EXECUTIVE SUMMARY

INTRODUCTION

The Philippine Heart Center (PHC) was established through Presidential Decree (PD)
No. 673. Inaugurated on February 14, 1975, PHC, as an institution, is committed to
caring for patients with heart and related ailments with a vision to be the leader in
upholding the highest standards of cardiovascular care and a self-reliant institution
responsive to the health needs of the Filipino people. Its Board of Trustees is composed
of nine members with the Secretary of Health as the ex-officio Chairperson.

As of December 31, 2020, the PHC had a total of 2,056 personnel complement
composed of 2,034 permanent and 22 contractual employees.

The Principal Officers of the Center are as follows:

Executive Director Joel M. Abanilla, M.D.

Deputy Executive Director for:
Hospital Support Services Josephine G. Lopez, CPA, MBA
Medical Services Gerardo S. Manzo, M.D.
Education, Training and Research Services Gilbert C. Vilela, M.D.
Nursing Services Criselle M. Galang, RN, MAN

FINANCIAL HIGHLIGHTS (In Pesos)

I. Statement of Financial Position

2019 Increase/
2020 (As Restated) (Decrease)
Assets 6,697,652,168 6,534,957,341 162,694,827
Liabilities 2,806,501,182 2,463,524,661 342,976,521
Net assets/equity 3,891,150,986 4,071,432,680 (180,281,694)

II. Statement of Financial Performance

2019 Increase/
2020 (As Restated) (Decrease)
Revenue 1,600,199,464 3,140,532,630 (1,540,333,166)
Current operating expenses 3,233,845,420 3,981,927,544 (748,082,124)
Surplus/(Deficit) from current
operations (1,633,645,956) (841,394,914) (792,251,042)
Non-operating income, gains or
losses 29,341,262 97,869,159 (68,527,897)
Subsidy from national government 1,424,023,000 1,288,104,693 135,918,307
Net surplus for the period (180,281,694) 544,578,938 (724,860,632)

i
III. Comparison of 2020 Budget and Actual Expenses

Corporate Operating Actual Savings

Budget Expenses (Deficit)
Personnel services 1,733,195,000 1,684,107,902 49,087,098
Maintenance and other operating
expenses 1,650,147,000 1,302,938,191 347,208,809
Capital outlay 116,429,000 46,931,986 69,497,014
Financial expenses - 39,383 (39,383)
3,499,771,000 3,034,017,462 465,753,538

SCOPE OF AUDIT

Our audit covered the examination, on a test basis, of transactions and accounts of
PHC, for the calendar year (CY) 2020 to enable us to express an opinion on the financial
statements for the years ended December 31, 2020 and 2019 in accordance with the
International Standards of Supreme Audit Institutions (ISSAIs). It was also conducted at
determining the Agency’s compliance with pertinent laws, rules and regulations and
adherence to prescribed policies and procedures. To a limited extent, an evaluation of
the adequacy and effectiveness of systems and procedures of certain aspects of PHC’s
operations was also undertaken.

AUDITOR’S OPINION

We rendered a qualified opinion on the fairness of the presentation of the financial

statements of the PHC in view of the following:

1. The faithful representation in the financial statements of the Liabilities accounts

aggregating P2,806.501 million as of December 31, 2020 could not be
established due to the following deficiencies, contrary to Paragraph 27 of
International Public Sector Accounting Standard (IPSAS) 1:

a. General Ledgers (GLs) were only maintained for six (6) Liabilities sub-
accounts in the total amount of P132.968 million, without supporting
Subsidiary Ledgers (SLs) and aging schedules, thus the details and
concerned creditors could not be readily determined;

b. Variance of P26.620 million, in absolute amount, between book balances

and results of confirmation in the Accounts Payable (A/P) account;

c. Difference of P14.086 million in the Guaranty Deposits Payable-Patients

account between the accounting records and the Report of Undischarged
Patients of the Management Information Systems Division (MISD); and

d. The A/P account included payables amounting to P126.590 million which

have been long outstanding in the books and were not reverted to the
Cumulative Results of Operations - Unappropriated (Accumulated
Surplus/(Deficit) account under the Revised Chart of Accounts), contrary to
the guidelines prescribed under the Department of Budget and

ii
 Management – Commission on Audit (DBM-COA) Joint Circular No. 99-6
dated November 13, 1999, implementing Executive Order (EO) No. 109
dated June 18, 1999, thereby overstating and understating the A/P account
and Accumulated Surplus/(Deficit) account, respectively, by the said
amount at year-end.

2. The faithful representation of the balance of Inventories account in the financial

statements valued at P244.904 million as of December 31, 2020 could not be
established due to, among others: (a) discrepancies totaling P92.622 million, in
absolute value, between the balances per books and the Report on the Physical
Count of Inventories (RPCI); (b) adoption of Periodic Inventory System in
accounting for Inventories instead of Perpetual Inventory System, contrary to
Section 9, Chapter 8 of Government Accounting Manual (GAM), Volume I; and
(c) stocks transferred from Property and Supply Management Division (PSMD) to
various Income Centers (ICs) were directly accounted as outright expense in the
books although the supplies were not actually sold, utilized or consumed by the
end-users, contrary to the pertinent provisions of IPSAS 12.

