DENR 2012 COA OBSERVATION RECOMMENDATOIN

PART II OBSERVATIONS AND RECOMMENDATIONS

A. VALUE FOR MONEY AUDIT

Limited Monitoring of National Greening Program (NGP) activities

1. Monitoring of NGP activities at DENR-NCR was limited on the number of hectares and seedlings planted hence, no inspections were conducted to check the status of the planted seedlings as of year-end as required by the CY 2012 DENR NGP Implementation Manual. As such, the needed remedial actions like replanting and proper care and maintenance were not undertaken so as to achieve the desired survival rate of 85 percent of the planted seedlings, on the third year of implementation which is the key success indicator of the program.

1.1. Executive Order (EO) No. 26 was issued on February 24, 2011, to implement the National Greening Program (NGP) under a National Convergence Initiative (NCI) composed of the Department of Environment and Natural Resources (DENR), other implementing agencies and people’s organizations (POs), non-government organizations (NGOs) and in partnership with the private sector and civil society.

1.2. It is implemented in pursuit of sustainable development for poverty reduction, food security, biodiversity conservation, environmental stability, and climate change mitigation and adaptation.

1.3. Section 2 of said EO specifies that the NGP shall plant from 750 million to 1.5 billion trees cover in about 1.5 million hectares for the period of six years from CY 2011 to 2016 in forest lands, mangrove and other lands of the public domain.

1.4. In CY 2012, DENR-NCR entered into Memoranda of Agreement (MOA) with various schools, barangays, private organizations and private offices/establishments as part of the social mobilization for the implementation of the NGP. As disclosed in the Report on the Monitoring and Evaluation of Accomplishments of NGP Sites for CY 2012, about 945.289 hectares were planted with various types of seedlings totaling 472,644.

1.5. The CY 2012 DENR NGP Implementation Manual states that (a) the implementers shall submit reports on the number of hectares and seedlings planted to the office of Undersecretary for Field Operations; (b) survival of

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the seedlings shall be at least 85 percent on the third year of implementation; and (c) in order to meet the desired survival rate, regular monitoring of the planted seedlings is required to check if replanting is needed. The monitoring aspect of the program is also one of the provisions in the MOA entered into by and between the DENR-NCR and the program implementers wherein the former is tasked to monitor the survival of the planting materials periodically while the latter (organization, school etc.) shall provide proper maintenance and protection of the planted seedlings.

1.6. Verification of records of DENR-NCR and interview with the officers and staff of the NGP Office and the Planning and Management Division of the DENR-OSEC disclosed that although monitoring activities were undertaken, these were limited on determining the number of hectares and seedlings planted as these data are required to be submitted to the NGP Secretariat weekly. It was admitted by the NGP Office that there were no inspections conducted to check the status of the planted seedlings as of CY 2012. As such, the rate of survival of the same, which is the key success indicator of the program, was not determined.

1.7. Management informed that the monitoring of the condition of the planted seedlings was not undertaken due to lack of personnel.

1.8. We recommended that the Regional Executive Director designate personnel, even on an ad hoc basis, to undertake inspection of the NGP sites as basis in determining the condition of the planted seedlings and the remedial actions to undertake to ensure the attainment of the required survival rate.

1.9. Management informed that a monitoring/evaluation activity which was undertaken on March 18-22, 2013 disclosed that of the 945.289 hectares planted in CY 2012, 91.144 hectares were inspected/monitored wherein a 61 percent survival rate was reported.

Slow disposal of Taguig lots

2. The disposition of the Taguig lots to intended beneficiaries by the Land Management Bureau (LMB) continue to move at a relatively slow pace with only 55.71 percent disposal rate from CYs 1987 to 2012 due to the absence of a work map/plan for the undertaking. As such, as of to date, only few benefited therefrom despite the lapse of 25 years from its inception.

2.1 Republic Act No. 274 dated June 15, 1948, an act authorizing the then Director of Lands, now Land Management Bureau (LMB), to subdivide the lands within military reservations belonging to the government which may

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be declared by the President as no longer needed for military purposes and to dispose the same by sale subject to certain conditions and for other purposes, authorized the subdivision and sale of the said lands to persons qualified under the Public Land Act. Further, the Director of Lands, with the approval of the then Secretary of Agriculture and Natural Resources, shall determine the purpose for which it will be utilized and the number of prospective applicants.

2.2 Presidential Proclamation No. 2476 dated January 7, 1986, an act excluding the Barangays Lower Bicutan, Upper Bicutan and Signal Village in the then Municipality of Taguig, from the operation of Proclamation No. 423 dated July 12, 1957 and declared the said barangays open for disposition.

2.3 Subsequently, Presidential Proclamation No. 172 dated October 16, 1987 signed by then President Corazon C. Aquino, an act expanding the coverage of Proclamation No. 2476 to include Western Bicutan and likewise provided for the technical descriptions of the land subject for disposition was issued.

2.4 Pursuant to the said laws, the LMB, an attached Bureau of DENR, started in 1987 the identification and disposition of the following portion of the land at Fort Bonifacio, Taguig City:

2.5 However, of the total area identified of 4,446,478 sq.m., only 3,105,535 sq.m. or 70 percent thereof is disposable as the 1,330,943 sq.m. are reserved for public use such as roads, alleys, parks etc. as mandated under Presidential Proclamation No. 2476.

2.6 As of December 31, 2012 or 25 years later, 1,733,209.02 sq.m. or 55.81 percent of the disposable area of 3,105,535 sq.m. were disposed of. Given below is the trend of the disposal, in terms of square meters, based on available records:

YearNo. of Sq. Meters

DisposedPercentage of Disposal

1992 41,159.00 1.321993 102,380.00 3.301994 209,057.00 6.731995 140,011.00 4.511996 153,838.00 4.95

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Lot Location Area (sq. m)1 Signal Village 1,642,869 2 Upper Bicutan 1,071,790 3 Lower Bicutan 1,084,311

1 and 2 Western Bicutan 647,508 Total 4,446,478

YearNo. of Sq. Meters

DisposedPercentage of Disposal

1997 48,052.00 1.551998 116,945.03 3.771999 75,389.50 2.432000 180,322.60 5.812001 75,544.65 2.432002 59,611.42 1.922003 125,816.00 4.052004 67,054.08 2.162005 47,437.54 1.532006 63,306.27 2.042007 59,742.75 1.922008 91,534.75 2.942009 19,791.71 0.642010 38,457.50 1.242011 10,660.52 0.342012 7,097.70 0.23Total 1,733,209.02 55.81

2.7 The low rate of disposal, however, correspondingly affected the issuance of the Deed of Sale. For CY 2012 alone, of the targeted 500 Deed of Sale, only 54 or 10.8 percent were issued.

2.8 The primary contributory factor to this low performance is the absence of a work map or plan as a tool to guide the Agency in carrying out its mandate. Thus, the titling and transfer of the lots to the intended beneficiaries was undertaken without any work targets, timelines and planned actions to tackle the emerging issues and problems in the implementation thereof.

2.9 The other causes identified for such unsatisfactory performance were the following: (a) insufficient agency personnel to undertake the activities; (b) lack of information campaign; (c) the difficulty in coordinating with the concerned Local Government Units; (d) incomplete documents supporting the applications; (e) financial constraints of applicants in complying with the cash and documentary requirements; and (f) complacency on the eventual ownership of the lots by concerned occupants thereof.

2.10 We recommended and Management agreed to prepare a strategic work map/plan, taking into consideration the problems identified affecting the success of this undertaking, in order to have a guide to fast track the disposition of the lots to ultimately attain the objective of the project which is to deliver the titles to the intended beneficiaries.

2.11 Management informed that they have already formulated/drafted on March 7, 2013 the roadmap with the objective to set a timeframe relative to the disposition of the lots and identify the accurate solutions to accelerate the titling activities.

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Possible loss from confiscated products - P6.880 million

3. The government stands to lose P6,880,146.40 from the benefits of the confiscated products and conveyances which were left deteriorating in DENR- Regions 1, 3 and 7 due to (a) inadequate and improper storage; and (b) failure to make representations with the court to request authority for the immediate disposal and/or facilitate the issuance of a court decision to finally turnover the items to the government.

3.1 Chapter 4, E2-4 of the Primer on Illegal Logging provides that confiscated/seized forest products/conveyances in the custody of PENROs/CENROs should be provided with a place for adequate safekeeping/preservation during the pendency of the case.

3.2 Ocular inspections of confiscated forest products (lumber, charcoal, stalagmites and stalactites), conveyances (trucks, jeepneys, tricycles, vans) and tools (chains and circular saws) turned over to DENR-Regions 1, 3 and 7 as presented in the table below disclosed that there were not enough and safe storage facilities to keep and preserve them from deterioration due to exposure to heat, rain, termites and other environmental elements as well as possible loss thru theft.

Region Particulars Amount Remarks

1Forest products P 1,834,436.69 The bodega is a fire hazard and not

well safeguarded.Conveyances 200,000.00

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Lumber 3,786,639.71 There are also undetermined amount of items confiscated by other authorized agencies that are not yet accepted for turn-over by the Region for lack of depository and security guards. The confiscation case is still under judicial proceedings.

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Stalactites and stalagmites

1,059,070.00 These were confiscated way back in 1994. The items have turned into a semblance of ordinary stones already due to exposure to environmental elements.

Total P6,880,146.40

3.3 Further, there was no action made by the concerned DENR-Region 3 to make representations with the courts handling the confiscation cases to facilitate the issuance of decisions or at least to request for an authority for the immediate disposal of the properties while awaiting for the resolution of the case to avoid loss of economic value as allowed/permitted in Chapter 4, Section F (b) of the Primer on Illegal Logging.

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3.4 As such, government stands to lose P6,880,146,40 from the benefits of the confiscated items if these are left to further deteriorate and without action for their immediate disposal.

3.5 We recommended that the Directors of:

a. DENR- Regions 1 and 7 (i) ensure that proper care and storage are provided for the confiscated property to preserve their economic values for the government to obtain optimum benefits therefrom; and (ii) if warranted, request the DENR-Central Office to include in the budget the acquisition of storage facility otherwise, source out for available spaces from other government offices for the safekeeping of the items; and

b. DENR – Region 3 make follow-ups with the concerned courts on the status of the cases filed for the confiscated property and to facilitate the issuance of decisions thereof and/or request for an authority to dispose the confiscated items while awaiting resolutions of the cases.

Post-evaluation for completed projects of Upland Development Program

4. No post assessments/evaluations of the completed projects totaling P48,233,849.00 were undertaken to determine their contributions to the attainment of the objectives of the Upland Development Program (UDP) since such activity was not programmed and budgeted by PENRO-Bukidnon.

4.1 In CYs 2009-2010, PENRO-Bukidnon, in cooperation with the five CENROs and two Park Superintendents (PASUs), implemented and completed projects under the Upland Development Program (UDP) with a total budget of P48,233,849.00 for the following targeted activities:

ActivitiesPerformance Indicators

No. of hectares developedNo. of seedlings

procured/produceda. Reforestation 718 has 437,562b. Assisted Natural Regeneration 321 has. 175,429c. Agro Forestry 917 has. -

4.2 Among the specific objectives of the Program are the creation of additional and immediate employment and income for poor upland households and people’s organizations; improvement of the productivity and soil and water conservation functions of forestlands currently cultivated as upland agricultural farms through agro-forestry; reforestation, assisted natural regeneration and enrichment planting in public forestlands and protected

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areas. Likewise, the Program aims to rehabilitate, effectively manage and protect forests and forestlands, watersheds, mangroves, urban forest parks, coastal zones, protected areas and protection forestlands considering the roles of these areas in providing water for irrigation, power and municipal water systems, in the provision of vital forest-based goods and services, in the conservation of biodiversity resources, and in the mitigation of, and adaptation to climate change.

4.3 We noted in audit that to date, no post assessments/evaluations of the completed projects were yet undertaken to determine their contributions to the attainment of the objectives of the UDP since such activities were not programmed and budgeted by the PENRO-Bukidnon despite the previous year’s audit recommendation relative thereto. It was explained by Management that a thorough monitoring was done during the first year of its implementation. They could not however, monitor any further the progress of the projects after the expiration of the one year term of the Letter of Agreement with the People’s Organization since there is no post-evaluation activity programmed and budgeted coupled with the lack of available personnel for the purpose.

4.4 In the absence of such assessment/evaluation, Management then measured the success of the projects merely on the determination whether the targeted number of seedlings and hectares were planted. However, the basis of the measurement on the effectiveness of the projects by Management was only inputs towards the achievement of the desired impact/outcome. Thus, the conduct of a post assessment/evaluation is imperative.

4.5 We recommended that Management of PENRO-Bukidnon request funds from the DENR-Central Office for the conduct of a post-evaluation activity for the completed UDP projects to ascertain whether the intended impact/outcome is attained or not. Henceforth, in planning for future programs/projects, ensure that post validation is included in the activities and budget.

Low fund utilization of foreign assisted projects

5. For CY 2012, the fund utilization rate of the 13 Foreign Assisted Projects (FAPs) of DENR-OSEC, three bureaus and 13 regions ranged only from 5.5% to 96% while their average delivery rate was only from 11% to 119% due to (a) slow liquidation of funds transferred to implementing agencies; (b) delay in the hiring of consultants; and, (c) slow and lengthy procurement procedures lead to the extension of the end dates of four FAPs and may affect the attainment of projects’ objectives and possible incurrence of commitment fees.

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5.1 As of December 31, 2012, the DENR-OSEC, three bureaus and 13 regions have the following Foreign Assisted Projects (FAPs):

Funds ProjectsName Objective/s Cost Duration

102

National Program Support for Environment and Natural Resources Management Project (NPS-ENRMP)

To improve efficiency and effectiveness of DENR in implementing its core functions and service delivery and assist in enhancing the ecosystem services for additional global and local benefits.

Loan Proceeds - USD 50 M

August 2007 to December 2012; extended up to December 2013

Second Land Administration Management Project (LAMP 2)

Aims to alleviate poverty and enhance economic growth by improving land tenure security and fostering the development of efficient land markets in rural and urban areas.

Grant Proceeds -USD 17.45 M

GOP Counterpart – P 91.312 M

October 2005 to December 2012; extended up to September 2013

Integrated Coastal Resources Management Project (ICRMP)

Sustainable management of coastal resources and to uplift the socio-economic conditions of people living in coastal areas surrounding ma-rine biodiversity corri-dors of national and global importance.

Loan Proceeds - USD 33.8 M

GOP Counterpart – USD19.520 M

June 2007 to June 2013; extended up to June 2014

Community- Based Forest and Mangrove Management Project (CBFMMP)

To contribute to the improvement of environ-mental conditions and reduction of poverty in Panay and Negros through sustainable ma-nagement of forests and mangroves.

Loan Proceeds -USD 5.78 M

GOP Counterpart – USD 2.53 M

January 2009 to December 2015

171

National Program Support for Environment and Natural Resources Management Project (NPS-ENRMP)

To improve efficiency and effectiveness of DENR in implementing its core functions and service delivery and assist in enhancing the ecosystem services for additional global and local benefits.

Grant Proceeds – USD 7 M

August 2007 to December 2012; extended up to December 2013

Integrated Coastal Resources Management Project (ICRMP)

Sustainable management of coastal resources and to uplift the socio-economic conditions of people living in coastal

Grant Proceeds – USD 9 M

June 2007 to June 2013; extended up to June 2014

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areas surrounding ma-rine biodiversity corri-dors of national and global importance.

Community- Based Forest and Mangrove Management Project (CBFMMP)

To contribute to the improvement of environ-mental conditions and reduction of poverty in Panay and Negros through sustainable ma-nagement of forests and mangroves.

Grant Proceeds – USD 4.33 M

January 2009 to December 2015

171

National Portfolio Formulation Exercise (NPFE)

To enable the country to conduct a consultation process with a broad range of stakeholders involved in the national GEF policy and pro-gramming, to set priori-ties for GEF resources programming covering the 5th replenishment period.

