OBSERVATIONS AND RECOMMENDATIONS

FINANCIAL ISSUES

Unreleased Checks not restored at year end

1. The unreleased checks at year end amounting to Ᵽ221,039.45 were not re-
stored to the Cash account of COA Negros Island and Siquijor (NIS) resulting
in the understatement of the reported cash and the corresponding liability ac-
count by the same amount.

1.1 Section 56, Chapter 19 of GAM for NGAs, Volume I requires the adjustment
for unreleased commercial checks. Accordingly, a Schedule of Unreleased
Commercial Checks shall be prepared by the Cashier for submission to the
Accounting Division/Unit. All unreleased checks at the end of the year shall
be reverted back to the cash accounts. A Journal Entry Voucher (JEV) shall
be prepared to recognize the restoration of the cash equivalent to the unre-
leased checks and the recognition of the appropriate liability/payable account.

1.2 Review of records of the COA NIS disclosed that there were several checks
drawn totaling ₱221,039.45 (Please see Appendix A) that were still in the pos-
session of the Cashier or which remain unreleased to the payees at the end of
the year.

1.3 It was noted that the subject unreleased checks were not restored to the cash
account resulting in the understatement of the Cash in Bank-Local Currency,
Current Account (LCCA) by the same amount and the corresponding Liabil-
ity account at year end.

1.4 The Accountant reasoned out that the Cashier failed to prepare and submit the
schedule of unreleased commercial checks, hence, no adjustment was made to
the cash and liability accounts.

1.5 We recommended that COA NIS Management direct the Cashier to:

a. Prepare the Schedule of Unreleased Commercial Checks based on

the checks which remain unclaimed by the payees and are still in
her possession at the end of the year; and

b. Submit the report to the Accountant before the closing of the

books for immediate preparation of JEV to restore all unreleased
checks to the cash account and recognize the corresponding
liability/payable account.

1.6 The Regional Accountant commented that the List of Unissued Checks for
CY 2020 disbursements which was certified and submitted by Acting Cashier

39
 on January 21, 2021 has zero balance since all the checks in her custody were
all released as of that date.

Inaccurate and unreliable balance of Due from Government-Owned and Controlled

Corporations

2. The accuracy and reliability of the account Due from GOCCs amounting to
P3.882 billion as at December 31, 2020 cannot be ascertained due to: (a) inclu-
sion of dormant accounts in the amount P1.569 million or 40.41 percent of the
reported amount; and (b) non-provision of impairment loss on dormant ac-
counts.

a. Inclusion of dormant accounts in the amount of P1.569 million

2.1 COA Circular No. 2016-005 dated December 19, 2016 provides the guide-
lines and procedures on the write-off of dormant receivable accounts, unliqui-
dated cash advances, and fund transfers of National Government Agencies
(NGAs), Local Government Units (LGUs) and Government-Owned and Con-
trolled Corporations (GOCCs).

2.2 The Circular defines Dormant Receivable Accounts as accounts which bal-
ances remained inactive or non-moving in the books of accounts for ten (10)
years or more and where settlement/collectability could no longer be ascer-
tained.

2.3 Section 6.1 of the same Circular states that all government entities shall con-
duct regular monitoring and analysis of receivable accounts to ensure that
these are collected when these become due and demandable and that cash
advances and fund transfers are liquidated within the prescribed period de-
pending upon their nature and purpose.

2.4 It was noted that there was a failure to monitor the account despite the guide-
lines provided under the aforementioned COA Circular.

2.5 The lack of effort in conducting timely and regular monitoring and analysis of
receivable accounts to ensure that they are collected when they become due
and demandable had led to the non-detection of the unbilled portion of the as-
sessments of numerous GOCCs for CYs 2019 and 2020 and further contrib-
uted in the significant outstanding balance of the account as at December 31,
2020. (See Appendix B)

2.6 Had there been proper and timely monitoring of the account, the Accounting
Office could had been able to make appropriate actions and to follow-up from
concerned GOCCs on the remittance of the audit fees as they become due.

40
2.7 Owing to the non-monitoring of account, a significant amount of
P1,568,720,710.51 or 40.41 percent of the reported amount had become dor-
mant, broken down as follows:

Table No. 1-Breakdown of Dormant Accounts

Regional Amount Remarks

Office
Central P1,566,160,334.07 Outstanding receivables from 26
Office GOCCs which were recognized in
2010 and prior
Region III 2,560,376.44 In arrears/no payments made even on
current billings for a period of ten
years or more
TOTAL P1,568,720,710.51

2.8 The dormant accounts identified in the COA CO represents the outstanding
receivable accounts from 39 GOCCs (See Appendix C), while in COA RO III,
they represent receivables from 12 Water Districts (WDs) (See Appendix D).

b. Non-provision of impairment loss considering the existence of dormant accounts

2.9 Section 7.4 of COA Circular No. 2016-005 dated December 19, 2016 pro-
vides that the Accountant shall prepare aging of dormant receivables, unliqui-
dated cash advances and fund transfers on a quarterly basis (Annexes 1-3) to
support the request for write-off, and indicate in the remarks column the exis-
tence of the applicable conditions xxx.

2.10 Par. 40 of IPSAS 41 states that a financial asset shall be measured at amor-
tized cost if both of the following conditions are met:

(a) The financial asset is held within a management model whose ob-
jective is to hold financial assets in order to collect contractual cash
flows and

(b) The contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and inter-
est on the principal amount outstanding.

2.11 Meanwhile par. 67 of IPSAS 29 “Financial Instruments: Recognition and

Measurement” provides that an entity shall assess at the end of each reporting
period whether there is any objective evidence that a financial asset or group
of financial assets is impaired.

2.12 The Accounting Office had not prepared the aging of dormant receivables on
a quarterly basis as provided in Section 7.4 of COA Circular No. 2016-005
and assess these accounts on a regular basis whether there is a need to request
for write-off.
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2.13 The non-moving accounts is an indication a remote possibility of collecting
the receivables.

2.14 Despite the fact that the recorded receivables may not be fully realized, the
Commission does not have a policy for recognizing impairment loss contrary
to the provisions set forth under IPSAS 29, in particular those accounts con-
sidered as dormant receivables under COA Circular No. 2016-005.

2.15 The allowance for impairment account is credited to set-up the provision for
losses which may arise from the non-collection of receivables and debited
upon receipt of payment, settlement, reversal of impairment, write-off, and/or
adjustments.

2.16 The non-provision of allowance for impairment for dormant/long outstanding

receivables reflects that the net realizable value of the receivable was not
properly measured.

2.17 These accounts which have long been outstanding have deprived the govern-
ment of funds for its operations and has affected the fair presentation of the
accounts in the Financial Statements as at December 31, 2020.

2.18 We recommended that Management require the Accounting Office to:

a. Conduct regular monitoring and analysis of the account in accor-
dance with Section 6.1 of COA Circular No. 2016-005 to ensure
that the outstanding balances are collected when these become
due and demandable; and to prepare the aging of the account as
required in Section 7.4 of the same Circular; and

b. Formulate a policy for recognizing impairment loss in order to

provide a basis on the adequate amount of allowance for impair-
ment to be recorded and assessed by the Commission on a regular
basis.

2.19 The Management explained that the non-monitoring of the account on a regu-
lar and timely basis was not due to the lack of effort but it is either the de-
clared representation of the GOCC’s non-capability to settle in full the audit
fees and therefore manifested to pay on installment the prior year’s balances
or they are in the process of reconciling their records with the accounting
records.

2.20 GOCCs like the NFA; NIA; PCA; and PPC which contributed a significant
amount in the P1.569 billion account have remitted a total amount of ₱401.6
million from CY 2018 to present thus, cannot be considered as dormant ac-
counts. Management claimed that it is the result of their continuous effort to
monitor remittances by sending memoranda to the Office of the Assistant
Commissioners of the Corporate Government Sector (CGS) and Local Gov-

42
 ernment Sector (LGS) seeking assistance for the remittance of unpaid audit
fees whenever bills are transmitted to them.

2.21 It was further informed that aging of the subject account can be generated
from the e-NGAS. As they have just recognized the said account in CY
2018, its analysis by the Billing Section needs more time and effort, with only
two personnel including the Section Chief, taking charge of the annual assess-
ments, monthly billings and monitoring of remittances of 84 government cor-
porations.

Auditor’s Rejoinder

2.22 While we recognize the continuous effort of Management to monitor remit-

tances, which resulted in remittances for some of the dormant accounts during
CY 2018-2020, it should be noted that not all the GOCCs with dormant ac-
counts made a remittance, thus, the outstanding balance as at December 31,
2020 from audit fees in CY 2010 and prior years still remain significant in
amount.

Outstanding Other Receivables account

3. Dormant Receivables of COA RO XIII amounting to ₱1.109 million, aged 10

years or more has remained outstanding in the books of accounts, contrary to
existing COA rules and regulations thus, affecting the fairness of presentation
of the financial statements.

3.1 Section 30 (2) of PD No, 1445, or the State Audit Code of the Philippines,
provides that all government entities shall conduct regular monitoring and
analysis of receivable accounts to ensure that these are collected when these
become due and demandable and that cash advances and fund transfers are
liquidated within the prescribes period depending upon their nature and pur-
pose.

3.2 Likewise, Item No. 6.1 and 6.2 of COA Memorandum No. 2009-007 dated
March 6, 2009, provides that the Accountant shall conduct regular and peri-
odic verification, analysis, and validation on the existence of the receivables,
unliquidated cash advances, and fund transfers, and determine the concerned
debtors, accountable officers (Regular and Special Disbursing Officers, Col-
lecting Officers, Cashiers) and the source and implementing government enti-
ties concerned; and reconcile the unliquidated fund transfers between the
source and implementing government entities, prepare the adjusting entries
for the reconciling items noted, and require liquidation of the balances.

43
 3.3 Review of COA RO XIII Subsidiary Ledgers (SL) revealed that Other Re-
ceivables, amounting to ₱1,109,034.05 remained outstanding per agency
books.

3.4 Per inquiry with the Accountant, a receivable amounting to ₱992,044.01 was
recognized due to a pending case involving a former employee who already
absconded. Claims amounting to ₱10,106.88 are due from debtors who were
already deceased. The rest of the claims were still awaiting collectability.

3.5 We recommended that Management require the COA RO XIII Accoun-

tant to:

a. Ensure monitoring and validation of the outstanding balances;

b. Include disclosures of the receivable with pending case in the

Notes to Financial Statement;

c. Enforce collection by issuing demand letters to the different

debtors; and

d. Request authority for the write-off of receivables after

exhausting all measures to collect has proved futile.

3.6 Management commented that the Accounting Unit has already verified and
validated the dormant receivable accounts, except for two accounts, involving
accountable officers who remain unidentified due to incomplete data/records
available in the Unit. Demand letter was already issued and received commit-
ment to settle the same within the year. Management will request for write-off
of receivables with remote chance of collection and receivables from account-
able officers which can no longer be individually identified.

Unreconciled difference between Inventory reports and Accounting reports and other
deficiencies

4. The accuracy and reliability of the year-end balances of the Inventory ac-
counts of COA ROs V, XII and NIS with a total amount of ₱3.893 million
cannot be ascertained due to: a) unreconciled differences between the Report
on the Physical Count of Inventories (RPCI) and Subsidiary Ledger Cards
(SLC) of COA Region V amounting to P1.320 million; b) unrecorded issuances
of office supplies of COA Region XII amounting to ₱130,338.80; c) non-adop-
tion of the weighted average method for costing Inventories; and d) non-main-
tenance of the SLCs and Stock Cards (SCs).

4.1 Chapter 8 of the GAM, Volume I provides for the procedures of the inventory
accounting system to include monitoring, controlling and recording of acqui-
sition and disposal of inventory; require the use of perpetual inventory system

44
 in the National Government Agencies (NGAs); and prescribe the records and
reports to be prepared by concerned Units/Divisions.

