EXECUTIVE SUMMARY

A. Introduction

The Department of Foreign Affairs (DFA) was established as an independent

agency in June 1952 under Republic Act (RA) No. 708, known as the Magna Carta
of the Foreign Service, although it was formally created in June 1898 with the birth
of the first Philippine Republic. On September 19, 1991, RA No. 708 was revised by
RA No. 7157, also known as the “Philippine Foreign Service Act of 1991”.

The DFA is entrusted with crafting, coordinating and implementing Philippine

foreign policy to advance the interests of the Philippines and the Filipino people in
the world community. It discharges its duties through the following fundamental
policy planks:

• Contribution to the preservation and enhancement of national security, including

the protection of territorial integrity and national sovereignty;
• Promotion of economic security, while ensuring inclusive growth and sustainable
development; and
• Protection of the rights and promotion of the welfare and interest of Filipinos
overseas, recognizing them as partners in national development.

The various offices at the Home Office (HO) are supported by six Satellite
Offices located in premier malls in Metro Manila, 37 Consular Offices (COs), 94
Foreign Service Posts (FSPs) worldwide and 156 Honorary Consulates (HCs) in
selected locations where embassies/consulates are not present. Three attached
agencies are directly supervised by the Department Secretary:

• Foreign Service Institute (FSI);

• UNESCO National Commission for the Philippines (UNACOM); and
• Technical Cooperation Council of the Philippines (TCCP)

The Department was headed by Secretary Enrique A. Manalo. It has a total of

3,487 personnel complement as of December 31, 2022, composed of the following:

Regular/Permanent 2,902
Presidential Appointee/ Co-terminus 13
Casual 27
Contractual 228
Contract of Service 317
Total 3,487

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B. Operational Highlights

The DFA reported the following targets and accomplishments for Calendar
Year (CY) 2022:

Organizational Outcomes/ Percentage of

Targets Accomplishments
Performance Indicators Accomplishment
1. DIPLOMACY PROGRAM
Foreign relations strengthened to promote national development and international
cooperation
Percentage of activities/reports
that led to expressions of
support, commitment, or
interest arising from DFA
engagements:
• National Security 80 94.58 118.22
• Economic Diplomacy 80 100 125.00
• Public and Cultural 90 94.71 105.23
Diplomacy
Number of activities
organized, initiated or attended
by the DFA annually:
• National Security 10,451 64,450 616.69
• Economic Diplomacy 7,818 21,781 278.60

Number of reports submitted

by the Department in
connection with diplomatic
activities:
• National Security 12,008 33,733 280.92
• Economic Diplomacy 6,836 14,729 215.46

Number of activities primarily

aimed at enhancing the image
of the Philippines in the global
community:
• Public and Cultural 132,600 137,816 103.93
Diplomacy
2. CONSULAR/ ATN PROGRAM
Overseas Filipinos protected and engaged, and consular services improved
Percentage of passports issued 90 100 111.11
within the prescribed period

Higher satisfaction rating by Majority of 94.76 -

those who
those who avail themselves of accomplished
other consular documents client
feedback
forms gave
Percentage of cases involving satisfactory 100 111.11
rating

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 Organizational Outcomes/ Percentage of
Targets Accomplishments
Performance Indicators Accomplishment
overseas Filipinos resolved as
a proportion of total requests 90
and cases handled
Number of passports issued 4,556,325 4,127,863 90.60

Number of other consular 2,661,393 724,127 27.21

documents issued

Number of Overseas Filipinos 145,000 127,430 87.88

assisted using Assistance to
Nationals (ATN) Fund and
Legal Assistance Fund (LAF)
as well as other interventions
aside from ATN Fund and
LAF

C. Financial Highlights

The financial position, financial performance and sources and utilization of

funds of the DFA for CY 2022 with corresponding figures for CY 2021 are shown
below:

2021
Particulars 2022
As Restated
Financial Position
Assets 32,256,769,179.89 29,404,824,734.12
Liabilities 5,717,317,076.40 6,052,744,518.78
Net Assets/Equity 26,539,452,103.49 23,352,080,215.34
Financial Performance
Revenue 7,478,040,492.73 5,717,906,069.65
Current Operating Expenses 17,905,729,048.72 16,396,728,466.96
Net Financial Assistance/Subsidy 19,775,519,338.92 16,729,529,201.80
Gains 1,298,488,814.19 962,996,121.43
Losses (608,214,056.90) (309,640,791.48)
Surplus/(Deficit) for the period 10,038,105,540.22 6,704,062,134.44
Sources and Utilization of Funds
Appropriations 22,247,430,618.00 22,606,872,394.00
Allotments 24,471,937,315.22 24,849,107,591.46
Continuing Appropriations 5,496,818,640.22 4,954,456,457.46
Obligations Incurred 22,084,172,330.61 19,939,488,543.26
Disbursements 17,065,474,580.47 15,857,942,136.33
Unobligated Allotment 2,387,764,984.61 4,909,619,048.20

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 The Statement of Appropriations, Allotments, Obligations, Disbursements and
Balances for CY 2022 is shown as Annex A.

D. Scope of Audit

The audit covered the accounts and operations of the DFA for CY 2022. It 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 audit recommendations. Moreover, the audit
was conducted in accordance with International Standards of Supreme Audit
Institutions (ISSAIs).

E. Auditor’s Opinion on the Financial Statements

We rendered adverse opinion on the fairness of presentation of the financial

statements of DFA due to the material and pervasive uncorrected misstatements
affecting the total assets, liabilities and equity of the Department amounting to
₱5,488,319,864.09, ₱110,934,158.88, and ₱3,049,077,823.33, respectively. The
details are discussed in Part II of this report.

F. Summary of Significant Observations and Recommendations

The following are the other significant audit observations and corresponding
recommendations which were communicated to concerned Management officials
through the issuance of Audit Observation Memoranda (AOM), and discussed during
the exit conference held on May 25, 2023 details of which are further discussed in
Part II of the Report. Management comments were incorporated in the Report where
appropriate:

1) The validity and reliability of the Accounts Payable amounting to

₱1,144,690,620.31 is doubtful due to the discrepancy of ₱12,959,797.94 between
the balance per books and confirmed amounts, inconsonance with Paragraph 27 of
IPSAS 1. Moreover, non-reversion of long outstanding accounts payables aged
two years and above totaling ₱193,004,627.14 is contrary to Executive Order
(EO) No. 87 dated August 13, 2019.

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

a) reconcile the balance of accounts payable per books against the balances
confirmed by the creditors;

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 b) review, analyze and revert all recorded payables that remained outstanding
for two or more years pursuant to EO No. 87; and

c) settle valid and legal obligations duly recognized in the books of accounts
without the need to file a petition for money claim.

2) Delayed submission for an average of 141 days of the liquidation reports of the
fund transfers of the National Election overseas of the 23 sampled FSPs to the
COMELEC, hence, not in compliance with the provision of item B.1.d of the
MOA.

We recommended and Management agreed to:

a) Require the concerned FPSs and the DFA-OVS to strictly comply with the
provision of the MOA in the submission of the liquidation reports and
necessary documents;

b) Submit separately the liquidation reports for specific purposes, including its
supporting documents, and the Monthly Fiscal Reports; and

c) In the ensuing years, to:

• set a more reasonable deadline for the submission of liquidation reports

for specific purpose, considering the geographical locations of the FSPs;
and

• include in the MOA a provision on applicable sanction/penalty that may

be imposed to persons identified to be responsible for the delayed
submission of liquidation reports.

3) Expedite fees totaling ₱29,337,092.72 collected from CYs 2018 to 2022,

remained unremitted as at April 30, 2022, contrary to DFA Circular-401-OUA-
2014 dated February 26, 2014.

We recommended and Management agreed to require the FSPs to remit

immediately the expedite fees collected in compliance with the internal guidelines
issued by the Office of the Undersecretary for Administration.