Grant Proceeds - USD 0.030 M

March 8 to November 8, 2011

Manila Third Sewerage Project (MTSP)

To enhance the invest-ments in sewerage projects through resolu-tion of several key institutional, legal, fi-nancial and technical barriers to enable a more efficient investment en-vironment in the pollu-tion control sector.

Grant Proceeds - USD 5 M

GOP Counterpart – in kind

Year 2008 to November 2012; extended up to May 2014

Philippine Chillers Energy Efficiency Project (PCEEP)

To capture the signifi-cant potential for energy efficiency of new non-CFC chillers and contri-bute to more energy conscious decision ma-king by chiller owners and eventually a perma-nent market transfor-mation of the chiller sector.


January 2011 to Year 2020

Integrated Persistent Organic Pollutants Management Project (IPOPsMP)

To assist the Philippines in minimizing the risk of human and environ-mental exposure to POPs by strengthening the regulatory and moni-torring framework and improving capacity for


GOP Counterpart – USD 16.03 M

January 2011 to February 2017

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171

and providing demons-trations of safe manage-ment POPs.

Philippine Climate Change Adaptation Project (PhilCCAP)

To improve resiliency of communities and reduce economic losses attribu-table to climate change by demonstration of cost-3-effective adapta-tion strategies in agricul-ture and natural resour-ces management, sup-ported through streng-thened institutions, ho-listic planning and im-proved access to infor-mation.


Year 2011 to December 2015

Manila Bay Integrated Water Quality Management Project (MBIWQMP)

To establish an effective management system and institutional operational framework for impro-ving the water quality of the Laguna de Bay, Pasig River and Manila Bay and restoring its intrinsic value to society.


November 2011 to March 2013; extended up to March 2014

5.2 Per Work and Financial Plan (WFP) for Fund 102 and 171 for CY 2012 of the above projects, the following were the major targets for the year with the corresponding budget:

Name of Project

BudgetTargets

Performance Indicators Quantity

Fund 102NPS-ENRMP (SIM Loan) P600,000,000.00 No. of seedlings produced 50,000,000

978,000,000.00 No. of cadastral contracts awarded 217

LAMP 2 9,169,000.00 No. of workshops for training of Regional and Sector Personnel on LAMP System and technologies

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ICRMP 451,081,000.00 No. of studies undertaken, no. of participants, no. of documented system, no. of materials, no. of trainings conducted , etc.

Various

CBFMMP 37,000,000.00 No. of areas contracted/planted 2256/6415Fund 171NPFE 836,491.00 No. of meetings/workshops for Focal Areas

Biodiversity-Climate Change Land Degra-dation 190

MTSP 672,390.00 No. of meetings/on-site inspections to moni-

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Name of Project

BudgetTargets

Performance Indicators Quantity

tor construction of Sewerage and Septage Plant 30

PCEEP 137,000.00 No. of site visits 3

IPOPsMP 157,001,160.00 No. of consultants/teams hired 4

PhilCCAP 28,000,000.00 No. of consultants hired 4

MBIWQMP 5,375,000.00 No of consultants hired 10

5.3 Comparison of the WFP and Fund Utilization Report for Loans and Grants for CY 2012 of the 13 FAPs showed that the rate of fund utilization ranged from 5.50% to 96.33% or an average rate of 34.42% as shown below.

Project BudgetUtilization/

DisbursementsUtilization

Rate

Loan Funded (NPS-ENRMP) Sim Loan P 1,806,958,000.00 P 169,116,000.00 9.36% LAMP 2 9,169,000.00 4,362,000.00 48.00%ICRMP 451,081,000.00 289,867,000.00 64.26%CBFMP 47,200,000.00 5,358,920.00 11.35%

Grant Funded NPFE 1,282,620.00 1,235,616.00 96.33%NPS-ENRMP Grant 13,714,000.00 5,141,000.00 37.49%MTSP 10,775,600.00 3,349,400.00 31.08%PCEEP 2,294,500.00 1,075,437.00 46.87%IPOPsMP 189,915,060.00 11,633,322.51 6.12%PhilCCAP 38,548,206.94 8,571,013.96 22.23%MBIWQMP 10,750,000.00 591,000.00 5.50%Total P 2,581,687,986.94 P 500,300,709.47% of Total Fund Utilization 34.42%

5.4 Further review and analysis revealed that the physical accomplishments for the major targeted activities for the said FAPs were as follows:

ActivitiesPhysical Accomplishment

Target Actual %NPS ENRMP (SIM Loan)Component 1Environment and Natural Resources Mgt. policies and plans 221 186 55.12Component 2National Greening Program/Seedling Production 50,000,019 43,597,149 86.91Component 3Implementation of the OPMBCS pursuant to SC decision 17,827 10,998 47.06

Average Delivery Rate 50,018,067 43,608,333 63.03LAMP 2Component 1Priority Policy, Legislation to Support Land Administration Reform Developed

30 36 120.0

Activities Physical Accomplishment

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Target Actual %Target Actual %

Component 3Roll-out of LAMP’s Technology and Procedure 82 94 114.60Component 5Preparation of Project’s Regular and Major Reports 13 16 123.00

Average Delivery Rate 125 146 119.20ICRMPComponent APolicy and Institutional Strengthening and Development 4,122 112 2.78Component BICRM and Biodiversity Conservation 4,253 2,587 60.82Component CEnterprise Development and Livelihood Diversification 3,459 3,062 88.52Component DSocial and Environmental Services and Facilities 135 41 30.37Component ESupport to Project Management 1 1 100.00

Average Delivery Rate 11,970 5,803 56.50CBFMMPComponent 1DENR and LBP staff participating LGUs capacitated in planning for implementation of CBFM project 298 265 78.89Component 2Forests and Mangroves Rehabilitated through LGUs, POs and Rural Households 9,185 3,869.04 73.80Component 3Livelihood projects for Sustainable Forest and Mangrove Management 7 2 28.57Component 4CBFM Beneficiaries Supported in Value-Adding and Marketing of Forestry and Agro-forestry products

13 12 91.66

Component 5Rural Infrastructure in Support of Livelihood Improved 14 11 107.33Component 6Project Management 5,037 30 70.87

Average Delivery Rate 14,554 4,189.04 75.18NPFECategory ANational Meetings/Consultations 190 187 57.15Category BTravel 15 17 113.33Category CLocal Consultants 4 4 100.00Category DProcurement of Supplies and Materials 300 300 100.00Category EMiscellaneous 1 1 100.00Category FAdministration and Supervision 5 5 100.00

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Target Actual %Average Delivery Rate 515 514 95.08


Target Actual %NPS –ENRMP GrantComponent 2Technical Assistance for Devt. and Pilot Testing of IEM System

49 41 61.90

Rehabilitation and Protection of GEF Assisted Watersheds and Wetlands

361 331 91.70

Average Delivery Rate 410 372 76.80MTSPComponent 1Strengthened Partnership among Stakeholders 27 23 63.00Component 2S&S Master plans using criteria/standards utilized by govt, etc. 29 13 38.00Component 3Innovative Financing Mechanisms Developed and tested 14 13 92.00Component 4Market based incentives introduced 3 2 50.00Component 5Technical Assistance on Rate Rebasing 1 0 00.00Component 6Viability of alternative treatment facilities 31 36 60.00Component 7Operation of PMO 1,002 2 66.67

Average Delivery Rate 1,107 89 52.81PCEEPComponent 1Investment in Chiller Replacement 26 13 36.08Component 2Measurement, Monitoring and Evaluation 26 10 36.00Component 3Technical Assistance 119 9 60.00Component 4Procurement of Goods and Services 15 12 79.16

Average rate 186 44 52.81IPOPs MPComponent 1Strengthening the Regulatory Framework 2 1 50.00Component 2Reduction of Releases of Unintentional POPs 37 31 50.00Component 3Environmentally Sound Management of PCB 1 0 0Component 4Identification and Remediation of POPs 8 8 100Component 5Project Management 1,115 1,106 69.60

Average Delivery Rate 1,163 1,146 53.92PhilCAPP

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Target Actual %Component 1Strengthening the Enabling Environment 10 5 50.00Component 2Strengthening Climate Change Resilience 490 503 102.65


Target Actual %Component 4Project Management 4 4 100

Average Delivery Rate 504 512 84.22MBIWQMPComponent 1Strengthening Institutions and Instruments 29 0 0Component 2Environmental Investments 30 21 35.00Component 3Community and Volunteer group Participation 20 0 0

Average Delivery Rate 79 21 11.67

5.5 The table above showed that the average physical delivery rate was from 11.67% to 119.20%. As shown in the two tables, the delivery rates are higher than the fund utilization rates. This was attributed to the reporting of accomplishments for unpaid expenses and those for the unliquidated fund transfers of implementing agencies relative to the FAPs as of CY 2012. Thus, the accomplished activities were already reported while the corresponding expenses thereto were not yet included in the financial reports. For the LAMP 2 Project, the programmed activities were 119.20% accomplished because Management strategized to make efficiently use of their resources by joining Land Management Bureau (LMB) meetings and workshops where the targeted participants of DENR - OSEC were also involved, instead of conducting separate meetings or workshops, hence accomplishing their targets with minimal or no expenses.

5.6 This relatively low financial and delivery rates were due to the following:

Project Causes for Low PerformanceNPS-ENRMP ( Sim-Loan)

The procurement of 20 trash boats and two in-site water quality monitoring equipment under Component 3 was not undertaken due to failure of bidding.

Slow liquidation of transferred funds by some implementing agencies causing delay in the release of succeeding funding for the project implementation.

The contract for research study on the Total Maximum Daily Load within Manila Bay was returned by World Bank because the work schedule for its accomplishment is beyond the closing date of the project.

ICRMP Delayed engagement of consultants due to long procurement process which consequently delayed the conduct of the three remaining policy studies namely: (1) Environmental and Social Impact Assessment;

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Project Causes for Low Performance(2) Environmental Hazard Management; and (3) Live Reef/Food Fish Trade.

Insufficient cash available due to slow liquidation which prolonged replenishment of the imprest fund by ADB.

CBFMMP Delayed implementation of the targeted activities under Natural Resources Management (NRM) and Livelihood components due to the late issuance of the Monetary Board Opinion on the approval of the Sub-Loan Approval (SLA) of the four participating LGUs in Panay. This consequently caused the late release of the project fund in CY 2011 and subsequently delayed the replenishment of funds in CY 2012.

There was insufficient production of seedlings due to lengthy procurement procedures at the LGU level.

MTSP The delayed procurement of Consultants caused the non-accomplishment of the Water Quality Monitoring Program and Reports;

The operationalization of the Partnership Information Center (PIC) was not implemented due to slow process of procurement.

PCEEP (Chillers) The restructuring of the project delayed its implementation. IPOPsMP Delay in the procurement of the Project Management Specialist, Team

Consultants and Technical Specialists which consequently affected the project implementation.

PHILCAP Delayed hiring of Project Manager and Policy Expert Consultant caused the non-accomplishment of the major activities of the project.

5.7 Although management claimed that their accomplishment under the NPS-ENRMP was 76 percent, the audit team found it otherwise since some targeted activities in the WFP for Component 3 were not accomplished such as the procurement of trash boats, in-site water monitoring equipment and research study on Total Maximum Daily Load in Manila Bay. Also, in Component 1, the targeted activities for cadastral survey and special study on wealth accounting and valuation of ecosystem services (WAVES) were 217 contracts and four trainings/activities, respectively, while in their accomplishment report, only 195 contracts for cadastral survey and one training/activity for WAVES were reported, hence the difference.

5.8 The non-accomplishment of the targeted activities/slow delivery rate during the year resulted in the extension of the end dates of the following projects:

FundProject

DatePurposeOriginal Project

End Extension

102 NPS-ENRMP

December 2012 December 31, 2013

Completion of the remaining targets and to fully utilize the remaining funds.

102 LAMP2 December 2012 September 2013

Keep the original activities while awaiting approval and effectivity of the additional financing as a requirement by the World Bank (WB).

102 ICRMP June 2013 June 30, 2014

Complete the project and attain the project’s objectives.

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FundProject

DatePurposeOriginal Project

End Extension

171 MTSP November 2012 May 2014 Complete the project and attain the project’s objectives.

171 MBIWQMP March 2013 March 2014

Complete the project and attain the project’s objectives.

5.9 Management offered the following comments on the above observations:

Projects Management CommentNPS-ENRMP Sim Loan

Of the total P1,827,607,240.00 enrolment for CY 2012 for the implementation of Components 1, 2 and 3, only P1,779,118.00 was covered by an allotment from the DBM. Of the said amount, 32% has been utilized as of December, 2012. As per physical accomplishment, computation showed that the project has already 76% average performance rating.

The delay in the implementation of Cadastral Survey was attributed to the late hiring of contractors and some contracts were awarded only in the 3 rd and 4th

quarters of CY 2012.

The low financial utilization was due to (a) some regions started seedling production in the 3rd and 4th quarters of CY 2012 due to tedious bidding/procurement processes and lack of rainfall; and (b) seedling production under DENR-PTFCF/FPE partnership was issued “No Objection Letter” only in October 2012.

PCEEP Management explained that no Current Appropriation or SARO has been issued by DBM for the project.

IPOPsMP Slow rate of disbursements was also due to the tedious process of the review of the consultants’ outputs and the payment process which is common in projects that have just started.

MBIWQMP The low utilization of funds was due to the delays in the issuance of “No Objection” letter by the World Bank for the engagement of the Institutional Development Specialist and nine specialists to work on Components 1 and 3; and delay in the delivery of equipment and approval by BAC-FAPs.

5.10 The extension of the completion date of the above five projects may affect the attainment of projects’ objectives and possible incurrence of commitment fees.

5.11 We recommended and Management agreed to benchmark with best practices of successful previous projects in addressing problems and challenges for effective and efficient implementation of projects.

5.12 Management informed that :

a. NPS-ENRMP Grant - Continuous coordination with concerned DENR and LGU offices/units to fast track the completion

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of the remaining activities and improve financial utilization are currently being carried out.

b. PhilCCAP - The slow disbursement in CY 2012 was partly due to a rational decision by the DENR-PMO and regions to defer certain activities in the absence of the consultants. It was agreed to have a pragmatic action in order to obtain a good coordination of all DENR-PhilCCAP activities and avoid unnecessary wasting of funds.

Uneconomical practices for expenses related to meetings and conferences – P21.383 million

6. The failure of DENR-OSEC to observe economy measures in the disburse-ments for food/catering services during conferences and routine/ordinary meetings resulted in over-expenditures of P21,383,358.45 or 3,037 percent in the budget for Representation Expenses and realignments within the Main-tenance and Other Operating Expenses (MOOE) sacrificing the allotments for other expenditures.

6.1 The General Appropriations Act for FY 2012 provides a budget of P10,390,000.00 for Representation Expenses of DENR in which the DENR-OSEC was allotted the amount of P704,000.00.

6.2 Analysis disclosed that during the year, the DENR-OSEC incurred P37,803,349.66 for its representation expenses. This represents 12.71 percent of the total Maintenance and Other Operating Expenses (MOOE) of P297,505,022.08

6.3 Of the P37,803,349.66 representation expenses, P15,715,991.21 or 41.57 percent was used for the conduct of the Global Conference on Land Based Ocean connections while the P22,087,358.45 went to the procurement of food and catering services for regular/routine office meetings and conferences. The DBM later issued a funding approval for the expenses for the Global Conference.

6.4 Comparison of the approved P704,000.00 budget for representation expenses for the year with the P22,087,358.45 spent by DENR-OSEC showed over-expenditure of P21,383,358.45 or by 3,037 percent more than its budget which resulted in realignments of budget on expenses within the Maintenance and Other Operating Expenses (MOOE) thus, sacrificing the allotments for other expenditures.

