technical innovations. *$ r$c&++$#)$) t,at Ma#a4$+$#t. /i0 6u)ici&usl5 (la# a#) $2aluat$ 'utur$ (r&6$ct (r&(&sals as 7$ll as t,$ s$l$cti&# &' 1$#$'iciari$s. Als&8 ass$ss t,$ <uali'icati&#s%r$a)i#$ss &' t,$ (r&(&#$#ts t& $#sur$ t,$ sustai#a1ilit5 &' t,$ (r&6$ct a#) t& a2&i) accu+ulati&# &' (ull$) &ut% i)l$ $<ui(+$#t; /ii0 i+(l$+$#t strictl5 t,$ (r&2isi&# &# t,$ r$c&2$r5 &' $<ui(+$#t &r t,$ 7,&l$ 2alu$ &' t,$ $<ui(+$#t '&r (r&6$cts 7,ic, 7$r$ (r$+atur$l5 t$r+i#at$) i# &r)$r t& (r$2$#t 7asta4$ &' 4&2$r#+$#t 'u#)s; /iii0 $9$rt $''&rt i# l&&3i#4 '&r #$7 1$#$'iciari$s &' t,$ (ull$)-&ut $<ui(+$#t s& t,at t,$ $<ui(+$#t 7ill 1$ 'ull5 utili:$) a#) (r&t$ct$) 'r&+ 'urt,$r )$t$ri&rati&#; a#) /i20 +a3$ r$(r$s$#tati&# 7it, t,$ su((li$rs &' t,$ )$'$cti2$ $<ui(+$#t '&r (&ssi1l$ r$(air &r r$(lac$+$#t t& (ut t,$ $<ui(+$#t i# us$ '&r t,$ 1$#$'it &' &t,$r i#t$r$st$) r$ci(i$#ts. $) ,bandoned, partially completed and unfinished four (<) building projects of DOST2OS/@ and 8egion D remained idle and unutili(ed for a number of years thus, resulted to wastage of government funds. *$ r$c&++$#)$) t,at Ma#a4$+$#t &' DOST-OSEC t& 7 /a0 +a3$ r$(r$s$#tati&# 7it, t,$ D$(art+$#t &' Pu1lic *&r3s a#) Hi4,7a5s /DP*H0 '&r a R$1&u#) Ha++$r T$st '&r t,$ t7& 1uil)i#4s t& )$t$r+i#$ 7,$t,$r t,$ u#'i#is,$) structur$ ca# still 1$ sa2$) a#) c&+(l$t$); /10 r$<u$st '&r a))iti&#al 'u#)i#4 'r&+ t,$ DBM t& c&+(l$t$ t,$ c&#structi&# &' t,$ 1uil)i#4. F&r DOST-R$4i&# X t&. /c0 r$sci#) t,$ c&#tract a#) 1lac3list t,$ #a+$ &' t,$ c&#tract&r i# t,$ r&&st$r &' <uali'i$) 1i))$rs '&ll&7i#4 t,$ (r&c$)ur$s (r$scri1$) u#)$r t,$ r$2is$) IRR &' RA =">? as 7$ll as )$t$r+i#$ t,$ lia1ilit5 &' t,$ c&#tract&r u#)$r t,$ c&#tract a#)8 i' 7arra#t$) 15 $2i)$#c$8 'il$ a((r&(riat$ c,ar4$s a4ai#st t,$ c&#tract&r; /)0 )ir$ct t,$ $+(l&5$$s &' t,$ Pr&2i#cial O''ic$ t& (r$(ar$ &ccu(5i#4 t,$ 1uil)i#4 si#c$ it is alr$a)5 ,a1ita1l$ t& (r$2$#t a#5 'urt,$r (&ssi1l$ l&ss a#) )a+a4$ t& t,$ (r&($rt5; /$0 r$<u$st '&r a))iti&#al 'u#)i#4 'r&+ DOST-OSEC t& c&+(l$t$ t,$ c&#structi&# &' t,$ 1uil)i#4; a#) /'0 u#)$rta3$ t,$ c&+(l$ti&# &' t,$ 1uil)i#4 15 a)+i#istrati&# t& 1$ 'u#)$) 'r&+ t,$ 1ala#c$ &' t,$ &1li4at$) a+&u#t '&r t,$ c&#tract. iv

<)

