EXECUTIVE SUMMARY

A. Introduction

The Ministry of Transportation and Communications (MOTC), DOTr’s predecessor,

was created by virtue of Executive Order (EO) No. 546, series of 1979, which converted
the then Ministry of Public
Works, Transportation and
Communications
(MPWTC) into two
ministries, namely, the
MOTC and the Ministry of
Public Works and
Highways (MPWH). The
MOTC was reorganized,
both structurally and
functionally, and was
renamed as Department of
Transportation and
Communications (DOTC) DOTr Office at Clark Freeport Zone, Pampanga
pursuant to EO No. 125
dated January 30, 1987, as amended by EO No. 125-A dated April 13, 1987, which was
issued to give further impetus to the declared policy of the State towards the maintenance
and expansion of viable, efficient and dependable transportation and communication
system as effective instruments for the Department’s objectives. Following the passage in
2016 of Republic Act (RA) No. 10844, otherwise known as the Department of
Information and Communications Technology Act of 2015, DOTC was renamed as the
Department of Transportation (DOTr) and its functions and responsibilities dealing with
communications were transferred to the newly formed Department of Information
Communications and Technology (DICT).

The DOTr is the primary policy, planning, programming, coordinating, and

implementing, regulating and administrative entity of the government in the promotion,
development and regulation of dependable and coordinated networks of transportation
systems.

The DOTr is headed by Secretary Arthur P. Tugade who is assisted by six

Undersecretaries and twelve Assistant Secretaries which include the Head of the Land
Transportation Office (LTO), and the Chairman and Members of the Land Transportation
Franchising and Regulatory Board (LTFRB).

I
 The list of DOTr officials is presented hereunder:

Undersecretaries
1 Timothy John R. Batan Railways
2 Garry V. De Guzman Finance
3 Artemio U. Tuazon, Jr. Administrative Sector
4 Ruben S. Reinoso, Jr. Planning and Project Development
5 Reinier Paul R. Yebra Legal Affairs
6 Anneli R. Lontoc Philippine Railways Institute
Assistant Secretaries
1 Narciso A. Vingson, Jr. Maritime
2 Eymard D. Eje Project Implementation - Mindanao Cluster
3 Manuel S. Gonzales Special Concerns
4 Giovanni Z. Lopez Procurement and Project Implementation
5 Goddes Hope O. Libiran Communications and Commuter Affairs
6 Mark Steven C. Pastor Road Transport and Infrastructure
7 Maria Sheilah G. Napalang Planning and Project Development
8 Fidel Igmedio T. Cruz, Jr. Railways
9 Edgar C. Galvante Land Transportation Office
10 Martin B. Delgra III Chairman, LTFRB
11 Ronaldo F. Corpuz Board Member, LTFRB
12 Joel C. Pernito Board Member, LTFRB

The DOTr has direct line supervision and control over two Regional Offices, namely,
Cordillera Administrative Region (CAR) and CARAGA Administrative Region (Region
XIII). CAR was established by virtue of EO No. 220 dated July 15, 1987, while
CARAGA Administrative Region was established pursuant to RA No. 7901. In June
2019, by virtue of DOTr Department Order No. 2018-003, separate regional offices for
the LTO and LTFRB were established both in CAR and CARAGA Administrative
Region, with each office headed by a Regional Director. The DOTr also has jurisdiction
over two sectoral agencies, namely, LTO and LTFRB. As at December 31, 2020, the
DOTr and its attached agencies has a total personnel complement of 7,863 inclusive of
the regional offices.

46
%
51
%

II
 B. Financial Highlights
For Calendar Year (CY) 2020, the DOTr has total
appropriations of P103.359 billion consisting of
Regular Agency Appropriations, Seatbelt Funds,
Automatic Appropriations, Special Purpose Funds
(SPF) and Unprogrammed Funds, as provided for
in the General Appropriations Act (GAA) for
Fiscal Year (FY) 2020 and Bayanihan to Recover
as One Act. During the year, the DOTr received
total allotments of P92.403 billion in addition to
the allotments of P9.909 billion extended from prior year or a total of P102.312 billion.
Of the total allotments, P98.247 billion were obligated leaving an unobligated balance of
P4.065 billion while only P27.968 billion was disbursed as at year-end. Details are shown
hereunder:

Unobligated
Appropriation Allotment Obligation Disbursement
Source of Funds Balance
(in Million Peso)
Current Year 93,218.54 92,402.54 88,608.37 3,794.17 25,155.32
1. Regular 70,484.84 69,668.84 65,879.67 3,789.17 12,668.17
2. Seatbelt Fund 66.74 66.74 66.38 0.36 57.06
3. Automatic 2,087.12 2,087.12 2,086.40 0.72 2,084.80
Appropriations
a. RLIP 42.45 42.45 41.73 0.72 40.13
b. Custom 2,044.67 2,044.67 2,044.67 0.00 2,044.67
Duties and Taxes
4. Special 19,770.83 19,770.83 19,767.31 3.52 10,092.04
Purpose Fund
a. MPBF 215.52 215.52 212.02 3.50 187.68
b. PGF 6.36 6.36 6.34 0.02 5.79
c. Contingent 2,200.00 2,200.00 2,200.00 0.00 500.00
Fund
d. SFAP 9,500.00 9,500.00 9,500.00 0.00 9,398.57
e. Support to 7,848.95 7,848.95 7,848.95 0.00 0.00
Operations
5. Unprogrammed 809.01 809.01 808.61 0.40 253.25
Fund
Extended 10,140.84 9,909.48 9,638.86 270.62 2,812.33
1. Regular 10,136.86 9,905.50 9,636.40 269.10 2,809.87
2. Special 3.98 3.98 2.46 1.52 2.46
Purpose Fund
TOTAL 103,359.38 102,312.02 98,247.23 4,064.79 *27,967.65
* The reported disbursement excludes the P28.925B pertaining to non-cash loan proceeds of FAPs since no NCAA was issued
for this by the DBM in CY 2020