4) Unutilized and long outstanding a) International Commitment Fund (ICF)

amounting to USD100,000.00 in Moscow PE and b) building funds amounting to
CAD 1,165,028.47 and USD222,750.88 in Ottawa PE and Sydney PCG,
respectively remained in Post’s bank accounts and not yet returned to the HO.
Moreover, unutilized transferred working fund in three COs totaling
₱1,852,114.75 was not returned to the National Treasury.

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 We recommended and Management agreed that:

a) concerned FSPs reiterate their request for a specific guidance on the

disposition of the idle and long outstanding ICF and Building Fund balances
or for its eventual reversion to the National Treasury considering that the
funds were sourced out of the GAA; and

b) concerned COs to cause the reversion of the unutilized working funds to the
National Treasury.

5) Seven Accountable Officers (AOs) and two Head of FSPs were either not bonded
or the amount of their fidelity bond were not enough to cover their
accountabilities, contrary to Section 4.1.1 of Treasury Circular (TC) No. 02-2019,
may preclude the government to substantially recover from the Fidelity Fund the
appropriate amount due to the government, in case of loss of government assets
under their custody.

We recommended and Management of concerned FSPs agreed to:

a) secure the required fidelity bond that is enough to cover their accountabilities
in compliance with TS Circular No. 02-2019 dated April 25, 2019;

b) monitor closely the renewal/application of bonds of all AOs and Head of

FSPs; and

c) For Kuala Lumpur, Riyadh and Kuwait PEs to duly notify the HO of the
amount of accountabilities of AOs and submit the required application for
bond and to request increase of the amount of bond.

We likewise recommended that Muscat PE to strictly monitor the granting and

liquidation of cash advances to ensure that no additional cash advances are
granted when the concerned AO still has outstanding cash advances.

6) Due to the non-creation of an Inventory Committee, the physical count of PPE

and Inventories was not conducted at the Home Office and in four FSPs with an
aggregate amounts of ₱2,105,648,315.39, resulting in the non-preparation of the
Reports on the Physical Counts of Tangible Assets, contrary to the pertinent
provisions Chapters 8 and 10, Volume 1 of the GAM for NGAs, hence the
existence and accuracy of the PPE and Inventories accounts balances in the
financial statements could not be established.

We recommended and Management agreed to:

a) Create an Inventory Committee at the HO and concerned FSPs;

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 b) Conduct physical count at HO and concerned FSPs on the Inventories. Semi-
Expendable items and PPE as prescribed under COA rules;

c) Submit RPCPPEs, RPCIs and RPCSPs within the prescribed period, and
instruct the Property Officers and Accounting Office to maintain and update
PPELCs, SLCs, SCs and PCs and other required reports; and

d) Implement the one-time cleansing of all DFA properties, to establish

existence and to prove accuracy of the recognized amounts in the books of
accounts.

7) The Department had obligated the amount of ₱22,084,172,330.61 or 90.24

percent out of the total allotments of ₱24,471,937,315.21 while only
₱17,065,474,580.47 or 77.27 percent was disbursed during the year indicating
low fund utilization and agency’s inability to maximize the utilization of the
budget provided which may affect the services to be rendered to the Filipinos all
over the world. Moreover, out of the total current year’s Notice of Cash
Allocation (NCA) of ₱18,586,547,136.00, ₱2,053,497,297.62 or 11 percent, was
reverted back to the National Treasury, due to its non-utilization.

We recommended and Management agreed to:

a) establish measures to ensure timely implementation of projects/programs and

utilization of funds within the year they were budgeted;

b) facilitate proper planning and implement early procurement in order to

increase the utilization of capital outlay, and prepare alternative PAPs in case
of unforeseen events particularly those in the FSPs; and

c) strictly monitor the utilization of budget appropriations and the

implementation of the agency’s program/projects/activities for each budget
year to prevent the lapsing and reversion of unused cash allocations.

G. Status of Implementation of Prior Year’s Audit Recommendations

Of the 123 prior year’s audit recommendations in the CY 2021 Annual Audit
Report, 83 were implemented and 40 were not implemented. The details are
presented in Part III of this report.

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