5rocurement of mobile science bus costing &.# million was awarded to an ineligible supplier or bus company with a line of business Ebus line operationF contrary to e0isting laws, rules and regulations. There was also absence of complete detailed contract andCor agreement for the supply of the said mobile science bus and no amended contract for the e0tension of wor-Ctime to justify the late delivery of mobile bus. *$ r$c&++$#)$) t,at t,$ Ma#a4$+$#t. /i0 r$<uir$ t,$ C,air+a# &' t,$ DOST-CO Bi)s a#) A7ar)s C&++itt$$ /BAC0 t& su1+it 6usti'icati&#%$9(la#ati&#s '&r a7ar)i#4 t,$ (r&6$ct t& t,$ i#$li4i1l$ l&#$ 1i))$r%su((li$r8 G$#$sis Tra#s(&rt S$r2ic$s8 I#c.8 si#c$ it 'ail$) t& su1+it all t,$ )&cu+$#tar5 r$<uir$+$#ts as (r&2i)$) '&r i# R.A. =">? a#) su1+it 6usti'icati&# '&r t,$ r$as&# &' )$la5 i# t,$ issua#c$ &' N&tic$ t& Pr&c$$); /ii0 su1+it a)2a#c$ c&(i$s &' C&#tracts%PO%*O 7it,i# t,$ (r$scri1$) ($ri&) t& t,$ O''ic$ &' t,$ Au)it&r '&r ti+$l5 r$2i$7 &' t,$ l$4al a#) t$c,#ical as($cts &' t,$ c&#tract8 (ursua#t t& COA Circular !!=-!!"; a#) /iii0 )$)uct t,$ &#$-,al' &' &#$ ($rc$#t '&r $2$r5 )a5 &' )$la5 as li<ui)at$) )a+a4$s i# t,$ 'i#al 1illi#4%(a5+$#t t& 1$ r$c3&#$) 'r&+ t,$ )at$ &' )$li2$r5 as ($r a4r$$+$#t t& t,$ )at$ &' acc$(ta#c$.

&)

5rocurement of the science bus laboratory supplies and eAuipment with a total cost of %**,...... were split into five (&) different reAuisitionsCpurchase orders to avoid procurement through public bidding. 9nstead, they were acAuired through shopping from only one supplier in violation of 8.,. %#'< and @O, @irculars os. *?2<# and '&2&&2, as amended, dated "uly $., #%*? and September ', #%'&, respectively, rendering the transactions irregular. *$ r$c&++$#)$) t,at t,$ Ma#a4$+$#t r$<uir$ t,$ C,air+$# &' t,$ DOST-CO Bi)s a#) A7ar)s C&++itt$$ /BAC0 a#) S,&((i#4 a#) S+all Valu$ Pr&cur$+$#t /SSVP0 C&++itt$$ t& strictl5 a),$r$ t& t,$ (r&2isi&#s &' RA =">? a#) &t,$r rul$s8 r$4ulati&#s a#) (&lici$s r$lati2$ t& t,$ (r&cur$+$#t &' 4&&)s8 i#'rastructur$ (r&6$cts a#) c&#sulti#4 s$r2ic$s t& (r&+&t$ 4&&) 4&2$r#a#c$ a#) a),$r$#c$ t& tra#s(ar$#c58 acc&u#ta1ilit58 $''ici$#c5 a#) $c&#&+5. Furt,$r8 Ma#a4$+$#t i#stitut$ l$4al a#)%&r a)+i#istrati2$ sa#cti&#s t& t,&s$ '&u#) lia1l$ '&r t,$ s(litti#4 &' t,$ (r&cur$+$#t.

?)

5rocurement of 9T /Auipment amounting %$&,<'&... to D@9 9nternational 9T Solutions and Services @orporation was +'.&* percent or +.*,%.$... higher than the price evaluation in the @O, T,S Technical /valuation 8eport in violation of @O, @ircular +.#+2..$ dated October +%, +.#+, limiting only the price variance under the plus and minus factor of up to #. percent in the open mar-et. v

*$ r$c&++$#)$) t,at t,$ Ma#a4$+$#t r$<uir$ DCI I#t$r#ati&#al IT S&luti&#s a#) S$r2ic$s C&r(&rati&# t& r$'u#) t,$ a+&u#t i# $9c$ss &' t,$ all&7$) "! ($rc$#t 2aria#c$ i# c&+(lia#c$ 7it, A##$9 D &' COA Circular !" -!!@ )at$) Oct&1$r =8 !" .
*)

The agency failed to indicate in its ,nnual 5rocurement 5lan (,55) the name of the procurement programCproject, mode of procurement and the corresponding project )anagement Office or end2user unit of each procurement activity, and no 5roject 5rocurement )anagement 5lans (55)5) were prepared by the end users for their different programs, activities and projects, thereby indicating the procuring entity did not meticulously and judiciously plan the procurement activities. *$ r$c&++$#)$) t,at Ma#a4$+$#t a),$r$ strictl5 t& t,$ (r&2isi&#s &' t,$ R$2is$) IRR &' R.A. N&. =">? &# t,$ (r$(arati&# &' t,$ r$s($cti2$ PPMP 15 $ac, $#)-us$r u#it &' t,$ a4$#c58 &' 7,ic, t,$ BAC s,all c&#s&li)at$ i#t& t,$ (r&curi#4 $#tit5As APP. E#sur$ t,at t,$ PPMP%APP s,all i#clu)$ t,$ #a+$ &' t,$ (r&cur$+$#t (r&4ra+%(r&6$ct8 +&)$ &' (r&cur$+$#t a#) t,$ (r&6$ct Ma#a4$+$#t O''ic$ &r $#)-us$r u#it &' $ac, (r&cur$+$#t acti2it58 i# acc&r)a#c$ t& GPPB Circular !"- !!=.

')

)OO/ :unds amounting to &,$+?,++<.'# were used to pay additional

personnel benefits. On the other hand, 5roject :unds of $,&&+,#'%.%$ were used to pay unrelated e0penditures contrary to Section $* of 5residential Decree o. ##**. *$ r$c&++$#)$) t,at Ma#a4$+$#t c$as$ 'r&+ (a5i#4 ($rs&##$l 1$#$'its 7it,&ut a),$ri#4 t& la78 rul$s a#) r$4ulati&#s a#) DOST 4ui)$li#$s t& a2&i) sus($#si&#s a#) )isall&7a#c$s i# au)it. S($ci'icall5 $#sur$ t,$ '&ll&7i#4: / i 0 &1s$r2$ strictl5 t,$ us$ &' 'u#)s '&r t,$ s($ci'ic (ur(&s$s '&r 7,ic, t,$s$ ar$ i#t$#)$) (ursua#t t& S$cti&# @B &' PD ""BB; /ii0 )ir$ct DOST $+(l&5$$s t& su1+it &''icial r$c$i(ts a#) 1ill%stat$+$#ts 'r&+ la1&rat&r5 cli#ics &r ,&s(ital su((&rt$) 15 r$sults &' +$)ical $9a+i#ati&#s t& 2ali)at$ t,$ +$)ical assista#c$ clai+$) i# acc&r)a#c$ t& t,$ r$c$#t issua#c$ &' 4ui)$li#$s all&7i#4 t,$ 4ra#t &' a##ual 'r$$ +$)ical $9a+i#ati&# t,ru r$i+1urs$+$#t 1asis; /iii0 st&( t,$ (ractic$ &' (a5i#4 u#i'&r+ ,a:ar) all&7a#c$ &' @! ($rc$#t &' t,$ +&#t,l5 1asic salar5 rat,$r8 1as$ t,$ c&+(utati&#%(a5+$#t &# t,$ )$4r$$ &' $9(&sur$ t& ,a:ar)s )$($#)i#4 &# t,$ #atur$ &' t,$ir )uti$s a#) (lac$ &' assi4#+$#t8 a+&#4 &t,$rs8 a#) strictl5 a),$r$ t& (ara4ra(, .@. 8 S$cti&# 8 Rul$ II &' t,$ i+(l$+$#ti#4 rul$s a#) r$4ulati&#s &' R.A. >?@=; /i20 )$t$r+i#$ a#) i)$#ti'5 $+(l&5$$s 7,& ar$ )ir$ctl5 a#) i#)ir$ctl5 $9(&s$) t& ,a:ar)s a#) (a5 t,$ c&rr$s(&#)i#4 a((lica1l$ ,a:ar) all&7a#c$ rat$ i# acc&r)a#c$ 7it, t,$ a'&r$+$#ti&#$) 4ui)$li#$s; /20 vi

st&( t,$ (ractic$ &' (a5i#4 1&t, t,$ l&#4$2it5 (a5 a#) st$( i#cr$+$#t 1$#$'its si+ulta#$&usl5 t& a2&i) )isall&7a#c$ i# au)it a#) caus$ t,$ r$'u#) &' u#aut,&ri:$) (a5+$#ts (r$2i&usl5 +a)$; a#) /2i0 a),$r$ strictl5 t& DBM Bu)4$t Circular N&. !" -@ 7,ic, (r&2i)$s '&r t,$ 4ui)$li#$s &# t,$ 4ra#t &' Pr&)ucti2it5 E#,a#c$+$#t I#c$#ti2$8 (articularl5 It$+s @ a#) ?8 7,ic, cl$arl5 )$'i#$s a#) )isti#4uis,$s t,&s$ 7,& ar$ c&2$r$) 15 a#) $9clu)$) 'r&+ t,$ Circular. The above observations and recommendations were discussed with the concerned officials of the agency. )anagement comments were incorporated in this report, where appropriate. F. STATUS OF IMPLEMENTATION OF PRIOR YEARSAS AUDIT RECOMMENDATIONS

Out of the <& prior years1 audit recommendations, ## were fully implemented, #% were partially implemented and #& remained unimplemented as discuss in detail in 5art 999 of this report.

vii