4.2 As at December 31, 2020, the reported balances of the Inventory accounts of
the following COA Regional Offices are as shown under Table No. 2:

Table No. 2- Balances of Inventory Accounts as of December 31, 2020

COA Regional Office Amount

RO V ₱2,027,254.18
RO XII 972,675.95
NIS 893,115.85
Total ₱3,893,045.98

4.3 Comparison of records between the Accounting Unit and Property/Supply

Section in COA RO V showed a discrepancy of ₱1,319,740.61, as presented
below:

Table No. 3 – Discrepancy in the Inventory Supplies

Account Per Books Per RCPI Discrepancy

Inventory P2,027,254.18 P707,513.57 P1,319,740.61

4.4 Efforts were made to reconcile the account, however, the account remains un-
reconciled due to the non-availability of records. The non-reconciliation
could result in the overstatement/understatement of the account inventory.

4.5 In the COA RO XII records, office supplies listed in the RSMIs totaling
P130,338.80 were not recognized in the books of account, thereby overstating
the office supplies inventory account by the same amount as at year end.

4.6 While in COA NIS, the Report of Supplies and Materials Issued (RSMI) and
the General Ledger disclosed that the issuance of items was recorded using
the acquisition cost of inventories instead of the weighted average cost as pre-
scribed under GAM. Thus, the carrying amount of inventory accounts of
COA NIS was not compliant with the accounting policy adopted on weighted
average cost.

4.7 Likewise, SLCs and SCs were not maintained by the COA RO XII and COA
NIS as basis for reconciliation of records between the Property Section and
the Accounting Section to substantiate the balance of Inventory Account
recorded in the General Ledger.

4.8 The non-reconciliation and adjustments of the noted deficiencies between the
accounting and property records affect the accuracy and reliability of the
year-end balance of account Inventory and its fair presentation in the Finan-
cial Statements.

45
4.9 Management of COA RO V informed that the discrepancy in the records can
be traced from CY 2006, the year of the earliest recorded remaining item to
present. It was also noted that the RPCI was not promptly submitted to the
Audit Team thus, precluding its timely verification.

4.10 We recommended that Management require the:

a. Property Officer of COA RO V to prepare and submit promptly

the RPCI to the Audit Team;

b. Accountant and Property Officer of COA NIS to compute the

weighted average cost of inventory on a regular basis using the
SLC;

c. Accountant and Property Officer of COA ROs V, XII and NIS to

maintain the SLCs and SCs, respectively, and such other records
to support the Inventory balances; and

d. Accountant and the Property Officer of COA RO V to conduct

periodic reconciliation of their records, and make the necessary
adjustments if warranted, to come up with accurate Inventory
balances.

4.11 The Accounting Section of COA RO V informed the audit team that unrecon-
ciled balance between the Property and Accounting Section might have been
caused by the delay in recording of receipt of office supplies by the Account-
ing Section which was due to delayed submission of delivery receipt, certifi-
cate of acceptance and other supporting documents to support recording in the
books. However, the Property and Supply Section committed to perform rec-
onciliation of records to identify the cause of the differences and make the
necessary adjustments and to timely prepare and submit to accounting section
proofs of receipt of supplies and other supporting documents to ensure timely
recording of receipt and issuance of supplies and to conduct periodic reconcil-
iation of their records.

4.12 The Regional Accountant of COA RO XII acknowledged the observation and
admitted that indeed an error was committed in preparing the subject schedule
for recording the issuance of supplies for the subject months in the e-NGAS.
The accountant committed to correct the said lapses and Management also
committed that proper recording and maintenance of records will be strictly
observed in succeeding transactions.

4.13 Management of COA NIS acknowledged the audit observations and will
adopt the recommendations.

Discrepancy between General Ledger and RPCPPE and non-reclassification of

items below threshold

46
5. The accuracy and existence of Property, Plant and Equipment (PPE) accounts
with an aggregate balance of ₱2.391 billion as at December 31, 2020 cannot be
ascertained due to: a) the discrepancy of ₱296.326 million between the General
Ledger balance and the Report of Physical Count of PPE (RPCPPE); and b)
inclusion of items below the capitalization threshold.

a. Discrepancy of ₱296.326 million between the General Ledger balance and

the RPCPPE

5.1 Section 27 of International Public Sector Accounting Standards (IPSAS) 1

provides that, “Financial Statements shall present fairly the financial position,
financial performance and cash flows of an entity. Fair presentation requires
the faithful representation of the effects of transactions, other events and con-
ditions in accordance with the definitions and recognition criteria for assets,
liabilities, revenue and expenses set out in the IPSAS.”

5.2 Chapter 10, of GAM Volume I GAM for National Government Agencies
(NGAs) provides the basic accounting policies and principles on PPE in ac-
cordance with the IPSAS.

5.3 As of December 31, 2020, the PPE accounts have a total balance of
₱2,390,632,607.74.

5.4 Comparison between the General Ledger and RPCPPE of the COA CO; CO
ROs V, VI and X disclosed a difference of P296,326,311.38. Details are
shown in Table No. 4:

Table No. 4-Breakdown of Variances

COA Offices Amount of Variance Remarks

Central Office ₱269,735,599.49 Comprises of 13 PPE ac-
counts
RO V 840,632.70 15 PPE items not included in
the PCs
RO VI 16,449,548.54 Includes disposed PPE not
yet dropped from the books
RO X 9,300,530.65 Incomplete physical count of
ICTE
Total ₱296,326,311.38

5.5 The accumulated variance of P269,735,599.49 in the COA CO was noted in

13 PPE accounts is equivalent to 27.17 percent of the aggregate PPE re-
ported balance of ₱992,946,678.15. The variance is accounted as follows:

Table No. 5-Accounting of Variances (COA CO)

Particulars Amount
Unaccounted PPE (not found on RPCPPE) ₱282,182,037.05

47
 PPE not on record (11,221,139.97)
(not found on PPELC)
PPE w/ Diff in Recorded Amounts 260,878.05
PPE counted twice per RPCPPE (1,748,785.64)
Included in RPCPPE but classified under other 150,000.00
PPE Category
PPE recorded twice in the books 112,610.00
Total (Details in Appendix E) ₱269,735,599.49

5.6 Further review and reconciliation of the accounts revealed that the unac-
counted assets of ₱282,182,037.05 in the inventory report consists mostly of
2,838 Information and Communication Technology Equipment (ICTE)
amounting to ₱218,550,446.17 or equivalent to 77.45 percent equivalent of
the unaccounted assets.

5.7 In addition, out of 6,645 PPE items recorded in the books, only 2,813 or
42.33 percent was listed in the inventory report; the existence of 3,830 or
57.64 percent was not accounted in the current year’s physical count. On the
other hand, out of the 2,981 items counted per RPCPPE, 118 items were not
found in the PPE Ledger Cards and 50 items were listed twice in the report.
Details are shown in Table No. 6:

Table No. 6-Reconciliation of PPE Count

Quantity
Per Book 6,645
Per RPCPPE 2,981
Variance 3,664
Unaccounted PPE
3,830
(not found on RPCPPE)
PPE not on record
118
(not found on PPELC)
PPE counted twice per RPCPPE 50
PPE recorded twice in the books 2

Others
PPE with Difference in
136
Recorded Amounts
Included in RPCPPE but classified under other PPE
42
Category

5.8 Moreover, among the 103 PPE items purchased during the current year, 51
were included in the 3,830 unaccounted assets, with an aggregate amount of
₱3,770,468.00. (Please see Appendix E)

5.9 In COA RO V, the variance was attributed to the 15 properties with total ac-
quisition cost of ₱840,632.70 which were recognized in the books but not
recorded by the Property Section, as shown in Table No. 7:

48
 Table No. 7-Breakdown of Variance

Account Quantity Acquisition Cost

ICT Equipment 6 ₱217,171.00
Technical and Scientific Equipment 6 282,000.00
Other Machineries and Equipment 2 36,000.00
Furniture and Fixture 1 305,461.70
Total ₱840,632.70

5.10 In COA RO VI, comparison between the Property Cards (PC) of the Property
Division, and the PPE Ledger Cards (PPELC) disclosed that several items of
PPE which are no longer recorded in the PC are still carried in the books of
accounts, and vice versa. In CYs 2016-2017, COA RO VI had disposed sev-
eral units of ICT equipment, however, after the disposal, the same were not
derecognized/ dropped from the books of accounts for reason that the data
presented in the IIRUP did not include dates and costs of acquisition.

5.11 In COA RO X, the actual physical count of Inventory of Information and

Communication Technology Equipment (ICTE) was not completed for CY
2020 thus, balance of ICTE of ₱9,300,530.65 remains unreconciled.

5.12 From the ₱29,654,888.35 unreconciled balance of ICTE in CY 2019 of COA

RO X, the same was decreased to ₱9,300,530.65 in CY 2020. This is reiter-
ated audit finding from CY 2019.

b. Inclusion of items below the capitalization threshold of ₱15,000.00

5.13 Section 10, Chapter 8 of the GAM, Volume I, provides that tangible items be-
low the capitalization threshold of ₱15,000.00 shall be accounted for as semi-
expendable (SE) property; those which were originally recognized as PPE
shall be reclassified to the specific semi-expendable accounts and they shall
be recognized as expenses upon issue to the end-users.

5.14 PPE Schedule provided by the Accounting Unit in COA RO V showed that
1,010 properties with a total acquisition cost of ₱2,488,060.33 and net book
value of ₱226,029.44 which are below the capitalization threshold of
₱15,000.00 for PPE were still carried in the books, details are shown in Table
No. 8:

Table No. 8-List of PPE below the Capitalization Threshold

Acquisition Accumulated Net Book

Account Quantity
Cost Depreciation Value
Office
82
Equipment ₱442,070.05 ₱407,514.32 ₱34,555.73
ICT Equipment 130 515,132.54 481,634.59 33,497.95
Communication
74
Equipment 297,414.95 265,895.96 31,518.99
Technical and 2 5,000.00 4,500.00 500.00

49
 Scientific
Equipment
Other
Machineries and 86
Equipment 236,276.25 196,997.62 39,278.63
Furniture and
636
Fixture 992,166.54 905,488.40 86,678.14
TOTAL 1,010 ₱2,488,060.33 ₱2,262,030.89 ₱226,029.44

5.15 This is a reiteration of prior year’s audit observation. Management took posi-
tive action in the implementation of the prior year audit recommendation.
However, out of the ₱7,429,785.62 semi-expendable properties for reclassifi-
cation in CY 2019, items with total costs of ₱2,488,060.33 are yet to be re-
classified as at December 31, 2020.

5.16 We recommended that Management require the:

a. Property Office, COA CO to -

a.1 Reconcile its records with the Accounting Office and record
the PPEs not found in the books and the correction of items
with discrepancy in their recorded costs;

a.2 Make an inventory recount of all unaccounted PPEs to verify

their existence and investigate the reasons for assets that can-
not be located; and

a.3 Send letters of inquiry to personnel accountable for the unac-

counted/unlocated items to ascertain the existence of the Com-
mission’s assets under their accountability.

b. Accounting Office, COA CO to -

b.1 Record in the books the PPEs with verified existence, effect the
necessary corrections of assets cost and reclassify items based
on the reconciliation with Property Office; and

b.2 Send billings to Accountable Officers with missing property ac-

countability.

c. Regional Accountant of COA RO VI to derecognize from PPE

accounts, properties that were disposed of on the basis of property
descriptions stated in the schedule submitted by the designated
Property Officer;

d. Inventory Team in COA RO X to fast track the conduct of actual

physical count of ICTE; and

50
 e. Regional Accountant of COA RO V and COA RO VI to reclassify
all the remaining semi-expendable properties to their proper
accounts in compliance with Section 10, Chapter 8 of GAM Volume
1.

5.17 Management of COA CO committed to closely coordinate and undertake col-

laborative procedures with the General Services Office (GSO) to ensure that
all PPE included in the RPCPPE are duly recorded in their respective records
with proper account classification and that the PPELCs of the Accounting and
the PCs maintained by the GSO are updated and reconciled in due time.

5.18 On the noted variance, the COA CO corrected and refooted the RPCPPE for
the 50 items counted and reported twice amounting to ₱1.748 million. The
difference in the cost of the 114 PPE items were adjusted in the Property
Cards; Plant and Equipment Monitoring System (PPEMS); and in the
RPCPPE. The reconciliation team for the one-time cleansing of PPE ac-
counts is in the process of finalizing the report.

5.19 In COA RO X, Management commented that the conduct of actual physical

count started in the last quarter of CY 2020. There had been delays in the in-
ventory taking of PPE especially for individual laptops issued to field audi-
tors due to the pandemic; it hindered the verification/confirmation of Property
Acknowledgment Receipt (PAR) from end-users. The General Services Unit
(GSU) is currently making follow-ups through online communication.

5.20 Management of COA RO V commented that as of February 1, 2021, a total of

₱361,047.95 semi-expendable properties were reclassified to its appropriate
account and that Inventory Custodian Slips (ICS) are being prepared for the
remaining semi-expendable properties and copies will be provided to Ac-
counting Section not later than April 30, 2021 as basis for reclassification

Construction in Progress account not reclassified to Property, Plant and Equipment

account

6. The year-end balance of ₱194.811 million of the Construction in Progress ac-

count is overstated by ₱23.493 million due to non-reclassification of completed
projects in COA RO VII to its proper Property, Plant and Equipment (PPE)
account. Likewise, expenses were understated due to non-recognition of re-
lated depreciation expenses amounting to ₱0.684 million, contrary to existing
law and international accounting standards.

6.1 Section 112 of the Presidential Decree (PD) 1445 provides that each govern-
ment agency shall record its financial transactions and operations con-
formably with generally accepted accounting principles and in accordance
with pertinent laws and regulations.

51
6.2 Paragraph 14, IPSAS 17 states that the cost of an item of property, plant and
equipment shall be recognized as an asset if, and only if it is probable that fu-
ture economic benefits or service potential associated with the item will flow
to the entity and the cost or fair value of the item can be measured reliably.
Par. 71 states that depreciation of an asset begins when it is available for use,
i.e., when it is in the location and condition necessary for it to be capable of
operating in the manner intended by management.

6.3 Review of COA RO VII CIP account as of December 31, 2020 showed a bal-
ance of ₱23,492,952.27 composed of two projects as shown in Table No. 9:

Table No. 9-Completed Projects

Project Name Contract Cost Date of

Completion
1.Construction of Two (2) Storey ₱19,471,452.90 November 21,
Provincial Satellite Auditing Office 2018
(PSAO) Building
2.Construction of Site Development 4,021,499.37 February 7, 2020
including Perimeter Fence,
Driveway, Sidewalk, Perimeter
Lighting and Flagpole of COA
Provincial Satellite Auditing Office
(PSAO) Cebu
Total ₱23,492,952.27

6.4 Verification of records and personal knowledge of the Audit Team revealed
that the building and the land improvements were already completed and in
fact the PSAO building was already occupied by its intended users as early in
February 2020. The Land Improvements were likewise completed in the same
month as indicated in the Certificate of Completion dated February 7, 2020;
thus, the structure and the improvements thereon were already actually used
in the manner intended by Management.

6.5 Despite the projects being completed and actually in use, the same were not
reclassified to their proper accounts pursuant to the aforementioned guide-
lines.

6.6 Inquiry from the Accountant that a Certificate of Final Acceptance is neces-
sary to support the preparation of Journal Entry Voucher (JEV) to reclassify
the CIP account following Government Accounting Manual (GAM).

6.7 Specifically, the Accountant is referring to the explanation of the sample jour-
nal entries for construction projects undertaken by contract as illustrated in
Item G.1 of Section 8, Chapter 10 of the GAM Volume I where after the en-
try: Debit – Buildings; Credit – Construction in Progress – Buildings and
Other Structure the words “To recognize turnover and acceptance of building
– contract amount” was indicated.

52
 6.8 The non- reclassification of CIP accounts to the proper PPE accounts there-
fore, overstated the CIP accounts by ₱23,492,952.27 and understated the re-
spective PPE accounts by the same amount. Moreover, the expense accounts
were understated by ₱683,606.89 due to non-recognition of depreciation ex-
penses as of year- end.

6.9 We recommended that Management require the Accountant of COA RO

VII to make the necessary adjusting entries to reclassify the CIP to their
proper PPE accounts.

6.10 Management explained that from the time the GAM was circulated, they have
strictly adhered with the guidelines and procedures outlined therein in the
recording of their financial transactions. Hence, the balances reflected under
the Construction in Progress accounts in the total amount of ₱23,492,952.27
were not reclassified to its proper PPE account as of December 31, 2020 be-
cause of the absence of the Certificate of Acceptance.

6.11 They further informed that COA Central Office-Accounting Office is also re-
quiring the Certificate of Acceptance before reclassifying the CIP account to
its proper PPE account.

6.12 With the receipt of the Certificate of Acceptance dated January 14, 2021 for
the Construction of Two-Storey Provincial Satellite Auditing Office Building
at Sudlon, Barangay Lahug, Cebu City, the Management prepared the neces-
sary journal entries to effect reclassification.

Improper recognition of the cost infrastructure projects

7. Repairs and Maintenance Expenses for Buildings and Other Structures

amounting to ₱24.809 million for the year ended December 31, 2020 was over-
stated by P13.896 million and understated Construction in Progress by P9.622
million and Buildings by ₱4.273 million due to the recognition of the COA CO
infrastructure projects as outright expenses instead of replacement costs.

7.1 Chapter 10 of the GAM Volume I provides the guidelines for proper account-
ing of Property, Plant and Equipment (PPE), including Section 24 on Repairs
and Maintenance which states that repairs and maintenance primarily main-
tain or improve the functionality and capacity of the PPE; increase its ser-
vice life; improve the quality of its output; or reduce the operating cost.
These may be categorized into major and minor repairs. Minor repairs shall
be directly charged to expense account “Repairs and Maintenance” of the
specific PPE while major repairs shall be added to the carrying amount of
the PPE and shall be depreciated over the remaining life of the PPE. Where
cost cannot easily be differentiated between a minor or major repair, it shall
be treated as expense.

53
 7.2 Moreover, Section 24(b), Chapter10 of GAM Volume I provides that parts of
some items of PPE may require recurring replacement such as a road needing
resurfacing every few years or non-recurring replacement such as replacing
the interior walls of a building. Under the recognition principle, an entity
recognizes in the carrying amount of an item of PPE the cost of replacing
part of such an item when that cost is incurred if the recognition criteria are
met. The carrying amount of those parts that are replaced is derecognized.
(Italics supplied)

7.3 Finally, Section 8(g), Chapter 10 of GAM Volume I on construction of PPE

states that during the construction period, all expenses incurred in relation to
the construction of the PPE shall be taken up in the books as Construction in
Progress (CIP) with the appropriate asset classification. As soon as the con-
struction is completed, the “Construction in Progress” account shall be reclas-
sified to the proper asset account. Likewise, all expenses such as interests, li-
cense fees, etc., during the construction period shall be capitalized.

7.4 Review of the account Repair and Maintenance Expense-Buildings and Other
Structures disclosed that three infrastructure projects that met the recognition
criteria of PPE as replacement costs were recognized as outright expenses and
were included in the said account instead of recognizing them in the carrying
amount of the proper PPE account “Buildings and Other Structures” upon
completion or in CIP, if otherwise. Details are shown in Table No.10.

Table No. 10-Schedule of the Infrastructure Projects

Total Expense
Total Contract Total Amount of
# Infrastructure Project Contractor Recognized in
Amount Respective PPE
CY 2020
JEPA Con-
Conversion of Portion of
struction and
1 Publication Building to P9,622,245.42 P11,841,516.17 P7,613,196.95
Development
Performance Audit Office
Corporation
Reconfiguration of the Lourbel Con-
2 Technical Services Office struction and 4,172,811.54 8,011,587.39 66,564,674.00
(TSO) Supply
Reconfiguration of Pro-
curement and Property & Ayzariz Cor-
3 100,551.79 1,927,680.26 1,939,643.00
Supply Management Ser- poration
vices (PPSMS)
Total P13,895,608.75 P21,780,783.82 P76,117,513.95

7.5 The descriptions of the projects alone signified the intention of the Commis-
sion to replace a significant part of the affected buildings, as opposed to mi-
nor repairs which can be directly charged to the expense account.

7.6 In addition, the contract amount for each project is material in relation to the
recognized value of their respective PPE accounts specifically the first project
wherein the contract amount was much higher than its reported amount in the
books.

54
 7.7 Based on the foregoing, the Commission should have recognized in the carry-
ing amount of the respective PPE, the total cost incurred for the projects that
were completed as at December 31, 2020 and should have been depreciated
over the remaining estimated useful life of Buildings and Other Structures (30
to 50 years) as provided in COA Circular No. 2017-004 dated December 13,
2017. Meanwhile, the carrying amount of those parts that were replaced
should be derecognized. Following this would result in:

Table No. 11-Computation of Depreciation Expense

Total Contract Depreciation Ex-

Infrastructure Residual Value
# Amount pense/Year
Project
1 2 = 1 * 5% 3 = (1-2) / 30*
Conversion of
Portion of Pub-
lication Build-
1 P11,841,516.17 P592,075.81 P374,981.35
ing to Perfor-
mance Audit
Office
Reconfiguration
of the Technical
2 8,011,587.39 400,579.37 253,700.27
Services Office
(TSO)
Reconfiguration
of Procurement
and Property &
3 1,927,680.26 96,384.01 61,043.21
Supply Manage-
ment Services
(PPSMS)
TOTAL ₱21,780,783.82 ₱1,089,039.19 ₱689,724.82
*Assuming each PPE account has a remaining useful life of 30 years.

7.8 As a result of the improper recognition, the expense account was overstated
by P13,895,608.75 for the year ended December 31, 2020, while the CIP ac-
count was understated by P9,622,245.42, since the conversion of the portion
of Publication Building to Performance Audit Office (Project 1) as presented
in Table No. 3 is still in progress as of December 31, 2020.

7.9 Furthermore, considering that the second and third projects were already
completed in CY 2020, they should have been recognized in the carrying
amount of their respective PPE accounts to be depreciated over their remain-
ing useful life. Thus, the gross amount of the Buildings account is understated
by P4,273,363.33 and overstated by the amount equivalent to the carrying
amount of the parts that were replaced considering that it should have been
derecognized as of December 31, 2020.

7.10 We recommended that Management require the Accounting Office to:

55
 a. Adhere to the guidelines set forth in Chapter 10, GAM Volume 1
to ensure proper accounting of expenses that may be capitalized
and included in the carrying amount of the respective PPE account;
and

b. Make the necessary adjusting entries to correct the subject account

balances presented in the financial statements.

7.11 Management noted the recommendation and made the necessary adjusting en-
tries under JEV No. 2021-02-001656 dated February 26, 2021. A memoran-
dum was sent to the General Services Office (GSO) requesting the cost of the
area/parts replaced on various projects for derecognition in the books and the
new estimated life of the Buildings after the major repair. Once the data are
available, a JEV for the derecognition and for the corresponding depreciation
of the reclassified Building account shall be prepared.

OTHER FINANCIAL ISSUES

Excessive Petty Cash Fund

8. Petty Cash Fund (PCF) established and granted to several PCF Custodians in
COA CO were found to be excessive for the monthly recurring expenses of the
different offices of the Commission including a PCF of ₱500,000.00 which re-
main unexpended for nearly one year thereby exposing the fund to risks of
possible loss and/or misuse of government resources.

8.1 Section 5.7 of COA Circular No. 97-002 dated February 10, 1997, specifi-
cally states that: When a cash advance is no longer needed or has not been
used for a period of two months, it must be returned to or refunded immedi-
ately to the Collecting Officer; refund any unexpended balance to the
Cashier/Collecting Officer who will issue the necessary official receipts.

8.2 Section 4.3.1 of the same circular provides that the cash advance shall be suf-
ficient for the recurring expenses of the agency for one month. The AO may
request replenishment of the cash advance when the disbursements reach at
least 75%, or as the need requires, by submitting a replenishment voucher
with all supporting documents duly summarized in a report of disbursement.

8.3 Section 2 of P.D. 1445 states that It is the declared policy of the state that all
resources of the government shall be managed, expanded or utilized in accor-
dance with law and regulations, and safeguard against loss or wastage
through illegal or improper disposition, with a view to ensuring efficiency,
economy and effectiveness in the operations of the government.