6.5 In the post-audit of transactions, we observed the following practices in the conduct of routine/ordinary meetings and conferences which are manifestations of the agency’s non-observance of economy measures in the

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disbursement of government funds which are considered unnecessary/ uneconomical uses of resources:

a. The quantities of food ordered/served during meetings by the different offices were most often in excess of the number of participants as per Notices of Meetings. As such, the excess foods were served to other staff, security guards and drivers who are not part of the meetings.

b. The prices of the catered foods were higher than those similarly offered by common food chains/restaurants such as Jollibee, McDonalds, among others. This was due to lack of proper bidding/canvassing of catering needs and the availment of the services of limited number of caterers/suppliers such as My Sweet Ants Patisserie, MPCC, Aleka Catering and Food Services and F.P. Astudillo Catering Services.

c. Catered meals and snacks mostly for DENR-OSEC officials and employees were unnecessarily provided as evident in the following instances:

Breakfast is served although the meetings started at 9 am.

Morning snacks and lunch were ordered for meetings that started after lunch.

Meals or heavy snacks were served during routine/ordinary meetings that last for just an hour or two when a simple snack would suffice such as coffee/drinks and biscuits and the like.

d. Snacks served which were purchased from McDonalds and Jollibee during the World Water Day at the Luneta Grandstand on March 22, 2012 and the IP Phones User’s Training were contracted to two caterers instead of buying directly from the former food outlets which resulted in higher costs.

e. Simplicity of food served was not observed in meetings since menus consisted of four (4) to five (5) main courses. Prices of snacks per person ranged from P120.00 to P174.00 while those for lunch were from P550.00 to P600.00

6.6 The foregoing manifest unwise and uneconomical spending which resulted in over-expenditure for representation expense and is not in accord with Section 7.1 of RA No. 9184 which mandates that all procurement shall be within the approved budget of the procuring entity. It likewise redounds to sacrificing funds for other operational needs of the DENR-OSEC.

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6.7 We recommended that Management (a) be judicious and frugal in its expenses for meals and snacks and always keep expenses within the budget; and (b) consider coming up with a policy that would mandate the application of economy measures as regards these expenses in order to prevent unnecessary and uneconomical spending.

6.8 Management of DENR-OSEC informed that they have already drafted the “Guidelines on the Procurement of Food/Catering Service for In-house Meeting, Trainings and Workshop”.

B. FINANCIAL AND COMPLIANCE

Undocumented transfer of unclosed accounts of completed projects under Funds 102 and 154 to Fund 101- P872.742 million

7. The unclosed accounts of completed projects under Funds 102 and 154 of DENR-OSEC comprised of P618,885,721.23 and P90,082,826.92 in assets and liabilities, respectively, were transferred to Fund 101 in CY 2012 despite the absence or incomplete documentation thereof, non-verification and recon-ciliation of balances prior to the transfer and absence of the equivalent cash back up for the cash accounts as required by COA Circular No. 97-001 dated February 5, 1997. Thus, the existence, accuracy and validity of the transferred year-end account balances could not be established rendering such balances doubtful which also affected the accounts of Fund 101 where these were transferred/closed.

7.1 It was recommended in the CY 2010 Consolidated Annual Audit Report (CAAR) of the DENR that the balances of terminated/completed projects be transferred to Fund 101- General Fund or carried forward in the books of the succeeding projects after obtaining the proper documentation and following the required procedures under COA Circular No.97-001 dated February 5, 1997, the guidelines on the proper disposition and closure of funds and accounts of programs/projects that have long been completed and are non-moving for five consecutive years.

7.2 During the year, the balances of various assets, liabilities and government equity of the completed projects under Funds 102 and 154 were transferred to Fund 101 in compliance with the audit recommendations summarized below:

Project AmountAccounts Transferred

Assets Liabilities Government Equity ICRMP P 100,750.00 P 75,111.18 P 75,111.18LIUCP 1,670,362.13 167,036.22 167,036.22LIUCP 207,131,974.68 177,350,727.88 P 28,487,217.49 148,863,510.39LAMP 4,631,101.28 1,654,766.45 21,464.63 1,633,301.82NRMP 1,373,876.23 907,714.63 907,714.63

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ICRI 1,613,525.00 612,470.00 612,470.00OECF 2-JBIC 133,960,109.96 132,486,903.86 2,310,535.77 130,176,368.09MMAQ 141,402,397.76 43,821,238.55 43,821,238.55ADB2 91,720,549.49 24,962,112.69 24,962,112.69SRMPP/IIWMP 102,800.00 11,000.00 11,000.00SECAL 184,173,653.51 184,173,653.51 59,263,609.03 124,910,044.48PRRP 1,642,402.42 1,196,064.97 1,196,064.97Various FAPS 93,233,848.00 42,087,369.07 42,087,369.07RBWMPP 878,553.00 303,882.85 303,882.85MTSP 55,070.00 24,216.98 24,216.98

Project AmountAccounts Transferred

Assets Liabilities Government EquityFund 154 9,051,452.39 9,051,452.39 9,051,452.39

P 872,742,425.85 P 618,885,721.23 P 90,082,826.92 P 528,802,894.31

7.3 We noted however, that the necessary review, analysis and reconciliation prior to the transfer of the accounts required under COA Circular No. 97-001 were not undertaken to ensure the existence, validity and accuracy of the account balances.

7.4 Further review of pertinent documents disclosed that:

a. the Journal Entry Vouchers (JEVs) drawn were either inadequately or not supported with the necessary documents such as the Invoice Receipt of Property, Acknowledgement Receipt for Equipment, Inventory Report for Property, Plant and Equipment (PPE), Bank Reconciliation Statements, schedule of accounts and such other documents to substantiate the details, existence, completeness and validity of the transactions; and

b. transferred cash account of P1,703,547.01 for the SECAL project was not backed- up with cash as per confirmation of the audit team with the Land Bank of the Philippines.

7.5 The existence of unclosed balances was the result of allowing the Foreign Assisted Projects to end without closing the books of accounts.

7.6 Management informed that the deficiency was the result of the absence of proper turn-over of records of Project personnel to the Chief Accountant.

7.7 We recommended that the Department’s Accounting Division:

a. coordinate with the Foreign Assisted Project Office to secure the needed supporting documentations;

b. after receipt of the documents, review the propriety, accuracy and validity of the transferred accounts;

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c. if after exhausting all efforts and substantiation of the subject accounts proved futile, consider requesting for write-off of the undocumented dormant accounts from COA following the required procedures thereon; and

d. henceforth, (i) ensure financial closure of all accounts of completed projects on a timely manner; and (ii) before transferring accounts to Fund 101, succeeding similar projects or to other government agencies, make sure that these are properly and adequately documented.

7.8 Management informed that verification and reconciliation on the accounts of completed projects is on-going.

Transfer of unutilized Notice of Cash Allocation (NCA) to current accounts - P43.992 million

8. The unutilized CY 2012 Notice of Cash Allocations (NCAs) of CAR-PENROs Abra, Benguet, Ifugao, Kalinga and Mountain Province totaling P43,992,302.58 were transferred to the current accounts maintained by the respective offices before the lapsing of the amount contrary to DBM National Budget Circular No. 535 dated December 29, 2011.

8.1 Analysis of accounts Cash-National Treasury, Modified Disbursement System (MDS) and Cash in Bank– Local Currency, Current Account (LCCA) of PENROs Abra, Benguet, Ifugao, Kalinga and Mountain Province in CAR, showed that from February to December 2012, the unutilized Notice of Cash Allocation (NCA) totaling to P43,992,302.58 were deposited to the current accounts maintained by the respective offices before the lapsing of the amount, as shown below.

MonthPENRO

TotalAbra Benguet Ifugao Kalinga Mt. Prov.

Feb P 15,019.44 P 15,019.44Mar P 3,170,370.95 354,147.69 3,524,518.64Apr 1,390,377.27 1,390,377.27May 539,802.70 45,184.13 584,986.83Jun 161,548.20 161,548.20Jul P 2,789,258.71 3,147,124.00 672,329.43 6,608,712.14

Aug P2,000,000.00 P6,848,493.83 6,329,794.12 2,805,039.87 17,983,327.82Sep 1,970,937.54 3,799,932.59 4,699,049.98 10,469,920.11Oct 3,253,892.13 3,253,892.13

Total P2,000,000.00 P8,819,431.37 P2,789,258.71 P18,377,401.63 P12,006,210.87

P43,992,302.58

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8.2 The concerned PENROs admitted the above observation and offered the following justifications thereon:

a. In PENROs Abra and Ifugao - there were unforeseen delays in accomplishing the targets and the timing of releases of NCAs did not match with their financial plans.

b. In PENRO Benguet- the late designation of an Officer in-Charge (OIC) consequently delayed the processing and payments of claims thus necessitate the transfer of funds.

8.3 The transfer of unutilized NCAs to Cash in Bank- LCCA accounts to prevent lapsing of the amount is in violation of Section 3.9.1.3 of DBM National Budget Circular No. 535 dated December 29, 2011 which states that “Notice of Cash Allocation (NCA) issued and credited to the Regular MDS accounts of the agencies for their regular operations which are programmed for a specific month shall be valid only until the last working day of the said month”.

8.4 We recommended and the Management of DENR-CAR and the concerned PENROs agreed to:

a. remit the unutilized NCA to the Bureau of the Treasury;

b. improve their cash management to maximize the use of the monthly cash allocation; and

c. henceforth, refrain from such practice.

Understatement of cash balances- P55.542 million

9. The year-end balances of the cash and payable accounts of DENR-OSEC and three regions were understated by P55,520,784.40 and P30,442,571.23, respectively, while receivables were overstated by P25,491,715.00 due to (a) non-restoration of the cash equivalent of the unreleased checks totaling P55,934,286.23 as required by GAFMIS Circular Letter No. 2002-001 dated December 16, 2002; and (b) non-recording/adjustments of reconciling items with a net amount of P413,501.83.

9.1 As of year-end, the Department reported a total cash balance of P849,833,820.71. Review of the related cash accounts disclosed the following:

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a) Non-restoration of the amount of cash equivalent of unreleased checks to cash account- P55,934,286.23

Verification of the Cash-in-Bank – LCCA and Cash-National Treasury (NT) - MDS of DENR-OSEC and two regions revealed that there were unreleased checks totaling P55,934,286.23 in the custody of their respective Cashiers as at year-end which were not restored to the cash accounts, as shown on the next page.

Office Cash-NT,MDSCash in Bank-

LCCATotal

DENR-OSEC P33,638,638.30 P33,638,638.30REGION 7 P12,657,391.91 12,657,391.91CAR 9,638,256.02 9,638,256.02Total P33,638,638.30 P22,295,647.93 P55,934,286.23

This remiss of the concerned Accountants is not in accord with GAFMIS Circular Letter No.2002-001 dated December 16, 2002 which provides that:

o Section 2.3- “At the end of each month, a Schedule of Unreleased Checks shall be prepared by the Cashier for submission to the Accounting Unit. Based on this schedule, a working paper entry shall be prepared to restore the amount of cash equivalent to the total amount of unreleased checks by debiting the accounts, Cash, National Treasury, MDS and crediting the appropriate payable/liability accounts xxx.”

o Section 2.4 - “At the end of the year, the same procedures under item number 2.3 shall be done except that a JEV shall be prepared to record the entry for the restoration of cash equivalent of the unreleased checks and recognition of the appropriate payable/liability accounts.”

b) Unrecorded reconciling items- P413,501.83 (net)

The Bank Reconciliation Statements of the Cash in Bank-LCCA account as of December 31, 2012 showed that the following reconciling items with a net amount of P413,501.83 were not taken up in the books:

Office Nature of Reconciling ItemsAmount

Over/(Under)DENR-OSEC

Transferred book balance of cash of the completed projects under Fund 102, Sector Adjustment Loan (SECAL), to Fund 101 without the corresponding cash in bank

P1,703,547.01

Unrecorded bank balance under Account No. 0712-1035-31 with LBP representing funds received from NEDA for Phases II and III of

(449,566.96)

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Office Nature of Reconciling ItemsAmount

Over/(Under)the ENR Framework Plan Unrecorded deposits of collections for the month of December 2012 from HOPE remittances and Trust accounts

(71,818.23)

NCRNon-recording of (a) refund of cash advances P 1,650.00

(b) bidder’s bonds 7,500.00(c) fees collected 466,609.99

(475,759.99)

Region IX Unrecorded deposits (292,900.00)Net Overstatement P 413,501.83

9.2 The above lapses resulted in the overstatement and understatement of the following accounts:

AccountsAmount

Understatement OverstatementCash in Bank- LCCA P413,501.83Due from Officers and Employees 1,650.00Liability P 7,500.00Government Equity 916,176.95Cash-Collecting Officer 364,718.23

The non-restoration of the amount to the two cash accounts as well as the unrecorded reconciling items understated cash and payable accounts by P55,520,784.40 and P30,442,571.23, respectively, and overstated receivable accounts by P25,491,715.00 as of year-end.

9.3 We recommended that the Accountants of:

a. DENR-OSEC, CAR and Region 7 comply with GAFMIS Circular Letter No. 2002-001 on the restoration of the amount of the unreleased checks to cash account; and

b. DENR-OSEC, NCR and Region 9 effect the necessary adjusting entries to reflect the correct balances of cash accounts.

9.4 The following comments were given by the concerned offices:

a. DENR-OSEC- adjustments were already made under various JEVs in January and February 2013.

b. NCR - the unrecorded collections of P474,109.99 were already recorded in October 2012 and January 2013.

c. Region 9 – the necessary adjustments/corrections will be made.

Collections not deposited to the Bureau of the Treasury – P5.978 million

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10. Collections from performance bonds, refunds of unutilized cash advances and income from specific activities of DENR-OSEC; performance/bidders bonds of DENR-NCR and penalties of DENR-Benguet amounting to P5,978,212.33 were not deposited to the Bureau of the Treasury contrary to Section 6 of RA No. 10155, the General Appropriations Act of FY 2012, and Section 65 of PD No. 1445. Moreover, the collections from HOPE amortizations of DENR-OSEC were remitted one to 48 months from receipt thereof resulting in an unremitted amount aggregating to P1,829,434.82 as of year-end.

10.1 During the year, the DENR-OSEC, NCR and PENRO-Benguet collected the amount of P5,978,212.33 from the following:

Office Particulars Amount

DENR-OSEC

Performance bonds P 460,814.46Refund of unused/excess cash advances of Special Disbursing Officers

123,833.12

Income from workshops, seminars, conventions and sports festival

2,650,914.30

HOPE amortizations 1,829,434.82NCR Performance/bidders bonds 655,175.14CAR-PENRO Benguet Fines/Penalties for violations of forestry laws 258,040.49Total P5,978,212.33

10.2 Verification disclosed that as of December 31, 2012, the above collections were not yet deposited to the Bureau of the Treasury (BTr) as required by the following laws:

a. RA No. 10155, the General Appropriations Act for FY 2012

Section 6 - “Receipts from non-tax sources xxx which have been received as guaranty for the fulfillment of an obligation xxx shall be booked as trust liability of the agency concerned and deposited with the National Treasury in accordance with E.O. No. 330,s. 1996 xxx.”

Section 7 - “Performance bonds and deposits filed or posted by private persons or entities with the agencies of the government shall be deposited with the National Treasury as trust receipts under the name of the agency concerned xxx.”

b. Section 65 of PD No. 1445 - “Unless otherwise specifically provided by law, all income accruing to the agencies by virtue of the provisions of law, orders and regulations shall be deposited in the National Treasury or in any authorized government depository, and shall accrue to the unappropriated surplus of the General Fund of the Government.”

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10.3 Further, it was noted that the accumulation of the unremitted HOPE amortizations was due to the practice of the Accounting Division of DENR-OSEC to temporarily take-up and deposit the collections under account Cash in Bank-LCCA and remit the same after one to 48 months resulting in unremitted amount aggregating to P1,829,434.82 as of year-end as shown on the next page.