III
 The details of the DOTr’s Appropriations, Allotments, Obligations and
Disbursements per Office are as follows:

Obligation Disbursement
Appropriation Allotment Obligation Disbursement Rate Rate
Office
(in Million Pesos) (in %)
DOTr- 98,786.08 97,829.92 93,976.44 25,353.64 96 27
Proper
LTO 4,120.39 4,029.19 3,854.22 2,256.26 96 59
LTFRB 452.91 452.91 416.56 357.75 92 86
TOTAL 103,359.38 102,312.02 *98,247.22 27,967.65 96 28
*The P0.01 difference vs. computation in previous table is due to rounding-off.

The undisbursed amount of P70.279 billion pertains to the fund for the payment of
Right-of-Way (ROW) and low disbursement rate of 56 out of 81 locally and foreign-
assisted projects ranging only from zero to 20% of the obligations which are discussed in
detail in Part II of this Report.

The DOTr’s financial position and financial performance for CY 2020, with
comparative restated figures for CY 2019, are presented hereunder:

2019
Fund 01 Fund 02 Fund 03 Fund 04 Fund 07 2020
Particulars (as restated)
(in Billion Pesos)
Financial Position
Assets 75.293 108.539 67.699 0.060 10.636 262.227 181.487
Liabilities 11.348 83.327 0.004 0.000 8.571 *103.250 64.366
Accumulated
Surplus/(Deficit) 63.945 25.212 67.695 0.060 *2.065 158.978 117.121
*The P0.001 difference vs. Financial Statements is due to rounding-off.

IV
 2019
Fund 01 Fund 02 Fund 03 Fund 04 Fund 07 2020
Particulars (as restated)
(in Billion Pesos)
Financial Performance
Revenue 4.852 0.001 16.182 0.000 0.000 21.035 25.560
Current Operating
Expenses 14.518 3.249 0.075 0.000 1.319 *19.161 21.643
Surplus/(Deficit) from
Current Operations *(9.666) (3.248) 16.107 0.000 (1.319) 1.873 3.917
Net Financial
Assistance/Subsidy 37.566 7.583 (0.005) 0.000 1.149 46.293 37.432
Gains/(Losses) 0.079 0.118 0.000 0.000 0.003 0.200 0.142
Surplus (Deficit) for
the period *27.979 4.453 16.102 0.000 (0.167) 48.366 41.491
*The P0.001 difference vs. Financial Statements is due to rounding-off.

C. Operational Highlights

The DOTr’s reported targets and actual accomplishments are as follows:

Actual
Performance Indicators Targets Variance
Accomplishments
Rail Transport Services Improved
Metro Rail Transit (MRT) Sub-Programs
% reduction in transfer time from platform to 10.00% 35.64% 25.64%
loading (minutes)
% decrease in load factor 13.00% 70.86% 57.86%
Compliance with approved timetable (90% 90.00% 90.08% 0.08%
efficiency)
Compliance with the peak-hour train 90.00% 112.99% 22.99%

V
 Actual
Performance Indicators Targets Variance
Accomplishments
availability requirements (15 trains minimum)
Increase in average travel speed (kph) 30 40 10
Railway Construction, Rehabilitation and Improvement Sub-program
% increase in number of weekday passengers 1,053,150 339,101 (714,049)
Increase in average weekday peak-hour 5.50 7.71 2.21
headway (minutes)
% of completion of new railway system 15.00% 0.27% (14.73%)
projects
% completion of expansion of existing railway 15.00% 13.07% (1.93%)
system projects
Air and Water Transport Facilities and Services Improved
Aviation Infrastructure Program
Number of airports improved 15 4 (11)
Number of airports night rated 2 0 (2)
% increase in passenger traffic 5.00% (64.07%) (69.07%)
% increase in cargo traffic 2.00% (55.31%) (57.31%)
Maritime Infrastructure Program
% increase in passenger traffic 5.00% 1.07% (3.93%)
% increase in vessel traffic 5.00% 3.45% (1.55%)
% decrease in passenger waiting time 50.00% 66.67% 16.67%
% increase in tourist arrivals 5.00% 1.3636% (3.64%)
Road Transport Services Improved
Motor Vehicle Regulatory Program
% of reduction in average transaction time of
Driver’s license issuance
New 6.67% 6.67% 0.00%
Renewal 40.00% 40.00% 0.00%
Motor vehicle registration
New 16.67% 16.67% 0.00%
Renewal 33.33% 33.33% 0.00%
% of motor vehicle registration applications 100.00% 88.50% (11.50%)
processed within reglementary period as
determined by the Department and reckoned
upon submission of complete documentary
requirements
% of driver’s license and permits issued within 100.00% 85.50% (14.50%)
the reglementary period as determined by the
Department and reckoned upon the submission
of complete documentary requirements
No. of apprehensions for which a Temporary 679,130 430,406 (248,724)
Operator’s Permit (TOP) is issued
Land Public Transportation Program
% increase in public transport vehicles 50.00% 1.60% (48.40%)
modernized (improved model year and use of
environmentally-friendly fuel)
% of CPC/franchise applicants resolves/ 90.00% 92% 2%
decided upon within the reglementary period
% of holders audited/monitored/penalized for 5.00% 14% 9%
non-compliance with the terms and conditions
of franchise
No. of policies formulated, developed, 30 286 256
implemented, updated and disseminated