56
 8.4 Review of the petty cash fund recognized in the books of the COA CO
showed that there are 12 offices with designated Petty Cash Fund Custodians
(PCFCs). The custodian is given a petty cash fund ranging from ₱15,000.00
to ₱500,000.00 depending on the need. For CY 2020, the total petty cash
fund established amounted to ₱1,145,000.00. (Details are shown in Appendix
F)

8.5 As of December 31, 2020 the reported balance of the COA CO Petty Cash
Fund (PCF) amounted to P779,938.42, broken down as follows:

Table No. 12-Petty Cash Fund Balance as of December 31, 2020

Fund Source Amount

Regular Agency Fund (RAF) ₱753,105.02
Business Type Income Fund (BTIF) 981.4
Trust Fund(TF) 25,852
Total ₱779,938.42

8.6 Further analysis revealed 76 petty cash replenishments in the total amount of
P1,408,766.83 from January 1 to December 31, 2020. The number of replen-
ishments and the monthly percentage rate of expenses incurred for each PCF
during the year ranges from zero to 16 times and zero percent to 44.20 per-
cent, respectively, details are presented in Table No. 13.

Table No. 13-Number of Replenishment and Average Expenses for each Petty Cash during the
Year
Number
of
Months
from the No. of Total
Amount of Date of Replenish Amount of % rate of
PCC PCF Grant of ment Replenishme Monthly Expenses
Reference Established Petty during the nt during the Average for one
Cash Year Year Expenses month

A B C D E F
E=D/B F=E/A
PCC-1 100,000.00 8 14 ₱168,276.00 ₱21,034.50 21.03%
PCC-2 20,000.00 12 5 83,373.00 6,947.75 34.74%
PCC-3 25,000.00 12 2 23,190.60 1,932.55 7.73%
PCC-4 500,000.00 11 0 - - 0.00%
PCC-5 50,000.00 12 3 120,118.50 10,009.88 20.02%
PCC-6 100,000.00 12 16 333,585.76 27,798.81 27.80%
PCC-7 150,000.00 12 12 231,778.47 19,314.87 12.88%
PCC-8 100,000.00 12 14 336,960.00 28,080.00 28.08%
PCC-9 15,000.00 12 2 16,864.90 1,405.41 9.37%
PCC-10 15,000.00 11 6 72,925.95 6,629.63 44.20%
PCC-11 40,000.00 5 1 17,545.65 3,509.13 8.77%
PCC-12 30,000.00 6 1 4,148.00 691.33 2.30%
Total 76 ₱1,408,766.83

57
 8.7 It can be gleaned from the above table that the percentage rate of expenses for
one month as shown in column F ranges from zero percent to 44.20 percent
denoting that all of the petty cash granted to petty cash custodians were
deemed to be excessive for the monthly recurring expenses of the offices of
the Commission.

8.8 Further review disclosed that PCC-4 had no activity during the year. The sub-
ject petty cash was granted for the payment of Honoraria of Resource Persons
and Training Management Teams in various seminars conducted by Profes-
sional and Institutional Development Sector (PIDS), but since face-to-face
seminars are not feasible because of the pandemic, the said petty cash of
₱500,000.00 remains unused and not yet refunded until now.

8.9 We recommended that Management require the concerned official to:

a. Close the petty cash fund released to the Professional and

Institutional Development Sector (PIDS) for the honoraria of
Resource Persons and Training Management Teams in various
seminars conducted by PIDS until the resumptions of trainings to
normal condition;

b. Immediately require the Petty Cash Custodian to refund the

amount of ₱500,000.00 in accordance with Section 5.7 of COA
Circular No. 97-002; and

c. Revisit the granting of the maximum cash accountability to the

designated petty cash custodian giving attention to the necessity
and to the amount sufficient for the recurring monthly expenses in
accordance with Section 4.3.1 of COA Circular No. 97- 002.

Delayed/Non-preparation of Billing Statements for cost of audit services

9. Delayed/non-preparation of billing statements for the cost of audit services

rendered to 34 Water Districts (WDs) deprived the Commission of the income
necessary for its operations.

9.1 Item 6.1 of COA Memorandum No. 2009-007 dated March 6, 2007, states
that The estimates of audit man-hours and the computation of the audit fee
shall be prepared by the Audit Team Leader, reviewed by the Supervising Au-
ditor, and submitted to the Regional Director for approval.

9.2 Section 6.2 thereof provides that The Regional Director shall forward the
same to the Regional Administration, Training and Finance (RATFS) for
proper billing. The RATFS, particularly the Accounting Division, shall pre-
pare the billing letter while the Regional Director shall transmit the same to
the water districts concerned thru the Supervising Auditor. The Audit Team
Leaders shall be responsible for following-up the payments.
58
 9.3 Further, Section 4.3 of COA Memorandum No. 2017-014 dated July 3, 2017
provides that The Regional Director shall transmit the Billing Statement to
the Water District thru the Supervising Auditor within 15 days after the
transmittal of the AAR to the Water District Management.

9.4 In COA Regional Satellite Audit Office-Negros Island and Siquijor (RSAO-
NIS), 14 WDs were audited in CY 2020 and only one WD was not billed.
However, billing statements with an aggregate amount of ₱1,851,804.86 cov-
ering the period CYs 2013-2015; 2016-2017; and 2017-2018 accounts and
transactions of 10 WDs were prepared and transmitted only in 2020.

9.5 While in COA RO VI, 23 WDs were not billed for audit services due to non-
submission of the assessments/revised computation by the Supervising Audi-
tor/Regional Audit Team Leaders (SA/RATLs) to the Regional Accounting
Unit (RAU) to serve as basis in the preparation of the Statement of Accounts.

9.6 The delay in the preparation of billing statements and inability to prepare and
issue the same for the cost of audit services rendered to WDs deprived the
Commission of additional resources necessary for its operational expenses.

9.7 This is a reiteration of the previous audit observation.

9.8 We reiterate the previous recommendations that Management direct the

concerned Audit Team Leaders/Supervising Auditors to cause the
prompt submission and computation/assessment of audit fees and send
billing statement for the cost of audit services rendered to Water Dis-
tricts for immediate recognition of income.

9.9 The OIC-Supervising Auditor of the CGS-Water Districts and Other CGS
Stand Alone Agencies assured the audit team that they will comply with the
recommendations.

Auditor’s Rejoinder

9.10 The Team acknowledged the Managements efforts to implement the audit
recommendations and will monitor their full compliance in CY 2021.

Overstocking of Office Supplies

10. Failure of Management to implement the audit recommendations on procure-

ment planning resulted in the continuous overstocking of office supplies
amounting to ₱9.074 million as at December 31, 2020 and possible wastage of
government resources through obsolescence.

10.1 It is the policy declaration of the government in Section 2 of PD 1445

which requires that all of its resources be managed, expended or utilized in

59
 accordance with law and regulations, and safeguarded against loss or
wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government.

10.2 Section 5.1 of COA Circular No. 2012-003 dated October 29, 2012 pro-
vides definition of the term "excessive expenditures" as those which signi-
fies unreasonable expense or expenses incurred at an immoderate quantity
and exorbitant price. It also includes expenses which exceed what is usual
or proper, as well as expenses which are unreasonably high and beyond
just measure or amount. They also include expenses in excess of reason-
able limits.

10.3 Section 25 of the General Provisions of the FY 2020 General Appropria-

tions Act (GAA) states that the inventory of supplies, materials and equip-
ment spare parts to be procured shall not exceed the agency's two-month
requirement.

10.4 Section 7.1, Rule II of the 2016 Revised Implementing Rules and Regula-
tions (RIRR) of RA 9184 on Procurement Planning provides that all pro-
curement shall be within the approved budget of the Procuring Entity and
should be meticulously and judiciously planned by the Procuring Entity.
Consistent with government fiscal discipline measures, only those consid-
ered crucial to the efficient discharge of governmental functions shall be
included in the Annual Procurement Plan (APP). For purposes of this IRR,
a procurement project shall be considered crucial to the efficient discharge
of governmental functions if it is required for the day-to-day operations or
is in pursuit of the principal mandate of the Procuring Entity concerned.
The APP shall include provisions for foreseeable emergencies based on
historical records.

10.5 Accordingly, the head of agencies may increase their inventory of critical
supplies, materials and equipment spare parts to be procured only in any of
the following instances:

(i) in anticipation of cost increases;

(ii) necessitated by a national emergency;
(iii) when there is an impending shortage; and
(iv) when otherwise authorized in this Act or in the charter of
the agency concerned.

10.6 The purchase of stocks exceeding an agency's one-year requirement shall

be subject to approval by the President of the Philippines, upon the joint
recommendation of the Chairperson of the COA and the Secretary con-
cerned in accordance with Section 25 of the General Provision of the FY
2020 General Appropriations Act (GAA).

60
 10.7 Review of the Commission’s monthly purchases and consumption of of-
fice supplies for CYs 2019 and 2020 disclosed the following as reflected in
Table No.14.

Table No. 14-Monthly Purchases and Consumption of Office Supplies

CY2019 CY 2020
Consumption Consumption
Month Purchases and Purchases and
and Other and Other
Other Debits Other Debits
Credits Credits
January ₱15,323,013.79 ₱1,562,710.48 ₱143,577.00 ₱4,570,749.76
February 472,861.80 1,234,529.17 743,456.37 2,293,803.34
March 1,223,764.94 1,505,438.31 243,573.81 1,026,734.75
April 1,006,604.00 1,485,745.61 - -
May 1,317,913.20 1,511,789.03 - -
June 445,925.00 1,637,155.45 422,967.06 2,545,099.69
July 552,241.43 861,642.69 97,886.00 720,134.98
August 1,928,960.00 1,869,217.62 56,400.00 197,449.39
September 1,819,664.76 2,682,002.22 493,300.00 993,670.74
October 825,510.32 900,249.62 124,657.84 901,013.80
November 10,184,839.00 1,090,568.92 1,336,802.50 1,015,036.49
December 4,453,018.54 1,693,075.17 656,873.00 1,228,834.41
TOTAL ₱39,554,316.78 ₱ 18,034,124.29 ₱4,319,493.58 ₱15,492,527.35

10.8 Using the data presented in Table No. 14, we computed the Commission’s
average monthly consumption as well as the two (2) months’ supply re-
quirement to arrive at the excess amount of office supplies inventory per
month for CY 2020, as shown in Table No.15.

Table No. 15 – Required Supply of Inventory vs. Actual Amount of Inventory

Total Con- Two

Average Office Sup-
sumption (For Months' Excess
Monthly Con- plies Inven-
Month The Last Supply Re- Amount
sumption tory
6 Months) quirement
A B = (A/6) x 1.1 C=Bx2 D E=D-C
January ₱9,096,756.24 ₱1,667,738.64 ₱3,335,477.29 ₱17,110,562.15 ₱13,775,084.86
February 12,805,863.31 2,347,741.61 4,695,483.21 15,354,671.80 10,659,188.59
March 13,230,449.03 2,425,582.32 4,851,164.64 14,579,443.71 9,728,279.07
April 11,575,181.56 2,122,116.62 4,244,233.24 14,579,900.25 10,335,667.01
May 10,674,931.94 1,957,070.86 3,914,141.71 14,579,900.25 10,665,758.54
June 9,584,363.02 1,757,133.22 3,514,266.44 12,470,296.69 8,956,030.25
July 10,436,387.54 1,913,337.72 3,826,675.43 11,896,529.71 8,069,854.28
August 6,585,772.76 1,207,391.67 2,414,783.35 11,785,297.32 9,370,513.97
September 4,489,418.81 823,060.12 1,646,120.23 11,306,344.24 9,660,224.01
October 4,456,354.80 816,998.38 1,633,996.76 10,718,684.96 9,084,688.20
November 5,357,368.60 982,184.24 1,964,368.49 12,055,487.46 10,091,118.97
December ₱6,372,405.09 ₱1,168,274.27 ₱2,336,548.53 ₱10,272,208.88 ₱7,935,660.35

10.9 It can be gleaned from Table No.15, that purchase of supplies and materi-
als exceeded the two-month requirement of the Commission contrary to

61
 existing rules and regulations thus, resulting in the overstocking of office
supplies.

10.10 This issue on inventory overstocking was already noted in CYs 2018 and
2019 under AOM No. 2020-006 (2019) dated August 7, 2020. While the
Commission was able to reduce its office supplies inventory by ₱11.045
million or 51.8 percent in CY 2020, the current inventory stock still poses
a significant risk due to possible wastage through obsolescence.

