EXECUTIVE SUMMARY

A. Introduction

The Philippine Overseas Employment Administration (POEA) was created in 1982,

through Executive Order (EO) No. 797, to manage the overseas employment program. In
1987, EO No. 247 systematized POEA’s functions, structure and organization to make it
more efficient in promoting and monitoring the overseas employment of Filipino workers
and for protecting their rights to fair and equitable employment practices. In 1995,
Republic Act (RA) No. 8042, known as “The Migrant Workers and Overseas Filipino
Act of 1995”, was passed instituting policies of overseas employment and establishing a
higher standard of protection and promotion of the welfare of migrant workers, including
their families, and overseas Filipinos in distress and for other purposes. On April 10,
2007, the passage of RA No. 9422 strengthened the regulatory functions of the POEA.
The standard of protection and promotion of the welfare of migrant workers, their
families and overseas Filipinos in distress was further improved under RA No. 10022 of
2010.

The core functions of the POEA are the following:

1. Industry Regulations
2. Employment Facilitation
3. Workers’ Protection
4. General Administration and Support Services (GASS)

The POEA’s mission is to facilitate the generation and preservation of decent jobs
for Filipino migrant workers, promote their protection and advocate their smooth
reintegration into Philippine society.

As a policy-making body, it has a Governing Board composed of the following

members:

1. Secretary of Department of Labor and Employment (DOLE) -Chairman

2. POEA Administrator -Vice Chairman
3. Private Sector -Representative
4. Overseas Filipino Workers (OFWs) Sector -Representative
a. Land-based (LB) Sector
b. Sea-based (SB) Sector
c. Women Sector

The incumbent Administrator, Atty. Bernard P. Olalia, is in-charge of the POEA’s

day-to-day activities with the support from the following Offices:

1. Deputy Administrator (DA) for Employment and Welfare

- LB Center
- Balik Manggagawa (BM) Division
- SB Center
 - Marketing Branch
- Employment Branch
- Government Placement Branch (GPB)
- Conciliation Unit

2. DA for Management Services

- Planning Branch
- Finance Branch
- Administrative Branch (Admin Branch)
- Regional and Overseas Coordinating Office (ROCO)
- Information and Communication Technology (ICT) Branch

3. DA for Licensing and Adjudication

- Employment Regulation Branch (ERB)
- Anti-Illegal Recruitment Branch (AIRB)
- Licensing Branch
- Workers Education Division (WED)
- Adjudication Branch
- Recruitment Regulation Branch
- Legal Research, Docket and Enforcement Branch

The POEA has its services in three Regional Centers (RCs) located in La Union for
Luzon, Cebu City for Visayas and Davao for Mindanao. Also, there are four Regional
Extension Units (REUs) in Baguio, Iloilo, Cagayan de Oro and Zamboanga. Nine
Satellite Offices (SOs), under the jurisdiction and supervision of the RCs, were
established in Tuguegarao, Pampanga, Calamba, Legazpi, Bacolod, Naga, Tacloban,
Butuan and Tawi-Tawi. The RCs, REUs and SOs have no complete set of books.
Funding requirements are granted through cash advances (CAs) to RCs to defray their
field operating expenses, subject to liquidation.

Moreover, the services of the POEA are extended in the 32 Philippine Overseas
Labor Offices (POLO), which are under the jurisdiction of DOLE, posted in selected
countries - 11 of which are in Asia, 11 in the Middle East, seven in Europe, and three in
the Americas and Trust Territories.

The POEA has 510 plantilla positions, 62.54 percent of which was filled-up, as of
December 31, 2017. Twelve casuals and 227 service contractors completed its personnel
complement.