Collection MonthAmount Collected

RemittanceNo. of

Month/s Delayed

Date AmountVarious months (CY 2008-2011)

P 2,034,940.27 From February to

October 2012

P 1,026,088.40 12 to 48

CY 2012January 277,891.79 05/22/12 277,891.79 4February 140,981.78 05/22/12 140,981.78 3March 247,087.48 08/30/12 247,087.48 5April 254,711.62 08/30/12 254,711.62 4May 225,197.34 08/24/12 225,197.34 3June 241,014.52 09/03/12 241,014.52 2July 206,867.32 10/18/12 206,867.32 2August 167,582.41 10/18/12 167,582.41 1September 662,668.96 12/13/12 662,668.96 2October 219,793.72 12/13/12 219,793.72 1November 475,821.53 - - 1December 344,761.42 - - -Total P

5,499,320.16 P

3,669,885.34Unremitted P1,829,434.82

10.4 We recommended that the Accountants and Cashiers of DENR-OSEC, NCR and CAR (a) cause the immediate remittance of the said collections to the BTr; and (b) henceforth, ensure compliance with the above laws on the remittance of collections.

10.5 Management of DENR-OSEC informed that they already remitted the amount of P3,738,218.98 to the BTr from January to March 2013. Management further committed that for the prior years’ unremitted amounts, these will be reviewed for subsequent remittance.

Long outstanding fund transfers, doubtful validity and understatement of receivable accounts - P1.043 billion

11. As of December 31, 2012, the unliquidated funds transferred to various NGAs/GOCCs/LGUs/NGOs/POs of DENR-OSEC, PAWB and five regions

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accumulated to P1,044,334,134.62 wherein P276,243,788.24 or 26.56% thereof have been outstanding from 91 days to over two years the purpose of which should have been accomplished due to laxity in monitoring and enforcing liquidations thereof contrary to COA Circular Nos. 94-013 and 2007-001 dated December 31, 1994 and October 25, 2007, respectively. Moreover, the deficiencies in the balances of receivable accounts and errors in recording of transactions of DENR-OSEC, two attached bureaus and five regions amounting to P13,494,193.85 resulted in doubtful validity of the accounts and total understatement thereof by P4,757,000.00 as of year-end.11.1 Review of the accounts Due from NGAs/GOCCs/LGUs and NGOs/POs

disclosed a substantial amount of unliquidated/outstanding balance of P1,044,334,134.62 as of December 31, 2012 from the following offices:

OfficeAccount/Amount

TotalDue from NGAs

Due from GOCCs

Due from LGUs

Due from NGOs/POs

DENR-OSEC P931,132,360.43 P62,624,453.25 P22,974,847.91 P1,016,731,661.59PAWB 3,456,459.99 630,906.69 4,087,366.68Region 3 2,716,428.90 2,716,428.90Region 5 500,000.00 P 357,500.00 857,500.00Region 6 8,701,239.45 8,701,239.45Region 7 1,239,938.00 1,239,938.00Region 12 10,000,000.00 10,000,000.00Total P934,588,820.42 P62,624,453.25 P36,763,360.95 P10,357,500.00 P1,044,334,134.62

11.2 These fund transfers were downloaded by the above DENR Offices to other government national and government owned corporations, local government units and NGOs/POs for the implementation of environment-related projects.

11.3 Further review and analysis revealed that:

a) substantial unliquidated fund transfers – P1,040,246,767.94

Given below is the aging of the four receivable accounts as of year-end.

AgencyBalance as of

12/31/2012Less than 90

days91-365 days Over 1 year Over 2 years

Due from NGAsDENR-OSEC P931,132,360.43 P691,045,866.45 P126,945,763.66 P 97,962,849.87 P 15,177,880.45Due from GOCCs OSEC 62,624,453.25 62,457,113.25 - - 167,340.00Due from LGUs DENR-OSEC 22,974,847.91 10,000,000.00 - 1,497,503.30 11,477,344.61Region 3 2,716,428.90 - - - 2,716,428.90Region 5 500,000.00 500,000.00 - - -Region 6 8,701,239.45 - - - 8,701,239.45

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AgencyBalance as of

12/31/2012Less than 90

days91-365 days Over 1 year Over 2 years

Region 7 1,239,938.00 - - - 1,239,938.00Sub-Total 36,132,454.26 10,500,000.00 - 1,497,503.30 24,134,950.96Due from NGOs/POs Region 5 357,500.00 - - - 357,500.00Region 12 10,000,000.00 - - - 10,000,000.00Sub-Total 10,357,500.00 - - - 10,357,500.00Grand Total P1,040,246,767.94 P764,002,979.70 P126,945,763.66 P99,460,353.17 P49,837,671.41

Percent of Total

100% = 73.44% P276,243,788.24 = 26.56%

Included in the accounts aged over two years are the dormant accounts at DENR-OSEC and Region 7 of P26,822,565.06 and P1,239,938.00, respectively.

For PAWB, the age of the receivables of P4,087,366.68 could not be determined in the absence of a provision as to project end/termination date in the Memoranda of Agreement (MOA) with the project implementers and recipient agencies.

The substantial amount of unliquidated fund transfers in the books of concerned agencies indicates that the agencies have been remiss in monitoring the accounting/liquidations of fund transfers contrary to:

o COA Circular No. 94-013 dated December 13, 1994 - The Implementing Agency is required to submit within ten (10) days after the end of each month or end of the agreed period for the project, to the Source Agency, the Report of Checks Issued and the Report of Disbursements and other supporting documents in the utilization of funds.

o COA Circular No. 2007-001 dated October 25, 2007 - The NGOs/POs, on the other hand, are required to submit the final Fund Utilization Report certified by its Chief Accountant and approved by its President/Chairman and other documents to support the liquidation of funds granted to it by the Government Office (GO) within sixty (60) days after the completion of the project.

Considering the age of the accounts particularly those granted from 91 days to over two years, the purposes of which have been surely attained/completed as of year-end hence, these should have been liquidated. As a result, the balances of the four receivable accounts

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and the corresponding expenses were understated by the amount of expended fund transfers as follows:

b) Deficiencies in the balances of receivable accounts – P13,494,193.85

Further, the following deficiencies/lapses were also noted in the audit of the receivable accounts which cast doubt on the accuracy and reliability of their year-end balances:

Agency Particulars Accounts Affected AmountDENR OSEC

Discrepancy between the book balances and per confirmation with recipient agencies:

a. National Resources Defense Council (NRDC)b. PENRO Maguindanao

Due from NGAs

P 790,827.202,310,007.441,774,826.54

273,860.00 5,149,521.18

LMB Discrepancies between the books and records of the following agencies:

a. PS-DBMb. National Printing Office

Inclusion of dormant account 5,149,011.91PAWB Non-submission of documents for fund transfers way

back in 2007-2011 and for completed projects - Municipalities of Kidapawan, Magpet and Makilala

Due from LGUs337,306.69

Region 6 Non-maintenance of Subsidiary Ledger at PENRO Iloilo Due from LGUs 2,491,206.32Region 12 Unreconciled difference due to lack or insufficiency of

documentsDue from GOCCs 99,000.00

Abnormal/negative balance Due from NGOs/POs 268,147.75Total P13,494,193.85

Section 12 of the Manual of NGAs, Volume II, provides that the SL is the book of final entry containing the details or breakdown of the balance of the controlling account appearing in the GL. The SL shall be kept for each control account in the General Ledger.

c) Errors/misclassification in recording of receivables transactions – P5,715,786.82

The following errors in recording were also observed which resulted in total understatement of the receivable account by P4,757,000.00:

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Account AmountDue from NGAs ₱240,086,493.98

Due from GOCCs 167,340.00

Due from LGUs 25,632,454.26

Due from NGOs/POs 10,357,500.00

Total ₱276,243,788.24

Office Amount

Over /(Under)Nature of

transactionAccounts

As recorded Should beDENR - OSEC P

(384,000.00)Fund transfers to PWU

Other Maintenance and Operating Expenses

Due from NGOs/POs

NCR 165,799.35 Unrecorded deliveries from PS-DBM

No entry Due from NGAs

(165,799.35)Office Supplies Inventory

Region 6 – PENRO Iloilo (4,373,000.00)

Fund transfers to various LGUs

Other Maintenance and Operating Expenses

Due from LGUs

Net Understatement P(4,757,000.00)

Further, the following misclassifications in accounting for receivables were noted:

Office Amount Nature of transaction As recorded Should be

DENR-OSEC

P 682,786.82 Fund transfer to Office of Northern Communities

Due from LGUs Due from NGAs

96,000.00 Fund transfer to PWU Due from NGAs Due from NGOs/POs180,000.00 Fund transfers to Sambisig

Multi-Purpose CooperativeDue from LGUs

Total P 958,786.82

11.4 The above errors/misclassifications of transactions resulted in the overstatement and understatement of the following accounts:

AccountAmount

Understatement OverstatementDue from NGOs/ POs P 660,000.00Other Maintenance and Operating Expenses P4,757,000.00Due from NGAs 420,987.47Office Supplies Inventory 165,799.35Due from LGUs 3,510,213.18

11.5 We recommended that the Accountants of the DENR-OSEC, concerned agencies and regional offices:

a. send demand letters to the concerned implementers for the immediate liquidation/settlement of the funds transferred to them;

b. determine the causes of the discrepancies in the balance of Receivable accounts between the books and those of the implementers and effect the necessary adjustments;

c. make the necessary adjustments in the books to correct the under/overstatements and misclassifications of the Receivable and other accounts affected;

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d. exert effort to document and establish the validity of the dormant accounts;

e. submit the liquidation reports the soonest possible time; and

f. maintain SLs for Receivable accounts.

11.6 We also recommended that the Director of PAWB ensure that in succeeding fund transfers, the MOA include provisions as to the project completion dates and the timelines on the submission of liquidations.

11.7 The following were the comments of the Management:

Office CommentsPAWB PAWB Director issued a Memorandum dated April 26, 2013 to the

Regional Executive Directors of the cities of Davao and Koronadal requesting that the Mayors of Makilala, Kidapawan and Magpet be advised to liquidate their unsettled accountabilities.

Region 5 Letters/reminders have been sent to the concerned POs thru the PENROs/CENROs to submit the liquidation documents.

The amount of P500,000.00 released/transferred to LGU Legazpi City was liquidated in January 2013.

Region 7 Agreed to comply with the audit recommendationsRegion 12 The Chairman of the Presidential Task Force MRBRD has already

submitted a liquidation report to DENR-RBCO at the Central Office

Unreliable balances of the Receivable accounts- P232.124 million

12. The year-end balances of the Receivable accounts totaling P232,124,222.71 of DENR-OSEC, two attached bureaus and four regions were unreliable due to (a) discrepancies of P1,639,226.48 between the book balances and per results of confirmations with four DENR regions and an attached bureau and subsidiary records ; (b) net overstatement of P908,623.01 attributed to errors in recording receivable account transactions; and (c) other lapses in the granting/utilization/liquidation and maintenance of records.

12.1 The following receivable accounts reported a total year-end balance of P232,124,222.71:

Account AmountAccounts Receivable P 22,098,908.18Due from Officers and Employees 18,742,260.17Receivables-Disallowances/ Charges 33,998,955.62Advances to Officers and Employees 39,545,346.39Other Receivables 73,760,692.75

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Account AmountDue from ROs/SBs 43,978,059.60TOTAL P232,124,222.71

12.2 Verification and analysis of these accounts disclosed the following:

a) Discrepancies between the book balances and results of confirmations/ subsidiary ledgers - P1,639,226.48

Confirmation of the audit team of the balances of the funds transferred by DENR-OSEC with the Regional Offices and LMB for the implementation of various projects disclosed a total discrepancy of P980,963.42, as shown on the next page.

Implementing Agency

BalancesRemarksPer Books of

DENR-OSECPer

ConfirmationDiscrepancy

LMB P 495,583.73 P 263,295.31 P 232,288.42The discrepancy represents unrecorded liquidations in the books of DENR-OSEC.

Region 9 1,360,493.88 695,693.88 664,800.00The discrepancy represents the unrecorded fund transfer in the books of Region 9.

Region 13 742,414.00 658,539.00 83,875.00The difference represents unrecorded liquidation in the books of the DENR-OSEC

Total P2,598,491.61 P 1,617,528.19 P 980,963.42

Disparities in the total amount of P658,263.06 were likewise noted between the books and the Schedules/subsidiary records for account Advances to Officers and Employees of these agencies as shown below.

Office BalancePer GL Per Schedule Difference

LMB P2,716,073.29 P2,167,887.22 P548,186.07Region 3 233,410.20 123,333.21 110,076.99Total P2,949,483.49 P2,291,220.43 P658,263.06

The discrepancies between the book balance of receivable accounts of DENR-OSEC and two Regional Offices and LMB as well as the Schedules/subsidiary records for account Advances to Officers and Employees of LMB and Region 3 totaling P1,639,226.48 rendered the receivable accounts totaling P5,547,975.10 unreliable as of year-end.

b) Errors in recording receivable account transactions – P908,623.01

There were errors noted in recording of transactions which resulted in a net overstatement of the receivable account balance by P908,623.01 as shown below.

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Office Nature of TransactionAmount

Accounts Understated Overstated

DENR-OSEC

Closure of the unliquidated balances on travel advances and recording of unrefunded disallowances of employees assigned at the Regional, Line and attached Offices and Bureaus of the Department although there was no actual liquidation/ settlement thereof.

Prior Years’ Adjustments

P 100,300.00

Receivables – Disallowances and Charges

P 100,300.00

Region 13

Unrecorded cash advances for payrolls for contractual/ job order employees.

Advances to Officers and Employees

500,000.00

Cash-NT, MDS

500,000.00

Erroneous recording of cash advance for payment of salary, salary differential and year end personnel benefits.

Advances to Officers and Employees 1,508,923.01

Payroll Fund 1,508,923.01Net Effect on Receivables P908,623.01

c) Other deficiencies/lapses

Other noted deficiencies that also affected the reliability of the balances of eight receivable accounts totaling P33,729,432.20 were as follows:

Office Deficiency Account Affected AmountDENR-OSEC

Inclusion of dormant accounts Due from ROs/SBs P 4,491,840.46

PAWB Expended but unliquidated fund transfers due to non-submission of liquidation documents/ reports

Due from ROs/SBs

Various Expenses

1,903,384.73

LMB Expended but unliquidated cash advances of retired, resigned and transferred employees to other offices and those on Absent without Leave (AWOL)


Various Expenses

394,898.00

Region 6 Non-maintenance of Subsidiary Ledger records for receivables

Accounts Receivable 21,689,528.54Cash-Disbursing Officers

2,836,500.00

Receivable-Disallowances and Charges

592,062.42


252,195.00

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Office Deficiency Account Affected AmountRegion 13 Non-posting of transactions in the Subsidiary

Ledger Cash-Disbursing Officers

1,412,611.49

Inclusion of dormant accounts Receivable-Disallowances and Charges

156,411.56

Total P 33,729,432.20

12.3 The following rules and regulations govern the above lapses:

a. COA Circular No. 97-001 provides the Guidelines on the Proper Disposition/Closure of Dormant Funds and/or Accounts of National Government Agencies.

b. Section 13 of the COA Circular 2009-006 dated September 15, 2009, the Revised Rules on Settlement of Accounts which provides that a disallowance or charge shall be settled by payment of the amount disallowed or by such other applicable modes of extinguishment of obligation as provided by law.

c. Section 4.6 of COA Circular No. 94-013 dated December 1991 -Implementing Agency (IA) shall submit to the Source Agency (SA) the Report of Checks Issued (RCI) and the Report of Disbursement (RD) within ten days after the end of each month or at the end of the agreed period for the project, to report the utilization of the cash advance/fund transfer.

d. PD No. 1445 -

Section 89- A cash advance shall be reported on and liquidated as soon as the purpose for which it was given has been served.

Section 12 of New Government Accounting System (NGAS) Volume II- provides for the Subsidiary Ledger (SL) as the book of final entry containing the details or breakdown of the balance of the controlling account appearing in the General Ledger (GL).


a. DENR-OSEC, LMB and Regions 9 and 13 reconcile the balances of the receivable accounts with the concerned implementing agencies to establish the correct amount of receivables;

b. Region 3 and LMB exert effort to document the discrepancy between the General Ledger and the Schedule of Advances and support the entries in the General Ledger through the maintenance of Subsidiary Ledgers;

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c. DENR-OSEC and Region 13 make the necessary adjustments in the books to correct the over and understatements as well as the misclassifications of the affected receivable and other accounts; and

d. DENR-OSEC, PAWB, LMB, Regions 6 and 13 strictly comply with the regulations on the proper treatment of dormant accounts, settlement of receivables, and maintenance of subsidiary ledgers.