10.11 Further analysis revealed that 114 types of office supplies, consisting
mostly of IT supplies such as toners and ink cartridges, totaling
₱6,181,209.66 were considered as slow-moving and 115 items of supplies
amounting to ₱2,770,681.74 were non-moving in CY 2020.

10.12 Among the slow-moving/non-moving inventories with material outstand-

ing balances as at December 31, 2020 are shown in Table No.16.

Table No.16-Monitoring of Slow-Moving/Non-Moving Inventories (2019-2020)

Outstanding Balance as of: (Quan- Total

Inventory tity) Amount as of
01/01/2019 12/31/2019 12/31/2020 12/31/2020
Insecticide (500/600 ml, all brand) 2,501 2,034 1,599 ₱222,792.02
Toner (HP Q5952a, Yellow, Orig-
20 20 20 213,109.88
inal)
Toner (FS-2020D, TK-344, Ky-
31 24 24 183,360.00
ocera)
Toner, Cartridge for Canon LBP-
83 46 32 404,670.06
7780CX, Cyan
Toner, Cartridge for Canon LBP-
81 51 41 517,069.15
7780CX, Magenta
Toner, Cartridge for Canon LBP-
81 50 39 491,812.94
7780CX, Yellow
Toner, Samsung, CLT-K506S/
99 64 38 226,372.09
K506L, Black
Toner, Kyocera TK-3104, FS-
124 122 94 808,380.02
2100DN
Toner, TK-5144K Kyocera
0 132 21 193,200.00
Ecosys P6130DN
Toner, TK-5154K Kyocera
0 47 18 227,250.00
Ecosys P6035DN
TOTAL 3,020 2,590 1,926 ₱3,488,016.16

10.13 Furthermore, injudicious planning and monitoring of stock availability was

observed as evidenced by the procurement of 14 types of office supplies in
CY 2020 wherein total issuances for each inventory were not even enough
to consume the beginning balance of such inventory. The said inventories
amounted to ₱382,371.04 as at December 31, 2020.

10.14 In COA RO 1 and BARMM, the same condition exists and so deficiencies
such as overstocking of supplies amounting to ₱496,655.77 and

62
 ₱641,947.88, respectively, and slow moving items were also noted bring-
ing the total amount to P9,074,264.00.

10.15 The recurring practice of bulk purchasing and overstocking demonstrated

the lack of meticulous and judicious procurement planning of office sup-
plies requirements and non-compliance with the provisions of the law and
regulations, resulting in significant wastage of government resources
through obsolescence.

10.16 We reiterated the prior year’s recommendations that Management di-

rect the Property Officer to:

a. Ensure judicious planning in the purchase of supplies and ob-

serve the normal two-month requirement in accordance with
Section 7.1, Rule II of the 2016 RIRR of RA 9184 and the GAA
General Provisions, respectively;

b. Check the condition of each slow and non-moving inventories as

of December 31, 2020 and prioritize their issuance, if still in good
condition; and

c. Monitor and coordinate with the Accountant on the purchase, is-

suance and consumption of office supplies in their updated Stock
Cards and Supplies Ledger Card respectively, to maintain ap-
propriate level of stocks to prevent occurrence of slow and non-
moving inventories and avoid wastage of government resources
due to obsolescence.

10.17 Management took note of the recommendations and that monitoring of the
purchase, issuance and consumption of office supplies for the purpose of
maintaining the appropriate level of stocks to prevent the occurrence of
slow and non-moving inventories, thus avoiding wastage of government
resources due to obsolescence may be done in a timely manner by the
PPSMS, GSO.

Unliquidated cash advances for foreign and local travels

11. Cash advances for foreign and local travels in COA CO in the total amount of
P12.387 million were not liquidated within the deadlines set by existing rules
and regulations resulting in a significant balance of the account Advances to
Officers and Employees. Likewise, cash advances of P13.623 million were
granted to Accountable Officers (AOs) despite non-liquidation/settlement of
previous cash advances. Further, excess/balance of cash advances was not im-
mediately refunded.

63
11.1 COA Circular No. 97-002 dated February 10, 1997 provides among others,
the following guidelines on the granting, utilization and liquidation of cash
advances:

a) Section 5.3 states that the Accountable Officer (AO) shall liquidate
his cash advance for official travel within sixty (60) days after return
to the Philippines in the case of foreign travel or within thirty (30)
days after return to his permanent official station in the case of local
travel, as provided for in EO 248 and COA Circular No. 96-004.

b) Failure of the AO to liquidate his cash advance within the prescribed

period shall constitute a valid cause for the withholding of his salary
and the instruction of other sanctions as provided for under para-
graphs 9.2 and 9.3 of the same Circular.

c) Section 5.7 states that when a cash advance is no longer needed or

has not been used for a period of two (2) months, it must be returned
to or refunded immediately to the collecting officer.

d) Section 4.1.2 provides that no additional cash advances shall be al-

lowed to any official or employee unless the previous cash advance
given to him is first settled or a proper accounting thereof is made.

11.2 As of December 31, 2020, the reported balance of the account Advances to
Officers and Employees for COA-CO amounted to P12,406,036.98, bro-
ken down as follows:

Table No. 17-Advances to Officers and Employees

Fund Amount
Trust Fund (TF) ₱11,381,922.88
Regular Agency Fund (RAF) 1,024,114.10
TOTAL ₱12,406,036.98

11.3 Analysis of the said account revealed that out of the reported amount,
P12,387,054.98 or 99.85 percent pertained to cash advances which were
already past due but remain unliquidated as of year-end, broken down as
follows:

Table No. 18-Unliquidated Cash Advances

Regular Agency
Particulars Trust Fund Total Amount
Fund
Foreign Travel ₱11,381,922.88 ₱516,311.60 ₱11,898,234.48
Local Travel 0.00 488,820.50 488,820.50
TOTAL ₱11,381,922.88 ₱1,005,132.10 ₱12,387,054.98

64
11.4 Of the ₱12,387,054.98 unliquidated cash advances, ₱3,771,172.50 or
30.44 percent pertained to cash advances that were granted from the previ-
ous year, to wit:

Table No. 19-Unliquidated Cash Advances for over one year

Regular Agency
Particulars Trust Fund Total Amount
Fund
Foreign Travel ₱3,234,310.90 ₱516,311.60 ₱3,750,622.50
Local Travel 0.00 20,550.00 20,550.00
TOTAL ₱3,234,310.90 ₱536,861.60 ₱3,771,172.50

11.5 Moreover, monitoring of cash advances granted and/or due for liquidation
for calendar year 2020 showed the following data:

Table No. 20-Number of Liquidated Cash Advance for the year

Liquidated beyond Unliquidated/Partially

Liquidated the Prescribed Period Liquidated as of De- Total
Type of Type of w/in The (No. of Days Past cember 31, 2020 No. of
Fund Travel Prescribed Due) (No. of Days Past Due) Cash
Period Less than 91-365 Over 1 Advance
91-365 days
90 days days year
Regular Foreign 2 9 8 0 2 21
Agency
Local 4 31 15 7 1 58
Fund
Internally Foreign 0 2 1 0 0 3
Generated 0 4 0 0 0 4
Local
Fund
Trust Fund Foreign 4 45 32 32 10 123
Local 0 0 0 0 0 0
TOTAL 10 91 56 39 13 209
Summary 10 147 52 209
Percentage 4.79% 70.33% 24.88% 100%

11.6 As shown in Table No. 20, 147 out of 209 cash advances or 70.33 percent
were liquidated beyond the prescribed period, while the 52 outstanding
cash advances or 24.88 percent for local and foreign travel were already
past due. This manifests a low compliance with the provisions set forth un-
der COA Circular No. 97-002 particularly on the prescribed period within
which cash advance should be liquidated.

11.7 Interview with Accounting Staff disclosed that a Memo was sent to respec-
tive Accountable Officers (AOs) regarding their outstanding cash ad-
vances, but still some cash advances remain unliquidated as at December
31, 2020.

11.8 It was also noted that there was significant delay in the refund of excess/
balance of cash advances. Since the purpose of the cash advance was al-
ready undertaken, any excess should have been immediately refunded by

65
 concerned AO. The lag time for the delay or non-refund of the excess cash
advances ranges from 3 days to 249 days (per working paper), to wit:

Table No. 21-Delayed Refund of Excess Cash Advances

No. of Days Delayed

Total From The Prescribed Amount Not-
No. of Date of Liquidation Amount of
Fund Refunded As Total Amount
Late Late Refund
Less than 91-365 of 12/31/2020
Refund
90 days days
RAF 46 28 18 ₱2,127,711.10 ₱96,323.50 ₱2,224,034.60
IGI 4 4 16,802.40 .00 16,802.40
TF 12 8 4 996,572.50 770,245.36 1,766,817.86
TOTAL 62 40 22 ₱3,141,086.00 ₱866,568.86 ₱4,007,654.86

11.9 Further, it was also observed that a total of 42 additional cash advances
amounting to ₱13,622,587.04 were granted to officers and employees de-
spite the non-liquidation of their previous cash advances which is contrary
to Section 4.1.2 of COA Circular No. 97-002 dated February 10, 1997.

11.10 Although the Accounting Office has been monitoring these cash ad-
vances, some officials and employees were still able to obtain additional
cash advance/s even without liquidating their previous cash advance.

11.11 These observations were also included in the previous audit report.

11.12 Noteworthy to mention that under Section 6.18 of the DBM Memorandum
Circular No. 2020-01 dated June 2, 2020, officials and employees who
failed to liquidate all cash advances received in FY 2020 within the regle-
mentary period, as prescribed in COA Circular No. 97-002, shall not be
entitled to the FY 2020 Performance-Based Bonus (PBB).

11.13 We recommended that Management:

a. Strictly adhere to the provisions on the granting, utilization and

liquidation of cash advances set forth under COA Circular No.
97-002;

b. Require from officials and employees a certification from the Ac-

countant that their previous cash advances have been liquidated
and accounted for prior to granting another cash advance pur-
suant to COA Circular No. 2012-001 dated June 14, 2012;

c. Direct the Accounting Office to require the immediate refund of

excess cash advances from the concerned AOs; and

d. Direct the Risk Management and Budget Office to impose the

sanction provided under the DBM Memorandum Circular No.
2020-001 on the exclusion of AOs from claim of the PBB in case

66
 of failure to liquidate the cash advance within the prescribed pe-
riod.

11.14 Management informed that of the ₱11,381,922.88 unliquidated cash ad-

vances for foreign and local travels, ₱7,663,217.33 or 67 percent were liq-
uidated from January to April 27, 2021. The grant of cash advances even
if previous cash advances were not liquidated yet was due to the continu-
ous audit engagement of UN Auditors which makes it impossible for them
to liquidate immediately the previous cash advances granted.

11.15 For CY 2020, the Accounting Office sent 59 demand letters (51 for local
and 8 for foreign travels) to concerned accountable officers. Likewise, 33
demand letters were sent in March 2021 for foreign travel in relation to
UN audit.

11.16 Of the ₱488,820.50 unliquidated balance for local travel, ₱86,014.00 or

17.6 percent was refunded from January to March 2021.

Auditor’s Rejoinder

11.17 While we agree that in several occasions continuous audit engagements

were undertaken by UN Auditors causing their inability to liquidate their
previous cash advances, still we emphasize that the issue raised mostly
pertained to CY 2019 transactions. As the cash advances were granted in
CY 2019, they have ample time to liquidate the same before a new/addi-
tional cash advance can be granted in CY 2020.

Unremitted Inter-Agency Payables

12. The balances of Due to Government Insurance System (GSIS), Home Develop-
ment Mutual Fund (HDMF), Philippine Health Insurance Corp (PHIC) ac-
counts recorded in the books of COA RO IX totaling ₱100,279.58 remain un-
remitted for six years to date

12.1 Under Volume III of the GAM the Inter-Agency Payable accounts such as
Due to GSIS, PAG-IBIG, PhilHealth accounts recognizes the withholding
of employee’s premium payments and other payables for remittance to the
Government Insurance System (GSIS), Home Development Mutual Fund
(HDMF), Philippine Health Insurance Corp (PHIC). It has a normal credit
balance and debited for the remittance of withheld amount.

