Republic of the Philippines

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
NATIONAL GOVERNMENT SECTOR
Cluster 6 Health and Science
Department of Health
Sta. Cruz, Manila

CONFIDENTIAL

July 31, 2014

HON. ENRIQUE T. ONA, MD, FPCS, FACS

Secretary
Department of Health
San Lazaro Compound
Sta. Cruz, Manila

Dear Secretary Ona:

Management Letter on the Audit of the

Second Womens Health and Safe Motherhood Project (2WHSMP)
for the period January 1 December 31, 2013

1. Pursuant to Article IV (b.i-iii) of the Loan Agreement between the Government

of the Philippines (GOP) and the International Bank for Reconstruction and
Development (IBRD), we have audited the accounts and operations of the Second
Womens Health and Safe Motherhood Project (WHSMP2) for the period ended
December 31, 2013. The audit was conducted in accordance with applicable legal and
regulatory requirements, and generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain a reasonable basis for our
conclusions.

2. The audit was conducted by the audit team led by Mr. Modesto DG. De
Guzman, State Auditor III, Audit Team Leader to: (a) verify the level of assurance
that may be placed on managements assertions on the financial statements; (b)
recommend measures to improve the efficiency and effectiveness of program
operations; and (c) determine the extent of implementation of prior years audit
recommendations.

3. The Independent Auditors Report, Statement of Management Responsibility on

the Financial Statements, Projects financial conditions, results of operations, cash flow
statement and notes to the financial statements for calendar year 2013 compared with
that of preceding year are shown in Annexes A-F. The accounting errors and
deficiencies affecting the fair presentation of the financial statements are summarized in
Annex G.
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4. Deficiencies observed in the course of the audit were earlier communicated
through Audit Observation Memoranda and discussed in an exit conference conducted
on July 3, 2014 with concerned DOH officials and project personnel. Deficiencies
corrected during the year are no longer included in this report. Their comments were
incorporated in this letter, where appropriate. The significant audit observations and
recommendations shall be incorporated in the Consolidated Annual Audit Report
(CAAR) of the DOH for CY 2013.

A. Summary of Recommendations

5. For the significant deficiencies observed in the course of the audit, we

recommended that Management require the:

a. BIHC Project Management and the Accountant to: (i) to observe the ceiling
set forth in the GAA for extraordinary and miscellaneous expenses; and (ii)
refrain from incurring ineligible expenses like EME charged against Project
funds, otherwise, the same expenses in the future will be disallowed in audit.
(para. 15)

b. Accountant to prepare an adjustment to debit account Due to LGUs and

credit Government Equity/Accumulated Surplus/Deficit account, both by
P20,817,974.35. (para. 20)

c. Accountant to prepare an adjustment to debit the account Accounts Payable

and credit the Construction in Progress account, both by P5,014,631.20.
(para. 27)

d. BIHC PMO to: (i) strengthen its function in monitoring and ensuring that
project implementation and disbursements are within the budget and project
duration as per Loan agreement; and (ii) come up with a realistic project
implementation period and incorporate lessons learned from completed
projects to avoid incurrence of the same project deficiencies in the future.
(para. 32)

e. BIHC and Finance Service to prepare a complete Financial Monitoring

Report for CY 2013 in order to assess the performance of the Project. (para.
36)

f. BIHC Program Management to: (i) submit immediately to COA the DOH
reply on the Order to Answer, in compliance to the Commission Secretarys
letter dated October 30, 2013; and (ii) henceforth, for future project with
similar situation, strictly observe the salient provisions of the contract as
well as the governing implementing guidelines, if necessary, including fast
tracking of the MOA for purposes of setting up obligations to ensure the
timely release of funds and smooth implementation of the Project. (para. 53)

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 B. Detailed Observations and Recommendations

Financial and Compliance Audit

Excessive claims of expenses

Extraordinary and Miscellaneous Expenses( EME) amounting to P165,297.17 was

charged to the project, despite the EME limit provided in the General
Appropriation Act has been exhausted using the allotted budget for Fund 101,
contrary to Section 23 General Provisions of RA No. 10352, known as the General
Appropriations Act of FY 2013 and COA Circular No. 2012-003 dated October 29,
2012, thus, resulting in excessive claims by same amount.