12.5 The Management of DENR-OSEC committed to make the necessary adjustments and reclassification of accounts.

Improper closure of unsettled disallowances of employees – P8.966 million

13. The dropping of disallowances/charges totaling P8,966,864.84 from the books of DENR-Region 2 by debiting Prior Years’ Adjustments (PYA) account without actual settlement thereof was contrary to Section 13 of COA Circular 2009-006 dated September 15, 2009 and understated the balance of accounts Receivable-Disallowances/Charges and the total of PYA as of year-end both by that amount.

13.1 Review of records of DENR - Region 2 disclosed that JEV No. 12-246-B was drawn in December 2012 by the Accountant to drop the dis-allowances/charges amounting to P8,966,864.84 by debiting PYA account and crediting account Receivables-Disallowances and Charges.

13.2 This action of the Accountant was improper since it lacked basis when it purged from the records the accountabilities of the concerned persons liable without the actual settlement of the disallowances. This is contrary to Section 13 of COA Circular 2009-006 dated September 15, 2009, the Revised Rules on Settlement of Accounts which provides that “A disallowance or charge shall be settled by payment of the amount disallowed or by such other applicable modes of extinguishment of obligation as provided by law.”

13.3 This also understated the balance of the account Receivables-Disallowances and Charges and the total PYA as of year-end both by P8,966,864.84.

13.4 We recommended that the Accountant of DENR Region 2 (a) draw a JEV to restore the dropped amount of disallowances/charges in the books of accounts; and (b) henceforth, ensure that all JEVs are supported with complete and adequate documentation.

13.5 The Management of Region 2 assured that reversion of the disallowances/charges will be made.

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Unreliable Inventory balances - P325,372,539.60

14. The accuracy and existence of the Inventory account balances of P325,372,539.60 as of year-end were unreliable due to (a) non-conduct of physical count of inventories totaling P17,455,293.23 of six PENROs; (b) errors in recording of deliveries/transfers/issuances of P31,531,572.44 of DENR-OSEC, two attached bureaus, four regions and six PENROs; (c) unreconciled difference of P5,941,949.94 between the recorded inventories and the Report of Physical Count of Inventory (RPCI) of DENR-OSEC, LMB, two regions and one PENRO; and (d) non-maintenance of Supplies Ledger Cards and Stock Cards (SC) for inventories of P25,571,636.43 of Region 7 and five PENROs.

14.1 As of year-end, the total of the inventory accounts aggregated to P325,372,539.60.

14.2 Audit of the Inventory accounts disclosed the following errors in the recording of related transactions and lapses in the management thereof that rendered the year-end account balance doubtful:

a) Absence of physical inventory taking of inventory accounts - P17,455,293.23

As of year-end, no physical count was yet conducted for the following Inventory accounts totaling P17,455,293.23:

DENR Offices

Inventory Accounts

TotalOffice Supplies

Agricultural Supplies

Construction Materials

Other Agricultural, Fishery and

Forestry Products

Region 2PENRO Isabela

P1,122,021.00 P1,122,021.00

Region 3PENRO Zambales

1,249,678.48 1,249,678.48

Region 6PENRO Antique

1,138,749.30 1,138,749.30

PENRO Negros

P2,616,545.87 2,616,545.87

PENRO Aklan

106,261.25 P291,273.96 10,069,053.81 10,466,589.02

Region 7PENRO Bohol

474,111.41 P387,598.15 861,709.56

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DENR Offices

Inventory Accounts

TotalOffice Supplies

Agricultural Supplies

Construction Materials

Other Agricultural, Fishery and

Forestry Products

Total P4,090,821.44 P387,598.15 P291,273.96 P12, 685, 599.68

P17,455,293.23

Management of Regions 3 and 6 attributed the non-conduct of the required physical count to the lack of personnel to undertake such activity.

Section 65 of the Manual on NGAS, Volume II requires however, that the Report on the Physical Count of Inventories (RCPI) shall be used to report the physical count of supplies by type of inventory as of a given date. This shall be prepared every six months in three copies and shall be certified correct by the Inventory Committee and approved by the Head of the Agency.

b) Errors and omissions in recording transactions – P31,531,572.44

Verification of transaction documents disclosed various errors and omissions in recording of deliveries, transfer and issuances of supplies and confiscated items during the year which resulted in a net overstatement of P31,531,572.44 of the Inventory accounts as shown below.

DENR Offices Amount Errors Accounts AffectedAmount

Overstated Understated

DENR OSEC

P214,044.11

Charged directly to Office Supplies Expenses and other accounts

Prior Years’ AdjustmentsOther Supplies Inventory Office Supplies Expenses

P214,044.11

Office Supplies Inventory P214,044.11

442,384.26Unrecorded deliveries of PS-DBM Due from NGAs 442,384.26

Office Supplies Inventory 442,384.26

NCR 142,697.57Error in recording deliveries to Office Supplies Expenses instead of Office Supplies Inventory

Office Supplies Expenses 142,697.57Office Supplies Inventory

142,697.57

PENRO Isabela

1,122,021.00

Non-preparation of the Report of Supplies and Materials Issued (RSMI) for the supplies issued during the year

Office Supplies Inventory4,669,457.59Region 3

PENRO Zambales

1,249,678.48

LMB 1,159,008.81Office Supplies Expenses 4,669,457.59

Region 6 1,138,749.30

NCR 2,306,880.00Unrecorded transfer of confiscated lumber to DENR-OSEC for the manufacture of chairs

Confiscated Goods Inventory 2,893,766.03 14,967,314.74CAR 554,829.29Unrecorded confiscated asset while donation thereof was recorded resulting in abnormal balance

PENRO Davao Oriental

3,259,364.00Unrecorded Confiscated Forest Products

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DENR Offices Amount Errors Accounts AffectedAmount


Region 2

PENRO Nueva Vizcaya

886,818.00

Region 1 2,949,781.19

Government Equity 586,886.06 17,274,244.74

Region 11 PENRO CompostelaValley

7,316,572.26

PENRO Davao del Sur

586,886.03Non-existing confiscated forest products which remained unadjusted for more than 5 years

PAWB

0.00No appraisal for the 1,842 pieces of elephant tusks weighing more or less 3,893.98 that remained unrecorded in the books

249,500.00Receipt of entrance tickets recorded as outright expense instead of coursing thru the inventory account

Accountable Forms Inventory

249,500.00

Accountable Forms Expenses 249,500.00

Further verification revealed that at the DENR-OSEC, the deliveries were recorded as outright expenses since it has been the practice that procurement of supplies for Fund 102 are directly delivered to the Foreign Assisted Projects Office (FASPO) without informing the General Services Division. As such, the receipt of the deliveries and the issuances were not recorded.

It was also noted that confiscations and subsequent transfer of forest products in Region 13 totaling P1,015,336.00 were not recorded.

The effects on inventory accounts as well as other affected accounts are as follows:

Inventory Accounts Affected Overstatement UnderstatementOther Supplies Inventory P 214,044.11Other Agricultural, Fishing, Fishery and Agricultural Products Inventory

39,770,295.55

Office Supplies Inventory 3,870,331.65Confiscated Goods Inventory P12,073,598.87Accountable Forms Inventory 249,500.00Total P43,854,671.31 P12,323,098.87Net Effect on Inventory P31,531,572.44

Other Accounts AffectedPrior Years’ Adjustments P214,044.11Due from NGAs 442,384.26Accountable Forms Expenses 249,500.00Office Supplies Expenses P 4,312,715.91CIP – Reforestation Upland 39,770,295.55Government Equity 16,687,358.71

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The above errors/deficiencies violated the following regulations:

o Section 43 of the Manual on the NGAS, Volume I - Purchases of supplies and materials for stock, regardless of whether or not they are consumed within the accounting period, shall be recorded as Inventory account.

o COA Circular No. 2003-001 dated June 17, 2003 - Charges to Capital Outlay for reforestation projects shall be recorded as CIP-Reforestation Upland/Marshland/Swampland.

o Section 62 of the Manual on NGAS, Volume II - The Supply Officer shall summarize all supplies and materials issued during the month in the RSMI for submission to the Accounting Units as basis in the preparation of the Journal Entry Voucher (JEV) to record in the books of accounts the inventory issuances monthly.

c) Unreconciled difference between the General Ledger (GL) and Report of Physical Count of Inventory (RPCI) for inventory accounts - P5,941,949.94

Comparison of the balances of inventory accounts per GL and the RPCI as of December 31, 2012 showed a total difference of P5,941,949.94, as computed below:

Office Inventory Accounts Amount

Per Books Per RPCI Difference

DENR-OSECOffice Supplies P 6,253,975.34 P 3,582,583.67 P 2,671,391.67Other Supplies 483,950.54 176,901.16 307,049.38Confiscated Goods 713,952.39 0.00 713,952.39Spare Parts 518,570.28 428,129.68 90,440.60

NCR Office SuppliesOffice Supplies

744,907.73 48,856.98 696,050.75Region III 1,249,678.48 0.00 1,249,678.48Region VPENRO Cam Norte

Confiscated Goods 1,091,452.02 2,732,843.35 (1,641,391.33)

LMB Office Supplies 2,177,730.80 322,952.80 1,854,778.00Total P13,234,217.58 P 7,292,267.64 P

5,941,949.94

For DENR-OSEC, of the P2,671,391.67 difference between the two records, the amount of P2,497,546.58 pertains to the result of previous year’s conversion from the old to the new Government Accounting System. For the remaining unreconciled balance, the causes thereof could not yet be determined due to the absence of a regular reconciliation of records of the Accounting and the General Services Divisions.

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The unreconciled disparity in the balances of the above inventory accounts is not only contrary to Section 491.i of the GAAM, Volume I which provides that discrepancies in the inventory taking should be investigated and cleared immediately but also casts doubt on the reliability of the reported balances of the said inventory accounts as of year-end.

d) Non-maintenance of accounting and property records - P25,571,636.43

Subsidiary Ledger Cards (SLC) and SC for the following inventory items were not maintained by four DENR Regions to support the GL balances in the total amount of P25,571,636.43:

DENR Offices

Inventory AccountsTOTALOffice

SuppliesAgricultural

SuppliesConfiscated

GoodsRegion 3

PENRO Zambales

P1,249,678.48 P1,249,678.48

Region 5PENRO CatanduanesPENRO Cam. Norte

P6,653,392.24

1,091,452.02

6,653,392.24

1,091,452.02Region 6 PENRO Iloilo PENRO Antique

1,138,749.30

P334,234.50 14,242,420.33 14,576,654.83

1,138,749.30

Region 7 474,111.41 387,598.15 861,709.56Total P2,862,539.19 P721,832.65 P21,987,264.59 P25,571,636.43

Management of the concerned regions informed that the non-maintenance of Accounting and property records were due to the following reasons:

Office ReasonsRegion 3 Lack of manpower and time constraintRegion 5 Lack of manpowerRegion 6 Prior year’s recommendation not complied by managementRegion 7 Lack of manpower

The non-maintenance of the prescribed records for inventory accounts rendered no basis to check on the accuracy of the GL balances and not in compliance with the following regulations of the Manual on the NGAS, Volume II:

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o Section 12 – The Accounting Unit shall maintain SLC for each type of supplies where all receipts and issuances shall be recorded promptly.

o Section 41 – The SC shall be used to record all receipts and issuances of supplies. It shall be maintained by the Supply and Property Unit for each item in stock.

14.3 We recommended that the:

a. Property Officers of Regions 2, 3, 6, and 7 conduct inventory taking of all inventories and prepare report thereon copy furnished the Accountants;

b. concerned Accountants (i) take up the unrecorded deliveries, confiscated items and transfers/issuances of inventories; (ii) reclassify the cost of the planted seedlings from Other Agricultural, Fishing, Fishery and Agricultural Products Inventory to CIP-Reforestation –Upland; and (iii) maintain SLCs for inventory accounts;

c. Accountants and Property Officers of DENR-OSEC, LMB and three Regions reconcile the balances of inventory accounts between the GL and RPCI; and

d. Property Officers of -

PAWB initiate appraisal of the confiscated elephant tusks and copy furnished the Accountant of the appraisal report for recording; and

DENR Regions 3, 5, 6, and 7 maintain SC.

14.4 Management of –

a. DENR-OSEC informed that:

JEVs were already drawn to take up the unrecorded deliveries; and

The difference between the books and the RPCI were due to some damaged/expired items as well as obsolete forms of DVs which were already reported for disposal to the Property Section of the GSD but the Accounting Division was not furnished copies thereof for recording in the books. The GSD and the Accounting Division are continuously reconciling their records.

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b. The Accountant of DENR- Region II is still waiting for the submission of the RSMIs from the Property Custodians of the PENRO and the six CENROS as his basis in recording the issuances.

Unreliable balances of the Property, Plant and Equipment accounts- P10.743 billion

15. The balances of Property, Plant and Equipment (PPE) accounts of P10,743,441,282.06 were unreliable due to (a) non-recording of acquisitions at DENR-OSEC and three regions of P17,732,002.28 (b) non-dropping from the books of DENR-OSEC the transferred/donated property of P20,278,228.00; (c) recording and transfer of a confiscated vehicle with a value of P776,000.00 although with only Conditional Order of Finality of DENR-OSEC; (d) errors in recording of acquisitions amounting to P14,340,726.71 of DENR-OSEC; (e) non-reclassification of unserviceable and obsolete property of P78,212,488.08 to Other Assets account of DENR-OSEC, three attached bureaus and eight regions; (f) inadequate provision of depreciation for PPE accounts totaling P107,764,965.38 of DENR-OSEC and two regions; (g) non/incomplete conduct of physical count of property worth P2,949,466,908.32 of DENR-OSEC, two attached bureaus and seven regions; (h) unreconciled balances of P26,183,869.24 of PPE accounts between General/Subsidiary Ledgers and Inventory Reports of DENR-OSEC, LMB and Region 5; and (i) lack of adequate documents and records for property accounts of P586,302,209.71 of five regions.

15.1 As of year-end, the consolidated balances of Property, Plant and Equipment (PPE) accounts amounted to P10,743,441,282.06.

15.2 Audit of the said accounts disclosed various lapses in Management’s monitoring thereof as discussed below.

a) Unrecorded acquisitions - P17,732,002.28

Records showed that in CY 2012, the DENR-OSEC and three Regions acquired thru procurement and confiscation various property aggregating to P16,543,982.28, as shown below.

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Office PPE Category AmountDENR-OSEC Motor Vehicles P 9,356,151.71

Confiscated Motor Vehicles 767,000.00IT Equipment 6,121,776.78Furniture and Fixtures 179,053.79

Region 5 Land 120,000.00Total P16,543,982.28

These pieces of property were however, not booked-up since recording thereof was overlooked and due to the early cut-off date in the closing of the books of accounts.

Moreover, there were also property of DENR-Regions 2 and 7 which were not yet recorded in the books due to lack of supporting documents, as follows:

Office PPE Account Amount Lacking Documents

Region 2 Land P244,020.00Titles not yet transferred to DENR due to incomplete documentations and lack of funds for the titling.

