EXECUTIVE SUMMARY

I. Introduction

The Sandiganbayan is a special court of justice established to try and decide

criminal and civil cases against government officials and employees, including
those in government-owned or controlled corporations, accused of graft and
corruption and other offenses committed in relation to the office. The creation of
the Sandiganbayan was originally provided under Section 5, Article XIII of the
1973 Constitution but it was created only on June 11, 1978 with the issuance of
Presidential Decree No. 1606, Batas Pambansa Blg. 129, and Republic Act (RA)
Nos. 7975 and 8249. As restructured by the foregoing laws, Sandiganbayan is
presently composed of the Presiding Justice and 14 Associate Justices who sit in
five Divisions of three Justices each in the trial and in the determination of cases.
At present, Honorable Francisco H. Villaruz, Jr. is the Presiding Justice of the
Sandiganbayan.

The major function of the Sandiganbayan is the adjudication of cases arising from
violations of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices
Act, RA 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code.

II. Financial Highlights

The comparative financial condition and sources and application of funds are as
follows:
Increase/
2012 2011 (Decrease)

(In Philippine Peso)

A. Financial Condition
Assets 980,924,409.15 1,096,711,478.93 (115,787,069.78)
Liabilities 662,383,859.79 821,280,173.32 (158,896,313.53)
Government
Equity 318,540,549.36 275,431,305.61 43,109,243.75

B. Sources and Application of Funds

Allotments 460,636,261.28 417,915,101.88 42,721,159.40
Obligations 397,714,789.61 356,275,139.25 41,439,650.36
Balance 62,921,471.67 61,639,962.63 1,281,509.04

The details of allotments, obligations and balances are presented in Annex A of

this report.

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III. Scope of Audit

The audit covered the accounts and operations of the Sandiganbayan for CY
2012. The audit was aimed at ascertaining the propriety of disbursements,
reliability of financial reports and compliance with prescribed auditing and
accounting rules and regulations based on the available records and reports
obtained and presented by the Auditee.

IV. Audit Opinion on the Financial Statements

The Auditor rendered an unqualified opinion on the fairness of the presentation of

the financial statements of the Sandiganbayan for CY 2012.

V. Significant Observations and Recommendations

The following significant audit observations and recommendations are discussed

in detail in Part II of the report:

1. The Sandiganbayan Payroll System still adopts the traditional manual

payroll system of paying employees’ salaries and other personnel benefits
in cash instead of the automated payroll-thru-bank system; thus, unduly
exposing payroll money to risks of losses either through theft or robbery.

We recommended that Management consider the following to strengthen

its internal controls on cash and to promote operational efficiency:

a. Adopt the payroll-thru-bank system; and

b. Coordinate with a government servicing bank near the Sandiganbayan

office and initiate arrangements for the installation of automated teller
machine (ATM) facilities within the Sandiganbayan.

2. The Accounting Section failed to maintain Property, Plant and Equipment

Ledger Cards (PPELC) and Stock Ledger Cards (SLC) for its Property,
Plant and Equipment (PPE) and inventory accounts in violation of Section
43, Volume I of the Manual on New Government Accounting System
(MNGAS) for the National Government Agencies and Section 12,
Volume II of the same Manual; thus, casting doubt on the correctness and
reliability of the records of the Property and Supply and Accounting
Sections.

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 We recommended and Management agreed to direct the Accounting
Section to maintain and update the SLC to facilitate the reconciliation of
Supplies and other inventories, and to maintain the PPELC as control
records for PPE accounts.

3. Several tangible assets in the total amount of P232,749.50 and with

estimated service life of more than one year but small enough to be
considered as Property, Plant and Equipment (PPE) were included in the
inventory report and classified in the books of accounts as PPE, contrary to
COA Circular No. 2005-002.

We recommended and Management agreed to require the Accounting

Section to make the necessary adjusting entries to correct the erroneous
recording of small tangible assets under the PPE account, in compliance
with Section 2.2.1 of COA Circular No. 2005-002.

VI. Status of Implementation of Prior Years’ Audit Recommendations

Of the four audit recommendations embodied in the 2011 Annual Audit Report
and prior years (2008-2010), three were partially implemented and one was not
implemented.

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