6. Section 23, General Provisions of the General Appropriations Act (GAA)

regarding EME states that:

Appropriations authorized herein may be used for extraordinary expenses of the

following officials and those of equivalent rank as may be determined by the DBM,
not exceeding:

a). P220,000.00 for each Department Secretary

b). P90,000.00 for each Department Undersecretary
c). P50,000.00 for each Department Assistant Secretary
d). P38,000.00 for each head of bureau or organization of
equivalent
rank, and for each head of a Department Regional Office
e). P22,000.00 for each head of a Bureau Regional Office or
organization of equivalent rank; and
f). P16,000.00 for each Municipal Trial Court Judge, Municipal
Circuit Trial Judge, and Sharia Circuit Court Judge.

In addition, miscellaneous expenses not exceeding Seventy-Two Thousand Pesos

(P72,000.00) for each of the offices under the above named officials are herein
authorized.

No portion of the amounts authorized herein shall be used for salaries, wages,
allowances, confidential and intelligence expenses. In case of deficiency, the
requirements for the foregoing purposes shall be charged against savings of the
agency.

7. COA Circular No. 2012-003 dated October 29, 2012 provides the updated
guidelines for the prevention and disallowance of irregular, unnecessary, excessive,
extravagant and unconscionable expenditures. As cited under Annex B, paragraph 3.14
thereof, payment of extraordinary and miscellaneous expenses in excess of the
limitations is one of the cases that is considered illegal expenditures, hence,
disallowable in audit.

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 8. The objective of the Project was to assist the Borrower in improving womens
health by: (i) demonstrating in selected sites a sustainable model of delivering cost-
effective reproductive health services to disadvantaged women; and (ii) establishing
support systems to facilitate country-wide replication of lessons learned within the
framework of its Health Sector Reform Agenda (HSRA).

9. The EME account disclosed the following reimbursements of expenses that

were charged to the 2WHSMP:

Check
Payee Position CY 2013 No. Subtotal Total
Enrique T. Ona Secretary March 13 516431 27,282.37
May 16 516458 44,717.63 P 72,000.00
Madeleine De Rosas- Assistant
516445 15,704.15
Valera Secretary April 22
August 8 516473 31,627.70
May 9 516456 9,490.10
November 5 516496 14,507.60 71,329.55
Maylene M. Beltran Director IV August 28 516483 21,967.62 21,967.62
Total P165,297.17

10. The accounting records also showed that said mentioned officials claimed EME
under Fund 101 as follows:

Total Actual EME Allowable EME Excess EME

Name Position Level charged to F-101 per GAA Fund 101
(A) (B) (C) = A-B
Enrique T. Ona Secretary P 303,999.96 P 292,000.00 P11,999.96
Madeleine De Rosas-Valera Assistant Secretary 125,000.01 122,000.00 3,000.01
Maylene M. Beltran Director 110,000.04 110,000.00 .04
TOTAL P 539,000.01 524,000.00 15,000.01

11. Based on the table above, the three (3) officials except the Director had already
exhausted the allowable amount with an excess claims of P15,000.01 for Fund 101
alone.

12. Considering that the actual charges to EME has exceeded the limit, it is
inappropriate to charge to 2WHSMP the additional amount of P165,297.17, when EME
should be charged to GAA funds. Further, it has been observed that the above stated
provision per GAA was not strictly followed, thus, the total amount of P180,297.18 or
34.41 percent excess over the allowed rate is considered illegal pursuant to said RA
10352 and COA Circular No. 2012-003, as shown below:

Total Actual Total Actual Allowable Excess EME

Total EME
Position EME charged EME charged to EME per
Name Claimed
Level to F-101 2WHSMP GAA
(C) = A +B
(A) (B) (D) (E) = C-D
Enrique T. Ona Secretary P 303,999.96 P 72,000.00 P375,999.96 P 292,000.00 P 83,999.96
Madeleine De Assistant 71,329.55 196,329.56 122,000.00 74,329.56
Rosas-Valera Secretary 125,000.01
Maylene M. Director 110,000.04 21,967.62 131,967.66 110,000.00 21,967.66
Beltran
TOTAL P 539,000.01 P165,297.17 P704,297.18 P524,000.00 P180,297.18

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 % to Total 34.41%

13. Moreover, the expenses reimbursed include, among others, meals, coffee maker,
groceries, i-phone repair, e-tag load, and other supplies. However, the purpose of the
expenses incurred/paid with corresponding receipts were not disclosed, it only states
that payment of miscellaneous expenses were relative to the performance of duty as
officials involved in the project. It was not mentioned if these were related to the
attainment of the objectives of the Project, thus, the validity of these extraordinary and
miscellaneous expenses was doubtful.