Region 7 Motor Vehicles 944,000.00 No Deed of DonationTotal P1,188,020.00

b) Transferred/donated items not dropped from the books - P20,278,228.00

Various PPE of the DENR-OSEC totaling P20,278,228.00 from Funds 101 and 102 which were already transferred or donated to the various Regional Offices of the Department and to Local Government Units (LGUs) were not yet dropped from the books of accounts and in the Inventory Report as of year-end due to the failure of the General Services Division to submit to the Accounting Division the documents supporting such transfers, as follows:

OfficeFund

PPE Account Amount RecipientsDENR-OSEC Fund101 Motor Vehicles P2,863,500.00 Regional Offices

Confiscated Motor Vehicles 2,126,000.00IT Equipment 124,072.50

Fund102 IT Equipment 7,760,455.50Watercrafts 6,931,200.00 LGUs

FMB Motor Vehicle 473,000.00Total P20,278,228.00

Also during the year, the DENR-OSEC was issued by the court the Certificates of Finality of Order for four confiscated vehicles. Since the ownership of these vehicles was already transferred to the government, the same were donated to TESDA, LGUs and one DENR -Regional Office but acquisitions and transfers of the subject vehicles were not yet recorded in the books of accounts as of year-end. The details are shown below:

Item Plate No. Amount Recipients Isuzu Elf BCD 197 undetermined Donated to TESDA per Deed of Donation

dated 9/9/11. Fuzo Truck RJK 820 P384,000.00 Donated to LGU Dupax Del Norte per Deed of

Donation dated 10/12/12Passenger Jeep BVL 905 158,000.00 Donated to TESDA

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Item Plate No. Amount Recipients Isuzu Elf WDZ 690 233,000.00 Transferred Region III with IRP dated 9/13/12

and ARE dated 9/12/12 Total P775,000.00

c) Improper recording and transfer of confiscated vehicle with Conditional Order of Finality – P776,000.00

In DENR-OSEC, the Forward Container Truck with plate No. PWW 632 valued at P776,000.00 which was a subject of a Conditional Order of Finality was already included in the Inventory Report and recorded in the books of accounts. However, such recording is not yet appropriate since ownership is still not absolute. The said vehicle was subsequently transferred to DENR Region 3 in September 2012. The said transfer was not recorded by DENR-OSEC.

d) Errors in recording of acquisitions – P14,130,179.71

At DENR-OSEC, the transfer of a Toyota Corolla with plate no. TAP-879 valued at P210,547.00 from Fund 101 to FMB was recorded twice on July 25, 2012 and July 31, 2012.

Moreover, the following errors were noted in the recording of acquired property:

ParticularsAccounts

Amount As Recorded ProperAcquisition of various PPE P 491,069.92 IT Equipment Reforestation UplandAcquisition of technical/scientific equipment and other machineries

286,671.00IT Equipment and Software

Technical and Scientific Equipment

159,060.00Other Machineries and Equipment

Construction of multi-purpose building and covered court

5,029,088.04Office Building Other Structures

Major repairs of office 3,554,988.12Repairs and Maintenance- Office Buildings

Office Buildings

Total P9,520,887.08

At DENR-OSEC, the PPE account balances included small tangible items with estimated useful life of more than one year totaling P4,609,292.63, as follows:

Account AmountOffice Equipment P 71,722.25

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Account AmountFurniture and Fixtures 2,582,160.14IT Equipment And Software 284,685.98Library Books 402,349.16Other PPE 1,268,375.10 Total P 4,609,292.63

COA Circular 2005-02 dated April 14, 2005 provides however that small tangible items with estimated useful life of more than one year shall be recorded as inventories upon acquisition and expense upon issuance.

The above observations/lapses are not in consonance with Section 112 of PD No. 1445 which provides that each government agency shall record its financial transactions and operations conformably with generally accepted accounting principles and in accordance with pertinent laws and regulations.

e) Unserviceable and obsolete PPE not yet reclassified - P78,212,488.08

As of year-end, the unserviceable/obsolete property aggregating to P78,212,488.08 of DENR-OSEC, three attached bureaus and eight Regions are still recorded under PPE accounts, as shown below:

Office AmountDENR-OSEC P58,167,710.32Region 1 528,416.59Region 3 569,236.51Region 6 173,402.50Region 7 51,014.62Region 10 865,244.84Region 11 703,000.00Region 13 804,388.00CAR 227,014.95PAWB 4,274,416.82FMB 1,909,702.77

LMB8,665,263.071,273,677.09

Total P78,212,488.08

Section 143 of the Manual on NGAS, Volume III requires that the value of obsolete and unserviceable assets awaiting final disposition as well as those assets still serviceable but no longer used should be reclassified to “Other Assets”.

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f) Non/Inadequate provision for depreciation – P107,764,965.38

Sections 67, Volume I of the Manual on New Government Accounting System (NGAS) reads:

“The cost of property, plant and equipment are allocated to the periods benefited through the provision of accumulated depreciation. Depreciation is the systematic and gradual allocation of the depreciable amount of asset over its useful life.”

As shown in the Property Schedule in the e-NGAS of DENR-OSEC, PPE costing P75,714,003.08 were not provided with depreciation from CYs 1982 to 2012. Per computation of the audit team, the amount of depreciation that should have been provided for PPE for the said period totaled P64,342,070.59 broken down as follows:

Accounts Acquisition CostAmount of

DepreciationOffice Equipment P11,465,593.99 P10,051,602.89Furniture and Fixtures 11,415,215.73 9,852,981.03IT Equipment and Software 25,281,197.45 19,925,538.22Library Books 714,551.00 643,095.90Communication Equipment 1,566,557.50 1,150,239.83Technical and Scientific Equipment 21,148,809.21 19,018,965.79Other PPE 4,122,078.20 3,699,646.93Total P75,714,003.08 P64,342,070.59

On the other hand, although DENR-OSEC and two Regions provided depreciation for some of their property from CYs 1989 to 2012, the amount was however, deficient by P43,422,894.79, as computed below:

FundAccumulated Depreciation/Depreciation Expenses

As Provided Correct Amount Deficiency

DENR-OSEC P144,835,233.96 P187,122,424.87 P42,287,190.91Region 3 3,513,165.87 4,623,821.40 1,110,655.53 Region 5 0.00 25,048.35 25,048.35 Total P148,348,399.83 P191,771,294.62 P43,422,894.79

The above lapses are contrary to Section 4(o), Chapter 1 of the Manual on NGAS, Volume I as amended by COA Circular No. 2004-003 dated October 4, 2004, which states that depreciation should start on the following month after purchase of the property, plant and equipment irrespective of the date within the month.

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In summary, the following were the effects of the above observations/lapses on PPE accounts:

Deficiencies Accounts AffectedAmount

Understated Overstated

a) Unrecorded acquisitions of PPE

Motor Vehicles

P17,732,002.28IT EquipmentFurniture and FixturesLandGovernment Equity

b) Unrecorded transfers/donations of PPE to Regional Offices/LGUs

Motor Vehicles

P20,278,228.0

0 IT EquipmentWatercraftsGovernment Equity

c) Transfer of vehicle with Conditional Order of Finality

Motor Vehicles

776,000.00Government Equity

d) Errors in recording of PPE transactions - ₱14,130,179.71

Motor Vehicles210,547.00

Government EquityOffice Buildings 1,474,099.92IT Equipment and Software 936,800.92 Reforestation-Upland 491,069.92Technical and Scientific Equipt.

286,671.00

Other Machinery & Equipt. 159,060.00Other Structures 5,029,088.04Repairs and Maintenance – Office Building

3,554,988.12

e) Small value items taken up as PPE

Office Equipment

4,609,292.63Furniture and FixturesIT Equipment and SoftwareLibrary BooksOther PPE

Various Inventory 4,609,292.63

f) Unserviceable and obsolete property not yet reclassified to Other Assets

Various PPE 78,212,488.08

Other Assets 78,212,488.08

g) Non-provision of/deficiency in depreciation

Depreciation Expenses 107,764,965.38

Accumulated Depreciation

15.3 The audit also disclosed the following lapses that rendered the account balance unreliable:

g) Non/Incomplete conduct of physical count/ submission of inventory report - P2,949,466,908.32

During the year, it showed that the DENR-OSEC, two attached agencies and seven Regions had (i) not conducted inventory of its

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property accounts; (ii) undertaken partial count; and (iii) not rendered inventory report on the results of physical count the details of which together with the reason/s thereof are given below.

Office Amount ReasonsWith Partial Inventory CountDENR-OSEC P1,947,292,090.72 Lack of personnel

LMB 67,031,700.42

Only one employee was assigned to conduct the count.Concerned employees are not available to present their accountabilities during inventory taking.

Sub-Total 2,014,323,791.14With no Inventory reportRegion 2 27, 510, 860. 40 Lack of personnel Region 6 163,729,965.12 Physical Inventory still ongoing

Region 10 8,865,953.55Preparation of report overlooked by the Property Section

Sub-Total 200,106,779.07

With no Inventory CountRegion 3 282,955,730.48

Lack of personnelRegion 12 142,891,081.68Region 13 51,405,725.48NCR 57,228,960.60 Due to time constraint since the office

transferred from Roxas Blvd. to East Ave. PAWB 200,554,839.87 Lack of personnel. The Property Section is

also the lead unit of the Disposal Committee.The transfer of offices was due to the on-going construction of the office building.

Sub-Total 735,036,338.11 Grand Total P2,949,466,908.32

The following regulations require however, that:

o Section 490 of the GAAM, Volume I - Inventory taking is an indispensable procedure for checking the integrity of property custodianship.”

o Section 65 of the Manual on the NGAS, Volume II - The Report on the Physical Count of Property, Plant and Equipment shall be used to report the physical count of property, plant and equipment by type as of a given date. It shows the balance of property and equipment per card and per count and shortage/overage, if any.

The non-conduct of physical count and non-rendition of the report thereon rendered the existence and accuracy of the balances of the PPE accounts totaling P2,949,466,908.32 unreliable as of year-end.

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h) Unreconciled Inventory Report (IR) and General Ledgers (GLs) - P26,183,869.24

Comparison of the Inventory Report with the GLs of the PPE as of year-end of DENR-OSEC, FMB and Region 5 showed a disparity of P26,183,869.24 arrived at as follows:

Office Per IR Per GL Per SL DifferenceDENR-OSEC* P 2,684,700.00 P1,414,285.72 P 1,270,414.28 FMB 78,397,576.93 P 77,555,038.75 842,538.18Region 5 80,579,371.96 104,650,288.74 24,070,916.78Total P161,661,648.89 P182,205,327.49 P 1,414,285.72 P26,183,869.24

*only the inventory report for Motor Vehicles was completed The discrepancy between the accounting records and the physical

inventory report was the result of the non-conduct of regular reconciliation between the Accounting and the General Services Divisions as required under Section 491(i) of the GAAM, Volume I which provides that in the inventory taking, all discrepancies between physical and book inventories must be investigated and cleared immediately.

i) Lacking/inadequate documentation and records to support PPE balances - P586,302,209.71

PPE worth P586,302,209.71 were not supported with documents and records as shown below.

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Office Lacking Documents Amount of PPEWith Incomplete DocumentationRegion 10 Certificate of Land Title P 958,400.00With lacking recordsCAR Property Cards (PC) and PPE Ledger Cards (PPELC) 18,359,622.45Region 2 PC 275,510,860.40Region 3 PC and PPELC/Schedule of PPE 282,955,730.48Region 6 PC/PPELC 8,517,596.38Sub-Total P585,343,809.71Grand Total P586,302,209.71

The absence of complete PC and PPELC is not in accord with Section 43(c) of the NGAS Manual, Volume I which states that the Accounting Unit shall maintain perpetual inventory records such as Supplies Ledger Cards for each inventory stock, Property, Plant and Equipment Ledger Cards for each category of plant, property and equipment including work and other animals, livestock, etc. The subsidiary ledger cards shall contain the details of the General Ledger accounts.

15.4 We recommended that the DENR-OSEC, concerned attached agencies, and regional offices:

a. The Accountants (i) take up the unrecorded acquisitions and transferred/donated items; (ii) make the necessary adjustments on the improper recording of acquired and transferred vehicles and items; (iii) reclassify obsolete/unserviceable PPE to Other Assets account and small value items to their appropriate inventory accounts; and (iv) provide the correct depreciation for assets;

b. The Accountant and the Property Officer (i) reconcile their records on PPE accounts; and (ii) gather/obtain and maintain appropriate PPE records and documents; and

c. Head of Agency/Region create an inventory team, even on adhoc basis, to conduct inventory taking of PPE accounts and render report thereon.

15.5 The management of the following offices gave these comments:

Office CommentDENR-OSECDENR-OSEC

The error in the recording of the vehicle transferred to FMB was already adjusted on January 31, 2013.

The reclassification of the unserviceable and obsolete property to Other Assets, small value items and other adjustments for PPE accounts will be made in CY 2013.

The appropriate depreciation will be provided for PPE accounts.

Region 3 Management committed to comply with the recommendations. Region 5 A JEV was drawn on March 31, 2013 to correct the recording of PPE accounts.Region 12 The General Services Section has started conducting inventory and will

coordinate with the Accounting Section to reconcile the PPE accounts. Region 13 The Property Section is still preparing the Inspection and Inventory Report for

unserviceable property before these are reclassified.CAR Committed to conduct another physical inventory taking and the result will be

their basis in recording/adjusting their PPE accounts.

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Inaccurate balance of Construction In Progress – Reforestation – Upland account - P2.343 billion

16. The balance of the account Construction in Progress (CIP) – Reforestation-Upland as of December 31, 2012 of P2,343,757,416.44 was overstated by a net amount of P407,584,075.78 due to (a) unrecorded cost of seedlings for NGP totaling P1,262,064.00 of DENR-Region 2; (b) non-reclassification of completed reforestation projects amounting to P453,664,708.66 from CIP–Reforestation-Upland account to Reforestation-Upland account of five regions; (c) erroneous recording of advances to contractors to the account totaling P12,226,211.96 of DENR-Region 5; and (d) Upland Development Project (UDP) related disbursements totaling P57,044,780.84 were directly recorded/booked-up under account Reforestation-Upland instead of under account CIP-Reforestation-Upland by DENR-Region 11. Moreover, disbursements totaling P5,071,640.13 were recorded under account CIP- Reforestation Upland by DENR-Region 5 in the absence of documentation which casts doubt on the validity of the recorded transactions and not in consonance with the Section 4.6 of PD No. 1445. Further, the subsidiary ledgers (SLs) for account CIP–Reforestation–Upland for UDP of DENR-CAR included adjustments totaling P5,396,772.53 which represent costs of completed projects although there were no previous recordings/entries of costs incurred for the projects while these were still in progress which resulted in negative balances in the SL.

16.1 Verification of the Construction in Progress – Reforestation Upland account of DENR CAR and Regions 2, 5, 11, and 13 disclosed the following deficiencies:

a) Unrecorded fruit/forest trees produced and planted for the NGP project - P1,262,064.00

Seedlings of various fruit/forest trees produced and planted for the NGP project totaling to 105,172 pieces at P12.00 per piece or a total amount of P1,262,064.00 of DENR – Region 2 were not recorded in the books under Fund 101 because these were acquired through the initiative and voluntary efforts of the DENR personnel hence, no costs were incurred thereon.

However, as part of the input of the project, general accounting standards require that these should be measured based on the fair market values of the produced seedlings used in the project and must be included as part of the cost thereof.

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This understated the balances of accounts CIP – Reforestation Upland and Government Equity by that amount as of December 31, 2012.

b) Completed reforestation projects still recorded in the books – P453,664,708.66

The following reforestation projects costing P453,664,708.66 of DENR – CAR, Regions 2, 5, 11, and 13 were already completed as of year-end.

These finished projects however, are still recorded in the books under account CIP - Reforestation-Upland as of December 31, 2012 instead of transferring the amounts to account Reforestation–Upland 2 and subsequently transferring to the Registry of Reforestation Projects as required by COA Circular No. 2002-002 dated June 18, 2002.

o Section 138 - CIP-Reforestation Projects – Debit this account for cost incurred while the reforestation projects are still in progress and credit this account for transfer to Reforestation Projects account upon completion or discontinued reforestation projects.

o Sec. 140 - Reforestation Projects – Debit this account for completed/ turned over reforestation projects or discontinued reforestation projects and credit this account for transfer of completed/turned-over reforestation projects to the Registry of Reforestation Projects at the end of the accounting period.

