OBSERVATIONS AND RECOMMENDATIONS

Value for Money Audit

Budget Utilization

1. The DepEd year-end reports reflected a favorable improvement in the utilization

of allotment in CY 2017 compared to previous years, as only P15,734,573,153 or
three percent had remained unutilized as of year-end. However, achieving the
desired physical outputs for the year were not fully realized as operational lapses
in budget utilization were still noted, such as: a) unutilized allotment of
P8,319,938,425 caused by delay in the implementation of Government Assitance
to Students and Teachers in Private Education (GASTPE) grants and Science
and Mathematics Equipment (SME) procurement in Central Office (CO),
unfilled positions for teaching and non-teaching personnel and unmet number of
school children served in the implementation of School-Based Feeding Program
(SBFP) in National Capital Region (NCR), and the late fund releases to operating
units and schools reported in five Regions; b) obligations for programs/projects
of P56,271,465,649 incurred in CO were only made in the latter part of the year,
including the amount of P13,701,515,748 as fund transfer to Department of
Budget and Management – Procurement Service (DBM-PS), thus deliveries of
their physical targets are definitely deferred to succeeding year; and c)
obligations incurred without valid and legitimate claims of P1,283,242,303 in
NCR. Moreover, other deficiencies relating to fund utilization also exist, such as
incurrence of overdrafts in allotment and obligation in CO, low capacity on
disbursement in CO and Cordillera Administrative Region (CAR) and not fully
utilized cash allocations for the year in CO, RO IX and NCR.
1.1 The DepEd is mandated to formulate, implement, and coordinate policies, plans,
programs and projects in the areas of formal and non-formal basic education and
to provide for the establishment and maintenance of a complete, adequate, and
integrated system of basic education relevant to the goals of national
development.

1.2 National Budget Circular (NBC) No. 567 dated January 3, 2017 issued by the
Department of Budget and Management provides for the Guidelines on the
Release of Funds for Fiscal Year (FY) 2017, as follows:

a. The appropriations authorized under RA No. 10924 shall be valid for release
and obligation for the purpose specified and subject to the pertinent special
and general provisions:

 For Personnel Services (PS) - until December 31, 2017; and

 For Maintenance and Other Operating Expenses (MOOE), Capital Outlays

and Financial Expenses - until December 31, 2018.

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 b. The President’s veto message for Item III.A of the FY 2017 budget directed
all agency heads to ensure obligation of programs, activities and projects
funded under FY 2017 General Appropriations Act (GAA) not later than
December 31, 2017.

c. Other Timelines –

The appropriations under the following shall be available for release and
obligation of Special Allotment Release Order (SARO) for the specified
purposes:

 FY 2016 Continuing Appropriations for MOOE and Capital Outlay until

December 31, 2017; and

 All FY 2017 programmed amounts under Automatic Appropriations

for PS, MOOE, and Capital Outlay until December 31, 2017.

1.3 In FY 2017, DepEd has a total consolidated available allotment1 of

P471,982,544,896, of which only three percent or P15,734,573,153 remained
unutilized as of year-end. Details are as follows:
Obligations Incurred Unutilized Balance Overall
Transfer/ Available
Office Year Allotment Unutilized
Sub-allotment Allotment Amount % Amount %
%
a b c=a+b d d/c e=c-d e/c
2017 79,950,158,350 (16,757,290,821) 63,192,867,529 59,442,626,208 94 3,750,241,322 6 24
CO
2016 28,501,438,719 (6,584,642,139) 21,916,796,580 18,179,693,879 83 3,737,102,701 17 24
Sub-total 108,451,597,069 (23,341,932,960) 85,109,664,109 77,622,320,087 91 7,487,344,023 9 48
2017 356,955,803,234 16,757,290,821 373,713,094,054 367,332,070,248 98 6,381,023,806 2 41
RO
2016 6,575,144,593 6,584,642,139 13,159,786,732 11,293,581,408 86 1,866,205,324 14 12
Sub-total 363,530,947,827 23,341,932,960 386,872,880,786 378,625,651,656 98 8,247,229,130 2 52
Total 471,982,544,896 - 471,982,544,895 456,247,971,743 97 15,734,573,153 3 100

1.4 A three year period analysis of DepEd’s budget utilization showed a decline in
the unutilized amount, wherein from the 12 percent unutilized budget in 2015
and 10 percent in 2016, it was further reduced to three percent in 2017, to wit:
Year Allotment Obligations Incurred Unutilized Allotment %
2015 351,113,569,961 308,135,967,600 42,977,602,361 12
2016 412,434,829,282 369,435,120,445 42,999,708,837 10
2017 471,982,544,896 456,247,971,743 15,734,573,153 3

1.5 Review of the Status of Appropriations, Allotments, Obligations, Disbursements

and Balances (SAAODB) and corresponding registries in the CO and in the
following regions revealed the following observations:

a.) Unutilized allotment amounting to P8,319,938,425 due to delay in the

implementation of program activities and fund releases to operating units
and schools affecting the timely delivery of intended basic education
services

1
FY 2017 Status Of Appropriations, Allotments, Obligations,Disbursements and Balances as of March 6, 2018
93
 CO/ Unutilized
Remarks
Region Amount
CO 7,487,344,023 The amount of P7,487,344,023 unutilized allotments from several
programs/projects/activities (PPA) includes huge balances of the
following PPAs:

Assistance to Students and Teachers in Private Schools and in Non-

DepEd Public Schools (GASTPE) – P2,293,760,114

The allocated amount for GASTPE has not been fully utilized as
based on BAR No.1: Physical Report of Operation for the funds
covering FYs 2016 (continuing) and 2017 (current), the targeted
4,489,195 numbers of grantees have not been achieved showing
shortfall in grantees of 942,060. The provision of grants has yet been
maximized because the validation for some recipients is still on-
going.

Physical Physical
Program Difference
Targets Accomplishment
Educational
Service
Contracting
2,139,819 1,906,505 233,314
(ESC) for Private
Junior High
School
Senior High
School Voucher
2,037,729 1,550,434 487,295
Program (SHS-
VP)
Voucher Program
for Non- DepEd 211,647 90,196 121,451
Public SHS
Joint Delivery for
Technical-
Vocational- 100,000 - 100,000
Livelihood (TVL)
Specialization
Total 4,489,195 3,547,135 942,060

Science and Mathematics Equipment – P2,193,177,344

Most of the unutilized allotment was due to recurring problems in

the procurement of SME’s which eventually caused the derailment
of planned activities for the year. Based on the 2017 Procurement
Monitoring Report, P592,816,132 or 27 percent of the unprocured
equipment was attributed to failed biddings.

Details 2017 2016 Total

Allotment 4,543,176,000 2,400,346,000 6,943,522,000
Awarded Contracts 3,016,059,906 1,734,284,750 4,750,344,656
Details 2017 2016 Total
Unprocured SMEs 1,527,116,094 666,061,250 2,193,177,344
% of Unprocured SMEs 34 28 32
Failed Bidding 177,394,913 415,421,219 592,816,132
% of failed bidding on
12 62 27
unprocured SMEs

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 CO/ Unutilized
Remarks
Region Amount
NCR 733,715,404 Of the total allotments of P30,538,617,491.74, a total of
P29,804,902,087.06 or 97.60 percent was obligated, leaving an
unutilized balance of ₱733,715,404.68 or 2.40 percent, of which
P621,500,267.88 pertains to the following:

Unobligated PS allotment amounting to P546,197,741.12

The amount is part of the allocation for the hiring and creation/filling
up of positions for elementary and secondary schools teaching and
non-teaching personnel and the corresponding Retirement and Life
Insurance Premiums (RLIP). The non-obligation thereof was
attributable to the 6,433 unfilled positions of teaching and non-
teaching personnel for the new items and natural vacancies
(retirement/resignation/transfer), over-allotment provided to
Implementing Units (IUs), unavailability of new applicants for
specific track/strand and transfer of plantilla items from IUs to Non-
IUs.
Particulars Amount
Elementary Education (Elementary Schools) 16,358,916.35
Secondary Education ( Secondary Schools) 434,266,484.70
Creation and Filling - up of Positions 36,549,726.97
RLIP - Elementary Education 2,139,667.01
RLIP - Secondary Education (Secondary Schools) 54,822,703.72
RLIP - Creation and Filling-Up of Positions 2,060,242.37
Unobligated PS allotment 546,197,741.12

Unobligated MOOE allotment of P38,856,116.76 for School Based

Feeding Program (SBFP) for SY 2017-2018

The unutilized balance of SBFP funds amounting to P38,856,116.76

as of December 31, 2017 was caused by the decrease in the actual
number of beneficiaries as against the target number thereof, wherein
NCR targeted the 174,811 beneficiaries but only 158,403 or 91
percent were actually served or a difference by 16,408 school
children.

Unobligated MOOE allotment of P36,446,410.00 for Basic

Educational Facilities Fund-School Furniture Program (BEFF-
SFP) of CY 2017

The procurement activities for the SFP started only on November 9,

2017. The Sub-ARO from DepEd CO was released on December 12,
2017. There was also a failure of bidding that occurred in the opening
of bids on December 6, 2017 that became the main cause of the
unprocured school furniture for the recipient schools with a total
amount of P36,446,410.00.
RO III 840,809 DO Mabalacat City had unutilized allotment of P840,809 as of
December 31, 2017 for its special programs/projects. Among the
reasons cited were lack of program preparation and having no filed
claims from program-takers indicating that intended delivery of
physical outputs out of the fund was not achieved.
RO IX 34,084,930 The Regional Office Proper (ROP) reported unutilized Sub-AROs
from CO amounting to P34,084,930. Validation revealed that 83
percent or P28,356,300 of the unutilized Sub-AROs were only sub-
allotted and received by the ROP in December 2017. This resulted to

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 CO/ Unutilized
Remarks
Region Amount
the non-implementation of scheduled program/project/activity
(PPA) during the year, among which are the following:

PPAs Amount
Provision and Maintenance of Basic Education 9,926,100
Facilities
Human Resource Development for Teaching, 6,960,000
Teaching-Related, Non-Teaching and Other
Personnel
Basic Education Madrasah 3,998,400
Implementation of Alternative Learning and 3,000,000
Delivery Mode Programs including
Requirement of Learning Centers
Department of Education Computerization 783,200
Program (DCP)

RO XI 40,016,226 The unutilized budget pertains to the allocations for MOOE in the
DOs of Davao City, Compostela Valley and Davao Oriental,
consiting of 284 schools that were not able to request all their CY
2017 MOOE allocation caused by, among the reasons cited, delayed
release of budget allocation, delay in the processing of cash advance
requests and liquidaton reports.
RO XIII 23,937,033 Verification revealed that the unutilized budget were sub-allotments
received from CO by the ROP, Nasipit National Vocational School,
DOs Agusan del Norte, Agusan del Sur and Bayugan City for the
programs listed below. Factors that contributed to the low utilization
of funds are: i) incurrence of delay in the release of funds; ii)
unsettled previous cash advances which prevents the SBFP
Coordinator from drawing another cash advance for the next feeding
period; and iii) lack of proper coordination between the Curriculum
Implementation Division and Budget Unit.

PPAs Amount
Human Resource Development for Teaching, 10,177,000
Teaching-Related, Non-Teaching and Other
Personnel
Implementation of Alternative Learning and 4,084,057
Delivery Mode (ALDM) Programs, including
Requirement of Learning Centers
SBFP 3,295,773
Implementation of Alternative Learning 2,693,278
System Integrated Education and Skills
Training (ALS-IEST) Program
Textbooks/ Instructional Materials (TX/IMs), 2,077,725
including ₱100 Million for Children with
Special Needs
PPAs Amount
DCP 1,609,200
Total 23,937,033

Total 8,319,938,425

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 b.) Obligations totaling P56,271,465,649 incurred in the latter part of the year
including committed fund transfer to DBM-PS that deferred the delivery of
physical targets to succeeding year

1.6 In CO, the significant portion of the obligated allotment was made on the latter
part of the year wherein P56,271,465,649 or 73 percent were obligated in the
month of December 2017, or comprising about 40 to 99 percent of the total
obligated amounts for the following programs:

Allotments
Total Obligated Obligated
Program/Project Allotments only in % Remarks
As of December
31, 2017
December
2017
1) Implementation 7,823,449,349 7,815,960,303 99 Out of the physical target of
of the 15,707 TVL packages, no
Redesigned items were procured. Thus, the
Technical- amount of P7,812,673,323 out
of the obligated amount of
Vocational
P7,815,960,303 in
High School December 2017 was
(RTVHS) transferred to DBM-PS.
Program
2) TX/IMs, 6,327,286,828 6,162,466,134 97 Out of the physical target of
including ₱100 77,425,496
Million for Textbooks/Teacher’s Manuals
Children with (TX/ TMs), only 22,270,000
Special Needs or 29 percent was delivered in
CY 2017, expecting the
completion of distribution of
55,155,496 TX/TMs or 71
percent in CY 2018.
3) DCP 11,491,878,829 10,968,268,292 95 Out of the physical target of
50,567 Information and
Communication Technology
(ICT) packages, only 889 or
two percent was delivered in
CY 2017, expecting the
completion of distribution of
49,678 ICT packages or 98
percent in CY 2018.
4) SME 4,750,344,656 3,373,114,756 71 Out of the physical target of
15,627 SME packages, only
3,948 or 25 percent was
delivered in CY 2017,
expecting the completion of
distribution of 11,679 SME
packages or 75 percent in CY
2018.
5) GASTPE 41,116,305,954 25,535,009,076 62 The December 2017
disbursements revealed that
total amount of
P22,783,072,346 were mostly
for the account of the SHS-VP,
where the participating
schools must create the billing
statement for the first semester
from July 1, 2017 to October
31, 2017 and the billing

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 Allotments
Total Obligated Obligated
Program/Project Allotments only in % Remarks
As of December
31, 2017
December
2017
statement for the second
semester from December 1,
2017 to March 31, 2018 for
SY 2017-2018 grants. It was,
however, noted from paid
claims that P5,817,269,688 or
14 percent of the total
obligated allotments of
P41,116,305,954 are late
payments from previous
school years’ billings, which
includes SYs 2014-2015,
2015-2016 and 2016-2017.
6) Provision and 2,771,985,130 1,100,054,145 40 The DepEd CO shall procure
Maintenance of school furniture from
Basic Education cooperatives of Persons with
Facilities Disability (PWD) using the 10
percent budget allocation
earmarked for the
government’s assistance to
PWDs. There was no delivery
out of the physical target of
21,952 school furniture in CY
2017, expecting the
accomplishment of the
physical target in CY 2018.
7) Other Programs 2,844,802,046 1,316,592,943 46 Human Resource
and Projects Development for Teaching,
Teaching-Related, Non-
Teaching and other personnel
is one of the major programs
having unutilized budget
which was affected by
recruitment gaps wherein for
the FY 2017 funding, only
28,680 or 53 percent of the
targeted 53,831 plantilla
positions were filled-in.
Total 77,126,603,443 56,271,465,649 73

1.7 The late/delayed budget utilization would indicate that recipient schools do not
have the necessary instructional materials and facilities during the supposed
school year that the activities are planned. The BAR No.1, Physical Report of
Operation of DepEd showed that the physical targets for the year were not
accomplished for the identified programs in the table.

1.8 If problems in the program implementation cannot be properly addressed or

improved, prompt delivery of basic education services will always be at stake.

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 1.9 Forming part of the obligation incurred in December 2017 in DepEd CO, the
allotment of P13,701,515,748 allocated for various major programs and projects
was committed as fund transfer to DBM-PS covered by a Memorandum of
Agreement2 executed by the DepEd and DBM-PS. Such amount registered a
significant increase of 469 percent compared with fund transfer in 2016 as shown
below.
Description Year Increase
2016 2017 Amount %
Amount Transferred to DBM-PS 2,416,622,629 13,759,529,478 11,342,906,489 469

1.10 The obligated fund transfer to DBM-PS in December 2017 pertains to the
following programs and projects:

Total
Program/Project Description Obligation %
Allotment
Implementation of the 7,276,246,000 Tools and Equipment for 11,154 7,062,830,333 97
RTVHS Program – TVL Specializations of 3,152
Current Public Senior High Schools for
Implementation of the 2,096,191,420 Grades 11 and 12 Technical and 749,842,990 36
RTVHS Program – Scientific Equipment
Continuing
TX/IMs, including 3,040,831,000 Textbooks and Instructional 2,480,017,738 82
₱100 Million for Materials
Children with Special
Needs – Current
TX/IMs, including 3,623,313,635 1,699,213,710 47
₱100 Million for
Children with Special
Needs – Continuing
DCP – Continuing 4,901,663,888 Information and 630,301,452 13
Communications Technology
DCP – Current 6,853,359,000 Equipment 332,000,000 5
SME – Current 4,543,176,000 Technical and Scientific 196,159,855 4
Equipment
Implementation of 653,436,000 Information and 100,000,000 15
ALDM Programs, Communications Technology
including Requirement Equipment
of Learning Centers –
Current
Provision and 526,947,959 Furniture and Fixtures 164,541,780 31
Maintenance of Basic
Education Facilities –
Current
National Assessment 284,617,442 Printing and Publication 753,551 .3
Systems for Basic Expenses
Education – Continuing
National Assessment 479,048,000 Assessment Test Materials 64,991,924 14
Systems for Basic
Education – Current

Disaster Preparedness 288,933,622 Personal Protective Equipment 8,812,000 3

Program– Continuing
Hiring of consultants 250,000

2
Notarized date of December 28, 2017
99
 Total
Program/Project Description Obligation %
Allotment
Site Development Plan – 100,000,000 Service Provider for the 100,000,000 100
Current preparation of school site
development plans covering
3,853 schools
Education Information 32,417,000 Consultant 660,000 2
and Communication
Services – Current
Development and 51,456,233 Service Provider for monitoring 3,000,000 6
Implementation of of conduct of DCP
Education Projects –
Continuing
General Management 1,138,426,201 Air conditioner 9,805,000 7
and Supervision - Motor Vehicles 49,110,000
Central Office – Current Furniture and Fixtures 15,000,000
Fleet Card Services for DepEd 4,000,000
Officials Vehicles
Renovation of the Office of the 3,088,090
Secretary
Consultant/ Programmer for the 420,000
Cash Disbursement and
Receipts Databases System
General Management 539,617,282 Office Equipment 12,850,000 5
and Supervision - Structural Investigation and 7,617,325
Central Office – Detailed Engineering for the
Continuing rehabilitation of Mabini and
Bonifacio Dorm D and E and
repair of gutter and downspout
Consulting Services for the 6,250,000
Assessment of existing DepEd
Electric Power System
Total 36,429,680,682 13,701,515,748 38

1.11 Although transfer of funds to DBM-PS is permissible, the year-end obligation in

favor of DBM-PS of P13.70 billion would eventually increase the current
outstanding balance of P7 billion to P20.70 billion as unliquidated fund transfer
of DBM-PS due to DepEd CO, once such transfer shall be effected.

1.12 Moreover, DBM-PS requires two percent service charge estimated at P274
million procurement cost, which in effect reduces DepEd’s allotted budget for
its programs/projects. This additional cost could reduce expected deliverables of
programs/projects or could have been savings generated if DepEd was able to
utilize its available resources by efficiently carrying out the planned activities
for the program implementation.

1.13 It has to be reminded that fund transfer would somehow improve budget
utilization but it does not demonstrate the Agency’s competence to administer
its own programs and projects to serve its mandated functions. Because in
reality, DepEd CO still fell short in its expected education service delivery in
terms of equivalent physical outputs out of the utilized budget.

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 c.) Obligations incurred in total amount of P1,283,242,303.45 without valid
and legitimate claims

1.14 In NCR, out of the total obligated balance of P29,804,902,087.06, the amount of
P1,283,242,303.45 was obligated without any valid and legitimate claims or
specific payees, apparently to avoid the adverse effect on future budget level of
the agency for its failure to obligate its CY 2017 appropriations as provided
under Item III.A of the President’s Veto Message in the GAA for FY 2017.
These obligations which were found not properly supported by sufficient
evidence to establish validity of their incurrence violated Section 46 of PD 1177.
DOs with invalid obligations are listed in the table below.

Amount of Invalid
Division Office
Obligation
Quezon City 644,558,322.78
Manila City 368,454,997.32
Caloocan City 120,590,965.29
Valenzuela City 2,734,715.00
Malabon City 17,146,462.26
Navotas City 27,374,389.24
Pasay City 8,882,480.21
Muntinlupa City 66,971,053.32
Las Piñas City 26,528,918.03
Total 1,283,242,303.45

d.) Other deficiencies

d.1.) Incurrence of overdrafts or obligation in excess of allotment and

disbursements in excess of obligations incurred

1.15 The DepEd CO’s SAAODB for CY 2017 further revealed that there are
programs in which the obligated amount exceeds the allotment for the year in
violation of Section 38 Chapter 2 of the GAM, to wit:

Obligated
Program/Project/Activity (PPA) Allotment Overdraft
Amount
General Administration and Support 15,915,939.51 15,935,496.12 (19,556.61)
Pre-Regional and Regional Palaro and 416,000.00 509,949.00 (93,949.00)
Conduct of the "Palarong Pambansa"
Education Information and 1,862,113.00 2,059,791.84 (197,678.84)
Communication Services

1.16 The overdraft incurred may be minimal but it signifies weakness in monitoring
proper controls in budget allocation and utilization, and likewise indicates poor
planning.

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 1.17 The SAAODB also showed existence of excessive amount of disbursements vis-
a-vis the obligated amount for the year for the following PPA:

Obligated
Program/Project/Activity (PPA) Disbursement Excess
Amount
General Administration and Support 209,842,650.88 209,862,142.09 (19,491.21)
Pre-Regional and Regional Palaro and 4,888,092.17 6,078,668.68 (1,190,576.51)
Conduct of the "Palarong Pambansa"
National Assessment Sytems for Basic 20,141,832.37 20,552,923.56 (411,091.19)
Education
Development and Promotion of Campus 2,228,958.82 2,521,073.50 (292,114.68)
Journalism
Department of Education 9,183,129.00 13,696,149.53 (4,513,020.53)
Computerization Program
Retirement Benefits Fund (PGF) - 6,807,196.29 6,809,119.34 (1,923.05)
Monetization of Leave Credits
Educational Project Development and 1,021,993.92 1,026,533.40 (4,539.48)
Implementation Task Force
School Health and Nutrition Center 918,002.64 980,860.20 (62,857.56)
Continuing Fund
Curricular Programs, Learning 143,250.00 220,539.00 (77,289.00)
Management Models, Standards and
Strategy Development
Implementation of Indigenous Peoples 20,601,978.59 21,607,978.49 (1,005,999.90)
Education Program

1.18 This is a serious mistake which should have been avoided. It has to be
emphasized that payment or disbursement in excess of obligation is contrary to
budgetary regulations where the approving officers/employees may be held
personally liable/accountable.

d.2.) Low disbursement capacity

1.19 NBC No. 567 dated January 3, 2017 provides for the guidelines for the validity
of Notice of Cash Allocations (NCAs) issued, where validity of NCAs issued
and credited to the Regular MDS Sub-Accounts of agencies/OUs for their
regular operations, shall be valid until the last working day of the 3rd month of
that quarter pursuant to DBM Circular Letter No. 2013-12 dated November 21,
2013.

1.20 Chapters 2 and 3 of the GAM, Volume 1 provide for the guidelines for
disbursements and budget monitoring.

1.21 In CY 2017, DepEd CO has a total available allotment3 of P85,109,664,109 of

which 91 percent or P77,622,320,087 was fully obligated, with only 33 percent
or P25,753,997,695 had been paid, leaving unpaid obligations of
P51,868,319,152 at the end of the year. Details are shown on the next page:

3
FY 2017 Status Of Appropriations, Allotments, Obligations,Disbursements And Balances as of March 16, 2018
102
 Obligations
Appropriation’s Disbursements Unpaid Obligations
Incurred
FY
Amount Amount % Amount %
2017-Current 59,442,626,208 19,261,724,017 32 40,180,902,191 68
2016-Continuing 18,179,693,879 6,492,273,678 36 11,687,416,961 64
Total 77,622,320,087 25,753,997,695 33 51,868,319,152 67

1.22 The low disbursement rate of 33 percent out of the obligated allotment obviously
indicates that the contracted projects had missed the expected physical targets.
Programs with low disbursement rates are the following:
Total Obligated
Program/Projects Disbursements %
Amounts
Implementation of the RTVSHP 7,823,449,349 4,489,516 0.1
TX/IMs, including P100 Million for Children 6,327,286,828 86,765,481 1
with Special Needs
DCP 11,491,878,829 534,732,974 5
SME 4,750,344,656 746,016,742 16
GASTPE 41,116,305,954 21,634,320,222 53
Provision and Maintenance of Basic Education 2,771,985,130 816,568,691 29
Facilities
Other Programs and Projects 3,341,069,341 1,931,104,069 50
Total 77,622,320,087 25,753,997,695 33

1.23 Likewise, the CAR registered total available allotment of P132,712,966.56 in

some programs/projects, in which 95 percent or P126,199,412.82 had been
obligated; however, only 12 percent or P15,245,312.68 had been disbursed,
details are as follows:
Source of Obligation Disbursement
Program/ Project Office Allotment
Funds Amount % Amount %
Classrooms and DO Apayao 13,450,000.00 13,320,000.00 99 3,190,000.00 24
Current SBs DO Ifugao 30,455,966.24 30,402,620.49 100 11,867,772.68 39
School Furniture ROP 42,737,900.00 42,531,610.00 100 -
RTVHSP DO Apayao 2,000,000.00 - -
Sub - total 88,643,866.24 86,254,230.49 97 15,057,772.68 17
School Furniture ROP 2,355,001.52 2,342,257.50 99 -
Continuing
RTVHSP ROP 41,714,098.80 37,602,924.83 90 187,540.00 0.45
Sub - total 44,069,100.32 39,945,182.33 91 187,540.00 0.00
Total 132,712,966.56 126,199,412.82 95 15,245,312.68 12

1.24 The low disbursements also signifies that expected outputs for the year from the
foregoing projects were not fully attained.

d.3.) Cash allocations not fully utilized

1.25 In CY 2017, DepEd CO and RO IX have total released NCAs from DBM of
P46,113,406,500 and P103,222,479, respectively, wherein P12,282,880,193 or
27 percent had lapsed for CO while P103,222,479 or 100 percent of the total
released NCAs for the 1st semester of RO IX lapsed and was automatically
reverted to the National Treasury. Details of quarterly reversion are shown on
the next page:

103
 Lapsed NCA
Office Quarter Received Utilized
Amount %
CO 1st 8,194,431,972 7,957,367,041 237,064,931 3
2nd 6,507,065,272 3,882,319,280 2,624,745,992 40
3rd 5,911,985,051 5,826,482,813 85,502,238 1
4th 25,508,469,165 16,172,902,133 9,335,567,032 37
Total 46,121,951,460 33,839,071,267 12,282,880,193 27
RO IX 1st 74,558,877 - 74,558,877 100
2nd 28,663,602 - 28,663,602 100
Total 103,222,479 - 103,222,479 100

1.26 The lapsed NCAs are indications that funded programs/projects were not
completely implemented as planned, as the supposed financial resources
allocated had not been fully utilized.

1.27 While in the NCR, the use of cash allocations posted unauthorized transfer of
unutilized/excess NCAs/Notice of Transfer of Allocations (NTAs) totaling
P1,612,348,892.22 from the MDS Accounts to the Current Accounts, details of
which are as follows:

No. Office Bank Account No. Amount Collected

1 ROP
2 DO Quezon City
3 DO Manila City
4 DO Caloocan City
5 DO Valenzuela City
6 DO Malabon City
7 DO Navotas City
8 DO Pasig City
9 DO Marikina City
10 DO San Juan City
11 DO Pasay City
12 DO Muntinlupa City
13 DO Parañaque City
14 DO Las Piñas City
Total
LBP Account No. 0692-1020-61 114,231,115.24
LBP Account No. 0692-1020-70 644,449,095.78
LBP Account No. 1982-1001-07 595,212,996.92
LBP Account No. 0482-1044-44 27,529,164.61
LBP Account No. 0252-1050-42 15,872,702.68
LBP Account No. 0652-1019-68 37,258,825.06
LBP Account No. 1592-1010-64 95,520.21
LBP Account No. 1521-10-10-56 2,012,676.03
LBP Account No. 0672-1073-93 28,259,321.70
LBP Account No. 2272-1017-18 462,193.78
No data provided 6,862,372.96
No data provided 46,650,719.38
LBP Account No. 0392-1027-87 31,625,355.81
LBP Account No. 1562-1020-74 12,709,252.94
LBP Account No. 1552-1018-60 49,117,579.12
1,612,348,892.22

1.28 The unutilized NCAs/NTAs pertain to cash allocations transferred to current

accounts purposely to extend their validity to fund for the unimplemented
programs/activities and unsettled obligations of PS and MOOE. The non-
implementation of various programs/activities during the year is attributable to
the Management’s deficient planning.

1.29 We recommended that the Management require:

CO to –

a. make thorough and careful study on the viability of transfers with DBM-
PS and conduct reconciliation of balances to ensure that fund transferred
were fully liquidated in terms of delivery;

104
 NCR to –

b. intensify the hiring of unfilled positions for teaching and non-teaching

personnel of the DOs/IUs/Non-IUs through publication of the vacant
positions, to be posted in three conspicuous places for a period of 10 days
as required by the Republic Act (RA) No. 7041 dated June 5, 1991;

c. disregard all obligations without legitimate claimants and valid

supporting documents, adjust the records/reports on allotment and
obligations in the budgetary records and Financial Accountability
Reports (FARs), and refrain from certifying the same as accounts
payable;

CO and ROs to –

d. identify the bureaucratic bottlenecks in the procurement system and

releases of funds to operating units and schools that tend to delay
program implementation as well as budget non-utilization;

e. strictly monitor through maintenance of subsidiary records incurrence

of obligations, disbursements and cash allocation to avoid overdraft in
allotment and obligation as well as unauthorized transfer of cash
allocations, and maximize utilization of NCAs; and

f. henceforth, ensure the optimum utilization of funds received vis a vis

timely delivery of basic education services.

1.30 Below are the Management’s comments/responses relative to the

aforementioned observations/recommendations.
CO/
Management’s Comments
Region
CO Management sincerely acknowledged the findings on favorable improvements the Department
achieved in the utilization of allotment. This financial performance can be attributed to the
program, financial management, procurement process reforms and strategic interventions instituted
by the Executive Team of the Department that will also address the COA recommendations:
Recommendation Management’s Reform/Intervention
In identifying the bureaucratic  Re-constituted six BACs under DepEd Order No.
bottlenecks in the procurement  2018-008 dated March 7, 2018 primarily to undertake the
system that tend to delay functions mandated under RA No. 9184 and its Revised
program implementation, as well Implementing Rules and Regulations (IRR) and to focus
as, budget non-utilization on specific programs and transactions;
 Updated the processes and procedures on Activity Request
(AR) and Authority to Procure (ATP) minimizing
documents needed for each type of request.
In making a thorough and careful  Created the DepEd Task Force to monitor the progress and
study on the viability of transfers status of funds transferred to DBM-PS under Office Order
to DBM-PS and conduct No. 00-Osec-2018-028 dated April 16, 2018;
reconciliation of balances to  Outsourced the procurement tasks of some items to DBM-
ensure the funds transferred were PS under the MOA entered into by DepEd with the DBM-
fully liquidated in terms of PS wherein DepEd is still accountable for the transferred
delivery funds.

105
 CO/
Management’s Comments
Region
In ensuring the optimum  It will continue to enjoin program planners and
utilization of funds received vis a implementers across the governance levels in the
vis timely delivery of basic Department to make the necessary adjustments in their
education services work systems and processes, to continue to conduct
emergency and regular collaboration sessions with
program teams and executive leads in the Department to
diagnose bottlenecks, constraints and challenges being
faced in the program implementation.
NCR The Management of DOs of Malabon City and Navotas City commented that they will stop the
practice of making obligations without valid claimants, and also commented that some funds for
special programs were received on the last quarter of the year which prompted them to transfer it
to current account in order not to hamper its implementation.
RO III The Management of DO Mabalacat City commented that the Budget Unit was already
implementing the proper communication of receiving Sub-AROs by channeling it to its respective
program taker. The recommendation will be highly considered and with compliance with cited
provisions, laws and regulations.
RO IX Management commented that FY 2017 Budget Circular Guidelines prohibits the RO to issue
funding checks to the IUs notwithstanding the Allotment are sub-alloted, hence the lapsing. The
lack of material time to complete the procurement process due to the late release of the Sub-AROs
by the Central Office to the RO is also one of the main reasons why allotments were not utilized.
RO The Management of Nasipit National Vocational School - DO Agusan del Norte was advised to
XIII write a letter of withdrawal so that it will not be recorded as unutilized. The withdrawal letter until
now has no reply.
Management of Agusan Del Sur agreed that the budget was not utilized and all the items were not
delivered in CY 2017.
Management of Bayugan City stated that the main reason why the allocation for the Distribution
Fund for the delivery of learning resources remained unutilized is because the school
heads/property custodians did not anymore claim for the transportation cost of these books to their
schools because the books were picked up from the DO during occasions when there are Mancon
Meetings or conferences.

Implementation of DepEd Computerization Program (DCP)

2. The DepEd Computerization Program (DCP) revealed implementation gaps

showing: a) ninety-nine percent overall CYs 2015 to 2017 physical target
deficiency or at least 77,704 schools still awaiting for the Information and
Communications Technology (ICT) packages, including the 17,016 identified
recipient schools with undelivered packages out of the P2,059,940,765.59 from
CY 2015 budget transferred to DBM-PS in CY 2016; b) extended contract
execution timeline up to 25 days from approval of Resolution to Award on
awarded procurement under DCP CY 2017; and c) deficiencies observed in the
deliveries and utilization of ICT packages such as unmet counterpart readiness
requirements for the schools, defective/ incomplete items/ uninstalled delivered
packages, poor after sales service by suppliers and weak financial reporting
compliance, among others. These gaps deferred the timely provision of necessary
learning interventions to intended users of DCP packages and weakened controls
in proper safeguarding of public funds and property.

106
 2.1. Over the years, the implementation of the DCP Program has never been easy as
management continuously struggling to lessen if not to eliminate, recurring
problems of delayed procurement, late delivery, non-readiness of the selected
recipient schools, poor monitoring strategy and delineation of property
accountability which adversely affected the attainment of the program’s
objective. DepEd tapped the services of DBM-PS and United Nations
Development Programme (UNDP) despite the fact that it entailed additional cost
and encountered difficulty in tracking deliveries due to deficient reporting
requirements. However, it also failed to deliver the expected results because
some of the problem lies in the internal system, project’s size and volume and
that the transfer was apparently not carefully planned and studied but was opted
to secure and place the allotted budget on hold, to minimize the impact of
delayed implementation.

2.2. Audit revealed that deficiencies still persist affecting the timely provision of
necessary learning interventions of intended users of DCP packages.

a.) Ninety-nine percent physical target deficiency in schools to have ICT

packages or at least 77,704 schools still awaiting for ICT learning
equipment, including the 17,016 identified recipient schools as beneficiaries
from transferred funds of P2,059,940,765.59 to DBM PS in CY 2016

2.3. The Agency’s Physical Report on Operations as of December 31, 2017 disclosed
that out of the 78,140 targetted school recipients of ICT Packages under the
DCP for CY 2015-2017, only 436 received delivery showing an overall 99
percent deficiency vis-a-vis expected physical target. The details are provided in
the next table.

No. of Schools to Receive ICT Package

Budget Year/ Batch
Physical Physical Remarks4
Particulars Variance
Target Accomplishment
CY 2015
Batches 29 to 32 13,158 - (13,15) Allotted budget was
(K to 10) transferred to DBM-PS.
Batch 33 (SHS) 991 436 (555) Remaining items are for
rebid at DBM-PS. Delivered
items were procured by
DepEd.
Batch 34 11,070 - (11,070) Allotted budget was
(Unenergized ICT transferred to UNDP with
for Luzon and scheduled delivery of ICT
Mindanao) before June 2018.
Batch 34 3,303 - (3,303)
Allotted budget was
(Unenergized ICT
transferred to DBM-PS.
for Vizayas)
Sub-total 28,522 436 (28,086)

4
Taken from the Information and Communication Technology Service (ICTS) year-end report
107
 No. of Schools to Receive ICT Package
Budget Year/ Batch
Physical Physical Remarks4
Particulars Variance
Target Accomplishment
CY 2016
Batch 35 (K to 10) 715 - (715) Awarded to winning bidder
Batch 36 (SHS) 4,426 - (4,426) in December 2017 with ICT
delivery schedule before
June 2018.
Sub-total 5,141 - (5,141)
CY 2017
Batches 39-46 and 44,417 - (44,417) Remaining batches 40-44
48 (K to 10) awarded to winning bidder in
December 2017 with ICT
delivery schedule before
June 2018.
Batches 47, 49 60 - (60) Committed o be transferred
and 50 (SHS) to DBM-PS.
Sub-total 44,477 - (44,477)
Grand Total 78,140 436 (77,704)
% to Total 100 1 (99)

 DCP CY 2015

2.4. DCP for CY 2015 includes IT Package Batches 29-32, 33 and 34 (Unenergized
ICT for Visayas), where the total allotted budget of P2,059,940,765.59 was
transferred in CY 2016 to DBM-PS. However, confirmation reply from the
DBM-PS disclosed that no deliveries were made pertaining to these fund
transfers as of December 31, 2017.

2.5. For Batch 34 on the provision of Unenergized DCP Package for Luzon and
Mindanao, funds were transferred to UNDP with original timeline for delivery
per Project Document of June to December 2016. But validation from the ICTS
report shows that the project is still on-going as of December 31, 2017. It has
also been observed that the number of recipient schools has a discrepancy
of 6,669 between the Agency’s Physical Report of 11,070 schools and as per
UNDP Project Document of 4,401 schools which ICTS was not able to account
as of audit date.

 DCP CY 2016 and 2017

2.6. Total available budget for DCP 2017 was P11,484,254,584.52 consisting of
current appropriation of P6,625,982,000.00 and CY 2016 continuing
appropriation of P4,858,272,584.52. The allotted budget was reported almost
utilized in total amount of P11,473,686,777.38 broken into CY 2017 and
continuing CY 2016 of P6,621,816,323.10 and P4,851,870,454.28, or budget
utilization rates of 99.94 percent and 99.87 percent, respectively. The utilized
budget pertained to the obligated amounts for the awarded six contracts with a
total cost of P9,988,802,227.36 in favor of four suppliers shown in details in the
following table and the remaining P1.5 billion committed by DepEd as fund
transfer to DBM-PS.

108
 Date of Expected
No. of Lots No. of Total Contract
Name of Supplier Receipt of Completion
Contracts Awarded Packages Cost
NTP Date
RedDot Imaging Philippines
Inc. JV With Shenzen Kstar
2 1,6,8 14,780 3,999,859,904.13 12/14/2017 7/12/2018
Science and Technology
Co.,LTD
Columbia Technologies Inc. 2 2,4 8,953 2,693,156,569.00 12/15/2017 7/13/2018
Girlteki Inc. JV with
Shenzhen Hasee Computer 1 5,7 9,389 2,557,047,068.95 12/14/2017 7/12/2018
Co., LTD
Allcard Plastics Philippines
Inc., JV with Silicon Valley 1 3 3,003 738,738,685.28 1/9/2018 8/7/2018
Computer Group Phils., Inc.
Total 6 8 36,125 9,988,802,227.36

2.7. The DepEd’s Physical Report of Accomplishment clearly shows no delivery yet
for the P9.9 billion awarded contracts as five out of six contracts were perfected
in December 2017 and one was perfected only in January 2018. As per contract
stipulation, delivery is to be made within 210 calendar days from the receipt of
Notice to Proceed by the suppliers. Hence, the delivery is expected to be
completed in July and August 2018.

2.8. Also noted was a discrepancy in the Physical Target for the CY 2017 DCP Fund,
K to 10 (Batches 39-46 and 48) and the actual targeted recipients per awarded
contracts. Per Physical Report, targeted recipients for K to 10 (Batches 39-46
and 48) is 44,417, while the total recipients per awarded contract is only 30,985.
The discrepancy of 13,432 which is equivalent to 30 percent should be traced
and investigated as other recipients might have been excluded.

b.) Extended Contract execution timeline up to 25 days from approval of

Resolution to Award

2.9. The CY 2017 procurement activities were also delayed which was partly
attributed to some pending issues faced by DepEd such as failure to enter into
contract with the winning bidder within the prescribed period and settling
Motions of Disqualified Bidders.

2.10. It was also noted that contract signing activities were completed in two to 25
days after the date of Notice to Award (NOA) for contracts; while the number
of days that lapsed from the approval of Resolution to Award (RTA) to winning
bidders’ receipt of NOA ranges from one to eight days. Detail of which are
shown below:
Winning No. of Days No. of Days
Mandated
Lot Approval of Bidder's Date lapsed from of Delay in
Contract No. Date of Contract Contract
No. RTA of Receipt of Approval of Contract
Signing
NOA RTA Signing
3 2017-08-ICTS1 (001,002 11/17/2017 12/5/2017 18 1/9/2018 12/15/2017 25
&004 to 016)-BII-CB022-
C038
4 2017-08-ICTS1 (001,002 10/26/2017 11/3/2017 8 No date 11/13/2017 22
&004 to 016)-BII-CB022- (Date of
C030 Notary Public
12/5/17)
109
 Winning No. of Days No. of Days
Mandated
Lot Approval of Bidder's Date lapsed from of Delay in
Contract No. Date of Contract Contract
No. RTA of Receipt of Approval of Contract
Signing
NOA RTA Signing
5,7 2017-08-ICTS1 (001,002 10/26/2017 11/2/2017 7 No date 11/12/2017 22
&004 to 016)-BII-CB022- (Date of
C031 Notary Public
12/4/17)
8 2017-08-ICTS1 (001,002 10/26/2017 11/2/2017 7 No date 11/12/2017 22
&004 to 016)-BII-CB022- (Date of
C032 Notary Public
12/4/17)
1,6 2017-08-ICTS1 (001,002 11/23/2017 11/24/2017 1 No date 12/4/2017 2
&004 to 016)-BII-CB022- (Date of
C035 Notary Public
12/6/17)

2.11. Nevertheless, the Audit Team observed improvements in the conduct of several
procurement activities despite the delays incurred. To cite favorable instances,
the above period of delay in contract signing is considered shorter compared to
previous year’s 30 to 66 days; while for the post-qualification activites, it only
took the Agency 45 calendar days to finish the award of all lots compared to
previous year’s minimum of 62 days to a maximum of 84 days.

c.) Recipient schools’ feedback for UNDP procured computer packages and
other deficiencies in the deliveries and utilization of ICT packages observed
by Audit Teams in different Regional Offices such as unmet counterpart
readiness requirements of the schools, defective/ incomplete items/uninstalled
delivered packages, poor after sales service by suppliers and weak financial
reporting compliance, among others

2.12. On March 23, 2016, DepEd and the UNDP entered into an agreement for
development support services in the course of the implementation of 2016 K to
12 Basic Education Program. Under the Cost-Sharing Agreement between the
UNDP and DepEd, the latter will place at the disposal of UNDP the fund transfer
of P2,404,329,480.00 for DCP, breakdown of batches is shown in the table.
DepEd Number of
Budget Recipient
Allocation/ Description Schools ABC Status
Fund and
Source Packages
2016 DCP Batch 37 - SHS Regular Package 184 150,792,600.00 Completed
(Stand Alone)
Batch 38 - SHS Special Package 889 1,146,702,984.00 Completed
(arts and design, technical drafting ,
illustration TVL, programming,
medical transcription TVL) + Pen
Tablet
2015 DCP 4401 1,106,833,896.00 To be
Batch 34 - DCP Package for
updated by
Unenergized Schools
ICT Service
Total 2,404,329,480.00

110
2.13. Guidelines relative to the implementation of the DCP for Batch 37 is embodied
in DepEd Memorandum No. 122, series of 2016 dated August 16, 2016 entitled
“Implementation of the DepEd Computerization Program for Batch 37 E-
classroom packages for Public Stand-Alone Senior High Schools”, while for the
implementation of DCP for Batch 38 is provided in the DepEd CO – ICTS
Unnumbered Memorandum dated September 23, 2016 with the subject “Updates
on the Implementation of DCP Batch 38”. The target beneficiaries of the DCP
for the said Batches are SHS students.

2.14. The Audit Team of DepEd CO validated thru confirmation procedure the
delivery of the completed batches for DCP 2016, Batches 37 and 38.
Confirmation letters were sent to 604 selected recipient schools out of the total
1,073 schools. Out of the 604 confirmation sent, only 113 replied as of report
date.

2.15. The summary of the feed back is shown below:

No. of Recipient
Item Nature of Deficiency
Schools
1 Items not recorded in the books of account as assets 113
2 Not fully compliant with school readiness requirement 12
3 Items not in good operating condition 10
4 Incompete/lacking items 3
5 Not properly installed and tested by supplier 3
6 Other Issues to be addressed 5

2.16. Moreover, summarized hereunder are the deficiencies in the deliveries and
utilization of ICT packages in different ROs observed by respective Audit
Teams:

c.1.) Partial/Non-utilization of ICT packages due to unreadiness of recipient

schools

DCP
Region Observations/Deficiencies
Batches
NCR 37,38 DCP packages recieved by 24 SHS were either transfered to
other SHS for safekeeing or transferred to other buildings
until the construction of the SHS where they will be housed
are completed.
About 53 recipient SHS in 16 DOs have not adequately
provided the counterpart requirement such as multi-media
rooms, computer tables, windows and doors with iron grills,
proper electrical wirings with circuit breaker and/or standard
electrical outlets with appropriate load capacity duly certified
by the Municipal/City Electrician hindering the full utilization
of the delivered packages.
RO III 29,30,31,33 No adequate security measures noted in various schools in
Pampanga, Nueva Ecija and Zambales, such that 101 IT
equipment worth P7.5 million were lost thru robberies.

111
 DCP
Region Observations/Deficiencies
Batches
RO IV-B 38 Computer laboratories in four out of seven recipient High
Schools of Division of Romblon have no iron grills on its
doors, thus, rendering these schools non-compliant with the
Counterpart Requirements as part of assessing School’s
Readiness for the program.
RO XI 26,27,30,33 About 95 out of 185 recipient schools for the batches were
considered partially/not ready because they were not able to
meet all the counterpart requirement.
The poor condition of the Multi-media room, among others,
is contributory to the very short lifespan of the computer
packages. Some schools reported that they only get to use
their computer packages for six months to one year.

c.2.) Defective ICT packages and poor after sale assistance from supplier
DCP
Region Observations/Deficiencies
Batches
NCR 37,38 Noted items delivered to eight SHS in five DOs were found
defective or damaged and unreplaced during the Audit Teams’
inspection.
CAR 16, 19, 20, Items delivered in 77 schools in Ifugao costing P4.71 million
24, 26, 27, 33 were no longer functioning. These packages were delivered
by Red Dot Imaging Philippines Inc., and Advance Solutions,
Inc. The defects are already reported to the supplier's
representative and DepEd RO and CO as per ICT Coordinator
of DO Ifugao. However, no feedback was received to date.
Thus, the defective computer packages were left unutilized at
the computer rooms, libraries or offices of the school heads,
resulting in wastage of P4.71 million in government
resources.
RO II 38 Three schools reported a total of five defective units, three of
which were not yet resolved.
RO IV-B 38 Of the seven recipients schools in DO Romblon, three schools
have reported malfunctioning of computers, uninterruptible
power supply and printer after months of use. Interview with
the ICT Coordinators and Property/Supply Officers revealed
that they tried to contact the supplier but the latter was out of
reach.
RO XI 26,27,30,33 Pablo Lorenzo National High School reported that seven LCD
Projectors under DCP Batch 33 received last January 2017 are
no longer functional.
Forty schools under Batch 26 while eight schools under Batch
27 have defective components that need replacement, repairs
and/or reconfigurations.
Most of the recipient schools that reported to have defective
computer units and have not fully utilized their DCP Packages
was due to lack of proper and conducive Multi-media
classrooms.
Many of recipient schools reported a defective Host PC which
affected the performance of the entire computer packages.

112
c.3.) Incomplete or absence of documents for the recognition in the books of
accounts and transfer of accountability of delivered ICT equipment in
the recipient DOs/Implementing Units (IUs)

DCP
Region Division Observations/Deficiencies
Batch/es
NCR Quezon City, 37,38 All DOs of NCR showed that the cost of the
Manila, delivered computer packages as well as its
Caloocan, depreciation remained unrecorded in their
Valenzuela, books, which resulted in the understatement
Malabon, of the account balances of the ICT
Navotas, Pasay, Equipment, Subsidy from Central Office,
Parañaque, Las Depreciation Expense and Accumulated
Piñas, Depreciation-ICT Equipment. Section D.1
Munitinlupa, of the DCP Orientation Handbook, UNDP
Pasig, Marikina, Edition, provides the procedures in
San Juan, recording the receipt of DCP packages
Makati, among which is the issuance by the DepEd
Mandaluyong, CO of the Property Transfer Report (PTR)
Makati, and Journal Entry Voucher (JEV) dropping
Taguig/Pateros from the DepEd CO’s books of the procured
computer packages, which will serve as the
DO/IU’s basis for recording the receipt
thereof.
RO I Ilocos Norte 26, 27, 28, Delivered ICT Equipment and computer
29, 34, packages were not booked up by the DO
37,38 Accountant due to the absence of
Ilocos Sur 27, 28, 29, documents.
30,33
Dagupan City 7, 13, 14, The required PTR to support the property
16, 18, 19, procured by DepEd CO was not yet issued
24, 25, 26, to the DO which resulted to unrecorded
27, 29, 30, property in the books of the agency.
33, 38
Urdaneta City 14, 16, 24, The request for relief from property
25, 26, 29, accountability for DCP Equipment lost due
30, 31,38 to robbery cannot be acted by the
La Union 19, 20, 24, Management of the DO and the Audit Team
26, 27, 28, because there is no basis as to the exact
29, 30, 33, valuation of the lost property as required
37,38 under COA Memorandum No. 92-751
Laoag City 26, 29, 30, dated February 24, 1992.
33,38
RO II Isabela 38 The PTRs for ICT Packages from DepEd
CO-Asset Management Division indicate
Isabela 14,16,13,25 the total cost per recipient school but not the
cost of each item. PTRs serve as basis for
Ilagan 26-28 the CO in dropping from its books the
computer packages and the DO to recognize
such in its books.

