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EXECUTIVE SUMMARY

A. INTRODUCTION

Republic Act No. 9155, otherwise known as the “Governance of Basic Education Act of 2001” changed the name of the agency from Department of Education, Culture and Sports (DECS) to Department of Education (DepEd). The Department is organized into two major structural components: the Central Office and the Field Offices, which consists of 16 Regional Offices (ROs) and 199 Division Offices (DOs). Under the Office of the Secretary (OSEC) at the Central Office are five support services, namely: Administrative Service, Financial and Management Service, Human Resource Development Service, Planning Service, and Technical Service. The formulation of policies, standards and programs on curriculum and staff development is undertaken by the three staff bureaus, the Bureau of Elementary Education (BEE), Bureau of Secondary Education (BSE), and Bureau of Alternative Learning System (BALS). The centers/units attached to the Department similarly provide technical and administrative support towards the realization of its vision, namely; the Educational Development Projects Implementing Task Force (EDPITAF), National Educational Testing and Research Center (NETRC), School Health and Nutrition Center (SHNC), National Educators Academy of the Philippines (NEAP), National Science Teaching Instrumentation Center (NSTIC), Instructional Materials Council Secretariat (IMCS), and the National Council for Children’s Television (NCCT). Other attached and support agencies are the Teacher Education Council (TEC), Philippine High School for the Arts (PHSA), Literacy and Coordinating Council (LCC), Baguio Teacher’s Camp (BCT), National Museum and the National Book Development Board (NBDB).

The Secretary is assisted by four undersecretaries and four assistant secretaries. The directors and assistant directors of support services, staff bureaus, centers/units and attached agencies also assist the key officials of the Department. Total personnel complement as of December 31, 2013 is 547,574 teachers, 46,833 teaching related, 3,619 non teaching and 30,473 administrative staff. It has: 38,659 Public Elementary Schools, and 7,748 Public Secondary Schools. Total learners of 24,249,778 which comprises of 2,202,486 Kindergarten learners, 14,476,181 Elementary pupils, 7,050,245 Secondary Students and 520,855 Alternative Learning System learners.

The Department of Education is the largest government bureaucracy in the

country. On FY 2013, the Department was given a budget of P293.4 billion, a considerable increase from the P238.7 billion budget in FY 2012.

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B. OPERATIONAL HIGHLIGHTS

The major accomplishments per Major Final Output (MFO) and Performance Indicator of DepEd for CY 2013 are presented as follows:

Major Final Output /Performance Indicator Target Actual % of

Accomplish-ment

MFO 1: Public Pre-Elementary and Elementary Education Services

Public Pre-Elementary Education Services

- Enrolment in DepEd & DepEd- 1,889,022 1,865,807 99% contracted pre-schools

Public Elementary Education Services

- Enrolment in public elementary schools 14,436,584 13,245,848 92%

- Participation rate 80.15% 80.15% 100%

- Completion rate 78.90% 78.60% 99% - MPS in NAT, Grade 6

Total Test 77.21% 69.97% 91%

English 76.51% 70.17% 92%

Science 72.24% 66.56% 92%

Math 73.15% 72.38% 99%

Filipino 83.50% 76.18% 91%

HeKaSi 80.67% 64.59% 80%

MFO 2: Public Secondary Education Services

- Enrolment in public secondary schools 6,025,980 5,773,267 99%

- MPS in NAT of Year IV students in

public secondary schools

Total Test 60.40% 53.77% 89%

English 63.00% 58.41% 93%

Science 52.00% 44.80% 86%

Math 52.00% 51.94% 100%

Filipino 69.00% 56.83% 82%

Araling Panlipunan 64.00% 58.55% 91%

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This year’s highlights of DepEd accomplishment for FY 2013 as indicated in their 2013 Annual Report provides the following:

a. A total of 34,953 teachers were deployed nationwide by 2012 from the 145,827 teacher shortage in 2010. With the newly-created 61,510 teaching positions in 2013, 58,774 positions have already been filled-up.

b. A total of 32,127 new classrooms were constructed by end of 2012 with the

34,686 newly constructed classrooms in 2013 from the 66,800 classroom shortage in 2010. FY 2013 accomplishment consists of 35,301 funded by 2011 to 2013 Basic Education Facilities Fund (BEFF) and Regular School Building Program, 13,189 from LGU and legislators, 14,866 from PAGCOR, PTA and private donations, and 1,215 from foreign donations.

c. A total of 52,590 have been constructed from the 135,847 water and sanitation

facilities shortage in 2010. In addition, 5,747 units are being constructed while the 70,532 is under procurement process.

d. A total of 2.7 million school seats were procured and delivered from the initial

target of 3.6 million. From the remaining 892,802, a total of 885,342 school seats will be delivered by March 2014.

e. Through the School-Based Feeding Program (SFBP), a total of 40,531

severely wasted learners from Kinder to Grade VI were fed for 120 days on SY 2013-2014. A total of twenty-eight divisions nationwide incorporated in their schools the following health and nutrition activities: a) feeding; b) deworming; c) hand washing; and d) development of health and nutrition values and behavior.

f. The number of GASTPE grantees increased from 761,314 students in 2012 to

809,212 in 2013. This raised the percentage of grantees vis-a vis total private school enrollees from 53% in 2012 to 58% in 2013.

g. Provision of instructional materials for 2013 totaled to 37.8 million of

textbooks and instructional materials were already procured and delivered. These include 1.7 million storybooks, 1.7 million Kinder Activity Sheets, 3.2 million Grade 1 Learning Materials and Teacher Guides, 12.5 million Grade 2 Learning Materials, 15 million Grade 8 Learning Materials, 2.6 million additional textbooks and 855,000 other instructional materials such as Accreditation & Equivalency (A & E) Exam materials and Supply Property Management Handbooks.