B. Operational Highlights

The reported accomplishments for Calendar Year (CY) 2017 are as follows:

Particulars Baseline Targets Accomplishments

Empowerment and Protection of OFWs ensured
Percent increase in the 933 licensed agencies 8% 12.65%
number of licensed (2014 – total no. of (1,008) (1,051)

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 Particulars Baseline Targets Accomplishments
agencies that complied licensed agencies – 1,207)
with recruitment rules Percent of agencies that
and regulations have complied with
recruitment rules and
regulations – 77.3%
Percent decrease in the 427 15% 21%
number of illegal (363) (337)
recruitment complaints

Percentage of
Performance Indicators (PIs) Targets Accomplishments Accomplish-
ment
MFO 1: Overseas Employees Welfare Services
Operations
1. Number of workers monitored
Deployed 2,024,744 1,992,746 98.42
- LB Workers 1,614,674
- Seafarers 378,072
2. Number of OFW provided with
8,757 15,337 175.14
assistance
3. Percent of overseas workers who
96.59%
rate support services as good or 90% 107.32
(1,049/1,086)
better
4. Percent of requests for assistance of
requests for assistance acted upon 100% 100% 100
within 24 hours
MFO 2: Overseas Employment Regulation Services
Licensing Program
1. Number of license, registration, and
accreditation applications acted 36,722 36,324 98.92
upon
2. Number of OFW contracts acted
2,525,152 2,539,625 100.57
upon
3. Percent of licensed, registered and
accredited agencies with one or 21.06%
Not more
more recorded complaints or (251/1,192) 21.06
than 30%
licensing/accreditation breaches
over the past two years
4. Percent of application processed
100% 100% 100
within five days
Monitoring
1. Number of inspections and
1,120 1,291 115.27
assessments undertaken

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 Percentage of
Performance Indicators (PIs) Targets Accomplishments Accomplish-
ment
2. Percent of inspections that resulted 0.35%
10% 3.50
in one or more detected violations (4/1,154)
3. Percent of licensed, registered and
95.46%
accredited agencies subject to two
90% (1,135/1,189) 106.07
or more inspections in the last two
years
Enforcement
1. Number of enforcement cases
430 326 75.81
undertaken
2. Number of licensed, registered and
accredited agencies with three or
more recorded complaints or
Not more 10.33%
breaches over the last three years as 10.33
than 30% (47/455)
a percentage of the total number of
agencies with one or more recorded
breaches or complaints
3. Percent of enforcement cases that
100% 100% 100
resulted in a favorable judgment
4. Percent of enforcement cases
100% 100% 100
resolved within 90 days
Source: Quarterly Physical Report of Operations as of December 31, 2017

Land-based recruitment and manning agencies with valid licenses as of February

06, 2018 are broken down as follows:

Particulars No. of Agencies

Landbased 822
Manning Agencies 405
Total 1,227

C. Financial Highlights
The appropriations of the POEA pursuant to RA No. 10924, known as the General
Appropriations Act (GAA) for Fiscal Year (FY) 2017, the total allotment received from
the Department of Budget and Management (DBM), as well as, the obligations incurred
are shown below.

Obligations Unobligated
Source of Funds Appropriations Allotments
Incurred Balance
Current Year
Personnel Services 211,603,000.00 219,883,670.00 219,883,667.45 2.55
Maintenance and Other
183,778,000.00 175,478,000.00 148,837,870.76 26,640,129.24
Operating Expenses
Capital Outlay 184,079,000.00 184,079,000.00 124,143,624.58 59,935,375.42
Sub-total 579,460,000.00 579,440,670.00 492,865,162.79 86,575,507.21

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 Obligations Unobligated
Source of Funds Appropriations Allotments
Incurred Balance
Retirement and Life
Insurance Premiums 18,786,000.00 18,786,000.00 18,499,685.44 286,314.56
(RLIP)
Miscellaneous Personnel Benefits Fund (MPBF)
Performance-Based
6,602,962.00 6,602,962.00 6,602,962.00 -
Bonus (PBB)
Pension and Gratuity
Funds/Terminal Leave 9,521,428.00 9,521,428.00 9,328,967.24 192,460.76
Benefits
Total 614,370,390.00 614,351,060.00 527,296,777.47 87,054,282.53

