EXECUTIVE SUMMARY

A. Introduction

The DOST is the premiere science and technology governing agency in the
country with the mandate of providing central direction, leadership, and coordination of
scientific and technological activities; as well as formulating policies, programs, and
projects to support national development.

DOST has 16 regional offices and 80 Provincial Science and Technology Centers,
which serve as the implementing arms of the Department nationwide in carrying out its
laws, regulations, policies, and programs. These offices and centers provide efficient
S&T services to the people in the regions and provinces with the ultimate objective of
alleviating poverty and accelerating growth and development in the countryside.

DOST-CO is headed by the Department Secretary, Fortunato T. De la Peña, who

is assisted by four Undersecretaries and four Assistant Secretaries.

The Department has five (5) Staff Services, namely: (a) Administrative and Legal
Service; (b) Planning and Evaluation Service; (c) Financial and Management Service; (d)
Internal Audit Service; and the (e) Gender and Development and Regional Support
Service, each performing their respective functions.

Pursuant to Governance Commission for GOCCs (GCG) Memorandum No. 2015-

11, the DOST was also designated as the Supervising Agency in the winding down of
operations of the abolished Technology Resource Center effective 31 October 2015 until
the corporate assets are disposed through the Privatization and Management Office.

B. Financial Highlights

The DOST had a total appropriation of ₱5.412 billion, pursuant to Republic Act
No. 11465 or the General Appropriations Act for FY 2020. Total allotment received
amounted to ₱5.386 billion, of which ₱5.123 billion was incurred, leaving unobligated
balance of ₱0.263 billion, with details as follows:

Amount (in Thousand Philippine Peso)

Particular CY 2020 CY 2019 Increase (Decrease)
Appropriations*
Regular 5,022,479 5,402,119 (379,640)
Continuing 351,998 164,476 187,522
Special Purpose Fund 26,644 34,745 (8,101)
Automatic** 11,103 45,096 (33,993)
Total Appropriations 5,412,224 5,646,436 (234,212)
Allotment 5,386,028 5,359,036 26,992
Obligation Incurred 5,123,468 5,282,589 (159,121)
Unobligated Balance 262,560 76,447 186,113
*NET of NBC 580
***NET of negative GARO and negative SARO

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 The comparative details of the financial condition and performance are shown
below:

Increase/
Particulars 2020 2019 (Restated)
(Decrease)
a. Financial Position
Assets 16,121,007,867 13,273,727,105 2,847,280,762
Liabilities 1,034,218,826 818,146,227 216,072,599
Net Assets/Equity 15,086,789,042 12,455,580,877 2,631,208,165
b. Financial Performance
b.1 Revenue 60,420,642 75,379,375 (14,958,733)
b.2 Operating Expenses
Personnel Services 729,813,054 769,519,834 (39,706,781)
MOOE 571,888,484 706,573,372 (134,684,888)
Financial Expenses 6,066 2,300 3,766
Non-Cash Expenses 165,194,795 161,252,985 3,941,810
Total 1,466,902,398 1,637,348,491 (170,446,093)
Surplus/(Deficit) from Current
(1,406,481,756) (1,561,969,116) 155,487,360
Operations
Net Financial Assistance Subsidy 4,659,313,543 5,680,402,123 (1,021,088,580)
Other Non-Operating Income 1,563,493 1,693,555 (130,062)
Surplus/(Deficit) for the Period 3,254,395,281 4,120,126,563 (865,731,282)

C. Scope of Audit

The audit covered the accounts and operations of the DOST Central and 16
Regional Offices for CY 2020. The audit was conducted to a) verify the level of
assurance that may be placed on management’s assertions on the financial statements; (b)
recommend agency’s improvement opportunities; (c) determine the propriety of
transactions as well as the extent of compliance with pertinent laws, rules and
regulations; and (d) determine the extent of implementation of prior years’ audit
recommendations.

D. Independent Auditor’s Opinion

The Agency’s Cash, Receivables, Inventories, PPE, Other Assets and Other
Prepayments accounts have misstatements totaling ₱341.566 million representing 2.12
percent of its total assets, while Inter-agency Payables and Trust Liabilities have
misstatements of ₱16.171 million or 1.56 percent of the total reported Liabilities, and
Accumulated Surplus/ (Deficit) account have misstatements of ₱281.390 million or 1.87
percent of the total equity of the Agency as at 31 December 2020. Moreover, reported
deficiencies totaling ₱1.148 billion also affected the Management assertions on the
accuracy and completeness of the said accounts. Due to the significant impact of such
misstatements and deficiencies, we rendered a Qualified Opinion on the financial
statements of the DOST as at year-end