VI
 The negative variances as shown in the foregoing table were due to the following:

 Rail Transport Services

 Decrease in number of operational

trains for Metro Rail Transit (MRT)3 due to
ongoing rehabilitation of the system;

 Imposition of social distancing

measures due to Corona Virus Disease 2019
(COVID-19) pandemic; and

 Reduced demand due to community quarantines, closing of

establishments, remote school and Work from Home (WFH) setup implemented.

 Air and Water Transport Facilities and Services

 Development and improvement of Airport were

affected due to funding reallocation to cover the
requirement in addressing COVID-19 pandemic.
Allocation for 10 Airport projects under the CY 2020
GAA were offered to cover funding requirement to
address COVID-19;

 Sudden decrease in passenger/cargo traffic is due

to the closure of airport brought by the COVID-19
pandemic; and

 No data for Volcano Island Port and

Caticlan Port due to the recent Taal Volcano
eruption and pandemic, respectively.

 Road Transport Services

 The decrease in percentage of accomplishment

was attributed to the implementation of nationwide
Enhanced Community Quantity (ECQ) from March 16
to May 15, 2020 and of Modified Enhanced
Community Quarantine (MECQ) and General
Community Quarantine (GCQ) in Metro Manila and
other areas in the succeeding months due to COVID-
19 Pandemic; and

 Extension of implementation of Public Utility Vehicle

Modernization (PUVMP) from June 30, 2020 to December 31,
2020 under MC No. 2020-027.

VII
 D. Scope of Audit
The audit covered the accounts and operations of DOTr for the year ended December
31, 2020. The objectives of the audit were to (a) verify the level of assurance that may be
placed on Management’s assertions on the consolidated financial statements;
(b) determine the propriety of transactions as well as the extent of compliance with
applicable laws, rules and regulations; (c) recommend agency improvement
opportunities; and (d) determine the extent of implementation of prior years’ audit
recommendations.

The Consolidated Financial Statements (FS) as at December 31, 2020 consist of the
FS of the Office of the Secretary, CAR, CARAGA, LTO and LTFRB for all funds,
including MVUC.

E. Independent Auditor’s Report

As discussed in Part II of this report, the Auditor
rendered a qualified opinion on the fairness of
presentation of the consolidated financial statements of
the DOTr due to accounting errors and omissions found
in nine accounts amounting to P13,480,638,745.43.

Enumerated below are the errors, omissions and

accounting deficiencies which, among others, bear the
greatest significant impact on the account balances in the
financial statements of the DOTr:

1. The Cash and Cash Equivalents account was misstated by P19,520,224.53 as at

year-end due to unrecorded collections from online payment transactions and
proceeds from the auction of impounded motor vehicles, undeposited collections and
uncorrected prior year’s errors.

2. The Receivable account was misstated by P242,890,149.03 due to (i) unrecorded

liquidations/adjustments of various Implementing Agencies corresponding to a net
overstatement on the account by P2,336,946,764.75; (ii) improper recording of
liquidations with Property, Plant and Equipment (PPE) component, thereby
understating the account by P2,182,106,935.72; (iii) erroneous classification of
claims against relieved/dismissed Collecting Officers which understated the account
by P4,129,986.97; and (iv) non-recognition of impairment for impaired receivables,
thus overstating the account by P92,180,306.97.

3. The Inventory account was misstated by P424,369,650.82 due to (i) non-

derecognition of obsolete inventories and damaged/rejected inventory items resulting
to the overstatement of the account by P18,030,662.64; (ii) inconsistent accounting

VIII
 treatment of Radio-Frequency Identification (RFID), thereby understating the
account by P8,150,000.00; and (iii) recording errors (unrecorded receipts, issuances,
double recording and erroneous costing) which overstated the account by
P414,488,988.18. These are departures from IPSAS 12.

4. The sub-accounts under the Deposits account was misstated by P498,977,406.00 due
to improper recording to the Guaranty Deposit account of deposits to different
Regional Trial Courts (RTCs) in favour of the landowners of affected properties in
connection with the implementation of the Metro Manila Subway Project (MMSP)
Phase 1 project instead of Other Deposits account.

5. The PPE account was misstated by P10,437,733,087.86 due to (i) completed projects
not yet transferred to entities having control over the assets, thereby overstating the
account by P10,419,357,926.21; (ii) unrecorded intra-agency transfers which
understated the account by P82,947,873.25; (iii) erroneous recording of transactions
resulting to overstatement of Construction in Progress (CIP) account by
P78,875,403.96; (iv) non-recognition of impairment losses on unserviceable PPE,
thus overstating the account by P22,447,630.94; and (v) non-reclassification of
completed projects to appropriate PPE accounts. The noted deficiencies are
departures from IPSAS 17.

6. The Accounts Payable account was misstated by P2,837,389.39 due to (i)

unrecorded purchases already delivered and services rendered as at year-end, thereby
understating the account by P4,424,421.21; and (ii) recognition of liability without
sufficient and appropriate documentation which has been outstanding for more than
two years resulting to the overstatement of the account by P1,587,031.82.

7. Various Expense accounts were misstated by P2,353,288,243.80 due to net

overstatement on Financial Assistance/Subsidy to NGAs, LGUs, GOCCs of
P1,206,528,273.43 caused by (i) improper recording of liquidations of fund transfers
which understated the said account by P14,631,141.76, and (ii) erroneous use of
Assistance to Other National Government Agencies account to record transfers of
completed projects made to Civil Aviation Authority of the Philippines (CAAP),
which overstated the same account by P1,191,897,131.67; net understatement on
Maintenance and Other Operating Expenses by P1,067,989,579.44 caused by (i)
erroneous recording of recoupment of advance payment for the procurement of
supervision consultant for the MRT Line 3 Rehabilitation Project which overstated
the account by P5,085,764.48, and (ii) non-compliance with accrual basis of
accounting which understated the account by P1,073,075,343.92; and understatement
on Non-cash Expenses by P78,770,390.93 caused by erroneous computation of
Depreciation Expenses.

IX
 F. Other Significant Observations and
Recommendations
Hereunder are the other significant audit observations noted during the year and the
corresponding recommendations that are discussed in detail in Part II of this Report.

1. The DOTr obligated P98,247,219,704.41 or

96.03% of the total allotments of
P102,312,022,626.65 received in CY 2020
and disbursed P27,967,647,276.63 or
28.47% of the total obligations. The
undisbursed amount of P70,279,572,427.77
pertains primarily to the fund for the
payment of Right-of-Way (ROW) and for
the implementation of 56 out of 81 locally
and foreign-assisted projects with low
disbursement rates ranging only from zero
to 20% of the obligations. Moreover, of the
total Notice of Cash Allocations (NCAs)
received amounting to P56,381,678,557.01,
only P54,561,845,196.71 or 96.77% was
utilized as at December 31, 2020 resulting
in the reversion to the Bureau of the
Treasury (BTr) of P1,819,833,360.30 or
3.23% thereof. (Observation No. 3)

We recommended that Management:

a. closely coordinate with the Department

of Budget and Management (DBM) for
the timely release of SARO for the
implementation of ROW activities;

b. endeavor to fully utilize the allotments

received for timely implementation of programs and projects for public use, thus
improve the quality of service to be rendered to the general public; and

2. A total of four projects which were terminated by the DOTr from CY 2015 to CY
2019 with total contract cost of P76,470,882.00 have no continuity or progression
plan for its further implementation, thereby depriving the public of the optimum use
of these projects. Moreover, two completed projects with aggregate contract cost of
P502,583,653.82 remained idle and not utilized since its completion, thereby
exposing these projects to further deterioration, decline in value by reason of
technological obsolescence and risk of pecuniary loss to the Government.
(Observation No. 4)

X
 In view of the foregoing, we reiterated the following prior year’s recommendations
that Management:

a. provide the Audit Team with a continuity or back up plans for the noted
terminated projects;

b. explore various options to

utilize the substantially
completed New MACC
Phase 1 and 2 to ensure that
objectives are met and
public resources are
judiciously utilized to
prevent further loss to the
government by reason of
technological obsolescence;
and

c. ensure that the application of

advances as compensatory payment to works performed by the contractor is
justified and authorized and exhaust all remedies to recover any outstanding
and/or remaining advances made to the contractor.

3. A total of 7,347 pieces or

20.41% of the total concrete
barriers procured for the EDSA
Bus Way Project with an
equivalent value of
P31,592,100.00 remained
uninstalled/undeployed due to:
(a) replacement of at least 3,243
pieces of barrier by steel and/or
metal bollards in flyovers and
underpasses; and (b) construction
of needed concourses, structures
and other structures along EDSA
prior installation/deployment of barriers, thereby limiting its potential use not only
to maintain orderliness and ensure the safety and security of commuters using the
EDSA Busway but also to mitigate traffic congestion. (Observation No. 5)

We recommended that Management of the DOTr-MRT3 in coordination with the

MMDA, provide installation and/or deployment plan indicating the specific areas
and/or locations to which these remaining concrete barriers will be installed and/or
deployed to ensure maximum utilization thereof.

XI
 Likewise, we recommended that Management closely coordinate with partner
agencies and entities to ensure timely construction and completion of required
concourses, structures and other developments not only to facilitate installation
and/or deployment of the remaining uninstalled concrete barriers but primarily to
achieve the very objective for the procurement thereof.

4. Various issues/setbacks were encountered in the implementation of 15 DOTr-

Foreign Assisted Projects (FAPs) in CY 2020 with an aggregate cost of
P1,312,605,770,000.00, thus, resulted in prolonged/extended project
implementation period and/or further project delays, possible change in total project
cost and slippages or low/no actual physical accomplishments of the projects which
consequently will require project restructuring. The overall causes of delays in the
project implementation
also resulted in the
incurrence and
payment of additional
commitment fees for
the seven FAPs per
BTr report amounting
to P158,223,997.87 in
CY 2020.
(Observation No. 6)

We recommended that
Management:

a. directly/closely monitor the execution of the action plans set to address the
issues/setbacks and delays identified on each FAP to ensure smooth and timely
implementation of projects and to avoid further delays;

b. require the
concerned Project
Management
Offices (PMOs)
to (i) review and
validate the data/
information
contained in the
National
Economic and
Development
Authority
(NEDA) Draft
CY 2020 Official Development Assistance (ODA) Portfolio Review of the
DOTr; and (ii) submit to the Audit Team the updated/revised FAPs Physical
Status Report as at December 31, 2020, including the updates/status on the

XII
 measures undertaken to address the issues/setbacks and delays on the project’s
implementation; and (iii) regularly provide NEDA-Monitoring and Evaluation
Staff (MES) and COA Audit Team with complete quarterly/periodic status
reports of the FAPs;

c. require all stakeholders such as the approving authorities, PMOs, and others
involved in the procurement and implementation phase to exert best efforts to
minimize delays and maximize loan proceeds availment during the loan validity
period thereby minimizing incurrence of commitment fees; and

d. fast-track preparation of ICC requisite documents for the approval of the DOTr’s
requests for project restructuring in CY 2021.

5. Various PPE costing P120,001,519.66 and P20,521,978.09 relative to the DOTr

Road Transportation Information Technology Infrastructure Project and Driver’s
License Cards with Five-Year Validity, respectively, were either undeployed,
uninstalled or unutilized, thus, resulted in the inefficient implementation of the
projects. (Observation No. 7)

We recommended that Management:

a. direct the Management Information Division (MID) of LTO-SHO to coordinate

with the Equipment Unit to ensure deployment and utilization of equipment and
devices procured to avoid wastage of government funds;

b. direct LTO-XII to conduct assessment on the possible reasons/causes or delay for

the non-utilization of the ICT and Communication equipment and fast track the
full implementation on the utilization of the said properties in order to achieve
the agency’s program and prevent equipment obsolescence and wastage of public
funds;

c. utilize and deploy the fingerprint scanner (ZF2) and other idle peripherals to
efficiently implement the project and effectively execute its mandate; and

d. instruct Drivers’ License Renewal Offices (DLROs) to return the laser engravers
and peripherals to the Property Section and the latter in coordination with MID to
issue and utilize returned and undeployed laser engravers.

6. Approval of extension orders for the DOTr Road Transportation IT Infrastructure

Project - LTO Component A with a contract amount of P3,190,020,094.08 without
proof of due diligence, and acceptance of customized core applications even with
unresolved defects and implementation thereof to the non-pilot sites caused undue
payments to the vendor which is disadvantageous to the government and delayed
processing of transactions causing unnecessary burdens to its clients, respectively.
(Observation No. 8)

XIII
 We recommended that Management:

a. monitor and ensure implementation of the project in accordance with the

provisions of the contract and the applicable laws, rules and regulations;

b. consider stopping the implementation of the core applications to non-pilot sites

until all core
applications
are accepted
and integrated
to one
another, and
the Land
Transportation
Management
System
(LTMS) is
functioning
seamlessly;

c. fast-track the connectivity of unconnected Medical IT Providers, and submit

Management actions on non-compliance with LTO Memorandum Circular No.
2018-2157 by the 12 medical clinics directly connected with the LTMS;

d. instruct the Acceptance Committee and Project Management Committee to

check the receipt dates in the penalty computation and support it with
appropriate documents as basis for the computation of liquidated damages; and

e. stop extending and changing dates of deliveries of items and activities in favor
of the vendor without a valid and justifiable reason.

7. The LTO Disposal Committee of SHO, Regional Office Nos. I, IV-A and X were not
able to dispose 2,595 units of Impounded Motor Vehicle (IMV) stored in their
respective compound/premises which are presumed to have been unreasonably and
actually abandoned by their owners for failure to pay the necessary and required
fines and penalties. The non-disposal of these motor vehicles despite the lapse of the
six-month period from the date of its apprehension has prevented the agency from
earning more revenues and from clearing the premises to provide additional space for
vehicle storage. (Observation No. 9)

We reiterated our previous recommendations that Management:

a. fast track the disposal of the IMVs in accordance with the provisions of PD No.
1729 to prevent further deterioration and loss of economic value, free its
premises with adequate space needed for future storage, generate additional
income and prevent incurrence of additional expenditures; and

XIV
 b. instruct the concerned personnel of LTO-SHO to disseminate the approved
uniform guidelines on the disposal of unclaimed Impounded MVs/MCs to the
concerned regional offices.

8. Various circumstances caused delays in the procurement of plates, thus, resulted in

the undelivered license plates of the registrants nationwide from CY 2014 to CY
2020 amounting to P2,159,036,340.00 corresponding to 8,120,837 pieces of
Motorcycle (MC) and 2,632,302 pairs of replacement Motor Vehicle (MV) license
plates. Further, the undelivered replacement plates indicated lapses in the
performance by the LTO Management of one of its mandates, thus, depriving the
registrants of their right to receive the plates they have paid for and affecting the
efficient apprehension of the traffic violators. (Observation No. 10)

We recommended that Management fast track the production of the backlog in MC

plates and replacement MV plates from the existing contracts and subsequently issue
the same to the respective registrants nationwide.

9. The erroneous computation of the undelivered license plates for the amended
contract of the Motor Vehicle License Plates Standardization Program resulted in the
overstatement of the remaining requirements thereby exceeding the original contract
price by P46,824,310.00. (Observation No. 11)

We recommended that Management consider amending the schedule of requirements

to correct the computation of the remaining deliverables so as not to exceed from the
original contract price of P3.186 billion.

10. The reported balances of Advances to Contractors account amounting to

P1,086,551,678.23 as at year-end included unrecouped advances to contractors from
terminated/rescinded projects and projects with inadequate information and/or
documentation totaling P278,871,316.04 or 25.67% of the account balance, contrary
to item 4.3 of Annex “E” of the Revised IRR of RA No. 9184, which may cause loss
of government funds if these advance payments will not be recovered from
contractors concerned. (Observation No. 12)

We recommended to Management the following courses of action:

a. consider the creation of a Committee who will be responsible for the following:
(i) inventory and collection of money value of forfeiture of surety bonds;
(ii) retrieval, review and verification of documents particularly those advances to
contractors with inadequate information and documentation; and (iii) eventually,
issuance of demand letters and/or legal remedies, if warranted, to recover
outstanding advances made to concerned contractors; and

b. closely monitor the status of project implementation and corresponding

payments made to concerned contractors to ensure that advances made are

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 recouped pursuant to item 4.3 of Annex “E” of the Revised IRR of RA No.
9184. For completed projects with outstanding advances, apply the unbilled final
billings of contractors from completed projects to any of their outstanding
advances in order to recoup the full amount.

11. Fund transfers to various government agencies for the implementation of programs
and projects aggregating P19,576,219,559.76 remained unliquidated in the books for
1 to 39 years contrary to item 4.6 of COA Circular No. 94-013, thereby resulting in
the accumulation of long outstanding Inter-Agency Receivables. (Observation No.
13)

We recommended to the DOTr-OSEC Management the following courses of action:

a. instruct the Accountant of MRT-3 to closely coordinate with the PS-DBM on the
liquidation of fund transfers for various purchases for the DOTr-MRT3;

b. demand liquidation and refund of unused funds for fund transfers with
completed projects;

c. closely coordinate with the PMO on the status of implementation of

programs/projects to facilitate the proper recording of liquidations of fund
transfers in the books of accounts; and

d. consider to request authority to write-off dormant outstanding inter-agency

receivables in accordance with COA Circular No. 2016-005.

12. Several deficiencies were noted in the Right-of-Way (ROW) acquisition, particularly
on the payments of claims and incidental expenses, contrary to existing laws, rules
and regulations and exposes the Department to the risk of possible adverse claims to
the disadvantage of the government. (Observation No. 14)

We recommended that Management of the DOTr-OSEC:

a. refrain from allowing Attorney-in-Fact as payee of the checks representing

payment of the ROW claims so as not to expose the Department to the risk of
possible adverse claims to the disadvantage of the government;

b. submit proof and/or any document showing that the Special Power of Attorney
(SPA) was registered with the Registry of Deeds of the province or city where
the land lies pursuant to Section 64 of PD No. 1529;

c. strictly adhere to Section 5 of RA No. 10752, in any case, incidental expenses

such as CGT, DST, transfer tax and registration fees must be paid by the
IA/DOTr directly to the BIR or Office of the LGU where the land lies;

XVI
 d. closely coordinate with the AIF to follow-up the status of the transfer of the
three lots that remained not transferred in the name of the Republic of the
Philippines; and
e. henceforth, comply with Section 6.2 of the IRR of the RA No. 10752 to ensure
that appropriate price offer is obtained for its ROW acquisition.

13. Delayed and/or non-submission of financial and budgetary reports precluded the
prompt audit of the accounts and financial transactions impeding early detection and
correction of errors/deficiencies and timely reporting of the audit results to
Management contrary to various issuances of COA and pertinent provisions of the
Government Accounting Manual (GAM) for National Government Agencies
(NGAs). Moreover, audit disclosed disbursements totaling P223,684,266.37 were not
supported with complete documentation. (Observation No. 15)

We recommended that Management of concerned DOTr and LTO offices:

a. require all concerned agency officials/personnel to comply strictly with the

timelines in the submission of financial reports and other documents set forth in
the above mentioned COA issuances and GAM provisions to ensure timely
delivery of our audit outputs;

b. develop and implement adequate measures that will enable the officials
concerned to religiously comply within the set timelines/due dates of submission
of the required reports and documents;

c. follow up the status of its application for enrollment to weAccess banking

facility of LBP for the aforesaid two bank accounts and request for the
immediate approval thereof in order to facilitate the timely preparation and
submission of the required Bank Reconciliation Statements (BRS);

d. consider enrolling all their bank accounts in online banking facility of the
depository bank to facilitate timely preparation and submission of BRS;

e. submit the BRS and Analysis Statements of various bank accounts listed in
Table 74 once reconciliation and analysis are completed; and

f. cause the immediate submission of the lacking documents in compliance with

DBM Budget Circular No. 2020-1 and COA Circular Nos. 2012-001 and 96-
004. Likewise, instruct the respective Accountants to refrain from processing
claims and/or payments to internal and external creditors unless the submission
of required supporting documents have been complied with.

14. Several approved Contract Agreements and Memoranda of Agreement involving

total amounts of P19,764,179,830.59 and P3,074,743,973.38, respectively, were
submitted late, in violation of item 3.1.1 of COA Circular No. 2009-001. Further,
submitted contracts lacked documentary requirements as set forth under item 8 of the

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 COA Circular No. 2012-001, thereby, hindered the effective and complete review of
transactions. (Observation No. 16)

We recommended that the respective BAC Secretariat Division of the DOTr-OSEC

and concerned LTO offices:

a. comply with the timely submission of Contracts Agreements/MOA and its

supporting documents pursuant to COA Circular No. 2009-001; and

b. submit the documentary requirements listed in the attached Appendix 3 in order

to facilitate the timely and complete review and evaluation of the subject
contracts.

15. The DOTr-CAR contracted the services of Job Order workers without first obtaining
the approval of the Undersecretary of Administrative Service or equivalent office
contrary to DOTr DO No. 2019-004, resulting in irregular expenditures on the
payment of salaries/wages amounting to at least P6,522,694.56. (Observation No.
17)

We recommended that Management of the DOTr-CAR obtain post-facto approval of

the service contracts entered into by the Regional Office with the Job Order
employees from the Office of the Undersecretary of Administrative Service or
equivalent office, and also acquire the required authority for the contracts which
have yet to be executed.

16. Deviations from certain provisions of RA No. 9184 and its Revised IRR were noted,
thus, defeating the very purpose of prescribing the necessary rules and regulations
for the modernization and standardization of the procurement activities of the
government. (Observation No. 18)

We recommended that Management of the respective DOTr offices strictly adhere to

the provisions of RA No. 9184 and its Revised IRR in all stages of procurement of
infrastructures, goods and services to uphold transparency, efficiency and economy
in the procurement process.

17. Control gaps and/or improvement opportunities were noted in the Gender and
Development (GAD) planning, budgeting and implementation of the GAD programs,
projects and activities (PPAs) of the DOTr, thereby, contrary to existing laws, rules
and regulations on GAD and defeated the very purpose of addressing gender issues
towards gender equality and women’s empowerment. (Observation No. 19)

In view of the foregoing, we recommended the following courses of action:

a. comply with the allocation of at least 5% of its total appropriation as required by

the Magna Carta of Women (MCW) and the General Appropriations Act
(GAA);

XVIII
 b. strictly comply with the requirements of the IRR of RA No. 7192 regarding the
implementation of the Resource Mobilization for Gender Concerns and
Women’s Activities of the ODA funds received by the Department from foreign
government and multi-lateral agencies and organizations, and to properly
prepare and accomplish the GAD Plan and Budget (GPB) incorporating the
attributions of budget and programs specifically for FAPs and the related
Accomplishment Report thereon addressing gender related activities/issues;

c. ensure that GPB along with the Annual GAD Accomplishment Reports (AR) are
duly approved and endorsed by the Philippine Commission on Women (PCW).
Likewise, submit approved and endorsed reports to the assigned Audit Team
pursuant to COA Circular No. 2014-001;

d. closely monitor and consider in the ensuing year the implementation of the
identified GAD PPAs that were affected by the global pandemic COVID-19 not
only to maximize the utilization of the allocated budget but primarily to achieve
the GAD objectives pursuant to Section 31 of RA No. 11465;

e. speed-up the establishment and completion of the GAD database/ Sex-

Disaggregated Data (SDD) with adequate and systematically gathered sex-
disaggregated data which will provide the basis for gender analysis, planning,
budgeting, programming and policy formulation and undertake gender analysis
to identify and confirm existing gender issues and ensure that the programs,
projects and activities are responsive to said issues; and

f. require GAD Focal Point Sytem (GFPS) to undertake regular capacity

development training on GAD, including gender mainstreaming, gender analysis
and gender-responsive planning and budgeting, to further their understanding
and appreciation of GAD and be updated on GAD-related laws and
commitments.

18. The DOTr was not fully compliant with Section 32 of the General Provisions of RA
No. 11465 or the GAA of FY 2020, thereby, concerns and needs of Senior Citizens
(SCs) and Persons with Disabilities (PWDs) were not completely addressed.
(Observation No. 20)

We recommended that Management of the DOTr offices concerned pursue the

implementation of identified programs/projects which were put on hold due to the
COVID-19 global pandemic and continue the formulation and integration of
programs/projects in the agency’s regular activities in order to address the concerns
and/or enhance the mobility, safety and welfare of SCs and PWDs in our
transportation system.

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19. The DOTr-OSEC, DOTr-CAR, DOTr-CARAGA, and LTO and LTFRB offices,
except LTO-NCR, LTO-VI and XII, LTFRB-VI and X, have substantially complied
with the Insurance of Property, Plant and Equipment pursuant to Section 2 of RA No.
656. (Observation No. 22)

We recommended that Management direct the designated Supply/Property Custodian

to insure all its insurable assets with the General Insurance Fund of the GSIS against
any insurable risk to ensure that the government will be secured or indemnified for
any damage or loss of properties.