The POEA’s financial position and financial performance for CY 2017, with
comparative figures for CY 2016, are as follows:

Particulars 2017 2016

As Restated
Financial Position
Assets 788,076,149.57 688,298,900.89
Liabilities 384,061,641.96 408,275,961.52
Equity 404,014,507.61 280,022,939.37
Financial Performance
Revenue 357,619,582.73 455,157,758.98
Less: Current Operating Expenses
Personal Services (PS) 253,548,752.91 240,688,627.31
Maintenance and Other Operating Expenses
136,503,039.59 169,563,765.72
(MOOE)
Non-Cash Expenses 6,957,999.34 883,633.05
Surplus (Deficit) from Current Operations (39,390,209.11) 44,021,732.90
Net Financial Assistance/Subsidy 523,936,653.14 434,718,619.03
Surplus (Deficit) for the period 484,546,444.03 478,740,351.93

For CY 2017, the POEA reported an income of P357,619,582.73 which were

remitted to the BTr, details as follows:

Particulars Amount
Processing Fees 293,894,170.33
Rent/Lease Income 4,930,066.95
Interest Income 34,761.14
Miscellaneous Income and Gains 163,998.13
Fines and Penalties 39,396,586.18
License Fees 19,200,000.00
Total 357,619,582.73

There was a significant decrease in the collected Processing Fees as workers who
meet the following conditions are exempted from the payment of Overseas Employment
Certificate (OEC), pursuant to POEA Governing Board Resolution No. 12, which had a
pilot implementation during the 1st week of September, 2016:

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 a. Balik-Manggagawa workers who are returning to the same employer and jobsite
and with existing record/s in the POEA database; and

b. Balik-Manggagawa workers hired through the Government Placement Branch

(GPB).

D. Scope of Audit

The audit covered the financial transactions and operations of the POEA for the
year ended December 31, 2017. The audit was conducted to: (a) ascertain the level of
assurance that may be placed on management’s assertions on the Financial Statements
(FS); (b) determine the extent of compliance with applicable laws, rules and regulations;
(c) recommend agency’s improvement opportunities; and (d) determine the extent of
implementations of prior years’ (PYs’) audit recommendations.

E. Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of the presentation of the
FS of the POEA for CY 2017 for reasons stated in the attached Independent Auditor’s
Report and as discussed in detail in Part II of this Report.

F. Summary of Significant Audit Observations and Recommendations

The following are the significant audit observations and recommendations, the
details of which are discussed in Part II of this report:

1. The continuous increase in requests for repatriation of Overseas Filipino

Workers (OFWs) since CY 2013, which had reached 142.59 percent by CY
2017, is indicative that the Government’s policy to uphold the dignity and
fundamental rights of Filipino migrant workers and ensure that the freedoms of
the Filipino citizens shall not, at any time, be compromised nor violated had
not been effectively implemented. (Observation No. 1)

We recommended that the Management: (a) ensure that adherence to the

recruitment and deployment policies and procedures is being regularly
monitored and that these policies and procedures are strictly being
followed by the recruitment agencies and foreign employers in countries
where the OFWs, especially the Household Service Workers, who are most
vulnerable to abuses and maltreatment, are or will be deployed; (b)
assess the effectiveness of the Pre-Employment Orientation Seminar
(PEOS) and Pre-Departure Orientation Seminar (PDOS) given to OFWs
prior to their deployment in deterring or minimizing the abuses against
OFWs. Otherwise, consider the conduct of additional seminars and other
capacity-building activities given last year's comment from the
Management that such problems on site can be avoided if the OFWs are
fully aware of the complete picture of overseas employment and are able

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 to have a good grasp and process the information from the time they
attend PEOS until the time they depart; (c) conduct an in-depth study on
the reasons for the continuous annual increase in the number of abused
Filipino workers that need repatriation and address immediately the
results thereof; and (d) conduct regular monitoring in coordination with
other concerned government agencies, such as the Overseas Workers
Welfare Administration (OWWA), Department of Labor and
Employment (DOLE) and Department of Foreign Affairs (DFA), of the
status of OFWs especially those deployed in countries where there are
high incidences of abuse and maltreatment of OFWs.

