EXECUTIVE SUMMARY

A. Introduction

The Philippine Sports Commission (PSC) was created by virtue of Republic Act
(RA) No. 6847 dated January 24, 1990 to serve as the sole policy-making and
coordinating body of all amateur sports development programs and institutions in the
Philippines. PSC has the same status as that of a governmental regulatory national
agency attached to the Office of the President. It also exercises corporate powers.

The objectives of PSC are to:

a. provide leadership, formulate the policies and set the priorities and direction
of all national amateur sports promotion and development, particularly
giving emphasis on grassroots participation;

b. encourage wide participation of all sectors, government and private, in

amateur sports promotion and development; and

c. supplement government appropriations for sports promotion and

development.

Chairman William I. Ramirez and four Commissioners lead the operations of

PSC, all of whom are appointed by the President. The Executive Director, appointed
or designated as such by the Chairman, directs and supervises the day-to-day
transactions of the agency and has supervision and control over the Bureau on
Administrative, Financial and Management Services (AFMS) and the Bureau on
Coordinating Secretariat and Support Services (COSECSS), both headed by a Deputy
Executive Director (DED). As of December 31, 2019, the manpower complement
totaled 398, of which 111 were on permanent status, 283 were under Contract of
Service (COS) and 4 were on job order basis.

The offices of PSC are located in Rizal Memorial Sports Complex (RMSC),
Malate, Manila, PhilSports Complex in Pasig City, Baguio City and Cebu City. Other
venues are the Shooting Range in Muntinlupa, Fort Bonifacio, Amoranto Velodrome,
La Mesa Dam and Canoe-Kayak in Taytay, Rizal.

B. Operational Highlights

The PSC reported its accomplishments vi-a-vis their targets for Calendar Year
(CY) 2019, as shown on the next page:
 Organizational Outcomes/Performance Accomplishments
Target
Indicators Actual Percentage
Amateur Sports Development Program
Outcome Indicators
 Number of grassroots athletes competing in the 15,759 17,585 112
Philippine National Games and Batang Pinoy
Games
 Number of Filipinos participating in Sports-for- 88,761 91,084 103
All activities
 Number of national athletes participating in 250 1,249 500
international and national competitions
Output Indicators
 Number of LGUs sending delegates in PSC 302 576 191
competitions
 Number of promotional events/activities held 32 46 144
 Number of national athletes and coaches 989 1,215 123
supported

C. Financial Highlights

The financial position, financial performance and sources and utilization of funds
of PSC for CY 2019 with corresponding figures for CY 2018 are shown below:

Amount (₱)
Particulars
2019 2018
Financial Position
Assets 14,828,463,625.53 7,959,642,938.55
Liabilities 619,884,739.42 74,144,840.88
Net Assets/Equity 14,208,578,886.11 7,885,498,097.67
Financial Performance
Revenue 3,136,951,206.61 6,047,647,315.32
Current Operating Expenses 2,543,279,013.22 1,347,494,513.91
Net Financial Assistance/Subsidy 5,734,515,165.72 251,129,613.78
Losses (215,115.30) (7,125.74)
Surplus/(Deficit) 6,327,972,243.81 4,951,275,289.45
Sources and Utilization of Funds
Appropriations 6,365,708,269.00 249,243,666.00
Allotments 6,330,581,699.00 248,346,750.00
Obligations Incurred 5,966,231,436.35 245,983,500.09
Disbursements 5,719,938,582.28 244,704,110.96
Unobligated Allotments 364,350,262.65 2,363,249.91

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 The Statement of Appropriations, Allotments, Obligations, Disbursements and
Balances for CY 2019 is shown in Annex A.

PSC also received additional fund from the Philippine Gaming Corporation
(PAGCOR) amounting to ₱3,110,621,852.13 and Philippine Charity Sweepstakes
Office (PCSO) amounting to ₱2,317,340.97, which formed part of the National Sports
Development Fund (NSDF) authorized under RA No. 6847.