12.2 In 2015, the Commission on Audit implemented a Centralized Payroll In-

formation System for all the regional offices. Payment of salaries and other
personal benefits of all the employees from the different regional offices
are made by the COA Central Office including remittances of the employ-
ees’ premium payments and other payables withheld. Amounts withheld

67
 are recorded in the Inter-Agency Payable accounts by the COA Central
Office.

12.3 Records disclose, as shown in Table No. 22, that there are balances of Due
to GSIS, PAG-IBIG and Philhealth accounts in the books which remain
unremitted for six years.

Table No. 22-Outstanding Inter-Agency Payables

Accou Dec. 31, 2020 Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
nt 2019 2018 2017 2016 2015
Due to ₱48,959.67 ₱48,959.67 ₱48,959.67 ₱48,959.67 ₱48,959.67 ₱48,959.67
GSIS
Due to 9,917.98 9,917.98 9,917.98 9,917.98 9,917.98 9,917.98
Pag-
ibig
Due to 41,401.93 41,401.93 41,401.93 41,401.93 41,401.93 41,401.93
Philhe
alth
TOTA ₱100,279.58 ₱100,279.58 ₱100,279.58 ₱100,279.58 ₱100,279.58 ₱100,279.58
L

12.4 The amounts withheld for employee’s premium payment and other
payables for remittance to GSIS, HDMF and PHIC totaling ₱100,279.58
were not supported with list/record/document, the absence of which ren-
dered difficulty in identifying the name of employees, amounts withheld
per employee, and other relevant information.

12.5 The Accountant informed the team that these balances were already
present/existing prior to his assumption on February 2, 2015 and there
were no list/records and documents or details of these accounts. Presently,
the Accountant was able to retrieve some data on unremitted balances
from journal entries in 2008 and 2011 and continued to identify and vali-
date these payables until now.

12.6 We recommended that Management direct the COA RO IX Regional

Accountant to:

a. Continue his/her efforts of identifying all the necessary details of

the abovementioned long outstanding Inter-Agency Payable
Accounts and after having the necessary details, remit the
payables to respective agencies; and

b. Make the appropriate journal entries to recognize the

remittances.

12.7 Management acknowledged the existence of selected balances of payable

accounts and that a complete and detailed listing will be prepared and as-
sessed the validity of these payables, to include the completeness and pro-
priety of available documents. Once established with finality, appropriate

68
 courses of actions will be made towards settlement of these payables to the
appropriate government agencies

COMPLIANCE ISSUES

Construction not completed and subsequently terminated

13. The construction of COA-CAR Regional Training Center and Dormitory

Building Phase I with total project cost of ₱59.097 million was not completed
and subsequently terminated due to the inability of the contractor to continue
with the project resulting in the risk of possible loss of government resources
in the amount of ₱3.380 million.

13.1 On January 22, 2018, the COA CAR represented by the Regional Director
and a representative of Royalink Builders, Inc. entered into a Contract
Agreement for the construction of the COA-CAR Regional Training Cen-
ter and Dormitory Phase I in the amount of ₱58,704,908.08. The construc-
tion period was set for completion within 812 calendar days. Notice of
Award was issued on January 18, 2018 while the Notice to Proceed on
February 1, 2018.

13.2 On June 18, 2019, Variation Order No. 1 was issued for additional contract
cost of ₱392,229.71 and 30 calendar days extension, rendering the revised
contract price at ₱59,097,137.79 for 842 calendar days construction pe-
riod. The revised completion date was set on May 29,2020.

13.3 Audit of Disbursement Vouchers (DVs) and verification of documents

such as the original construction plan and the revised catch up plan,
showed that the contractor has incurred negative slippage since the start of
the construction as shown in the succeeding table:

Table No. 23-Negative Slippage incurred in the Construction

Percentage of Computed
Verified Percentage
Date Completion as negative
of Accomplishment
planned slippage

March 7, 2019 36.47 44.30 7.88

April 26, 2019 (3 Billing)
rd
36.77 41.79 5.02
May 21, 2019 36.77 44.80 8.03
July 26, 2019 (4th Billing) 42.02 50.10 8.08
February 3, 2020 47.02 47.02 12.96

13.4 In a letter to the COA CAR Regional Director dated September 30, 2020,
the Royalink Builders, Inc. has unilaterally terminated the contract invok-
ing the provisions of Sections 20 and 20.3 of the Revised IRR of RA 9184

69
 which provides that either party in a contract may give notice of termina-
tion if the fortuitous event (referring to the ongoing pandemic) continues
for a period of 84 days. The termination shall take effect 28 days after giv-
ing the notice.

13.5 On October 13, 2020, the Technical Team constituted by the agency to
conduct inventory of accomplishment of Royalink Builders Inc. in the con-
struction of COA-CAR Training Center, reported that the actual accom-
plishment is only at 40.66 percent valued at ₱24,028,310.00 compared to
the total payments made amounting to ₱24,803,227.10 at 42.02 percent..
Thus, there is an overpayment of ₱774,917.10.

13.6 The financial statement of COA CAR as at December 31, 2020 showed a
total of ₱5,085,252.14 unrecouped portion of the mobilization fee ad-
vanced to the contractor, and a total of ₱2,480,322.72 retention fee. Taking
into account the overpayment, the unrecouped portion of the mobilization
fee, and the accumulated 10 percent retention fee, the agency still has a to-
tal receivable of ₱3,379,846.52 from the contractor, accounted as follows:

Unrecouped mobilization fee P5,085,252.14

Retention fee (2,480,322.72)

Overpayment of contract 774,917.10

Total amount due from contractor P3,379,846.52

13.7 The termination of the contract while there is an existing receivable from
the contractor has rendered the probability that the contractor may no
longer pay the amount advanced to them, thus, subsequent loss of the total
receivable.

13.8 We recommended that COA CAR Management exhaust the best pos-
sible legal remedy to recover the receivable of ₱3,379,846.52 from the
contractor by considering the following:

a. Issue demand/collection letter to the contractor;

b. Negotiate with the contractor to assign their rights over their

receivable with other government agencies in favor of COA CAR;
and

c. File a case, if the contractor still failed to perform or deliver any

of the obligations and undertakings in the contract pursuant to
25.3(i) of the revised IRR of RA 9184 and other relevant laws.

70
 13.9 Management commented that they had issued a letter to the contractor in-
forming of the total receivable due from them and attached a copy of the
COA Technical Team’s assessment and inventory of accomplishment for
their review and concurrence.

13.10 Based on information, the DPWH-Baguio District Engineering Office

(DPWH-BCDEO) has an existing payable to Royalink Builders, the Re-
gional Director was able to request for the withholding of payment to the
contractor until the obligation with COA CAR is settled.

13.11 Meantime, the COA CAR Regional Director and the Project Team are
constantly following up with the contractor for the concurrence with the
COA Technical Team’s assessment and inventory of accomplishment
through series of e-mails from December 21, 2020 to March 1, 2021. The
Management committed to exert all legal remedies to demand/collect from
the contractor.

Procurement of Infrastructure projects not compliant with RA 9184

14. The procurement process on several infrastructure projects of the Commission

in CY 2020 was non-compliant with the provisions of Republic Act No. 9184
(RA 9184) and its revised Implementing Rules and Regulations (IRR), thus de-
laying the implementation of three projects and at some point, casting doubt
on the validity of its contracts.

a. Significant delays on specific activities in the procurement process.

14.1 It is the policy of the Government of the Philippines (GoP) as provided in

Section 2 of the 2016 revised IRR of RA 9184 that procurement of Goods,
Infrastructure Projects and Consulting Services shall be competitive and
transparent, and therefore shall undergo competitive bidding.

14.2 As such, the procurement of the GoP shall be governed by the Governing
Principles on Government Procurement, in particular Section 3 (c) of the
same IRR which provides that Streamlined procurement process that will
uniformly apply to all government procurement. The procurement process
shall be simple and made adaptable to advances in modern technology in
order to ensure an effective and efficient method.

14.3 Section 7 of the same IRR states that all procurement should be meticu-
lously and judiciously planned by the Procuring Entity.

14.4 The 2016 Revised Implementing Rules and Regulations-Annex “C” pro-
vides that the maximum period allowed for the procurement of infrastruc-
ture projects with contract amounts of ₱50,000,000.00 and below is 141
calendar days.

71
14.5 Result of the detailed review made by the audit team showed that three in-
frastructure projects of the Commission were not compliant with the afore-
mentioned regulations thereby exceeding the maximum allowed period by
an average of 132 days and thus, delaying the implementation of the
project as shown in Table 24:

Table No. 24-Schedule of Infrastructure Projects as of December 31, 2020

Issuance
Posting of No. of
Infrastructure Contract of
# Contractor Invitation Days to
Project Amount Notice to
to Bid Complete
Proceed
Construction of
I.M. Bongar &
1 Waste Water P8,792,087.06 11/28/2018 09/02/2019 278
Co., Inc.
Treatment
Additional JEPA Con-
Works at PIDS struction and
2 2,997,764.78 11/08/2019 06/08/2020 213
Extension Development
Building Corporation
Supply and In-
stallation of 328 days
Not yet is-
New Generator Innovalite, and count-
3 5,903,137.00 02/07/2020 sued as of
Set Including Inc. ing as of
12/31/2020
Electrical 12/31/2020
Rewiring Works

14.6 The significant delay in the projects above can be attributed to the follow-
ing procurement activities:

a. Procurement process from the Opening of Bids to Issuance of Notice

of Award (NOA)

a.1 Section 38 of the same IRR provides that the procurement

process from the opening of bids up to the award of contract
shall not exceed three (3) months, or a shorter period to be deter-
mined by the Procuring Entity concerned. All members of the
Bids and Awards Committee (BAC) shall be on a “jury duty”
type of assignment until the Notice of Award is issued by the
HoPE in order to complete the entire procurement process at the
earliest possible time.

a.2 Records show that Projects 1 and 3 were not compliant with the
provisions above, exceeding the maximum allowed period by an
average of 148.5 days as summarized below:

Table No. 25-Summary of Procurement Process for Projects 1 and 3

72
 Issuance of No. of
Infrastructure Contract Bid Open-
# Contractor Notice of Days to
Project Amount ing
Award Complete
Construction I.M. Bon-
1 of Waste Wa- gar & Co., P 8,792,087.06 01/04/2019 08/05/2019 213
ter Treatment Inc.
Supply and In-
stallation of
New Genera-
Innovalite,
2 tor Set Includ- 5,903,137.00 03/04/2020 11/23/2020 264
Inc.
ing Electrical
Rewiring
Works

a.3 In addition, the audit team noted that another infrastructure

project did not comply with the said provisions above. Even
though they were able to comply with the maximum period of
141 days, as the entire process was completed in 136 days, it
took them 96 days to issue the NOA from the opening of bids.
Details are in Table No. 26.

Table No. 26-Summary of Procurement Process

No. of
Issuance of Days
Infrastructure Contract
# Contractor Bid Opening Notice of to
Project Amount
Award Com-
plete
Conversion of
Portion of Pub- JEPA Con-
lication Build- struction and
1 P11,841,516.17 10/18/2019 01/22/2020 96
ing to Perfor- Development
mance Audit Corporation
Office

b. Contract was awarded beyond the bid validity period

b.1 Section 37.1.5 of the revised IRR mandates: contract award shall
be made within the bid validity period provided in Section 28 of
this IRR.

b.2 Section 28.1 provides that Bids and bid securities shall be valid
for a reasonable period as determined by the HOPE concerned,
which shall be indicated in the Bidding Documents, but in no
case shall the period exceed one hundred twenty (120) calendar
days from the date of the opening of bids.

b.3 As already provided in Table No. 25 above, the procurement

process from the opening of bids until the awarding of contract
for Projects 1 and 3 were completed in 213 and 264 days, re-
spectively.

73
 b.4 Thus, there was no valid and existing bid for award on August 5,
2019 for Project 1 and November 23, 2020 for Project 3 consid-
ering that the number of calendar days from bid opening to con-
tract award was more than the allowable 120-day bid validity
period thereby, casting doubt on the validity of such contracts.

c. Issuance of Notice to Proceed (NTP)

c.1 Section 37.4.1 provides that the concerned Procuring Entity

shall issue the NTP together with a copy or copies of the ap-
proved contract to the successful bidder within seven (7) calen-
dar days from the date of approval of the contract by the appro-
priate government approving authority.

c.2 The contract between the Commission and JEPA Construction

and Development Corporation for the project “Additional Works
at PIDS Extension Building” was perfected on March 09, 2020.
However, the NTP was issued by the Commission to the con-
tractor only on June 8, 2020, or after a total of 91 calendar days
which totally exceeds the allowed period of seven calendar days.

b. Failure to satisfactorily complete the work within the specified contract

time which constitutes a violation of the terms and agreements of the
contract.