14. These expenses were reflected in the CY 2013 Work and Financial Plan of
2WHSMP as administrative and operating expenses, however, these were not of the
nature or circumstance for the attainment of a major final output of the Project, which is
entitled leveraging services for priority health programs. The same EME were neither
used for the Project goals nor for its bonafide recipients.

15. We recommended and Management agreed to require the BIHC Project

Management and the Accountant to:

a) observe the ceiling set forth in the GAA for extraordinary and
miscellaneous expenses; and

b) refrain from incurring ineligible expenses like EME charged against

Project funds, otherwise, the same expenses in the future will be disallowed
in audit.

Error in recording payments of PBG incentive payables

The error in recording payments of payables made in CY 2013 of Performance

Based Grant (PBG) incentives of CY 2012 to the Local Government Units (LGUs),
resulted in the overstatement of the accounts Prior Years Adjustments and Due to
LGUs by P20,817,974.35.

16. COA Circular No. 2004-008 dated September 20, 2004 provides the updated
description of accounts under the New Government Accounting System, as follows:

Due to LGUs (418) is used to record the amount due to LGUs (provinces,
cities, municipalities and barangays)

Prior Years Adjustments (684) is used to debit or credit adjustment of prior

years income earned/expenses incurred.

17. The DOH was authorized to implement PBG activities under the 2WHSMP.
The PBG is granted by the Government of the Philippines (GOP), through the DOH, to
selected LGUs or health service provider or user out of the proceeds of the Loan to
finance, in part, the carrying out of the activities. The DOH shall release the funding in
the form of fund transfer, subject to liquidation, to these LGUs upon compliance of the
requirements or reimbursement of the amount advanced by them.

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18. The accounting records disclosed that request for funding of payments for PBG
covering CY 2012 amounting to P22,296,474.35 were made to various municipalities of
the Provinces of Surigao del Sur, Catanduanes, Albay, Masbate, and Sorsogon in CY
2013 (Annex A). The Accountant has set up payables and payments in the books of
accounts, as follows:

Prior Years Adjustments P22,296,474.35

Due to LGUs P22,296,474.35
#

Prior Years' Adjustments P20,817,974.35

Cash in Bank LCCA P20,817,974.35
#

19. However, the Accountant made an error in recording the payments as she
debited the account Prior Years Adjustments, instead of the Due to LGUs account. As a
result, there was an overstatement of both accounts Prior Years Adjustments and Due
to LGUs by P20,817,974.35.

20. We recommended and Management agreed to require the Accountant to

prepare an adjustment to debit account Due to LGUs and credit Government
Equity/Accumulated Surplus/Deficit account, both by P20,817,974.35.

Erroneous Setting-Up of Accounts Payable

The erroneous setting-up of Accounts Payable pertaining to direct payment

through World Bank (WB) in favor of Incore Builders & Development in the
upgrading of training center for BEMONC Skills Training was contrary to
paragraph 5.1.4.2 of Joint Circular No. 2-97 dated March 21, 1997, thus, resulting
in the overstatement of the accounts Construction in Progress (CIP) Agency
Assets and Accounts Payable both by P5,014,631.20.

21. Paragraph 5.1.4.2 of Joint Circular No. 2-97 dated March 21, 1997 provides for
the procedures in the direct payment scheme, among others are:

The Bureau of the Treasury (BTr) shall furnish the concerned National
Government Agencies (NGAs) a copy of the Journal Voucher (JV) together with
the withdrawal authorization/advice of payment or any proof of disbursement
received from the lending institution;

In the case of direct payment for civil works under the loan, the cost shall be
based on a certified copy of the duly approved billing. In either case, the
amount shown in the Certificate of Acceptance and/or copy of the duly approved
billing must reconcile with the amount shown in the withdrawal authorization;

The NGA shall request DBM for the issuance of an Non-Cash Availment
Authority (NCAA) to be supported by, among others, a copy of BTr JV
recording the amount paid directly by the lending institution to the supplier
/contractor as proceeds of borrowings: and
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 The NGA upon receipt of NCAA shall record in its books of accounts to
liquidate the obligations incurred.

22. The upgrading of training center for BEMONC Skills Training was funded by
2WHSMP wherein the DOH transferred the amount of P794,397.02 to Dr. Jose Fabella
Memorial Hospital (DJFMH) on April 15, 2013 to cover the 15% advance payment to
Incore Builders & Development. The amount of $95,372.52 or P4,220,234.18 was a
direct payment through WB on December 26, 2013 per WB Payment Advice No. 0073.

23. The recording of the transactions regarding the fund transfer and direct payment
were as follows:

Date Transaction Accounting entry made

04/15/13 Transfer of funds to DJFMH for the Due from OUs 49,649.81
upgrading of training center for BEMONC Cash-NT,MDS 49,649.81
Skills Training Course to cover the 15%
advance payment to Incore Builders &
Development (GOP counterpart)
04/15/13 Transfer of funds to DJFMH for the Due from OUs 744,747.21
upgrading of training center for BEMONC Cash in Bank-LCCA 744,747.21
Skills Training Course to cover the 15%
advance payment to Incore Builders &
Development (LP counterpart)
10/25/13 Set-up accounts payable to Incore Builders CIP 5,295,980.15
and Development for the upgrading of Accounts payable 5,295,980.15
training center
12/27/13 Record tax withheld from Incore Building Accounts payable 281,348.95
& Development Due to BIR 281,348.95

24. In the contract agreement between the DJFMH and Incore Builders, it was
stated that the contract price is P5,295,980.15 and that the DJFMH shall pay the
Contractor in consideration of the execution and completion of the works under the
provisions and manner prescribed by the contract.

25. As can be inferred from the table above, the balance of the accounts CIP and
Accounts Payable include the amount of P794,397.02, representing the transfer of fund
made to DJFMH covering the 15% advance payment to Incore Builders &
Development for the said project. The said amount should have not been taken up
under the account CIP or included in the payable account, as no liquidation yet was
made by the DJFMH. Moreover, the amount of P4,220,234.18, corresponding to the
direct payment through World Bank in favor of the contractor should have not been set-
up as payable, as there was no copy of JV received by the DOH from the BTR, as basis
in the recording, as prescribed under paragraph 5.1.4.2 of Joint Circular No. 2-97. As a
result, the accounts Construction in Progress Agency Assets and Accounts Payable
were both overstated by P5,014,631.20,

26. The account Due to BIR of P281,348.95 previously recorded under Accounts
Payable with corresponding amount for CIP is not affected, since the tax has been
remitted to the BIR, hence, it is appropriate now to recognize under CIP account.

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27. We recommended and Management agreed to require the Accountant to
prepare an adjustment to debit the account Accounts Payable and credit the CIP
account, both by P5,014,631.20.

Incurrence of unnecessary commitment fees

The failure of the Project Management OfficeBIHC/DOH to meet the project

time of implementation, despite the extension granted resulted in the non-
availment of loan proceeds in the amount of P101,009,596.00, thereby incurring a
commitment fees in the amount of P395,710.80.

28. The project commenced its operations in January 2006 and was expected to be
completed by December 31, 2011 while closing date shall be June 30, 2012, but it was
revised to December 31, 2013.

29. Despite the extensions granted by financing banks the project was still behind
the scheduled time of implementation, as shown below:

Physical Accomplishment
Project Remarks
Target Actual Slippage
Closed in December 2013 with 87%
2WHSMP WB 100% 87% 13% physical accomplishment and loan
utilization of 73%

30. The total amount of P101,009,596.00 loan proceeds were not availed of, thereby
incurring a commitment fees of P395,710.80 for CY 2013.

31. The following were the causes of the non-utilization and failure to complete the
project:

Cancellation of consulting services for End Line Survey and Assessment of

BEmONC Functionality in the Project Sites.
Non-payment of PBG claims by the LGUs due to disbursement deadline of WB
on December 31, 2013 (P80M of the obligated PBGs were not processed.).
Bid failure of Procurement of Blood Bank Equipment and IT and other training
equipment.
Cancellation of training/workshops due to moratorium issued by the Secretary
due typhoon Yolanda.