D. Scope of Audit

The audit covered the review of accounts and operations of PSC for the period
January 1 to December 31, 2019. The audit was conducted to: a) ascertain the level of
assurance that may be placed on the Management’s assertion on the financial
statements; b) determine the propriety of transactions as well as extent of compliance
on the applicable laws, rules and regulations; c) recommend agency improvement
opportunities; and d) determine the extent of implementation of prior year’s
recommendations. Moreover, the audit was conducted in accordance with the
International Standards of Supreme Audit Institutions (ISSAIs).

E. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

PSC’s financial statements for CY 2019 due to the following observations:

1. Understatement of the Cash in Bank account balance by the total amount of

₱64,630,964.78 because of the unadjusted valid book reconciling items of
₱201,203.23, and non-restoration of unreleased checks amounting to
₱64,429,761.55 to the cash account;

2. Overstatement of the Due from NGAs account and understatement of the affected
inventory and Property, Plant and Equipment (PPE) account balances due to
unrecorded deliveries of ₱36,188,954.62; and

3. Non-reclassification of completed structures amounting to ₱4,431,666.22 to the

proper PPE account.

Moreover, we were unable to obtain sufficient appropriate audit evidence for the
recorded transactions aggregating ₱7,145,239,388.82 due to non-submission by
Management of the related disbursement vouchers and liquidation reports, that
possible material misstatements, if any, were not detected.

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F. Significant Observations and Recommendations

The following are the other significant audit observations and corresponding
recommendations, which were discussed with Management officials concerned
through the issuance of Audit Observation Memoranda and discussed during the exit
conference, details of which are further discussed in the report. Management views and
comments were incorporated in the report, where appropriate.

1. The combined Cash in Bank accounts balances of ₱1,394,656,674.36 was

unreliable due to reconciling items which could not be recognized in the books
due to lack of documents.

We recommended and Management agreed to instruct the PSC Board of

Commissioners to send a formal letter addressed to the Bank Manager to provide
the debit/credit memos and other pertinent documents regarding prior years’
reconciling items so that the same can be recognized in the books.

2. The reported balance of the Due from NGAs account amounting to

₱3,080,823,135.73 was unreliable due to unreconciled difference of
₱2,470,441,390.70 with the PS-DBM records representing 80.19 per cent of the
account balance, thereby affecting the fairness of presentation of the agency’s
statement of financial position.

We recommended and Management agreed to require the:

a. Acting Chief Accountant to assign an accounting staff to liaise with the PS-
DBM to reconcile their records so that proper adjustments or other
appropriate action could be taken on the discrepancy; and

b. Head, PSO to submit all the documents pertinent to the deliveries made by
the PS-DBM to the Accounting Division for recording in the books of
accounts.

3. Laxity in the enforcement of existing rules and regulations on the funds released
to NGOs/POs, and the related agency’s policy on the grant of financial assistance
(FA) to sports associations and organizing committees resulted in huge
outstanding balance of Due from NGOs/POs account amounting to
₱2,515,059,519.76, of which ₱2,419,503,066.31 had been past due for over 30
days to 10 years. The account balance, however, could have been reduced by
₱67,190,044.60 had the evaluation/processing of corresponding liquidations
reports (LRs) been completed by the Accounting Division before the closing of
the books of accounts.

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 We recommended and Management agreed to require the Acting Chief
Accountant to:

a. make final demand to all NGOs/POs with past due accounts;

b. exert utmost efforts to locate the whereabouts of the former officers of the
National Sports Associations (NSAs) that have ceased operation and compel
them to settle their accounts;

c. institute legal action, if warranted, against the officers of the defaulting

NGOs/POs;

d. closely monitor the liquidation of FA and render a monthly monitoring report,

copy furnished the relevant PSC offices such as the NSA Affairs Office and
Legal Affairs Office, for their information and appropriate action;

e. cause the completion of the evaluation/processing of the 69 LRs already

submitted by the NGOs/POs for recording in the books in order to reduce the
account balance;

f. manage the workload distribution of the manpower complement within the

Accounting Division with the end view of accelerating the evaluation of LRs;

g. evaluate the reasons/justifications submitted by the grantees for the non-

liquidation of FA, especially for those dormant accounts, and if warranted,
request authority for write-off from COA in accordance with COA Circular
No. 2016-005;

h. refrain from granting new/additional FA unless the previous ones have been
fully settled; and

i. consider the grant of FA equivalent to only 80 percent of the amount

requested by the associations/organizations and release the remaining 20
percent through reimbursement basis so as to compel the latter to immediately
liquidate the FA.