14.7 Section 8, Annex E on Liquidated Damages states that:

 Where the contractor refuses or fails to satisfactorily complete the work

within the specified contract time, plus any time extension duly granted
and is hereby in default under the contract, the contractor shall pay the
procuring entity for liquidated damages, and not by way of penalty, an
amount, as provided in the conditions of contract, equal to at least one
tenth (1/10) of one (1) percent of the cost of the unperformed portion of
the works for every day of delay.

 In case that the delay in the completion of the work exceeds a time du-
ration equivalent to ten percent (10%) of the specified contract time
plus any time extension duly granted to the contractor, the procuring
entity concerned may rescind the contract, forfeit the contractor's per-
formance security and takeover the prosecution of the project or award
the same to a qualified contractor through negotiated contract.

14.8 Evaluation of the status of awarded infrastructure projects disclosed that 4

out of 5 projects were still on-going as of December 31, 2020, including
two projects which have not been completed within the required comple-
tion date. (See Appendix G)

74
14.9 Significant delay incurred in the completion of the projects particularly in
Projects 2 and 3, which amounted to 259 days and 150 days, respectively,
as of December 31, 2020, consequently delayed the delivery of services/
benefits to the beneficiaries of the projects.

14.10 Except for causes of delay beyond the control of the agency and the con-
tractor such as the ongoing pandemic, typhoons and unfavorable weather
conditions, all other factors should have been considered and resolved al-
ready during the preliminary engineering study to ensure the timely com-
pletion of projects in accordance with Section 3 of the revised IRR of RA
9184.

14.11 We recommended that Management require the:

a. BAC to minimize the delays in the procurement activities by ad-

hering to the provisions of the RIRR of RA 9184, in particular
the maximum period allowed for the procurement of infrastruc-
ture projects, as provided in Annex C of the RIRR;

b. GSO to continuously monitor, review and evaluate the program

of work under detailed engineering to ensure that all phases of
the projects are covered to minimize the variation orders and re-
quests for time extensions;

c. GSO to strictly monitor all ongoing projects and consistently

communicate with the contractor regarding the agreed timeline
and deadline for the projects.

d. Accounting Office to impose liquidated damages to the contrac-

tors for every day of delay pursuant to Section 9, Annex E of the
revised IRR of RA 9184; and

e. Concerned office to consider disqualification and/or blacklisting

of contractors who have failed to satisfactorily complete the
work within the agreed contract time based on the performance
evaluation of the contractors in accordance with 13.3 of Annex
E, Revised IRR of RA No. 9184.

14.12 Management explained that the reason for the prolonged/extended pro-
curement process for several infrastructure projects was due to the follow-
ing: a) Notice for the Post Disqualification and Motion for Reconsideration
were undertaken by the BAC; b) bidding process was heavily affected by
the COVID-19 pandemic; c) failure of bidding due to lone bidder; and d)
the procurement activity was undertaken during the last quarter of CY
2019. Management further explained that if the contract is not yet
awarded within the original period, the bidders are requested to extend the
validity period for their bid offers.
75
 14.13 Management is of the view that delays are not necessarily incurred when
the corresponding reasons are found acceptable and valid.

14.14 Nonetheless, Management appreciated the recommendations and consid-

ered the recommended action of great assistance.

OTHER COMPLIANCE ISSUES

Inadequate monitoring and lack of timely reconciliation of leave balances

15. Inadequate monitoring of leave balances and lack of timely reconciliation re-
sulted in the overpayment of salaries while in active service of 28 COA retirees
who incurred negative leave balances amounting to P0.939 million and if not
collected/refunded will lead to loss of government resources. Moreover, lack
of proper review resulted in significant number of deficiencies which if not
identified could lead to payment of incorrect money value of unused leave
credits.

15.1 It is the policy declaration of the government in Section 2 of PD 1445

which requires that all of its resources be managed, expended or utilized in
accordance with law and regulations, and safeguarded against loss or
wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government.

15.2 COA Memorandum No. 2011-017 dated September 1, 2011 provides the
Revised Rules and Guidelines on Travels, Attendance and Leaves.

15.3 Item IV of the same Memorandum on Notification of Absences without

Approved Leave, Habitual Absenteeism without Sufficient Leave Credits
and Non-Submission of DTRs states the responsibility of those who have
immediate supervision over the personnel concerned to notify immediately
the HRMO, Administration Sector, and the Accounting Office-PFMS of
the personnel concerned to avoid incurrence of overpayment of salaries.

15.4 While in Item II, 7(e), of the same Memorandum it provides, among oth-
ers, that each Office’s leave credit records should be reconciled periodi-
cally with those maintained by HRMO.

15.5 In COA Circular No. 2011-002 dated July 22, 2011, the Commission with-
drew the selective pre-audit under COA Circular No. 2009-002 and lifted
all the pre-audit activities being performed on the financial transactions of
the national government agencies.

15.6 However, based on the Memorandum on the request for the continuous
conduct of pre-audit on terminal leave claims approved by the former

76
 COA Chairman Guillermo N. Carague, claims for TLBs of retired/re-
signed employees, are being subject to pre-audit to ensure their accuracy.

15.7 Result of review on the TLBs for CYs 2017-2020 showed that a total of
28 COA retirees have accumulated negative leave balances denoting over-
payment of salaries totaling ₱939,396.41. Details are as follows:

Table No. 27-Summary of TLBs with negative balances (CYs 2017-2020)

TOTAL TLB
WITH NEG- TOTAL LEAVE TOTAL AMOUNT
YEAR
ATIVE BAL- CREDITS (VL+SL) TO BE REFUNDED
ANCES
2017 6 (127.23) (₱205,581.25)
2018 3 (28.55) (36,363.65)
2019 12 (51.88) (487,144.30)
2020 7 (127.73) (210,307.22)
TOTAL 28 (335.39) (₱939,396.41)

15.8 In some instances, approval was made by the immediate supervisor of the
application for leave filed by the staff without knowing the actual leave
balances as certified by the Personnel Officer, due to inadequate monitor-
ing and timely reconciliation of leave credits and the delay in communi-
cating to the HRMO of personnel on Absence without Official Leave
(AWOL), led to late detection of insufficient leave balances which gave
rise to the following conditions:

1) Monetization of leave credits were allowed despite the lack of accu-

mulated leave credits as prescribed in the Omnibus Rules on Leave
of the Civil Service Commission (CSC) and in Section 22 of CSC
Memorandum Circular No. 41, s. 1998.

2) Inaccurate Vacation Leave (VL)/Sick Leave (SL) running/ending

balances due to lack of periodic reconciliation with each Office’s
leave credit records as prescribed in COA Memorandum No. 2011-
017, led to overcharging of VL/SL balance thus, resulting in nega-
tive balances.

15.9 Furthermore, it was observed that the Accounting Office did not set-up a
receivable account pertaining to the refund of overpaid salaries in the
year the TLBs were processed, which resulted in the Commission’s asset
and accumulated surplus accounts being understated.

15.10 It was also noted that out of the 28 TLBs with negative balances, only 11
retirees were billed and recorded as at December 31, 2020, including nine
TLBs processed in CY 2017-2019 but recorded only in CY 2020. Thus,
only 58 percent of the total amount of overpayment or ₱546,774.10 has
been recorded.

77
15.11 The non-recognition of the receivable account and lack of proper monitor-
ing thereof also led to the delay or non-collection of said overpayments.
Accordingly, out of the total overpayment of ₱939,396.41, only
₱327,447.73 has been collected as of December 31, 2020 leaving a balance
of ₱611,948.68, which if not collected will lead to loss of government re-
sources.

15.12 It is also worth mentioning that majority of the TLBs reviewed were noted
with deficiencies that need adjustments. The existence of high number of
adjustments suggests lack of proper review of the TLBs. Details are
shown below:

Table No. 28-Summary of Pre-audited TLB with adjustments (CYs 2017-2020)

Total No. Of TLB Total No. of Pre-

Year Percentage
With Adjustments Audited TLB
2017 223 364 61%
2018 226 406 56%
2019 229 497 46%
2020 159 370 43%
TOTAL 837 1,637 51%

15.13 Though the above data showed a yearly improvement in the processing of
the TLBs, adjustments are still considerably high in CY 2020. The com-
mon errors noted in TLBs were as follows:

1) Not deducted/understated/overstated deduction for absences and

tardiness;
2) Understated/overstated credit for VL/SL earned;
3) Not deducted/understated/overstated deduction for unused FL(s)
during the year;
4) Not deducted monetization of leave credits; and
5) Error in VL/SL running/ending balances

15.14 We recommended that Management require the concerned HRMO

personnel to:

a. Strictly adhere to the provisions set forth under COA Memoran-

dum No. 2011-017, in particular the periodic reconciliation with
each Office to ensure the accuracy of the running balances of
leave credits of all employees;

b. Work closely with the Accounting Office in properly monitoring,

billing and subsequently collecting the refund for the overpay-
ment of salaries to avoid loss of government resources and observe
the proper accounting procedures in the recognition of the receiv-
able account; and

78
 c. Impose proper review of claims for TLBs before their submission
to the Audit Team for review.

15.15 The HRMO committed to continue to work closely with the Accounting
Office with regard to reporting requirement for proper monitoring and
billing of refund for the overpaid salaries to avoid loss of government re-
sources. It shall revisit existing levels of review process and commit to
propose additional level of review for TLB claims before their submission
for pre-audit. It shall coordinate and request for trainings/orientation from
the Auditing Office for uniform and consistent interpretation and applica-
tion of issuances pertaining to the TLB.

Non-preparation and submission of Government projects/programs/activities (GPPAs)

16. Monitoring and validating COA RO VIII Management’s compliance with the
inclusion of proposed projects/procurement in the Annual Procurement Plan,
posting of project signboard and notice to the public, could not be made by the
audit team due to the absence of the list of all on-going government projects/
programs/activities (GPPAs).

16.1 Section 2.1 of COA Circular No. 2013-004 dated January 30, 2013 pro-
vides that, at the beginning of the year, all government agencies shall pro-
vide their Supervising Auditors (SAs) and Audit Team Leaders (ATLs)
with a list of all on-going GPPAs and those to be implemented during the
year.

16.2 COA Circular No. 2015-006 dated August 20, 2015, amending Section 3.3
of COA Circular No. 2013-004 states that, the ATLs/SAs shall submit to
their respective Regional/Cluster Director (RCD) a Quarterly Report of the
Publicized GPPA for consolidation and transmittal to the Office of the As-
sistant Commissioner of concerned Sector, for monitoring and compliance.

16.3 Despite constant follow-ups made by the Audit Team at the beginning of
CY 2020, COA RO VIII did not submit a list of all on-going GPPAs in-
cluding those for implementation during the year. Although a Quarterly
Report was submitted, only the names and nature of the infrastructure
projects were included, and no information on non-infrastructure projects
and other requisite data.

16.4 As such, the Team could not fully determine if the listed projects/programs
in the Quarterly Report of the Publicized GPPAs, were specifically in-
cluded in the Annual Procurement Plan for CY 2020.

16.5 In addition, the agency failed to inform the Team before the start of the
program/activity that the appropriate project signboards and/or public no-

79
 tices are already posted which is inconsistent with the provision under Sec-
tion 3.1 of COA Circular No. 2013-004, which states that, the head of
agency shall inform its SA and ATL within ten (10) days after the award
of the infrastructure project or before the start of the program/activity, that
the appropriate project signboards and/or public notices are already posted.

16.6 Inquiry made by the Team disclosed that the Chief Administrative Officer
was not aware of the requirement on submission of list of all on-going
PPAs and those to be implemented during the year, as well as the deadline
for submission.

16.7 Likewise, it was noted that the Monthly Monitoring Report on the Project
Status which should be maintained as current and updated as possible was
not also available contrary to Section 3.2 of the COA Circular No. 2015-
006 dated August 20, 2015.