2. Delayed action by the Management on requests for repatriation is contrary to

Section 214, Part VIII, Rule II of the 2016 Revised POEA Rules and
Regulations Governing the Recruitment and Employment of Landbased OFWs;
thus, OFWs were exposed to risks of further abuses and maltreatment.
Moreover, appropriate sanctions were not imposed on recruitment
agencies/foreign employers who failed to observe timeliness of repatriation.
(Observation No. 2)

We recommended that the Management: (a) ensure strict compliance by

the recruitment agency/principal/foreign employer with Section 214 of the
2016 Revised POEA Rules and Regulations specifically pertaining to the
48 hours and the 15-day repatriation process; (b) hold accountable the
concerned Repatriation Unit officials and personnel found remiss in their
duty of timely handling repatriation requests; and (c) impose appropriate
sanctions on erring recruitment agency/principal/employer.

3. Insufficient balance of escrow deposits failed to satisfy claims totaling

P32,763,453.48, thus, defeated its purpose to answer for all valid and legal
claims arising from contracts of employment and violations of the conditions
for the grant and use of the license, including fines imposed by the
Administration. (Observation No. 3)

We recommended that the concerned POEA officials: (a) conduct further

study on the possibility of increasing the escrow deposit during the
pendency of the case and not merely upon renewal of licenses of
recruitment agencies; and (b) revisit the guidelines on escrow deposits to
make them exclusively for the satisfaction of the POEA’s money claims
cases.

4. No guidelines have been issued yet for the administration of the Foreign
Employer’s Guarantee Fund (FEGF) which has a reported balance of
P8,609,209.28 as of December 31, 2017 contrary to the requirement under
Section 131, Part IV, Rule I of the 2016 Revised POEA Rules and Regulations
Governing the Recruitment and Employment of Land based OFWs.
(Observation No. 4)

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 We reiterated our previous year’s (PY’s) audit recommendation that the
concerned POEA officials prepare guidelines, in accordance with
government accounting and auditing rules and regulations, on the
administration of the FEGF indicating the eligible expenses that could be
charged. We also recommended that concerned POEA officials either: (a)
revisit the provision in establishing FEGF to include any equivalent or
mechanics similar to guarantee fund scheme; or (b) execute a
Supplemental Agreement with Taiwan and ROK to include the provision
of FEGF.

5. Absence of reports from the Human Resources Development Services of Korea

(HRD Korea) showing full accounting of collected test fees for 9th – 14th
batches of Employment Permit System–Test of Proficiency in Korea (EPS-
TOPIK) restricted the full validation of the correctness and completeness of the
received shares by the POEA aggregating P27,500,698.15 and forfeited the
endeavor to implement the Program under the principles of transparency and
fairness as embodied in Article 2 (Basic Principles) of the Service Commitment
Agreement (SCA). (Observation No. 6)

We reiterated our PY’s recommendations that the Management require

the HRD Korea to provide a report showing the full accountability of
collections made for each batch of EPS-TOPIK and furnish the Audit
Team of the same once available. Further, we recommended that the
Management: (a) compare the report received from HRD-Korea with that
of the POEA to determine deficiency, if any. In case of deficiency, make
appropriate corrective measures/remedies, if necessary; and (b) if the
report on the full accounting of collections remains unsubmitted,
communicate with HRD Korea regarding the share deficiency based on
the POEA records; and make the necessary action to collect the deficiency.