4. Huge amount of unutilized FA totaling ₱59,298,826.63 were refunded by the

NGOs/POs indicating excessive grant of FA and/or non-implementation of the
planned activities, thus, exposed the government funds to possible misuse or
misappropriation by the NGOs/POs.

We recommended and Management agreed to require the NSA Affairs Office to

be prudent in evaluating the budget estimates proposed by the NSAs to prevent
the grant of excessive FA.

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5. Funds transferred to other government agencies totaling ₱31,213,712.00 were
erroneously recorded as Due from NGOs/POs account instead as inter-agency
receivables accounts resulting in the misstatement of the affected accounts
balance.

We recommended and Management agreed to require the Acting Chief

Accountant to reclassify the transactions that were erroneously recorded as Due
from NGOs/POs to the appropriate inter-agency receivables accounts.

6. The validity of the total inventory accounts balance of ₱330,669,642.95 was

doubtful because of: a) material discrepancy of ₱299,616,282.70 between the
balances per General Ledger (GL) and Report on the Physical Count of
Inventories (RPCI), resulting from unrecorded issuances due to lack of Report of
Supplies and Materials Issued (RSMI) and; b) non-updating of Supplies Ledger
Cards (SLCs) and Stock Cards (SCs).

We recommended and Management agreed to require the:

a. Acting Chief Accountant and Head, Property and Supply Office (PSO) to:

- exert utmost efforts for the speedy reconciliation of the inventory

accounts in order to present a more reliable and truthful account balances;

- update the SLCs and SCs and immediately record the transactions
affecting the inventories, and reconcile said records with the RPCI; and

- conduct periodic reconciliation of their records, at least on a quarterly

basis, for early detection, verification and correction of any discrepancy;

b. Head, PSO to prepare and submit the RSMIs to the Accounting Division for
all issuances of inventory items, duly supported with Issuance of Supplies and
Materials (ISMs), for recording in the books; and

c. DED, AFMS to closely monitor the progress of the reconciliation process and
recommend imposition of sanctions (such as reprimand, withholding of
salary) against the concerned employees who will fail to comply with the
audit recommendations and/or to perform the inherent functions as custodians
of the property records.

7. Additional cash advances (CAs) amounting to ₱374,267,393.85 were granted to

19 Special Disbursing Officers (SDOs) even if their previous advances were not
liquidated/settled contrary to Section 89 of Presidential Decree (PD) No. 1445,
resulting in accumulation of huge outstanding balances at year-end. While the
liquidation of CAs and refund of unexpended balance were made beyond the
prescribed period under COA Circular No. 97-002 having delays from one to 250

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 days and 3 to 220 days, respectively, resulting in delayed recording of expenses
and exposing the unutilized funds to possible risk of loss or misappropriation.

We recommended and Management agreed to:

a. stop the grant of new advances to Accountable Officers (AOs) with

unliquidated advances;

b. direct the OIC-Executive Director (ED) to review immediately the propriety

of the pending LRs and effect the signing of documents found in order so that
the same could now be processed and recorded in the books;

c. instruct the AOs to immediately resubmit the LRs to the Accounting Division,
excluding the deficient transactions or those with incomplete documents, for
recording in the books;

d. direct the Acting Chief Accountant to:

 record in the books as partial liquidation those transactions without

deficiencies to reduce the outstanding balances; and

 cause the withholding of salaries or any amount due to the AOs who
failed to settle their accounts despite the demand; and

 closely monitor the status of CAs and strictly enforce the liquidation of
all advances and refund of unutilized funds, if any within the prescribed
period under COA Circular No. 97-002.

8. The reliability of the total PPE account balance of ₱2,344,730,149.01 as at

December 31, 2019 could not be established due to: a) discrepancy of
₱247,093,649.57 between the accounting records and physical count; b) existence
of unidentified/unverified/for adjustment balances of ₱38,571,315.64 and
₱22,324,561.93 in the PPE Ledger Card (PPELC) and Report on the Physical
Count of PPE (RPCPPE), respectively; and c) un-updated property records.

We recommended and Management agreed to require the:

a. Acting Chief Accountant and Head, PSO to:

- create a time-bound action plan for the reconciliation of the PPE accounts
detailing the activities to be undertaken, personnel to be assigned for the
activity, duration and corresponding deliverables; and

- exert effort to analyze the unidentified/unverified/for adjustment

balances in order to provide a more reliable financial information;

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 b. OIC-ED to oversee the implementation of the reconciliation plan, regularly
monitor the progress of the reconciliation, assess the capacities of all the
personnel involved in the receipt, disposition and management of the PPE,
and accordingly capacitate or replace the personnel incapable of performing
the assigned duties. If warranted, institute appropriate administrative
sanctions against those officers/employees who will fail to discharge their
responsibilities;

c. Acting Chief Accountant to reconcile the PPELC with the records of the
Engineering Office on a regular basis to ensure the correctness of the
accounting records pertinent to the construction projects; and

d. Head, PSO to:

- update all PCs and to promptly record transactions or other information about
the PPE in the PCs; and

- henceforth, reconcile the PCs with the PPELCs and RPCPPE.

9. Payables totaling ₱6,505,756.88 incurred in CY 2016 and prior years were not
reverted to the Accumulated Surplus/(Deficit) account contrary to Executive
Order (EO) No. 87. Moreover, the Due to Officers and Employees and
Guaranty/Security Deposits Payable accounts balances were reduced by the
negative balance of ₱338,759.59 and ₱3,308,091.70, respectively, thus, affecting
the fairness of presentation of the agency’s financial position.

We recommended and Management agreed to require the Acting Chief

Accountant to:

a. apply the advance rentals of the former tenants to their corresponding unpaid
accounts amounting to ₱955,197.19;

b. prepare Journal Entry Voucher (JEV) to revert all outstanding payables

covered by the EO totaling ₱6,505,756.88 to the Accumulated Surplus/
(Deficit) account; and

c. review and analyze the negative balances in order to reflect the correct
account balance.

10. The Payrolls for Athletes’ and Coaches’ Allowances (PACA) prepared by a
Contract of Service (COS) staff covering the period from January to September
2019 differed by ₱5,791,557.78 from the Monthly Allowance Reports (MAR)
prepared by the staff assigned at Assistance and Coordination Division (ACD),
indicating that the payrolls were padded. This was due to inclusion in the PACA
of athletes and coaches who were already dropped from the pool, with
no/incomplete attendance, still for approval, different rates, uncertain/inconsistent

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information and other noted deficiencies; and thus, resulted in monetary loss to
the agency that further depleted the fund for its sports promotion and development
programs. Also, lapses and other deficiencies were noted in the processes involved
and relevant documents/reports for the subject transaction.

We recommended that Management require the:

a. Head, Legal Affairs Office to:

- appeal/follow-up with the court for the immediate filing of the criminal
charges against the three COS personnel;

- file with the competent court for the immediate recovery of the amount
lost such as lien on the assets owned by the three COS personnel; and

- recommend to the PSC Board of Commissioners the filing of

administrative charges against those officers who failed to exercise due
diligence in the conduct of their responsibilities relative to the payment
of ineligible allowances, if warranted;

b. Head, NSA Affairs Office to:

- submit the Board Resolutions (BRs) together with the approved list of
athletes and coaches endorsed by the NSAs and their corresponding
classification and rates of allowances for CY 2019; and hereafter submit
immediately to the ACD all the related succeeding BRs;

- periodically update the Master List to effect any changes in the athletes
and coaches in the training pool as well as their allowances, classification
or other information, and send the same to ACD and relevant Offices of
the agency for their reference, supported with approved BRs; and

- determine the proper status of the athletes and coaches to eliminate the
duplication of entries both in the Master List and dropping list;

c. Chief, ACD to:

- submit the approved Daily Time Records (DTRs), accomplishment

reports and MARs to support the allowances paid in CY 2019; and

- instruct the Sports and Games Relations Officer (SGRO) II to exclude

the unqualified athletes and coaches, and those with questionable
entitlements in the MAR that will be forwarded to the Personnel Office
but prepare a separate report thereon, instead;

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 d. Acting Chief Accountant to submit the Payroll Register; and

e. PSC Board of Commissioners to strengthen internal control on the processing

of payments of the athletes’ and coaches’ allowances by requiring the
responsible officers to conduct due diligence through
counterchecking/review of the details of the information indicated in the
documents/reports. Revisit the processes involved and institute other
backstopping processes/measures such that no individual has complete
control on the preparation of relevant reports to prevent occurrence of payroll
fraud.

11. Submission by Management of the 6,667 paid disbursement vouchers (DVs)

together with the supporting documents with an aggregate amount of
₱10,129,184,405.49 were delayed by five (5) to 345 days, while the 3,233 DVs
with monetary value of ₱7,039,242,145.58 were not submitted as at year-end, in
contravention with COA Circular No. 2009-006 and precluded the Audit Team
from the timely audit of the related transactions and communication of deficiency,
if any. Similarly, delays were incurred in the submission of 67 JEVs covering LRs
aggregating ₱53,587,917.29 ranging from 35 to 162 days, while the 119 JEVs
including the supporting documents for the recorded liquidations of
₱105,997,243.24 remained unsubmitted to the Audit Team as of end of the year.
The delay was caused by the scanning by the Accounting Division of all the
documents before forwarding the same to the Audit Team.

We recommended and Management agreed to require the Acting Chief

Accountant to:

a. submit immediately to the Audit Team the remaining 3,233 paid DVs and 119
JEVs duly supported with LRs and other pertinent documents;

b. evaluate the adequacy of the existing manpower complement in the

Accounting Division in order to properly address the issues on
workload/assignment. If necessary, request additional personnel who will do
the scanning of all the documents processed by the Accounting Division to
prevent delay in the submission to the Audit Team; and

c. henceforth, strictly observe the deadline for the submission of transaction

documents as prescribed under COA Circular 2009-006.

12. Payments of the agency’s accounts payables/obligations totaling

₱4,835,083,850.57 chargeable against the Notice of Cash Allocation (NCA) were
made through Modified Disbursement System (MDS) checks instead of Advice
to Debit Account (ADA), contrary to DBM Circular No. 2013-16 resulting in
numerous outstanding checks totaling ₱596,642,553.94 at year-end.

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 We recommended and Management agreed to require the Cashier to:

a. strictly adopt the use of ADA for the settlement of its accounts
payables/obligations chargeable against the NCA in compliance with DBM
Circular Letter No. 2013-16; and

b. take extra effort in reminding the creditors/payees of the issuance of Official

Receipt (OR) immediately after the actual receipt of payment through ADA.

13. The financial capability of Philippine SEA Games Organizational Committee

Foundation, Inc. (PHISGOC) to undertake the preparation and organization of the
30th Southeast Asian (SEA) Games and compliance with the equity requirement
were not ascertained due to the absence of the audited financial reports of
PHISGOC, Work and Financial Plan (WFP) showing the overall budgetary
requirements for the event, and the sources and details of PHISGOC’s equity
participation therein, as required under COA Circular No. 2007-001.

