REPUBLIC OF THE PHILIPPINES

COMMISSION ON AUDIT
REGIONAL OFFICE NO. X
CAGAYAN DE ORO CITY

Office of the Auditor – NGAS 10 Cluster 6 Audit Team No. 03

AOM No. 23-006

Date: March 17, 2023

AUDIT OBSERVATION MEMORANDUM (AOM)

For : DR. JOSE C. CHAN, M.D., FPOA, FPCS, MHA, FPCHA

Medical Center Chief II
Northern Mindanao Medical Center (NMMC)
Cagayan de Oro City

Attention: MA. LURENA R. MONEVA

MMS SAO/Property Custodian

During our examination of unserviceable Property, Plant and Equipment of the

hospital, we observed the following deficiency:
The Property Section responsible for the unserviceable property with total cost of
P26,770,445.27 does not have a storeroom or warehouse for safekeeping of the items
that are due for disposal in violation of Section 2 of PD No. 1445.
1. Section 2 of PD No. 1445 states that all government resources must be managed in
accordance with laws and regulations and safeguarded against loss or wastage. The
responsibility for adhering to this policy rests with the chief or head of the government
agency concerned.

2. According to Section 79 of the same law, unserviceable government property should be

inspected by the head of the agency or their authorized representative in the presence of the
auditor concerned. If the property is found to be valueless or unsalable, it may be destroyed in
their presence. If it is found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award.

3. Verification of Inventory and Inspection Received of Unserviceable Property (IIRUP)

received on February 2, 2023 revealed that unserviceable property of the NMMC with a cost
of P26,770,445.27 remained not disposed of, contrary to Section 79 of PD No. 1445, thus,
exposing these properties to further deterioration and decreasing their realizable value. The
PPEs due for disposal are the hospital's obsolete and unserviceable assets, including medical
equipment used for patient treatment and small-sized equipment. Please refer to the attached
pictures for more details.

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4. The PPEs were dispersed throughout the hospital in hallways and other unoccupied areas,
which are potentially dangerous. Although these medical supplies are no longer usable, they
can still jeopardize human health, particularly for patients with compromised immune
systems, as the hospital primarily treats sick individuals. In addition to being hazardous,
small PPEs can be easily removed from the hospital grounds if not appropriately secured.

5. The agency's lack of a storeroom/warehouse for unserviceable PPEs may impede monitoring
and disposal efforts, and may also result in potential loss or waste of government resources.
Despite being unserviceable, the sale of these goods could still generate income for the
hospital.

6. We recommend that Medical Center Chief should:

a. provide a suitable storeroom/warehouse for safekeeping and disposal of unserviceable

equipment and instruct the Property Officer to store small PPEs in a secure location to
prevent loss; and

b. immediately conduct the disposal of the unserviceable properties in accordance with

Section 79 of PD 1445 to generate additional income and avoid further deterioration
and decreasing their realizable value.

7. May we have your comments on the foregoing audit observation within three (3) calendar
days from receipt hereof.

JHAHIDAH L. GUILING
State Auditor III
OIC-Audit Team Leader

MARILOU C. MAMPAO
State Auditor V
Regional Supervising Auditor

Proof of Receipt of AOM:

Name of Official Position/Designation Signature Date Received

1. Dr. Jose C. Chan Medical Center Chief II

2. Ma. Lurena R. Moneva Supervising Administrative
Office/ Property Custodian

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