113
 DCP
Region Division Observations/Deficiencies
Batch/es
RO III Tarlac Province 29,30,31,33 The ICT Packages were not yet recognized
and Tarlac City in the books of accounts of the DO due to
the absence of the necessary documents as
bases in recording. It was also observed that
the acquisition costs were not indicated in
any of the documents in the custody of the
supply officers of the recipient schools.
RO IV-B Romblon 38 The ICT packages remained unrecorded in
the books of the DO and IUs. It was noted
that the DO Accountant had not received
JEVs from CO. Thus, ICT Equipment and
Subsidy from Central Office accounts as
well as the corresponding depreciation on
the property remained not recognized in the
books of the DO and IUs.

c.4.) Other related issues/concerns

DCP
Region Observations/Deficiencies
Batches
NCR 37,38  ICT Packages under Batch 37 were delivered to the three
schools in DO Navotas, namely: Kaunlaran HS, Tangos HS
and San Roque HS, instead of delivering Batch 38 as indicated
in the list provided by the DepEd CO.
 Camarin HS, Cielito Zamora HS, MB Asistion Sr. HS Unit 1
and Caloocan City Business HS received computer packages
for Batches 37-38; however, the said schools were not included
in the list of recipient of computer packages provided by the
DepEd CO.
 No package was delivered to Taguig Elementary School (ES)
which was identified as one of the recipient school under DCP
Batch 37.
 The package intended for Pateros ES under DCP Batch 37 was
delivered and installed to Pateros NHS.
 One package under DCP Batch 37 was allotted to Brgy. Fort
Bonifacio, Taguig City, but there is no such school under DO
of Taguig City and Pateros, so no allotted computer package
was delivered to the Division or to any school within the DO.
 DCP Batch 38 intended for Isaac Lopez Integrated School was
delivered at night time and was received by the school guard.
 Some items of the computer packages were noted unutilized
during inspection in eight recipient schools of six DOs due
to reasons other than the aforementioned deficiencies:
a)
Head phones and projector screen were stored in stock
room.
b) Pen Tablets were unutilized due to adequate units held
by schools (e.g from Donations from LGUs) or recipient
do not offer subject or course intended for the items.
RO I Not  Weak internet access and shortage of computer units in most
indicated elementary and secondary schools in the DOs of Pangasinan II
and La Union.

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 DCP
Region Observations/Deficiencies
Batches
RO IV-B 38  In DO Romblon, the graphics tablets were not yet utilized or
underutilized because the schools do not offer the Arts and
Design program.

2.17. DepEd should look into the foregoing deficiencies which can be detrimental to
the success and effectiveness of the program. To look into the root cause can
provide opportunity to improve and reduce the threats to the project’s objective
and prevent wastage of government resources due to losses, malfunctioning or
deterioration and unrectified incomplete and defective deliveries of DCP
packages.

2.18. We recommended that the Management in CO undertake the following

actions to address the foregoing deficiencies cited:

a. inquire into the unutilized DCP funds with DBM-PS as the benefits for
the intended beneficiaries are at stake;

b. come up with an effective monitoring and evaluation system to be able to

identify key issues and other major factors affecting DCP’s
implementation as well as the related actions to be taken;

c. review the Agency’s internal processes related to procurement in order

to further improve its service delivery and its compliance with timeline
requirements of the Revised IRR of RA No. 9184;

d. institute effective reporting mechanism to immediately monitor

supplier’s contract implementation so DepEd can timely enforce after
sales responsibility of supplier;

e. come up with specific guidelines especially those affecting financial

reporting compliance;

f. look into the reported deficiencies on deliveries and identify the

responsible supplier for immediate rectification; and

g. consider performance feedback in the awarding of future contract to

prevent wastage of government resources.

2.19. The Management of CO duly noted the observations and will ensure to continue
to endeavor together with other offices to comply with the timelines prescribed
in the Revised IRR of RA No. 9184.

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Basic Educational Facilities Fund (BEFF) – Repairs and Rehabilitation of School
Buildings

3. Eight regions fell short in achieving the objective of improved physical facilities
under the DepEd’s BEFF for CYs 2017 and 2016 and in complying with the
related DepEd guidelines and COA regulations. Due to late issuance of sub-
allotments from the Central Office, improper timing of projects during the
schedule of classes and inadequate monitoring thereof resulted in the delayed
completion of repair projects in 49 out of the 91 schools inspected and the poor
workmanship/defects of the repairs done by contractors. Other deficiencies such
as awarded contracts in DO that exceeded the P15 million threshold and paid
contracts with incomplete supporting documents were also observed.
3.1. The Basic Educational Facilities Fund (BEFF) is a lump sum amount
appropriated annually starting FY 2011 GAA to address the classroom, water
and sanitation facilities, and furniture requirements of the schools.

3.2. From FY 2013, the BEFFs were appropriated for the provision and maintenance
of the school facilities wherein the allotment for the construction, replacement
and completion of kindergarten, elementary and secondary school buildings, and
the construction of water sanitation facilities to address the remaining shortages
and meet the requirements of the K-12 Basic Education Program were released
to the Department of Public Works and Highways (DPWH); and the
appropriations for the repair, rehabilitation and renovation of kindergarten,
elementary and secondary school buildings, and repair of water sanitation
facilities including the annual lease for the Public-Private Partnership for School
Building Project (PPP-SBP), and the acquisition of school desks, furniture and
fixtures was made available to DepEd.

3.3. DepEd under the GAA for FYs 2013 to 2017 was provided the following
appropriations on BEFF:
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
PPA No. A.III.e.17.o 302070000 302070000 302070000 302070000
Repair, rehabilitation and 4,936,995,000 2,850,840,000 2,938,367,000 4,006,000,000 4,994,325,000
renovation of school
buildings and the repair of
water and sanitation
facilities
Acquisition of school 1,645,665,000 1,117,845,000 1,206,212,000 3,406,390,000 2,474,573,000
desks, furniture and
fixtures
PPP-SBP 4,000,000,000 1,628,071,000 1,628,071,000 1,628,000,000 1,628,071,000
Total 10,582,660,000 5,596,756,000 5,772,650,000 9,040,390,000 9,096,969,000

3.4. DepEd Order No. 94, series of 2011 dated November 29, 2011, as amended by
DepEd Order No. 35. s. 2017 dated July 17, 2017 provides the guidelines relative
to the program implementation of BEFF.

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3.5. Section 10 of the DepEd Order No. 94 states that, “x x x Division Offices as
implementing units shall undertake the contract implementation up to Php15
Million worth of projects per contract whether single or clustered while the
Regional Offices shall undertake the contract implementation of more than
Php15 Million up to Php20 Million worth of projects per contract whether single
or clustered.

3.6. Enclosure No. 2 of the DepEd Order further provides the Guidelines on the
Implementation of Repair/Rehabilitation of Classrooms including Heritage
Buildings, and Water and Sanitation Facilities funded under the BEFF. The
guideline has set the manner of allocations for the said project which shall be
equitably distributed to all legislative districts on the basis of the following:

a. Data on reported school with structural defects;

b. Data on shortage of toilet and water facilities from the latest Basic Education
Information System (BEIS);
c. Unfunded requirements for school damaged by typhoon and other calamities;
d. Data on the reported costs of restoration of Gabaldon and other types of
heritage buildings; and
e. Other priority schools reporting needing immediate repair/rehabilitation.

3.7. The Audit Teams of Regions NCR, CAR, I, III, IX, XI, and XIII conducted
auditorial review of the contracts, verification of the related documents and
inspection of the implementation of repair of classrooms funded in CYs 2017
and 2016 and noted the following observations:

a. The DepEd CO downloaded the CYs 2017 and 2016 BEFF-Repair of

Classrooms Sub-Allotment Release Orders (Sub-AROs) amounting to
P260,976,903.01 to the ROs NCR, CAR, and I, of which SAROs with total
allocation of P240,113,554.50 was only released during the third and fourth
quarters of 2017 and 2016 that hindered the timely implementation of the
projects as planned. Details are as follows:

Sub-AROs
Region/DO
No. Date Amount
CY 2017
NCR
Quezon City OSEC-NCR-17-5539 03-Jul-17 32,488,850.00
Malabon City OSEC-NCR-17-5345 03-Jul-17 8,974,350.00
Makati City OSEC-NCR-17-0301 1st quarter 10,012,043.73
Pasay City OSEC-NCR-17-05340 03-Jul-17 24,990,000.00
Muntinlupa City OSEC-NCR-17-05344 03-Jul-17 3,880,800.00
Parañaque City OSEC-NCR-17-05341 03-Jul-17 5,880,000.0
Las Piñas City OSEC-NCR-17-05346 03-Jul-17 23,185,800.00
CAR OSEC-CAR-17-05166 03-Jul-17 24,500,000.00
RO I
La Union OSEC-1-17-5186 03-Jul-17 36,600,695.93
San Fernando OSEC-1-17-5191 03-Jul-17 3,512,910.77
Sub-total 174,025,450.43

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 Sub-AROs
Region/DO
No. Date Amount
CY 2016
NCR
Quezon City OSEC-NCR-16-4596 07-Sep-16 49,543,202.60
OSEC-NCR-16-4594 07-Sep-16 2,934,840.00
Pasay City
OSEC-NCR-16-7334 23-Dec-16 3,695,916.35
Muntinlupa City OSEC-NCR-16-4591 07-Sep-16 8,768,388.16
Parañaque City OSEC-NCR-16-4593 07-Sep-16 11,157,800.69
Las Piñas City OSEC-NCR-16-1670 2nd quarter 10,851,304.78
Sub-total 86,951,452.58
Total 260,976,903.01

b. It was noted that the NCR-DO of Quezon City executed contracts for the
repair projects to four contractors with contract amounts of more than the P15
million threshold, contrary to the provision of Section 10 of the DepEd Order
No. 94, s. 2011. The contracts on repair projects that exceeded the threshold
were awarded to the following:
Year Region/ Contract
Awarded Name of Contractors
DO Amount
2017 NCR – DO I.M. Construction Corporation 16,248,969.33
Quezon Aylan Construction and Trading 15,531,727.75
2016 City J. Simeon Construction 15,774,648.82
Aylan Construction and Trading 16,249,575.79
Tapnio and Tan Construction and Development 16,800,014.46

c. Repair works in 69 out of 97 recipient schools for CY 2017 BEFF, 22 out of

50 recipient schools for CY 2016 BEFF were inspected in the NCR, CAR and
RO I on February 19 to March 2, 2018, which revealed delay in the repair
works 49 inspected schools. Details of the project status of the recipient
schools are shown below:
No. of schools Status of Repair Works
Completed On-going Repair
Region BEFF Beyond Within Beyond
Inspected Within Remarks
Recipient Contract Contract Contrac Contract
Period Period t Period Period
CY 2017
NCR 40 19 6 - 3 10 With variation order;
DOs Quezon City, Repair works are suspended
Malabon City, due to ongoing classes.
Pasay City, According to the DO
Muntinlupa City, Engineer, the repair may
Paranaque City, start on summer so that the
students will not be
Las Piñas City displaced during the critical
work of repair.
On-going due to on-going
classes with time extension
period

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 No. of schools Status of Repair Works
Completed On-going Repair
Region BEFF Beyond Within Beyond
Inspected Within Remarks
Recipient Contract Contract Contrac Contract
Period Period t Period Period
CAR 15 8 - - - 8 The main cause for the delay
DO Ifugao in the execution of the works
was the lack of temporary
learning shelters for the
pupils to use while repair
works on the school
buildings were underway,
thus the pupils had to vacate
the rooms on rotation.
RO 1 38 38 22 - 16 Various beneficiary schools
DOs La Union, remained unfinished due to
San Fernando the contractor’s failure to
comply with the provisions
of the contract.
4 4 2 - - 2 Partition wall in the first
room has big crack, four
windows need some glass
replacement, ceiling need
some retouch in Sacyud ES
and Bangbangolan NHS.
Sub-Total 97 69 30 - 3 36
CY 2016
NCR 48 20 9 - - 11 Repair works in five schools
DOs Quezon City, are substantially complete
Pasay City, but there are corrective
Muntinlupa City, works to be done to address
Parañaque City, the noted problems by the
Las Piñas City schools and to conform with
the project specifications
/program of works (POWs).
Due to unavailability of
rooms to temporarily hold
classes, repair works could
not be done full blast by
contractor/laborers
With delay because repair
works are only done on
weekend; with variation
order and contractor
negligence
RO I 2 2 - 1 - 1 Out of the 11 classrooms
DOs Pangasinan II, that supposed to be repaired,
Candon as per Contract, Program of
Works and Statement of
Work Accomplishment,
only six classrooms were
completely repaired in time
of COA Inspection. No
repair were made for the
remaining five classrooms.
Sub-total 50 22 9 1 - 12
Total 147 91 39 1 3 48

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 d. Repair works in 21 schools of NCR (10 for CY 2017 and 11 for CY 2016
BEFF are on-going repair which are considered already beyond the contract
period. In CAR-DO Ifugao, out of the 15 repair projects, eight were not yet
completed and were already beyond contract period as of year-end. Further
in RO I, out of the 44 repair works in schools (42 for CY 2017 and two in CY
2016), one project was completed beyond contract period, while 19 projects
(18 for CY 2017 and one for CY 2016) were not yet fully accomplished even
when the target completion dates already lapsed.

e. Among the reasons cited for the delay in the completion of repair projects are
as follows:

Region/DO Year Reasons for the delay

NCR-DOs 2017  Repair projects at DO Quezon City did not commence as
Quezon City, scheduled. Based on the Notices to Proceed, the repair projects
Malabon, Pasay should have been started on December 23, 2017; however, upon
City, Muntinlupa, verification with the recipient schools, these were started only in
February 2018 that may cause delay in the completion thereof.
Parañaque, Las
Piñas  Repair projects in two schools, the Poblacion ES and
Muntinlupa Science HS, are still on-going and already beyond
the completion date with approved time extension.
 Repair projects is still on-going at Philippine School for the Deaf
and already beyond the target completion date but the extension
of completion period was requested and approved by the DO.
 Repair projects in two schools, the La Huerta National HS and
Parañaque ES Unit II of DO Parañaque City, are still suspended
due to on-going classes. Projects may start in summer so that
the students will not be displaced during the critical repair
works.
 Repair project in one school, the CAA ES Main, DO Las Pinas
is still on-going and with approved time extension due to on-
going classes.
2016  Completion of project at Bagong Pag-Asa ES, DO Quezon City
was delayed because according to the Principal the workers did
not do the repair works as they were not being paid by the
contractor.
 Repair works in five recipient schools were not yet completed as
of December 31, 2017 due to the late start of the projects which
commenced during the opening of classes wherein workers only
do the repair works during weekend and there are still corrective
works to be done to conform with the specifications based on
scope of works. As of date of inspection, the contractor has
already left the school’s premises; however, further verification
disclosed that any unfinished works will be repaired and
liquidated damages will be deducted from their claims.
2017/ 2016  The repair works at Philippine School for the Deaf, DO
Muntinlupa could only be done during nighttime and weekends
due to unavailability of rooms where classes can be temporarily
conducted.

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 Region/DO Year Reasons for the delay
CAR-DO Ifugao 2017  The execution of contracts covering the repair and rehabilitation
of 13 school buildings in DO Ifugao incurred delay with slippage
of up to 168.33 percent as of year-end mainly because of lack of
temporary learning shelters for the pupils to use while the works
were under way.
RO I-DOs 2017  Repairs of school buildings in various beneficiary schools
Pangasinan, La remained unfinished due to the contractor’s failure to comply
Union and San with the provisions of the contract.
Fernando
RO XIII-DOs 2017  Repair/Rehabilitation of 138 classrooms for the 45 identified
Surigao del Sur, school sites in Surigao del Sur with allocated budget of
Bislig City P42,505,000.00 and 38 classrooms for the 14 identified school
sites in Bislig City with allocated budget of P6,832,083.33,
respectively, was not yet completed as of December 31, 2017
due to delayed execution of procurement activities caused by
failure to execute detailed implementation plan.

f. Aside from late release of sub-allotments, non-compliance with the P15

million contract threshold and delayed execution of the repair projects, other
lapses in the implementation of the projects, payments to contractors and
submission of contracts/ quarterly program/project reports were also observed
and discussed as follows:

Region/DO Year Deficiencies

Implementation of the projects
NCR-DOs 2016  Electrical capacity of the buildings at Krus na Ligas HS and
Quezon City, Fort Aguinaldo ES of DO Quezon City was not considered in
Malabon the pre-inspection of the repair works to be done which
resulted in uninstalled and unutilized sets of lamps and
duplication of work that indicate inefficient use of resources.
Also at Fort Aguinaldo ES, the absence of the specific details
such as the actual number of classrooms/name of the school
building to be repaired in the contracts resulted in the
overlapping of the scope of works of projects implemented by
the Local Government Unit of Quezon City.
2017  At Tañong National HS of DO Malabon, the number of tiles
was overestimated. In addition, only two were installed out of
the 26 electric fans included in the POWs. The work done on
the ceiling was with poor workmanship as the plywood seemed
to collapse and paints were already peeling off.
NCR-DOs 2017/  The Principals and Property Custodians of some recipient
Quezon City, 2016 schools were not provided with copies of the contracts and
Malabon, Pasay detailed POWs relevant in determining the scope of works.
City, Consequently, the said school officials were not able to check
Muntinlupa if the repair works were completely finished, in accordance
City, Parañaque with the contract specifications, within the contract period, and
City, Las Piñas undertaken by the contractors themselves.
City
 Tarpaulin signboard was not posted for the repair projects
RO IX-DO
contrary to Section 2.2.3 of COA Circular No. 2013-004 dated
Zambonaga del
January 30, 2013.
Sur

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 Region/DO Year Deficiencies
NCR -DOs 2017/  The Audit Team had encountered difficulty to identify the
Quezon City, 2016 project during the ocular inspection conducted in the schools
Malabon, since the specific classrooms and buildings for
Muntinlupa repair/rehabilitation were not stated in the contracts or even in
City, Parañaque the POWs.
City, Las Piñas
 Due to the absence of specific information regarding the
City
damaged/deteriorated portion/s of the buildings to be repaired,
it could not be established with certainty whether the repair
works are minor or major repairs; thus, may result in the
incorrect classification of accounts either as expense or
capitalized as Property, Plant and Equipment (PPE), as
provided under Section 24, Chapter 10, Volume I of the GAM.
RO I -DOs 2017  Partition wall in the first room has big crack, four windows
Pangasinan, La need some glass replacement, ceiling need some retouch in
Union and San Sacyud ES and Bangbangolan NHS.
Fernando
RO III -DOs 2016  Schools Principal failed to secure copies of the contracts, and
Malolos, POWs, precluding the appropriate verification of the projects.
SJDM, Bataan,
 Delays in the completion of repairs and rehabilitation of
Balanga
classrooms, thus depriving the school children of the
immediate use thereof.
DO Zambales
RO XI 2016  Repair of four schools revealed several complaints coming
DO Davao City from the end-users or recipients of the projects due to poor
workmanship by the contractor.
Audit of the payments made
NCR 2016  Final billings as well as the retention fee pertaining to two
DO Quezon contracts were fully paid despite the noted deficiencies and
City non-issuance of Certificates of Completion as at year-end
contrary to Paragraph 6.2, Annex E of the Revised IRR of RA
No. 9184.
 The surety bonds callable on demand were issued by the two
contractors to guarantee the 10 percent which was intended to
cover uncorrected discovered defects and third party liabilities.
However, validation revealed that these bonds will expire 12
months from October 2017 which should have guaranteed the
retention for one year after project completion. These bonds
were also accepted even though the projects were not yet
finished within the prescribed period.
RO IX 2015/  During the review of the contracts and inspection it was noted
DO Zamboanga 2016 that:
a. Most of the contracts did not contain the date the
instruments were executed by the parties, which could
make the contract defective;
b. Technical/Engineering documents submitted did not
contain the detailed breakdown of estimates per Approved
Budget for the Contracts and per estimates of the winning
bidders, which could likely affect the timely
implementation of the projects;
c. Notices to Proceed issued to the winning bidders were not
dated, while some did not contain the date received by the

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 Region/DO Year Deficiencies
contractors, thus the determination of the agreed number of
days for project implementation became difficult;
d. Five of the completed projects are with total deficiency of
P1,938,292.37 due to various deviations from the approved
plans/POWs or non-performance of works, of which the
amount of P1,500,718.90 was disallowed in audit, the
amount of P328,454.91 could also result to disallowance in
audit unless immediately corrected;
e. No written requests from principal for the postponement of
projects implementation due to non-availability/shortage of
classrooms, or time extensions (from contractors) for the
completion of projects, making it difficult in the
determination of delay or negative slippage;
f. Absence of agency’s inspection report on some of the
completed projects;
g. Full payment made to non-peformed portion of the project-
repair of one school building at Pasonanca ES, an indication
that no inspection or monitoring was conducted on the
project.
RO XI 2016  Repair of classrooms at Catigan ES with a contract amount of
DO Davao City P3,911,558.42 was accepted and paid despite the failure of the
contractor to fully complete the repairs of the classrooms.
Submission of contracts and supporting documents as well as quarterly status reports
NCR 2017/  Contracts and supporting documents for the implementation of
DOs Quezon 2016 the projects were not submitted to the Audit Teams within the
City, prescribed period, contrary to Sections 3.1 and 3.2 of COA
Malabon, Pasay Circular No. 2009-001 dated February 12, 2009.
City
 DOs of Muntinlupa City and Pasay City failed to comply with
Muntinlupa City
the set timelines in the submission of the quarterly status report
on projects, programs and activities thereby hindering the
timely review thereof and preventing the Audit Team to submit
the same on time to the Commission on Audit for consolidation
purposes.
NCR 2017  Based on the review of the submitted documents,
DO Makati City incompleteness of documentation was noted contrary to
Paragraphs 5 and 6, Section 4 of PD No. 1445 and COA
Circular No. 2009-001 which require among others that claims
against government funds shall be supported with complete
documentation.
RO III-DOs 2016  Omission to submit pertinent documents such as approved
Nueva Ecija and design plan, technical specifications and other documents that
Pampanga are integral and vital part of the contract.
 Omission to submit the necessary documents as required. In
addition the agency failed to forfeit the bid security, amounting
to P45,000.00, of the winning bidder for the repair of Gulap
ES for his failure to accept the Notice of Award and execute
the contract.

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3.8. We recommended that the Management require:

CO to –

a. notify early on the ROs/DOs regarding the allocated funds on repair

projects and facilitate the downloading thereof, as much as possible
before start of school year, to ensure the timely implementation of the
projects;

ROs and DOs to –

b. require the DO Engineers to strictly monitor, evaluate, and validate all

project accomplishments on a regular basis to ensure that projects are
on schedule and are performed in accordance with the approved POWs;

c. properly coordinate and inform school officials/personnel about the

projects to be undertaken by providing them with contracts, detailed
POWs and such other related documents for them to know the project
details and use as basis in checking if the repair works being done
conform with the contract specifications;

d. see to it that the contract and POWs completely provide the specific
details as to the nature of the repair and rehabilitation works to be done
including the actual number of classrooms/name of the school buildings
to facilitate evaluation of the contractor’s project accomplishment;

e. notify the public through a tarpaulin signboard for infrastructure

projects to be suitably framed for outdoor display at the project
location;

f. secure authority from DepEd CO to implement projects with contract

cost exceeding the required P15 million threshold;

g. submit the contracts and its supporting documents to the Audit Team for
proper review and/or evaluation; and

h. impose corresponding liquidated damages on the late completion of the

repair works as stated in the approved contract.
3.9. The following are the comments of Management of concerned Offices:
Region/DO Management’s Comments
NCR During the exit conference, the Management clarified on the P15Million
DO Quezon City threshold and commented that they will abide with the recommendations.
In addition, the Principal of Bagong Pag-asa ES confirmed that there are
still parts/portions which remained undone and there are no documents
which have been signed nor accepted regarding the completion of the
repair works in the school. Likewise, any updates or developments have
not been communicated by the contractor to the school.
CAR The DO agreed to impose liquidated damages, which will be deducted
DO Ifugao from the final billing of the contractors.

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 Region/DO Management’s Comments
RO I To validate the completion of the repairs of the 161 classrooms for
DO La Union Division of La Union under SARO No. OSEC-17-5186 dated July 3, 2017
DO San Fernando amounting to P36,600,695.93, the Management has submitted a request
for the technical assistance of a COA Technical Audit Service on February
8, 2018 to assist in the ocular inspections of these BEFF Projects.
During the Exit Conference, the DOSF Management replied that they were
always been reminding their Inspectorate Team about their duties and
responsibilities to ensure fulfilment/ completion of contracts prior to
payments.
RO IX Management commented that the Office has already made a presentation
DO Pagadian and requested for the release of funds for the electrification of the newly
DO Zamboanga completed 2-storey Division Office to the DepEd Central Office.
del Sur Management also assured compliance on the recommendations.
Management of DO-Zamboanga del Sur explained that it overlooked to
include the provision of signboard in the scope of works.
RO XI Management committed for an immediate action on the complaints raised
DO Davao City the concerned School Heads.

BEFF – Public Private Partnership (PPP) for School Infrastructure Program (PSIP) I and
II

4. The DepEd’s PSIP with aggregate contract cost of P20,140,027,526 to construct

9,303 classrooms for PSIP I and 4,371 classrooms for PSIP II experienced
implementation setbacks, such as: a) lack of validation in allocation of sites
reduced the targeted number of classrooms from 9,303 to 9,296 for PSIP I;
b) delay by one and a half years in the completion of classrooms under PSIP I
mostly attributed to the incidents considered as Excusable Delays in Construction
under Section 12.8b of the contract agreement; c) 1,327 classrooms under PSIP
II were still awaiting construction completion after more than two years of
project implementation caused by hard access/clearing of sites, permits issues,
force majeure, demolition of existing buildings, realignment, among others; and
d) possible incremental consultancy cost due to extended project completion or
consultancy contract termination/abandonment. Hence, the overall achievement
of the program in supplementing the current initiatives of the DepEd to address
classroom backlog and fast track classroom construction has not been achieved.
4.1. Over the years, the total seating capacity of existing primary and secondary
classrooms has never been enough to accommodate students enrolled. This
suggests a severe overcrowding in many schools, and the need to build more
classrooms. The classroom requirement will increase even more because of a
number of factors such as: (a) the implementation of K to 12 program;
(b) government target to achieve universal participation of students in line with
its commitment to Education for All; (c) damage to classrooms caused by
typhoons and other calamities; and (d) the many old and dilapidated classrooms
that need to be rebuilt.

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 4.2. Given the huge demand for classrooms, various strategies are laid down in the
Philippine Development Plan to ensure the adequate provision of classrooms.
One of these strategies is the use of PPP scheme through the PSIP.

4.3. The first phase of the PSIP adopted a “Build-Lease-Transfer” (BLT) modality
under the Build Operate – Transfer (BOT) Law (RA No. 6957, as amended by
RA No. 7718), involving the finance, design, construction and maintenance of
9,303 classrooms in 2,300 elementary and secondary school sites. These schools
are located in RO III (Central Luzon) and RO IV-A (CALABARZON).

4.4. The PSIP II follows the implementation of the first phase of PSIP adopting the
“Build-Transfer” (BT) modality where the proponent undertakes the financing
and construction of a given infrastructure or development facility and after its
completion turns it over to the agency concerned. The project implementation
covers 4,371 classrooms in 1,757 elementary and secondary school sites located
in CAR, ROs I, II, III, X and CARAGA.

4.5. The BOT Agreements for the School Infrastructure Projects were both entered
into by and between the Department of Education, represented by its former
secretary, and the respective authorized representatives of the contractors, for
the following contract packages:

Contract Contract No. of

Contractor RO Amount
Date Package Classrooms
PSIP I
Bright Future 3,445,903,120.00
October 8,
Educational Facilities, A I 2,157
2012
Inc.
Citicore-Megawide October 8, B III 2,885 5,229,899,136.00
Consortium, Inc. 2012 C IV-A 4,261 7,604,904,384.00
Sub-total 9,303 16,280,706,640.00
PSIP II
I 523 2,255,923,096.49
Megawide October II 459
A
Construction 17, 2013 III 1,103
Corporation CAR 353
Sub-total 2,438
X 1,224 1,603,397,790.00
Consortium of BSP & October E
CARAG
Co., Inc. and Vicente 17, 2013 709
A
T. Lao Construction
Sub-total 1,933
Sub-total 4,3715 3,859,320,886.49
Total 13,674 20,140,027,526.49

5
Due to various realignment and change of site, the original classrooms (CL) per contract of 4,370 CLs were increased
to 4,371 CLs. For Package A, from the initial 2,440 it was decreased to 2,438 due to various realignment and exclusion
of two projects, one in Kalinga and the other in Mt. Province. The deficiency in CL requirement was realigned to sites in
package B wherein additional three CLs were added from the initial 1,930 CLs to 1,933 CLs, two in RO X and one in
CARAGA, based on the Memorandum dated January 22, 2016 by the Physical Facilities and Schools Engineering
Division regarding the Approval of the Replacement Sites for “No Go” Sites/Sub-Projects under the PSIP II Contract
Package E.
126
 4.6. The Agreements also require that there shall be an Independent Consultant (IC)
procured through competitive bidding to provide independent services to the
parties in relation to the design and construction of the project. In line with this,
the contracts for the Procurement of IC referred/called the “Consulting
Services”, were entered into by and between the Department of Education,
represented by its former Secretary, and the authorized representatives of the
winning ICs, wherein half of the total contract cost is to be shared
proportionately by the Proponent and the remaining 50 percent to be shouldered
by DepEd:
Contracto Total
Contract Contract Deped
r/ Date Proponent Share Contract
No. Share
IC Amount
PSIP I
PFSED- MOHRI & January 23, Bright Future 19,434,056.48 19,434,056.48 139,888,888.88
BI-2012- P.A. 2013 Educational
021A-060 Associates Facilities,Inc.
Citicore- 50,510,387.96 50,510,387.96
Megawide
Consortium,Inc
.
PSIP II
Package A: Engineerin March 28, Megawide 24,983,800.00 24,983,800.00 49,967,600.00
2013- g& 2014 Construction
OPS4-019- Developm Corporation
BI-016A- ent Corp of
064 the
Philippines
Package E: Urban March 28, Consortium of 16,449,908.00 16,449,908.00 32,899,816.00
Integrated 2014 BSP & Co.,
Consultant Inc. and
s Inc. Vicente T. Lao
Construction

4.7. The project completion deadline embodied in the contracts are as follows:

Details PSIP I PSIP II

BLT/BT Contract Date (Signing Date) October 8, 2012 October 17, 2013
Original Contract Completion Date from the Signing Date February 8, 2014 December 17, 2014
(16 months for PSIP I; 14 months for PSIP II)
End of period for procurement of IC from the Signing Date December 7, 2012 December 1, 2013
(60 days PSIP I; 45 days PSIP II)
Actual Contract Date of IC January 23, 2013 March 28, 2014
Delay in the procurement of IC (Time Extension) 46 calendar days 117 calendar days
Revised BLT/BT Contract Completion March 26, 2014 April 13, 2015
Contract Completion6 2015 Pending with 31
percent uncompleted

6 Summary of Sub-Projects for PSIP I and II as of December 31, 2017

127
 4.8. The following observations were noted in the review of the implementation of
the PSIP:

a.) The lack of validation in allocation of sites reduced the targeted 9,303 to
9,296 classrooms, adjusting contract cost from P16,280,706,640 to
P16,264,995,828 for PSIP I.

4.9. The awarded contracts required for the construction of 9,303 classrooms; but on
the final construction completion accomplishment, it was reduced to 9,296,
attributed to the contract provision allowing possible realignment based on the
actual buildable space.

4.10. The Closure Report7 of the Independent Consultant MOHRI & P.A. Associate
Inc. disclosed the following conditions in classroom adjustments:

a. Several project variations in Pangasinan, Ilocos Sur, and La Union resulted in

a shortage of six classrooms, which was replaced by one-storey, five-
classrooms in Ubagan Elementary School in La Union.

b. There was re-allocation in Geronimo Elementary School located in

Rodriguez, Rizal, from two-storey, six classrooms to two-storey, four
classrooms. While for Dulong Bayan Elementary School in San Mateo, Rizal,
the site has a dilapidated two-storey, 10 classroom building due for
demolition. However, the school administration accordingly refused to accept
the new project with only four classrooms because the existing building has
10 classrooms, thus, the four-classroom project was excluded.

4.11. The final actual accomplishment for PSIP I therefore, is still short in RO I under
Contract Package A by one classroom and in RO IV-A for Contract Package C
by six classrooms, or total of seven against the total classrooms to be constructed
per contract.

4.12. It was verified that the exclusion of seven classrooms for completion adjusted
total contract cost from P16,280,706,640 to P16,264,995,828. Contract cost
adjustment is shown in the following table:

Awarded Contract Adjusted Contract Decrease

Contract
Contractor RO No. of No. of No. of Amount
Package Amount Amount
CL CL CL
Bright Future A I 2,157 3,445,903,120.00 2,156 3,441,882,286.00 1 4,020,834.00
Educational
Facilities, Inc.
Citicore- B III 2,885 5,229,899,136.00 2,885 5,229,899,136.00 - -
Megawide
Consortium, Inc. C IV-A 4,261 7,604,904,384.00 4,255 7,593,214,406.00 6 11,689,978.00
Total 9,303 16,280,706,640.00 9,296 16,264,995,828.00 7 15,710,812.00

7 Public-Private Partnership For School Infrastructure Project Phase- Closure Report by MOHRI & P.A. Associates Inc.
128
4.13. The payments made to the Proponents also indicated subsequent adjustments in
the annual lease payments. To wit:
Original Revised
Contract Decrease in
Contractor RO Annual Lease Annual Lease
Package Annual Lease
Payment Payment
Bright Future A I 344,590,312.00 344,188,228.56 402,083.44
Educational
Facilities, Inc.
Citicore-Megawide C IV-A 760,490,438.00 759,321,440.60 1,168,997.40
Consortium, Inc.

b.) The Closure Report of the IC clearly disclosed the delayed completion of
classrooms under PSIP I that are mostly attributable to incidents
considered as Excusable Delays in Construction under Section 12.8b of the
BLT agreement.

4.14. As previously presented, the PSIP I was not accomplished on the original
targeted completion date on February 8, 2014, but was subsequently moved to
March 26, 2014 or extended by 46 days in view of the delay in the procurement
of IC. However, setbacks encountered during the construction implementation
necessitated another extension of the completion period; thus, the projects
suffered delay of one and half years until November 2015, the final completion
of the 9,296 classrooms in the following Regions:
No. of No. of Construction
RO
Schools CL Completion
I 667 2,156 2/10/2015
III 597 2,885 8/30/2015
IV-A 964 4,255 11/30/2015
Total 2,228 9,296

4.15. The Closure Report cited that the delayed completion of PSIP I was mostly
attributable to incidents covered by Section 12.8b of the BLT agreement,
wherein major causes of delays were identified as follows:
Major Causes of Delay
Attributable to Contractor Attributable to DepEd
A. Poor selection of sub-contractors resulting in a. Incidents covered by Section 12.8b of the
termination of contract or abandonment of sub- BLT Agreement:
projects, inadequate supervision from sub-  Variation;
contractor’s engineering staff, lack of logistical  Delay in the issuance of consents
support of sub-contractors to proponent; required/delay in the issuance of
building permit;
B. Inefficient distribution of materials from  Delay by DepEd in providing access
distribution center to various sub-contractors; to Project Site;
 Failure to Appoint the IC within 60
C. Inadequate supervision from sub-contractors days from execution date;
engineering staff.
b. Delayed or late resolution of sub-projects
for “No Go” sites, or projects with site
issues.

129
4.16. The IC Report also mentioned the following:

a. The selection process of schools to be included in the list of sub-projects

should be thoroughly screened and scrutinized, such as topographic
condition, flooding, access roads among others should be reflected in the Site
Appraisal Report (SAR).

b. Site conditions and other hindering factors that would pose obstruction on the
required buildable space such as demolition of existing school
building/structure/trees should be well described on the SAR.

c. DepEd should already have readily available list of alternative schools as

possible replacement schools to avoid long delays in getting approval of a
replacement school which needs to pass through the bureaucratic procedure
and existing policies.

d. Zoning classifications as to weather and other environmental factors should

also be taken into account in nominating recipient schools.

e. There must be flexibility to adapt different building designs as well as

material specifications that are adaptable to the different geographical
locations of the school sites.

f. Weather and other environmental factors/conditions should also be taken into

account in nominating recipient schools or determining the most effective
school building design most applicable to the condition.

g. There should be effective advocacy activities among DepEd Offices, Local

Government Offices, and other government agencies to avoid unnecessary
delays and confusion during the implementation stage.

4.17. It was further highlighted in the report that dividing the financial payment for its
services being shared equally by the DepEd and the Proponent has its
disadvantage because the Proponent may take advantage of delaying the
payments of its 50 percent share to get even with the IC for its strictness during
the implementation.

4.18. From the foregoing observations, it can be inferred that DepEd, being the
principal implementing agency, had been lax in the performance of its duties and
responsibilities in providing access to the site and in securing the necessary
permits as well as in attending on the variation requirements the soonest possible
time to complete the construction on schedule.

c.) After more than two years of program implementation, PSIP II remained
uncompleted with 1,327 classrooms or 30 percent still awaiting
construction completion.

130
 4.19. The revised contract completion for PSIP II was due on April 13, 2015.
However, after more than two years of program implementation, only 3,044
classrooms or 70 percent were completed as of December 31, 2017 based on the
monitoring of the final list of sub-projects for PSIP II. Consider the following
table:

No. of Classrooms (CL) Completed

Uncom-
With Certificate of Completion (COC) With- % pleted
RO Target
FY % FY % FY % FY % out Total CLs
2014 ** 2015 ** 2016 ** 2017 ** COC
Contract Package A
CAR 353 8 2 146 43 136 82 25 89 10 325 92 28
RO I 523 27 5 110 26 77 41 14 44 - 228 44 295
RO II 459 131 29 229 78 95 99 1 99 2 458 99 1
RO III 1,103 56 5 444 45 247 68 51 72 22 820 74 283
Sub total 2,438 222 9 929 47 555 70 91 74 34 1,831 75 607
Contract Package E
RO X 1,224 - - 385 31 424 66 68 72 - 877 72 347
CARAGA 709 - - 121 17 113 33 102 47 - 336 47 373
Sub total 1,933 - - 506 26 537 54 170 63 - 1,213 63 720
Total 4,371 222 5 1,43 38 1,092 63 261 69 34 3,044 70 1,327
5
Remarks Within the Construction Beyond the Construction Completion 1,327 CL Remained
Completion Deadline Deadline Uncompleted
1,657 CL 1,387 CL
**Percentage of completion is on a cumulative basis.

4.20. Of the 1,327 uncompleted classrooms, 1,305 are still on-going, while 22
classrooms have not yet been started. Details are shown in the next table:
No. of Classrooms (CL)
RO On-going Not Yet
Completed % % % Total
Construction Started
Contract Package A
CAR 325 92 26 7 2 1 353
RO I 228 44 295 56 - - 523
RO II 458 99 1 1 - - 459
RO III 820 74 263 24 20 2 1,103
Sub total 1,831 75 585 24 22 1 2,438
Contract Package E
RO X 877 72 347 28 - - 1224
CARAGA 336 47 373 53 - - 709
Sub total 1,213 62 720 38 - - 1,933
Total 3,044 70 1,305 30 22 1 4,371

4.21. Based on the monitoring report,8 the non-completion of the project is mainly
attributed to the accessibility issues in the site, including the issuance of building
permit and other force majeure instances like weather, security threat, damaged
bridge, labor scarcity, among others. An equivalent of 46 percent of the
constructed classrooms was beyond the completion deadline. Although these
factors are deemed to be a part of excusable delay provision in the contract, the

8 Summary of Sub-Projects for PSIP I and II as of December 31, 2017

131
 incurrence of delay of more than two years is indicative that these problems were
not addressed by DepEd promptly. Also, the 24 percent realigned projects is an
indication that some schools sites with classroom allocation had in fact do not
have any classroom shortages. Others are apparently attributed to the lack of
proper planning in the allocation procedure which greatly affected the overall
completion of the project. Details are as follows:
No. of CL CL
Reason for Delay in
Status Package Package Remarks
Construction No. %
A E
Completed 158 - Realigned 795 24
On-Going 558 57
Not yet 22 -
Started
Completed 49 - Change in Design 58 2
On-Going 9 - Beyond the
Construction
Completed 808 10 Delay/Hard Access in Site, 1,499 46 Completion
On-Going 18 663 Permits Issues Force Majeure Deadline
(Weather, Security Threat, 3,241 CL
Damaged Bridge, Labor 74 percent
Scarcity, Legal Holidays, Port
Congestion),
Completed 219 - Clearing of Site, Demolition 219 7
of Existing Building
Completed - 670 No Data; 2016-2017 670 21
Completed 597 533 Within the construction 1,130 26 Within the
completion Construction
Completion
Deadline
1,130 CL
26 percent
Total 2,440 1,933 4,371

4.22. Validation based on the standard time for preliminary activities and the actual
construction provides that the overall project duration should be as early as 145
days for two classrooms and as late as 195 days for 12 classrooms based on the
construction schedule of Bright Future Educational Facilities, Inc.9
Activity Description Early Start Early Finish Duration
Providing Access to Project Sites 8/7/2012 9/5/2012 30
Construction Permit 2/3/2013 2/17/2013 15
Procurement and Delivery of Materials 8/7/2012 11/4/2012 90
CL Construction:
Landoc ES 2CL 12/12/12 12/21/2012 10
Alaminos CS 4 CL 11/22/2012 12/11/2012 20
Candon NHS 6CL 2/6/2013 3/7/2013 30
Manlued ES 8CL 7/23/2013 8/31/2013 40
Bonuan Boquig NHS 10CL 2/23/2013 4/13/2013 50
Alaminos NHS 12CL 3/12/2013 5/10/2013 60

9
Annex D Construction Schedule Build Lease Transfer Agreement PPP for School Infrastructure Contract
Package A
132
4.23. As can be gleaned from the foregoing information, the PSIP II project likewise
suffered delay in the construction implementation as 31 percent of the targeted
classroom provisions were uncompleted despite more than two years of program
implementation. Based on standard time, an ordinary construction with 12
classrooms should have been completed within six months.

4.24. The PPP was supposed to address the backlog in classroom requirement the
soonest possible time, but such expectation did not materialize as the process
turns out to be slow.

d.) The extended PSIP II classroom completion may result in incremental

consultancy cost, or possible termination/abandonment of the project.

4.25. Since the contract completion date for PSIP II which is supposed to be on April
13, 2015 has already been delayed, a possible contract extension is anticipated
and additional operational cost is most likely to be instituted considering that the
project has been running for more than two years and yet only 70 percent (3,044
CL out of 4,371 CL) had been completed. It was noted that procurement of
consultant for extended services for the implementation of PSIP II already
undergone Pre-procurement conference; but the BAC resolved to deny the
request for procurement. Hence, it was yet uncertain whether DepEd would still
extend/procure an IC to carry out the management of the PSIP II construction
completion.

4.26. Whereas, accounting records would show that the IC for Package A, Engineering
& Development Corp of the Philippines (EDCOP), has almost been fully paid in
its last billing on June 29, 2016, with outstanding balance of P2,848,153.20 as
of December 31, 2017, summarized as:

Particulars Amount
Revised Contract Amount 23,734,610.00
Payments made 20,886,456.80
Balance 2,848,153.20
% Contract Amount 12

4.27. Analysis shows that the outstanding amount due to EDCOP represents 12
percent of the contract price; while the contract between DepEd and EDCOP
stipulates that the final billing is equivalent to 10 percent of the primary
remuneration due upon submission of the required monthly reports and other
deliverables in accordance with the Terms of Reference, whichever is higher. So
in essence, with only 12 percent amount due, EDCOP appears to be in its final
billing of remuneration for the supposed completed construction. However, this
is inconsistent with the actual condition as the contract for Package A is still on-
going with 607 classrooms (585 CL on-going and 22 CL not yet started) or 33
percent remained uncompleted.

133
4.28. There was no provision in the IC contracts allowing for automatic service
extension in case of prolonged project completion for incidental causes
attributable to DepEd, thus the probability of project management abandonment
of the IC until the matter has been resolved by the DepEd. This problem is again
a contributing factor to the timely delivery of the needed classrooms.

4.29. PSIP is an initiative created to fast track the classroom construction. Thus, the
continuous delay in program implementation defeats the purpose why the
strategy has been opted to. DepEd therefore, was not able to address the
provision of classrooms in identified priority areas in due time as targeted.
Further, the overall procedural requirement was more complicated and
apparently more costly.

4.30. We recommended that the Management require the concerned DepEd

Offices to:

a. be more prudent and objective in its evaluation/assessment, and to

consider the availability of needed machinery before venturing into new
strategy/undertaking to serve its mandate;

b. clearly define responsibility areas, strengthen coordination among

involved offices and strictly enforce validation of proposed sites to
immediately address issues/problems prior to project implementation;

c. evaluate and closely monitor project sites that were not yet completed
and ensure that the Proponents comply with their contractual
obligations;

d. exercise proper diligence in the monitoring and supervision of the

program to ensure that only those projects done in accordance with the
requirements of the contract are accepted and paid to avoid wastage of
government resources; and

e. impose necessary and appropriate penalty to contractors, if warranted.

4.31. The Management through the Assistant Secretary for Procurement, Project
Management and Field Operations, and the Chief, Education Facilities Division,
requested for time extension to give their comments considering the
complexities of the contract and the necessity of gathering information and
retrieving of documents.

134
BEFF – School Furniture Program (SFP)

5. The desired outcome of addressing furniture needs of schools thru the School
Furniture Program (SFP) under the CYs 2016 and 2015 BEFF was not fully met
in seven regions due to the: a) delay in the downloading of funds by the DepEd
CO and execution of procurement activities; b) non/delayed deliveries of at least
70,124 pieces of armchairs (AC) and 2,242 sets of teachers’ tables and chairs
(TTC); c) non-utilization of 19,493 pieces of AC and 286 sets of TTC that were
stored in vacant rooms, covered courts, roof deck and along the corridors/
Principals’ office due to, among others, delayed completion of the school
buildings, oversupply of furniture and poor workmanship/ inferior materials
used resulting in 3,049 and 54 damaged/broken AC and TTC, respectively; and
e) deliveries/transfers to non-recipient schools of excess 4,962 pieces of AC and
85 sets of TTC due to lack of coordination among the DepEd procuring offices
and between the DepEd and the LGUs resulting in the deliveries of the same
items.

5.1. Section 7.6 of the 2016 Revised IRR of RA No. 9184 provides that:

“To facilitate the immediate implementation of procurement of Goods,

Infrastructure Projects or Consulting Services, even pending approval
of the GAA, corporate budget or appropriations ordinance, as the case
may be, and not withstanding Section 7.2 hereof, the Procuring Entity
may undertake the procurement activities short of award.

NGAs, SUCs, Constitutional Commissions or Offices are encouraged

to start their procurement activities immediately after the National
Expenditure Program (NEP) has been submitted by the President to
Congress, provided that the HOPE has approved the corresponding
indicative APP. This will facilitate the awarding of procurement
contracts after the enactment of the GAA, enabling the timely
implementation and completion of programs and projects.”

5.2. Pursuant to the above provision of the IRR of RA No. 9184, the revised
procedures on the downloading of Funds to the ROs/DOs as embodied in the
DepEd Unnumbered Memorandum dated August 9, 2016 and DepEd Order No.
35, s. 2017 dated July 17, 2017, provide the following:

a. DOs to proceed with the procurement activities short of award while the
DepEd CO is processing the Sub-allotment Release Orders (Sub-AROs). The
Sub-AROs will be released to the Division Offices immediately.

b. Upon receipt of the Sub-ARO, the DO shall obligate the funds within three
months from the date of Sub-ARO, subject to the usual existing budgeting,
accounting and auditing rules and regulations.

135
 c. In the event that the funds are not obligated within the three-month period,
the concerned DO/RO is obliged to report unobligated funds and to submit a
Certificate of Availability of Funds immediately to the Budget Division of the
Central Office. In this case, the Budget Division will issue a negative sub-
ARO and RO/CO shall take-over the procurement and implementation of the
said projects. The failure will be reflected in the performance, ranking and/or
standing of the concerned office/s.

d. Inspection of school furniture must be conducted in three stages as required

in the contract implementation phase. School furniture must be inspected
during pre-delivery, during delivery, and post-delivery. In each stage, the
school furniture must be inspected following inspection procedures
enumerated in Enclosure No. 3, Paragraph 7, Items a to c of DepEd Order No.
35, s. 2017.

5.3. Review of the implementation of the School Furniture Program in ROs NCR, I,
III, IVB, V, IX and XIII as well as ocular inspection conducted to determine the
existence, extent of utilization and condition of the delivered school furniture to
school recipients disclosed deficiencies, details of which are discussed below:

a.) Delay in the downloading of funds/procurement activities reported in the

following regions:

Date of
Sub-ARO
Region Office Amount Remarks
issued by
the CO
NCR ROP, August to 103,902,221.53 All Sub-AROs have
Quezon City, December validity period until
Manila City, 2016 December 31, 2017, except
Caloocan City, for the two Sub-AROs
Valenzuela City, January, received in 2016 by DO
Malabon City, February, Las Piñas totaling
Navotas City, San March and P6,264,977.09 and DO
Juan City, August 2017 Caloocan amounting to
Muntinlupa City P995,505.91 which are
Parañaque City effective until December
and Las Piñas City 31, 2016.

RO I Ilocos Norte, October 23,593,650.00 Most of the procurement

Batac City, Laoag 2016 activities at DOs Laoag and
City and Ilocos Ilocos Sur from
Sur advertisement up to award
of contracts were done only
after the receipt of the Sub-
AROs.

RO III ROP October 20,347,279.50 Delayed procurement

2016 activities with Invitation to
Bid issued only on
September 28, 2017 or
almost one year after the
136
 Date of
Sub-ARO
Region Office Amount Remarks
issued by
the CO
issuance of Sub-ARO.
Allotment was obligated
only on December 28,
2017. Notice to Proceed
was issued only on January
31, 2018

RO V Albay and Tabaco June and 16,668,182.41 The Sub-AROs for the SFP
City October were received by the DO
2016 Tabaco on June 13 and
June 16, 2016. The BAC
only commenced its
procurement activities on
June 17, 2016.

Total 164,511,333.44

As shown in the above table, the releases of the Sub-AROs only in the last
quarter of 2016 and subsequent releases in the 1st and 3rd quarters of 2017
in the case of NCR, delays the procurement activities of school furniture
and their subsequent deliveries to schools as planned. ROs NCR, I, III and
V prolonged the start of their procurement activities, which were mostly
done after the receipt of the Sub-AROs, resulting in additional undue delays
in the procurement of school furniture despite Section 7.6 of the 2016
Revised IRR of RA No. 9184 and the DepEd guidelines provided that the
operating units to undertake preliminary procurement activities short of
award to facilitate the immediate implementation of the procurement of
goods.

b.) Undelivered/Delayed deliveries of school furniture totaling 70,124

armchairs (AC) and 2,242 teachers’ tables and chairs (TTC)

b.1.) At least 33,758 AC and 1,235 sets of TTC were still undelivered,
shown as follows:

No of Quantity
Region Division Recipient Remarks
AC TTC
Schools
NCR Quezon City, 12 6,391 139 At DO Quezon City, three
Manila, schools which are Project 6
Navotas City ES; Rosa L. Susano-
Novaliches ES and Don
Alejandro Roces waived
acceptance of the deliveries
due to adequate number of
chairs while Payatas B ES
refused to accept the items
delivered due to insufficient
storage space.
137
 No of Quantity
Region Division Recipient Remarks
AC TTC
Schools
RO I Ilocos Norte, 81 20,522 538 Status Report submitted by
Batac City, (excluding the Division Engineers /
Laoag City DO Batac Supply Officers revealed that
and Ilocos Sur City- out of the contracted 29,905
schools pieces of ES/HS/JHS AC and
not stated) 739 sets of TTC, only 9,388
pieces of ES/HS/JHS AC and
201 sets of TTC were
delivered, leaving 20,522
pieces of ES/HS/JHS AC and
538 sets of TTC undelivered
as of year-end

RO IV-B Palawan 17 -* -* The School Principals have

submitted signed
Certification that they have
not received any deliveries
of AC and TTC set from
Fhellus Trading and Wood
Workshop.