We recommended and Management agreed to require the:

a. DED, AFMS and PHISGOC’s President to prepare and submit to the Audit
Team a complete report showing the actual overall costs incurred in
connection with the holding of the 30th SEA Games, indicating the specific
expenditures assumed by the PSC and PHISGOC; and

b. PHISGOC to submit its audited financial reports for CYs 2018 and 2019, and
the sources and details of its equity participation, whether in the form of cash
or other resources in the said undertaking.

14. The terms on the sharing of revenues that could be generated from the hosting of
the 30th SEA Games were not stipulated in the Memorandum of Agreement
(MOA) between the PSC and PHISGOC as required under COA Circular No.
2007-001, thus, the remittances made by PHISGOC amounting to
₱196,806,262.00 to PSC with inadequate supporting documents could not be
determined if reasonable government’s share.

We recommended and Management agreed to require the PHISGOC to submit the

collection reports disclosing all the revenues/receipts derived from the SEA
Games events including all donations/sponsorships from private institutions, duly
supported by ORs and contracts.

Likewise, we recommended that the PSC Board of Commissioners come up with

a written agreement with PHISGOC on the proper sharing of all the revenues
earned and collected from the SEA Games events.

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15. The terms of reference that shall embody the MOA such as the project cost
estimates, time schedules for the releases of funds, specific period to liquidate the
funds granted to PHISGOC and maintenance of a separate savings account
therefor, were not incorporated in the MOA contrary to COA Circular No. 2007-
001.

We recommended and Management agreed to:

a. require PHISGOC to:

 submit the invoices, billings, statement of accounts, purchase

orders/contracts or other documents to establish the existence of the
unpaid obligations incurred for the SEA Games to support the succeeding
fund releases;

 submit the bank statements for the funds received from the PSC from the
time the account was opened until the current date; and

 remit to PSC the interests earned from all the FAs received and deposited
to its bank account; and

b. henceforth, incorporate the relevant terms of reference required in COA

Circular No. 2007-001 in future MOAs to be entered by the PSC involving
the release of funds to NGO/PO.

Moreover, if there are still expenses/obligations that need to be paid by

PHISGOC, we recommended and Management agreed that fund releases should
only be approved by the PSC Board of Commissioners upon presentation by
PHISGOC of the proof of document to establish the existence of the unpaid
obligations, and the fund to be released should only correspond to the actual
amount thereof.

16. Disbursements for PHISGOC’s expenditures incurred in CY 2018 amounting to

₱24,636,309.08 were without basis considering that it was only on January 25,
2019 that the Office of the President (OP) in its Memorandum Circular (MC) No.
56 directed all government agencies to extend support to PHISGOC.

We recommended and Management agreed to submit justification for all the

disbursements relating to the expenditures incurred for PHISGOC’s activities and
other operational requirements in CY 2018, or prior to the OP’s directive.

17. FAs released to PHISGOC and Philippine Olympic Committee (POC) in CY 2019
in the total amount of ₱1,815,169,762.67 and ₱535,413,045.56, respectively
pertinent to SEA Games events remained unliquidated as of year-end despite
completion of the intended purpose, contrary to COA Circular No. 2007-001.
Moreover, the PSC granted additional FAs to PHISGOC from January 29, 2020

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 to June 19, 2020 in the total amount of ₱417,546,728.08, despite non-liquidation
of previous FAs, thus, further increasing the unliquidated accounts of PHISGOC
to ₱2,232,716,490.75.

We recommended and Management agreed to require the PHISGOC and POC to:

a. immediately submit the LRs together with the supporting documents for each
FA received from the PSC; and

b. submit the final fund utilization reports covering all the FAs and expenditures
that were charged thereto.

G. Summary of Audit Suspensions, Disallowances and Charges at year-end

As of December 31, 2019, unsettled suspension and disallowances totaled

₱39,281,979.61 and ₱112,696,630.04, respectively.

H. Implementation of Prior Year’s Audit Recommendations

Of the 58 audit recommendations embodied in the CY 2018 Annual Audit

Report (AAR), 31 recommendations were implemented while 27 recommendations
were not implemented, details of which are discussed in Part III of this report.

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