6. Procurement of desktops worth P10.352 million from the Department of

Budget and Management-Procurement Service (DBM-PS) under the Medium-
Term Information and Communications Technology Harmonization Initiative
(MITHI) Project remained undelivered for 215 days as of December 31, 2017;
hence, the objectives set under the Project have not been timely and efficiently
met. Moreover, funds for the purpose remained idle in the hands of DBM-PS.
(Observation No. 7)

As the procurement was already entrusted to the DBM-PS, we

recommended that the Management constantly follow-up the delivery of
the desktops. We also recommended that in the procurement of goods
intended for projects which are not considered common use supplies,
consider the procurement of items through competitive bidding following
the Guidelines of RA No. 9184 to ensure timely and efficient
implementation of Projects.

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7. Remittances totaling P187.858 million made from January 2016 to September
2017 by the Land Bank of the Philippines (LBP) to the Bureau of Treasury
(BTr) under the Electronic Payment System (ePS) facility were not sufficiently
supported with Reports of Deposits (ROD) and pertinent documents; thus, the
completeness of the amounts remitted and the reliability/accuracy of the
recorded amounts in the books are compromised and could not be fully
established. (Observation No. 8)

We recommended that the Management demand from the LBP the

submission of ROD for remittances made to the BTr and other supporting
documents as required by the MOA and the provisions of the GAM to
fully account for all collections and remittances. In case of failure to
comply, the appropriate Notice of Charge will be issued to enforce full
remittance of collections.

8. The uncertainty of settlement of the dormant outstanding cash advances (CAs)

totaling P1,256,400.21 aged 12 to 21 years adversely affected the fair
presentation of the financial statements as the existence and correctness of the
recorded asset account could no longer be relied upon. (Observation No. 9)

We reiterated our PY’s recommendations that the Management: (a) send

another set of demand letters, except to those who are already deceased, to
the former officers and employees to enforce settlement; and (b) in case
settlements are still not made by the concerned former officers and
employees, consider requesting for write-off of accounts following the
requirements set forth under COA Circular No. 2016-005 dated December
19, 2016 to arrive at a more reliable presentation of financial statements.

9. Lapses in recording and inaction to reconcile prior years’ balances of the

account Due from National Government Agencies, specifically, DBM-PS,
resulted in a discrepancy of P7,578,242.79 between the Accounting records of
POEA and of DBM-PS. (Observation No. 10)

We reiterated our PY’s recommendations that the Management:

(a) require the Chief Accountant and the Property Officer to reconcile
their respective records/reports to establish the correct balance of the
reported deliveries made by DBM-PS and adjust them accordingly;
(b) ensure, in the meantime that full reconciliation has not yet been
effected, that the discrepancy in the amount per Accounting and per
DBM-PS books remain at P1,726,035.22; and (c) require the Chief
Accountant to continuously reconcile the Accounting books with DBM-PS
books to establish the correct amounts of undelivered items and ensure
that the PYs’ accounts included in the schedules supporting the General
Ledger account of Due from National Government Agencies, DBM-PS are
properly recorded and reconciled.

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10. Incomplete inventory-taking, improper recording of transactions in the books
and non-maintenance of the required Property Cards (PCs), contrary to the
provisions of applicable COA rules and regulations, resulted in an unreconciled
balance of P321,765,639.61 between the Accounting and Property records,
which cast doubts on the accuracy, completeness, and existence of reported
PPE accounts with a gross amount of P589,923,927.07. (Observation No. 12)

We recommended that the Management require the: (a) Chief Accountant

and Property Officer to (i) conduct periodic reconciliation of their
respective reports and records, (ii) prepare and maintain PCs to account
for the receipt and disposition of PPE, and (iii) maintain PPELC to
present the details of the PPE per category instead of in lump sum basis to
arrive at a more accurate and reconciled balances of respective
Accounting and Property books and records; (b) Chief Accountant to
prepare adjusting entries to reflect the PPE worth P8,839,390.00, which
were counted but not recorded in the books of accounts; (c) Property
Officer to (i) conduct 100 percent physical count of all PPE and submit to
the Audit Team the corresponding Report of Physical Count of PPE, and
(ii) look into missing PPE amounting to P17,997,787.72, which were
recorded in the books but were not physically counted.

11. Unverified and unreliable book entries, recording error and absence of physical
inventory-taking, contrary to GAM provisions, affected the reliability,
completeness and existence of the Inventory accounts totaling P13,356,389.65.
(Observation No. 13)

We recommended that the Chief Accountant and the Property Officer

conduct periodic reconciliation of their respective reports and records and
make necessary adjustments on the deficiencies noted to reflect the correct
balances of the Inventory accounts. We further recommended that the
Property Officer conduct 100 percent inventory-taking of all Inventory
accounts and prepare the Report on the Physical Count of Inventories
(RPCI).

12. Negative balances in the Subsidiary Ledgers (SLs) totaling P26,530,687.34,

and setting up of liabilities for undelivered/uncompleted projects were not
compliant with the provisions of Volume 1 of the GAM, thus adversely
affected the fair presentation in the FS of liability accounts aggregating
P105,779,361.55. (Observation No. 14)

We recommended that the Chief Accountant: (a) conduct a thorough

review of the SL balances and effect the necessary adjustments to reflect
the true balances of the accounts; (b) prepare the necessary adjusting
entries to set up the liabilities; (c) exercise due care in recording
transactions to avoid the incurrence of the noted errors; and (d) refrain
from paying prior years’ expenses from current year’s appropriations.

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 13. Management’s failure to immediately determine the cause/s of abnormal
negative balances of four GL accounts totaling P1,679,076.12, renders the
financial statements not compliant with the provisions of Section 7, Chapter 19,
Volume I of the GAM and Section 112 of PD No. 1445, and understated the
totals of the four affected GL accounts. (Observation No. 15)

We reiterated our PY’s audit recommendations that the Management

direct the concerned officials of the Accounting Division to: (a) conduct
continuous analysis of accounts with abnormal balances, especially those
which are still with available records; (b) conduct reconciliation of records
with GSIS, Pag-IBIG and other government financial institutions/
employees associations regarding over remittances, if there are any;
(c) ensure that all withheld and remitted GSIS contributions/loan
repayments and Pag-IBIG contributions in a given period are recorded in
the books; and (d) reconcile accounts with abnormal balances and
immediately prepare necessary adjustments to reflect the correct balances.

14. Concerned POEA officials failed to deduct and remit to the Government
Service Insurance System (GSIS) the Consolidated Loans repayments/
amortizations totaling P4,666,467.37 from 25 out of 38 employees as of
February 2018, in disregard of Section 14 of the Revised Implementing Rules
and Regulations (RIRR) of Republic Act (RA) No. 8291. (Observation No. 20)

We recommended that the concerned officials act promptly on the GSIS

request for POEA’s member-borrowers to update their accounts in
default and/or settle overdue/matured loans to avoid further accumulation
of interests and penalties and the filing of appropriate legal action against
responsible POEA officials.

The foregoing audit observations and recommendations were communicated

through Audit Observation Memoranda (AOMs) and discussed in an Exit Conference
with concerned POEA officials and employees on April 6, 2018. Their comments were
incorporated in this Annual Audit Report (AAR), where appropriate.

G. Summary of Audit Suspensions, Disallowances and Charges

As of December 31, 2017, the POEA had a total unsettled disallowances, charges
and suspensions of P10,008,755.31, P1,398,852.38 and P267,930.65, respectively, the
details of which are discussed in Part II of this Report.

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H. Status of Implementation of PYs’ Audit Recommendations

Out of the 81 audit recommendations from prior years, 24 were fully

implemented, 14 were partially implemented and 43 were not implemented, as shown
below. The details of previous years’ recommendations are discussed in Part III of this
report.

Status of Implementation Number Percentage

Fully Implemented 24 29.63
Partially Implemented 14 17.28
Not Implemented 43 53.09
Total 81 100.00

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