RO V Catanduanes 6,845 558 A review of the submitted

Quarterly Report of PPAs for
the 4th Quarter of 2017,
disclosed that BEFF Batches
3 and 4 with contract costs of
₱2,938,480.00 and
₱2,800,945.00, respectively,
were not yet delivered as of
December 31, 2017. The 1st
semester had already ended
and yet the school furniture
was not yet available.

Total undelivered school

110 33,758 1,235
furniture
*not stated

b.2.) Delivery of 36,366 AC and 1,007 sets of TTC were considerably

delayed in the following regions:

Region Division AC TTCs Remarks

RO I Ilocos Norte 7,448 149 At DO Ilocos Norte, supplier-Nothlandia
Enterprise made the partial delivery of
goods beyond the prescribed period
(inclusive of 60 days extension period) of
150 calendar days.

RO Puerto 18,975 464 School furniture under the CY 2015 and

IV-B Princesa 2016 BEFF in the Division of Puerto
City, Princesa City totaling P11,422,706.50,
Palawan, 18,975 pieces of AC and 464 sets of TTC

138
 Region Division AC TTCs Remarks
and amounting to P15,049,570.00 in Division
Occidental of Palawan, and school furniture for CY
Mindoro 2017 in the amount of P7,111,090.00 in
the Division of Occidental Mindoro were
not delivered within the stipulated date in
the contract. In DO Occidental Mindoro,
deliveries to recipient schools of 8,280
AC (all plastic) and 184 sets of TTC (all
wood) were delayed ranging from 4 to
218 days.

RO V Albay and 9,943 394 At DO Albay, there were delays in the

Catanduanes delivery of the ACs ranging from 180 to
318 days and 216 to 320 days for TTCs
intended for 33 recipient elementary and
secondary schools. It was only on January
11, 2018 that the supplier started to deliver
the TTCs.

For the contract amount of ₱3,812,715.00

under BEFF 2015 of DO
Catanduanes,only 43 percent was
delivered within the target date and the
rest were delivered three to 11 months
beyond the target date.

Total 36,366 1,007

Undelivered/Delayed deliveries of school furniture by defaulting supplier

shall be subject to the imposition of corresponding liquidated damages at
least equal to one-tenth of one percent of the cost of the unperformed portion
for every day of delay or termination of the contract if the cumulative
amount of liquidated damages reaches 10 percent of the amount of the
contract pursuant to Section 68 of the Revised IRR of RA No. 9184.

c.) Unutilized school furniture due to to: i) unfinished school buildings; (ii) not
assembled by supplier upon delivery/defective or more than enough chairs
already in use; (iii) old armchairs are still usable; (iv) infested with
termites; and (v) no available space, thus, these were stored in vacant
rooms, along the corridor, roof deck, below the stairs, audio visual room,
in front of the stage/Principal’s Office and covered court exposing them to
the elements and risk of loss thru theft.

Division Quantity
Region Recipient School Remarks
Office AC TTCs
NCR Quezon City Rosa L. Susano-Novaliches 8,557 115
ES; Eulogio Rodriguez, Jr.
HS; SHS in Kaligayahan;
Commonwealth HS; San
Agustin ES; Nagkaisang
Nayon ES; Krus na Ligas HS;
139
 Division Quantity
Region Recipient School Remarks
Office AC TTCs
Ernesto Rondon HS; Bagong
Pag-asa ES; Bago Bantay ES;
Esteban Abada ES; Balara ES;
North Fairview ES; Project 6
ES
Manila City Gregorio del Pilar ES; P. 3,257
Gomez ES; Pres. Sergio
Osmeña, Sr. HS Annex; Claro
M. Recto HS; SHS within
Bacood ES; Eulogio
Rodriguez Vocational HS
Caloocan Maria Clara HS 16
City 720
Valenzuela Pio Valenzuela ES 12
City 540
Malabon Tinajeros ES 21
City
Marikina Fortune Elementary School 180 4
City
San Juan Pedro Cruz ES; Salapan ES; 2,297 43
City San Juan ES; Pinaglabanan ES;
Sta. Lucia ES
Pasay City Phil. National School for the 60 3
Blind
Muntinlupa Muntinlupa Senior HS
City 480
Parañaque SHS within Sto. Nino ES; 1640
City Parañaque ES-Central
Las Piñas CAA ES-Main 28
City
Sub-Total 17,731 242
RO V Albay Not indicated 8 AC were already
broken despite of
being just delivered
as they were brittle.
Eight AC were
returned by the
advisers to the
Supply Officer as
the same cannot be
used anymore.

RO IX Zamboanga Tukuran TVHS, Aurora NHS, 1,707 About 1,707 unused

City Midsalip NHS and Guipos plastic AC are either
NHS located beside the
Principal’s Office
(covered pathway),
in front of the
school stage and in
front of the Office
of the Principal in
three schools. The
AC are vulnerable

140
 Division Quantity
Region Recipient School Remarks
Office AC TTCs
to sun and rain that
will cause
immediate
deterioration of the
plastic materials
causing them to
become brittle and
adding stress to the
already low quality
AC.

Pagadian Pagadian Science High School, 47 There are 47 unused

City Pagadian City NHS (PCNHS_ wooden AC located
and Norberta Guillar NHS. outside the school
building covered
only with worn-out
sack-like canvass,
while 17 are located
just outside the
classroom exposed
to rain thus leg parts
are starting to
deteriorate.

Sub-Total 1,762 -
Total 19,493 242

d.) Damaged/Broken school furniture or with defects due to poor workmanship

and inferior materials used

Division Recipient Quantity

Region Deficiencies
Office School AC TTCs
NCR Quezon City, 33 schools 2,743 50 Leg, backrest, writing
Manila, boards, table top, table
Caloocan, drawers partially/totally
Valenzuela, damaged, cracked,
Malabon, detached from the chair;
Navotas, chipping off of plastic parts
Muntinlupa, of ACs; surface of TTCs
Las Piñas and was made of cheap
San Juan materials, thus, were easily
damaged, termites
infestation on ACs in five
schools; broken armrest;
unstable due to poor quality
of wood; writing boards
and table drawers were
detached; cracks in arms of
chairs; rough surfaces of
armchairs; TTCs not neatly
varnished.

141
 Division Recipient Quantity
Region Deficiencies
Office School AC TTCs
RO IV-B Palawan 15 schools in Not Not Some bolts were
Southern and stated stated inadequate/ sizes not fit to
Northern the receptacle holes of the
Palawan armrest; AC materials were
too brittle; AC delivered in
15 schools were not
assembled contrary to what
was agreed in the contract.

Occidental Sta. Cruz Not Not Teachers’ tables were not

Mindoro Mulawin ES stated stated fully varnished, ruler
and San Jose guides of the drawers were
National not heavy duty and drawers
Agricultural and difficult to open; screws on
Industrial HS armchairs beneath the
writing board were not
properly installed in
slanting manner; some
armrests of the chairs were
easily removed due to
loose-threading of the
screws. Some teachers
complained that the chairs
might not withstand
prolonged use due to poor
quality of production.
Some chairs are not within
the specifications with
substandard and/or inferior
quality of plastic thus, the
writing boards were easily
deformed.

RO V Albay One elementary Not Not The AC were already

and one stated stated broken despite being just
secondary delivered as they were
schools brittle.
RO IX Zamboanga Tukuran TVHS, 306 4 Either damaged/ defective/
del Sur, Aurora NHS, with flaws, beyond use or
Pagadian City Midsalip NHS have visible cracks
and Guipos
NHS. Pagadian At DO Pagadian City 256
Science High AC do not have writing
School, boards when delivered;
Pagadian City teachers’ tables are not
NHS (PCNHS_ properly varnished/
and Norberta painted. Plywood used
Guillar NHS. starts to peel-off. drawers
are misaligned; and TCs
have wormholes. Wood
used easily chips off.

Total 3,049 54

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e.) Transferred/Delivered to non/other recipient schools in NCR

Division Transferred/Delivered Quantity

Office From To AC TTCs
Quezon City San Francisco HS San Bartolome HS 400 10
Payatas B ES Sta. Luica HS 150 3
Manila City Pres. Sergio Osmeña, Sr. HS Old Osmeña (Torres HS) 352 8
CENTEX A. Mabini ES 540 12
G. Santiago ES 225 5
J. Luna ES 225 5
HJ Atienza ES 90 2
Manila Science HS Araullo HS 283
A. Quezon ES 197
Valenzuela Valenzuela City Science HS Lawang Bato NHS 50
City Bagbaguin NHS 50
Dalandanan 58
Canumay East NHS 22
Dalandanan NHS Veinte
Reales Annex 4
San Juan City San Juan Senior High School San Juan ES 1,080 24
Las Piñas Las Piñas City National Las Piñas National HS 300
City Senior High School
CAA ES-Main Las Piñas National HS- 150 3
Main
Manuyo SHS 90 9
CAA Jr. HS 400
Las Piñas National HS- 300
Almanza
Total 4,962 85

At DO Manila, CENTEX waived the delivery of 1,080 units of ACs and 24

sets of TCCs, thus, the DO decided to transfer the same to other schools as
there is no available storage space because the school buildings are not yet
completed. Further, no deliveries were made to San Juan Senior High
School. Instead, the allotted 1,081 armchairs and 24 sets of TCCs were also
delivered to San Juan ES.

f.) Lack of coordination between the DepEd and the Local Government Units
in NCR resulting in the delivery of the same items and surplus in the supply
thereof
Division Office Recipient School School Furniture Received
Manila City Eulogio Rodriguez Vocational HS AC
Pasay City Phil. National School for the Blind; Pasay TTC
City East HS
Muntinlupa City Muntinlupa National HS-Tunasan Annex; AC and TTC
Muntinlupa National HS-Main; Muntinlupa
Science HS
Paranaque City Tambo ES; La Huerta ES AC
Las Piñas City Las Piñas City National Senior HS; Daniel AC and TTC
Fajardo ES; Las Piñas National HS-Main

143
g.) Sixteen schools in RO XIII with seat shortage

The Accomplishment Report of the Division of Cabadbaran City, RO XIII

as of December 31, 2017 disclosed that 16 elementary and secondary
schools have shortage in the number of seats as compared with the actual
number of enrollees, as summarized below.

School No. of Pupils No. of Seat Shortage

Elementary Schools
Comagascas ES 367 218 149
South Cabadbaran CES 1,313 1,073 240
Calamba ES 474 286 188
La Union ES 1,108 977 131
Antonio Luna ES 248 125 123
Putting Bato Elementary School 475 358 117
Sanghan ES 530 438 92
Antonio C. Dagani CES 754 693 61
Del Pilar CES 420 360 60
Mahaba ES 246 203 43
Soriano ES 271 243 28
Alfonso B. Dagani ES 466 464 2
Cabinet ES 221 220 1
Sub-total CES/ES 1,235
Secondary Schools
La Union NHS(Calamba Annex) 439 410 29
Puting Bato NHS 112 100 12
Norcases ISS 170 150 20
Sub-total NHS 61
Total 1,296

h.) Other deficiencies

Region/DO Deficiencies
NCR Some recipient schools under CY 2016 BEFF were also recipients
Quezon City of SFP under other funding sources resulting in surplus of seat
provision;
Commonwealth HS and Esteban Abada ES requested for the pull-
out of armchairs delivered due to either poor workmanship or
inferior quality of materials used. Replacement was done by Hope
Metal Furniture Manufacturing, Inc., an affiliate of Top Asia
Furniture Producers COOP; and
Two sets of TCCs delivered to Pura V. Kalaw ES were utilized by
the staff of the Administration Office.
Manila City Two recipient schools, Pres. Sergio Osmeña Sr. HS and Claro M.
Recto HS under 2016 BEFF were also recipients of SFP under
other funding sources resulting to surplus of armchairs; and
All of the delivery receipt for RO procured school furniture were
not dated.
Valenzuela Invoice Receipt from the RO to the DO was not provided by
City Caruhatan NHS.

144
 Region/DO Deficiencies
Marikina City There were other units of furniture stored in front of the building
being constructed. These DO-procured furniture were received by
FES from other schools to fill-up the other vacant classroom of the
building upon completion. Since the furniture were stored outside,
it exposed the units to the elements and risk of loss.
On the other hand, delay is likewise observed in the delivery of
centrally-procured furniture under CY 2015 BEFF. San Roque
NHS is entitled to receive 640 ACs and 16 TCCs amounting to
P512,768.00 under the said program and these were delivered in
February 21, 22, 27 and March 16, 2018 only. The final date of
completion of deliveries should have been on September 12, 2016
following the grant by the Regional Director of DepEd – NCR on
the requested extension by the Supplier.
NCR (DOs There were ACs/TCCs not properly labeled with the funding
Quezon City, source and year as well as the name of supplier for proper and easy
Manila City, identification as required under DepEd Order No. 61, s. 2009.
Pasay City,
Muntinlupa City,
Las Piñas City);
IVB (DO
Palawan); IX
Pagadian City
NCR (DOs Delivery Receipt/ Inspection and Acceptance Report were not
Manila City, presented to the Audit Teams during inspection by Pres Sergio
Muntinlupa City); Osmeña Sr HS and Claro M Recto HS (DO Manila), Muntinlupa
IVB, IX-(DO National HS-Main Muntinlupa Science HS and by concerned
Zamboanga City) officials of DepEd RO IV-B.
The DO (Zamboanga del Sur) was not furnished with delivery
receipts and Acceptance Reports by the school heads. It was
gathered that the Division Office did not formally constitute
Division Inspectorate Team for the procurement of furniture.
RO IV-B The request for extension of delivery time due to insufficient
supply of wooden materials was not supported by certification
from Department of Trade and Industry (DTI). Moreover, the
granting of the request was not in accordance with No. 7 provision
in contract which states that: “No extension of contract whatsoever
shall be granted to the supplier due to ordinary unfavorable weather
conditions, non-availability of equipment or supplies to be
furnished by the same, labor problems and such causes for which
the government is not directly responsible, or when time affected
activities do not fall within the critical path of the network.
Extension of time shall be granted only the equivalent of delay due
to major calamities.”
RO IX-DOs The 292 plastic ACs and 337 wooden ACs intended for SHS are
Zamboanga del used by the Junior HS students at DOs Zamboanga del Sur and
Sur and Pagadian Pagadian City.
City
At DO Pagadian City, there were only 438 wooden armchairs
accounted for out of the 450 delivered furniture, therefore 12
wooden armchairs were missing as of inspection dates.

145
5.4. We recommended that the Management require:

a. DepEd CO to:

a.1. be prompt in the downloading of funds to the operating units;

a.2. coordinate with the DPWH to synchronize timelines in the

construction of school buildings with the provision of school
furniture;

a.3. ensure that the DepEd guidelines are consistently observed and
provide for sanctions in case of defiance by responsible persons; and

a.4. observe coordination among the DepEd procuring offices and

require ROs to coordinate with the LGUs to rightfully address the
furniture needs of the school, thereby avoiding oversupply thereof;
and

b. concerned ROs/DOs (procuring entities) to:

b.1. comply with Section 7.6 of the 2016 Revised IRR of RA No. 9184 and
DepEd Guidelines regarding the undertaking of procurement
activities short of awarding prior to the release of funds to facilitate
procurement of goods and the procedures on pre and post inspection
of items to ensure its quality;

b.2. closely monitor the delivery and condition of the goods delivered and
advise the Principals, Property Custodians and other concerned
DepEd officials of the recipient schools to immediately report
deliveries, reject outright defective deliveries, indicate the date of
receipt of deliveries and keep record of DRs, IAR, Certificate of
Acceptance and other related documents on file for future reference;

b.3. require the supplier to expedite the delivery of the undelivered items
and replace the defective items delivered;

b.4. impose the equivalent liquidated damages for late delivery; and

b.5. conduct inventory of unutilized excess furniture for transfer to other

schools with furniture needs.

5.5. Management commented, thus:

Regions Management’s Comments
NCR The Schools were advised to communicate with the concerned DepEd-NCR ROP
personnel in the instance that they encounter problems in the delivered school
furniture. The DO Quezon City conducted meetings wherein various solutions were
resolved and implemented and that compliance by the supplier has reached 95 percent.
It will issue a memorandum to all concerned school officials regarding the noted audit
issues.

146
Regions Management’s Comments
The Physical Facilities Education Division of DepEd OSEC is in constant
coordination with DPWH in the construction of school building, however, delay in its
completion caused DO Caloocan to transfer the delivered armchairs to schools in need
of the said furniture. The DO Caloocan property custodians and respective schools
kept their ICS records on file.
Further, the suppliers of DO Caloocan, Valenzuela, Navotas were informed of
damaged armchairs and tables and requested for their replacements, which for DO
Valenzuela were immediately replaced. For those transferred armchairs, the
concerned schools of DO Valenzuela will be instructed to prepare Property Transfer
Report.
DO Navotas -Tangos NHS preferred the wood and steel materials but no bidder, so
they resorted to all wood which caused the delay in the procurement process.
DO Marikina explained that the delay in the delivery of school furniture is beyond
their control since it is a contract between the Central Office (CO) and the supplier.
However, report is being made to the CO on the actual date of receipt of the delivery
of the furniture and it is up to the CO to claim for liquidated damages from the supplier
in case of delay or breach of contract. Efforts are being made to expedite the
construction of the building so that the school furniture could already be put in place.
RO I In DO Ilocos Norte, the supplier had requested for extension of 60 calendar days due
to force majeure brought about by typhoon and extreme weather conditions that
affected the province of Isabela, the supplier’s base of operations and source of
materials. Somehow, the supplier has admitted his default for the delayed delivery of
the furniture and has agreed to fully deliver and finish the project until the 2 nd week of
October 2017. Also, he was amenable to be charged liquidated damages equivalent
to an amount of one-tenth of one percent of the cost of the delayed goods for everyday
of delay until such goods are fully delivered and accepted by the Division.
Management made an assurance that this particular procurement experience will be
greatly considered in the determination of the eligibility of supplier in future
procurement of furniture of the Schools Division of Ilocos Norte.
In DO Batac City, the defective tables and chairs were already fixed by the
contractor/supplier. In addition, the accounting section will be imposing the provisions
of liquidated damages based on the Revised IRR of RA No. 9184 once section obtains
the attachments and supporting documents of the project procurement for TCCs and
learners’ chair for the senior high school. The management assured that the TTCs and
learners’ chair were already completely delivered to the recipient schools as confirmed
by the heads of schools.
DO Laoag City has already rescinded their contract. While in DO Ilocos Sur, the
supply officer contacted the contractor and it was agreed upon that liquidated damages
will be deducted to contractor’s billing.

RO IV-B The concerned agency officials of the DO Puerto Princesa City assured that they will
closely monitor deliveries. The Accountant will compute liquidated damages
accordingly and rescission of the contract and forfeiture of performance will be
applied, if warranted. Blacklisting and disqualification will be particularly considered
on defaulting contractors.
The Engineer of the Division of Palawan commented that the contractor promised to
deliver the items stated in the contract and is willing to pay all liquidated damages
incurred. The management required the contractor to post a new performance security
bond since the previous bond has already expired.
The Accountant of Division of Occidental Mindoro assured that no payment will be
made until the complete delivery and/or replacement of defective items be made and
liquidated damages shall be imposed for the late deliveries.

147
 Regions Management’s Comments
RO V Management of DO Albay averred that reliance was made on the submitted Delivery
Receipts by the supplier and that validation from the recipient schools as to the date
indicated in each DR was no longer done. Accordingly, this would result to inaccurate
computation of the liquidated damages. Also, Management committed to conduct a
reorientation to all Designated Property Custodian/Supply Officers reminding them of
the importance of indicating the actual date of delivery of the items.
DO Catanduanes officials concerned explained that they had many times called up the
suppliers to deliver the furniture, but still, only partial delivery was made on the first
contracts awarded and none for the last contract.
DO Management and BAC offered no objections to the audit observations and assured
the Audit Team of their compliance with the recommendations.
RO IX DO Zamboanga del Sur admitted that the designated personnel was not able to closely
monitor the delivery of school furniture. They justified that it intended to specify all
wood type of school furniture in the procurement as it usually did in the prior years.
However, the DepEd Central Office advised the Management to have it open to all
types (i.e. all wood, all plastic, combination of wood and steel or plastic and steel) to
avoid failure of bidding which commonly happened to other Division Offices due to
scarcity of good lumber with the “Log Ban” program of the Department of
Environment and Natural Resources (DENR). Furthermore, Management needed to
award the contract before the sub-ARO will lapse considering the procurement was
already on the 4th quarter of the year. The management found the documents and the
samples submitted during bidding were sufficient and compliant and relied on them
thus, it no longer conducted self-testing and research. However, management has not
yet paid the supplier. According to Management, with the observations and
recommendations, it is now compelled to require the supplier to do repair or replace
all the defective items, to complete delivery of the lacking writing boards and other
parts, to fix issues on self-loosening bolts and nuts and to provide markings on
furniture as specified in DepEd Order No. 61, s. 2009. Moreover, management assured
the creation of an Inspectorate Team for school to ensure compliance with the
technical specifications prior to issuance of acceptance certificates.
DO Pagadian City assured the implementation of the recommendations.
The management is sending a participant in the person of Engr. Alvin Marion C.
RO XIII Orboc – Division Engineer on February 20-23, 2018 to be an active participant of the
Workshop on the Preparation and Finalization of the Five Year Comprehensive School
Facilities Development Plan that would include the discussion of the Replacement of
Old School Furniture and Provision of Furniture to Newly Constructed Classroom.

Redesigned Technical-Vocational High School (RTVHS) Program

6. The effective implementation of the Redesigned Technical-Vocational High

School Program in nine regions was negated by: a) delayed/non-delivery of
Technical Vocational Livelihood tools, materials and equipment costing
P386,834,786.39; b) underutilized/ unutilized delivered items due to, among
others, unreadiness of at least 104 SHSs to implement the program and defects in
the specifications of the procured items delivered in 45 schools; c) recording and
procedural deficiencies; and d) other issues and concerns encountered in the
implementation thereof, thereby depriving the students of productive, relevant,
and quality vocational education.

148
6.1. It is the declared policy of the State, as stated in PD No. 1445, that all resources
of the government shall be managed, expended or utilized in accordance with
laws and regulations, and safeguarded against loss or wastage through illegal or
improper disposition, with a view to ensuring efficiency, economy and
effectiveness in the operations of government.

6.2. The RTVHS Program was initially implemented in the secondary technical-
vocational schools for SY 2005-2006. The program was implemented to support
the thrust of the DepEd for productive, relevant, and quality vocational
education.

6.3. For SY 2007-2008, the DepEd launched the Strengthened Technical-Vocational

Education Program (STVEP) to achieve its goal of equipping HS students with
relevant skills in order to prepare them for higher education, world of work and
for entrepreneurship. The objectives of the program, as enumerated in Annex A
of the DepEd Order No. 48, series of 2007 entitled, “Specific Guidelines for the
Implementation of the Strengthened Technical-Vocational Education Programs
(STVEP)”, are as follows:

a. to provide HS graduates with opportunities to acquire certifiable vocational

and technical skills that would allow broader options in pursuing their post-
secondary career whether this is college education, short-term technical
courses, entrepreneurship or apprenticeship leading to eventual formal
employment;

b. to provide HS graduates with employable and entrepreneurial skills that will

provide them with means and resources to support their post-secondary career
as well as enabling them to support formal schooling opportunities for the
younger siblings of the family; and

c. to provide technical skills training to out-of-school youths who receive

education through the Alternative Learning System (ALS) and the Madrasah
Education Program. Several intervention strategies were applied for the
successful implementation of the program, among which are the provision for
tools, facilities and equipment, and infrastructure support that includes repair,
rehabilitation and construction of workshop buildings.
6.4. The emergence of the K to 12 program, which covers 13 years of basic
education, not only re-established the Technical-Vocational education but also
strengthened it by integrating TVL tracks in the last key stage of the program,
the SHS, implementation of which started in the SY 2016-2017. One of the
requirements of an effective implementation of the SHS particularly in the TVL
tracks is the provision of facilities, tools, materials and equipment.
6.5. DepEd Order No. 8, series of 2016 dated February 15, 2016 provides, among
others, the following guidelines for the procurement of TVL specialization tools,
equipment and materials for SY 2016-2017:

149
 a. The regions shall consult with their SHS Coordinators and the Divisions
concerned regarding the specific requirements of schools per specialization,
including details such as quantity per item and points of delivery;
b. Technical specifications of goods for procurement shall be guided by the
standards set by the Office of the Undersecretary for Curriculum and
Instruction as contained in the SHS Tools and Equipment Database file
provided during the Regional Orientation-Workshop held on February 1-3,
2016. In general, the items to be procured must meet specified standards, x
xx, must be safe for use by high school students, x xx.
6.6. Likewise, the Senior High School Manual of Operations, Volume I, was issued
per DepEd Memorandum No. 76, series of 2016 which aims to help School
Heads of SHSs in carrying out all the necessary preparations before the opening
of the classes for the SY 2016-2017. The said Manual serves as a guide to School
Heads to ensure that requirements and provisions in schools are ready and
complete when SHS Program is implemented in the said SY.
6.7. Based on the GAA for the FY 2016, the DepEd has allocated a total of
P4,600,612,000.00 to implement the RTVHS Program in SY 2016-2017, as
summarized below:
Office/Region Amount
CO 128,459,000.00
NCR 145,075,000.00
CAR 107,799,000.00
I 348,584,000.00
II 186,382,000.00
III 420,114,000.00
IV-A 399,965,000.00
IV-B 178,322,000.00
V 434,219,000.00
VI 364,704,000.00
VII 536,981,000.00
VIII 233,733,000.00
IX 125,934,000.00
X 221,643,000.00
XI 236,755,000.00
XII 242,800,000.00
XIII 289,143,000.00
Total 4,600,612,000.00

6.8. The ROs submitted the approved RTAs to the DepEd CO which became its basis
in releasing funds to implement the program. Utilization by the audited four
regions of the FY 2016 appropriations for the said program as of year-end is
shown below.
Region Appropriation Contracted Amount Unutilized Budget
NCR 145,075,000.00 126,245,254.60 18,829,745.40
RO II 186,382,000.00 172,789,802.60 13,592,197.40
RO V 434,219,000.00 401,472,590.65 32,746,409.35
RO XI 236,755,000.00 210,522,214.00 26,232,786.00
Total 1,002,431,000.00 911,029,861.85 91,401,138.15

150
6.9. Moreover, evaluation of the implementation of the program in the aforesaid
regions, as well as in ROs of CAR, III, IV-B, XII and XIII, revealed deficiencies
such as: (a) delayed/non-delivery of TVL tools, materials and equipment costing
at least P386,834,786.39; (b) underutilized/unutilized delivered items due to,
among others, unreadiness of at least 104 SHSs to implement the program and
defects in the specifications of the procured items delivered in at least 45
recipient schools; (c) recording and procedural deficiencies; and (d) other issues
and concerns encountered in the implementation thereof. The aforesaid
deficiencies are discussed in detail below:

a.) Delayed/Non-delivery of TVL tools, materials and equipment

The delay or non-delivery of procured TVL tools, materials and equipment

was mainly caused by the delay in the procurement thereof affecting the
timely program implementation to the detriment of the program’s intended
beneficiaries. Relative observations noted in eight regions are as follows:

Region Cost of Items Observations/Deficiencies

NCR 634,418.42 Thirty-three undelivered items were noted in the
DOs of Manila, comparison between the Delivery Receipt (DR) and
Valenzuela, actual items delivered in seven selected recipient
Pasay, schools.
Parañaque and
Las Piñas City
RO II 11,748,713.71 Based on the report submitted by the Supply Section,
5,256 TVL materials, tools and equipment remained
undelivered as at year-end.
RO III -* Delays were incurred in the deliveries of items
especially for those contracts that were awarded and
started in 2016. Although majority of the items
procured in CY 2016 were 100 percent delivered, all
the contracts started only in September 2016. The
suppliers were given 90 days to deliver the procured
items and were likewise approved with 60-day
extension to complete the delivery hence the contract
completion was further moved to February 2017.
RO IV-B 105,789.61 Four items included in the DRs, Invoice Receipt for
DO Romblon Property (IRP) and Inspection and Acceptance Report
(IAR) were not delivered.
RO V 374,345,864.65 Target dates of delivery for the 13 awarded Lots were
not met by the concerned suppliers. It was noted that
not even a single delivery was made by the supplier
for Lot 12 which prompted the Management to
terminate the contract with the supplier whereas the
procured items for Lots 1 to 4, 6 to 11 and 13 with a
total contract amount of P374,345,864.65, though
completely delivered to the recipient schools, incurred
delay ranging from four to 427 days resulting in
imposition of liquidated damages totaling
P5,860,331.97.

151
 Region Cost of Items Observations/Deficiencies
RO XI -* Comparison between the list and actual delivery
disclosed items that were not yet delivered.
RO XII -* A total of 566 items were left undistributed to its
respective beneficiaries. The processing of documents
for transfer of ownership from Supplier to DepEd RO
XII and the construction of the canal at the exit gate
were both delayed. Moreover, the procurement of the
packages had undergone a lengthy process since
despite of reposting the procurement notice in the
PhilGEPS on May 2016, still there were no interested
bidders for some items in some specializations. Notice
to Award was received late on May 2017 and delivery
of the packages to RO happened in late 2017.
RO XIII -* The schools responded that the tools and equipment
Nine DOs were not delivered and installed in time for the start of
classes in SY 2016-2017.
Total 386,834,786.39
*Amount not stated

b.) Underutilized/Unutilized delivered items due to, among others, unreadiness

of at least 104 SHSs to implement the program and defects in the
specifications of the procured items delivered in at least 45 recipient schools

The SHS unreadiness was observed in view of the absence of technical-

vocational laboratories, lack of space or room to accommodate the items
delivered, deferred or no TVL track/course offerings, absence of enrollees
and non-provision of supplies necessary for the delivered TVL equipment
to function properly. Likewise noted were delivered items that were of poor
quality, for commercial or industrial use, and non-compliant with the
required specifications. Details are shown below:
Defects in the
Unreadiness
Specifications of the
Region of the SHS Observations/Deficiencies
Procured Items
No. of Recipient Schools
NCR 44 12 As to the schools unreadiness, seven
schools were observed without technical-
vocational laboratories since there were
no SHS buildings constructed as at
inspection date, with on-going or
completed construction thereof but was
deemed un-operational due to lack of
electricity and water supply or operational
but not suitable for TVL courses as its
design were classroom type. Items
delivered were housed in different
classrooms, buildings, guidance office,
school clinic or in a stock room. Lack of
space or room to accommodate the items
delivered were likewise noted in 20
schools. Moreover, 19 schools were
delivered with TVL equipment for TVL

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 Defects in the
Unreadiness
Specifications of the
Region of the SHS Observations/Deficiencies
Procured Items
No. of Recipient Schools
tracks not currently offered or were no
longer offered by them and Bread and
Pastry Production (BPP) course activity
such as baking of bread which involves
the use of bread slicer was not
incorporated in the course syllabus thus,
delivered TVL equipment were
unutilized. Two schools of DO Manila
and one in DO Parañaque City no longer
have SHS enrollees. Furthermore, 10
schools were noted with unutilized TVL
tools and equipment due to lack of
necessary supplies such as power supply,
gas tank for the gas range and blade for
the circular saw.
Defects in and/or poor quality of the items
delivered in 12 recipient schools were
also noted. TVL equipment such as
commercial mixers with attachments,
mechanical dough rollers, decker ovens,
uprights freezers, refrigerators and
welding tables were found unsuitable for
teaching purposes as its size, quantity and
capacity were for industrial or
commercial use.
CAR 6 None Six schools lacked laboratory rooms.
Hands-on activities for BPP, Cookery and
Food Services were done in Science
Laboratories. Demonstration for organic
agriculture and carpentry were conducted
at any available space in the school
premises. One school offering EIM and
carpentry used a regular classroom as
laboratory which was a disturbance to
other classes in the adjacent rooms
because of the noise during practicum.
RO III Not stated Not stated In August 2017, an order was issued by
the Regional Director to the supplier to
pull out items that did not meet the
specifications. Inquiry with the
Management disclosed that these items
were not yet paid but were still in the
custody of the respective schools. Other
items were put on hold, with the
instructions to not utilize the said items
yet or to await go signal for its use.
Eventually on January 12, 2018, Regional
Memorandum No. 12 was issued allowing
the use of the NC II BPP tools, NC II
masonry equipment and tools, NC II tile
setting equipment and NC I plumbing

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 Defects in the
Unreadiness
Specifications of the
Region of the SHS Observations/Deficiencies
Procured Items
No. of Recipient Schools
tools and equipment. On the other hand,
other schools received tools and
equipment even though the programs
were not offered while other schools have
no enrollees in some TVL tracks. Items
such as portable disc grinders were
reported not usable due to breakage of
grinding disc.
RO IVB 1 1 Alcantara NHS was provided with TVL
tools that are of poor quality and were
easily damage after few uses. Romblon
NHS was provided with TVL items
(Cluster II, Lot 1 - Home Appliances and
Cluster V, Lot 1 - Hardware) amounting
to P192,794.70 however, it does not
currently offer the SHS tracks.
RO V 11 7 In DO Albay, TVL tools, equipment and
materials costing P1,389,886.00 were
found defective/non-functional/of poor
quality. Some equipment had sizes and
capacity that appeared to be for
commercial or industrial use. Three
tractors each costing P0.445 million were
not utilized due to lack of enrollees on
TVL tracks of Oas Polytechnic School
and non-availability of farm at Marcial O.
Rañola Memorial School and Cagmanaba
NHS. Some school heads reported that the
SHS enrolled under the TVL tracks were
not provided with workshops required for
the effective implementation of the
program. Limited electricity supply and
need for additional transformer to
augment the power supply was also noted.
Since they do not have capital outlay for
the procurement of transformers and
because of the limited power supply
during daytime, they devised a system
wherein the students would use it at 5 PM
as electricity consumption at this time is
not as much as compared to regular
teaching time of 7 AM to 5 PM.
In DOs of Legazpi City and Tabaco City,
various tools, materials and equipment
with a total cost of P3,072,849.20
remained unused, untested, defective and
inappropriately stored.
RO XI 13 9 Nine schools reported low quality of
delivered items, based on the result of
survey. Upon inspection, defective or
poor quality items, lack of supplies
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 Defects in the
Unreadiness
Specifications of the
Region of the SHS Observations/Deficiencies
Procured Items
No. of Recipient Schools
needed to utilize TVL tools, lack of
laboratory or with on-going construction
thereof, lack of space to accommodate
deliveries and deferred course offering,
were also noted in 13 recipient schools.
RO XIII 29 16 The required specifications of TVL
equipment such as reach-in refrigerator,
LCD projector and airbrush cake
decorating set with compressor were not
observed. Moreover, replies from the
survey questionnaires sent to various
recipient schools disclosed deficiencies in
the delivered items such as poor quality,
defective, non-compliant with the
required specifications, lack necessary
supplies for it to function properly, no
proper storage area/facility, and no
available technical-vocational laboratory.
Total 104 45

c.) Recording and procedural deficiencies

As provided in the DepEd Financial Management Operations Manual, the

procedural flow of documenting delivered TVL tools, materials and
equipment are enumerated below:

a. Upon delivery, the School Inspectorate Team conducts inspections and

signs Inspection and Acceptance Report (IAR). School Property
Custodian signs the acceptance portion of the IAR;

b. School Property Custodian returns original signed Delivery Receipt (DR)

and provide fully signed IAR to the supplier;

c. Supplier provides copy of DR and IAR to Central Office (CO)/Regional

Office (RO) Asset Management Division;

d. CO/RO Asset Management Division prepares and transmits Property

Transfer Report (PTR) with DR attachment to respective DO ;

e. Division Supply Officer verifies delivery based on attachments and signs

PTR;

f. Division Supply Officer transmit signed PTR to Central Office/Regional

Office Accountant for dropping from book of accounts; and;
g. The CO/RO Accountant transmit Journal Entry Voucher to respective
DO Accountant for booking-up.

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Validation of records and interview with the concerned personnel in seven
regions disclosed recording and procedural lapses as follows:
Region Observations/Deficiencies
NCR Transferred TVL tools, materials and equipment were not yet recorded in
Implementing Units’ (IUs) respective books pending receipt of JEVs from the
RO thus, resulting in the unreliable presentation of affected accounts in the
financial statements.
RO II TVL materials, tools and equipment were taken up in books of the RO as
Property, Plant and Equipment (PPE) items and were entered as debit entries
to the Technical and Scientific Equipment account. The said items were still
accounted for as property of RO as of year-end when the items were already
in the custody of the recipient schools. Further, allocation to each school could
not be determined due to the absence of acquisition cost of each item in the
DRs and IARs. This resulted in the non-booking up in the books of DO Isabela
and its IUs since the items' delivery in November 2016.
The DOs and IUs had not received JEVs from CO/RO to effect the recognition
of TVL tools, materials and equipment in the books. As a result, the Technical
and Scientific Equipment account was misstated in the books of the RO and
DOs since there was no transfer documents for all deliveries made to facilitate
the proper recording thereof.
RO III Delays in the re-bidding process of the RO was observed so that contracts were
awarded in May 2017 and the NTPs were issued in July 2017, more than the
seven-day requirements of RA No. 9184. Moreover, additional delays were
also noted in the receipt of NTPs for contracts in CY 2017, as the suppliers
received the notices one to three months after NTP date.
RO Schools were not provided with list of TVL tools, materials and equipment to
IV-B be delivered as well as its specifications thus, on delivery, the designated
custodians could not ascertain whether the school is actually the intended
recipient of the delivered items or that the specifications of the actual products
delivered were compliant with the contract agreement. This compelled
custodians to simply accept the deliveries and rely on the DRs to inspect the
same.
Moreover, TVL tools, materials and equipment delivered in recipient schools
remained unrecorded in the books of the DO and its IUs as at year-end. The
DO and IUs had not received JEVs from the RO to effect the recognition of
delivered TVL tools, materials and equipment in the books. In like manner,
depreciation for the equipment could not be recognized as well.
RO V Based on the reviewed reports and documents, out of the 14 Lots subjected for
public bidding, only Lots 1 to 13 have been awarded to the winning bidders.
The procurement of Automotive Servicing (Lot 14) did not push through due
to the failure of two successive biddings conducted on April 19 and June 6,
2016, for which the BAC recommended that procurement thereof be made
through alternative method under the Negotiated Mode of Procurement. The
Management requested for quotations from prospective suppliers however,
only one supplier responded and submitted quotation amounting to
P3,196,093.00 which exceeded the ABC of P2,449,515.00 by
P746,578.00.Schools have no copy of DRs from suppliers hence, delay in
delivery could not be determined.
RO XI Four schools reported that they did not receive the list of items to be delivered
hence completeness of the deliveries made by the suppliers could not be easily
determined.

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 Region Observations/Deficiencies
RO Some of the schools in five DOs reported that the teachers were not given
XIII detailed instructions/orientation or were not properly trained to use the tools
and equipment delivered by the supplier. Most of the schools in six DOs also
reported that suppliers did not provide contact persons in case of defects noted
within the warranty period.
Inadequate monitoring on the implementation of TVL program and the non-
preparation/submission of the required report by DOs of Surigao del Sur,
Tandag City and Bislig, resulted to difficulty in determining whether the
program was implemented efficiently and the objective were attained in CY
2017.
In DOs of Surigao del Norte and Surigao City, TVL tools and equipment were
not yet recorded nor disclosed in their financial statements as at year-end as
the PTR were not yet received by the DOs/Implementing Units (IUs) from
RO. The Supply Office was still in the process of preparing the PTRs and that
they will finish the preparation of the same so that control and accountability
of the tools and equipment delivered will be transferred to the respective
recipient schools/DOs at once. Further, records obtained from RO disclosed
recognition of TVL items costing below the capitalization threshold of
P15,000.00 as PPE.

d.) Other deficiencies

Other issues and concerns that affected the effective implementation of the
program are enumerated below:

Region Observations/Deficiencies
NCR Due to the deficiencies observed in the inspection and audit of relative
disbursements, Notices of Suspension with a total suspended amount of
P67,038,558.33 were issued requiring submission of documents/justifications
which to date were still not yet completely submitted for evaluation.
Excessive supply of TVL tools, materials and equipment was noted in 10
schools which was caused, among others, by small population of SHS
enrollees and duplicate supply from the local government.
A school building was constructed in Tanza NHS intended for SHS students
use however, due to the demolition of the JHS school building, the SHS
students were displaced to different schools prioritizing the JHS students. The
TVL laboratory in Sta. Elena HS was not properly ventilated.
The Property Custodian of Senator Renato Compañero Cayetano Memorial
Science and Technology HS declared missing tools, materials and equipment
amounting to P26,887.71. The items were fully accounted when delivered to
the school but were temporarily stored in the bartending room commonly used
as their stock room. According to the custodian, the investigation is still on-
going. The incident remains unreported to the RO.
CAR Most schools used tools donated by Secondary Education Development and
Improvement Project (SEDIP). The lack of appropriate classrooms,
specialized tools and equipment, as well as supplies and materials for the TVL
program resulted in the low turnout of assessment passers. As of December
2017, there were 348 Grade 12 students of whom only 65 were assessed and
only 41 passed the assessment tests.

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 Region Observations/Deficiencies
RO In Looc NHS and Ferrol NHS, of the six units of gas range delivered to the
IV-B schools, only three were utilized because similar equipment were provided by
private group and DOLE.
In San Jose Agricultural HS, there were enrollees for Commercial Cooking
(NC II) and Barbering and Hairdressing (NC II) courses/specialization
however, no TVL tools, materials and equipment were provided thereof.
RO XI In Cateel Vocational HS, three units of high-speed machine with attachment
button holder and one set of jack hammer were delivered but not included in
the list of items to be received by the school. Nonetheless, the said items were
being used by the students.
In DRANHS, the electrical and installation equipment were not utilized
pending inspection by the Inspectorate Team.
RO Procurement process for TVL tools and equipment delivered to recipient SHS
XIII were not carefully undertaken as prices for items such as reach-in refrigerator,
fire extinguisher, TV, LED projector, four-burner gas range, airbrush cake
decorating set with compressor and arc welding machine AC/DC and
accessories were considerably costly. Review and comparison of prices per
Sales Invoice and as researched online through the internet revealed price
variances.
Likewise noted was the insufficiency of tools and equipment delivered. The
items were shared by the students thus, some were personally bought by the
students or borrowed from ALS program. There was also insufficiency in the
number of teachers of Bayugan City SHS. Currently, the school have 31
teachers that handle 1,099 SHS students. According to the school head, the
ideal student-teacher ratio is 1:40. However, existing condition of the school
showed a 1:60 ratio thus, the classrooms were not conducive to learning.

6.10. We recommended that the Management of the concerned ROs and DOs to:

a. strictly monitor the suppliers’ compliance with the contract stipulations

particularly on the timeliness and completeness of the delivery. In case
of delay, impose liquidated damages to erring suppliers;

b. establish proper coordination among the concerned DepEd Offices on

the specific requirements of the TVL tracks offered by the recipient
schools most importantly the latter’s need for technical-vocational
laboratory, supplemental budget in the schools’ MOOE allocation and
the technical specifications and quantity of TVL tools and equipment to
ensure maximum utilization thereof by the intended program
beneficiaries;

c. formulate strategies to promote the TVL tracks offered by the public

SHSs enabling them to gain new enrollees or increase its number;
d. instruct the concerned Property Custodians of the DOs and the recipient
schools to report immediately to the ROs the TVL tools, materials and
equipment that were found defective and still covered within the
warranty period for the replacement thereof from the suppliers or
adjustment in the prices of items not in accordance with the required
specifications;
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 e. advice and provide with documents the schools’ Property Custodians
about the expected deliveries in their respective schools which will serve
as its basis for its comparison with the actual deliveries; and

f. instruct the Supply Officer of DOs and IUs to transmit the PTR to the
Accounting Division of the ROs as well as the Accountant of the ROs to
transmit the JEV to the DOs and IUs for the proper recording of the
transferred TVL tools, materials and equipment in their respective
books.
6.11. The following are the comments of the Management:

Region Management’s Comments

NCR They were given order by the CO to start with the procurement of TVL tools, materials and
equipment despite of the delay in the construction of the TVL laboratories where the said
tools, materials and equipment will be kept. To address the issue on lack of laboratories, the
recipient schools were advised to receive the deliveries and undertake coping strategy
wherein the existing classrooms will be converted to TVL laboratories. On the issue of non-
utilization of the delivered items due to the absence of SHS enrollees for TVL tracks, the
Management averred that 80 per cent of the incoming SHS from public schools tend to enroll
in private schools. The remaining 20 per cent that will be enrolled in the public SHS were
programmed to be provided with the needed TVL tools, materials and equipment. However,
the actual enrollment did not coincide with the expected number of enrollees which
consequently affected the utilization of the deliveries. The Management further argued that
although the deliveries were not utilized, it was able to secure the required materials and
equipment for the TVL courses. Should there be an increase in the number of SHS enrollees
for TVL courses, there will be no issues on the insufficiency of its material and equipment
requirements. As to the question on the specification of the items delivered, the Management
commented that they intentionally procured items of industry-based specifications to
prepare SHS students to the world of work.
The Management of DOs of Caloocan and Pasig will be in close coordination with the RO
and CO regarding the specific requirements of the SHS with TVL courses, the recording of
the TVL items delivered and defects on the deliveries, if there are any.
RO II The Management of RO commented that despite frequent follow-ups on the undelivered
items, the suppliers failed to comply hence, they imposed liquidated damages. Further, they
commented that PTRs will be issued upon completion of deliveries.
In DO Isabela, the Management directed all concerned officials to coordinate with the
RO/CO on the listing of the procured TVL tools, materials and equipment and undelivered
tools. The Accountant will direct recipient schools to submit IAR for booking-up.
RO III The Management acknowledged that there were delays in the implementation of the project
and gave assurance that they will continue to implement the program properly and
expeditiously for the benefit of the learners.
RO IV-B The Management, during the Exit Conference, commented that the TVL tools and equipment
were procured by the CO and RO and selected the recipient schools without validating
whether the schools offer vocational courses intended for the tools and equipment bought.
RO XI During the Exit Conference, the Management committed to look into the materials that were
not yet delivered. As to the demonstration of the different equipment, the TVL coordinator
of the RO will coordinate to the suppliers to expedite the demonstration so that the
tools/equipment will be available for use. The Regional Director stressed that the non-
utilization of the TVL was due to the absence of enrollees. As a result, the schools who have
the TVL tools but have no enrollees opted to lend the equipment to other SHS with enrollees
of the specific track, with the condition that once the school will have enrollees, the latter

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 Region Management’s Comments
will return the equipment to them. The Regional Director also confirmed the existence of
low quality equipment during his visit to some schools and instructed them to return the item
if such do not meet with the qualifications set during the bidding. Further, he acknowledged
the problem with the unreadable manual and committed to address the problem as soon as
possible.
RO XIII The RO Management commented, on the items which were noticed to be costly and not in
conformity with the specifications, that they strictly followed the provisions of RA No. 9184
and its IRR. Four competitive biddings were held and two negotiated procurements were
conducted to ensure transparency. Further, they commented that the online prices could not
be the basis for the RO in its procurement because the prices online are on a cash basis.
Freight and handling costs are not included and in all probability, the bidders also considered
the length of time that they will be paid in the computation of their bids. Moreover,
Memorandum dated March 16, 2017 was issued by the RO directing the Division
Coordinators to conduct an inventory of the TVL tools and equipment and submit Inventory
Report to the RO.
The Management of DOs Agusan del Norte, Butuan City, Cabadbaran City, Bayugan City,
Dinagat Islands, Surigao City, Surigao del Norte and Tandag City confirmed the deficiencies
noted in the delivered TVL tools, materials and equipment and the same has already been
brought to the attention of the RO.

Payroll System

7. The current payroll system of the DepEd caused several drawbacks such as:
a) net under-remittance of payroll requirements amounting to P74,388,234.21
and unreconciled reciprocal account balances of the Due from Operating Units
and Due to Regional Office per books of DepEd NCR ROP and DOs with a net
discrepancy of P82,817,183.64; b) non-compliance with the order of priority for
authorized deductions and uncontrolled types of loans offered by private lending
institutions (PLIs) in ROs NCR, CAR, I, IV-B, IX and XIII that led to undeducted
obligations in favor of the GSIS, HDMF/Pag-IBIG and PLIs amounting to
P377.73 million, P16.56 million, and P1.80 billion, respectively; c) non-
observance with the required minimum net take home pay of P4,000.00 in ROs
of NCR, I, VIII, IX and XI; d) inadequate controls in processing payrolls in ROs
of NCR, I, VIII, IX and XI resulting in over or underpayment of salaries,
erroneous computation of contributions, unsupported payroll transactions and
exposure of government funds to the risk of loss or misuse with the adoption of
payrolls thru cash advance; and e) continuous payroll preparation and
processing by the Regional Payroll Servicing Unit (RPSU) in ROs III and IX
despite readiness of its concerned IUs to implement the school-based payroll
preparation.

7.1. Section 47 of the General Provisions of the GAA for FY 2017 provides that:

 Authorized Deductions. Deductions from salaries and other benefits accruing

to any government employee, chargeable against the appropriations for
Personnel Services, may be allowed for the payment of an individual
employee’s contributions or obligations due the following, and in the order of
preference stated on the next page:

160
 o The BIR, PHILHEALTH, GSIS AND HDMF;
o Non-stock savings and loan associations and mutual benefits
associations duly operating under existing laws and cooperatives which
are managed by and/or for the benefit of government employees;
o Associations or provident funds organized and managed by government
employees for their benefit and welfare;
o GFIs authorized by law and accredited by appropriate government
regulating bodies to engage in lending;
o Licensed insurance companies; and
o Thrift banks and rural banks accredited by the BSP.

In no case shall the foregoing deductions reduce the employee’s monthly net
take home pay to an amount lower than Four Thousand Pesos (P4,000.00).

7.2. The DepEd Order No. 55, series of 2017 dated October 26, 2017 was issued to
revise the guidelines on the implementation of P4,000.00 net take home pay for
Department of Education Personnel. Pertinent provisions thereof are as follows:

 Employees’ contributions or obligations to the Government Service Insurance

System (GSIS) and Home Development Mutual Fund (HDMF) include both
premiums and loans. Thus, payment for these, together with those for the
Bureau of Internal Revenue (BIR) and the Philippine Health Insurance
Corporation (PhilHealth), shall be accorded first order of preference in
deductions from the salaries of employees, in accordance with Section 47.

 The “First-In, First Served” queuing system shall be observed except that
deductions due to GSIS and HDMF shall be accorded first order of preference
and the P4,000.00 threshold is observed.