20. The DOTr had not attained optimum use of its P9,500,000,000.00 budgetary
appropriation under RA No. 11494 “Bayanihan to Recover as One Act” due to
delays noted in the release of funds to the Implementing Agencies (IAs). Moreover,
of the total Notice of Cash Allocations (NCAs) received under this Act,
P9,398,574,014.69 or 98.93% thereof was utilized as at year-end, thereby resulting in
the reversion to the Bureau of the Treasury (BTr) of P101,425,985.31or 1.07%. In
addition, required liquidation reports were not submitted by the IAs to the DOTr,
contrary to item 4.6 of COA Circular No. 94-013 and Memoranda of Agreement
(MOA) with IAs. (Observation No. 24)

We recommended that Management of the DOTr-OSEC:

a. moving forward, ensure the timely completion of all the requirements stipulated
in the MOA and endeavor to achieve the implementation schedules/timelines set
for the identified programs/projects of the DOTr through close monitoring and
coordination with the concerned IAs;

b. timely prepare the MOA and other necessary project documents to avoid
reversion of NCA so as not to delay the implementation of the identified COVID-
19 programs/projects of the Department; and

c. require the respective IAs to submit liquidation reports in compliance with

pertinent provisions
of COA Circular
No. 94-013 and
MOA with
respective IAs.

21. Delays in the

implementation of the
Service Contracting
Program ranging from
2 to 10 weeks as at
December 31, 2020
resulted in the minimal
fund utilization of only

XX
 P59,720,089.25 or 1.07% of the total project fund of P5,580,000,000.00, thereby
delaying the intended benefits to the PUV drivers and operators. Furthermore, only a
total of 29,871 drivers or 49.79% of the 60,000 targeted driver-participants were
registered in the Program as at year-end. (Observation No. 25)

We recommended that the LTFRB Management review the guidelines and simplify
the processes for the implementation of the Service Contracting Program to
maximize the utilization of the project funds and the participation of qualified PUV
drivers and to serve the intended benefits expeditiously.

22. Out of the total Direct Cash Subsidy Program Fund of P1,161,214,210.00, only the
amount of P963,696,500.00 or 82.99% of which was utilized and P839,520,500.00 or
87.11% thereof was actually
disbursed, hence, delaying the
benefits intended for the
Program beneficiaries.
(Observation No. 26)

We recommended that the

LTFRB Management:
(a) facilitate the immediate
distribution of the remaining
cash subsidies to the intended
beneficiaries before the lapse
of the Program fund to
maximize its benefits; and
(b) require the LBP to immediately return any excess/unutilized fund, including all
interests earned, if any, to the DOTr once it lapses.

23. Payments for COVID-19 Hazard Pay of P1,771,500.00 to the DOTr-OSEC

employees were not subjected to applicable withholding taxes, contrary to BIR
Revenue Regulation No. 11-18. Further, the DOTr-MRT3 has failed to include in the
contractual agreements warranty clause for the procured supplies in relation to
COVID-19, contrary to pertinent clauses of GPPB Circular No. 01-2020 and NPM
No. 003-2020. (Observation No. 27)

We recommended that Management of the DOTr-OSEC require the Chief

Accountant to withhold applicable taxes on the payments of COVID-19 Hazard Pay
pursuant to existing BIR Revenue Regulation.

Likewise, we recommended that DOTr-MRT3 Management comply henceforth with

the guidelines set forth under GPPB Circular No. 01-2020 and NPM No. 003-2020.

In view of the current pandemic, the foregoing observations and recommendations

were communicated to DOTr Management on June 17, 2021 through the issued
Summary of Audit Observations and Recommendations (SAOR). Likewise, the results of

XXI
audit of offices/agencies covered in this report, i.e. the DOTr Proper (OSEC, CAR and
CARAGA) Head/Central and regional offices of LTO and LTFRB, were discussed to the
Management of the respective offices by the concerned Audit Team on various dates.

The comments on the above observations and recommendations were incorporated in

this report, where appropriate.

Summary of Total Suspensions, Disallowances and

G.
Charges
The unsettled suspensions, disallowances and charges as at December 31, 2020
accumulated to P585,969,040.07, P1,406,089,894.58 and P13,566,942.20 respectively,
due to Management’s failure to enforce settlement from the persons held liable contrary
to pertinent provisions of
COA Circular No. 2009-
006 which prescribes the
use of the 2009 Rules
and Regulations on
Settlement of Accounts
(RRSA). Moreover,
suspensions,
disallowances and
charges, issued prior to
the effectivity of the
RRSA, in the amount of
P173,412.25,
P143,101,300.69, and
P3,669,527.09
respectively, remained
unsettled. Details of the
status of the audit suspensions, disallowances and charges are presented in detail in
paragraph no. 23 in the Part II of this Report.

H. Status of Implementation of Prior Years’ Audit

Recommendations
Of the 155 outstanding prior years’ audit recommendations as at January 1, 2020,
25 were reiterated and/or restated in Part II of this report, 81 were implemented and 49
were not implemented as at year-end. The details of the implemented and not
implemented recommendations are presented in detail in Part III of this Report.

XXII