The Year 2013 also marks the signing into law of Republic Act 10533 or the Enhanced Basic Education Act on May 15, 2013 adding three (3) years to the basic education curriculum. Beginning SY 2013-2014, the curriculum for Grades 2 and 8 was implemented after completing the mass training of Grade 8 teachers on April 2013.

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C. FINANCIAL HIGHLIGHTS

For CY 2013, DepEd has a total appropriation of P302,211,603,302.37. During the year, the Department received a total allotment of P297,277,611,561.90 including releases for Special Purpose Fund, out of which, total obligations of P279,474,064,702.81 were incurred leaving an unexpended balance of P17,803,546,859.09 as at year-end. Special Purpose Fund of DepEd includes releases for Priority Development Assistance Fund (PDAF), Disbursement Acceleration Fund (DAP) and School Building Program amounting to P89,802,740.06, P4,132,914,000.00, and P200,000,730.00, respectively. Other fund sources during the year came from foreign donations of the Government of Australia and Spain for the implementation of School Building Project for Basic Education (SBP4BE), Philippine Response to Indigenous Peoples and Muslim Education (PRIME), Agencia Española de Cooperacion International para el Desorrollo (AECID) Projects, SPHERE and UNICEF with total grant amount of P874,399,850.00, P266,000,000.00, P9,115,048.19, P1,533,414,480.00 and P1,061,925.00, respectively, and transferred fund received from PAGCOR of P935,000,000.00.

The Department’s assets, liabilities, government equity and sources and

application of funds for CY 2013 with comparative figures for CY 2012, are as follows:

I. Financial Position

Particulars 2013 2012 Assets P 108,520,216,573.79 P 97,546,208,664.78 Liabilities 19,069,025,873.32 16,365,134,578.62 Government Equity P 89,451,190,700.48 P 81,181,074,086.16

II. Sources and Application of Funds

Particulars 2013 2012

Income P 257,679,455,039.84 P 232,061,269,828.88 Personal Services 226,772,993,848.56 202,973,902,629.07 Maintenance and Other Operating Expenses 20,724,086,331.35 17,804,920,293.63

Financial Expenses 1,182,752.69 2,436,107.35 Total Expenses 247,498,262,932.60 220,781,259,030.05 Excess of Income over Expenses

P 10,181,192,107.24

P 11,280,010,798.83

D. SCOPE OF AUDIT

The audit covered the accounts and operations of the DepEd for CY 2013 except for the DOs and National High Schools under the jurisdiction of the ARMM, to determine the fairness of presentation of the financial statements and propriety of the recorded and reported financial transactions in accordance with applicable laws, rules and

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regulations. Review of DepEd payroll system, school building program, Government Assistance to Private Education (GASTPE) program, availability of K-12 learning materials and downloading of funds to different elementary and national high schools were also undertaken to determine whether operations were conducted in an economical, efficient and effective manner. E. INDEPENDENT AUDITOR’S REPORT The Auditor rendered a qualified opinion on the fairness of the presentation of the financial statements of the DepEd for CY 2013 in view of the deficiencies noted in the accounts and non-compliance with the existing laws, rules and regulations as stated in the Independent Auditor’s Report and discussed in detail in Part II of the report. F. AUDIT OBSERVATIONS AND RECOMMENDATIONS The following is a summary of significant observations and recommendations, among others, the details of which are discussed in Part II-Observations and Recommendations of the report:

Value for Money Audit 1. Out of the total allotment for the DAP of P4.130 billion released to DepEd for the

implementation of programs/projects on infrastructure, computerization and alternative learning systems in CY 2012 to 2013, P2.976 billion or 72 percent were obligated, leaving an unobligated balance of P1.154 billion or 28 percent as of December 31, 2013. Further, some lapses such as delayed deliveries, deficient documentation, etc., were noted in the procurement of modules, IT equipment and in the construction of school building in CAR, Regions III, IV-A, V, VII and XI contrary to the provisions of RA 9184. (Paragraphs 1-7)

We recommended that Management require concerned offices to:

refund the unutilized fund of the DAP; and

strictly adhere with the provisions of the Revised Implementing Rules

and Regulations (IRR) of RA 9184 on the Government Procurement Reform Act.

2. Of the total allotment of P73.350 million received by DepEd on PDAF, P63.791

million or 87 percent were obligated, leaving a total of P9.56 million or 15 percent of unobligated balances for the period covering CYs 2012 to 2013. Moreover, deficiencies such as defects in the bidding documents and procedures were noted relative to the award of contracts in the construction and repair of school buildings and delivery of ALS reading materials for field operations in NCR and Region I contrary to Section 2.6 of DBM National Budget Circular No.

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537 dated February 20, 2012 requiring compliance with the provisions of the Government Procurement Reform Act, R.A. No. 9184. (Paragraphs 8-13) We recommended the Management to require concerned offices to:

require the Accountant to revert the remaining amount of PDAF in

pursuance of Supreme Court Decision in Greco Antonious Beda B. Belgica, et al., vs. Paquito Ochoa Jr., et al., G.R. No. 208566; Social Justice Society (SJS) President Samson S. Alcantara vs. Franklin Drilon, G.R. No. 208493; Pedrito M. Nepomuceno, etc. vs. President Benigno Simeon Aquino III, et al., G.R. No. 209251, all dated November 19, 2013; and

strictly comply with the provisions of R.A. No. 9184 on procurement for the construction and repair of school buildings and delivery of ALS reading materials.

