EXECUTIVE SUMMARY

A. Introduction

The Court of Tax Appeals (CTA) was created on June 16, 1954 through the
enactment of Republic Act (RA) No. 1125. Considering its limited jurisdiction
then, it had only three Judges which, at present, is equivalent to one Division.

With the passage of RA 9282 on April 23, 2004, the CTA became an Appellate
Court, equal in rank to the Court of Appeals. The composition of the Court
increased to six Justices with one Presiding Justice and five Associate Justices. It
sits en banc or in two Divisions with three Justices each.

Pursuant to the provisions of RA 1125 and other laws prior to RA 9282, the Court
of Tax Appeals retains exclusive appellate jurisdiction to review, by appeal, the
following:

1. Decisions of the Commissioner of Internal Revenue;

2. Decisions of the Commissioner of Customs;
3. In automatic review cases where such decisions of the Commissioner of
Customs favorable to the taxpayer is elevated to the Secretary of Finance;
and
4. Decisions of the Secretary of Trade and Industry.

Under RA 9282, the CTA’s original appellate jurisdiction was expanded to include
the following:

1. Criminal cases involving violations of the National Internal Revenue Code

and the Tariff and Customs Code;
2. Decisions of the Regional Trial Courts (RTC) in local tax cases;
3. Decisions of the Central Board of Assessment Appeals (CBAA) in cases
involving the assessment and taxation of real property; and
4. Collection of internal revenue taxes and customs duties, the assessment of
which had already become final.

Likewise, RA 9503 was enacted on June 12, 2008 and took effect on July 5, 2008.
This further enlarged the organizational structure of the CTA by creating a Third
Division and providing for three additional Justices. Hence, the CTA is now
composed of one Presiding Justice and eight Associate Justices.

As of December 31, 2012, the CTA has 242 manpower complement of which 163
are permanent, 71 are co-terminus, 6 are casual and 2 are contractual.

i
 The CTA, as one of the courts comprising the Philippine Judiciary, is under the
supervision of the Supreme Court.

B. Financial Highlights

The agency’s assets, liabilities and government equity; and the total allotments
received and total amounts obligated during the year as compared with CY 2011 are
as follows:

Increase/
2012 2011 (Decrease)
(In Philippine Peso)
A. Financial Condition
Assets 377,491,211.27 327,970,566.76 49,520,644.51
Liabilities 49,370,688.97 17,590,355.93 31,780,333.04
Government Equity 328,120,522.30 310,380,210.83 17,740,311.47

B. Sources and Application of Funds

Allotments 373,090,552.17 342,210,388.72 30,880,163.45
Obligations 248,157,664.70 231,985,302.55 16,172,362.15
Balance 124,932,887.47 110,225,086.17 14,707,801.30

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

C. Scope of Audit

The audit was focused on the financial accounts and operations of the Court of Tax
Appeals for the year ended December 31, 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.

D. Audit Opinion on the Financial Statements

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

the financial statements of the CTA for CY 2012.

ii
E. Significant Observations and Recommendations

The following significant audit observations and recommendations are discussed in

detail in Part II of the report:

1. Disbursements totaling P95,837.15 out of a cash advance of P250,015.00

exceeded the allowable amount of P15,000.00 for each transaction under Section
4.3.2 of COA Circular No. 97-002 dated February 16, 1997.

We recommended that Management direct its accountable officers to comply with

the provision of Section 4.3.2 of COA Circular No. 97-002 that disbursements
made out of cash advances be within the allowable amount of P15,000.00 for each
transaction.

2. Unreconciled differences totaling P538,666.53 between the accounting and

property records cast doubt on the accuracy and valuation of some Property,
Plant and Equipment (PPE) accounts aggregating P80,443,124.43 as of December
31, 2012.

We recommended that Management require the Accountant and the Property

Officer to exert efforts to immediately reconcile their respective records to
determine the causes of the discrepancies noted so that necessary adjustments
could be effected; and conduct periodic reconciliation of the accounting and
property records to ensure early detection and/or adjustment of
errors/discrepancies.

3. Delayed submission of copies of 66 out of 101 Purchase Orders (POs) by the

Property Officer to the Office of the Auditor, contrary to the provisions of COA
Circular Nos. 96-010 and 2009-001 dated August 15, 1996 and February 12,
2009, respectively, caused delayed audit action.

We recommended that Management require the officials concerned to submit to

the Office of the Auditor copies of POs and all supporting documents forming
part thereof within five days after perfection/issuance in compliance with COA
Circular No. 2009-001. We also recommended that the Supply Officer and the
Property Officers notify the Office of the Auditor, within 24 hours from
acceptance of the items delivered, of the time and date of the scheduled deliveries
pursuant to COA Circular No. 96-010.

F. Status of Implementation of Prior Years’ Audit Recommendations

Of the 11 recommendations embodied in the 2011 Annual Audit Report and prior
years (2007-2010), 2 were implemented, 8 were partially implemented and 1 was
not implemented.

iii