32. We reiterated our last years audit recommendations and Management

agreed to require the BIHC PMO to strengthen its function in monitoring and
ensuring that project implementation and disbursements are within the budget
and project duration as per Loan agreement and come up with a realistic project
implementation period and incorporate lessons learned from completed projects to
avoid incurrence of the same project deficiencies in the future.

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Non-preparation of a complete Financial Monitoring Report

The Financial Monitoring Report (FMR) for CY 2013, showing the targeted vis-a-
vis actual accomplishments and disbursements, as required by the World Bank
and other stakeholders, in accordance with Section 4.02 of the Loan Agreement,
was not prepared completely upon/after the closing of the Project, hence, the
Project performance and resulting outcomes/outputs for CY 2013 can neither be
measured nor determined.

33. The Second Womens Health and Safe Motherhood Project is funded by the
International Bank for Reconstruction and Development (IBRD)/World Bank (WB)
under Loan Account No. 7290-PH in the amount of US$16,000,000, equivalent to
P838,576,150.00. The loan agreement was amended and restated on September 30,
2010. Under the newly amended loan agreement, Section 2.03 provides that the
Closing Date shall be June 30, 2013, which was subsequently extended until December
31, 2013.

34. The DOH, as signatory to the loan agreement and lead agency in managing and
implementing health sector programs and projects, prepares and submits Work and
Financial Plan (WFP), monitors the budget utilization and reports the financial and
physical accomplishments to the stakeholders and funders. In order for the DOH to
monitor the progress of program implementation against financial targets or program
accomplishments, the program management ensured complete, accurate and reliable
financial information.

35. Section 4.02 of the Loan Agreement, as follows, requires the DOH, through
BIHC, to report on the status of loan:

a) Without limitation upon the Borrowers progress reporting obligations set out in
paragraph 8 of Schedule 5 to this Agreement, the Borrower shall prepare and
furnish to the Bank a financial monitoring report (FMR), in form and substance
satisfactory to the Bank, which:

(i) Sets forth sources and uses of funds for the Project, both cumulatively and
for the period covered by said report, showing separately funds provided
under the Loan, and explains variances between the actual and planned
uses of such funds.

(ii) Describes physical progress in project both cumulatively and for the period
covered by said report, showing separately funds provided under the Loan,
and explains variances between the actual and planned project
implementation.

36. Management disclosed that the Statement of Sources and Utilization of fund per
Category, which is part of the FMR, was prepared but it only covers the 1st semester of
CY 2013. On the other hand, the project physical accomplishment, which is also a part
of the FMR, showing the project outcomes in accordance with the performance
indicators as stated in the loan agreement, was not prepared/submitted, thus, the overall
project performance cannot be measured and the resulting outcomes/outputs cannot be
determined for the calendar period 2013.
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37. The present accounting staff assigned confirmed that the FMR was not
completely prepared and she is currently updating the Statement of Sources and
Utilization of Fund for CY 2013. The documents turned over by the former Project
financial analyst does not include the FMR, hence, its whereabouts cannot be
determined, and assumed lost or destroyed.

38. We recommended and Management agreed to require the BIHC and the
Finance Service to prepare a complete FMR for CY 2013 in order to assess the
performance of the Project.

Value for Money Audit

Unbooked obligations of PBG incentives for CY 2008-2011

Poor monitoring, lack of coordination and non-observance of the DOH

Department Order No. 2007-0098 and the provisions of the Performance Based
Grant (PBG) contract, both by the BIHC Program Management and the
participating Provincial/Local Government Units (P/LGUs), resulted in the non-
obligation and non-payment of PBG incentives for the period FY 2008-2011
amounting to P80,071,266.31, which also deprived said P/LGUs of the benefit
entitled thereon.