3. Of the 6,040 classrooms still to be completed from the FY 2012 Basic Education

Facilities Fund (BEFF) being implemented by DepEd, a total of 5,105 classrooms worth P5.041 billion were already completed in 2013 while 935 classrooms with allocated cost of P787.9 million remained not completed. Furthermore, out of the 7,192 classrooms for rehabilitation in FY 2013 with total projects’ contract costs of P1.231 billion only 5,422 classrooms costing P904.1 million was reported 100 percent completed and 1,770 classrooms with allocated budget of P327.5 million have not been repaired and rehabilitated. (Paragraphs 14-29) We recommended concerned Management to exercise diligent monitoring and supervision on the implementation of projects for construction and rehabilitation of classrooms to immediately address issues and lapses thereof, which certainly affects the delivery of DepEd’s physical targets to address resource gap in school facilities.

4. Due to weak implementation of kindergarten program, and the non-prioritization of construction project for Kindergarten School Buildings in RO X, only P3,311,610 was allotted in FY 2011 by DepEd for the construction of four (4) kindergarten classrooms with furniture, thus, shortage remains in the face of huge demand for classrooms, depriving more than 15,000 kindergarten enrollees each year for a safe, secured, adequate and satisfactory educational facilities that support the teaching and learning processes for an improved quality kindergarten education pursuant to R.A. No. 10157 otherwise known as “The Kindergarten Education Act”. (Paragraphs 30-45) We recommended that Management require the:

concerned Division Officials, Physical Facility Coordinator and School

Heads to comply with the policies stipulated in the IRR of RA 10157 otherwise known as “The Kindergarten Education Act”, and adhere to the

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standard physical facilities prescribed under Section 9.2 thereof to ensure provision of sufficient and appropriate classrooms with toilets and furniture for kindergarten age children;

Physical Facility Coordinator and Education Supervisors for

kindergarten level conduct proper monitoring and prepare complete status reports in order to accurately track progress of implementation of various kindergarten projects/programs and identify issues, gaps and deficiencies pertaining to physical facility support, pursuant to Section 18 of the IRR of RA 10157;

Physical Facility Coordinator seek clarification and guidance from

DepEd Regional Office 10 and DepEd Central Office regarding the preparation of lists of priority projects that are to be submitted to DPWH for construction of kindergarten school buildings;

Division Officials and School Heads seek the support from the LGU in

providing assistance for the construction of kindergarten School Buildings; and

concerned Officials and School Heads encourage private organizations

and civic-spirited members of the community to the schools through “Adopt a School Program” and promote the need for more kindergarten school buildings with toilets and furniture.

5. The constructed hand washing facilities in 39 schools in the Divisions of

Pangasinan I, Pangasinan II, Urdaneta City, Dagupan City, Alaminos City and San Carlos City with a total project cost of P11.52 million were mostly not functional and not fully utilized as management failed to consider the availability of water resources required under DepEd Order No. 1, s 2011 dated January 6, 2011 and the existing toilets and hand washing facilities in almost every classrooms thus, defeating the objectives of the projects which resulted to wastage of scarce government resources. (Paragraphs 46-51) We recommended and concerned Management agreed to:

coordinate with the concerned School Principals to address the water

supply problem of concerned schools in order that the facilities will be utilized for the benefit of the students and school personnel; and

require the Division’s Physical Facilities Coordinator and DepEd Project Engineers to monitor not only the implementation of this project but also the upkeep of the facility.

6. The guidelines for the downloading of School Maintenance and Other Operating

Expenses (MOOE) pursuant to DepEd Order No. 60 s. 2011 were not strictly observed as allocations for the MOOE were not all released to the heads of

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different elementary and secondary schools depriving these schools the maximum utilization of operational funds due them, downloaded MOOE was utilized to procure ineligible expenditures under DO No. 60 and liquidation vouchers were not duly supported with approved disbursement vouchers and complete supporting documents casting doubts as to the validity and propriety of the individual transactions. (Paragraphs 52-56) We recommended that the Management of the concerned DOs to require the concerned DOs to strictly adhere with the provisions on the downloading of MOOE required under DepEd Order No. 60 s. 2011; otherwise to impose sanctions on accountable officers who continuously defy the rules and regulations relative to granting, proper utilization and liquidation of cash advances.

7. The implementation in Region X of some of the pertinent rules and regulations on Water and Sanitation requirements stated in the Implementing Rules and Regulations on School Sanitation and Health Services of the Code on Sanitation of the Philippines remains weak and inconsistent which resulted to (a) absence of toilets in 23 public schools; (b) shortage of toilets in 173 public schools with an average Toilet Bowl to Pupil Ratio of 1:76; (c) non-functional hand washing facilities in 46 public schools; (d) insufficient supply of water in 38 public schools; (e) absence of assigned custodial workers in 180 public schools to keep sanitation facilities clean; (f) improper hygiene and poor sanitation practices, exposing the students to sickness affecting their health and consequently their ability to learn. (Paragraphs 57-80) We recommended the Management to:

revisit the IRR on School Sanitation and Health Services of the Code on

Sanitation of the Philippines (P.D. 856) and comply with the policies stipulated therein. Adhere to standard Toilet Bowl to Pupil Ratio in the IRR of 1:49 males and 1:29 females;

promote the Gender Water and Sanitation Facilities by providing more

separate toilets and hand washing facilities for boys and girls; require all school principals to submit on regular basis water samples

from their school’s water sources to DOH accredited laboratories for examination;

assign a custodial worker to keep the schools’ toilets and hand washing

facilities always clean; make representations with the LGU to be proactive in promoting

sanitation and essential health care programs in the schools; and

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encourage those who are interested to help the schools through “Adopt a School Program” and prioritize the water and sanitation facilities.