 The DepEd Authorized Approving Officers (AAOs) must exercise due

diligence in certifying the NTHP of DepEd personnel. The AAOs shall
reiterate to DepEd personnel the consequences of applying for loans with
various PLIs without considering their capacity to pay. Delay in the payment
of loans may result in the imposition of penalties and accrued interests by the
PLIs and the GSIS.

 All DepEd personnel shall ensure that they have the capacity to pay loans
being applied for under the Automatic Payroll Deduction System (APDS).
DepEd personnel whose loans are not deducted under the APDS are advised
to pay their loans directly to their respective lenders.

7.3. However, prior to the issuance of the aforementioned DepEd Order in October
2017, the “First-In, First Served” queuing system was already observed in the
salary deductions of employees. It was embodied in Enclosure B of DepEd
Memorandum No. 228, series of 2011, which reads:

“The DepEd shall strictly observe the “First-In, First Served” queuing
system in managing the order of salary deductions. If deduction cannot
161
 be made due to insufficient take home pay, the claim of the Lender shall
be given preference in the order of queuing until such time that
deduction may be validly made.”

7.4. The DepEd Payroll Servicing Manual, issued on June 21, 2006, serves as a
reference guide to the DepEd CO, RO, Divisional and Field officials on the
decentralization of the payroll servicing system from the Central Office to the
Regional Payroll Servicing Unit (RPSU). Chapter III of the said Manual
provides the general procedures in the preparation of the payroll, which starts
from the submission by the Schools to the RPSU of the duly accomplished Form
7, based on the Daily Time Records (DTRs) of teaching and non-teaching
personnel. The RPSU reviews the Form 7 and other relevant documents from
which the former will prepare the payroll, payroll slips, pay checks, etc. From
the payroll printed by the RPSU, the Regional Accountant informs the
DOs/Schools of the amount to be transferred for the payroll. Other than the
payroll, the RPSU generates a Summary of Cash Disbursement Report (SCDR)
which also shows the amount to be transferred by the DOs/IUs for the salaries
of their respective employees.
7.5. Procedures applied in the centralized payroll system of DepEd were observed
ineffective that resulted in several drawbacks, details of which are discussed as
follows:

a.) Net under-remittance of P74,388,234.21 and unreconciled reciprocal

account balances of the Due from Operating Units and Due to Regional
Office in the books of DepEd NCR ROP and DOs with a net discrepancy of
P82,817,183.64

7.6. In DepEd NCR, the remittances of the DOs/IUs were not in accordance with the
amounts required as these were either more or less than the amount indicated in
the SCDRs. Seven DOs remitted in excess amounting to P58,703,055.21 whilst
the remaining nine DOs had deficient payroll remittances of P133,091,289.72,
thus a net under-remittance of P74,388,234.21. Among the causes of the reported
under-remittances was due to the concerned DOs’ failure in providing the DBM
with updated plantilla of personnel that serve as basis for the budget, allocation
of its Personnel Services (PS). Such omission affected the DO’s obligation to
pay the salaries and benefits of its employees forcibly borne by the ROP which
inappropriately sourced its funding from the accumulated over-remittances of
other DOs/IUs. On the other hand, excessive remittances resulted from the
significant amounts of fund transfers by the DOs/IUs to the ROP in order to
avoid the lapsing of NCAs which were supposedly remitted to the Bureau of the
Treasury (BTr).

7.7. Furthermore, a comparison between the year-end balance of the reciprocal

accounts Due from Operating Units and Due to RO reported in the books of
DepEd NCR ROP and 13 DOs, respectively, revealed a net discrepancy of
P82,817,183.64. Likewise noted was the erroneous closing of the year-end
balance of the Due from Operating Units account amounting to P48,547,333.00,
net of unaccounted deposits of P122,935,567.21 in the Payroll Fund maintained
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 by ROP, to the Subsidy from Other National Government Agencies account to
effect reciprocal account’s elimination in the Consolidated Financial Statement
prepared by the ROP. The same thing occurred in the records of six DOs/IUs in
NCR wherein the account balance of the Due to RO account was closed either
to the Financial Assistance to National Government Agencies account, in case
of over-remittances or Subsidy from Other National Government Agencies, in
case of under-remittances, as advised by the Finance Division of ROP. The
aforesaid entries in the books of ROP and concerned DOs/IUs rendered with
doubtful validity the accuracy of the reported account balances of the reciprocal
accounts used in recording payroll transactions.

b.) Non-compliance with the order of priority for authorized deductions and
uncontrolled types of loans offered by the PLIs that led to undeducted
obligations in favor of the GSIS, HDMF/Pag-IBIG and PLIs amounting to
P377.73 million, P16.56 million, and P1.80 billion, respectively

7.8. The order of preference for the authorized deductions from the salaries and
allowances accruing to government employees in favor of GSIS and
HDMF/Pag-IBIG, as provided in Section 47 of the General Provisions of the
GAA for FY 2017, was disregarded in the NCR, CAR and ROs I, IVB, IX and
XIII due to the accommodation of various PLIs that offer numerous types of
loans and the “First In, First Served” queuing system which was silent as to the
classification of lenders to be given priority over salary deductions, which
resulted in undeducted GSIS and HDMF/Pag-IBIG loans and/or premiums
amounting to P377,728,531.98 and P16,559,367.86, respectively. Details are as
follows:
Amount of Undeducted Obligations
Region Period Covered
GSIS HDMF/Pag-IBIG
NCR 154,765,915.13 12,944,660.22 January to December 2017
CAR 27,242,772.74 3,361,372.35 January to December 2017
RO I 6,245,501.76 - As of December 31, 2017
RO IV-B 74,735,403.16 253,335.29 January to December 2017
RO IX 2,188,491.00 - January to December 2017
RO XIII 112,550,448.16 - October 2016 to August 2017
Total 377,728,531.95 16,559,367.86

7.9. The said deficiency was relentlessly observed until the issuance of DepEd Order
No. 55, series of 2017 dated October 26, 2017, which explicitly provided that
deductions due to GSIS and HDMF/Pag-IBIG shall be accorded first order of
preference. However, the undeducted GSIS and HDMF/Pag-IBIG loans and/or
policy premiums will remain arrears from the records of the said GOCCs and
could possibly incur compound interests and penalties or surcharges. Employees
with persistent delay in the deduction of loans could suffer the consequences
later on through non-availment of benefits from their retirement and separation
from the service due to the offsetting of outstanding loan obligations including
interests and/or penalties/surcharges incurred therefrom.

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 7.10. Moreover, loans and/or premium payments due to PLIs had the most significant
undeducted amount of P1,795,378,486.54, as observed in the payrolls of
teaching and non-teaching personnel in the NCR and RO IX. This is a result of
the uncontrolled offer and approval by various PLIs of several types of
loans/policies to DepEd employees that could no longer afford to pay the same
due to insufficiency of their net take home pay. Breakdown of undeducted
loans and premiums due to PLIs for ROs NCR and IX is shown in the following
table:
Region Amount of Undeducted Period Covered
NCR 1,780,087,257.09
Obligations due to PLIs January to December 2017
RO IX 15,291,229.45 January to December 2017
Total 1,795,378,486.54

7.11. Gleaned from the foregoing, an overwhelming total amount of

P2,189,666,386.35 payable to the GSIS, HDMF/Pag-IBIG and PLIs remained
undeducted in the payroll of DepEd employees, application of which could
adversely affect their existing financial condition. Summary of the undeducted
obligations are as follows:
Agencies Undeducted Loans/Premiums
GSIS 377,728,531.95
HDMF/Pag-IBIG 16,559,367.86
Various PLIs 1,795,378,486.54
Total 2,189,666,386.35

c.) Non-observance with the required minimum net take home pay of P4,000.00

7.12. Audit of the payroll submitted to the Audit Teams likewise revealed the
existence of number of employees ranging from a low of three to a high of 873
with salaries below the required net take home pay of P4,000.00 due to various
personal loans availed of by DepEd employees in the following ROs:
No. of Employees with
Region Remarks
NTHP Below P4,000.00
NCR 3 to 873 The existence of employees with NTHP
All DOs below the P4,000.00 threshold was noted
from the payrolls for the months of January
to October 2017.
RO I 10 to 185 Employees incurred NTHP below the
DOs of Urdaneta City, threshold amount of ₱4,000.00 thereby
Dagupan City, San affecting the employees’ productivity,
Carlos City, Alaminos motivation towards work, and capacity to
City and Ilocos Norte meet their families’ basic needs.
RO VIII 8 employees in Inquiry from agency personnel disclosed
Hinabangan NHS and Hinabangan NHS; range that the noted deficiency is mainly due to
DO Baybay City not provided for DO various personal loans availed of by
Baybay City employees.
RO IX One to 22 employees of The existence of employees with NTHP
One IU under DO one IU in DO Zamboanga below the P4,000.00 threshold was noted
Zamboanga del Sur del Sur; and three to 79 from the payrolls for the months of January
and two IUs of DO employees of two IUs in to December 2017.
Pagadian DO Pagadian

164
 No. of Employees with
Region Remarks
NTHP Below P4,000.00
RO XI 44 to 84 employees of The minimum NTHP of P4,000.00 was not
Davao City NHS and Davao City NHS; range implemented and complied with exposing
14 schools under DO not provided for the 14 the employees concerned to the risks of
Davao del Sur schools under DO Davao unfavorable work and undignified
del Sur economic conditions.

7.13. Despite NTHP below the threshold of the noted employees, loans from the GSIS
and/or HDMF/Pag-IBIG were persistently extended to these employees, as
observed by the Audit Teams in DepEd NCR and RO IX. The said instance could
have been avoided had the DepEd AAOs performed with prudence its
responsibility in certifying loan applications of members in DepEd as to the
sufficiency of the NTHP of the member to cover the regular monthly
amortization of the loan applied for. The same is true with the PLIs who
continually grant loans to employees with NTHP that could no longer
accommodate new approved loans. Enormous amount of undeducted obligations
came from the loans and/or policy premiums granted by the PLIs that could
remain undeducted since application of its deductions would render negative
balances of NTHP of concerned employees.

d.) Inadequate controls in processing payrolls resulting in over or

underpayment of salaries, erroneous computation of premium
contributions, unsupported payroll transactions with documents to establish
its validity and exposure of government funds to the risk of loss or misuse
with the adoption of payment of payrolls thru the cash advances

7.14. Deficiencies noted in the following ROs:

Region Amount Deficiencies
NCR Not indicated Delay or non-submission of SCDRs and payroll registers to
DOs of Marikina, Pasig, establish validity of disbursements
Mandaluyong, Taguig
City/Pateros and Malabon
RO I 4,409,947.14 Inaccurate deduction of teachers’ Leave of Absence Without
DOs of La Union and San Pay (LWOP) covering the period June 1, 2016 to May 31, 2017
Fernando City resulted in over-deduction of salaries and PERA, and under-
deduction of government contributions due to GSIS, HDMF,
and PHIC.
RO I 268,975.59 Inclusion of eight retired/resigned teachers and personnel in
DO Ilocos Norte the payroll of the DO resulted in overpayment of salaries and
allowances.
RO I 112,855.61 Inadequate control and procedures to ensure the regular grant
DO Laoag of the step increments based on length of service to the
qualified personnel of the DO resulted in underpayment and/or
delayed payment of authorized salaries.
RO VIII 44,212.50 Erroneous deduction of PhilHealth Contributions for both
DO Tacloban City, San employers and employees shares was disclosed due to the
Jose NHS, Sagkahan failure of the agency to review/evaluate and examine Health
NHS and Tacloban City Insurance Premium (HIP) contributions received from the
NHS RPSU, thus casting doubt on the reasonableness of premium
contributions and causing inaccuracies of recorded expenses
165
 Region Amount Deficiencies
per the agency’s books and financial statements. The total
erroneous deduction consists of discrepancy in the
computation of employees share of P25,462.50 in DO
Tacloban City and overpayment of employee and employer
share totaling P18,750.00 in San Jose NHS, Sagkahan NHS
and Tacloban NHS.
RO VIII Not indicated Unsupported payroll transactions with the necessary
documents such as, but not limited to, Daily Time Records
(DTRs), travel orders/office orders, application for leaves,
original copies of validated deposit slips, and original copies
of computer-generated payroll registers.
RO IX 158,717.36 Over-remittance of premium contributions deducted from the
DO Zamboanga del Sur payroll that was not actually paid.
RO XI Not indicated Incorrect salary rates reflected in the payroll journal of the 14
DOs of Davao del Norte IUs under the concerned DOs which was not the same as the
and Panabo City rates indicated in the Personnel Services Itemization and
Plantilla of Personnel (PSIPOP) for FY 2017 creating
confusion as to the accurate positions and basic salaries of the
employees concerned.
RO XI 14,589,305.40 Grant of cash advances to two accountable officers of the DO
DO Davao del Sur and and Davao City NHS for the payment of year-end benefits,
Davao City NHS cash gift, PEI, salary differential, hardship allowance and other
employee benefits instead of paying the same thru Automated
Teller Machine (ATM) Payroll System, exposing government
funds to risk of loss or misuse.
RO XI 34,759,972.92 Unsupported disbursements for the payment of regular
DO Digos City employees’ salaries and allowances with necessary documents
such as application for leave, travel authority, certificate of
appearances except duly approved DTRs.

e.) Continuous payroll preparation and processing by the RPSU in ROs III and
IX despite readiness and capacity of its concerned IUs to implement the
school-based payroll preparation

7.15. Preparation and processing of the monthly payrolls of the concerned IUs in ROs
III and IX, which have financial staffs capable of administering its own funds,
are continuously handled by their respective RPSUs, contrary to DBM-DepEd
Joint Circular No. 2004-1 and DepEd Order No. 30, series of 2011 dated January
1, 2004 and March 24, 2011, respectively, requiring the implementation of
school-based payroll preparation. Details of the deficiencies noted are as
follows:
No. of
Region Concerned Remarks
IUs
RO III 34 Review of the records showed that, since the payrolls are
DOs of processed/paid by the RPSU, the IUs do not maintain individual
Tarlac City, index of payment of paid salaries, allowances, contributions, etc. of
Tarlac school officials and employees, contrary to Section 18, Volume I of
Province and the GAM. Hence, the actual salaries paid, unclaimed or refunded,
Aurora including over or under-remittances of personal share of mandatory
contributions and other deductions, were hardly monitored. Drawn
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 No. of
Region Concerned Remarks
IUs
JEVs to record fund transfers to the RO to cover the payment of
mandatory deductions like GSIS, PhilHealth and HDMF were not
supported with appropriate acknowledgment receipts/official
receipts with the list of employees and the amounts remitted for
monitoring purposes.
The payroll preparation could already be done by the IUs; however,
the RO and Systems Division at the CO have not conducted the
required training or briefing of the schools’ staff to acquire the skills
and knowledge on the operation of the school-based payroll system
and the APDS.
RO IX 20 In DO Sibugay, the preparation and payment of salaries are still
DOs with the RO hence, the continuous fund transfers for the purpose. It
Zamboanga was noted that conditions required in the DBM-DepEd Joint
del Sur and Circular No. 2004-1 were already satisfied when the seven IUs were
Sibugay recommended as capable and ready to implement the school-based
payroll preparation.
The same is true in DO Zamboanga del Sur. Review of the status of
implementation of the Audit Team’s recommendations revealed
that the preparation and processing of the schools’ payroll payments
are still being handled by the RPSU. The Audit Team likewise noted
that payments for the net pay of the employees were already made
directly to the bank by the schools, but SLs are still being
maintained by the RPSU and are not available in the school.
Moreover, the integration of any salary adjustments or inclusion for
newly-hired employees or any other changes to payroll, cannot be
promptly effected. Delay in the integration of any
changes/adjustments in the payroll reached several months or up to
almost two years. The schools already requested from the RO for
the transfer of the payroll preparation however, no status was
provided as of this writing.

f.) Other deficiencies

7.16. The following are the other deficiencies observed in the audit of the payroll
system:

Region/DO Other Deficiencies

NCR Delay in the deposit of payroll requirements by the DOs to the ROP which
contributed to the improper use of over-remittances and/or accumulated
funds from the Payroll Fund account maintained by the ROP. The delay in
the remittances in January 2017 ranged from two days to up to almost a
month.
NCR Errors in the recording of payroll transactions resulted in the understatement
DOs of Quezon of the Due to RO account of P3,232,409.37 in the books of DO Quezon City
City and Pasay and overstatement amounting to P7,476,235.66 in the books of DO Pasay

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7.17. The abovementioned deficiencies was attributable to the defective payroll
procedures where it is the ROP that processes, prepares and pays the payroll of
the DOs/IUs from the funds transferred by the latter to the former. The
procedures complicate the processing of payroll transactions which could have
been avoided had the DOs/IUs, who has first-hand information of its payroll
requirement, process, prepare and pay its respective employees’ monthly
salaries.

7.18. We recommended that the Management require the ROs to:

a. strictly require the DOs/IUs to transfer funds based on the actual

monthly payroll requirements of the DOs/IUs per approved SCDR and
immediately provide the RO with relevant documents to facilitate the
recording and reconciliation of financial records/reports relative to the
payroll transactions;

b. stop the practice of transferring excess cash allocations to the Payroll

Fund account maintained by ROP, instead, revert the same to the
National Treasury. Any transfer of excess cash allocations to prevent the
lapsing thereof and for invalid obligations shall be disallowed in audit;

c. provide the DBM with updated plantilla of personnel to ensure accurate

budget allocation for PS of DOs/IUs;

d. reconcile the ROP’s records with those of the DOs/IUs in order to resolve
the disparities between the balances of the reciprocal accounts Due from
Operating Units and Due to RO;

e. ensure that the authorized deductions are done in accordance with the
order of preference in the salary deductions with due consideration on
the NTHP threshold of P5,000.00, as required in Section 48 of the
General Provisions of the GAA for FY 2018. Restudy DepEd’s policy on
the accreditation of PLIs which should include the limit on the types of
loans to be offered by them to regulate the extension of loans to DepEd
employees for their protection and financial stability;
f. reinforce sound internal control system in the preparation and
processing of payrolls and payment of salaries and allowances through:

f.1. diligent review and proper approval by the concerned officials;

f.2. timely submission of complete supporting documents to ascertain

validity of disbursements and immediately update records and
integrate salary adjustments, if any;

f.3. use of ATM in the payment of salaries and allowances to avoid the
risk of loss and/or misuse of government funds;

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 f.4. payroll deduction or billing the refund of overpaid salaries caused
by erroneous computation of salary adjustment and premium
contributions, and the settlement of under-paid salaries owing to the
concerned DepEd employees; and

g. simplify the processing, paying and recording of payroll transactions by

decentralizing the same to the respective DOs/IUs and implementing the
school-based payroll preparation in accordance with DepEd Order No.
30, series of 2011 dated March 24, 2011.

7.19. The Management commented as follows:

Region Management’s Comments

NCR Memoranda were issued by the Management requiring the DOs/IUs to transfer exact
amounts indicated in the SCDR. They are now implementing procedures in the RPSU
to simplify the processing, preparing, paying and recording of payroll transactions.
They have plans of downloading payroll processing to the DOs/IUs however, the new
payroll system is still being developed by the DepEd CO. Effective January 2018, cash
allocations for net pays are no longer transferred to ROP current account, with the
DOs/IUs directly paying the salaries of their teaching and non-teaching personnel.
They also commented that the implementation of the P5,000.00 NTHP per GAA of FY
2018 has already been implemented effective February 2018. However, as to the order
of preference on authorized deductions, they are still waiting for the guidelines and
program to be issued by the DepEd CO. As regards excessive/deficient remittances,
the concerned DOs/IUs committed to stop the practice of excessive transfer and to
update its PSIOP on a regular basis for proper budgetary allocation. Lastly, a complete
set of payroll documents will be submitted by the concerned DOs/IUs for proper audit.
CAR The RO is drafting a Memorandum to all DepEd employees concerned through the
DOs informing them of their GSIS and HDMF loan amortizations that were not
deducted in 2017. It also informed that safeguards shall be added in the existing policy
on the issuance of certifications on the net pay of employees for purposes of loan
applications.
RO I The Management informed the teachers regarding the refund of overpayment of
salaries and allowances as well as the contributions to GFIs. The overpayment of
salaries and allowances of the retired/resigned employees of DO Ilocos Norte was
disallowed in audit. Moreover, they have requested to the RPSU of DepEd RO I to
download the payroll preparation to the DO. Furthermore, they committed to strictly
comply with the provisions of the GAA relative to the required minimum NTHP.
RO VIII The remittance of the Pag-IBIG contributions and loans was already downloaded to
the DOs. They gave instructions to submit to the Audit Team the payrolls with DTRs
and other necessary documents within the reglementary period. They further responded
that they are prudent in approving GSIS loans however, the teachers can directly avail
loans from the PLIs without their approval hence, their effort to curtail loans has been
a struggle. As regards the observation on overpayment of PhilHealth contributions, it
has already been raised to the PhilHealth and they suggested that overpayments will
be applied to the succeeding monthly premiums upon reconciliation of accounts.
RO IX The Management also committed to ensure that the over-remittance will be off-set with
the succeeding remittances to PhilHealth. They also explained that the deficiency on
premium payments and loan deductions was due to the contributions of teachers who
were on leave without pay and request of concerned teachers for the exclusion of its
deductions from their salaries. The NTHP below the threshold, on the other hand, was
due to negligence of the bookkeeper and deductions pertaining to absences of

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 Region Management’s Comments
employees however, the Management assured that the relative DepEd Order will be
strictly followed and that it will assess loan applications by employees before
approving.
The concerned IUs communicated with the RO regarding the implementation of
school-based payroll preparation and is still awaiting for the latter’s response.
RO XI The Management advised the concerned offices to submit, on a regular basis, the
required payroll documents otherwise, provide an explanation on failing to do so.
Cash advances was resorted to by the Management in view of the lack of time in
preparing the ADA. However, they have committed to stop this practice and employ
the payment of payroll thru the ATM.

Procurement and Warehousing of Learning Materials (LMs)/Textbooks (TXs)/ Teachers’

Manual (TMs)Bufferstocks

8. DepEd suffered loss amounting to P25,213,511.10 representing the cost of 820,682

damaged Grade 2 Learning Materials (LMs) at the contractor’s warehouse due
to insufficient warehousing facilities to house the deliveries and lack of prudence
on the part of DepEd to ensure the safety of the LMs. Likewise, out of the
2,673,384 Textbooks (TXs)/ Teachers’ Manual (TMs) buffer stocks proccured
from CYs 2013-2016, seventy nine percent or 2,101,670 TXs/TMs worth at least
P56,750,598.00 remained undistributed as of inspection date which may
eventually result in wastage of government resources due to time obsolescence,
loss, damage or deterioration. Moreover, observed control weaknesses were
observed in the proper safekeeping and inventory system of TXs/TMs which can
bring further damage or loss of TXs/TMs.

Damaged LMs worth P25,213,511.10

8.1. During the last quarter of CY 2015, DepEd through the Instructional Materials
Council Secretariat (IMCS), now the Bureau of Learning Resources (BLR) had
commenced the procurement process for the following projects:

a. Printing of Kindergarten and Grade 1 English Activity Sheets and

Teachers Guides (TGS), and Delivery to the DepEd Central Office and
Public Schools Districts Nationwide; and

b. Reprinting of Grades 2, 3, 8 and 9 Learner’s Materials (LMs), and

Delivery to DepEd Central Office Warehouse.

8.2. For these procurement, the DepEd had opted to separate the procurement of
printing from the delivery of LMs to respective recipients under the following
scope of work:

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 Procurement Scope of Work
Printing of LMs Reprinting of LMs and Delivery to DepEd Central Office
(Printing Company) Warehouse.
Delivery of LMs to The scope of work shall cover but not limited to the delivery of
ROs/DOs/Schools Learner's Materials from DepEd CO Warehouse to Public School
(Forwarding Company) Districts and Public High Schools. The works include handling,
lifting, loading and unloading.

8.3. Records showed that the signing/approval of contract with the awarded suppliers
was undertaken during the first quarter of CY 2016, wherein Lexicon Press, Inc.
in joint venture with FNB Educational, Inc., under Contract No. 2015-10-IMCS
(073, 075 and 079)-BI-CB026-C047 was contracted for the reprinting of the
following Grade 2 LMs, for a total contract cost of P72,124,094.76:

Lot Item Description Quantity Amount

3 Grade 2 English LMs 288,628 28,489,450.80
Grade 2 ESP LMs 373,016
Grade 2 MTB-MLE LMs 373,016
4 Grade 2 Araling Panlipunan LMs 373,016 20,403,207.48
Grade 2 Filipino LMs 286,628
5 Grade 2 MAPEH LMs 373,016 23,231,436.48
Grade 2 Mathematics LMs 373,016
Total 2,440,336 72,124,094.76

8.4. The contract completion period was 90 calendar days reckoned from the date of
the local supplier’s receipt of the Notice to Proceed (NTP) which was February
29, 2016. Hence, the contract completion date should be on May 29, 2016.

8.5. Payment to be made to the contractor under LDDAP-ADA No. 01-101-101-07-

137-2016 dated July 21, 2016 in the amount of P64,190,444.33 net of tax and 10
percent retention was verified. Subsequently, on November 26, 2016, the 10
percent retention in the amount of P7,212,409.48 was released after the lapsed
of the three months warranty period. Therefore, the contract was 100 percent
paid as of December 31, 2016.

8.6. However, sometime in August 2017, the Audit Team received information that
copies of Grade 2 LMs delivered by Lexicon Press, Inc. were damaged and were
already disposed, which prompted the Audit Team to conduct inquiry and initial
verification. The Team was able to secure a copy of a report about the damaged
Grade 2 LMs signed by Mr. Emilio A. Celedonio, Warehouseman III,
Mr. Robertson M. Tuliao, Administrative Officer V, and noted by Ms. Besy C.
Agamata, Chief Education Program Specialist and Ms. Edel B. Carag, Director
III. It was learned from the report that 820,682 Grade 2 LMs were actually
damaged at Lexicon Press, Inc. warehouse due to its defective inside gutter and
downspouts which caused the flooding and damage of the LMs. The report also
disclosed that the damage materials were already disposed to clean up the area
because of the bad odor, and for sanitation and health concerns.

171
 8.7. The report on the damaged Grade 2 LMs transmitted on March 17, 2017 to Atty.
Revsee A. Escobedo, Assistant Secretary for Procurement Service, revealed the
extent of the damaged LMs at Lexicon Press, Inc. warehouse, with computed
value of P25,213,511.10, broken down as follows:

Quantity
% of Cost Per
Items Description Per Damaged Amount
Loss Unit 10
Contract11 LMs 2
English LMs 288,628 107,611 37 40.64 4,373,311.04
ESP LMs 373,016 106,223 28 22.82 2,424,008.86
MTB-MLE LMs 373,016 129,129 35 22.11 2,855,042.19
Araling Panlipunan LMs 373,016 87,427 23 23.37 2,043,168.99
Filipino LMs 286,628 154,110 54 40.77 6,283,064.70
MAPEH LMs 373,016 105,917 28 36.06 3,819,367.02
Mathematics LMs 373,016 130,265 35 26.22 3,415,548.30
Total 2,440,336 820,682 34 - 25,213,511.10

8.8. Analysis of the incidents associated to the damaged unutilized LMs worth
P25,513,511.10 revealed the following observations:

a.) Procurement of forwarding services and the refurbishment of the BLR

warehouse which did not coincide with the delivery of the LMs depicted
poor planning that resulted in non-availability of the needed services and
storage facilities for delivered Grade 2 LMs.

8.9. As DepEd opted to separate the procurement of the printing of LMs from the
delivery of said materials to respective recipients, the availability of the needed
storage facilities should have been addressed in due time. The bulk of the
procurement apparently requires adequate warehouse facilities for the storage
and safety of 2,440,336 expected copies of Grade 2 LMs. While DepEd may
have foreseen the needs, but it failed to timely address the said needs as
inspection conducted revealed that the capacity and availability of the DepEd-
BLR warehouses was not sufficient to accommodate all the printed LMs
procured, which at the time was still partly occupied with the remaining copies
of buffer stocks on previous procurement. It was also observed, that the
unavailability of storage facilities was attributed to the fact that the largest
warehouse is still under-going refurbishment.

8.10. Review of the Annual Procurement Plan (APP) revealed several lapses in the
procurement planning for the printing of the LMs, as both the procurement of
forwarding services and the refurbishment of the needed warehouse were only
done months after the expected delivery date of the LMs which was on
November 30, 2015. As noted, the forwarding services has an expected contract
completion date in four months, which commenced on March 31, 2016, while
the refurbishment of the DepEd-BLR warehouse was only contracted six months

10 Based on Summary of Delivery Receipts/Inspection & Acceptance Report Grade 2 Learning Materials for Contract
No. 2015-10-IMCS (073,075&079)
11 Based on Contract No. 2015-10-IMCS(073, 075&079)-BI-CB026-C047

172
 following the delivery date of the LMs. Detailed information are also presented
in the table.

Schedule of Procurement Activity12

Procurement Pre- Contract Issuance Delivery
Particulars Code
Program Procurement Signing of NTP
Conference
Printing of IMCS Re print of Grades August 21, November November November
LMs 073 2,3,8 & 9 LMs 2015 9, 2015 23, 2015 30, 2015
Forwarding IMCS Delivery of December 21, March 10, March 24, March 31,
Services 038 Additional copies 2015 2016 2016 2016
of Reprinted
Grades 2, 3, 8, 9
& buffer stocks
LMs to recipient
field offices.
Refurbishme ADMS Procurement of January 26, May 24, - -
nt of 4 26 Repair and 2016 2016
Warehouse Rehabilitation of
DepEd
Warehouse in
Taguig City

8.11. The deficiency in planning was apparently a contributing factor for the loss,
which can also be directly attributed to the prevalent delay in the
bidding/procurement activities of DepEd. This is evident in the analysis of the
procurement undertakings per contract, wherein all of the planned procurement
activities showed delay vis a vis the APP. This is illustrated in the table below.
E.B. Matias
LBC Express All Transport
Supplier Lexicon Construction &
Inc. Network Inc.
Trading
Contract No. 2015-10- 2016-04- 2016-04- 2016-10-AdmS4
IMCS(073,07 IMCS(038)BIII IMCS(038)- (026AMp017)-BI-
5&079) CB010-C010 BIICB010a-C016 NP2FB097a-C047
Purpose For reprinting For delivery of For delivery of the For the refurbishment
of LMs the LMs to school LMs to school of the BLR warehouse
Approved 9/24/2015 1/11/2016 1/11/2016 2/1/2016
Authority to
Procure (ATP)
Issuance of 12/29/2016 6/21/2016 8/3/2016 12/29/2016
Notice of 1/11/2016 6/24/2016 8/15/2016 12/29/2016
Award (received by (received by (received by (received by supplier)
supplier) supplier) supplier)
Contract 2/18/2016 8/19/2016 10/25/2016 2/17/2017
Preparation and
Signing /PO
Issuance of 2/12/2016 8/15/2016 10/1/2016 2/2/2017
Notice to 2/29/2016 8/26/2016 10/24/2016 2/17/2017
Proceed (received by (received by (received by (received by supplier)
supplier) supplier) supplier)

12
DepEd Annual Procurement Plan 2015-2016
173
8.12. It can be gleaned from the foregoing information that the necessary storage
facilities were not readily available in time for the scheduled delivery of the
reprinted Grade 2 LMs. Hence, as indicated in the BLR’s report on damaged
LRs, the LMs remained in the Lexicon’s warehouse until the damaged materials
were reportedly discovered. However, the delivery, inspection and acceptance
reports were processed and made to appear that the deliveries were actually
undertaken at the DepEd central office warehouse as stipulated in the contract,
and the same were completed and accepted as certified by the BLR,
undermining the possible risks of such arrangement poses to the interest of the
government.

8.13. The BLR in its justification dated July 18, 2016, claimed that it requested
Lexicon to defer the delivery of the reprinted Grade 2 LMs as the DepEd-BLR
Warehouse located in Taguig City has no adequate space to accommodate the
LMs. At this instance, the BLR held in abeyance the delivery until such time that
the contract for forwarding services had been awarded. The LMs remained in
the Lexicon’s storage facility until they were pulled out by the winning
forwarder for deliveries to districts/schools as can be gleaned in the report of the
damaged LMs.

8.14. DepEd seemingly failed to consider possible remedy measures to address the
urgent need for spacious storage facilities during the procurement planning of
LMs. It should have first assessed the availability of needed facilities to store
deliveries before it opted to separate the procurement of forwarding company to
handle the distribution of LMs to the various recipients. As noted, even during
the planning stage, the APP showed that the refurbishment was planned months
after the purchase of LMs. Under the circumstances, prudence and diligence
would dictate the necessity to plan for an appropriate contingency measures to
prevent or minimize the probability of any event or action to happen that may
have harmful or unfavorable effects to the delivery of program implementation.

b.) Procedural lapses in the receipt and inspection by officers/employees

having no appropriate authority on property custodianship over the
delivered LMs and the subsequent disposal thereof, without observing
lawful measures provided under Sections 73 and 79 of PD No. 1445, may
prevent recovery of cost of the loss incurred. The lack of prudence may also
not relieve the responsible and accountable officials and employees from
their liability for the cost of 820,682 damaged LMs worth P25,213,511.10 .

8.15. Payment to Lexicon Press, Inc. for Contract No. 2015-10-IMCS (073,075, and
079) – BI-CB026-C047 in total amount of P72,124,094.76 was made based on
Certification of Completed (COC) Delivery dated July 19, 2016 issued and
signed by Ms. Besy C. Agamata, Chief Education Program Specialist, and Ms.
Edel B. Carag, Director III, supported by other relevant documents on the
reprinted Grade 2 LMs delivered by Lexicon.

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8.16. Review of documents attached to payment showed that Lexicon’s Delivery
Receipt (DR) Nos. 29301, 29303, 29304, 29305, 29306, 29307 and 29308, all
dated May 28, 2016, were received by the personnel with plantilla position of
Warehouseman III, for the delivery of Grade 2 LMs valued at P72,124,094.76
at the DepEd-BLR Warehouse, Nutrition Council of the Philippine Compound,
Taguig City. The corresponding Inspection and Acceptance Report (IAR) Nos.
0152447, 0152448, 0152449, 0152450, 0152451, 0152452 and 0152453 were
signed inspected on May 28, 2016 by a BLR contractual employee.

8.17. The general guidelines on inspection of deliveries pursuant to DepEd Order No.
5, s. 2010, require that:

a. The inspection of deliveries shall be handled by the Inspectorate Team

composed of representatives from property, finance, and procuring/end-user’s
units with technical knowledge about the deliveries.

b. Purchases made by the procuring entity must be inspected by their respective

Inspectorate Team in conformity with the specifications indicated in the
perfected Purchase Order/Contract supported by the supplier Sales Invoice
and Delivery Receipt.

c. Inspection shall be conducted only on deliveries properly receipted and upon

receipt of a written request for Inspection by the Property/Supply Office.

d. Inspection shall be conducted at the site specified in the perfected Purchase

Order/Contract.

e. Alterations, erasures or modifications on the perfected Purchase

Order/Contract must be verified and duly authenticated by the authorized
approving officials.

f. Inspection and Acceptance Report must state items actually inspected and
conclusive remarks or findings and recommendations relative to the
inspection conducted. The inspectorate Team shall affix their signature over
their printed name and designation and indicate the date of inspection on the
said report.

8.18. Apparently, based on the signed IAR, the deliveries were inspected, verified and
found the items in order as to quantity and specifications by a BLR contractual
employee, instead of the Inspectorate Team. It was also evident that the
inspection date on the IAR exactly coincides with the date of delivery on May
28, 2016, casting doubts on the veracity of inspection made over the 2,440,336
copies of Grade 2 LMs. These circumstances bring doubts not only as to the
authority of a BLR contractual employee to inspect the items, but also on his
capacity to carry out complete inspection of delivered LMs worth
P72,124,094.76 on the day of actual delivery.

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8.19. Further, the personnel with a plantilla position of Warehouseman III assigned at
the BLR, was the one who signed and accepted the goods per respective IAR
and DR, instead of the bonded Property Officer who should be the proper person
accountable in the control of the receipt of LMs and their subsequent issuances
as well as the proper reporting to the Accounting Division for recording,
monitoring and reconciliation purposes. It may be emphasized that property
custodianship includes accountability, responsibility and liability of accountable
or responsible officers arising from loss, misuse, damage or deterioration of
government property due to fault or negligence in the safekeeping.

8.20. The Audit Team also noticed that there were visible erasures in the supporting
DRs and IARs which was also noted by the Accounting Division in the
processing of payment. Through a document dated July 18, 2016, the BLR
Supervising Education Program Specialist, provided the following justifications
about the erasures:

a. The contract of Lexicon Press, Inc. is to deliver the Grade 2 LMs to the BLR
warehouse; but the BLR requested Lexicon to defer delivery because the BLR
warehouse in Taguig City has no adequate space to accommodate the said
LMs.

b. Lexicon agreed to defer deliveries, temporarily safe keep the LMs, and wait
for the go signal from BLR to effect deliveries. The deliveries had been
deferred for about 45 days.

c. The BLR informed Lexicon that the receipt of the goods shall be ante dated
so it will not be charged of any liquidated damages. The BLR warehouseman
however unwittingly wrote the actual date of receipt of the LMs and did not
ante date the same; hence, the erasures made in the DRs and IARs.

8.21. The foregoing observations actually affirmed the non-readiness of DepEd to

house the procured LMs, and clearly show the laxity on the part of the BLR to
observe proper procedures and controls to address the problem without regard
to altering even vital information in the DRs and IARs.

8.22. As mentioned, the DRs and IARs issued in favor of Lexicon stipulated the date
of receipt and acceptance as May 28, 2016. These documents were made to
appear that the materials were completely delivered at the BLR warehouse in
Taguig City and the same had been issued by BLR with COC to formalize final
acceptance of delivered 2,440,336 copies of Grade 2 LMs. In truth and in fact
however, the LMs remained in the custody of contractor and were damaged
while in the contractor’s possession.

8.23. The Special Conditions of Contract with Lexicon stipulated that:

a. The goods supplied under this contract shall be fully insured by the
supplier in a freely convertible currency against loss or damage
incidental to manufacture or acquisition, transportation, storage and

176
 delivery. The goods remain at the risk and title of the supplier until their
final acceptance by the procuring entity. (Underscoring supplied)

b. For goods supplied from within the Philippines, Risk and title will pass
from the supplier to the procuring entity upon receipt and final
acceptance of the Goods at their final destination. (Underscoring
supplied)

8.24. The issued IARs and COC signify final acceptance, therefore in effect, relieves
the contractor from any obligation/liability from the contract, and thereby
transferring the accountability/liability in case of loss or damage to the procuring
entity or DepEd. In which case, DepEd-BLR responsible officials/employees
who received and accepted the LMs have custodial responsibility for the
materials safekeeping and therefore if found negligent may be held accountable
for loss or damage equivalent to the cost of government property.

8.25. The BLR’s report on damaged LRs narrated the discovery of the damaged
820,682 copies of Grade 2 LMs on January 21, 2017 at the Lexicon’s warehouse
and the materials’ disposal for sanitation concerns. It is significant to note that
although disposal of hazardous materials may be one allowable condition to
warrant the credit from accountability, such disposition must still conform to
government laws, rules and regulations.

8.26. Apparently, the concerned BLR officials/employees failed to observe the

prevailing rules under Sections 73 and 79 of PD No. 1445 on the relief from
accountability and disposal of government properties –

 Section 73. Credit for loss occurring in transit or due to casualty or force
majeure.

When a loss of government funds or property occurs while they are in transit
or the loss is caused by fire, theft, or other casualty or force majeure, the
officer accountable therefor or having custody thereof shall immediately
notify the Commission or the auditor concerned and, within thirty days or
such longer period as the Commission or auditor may in the particular case
allow, shall present his application for relief, with the available supporting
evidence. Whenever warranted by the evidence credit for the loss shall be
allowed. An officer who fails to comply with this requirement shall not be
relieved of liability or allowed credit for any loss in the settlement of his
accounts. (Underscoring supplied)

 Section 79. Destruction or sale of unserviceable property.

When government property has become unserviceable for any cause, or is no

longer needed, it shall, upon application of the officer accountable therefor,
be inspected by the head of the agency or his duly authorized representative
in the presence of the auditor concerned and, if found to be valueless or
unsalable, it may be destroyed in their presence. If found to be valuable, it
may be sold at public auction to the highest bidder under the supervision of
177
 the proper committee on award or similar body in the presence of the auditor
concerned or other duly authorized representative of the Commission, after
advertising by printed notice in the Official Gazette, or for not less than three
consecutive days in any newspaper of general circulation, or where the value
of the property does not warrant the expense of publication, by notices posted
for a like period in at least three public places in the locality where the
property is to be sold. In the event that the public auction fails, the property
may be sold at a private sale at such price as may be fixed by the same
committee or body concerned and approved by the Commission.

8.27. When warranted by circumstances that the officers/employees concerned who

by reason of their duty failed to exercise due prudence, they could be held
answerable pursuant to Section 105 of PD 1445 which provides that:

“Every officer accountable for government property shall be liable for its money
value in case of improper or unauthorized use or misapplication thereof, by
himself or any person for whose acts he may be responsible. He shall likewise be
liable for all losses, damages, or deterioration occasioned by negligence in the
keeping or use of the property, whether or not it be at the time in his actual
custody.”

8.28. As of audit date, the Audit Team’s verification disclosed that the receipt of
delivered LMs have been accounted in the records of Accounting but not the
disposal of the materials; while the Asset Management Division (AMD) has no
records showing its disposition about the LMs’ delivery and disposal.

Unutilized/Undistributed TXs/TMs buffer stocks

8.29. DepEd Order No. 74 s. 201113 provides for guidelines in the allocation of buffer
stocks.

8.30. Paragraph 2 of said DepEd Order provides that, buffer stock shall be provided
for TXs and TMs equivalent to 10 percent of the projected enrolment of the
school year. The buffer stock shall answer for replacements for losses and/or
damages of TXs, increase in enrolment, and for meeting the requirements of
newly established/created schools. The school districts and high schools will
receive 10 percent of the buffer stock, while 30 percent shall be delivered
directly to the DOs (ROs) and 50 percent shall be delivered to the DepEd–CO
designated warehouse. In this regard, schools division/city superintendents
(SDSs) and school heads (SHs) shall ensure that buffer stocks are properly stored
in protected places/warehouses, and that these are equitably distributed to and
utilized by schools need.

13
Policies and Guidelines on the Allocation of Textbooks and Teacher’s Manuals
178
8.31. Inspection conducted on September 14, 2017 at the DepEd-BLR warehouse
showed undistributed/unissued buffer stocks, which according to the BLR report
has a total quantity of 2,101,670 copies of various TXs/TMs. To wit:

Year Total Released/ Pulled out Existing Buffer at

Delivered Deliveries Qty % Qty Warehouse%
2013 173,232 173,026 99.88 206 0.12
2014 421,919 155,074 36.75 266,845 63.25
2015 1,538,940 241,072 15.66 1,297,868 84.34
2016 539,293 2,338 0.43 536,955 99.57
Total 2,673,384 571,510 21.38 2,101,874 78.61

8.32. The TX/TM buffer stocks had accumulated from CYs 2013-2016, and this
number could possibly be increased if the unissued buffer stocks in
schools/districts and DOs nationwide shall also be accounted. Based on the
previous report on procurement, the cost per textbook ranges from P27 to P50
per copy, hence, the value of the undistributed/unissued textbooks
approximately ranges from P56,750,598 to P105,093,700.

8.33. The percentage of issuance as shown in the preceding table, reflected a minimum
quantity of filled up requests that caused the accumulation of stocks which can
be possibly attributed to excessive allocation of buffer stocks, lack of proper
monitoring and coordination to determine the needs of schools, and the time,
distance and inconvenience in the processing and filling up of request.

8.34. Further, 18 percent of the total remaining buffer stocks or 371,241 LMs are
Mother Tongue-Based Multilingual Education (MTB-MLE) LMs. Currently,
DepEd uses 19 languages in MTB-MLE implemented in two modules: 1) as a
learning/subject area; and 2) as medium of instruction. The mother tongue is
used in all learning areas from Kinder to Grade 3 except in teaching Filipino and
English subjects. The remaining LMs which are MTB-MLE related are as
follows:
Year Existing Buffer MTB-MLE
%
Delivered at Warehouse LMs
2014 266,845 129,778 49
2015 1,297,868 187,712 14
2016 536,751 53,751 10
Total 2,101,464 371,241 18

8.35. Since the MTB-MLE LMs are only designated to a particular RO, the needs
should be carefully assessed and validated.

Other Weaknesses

8.36. The following are the Audit Team’s observations as a result of the inspection
conducted at the DepEd-BLR warehouse for TXs/TMs which are not compliant
to the existing policies/guidelines:

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c.) Non-compliance to DepEd Property Manual

1) The TX/TM warehouse which is located in DepEd-owned property

within Nutrition Council of the Philippines Compound in Taguig City
consists of five separate storage buildings. Three of which were
converted to office rooms which are not fit for storage due to lack of
proper lightings and the small constricted doorways which is not safe
in case of emergency situation.

2) Stock pile of debris/trash/clutter filled the biggest warehouse that limits

the full capacity of the storage area.

3) The TX/TM boxes were not properly labeled and not properly sorted
according to the year of purchase.

4) Several books are loose from the boxes exposing the materials to
possible loss/misplacements.

5) Generally, the warehouses are not suitable for storage as these are
mostly classrooms and office rooms that are converted into storage
area.

6) Procedures in Storage/Warehousing was not been observed since

proper delineation of authority and accountability has not been clearly
defined or not properly observed by the concerned offices.

d.) Non-compliance with DepEd Order No. 46 s. 2010

1) DepEd was not able to provide for a suitable warehouse for

undistributed TXs/TMs. Thus, P25 million worth of buffer stocks were
damaged at the contractor’s warehouse, as already discussed.

2) Several LMs were reported destroyed by termites in the rented

warehouse located in Brgy. Pasong Tamo Quezon City.

e.) The following observations indicate control weaknesses in the inventory

system of TXs/TMs:

1) Interview with the Property Officer revealed that the AMD was only
involved during the pre-inspection of delivery upon request of the BLR.
AMD has never been involved in the completion of the IAR nor in the
issuance of the buffer stocks. It was further stated that the
recording/monitoring of TX/TMs was lodged solely with the BLR;
hence, AMD does not maintain stock cards because the TX/TM
inventory was not placed under its control and custody.

180
 2) During the inspection conducted, it was learned that the warehouse man
is a staff employee of the BLR, who do not maintain bin cards to
monitor and control the TX/TM inventories under his custody, but
merely rely on the records of issuance kept and maintained at the BLR
office. With this condition, there is apparent lax in the control of
inventory as the BLR which is in total control of the requisitions,
receipts and issuances of TX/TM inventory does not maintain complete
historical records thereon; hence, it was not easy to determine not only
the inventory items stored in the area at a given time but more
importantly the correctness of TX/TM inventory stocks in the custody
and control of the BLR due to absence of records.

3) In the absence of stock cards and bin cards or any record on that matter
that will monitor the stock position of TXs/TMs, reconciliation of
records for check and balance or control purposes cannot be made
possible.

4) Issuances made by the BLR were not properly documented since

Requisition and Issue Slip was not accomplished.

5) Since receiving, issuance, recording and monitoring rest solely with the
BLR, both the AMD and the Accounting Division are not aware of the
issuances or transactions affecting the buffer stocks, hence, no complete
recording of inventory transactions by the AMD and Accounting
Division and reconciliation of their respective records.

8.37. Further, the Inspection Team was not able to validate accuracy of the reported
inventory due to insufficient records/reports maintained by the BLR. This was
also aggravated by the warehousing/warehouse conditions.

8.38. It is important to emphasize that property custodianship does not only refer to
guardianship, safekeeping, receipts and issuance, but it likewise includes the
accountability, responsibility and liability of accountable or responsible officers
arising from loss, misuse, damage or deterioration of government property due
to fault or negligence in the safekeeping. It may be physical/actual or
constructive.

8.39. The low percentage of request for replenishment, insufficiency of inventory

control and the existing warehouse conditions may eventually results to wastage
of government resources due to time obsolescence, loss, damage or deterioration
of the learning materials.

8.40. We recommended that the Management:

a. exercise due diligence in procurement planning for an effective service

delivery, allowing for appropriate contingency measures to prevent
losses of government resources;

181
b. for failing to observe the rules under Sections 73 and 79 of PD No. 1445
in disposing the damaged materials –

b.1 conduct investigation to establish persons who should be held

responsible and accountable for the loss incurred and institute
recovery procedures;

b.2 require the officers concerned to explain the deficiencies noted and
when warranted by circumstances should be meted out with
appropriate sanctions as a consequence of their improper act;

b.3 revisit DepEd’s guidelines on supply and property management and

strengthen the system of accountability of involved DepEd officials
as well as the monitoring of the implementation thereof by
responsible and accountable officers to ensure proper observance to
duties and responsibilities;

c. revisit existing DepEd guidelines on TXs and TMs and to consider in the
evaluation the following as regard control on buffer stocks:

c.1 provision/allocation for buffer stocks on procurement/reprinting of

textbooks and to study whether the buffer stocks for MTB-MLE
LMs should be reduced or be placed under the direct custody and
control of the respective DO;

c.2 provision of specific guidelines and procedures, including

responsible offices, officials and appropriate documentation, to
strengthen internal controls for the following sub-systems on
TXs/TMs inventory:

c.2.1 Delivery of Inventory Items (receipt, inspection and

reporting/recording),

c.2.2 Requisition/Replenishment, Issuance and Disposal of

Inventory Items (including reporting/recording),

c.2.3 Monitoring and Inventory Taking;

d. provide for a suitable facility and thereafter ensure that the buffer stocks
are properly stored in protected places/warehouses; and

e. require the BLR to account all stocks at the warehouse and submit
inventory report to the AMD for monitoring and control and for
submission of appropriate reports to Accounting Division.