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E. Summary of Other Significant Observations and Recommendations

The other significant observations and recommendations, discussed in detail in

Part II of the report, are as follows:

1. Excess Cash in Bank, Local Currency Current Account (LCCA) not remitted to
BTr

We recommended and Management agreed to enjoin the concerned Regional

Directors to:

a. require the Regional Offices (ROs) Scholarship Units and the Accountants to
expedite reconciliation and return/revert to the DOST-SEI or to the BTr the
unexpended/unutilized scholarship funds. Henceforth, request authority
from the BTr for the maintenance of the scholarship funds and ensure that
all unexpended balances, upon serving the scholarship grant at the end of the
year, are duly remitted to the DOST-SEI or to the BTr, so as to avoid
accumulation of excess funds in the agency’s depository accounts; (DOST I,
III, IV-B, V, VI, VIII and XI)

b. coordinate with the respective State Universities and Colleges’ (SUCs) Office
of the School Registrar, where the scholars are enrolled, for a timely
submission of report cards (grades), similar to the procedures of DOST-SEI
and UP-Diliman wherein the former’s personnel are granted limited access
on grades of pertinent scholars; (DOST IV-B)

c. henceforth, ensure that scholarship funds received shall be supported with

trust agreement/s with the total project cost translated into the number of
scholars with covering grants, as determined by the DOST-SEI and Regional
Directors; (DOST IV-B and XI)

d. require the Project Managers to communicate and confirm with the source
agencies the status of the funds granted for completed projects and to ensure
that there are no remaining project funds due for liquidation and remit the
same to the BTr; (DOST CO and I) and

e. henceforth, require the Accountant to ensure that all collections regardless of

income source should be duly remitted to the BTr. (DOST I)

2. Long outstanding GIA Fund Transfers – Due from National Government Agencies
(NGAs), Local Government Units (LGUs), Regional Offices (ROs), Non-
Government Organizations/Peoples Organization/Civil Society Organizations
(NGOs/POs/CSOs) and Other Receivables

We reiterated our prior years’ recommendations and Management agreed to enjoin

the concerned Regional Directors to enforce strict compliance with existing rules
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and regulations, as well as the provisions of the MOA with the IAs on the grant,
utilization and liquidation of fund transfers by requiring the Project Leaders and
Accountants to:

a. ensure that all the project proponents complied with the requirements set
forth under the DOST GIA Guidelines including the counterpart equity
before approval of the proposals; (DOST CO, CAR, NCR, I, II, IV-B, VI,
IX and X)

b. henceforth, ensure commitment that the amount received by

implementing partners will be translated into research project
deliverables/outputs, only proposals with covering request for funding for
itemized budget shall be approved and funded; (DOST CO, CAR, NCR, I,
II, IV-B, VI, IX and X)

c. send demand letters and impose legal sanctions to IAs with completed
projects and outstanding account balances for immediate settlement of all
unliquidated fund transfers thru submission of liquidation reports with
adequate documentations and return of excess funds; (DOST IV-B)

d. exert more effort to locate the whereabouts of the incorporators of the

dissolved NGOs/CSOs/POs and consider endorsing IA accounts to OSG
for filing of appropriate legal action for failure to settle/ refund their
obligations in accordance with the terms and conditions of the contract
agreement; (DOST II)

e. conduct regular monitoring of project implementation and reconciliation

of receivable accounts with the Accountants and Project Leaders of the
Implementing Agencies (IAs) to effectuate regular/timely submission of
LRs-Financial/Technical Reports and return of the unexpended balances
not only to avoid accumulation of unliquidated account balances but also
to facilitate the preparation by the Accountants of the covering Status
Reports of the Unliquidated CAs, Fund Transfers, and Other Receivables;
and (DOST CO, CAR, NCR, I, II, IV-B, VI, IX and X)

f. ensure that no additional fund transfer is to be made unless the existing

balance has been properly liquidated. (DOST II)

3. Deficiencies in the implementation and collection or repayment for Small

Enterprise Technology Upgrading Program (SETUP) recorded under the Other
Receivable Accounts

We recommend and Management agreed to require the:

a. DOST NCR Management to (a) continue to send demand letters to all

delinquent SETUP beneficiaries requiring the immediate settlement of all past
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 due monthly repayments, and impose legal remedies for those who had been
found misappropriating the funds transferred to them; (b) formulate a policy
on the assessment and recognition of impairment of Other Receivables
pursuant to the applicable provisions of Section 10, Chapter 7, GAM for
NGAs, Volume I; and (c) ensure that the recognized Allowance for
Impairment – Other Receivables be supported by any documents assessing the
collectability of the account and disclosed results of assessments in the Notes
for the fair presentation of FS.