8. The procurement of the 16,296,231 textbooks amounting to ₱608.7 million of the

2011-2012 textbook replenishment program under the old curriculum delivered at the onset of the implementation of the K to 12 Program in SY 2012-2013 resulted to textbooks that could no longer be used in accordance with the intended purpose although eventually used only as reference materials being no longer responsive to the enhanced K to 12 curriculum. Moreover, the delayed procurement of the 8,595,999 learning materials amounting to ₱295.2 million under the enhanced curriculum of the K to 12 program for SY 2013-2014 deprived the students of the much needed learning resources since most deliveries were made during the 3rd and 4th Quarters of SY 2013-2014. (Paragraphs 81-98)

We recommended that Management: determine responsible officials who should be held accountable in the

procurement of textbooks under the old curriculum that turned out to be utilized only as reference materials contrary to the effort of DepEd to ensure adequacy of the much needed textbooks that are already responsive to the enhanced K to 12 curriculum; and

plan adequate and realistic timelines in the procurement process and delivery of textbooks and learning materials in order to make available the much needed learning resources in time with the opening of classes or within the implementation of the K to 12 Program by phase.

9. Memoranda of Agreements (MOA) entered into by DepEd and the Private

Education Assistance Committee (PEAC) in behalf of the Fund for Assistance to Private Education (FAPE) which entails payment/transfer of funds of at least P100,000.000.00 yearly as administrative cost for the implementation of Government Assistance to Private Education (GASTPE) program and funding for INSET and Research Studies, showed several misleading provisions/information which created doubt as to the validity/propriety of the representations made by the PEAC, and the juridical existence of FAPE as a legitimate organization to receive public funds and implement government programs. On the other hand, the Irrevocable trust fund created under EO 156, known as the Fund for Assistance to Private Education (FAPE), placed with the Land Bank of the Philippines (LBP), with a reported year-end equity of P184,378,049.69 has not been booked up as government funds, thus, increases or charges made to the fund since its creation has not been properly accounted and validated. (Paragraphs 99-141) We recommended the DepEd Management to: clarify and submit valid documents to ascertain legality and propriety of

yearly entrusting GASTPE funds with PEAC and commissioning FAPE

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as the service provider of the GASTPE program, INSET and Research Studies, as an exemption from the required bidding procedures of RA 9184;

consider the implementation of scholarship program under the GASTPE

using the existing manpower resources of the Department; initiate action for the recording of the Trust Fund account with LBP in

the books of DepEd for proper monitoring and accounting; and direct the opening of PEAC/FAPE’s books of accounts for audit by COA

for transparency and public accountability.

10. The DOs/schools’ in NCR and Region VI are remitting funds to the Payroll Fund (PF) account maintained in the Regional Office Proper (ROP) for the salaries of their respective teaching and non-teaching staff without valid obligations to be paid resulting to accumulation of excess balances of Cash in Bank, LCCA (PF) account in the amount of P1.337 billion as of year-end and misstatement of financial statements. (Paragraphs 142-150) We recommended that concerned ROP officials:

require DO/school officials to refrain from remitting funds to the PF

account intended for the salaries of their respective teaching and non-teaching staff unless supported with corresponding payrolls and SCDRs;

remit to the NT overremitted funds in PF account; and

review/update the existing plantilla of positions so that the required

allotment can be appropriated depending on the actual needs of the operating units and to avoid excessive releases of NCA.

11. In Region IV-A, due to unreliable RPSU database, inadequate systems controls,

inappropriate manning and inefficient processing of payrolls by the Secondary/Elementary Schools, Implementing Units (IUs), Division Offices (DOs) and the Regional Office (RO) resulted in the double issuance of pay slips, inclusion in the database of transferees, retired, resigned and deceased personnel, rejected payrolls and cancelled payroll checks, among others, causing the accumulation of idle funds in the RO’s payroll bank accounts of at least P19,378,307.76, overpayment in salaries/ allowances/benefits of employees no longer in service amounting to P3,076,803.40, and erroneous remittance of employees’ loans and premium contributions to GSIS, PAG-IBIG and PHILHEALTH and erroneous employees’ loan remittance to the PLIs. While in Region I, the cancelled payroll checks of retired, demised, transferred, resigned, etc. employees resulted to uncollected over remittances of employees payroll deductions to the GOCCs and different PLIs in the amount of P20,372,369.03 and P14,735,116.87, respectively. (Paragraphs 151-162)

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We recommended the Management to undertake the following courses of action:

For RO IV-A Director to –

o strengthen internal control system in the payroll processes through

appropriate review and approval by concerned officials of SS/ES/IUs/DOs and RO of payroll documents such as Form 7, DTRs, Application for Leave; Payroll Disbursement Reports, detailed Payrolls and other supporting papers, and their timely submission for updating of records and effecting actual service.

RPSU to –

o cause intensive cleansing of the database, updating of personnel

information on a regular basis though reconciliation of records with that of the DOs/IUs/SS/ES, comprehensive enhancement of the payroll system by ascertaining security features and access rights of users and facility for review and approval of all transactions;

o ensure that the Summary of Payroll/Disbursement Reports with detailed payrolls indicating the employees’ names and corresponding deductions be transmitted to the DOs/IUs with ample time for their review before transfer of payroll funds be made to the RO;

o determine the total amount of overpayment in salaries and cause

refund thereof in coordination with the concerned DOs/IUs and the amount of overpayment/over-remittance to the GOCCs and PLIs for the offsetting in future remittances.

Regional Accountant to –

o conduct thorough examination of the payroll fund bank accounts to determine rejected payrolls and cancelled checks and compute for the accurate amount of idle funds for immediate remittance to the BTr.

For RO I Director to –

o require RPSU to establish the over-remittance to the GOCCs and PLIs and intensify collections of receivables and enforcement of repayment thereof by sending demand letters to the GOCCs and the PLIs.