182
8.41. The following presents the comments of Management and Audit Team’s
response:
Management’s Comments
On damaged LMs worth P25,213,511.10:
The BLR Director narrated the following comment:
a. Lexicon and DepEd mutually agreed to defer the
delivery and subsequently temporarily safe keep
the LMs pending awarding of contract for the
forwarding services.
b. As early as June 2016, BLR was already
requesting for a storage facility at the DepEd CO
thru the Office of Undersecretary for Curriculum
and the Office of the Undersecretary for
Administrative Service.
c. DepEd in entrusting the LMs to Lexicon
exercise due diligence and by ensuring that the
LMs were in a good and safe place. That the
BLR acted in good faith thinking that such act is
beneficial to DepEd since no additional cost will
be incurred in doing so. While they admit that
the risk and title already pass from the contractor
to DepEd, by acting in good faith and as
mutually agreed upon, they expected that the
goods will be safe in Lexicon’s warehouse and
such will be taken cared of also with due
diligence on their part.
d. They had no knowledge on the intention to
separate the printing and delivery, but they saw
it as an opportunity to fast track the request for
repair/refurbishment of the warehouse.
e. They admitted that the forwarding service and
all planned activities state in the APP are their
responsibility but the repeated failed biddings
and the approval of their request is not within
their control.
f. That the report of Lexicon on damaged LMs was
acted upon and they had immediately dispatched
personnel to verify the veracity and extent of the
damage and reported the incident to the
Assistant Secretary for Procurement, Project
Management and Field Operations.
g. They had no control on the action taken by
Lexicon in disposing the items for sanitation
purposes, and they are fully aware of the
procedure for disposal but then the action of the
contractor is not within their control.
183
Audit Team’s Rejoinder
The BLR stated that Lexicon and DepEd
mutually agreed to defer the delivery and
subsequently temporarily safe keep the LMs
pending awarding of a winning bidder for the
forwarding services. This supposed
agreement was not supported with evidence
as there were no communications or any
document presented to support the same. It
was a not even stipulated who represented in
behalf of DepEd for the said arrangement.
During the last quarter of 2015, it was already
foreseeable that there will be shortage of
storage facilities because of the expected
volume of deliveries for printed LMs. But as
observed, there were no clear plans laid down
to at least lessen the possible impact on the
deficiency. Issuing a COC Delivery where in
fact there was none and was only based on
undocumented agreement is an act of
negligence, placing at stake the interest of the
government.
It was also stated that they acted in good faith
thinking that such act is beneficial to DepEd
since no additional cost will be incurred in
doing so; and because it was mutually agreed
upon, they expected that the goods will be
safe in Lexicon’s warehouse, and that it will
be taken care of with due diligence on their
part. Entrusting the government properties
worth millions of pesos without proper
documentation but based only on
undocumented mutual agreement and on the
assumption that it will be taken care of by
somebody who has no interest over the safety
of the property and has no accountability over
said properties negates the presence of good
faith and diligence.
As stated in the reply, on January 17, 2017,
the winning service forwarder LBC Express
had verbally reported to BLR the damaged
learning materials, but it appears that the
report was not urgent enough to require
immediate attention since it’s only on
February 9, 2017 that BLR sent their
personnel to verify and validate the report,
and it was only on March 17, 2017 that BLR
submitted the total damage report of 820,682
copies valued at P25,041,4321.69 to the
 Management’s Comments
On the other hand, Undersecretary Escobedo, in his
capacity as the Chairman of the Disposal
Committee, narrated the following:
h. He received a report from the Office of Director,
BLR regarding the damage Grade 2 LMs last
July 6, 2017 and immediately thereafter, he
issued a Memorandum dated July 12, 2017
directing the inspection of the warehouse by the
members of the Disposal Committee.
i. The Disposal Committee submitted a report
which was forwarded to the Secretary through a
Memorandum dated September 28, 2017
recommending an investigation relative to the
reported damaged LMs.
j. That his Office is fully aware of its responsibility
under Section 79 of PD No. 1445.
k. That the Resolution drafted by the Disposal
Committee there were no damaged LMs found
in the ware house, as the same were already
disposed of by Lexicon Press. Inc. without
knowledge and authority of the Department.
On unutilized/undistributed TXs/TMs buffer stocks:
Since 2013-2016 budget of the BLR, the budget for
pull-out or delivery of stocks was not included in the
Annual Plan, hence, expenses for the distribution
were not undertaken resulting in the accumulation of
buffer stocks in the warehouse.
The BLR made clarification that refurbishment of
the warehouse is within the jurisdiction of the
Administrative Office. The stock pile of debris
which filled the biggest storage capacity in the
warehouse was not from BLR. That as part of the
office refurbishment plan, the Administrative
Service used the warehouse to store old
documents/files, unserviceable chairs, tables and the
184
Audit Team’s Rejoinder
Assistant Secretary for Procurement, Project
Management and Field Operations.
It was further explained by the BLR that they
had no control on the action taken by Lexicon
in disposing the items for sanitation purposes,
as this may be hazardous if taken too long to
dispose and that they are fully aware of the
procedure for disposal but then the action of
the contractor is not within their control. This
statement is just an admission that they are
actually entrusted the government properties
at their own risk and without due regard of its
safety. How can they expect or demand from
the contractor that the damage textbooks to be
preserved to comply with rules and regulation
when in fact they even cannot actually
demand due diligence to insure good
condition and safety of the LMs.
The Assistant Secretary for Procurement,
Project Management and Field Operations in
his capacity as the Chairman of the Disposal
Committee also explained that upon receipt
of the report from the BLR regarding the
damaged Grade 2 LMs, he immediately
issued Memorandum dated July 12, 2017
directing the inspection of the warehouse by
the members of the Disposal Committee.
Such action denotes absence of urgency as
the BLR report was communicated to his
Office only on March 17, 2017 and it took
him almost four months to properly act on the
report.
Hence, the Audit Team reiterates the conduct
of investigation and impose appropriate
sanction to those found to be
liable/accountable for the loss.
As being understood, buffer stocks are issued
upon request, hence, funds needed for the
filling up of request can be augmented from
other sources if properly requested and
coordinated. It is unconscionable for the
Department to purchase millions worth of
textbooks then allowed it to remain on stock
and to become obsolete due to lack of
funding. Granting that lack of fund was
indeed the root cause, this can also be
attributed to inability to plan and lack of
coordination of the concerned offices to
allocate funds from procurement down to
distribution.
 Management’s Comments
like. That these materials came from different
bureaus and offices, which are not kept in their
respective offices because of limited space.
It is the normal practice of the BLR to stock pile
textbooks and teacher’s manual without proper
labels. But the warehouseman keeps record as to
when these learning resources were purchased, the
name of the suppliers and the copyright year for easy
identification. In regard to books that were found
loose, this was the result of incomplete packing of
books requested.
In the series of meetings with the AMD, it was
decided that the management of the buffer stocks
will be solely lodged with BLR as it pertains to
textbooks, hence, the AMD did not maintain stock
cards.
Audit Team’s Rejoinder
It is true that refurbishment of the warehouse
is within the jurisdiction of the
Administrative Office, but BLR is expected
to know and regularly report the existing
condition of the warehouse to the concerned
Office for appropriate action.
The Audit Team invites attention to the
provisions of Chapter 8, Section 17 of the
GAM and DepEd Property Manual as to the
Major functions of the Property and Supply
Division for the control and proper
management of inventories.

The BLR admits absence of stock and bin cards

resulting in the lack of check and balance. This was
due to BLR’s limited permanent plantilla position.
That the previous property custodian only maintains
digital record file of DR and IAR of the accepted
buffers and records in excel inventory form.

The BLR will conduct a thorough monitoring and

inspection of the buffer stocks in Taguig warehouse
to reconcile the existing records of BLR and properly
label the boxes according to grade level.

Financial and Compliance Audit

Unauthorized maintenance of bank accounts, retention of receipts/income and

unutilized/excess NCAs

9. The Cash in Bank - Local Currency, Current Account (LCCA) includes trust
accounts maintained without specific authority/legal basis and is being used for
the unauthorized retention of various receipts/income amounting to
P90,180,032.55 and unutilized/excess cash allocations amounting to
P1,832,532,743.67, which should have been properly remitted to the National
Treasury pursuant to pertinent provisions of the GAA for FY 2017 and other
applicable rules and regulations on the matter. Moreover, bank accounts with
total balance of P31,348,897.05 were maintained with banks without universal
bank license and approval from the Department of Finance (DOF) contrary to
the provisions under DOF Department Circular No. 001-2015 and DepEd
Memorandum No. 2015-007 dated July 27, 2015.

185
 9.1. Section 2.1 of the Permanent Committee Joint Circular No. 4-2012 dated
September 11, 2012 provides for the rationale for the reversion of all dormant
accounts, unnecessary special and trust fund to the general fund. It states that,
“It is hereby declared a policy of the State that unless otherwise specifically
provided for by law, all income collected by agencies of the government by
virtue of the provisions of law, orders and regulations shall be deposited in the
NT, and shall accrue to the unappropriated surplus of the General Fund of the
Government.”

9.2. Section 10, General Provisions of the GAA for FY 2017 provides that,
“departments, bureaus, offices and instrumentalities of the National
Government, xxx are mandated to close or revert all balances of Special
Accounts, Fiduciary or Trust funds and Revolving Funds to the General Fund in
any of the following instances: (i) when there is no legal basis for its creation;
(ii) when their terms have expired; or (iii) when they are no longer necessary for
the attainment of the purposes for which said funds were established. xxx”
9.3. Item 5.2.1.4 of National Budget Circular (NBC) No. 567 dated January 3, 2017
provides that, “NCAs issued and credited to the Regular MDS Sub-Accounts of
agencies/OUs for their regular operations, shall be valid until the last working
day of the 3rd month of that quarter pursuant to DBM CL No. 2013-125.”

9.4. Sections 6 and 7of the same GAA provides that trust receipts, and performance
bonds and deposits shall be deposited with the NT and recorded as trust receipts
in accordance with Executive Order No. 338, as implemented by COA-DBM-
DOF Joint Circular No. 1-97 dated January 2, 1997.

9.5. Audit of the account Cash in Bank - LCCA in the books of the different
central/regional/division offices/schools revealed that collections from various
sources are accounted as trust account in disregard of pertinent provisions of
law, rules and regulations. The following are the deficiencies noted:

a.) In CO and five Regions, trust accounts under Cash in Bank - LCCA are
maintained without specific authority/legal basis or are being used for the
unauthorized retention of various receipts/income amounting to
P90,180,032.55, which should have been properly remitted to the NT,
broken down as follows:

CO/Region Nature of Collection Account Amount

CO Bid Security/Performance OSEC Trust 0672-1000-20 1,266,498.67
Bond
Donations OSEC Trust 0672-1000-20 800,000.00
Adopt A School Trust 0672-1080-20 107,405.00
Registration Fees OSEC Trust 0672-1000-20 221,000.00
Interest Income OSEC Trust 0672-1000-20 110,654.62
DRRM Calamity Fund 3342-1012-82 48,644.50
Refund of Excess Cash OSEC Trust 0672-1000-20 131,646.25
Advance NETRC Trust 6675-1010-37 920.00
186
CO/Region Nature of Collection Account Amount
Miscellaneous Income OSEC Trust 0672-1000-20 1,046.00
NETRC Trust 6675-1010-37 407,144.00
Net Proceeds from sale of bid OSEC Trust 0672-1000-20 7,728,200.00
docs
Net Proceeds of Examination NETRC Trust 6675-1010-37 5,930,642.74
Fees
NCR Various collections DOs Manila, Caloocan, Valenzuela, 13,682,771.55
Malabon, Pasig, Marikina, San Juan
and Pasay trust accounts
RO III Performance bonds/bid ROP, DOs Pampanga and Nueva Ecija 18,085,592.85
securities of contractors, trust accounts
collection of bid documents
and seminar fees
RO V Trust fund ROP 7,660,236.79
Proceeds from sale of the bid DO Albay trust account 4,412,102.41
documents, bid security, DO Legazpi trust account 2,136,131.36
performance bond and
registration fees for seminars
and other activities
Trust fund DO Ligao City 334,352.11
RO IX Fund transfers from the Zamboanga del Sur 16,937,657.17
regional office, DBP 0840-19177-080
guaranty/security deposits,
sale of bidding documents,
income from rentals,
registrations of trainings and
seminars, refund of excess CA,
excess funds for completed
programs, activities and
projects, payment for lost Zamboanga del Sur 222,448.58
government properties, fund DBP 0-05532-840-1
transfers from the general fund
and other collections
Proceeds from the sale of DO Zamboanga del Norte 2,262,641.90
bidding docs, financial Dipolog Branch under Account No.
assistance for the 0815-015919-080
implementation of various
programs and activities, refund
of erroneous downloading of
fund, salaries and other
emoluments, returned of
unutilized funds and
registration fee
Proceeds from the sale of DO Dipolog City - LBP Dipolog 556,648.74
bidding docs, and registration Branch
fee
Trust fund DO Sibugay 302,783.06
DBP - Ipil 0825-026124-030
Sphere fund DO Sibugay 148,131.32
LBP - Ipil 1252-1107-94

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CO/Region Nature of Collection Account Amount
RO XIII Excess collections from DO Butuan City trust account 6,684,732.93
registration fees, refund of
cash advances, unutilized fund
transfers, idle cash balances
and other trust receipts and
income
Total 90,180,032.55

9.6. The retention of the fund in the bank instead of remitting the same to the NT did
not only run contrary to the foregoing rules and regulations but also deprived the
government of the use thereof to finance other priority programs and
expenditures.

b.) Current Accounts are being used to facilitate the transfer of

unutilized/excess cash allocations amounting to P1,832,532,743.67 to avoid
lapsing.

9.7. For CY 2017, the following Regions had withdrawn unutilized NCAs from MDS
account without proper documentation and transferred the same to Trust
Account-LCCA to avoid lapsing or reversion of the unutilized NCA balance:

Region Division Office Amount Deficiencies

NCR ROP, DOs Quezon 1,612,348,892.22 The unutilized NCAs/NTAs pertain to
City, Manila, Caloocan, allocations for the unimplemented programs/
Valenzuela, Malabon, activities and unsettled obligations of PS and
Navotas, Pasig, MOOE for the current and previous year/s. The
Marikina, San Juan, non-implementation of various
Pasay, Muntinlupa, programs/activities during the year is attributable
Parañaque, and Las to the Management’s deficient planning.
Piñas
RO I DOs La Union, San 2,552,347.40 The amount of the trust receipts are
Fernando City, savings/unobligated balances for activities that
Dagupan City and has been implemented and achieved and for
Urdaneta City which these balances are no longer necessary.
Hence, these are due for reversion but were not
remitted to the National Treasury.
RO II ROP and Nueva 6,082,142.07 Management transfers unused balance of NCA
Vizcaya for DepEd projects and activities and some
Personal Services items to the account at the end
of the year to avoid lapsing of cash allocation.
Moreover, refunds from excess disbursements out
of the general fund were collected and remitted in
the trust fund account.
RO DO Leyte 205,605,043.49 In DO Leyte, funds were transferred from the
VIII MDS account to other bank accounts maintained
by the Agency. It was also learned that the DO
maintains four other MDS accounts in violation
of existing rules and regulations.
RO IX DO Dipolog City 5,944,318.49 The DO made transfers of fund from the MDS
account to current account to avoid the automatic
lapsing of unutilized NCAs.
Total 1,832,532,743.67

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9.8. This practice/scheme used by several ROs/DOs circumvents the guidelines on
NCA validity embodied under NBC No. 567 dated January 3, 2017 and indicates
poor management of cash allocations.

c.) Bank accounts with an aggregate deposit of P31,348,897.05 were

maintained with banks without universal bank license and approval from
the DOF contrary to the provisions under DOF Department Circular No.
001-2015 and epEd Memorandum No. 2015-007 dated July 27, 2015.

9.9. Section 5.2 of DOF Department Circular No. 001-2015 provides that, “As part
of the Government’s effort to strengthen its overall fiscal position, all NGAs,
GOCCs, and LGUs specifically allowed by law, rules and regulations to retain
income and/or for operations and/or working balances shall deposit and maintain
accounts with GFIs with a universal bank license and a CAMELS rating of a
least 3.”

9.10. In compliance with said DOF Circular, DepEd Memorandum No. 2015-0007
was issued directing all IUs to transfer their accounts to GFIs that comply with
the conditions stated in the DOF Circular. The DepEd Memo further provides
that, should a DepEd IU find it necessary to continue maintaining its account
with non-GFI, the DepEd IU should request for prior approval from the DOF
through the DepEd CO in accordance with Sections 5.4 and 5.5 of the said DOF
Circular.

9.11. However, contrary to said rules and regulations, the following Regions maintain
bank accounts with non-GFI:

Region Bank Account Amount

RO I Philippine Veterans Bank (PVB) CA 0020-007322-001 13,112.52
PVB - CA 0020-005498-001 69,960.00
RO IX DO Zamboanga - PVB 31,265,824.53
Total 31,348,897.05

9.12. The current accounts maintained with the PVB in Region I (DO Pangasinan II)
are already dormant.

9.13. We recommended that the Management in concerned Offices:

a. secure authority from the Permanent Committee to maintain the current

accounts considered extremely essential in the operation of the agency.
Otherwise, close the unauthorized current accounts and remit existing
balances to the NT, pursuant to Section 11, General Provisions of the
GAA for FY 2017 and DBM-DepEd Joint Circular No. 2004-01; and

b. discontinue the practice of transferring unutilized funds from MDS

Regular accounts to the Trust Fund account or to any other bank account
not authorized by law.

189
9.14. The following are the Management’s comments:
CO/
Management’s Comments
Region
CO During the Exit Conference (June 13, 2018), Management stated that BALS Trust Account
No. 0672-1001-27 has already been closed, while there are on going verification and
reconciliation for other trust accounts for closure and for cash balances for remittance to
BTr.
NCR The remaining balance will be remitted to the BTr as soon as the same has been
coordinated to the program owners/coordinators.

The SDO is exerting efforts to revert the unused funds that have no valid claims, dormant
for an unreasonable length of time and the terms of validity have expired. They will seek
authority from the Permanent Committee through DepEd NCR ROP to maintain Current
Accounts for the continuous implementation of programs and projects
by the DO.

RO I Management apologized for the belated closing of the agency’s Philippine Veterans Bank
accounts for Payroll and Sphere Funds, which have exceeded the period allowed by the
Section 6 of DOF Circular 002-2015 enumerating the transitory provisions.

As of July 5, 2016, there were no more transactions of deposits and disbursements made
to these accounts and the necessary actions for the immediate transfer of the said cash
balances to Land Bank of the Philippines Accounts will be undertaken.
RO II In the ROP, the Management commented that they will adhere to the recommendation of
the Audit Team to remit to the National Treasury the unutilized CIB- LCCA except for
the unutilized fund in prior years such as the bid documents, qualifying exam for Principal
and proceeds from sale of scrap material totaling to P222,344.34 wherein they will utilize
this for some related programs/projects in the Regional Office.

In DO Nueva Vizcaya, the Management will remit the unused NCAs of MOOE for year
2013 to 2015 to the National Treasury and will remit the remaining funds, specifically the
unused NCAs of PS, until June 2018.
RO III Management commented that as of December 31, 2017, the total unidentified amount has
reached P18 Million, P7.6 Million of which are for identification and reconciliation and
will be ultimately remitted to BTr once identified.

Management of DO Nueva Ecija commented through the Accounting Division, in her

letter reply dated February 8, 2018, that a total of P767,653.41 was deposited to the
National Treasury on February 8, 2018. All other excess fund of their Trust fund
collections will be immediately returned to the Bureau of Treasury after payment of
remaining claims.
RO V In ROP, Management was informed by the Accountant of CO that the account has been
closed and the remaining balance was deposited to the Bureau of Treasury. The necessary
journal entry for the adjustment will also be recorded in the books of accounts.

In DO Albay, Management expressed that they will seek authority from Bureau of
Treasury to maintain said account.

In DO Legazpi, Management agreed to comply with the above recommendations and

informed that starting CY 2018, all collections will be remitted to the National Treasury.
As partial compliance, Management had already deposited the amount of ₱1 million from
the CY 2017 balance with the Bureau of the Treasury last December 2017. At year end,
the account had a balance of ₱460,759.42, which will be remitted in the ensuing year.

190
 CO/
Management’s Comments
Region
In DO Ligao City, Management was amenable with the recommendation. Accordingly,
immediate communication with the LBP-Ligao Branch will be made regarding the closure
of the bank account.
RO VIII In DO Leyte, Management commented that the decision to open a new Cash in Bank –
Local Currency Current Account No. 106-2-775-3 was part of the new procedure required
by the Regional Office on the payment of regular salaries of teachers and employees paid
by the Regional Payroll Services Unit. A formal letter shall be sent to the Regional Office
inquiring on the legality of the opening/maintenance of the accounts in question.
RO IX Management of DO Zamboanga del Sur commented that it had not yet obtained authority
from the BTr but as per GAA 2017, it had been stated that a current account may be
maintained for the collections of income for the repair and maintenance of the income-
generating project such as the Teachers’ Center of the Division Office.

For the collections and deposits made in prior years as enumerated in the previous AOM,
the said collections and excess funds had already been deposited in the BTr as per advice
by the Audit Team

DO Zamboanga del Norte Management committed that the said bank account will be
closed by the end of June 2018.

DO Dapitan City Management commented that the accounting unit is coordinating with
other concerned section/units to facilitate utilization of funds for planned activities and/or
identified payables and the remaining balances to be remitted/deposited to the Bureau of
Treasury.

Management of DO Sibugay commented that they are considering to close the DBP-Ipil
Trust Account right after the last transaction for Madrassah has been settled. The
remaining balance will be remitted immediately to the Bureau of Treasury. However, the
SPHERE –Trust account will be used for the transactions of EPIP Fund. Copy of the
authority for the opening of SPHERE Trust account will be submitted to COA for review
and validation.
RO XIII Management of DO Butuan City commented that they have purchases during seminars
that were not yet paid. However, they have received ₱3,700,000.00 from the Regional
Office for the payment of FY 2016 Hardship Allowance which was already paid in full.

While the Management of the Division of Surigao City commented that they are currently
processing and coordinating with the respective banks for the closure of the dormant
depository accounts of the Agency.

Internal control weaknesses that hindered the process of ascertaining the accuracy and
reliability of the Cash-in-Bank-LCAA account balance

10. Non-preparation or delayed submission of the monthly Bank Reconciliation

Statement (BRS) as required under Section 74, PD No. 1445 and COA Circular
No. 96-001, failure to effect the adjustments/recording of reconciling items, and
the unaccounted discrepancy between the General Ledger (GL) and Subsidiary
Ledger (SL) balances, hindered the process of ascertaining the accuracy and
reliability of the Cash-in-Bank-LCCA balance with unaccounted
discrepancy/variance of P1,130,121,420.48.

191
Likewise, other deficiencies such as unrecorded receipts/collections, non-issuance
of official receipts, and late or non-deposit of collections, as noted in six regions,
exposed government funds to possible misuse or misappropriation.

a.) Non preparation of BRS, failure to record or effect adjustments of

reconciling items and unaccounted discrepancy between the GL and SL.

10.1. Cash is the most vulnerable asset. Hence, internal control over this asset must be
properly in place and be strictly observed. It is normal that at certain period of
time, the Cash in bank balance per book does not reconcile with the actual Cash
balance per bank due to timing difference. There are transactions already
recognized in the agency books but not yet accounted for in the bank, in like
manner that there are transactions already recognized in the bank but not yet
accounted for in the agency books. This timing differences create reconciling
items in the BRS that requires immediate attention to determine possible errors
committed and to ascertain that the reported cash in bank per books, actually
exists and available per bank.

10.2. Sound internal control on cash requires prompt and correct recording and
reporting of transactions to ensure that financial information are reliable,
accurate and reported within the given accounting period. Likewise, to
strengthen internal control, the maintenance of Subsidiary Ledger (SL) is a
requirement to check the accuracy of the controlling asset account in the General
Ledger (GL).

10.3. Items 3.1 and 3.2 of COA Circular No. 96-011 set the general policy/guidelines
on the preparation and submission of the BRS and provides that:

“3.1 The depository/servicing banks shall furnish the Accountant with

the Bank Statements including debit/credit memos, paid checks,
etc. within five (5) days after the end of each month which shall be
the basis for the preparation of the monthly Bank Reconciliation
Statements (BRS)

3.2 The Accountant shall within ten (10) days from receipt of the BRS,
reconcile the same with the General Ledgers and prepare the BRS.”

10.4. Section 74 of PD No. 1445 provides that, “the head of the agency shall see to it
that reconciliation is made between the balance shown in the bank statement and
the balance found in the books of the agency.”

10.5. Audit disclosed that Accountant/Bookkeepers failed to regularly prepare and

submit the monthly reconciliation of cash account balance per book and per
bank, identify the discrepancy between the cash account balance per GL and
SLs, and to effect adjustment/recording of reconciling items thus, hindered the
process of determining the accuracy and reliability of the account Cash-in-Bank-

192
 LCCA balance totalling P3,106,088,129.44 in the following offices/schools as
shown in the table below:

Unaccounted
CO/
Discrepacy/ Observation
Region
Variance
CO 19,913,031.68  Delay in the preparation and submission of BRS ranges from two
days to as late as 344 days beyond the 20-day prescribed period
of submssion from the end of each month.

 The audit revealed that the Cash in Bank accounts showed an

unaccounted funds of P19,913,031.68, as this amount was not
supported by an equivalent bank deposit. It was also observed that
there were net reconciling items per bank of (P8,436,416.46) as
well as net reconciling items in the book of P6,903,289.11, which
in effect lessens the actual discrepancy or unaccounted funds to
only P4,573,326.11.

NCR 281,255,684.76 ROP & 16 Dos

 Unascertained difference of P281,255,684.76 between the

balance of the account Cash in Bank-LCCA per books and per
bank due to delayed or non-submission of BRS.

RO II 318,750.84 ROP and 8 Dos

 Net understatement in the balance per books totaling ₱318,750.84

due to non-adjustment of the reconciling items found in BRS in
prior years.

RO III Not indicated ROP & DOs San Jose City, Muñoz City, Gapan City, Cabatuan City,
Angeles City, San Fernando, Zambales and Olongapo City-

 The Accountant/Bookkeepers failed to regularly prepare and

submit the monthly reconciliation of cash account balance per
book and bank, and effect adjustment/recording of reconciling
items
28,479.69
 Stale checks not adjusted back to Cash in Bank account

RO IV-B 2,351,830.63 DO Romblon

 Delay in the submission of BRS ranges from 15 to 144 days and

a total of P2,351,830.63 reconciling items were not
adjusted/recorded in the books as of year-end, understating the
cash balance by same amount.
Not indicated
DO Palawan

 The bookkeeper of Gaudencio Abordo Memorial High School did

649,712.39 not prepare BRS for the period January to December 2017.

DO Mindoro

 BRS were not prepared that resulted in unreconciled discrepancy

between the book and bank balance of P649,712.39.

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 Unaccounted
CO/
Discrepacy/ Observation
Region
Variance
RO V Not indicated ROP

 As a follow-up to last year’s audit observation, while there was

movement/reduction in the amount of some long outstanding
reconciling items indicating that adjustments/corrections had
already been made, there were also items that significantly
increased during the year 2017. Other reconciling items in CY
2015 remained the same and have not yet been effected/recorded
in the books as of year-end.
6,955,111.20
DO Legazpi City

 No BRS was submitted for the calendar year 2017 for six bank
accounts.

RO VIII 818,648,819.29 ROP

 Existence of net unreconciled difference of P818,648,819.29

between the stated balances per the agency’s books and
confirmed Bank Statement of P999,891,286.67 and delay in the
submission/non-preparation of BRS.
RO IX Not indicated ROP and 2 Dos

 The Accountant/Bookkeeper failed to regularly prepare and

submit the monthly reconciliation of the cash account per book
and per bank resulting in the difficulty of ascertaining the
accuracy and reliability of various cash accounts totaling
₱783.67M and preventing the timely audit of cash account
balances and communication of result.

RO XI Not indicated ROP and four Dos

 The completeness and reliability of the balances of CIB – LCCA,

Cash MDS-Regular and the CIB-Cash MDS-Trust with an
aggregate amount of P8,394,076.72, as reported in the DepEd
Region XI Financial Statements may have been affected due to
delayed and/or non-preparation and eventual submission of the
BRS.

RO XIII Not indicated DO Surigao del Sur

 Non-preparation and/or delayed submission of the monthly BRS

resulted in difficulty of ascertaining the accuracy and reliability
of Cash in Bank – Local Currency, Current Account

10.6. The delayed preparation and submission of the BRS precluded the Audit Teams
from immediately ascertaining the accuracy of the cash balance as reflected in
the books of accounts. Moreover, errors or discrepancies requiring
corrections/adjustments either by the bank or in the books could not be effected
at once.

194
10.7. Further, the unreleased checks as at year-end of two regions totalling
P9,622,439.09 were not restored back or adjusted to Cash Account to reflect a
reliable Cash in Bank balance, to wit:

Region Amount Observation

RO II 2,588,798.80 DOs Isabela City and Santiago City-

 Unreleased checks at the end of the year which were not restored back
to the cash account

RO III 7,033,640.29 DOs Science City of Muñoz, San Jose City, Cabanatuan City and Gapan
City

 There were unreleased checks at the end of the year, which were not
reverted to the cash account .

Total 9,622,439.09

b.) Non-adherence to laws, rules and regulations in the recording, handling

and collections

10.8. Pertinent provisions of PD No. 1445 provide that:

 Sections 63 - Except as may otherwise be specifically provided by law or

competent authority, all moneys and property officially received by a public
officer in any capacity or upon any occasion must be accounted for as
government funds and government property and shall be taken up in the
books of the agency concerned xxx;

 Section 68 - No payment of any nature shall be received by a collecting officer

without immediately issuing an official receipt in acknowledgement thereof.
The receipt may be in form of postage, internal revenue or documentary
stamps and the like, or officially numbered receipts, subject to proper
custody, accountability and audit.

 Section 69 - Public officers authorized to receive and collect moneys arising

from taxes, revenues or receipts of any kind shall remit or deposit intact in
full amounts so received and collected by them to the treasury of the agency
concerned and credited to the particular accounts to which the said moneys
belong.

10.9. COA Memorandum No. 2012-004, The Revised Cash Examination Manual,
Chapter II item 32 dictates that “All Collecting Officers shall deposit intact all
their collections, as well as collections turned over to them by sub-
collectors/tellers, with authorized government depositary bank (AGDB) daily
or not later than the next banking day.”

10.10. The General Provisions of the 2017 General Appropriations Act, specifically
Section 4 thereof, provides that, “all fees, charges, assessments, and other
receipts or revenues collected by departments, bureaus, offices or agencies in
the exercise of their mandated functions, at such rates are now or may be
195
 approved by the appropriate authority shall be deposited with the National
Treasury as income of the General Fund pursuant to Section 44, Chapter 5,
Book VI of E.O. No. 292, s. 1987 and Section 65 of PD No. 1445.”

10.11. Audit of collections of the different DepEd offices/schools revealed the

following:
Amount
Region Observations/Deficiencies
of deficiency
CAR 113,064.32 DO Abra
 Unrecorded collections as at year-end
RO I Not indicated DO Pangasinan II
 An average of three to 28 calendar days of time lags before depositing
the collections to the authorized depository banks.

DO Ilocos Norte
Not indicated  There were delayed and staggered deposits of collections.
RO II Not indicated DO Nueva Viscaya
 Four National High Schools (NHS) did not deposit their collections
with the Bureau of Treasury and three NHS did not deposit their
collections since no bank account is maintained by the School
Division of Ilagan
274,755.00  Collections were either deposited in the personal account of the

Principal, designated as collecting officer or not deposited due to absence

of bank account maintained.

RO IV- 456,145.38 DO Puerto Princesa

B  Collections not deposited with the Bureau of the Treasury through the
Authorized Government Depository Bank (AGDB) and remained in
the hands of the Cashier from one month to more than one year.
RO III Not indicated San Jose del Monte National Trade
 Collections made were not deposited intact daily resulting in
accumulation of cash in the custody of the Cashier.
RO 96,883.03 DO Catbalogan City
VIII  Collections were not deposited in full/intact by the cashier, despite the
proximity of her office to the depository banks, thereby exposing
government funds to probable misuse or loss.

DO Ormoc
Not Indicated  Registration fees collected from participants coming from the
different schools were no longer issued with ORs nor were the
proceeds thereof deposited to the agency’s depository bank.

Hilongos National Vocational School

Not Indicated  Revenues collected by the school from its income generating projects
(IGP) were received by the designated treasurer without issuing ORs
as acknowledgment.
RO XI Not indicated ROP
 Collections for DepEd NEAP Funds under DepEd Regional Office XI
were collected by the Dormitory Manager who was not designated as
collecting officer.

DO Compostela Valley
196
 Amount
Region Observations/Deficiencies
of deficiency
Not indicated  Daily collections were not deposited intact at least on the next banking
day contrary to Section 69 of PD 1445. Deposits of collections takes
two to 29 calendar days, and done on a piecemeal.

290,356.71 DO Tagum City

 The registration fees and contributions for school activities amounting
to P290,356.71 were not covered with official receipts.
RO 20,060.10 Collections were not deposited to the National Treasury within the
XIII prescribed period. Likewise, the non-preparation of Reports of
2 IUs Collections and Deposits by the Collecting Officer at the close of the
business day implies that collections and deposits were not properly
monitored.

10.12. We recommended that the Management require the Accountants of

concerned offices to:

a. trace unaccounted funds and deficiencies/variance and make necessary

adjustment in the books;

b. strictly comply with the provisions on record keeping and reconciliation

of accounts as required under Section 74 of PD No. 1445 and COA
Circular No. 96-011;

c. enroll in online banking services where bank statement information can

readily be obtained at any time to facilitate the timely preparation of the
BRS; and

d. cause the timely preparation of monthly BRS so that errors/omissions

and/or reconciling items would be immediately detected for correction
and adjustment in the books of accounts, thus ensuring the accuracy and
reliability of the Cash in Bank-Local Currency and Treasury/Agency
Cash account balances in the agency’s financial statements.

10.13. We further recommended that Management require concerned officials to

strictly adhere to laws, rules and regulations in the handling, recording
and utilization of collections pursuant to Sections 63, 68 and 69 of PD No.
1445 and Section 4 of the General Provisions of the GAA for FY 2017.
10.14. The respective Management’s comments to the audit observations are as
follows:
Region Management’s Comment
CO According to the Accountant, the unaccounted discrepancy in OSEC books are already existing
several years ago. The Accounting Division find it difficult to trace the composition of the
unreconciled amount because many of the records are no longer available. Efforts will be
exerted to locate documents that would reduce the variance between GL and SL balances.
NCR The differences between book and bank balances are bank reconciling items, which do not
require adjustments in the books.
RO I Management, as the overseer of the activities of the administrative services, welcomed the
observations of the Audit Team.

197
 Region Management’s Comment
RO II Management commented that the non-preparation and non-submission of the BRS was due to
the delay of the government depository bank to issue the bank statements for the given period.

Management agreed to comply with the recommendations made.

RO III Management of the concerned offices all agreed to comply with the recommendations.

Management of San Jose del Monte National Trade School will be creating policy/scheme on
the daily collection and deposit of cash to ensure adherence to relevant laws and rules.
RO IV- Cashier assured to deposit the unremitted amount.
B
RO V In ROP, Management commented that most of the prior years’ reconciling items pertain to the
current accounts for net-pay (elementary and secondary) which are now the subject of the
ongoing reconciliation of accounts by the Accounting Section and the School Division Offices
which started on March 16, 2018 until May 25, 2018. Said accounts will soon be closed after
the reconciliation of reciprocal accounts Due to Regional Office versus Due from Operating
Units has been settled.

In DO Legazpi City, Management agreed to comply and as of March 13, 2018, this has been
partially complied with. Only three out of six bank accounts remained not updated pending
receipt of the bank statements from the concerned depository bank.
RO The Management commented that they already directed the Bookkeeper Designate to book-up
VIII the collections from Trust Fund Account starting this year. In addition, they assured to work
back in the tracing of unrecorded collections covering the period September 11, 2013 to
November 22, 2016 totaling P924,106.00 and would make necessary adjusting entries.

The Management will be creating a policy/scheme on the daily collection and deposit of cash
to ensure adherence to related laws and rules.
RO IX In the exit conference, Management commented that the late submission was due to the lack of
manpower in the Accounting Division. Nonetheless, they promised to remedy the situation by
assigning a separate employee to do the BRS to comply with the requirement.
RO XI The agency, thru Office Order No. 02, s. 2017, has designated a special collecting officer for
NEAP.

The Cashier of DO COMVAL committed to comply on the daily and intact deposit of
collections.

Management of DO Tagum City is amenable to the audit observation.

RO Management commented that reconciliation was already done on the cash balances for the year
XIII and directed the bookkeepers to strictly verify and review the propriety of the transactions
reliability of documents and costing or mathematical computation to avoid errors and fraud and
to reconcile first the bank statement with the general ledger before preparing the BRS to check
the accuracy in recording in the SL.

Unliquidated Cash Advances

11. Unliquidated cash advances at year-end had accumulated to P1,448,096,479.51 in

DepEd CO and 11 ROs due to laxity in the granting and liquidation of cash
advances and the monitoring thereof, contrary to existing COA rules and
regulations and DepEd guidelines. Likewise, validity and reliability of year-end
account balances and full settlement thereof cannot be assured due to: a) long
outstanding/dormant accounts amounting to P144,043,472.85; b) absence of
complete/updated subsidiary ledgers/details to substantiate the total cash
198
advances of P191,576,136.12; c) errors in recording/posting of transactions that
understated the reported advances balance by P102,317,679.28; and d) other
deficiencies noted that further exposed government funds to loss and non-
recovery.

COA Circular No. 97-002 dated February 10, 1997 provides, among others, the
following rules and regulations on the granting, utilization and liquidation of
cash advances:

a. No additional cash advance shall be allowed to any official or employee

unless the previous cash advance given to him is first settled or a proper
accounting thereof is made.

b. All cash advances shall be fully liquidated at the end of each year. Except for
petty cash fund, the accountable officer shall refund any unexpended balance
to the cashier/collecting officer who will issue the necessary official receipt.

c. When a cash advance is no longer needed or has not been used for a period
of two months, it must be returned to or refunded immediately to the
collecting officer.

d. Failure of the Accountable Officer to liquidate his cash advance within the
prescribed period shall constitute a valid cause for the withholding of his
salary and the institution of other sanctions as provided for under paragraphs
9.2 and 9.3 hereof.

Section 12 of DepEd Order No. 13 s. 2016 dated March 11, 2016 provides that
the elementary and secondary schools without financial staff shall:

a. draw cash advance from their supervising/directing School DO (SDO) for

their MOOE requirements;

b. submit to the SDO on or before the 5th day of the following month the original
copy of the Cash Disbursement Register (CDR), the paid Disbursement
Vouchers and all supporting documents which shall serve as liquidation or
replenishment of the cash advance granted. Subsequent cash advance shall
be granted only upon receipt of the DCR equivalent to at least 75 percent of
the previous cash advance. It is reiterated, however, that any remaining cash
advance at the end of the year must be liquidated in full and unexpended
balances refunded.

Section 25 (b), Chapter 6, Volume I of the GAM provides that officials and
employees authorized to travel shall be granted cash advance to cover traveling
expenses. The amount to be granted shall be accounted as “Advances to Officers
and Employees”.

199
Section 1, Chapter 3, Volume III of the GAM requires the use of the account
Advances for Operating Expenses to recognize in the agency books the amount
of advances granted to accountable officers for payment of operating expenses
of operating/field units and foreign posts not maintaining complete set of books
of accounts.

DepEd Order No. 13, s. 2016 dated March 11, 2016 prescribes the Implementing
Guidelines on the Direct Release and Use of Maintenance and Other Operating
Expenses (MOOE) Allocations of Schools, including other Funds Managed by
Schools, which aims to: provide guidance to all public schools on the derivation,
release and the utilization of school MOOE; ensure timely and optimal use of
school resources; and institute mechanisms for transparency and accountability.

Paragraph 6 of Department Order No. 46 series of 2004 directs, among others,

that heads of elementary schools and secondary schools without financial staff
have to open current accounts in the name of the schools and report to the SDO
for monitoring purposes, if funds are not spent immediately. In no instance shall
school funds be deposited in personal bank accounts.

As of December 31, 2017, the reported total unliquidated cash advances in the
CO and 11 ROs had accumulated to a huge aggregate amount of
P1,448,096,479.51, broken down as follows:

CO/Region Office/DO/IUs Amount

CO Office of the Secretary (OSEC) 170,258,883.47
ROP, Quezon City, Manila, Caloocan, Valenzuela,
NCR Pasig, San Juan, Mandaluyong, Taguig/Pateros, 404,001,963.44
Muntinlupa, Parañaque, Las Piñas
Apayao, Baguio, Benguet, CCNHS, Kalinga NHS 5,278,840.31
CAR
RO I ROP, Alaminos, Dagupan, Ilocos Norte, Ilocos Sur, 33,954,688.39
Laoag City, Pangasinan I, La Union
RO II ROP, Cagayan, Nueva Vizcaya, Cauayan City,
Quirino 60,024,005.98
RO III ROP, Pampanga, Zambales, Olongapo, Nueva Ecija, 135,885,374.15
Malolos
RO IV-B Palawan, Puerto Princesa City, Marinduque, Oriental 102,733,296.62
Mindoro, Romblon
RO V Camarines Norte, Tabaco City 86,767,588.62
RO VIII Biliran, Southern Leyte, Maasin City, Calbayog City, 170,613,016.37
Ipil NHS, Allen NHS, Catbalogan, Northern Samar
RO IX ROP,Dipolog, Isabela, Zamboanga, ZNHS-West, 124,789,534.90
ZNHS-Main
RO XI ROP, Davao del Sur, Digos City, Compostella 65,847,596.79
Valley, Davao Oriental
RO XIII ROP, Agusan del Sur, Bayugan City, Surigao del 87,941,690.47
Norte, Surigao City, Dinagat Island, Tandag City
Total 1,448,096,479.51

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 The foregoing unliquidated cash advances were granted for various purposes and
categorized under the following specific advances accounts.

Amount
Due from
Advances to
CO/ Advances to Advances for Officers and Cash Advances
Special Advances for Total
Region Officers and Operating Employees/ without
Disbursing Payroll
Employees Expenses Other specific details
Officers
Receivable
CO 4,779,098.81 115,461,230.60 19,078,333.80 0.00 30,940,220.26 170,258,883.47
NCR 156,662,383.08 23,818,287.07 15,505,388.73 208,015,904.56 - 404,001,963.44
CAR 64,340.06 702,150.31 0.00 4,512,349.94 - 5,278,840.31
RO I 1,725,528.37 12,716,369.15 319,861.46 19,192,929.41 - 33,954,688.39
RO II 4,234,459.16 479,909.68 29,313,516.54 25,996,120.60 - 60,024,005.98
RO III 3,031,070.88 69,897,811.82 1,153,125.94 61,803,365.51 - 135,885,374.15
RO IV-B 1,335,169.20 3,272,360.00 0.00 98,125,767.42 - 102,733,296.62
RO V 1,728,080.83 34,362,113.05 29,000.00 50,648,394.74 - 86,767,588.62
RO VIII 35,742,333.74 16,198,102.66 0.00 54,644,573.11 185,006.35 63,843,000.51 170,613,016.37
RO IX 124,789,534.90 124,789,534.90
RO XI 701,234.31 22,535,364.70 5,294,193.69 37,316,804.09 - 65,847,596.79
RO XIII 11,542,906.35 76,398,784.12 87,941,690.47
Total 210,003,698.44 299,443,699.04 70,693,420.16 571,799,115.73 31,125,226.61 265,031,319.53 1,448,096,479.51

The accumulation of unliquidated cash advances was mostly attributed to laxity

in the granting, liquidation, and monitoring of cash advances, contrary to
existing COA rules and regulations and DepEd guidelines. Details of the
deficiencies noted are shown in the table below:

CO/
Office/DO/IUs Observations/Deficiencies
Region
CO OSEC The accumulation of the unliquidated cash advances
was caused by the granting of additional cash
advances even though the previous cash advance has
not been liquidated, and by the absence of
monitoring for the settlement/ liquidation.
NCR ROP, All DOs Additional cash advances were granted to the AOs
despite the existence of unliquidated balances.
Quezon City, Caloocan, Pasig, Absence of complete/updated subsidiary
San Juan, Taguig/Pateros, ledgers/details to substantiate the total cash
Muntinlupa, Parañaque advances reported in the books.
Pasig, San Juan Delayed recording and/or non-processing of
liquidation reports at the Accounting Unit as well as
the inability of Management to monitor and enforce
settlement.
CAR Apayao, Baguio, Benguet, Non-compliance to the provision under COA
CCNHS, Kalinga NHS Circular No. 97-002 stating that cash advances
should be liquidated at the end of each year.
RO I RO, Alaminos, Dagupan, Ilocos Granting, utilization and liquidation of cash
Norte, Ilocos Sur, Laoag City, advances were not in accordance with COA rules
Pangasinan I, La Union and regulations and DepEd guidelines.
RO II ROP Management failed to strictly enforce the controls
over the grant, utilization, and liquidation of cash
advances. Documentary requirements to support
liquidation report were not in accordance with
DepEd guidelines.

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 CO/
Office/DO/IUs Observations/Deficiencies
Region
Cagayan, Nueva Viscaya Cash Advances were granted to School
Heads/Disbursing Officers despite existing
unliquidated cash advances.
Cauayan City, Quirino Late submission and non-submission of liquidation
report.
Isabela, Ilagan Cash Advances were transferred to other employees
that caused the delay in the submission of
liquidation report.
RO III ROP Late submission of liquidation report (LR) and
delayed processing/recording of LR in the books by
the Accounting Division.
Pampanga, Malolos Cash advances were granted despite the existence of
the previous cash advances not yet liquidated.
Zambales, Olongapo, Nueva Failure to monitor and enforce strictly the
Ecija liquidation of outstanding cash advances.
RO IV-B Palawan, Puerto Princesa City, Failure to enforce timely liquidation of cash
Marinduque, Oriental Mindoro, advances during the year, and full liquidation by
Romblon year-end.
Palawan, Puerto Princesa Cash advances were not liquidated despite
fulfillment of the purpose for which it was granted
and despite outstanding previous cash advances.
RO V Camarines Norte, Cash advances remained unliquited for over a year.
Tabaco City Cash advances were not liquidated as soon as the
purpose/s for which these were given have been
served. New/additional cash advances were granted
to Accountable Officers/ Employees although their
previous cash advances have not yet been fully
liquidated. Likewise, all cash advances were not
fully liquidated at the end of the year.
RO VIII Biliran Prior years’ cash advances remained unliquidated
despite demands made to liquidate the accounts.
Ormoc, Biliran, Southern Leyte, Grant of multiple cash advances to the Division’s
Maasin, Ipil NHS, Allen NHS Cashier and Disbursing Officer (CDO) despite non-
liquidation of previously granted advances.
Catbalogan, Northern Samar Cash advances of School Heads/Teachers-In-
Charge remained unliquidated as of year-end
contrary to relevant rules; and payments were made
notwithstanding the absence of some supporting
documents, thereby casting doubt on the utilization
of the fund.
RO IX ROP Cash advances were granted despite non-settlement
of previous CAs. This condition transpired because
funding for the various programs or undertakings
were handled by the different Education Programs
Coordinators that lacks the proper knowledge on the
requirements of the transactions, hence the delay in
liquidation.
Dipolog,Isabela Failure to liquidate cash advances after the due date
for its liquidation or as soon as the purpose of the
cash advances have been served. Additional cash
advances were granted despite failure on the part of
the official and/or employee concerned to liquidate
previous cash advances.

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 CO/
Office/DO/IUs Observations/Deficiencies
Region
ROP, Dipolog, Isabela, Laws, rules and regulations in the granting,
Zamboanga, ZNHS-West, utilization and liquidation of cash advances as well
ZNHS-Main as the recording, maintenance of proper records and
submissions of required reports, required under
pertinent provisions of PD No. 1445, COA Circular
Nos. 97-002, 2009-002 and 2012-004 were not
strictly observed
RO XI ROP Delayed processing/encoding by the Accounting
Unit of submitted liquidation reports from the
SDOs.
ROP, IGACOS Disbursements for salaries, allowances, cell card
allowance, and RATA are made thru cash when
these can be done thru Automatic Debit Advice
(ADA).
ROP, Davao City, Compostela Granting of additional cash advances despite
Valley previous cash advance was not liquidated or
properly accounted for.
Compostela Valley, Davao del Delayed downloading by DepEd Central Office of
Norte, Davao del Sur Sub-AROs compelled the Division Offices to grant
of additional
cash advances
RO XIII ROP Cash advances for official travel were liquidated
beyond the prescribed period to settle and after the
respective purposes had been served.
Agusan del Sur, Bayugan Despite non-settlement of previous cash advances,
additional ones were granted. Unliquidated cash
advances exceeded the maximum accountability of
the Accountable Officer.
Lack of strict implementation of the prescribed
Agusan del Norte guidelines in the granting, utilization and liquidation
of cash advances.
Agusan City Cash advances were either not supported with legal
basis to determine its specific purpose, remained
unliquidated to date, or granted with additional
advances despite non-liquidation of the previous
ones.
Surigao del Norte, Tandag City Of the total amount of School MOOE funds
downloaded through cash advance of
₱48,300,647.13, only ₱36,757,740.78 were reported
as liquidated, leaving an unliquidated balance of
₱11,542,906.35 as of year-end.

Over the years, the foregoing deficiencies have been prevalent and recurring in
DepEd offices. If not properly addressed, millions of government funds will be
at stake for being exposed to risk of loss through malversation and/or improper
disposition.

203
Further audit of the accounts Advances revealed the following deficiencies that
rendered unreliable the reported balances, and full settlements thereof cannot
be assured:

a.) Existence of long outstanding/dormant accounts in the following Offices

amounting to P144,043,472.85, broken down as follows:

CO/Region Office/DO/IUs Amount Period of Overdue

CO OSEC 59,996,407.91 Overdue for over one to
ROP, La Union 60,000.00 Over
three one
yearsyear
and above
Alaminos 25,461.37 Over one year
RO I Ilocos Norte 2,215,787.04 Over one year
Ilocos Sur 1,290,722.66 Over one year
La Union 1,166,953.60 Over one year
RO II ROP 1,539,137.62 Over one year
RO III Nueva Ecija 27,646,808.75 Over one year
Palawan 2,510,340.50 Over one year to 5 years
RO IV-B Puerto Princesa 4,624,641.00 Over one year
Marinduque 176,635.00 Over one year
RO V Camarines Norte 753,534.21 Over ten years
ROP 7,458,860.16 Over one year to 2 years
RO IX
Zamboanga City 34,348,461.27 Over one year to 13 years
RO XI Compostela Valles 229,721.76 Over one year to 8 years
Total 144,043,472.85

In Region XIII-DO Surigao del Norte, it was also reported that there were
unliquidated cash advances of P14,209,257.73 that has been due for 31 days to
over three years. Moreover, in NCR, the unliquidated cash advances include
accounts due from retired/resigned/deceased/former personnel of City DOs of
Mandaluyong, Quezon, and Parañaque amounting to P2,735,689.89,
P1,090,074.97, and P5,775,649.89, respectively.
b.) Absence of complete/updated subsidiary ledgers/details to substantiate the
total cash advances of P191,576,136.12 in NCR.
DO Amount Remarks
Quezon 4,101,568.86 Described as "for reconciliation"; have no details,
City supporting schedules and subsidiary ledgers
Caloocan 14,998,752.60 Prior years’ balances amounting P14,998,752.60 which
City lack supporting details.
Pasig City 96,007,442.19 Accounting Unit does not maintain complete and updated
subsidiary ledgers.
San Juan Not stated Absence of SL in the previous years and proper turnover
City of documents, reports and record from outgoing to
incoming Accountants
Taguig City 65,078,868.34 Accounting Unit does not maintain complete and updated
and Pateros subsidiary ledgers.
Muntinlupa 4,152,751.90 Described as "for reconciliation"; have no details,
City supporting schedules and subsidiary ledgers
Parañaque 7,236,752.23 Described as "for reconciliation"; have no details,
City supporting schedules and subsidiary ledgers
Total 191,576,136.12

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c.) Errors in recording/posting of transactions that understated the reported
accounts advances by P102,317,679.28.
CO/ Office/DO/ Overstatement/
Deficiency
Region IUs (Understatement)
CO OSEC Negative balances of Bureaus transferred (5,329,988.61)
to CO
NCR Quezon City Negative balances (5,434,446.98)
San Juan Negative balances (675,994.81)
Muntinlupa Negative balances (2,955,749.42)
Quezon City Exclusion from the Consolidated Trial (92,952,069.03)
Balance of transactions prior to CY 2016
Las Piñas Unrecorded Liquidation Report 6,434,304.00
RO Surigao del Cash Advance recorded as outright expense (1,403,734.43)
XIII Sur
Net Understatement (102,317,679.28)

Other deficiencies that further exposed government funds to loss and non-
recovery were noted as follows:
Region DO/IUs Deficiency
NCR Caloocan Cash advances amounting to P296,305.16 were
granted to a Finance Officer and one of its personnel
who are not authorized as they are not properly
bonded and is a signatory in the DVs.
RO III Angeles, Aurora, Several DOs granted cash advances to the Division
Balanga, Bataan, personnel and School Heads/concerned personnel of
Bulacan, City of San Non-Implementing Units (IUs) and Implementing
Fernando, Gapan, Units (IUs) which were deposited to the personal
Mabalacat, Meycauyan, bank accounts of the accountable officers contrary to
Olongapo, Pampanga, Section 63 of PD No. 1445 and paragraph 6 of
San Jose City, Science Department Order No. 46, series of 2004, thereby
City of Muñoz, Tarlac endangering loss of government funds through
Province, Tarlac City, misappropriation.
Zambales
Bataan, San Jose Del Accountable Officers are not covered by fidelity
Monte bond in violation of Section 101 of PD No. 1445.
Olongapo, Zambales Fidelity bond of Accountable Officers had expired.
RO VIII Catbalogan City, Downloaded to the personal accounts of concerned
RO XI Samar, Northern Samar Division Personnel and Head Teachers/Teachers-In-
Charge of their respective schools since there was no
depository account maintained under the name of the
school.
Davao City, Panabo The downloading of the school’s funds directly to
City the personal accounts of the SDOs in defraying cash
advances.
Davao del Norte The AO continued to perform their duties and
functions as SDOs even if their fidelity bonds had
expired, in violation to Section 101 of PD No. 1445.