b. DOST IV-B Management to instruct the (a) concerned Provincial Science and
Technology Directors (PSTDs) to i) compel respective project leaders to submit
technical progress reports as well as the corresponding financial reports on a
regular basis; ii) report status of progress to the Technical Services Division
(TSD) and the Planning for monitoring; (b) Planning and Management
Information System (MIS) to update its reports, particularly the technical and
financial progress reports, to monitor the activities that the Provincial Science
and Technology Centers (PSTCs) might have overlooked in order for the TSD
as well as the Office of the Regional Director (ORD) to take immediate actions
to correct the lapses; (c) TSD to provide the Accounting unit with the actual
due date for liquidation, among other information, of the fund transfers to
various organizations in order to take into consideration in the preparation of
the aging and status of unliquidated cash advances, fund transfers, and other
receivables; and (d) Accountant to i) correct the aging of receivables; ii)
prepare the notices of demand or demand letters to be immediately issued by
the ORD and served thru the PSTD’s to the delinquent recipients of
government funds; and iii) ensure that the notices are duly received, including
those that were demanded through the OSG.

c. DOST VI Management to (a) continue exerting effort in collecting the past due
accounts by continuously sending demand letters to defaulting project
beneficiaries; (b) henceforth, continue monitoring closely the implementation
of projects enforcing the agreed schedule of refunds; and (c) continue exerting
effort in the settlement of the uncollected balance of the dishonored checks,
through sending demand letters and/or enforcing legal actions against the
defaulted SETUP beneficiaries.

d. DOST VIII Management to direct the SETUP implementers to establish more

clear-cut and defined documentary requirements for strict compliance or
submission of qualified cooperators prior to the grant of assistance.
e. DOST IX Management to adopt new strategies to maximize collection and
continue the distribution of demand letters to defaulting proponents. If
warranted, file appropriate legal action against erring cooperators for failure
to settle/refund their obligations in accordance with the terms and conditions
of the contract agreement.

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 f. DOST X Management to undertake to (a) facilitate the pull-out of the
equipment procured out of the project funds from the terminated projects to
avoid further deterioration and facilitate the disposal of all pulled-out
equipment; and (b) continue exerting effort in the settlement of the uncollected
balance of the dishonored checks, through sending demand letters and/or
enforcing legal actions against the defaulted SETUP beneficiaries.
g. DOST XI Management to make representation with the DOST CO to (a)
update the SETUP guidelines to include provisions on the sanctions or
penalties in the event the co-operators failed to comply with the provision of
Batas Pambansa Blg. 22; (b) consider other options, such as requiring the co-
operator to post a Surety Bond over the issuance of post-dated checks to cover
the amount of fund assistance or government exposures; and (c) intensify
collections for the remaining ₱2,894,760.00 unsettled/ uncollected and
restructured accounts.

4. Disbursement for capital outlay component of research projects without

DBM/Legislative approval and fund transfer for activities within the mandate of
NGAs

We recommended and Management agreed to: (a) confer with the DBM to seek
legislative funding approval of the capital outlay component of research projects
under the S&T GIA fund releases through the GAA; and (b) judiciously screen
projects for funding to avoid allocating funds to Agencies for programs which
should have been funded from their specific budgets under the GAA.

The audit observations and recommendations were communicated with the

Auditee through the issuance of Summary of Observations and Recommendations
(SAOR) and their comments were incorporated in the report, where appropriate.

F. Status of Settlement of Suspensions, Disallowances and Charges

Total suspensions, disallowances and charges that remained unsettled at the end
of the year amounted to ₱1.556 billion, ₱125.396 million and ₱16.585 million,
respectively, after settlement in CY 2020 of ₱12.472 million or approximately 1.00
percent.

This period
Beginning Balance Ending Balance
Notices 01 Jan to 31 Dec 2020
(As of 01 Jan 2020) (As of 31 Dec 2020)
NS/ND/NC NSSDC
NS 46,402,896.69 1,520,909,673.97 10,883,577.60 1,556,428,993.06
ND 124,981,244.90 1,859,779.90 1,444,848.02 125,396,176.78
NC 16,729,031.08 0 144,000.00 16,585,031.08
Total 188,113,172.67 1,522,769,453.87 12,472,425.62 1,698,410,200.92

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G. Implementation of Prior Years’ Audit Recommendations

Out of the 100 audit recommendations embodied in the 2019 Consolidated

Annual Audit Report, 53 were implemented and 47 were not implemented; the details of
which are shown in Part III of this report.

Management is enjoined to ensure full implementation of all audit

recommendations to improve the financial and operational efficiency of the Agency.

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