39. The DOH was authorized to implement PBG activities under the 2WHSMP
covering CY 2006-2012. The PBG is granted by the Government of the Philippines
(GOP), through the DOH, to selected LGUs or health service provider or user out of the
proceeds of the Loan to finance, in part, the carrying out of the activities. The DOH
shall release the funding, in the form of fund transfer, subject to liquidation, to these
LGUs upon compliance of the requirements or reimbursement of the amount advanced
by them pursuant to the Department Order No. 2007-0098 dated October 15, 2007, the
Guidelines for the Release and Utilization of Performance-Based Grants of the Second
Womens Health and Safe Motherhood Project (2WHSMP), which provides the
following:

The PBG contract between the DOH and the Provincial Government regarding
the release, disbursement, and utilization of funds for said grants, the following
guidelines shall be strictly observed:

4.1 Facility-based Childbirth

f. At the end of each MONTH, MLGU:

Replenishes the Project account by an amount equal to P500 for every FBC-
PBG paid during the month plus all other payments made out of the Project
account. Note that the account balance plus the reimbursements due from DOH
(i.e. P1,000 for every FBC-PBG) should equal the initial deposit.

10
 Prepares required documents and requests replenishment of P1,000 per
qualified FBC through the Provincial Project Management Team (PPMT). (Note
that one of the required documents is a copy of the latest Bank Statement for the
MLGU Project Account as evidence of satisfactory compliance with the
requirement under the Project Loan Agreement, to replenish its Project account
on a monthly basis, including but not limited to the MLGUs P500 share of FBC
PBG payments made in the previous month.)
o At the end of the month, PPMT:
o Verifies consistency of List of Awardees with Provincial indigent list.
o Verifies that the MLGU has replenished the Project Account
accordingly.
o Endorses payment of the PBG to the Provincial Treasurer.
o Provincial treasure reimburses the MLGU P1,000 per eligible FBC-
PBG paid
o PLGU requests replenishment from DOH when its account balance
falls below 50% of initial deposit

40. In addition to the general guidelines under Department Order No. 2007-0098
dated October 15, 2007, amendments to the process flow of payment was enunciated in
Annex A Operating Guidelines on the Amended PBG Contract between the DOH and
Provincial Government of Sorsogon, viz:

The PLGU, through the PPMT shall request reimbursement from the
DOH by submitting a consolidated report of FBCs.
DOH reimburses the MLGU P1,000.00 for every eligible FBC-PBG the
MLGU has paid out.
If finances of the MLGU is not sufficient to fund advances for FBC, the
MLGU through PPMT may request for advances from DOH by
submitting a summary of FBC claims for payment.
DOH shall effect the corresponding fund transfer to the PLGU after
verifying the validity of the above claims.

41. Article II of the amended PBG contract states that the DOH shall:

Provide logistical and technical support to the PPMT for the overall
planning, management and coordination of PBG activities and
operations.
Ensure timely release of funds to the Province based on validated
physical accomplishment reports.
Monitor the implementation of PBG Contract activities and ensure
satisfactory outputs as defined in Operating Guidelines for PBGs.

42. The PBG component of the project was to be given to beneficiary provinces as a
reward in implementing the WHSMP2 activities from FY 2008 to FY 2012.
Reimbursement claims amounting to P80,071,266.31 was not paid to concerned LGUs
by the DOH as of December 31, 2012 because the allotment for the PBG as reward to
the LGUs of the previous years are no longer available due to the delay in the signing of
11
MOA of the LGUs. Since the contracts/MOAs with LGUs were not obligated prior to
lapse of the allotment, the said reimbursement claims became unbooked obligations.

43. The accounting records showed that request for funding of payments for PBG
covering FY 2008-2011 amounting to P 80,071,266.31 were made by various
municipalities of the Provinces of Surigao del Sur, Catanduanes, Albay, Masbate, and
Sorsogon sometime in June 2013.

44. The Budget Division disclosed that they have requested from the DBM for
authority to utilize current years allotment for the said project under Item No. B.II.a of
the FY 2013 DOH Budget, RA 10352 due to urgency to obligate said payments by June
30, 2013 and to effect these payments before September 30, 2013 as the loan closing
date is on December 31, 2013.

45. The DBM, in its letter dated July 19, 2013, granted the request of the DOH to
pay the unbooked obligations chargeable against any savings realized from the current
released allotment, payment of which is subject to COA validation.

46. The COA DOH had, in a number of requests for certification on the validity of
unbooked obligations by the DOH, on various dates in 2012, returned the same without
action informing that the certification is contrary to the stand of COA on the matter as
explained in the copy of the letter dated 28 March 2008 of then COA Chair Reynaldo A.
Villar to DBM Secretary Rolando G. Andaya, Jr.