16.8 The non-submission of the list of projects and non-giving of information to

the Team on the posting of project signboards and/or public notices pre-
vented the Audit Team from validating the compliance of the agency to the
submission of Quarterly Report of the Publicized GPPAs to the RCD.

16.9 We recommended that Management of COA RO VIII require the

Chief Administrative Officer to submit at the beginning of the year a
list of all on-going GPPAs to be implemented during the year, on a
quarterly basis, as well as the duly accomplished Monthly Monitoring
Report on the Project Status. Further, inform the Audit Team within
10 days after the award of the infrastructure project or before the
start of the program/activity that appropriate project signboards
and/or public notices are already posted.

16.10 Management commented that to ensure compliance, it was agreed that

submission of the list of all on-going PPAs shall be done on a monthly ba-
sis which they have already implemented.

Status of implementation of Provincial Satellite Auditing Offices (PSAOs) Project

17. One of the projects of the Commission on Audit is the implementation of Infrastruc-
ture Projects that include the construction of Provincial Satellite Auditing Offices
(PSAOs) in selected areas in the COA ROs to be used by COA personnel upon the
effectivity of the withdrawal of residency audit. Shown below are the extent of imple-
mentation of the PSAO Projects noted by the concerned Auditors in COA ROs:

80
 Table No. 29 – Status of Provincial Satellite Auditing Offices Project

Region Location Project Cost Status

I PSAO-Laoag City, Proposed lot has already been identified,

Ilocos Norte subject for inspection.

PSAO-Urdaneta, A Deed of donation between the City

Pangasinan (2nd PSAO) Government of Urdaneta and the
Commission was perfected last February,
2020. However, the particular lot subject
for donation has yet to be identified,
proposed implementation will be in 2022
II PSAO-Ilagan 35,012,844.33 Operational/inaugurated, March 03, 2020
PSAO-Nueva Ecija 19,372,148.05 Operational, March 03, 2020
III No data
IV-A PSAO-Batangas 27,334,344.42 Completed June 24, 2020. However it is
not operational as of year-end due to on-
going installation of electrical connection.
PSAO-Laguna On-going 13.92% of wok accomplished as
of November 25, 2020
PSAO-Cavite As of December 31, 2020 the Regional
Office was still searching for the possible
site thru donation
PSAO-Rizal Already has a parcel of Land and for
negotiation
IV-B PSAO-Mamburao 19,861,324.80 Completed July, 2020
V PSAO-Masbate-Phase 1 19,601,052.03 30.87%
(revised) Notice to terminate was sent to the
contractor due to several deficiencies
noted in the construction process;
however, a justification letter was sent to
the agency requesting reconsideration.
Thus, the contractor is now awaiting
assessment/decision by the Project
Management Team.
VI PSAO-Capiz 19,870,656.20 100% completed as of December 31, 2019
however, full payment to the Contractor in
the total amount of P6,879,811.35 was
made in CY 2020.
VII No data
VIII PSAO-Biliran Proposed – Mini PSAO,
No technical documents yet

PSAO-Baybay 38,836,643.68 The procurement process will start once

the Management receives the approved
Plans and Specifications from the GSO.
IX No data
X No data
XI PSAO-Davao Occidental 25,000,000.00 No award of contract was made as of
December 3, 2020 due to failure of public
bidding as no bids were received
XII No data
XIII PSAO-Agusan del Norte, 19,641,567.94 100% completed and not yet operational as

81
 Table No. 29 – Status of Provincial Satellite Auditing Offices Project

Region Location Project Cost Status

Phase 1 of December 31, 2019

PSAO-Province of 21,292,102.16 Deed of Donation for the Land was
Dinagat Islands executed in 2018 and the plans and
specifications as well as Program of Works
amounting to P39,255,000.00 were
submitted to COA Central Office for
review and approval.
BARM No data
M
CAR PSAO-Ifugao 19,797,990.24 100% Completed (date not supplied)
PSAO-Kalinga 26,031,316.79 100% Completed (date not supplied)
NIS No data

Gender and Development (GAD)

18. The Commission allotted ₱797.04 million or 6.40 percent of its total appropria-
tions of ₱12.463 billion in implementing the Gender and Development Plan for
CY 2020, which is more than the five percent prescribed under Section 32 of
the General Provisions of R.A. 11260. However, out of the ₱797.04 million al-
located amount only ₱85.708 million or 10.75 percent was utilized for the ac-
tual accomplishment.

18.1 Section 31 of the General Provisions of the FY 2020 GAA requires all
agencies of the government to formulate a GAD Plan designed to address
gender issues within their concerned sectors or mandate. It further pro-
vides that the GAD Plan shall be integrated in the regular activities of the
agency which shall be at least five percent of their budgets.

18.2 In response to this requirement, for CY 2020, the Commission allocated

₱797.04 million or 6.40 percent of its total appropriations of ₱12.463 bil-
lion.

18.3 We noted however in the submitted accomplishment report that significant

plans/activities were not implemented. For CY 2020 the reported actual
accomplishment amounted only to ₱85,707,843.40 which was only 10.75
percent of the ₱797,045,238 GAD Plan and Budget of the Commission.
Some of the GAD activities were not conducted during the year due to the
Pandemic.

18.4 We recommended that Management efficiently and effectively utilize the

amount allocated to GAD mainstreamed in the programs/projects/activi-
ties of the agency.

82
Programs/Projects Related to Senior Citizens (SCs) and Persons with Disability (PWD)

19. The COA had substantially implemented projects and activities formulated for
CY 2020 that addressed the needs of senior citizens and differently-abled per-
sons.

19.1 Section 32, of the General Provisions of the FY 2020 GAA (RA 11465) re-
quires that all agencies of the government shall formulate plans, programs
and projects intended to address the concerns of senior citizens and per-
sons with disability, insofar as it relate to their mandated functions and in-
tegrate the same in their regular activities. Moreover, it requires that all
government infrastructures and facilities shall provide architectural or
structural design or facilities that will reasonably enhance the mobility,
safety and welfare of persons with disability pursuant to Batas Pambansa
Blg. 344 and RA 7277.

19.2 Management had addressed the concerns of senior citizens and PWDs by
providing structural features and designs such as ramps and railings for
designated comfort rooms and waiting areas to support their mobility,
safety and welfare.

19.3 We commended the Management on its accomplishments and is en-

couraged to continue providing the required budget allocation for the
SC and PWD to continuously address the needs of senior citizens and
differently-abled persons.

GSIS, PhilHealth and Pag-Ibig Laws, Rules and Regulations

20. In accordance with RA No. 8291, the GSIS Act of 1997, RA No. 7875, as amended
by RA No. 9241 (National Health Insurance Act of 1995), RA No. 9679 (Pag-IBIG
Fund Law 2009) the agency deducted properly and remitted the total amount of
₱1,098,223,399.44 without delay as shown in Table No. 30:

Table No. 30 – Mandatory Government Deductions

Employees Share Government Loan Total

Share

GSIS ₱503,495,941.05 ₱181,151,767.06 ₱187,125,200.89 ₱871,772,909.00

HDMF 50,639,714.06 10,731,000.00 23,884,907.50 85,255,621.56
PHILHEALTH 70,597,244.62 70,597,624.26 ‒ 141,194,868.88
TOTAL ₱624,732,899.73 ₱262,480,391.32 ₱211,010,108.39 ₱1,098,223,399.44

Property Insurance Law under RA 656/ Non-insurance of physical assets with the
GSIS

83
21. Section 5 of RA 656, provides that every government, except a municipal govern-
ment below first class, is hereby required to insure its properties, with the Fund
against any insurable risk herein provided and pay the premiums thereon, which,
however, shall not exceed the premiums charged by private insurance companies:
Provided, however, that the System reserves the right to disapprove the whole or a
portion of the amount of insurance applied for: Provided, further, That such prop-
erty or part thereof as may not be insurable or acceptable for insurance may be in-
sured with any private insurance company. A municipal government below first
class may, upon application, insure its properties in the Fund under such rules and
regulations as the System may prescribe.

21.1 The Commission including its Regional Offices, except for ROs IV-A,
XII, XIII and BARMM, have insured their assets with the General Insur-
ance Fund (GIF) of the Government Service Insurance system (GSIS) in
compliance with the requirement under the Property Insurance Law (RA
656) in the total amount of insurance premium of P12,457,256.64, broken
down as follows:

Table No. 31-Schedule of Insurance Premium Paid

Office/Region Insurance Premium

COA – CO ₱1,905,412.63
I Amount not supplied
II 896,439.86
III 1,075,333.46
IV-B 320,279.34
V 1,245,157.54
VI 450,223.91
VII 384,678.51
VIII 2,558,493.59
IX 878,024.62
X 858,096.53
XI 1,338,988.69
NIS 111,055.89
CAR 435,072.07
Total ₱12,457,256.64

Tax Laws, rules and regulations

22. COA substantially complied with the revenue regulations on withholding taxes on
salaries, benefits and procurement of goods and services and the subsequent remit-
tance thereof, pursuant to Revenue Memorandum Circular No. 23-2007 dated
March 23, 2007, and BIR Tax Revenue Regulation No. 10-2008 dated July 8, 2008,
as shown below:

Table No. 32 –Tax Withheld and Remittances

84
 Date Balance was
Office Taxes Withheld Taxes Remitted Balance Remitted
CO ₱983,635,438.75 ₱949,184,656.76 ₱34,450,781.99 January 8, 2021
RO I 2,581,149.29 2,122,737.85 458,411.44 January 5, 2021
RO II 1,759,325.19 1,709,033.53 50,291.66 January 09, 2021
RO III 2,335,837.48 2,003,924.18 331,913.30 January 04, 2021
2,003,924.18
RO IV-A 1,840,240.54 1,816,283.60 23,956.94 on or before January
10, 2021
RO IV-B 2,090,035.99 1,701,743.29 388,292.69 January 6 & 22, 2021
RO V 1,058,953.66 1,018,781.58 122,607.32 remitted on January
2021
RO VI 1,118,391.68 991,689.60 126,702.08 January 07, 2021
RO VII 1,325,771.51 1,256,433.98 69,337.53 on or before January
10, 2021
RO VIII 582,166.82 563,121.40 19,045.42 January 2021
RO IX 2,867,310.77 2,223,952.49 643,358.28 January 10, 2021
RO X 1,534,217.24 1,351,029.91 183,187.33 January 5 & 6, 2021
RO XI 507,228.01 480,975.13 26,252.88 January 07, 2021
RO XII 785,479.59 693,739.89 91,739.70 January 2021
RO XIII 1,380,791.23 1,336,050.02 44,741.21 January 4 & Feb. 1,
2021
NIS 600,300.77 550,378.05 49,922.72 January 8, 2021
CAR 1,391,488.92 1,282,483.50 109,005.42 January 8, 11 &
29, 2021
BARMM 68,746.58 4,406.25 January 2021
Total ₱1,1007,462,874.0 ₱972,290,938.94 ₱37,193,954.16
2

Amended Guidelines on Authorized Government Depository Banks (AGDBs) per COA

Memorandum No. 2017-019 dated October 19, 2017

23. The COA complied with COA Memorandum No. 2017-019 dated October 19,
2017. It deposits and maintains its Government funds with the Land Bank of the
Philippines (LBP).

Receipt and Disbursement of the Disbursement Acceleration Program (DAP)/Priority

Development Assistance Fund (PDAF)

24. The COA was not a recipient of the DAP and the PDAF in CY 2020.

Enforcement of Audit Suspensions, Disallowances and Charges

25. The table below shows the breakdown of the Notices of Suspensions (NSs), Notices
of Disallowances (NDs) and Notices of Charge (NCs) in COA offices, as at Decem-
ber 31, 2020.

Table No. 33 - Enforcement of Audit Suspensions, Disallowances and Charges

85
 Office NS ND NC Total
COA- CO - ₱1,296,186.78 - ₱1,296,186.78

25.1 Out of the ₱1,296,186.78 disallowances, ₱1,271,630.00 was not recorded

in the books since the amount is still under appeal to the Commission. The
above balances did not include NS, ND and NC issued prior to effectivity
of the Rules and Regulations on Settlement of Accounts.

25.2 All ROs have no NSs, NDs and NCs issued for CY 2020 because of the
stringent measures adopted by Management in compliance with laws, rules
and regulations governing receipts and disbursement of funds.

86