The non-transfer of the costs of completed/turned-over reforestation projects from account CIP – Reforestation-Upland to account Reforestation – Upland and eventually to the Registry of Reforestation Projects resulted in the overstatement of accounts CIP – Reforestation-Upland and the Government Equity of P453,664,708.66 as of year-end.

c) Disbursements erroneously charged to CIP - Reforestation Upland account – P12,226,211.96

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Agency AmountRegion 2 P 1,793,053.57 Region 5 238,984,189.98 Region 11 86,403,111.40 Region 13 31,125,939.49 CAR 95,358,414.22

TotalP453,664,708.6

6

In DENR - Region 5, the 15 percent advance payment to contractors of P12,226,211.96 was recorded under account CIP – Reforestation - Upland instead of Advances to Contractors account. As of year-end, the advances were not yet recouped.

COA Circular No. 2002-002 prescribes that account Advances to Contractors is debited upon payment of authorized advances to contractors.

This erroneous recording of advance payment overstated the balance of CIP – Reforestation - Upland account and understated the Advances to Contractors account both by P12,226,211.96 as of year-end.

d) UDP related disbursements directly recorded as Reforestation – Upland - P57,044,780.84

At DENR - Region 11, payments for salaries, seedling production and other related expenses amounting to P57,044,780.84 for UDP were directly recorded/booked-up under account Reforestation - Upland instead of recording them under account CIP- Reforestation - Upland pending completion of the project pursuant to Section 138 of COA Circular No. 2002-002.

16.2 The non-recording of the above project expenses understated the balance of CIP - Reforestation - Upland account and overstated the account Reforestation-Upland both by P57,044,780.84 as of December 31, 2012.

16.3 In summary, the above errors resulted in the following:

Deficiency Accounts AffectedAmount


Unrecorded seedlingsCIP-Reforestation-Upland P1,262,064.00Government Equity

Completed reforestation projects still in the books

CIP-Reforestation-Upland P453,664,708.66Reforestation-Upland 453,664,708.66

Disbursements erroneously charged to CIP-Reforestation Upland

CIP-Reforestation-Upland 12,226,211.96Advances to Contractors 12,226,211.96

UDP-related disbursements recorded under Reforestation-Upland instead of CIP-Reforestation-Upland

Reforestation-Upland 57,044,780.84

CIP-Reforestation-Upland 57,044,780.84

and overstated CIP – Reforestation – Upland by a net amount of P407,584,075.78.

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e) Other deficiencies

i. Disbursements recorded under account CIP- Reforestation Upland without documentation - P5,071,640.13

During the year, the disbursements of P5,071,640.13 of DENR Region 5 were recorded under account CIP – Reforestation- Upland. The said disbursements were however, not supported with accomplishment reports and bills from the contractors to substantiate the transactions which was contrary to Section 4.6 of PD No. 1445 which requires that “Claims against government funds shall be supported with complete documentation.”

The lack of documentation for the said transactions casts doubt on the validity of the recorded disbursements.

ii. Negative balances in the SLs for UDP – P5,396,772.53

At DENR-CAR, the subsidiary ledgers/schedules (SLs) for account CIP – Reforestation – Upland for UDP included negative balances totaling P5,396,772.53 which represent adjustments for 18 completed projects. However, the said SLs for UDP do not show that there were previous recordings/entries of costs incurred for the projects while these were still in progress. This error reduced the balance of UDP per SL and caused discrepancy in the balances between the SLs and GL for account CIP – Reforestation – Upland.


a. Region 2 determine the cost of the planted seedlings for the NGP and thereafter record the same in the books;

b. Regions 2, 5, 11, 13 and CAR draw a JEV to (i) transfer the costs of completed projects from CIP- Reforestation-Upland account to Reforestation Upland account; and (ii) drop from the books the costs of the completed projects transferred to the Registry of Reforestation Projects;

c. Region 5 (i) reclassify the advances made to contractors from account CIP – Reforestation-Upland to Advances to Contractors account; and (ii) support the disbursements of P5,071,640.13 recorded under account CIP – Reforestation-Upland;

d. Region 11 draw a JEV to reclassify the expenses amounting to P57,044,780.84 for UDP from Reforestation-Upland to CIP- Reforestation-Upland; and

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e. CAR trace from records the payments made for UDP while these were still in progress and match the same with those credited under account CIP – Reforestation-Upland and post the said payments in the SL for that account.

Unreliable balances of Payable Accounts – P1,391,825,995.03

17. The year-end balances of Payable accounts of P1,391,825,995.03 were inaccurate due to the (a) undocumented and outstanding liabilities for over two years of P80,477,638.77 of DENR-OSEC, LMB and three regions that remained unreverted to the Government Equity account contrary to Section 98 of PD No. 1445; (b) net overstatement of P125,119,129.78 attributed to the errors and omissions in recording payable transactions of DENR-OSEC, LMB and two PENROs; and (c) discrepancy of P1,623,401.99 between the payable records of DENR-NCR and results of confirmation with the source agencies.

17.1 As of year-end, the consolidated balances of four payable accounts amounted to P1,391,825,995.03. Review and analysis of these accounts disclosed several errors and deficiencies as discussed in the succeeding pages.

a) Undocumented and outstanding payables for over two years – P80,477,638.77

The DENR-OSEC, LMB and three regions have payables totaling P80,477,638.77 as of year-end, as shown below.

Office Amount AccountsAging

Undocumented DocumentedLess than 2 years

Over 2 years

DENR-OSEC

P2,471,939.77Accounts Payable

P2,471,939.77 P2,471,939.77

Region 1 8,199,468.00 8,199,468.00 P8,199,468.00

Region 5

7,712,240.48 7,712,240.48 7,712,240.4815,253,383.23 P15,253,383.23 15,253,383.23

1,870,292.49Other Payables 1,870,292.49 1,870,292.49

LMB 10,035,309.77Due to Other NGAs

10,035,309.77 10,035,309.77

NCR30,301,699.75 Accounts

Payable30,301,699.75 30,301,699.75

4,633,305.28 4,633,305.28 4,633,305.28

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Total P80,477,638.77 P47,425,375.47 P33,052,263.30 P72,278,170.77 P 8,199,468.00

These payables were either not substantiated with documentation or have been outstanding for over two years, or both. However, the said amounts were not yet reverted to the Government Equity account as required under Section 98 of PD No. 1445 which requires the reversion to unappropriated surplus of any unliquidated balance of accounts payable which has been outstanding for two years or more and against which no actual claims, administrative or judicial contracts, has been filed or which is not covered by perfected contracts on record.

The payables of P72,278,170.77 were not supported with the required documents such as the disbursement vouchers, delivery receipt, purchase orders and such other proofs of indebtedness. As such, their existence and validity are doubtful.

b) Errors and omissions in recording payable transactions – P125,119,129.78

Errors and omissions in recording transactions related to liability accounts were also noted as in the following instances:

Office Errors/OmissionsAccounts Affected

Amount


DENR-OSEC

Payment of payables was debited to Other Supplies Expense account instead of Accounts Payable.

Accounts Payable

₱121,317.62

Other Supplies Expenses

121,317.62

DENR-OSEC

Payments of obligations for Fund 102 by the foreign lending institution, the World Bank, under the direct payment scheme was not recorded in the books due to failure to secure from DBM the Notice of Cash Availment Authority (NCAA) to support the recording of the liquidations of the obligations incurred.

Accounts Payable

120, 064, 464. 97

Subsidy Income from National Government

₱120, 064, 464. 97

LMBLiquidations were debited to expenses instead of account Due to Other NGAs.

Due to Other NGAs

1,631,559.21

Expenses 1,631,559.21Region 2 PENRO Cagayan

Payment of Payables was debited to Prior Years’ Adjustments instead of Accounts Payable.

Accounts Payable

3,301,787.98

Prior Years’ 3,301,787.98

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Office Errors/OmissionsAccounts Affected

Amount

Overstated UnderstatedAdjustments

Region 5 PENRO Camarines Sur

Retention fee recorded as Accounts Payable instead of Guaranty Deposits Payable

Accounts Payable

1,317,201.86

Guaranty Deposits Payable

1,317,201.86

In summary, the following accounts were affected:

AccountsAmount

Overstated UnderstatedAccounts Payable P 124,804,772.43Due to Other NGAs 1,631,559.21Guaranty Deposits Payable P 1,317,201.86Total P 126,436,331.64 P 1,317,201.86Net Effect on Payable Accounts P 125,119,129.78Other Accounts AffectedExpenses P 1,752,876.83Prior Years’ Adjustments P 3,301,787.98Subsidy Income from National Government 120,064,464.97

c) Discrepancies in the balance of payables account per books and per confirmation – P1,623,401.99

A difference of P1,623,401.99 between the balance of Due to Other NGAs account per books of NCR of P317,433.71 and per results of confirmation of P1,940,835.70 with NAMRIA was noted in audit thereby rendering the balance of that account unreliable as of year-end.


a. DENR - OSEC, Regions 1 and 5, LMB and NCR revert to Government Equity the undocumented payables and which have been outstanding for more than two years;

b. DENR – OSEC, LMB and PENROs Cagayan and Camarines Sur prepare the necessary adjustments in the books for the errors and omissions in recording payables and other transactions;

c. DENR – OSEC request from DBM the issuance of the corresponding NCAA for Accounts Payable for the amount paid by the World Bank for Fund 102 under the direct payment scheme to liquidate the recorded obligations. Pending the receipt thereof, disclose in the Notes

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to Financial Statements the amount involved. Thereafter, request for NCAA upon receipt from the World Bank on payments made; and

d. DENR – NCR determine the causes of the discrepancy in the amount of the payable to NAMRIA and the account Due to Other NGAs and thereafter effect the necessary adjustments.

17.3 The following comments were submitted by the concerned offices:

Office Management CommentDENR-OSEC Adjustments were already made to revert the P917,314.12 outstanding and

undocumented payables. The errors totaling P458,481.16 were already corrected. Management already received the said NCAA and adjustment was already made per JEV No. 2013-03-0406 dtd. March 31, 2013.

LMB Management agreed with the recommendation and had advised the Bookkeeper to make the necessary adjustments to take up the unrecorded liquidations.

Region 1 Management informed that the amount of P3,571,037.12 was already reverted as of March 31, 2013.

Regions 5 - PENRO Camarines Sur

The Accountant of PENRO Camarines Sur committed to make the necessary adjustments and henceforth, will record the transactions in accordance with the Standard Chart of Accounts.

NCR Management had already reverted the payables to ALT Court in the amount of P351,987.58 on March 31, 2013.

Procurement not in accordance with R.A. No. 9184 and its IRR

18. The provisions of R.A. No. 9184, the Government Procurement Reform Act, on the requirements of DENR-OSEC, eight regions and one PENRO in the procurement of goods and services and provisions for liquidated damages, warranty security and performance security, among other, were not com-plied with in the procurement of planting materials, office equipment, IT equipment and goods and services totaling at least ₱31,048,761.64 thus, defeating the purpose of transparency, competitiveness and accountability in the procurement process.

18.1 Review and verification of procurement documents and records for CY 2012 disclosed the following violations of RA No. 9184, the Government Procurement Reform Act, of DENR-OSEC, Regions 1, 2, 3, 7, 9, 11, 12, and 13:

Agency Deficiencies Amount Section Provisions EffectDENR-OSEC

Catering services were procured from caterers who are not registered with the DTI, and without Business Per-mits from the con-cerned city.

P 6,945,597.86 Section 52.3 of IRR

At least three (3) price quotations from bona fide suppliers shall be obtained.

This ultimately re-dounds to the dis-advantage of the gov-ernment, in general, in terms of uncollected Mayor’s fees, business and income taxes in

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Agency Deficiencies Amount Section Provisions Effectparticular.

Region 1

Commonly used sup-plies were not procured from PS-DBM.

1,225,592.71

Section 53 (e)

of IRR-A

Purchases of goods from another agency of the Government, such as the Procurement Service of the DBM, which is tasked with a centralized procurement of com-monly used goods for the Government in accord-ance with Letters of Instruction No. 755 and EO No. 359, series of 1989.

The agency missed the opportunity to avail of supplies at lower prices.Region

2- PENRO Isabela

1,931,115.29

Region 12

322,941.89

Region 2

Conduct of canvass and selection of suppliers were undertaken by the Human Resources De-velopment instead of the Procurement Office and the BAC.

605,553.75 Section 11.1.1 of IRR

Each procuring entity shall establish in its head office a single BAC to undertake the functions specified in Section 12 of this IRR in order to facilitate professiona-lization and harmoniza-tion of procedures and standards.

The HRD, because of its functions, could not efficiently undertake the harmonizing of the procedures and stan-dards in procurement because these are ap-propriately the BAC’s functions.

Region 3

PENROs resorted to another alternative mode of procurement which is Community Participation but their specifications, proce-dures and contract packages were not approved by the GPPB

Not indicated Section 53.12 of IRR

Where, in the interest of project sustainability or to achieve certain speci-fic objectives, it is desi-rable in selected project components to call for participation of local communities in the delivery of services, the procuring entity shall propose the procedures, specifications, and con-tract packaging which are subject to the approval of the GPPB.

Casts doubt on the integrity of the con-tracts and the reason-ableness of the con-tract price.

Performance security posted by the con-tractors in the form of surety bond was only 1% of the total contract price which is short of the required 30%.


The performance se-curity shall be in an amount equal to a per-centage of the total con-tract price. Surety bond callable upon demand issued by a surety or insurance company duly certified by the Insu-rance Commission as authorized to issue such security have a 30% amount of Performance Security.

Performance security which is short of the required percentage could not address/ answer for any defects in case there is a default on the per-formance of the reci-pient POs with the terms and conditions of the contract/agree-ment.

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Agency Deficiencies Amount Section Provisions EffectThere was no provision for warranty security.


For the procurement of goods, in order to assure that manufacturing de-fects shall be corrected by the supplier, a war-ranty security shall be required from the con-tract awardee for a mini-mum period of three (3) months, in the case of Expendable Supplies, or a minimum period of one (1) year, in case of Non-expendable Supplies, after acceptance by the procuring entity of the delivered supplies.

Management will have no hold on the sup-plies/contractors for any uncorrected dis-covered defects and third party liabilities because no amount was retained to answer for the said defects.

There was no provision for liquidated damages.

Not indicated Section 68

All contracts executed in accordance with the Act and this IRR shall contain a provision on liquidated damages which shall be payable by the contractor in case of breach thereof.

Absence of the pro-vision on liquidated damages will leave the CENRO/PENRO offi-cials no hold on the contractor in case of breach of the contract.

Region 7

The Regional Office did not declare as failure the bidding for the five months rental of I.T. and office equip-ment and awarded the contract split to the two non-responsive bidders who bid for the parts of the contract despite the non-adherence to pres-cribed bidding proce-dures.

2,330,000.00 Section 41

The Head of the Procuring Entity re-serves the right to reject any and all kinds of bids, declare a failure of bidding, or not award the contract if the BAC found to have failed in following the prescribed bidding procedures.

The non-compliance with the bidding pro-cedures, in effect al-tered the rules in the bidding process which defeated the founda-tion of a fair and competitive public bidding.

Region 7

Did not conduct public bidding in procurement of operational needs.

1,039,460.451,905,175.81

Section 10

Requires that all procurement shall be done through competi-tive bidding except as provided for in Article XVI (Alternative Me-thods of Procurement) of the Act.

Failure to extend equal opportunity to enable private parties to par-ticipate in the public bidding and deprive the agency of obtain-ing the most advan-tageous price that may be obtained from the market.

Region 9

700,000.00

Region 11

643,320.00

Region 13

1,399,069.63

Region 11

Lease of IT Equipment were made thru shop-ping instead of public bidding.

754,740.00 Section 46

Lease of construction and office equipment, including computers, communication and in-

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Agency Deficiencies Amount Section Provisions Effectformation technology equipment are subject to the same public bidding and to the processes prescribed under this Act.

Region 13

The amount awarded and paid to the supplier is over and above the Approved Budget for the Contract (ABC) posted in the Phil-GEPS.

925,544.25 Section 7

All procurement should be within the approved budget of the procuring entity and should be meticulously and ju-diciously planned.

The Project Procure-ment Management Plan was not followed thus, affected the bud-get of the agency for other operational re-quirements.

The agency resorted to Direct Contracting as their mode of procure-ment though none of the three conditions will qualify the agency to avail of direct contract-ing method.