47. In said letter of then COA Chair Reynaldo A. Villar to then DBM Secretary
Rolando G. Andaya, Jr., claimants of unbooked obligations may file their individual
money claims directly with the COA Commission Proper (CP) in the exercise of its
original jurisdiction to adjudicate specific money claims against the government based
on quantum meruit on a case-to-case basis.

48. On August 22, 2013, the DOH wrote the COA CP requesting issuance of COA
validation to pay the unbooked prior years obligations covering the PBGs of the LGUs.
In response to their letter, the Commission Secretary, in her letter dated September 4,
2013, requested the DOH to advise the LGU claimants to file a petition for money
claims in accordance with the 2009 Revised Rules of Procedures of the COA.

49. On October 30, 2013, the Commission Secretary issued to the DOH an Order to
Answer, which up to now has not been submitted by the DOH.

50. The Chief Accountant disclosed that Management did not submit anymore the
Answer, instead they informed the concerned LGUs claimants to file their petition for
money claims directly to COA CP.

51. The COA is observing strictly the process for money claims including the
timelines and until such time that the DOH submit their answer, there is nothing to be
acted by the CP.

52. Had the guidelines on PBG incentives were strictly followed, there would have
been no delay in the payments of PBG incentives covering FY 2008 to 2011. It is
already provided in the Department Order No. 2007-0098 that, each month, the MLGUs
12
of the Province shall submit the necessary documents and at the same time the PPMT
shall verify it for replenishment. Under Article II of the PBG contract, the DOH Project
management is duty-bound to provide logistical and technical support to the PPMT and
monitor the coordination and implementation of PBG activities and operations,
however, it failed to perform said duties/responsibilities.

Furthermore, poor monitoring and lack of coordination between the BIHC and
participating provincial/local government units were other reasons why the
reimbursement of PBG were submitted way behind from the year of its incurrence.
Considering that the reimbursable PBG by the LGUs occurred in CY 2008 2011, they
should have been reimbursed on the same year, pursuant to amended PBG contract and
did not wait until the allotment has lapsed.

53. We recommended and Management agreed to require the BIHC Program

Management to: (a) submit immediately to COA the DOH reply on the Order to
Answer, in compliance to the Commission Secretarys letter dated October 30,
2013; and (b) henceforth, for future project with similar situation, strictly observe
the salient provisions of the contract as well as the governing implementing
guidelines, if necessary, including fast tracking of the MOA for purposes of setting
up obligations to ensure the timely release of funds and smooth implementation of
the Project.

C. Status of Implementation of Prior Years Audit

Recommendations

54. We made a follow-up on the action taken by DOH Management to implement

the recommendations of prior years and noted the following:

Status of Implementation No. of Recommendations

Fully Implemented 7
Partially Implemented/ Ongoing 1
Not Implemented -
Total 8

55. The results of the validation of the implementation of prior years

recommendations are presented in Annex H.

56. Audit observations and recommendations with impact on the financial

statements are reiterated with modification in Part B of this report.

D. Acknowledgement

57. We wish to express our appreciation to the Management and project officials
and staff of the DOH for the cooperation and assistance extended to our audit team
during the audit.
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58. We request a status report (in hard and soft copy) on the actions taken on the
audit recommendations within sixty (60) days from the date of receipt hereof, pursuant
to Section 90 of the General Provisions of the General Appropriations Act of 2013 (RA
No. 10352), using the attached Agency Action Plan and Status of Implementation
(Annex I).

Very truly yours,

MARIBETH F. DE JESUS
Supervising Auditor
DOH Audit Group

Copy furnished:

The Funder
The Director, DOH-BIHC
The Director, Cluster 6, NGS
The ATL, DOH OSEC FAPs/Loans & Grants

Annexes:

A - Independent Auditors Report

B - Statement of Management Responsibility on the Financial Statements
C - Balance Sheet
D - Statement of Income and Expenses
E - Statement of Cash Flows
F - Notes to Financial Statements
G - Matrix of Accounting Errors and Deficiencies
H - Validation of Implementation of Prior Years Audit Recommendations
I - Agency Action Plan and Status of Implementation

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