12. Out of the allotted Quick Response Fund totaling P1.827 billion in CY 2013, only

P848.9 or 46 percent were downloaded during the year, of which P687.5 or 81 percent of downloaded funds were only released in the last quarter of the year attributed to the procedural requirement of releasing the sub-allotment order only

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upon submission of Resolution to Award by the operating units thereby delaying the project implementation and depriving the communities with the much needed rehabilitation or replacement of damaged school buildings. (Paragraphs 163-175)

We recommended the Management to issue the sub-allotment order on the basis of cost allocation per damaged school to the recipient operating units as their authority to implement the repairs, rehabilitation or replacement of damaged school buildings and facilities affected by calamities for the efficient utilization and completion of projects to normalize as quickly as possible the situation of communities needing much of the availability of learning facilities.

13. Procurement for the construction, repair or rehabilitation of Classrooms/ School

Buildings in the total amount of P49,136,238.11 were conducted through Negotiated Procurement as provided under Section 53, Rule XVI of RA 9184 instead of competitive/ public bidding as required under Rule IV, Section 10 of the same Act, thus precluding transparency and competitiveness among the eligible contractors who are qualified in public bidding. (Paragraphs 176-184)

We recommended Management to strictly adhere with Section 10, Article IV of the Revised RA 9184 which encourages the adoption of Public Bidding in agency’s procurement. Should the agency resort to the alternative methods of procurement, it must ensure that all the conditions/ requisites that were spelled out in Rule XVI of the Revised IRR of RA 9184 are duly complied with. Otherwise, the transaction would be disallowed in audit in pursuance of Item 1, Annex B of COA Circular 2012-003 which provides that payment of claims under a contract awarded not strictly in accordance with the procedures prescribed under RA 9184 and its Revised IRR is a case of illegal expenditure or use of government funds.

14. Receipt of cash donations intended for the victims of man-made disasters in

Zamboanga City and natural calamities in Bohol and Tacloban City totaling P8,153,736.15 were not properly accounted for in the books of account in Regions NCR, IV-A, IV-B and XII due to non-issuance of Official Receipts (OR) contrary to Sections 63 and 68 (1) of PD 1445, otherwise known as the Government Auditing Code of the Philippines. (Paragraphs 185-194)

We recommended that the respective Cashier/Collecting Officer issue official receipts for every cash donations received from donors and deposit the same intact and in full to the authorized government depository banks so that the same could be properly recorded and accounted for in the books of accounts.

Financial and Compliance Audit

15. Non-adherence to the laws, rules and regulations regarding recording, handling and utilizations resulted not only to unaccounted and unrecorded collections in

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NCR totaling P7,671,715.90 but likewise exposed government funds to misappropriation and losses. On the other hand, the total amount of P23,079,419.79 in NETRC consisting of unsettled/unremitted collections on PEPT application fees and financial subsidy in the administration of PEPT, NAT, NCEE, and NSAT examinations remained unsettled by different regional and division offices for more than five years. (Paragraphs 195-203) We recommended that concerned officials strictly adhere to the laws, rules and regulations regarding recording, handling and utilization of collection, and recommended further that:

NCR officials -

require the associations/organizations to turn-over the collected fees to the authorized/designated collecting officer of the NCR so that the same could be properly accounted and recorded in the books of accounts. Ensure that collections of seminar/training/conference fees be done by the authorized collecting officer of the NCR instead of private associations/organizations.

DOs/Caloocan/Pasig and School Heads - direct all schools heads to properly account the fees collected from the

conduct of summer classes, document the corresponding expenses/charges made against said collections and remit to the National Treasury (NT) the remaining balance; and

stop collecting fees in the absence of an explicit DepEd guidelines and

impose sanctions on school heads who authorized the collection thereof. NETRC – coordinate with the respective Regional Offices and Division

Offices/Operating Units in the control and monitoring of the receivable accounts for the settlement of the unremitted income for the conduct of PEPT examinations; and

send demand letters to concerned officials for the immediate settlement

of their unliquidated financial subsidy in the administration of various examinations/test given by NETRC which had been long outstanding.

16. Maintenance of trust account in authorized government depository banks (AGDB)

for various collections received which aggregated to P155,963,172.15 as of year-end is without legal authority and contrary to pertinent provisions of Fiscal Year (FY) 2013 General Appropriations Act (GAA), DBM and DepEd Joint Circular (JC) No. 2004-01 and COA Circular Letter (CL) No. 2004-004. Further, monthly

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lapsed Notice of Cash Allocations (NCAs) were transferred to the same trust account in violation of Section 3.1 of DBM CL No. 2011-15 dated December 26, 2011.These practices limit the utilization of scarce government resources and expose them to possible misappropriation. (Paragraphs 204-210)

We recommended the Management to:

adhere strictly to the General Provisions of the GAA 2013 and deposit with the National Treasury all receipts covered under Section 2 of COA Circular Letter 2004-004 dated October 5, 2004 following the procedures prescribed under COA-DBM-DOF Joint Circular No. 1-97 dated January 2, 1997;

remit to the NT collections from various sources in compliance with the provisions of the abovementioned laws, rules and regulations; and

ensure maximum utilization of issued monthly NCAs to avoid lapsing and

refrain from depositing unutilized NCAs to the trust account maintained in the AGDB.

17. The non-completion/preparation and delayed submission of the monthly Bank

Reconciliation Statement (BRS) pursuant to Section 74, PD 1445 and COA Circular No. 96-001 resulted to the difficulty of ascertaining the accuracy and existence of the Cash in Bank, LCCA amounting to P9,588,155,391.14 and Cash– National Treasury, MDS of P1,135,633,925.18 as of December 31, 2013. (Paragraphs 211-216) We recommended that Management require respective offices/schools to:

make representation with the bank for early transmission of the bank

statement to the agency;

henceforth, regularly prepare monthly Bank Reconciliation Statement in order to reconcile the balance of Cash in Bank per General Ledger and per bank statement and to effect the necessary correcting / adjusting entries in the books of accounts. Submit the same to the Audit Teams on or before the 10th day of the ensuing month in conformity with Section 74 of PD 1445 and COA Circular No. 96-001.

18. Unutilized Notice of Cash Allocations (NCA) at the end of the month totaling

P67,117,474.48 were withdrawn as cash advances in the name of the cashier for payment of salaries, wages, benefits and miscellaneous and other operating expenses or drawn as advance remittances for the ensuing month’s GSIS, Pag-IBIG, PHILHEALTH, PLI premiums or transferred to Payroll Fund account to avoid reversion to the National Treasury contrary to Section 3.12.2 of DBM National Budget Circular No. 545 dated January 2, 2013. (Paragraphs 217-221)

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We recommended that Management require concerned office/school heads to: stop approving advance remittances or granting cash advances of the

cashier on the monthly unutilized amount of NCAs. The cashier should immediately liquidate the outstanding cash advances and deposit the remaining balance to the National Treasury;

require the Accountant/ Budget Officer not to obligate unutilized NCAs

at the end of the month so that it would be automatically reverted to the National Treasury;

stop the practice of transferring any unused balance of MDS Funds to the

savings account or any depository account of the school to be used in payment of other obligations and strictly comply with the provisions of DBM Circular Letter No. 2011-15 dated December 26, 2011 particularly Sections 2.0 and 3.0 thereof, and similar issuances on the matter, that any unused MDS Funds in a particular month shall automatically lapse at the end of that month; and

maximize the use of the monthly NCA releases to meet the school’s

obligations within the implementation period of a particular program/project/activity to avoid incurring unutilized funds.

19. The laws, rules and regulations in the granting, utilization and liquidation of cash

advances required under Section 89 of PD 1445 and COA Circular Nos. 97-002 and 2009-002 dated February 10, 1997 and May 18, 2009, respectively, were not strictly observed resulting in unliquidated cash advances granted to officers and employees totaling P2,226,039,492.01 in the financial statements of DepEd as of December 31, 2013 or an increase of P344,559,869.20 as of last year’s balance of P1,881,479,622.81, which resulted to unreliable balances of the receivable and affected expenditure accounts. (Paragraphs 222-238)

We recommended that Management:

demand from all officers and employees with outstanding balances to liquidate/settle immediately their cash advances and/or refund all unexpended balances pursuant to COA Circular No. 97-002 and COA Circular No. 2012-004, otherwise cause the suspension of salaries of erring accountable officers;

instruct their respective Accountants to draw journal entry voucher on

the misclassification of cash advances to reflect the correct balances of the affected accounts;

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stop the practice of granting additional cash advances unless the previous ones are settled;

grant cash advances to the AO only within the limits of his accountability.

If management decides to grant cash advances higher than the present, the amount of bond shall be increased to correspond with the schedule of cash accountability and bond issued by the Bureau of Treasury (BTr) in consonance with paragraphs 7.3 and 7.5 of COA Circular No. 97-002;

determine officials/employees who should be held responsible for

continuously violating the rules and regulations of Section 89 of PD No. 1449 on the granting of cash advances and enforce the imposition of applicable administrative and legal sanctions provided under PD No. 1445;

cause the recovery of unliquidated cash advances from any amount due

from those who have transferred, retired and separated from government service, and to file request for write off for the unliquidated cash advances of deceased Accountable Officers; and

henceforth, all concerned officers and employees strictly comply with

Section 89 of PD 1445 and COA Circular Nos. 97-002 and 2009-002 on the granting, utilization and liquidation of cash advances.

20. The lack of monitoring and reconciliation of fund transfers of OSEC with the

Procurement Service (PS) of the Department of Budget and Management (DBM) resulted to undelivered common-used office supplies, armchairs, IT packages, textbooks and vehicles amounting to P3.8 billion; overstatement of the account due to unrecorded deliveries worth P500,312,197; and, accumulation of long outstanding balance of P2,060,001,862 or 54 percent of the total prepayments aging over five years to more than ten years, rendering the account Due from NGAs-DBM-PS of P3,824,437,772 as of December 31, 2013 doubtful or unreliable. (Paragraphs 239-251)

We recommended that Management require the following OSEC officials:

Property Officer and the Accountant to exert efforts to reconcile the advances made to PS-DBM and make necessary adjustments in the DepEd-OSEC’s book balances;

Property Officer to make representation with the DBM-PS on the status of the procured items with them; and

Property Officer to apply its current requirements from the outstanding

balances with the PS-DBM and/or demand the refund of prepayments, and remit the same to the National Treasury.

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21. The non-adherence to the required submission of Liquidation Reports/Report of

Disbursements on project transferred funds within the prescribed period required by COA Circular No. 94-013 dated December 13, 1994 and COA Circular No. 2007-001 dated October 25, 2007, resulted in the accumulation of the unliquidated balances aged over one year to over 10 years of the accounts Due from National Government Agencies/Local Government Units/Non-Governmental Organizations/Private Organizations (NGAs/LGUs/NGOs/POs) with an aggregate amount of P417,494,778, which denied OSEC and the other offices with the complete monitoring of project accomplishments and proper accounting of fund utilization. Moreover, lack of monitoring and coordination on proper accounting treatment of fund transfers to various ROs/SBs overstated the account Due from Regional Office/Staff Bureaus (ROs/SBs) and overstated the Government Equity by P47,012,138 in OSEC. (Paragraphs 252-278)

We recommended that Management of:

OSEC – send demand letters and/or coordinate with the project implementers to

cause the submission of liquidation reports/report of disbursements on transferred funds for completed programs/projects for proper recording;

require TESDA to submit Progress and Liquidation Reports starting

from the school year of implementation of the Alternative Learning System Cum Madrasah Education for Muslim Out -of-School Youth (OSYS) program covering 2009-2013;

instruct the EWBD to monitor the status of the fund and require PFTEC to submit its financial record and a liquidation report in order to assess the reliability of the fund and the loans granted;

prepare the necessary adjusting journal entries on submitted liquidation reports to correct the balance of the affected accounts;

request authority from COA to write-off the dormant accounts following the guidelines provided under COA Circular No. 97-001. However, this can be done after management had shown that exhaustive efforts had been made to collect/settle the outstanding accounts;

reconcile and analyze the component of the receivable accounts with ROs/SBs and prepare the appropriate adjusting entries; and

henceforth, monitor the liquidation and reporting requirements of funds transferred to NGAs/LGUs/NGOs/POs pursuant to COA Circular Nos. 94-013 and 2007-001, and observe compliance on proper releasing of fund

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allocation to ROs/SBs as prescribed under GAFMIS Circular Letter No. 2003-004.

BAGUIO TEACHERS CAMP – determine all dormant receivables that are deemed uncollectible and file

the necessary request for the write-off thereof complete with supporting documents evidencing that efforts to collect the same were made.

22. The validity, accuracy, and existence of the reported balance of the Inventory accounts in the consolidated financial statements for CY 2013 totaling P3,022,603,927.25 cannot be fully relied upon due to absence/non-completion of inventory reports and non-maintenance of complete accounting and property records on inventories totaling P449,950,864.41, unrecorded issuances of supplies/inventories amounting to P137,470,616.49, direct charging to expense account of purchases totaling P236,466,273.33, and discrepancies between accounting and property/supply records amounting to P2,776,202.28. (Paragraphs 279-291) We recommended that Management of respective offices require the:

Property/Supply Officer/Inventory Committee to prepare the Report on

the Physical Count of Inventories every six months to be submitted to the Accounting Unit for reconciliation with the subsidiary records and Inventory accounts;

Property/Supply Officer to maintain updated stock cards to record receipt of deliveries, and issuances thereof summarized in the Report of Supplies and Materials Issued (RSMI) to be submitted to the Accounting Unit for recording; and

Accountant and the Supply Officer to monitor and reconcile their records

and make the necessary adjustments on the discrepancies noted to reflect the true balances of the Inventory accounts in the financial statements.

23. The absence of Report on the Physical Count of Property, Plant and Equipment

(RPCPPE), property cards/PPE Ledger Cards (PPELC) for PPEs totaling P17,512,333,074.68, unrecorded Land and other PPEs of P4,023,854,549.54, misclassification of accounts totaling P1,832,198,715.48 and erroneous recording resulting to net overstatement of P56,455,975.73, and reporting difference between inventory report and the books of account of P4,023,854,549.54 rendered the accuracy and existence of the reported balance of PPE totaling P82,504,912,278.83 in the DepEd consolidated financial statements as of December 31, 2013 unreliable. (Paragraphs 292-303)

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We recommended that Management of concerned offices/schools require the:

Inventory Committee to prepare the RPCPPE every year to be submitted to the Accounting Unit for reconciliation with the property/equipment subsidiary ledgers and PPE general ledger accounts;

Property Officer and the Accountant to maintain updated property cards and property/equipment subsidiary ledgers, respectively;

Accountant to prepare necessary adjusting entries for unrecorded,

misclassified and erroneous recording of PPE accounts to reflect a more reliable balance of PPE accounts in the financial statements, and exert efforts for the titling of the acquired land thru purchase and donation to have absolute ownership and establish its propriety in the financial reports; and

Accountant and the Property Officer to regularly monitor and reconcile

their records and make the necessary adjustments on the discrepancies noted to reflect the true balances of the PPE accounts in the financial statements.

24. Despite the mandatory requirement to insure all government properties with

General Insurance Fund of the Government Service Insurance System (GSIS) pursuant to Admin Order No. 33, dated August 25, 1987and COA Circular No. 92-390 dated November 11, 1992, school buildings, and other school properties in four regions with total book value of P6,851,431,047.10 remained not insured with GSIS General Insurance Fund exposing these properties to unnecessary risk of not being indemnified for any damage or loss due to any fortuitous events such as fire earthquake, typhoon and/or flood. (Paragraphs 304-310) We recommended the Management to revisit the Administrative Order No. 33 and COA Circular No. 92-390 and prepare and submit inventory reports of all insurable properties to GSIS to ensure that all insurable assets and properties are adequately covered/insured with the General Insurance Fund of the GSIS to properly protect the government properties in the event of serious loss such as fire earthquake, typhoon and/or flood.

25. Validity and reliability of the liability accounts cannot be ascertained due to recognition of undocumented payable accounts amounting P26,467,061.67, non-reversion of long outstanding payable accounts without existing valid claims of P15,154,676.81, and understatement of the account by P514,890,864.78 due to unrecorded deliveries, unadjusted unreleased check and accounting errors committed. (Paragraphs 311-320)

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We recommended the Management that the following be undertaken:

DepEd-OSEC Accountant – o submit the approved Program of Work for infrastructure projects

and Project Expenditures or Estimated Expenses on all paid fund transfers, and Official Receipt issued by recipient to DepEd-Central Office acknowledging receipt of transferred funds;

o comply strictly with the existing rules and regulations on the grant of

funds transferred to implementing agencies pursuant to the abovementioned guidelines to avoid audit suspension;

o prepare the Subsidiary Ledgers for each creditor/agency and perform monthly reconciliation between the subsidiary accounts and the control accounts in accordance with Section 12 of the NGAS Manual Vol. II;

o record transactions when they actually occurred or incurred in order

to reflect timely information of the financial statements, and prepare necessary adjusting entries;

DepEd IMCS and PFSED (and Property Division) to immediately

coordinate/submit delivery documents from suppliers to the Accounting Division for proper and timely recording of the transactions.

