We have verified the budget and financial transactions of the High School for CY 2017

and the corresponding records and observed the following deficiencies/errors:

Appropriations as per approved budget does not reconcile with the actual expenditures as
reflected in the financial statements forfeiting control thru Obligation Request and Status
having failed to secure authority for modification and/or augmentation in allotment to
properly show actual budget as of the period.

Basically as its fundamental principles, no money shall be paid out of any public treasury
or depository except in pursuance of an appropriation. National Budget Circular No. 567 dated
January 3, 2017 provided “Guidelines on the release of Funds for FY 2017” and correspondingly
DepEd Order No. 9, s. 2017 on its implementation.

In the area of modification herein quoted are the conditions per its guidelines:

2. Modification of Allotment

2.1 As a general rule, agencies shall spend what is programmed on their respective
appropriation in the GAA. In exceptional circumstances, agencies may modify the
allotment issued within a PAP, subject to the approval of the following:
i) The heads of agencies for changes in the object of expenditure (Salaries,
Wages, Traveling Expenses, or Investment Outlays) within an allotment class
(PS, MOOE or CO). This covers the use of savings discussed in Section B.1.4.

xxx

2.2 For changes in the object of expenditure within an allotment class within the
same PAP, the delegated approving authorities are as follows:
xxx
iii. For SDOs and school IUs, including sub-allotted funds from Central/Regional
Office, the respective Schools Division Superintendents.

In the case of sub-allotted funds from Central Office, although authorities have
been delegated to field officials to approve modifications of allotment, the
concerned ROs, SDOs and school IUs shall provide the Central Office Budget
Division a copy and summary of their Realignment Advice Forms (RAF) at the
end of each quarter.

Moreover, in the case of savings generated from training activities which are
proposed to be used for other training activities within the same PAP but which
is/are not cited in the face of the Sub-Allotment Release Order, clearance from the
Undersecretary for Finance – Budget and Performance Monitoring shall be
secured prior to obligating said funds.

In the verification of the National Expenditure Program (NEP) as reflected in the

Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of
Expenditures (SAAODAB) with the Financial Statements of the School, it was noted that there
were object of expenditures reflected in the financial statements that were not included in the
approved budget (NEP). The following were identified:

1. Other Bonuses and Allowances

2. Telephone Expenses
3. Internet Expenses
4. Janitorial Services
5. Other Maintenance and Operating Expenses

Also, there were accounts whose expenses exceeded the appropriation and allotment, as
follows:
1. Salaries and Wages-Casual/Contractual
2. PAG-IBIG Contributions
 3. PHILHEALTH Contributions
4. Travelling Expenses-Local
5. Fidelity Bond Premiums

These expense accounts were not within the approved budget but were obligated in the
existing accounts in the approved budget (see Annex A for details). The Bookkeeper who also
acted as budget officer controlled/obligated expenses in accordance to the existing budget
despite,nature of expenses was not appropriate to the expense account. The expenses as incurred
were accounted to its proper object of expenditure despite no budget was appropriated for the
subject expenses, hence, the SAAODAB differ from the Financial Statements. Also, their
control did not indicate balances on the specific object of expenditure, hence despite the
appropriation has no balance, they continue to obligate and pay the same resulting to overdraft in
appropriation/allotment of the subject account.

The action taken by the Bookkeeper for obligating expenses despite the absence of
appropriation and the legal process in either augmentation and/or modification of allotment
violates the provisions in the GAA and NBC No. 567 on the Guidelines on the release of Funds
for FY 2017 as implemented per DepEd Order No. 9, s. 2017.

The object of expenditures cannot be identified as to its specific

Program/Activities/Project (PAPs) where modification can be based upon either “modify the
allotment issued within a PAP” or “changes in the object of expenditure within an
allotment class within the same PAP or both. The modification should have been approved by
the authorized officials depending on the nature of modification made. However, no record
shows that the same was complied with. Also, there were no copies retained for the Realignment
Advice Forms provided to Central Office Budget Division as summarized at the end of each
quarter in the case of sub-allotted funds from Central Office.

Likewise in the case of various trainings conducted no details of PAPs were provided to
identify savings and its proposals to be used for other trainings within the PAP where the Sub-
ARO has not cited. No clearance was secure from Undersecretary for Finance-Budget and
Performance Monitoring prior to obligation had any savings been utilized.

The failure of the concerned officials to properly control the appropriation and allotments
as per approved budget and prepare the necessary requirements in the modification and
realignment as the circumstances requires had exposed the payments made invalid. This has
forfeits the control thru Obligation Request and Status having failed to secure authority for
modification and/or augmentation in allotment to properly show actual budget as of the period.

We recommend that the concerned officials taking part in the preparation of the budget
be cautious and meticulous in identifying needs based on its historical records. All concerns
must get involved by the preparation of its own profiles to properly identify PAPs to be
incorporated in the budget proposal. Controls and obligations will be made in accordance with
the approved budget. The Obligation Request and Status must show the actual fund source and
its PAPs must be identified with the actual object of expenditures. Any modification or
realignment shall conform to the guidelines provided in the Use of Funds.
The Summary of Appropriations, Allotments, Obligations, Disbursements and Balances
by Object of Expenditures (SAAODAB) must have to reconcile with the Financial Statement of
the School which will be done on a monthly basis to assure early action on any unreconciled
items. The Financial Statement together with the SAAODAB will be submitted to the Auditor
duly reconciled monthly.
May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof.