EXECUTIVE SUMMARY

INTRODUCTION

The Ang Nayong Pilipino Foundation, Inc. was created primarily to promote research
development project on social science and humanities and related fields. It was duly
registered with the Securities and Exchange Commission on May 7, 1969, as non-stock,
non-profit corporation.

On November 6, 1972, by virtue of Presidential Decree No. 37, the Nayong Pilipino
Foundation (NPF) was created. Its penultimate purpose/objective is to establish parks and
recreation centers for the promotion of tourism in the country but its primary
purposes/objectives, among others, are to: (a) promote research development project on
social sciences and humanities and related fields; (b) formulate a comprehensive social
welfare program for the upliftment, improvement and amelioration of the social and
economic conditions of the unfortunate destitute members of our society with the end view
of availing maximum utilization of their potentialities in the solution of the country’s
problems; (c) encourage and facilitate the active participation of the domestic and foreign
sectors in furnishing financial, technical and other forms of assistance for the Foundation’s
social welfare programs; and (d) promote and encourage the dissemination of the results
of its researches and studies in social sciences and humanities and to encourage their
practical application to problems of the masses.

NPF is currently focusing on three major programs, i.e., the Research Institute, Heritage
Space, and Cultural Leadership Institute Programs. The Research Institute is a knowledge
development center that will conduct research on the fields of Philippine Natural and
Cultural Heritage, Sustainable Heritage Tourism and Ecotourism, Tourism Governance,
Cultural and Creative Industries, and related areas. The Heritage Space Program is a
series of program offerings for the Cultural Park and Creative Hub at the NPF Property
located in the New Seaside Drive, Entertainment City, in Parañaque City. The Cultural
Leadership Institute, in turn, is a training and formation program for developing cultural
leaders who shall be at the forefront of Philippine cultural heritage protection, promotion,
and development. Courses will be facilitated in partnership with scholars and practitioners
in the concerned subject areas.

The NPF is an attached agency of the Department of Tourism. It is governed by a Board

of Trustees composed of a Chairman and five Members and, its Management is headed
by an Executive Director.

The Governance Commission for Government Owned or Controlled Corporations issued

Memorandum Order No. 2017-01 dated February 24, 2017, approving the NPF
Reorganization Plan through a new structure with a total of 31 plantilla positions. However,
NPF Management was not able to fill up the plantilla positions. As of December 31, 2021,
NPF had a total personnel complement of 46 composed of nine (9) regular employees, 30
contract of service and seven (7) job order personnel.

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FINANCIAL HIGHLIGHTS (In Philippine Peso)

I. Comparative Financial Position

2020 Increase
2021 (As Restated) (Decrease)
Assets P9,931,944,946 P9,915,356,434 P16,588,512
Liabilities 832,504,033 795,718,710 36,785,323
Net assets/equity P9,099,440,913 P9,119,637,724 P(20,196,811)

II. Comparative Financial Performance

2020 Increase
2021 (As Restated) (Decrease)
Revenue P112,364,623 P119,597,665 P (7,233,042)
Current operating expenses 121,933,597 112,461,366 9,472,231
Surplus/(deficit) from current
operations (9,568,974) 7,136,299 (16,705,273)
Other non-operating income - 283 (283)
Income tax expense 6,029,935 3,122,055 2,907,880
Net Surplus for the period P (3,539,039) P 10,258,637 P(13,797,676)

III. Comparison of 2021 Budget and Actual Amounts

Difference
Final budget vs
Approved COB Actual Actual
Receipts P 157,220,000 P 104,530,684 P 52,689,316
Payments:
Personnel services 11,991,000 7,842,116 4,148,884
Maintenance and operating 122,788,000 84,777,175 38,010,825
expenses
Capital expenditures 11,078,000 34,071 11,043,929
Net Receipts/(Payments) P 11,363,000 P 11,877,322 P (514,322)

SCOPE OF AUDIT

Our audit covered the examination, on a test basis of transactions and accounts of NPF
for Calendar Year 2021 to enable us to express an opinion on the financial statements for
the years ended December 31, 2021 and 2020 in accordance with the International
Standards of Supreme Audit Institutions. It was also conducted to determine the Agency’s
compliance with pertinent laws, rules and regulations and adherence to prescribed policies
and procedures.

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INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS

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

statements of the NPF for the years ended December 31, 2021 and 2020 in view of the
following:

1. The faithful representation in the financial statements of the Property, Plant and
Equipment (PPE) account, excluding land account, with a carrying amount of
P19.310 million as of December 31, 2021 was not established due to: (a)
unreconciled inventory of PPE with a total items counted of 6,133 while only 726
items were in the records of the Accounting and Finance Unit (AFU); no alternative
procedures could be made since the inventory form or the records of the Property
Custodian do not have details as to the acquisition dates of these items nor its
respective costs while the records of the AFU do not show the whereabouts of
these properties as well as the reference property number/tags; and (b) non-
inclusion in the inventory the items under the account of Works of Arts and
Archeological Specimens with a balance of P2.950 million and the AFU does not
have details/items comprising the account. Furthermore, the PPE account is
misstated due to: (a) non-recognition of impairment nor review of the useful life of
immovable leasehold improvements amounting to P10.661 million despite the
damaged/dilapidated conditions of these improvements and expiration of the lease
agreement with the Clark Development Corporation (CDC) involving the Nayong
Pilipino Clark Expo (NPCE) Park; (b) the existing balance of construction in
progress account amounting to P0.950 million despite no ongoing construction in
the NPCE park and expiration of the lease agreement with CDC; and (c) inclusion
of items totaling P0.985 million with net book value of P56,033 which are below
the capitalization threshold of P15,000. These are all contrary with Paragraph 27
of International Public Sector Accounting Standards (IPSAS) No. 1, Item No. 6.3
of COA Circular No. 2020-06, and Item No. 5.4 of COA Circular No. 2016-006 and
Paragraphs 67 and 79 of IPSAS 17 in relation with IPSAS 21.

2. The faithful representation in the financial statements of the Financial Liabilities,

Trust Liabilities and Other Payables accounts in the amounts of P3.633 million;
P4.663 million; and P5.942 million, respectively, as of December 31, 2021 could
not be established due to: (a) unsupported assets/liabilities from various
customers, suppliers and contractors totaling P17.245 million which remained
outstanding for more than two years; and (b) unsupported abnormal balances
totaling P6.166 million which substantially reduced the balances of the Financial
Liabilities, Trust Liabilities and Other Payables accounts, contrary to Paragraph 27
of IPSAS 1 and Item 3.26 of the Conceptual Framework for General Purpose
Financial Reporting by Public Sector Entities.

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

1.1. Direct the Property Unit (PU) to:

a. Complete the details of Inventory Form including those items under the
account Works of Arts and Archeological Specimens and for those items with
no available cost, use the appraised value in accordance with COA Circular
No. 2020-006;

b. Determine and retain only those items with unit cost above the capitalization
value of P15,000 once the cost is included in the inventory forms and vice
versa;

c. Reconcile along with AFU the Inventory Forms with the PPE Ledger Card by
tracing all items recorded in the AFU to the inventory form;

d. Follow the procedures in COA Circular No. 2020-006 for those items
recorded in the books but were not counted or found; and

e. Update the Property Cards.

1.2. Direct the AFU to:

a. Draft the accounting policy and procedures for the annual determination of
impairment loss and review of useful life of an item of PPE and submit the
same to NPF Management for approval;

b. Prepare the necessary adjusting entries; and

c. Comply with the provisions of COA Circular No. 2020-006, COA Circular No.
2016-06, and IPSAS 17 and 21.

2.1. Direct the AFU to:

a. Exert all efforts to locate the supporting documents of the Financial

Liabilities, Trust Liabilities and Other Payables accounts and, if not found,
communicate with the previous Accountants and immediately demand for the
immediate turnover thereof;

b. Ensure that there is a valid obligation on long outstanding payables,

otherwise revert these to Accumulated Surplus and Deficit;

c. Provide the necessary adjusting journal entries;

d. Henceforth, maintain complete subsidiary ledgers for all liabilities accounts

and prepare monthly schedules for monitoring purposes as well as to
facilitate reconciliation with the records of the creditors; and

e. Ensure that all liabilities accounts are supported with complete documents.

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SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS

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

3. The continued hiring of Contract of Service (COS) Personnel with

corresponding/equivalent plantilla positions, instead of requiring them to apply for
regular appointment, is not in accordance with the CSC-COA-DBM Joint Circular
(JC) No. 2, s. 2020. Likewise, there were COS personnel performing functions
essential to the NPF that were without corresponding plantilla positions, thus
depriving these qualified personnel of the benefits and emoluments enjoyed by a
regular employee and at the same time, limiting NPF with regular employees
performing key and vital functions in its operations.

3.1. We recommended that Management:

a. Encourage the COS personnel to apply for the vacant plantilla positions and
hire them, if qualified;

b. Refrain from consistently hiring COS personnel in lieu of appointing them as

regular employees;

c. Review the current staffing pattern to meet the needs of NPF and thereafter,
request approval from Governance Commission for GOCCs (GCG) for the
re-organization in order to absorb those COS personnel performing regular
functions in the operations of NPF; and

d. Comply with the provisions of CSC-COA-DBM JC No. 2 s. of 2020.

4. The effective and efficient operations of NPF are doubtful since most of the
mandated purpose/objectives of NPF were not attained due to insufficient and/or
absence of programs, activities and projects (PAPs), contrary to Section 1 of
Presidential Decree (PD) No 37 “Creating the Nayong Pilipino Foundation” and
Section 2 of PD No. 1445. In addition, expenditures relative to the implementation
of PAPs totaling P7.520 million only represent 14 and 7 per cent of the total
Maintenance and Other Operating Expenses and Total Current Expenses,
respectively. Lastly, there is uncertainty in the ability of NPF to continue its
operations in the future considering the absence of alternative sources of revenue,
the funds for its operations would be fully depleted within six to seven years.

4.1. We recommended and Management agreed to:

a. Direct the AFU to:

a.1 Assist top Management in the long-term financial planning and in

devising detailed and realistic plans to address the depletion of funds;
and

a.2 In the financial planning, revisit the annual operating expenses so as

to introduce austerity measure as well as eliminate unnecessary

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 functions/cost centers to accommodate more PAPs for the attainment
of the mandated functions of NPF.

b. Instruct the Planning, Marketing and Operations Unit to:

b.1 Develop more PAPs directly related to the mandated purpose of NPF;
and

b.2 Introduce income generating activities that would address or mitigate

the effects of the depletion of funds.

c. Ensure that the resources of NPF is effectively and efficiently utilized.

SUMMARY OF UNSETTLED AUDIT SUSPENSIONS, CHARGES AND

DISALLOWANCES

As of December 31, 2021, there were no unsettled audit charges and audit suspensions.
The details and status of the unsettled disallowances in the amount of P41.940 million at
year-end are presented in Table 7, Part II of this Report.

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Of the 65 audit recommendations embodied in the prior year’s Annual Audit Report, 45
were fully implemented, 16 were partially implemented and four were not implemented.
Details are presented in Part III of this Report.

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