Region I Accountant –

o recognize liability at the actual time goods and service are rendered

and bills of suppliers are received in accordance with the Manual on NGAS and revert all outstanding balances which are more than two years without valid or actual claimants in accordance with Section 98 of Presidential Decree 1445.

Region III Accountant –

o conduct a thorough review on the transactions surrounding the incurrence of the negative balance of the Due to BIR account so that appropriate adjustments can be made in the books and that overpayments will be avoided.

Region IV-A Accountant – o analyze the component of the account Due to BIR and determine the

cause of the discrepancy;

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o submit all the necessary documents to substantiate accuracy, existence and completeness of the recorded payables and prepare adjustments, when applicable;

o maintain complete records including the Subsidiary Ledgers required

in PD 1445 to forestall similar lapses in the future; and

o prepare the necessary adjusting entries to reflect the accurate balances of the accounts for fair presentation in the financial statements.

Region IV–B Director – o require the Accountant to make necessary adjusting journal entry

reversing liabilities which are not legitimate obligations of the agency;

o instruct the Budget Officer and the Accountant to stop the practice of obligating year-end unexpended balance of MOOE allotment and recording fictitious transactions as payables; and

o institute necessary disciplinary action against the Accountant, Budget Officer and other persons liable for unjustifiable misstatement of payables and expenses accounts.

Region VI Accountant to verify the balances to make proper disposition

of the payables in pursuance to Section 98 of P.D. 1445.

26. GSIS, Pag-Ibig and Philhealth contribution/premium withheld from the salary, step increment/salary differential of employees in Regions II, III and IX were not remitted on time, as reflected from the deficiency in the remittance of the Division Offices to RO II on trust fund billing, and the accumulated balance of the respective trust liabilities account aggregating P807,497,556.13. Moreover, GSIS billing for unremitted compulsory contributions of DepEd-ARMM Basilan of P31,302,331.37 was no longer reflected in books, Furthermore, GSIS monthly loan amortization in RO I were not deducted from regular salaries, thus, placing at stake the full and continuous enjoyment of the benefits conferred, and entailing additional expenses for penalty charges. (Paragraphs 321-329)

We recommended that Management require the concerned officers of Regions I, II, III and IX to:

strictly adhere with Section 37 of GAA 2013 in order to forestall the imposition of sanctions spelled out in the aforesaid Section 52 of RA 8291 for those officials who failed to deduct the applicable GSIS loan amortizations from employees’ payroll;

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regularly and timely remit the employer and employee monthly premium contributions to avoid incurring any interest or penalties due to delayed remittances and so that the member employees will fully enjoy the services offered by the GSIS, Pag-Ibig and Philhealth; and

Accountant of Region IX properly disclose in the Notes to Financial

Statements the significant discussions on the account Due to GSIS that revealed an outstanding obligation of the unremitted account for DepEd-ARMM Basilan for May 2003 to June 2004.

27. The use of current allotment to pay prior year’s unobligated expenditures; use of

PS allotment for MOOE expenses and MOOE fund for capital expenditures; and use of Regular MOOE for other specially funded program expenditures, resulted to improper use of appropriations totaling P14,662,120.40 which violated pertinent provisions of the FY 2013 GAA. (Paragraphs 330-337)

We recommended that Management require concerned offices to observe prudence in the utilization of funds by strictly adhering to the pertinent provisions in the use of appropriations provided in the annual General Appropriations Act.

28. Various disbursements totaling P1,435,922,046.59 included payments of salary, terminal leave, honoraria, professional/ personnel benefits monetization, loyalty award, overtime pay, subscription, traveling expense and procurement which were found either contravening exiting government laws, rules and regulations or not supported with adequate documentation, thus casting doubts on the validity and propriety of expenditures. (Paragraphs 338-341)

We recommended that Management of concerned offices:

comply with the prescribed guidelines relative to pertinent rules and regulations on the payment of monetization, loyalty, payment to Job Order employees, overtime pay, gasoline expenses, and procurement of goods and services;

submit documents that will support the validity and regularity of the

disbursements; and require the Accountant/Bookkeeper to comply with Section 100 of P.D.

1445 on the submission of monthly reports of the agency transactions not later than the 5th day of the following month to the Auditor concerned.

29. Officials/personnel of some DepEd offices and schools involved in the

procurement of supplies, materials, services, equipment and infrastructure projects were unmindful of the related government rules and regulations on procurement resulting in the non-observance of the national government policy that procurement shall be done in the most transparent and competitive manner

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and to some extent, deprived the government to avail of the most reasonable price. (Paragraphs 342-347)

We recommended that management of concerned offices/schools observe faithful compliance with applicable rules and regulations of the Revised IRR of RA 9184 and other related government issuances on procurement.

G. IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS The status of implementation of Prior Years’ Audit Recommendations is

summarized below and shown in detail in Part III of this report.

Status of Implementation No. of Recommendation

Percentage to Total

Fully Implemented 2 6% Partially Implemented 30 88% Not Implemented 2 6%

Total 34 100% We enjoin management to ensure full implementation of all partially implemented

audit recommendations in prior years to improve the operational as well as financial efficiency of the agency.