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 Region DO/IUs Deficiency
Davao City Cash advances granted to SDO coursed thru their
ATM Payroll Accounts could wrongfully considered
as their salaries, personal money and /or loan
proceeds, etc. Thus, these cash advances are exposed
to unintentional misuse by the SDO especially when
crediting of said cash advances are not
communicated to the SDOs prior to its credit to their
payroll accounts.
RO XIII Bislig Fidelity Bond of the Cashier of Bislig City National
High School was inadequate to cover the maximum
accountability which the accountable officer
handled, contrary to Section 5.1 of Treasury Circular
No. 02-2009 dated August 6, 2009.

a. enforce strict compliance with the rules and regulations on the

granting, utilization and liquidation of cash advances within the
prescribed period, demand settlement specifically those pertaining to
long outstanding advances, and impose appropriate sanctions on AOs
who continually disregard the set timelines on liquidation;

b. direct the DO Accountant/s to exert efforts in determining the causes of

the negative accountabilities of AOs as well as those amounts described
as “for reconciliation” and effect the necessary adjustments to correct
the balances of the advances accounts;

c. request write-off of long outstanding cash advances, settlement of

which is uncertain and nil, after having exhausted all appropriate
remedies for their liquidation, in accordance with COA Circular No.
2016-005 dated December 19, 2016; and

d. instruct the Accountants/Bookkeepers to pay salaries, RATA,

allowances and other personnel’s claims thru Automatic Debit Advice
to simplify the transactions and efficiently reach the recipients on time.

Management of CO, NCR, ROs I, II, III, IV-B, VIII, XI and XIII commented
that they will comply with the recommendations. Other comments are the following:
CO/
Office/DO Management’s Comments
Region
CO OSEC The Accounting Division commented that due to the simultaneous
conduct of activities by all bureaus/offices, it is impossible to impose
the “no additional cash advance (CA) if the other CA remains
unliquidated”. Nevertheless, they have imposed some rules to regulate
the issuance of cash advance such as:

a) Cash advance should be liquidated within two months from the

date it was issued, otherwise, no additional CA will be granted.

206
 CO/
Office/DO Management’s Comments
Region
b) Quarterly issuances of Demand Letters to Special Disbursing
Officers with unliquidated cash advance.

c) Recommendation to withhold the salary

Other plans for consideration are: limit the number of SDOs per office;
consider the track record in handling CAs in designating SDOs;
expenses to be paid through reimbursement. Initial steps are also being
undertaken to request the write-off of some dormant unliquidated cash
advance.

Further, during the exit conference, Management replied that the

granting of cash advances shall now be minimized as activity expenses
to be conducted in the regions are being downloaded/sub-allotted in
the respective ROs/DOs. Additional SDOs have also been designated,
but their designation shall be revisited to regulate and control the
number of SDOs.
NCR Quezon City To avoid the granting of additional cash advance despite non-
liquidation of previous ones, a certification from the Accountant
stating that the previous cash advance has been settled should be
submitted.

It committed to scrutinize and reconcile the accounts to reflect the

correct balance per AO and to apply for write-off the long outstanding
cash advances due to death.
Pasig City, The DO Accountant explained that due to lack of
Mandaluyong personnel/manpower, the Accounting Unit could not record the
City, submitted liquidations immediately. The DO Accountant committed to
Taguig/Pateros, submit written justification and adjustments on April 15, 2018.
Las Piñas
San Juan City The former Accountant claimed that the negative balance existed
because the electronic accounting system cannot capture cash
advances drawn and recorded from prior years; so, recognized
liquidations are without the corresponding cash advances to settle.

That advances corresponding to the liquidation or settlement submitted

by the AOs may have still been recorded at the DO Pasig, when these
were drawn before the DO San Juan became financially independent.
Caloocan During the Financial Management seminar, it was emphasized that the
DO will be employing the replenishment method, that is, the amount
being liquidated will be the same amount to be downloaded
RO I ROP, The Management will monitor the submission of unliquidated cash
Alaminos City, advance and will stop the practice of granting additional cash advances
Dagupan City, unless the previous ones are settled and will issue demand letters.
La Union Management assured the Audit Team that they will faithfully adhere
to the provision of paragraph 5.8 of COA Circular No. 97-002 and
Section 89 of PD No. 1445.
Ilocos Sur During the Exit Conference, the accountant mentioned that they have
already notified the accountable officers specifically school heads,
that they will not be downloading any cash advance without settlement
of their previous unliquidated/unspent cash advances.

207
 CO/
Office/DO Management’s Comments
Region
Laoag City Management informed that the cash advances as at December 31,
2017 has been liquidated by the concerned employees. However, the
documents are still at the Accounting Office due to minor queries
regarding completeness of documents, etc.
RO II ROP, Cagayan, The Management justified that demand letters has been sent to the
concerned accountable officers with unliquidated cash advances but
no response was received from most employees with long outstanding
cash advances. They justified that they have been enforcing controls
in the granting of Cash Advances to employees/officials with
unliquidated cash advances. They added that two employees are now
being deducted from their salary to pay their cash advances.
RO III Zambales The Management commented that additional finance personnel were
being deployed to aid in the close monitoring and enforcement of
liquidation of cash advances. Moreover, additional cash advances were
not granted to accountable officers with outstanding cash advances.
Olongapo City, The Management noted that several accountable officers have renewed
Zambales their fidelity bonds; and assured observance of prompt renewal of
fidelity bonds.
RO IV- Romblon, Management of the DOs of Romblon, Oriental Mindoro, Puerto
B Oriental Princesa City, and Palawan are amenable to the Teams’
Mindoro, recommendations. The Accounting Unit of the DO of Romblon,
Puerto Princesa however, commented that they cannot control the release of another
City, Palawan cash advance to those with unliquidated/unsettled previous cash
advances especially when the fund due for release was received at a
later date.
RO VIII Southern Leyte The Management commented that they encountered difficulty in
religiously complying some rules and regulations on the granting,
utilization, liquidation of cash advances, especially those cash
advances granted to the cashier. DO undertakings with varied degree
of urgency sometimes have overlapping period of activity
implementation thus resulting to release of additional cash advances
despite the presence of unsettled or unliquidated previous cash
advances. However, the management will comply with the
recommendations they instructed the Cashier or Disbursing Officer to
liquidate every cash advance granted to her within the prescribed
period and they will also bond another DO personnel assigned at the
cash section to diminish if not entirely avoid the presence of multiple
unliquidated cash advances.
Northern The Management of DO Northern Samar explained that the substantial
Samar amount of unliquidated cash advances for operating expenses pertains
mostly on school MOOE in which some of them are already liquidated
before the end of the year. However, there were liquidations submitted
at year-end but were recorded only in January of the following year
due to the time constraints in prioritization in the preparation and
submission of year end reports. Moreover, during the exit conference,
Management answered that they have been discussing with the DBP
management regarding the issuance of a separate ATM account for the
downloaded MOOE but still under the name of the school head,
however, after drawing the amount downloaded to them, the ATM
Card will be deposited in the DO.

208
 CO/
Office/DO Management’s Comments
Region
Samar The Management of DO Samar explained that their practice of
downloading the MOOE funds to the school head was pursuant to Part
IV item C, No. 11.2 of DepEd Order No. 13, s. 2016, hence trusted that
practice was valid.
RO XIII Surigao del The recommendations of the Auditor are properly noted of DO Surigao
Norte del Norte.
Tandag City
The Management of DO Tandag City is very strict with the policy of
no liquidation means no downloading of MOOE. Hence, no cash
advances were granted to some School Heads during the last quarter
of the year which resulted in various reimbursement claims at year end.
However, they acknowledged the observation and assured adherence
to the audit recommendations.

Accumulation of unliquidated fund transfers to DBM-PS

12. Lack of coordination between the Asset Management and Accounting Divisions;
laxity in the control and monitoring of DBM-PS fund transfers for the
procurement and deliveries of various office supplies, materials and equipment;
absence of periodic reconciliation of records; and insufficient DepEd guidelines
resulted in: a) unreconciled variance of P4,471,988,027 between the CO and NCR
balances, and DBM-PS account balance; b) dormant and long outstanding
accounts of P898,581,407 in CO; and c) other recording deficiencies in NCR.

12.1. EO No. 359 dated June 2, 1989 provides that, “the Procurement Service (PS) of
the Department of Budget and Management (DBM) xxx shall be maintained as
the regular organizational unit to implement and operate a central procurement
system.” Section 4 (b) thereof further provides that, “agencies shall remit to the
Procurement Service the funds needed to service their requirements for supplies,
materials and equipment as reflected in the Work and Financial Plan.”

12.2. COA Circular No. 2016-005 dated December 19, 2016 prescribed rules and
regulations on the monitoring and liquidation of fund transfers. To wit:

Section 6.1 – All government entities shall conduct regular monitoring and
analysis of receivable accounts to ensure that these are collected when these
become due and demandable and that cash advances and fund transfers are
liquidated within the prescribed period depending upon their nature and purpose.

Section 7.1 – Conduct regular and periodic verification, analysis, and validation
of the existence of the receivables, unliquidated cash advances, and fund
transfers, and determine the concerned debtors, accountable officers (Regular
and Special Disbursing Officers, Collecting Officers, Cashiers) and the source
and implementing government entities concerned.

209
 Section 7.2 – Reconcile the unliquidated fund transfers between the source and
implementing government entities, prepare the adjusting entries for the
reconciling items noted, and require liquidation of the balances.
Section 7.4 – Prepare aging of dormant receivables, unliquidated cash advances,
and fund transfers on a quarterly basis to support the request for write-off, and
indicate in the remarks column the existence of the applicable conditions, such
as, “absence of records or documents to validate/support the claim and/or
unreconciled reciprocal accounts”.
12.3. The deficiencies noted in the Due from National Government Agencies account
of CO and NCR are as follows:
Deficiencies CO NCR Total
Long outstanding and dormant receivables 10 898,581,407 898,581,407
-
years or more
Errors/omissions in recording - 1,778,289 1,778,289
Confirmation difference with DBM PS 4,470,198,958 1,789,069 4,471,988,027
(Unreconciled Amount)
Unrecorded DBM liquidation 3,250,095,275 - 3,250,095,275
Unrecorded DBM reversion to BTr 643,290,419 - 643,290,419
Total 9,262,166,059 3,567,358 9,265,733,417

a.) DepEd-CO
12.4. A three-year period analysis of fund transfers to DBM-PS and result of the
confirmation made revealed significant variance in the respective account
balances, to wit:
Particulars 2015 2016 2017
Balance per DepEd 4,897,365,764 7,899,015,533 7,635,605,905
Balance per DBM 1,337,938,654 1,607,836,811 3,165,406,947
Difference 3,559,427,110 6,291,178,722 4,470,198,958
% 74 80 59

12.5. The above information revealed that throughout the three-year period, DepEd
CO and DBM-PS failed to reconcile the significant billion peso difference.
Crucial is the fact that most of the unreconciled difference pertains to long-
outstanding balances from prior years’ transactions, which shows laxity on the
part of DepEd to regularly monitor advances made to DBM-PS.
12.6. The Aging Schedule of CO as of December 31, 2017 showed that out of the
P7,635,605,905 year-end balance, 93 percent or P7,092,553,440 pertains to prior
years’ fund transfers as presented hereunder:
Current Past Due
Grand Total
60 days-1 year Over 1 year-5 years Over 5 years-10 years Over 10 years
5,700,643,829 493,328,204 898,581,407 7,635,605,90
543,052,465
7,092,553,440 5
7% 93% 100%

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12.7. Analysis of the Subsidiary Ledger also revealed that only 49 percent or
P7,450,838,895 of the fund transfers made to DBM-PS were deemed
liquidated/settled. The breakdown of unliquidated balances as to purpose of
procurement leading to the accumulation of the P7,635,605,905 balance of the
account Due from National Government Agencies - PS-DBM are shown in the
following tables:

Procurement Liquidation/
Year Balance
/Fund Transfers Deliveries
2009 and below 2,301,306,664 1,195,165,354 1,106,141,310
2010-2015 8,950,899,257 5,159,674,803 3,791,224,454
2016 3,004,586,749 18,866,695 2,985,720,054
2017 829,652,130 1,077,132,043 (247,479,913)
Total 15,086,444,800 7,450,838,895 7,635,605,905
% 100 49 51

12.8. The balance per category is presented below.

2017
Beginnng
Purpose Fund Liquidation/ Adjustment
Balance 2016 Total
Transfers Deliveries s
Common-Used
Office Supplies/ 113,706,184 42,801,949 21,301,424 (55,745,769) 79,460,940
Equipment
IT Equipment 6,640,862,067 513,884,098 - 727,118,767 6,427,627,398
Armchairs 305,300,796 - - - 305,300,796
Textbooks 556,196,923 - - - 556,196,923
Vehicles 7,907,364 - - - 7,907,364
Others 259,112,484 - - - 259,112,484
Total 7,883,085,818 556,686,047 21,301,424 671,372,998 7,635,605,905

12.9. Other related observations are also discussed, as follows:

a. For common-use office supplies, most of the accounts are those with dormant
balances from year 2004 and below, which had remained unaccounted, to
wit:
Procurement Liquidation/
Year Balance
/Fund Transfers Deliveries
2004 and below 377,373,051 248,350,815 129,022,236
2005-2010 43,916,830 80,924,480 (37,007,650)
2011-2015 170,178,043 142,674,138 27,503,905
2016 13,054,389 18,866,695 (5,812,306)
2017 50,337,374 84,582,619 (34,245,245)
Total 654,859,687 575,398,747 79,460,940

b. DepEd-CO also commissioned PS-DBM to undertake the purchases of

computer hardwares and softwares for distribution to various public
elementary and secondary schools nationwide for the DepEd
Computerization Program. As of audit date, accounting records showed that

211
 there were still P6,426,903,920 unliquidated advances, summarized as
follows:

Agency Liquidation/
DCP
Procurement Batch 2016 Balance Prepayments Deliveries in 2017 Balance
Year
Request No. 2017
Balances prior to 2009 78,198,505 - - 78,198,505
2009 09-0279s 6 825,872 - - 825,872
10-0070s-75s,
2010-
11-0111s to 11- 7-15 794,391,235 - 140,969,192 653,422,043
2011
0113s
12-0147s to 12-
0149s, 13-
2012- 0144s, 13-
16-27 2,861,805,798 - 586,149,575 2,275,656,223
2014 0210s, 14-
0096s, 14-
146s,14-246s
29, 30 and 31
Software,
15-0091s, 16- Unenergized
0051s, 16- Package,
2015 2,266,657,909 - - 2,266,657,909
0052s 16- Batches
0350s 17-0009s 4,7,12,13,16
and 20, SHS
Software
16-0082s & 16- 35, 36 and 37
2016 638,259,270 - - 638,259,270
0184s Software
Microsoft
2017 17-02095 - 513,884,098 - 513,884,098
License
Total 6,640,862,067 513,884,098 727,118,767 6,426,903,920

Comparison made by the Audit Team of DepEd CO and DBM-PS records

revealed that there were IT equipment/software deliveries/settlements
amounting to P3,250,095,275, which are not yet recognized in the CO
accounting records for the years, as shown below:

DCP Deliveries Per Deliveries Per

APR No. Batch Difference
Year DepEd DBM PS
2009 various Various 310,653,620 268,293,527 42,360,093
210- 10-0070S-75S, 11- 1,645,522,487 2,107,043,747 (325,887,768)
7-15
2011 0111s to 11-0113s
12-0147s to 12- 265,600,825 2,016,103,242 (1,750,502,417)
2012-
0149s, 13-0144s, 13- 16-27
2014
0210s, 14-246s
2015 15-0091s 29, 30 and 31 401,755,131 509,192,617 (42,369,688)
16-0082s, 16-0184s, 35, 36 and 37 - 679,886,024 679,886,024)
2016
16-0052s, 16-0350s Software
17-02095 Microsoft - 493,809,471 (493,809,471)
2017 License
Total 2,623,532,063 6,074,328,628 (3,250,095,275)

212
 c. The recorded armchairs and textbooks pertain to 2004 and prior years’ fund
transfers wherein at that time, procurement was delegated and entrusted to
DBM-PS with total unliquidated advances of P861,497,719, which has been
non-moving since 2007.

d. Out of the P9,675,000 advances made to DBM-PS in CY 2011 for the

procurement of four-wheel van type vehicle, six-wheel bus and five units of
two-wheel vehicle, only P1,767,636 or equivalent to 18 percent was
liquidated, thus leaving an undelivered units amounting to P7,907,364.
According to the Property Officer, the remaining balance was due to the
cancellation of the initial order pertaining to the purchase of a six-wheel bus,
which management disposed off as unnecessary. However, there was no
information as to what will happen to the prepayments made.

12.10. Confirmation reply dated April 19, 2018 from DBM-PS disclosed its
outstanding accounts to DepEd CO amounted to P3,165,406,948, to wit:

Unutilized Balance per DBM-PS

Common-use Non Common- Refunded to
Year
Supplies and use Supplies Balance BTr
Equipment and Equipment
2017 28,443,997 1,743,196,644 1,771,640,641 -
2016 1,776,411 561,369,297 563,145,708 -
2015 585,233 55,078,096 55,663,328 -
2014 (233,846) 74,028,942 73,795,095 -
2013 (2,022,086) 59,893,843 57,871,757 -
2012 2,374,014 104,783,121 107,157,135 107,157,135
2011-2002 (33,539,312) 568,714,692 535,175,380 535,175,380
2001 and
Various 957,904 957,904
below
Total (2,615,589) 3,167,064,635 3,165,406,948 643,290,419

12.11. The balance in the records of DBM-PS revealed that for 2017 alone, its
unsettled accounts to DepEd CO comprise 56 percent of the total fund transfer
balance indicative of the laxity on the part of DepEd to monitor DBM-PS
settlement/deliveries.

12.12. It was also learned that DBM-PS already reverted a total amount of
P643,290,419 to the Bureau of the Treasury (BTr) but the same has not been
derecognized in the CO outstanding receivable account from DBM-PS.

12.13. It is also worth mentioning that despite the unreconciled balance of

P4,470,198,958 and the long time unaccounted fund transfers, DepEd CO still
made another commitment, as CY 2017 allotment of P13,701,515,748
allocated for various major programs and projects was obligated as fund
transfer to DBM-PS through a Memorandum of Agreement14. Although such
transfers are permissible, DepEd should have first reconciled the reporting

14
Notarized date of December 28, 2017
213
 difference to be able to optimize the use of its financial resources. The
unutilized balance per DBM-PS records of P2,522,116,529 (P3,165,406,948 -
P643,290,419) also requires proper coordination so that the fund may be
immediately reverted to the BTr. If DepEd’s fund transfer merely resulted in
budget reversion, then this procurement mechanism to DBM-PS should not be
considered as an option just to reflect favorable improvement in DepEd’s
budget utilization.

12.14. Verification further disclosed that the material discrepancy of P4.4 billion
between the DBM-PS and DepEd CO books and the existence of long
outstanding balances of the account can be attributed to lack of coordination as
to the specific source document to be used or taken as basis for the recognition
of deliveries/settlement by DBM-PS. As observed, the DepEd took as reference
the DR Nos., hence, tracking of deliveries against the approved Agency
Procurement Request (APR) is expected to be difficult. While DBM-PS
correctly referred to the APR No. in recording the settlement/deliveries, lack
of uniformity resulted in reporting difference between the two agencies. This
condition was also aggravated as there are no guidelines on how to treat
cancellations, sales return or change in price per item as well as service fee
charges by DBM PS15. The reversion made to BTr, and the absence of
monitoring and reconciliation of accounts has greatly affected the accuracy of
the receivable account from DBM-PS.

12.15. The unaccounted and unreconciled balance of Receivable account Due from
National Government Agencies-DBM-PS has already been brought to
Management’s attention in the previous Annual Audit Reports. But as noted,
the audit recommendations were not implemented by the concerned offices.

12.16. The transfer of funds to DBM-PS without closely monitoring its status and
timely delivery of procured items defeats the purpose of expediting
procurement of supplies and capital assets needed for agency’s operations and
shall affect efficient program delivery of the DepEd. Leaving huge amount of
advances idle that will eventually be subjected to reversion negates the
necessity of transfer; hence, the same should have been allowed to lapse at
year-end for non-utilization.

b.) NCR

12.17. Likewise, the aforementioned deficiencies are also subsisting in NCR.:

15
Based on the DBM-PS Standard Memorandum of Agreement
2.3. The DBM PS reserves the right to adjust the ABC based on its price monitoring, as may be deemed
necessary, but subject to availability of funds and to the written consent of the (agency).
3.1 A four percent (4%) Service Fee to be computed on the basis of the contract award price shall be imposed
for services to be rendered by the PS and its BAC. The Service Fee shall be taken from the Project Fund and
shall accrue to the PS after the issuance of the Resolution recommending the award of Projects to (agency).
214
 12.18. The account Due from National Government Agencies in ROP and six DOs
has a total balance of P1,835,793.15 at year-end. Confirmation of their
procurement transactions revealed discrepancies in the beginning balances,
fund transfers, deliveries and ending balances, with the PS-DBM records
implying absence of regular reconciliation and deficient monitoring of both
records resulting in misstatements of Due from National Government Agencies
account and other affected accounts. As at year end, the unreconciled
difference amounted to P1,733,594.27, due the following reasons:

Amount Difference
Office Per PS- Reasons for the Difference
Per Books Over/(Under)
DBM
Ending Balance, December 31, 2017
ROP 1,022,249.16 712,000.32 310,248.84 Unidentified difference prior to 2016
Navotas City 45,280.80 79,651.46 (34,370.66) The P34,370.66 difference refers to
unascertained discrepancy in
beginning balance of P33,992.07 and
recorded deliveries of P15,839.18 and
the non-adjustment of cancelled
checks on fund transfer of
(P15,460.59)
Caloocan City 55,474.80 49,428.08 6,046.72 Pertaining to prior years’ balance
which cannot be identified by the
incumbent Accountant as there was no
subsidiary ledger turned-over by the
former Accountant.
Manila City 112,133.96 2,137,691.81 (2,025,557.85) Unascertained difference prior to
2016.
Quezon City 578,400.98 364,009.84 214,391.14 Unreconciled undelivered items in
prior years of P247,347.64,
unrecorded fund transfers in 2017
(P183,836.50) and unrecorded
deliveries in 2017 P150,880.00
Pasig City 606.66 226,574.98 (225,968.32) Unreconciled discrepancy of
P225,968.32 between the two records
was mainly due to failure on the part
of the Accounting Unit to record the
transactions with Procurement Service
in Due from NGAs account. Instead,
Office Supplies Inventory is debited
upon purchase of PS items regardless
whether the same were advance
payments. The book balance of the
DO pertains to beginning balance.
San Juan City 21,646.79 30.93 21,615.86 Unrecorded fund transfer in 2017 of
(P213.00) and unrecorded deliveries
in 2017 of P21,828.86
Total Ending
1,835,793.15 3,569,387.42 (1,733,594.27)
Balance

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 12.19. Furthermore, errors/omissions in recording fund transfers and deliveries
resulted in the net overstatement amounting to P1,778,289.30 of the Due from
National Government Agencies account balance in ROP, DOs Quezon City
and Navotas, as shown below.
Over (Under)
Office Particulars Amount
statement
ROP Unrecorded deliveries in the agency’s books but were 238,654.54 -
included in the Statement of Account-Customers of -
the PS-DBM 236,690.34
Double recording of deliveries by the agency (1,964.70)
Over recording of delivery by the agency 0.50
DO Quezon Misclassified fund transfers (1,710,545.63) -
City Unrecorded fund transfers (316,206.50) -
Unrecorded deliveries 574,610.60 -
Exclusion of prior years’ balances in the consolidated (578,298.70) (2,030,440.23)
trial balance
DO Navotas Non-adjustment of cancelled checks on fund transfer 15,460.59 15,460.59
City of P15,460.59
Total (net) 1,778,289.30

12.20. We recommended that the Management require concerned offices to:

a. direct the Accountant to exert efforts to reconcile records with Property

Officer on advances made to DBM-PS, coordinate with DBM-PS for the
reversion of unitized/dormant funds, and make necessary adjustments
in the Agency book balances;

b. limit fund transfer to programs/project already due for implementation

to avoid accumulation of receivable account in the books; and

c. establish guidelines to cover the processes of fund transfer, settlement

(deliveries, cancellations, sales return, change in price per item, service
fee charges) and reporting with proper coordination/consultation with
the DBM-PS.
12.21. Below are the Management’s comments/responses relative to the
aforementioned observations/recommendations.
CO/Region Management’s Comments
CO During the exit conference, Management assured the Audit Team that DepEd has a
working group to trace and reconcile records of DBM-PS with the records of the
Accounting Division. Accounted Delivery Receipts shall be submitted to Accounting
Division for proper derecognition of settlements made by DBM-PS. In CY 2017,
P992,549,426.00 has been liquidated pertaining to PY balances for ICT equipment and
P63,281,193.00 for various common used office supplies.
NCR ROP
During the exit conference, the Audit Team was informed that the Property Officer and
the Accountant went to the PS-DBM for purposes of reconciliation of records, but
records obtained from PS-DBM were not solely for DepEd-NCR. It included balances
of fund transfers and deliveries from and to RELC and DO QC. They requested PS-
DBM to provide the statement of account pertaining exclusively to DepEd-NCR
transactions.

216
 CO/Region Management’s Comments
DO Quezon City
In a letter dated March 20, 2018, the Accounting Unit committed to review the noted
errors and make the necessary adjustments and that it reconcile its records with the
Supply Unit. Moreover, in its reply to the AOM issued, the Property Section informed
the Audit Team that it has verbally requested the PS-DBM to refund the cost of the
undelivered items but to no avail because it promised to deliver the items on a certain
date. It regularly monitors the delivery of items thru telephone and visits the PS-DBM
once in a while.

DO Manila City
The Accounting Services will coordinate with the Property Services for the record
keeping of the transactions with DBM-PS, with a team to be sent to coordinate with
DBM-PS for the reconciliation of DO accounts.
DO Caloocan City
Proper coordination between two departments should be in place to properly implement
the procedures on procurement from DBM-PS. Recommendation was duly noted for
compliance.

Unreliable Intra/Inter Receivables and Other Receivables Account Balances

13. Non-monitoring of the submission of Liquidation Reports; laxity in the control

and absence of periodic reconciliation of records; and insufficient DepEd
guidelines resulted in: a) dormant and long outstanding accounts of
P199,195,914; b) unaccounted confirmation variance of P28,297,851 in CO
receivable balances; c) unaccounted balances without subsidiary records of
P31,379,546 in CO; d) lack/insufficient records for CO and ROs III and V of
P91,141,263.00, and e) other deficiencies in recording and classification of
accounts.

13.1. Deficiencies noted on Intra/Inter Receivables and Other Receivables account

balances as of December 31, 2017 are presented hereunder:

RO
Deficiencies CO CAR RO I RO III RO V RO IX RO XI
VIII
Long outstanding
and dormant
78,687,544 6,398,291 30,166,484 605,259 5,659,371 - 75,463,126 2,215,839
receivables 10
years and more
Unaccounted
31,379,546 - - - - - - -
balances
Accounts with
Negative (3,264,594) - - - - - - -
Balance
Lack of
documents and
insufficient 7,928,030 - - 83,205,621 - 7,612 - -
/incomplete
records
Confirmation
28,297,85 - - - - - - -
difference
Disallowance 10,000,000 - - - - - - -
217
 RO
Deficiencies CO CAR RO I RO III RO V RO IX RO XI
VIII
Misclassified
- 117,676 - - - 88,622 - -
Accounts
Errors/omissions
- 200,000 - - - 14,532 - -
in recording

a.) CO

13.2. This is a reiteration of the previous year’s audit findings and recommendations,
which were not addressed or properly acted upon as evidenced by the
P2,059,780,754 unliquidated fund transfers. The long outstanding accounts
already aged over one year to more than ten years, are presented in the next table.

Outstanding Prior Years

Accounts Over 1-5 years 6-10 years Over 10 years
Balance
Due from NGAs* 393,525,753 282,509,540 80,549,654 30,466,559
Due from LGUs 24,983,942 6,227,909 18,756,033 -
Due from NGOs/POs 1,224,965,460 1,190,711,142 135,000 34,119,318
Due from OUs 19,286,787 6,006,942 3,456,391 9,823,454
Due from GOCC 373,525,649 372,093,000 - 1,432,649
Due from BUs 16,605,872 15,404,277 3,274,751 (2,073,156)
Due from ROs 6,887,291 - 4,041,727 2,845,564
Total Balance 2,059,780,754 1,872,952,810 110,213,556 76,614,388
*Excluding long outstanding accounts made to DBM-PS

 Due from National Government Agencies

13.3. The aging schedule for Due from National Government Agencies accounts with
long outstanding balance of P393,525,753 pertains to the following National
Government Agencies, to wit:

Per Subsidiary Prior Years

Ledger/ Outstanding
Over 10
Implementing Balance Over 1-5 years 6-10 years
years
Agency
DPWH 48,157,947 - 48,138,576 19,371
DSWD 266,634,081 266,634,081 - -
DENR 10,172,959 10,172,959 - -
DND 914,346 - 914,346 -
NADESCOM 5,445,000 5,445,000 - -
EDPITAF* 62,256 - 62,256 -
RO-TRANSFER 32,250,276 257,500 1,545,588 30,447,188
TESDA 29,888,888 - 29,888,888 -
Total 393,525,753 282,509,540 80,549,654 30,466,559
% 100 72 20 8
*does not include the balance of P7,928,030 pertaining to completed projects wherein documents cannot be obtained.

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13.4. Fund transfers made to the foregoing National Government Agencies were
intended for the following programs/projects:

Implementing
Details Remarks
Agency
DPWH Pertains to school 99.9 percent or P48,124,360 of the outstanding balances
building construction, are from the DOs of ARMM. Previous confirmation
which also includes revealed discrepancy of P13,329,786 in which DepEd
regional transfers to was not yet able to reconcile. Details as follows:
ARMM as this is part of
the Regular School Balance
Amount per
Name of Debtor per SL Difference
Building Program (RSBP) (CO)
Confirmation
wherein the said project DPWH
shall be spearheaded by
DepEd DO Tawi-tawi 4,908,000 - 4,908,000
DPWH. DepEd DO Lanao Del Sur
II
Per check No. 909826 177,121 - 177,121
Per check No. 485087 302,916 - 302,916
Per check No. 983306 3,858,661 - 3,858,661
RO Transfer
DepEd ARMM RO 4,083,088 - 4,083,088
Total 13,329,786 - 13,329,786
DSWD Transfer of funds to As of December 31, 2017, thirty seven percent or 221
DSWD shall be for the classrooms has been completed and P253,865,919 or 49
construction of 605 percent has been liquidated mostly owing to the
classrooms in ROs IX, X, operating expenses incurred in the program.
XI, XII, and XIII for
indigenous peoples
communities
DENR Includes Surveying and The transfer made in 2014 amounting to P15,000,000.00
Titling of School Sites of still have a remaining balance of P5,172,959.00; while
ROs I, II, III, IV-A, and V for the 2016 transfer, no liquidation was submitted.
DND Fund Transfer for the Transfer was made in 2010, but to date, 2 percent or
Rehabilitation of Schools P914,346 remained unliquidated.
in Mindanao
NADESCOM Pertains to fund transfer The agency was reported to have been abolished in May
to the 2nd District of 2012, but the amount had remained unliquidated in the
Bohol for the books. There were no information or report that reached
Requirement of Basic this office on the management action taken to address
Education Facilities this problem, and to whom or what office the required
settlement shall be demanded.
RO Includes Financial Confirmation result on fund transfer granted to DepEd
TRANSFER Assistance to cover ARMM RO to cover various financial assistance to
Maintenance and other ARMM amounting to P32,250,276 revealed that
Operating Expenses of P4,083,088 or 13 percent of which have already been
various schools in ARMM liquidated based on copy of the liquidation report
provided to the Audit Team. DepEd ARMM however
was not able to confirm the balances prior to 2004
amounting to P28,167,188 in the absence of details on
the account and/or supporting documents, which
DepEd-CO record could not also account.
TESDA Pertains to the Phase 2 of Project implementation has a duration of 10 years from
the Alternative Learning 2009-2019. However, as of this date, TESDA was not
System Cum Madrasah able to submit their progress report during the eight
Education for Muslim Out years project implementation covering the School Years
-of-School Youth (OSYS) from 2009-2017, in violation of Article IV of the
program which covers agreement between DepEd and TESDA, which states

219
Implementing
Details Remarks
Agency
TVET with ALIVE that TESDA shall submit progress report and liquidation
(Arabic Language and of expenses incurred from the project funds to DepEd,
Islamic Values at the end of every school year.
Education).
EDPITAF Consist of completed EDPITAF’s unliquidated balance of P7,928,030
projects amounting to pertains to already completed projects, but per CO
P7,928,030 and transfers books, the amount had remained unliquidated and non-
to NEAP amounting to moving for years. It was informed that the documents
P62,256 for the training pertaining to the completed projects could no longer be
fees regarding the located.
implementation of
Capacity Building for
Trainors in the Bicol and
CARAGA ROs.

 Due from LGUs

13.5. The aging schedule of Due from Local Government Units account as of
December 31, 2017 showed the balance of P65,873,434 wherein 38 percent or
P24,983,942 pertains to prior years’ balances. Further analysis revealed that
from the prior years’ balances, 75 percent or P18,756,033 have been outstanding
from six to 10 years, as shown in the table below:
Particulars Current Year Prior Year Total
Due from LGUs 40,889,492 24,983,942 65,873,434
% 62 38 100

Ageing of Outstanding
Prior Year PY Balance
Name and Address of Debtor
Balances Prior Years
Over 1-5 years 6 -10 years
Municipality of Sta. Barbara Pangasinan 2,040 - 2,040
Province of Bohol 61,905 - 61,905
City of Puerto Princesa 10,000,000 - 10,000,000
Province of Aurora 108,855 - 108,855
Provincial Government of Surigao Del Norte 433,422 - 433,422
Provincial Government of Quezon 8,149,811 - 8,149,811
Provincial Government Northern Samar 1,211,647 1,211,647 -
City of Valenzuela 3,520,339 3,520,339 -
City Government of Ligao 293,956 293,956 -
Provincial Government of Bohol 263,600 263,600 -
City Government of Iligan 24,354 24,353 -
Provincial Government of Camarines Sur 914,014 914,014 -
Total 24,983,942 6,227,909 18,756,033
% 100 25 75

13.6. Confirmation reply received from the City of Valenzuela showed full liquidation
of the amount P3,520,339. Thus, Management should follow-up the submission
of the liquidation reports to update/correct its receivable account from the City.

220
 13.7. On the other hand, fund transfer granted to the City of Puerto Princesa amounting
to P10,000,000 intended for the repair and rehabilitation of various school
buildings for school year 2008-2009 was disallowed by the Audit Team of the
Local Government of the Province of Palawan because the funds were used in
the 2008 MIMAROPAA Meet and Palarong Pambansa, which was a clear
deviation from its intended purpose. Thus, the disallowed amount should be
monitored and recorded upon finality of the decision in accordance with Section
22.6 of COA Circular no. 2009-006 dated September 15, 2009.16

 Due from Non-Government Organizations/People’s Organizations

13.8. The Due from Non-Government Organizations/People’s Organizations as of

December 31, 2017 showed a total balance of P1,224,965,460 wherein
P34,254,318 pertains to prior years long outstanding accounts aging more than
nine years, and belong to the following NGOs:

No. of
Outstanding
NGO Years Remarks
Balance
Dormant
Buklod ng Pagkakaisa ng Bacood 711,000 -
Philippine Rural Reconstruction Confirmation reply reflected a
1,200,000 21
Movement (PRRM) zero account balance
Cahriba Foundation, Los Baños 139,305 -
Philippine Federation of Teachers Confirmation reply reflected
and Employees Cooperatives 11,500,000 20 P1,252,274 depleted balance17
(PFTEC)
Quest Foundation 6,000,000 18 -
Foundation for Upgrading the
3,250,000 17 -
Std. of Education
Tagipusuon Foundation 8,171,000 16 -
National Anti-Poverty
18,013 13 -
Commission
Creative Education Exponents &
330,000 12 -
Developers
YMCA Open Education
2,800,000 11 -
Development Foundation Inc.
Filipino Chinese Chamber of
135,000 9 -
Commerce and Industry
United Nations Development 1,190,711,142 2 The fund transfer has already 57%
Programme liquidation. Based on the
agreement, the amount should
have been fully settled by
December 2016, but the
outstanding account was affected
by delay in the distribution of

16
The Chief Accountant shall, on the basis of the NFD [Notice of Finality and Decision], record in the books of accounts, the
disallowance and/or charge as a receivable.
17
The P11,500,000 due to PFTEC were initially recorded as investment and was later reclassified. The transferred funds were entrusted
to PFTEC under DepEd Memo No. 229 s. 1997 which shall be used to grant loans to DECS teachers’ and employees cooperatives duly
registered with the Cooperative Development Authority (CDA) and affiliate members who are in need of additional capital for their
various projects. The non-monitoring of the DepEd-EWBD as provided in the MOA and the non-submission of the financial reports
by PFTEC, casts doubts on the proper administration and management of the fund

221
 No. of
Outstanding
NGO Years Remarks
Balance
Dormant
deliveries, still unprocured un-
energized packages and computer
packages cost variance.
Total 1,224,965,460

13.9. How DepEd previously managed to transfer millions of funds to these NGOs
appears questionable due to incomplete supporting documents, and likewise,
the failure on the part of DepEd to closely monitor these funds demonstrated
weakness in control and laxity in handling public funds.

 Due from Government Owned and Controlled Corporation

13.10. The Due from Government Owned and Controlled Corporation as of December
31, 2017 showed a total balance of P373,525,649, which includes P1,432,649
pertaining to prior years long outstanding accounts aging 10 years. Details are
as follows:
GOCC Balance Remarks
Laoag 112,000 Advances made to Land Bank of the Philippines for the
Cabarroguis 128,000 Techvoc Daily Subsistence Allowance for the training
Balanga 200,000 conducted by DepEd and TESDA during the period from May
Sara Ilo-Ilo 16,000 2007- June 2008 have been dormant for ten years. Status of
Bajada 288,000 this fund transfer was not determined since the Accounting
Matina Davao 656,000 Division of DepEd-CO cannot give concrete information on
Valencia 16,000 the nature of the fund transfer, how and why this was
Santiago Isabela 16,000 considered as an option to pay the allowances due to
Pasig 649 participants, and most importantly how this fund transfer be
liquidated or settled.
Sub Total
Landbank
Servicing Branches 1,432,649
Development 372,093,000 Collaborative Initiative of the DepEd and the DAP for an
Academy of the Intensified Abot Alam Program (IAAP): The fund transferred
Philippines (DAP) was intended to intensify the Abot Alam implementation by
integrating the education and skills training components into
one program for learners, which is expected to increase the
interest in the participation and completion of the program.
Given that the program will require initiating a collaboration
process among different institutions/organizations, as well as
developing the framework and benchmark content of the
skills training component, which does not fall within the
immediate capacity of DepEd, the Department engaged the
services of DAP to provide technical and consultancy
services for the program.

The transfers were made in July 2017 and December 2017,

but no settlement was yet recognized to comply with the
monthly report utilization requirement of the MOA.
Total 373,525,649

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  Due from Regional Office

13.11. The account Due from Regional Office as of December 31, 2017 in DepEd CO
showed a total amount of P6,887,290 outstanding from seven to over 10 years.
The accumulation of the balance of the account Due from RO was due to
uncoordinated accounting treatment of the fund transfer, in the absence of
appropriate accounting guidelines. Such that at DepEd-CO, the transfer of
funds to the ROs was recognized as receivable account-Due from RO, subject
to liquidation; while the ROs recognized these transfers in their books as
Subsidy from Central Office, hence, submission of liquidation report is not a
requirement. The inconsistent accounting treatment had resulted in
unreconciled/unadjusted receivable account at DepEd-CO’s books.

 Due from Operating Units

13.12. The account Due from Operating Units as of December 31, 2017 in DepEd CO
showed a total amount of P22,499,146.00. Out of the total balance, P9,823,454
or 44 percent is outstanding for more than 10 years, P3,456,391 for six to 10
years and P6,006,942.00 for one to five years. Most of the dormant balances
are pertaining to the funds transferred to DOs for the administration of different
examinations18 but were also treated as financial subsidy by the implementing
Operating Units, thus, the required liquidation reports for the expenses incurred
were not submitted. Further, the previous incorrect practice of recognizing the
Due from account for release of PEPT examination forms, which were only
derecognized upon the remittance of the corresponding registration fee,
resulted in unaccounted long outstanding balance of P2,718,197.

 Due from Bureaus

13.13. The account Due from Bureaus as of December 31, 2017 showed a total
amount of P16,605,872. Details of the account are as follows:

Aging of Outstanding Balance

Outstanding Prior Years
Bureau/Office
Balance Over 1-5
6-10 years Over 10 years
years
CO Proper 16,082,800 16,082,800 - -
Education Partnership Incentive (699,243) (699,243) - -
Program
Literacy Coordinating Council (5,000) - (5,000) -
Bureau of Physical Education and (73,034) - -
School Sports (73,034)
Bureau of Secondary Education 717,601 - 2,717,723 (2,000,122)
Bureau of Alternative Learning (16,151) (16,151) - -
System

18
Test of English Proficiency for Teachers (TEPT); National Achievement Test (NAT); Philippine Educational
Placement Test (PEPT); National Diagnostic Test (NDT); National Elementary Achievement Test (NEAT); National
Secondary Assessment Test (NSAT); National College Entrance Examination (NCEE); National Technical and
Vocational Examination (NTVE)
223
 Aging of Outstanding Balance
Outstanding Prior Years
Bureau/Office
Balance Over 1-5
6-10 years Over 10 years
years
National Educational Testing and 2,400 2,400 - -
Research Center
Bureau of Elementary Education 496,124 1,124 495,000 -
Deployed Account 0672-1017-78 94,147 30,397 63,750 -
Provident Fund 3,278 - 3,278 -
Others 2,950 2,950 - -
Total 16,605,872 15,404,277 3,274,751 (2,073,156)

13.14. Balance of this account had not been traced, and because of the implementation
of the Rationalization Plan, the outstanding accounts in the abolished/dissolved
bureaus/offices of the Department were merged with DepEd CO without
undertaking the necessary reconciliation procedure, thus, discrepancy had
increased and made the process more difficult and complicated on the part of
DepEd CO as no turn-over of documents and records was done.

13.15. The accumulation of the unliquidated fund transfers only showed that the
Management is still lax in the observance of the rules and regulations to
properly account for government funds. Likewise, leniency in the performance
of the responsibility to monitor and demand submission of liquidation or fund
utilization report from respective implementing agency and more importantly
to ascertain whether fund transfers were utilized in accordance with the
intended purpose has futher contributed in the accumulation of unliquidated
fund transfers.

13.16. Moreover, absence of appropriate accounting guidelines and procedures and

lack of information had aggravated the condition that resulted in errors in
accounting treatment directly affecting the accuracy and reliability of the
financial statements at year end.

b.) CAR, ROs I, III, V, VIII, IX, and XI

13.17. Likewise, the deficiencies aforementioned are also subsisting in other ROs, to
wit:

Region Observation
CAR The funds transferred by DO Kalinga to the Provincial Government of Kalinga
amounting to P200,000.00 for the regional athletic meet was recorded as Due from
National Government Agencies resulting in the overstatement of the account and
understatement of the Due from Local Government Units account.

DOs Kalinga, In DOs Abra and Apayao, dormant receivables amounting to P6.39 million remained
Abra, Apayao in the books of accounts because the guidelines on the write-off of dormant accounts
and Benguet as prescribed in COA Circular No. 2016-005 were not observed. These balances
represented the counterpart funds of local government units in the TEEP that was
implemented from 2000 to 2006. Thus, these receivables were dormant for over ten
years.
224
 Region Observation
In DO Benguet, the advances granted by DO Benguet for the MOOE of schools with
a balance of P117,675.88 were misclassified as Due from Operating Units.
RO I The Accountants failed to reconcile the accounts affecting fund transfers from various
DOs to the DepEd CO and RO, Other NGAs and Bureaus, Operating Units, Officers
Various and Employees, resulting in dormant balances of P30,166,483.99 in the various
accounts for “Intra-Agency Receivables”, “Inter-Agency Receivables” and “Other
Receivables,” which is not in accordance with GAM thereby affecting the fair
presentation of the Financial Statements.
RO III ROP transfers made to various LGUs amounting to P605,259.05 in 1998 for the Non-
formal Education Project – School Readiness Assessment remained unliquidated due
Various to lack of monitoring and appropriate follow-up.

On the other hand, balances of the Due from Government Owned and Controlled
Corporations in ROP and DO Cabanatuan City amounting to P62,760,890.99 remained
stagnant for more than 12 months. Management needs to inquire and investigate as
regards the proper treatment and validate if the amount still exists as a receivable and
the rights still belong to DepEd RO III.

Moreover, the balance of Due from Regional Office account of P19,839,471.09 as of

December 31, 2017 of seven DOs could not be ascertained for lack of supporting
documents. These were GSIS premiums and other GSIS related deductions from
cancelled checks or portion of cancelled checks remitted by the RO to GSIS, when the
salaries of the employees used to be paid by checks and not yet through ATMs.
RO V Due from Local Government Units totaling ₱5,659,371.30 reported by the DepEd
ROP ROV Proper to have been requested for write-off in CY 2011 remained dormant and
outstanding as of year-end due to inadequacy of documentary requirements prescribed
in COA Circular No. 94-013, as amended by COA Circular No. 2016-005, to support
such request. Its continued existence in the books affected the presentation of
receivable account in the financial statements.
RO VIII In DO Calbayog City, the receivable of P88,622.18 represents taxes due from the J.A
Construction contractor covering payment of services rendered in connection with the
DO Calbayog construction of school building, which were not initially withheld; while the refund of
City salary from teachers amounting to P14,531.91 were inadvertently recorded as Due
from OUs instead of Due from Officers and Employees.
RO IX The outstanding balance on accounts Due from National Government Agencies and
Due from Operating Units with a total amount of P103,412,930.74 is aged one to five
years. The Management failed to review, analyze and reconcile the balances with the
other related accounts in the trial balance especially on the composition of the
beginning balances of P45,967,986.61 which represented 44.45 percent of the total and
P29,495,139.52 or 28.52 percent of the total on accounts Due from National
Government Agencies and Due from Operating Units, respectively.
RO XI The Other Receivables account balance amounting to P2,215,839.34 of DO of Davao
del Sur had long been overdue and were uncollected for over nine to 14 years and had
DO Davao a very low collection efficiency rate of only 0.22 percent or only Ᵽ4,984.38 had been
del Sur collected for CY 2017, thus indicating a very low collection efficiency rate.

225
13.18. We recommended that the Management in concerned offices:

a. create a committee or team to –

a.1. trace, analyze and reconcile prior years intra-agency fund

transfers;

a.2. conduct investigation and validation of long outstanding inter-

agency fund transfers with government agencies (national, local
corporations) and other receivables with non-government
organizations;

a.3. submit a report with recommendations as to appropriate actions

to be undertaken, such as the:

a.3.1. proposed adjusting entries for identified

errors/misstatements,

a.3.2. demand for submission of financial reports through

appropriate legal process,

a.3.3. request for authority for the possible write-off of

dormant accounts in compliance with COA Circular No.
2016-005,

a.3.4. proposed accounting guidelines, or

a.3.5. other procedures deemed most appropriate, and

b. henceforth, instruct the Accounting Division to closely monitor all fund

transfers, keep records/documents relative thereto for future reference,
and to immediately prepare the necessary adjusting journal entries to
reflect more accurate receivable account balances.

13.19. Below are the Management’s comments/responses relative to the

aforementioned observations/recommendations.

CO/
Management’s Comments
Region
CO Management sent various demand letters requiring liquidation of outstanding accounts
which resulted to liquidation of PY balances. For Due from NGO/POs, 57 percent or
P1,609,928,338 of the total account balance has been liquidated pertaining to the ICT
equipment purchased to UNDP. Management will draft the request to write-off the
dormant accounts of NGOs with unavailable records. For Due from LGUs, 37 percent
or P24,490,282 of PY balances has already been liquidated whereas for other NGAs,
DSWD liquidated P253,865,919 or 51 percent of its outstanding balances. Also,
Management is in constant coordination with the project/program owners on how to fast
track the submission of liquidation reports; For Due from ROs and Due from Bureaus
the negative balances will be adjusted by the Accounting Division (AD) on March 2018.
Moreover, correcting entry for the identified and verified amounts for adjustment will
be adjusted based on the audit findings and thorough verification by AD.

226
 CO/
Management’s Comments
Region

RO I DOs San Fernando City, Dagupan City and La Union has directed the Accountant to
work back on the balances, identify the composition of the account balances, and do the
necessary actions to trace the breakdown of the dormant receivable accounts, which has
occurred several years ago.