3. The improper recording by the PHC of the PhilHealth Z-Benefit Package

Program transactions under the Quantified Free Service (QFS)-Z Benefit account
resulted in the overstatement of P72.196 million and understatement of P21.468
million or a net overstatement of P50.728 million on various affected accounts as
of December 31, 2020, contrary to the Conceptual Framework for General
Purpose Financial Reporting by Public Sector Entities.

For the above-cited observations, which caused the issuance of a qualified opinion, we
recommended that Management:

1.1. Require the Accountant to: (a) maintain SLs for all liabilities accounts for proper
monitoring and recording of transactions; and (b) establish valid creditors from
whom the Agency has liability.

1.2. Instruct the Accounting Division to:

a. Coordinate with the concerned private entities/creditors to reconcile the

variance of P26.620 million between their records;

b. Effect necessary adjustments in the books to reconcile the balance of

Guaranty Deposits Payable-Patients account as of December 31, 2020 with
the Report of Undischarged Patients of the MISD; and

c. Revert all dormant accounts under the A/P account to Accumulated

Surplus/(Deficit) account in compliance with DBM-COA Joint Circular No.
99-6 dated November 13, 1999, implementing EO No. 109 dated June 18,
1999.

2.1. Direct the Accounting Division and PSMD to conduct reconciliation of the
discrepancies in the Inventories account amounting to P92.622 million between
the balances per books and the RPCI and effect the necessary corrections or
adjustments in the affected records to arrive at reconciled balances.

iii
2.2. Instruct the Accounting Division to:

a. Change the current Periodic Inventory System to Perpetual Inventory

System in accounting for Inventories in compliance with Section 9, Chapter
8 of GAM, Volume I;

b. Discontinue the practice of recording as outright expense in the books of

accounts the transferred/issued supplies from PSMD to ICs;

c. Prepare and maintain separate subsidiary ledger accounts for PSMD and
each of the ICs; and

d. Maintain Supplies Ledger Cards for each kind of supplies and materials
and for check and balance, make periodic comparison with the Stock Cards
maintained by the PSMD and physical inventory of each IC and reconcile
differences, if any.

2.3. Create an Inventory Committee to take charge of the physical count/inventory-

taking of supplies and materials and all other Inventories under the custody of the
PSMD and ICs.

2.4. Fast track the upgrading of the current Medtrak System to comply with Section 9,
Chapter 8 of GAM, Volume I.

3.1 Direct the Accounting Division to:

a. Analyze thoroughly the current practice of recording the PhilHealth Z-

Benefit Package transactions and ensure that, henceforth, transactions are
correctly recorded in the books of accounts; and

b. Effect necessary adjusting entries and provide the Audit Team with the
corresponding Journal Entry Vouchers (JEVs) drawn with supporting
documents, for further review and validation.

SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS

The other significant audit observations and recommendations that need immediate
action are as follows:

4. Claims from PhilHealth amounting to P71.170 million were denied due to non-
compliance with pertinent provisions of the Revised Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 7875 or the National Health
Insurance Act (NHIA) of 2013, as amended by RA Nos. 9241 and 10606, and
relevant PhilHealth Circulars, thus resulting in accumulation of uncollectibles
from PhilHealth and loss of income on the part of PHC.

4.1. We recommended that Management instruct the Billing and Claims Division to:

a. Adhere strictly to the guidelines prescribed by the Revised IRR of the NHIA
of 2013 and other relevant PhilHealth Circulars;

iv
 b. Conduct deeper evaluation of the denied and Return-To-Hospital (RTH)
claims and explore all possible remedies to have them reconsidered by
PhilHealth and monitor the deadlines set by PhilHealth for filing claims and
appeals to ensure collection thereof;

c. Conduct regular reconciliation with PhilHealth for the unpaid claims

considering that these represent significant portion of the recorded income;
and

d. Ensure that concerned staff in-charge of PhilHealth matters undertake

continuous trainings and attend seminars to apprise themselves with the
correct and best practices relevant to processing of claims from PhilHealth.

4.2. We further recommended that Management instruct the Accounting and Billing
and Claims Divisions to provide supporting documents of the appealed claims
from PhilHealth and, for proper monitoring, reclassify the appealed claims to
separate them from the good claims.

5. Two (2) infrastructure projects for the conversion of PHC building into patients’
rooms and relocation of emergency room with total contract cost of P139.257
million were not completed on their expected dates of completion, thereby
depriving the intended beneficiaries of the timely use and benefits thereof.

5.1. We recommended that Management submit to the Audit Team justifications or

any documents that would warrant the non-imposition of liquidated damages
against the concerned contractor; otherwise, compute the liquidated damages
based on the provisions of Section 8, Annex E of the Revised IRR of RA No.
9184.

5.2. We further recommended that Management require the concerned contractor to

expedite the completion of the unfinished infrastructure projects, for the benefit of
the hospital patients.

SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES

As of December 31, 2020, there were no unsettled audit suspensions and charges, while
the unsettled audit disallowances amounted to P40.723 million. The details are
presented in Part IV, Annex A of this Report.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Of the 40 audit recommendations embodied in the previous year’s Annual Audit Report
(AAR), 17 were fully implemented, 12 were partially implemented and 11 were not
implemented. Details are presented in Part III of this Report.