747,900.00 Section 48.1

Subject to the prior approval of the Head of Procuring Entity, and whenever justified by the conditions provided in this Act, the procuring entity may, in order to promote economy and efficiency, resort to any of the alternative me-thods of procurement provided in this Rule. In all instances, the procu-ring entity shall ensure that the most advan-tageous price for the Government is obtained.

Impedes in ascer-taining whether or not prices paid are reasonably advan-tageous and beneficial to the Agency.

Procurement for the supply and delivery of quality planting mate-rials was awarded to a supplier without under-taking the required pre-qualification to deter-mine the supplier’s ca-pacity to bid.

9,572,750.00 Section 53

Provides that Negotiated Procurement is a method of procurement of goods, infrastructure projects and consulting services, whereby the procuring entity directly negotiates a contract with a tech-nically, legally and fi-nancially capable sup-plier, contractor or con-sultant only in the following cases:

53.1 Two failed bid-dings.

53.1.1 After conduct of the mandatory review of the terms, condi-tions, specifica-tions and cost

Deprive the agency from obtaining the best price.

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Agency Deficiencies Amount Section Provisions Effectestimates, as prescribed in Section 35 of this IRR, the BAC shall revise and agree on the minimum tech-nical specifica-tions, and if necessary, adjust the ABC, subject to the required approvals. How-ever, the ABC cannot be in-creased by more than twenty per-cent (20%) of the ABC for the last failed bidding.

53.1.2 The BAC shall invite and engage in negotiations with a sufficient number of sup-pliers, contractors or consultants to ensure effective competition.

Total P31,048,761.64

18.2 We recommended that the concerned officials of the General Services Division/Sections (GSD/GSSs) of DENR offices (i) strictly abide with the provisions of RA No. 9184 and its IRR to ensure that the government is at an advantage in all its procurements; (ii) conduct public bidding at all times and resort only to other modes of procurement in cases of failed bidding and emergency situations; and (iii) ensure that the correct amount of performance bond is collected and provisions for warranty and liquidated damages are incorporated in the contracts to ensure that the government is protected in cases of default of suppliers/contractors on their obligations.

18.3 We also recommended that the Management Division of the DENR-OSEC (i) review its processes/procedures adopted in the evaluation and selection of prospective caterers to avoid transacting with non-bonafide establishments; (ii) conduct a pre-qualification of prospective caterers and maintain a roster as basis to determine those qualified to transact

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business with the agency; and (iii) study the possibility of centralizing the acquisition of food/catering services at the Procurement Section of the GSD to get the optimum benefits from the procurement process.

18.4 We further recommended that the BAC of Region 11 handle all procurement activities, including catering services, in order to harmonize the procedures and standards in procurement. The selection on the method of procurement for catering services be covered with minutes of meetings and BAC resolution for proper accountability and transparency.

18.5 As mentioned earlier, the Management of DENR-OSEC informed that they have already drafted the “Guidelines on the Procurement of food/Catering Service for in-house meeting, trainings and workshop”.

18.6 Management of Region 11 issued Special Order No. 380 series of 2012 revoking the Special Order No. 104 series of 2004 and transferring the responsibility of procurement of food/catering and venue/accommodation services from the HRD Section to the BAC.

Gender and Development Fund

19. The requirements on the preparation of the GAD Plan and the provision of the five percent budget for GAD activities as required by Section 28 of the General Provisions of RA No. 10155 were not complied by a PENRO, an attached bureau and three regions. Moreover, the GAD Plan prepared by DENR-OSEC was only used for the purpose of the Focal Point System. Furthermore, the disbursements for GAD activities of DENR-Region 1 were not in accordance with the GAD Work and Financial Plan.

19.1 The General Provisions of RA No. 10155, the General Appropriations Act for FY 2012, requires the formulation of a GAD Plan within their concerned sectors or mandate and implement applicable provisions in the Convention on the Elimination of all Forms of Discrimination Against Women, the Beijing Platform for Action, the Millennium Development Goals (2000-2015), the Philippine Plan for Gender-Responsive Development (1995-2025), and the Framework Plan for Women.

19.2 Verification on the compliance of the DENR with the above provision of law disclosed that:

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a. DENR Region 3 - Formulated Gender and Development plans in accordance with RA No. 10155.

b. DENR –OSEC - The GAD Plan did not indicate the activities that are to be undertaken for those mainstreamed with other programs and projects. The Plan was for the use of the Focal Point/Secretariat only.

c. Region 1 - Some disbursements were not in accordance with the GAD-Work and Financial Plan (WFP).

d. PENRO Zamboanga Sibugay Province – No GAD Plan was formulated.

19.3 Further, the audit revealed that the required allotment for GAD projects/activities of least five percent (5%) of the total budget was not complied with by the following offices:

AmountPercentageOffice Total Budget Allotment for

GAD Region 3 P518,259,849.00 P 617,500.00 0.119Region 6 66,532,000.00 185,000.00 0.278Region 7 553,750,000.00 491,000.00 1.77LMB 0.00 601,401.90

19.4 It is noteworthy though that PAWB and Region 11 were able to accomplish their targets for GAD planned activities without necessarily spending in full their budgets as presented in the table.

OfficeGAD

PhysicalAccomplishmentsBudget Actual Expenses Percentage of

UtilizationPAWB P 2,218,000.00 P 1,679,999.00 76.00% 100%Region 11 P 1,500,000.00 P 826,195.00 55.08% 100%

19.5 Moreover, the following offices have mainstreamed their GAD activities and fully accomplished the same as planned through the following activities:

Office GAD ActivitiesRegion 2 Raising GAD’s awareness and building GAD related capabilities with the

installation of policies, structures and systems that facilitate and institutionalize the pursuit of gender equality and women’s empowerment. The Regional GAD Focal Point System has been religiously observing the celebration of women’s month.

Region 5 Collection and maintenance of sex-disaggregated data of personnel, participants to trainings, clientele of seedlings under the Forest Management Sector and applicants for the titling of residential lands for the Land Management Service.

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Office GAD ActivitiesRegion 10 Institutionalizing the program to the main agency’s plans, programs,

projects and activities through (a) releases to the Community Based Farm Management (CBFM) where the NGO/POs could benefit from the planting of trees and fruits under their selected areas for development; and (b) active participation in WINGS organization activities by giving seminars on Implementing Rules and Regulations (IRR) of RA No. 9184.

19.6 We recommended that the Focal Point Person:

a. DENR - OSEC (i) formulate an over-all framework plan and direction of the OSEC-GAD that incorporates all the envisioned GAD initiatives as well as the focused beneficiaries in consultation with the Budget Office and other concerned offices/divisions which would implement the mainstreamed activities;

b. Region 1 ensure that disbursements are in accordance with the WFP;

c. Region 9 Zamboanga, Sibugay Province formulate GAD Plan; and

d. Regions 3, 6, 7 and LMB work out for the increase of their GAD budget to comply with the five percent requirement of RA No. 10155.

19.7 DENR-OSEC Management commented that the DENR GAD Focal Point System has a Strategic Plan for CYs 2005-2010. However, since it was prepared in CY 2005, there is a need to revisit such document and update it taking into consideration new developments on gender and development.

Programs for Senior Citizens and Differently-abled Persons

20. The DENR-OSEC did not prepare a Work and Financial Plan for CY 2012 for senior citizens and differently-abled persons while LMB did not formulate plans and programs for these sectors of society. Further, the budget for programs of senior citizens and differently-abled persons of DENR-OSEC and LMB were inadequate. For DENR-Region 3 and its PENROs, no specific programs were formulated for these persons. These deficiencies were not in accordance with Section 29 of RA No. 10155.

20.1 Section 29 of the CY 2012 General Appropriations Act provides that “All agencies of the government shall formulate plans, programs and projects intended to address the concerns of senior citizens and differently-abled person and integrate the same in their regular activities which shall be at least one percent (1%) of their budget.”

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20.2 Verification disclosed that the following:

Office Amount DeficiencyDENR-OSEC P 300,000.00 No approved Work and Financial Plan (WFP) for the

implementation of the programs/activities intended to benefit the senior citizens and differently-abled persons.

In lieu of the WFP, the PWD and Senior Citizen Desk Officer furnished the audit team with the proposed budget of P863,000.00 for CY 2012. However, only P300,000.00 was budgeted for programs for senior citizens and differently-abled persons. There were however, no planned activities in the WFP.

The budget was concentrated for expenses related to activities for differently-abled persons thus, neglecting the senior citizens’ welfare.

LMB152,000.00

No plans/programs and guidelines to conduct/implement senior citizens and differently-abled persons related activities.

The allotted amount for programs for the senior citizens and differently-abled persons was not utilized.

Region 3 and the PENROs 200,000.00

No specific programs/guidelines to implement activities to benefit the senior citizens and differently abled persons.

DENR Regional Office had however, installed a ramp to provide easy mobility for disabled persons.

20.3 We recommended that the Focal Person:

a. DENR-OSEC (i) prepare a comprehensive Work and Financial Plan for the senior citizens and differently-abled persons; and (ii) include in its programs the senior citizens;

b. LMB (i) formulate plans and programs for these sectors; and (ii) comply with the required amount of allotment for senior citizens and differently-abled persons; and

c. DENR-Region 3 and its PENROs formulate specific programs for these sectors.

Compliance to Tax Laws

21. PAWB and nine DENR regions had complied with Section 58 of Revenue Regulation No. 2-98 dated April 17, 1998 on the withholding and remittances of taxes. On the other hand, as of year-end, DENR-OSEC, an attached

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bureau and two regions have unremitted taxes of P14,494,675.81 attributed to non-remittance in full and on time of the taxes withheld which is not in consonance with the said Revenue regulation.

21.1 Section 58 (A.2) of Revenue Regulation No. 2-98 dated April 17, 1998 requires the remittance of taxes withheld, whether creditable or final, within ten days after the end of each month except for taxes withheld for December which shall be filed on or before January 25 of the following year.

21.2 Relative to the regulation, the following offices were reported as compliant thereto:

Office Amount of Taxes RemittedCAR P 23,300,422.96Region 3 58,323,447.71Region 6 2,030,355.95Region 10 17,817,023.93Region 11 26,307,060.08

21.3 The PAWB, Regions 1, 2, 7 and 13 also reported compliance with the tax regulations but did not provide details on the amount of taxes withheld and remitted in CY 2012.

21.4 As of year-end, the taxes withheld by the DENR-OSEC, LMB, NCR and Region 9 amounting to P14,494,675.81 were not yet remitted to the BIR. Details are shown on the next page.

OfficeAmount Unremitted

BalanceWithheld RemittedDENR- OSEC

P 68,236,836.96 P 59,012,616.73 P 9,224,220.23

LMB 6,997,423.27 4,963,209.44 2,034,213.83NCR 11,164,202.70 10,780,177.30 384,025.40Region 9 14,190,247.87 11,338,031.52 2,852,216.35Totals P100,588,710.80 P86,094,034.99 P14,494,675.81

21.5 The significant amount of unremitted taxes was attributed to the practice of these agencies of not remitting the collected amounts in full and on time. Further, the DENR-NCR does not maintain subsidiary ledgers to monitor the taxes withheld and the amount remitted.

21.6 We commended the Management of PAWB and the nine Regions for complying with the provisions of tax laws.

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21.7 We recommended that DENR–OSEC, LMB, NCR and Region 9 (i) remit immediately all unremitted taxes; and (ii) henceforth, remit in full and on time all taxes withheld.

21.8 The Management of DENR-OSEC informed that the balance of P9,224,220.23 as of December 31, 2012 was remitted on January 15, 2013 thru various TRAs and that pending the development of a Document Tracking and Remittance System, the Accounting Division is committed to observe the recommendation.

21.9 The LMB management stated that reconciliation/verification of the account is on-going and immediate remittance of the outstanding balance will follow.

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Settlement of Suspensions, Disallowances and Charges

22. The audit suspensions, disallowances and charges of DENR-OSEC, two attached bureaus and eight Regions amounting to P49,609,320.92, P37,511,245.30 and P40,760,431.08, respectively, net of the amount of P29,198,866.58 which are under appeal, remained unsettled as of year-end contrary to COA Circular No. 2009-006 dated September 15, 2009, the Rules and Regulations on the Settlement of Accounts.

22.1 As of year-end, the balances of suspensions, disallowances and charges of the following agencies were:

Office Suspensions Disallowances Charges TotalDENR-OSEC P7,091,062.24 P17,093,543.87 P24,184,606.11LMB - 8,864,316.82 P40,760,431.08 49,624,747.90PAWB 144,900.00 144,900.00CAR 252,273.00 6,511,433.68 6,763,706.68Region 1 1,046,461.49 409,653.65 1,456,115.14Region 3 3,310,194.66 1,454,702.73 4,764,897.39Region 5 303,517.91 303,517.91Region 7 8,960.00 45,037.84 53,997.84Region 9 26,053,432.42 1,444,215.37 27,497,647.79Region 10 10,244,219.80 23,200.00 10,267,419.80Region 13 1,602,717.31 1,216,723.43 2,819,440.74Total P49,609,320.92 P37,511,245.30 P40,760,431.08 P127,880,997.30

22.2 Of the total disallowances, the amount of P3,363,277.52 were already final and executory, broken down as follows:

Office AmountLMB P 2,400.00Region 7 655,320.00Region 8 2,573,466.68Region 12 132,090.24

Total P3,363,277.52

22.3 The P40,760,431.08 charges issued by the audit team assigned at the LMB which is over two years was not yet settled as of December 31, 2012.

22.4 Further, of the total unsettled disallowances of P37,511,245.30, the amount of P29,198,866.58 were appealed by the following offices:

Office AmountOSEC P16,992,014.72LMB 7,424,758.39FMB 4,407,725.67

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Office AmountRegion 5 59,367.80Region 8 315,000.00

Total P29,198,866.58

22.5 Of the P16,992,014.72 disallowances under appeal by DENR-OSEC, P325,485.68 were already settled by the persons liable who retired from the service.

22.6 Settlements during the year amounted to P22,262,673.10, as summarized below.

Office NS ND Charges TotalOSEC P 338,985.68 P 338,985.68LMB P 2,350,000.00 970,900.00 3,320,900.00PAWB 183,363.80 183,363.80Region 3 3,656,749.31 1,600.00 3,658,349.31Region 7 10,855.00 3,000.00 13,855.00Region 10 10,403,668.65 72,903.00 10,476,571.65Region 13 4,217,773.01 38,874.65 P14,000.00 4,270,647.66Total P20,639,045.97 P1,609,627.13 P14,000.00 P22,262,673.10

22.7 COA Circular No 2009-006 dated September 15, 2009, the Rules and Regulations on the Settlement of Accounts, provides however, the following on settlement of accountabilities:

a. Section 7.1 – The head of the agency, among others, shall ensure that the settlement of disallowances and charges is made within the prescribed period.

b. Section 9.4 - A suspension should be settled within ninety (90) calendar days from receipt of the Notice of Suspension, otherwise the transaction covered by it shall be disallowed /charged after the auditor shall have satisfied himself that such action is appropriate.

c. Sections 10.4 and 11.4 the settlement of disallowances and charges is made within six months from receipt of the Notice of Disallowances or Charges.

22.8 We recommended that the Management, of DENR-OSEC, LMB, PAWB and regions, through their Accountants, (i) send demand letters to all persons responsible for suspensions and persons liable for disallowances and charges to settle in full and immediately their accountabilities pursuant to COA Circular No. 2009-006; and (ii) in case of failure to settle the same, resort to other legal means to enforce settlement thereof.

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22.9 The following were the comments of Management:

Office Management CommentDENR-OSEC Management informed that for CY 2013, total settlements

amounted to P96,333.34. CAR Management agreed with the recommendation and assured that the

settlement of disallowances will be continued thru payroll deductions.

Region 5 Management informed that refund is made thru salary deduction for persons liable for the disallowances who are still connected with the DENR. For those who are no longer in service, it will be difficult to collect the amount disallowed, but it will try to contact the persons or their families and inform them to refund.

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