DOs Ilocos Norte, Laoag City, Candon City, Vigan City, Ilocos Sur and Urdaneta City
committed to verify the veracity of the recorded receivables and make the necessary
procedures to reconcile balances.
RO II For ROP, the Management commented that the Due from GOCCs account is being
reconciled and was already brought to the attention of the DepEd Central Office and
GSIS to provide necessary documents to substantiate the settlement of the amount.

In DO Cabanatuan City, the Management have communicated the matter to the RO.
Reconciliation and settlement, if appropriate, shall be made. However, RO informed
them to transfer this account to Due from RO.
RO VIII The Accountant agreed to set-up impairment loss by January 2018 including the
issuance of Demand Letters to employees as supporting documents for write-off.
RO V Demand letters will be sent to the responsible officials of the LGUs included in the
schedule for immediate liquidation and submission of the documentary requirements. If
the records are no longer available since the transaction had transpired in CY 1996, a
certification under oath of the concerned accountable officers and/or municipal
accountant will be requested to effect the recording of settlement /liquidation of the fund
transfer. After all the remedies for settlement and liquidation have been fully exhausted,
the Management will again request for write-off of the account with the necessary
documentary requirements.
RO IX Management committed to exhaust effort to arrive at the breakdown of the accounts
involved. They will send confirmation requests with other Operating Units connected
with DepEd RO IX for possible data available concerning the receivable balance. The
Accountant commented that the unreconciled beginning balances were just inherited by
him from the previous Accountant and that no details were available since the turn-over.
But he promised to exert effort to identify the compositions and reconcile it with other
accounts in the trial balance to determine the accounts subject to request for write-off.
RO XI It was admitted by Management that indeed the collection of these receivables were not
given so much focus. They made a commitment to intensify the collection effort and
send demand letters.

Past due loans receivables from Provident Fund

14. Laxity in the grant of Provident Fund loans to DepEd officials and employees in
ROs I, III, IV-B and V resulted in the accumulation of loans receivable balance
to P194,432,009.38 consisting of ₱15,112,752.42 past due accounts of more than
one to 15 years, out of which P11,624,028.86 or 75.65 percent are receivables from
deceased, retired, resigned, AWOL, transferred or can no longer be located
borrowers, thus depleting the funds available for prospective borrowers and the
slim probability of its full collectibility, contrary to Section X.10 of DepEd Order
36, s. 2007 and negating the purpose for the creation of Provident Fund of
providing loan facility in case of emergency.

227
 The Provident Fund granted is embodied in DepEd Order No. 50 s. 2001 dated
September 26, 2001, which aims to provide DepEd officials and employees
with various benefits and loans as follows:

a. For emergency needs;

b. For their education and that of their children;
c. For their hospitalization and that of the immediate dependent;
d. For minor but immediately needed repair of their houses; and
e. For other similar purposes to be determined by the National Board of
Trustees (AO 279).

Pursuant to Administrative Order No. 279, the Provident Fund was established
to provide, among others, the officials and employees of the DepEd loan
facility in case of emergency. The interest is six percent and a co-maker is
required for all the borrowers. The payment of the loan is made in equal
monthly installments applied through automatic deduction from the salary of
the borrower.

Section X.10 of DO 36, s. 2007, Amendments and Addendum to DepEd Order

No. 12, s. 2004 (Revised Implementing Guidelines for the DepEd Provident
Fund), states that repayment period shall be at the option of the borrower,
subject to his/her capacity to pay and computation of his/her net take home pay
which shall not be reduced to less than Three Thousand Pesos (P3,000.00)19
after all deductions including the Provident Fund loan amortization. The
borrower may opt for a repayment schedule of 12 months (one year) up to a
maximum period of 60 months (five years) equal monthly installments. In all
cases, repayment of loans shall be through automatic deduction from the
borrower’s salary, either by agency payroll or PSD-IBM deduction. Also,
Section X.11 provides that the National Regional Boards may allow renewal
of loan provided that 50 percent of the previous loan has been paid, there are
no pending applications for new loans, and the balance of the principal amount
shall be deducted from the new loan.

Audit of the Provident Fund loans receivables amounting to ₱194,432,009.38

as of December 31, 2017 disclosed that a total of ₱15,112,752.42 are past due
accounts for more than one year to 15 years, of which at least ₱11,624,028.86
are due from deceased/retired/resigned/AWOL/transferred or no longer located
borrowers in the following ROs:

19
Net take home pay for CY 2017 is P4,000 per DO No. 12, s. 2017
228
 Due from No. of
deceased/retired/ deceased/retired/
Current Past Due resigned/ AWOL/ resigned/ AWOL/
Region Total transferred/ no transferred/ no
(1 year) Over 1 Year)
longer located longer located
borrowers borrowers
RO I – DOs Ilocos Sur,
Candon City, Pangasinan I,
90,235,331.58 8,774,793.87 99,010,125.45 8,488,344.65 1,171
Pangasinan II, Dagupan
City, Urdaneta City
RO III – DOs Angeles City,
San Fernando City,
Mabalacat, Cabanatuan, 69,981,936.12 5,073,248.03 75,055,184.15 1,870,973.69 Incomplete data
Muñoz City, San Jose City,
Gapan City
RO IV-B – DOs Calapan
-* 464,786.56 464,786.56 464,786.56 30
City, Romblon
RO V – DO Tabaco City 17,892,987.92 799,923.96 18,692,911.88 799,923.96 Not indicated
RO XIII – DOs Agusan del
1,209,001.34 -* 1,209,001.34 -* -*
Sur and Bayugan City
Total 179,319,256.96 15,112,752.42 194,432,009.38 11,624,028.86
* No data provided

In RO I (DOs Ilocos Sur, Candon, Dagupan City and Urdaneta City), the
P1,008,743.81 loans receivables from the deceased/retired/resigned/
transferred/retired employees have been dormant and carried in the books for
more than five years. At DOs Pangasinan I and II, a total of P7,479,600.84
receivables were already considered delinquent loans. Poor collection
performance thereat was caused by granting loans to employees having with
net take home pay below minimum threshhold.

In RO III (DOs Cabanatuan City, Muñoz City, San Jose City, Gapan City,
Angeles City and San Fernando City), loan borrowers were granted new loans
eve though 50 percent of the previous loan has not been paid, while the balance
of the principal amount of the previous loan was not deducted from the
new loan; each loan was accounted separately. Also, some borrowers were
granted more than the P100,000.00 maximum loanable amount. This was due
to filing and approval of several loans. The age of the borrower was also not
considered in the approval and granting of the loan, and retiring borrowers
were not required to pay their outstanding loan balances in full or issue a
notarized promissory note stating that the outstanding loan balance shall be
paid in full upon the receipt of his/her retirement/terminal leave benefits. In
DO Mabalacat City, the Management disclosed that its borrowers with past due
account amounting to P250,423.27 could not be located anymore.

In RO IV-B (DOs Calapan City and Romblon), verification of the overdue

accounts disclosed that only 2.73 percent of the total loans from the Provident
Fund were collected by the DOs in CY 2017.

229
In RO V (DO Tabaco City), audit of the Provident Fund loans receivables
amounting to P18,692,911.88 as of December 31, 2017, disclosed that a total
of P799,923.96 are past due accounts for more than one to ten years from
deceased, retired, resigned borrowers. Review of records also revealed that
officers and employees were granted additional loans without deducting the
balance of their previous loans from the new loan proceeds. Similarly, a
number of borrowers with outstanding/unpaid loan were granted new loan
without being required to fully settle their previous loan balances. Such being
the practice, those who were extended loans in an amount more than their
allowable monthly deductions can cover, most likely cannot settle their
obligations on the supposed amortization period they should have been settled.
A discrepancy of P6,166,179.14 was also observed between the loans
receivable balance per FS of P24,859,091.02 and SL balance of
P18,692,911.88.

In RO XIII (DOs Agusan del Sur and Bayugan City), provident loans
aggregating ₱484,240.09 were released to 20 DepEd employees without
considering the remaining net take home pay after the deduction of the loan
amortization, contrary to what is indicated in the guidelines. Also,
disbursements under the provident fund of the two DOs disclosed that
provident loans aggregating P724,761.25 were released to 34 employees
without a Budget Utilization Request Status (BURS) document. Box A of the
BURS shows certification as to legality and the necessity of the charges, while
Box B shows the availability of funds. As a result, the legality and necessity of
the transactions are doubtful.

a. DepEd CO to revisit DepEd Order No. 36, s. 2007 and study the
possibility of providing stricter sanction or penalty for borrowers who
have defaulted in the repayment of their loans;

b. concerned RO/DO to –

b.1. observe strict compliance as regards the provision limiting the

borrower’s maximum loanable amount of P100,000.00;

b.2. consider borrower’s ability to pay before granting loans and stop
granting of loans to those with net pay of less than the required
monthly net pay;

b.3. strictly enforce collection of loans through payroll deductions in

compliance with the existing rules and regulations of the
Provident Fund and enjoin the co-maker to pay their obligations
on the delinquent borrowers being the secondary persons liable;

230
 b.4. determine the delinquent borrowers with past due accounts and
issue Demand Letters for the recovery of past due accounts;

b.5. instruct the concerned officials to strictly enforce the provisions

of DepEd Order No. 12, s. 2004 in the administration and/or
management of the Provident Fund and determine the persons
responsible for not implementing Section X, Item 13 of DepEd
Order No. 12, s. 2004 causing the failure of collection on the
remaining balances of loans;

b.6. ensure that borrowers who are about to retire, resign, or transfer
shall only be cleared from accountabilities upon full settlement of
their obligations; and

b.7. direct the Budget Officer to ensure that provident loan

transactions are covered by a Budget Utilization Request Status
to support the legality and necessity of the transactions.

The Management in ROs submitted the following comments:

Region Management’s Comments

RO I Management of DOs Candon City, Pangasinan I, Pangasinan II, Muñoz City, San Jose
City, Gapan City, and San Fernando City gave assurance to the Audit Team that they
will comply with the recommendations.

Management of DOs Ilocos Sur, Dagupan City and Cabanatuan City will strengthen its
credit policies to maximize the timely collection of receivables and avoid accumulation
thereof, regularly review outstanding accounts receivables, prepare aging schedule and
send collection letters/ statement of account to debtors.

RO III Management of DOs Angeles City and Mabalacat City will review the list and contact
the co-maker of the borrowers to settle the balance. For the transferees, it will bill the
DOs where they transferred; and ensure that borrowers who are about to retire, resign,
or transfer shall be cleared from accountabilities upon settlement of their obligation.

RO IV-B In DO Calapan City, the co-makers of some borrowers working in DepEd were already
informed and have agreed to deduct the amortizations of the loans from their salaries.
The DO also committed to exert more efforts in collecting from those personnel who
have retired and/or transferred.

RO XIII In DO Agusan del Sur, the use of BURS will be adopted and the necessary adjusting
entries will be drawn.

In DO Bayugan City, Management will adhere to the recommendation of ensuring

BURS for their provident loan transactions and will be mindful in evaluating loan
applications.

231
Doubtful validity of Inventory accounts

15. The completeness and existence of the Inventory accounts with total balance of
P16,920,929,513.84 in nine ROs is of doubtful validity due to: a) non-compliance
with proper procedures and controls on inventory such as the required complete
maintenance of property and accounting records and reports as well as the
reconciliation thereof; b) erroneous recording/non-recording of transactions
affecting inventory accounts resulting in net overstatement of P44,906,185.44;
c) non-observance of proper adjustment for inventory items already distributed
to respective schools amounting to P4,510,960,267.30; and d) other deficiencies
inconsistent with applicable provisions of Chapter 8, Volume I of the GAM.

The pertinent provisions of Chapter 8, Volume I of the GAM relative to

Inventories provide the following:

a. Weighted Average Method. The weighted average method shall be used

for the costing of inventories, which calls for the recalculation of the
average cost of all items in stock after every purchase. The weighted
average cost is determined by dividing the total cost of all units
subsequent to the latest purchase by the total number of units available.
(Section 6)

b. Recognition as an Expense. When inventories are sold, exchanged or

distributed, their carrying amount shall be recognized as an expense in
the period in which the related revenue is recognized or if there is no
related revenue, the expense is recognized when the goods are
distributed. (Section 7)

c. Perpetual Inventory System, requires accounting records to show the

amount of inventory on hand at all times through the maintenance of the
Supplies Ledger Card by the Accounting Division/Unit and Stock Card
by the Supply and/or Property Division/Unit for each item in stock.
Regular purchases shall be coursed through the inventory account and
issues thereof shall be recorded as they take place except for supplies
and materials purchased out of PCF for immediate use or on emergency
cases which shall be charged directly to the appropriate expense
accounts. (Section 9)

d. Semi-expendable Property – Tangible items below the capitalization

threshold of P15,000 shall be accounted as semi-expendable property.
The following policies apply:

 Semi-expendable property which were recognized as PPE, shall be

reclassified to the affected accounts.

232
  These tangible items shall be recognized as expenses upon issue to
the end-user. (Section 10).

 Inventory Custodian Slip (ICS) shall be issued to end-user of Semi-

expendable property to establish accountability over them. (Section
11)

e. Physical count/inventory, which is required semi-annually, is an

indispensable procedure for checking the integrity of property
custodianship. (Section 13)

The Inventory accounts in the following DepEd offices have an aggregate year-
end balance of P16,920,929,513.84. Breakdown is as follows:

CO/ Balance as
Operating Unit
Region Dec. 31, 2017
CO Office of the Secretary 16,607,217,219.00
NCR ROP and all DOs 130,549,295.76
CAR DOs Ifugao, Abra, CCNHS and RNSAT 31,600,059.02
RO II DOs Cauayan City, Santiago City, Cagayan and Nueva Viscaya 1,346,984.07
RO III DOs Bulacan, Mabalacat, Nueva Ecija, Olongapo, Pampanga, 48,107,133.10
Tarlac, Tarlac City, and Zambales
RO VIII ROP and DOs 28,869,336.64
RO IX ROP, DOs Zamboanga Del Sur, Dipolog city, Dapitan City, and 14,568,851.31
Sibugay
RO XI ROP and DOs 17,307,697.23
RO XIII DOs Surigao del Norte, Surigao City, Surigao del Sur, Tandag 41,362,937.71
City, Bislig City and IUs
Total 16,920,929,513.84

Analysis of these accounts disclosed the following deficiencies, which

rendered the completeness and existence of the account balances of doubtful
validity:

a.) Non-compliance with proper procedures and controls pursuant to Chapter

8, Volume I of the GAM in the following ROs:

Observations/
Region
Deficiencies
NCR (DOs Pasig, Marikina, San Juan, Muntinlupa, Parañaque, Las Non-maintenance of
Piñas, Pasay) updated Supplies
RO III (DOs Bulacan, Mabalacat City and 1 IU, DO Nueva Ecija, Ledger Cards and
DO Olongapo, Tarlac, Tarlac City, Zambales, BVRHS) Stock Cards
RO VIII (ROP)
RO IX (DO Dipolog City)
RO XIII (DOs Surigao Del Norte, Surigao City, Surigao del Sur)
NCR (DO Pasay) Issuance of inventory
RO III (MNHS, BVRHS) items without the
RO XI (DO Davao City) corresponding ICS
RO XIII (Surigao Del NHS of DO Surigao DN, CARAGA RSHS
of DO Surigao City)

233
 Observations/
Region
Deficiencies
NCR (DO Pasig, San Juan, Taguig and Pateros, Pasay, Muntinlupa, Absence of the semi-
Parañaque, Las Piñas) annual physical
CAR (DO Abra and 1 secondary school) inventory taking
RO II (DOs Cagayan, Nueva Vizcaya) and/or inventory
RO III (DOs Nueva Ecija, Olongapo, Pampanga and 12 IUs, Tarlac, report as well as the
Tarlac City, Zambales, MNHS) corresponding Report
RO VIII (ROP) on the Physical Count
RO IX (ROP, DO Dipolog City) of Inventory (RPCI)
RO XI (DOs Igacos, Tagum City, 1 secondary school of DO Davao
City)
RO XIII (DOs Surigao Del Norte, Surigao del Sur, Tandag City and
IUs, Bislig City
NCR (ROP) Unreconciled
RO III (DOs Pampanga, Tarlac, Tarlac City, Zambales) discrepancies
RO VIII (ROP) between the book
RO IX (DOs Dipolog, Dapitan) balances as against
RO XI (Cabantian NHS of DO Davao City) the Inventory Report/
RO XIII (DO Surigao records
NCR (DO Marikina) Non-observance of
CAR (DOs Kalinga and Tabuk and 3 schools) Perpetual Inventory
RO II (DO Nueva Vizcaya) System in recording
RO III (DOs Bulacan, Olongapo, Zambales, DO Nueva Ecija) the procurement of
RO IX (DOs Isabela City, Dipolog) inventory items and of
RO XI (DOs Tagum City, Davao del Norte) Weighted Average
Method in costing
inventories

b.) Misstatement of the Inventory accounts due to the following reasons:

Erroneous recording/Non-recording of transactions affecting inventory

account balances resulted in a net overstatement of P44,906,185.44 in the
following ROs:

Operating Over/(Under-
Region Observations/Deficiencies
Units statement)
NCR ROP 377,358.19 Inventory items no longer found in the Inventory
Room

DO Pasay 2,622,112.35 Improper inclusion of inexistent inventory items

with non-moving balances

CAR DO Ifugao 19,284,747.05 Issuances of inventory items were not

RNSAT 1,953,960.18 recognized as expenses due to non-submission
DO Kalinga 835,564.68 of Report of Supplies and Materials Issued
DO Tabuk 559,363.21 (RSMI) to Accounting Unit
CBGMHS 323,700.00

234
 Operating Over/(Under-
Region Observations/Deficiencies
Units statement)
RO II DO Cauayan 121,661.00 Inventory Held for Distribution which inventory
City items were already issued to end-users but
issuances thereof were not taken up in the books

51,300.00 Should be adjusted to Semi-expendable expense

37,500.00 Should be adjusted to Semi-expendable expense
12,500.00 Should be adjusted to Office supplies expense

DO Santiago 36,040.00 Procurement of laptop was recorded as semi-

City expendable property instead of PPE – ICT
Equipment account

RO III DO Olongapo 3,838,142.46 Some inventories recorded in the books were

already issued and utilized

DO Pampanga 703,667.70 The reported Other Supplies and Materials

and IUs Inventory of Natividad HS, totaling P30,656.46
was non-existent because it was just recorded at
year-end to obligate the available allotment to
avoid its lapsing. Further, inventories totaling
P271,161.24 still remained as asset even though
they were already issued to end-users. In
addition, equipment totaling P401,850.00 were
recorded as Semi-Expendable Technical and
Scientific Equipment instead of PPE
DO Zambales 1,677,913.40
Inventories recorded in the books were already
issued and utilized

RO VIII DO Borongan (21,039.00) Recorded as PPE but did not meet the
City capitalization threshold of P15,000.00

RO XIII DO Agusan 14,484,089.56 Common-use supplies which were procured by

Del Sur the DO last CY 2015 from PS-DBM and
recorded under Office Supplies Inventory
remained unadjusted as of November 31, 2017.
The Common-use supplies were already
released by the DBM-PS to the school personnel
of the different elementary schools in CY 2016.
However, the necessary adjusting entry to record
the issuance were not prepared.

DO Surigao (1,992,395.34) Procurement of Medical, Dental and Laboratory

del Sur supplies and Textbooks & Instructional
Materials intended for distribution to different
schools was recorded as outright expenses.

Net overstatement/ 44,906,185.44

(understatement)

235
In CAR (DOs Kalinga and Tabuk and RNSAT, TNHS and TVS), the cost of
purchased supplies and materials in CY 2017 amounting to P6,504,974.17 was
directly charged to the expense accounts. Thus, the cost of supplies on stock at
yearend was not recognized.

Centrally-procured items as well as regionally-procured items, which were

already distributed in respective schools, remain in the books of CO and RO,
thereby overstating the Inventory account of CO and RO while understating
the Inventory account of DOs/IUs, as follows:

Office Amount Description

CO 4,428,076,191.00 Textbooks/Learning Materials, Scientific and
Mathematics Equipemt and Furniture and Fixtures
already distributed in public schools nationwide

NCR ROP 82,884,076.30 TVL materials already distributed

Total 4,510,960,267.30

Other deficiencies noted are shown below:

Region DO/IUs Deficiencies

NCR ROP  Unsubstantiated reclassification/adjustment of
Inventories accounts amounting P18,736,458.74

 Double recording of adjustment to negative balance of

account Property and Equipment for Distribution
which resulted from erroneous recording of issuances
of kitchen tools equipment without first recording the
Inventory account.

DOs Muntinlupa  Unrealistic balance compared to the minimal quantities

and Las Piñas of stock in the storage rooms

 Non-recognition of delivered semi- expendable items

DO Parañaque  Non-recognition of delivered items under the

Provision of Science and Mathematics (SME) due to
lack of data which resulted in the understatement of
Semi-Expendable Inventories account.
RO II RNHS  Balance of the accounts Textbooks and Instructional
SNHS Materials Inventory and Other Supplies and Materials
Inventory did not change due to non-submission of
Report of Supplies and Materials Issued by the Supply
Unit to the Accounting Unit

DO Nueva  DO Supply Officer did not prepare and submit to the

Vizcaya Accounting Unit the original copy of RIS and RSMI

236
 Region DO/IUs Deficiencies
RO III DO Mabalacat  The Office Supplies Inventory account for the year
City 2017 has no corresponding credits to record issuances.

DO Nueva Ecija  The Supplies and Materials Expenses account totaling

P75,919,826.34 as of December 31, 2017 has no
corresponding credits in the agency’s inventory
account.

MNHS in DO  Non-preparation of RIS by the requesting

Mabalacat office/personnel and properly filled-up and approved
RIS for supplies issuances;

 Non-submission of RSMI by the Property and/or

Supply Custodian to the Accounting Unit as basis for
recording issuances;

DO Nueva Ecija  The RIS on file in the Supply Unit did not identify the
requisitioner and the recipient of the items. The RIS
were all signed by the Supply Officer and her assistant,
thereby casting doubt on the issuance of the supplies;

 No RSMI from October to December 2017 was

submitted to Accounting Unit to record issuances.

DO Pampanga  Stock Cards were prepared/maintained for every

Purchase Order (PO) such that an item of similar
description purchased in various orders/transactions
carries as many stock cards as the POs.

 The RIS was not properly accomplished;

 Entries in the Stock Cards were not made

chronologically;

 The Accounting Unit did not maintain Supplies Ledger

Cards.

DO San Jose  Unnecessary and excessive purchase of accountable

City forms in excess of the three months requirement
resulting in overstocking.

DO Tarlac  There was a delay in the submission of monthly RSMI,

supported with RIS, by the DO Supply Officer to the
Accounting Unit.

BVRHS  Non-preparation of RSMI by the Property and/or

Supply Custodian for submission to Accounting Unit
to record issuance;

 Incomplete records to keep track of the actual

inventories on hand and to monitor consumption of
supplies of the different requesting office; and some
supplies were issued without necessary approval.

237
 Region DO/IUs Deficiencies
RO VIII ROP  Verification of actual stocks on hand revealed that
items of inventories as presented in the financial
statements were no longer available.

 The RSMI, RIS and other necessary documents to

report the issuances/distribution of the inventory items
were not submitted to Accounting Unit.

 Most of the RIS furnished to COA Office by the

Supply Section were not signed by requesting and
approving officers.

RO IX DO Zamboanga  Office Supplies Inventory Account that were procured

Del Sur in the prior year were not yet dropped or recorded as
expense pending receipt of RSMI

DO Sibugay  Instructional Materials like alphabet posters, picture

cards, and charts amounting to P7,700,000.00, which
were already distributed to 385 recipient schools, was
erroneously recorded as a debit to Other Supplies and
Materials Inventory instead of as a debit to Textbooks
and Instructional Materials Inventory with its
subsequent issuance should have been recorded as a
debit to Textbooks and Instructional Materials
Expenses.

RO XI Cabantian  The Accounting Unit had no basis in recognizing the

National HS – utilization of office supplies and materials since the
DO Davao City Supply Unit had not submitted the RSMI to them.
DOs Tagum  The Property Custodian failed to summarize the
City and Davao issuances or usage of supplies inventory in the RSMI
Del Norte for submission to the Accounting Unit for recording of
issuances.

a. conduct physical count of inventories semi-annually and submit the

RPCI not later than July 31 and January 31 of each year for the first
and second semesters, respectively;

b. require the Property and Accounting Divisions/Units to maintain their

respective records and reconcile balances regularly, and for the:

b.1. Property/Supply Officer to –

b.1.1. issue ICS for every issuance of semi-expendable tangible

items for control and monitoring of accountability over the
item;

238
 b.1.2. prepare the RSMI, based on RIS, to be submitted to the
Accounting Division/Unit as basis in preparing the JEV to
record supplies and materials issued;

b.1.3. apply the weighted-average method of costing inventories;

b.2. Accountant/s to –

b.2.1. record purchases using the appropriate Inventory

accounts, in accordance with the Perpetual Inventory
System;

b.2.2. b.ii.ii draw the appropriate adjustment for erroneous

recording/non-recording of transactions affecting
inventory account;

b.3. Property/Supply Officer and Accountant/s to address all other

procedural lapses by strict observance of rules and regulations for
Inventory as prescribed in Chapter 8, Volume I of the GAM for
NGAs.

Management in respective CO, NCR, ROs II, III and XIII all agreed to comply
with the recommendations.

Unreliable Property, Plant and Equipment (PPE) Account Balances

16. The existence, completeness and valuation of PPE account balances cannot be
fully relied upon due to noted deficiencies and weakness in the internal control in
DepEd CO and 11 ROs, such as, a) unaccounted reporting difference of
P39,941,045,473.48 between the accounting and property records; b) non-
performance of physical inventory to verify existence and completeness of the
reported assets worth at least P23,483,751,530.60 in nine regions; c) non-
maintenance of PPELC and PC or other records supporting PPE balances worth
at least P51,363,611,820.21; and d) the existence of dormant/undocumented
balances of P2,000,925,441.22.

Moreover, errors and omissions in the recording of transactions affecting PPE

accounts were also observed, such as, a) inclusion of semi-expendable items
costing at least P46,235,897.02; b) unrecorded unserviceable/demolished/razed by
fire/losses/transferred/disposed PPEs amounting to P14,452,858.69;
c) unrecorded properties of P3,016,356,877; d) PPE items not yet dropped from
books of accounts of CO and ROs of P10,819,693,024.50; and e) other errors and
omissions in classification to proper PPE accounts and provision of depreciation,
undocumented PPEs, titling and non-recognition of asset with respect to land
accounts.

239
 16.1 Chapter 10, Volume I of the GAM prescribes the accounting policies,
guidelines for the accounting treatment, recognition/derecognition,
measurement and reporting requirements of PPE accounts.

16.2 Review of the financial statements disclosed the following deficiencies

affecting the fair presentation of the PPE accounts:

a.) Reporting difference of P39,941,045,473.48 between the accounting and

property records of Central Office (CO) and eight other regions

16.3 The GL disclosed cost of PPE account balances in aggregate amount of

P48,094,015,146.27, while the RPCPPE reported a total amount of only
P8,152,969,672.79, showing a huge discrepancy of P39,941,045,473.48.
Details are shown below:

Office/ Balance per Balance per

OUs/DOs Discrepancy
Region Books RPCPPE
CO OSEC 33,955,800,015.21 1,348,266,789.51 32,607,533,225.70
Manila, Mandaluyong, and
NCR 3,268,344,282.70 2,342,147,048.49 926,197,234.21
Makati
ROP, Baguio City National
CAR High School, Pines City 622,818,005.15 154,009,289.42 468,808,715.73
National High School
RO I Vigan, Candon 79,694,082.72 63,326,263.46 16,367,819.26
DO Batanes Proper, DO
Cauayan City, DO Santiago
RO II City Proper, DO Quirino 804,450,824.90 765,272,702.80 39,178,122.10
Proper, DO Tuguegarao City
Proper
ROP, Aurora, Balanga City,
Bataan, Bulacan, City of
RO III Meycauayan, Nueva Ecija, 7,938,612,240.74 3,364,609,977.63 4,574,002,263.11
Pampanga, Tarlac City,
Tarlac Province
RO VIII Tacloban City, Calbayog City 715,006,371.91 24,155,913.39 690,850,458.52
RO XI ROP 632,328,805.71 20,146,624.93 612,182,180.78
RO XIII ROP 76,960,517.23 71,035,063.16 5,925,454.07
Total 48,094,015,146.27 8,152,969,672.79 39,941,045,473.48

16.4 In DepEd CO, the current year’s discrepancy of P9,193,205,951.56 out of the
total variance of P32,607,533,225.70 between the Accounting Division and
Asset Management Division (AMD) records pertains to the material
differences in certain PPE items such as ICT Equipment, Other Service
Concession Asset, Technical Science Equipment, and Furnitures and Fixtures
in their respective records. It was observed that the net increase in the amount
of P9,196,802,250.43 in PPE accounts in the accounting records during the
year represents the aggregate cost of centrally procured items in line with the
DepEd’s PAPs such as DCP, Supply and Delivery of Science and Mathematics
Equipment (SME) and Supply and Delivery of School Furnitures. Since

240
 deliveries of these items were made directly to identified recipient schools,
these were not included in the records of AMD. As of reporting date, the cost
of these properties remained in the CO books, since the needed reports to drop
the same were not accomplished, hence, proper accountability was not also
established.

16.5 Carrying in the books the cost of centrally procured PPEs overstated the PPE
accounts at the CO and non-recognition of the same by the OUs raises
accountability issues as to who should be responsible for the property’s control,
proper usage, and safety.

16.6 In addition to the above, out of the P2.800 billion transferred fund by DepEd
to United Nations Development Programme for delivery of DCP ICT
packages, a total of P1.693 billion worth of computer packages was considered
delivered based on the items per contract requirements. However, only P1.610
billion cost of ICT equipment was recognized as settlement, as shown in the
following table:

DepEd Effect to Due

Budget Number Amount from NGO/PO
Number
of Amount
Allocation Description Recipient
of Recorded as ICT Account– Over
Packages Transferred
/Fund Schools Equipment (Under)
Source statement
Batch 37 - SHS
Regular Package 184 184 150,792,600.00 124,421,878.35 26,370,721.65
(Stand Alone)
Batch 38 - SHS
Special Package
(arts & design,
2016 DCP
technical drafting,
1,146,702,984.0
illustration TVL, 889 889 1,250,896,823.75 (104,193,839.75)
0
programming,
medical
transcription TVL)
+ Pen Tablet
Division Offices IT
2016 GAS 234,609,635.58 161,700,364.42
Equipment 209 13,042 396,310,000.00
Total 1,693,805,584.00 1,609,928,337.68 83,877,246.32

16.7 The amount transferred was initially recognized as debit to Due from Non-
Government Organizations (NGOs)/People’s Organizations (PO) in the books
of account. This account is only adjusted when Information and
Communication Technology Equipment (ICTE) account is already recognized
in the books upon delivery by the United Nations Development Programme.
As can be observed however, the amount of ICTE recognized in the books only
amounted to P1,609,928,337.68 despite the reported complete delivery, thus
leaving a balance of P83.87 million and resulting to non-closure of the
receivable account in case no further settlement/delivery is expected or refund
of the balance shall be effected. It is worth-mentioning that the P83.87 million

241
 represents unexpended fund which under Clause No. 10 of the relevant Project
Document, DepEd has the option to request for reversion.

16.8 On the otherhand, the reported discrepancies in eight regions (NCR, CAR, I,
II, III, VIII, XI and XIII) were mainly due to absence of regular reconciliation
of records maintained by the Division Accountant and the Division Supply
Officer and failure to conduct the required physical inventory-taking.

b.) Absence of physical inventory to verify existence and completeness of the

reported assets worth P23,483,751,530.60

16.9 Section 38, Chapter 10, Volume I of the GAM provides that the entity shall
have a periodic physical count of PPE, which shall be done annually and
presented on the Report on the Physical Count of PPE (RPCPPE) as at
December 31 of each year. This shall be submitted to the Auditor concerned
not later than January 31 of the following year. Equipment found at station and
losses discovered during the physical count shall be reported to the Accounting
Division/Unit for proper accounting/recording.

16.10 Physical inventory-taking being an indispensable procedure for checking the

integrity of property custodianship has to be regularly enforced. Failure to
conduct physical count of PPE casts doubt on the correctness and existence of
the PPE recorded in the Agency’s books of accounts, thereby also affecting the
fairness of presentation of accounts in the financial statements.

16.11 The absence of the required periodic physical count of PPE and the incomplete
physical inventory report submitted by ROs and its DOs rendered unreliable as
to the completeness and existence of the reported PPE account balances in the
following regions:

Region ROs/DOs/OUs Amount

NCR Cities San Juan, Pasay 144,196,745.18
Abra, Baguio, Benguet, Abra HS, MNAS, Pilar Rural HS, BCNHS,
CAR 1,221,162,844.25
PCNHS
RO I La Union, San Fernando, Laoag, Batac, Pangasinan I, Pangasinan II 4,189,413,212.35
ROP, Cagayan, Cauayan City, Ilagan City, Isabela, Nueva Vizcaya,
RO II 2,798,994,429.26
Tuguegarao City
Angeles City, Cabanatuan City, City of San Fernando Pampanga,
Gapan City, Olongapo City, San Jose City, Science City of Muñoz,
Tarlac City, Tarlac Province, Bilad High School, Caluluan High
RO III 3,828,821,510.75
School, Cristo Rey High School, Estipona High School, Guevarra
High School, La Paz High School, Tarlac National HS, Victoria High
School, Zambales, Nueva Ecija
RO IV-B ROP 14,842,980.42
RO V Camarines Norte, Legazpi, Tabaco and Catanduanes 1,578,832,538.27

242
Region ROs/DOs/OUs Amount
Tacloban City, Baybay City, Southern Leyte, Maasin City, Maasin
National Vocational High School, Catbalogan City, Calbayog City,
Samar, Sta, Margarita National High School, Northern Samar, Allen
RO VIII 4,796,423,741.35
National High School, San Antonio Agricultural and Vocational
School, San Jose Technical High School, Silvino Lubos Vocational
High School
Davao del Sur, Digos City, IGACOS, Tagum City, Davao del Norte,
RO XI 3,278,215,667.53
Panabo City, Davao Oriental, Mati City
Surigao del Norte, Surigao City, Surigao del Sur, Tandag City, Bislig
RO XIII 1,632,847,861.24
City
Total 23,483,751,530.60

16.12 It is noted that the failure of the above units to perform the required inventory-
taking is mainly due to Management’s laxity in the creation of a Division
Inspectorate Team to perform the task.

c.) Non-maintenance of Property, Plant and Equipment Ledger Card

(PPELC) and Property Card (PC) or other records supporting PPE
account balances

16.13 Section 42, Chapter 10, Volume I of the GAM, provides that the Chief
Accountant shall maintain the PPELC for each category of PPE including work
and other animals, livestock, etc. The PPELC shall be kept to record promptly
the acquisition, description, custody, estimated useful life, depreciation,
impairment loss, disposal and other information about the asset.

16.14 For check and balance, the Property and Supply Office/Unit shall likewise
maintain PC for PPE in their custody to account for the receipt and disposition
of the same. The balance per PC shall be reconciled with PPELC maintained
by the Accounting Division/Unit. They shall also be reconciled with other
property records like the Property Acknowledgment Receipt (PAR).

16.15 The non-maintenance of the PPELC and PC, absence of breakdown/details of

PPE balances, deficient RPCPPE and lapsing schedules rendered the reported
PPE balances unreliable as shown in the following offices:

CO/
ROs/DOs/OUs Amount
Region
CO OSEC 33,806,627,897.68
NCR Manila, Marikina, Pasig, San Juan, Mandaluyong, Makati, Pasay, 4,395,966,688.78
Muntinlupa, Las Piñas
RO I La Union, San Fernando, Ilocos Norte, Batac, Ilocos Sur, Pangasinan II, 6,080,541,379.46
Dagupan, Laoag City, Pangasinan I
RO II ROP, Cagayan, Cauayan City, Ilagan City, Isabela, Nueva Vizcaya, 2,798,994,429.26
Tuguegarao City

243
 CO/
ROs/DOs/OUs Amount
Region
RO III ROP, Angeles City, Aurora, Balanga City, Bataan, Bulacan, Cabanatuan -*
City, City of Meycauayan, City of San Fernando Pampanga, Gapan
City, Nueva Ecija, Olongapo City, San Jose City, Science City of
Muñoz, Zambales
RO IVB ROP 329,036,862.90
RO VIII Tacloban City, Baybay City, Southern Leyte, Maasin City, Maasin
National Vocational High School, Catbalogan City, Calbayog City, 3,814,662,543.40
Samar, Sta, Margarita National High School, Northern Samar, Allen
National High School, San Antonio Agricultural and Vocational School,

San Jose Technical High School, Silvino Lubos Vocational High School
RO XI IGACOS, Tagum City 137,782,018.73
RO XIII ROP, Surigao del Norte, Surigao City, Surigao del Sur, Tandag City, -*
Jacinto P. Elpa NHS
Total 51,363,611,820.21
*Amount not stated

d.) Existence of dormant/undocumented accounts in the following offices with

an aggregate balances of P2,000,925,441.22

CO/
ROs/DOs/OUs Amount Remarks
Region
CO OSEC 987,395,919.95 Unidentified properties, which have no movement for
several years. These PPE account balances were not
supported by PPELC or PCs, thus the details and
validity of the same cannot be fully ascertained.
NCR ROP, Quezon 571,390,601.99 This includes the following deficiencies: Recording of
City, Manila transactions in the CIP account not supported with
City, Pasay City, statement of work accomplished; CIP account is
San Juan City,, inclusive of a negative balance; transfer of
Marikina City accountability of School Buildings to different
Schools, thereby reducing the account balance but
cannot be verified due to lack of proper documentation;
School Buildings transferred from the DPWH and
DepEd NCR have no breakdown and detailed
description of the structures/school buildings and are
not properly identified and described in the Subsidiary
Ledgers or PPELC.
RO I San Fernando, La 255,942,193.70 Dormant accounts since December 2014 or even earlier
Union and no provision for Accumulated
Depreciation/Impairment Losses were provided. Also,
no breakdown/composition of the accounts are
prepared/maintained such as PPE Ledger
Card/Property Card by the Accounting and Supply
Units. Accordingly, the condemnation/disposal of the
PPE accounts cannot be recorded or dropped from the
books of accounts since the Accountant and the Supply
Officer cannot readily identify the particular items to
be dropped from the books.
RO III ROP, Bulacan, 186,196,725.58 Most of the balance recorded as CIP pertained to
Pampanga projects which were already completed. These
negatively affected the fair presentation of the financial

244
 CO/
ROs/DOs/OUs Amount Remarks
Region
position of the agency concerned. The result of non-
classification to proper asset account understated the
expense account due to non-provision of depreciation
and therefore overstated the income. At the same time,
the School Building Account is understated as a result
of non-classifying CIP to proper asset account
Total 2,000,925,441.22

e.) Moreover, there were errors and omissions in the recording of

transactions affecting PPE accounts as follows:

e.1.) Inclusion of semi-expendable items costing at least P46,235,897.02

16.16 Deficiencies were noted on the reclassification of some PPE items following
the P15,000.00 threshold prescribed in the GAM, thus resulting in the
overstatement of the affected PPE accounts in the financial statements. As
provided in the GAM Volume I, tangible items below the capitalization
threshold shall be reclassified or removed from the PPE accounts. These
tangible items shall be recognized as expenses upon issuance to the end-user.

16.17 Inclusion of items in the PPE categorized as semi-expendable property which

were below the capitalization threshold had amounted to P46,235,897.02 as
reported in the following regions:

Region ROs/DOs/OUs Amount

ROP, Manila City, Valenzuela City, Makati City, Pasay
NCR 22,417,921.76
City, Muntinlupa City, Las Piñas City
ANIAHS, BAIS, Kalinga NHS, RNSAT, Tanudan VS,
CAR 5,538,992.72
Tuga NHS
RO V Camarines Norte 138,114.73
ZDS, Pagadian City, Sibugay, Isabela City,
RO IX 7,790,446.94
Zamboanga,
RO XI Panabo City 6,896,200.99
RO XIII ROP 3,454,219.88
Total 46,235,897.02

16.18 The failure of the Bookkeeper to reclassify the items below the threshold of
P15,000.00 to the proper Inventory accounts overstated the affected PPE
accounts, its corresponding accumulated depreciation expenses including
Accumulated Surplus/ (Deficit), as well as understated the affected Semi-
Expendable Supplies Expenses.

e.2.) Unrecorded unserviceable/ demolished/ razed by fire/losses/

transferred/disposed PPEs amounting to P14,452,858.69.

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 16.19 Unserviceable properties, equipments and demolished buildings were still
included in the books in the following regions:

Region ROs/DOs/OUs Amount Remarks/Reason

NCR Valenzuela City, Marikina 218,600.00 Various PPE Items
City, Pasig City
RO I ROP,Dagupan, Pangasinan 5,352,242.65 The Accounting Unit did not prepare
II, Urdaneta City any accounting entries to drop the
demolished school buildings from the
PPE account. The Accounting Unit was
not furnished with the accomplished and
approved Inventory & Inspection
Report and Report of Waste Materials
as the basis in dropping the school
buildings from the books of account.

RO II Batanes 599,250.00 The building is included in the PPE

balance and in the RPCPPE, but
Management’s assertion of existence
cannot be substantiated and the
reliability and correctness of the account
is doubtful.
RO III ROP, City of Malolos, City 2,871,320.54
Various PPE items
of San Jose del Monte
RO V ROP 3,060,141.88 Documentary requirements for the
transfer of the said unserviceable
property were complied with, only that
some transfer documents were not
dated, which failed to show the actual
dates of receipt by the recipient schools’
officials and/or representatives.
RO VIII Maasin City 2,351,303.62 Various PPE items
Total 14,452,858.69

e.3.) Unrecorded properties of P3,016,356,877

16.20 Unrecorded properties in the books of the following ROs were uncovered.

Asset Account Affected

Remarks/Reason for
Region/DOs Semi- Total Unrecorded Asset
Const. In School Motor Other
Land ICTE Expen Transaction
Prog. Bldg. Vehicles Equipment
d-able
NCR 85,633,559 -* 327,945,422 5,088,004 -* 2,920,106 421,587,091 For School Bldg., the DO
Quezon City, Engr. requested the DPWH
Manila City, Pasig to provide the list of
City, schools constructed under
Mandaluyong the latter’s supervision.
City, Pasay City, However, the DPWH can
Las Piñas City, no longer provide
Marikina City and documents for the same.
Muntinlupa City
CAR -* 693,650 306,724,385 -* 6,083,904 -* 431,155 313,933,094 SEDIP school building
Tabuk, Mtn.
Province, Ifugao,
Benguet, Apayao
RO I 133,896,219 -* 400,349,647 -* 8,078,411 484,363 -* 542,808,640 Cannot record the transfer
Candon City, due to the absence of
Pangasinan I, supporting documents as

246
 Asset Account Affected
Remarks/Reason for
Region/DOs Semi- Total Unrecorded Asset
Const. In School Motor Other
Land ICTE Expen Transaction
Prog. Bldg. Vehicles Equipment
d-able
Urdaneta, San basis for recognition in the
Carlos City, books of accounts of the
Dagupan City DOs. Construction
implemented by
PAGCOR, DPWH, LGU
and repairs implemented
by the DO were not
recognized in the books of
the school

CY 2016 Senior High

School Building projects
implemented by DPWH
were not yet recorded in
the books of accounts of
the DOs because there was
no proper turn-over
between the IUs and the
DOs.
RO II -* -* -* -* 546,265 -* -* 546,265 Supply Officer did not
Ilagan City, forward the PTR to DO
Isabela, Accountant.
Tuguegarao City
RO III -* -* 1,535,325,825 1,134,964 3,076,312 -* -* 1,539,537,101 Not yet recorded in the
ROP Cabanatuan books of respective DOs
City, Gapan City, despite issuance of JEV
Science City of and/or turn-over by the
Muñoz, Nueva DPWH.
Ecija, Olongapo
City, San Jose
City, Tarlac City
and Tarlac
Province,
Zambales
RO IX -* 9,000,000 -* -* -* 136,225 -* 9,136,225
ROP, Pagadian
City, ZDS
RO XI -* -* -* 795,003 -* -* 22,030,490 22,825,493 Transfers from the
ROP, Davao del Regional Office not
Norte, Panabo recorded in the books due
City, Southern to the failure of the
Davao NHS Property Officer to furnish
copies of the documents to
the Accounting Section
RO XIII -* -* 163,692,971 -* 2,289,996 -* -* 165,982,967 The Accountant was not
ROP, Surigao del formally informed of the
Norte, Surigao transfer of equipment and
City, Surigao del had not received copies of
Sur documents to support the
journal entry to be taken up
in the books of the Agency.
However, to correct the
deficiency, the Accountant
was directed to retrieve
copies of documents from
the Supply/Property
Custodian for record
purposes.
Total 219,529,778 9,693,650 2,734,038,250 7,017,971 20,074,888 620,588 25,381,751 3,016,356,877

*Amount not stated

247
 e.4.) PPE items not yet dropped from books of accounts of CO and ROs
of P10,819,693,024.50

16.21 The following PPE items in total amount of P10,819,693,024 were already
distributed/delivered in respective schools but were not yet dropped from
books of accounts of CO/ROs/DO:

CO/ ROs/DO
Amount Remarks/Reason
Region s/OUs
CO OSEC 10,226,026,815 Comprising the four asset accounts that recognized the
centrally procured goods related to DepEd PAPs.
CAR ROP 289,886,258.07 The necessary documents/information and the PTR were
not provided to the DOs and the secondary school, thus,
the school buildings costing ₱289.88 million remained
with the RO.
RO IV-B ROP 3,677,613.88 Various textbooks and instructional materials received
from the Regional Office for CY 2017 were delivered to
different schools without acknowledgement receipt for the
items. These items should have been recognized as
inventories in the books of the DO and be included in the
Report of Physical Count of Inventory to be prepared by
the Supply Officer every six months, certified by the
Inventory Committee and approved by the Head of the
Agency. A copy of which shall be furnished the Auditor.
RO IX Pagadian 110,148,170.55 PPEs belonging to five new IUs of DO-Pagadian City
City were not carried over and reflected in the latter’s financial
records. An IU is mandated to prepare and maintain their
own set of books of accounts and generate their own FS
and other reports to the DO for purposes of consolidation
and also directly to the government regulatory agencies.
RO XI ROP 189,954,167.00 Technical Vocational and Learning Tools (TVL) were
still booked in the accounting records of DepEd Regional
Office XI which should have already been transferred to
the books of their recipient schools and divisions.
Total 10,819,693,024.50

e.5.) Other errors and omissions

16.22 Other errors and omissions were observed which resulted in a net
understatement of PPE by P309,333,849.46 for the year ended December 31,
2017 as follows:

Net Effect
Region ROs/DOs/OUs Over/(Under) Affected Accounts
statement
NCR ROP, Quezon City, (301,733,236.23) Other PPE, Accumulated Surplus/Deficit,
Marikina City Construction in Progress
CAR Ifugao, Apayao, (1,374,094.90) ICT Equipment, Agricultural and Forestry
Apayao National Equipment, Office Equipment, Other PPE,
Industrial Agricultural Power Supply Systems, Other Structures,
High School Water Supply Systems
RO III Angeles City 1,387,333.00 Semi-expendable Property Expenses

248
 Net Effect
Region ROs/DOs/OUs Over/(Under) Affected Accounts
statement
RO IV-B Occidental Mindoro, (7,613,851.33) Furniture and Fixtures, Semi-Expendable
Romblon Furniture, Fixtures and Books, Office
Equipment, ICT Equipment,
Total (309,333,849.46)

16.23 While errors and omissions in recording depreciation resulted in the net
overstatement of PPE carrying value by at least P366,769,090.40 for the year
ended December 31, 2017 as noted in the following ROs:
Net Effect
Region RO/DO/ OU Over/(Under) Deficiencies
statement
RO V ROP, Catanduanes -* Failure to provide and/or recognize monthly
depreciation on PPEs amounting to
P659,242,891.74 from January to September of
CY 2017 in RO and from January to December
CY 2017 in DO Catanduanes.
RO VIII Northern Samar (1,900,877.72) Negative balance for ICT Equipment was due to
overstatement in the recorded accumulated
depreciation which already exceeded the costs or
booked up value of properties they pertain.
RO IX ZDS, Pagadian City, 368,648,045.52 Non-recording of depreciation of School
Zamboanga (Ayala Buildings.
NHS and Maria
Clara Lorenzo
Lobregat NHS)
RO XI Davao City 21,922.60 Non-taking up of the depreciation expense for two
months.
Total 366,769,090.40
*Amount not stated

16.24 The foregoing errors and omissions were primarily due to the following:

a) SL Balances not included in the Control Account;

b) Wrong basis of recognition of an item of PPE;
c) Recognition of an expense account instead of PPE; and
d) Insufficient provision and/or non-provision of depreciation

16.25 Errors were also committed in recording BEFF financial transactions which
resulted in the misstatements of accounts affected, as follows:
Over(under) statement
Region Particulars Constructio Accounts Guaranty Other Over (under)
n in Payable Deposits Accounts statement
Progress Payable Affected
(GDP)
NCR-DO Progress billings (44,552,464.1 Advances to 2,174,345.80
(38,633,639.67)
Quezon which have not been 8) Contractors
City set-up Other MOE 8,210,695.82
Erroneous entries
Cash NT– MDS 3,732,134.47
made on the payment 6,406,927.04 (1,194,283.03)
of progress billings Due to BIR 1,393,946.91

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 Over(under) statement
Region Particulars Constructio Accounts Guaranty Other Over (under)
n in Payable Deposits Accounts statement
Progress Payable Affected
(GDP)
Release of retention
money was debited to (3,304,959.03) 3,304,959.03
AP instead of GDP
Payment of a final 2,169,887.11 (255,280.84) Cash NT– MDS 1,755,055.75
billing to one of the
contractors which has
Due to BIR (159,550.52)
not been recorded as at
year-end
RO I- DO Erroneous recording Repairs and 3,467,489.81
San of the capital Maintenance
Fernando expenditures thus, the Expenses-
proper accountability school Building
of the beneficiary
schools were not
properly established
due to the erroneous
accounting entries
made
School Building (3,467,489.81)
Net over (under) statement (44,552,464.18) (33,361,784.55) 1,855,395.16

16.26 Moreover, there were titling, ownership issues and non-recognition of asset in
the books with respect to Land account.
Region ROs/DOs/OUs Amount Remarks
RO I Pangasinan I 278,918,216.50 Cannot claim ownership over the property due to the
absence of either original Certificate of Title/Transfer
Certificate of Title or a Torrens Title ownership over
the property, hence the validity and propriety of the
Land account could not be ascertained.

RO II Cauayan City and Villa
Luna NHS, Santiago
City, Nueva Vizcaya
RO III Aurora, Cabanatuan
City, City of San Jose
del Monte, Gapan City,
Pampanga, San Jose
City, Science City of
Muñoz, Zambales
RO V Camarines Norte, Albay
RO ROP
VIII
*Amount not stated
-* Audit observartion includes 116 unrecorded lots and
102 unregistered lots.
35,278,460.00 Land valued at P7.7M has no available schedule or
breakdown; and land with a total cost of P27.4M was
not yet recognized in the books although there were
already documents and Transfer of Certificate of Title.
51,842,009.29 Ownership and existence cannot be ascertained due to
the absence of titles, inventory list and supporting
documents to prove that the balance shown in the
financial statements were valid and accurate.
3,350,000.00 The correctness of the reported balance cannot be
ascertained due to the absence of supporting documents
to prove that the amount shown in the financial
statements were valid and accurate.

250
16.27 In Region III, Mobile Dental Vehicle (MDV) donated by the Department of
Health with a total value of P3,950,000.00 had remain unutilized from the time
it was received from DOH Central Office. Further, it was not accounted in the
inventory and not recorded in the books of the Regional Office due to absence
transfer papers, such as Deed of Donation, JEVs for accounting and recording
purposes, Official Receipt, Certificate of Registration, Insurance papers and
other needed documents. It was also noted that as of reporting date, the RO has
no dentist or any legible health personnel who can operate the equipment.

16.28 We recommended that the Management of concerned offices:

a. conduct and complete the annual physical count of PPE, maintain and
regularly update PPELC and PC as prescribed under the GAM, and
conduct regular reconciliation of Accounting and Property records to
facilitate adjustments of discrepancies or make corrections where
applicable;

b. require the Accounting Division to review, analyze and trace the

unidentified/unaccounted assets so that appropriate action on
disposition of undocumented accounts can be properly undertaken;

c. prepare adjusting entries for the noted deficiencies and reclassify all
PPE items costing below the capitalization threshold of P15,000.00 to
the appropriate Inventory account. For items that had been issued to
end-users, debit the appropriate Semi-Expendable Expense account if
issued in the current year or Accumulated Surplus or Deficit account if
issued in prior years and for monitoring of accountability, the issuances
thereof should be covered by ICS; and

d. observe complete and proper documentation of PPE account balance

and other adjustments related thereto.

16.29 We further recommended that the Management in CO:

a. revisit DO No. 45 as regards to the dropping of centrally/regionally

procured PPE items to introduce possible updates/amendments, and to
orient or re-orient the Operating Units (DOs and recipient schools),
particularly those personnel involve in the process; and

b. coordinate with the UNDP for the proper disposition of the P83.87
million transferred fund balance that remains outstanding despite
complete delivery of the subject DCP Batches. DepEd should also
consider requesting for the reversion of such fund pursuant to Clause
10 of the UNDP Project Document.

251
16.30 Management commented that:

CO/
Management’s Comments
Region
CO Management commented that Accounting Division (AD) immediately records the PTRs
received from AMD as long as the same reconciles with Accounting Records. However
the time consumed in the retrieval of PTRs from IUs/SDOs by AMD contributed to the
delays in dropping of the accounts and recording the transfer accountability to various
IUs, Non-IUs and SDOs.

AMD, AD, and Project Implementers (PI) agreed in the process to be followed to further
streamline the process of dropping centrally procured assets for CY 2017 and below.

Management commits to trace, analyze and reconcile unaccounted balance of PPE.

On the non-maintenance of PPELC, AD have submitted additional four PPELC on May

18, 2018 – a total of 10 PPE accounts as of June 1, 2018. Due to the manual preparation
of PPELC and considering voluminous PPE items (i.e 50-2,528 for OSCA alone), and
Computer application capacity (non-responding MS - Excel), AD is having a hard time
to comply. However, on-going creation/update of PPELC is done daily by concerned
personnel. AD also maintain separate report that is the basis of computation of
depreciation expense which can be use as an alternative record in reconciliation with
AMD.
NCR ROP agreed to implement the audit recommendations as to the conduct of physical
inventory and reconciliation.

DO Quezon City committed to secure COC for the 150 projects to facilitate
reclassification of accounts. The SDO thru the Infrastructure Development Unit will
prepare schedule of projects indicating the dates of progress billings and completion.

In DO Pasig City, Division Memorandum No. 42 s 2018 was issued on March 12, 2018
providing the Process Flow to be observed in the recording and physical checking of
PPE. DO Accountant explained that the amount P141,546,686.78 was reclassified to
Other Asset account because these were fully depreciated school buildings. The
Management admitted that cost and year of acquisition of several school buildings can
no longer be traced, thus, appraisal of the existing buildings are now being considered.

DO Marikina City Division Engineer explained that the DO already requested the
DPWH to provide the list of schools constructed under the latter’s supervision. However,
the DPWH can no longer provide documents for the same.
CAR ROP Management instructed the Property Officer to secure the documents of all
properties transferred and/or being used by schools and Division Offices so that the
affected accounts could be dropped from the books.

DOs Ifugao and Benguet agreed to implement the recommendation. DO Apayao

informed that the Delivery Receipts on the DCP equipment were still being reconciled
for the issuance to the DO of the Property Transfer Report, while other concerned DOs
and schools agreed to implement the recommendations.
RO I ROP is in the process of crafting a resolution wherein if approved, unserviceable
property will be auctioned or will be subjected to public bidding.

DO La Union Management replied that they will take the audit recommendations
positively and that this time they will conduct physical inventory of property.
DO San Fernando City agreed with the Audit Team to conduct the physical inventory
taking Emphasis is hereby made that most of the balances have been dormant.Also, they
252
 CO/
Management’s Comments
Region
agreed that adjustments should be done in the books of accounts and have the Supply
Officer to maintain and reconcile their records on the said PPE accounts.

DO Ilocos Norte commented that the Division is currently conducting inventory of

property.

DO Laoag City mentioned that they will revisit the guidelines on recognition and
derecognition of PPE assets. Furthermore, the Division Accountant and the Division
Supply Officer have signified their willingness to reconcile their respective records.

DO Batac City committed to submit the Report of Physical Count of Plant, Property and
Equipment (RPCPPE) conducted for CY 2017.

DO Ilocos Sur replied that the preparation of such reports was in process but delayed
due to the upcoming 2018 PALARONG PAMBANSA wherein meetings and
conferences were being attended and held.

DO Vigan City admitted that the Agency had fallen short on the establishment of strong
internal control even at least with the recording, reconciliation and physical count of PPE
due to capacity issues. They again committed that a team of technical personnel will be
created to formulate necessary measures to ensure compliance.

DO Candon City committed to adhere with the Audit Team’s recommendations. DO

Accounting Unit also committed to account and to follow-up again to the Central Office
documents needed in the transfer of records and eventually for recording in the financial
statements.

DO Pangasinan I commented that inventory-taking is ongoing. Management

commented that JEV has been prepared dated January 31, 2018, thus, the correct amount
of Construction-in-Progress has been properly booked.

DO Pangasinan II commented that the absence of Physical Count of PPE is due to time
and personnel constraints. Conducts PPE accounting on a sampling basis only since it is
a large division. It also commits itself to undertake the necessary activities related to
proper disposal of properties.

DO Dagupan City committed to enforce the physical count of inventory items and all
PPE accounts. The Management will also instruct Division Accountant to make initiative
to draw a JEV to reclassify the costs of the completed projects to the School Building
account in order to present fairly the balance of the said account and the Construction in
Progress – Agency Asset account. It will also have its accountant coordinate with DO
Engineer for the application of Relief from Accountability with COA.

DO San Carlos will have the Accountant and DO Officials coordinate with the proper
authority for the proper turn-over of the school building.

DO Urdaneta Management committed to comply with the audit recommendation.

RO II ROP, DO Cagayan and IUs, DO Cauayan City, DO Ilagan City, DO Isabela and IUs,
DO Nueva Vizcaya, Gosi National High School under DO Tuguegarao City all agreed
to create an Inventory Committee to conduct a physical inventory of the properties to
establish the existence and condition of the PPE. After the conduct of the physical
inventory, reconciliation of preperty and accounting records for the PPE accounts shall
be undertaken.

253
 CO/
Management’s Comments
Region
DO Batanes Proper, BNSHS and INAHS, Cauayan City NHS under DO Cauayan City,
DO Santiago City Proper, Santiago City NHS and Rizal NHS, DO Quirino Proper,DO
Tuguegarao City Proper, Cagayan NHS and Linao NHS agreed to comply with the
recommendations for the reconciliation of the PPE accounts.

DO Cauayan City will assign a responsible person to facilitate the titling of the lots in
the name of the agency for proper recording in the book of accounts.

DO Santiago City Management mentioned that they will propose the titling of the 32
school lots under the Special Education Fund.

DO Nueva Vizcaya Management is on the process of acquiring ownership of the lot

through Special Patent at the Office of the DENR as the school lot being occupied by
DepEd SDO Vizcaya is a public land.

IUs under DO Ilagan City, DO Isabela, DO Tuguegarao City requested the Property
Transfer Receipt (PTR) from the Supply Officer and will record the IT Equipment in the
books of accounts.
RO III ROP specifically required the Accounting Division and Asset Management Division to
expedite the reconciliation of PPE accounts especially buildings and motor vehicles.
Moreover, Management commented in the Exit Conference that the land being in the
name of the Province of Leyte has hampered the effort of the department for titling.
However, the Agency exerted effort to make negotiations with the Provincial
Government to issue a Deed of Conveyance in favor of DepEd to establish its ownership.

Management commented that a dentist was already hired and he will be responsible and
accountable for the operation of the MDV. Management also commented that to
maximize the use of the MDV, it will be offered for use to different Division Offices
subject to the approval of the Regional Director and upon renewal of the GSIS
Comprehensive Insurance.

DO Angeles City assured the Audit Team the following: a) the current Bookkeeper will
closely coordinate with the current Supply Officer so that he would be able to trace and
prepare the PPELC of the current list of PPE and conduct a periodic physical count;
b) they will exert effort to review the available documents for property, plant and
equipment and facilitate the recording of allowance for depreciation in the books; and
c) that they will comply with the recording of items with acquisition cost of less than
P15,000.00 as semi-expendable properties.

DO Aurora said they are also in the process of reconciling PPE as to corrected amount.

DO Cabanatuan City thru Division Memorandum No. 170 s. 2017, has already created
an Inventory Committee to facilitate inventory of PPE to comply with the audit
recommendations and assured the the Audit Team the following: a) the accounting office
has already booked school building items upon receipt from COA of the list of buildings
to be booked; b) Accounting Unit already coordinated with the Division Engineer to
facilitate for the compliance on the appraisal of land which titles are already under the
Division or school, as well as those which have deed of donations in favor of the division
or school; c) reorientation regarding proper disposal; and d) monthly depreciation shall
be recognized starting January 2018.

DO San Fernando Pampanga responded that they will conduct annual physical count of
all PPE.

254
 CO/
Management’s Comments
Region
DO Gapan Management assures the Audit Team the following: a) follow-up the transfer
JEVs of all completed School Building from DPWH and transfer them in the books of
the Division; b) comply with the recommendation to record the acquisition of service car
in the books of the School; and c) recognize depreciation expense on a monthly basis.

DO Nueva Ecija Accounting and Property Office will reconcile their records and adhere
to the corrective measures. They will also adhere with the recommendation to coordinate
with the 1st and 2nd District Offices of the DPWH for the recording of the transferred
school buildings.

DO Olongapo City agreed to implement the recommendations pertaining to

reconciliation and physical count.

DO San Jose City and DO Science City of Muñoz already created an Inventory Team
who will perform periodic physical count of all PPE of the Divisions. Maintenance and
reconciliation of records between the Supply and Accounting Unit will also be observed.
They assured the Audit Teams that they will reconcile the with the DPWH for the
completion of all the required supporting documents and that depreciation expense shall
be prepared on a monthly basis.

DO Science City of Muñoz Management already created an Inventory Team who will
perform periodic physical count of all PPE of the Division and that reconciliation of
records will be regularly done. For purposes of reconciliation of school buildings, they
will make representations to their DPWH counterpart regarding projects which were not
yet transferred to their end. Also, they will recognize depreciation expense on a monthly
basis in accordance with the GAM.

DO Zambales stated that school buildings and structures turned over by the DPWH
remained unrecorded in the accounting records for the reason that the Certificate of
Completion presented to the DO were certified by School Heads which should have been
signed by the SDS in accordance with DepEd Order No.1, s. 2010. Management will
conform to the guidelines to enable recognition of the assets.
RO IV B ROP commented that the Supply Officer conducted the actual physical count of PPE and
that the respective reports were submitted to the Office of the Auditor. They assured the
Team that actual physical count of PPE and Inventory for the ensuing year will be
scheduled on an earlier date.

Management of the Divisions of Romblon and Occidental Mindoro are amenable to the
recommendations.
RO V In ROP, they already recorded the annual depreciation on PPE for CY 2017. Assurance
was made that the required monthly computation of depreciation will be implemented
this CY 2018.

In DO Catanduanes, Agency Officials concerned promised to complete the inventory

taking which is in progress as of January 2018 and committed to submit the report upon
completion of the undertaking. Also, they committed to exert all efforts to locate the
report of the previous Accountant and to make necessary adjustment in the books for
past years’ unrecognized depreciation.

In DO Camarines Norte, Management assured that the Audit Team will form an
Inventory Committee and thereafter conduct a thorough physical inventory of all its
properties. As to the capitalization of properties below the threshold, Management
responded with the observation and immediately complied by reclassifying the items

255
 CO/
Management’s Comments
Region
mentioned from a normal Property and Equipment account into a Semi-Expendable
Equipment account as suggested.

In DO Legazpi, Management made an assurance that the recommendation will be

complied this ensuing year.
RO VIII DO Tacloban City committed that for CY 2018, the Management will heed to the advice
of the Audit Team to maintain an updated property ledger cards.The significant
difference was due to error in recording the of CIP account. Necessary adjustments will
be made this 1st quarter of 2018.

DO Baybay City responded of their willingness to create an Inventory Committee to

regularly conduct a physical count of PPE, to maintain hard copy of PPELC instead of
soft copy to record promptly the acquisition, description, custody, estimated useful life,
depreciation, impairment loss, disposal and other information about the asset. Likewise,
the Supply Section shall maintain property cards for PPE to account for the receipt and
disposition of the same.

DO Southern Leyte will adhere to the audit recommendation to conduct a physical

inventory on the Agency’s PPE as well as Inventories.

DOs Maasin City, Samar Division and Sta. Margarita NHS, Northern Samar Division
and Lorenzo S. Menzon Agro-Industrial School gave assurance to follow the audit
recommendations.

Maasin National Vocational High School Property Custodian has other teaching duties
aside from being a custodian. He disclosed that these are the deterrents on doing his
assigned tasks efficiently and effectively.

DOs Catbalogan City and Calbayog City agreed to create an Inventory and Inspection
Committee that required in conducting periodic actual inventory of PPE and to reconcile
their respective property and accounting records.

Allen National High School stated they already created a School Inventory Committee
responsible for the conduct of actual physical inventory of all properties every end of the
year.

DO Maasin City replied that a new Schedule of Land Valuation – Elementary and
Secondary Schools is already made.
RO IX DOs ZDS, Pagadian, Sibugay, Isabela City, Zamboanga commited to implement the
recommendations.
RO XI ROP Finance Officer committed to exert effort to prioritize retrieval of old files in 2018
to come up with schedules that will serve the purpose of reconciliation of accounting and
property records.
RO XIII ROP replied that a Memorandum was issued to complete the reconciliation by June 30,
2018. It assured that the Ledger Cards will be updated by June 30, 2018. Regarding PPE
items below capitalization threshold of P15,000.00, Management commented that the
Accounting Unit was able to issue the Journal Entry Vouchers (JEVs). However, per
schedule it was not dropped. It is assured that this concern will be accomplished by June
30, 2018. On completed projects still recorded in the CIP account, Management replied
that a memorandum was issued as early as May 2017 establishing the Composite Team.
The Acceptance Reports are ready for signature by the Regional Director. As soon as
said reports are signed, the documents will be submitted to the Accounting Unit for
reclassification/adjustments of accounts.
256
 CO/
Management’s Comments
Region

DO Surigao del Norte will direct the personnel concerned to observe the specific
guidelines in the deployment of IT equipment to its intended recipients and ensure that
the distribution of laptops and desktop computers are duly supported with the
corresponding Property Acknowledgment Receipt.

DO Surigao City will strengthen the proper coordination between the Supply and
Accounting Units so that properties will be recorded properly in the books of the Agency
and reconciliation of books of accounts will be done at least quarterly. They commented
that the main reason for the failure of the Accountant to record the transferred ICT
equipment from DepEd Central Office is that she was not formally informed of the said
transfer of equipment and had not received copies of documents to support the journal
entry to be taken up in the books of the Agency. However, to correct the deficiency, the
Accountant was directed to retrieved copies of documents from the Supply/Property
Custodian for recording purposes.

DOs Tandag City and Bislig City committed to comply with the recommendations.

Unreliable Liability Accounts

17. The Liability account balances are not reliable due to: a) recognition of invalid
claims pertaining to undocumented payables of P107,318,863.108 and
dormant/long outstanding payables of P69,986,894.98, which should have been
reverted to Accumulated Surplus pursuant to Section 98 of PD No. 1445; b) net
understatement of the account by P3,704,818.43 due to erroneous
recording/omission of entries; c) misclassification of Liability Accounts; and
d) liability account balance in RO III not supported by subsidiary ledgers to
validate existence.

17.1 Section 6.1.2 of DBM Circular Letter No. 2013-16 dated December 23, 2013
provides that “obligations, for which goods/services/projects have not yet been
delivered/rendered/completed by the creditor and accepted by the NGA/OU,
shall not be recorded as accounts payable at the end of the year. These
obligations shall only be recognized as accounts payable on the date of
delivery/rendition/completion and acceptance of the goods/services/projects,
regardless of the year of incurrence of such obligations.”

17.2 Likewise, Section 37, Chapter 2, Volume I of the GAM states that, “no
obligation shall be certified to accounts payable unless the obligation is
founded on a valid claim that is properly supported by sufficient evidence and
unless there is proper authority for its incurrence.”

17.3 Section 98 of PD No. 1445 provides that an agency, upon notice to the head of
the agency concerned, may revert to the unappropriated surplus of the general
fund of the national government, any unliquidated balance of accounts payable
for two years or more and against which no actual claim, administrative or
judicial, has been filed or which is not covered by perfected contracts on record
xxx.
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17.4 The Liability accounts in CO and eight Regions have an aggregate year-end
balance of P22,958,069,644.87. Breakdown are as follows:

Balance as of
CO/Region Operating Unit
December 31, 2017
CO Office of the Secretary 19,734,779,867.08
NCR NCR ROP, Dos Quezon City and Manila City 860,600,265.99
CAR Kalinga 6,286,848.71
RO II DO Batanes and 4,399,974.66
Cauayan City NHS 79,566.53
RO III Dos San Jose del Monte, City of Malolos, Bulacan, Nueva 135,573,114.28
Ecija, Pampanga, Science City of Munoz, Cabanatuan City,
Guiguinto National Vocational HS, San Miguel National
HS, Dr. Felipe de Jesus National HS
RO V DOs Legazpi City, Tabaco City, Albay 1,565,491,530.54
RO VIII ROP 105,509,537.47
RO IX ROP, DOs Dapitan City, Sibugay, Zamboanga de Sur, 452,982,882.80
RO XI ROP 92,366,056.81
Total 22,958,069,644.87

17.5 Audit of the Liability accounts disclosed that the payables are either invalid,
dormant, undocumented, with no specific creditors or with deficient/erroneous
schedules, with erroneous entries resulting in net overstatement of the
balance/abnormal balances and/or with unreconciled GLs and SLs balances as
discussed below.

a.) Invalid claims totaling P107,318,863.108 are undocumented/without

specific creditors.

CO/Region/OU Payable Account Amount Observations/Deficiencies

NCR
ROP, Manila, Accounts Payable 20,155,521.54 No specific names of creditors of
Quezon City which P1,388,174.04 was captioned
only as various creditors and
P2,826,000.00 as 16 Schools Division
Offices. Also, the payable was not
supported with progress billing and
contract.
Other Payables 14,005,549.26
Due to NGAs 50,931.56 Unsubstantiated balance due to
absence of subsidiary records.
CAR
Kalinga Accounts Payable 2,570,791.19 Not supported by any contract,
statement of work accomplished,
inspection report, obligation request,
or any other document.
RO V
Legazpi City Accounts Payable 1,907,001.31 Audit of liability accounts disclosed
Due to Offcers and 1,059,732.88 that the payables are either invalid,
Employees dormant, undocumented and with no
specific creditors

258
 CO/Region/OU Payable Account Amount Observations/Deficiencies
Tabaco City Due to Officers and 1,200,000.00 The amount is under the name of the
Employees Schools Division Superintendent and
not duly supported with valid
documents and purportedly for the
unpaid claims for Personnel Services
(PS) for CY 2017.
RO VIII
ROP Accounts Payable 2,475,799.72 Not supported with valid claims or
transaction documents that would
warrant the recognition of liability
accounts
RO IX
Zamboanga del Due to Officers and 61,917,642.00 Inadequate supporting documents.
Sur Employees The only documents attached and
presented to the Audit Team as basis
in recording such pertinent
obligations were Letter Request,
Obligation Request Status (ORS),
Purchase Request (PR) and the
School Operating Budget (SOB).
RO XI
ROP Accounts Payable 1,975,893.64 Not supported with Charge Invoice or
Delivery Receipt to attest rendered
service or goods are accepted
Total 107,318,863.10

b.) Payable accounts of P69,986,894.98 have been dormant/long outstanding

for two years or more.

CO/Region/OU Payable Account Amount Observations/Deficiencies

CO Accounts Payable 9,641,190.00 Already aged more than two years with no
feedback from proponents of the projects to
determine the status of compliance to the
contract or if already due for termination.
CAR Due to Officers and 130,241.58 Carried in the books since 2011 with no
DO Kalinga Employees subsidiary ledgers, schedules or other
records on this account.
RO II Accounts Payable 4,300,688.93 The accounts have been outstanding for
DO Batanes Due to RO more than one year to seven years and the
Due to Officers and 69,930.81 Management is still searching for
Iybayat NAHS Employees documents or records to establish validity
of liabilities.
Due to GSIS, Due
to Philhealth

Due to NGAs

Due to BIR

Sabtang NSF Other Payables 29,354.92

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CO/Region/OU Payable Account Amount Observations/Deficiencies
Cauayan City Other Payables 79,566.5 Not supported with subsidiary ledger,
NHS undocumented and dormant/outstanding for
more than two years resulting in the
overstatement of the liability account
RO III

DOs Science Accounts Payable 2,184,092.38 Past due account remained dormant for
City of Munoz three years due to the failure of the
Accounting Division to maintain subsidiary
ledgers.
Accounts Payable 1,075,770.77
Cabanatuan Due to Officers and 44,273.19 Payment of salary differentials, step
City Employees increment and Proportional Vacation Pay
Nueva Ecija remained outstanding in the books for over
two years.
RO V Accounts Payable 52,065,861.27 Unreverted payable accounts aged two
DO Albay years or more
RO IX
Dapitan Accounts Payable 365,924.63 Unpaid obligations aged two years and
above. Management could not present any
supporting document.
Total 69,986,894.98

c.) There were erroneous recording/omission of entries which resulted in net

understatement of the Liability accounts by P3,704,818.43.

Effect on the
Payable account Liability account
CO/Region/OU Observation/deficiencies
affected Under(Over)
stated
CO Balance for Lot 9 – Region VII was already Accounts Payable (1,428,850.00)
paid but the same was still incorporated in
the AP schedule.

Expenses to be incurred in CY 2018 were Accounts Payable (59,235.54)

already recorded in the A/P
NCR
ROP-NEAP Unrecorded payables of NEAP to the Multi- Accounts Payable 17,519,309.19
Purpose Cooperative of NCR.

Manila Erroneous set up of payables for goods/ Other Payables (3,281,440.10)

services/projects not yet
delivered/rendered/ completed

Quezon City SL balances that were excluded from the Due to NGAs (8,260,344.60)
FS; inclusion in the FS and SL of the
account Due to National Treasury;
erroneous entry in taking up liquidation of
cash advances; and errors in taking up grant
of DSWD SBFP for the Search for
Riceponsible Champions from Philippine

Rice Research Institute of (P500,000.00).

260
 Effect on the
Payable account Liability account
CO/Region/OU Observation/deficiencies
affected Under(Over)
stated
Prior years’ transactions of the DOP that Other Payables (3,682,074.38)
were excluded in the FS; and CYs 2016 and
2017 transactins which should have been
abnormal balances but were converted to
credit balances thru an unrecorded
adjustment to Accumulated Surplus/Deficit
for consolidation purposes
RO III
Nueva Ecija Stale checks which remained unnegotiated Due to Officers and (95,544.80)
for over two years were not cancelled. Employees

Pampanga Claims already paid/recorded twice. Accounts Payable (1,892,193.88)

RO VIII
ROP Erroneous recording of DVs in the Accounts Payable (23,832.24)
Schedule of Accounts Payable
RO IX
Dapitan With the recognition of the said liabilities, Accounts Payable (2,500,612.08)
the related expenses have been recorded in
the books of accounts even if these were not
yet incurred
Total 3,704,818.43

d.) Misclassification to Accounts Payable were noted as disussed below.

CO/Region Observations/deficiencies Amount Should be
CO Retention fee deducted to supplier still 465,009.60 Guaranty Security
remains in the Accounts Payable for over 3 Deposit Payable
years despite the payment of the amount
due in CY 2013.
RO III Error in recording to AP. 2,172,014.26 Due to Officeres
Pampanga and Employees
RO V Erroneous inclusion to AP 61,086,378.85 Due to BIR
DO Albay
Total 63,723,402.71

e.) Moreover, in RO III, unreconciled balances between the GL and SL of the

Accounts Payable and Due to Officers and Employees as of December 31,
2017 resulted in a variance of P8,026,607.48 and P193,925.00,
respectively.

17.6 We recommended that the Management:

a. recognize liability on the date of delivery/rendition/completion and

acceptance of the goods/services/projects, regardless of the year of
incurrence of such obligations in accordance with the Section 37,
Chapter 2, Volume I of the GAM, and DBM Circular Letter No. 2013-
16 dated December 23, 2013;

261
 b. revert all outstanding balances without valid claims as well as payables
aging two years or more and against which no actual claim,
administrative or judicial, has been filed or which is not covered by
perfected contracts on record in accordance with Section 98 of PD No.
1445; and

c. perform account analysis and prepare the necessary adjusting entries

to reflect the accurate balances of the affected accounts for fair
presentation in the financial statements.
17.7 Management commented, thus:
Region Management’s Comments
NCR ROP
Management already prepared an adjusting entry per JEV No. 2018-02-556 dated
February 28, 2018 to adjust the balance of Accounts Payable for the creditor Cooperative
de Muebles Filipinas which pertains to the liquidated damages incurred in CY 2012. All
other audit observations were duly noted by the Management particularly the Accounts
Payable by RELC NEAP.

Quezon City
The Accounting Unit will carefully review the noted understatement of the account Due
to NGAs, make reconciliation as soon as possible to reflect the correct balances and use
the appropriate entries in recording transactions.

The Accounting Unit committed to carefully review and reconcile the account balances
of Other Payables before consolidation to ensure accuracy of consolidated balances and
that it will exercise due diligence in the preparation of financial reports.

Manila
Management usually coordinates with the end user at the time the goods and services are
accepted or rendered and establishes that there is a valid claim once the Statement of
Account/Bills for payments are received and strictly monitors the supporting documents.
For any undocumented/invalid claims, Management will comply to the Audit
Observation Memoranda for the reversion thereof to Accumulated Surplus/Deficit.
CAR The Accountant of DO Kalinga agreed to adjust the payables account. The Budget
Officer, however, asserted that obligations amounting to P1.16 million were valid.
RO II Batanes
Management agreed to exhaust all remedies to trace/gather the documents of the recorded
payable accounts and to request for write-off for the unreconciled differences/balances.

Cauayan City NHS

Upon review of the 2015 Electronic Financial Reporting System or eFRS, it was found
out that the said payable amounting to P79,566.53 is a forwarded balance from CY 2014.
Various actions were initiated to trace the said payable but failed to find the composition
of this account, thus leaving it to the Payable Account. The Management will comply
with the audit recommendation to revert the Other Payable account to Accumulated
Surplus.
RO V DO Tabaco City
Management promised to comply with the recommendations.

DO Legazpi
Management reasoned out that they recorded the payables with documentation. If found
out
262
 Region Management’s Comments

during the processing of transaction that claims still lack other necessary documents, they
usually return all the documents to the claimants for compliance, but some claimants did
not return back the documents. Verily, only claims with complete documentation are
being paid. With the above recommendations, Management is very much willing to
comply wtih the recommendation on making the necessary adjusting entry in CY 2018.
RO VIII ROP Accountant assured the Team that the outstanding Accounts Payable of 2015 and
2016 will be dropped, while the 2017 payables will still be validated as to existence of
documents, and will consequently draw the necessary adjusting entries to reflect accurate
balances of the payable accounts.
RO IX Dapitan
Management of DO-Dapitan City gave assurance that they will comply with the rules
and regulations of the Commission on Audit in consonance with the existing reportorial
requirements of the DBM and timely utilization of funds. They also explained that the
Accountant still has reservation to hasten the reversion of the claims of Stars and Stripe
Construction and Westmin Construction which were recorded in 2013. Payable to Mr.
Benedick Inoferio amounting to P5,000.00 was already reverted to accumulated surplus.

Sibugay
The Management of DO-Sibugay commented that to correct the erroneous entry made in
2017 and per recommendation, a journal entry will be made to reflect the correct balance
of the accounts. To avoid the error from recurring, the accounting personnel in-charge of
remittances is required to submit a monthly report of the SL of the account. They are
assigned to handle and to be able to check with the monthly trial balance to detect
immediately errors committed and make immediate adjustments.

Zamboanga del Sur

Management commented that it has been a practice of DO- ZDS to obligate whenever it
runs out of cash and that there are still requests of school MOOE, SBFP and other
programs from the various schools at the end of the year which are duly supported with
SOBs and Work and Financial Plan (WFP). Management assumed that all those items
embodied in SOB and WFP are deemed incurred/rendered and payments are already due
to suppliers/payees of the schools. Complete supporting documents are attached upon
submission of liquidation reports. Upon pre-audit of the liquidation, Management
ensures that all transactions had transpired in the year wherein such payables were
recorded. According to Management, if the finding of the Audit Team is really valid and
for the Management to also have sound internal control over recording of obligations,
the DO- ZdS will no longer accept request from schools without the required
documentation and eventually, only those transactions that are submitted to the Office
with complete and valid supporting documents will be accepted, obligated and recorded
as payables in the next year-end.
RO XI During the Exit Conference, the Accountant III committed to submit a list of valid
creditors and suppliers by May 2018. The Team also appreciated that the Finance
Division has already submitted the list of creditors for the AP account prior to the exit
conference, which leaves the Due to NGAs and Due to GOCCs to be submitted on May
2018. The Accountant III also informed that they already adjusted the account affecting
the adjustments identified. As to the beginning balances, the Accountant III committed
to ask a certification from GSIS citing that they no longer have previous year balances
to be able to drop the beginning balance by May 2018.

263
Disbursements lacking proper documentation or wanting legality of expenditures

18. Total disbursements of P251,672,610.30 were found to be contravening to the

existing government rules and regulations, while total amount of P422,275,649.24
were not supported with adequate documentation, and P108,674,503.42 deviated
from the proper standard process/procedures on disbursements, thus, casting
doubts as to the validity and propriety of expenditures.

Section 17, General Provisions of the GAA of CY 2017 provides that,

Government funds shall be utilized in accordance with the appropriation
authorized for the purpose and comply with applicable laws, rules and
regulations, such as the following:

Laws, Rules
and
Expenditure Specific Requirement/Provision
Regulations
References
All type Section 4, PD Disbursements or disposition of government funds or property shall
No. 1445 1) invariably bear the approval of the proper officials, 2) claims
against government funds shall be supported with complete
documentation, (3) all laws and regulations applicable to financial
transactions shall be faithfully adhered to.
All type Section 36.f Submission of proper evidence to establish validity of the claim.
of Chapter 6, The Head of the Requesting Unit shall certify on the necessity and
Volume I of legality of charges to allotments under his/her supervision as well
GAM for as the validity, propriety and legality of supporting documents. All
NGAs payments of government obligations and payables shall be covered
by DVs/Payrolls together with the original copy of the supporting
documents which will serve as basis in the evaluation of
authenticity and authority of the claim. It should be cleared,
however, that the submission of the supporting documents does not
preclude reasonable questions on the funding, legality, regularity,
necessity and/or economy of the expenditures or transactions.
Overtime CSC and The rendition of overtime services shall be authorized only when
Pay DBM Joint extremely necessary, such as when a particular work or activity
Circular No. cannot be completed within the regular work hours and that non-
02 dated completion of the same will: a) cause financial loss to the
November 25, government or its instrumentalities; b) embarrass the government
2015 and as due to its inability to meet its commitments; or c) negate the
adopted by the purposes for which the work or activity was conceived.
Department in
DepEd Order The payment in cash of overtime services through Overtime Pay
No. 30, dated may be authorized only in exceptional cases when the application
May 19, 2016. of CTO for all overtime hours would adversely affect the
operations of the agency.

DBM Budget Overtime work should be avoided by adequate planning of work

Circular No. activities.
10
Hiring of COA Circular Updated Guidelines for the Prevention and Disallowance of
Consultant/C No. 2012-003 Irregular, Unnecessary , Excessive, Extravagant and
ontract of dated October Unconscionable Expenditures.
Service 29, 2012

264
 Laws, Rules
and
Expenditure Specific Requirement/Provision
Regulations
References
Section 1 of Individual Contract or Services/Job Order refers to employment as
Civil Service follows:
Commission
Resolution a) The contract covers lump sum work or services such as
No. 020790 janitorial, security, or consultancy where no employer-
employee relationship exists between the individual and the
government;
b) The job order covers piece work or intermittent job of short
duration not exceeding six months and pay is on a daily basis;
c) The contract of services and job orders are not covered by Civil
Service law, rules and regulations, but covered by COA rules;
d) The employees involved in the contract or job order do not
enjoy the benefits enjoyed by the government employees, such
as PERA, ACA and RATA; and
e) Services rendered thereunder are not considered as government
service.
Hazard Pay DBM and Hazard pay of public health workers effective January 1, 2013 shall
DOH Joint be based on the degree of exposure to high risk or low risk hazard
Circular No. 1 and the number of workdays of actual exposure over 22 days in a
s, 2012 dated month as:
November 29,
2012 Level of Risk
High Risk Low Risk
Actual Exposure
12 or more days 25% of Monthly Basic 14% of MBS
Salary (MBS)
6 to 11 days 14% of MBS 8% of MBS
Less than 6 days 8% of MBS 5% of MBS
Monetization Section 22-23 Monetization for a minimum of 10 days, provided that at least five
of Rule NIR days is retained after monetization and provided further that a
of the Civil maximum if 30 days may be monetized in a given year.
Service
Omnibus Monetization of 50 percent of vacation/sick leave credits may be
Rules allowed for valid and justifiable reasons subject to the discretion of
Implementing the Agency Head and the availability of funds.
Book V of EO
292
Specific COA Circular The Circular provides the documentary requirements for common
expenditure No. 2012-001 government transactions such as:
dated June 14,
2012 Procurement through alternative modes to include, but not limited
to: Duly Approved Purchase Order; Approved Purchase Request;
Price Quotations from at least three bonafide reputable
manufacturer/ suppliers/ distributors; and/or Abstract of Canvass

Claims for last salary: Clearance from money, property, and legal
accountabilities, and duly approved DTR

Monetization of leave credits: Approved leave application (ten

days) with leave credit balance certified by the Human Resource
Office; Request for leave covering more than ten days duly
approved by the Head of Agency

265
 Laws, Rules
and
Expenditure Specific Requirement/Provision
Regulations
References
Monetization of 50 percent or more: Clinical abstract/ medical
procedures to be undertaken in case of health, medical and hospital
needs; Barangay Certification in case of need for financial
assistance brought by calamities, typhoons, fire, etc.

RATA payment: Certification that the official/employee did not

use government vehicle and is not assigned any government
vehicle; and Certificate or evidence of service rendered

Telephone/Communication Services payment: Statement of

Account, Invoice/Official Receipt, Certification by Agency Head
or his authorized representatives that all National Direct Dial
(NDD), National Operator Assisted Calls and International
Operator Assisted Calls are official calls.

Liquidation of travel expenses for Local Travel: Paper/electronic

plane, boat or bus tickets, boarding pass, terminal fee; Certificate
of Appearance/Attendance; Copy of previously approved itinerary
of travel; Revised or supplemental Office Order or any proof
supporting the change of schedule; Revised Itinerary of Travel, if
the previous approved itinerary was not followed; Certification by
the Head of Agency as to the absolute necessity of the expenses
xxx

Liquidation Report: Reimbursement Expense Receipt (RER); OR

in case of refund of excess cash advance; Certificate of Travel
Completed; Hotel room/lodging bills with official receipts xxx

a.) Various disbursement not in accordance with existing rules and

regulations

For CY 2017, disbursements totaling P251,672,610.30 incurred in DepEd

Central, Regional and Division Offices and Schools were found not adhering
to pertinent laws, rules and regulations, as follows:

CO/
DO/IUs Deficiencies Amount
Region
1.) Payment for overtime services
CO Payment of overtime services not in accordance with Civil 38,200,451.87
Service Commission (CSC) and Department of Budget and
Management (DBM) Joint Circular No. 02 dated November
25, 2015
CAR Kalinga Overtime pay of nine employees of Pinukpuk Vocational 88,308.76
School without authority and supporting documents
RO II Isabela Overtime time paid to employees who incurred 77,034.07
late/undertime on regular workdays
RO VIII ROP Compensatory Overtime Credit were granted to 35 personnel 87,203.12
even if said employees were on travel status as evidenced by

266
 CO/
DO/IUs Deficiencies Amount
Region
their travel claims attending the Palarong Pambansa held in
Antique last April 2017.
Calbayog, Overtime pay was granted to some employees despite lacking 1,815,286.88
Borongan, in supporting documents and which activities performed
Northern involved regular/routine duties.
Samar
2.) Hiring of Consultant/Contract of service/Job Order Contract
CO N/A DepEd-CO incurred expenses for the salaries of hired 120,908,062.5
consultants, contract of service personnel, the incurrence of 5
which was not founded on necessity and reasonableness, and
had apparently defeated the objective of the rationalization
plan of the government.
RO XIII RO The salary given to the newly hired JO Personnel acting as 35,693.00
the Public Information Officer is the same as that of the
Administrative Officer V, SG 18, Step 1, holding the previous
position amounting to P35,693.00, which is deemed
excessive considering the employment status and
qualification of the concerned JO as compared to the present
rates of JO employees ranging from P350.00 to P736.00 per
day depending on the individual’s length of service.
3.) Payment for travelling expenses/Attendance in Trainings and Seminars
RO I Batac Expenses were taken from the Regular MOOE for the conduct 1,077,624.64
City of 3rd Division ICT Congress held on March 17-18, 2017
which was found to be unreasonable due to the lack of legal
basis or budget and non-conformity with DepEd Order DO
32, s. 2011 dated March 31, 2011
Dapitan, Various purchases of equipment and repairs undertaken by 3,602,861.88
Urdaneta different Senior High Schools (SHS) of the Division Offices
City of Dagupan City and Urdaneta City amounting to at least
P15,000.00 per item, were charged against their Maintenance
and Other Operating Expenses (MOOE)
RO VIII Calbayog Thirty percent of the monthly school MOOE allocation to 181 4,424,174.04
City Non-Implementing Units under the DO amounting to
P4,424,174.04 were collected to cover expenses of the
Eastern Visayas Regional Athletic Association (EVRAA),
contrary to DepEd Order No. 13 s. 2016 dated March 11,
2016, thus, depriving the schools of the use thereof for their
normal operations.
RO IX Zamboan Procurement for a three day live-in training on Facilitation for 4,039,200.00
ga del School-Based Contextualization of Teaching and Learning
Norte for the K to 12 Curriculum 2016 which funds were taken from
the CY 2016 unreleased school MOOE and is not in
accordance with DepEd Order No. 13 series of 2016, thus,
depriving the beneficiary schools of the use thereof.
RO XI ROP, Attendance of teaching and non-teaching personnel to -*
Davao trainings and seminars conducted by DepEd Regional Office
del XI without Office Order and/or authority to attend issued by
Norte, the Regional Director
Panabo

267
 CO/
DO/IUs Deficiencies Amount
Region
RO XIII ROP Payments of plane fares were exorbitantly higher by 5 percent 511,738.28
to 220 percent compared to the actual plane fares confirmed
from the websites of the airline companies.

Attendance of teaching and non-teaching personnel was not 24,701,111.00

covered with Office Order and/or authority to attend.
Surigao Unnecessary traveling expenses were incurred by several DO 372,400.00
del Sur personnel and District Supervisors for GAD benchmarking
activities held at Tagbilaran City and Cebu City.
Bayugan Traveling expense and room accommodation for the conduct 110,250.00
of personality development of division personnel thru Team
Building Activity held at Samal, Island Garden City of Samal,
Davao del Norte, is found to be excessive.
Zamboan Reimbursements of traveling expenses were not in 154,703.28
ga del accordance with the provisions of EO 298, COA Circular No.
Sur, 2017-001 and GAM Volume II, that define, prescribe
Pagadian documentary requirements and set limits to claims for actual
transportation and travel expenses rendering the
disbursements irregular and excessive.
Surigao Attendance of teaching and non-teaching personnel was not 17,931,851.69
del Sur, covered with Office Order and/or authority to attend issued
Tandag, by the Regional Director and/or the respective SDS.
Bislig
4.) Payment of Representation and Transportation Allowance (RATA)
RO I Dagupan, Unauthorized payment of transportation allowance to Schools 249,375.00
Urdaneta Division Superintendent (SDS) and Assistant Schools
Division Superintendent (ASDS) due to provision of a
government vehicle.
RO VIII ROP Payment of commutable RATA to ROP officials despite: a) 873,000.00
assignment of five motor vehicles under the custody of the
Agency, two of which were directly identified as for use by
the recipients of the allowance; and b) absence of certification
that claimants did not use government vehicle nor assigned
with any government vehicle, thus is contrary to Section 54
of the 2017 GAA and COA Circular No. 2012-001.
5.) Payment of Communication Expenses
CO Unbilled/unpaid excess usage, and inequitable attachment of 210,341.25
accountability/liability over the free cell phone unit included
in the plan
NCR Marikina Unauthorized communication expenses were incurred at 67,840.81
Malanday and Parang NHS due to payment for unauthorized
personnel’s cellphone usage and excess claim from the
allowable rates prescribed in DO Memorandum dated January
24, 2013 and pursuant to DepEd Regional Memorandum No.
209 s 2010.
RO II Isabela Communication Allowance were paid through 985,616.42
and 3 reimbursement, allowance, and prepaid cell cards in varying
IUs amount ranging from P300 to P1,500 monthly to some
officials and employees without legal basis or guidelines.

268
 CO/
DO/IUs Deficiencies Amount
Region
RO III Aurora, Absence of authority/specific guidelines from DepEd CO for 1,587,856.62
Tarlac the payment of cell card allowance to the DOs of Aurora and
Tarlac Province resulted to discretionary claims or grants of
the said benefit, which is not in conformity with DepEd
Office Memorandum dated February 6, 2007.
RO V ROP, Cell card/cell phone plan allowances were granted to officials 1,045,722.54
Albay, and employees without proper authority.
Camarines
Norte and
Ligao
RO VIII Western Grant of the said allowance to selected regular employees of 12,000.00
Samar Hinabangan NHS was without legal basis.
6.) Payment for monetization of leave credits
RO VIII DOs Payment of monetization of vacation leave credits to 434,528.47
Leyte, personnel with insufficient leave credits and incomplete
Boronga documentation.
n City,
Northern
Samar
RO IX Dipolog Payment of monetization of leave credits was not in 959,254.37
accordance with existing regulations.
RO XIII Surigao Monetization of 20 to 50 days leave credits were either not 5,947,713.29
del Norte duly approved by the Agency Head and/or not supported with
the required documents.
Siargao Monetization of leave credits was not in accordance with the 1,075,506.00
Island guidelines and was not duly supported with sufficient and
relevant documents.
Agusan Monetization of leave credits of teaching and non-teaching 1,734,141.68
del Sur personnel of nine IUs for CY 2017 was not in accordance with
the guidelines and was not duly supported with the
documentary requirements.
7.) Payment of Collective Negotiation Agreement (CNA)
RO XIII Surigao CNA were continuously paid to 15 school personnel even if 454,500.00
del Norte already paid by the DO.
8.) Payment of Rice Allowance/Grocery Allowance
RO VIII Western Grant of rice allowance to officials and employees of 442,500.00
Samar Clarencio Calagos Memorial School of Fisheries was
contrary to Section 12 of RA No. 6758 or the Salary
Standardization Law of 1989.
RO XIII Surigao Grocery/Rice Allowance were continuously paid to 17 school 170,000.00
del Norte personnel despite the previously issued NDs relative to the
same allowance for reasons such as absence of legal basis,
irregularity of transactions, and inappropriate charging of
accounts.
9.) Grant of mid-year bonus, clothing allowance, Cash gift, PEI and PBB to JO workers
RO VIII Northern Grant of mid-year bonus, clothing allowance and PBB to JO 82,500.00
Samar workers in violation to Budget Circular No. 2017-2 dated
May 8, 2017 and 2012-1 dated February 23, 2012

269
 CO/
DO/IUs Deficiencies Amount
Region
RO XIII Siargao Mid-year and year-end bonuses, Cash Gift and Productivity 95,305.00
Enhancement Incentive were paid to two JO personnel and
one personnel with casual appointment paid under Provident
Fund
10.) Payment of honoraria for the BAC & TWG
RO VIII Calbayog In DO Calbayog, payment of Honoraria for the BAC & TWG 2,432,941.00
City was excessive and not in consonance with relevant rules. The
officials and employees of DO Calbayog City were granted
with honoraria ranging from P2,000 to P30,000 as Resource
Speakers or members of the TWG involving the conduct of
seminar/trainings relevant to the mandates of their agency.

At DO Southern Leyte, the grant of honoraria was made out

Southern of savings rather than from the proceeds of sold out bidding 1,270,941.00
Leyte documents, thus putting to question the validity as well as
propriety of said claims.
11.) Payment of Power Supply System
RO XIII Agusan Labor cost incurred for the repair and restoration of electrical 69,528.48
del Sur connections is viewed to be unnecessary since the
performance was unsatisfactory. Said expenditure could have
been avoided had the Management immediately availed the
services of ASELCO which is the sole power distributor in
Agusan del Sur. Furthermore, we have observed the
following: a) total disbursements do not coincide with the
approved POW; b) splitting of payment for the procured
materials; c) items purchased relative to the re-wirings were
recorded as expense instead of a PPE account.
12.) Payment of Performance Based Bonus (PBB)
RO VIII Biliran Absence of a guideline on the grant of PBB for the DepEd 883,239.81
employees and officials for Fiscal Year 2015 contrary to
Section 7.1 of COA Circular No. 2012-003 dated October 29,
2012.
RO XIII Surigao FY 2015 PBB was paid without compliance to the individual 1,729,600.00
City eligibility and documentary requirements.
Surigao FY 2015 PBB was paid to 11 retired personnel and one 115,500.00
del Norte personnel with unliquidated cash advance.
13.) Payment of Hazard Pay
RO XIII ROP Hazard pay of the Nutritionist-Dietician for the period May 81,024.46
2016 to August 2017, even though, 59 percent of her working
days were spent in the ROP
Surigao Hazard Pay were paid to teaching and non-teaching personnel 988,000.00
del Norte without complete supporting documents and was charged
NHS (DO against the appropriation for Personnel Services, and booked
Surigao as Salaries and Wages-Regular.
del Norte)
14.) Procurement of Supplementary Reading, Reference and Other Instructional Materials
RO XIII Surigao Centralized procurement of Supplementary Reading, 4,000,000.00
del Norte Reference and Other Instructional Materials sourced out from
schools’ MOOE funds were resorted to by the Division Office
without pertinent documents.

270
 CO/
DO/IUs Deficiencies Amount
Region
15.) Payment Cash Allowances
RO XIII Tandag Payment for allowances on administering various school 39,000.00
examination for CY 2017 were granted to officers and
employees without legal basis.
Bislig No basis for the computation of the amount paid for 91,960.00
orientation allowances, transportation allowance and special
transportation allowance given to the examiners and working
committee’s for administering various examinations within
Bislig City which varied from P150.00 to P800.00.
Surigao No basis for the computation of the amount paid for expenses 199,060.00
del Sur for meals, snacks and transportation given to the examiners
and working committee’s in the form of direct cash
allowances for administering various examinations which
varied from P300.00 to P2,500.00.
16.) Disbursements without appropriate funding
CAR Abra Use of current year cash allocations from the National 178,676.00
Treasury by Northern Abra NHS to pay FY 2015 PBB,
Productivity Enhancement Incentive, CNA and a one-month
bonus, to five employees which were not authorized in the
GAA, and without the covering allotment in violation of
Section 45, Subtitle B, Title I, Book V of the Administrative
Code of 1987, rendering the expenditures irregular as defined
under COA Circular No. 2012-003
17.) Payment of Anniversary Bonus and Medical Allowance
RO IV-B Calapan, Payment of Anniversary Bonus to the officials and employees 3,264,000.00
Marindu of the DO Calapan City and its three IUs in CYs 2016 and
que 2017 and Medical Allowance to employees of Bangbang
NHS, and IU in DO Marinduque were inconsistent with the
rules and regulations. Thus, considered irregular expenditures
that would necessitate the issuance of Notice of
Disallowance.

Payment of medical allowances for CY 2015 and 2017 are

considered irregular as specifically stated under Item 1.8 of 638,403.35
Annex A of COA Circular No. 2012-003 dated October 29,
2012
18.) Payment of Food Expenses
RO IX Zamboan Incurrence of food expenses of the DO in CY 2017 for the 1,125,079.69
ga del entertainment of visitors, celebrations, performance
Norte assessment and other activities of the Division. These
expenses could not be justified especially that top officials of
the Division are receiving monthly representation expenses.
Most of these activities were part of the routinary
management functions which should not entail additional
expenses from the government.
Total 251,672,610.3
0
*Amount not indicated

271
 b.) Disbursements without proper documentation

Results of the post-audit of transactions in the different Offices/Operating

Units for CY 2017 disclosed that various disbursements amounting to
P422,275,649.24 were made even without the necessary supporting documents
in violation of Section 4(6) of PD No. 1445 and COA Circular No. 2012-001
dated June 14, 2012.
CO/
DO/IUs Deficiencies Amount
Region
NCR Quezon City Errors/omissions and unsubstantiated transactions of -*
the Balingasa HS for the period January to July, such
as: a) payments were not supported with approved
disbursement vouchers (DVs) and supporting
documents; b) LDDAP-ADA payments of security
services and some personnel benefits in the name of an
employee instead of the service provider and employee
claimants without proofs of receipt.
Marikina Issuance of 10 checks to the Marikina HS Disbursing 818,404.23
Officer to reimburse accumulated transactions ranging
from P33,825.47 to P160,041.74 per check without
specific purpose.
Mandaluyong Unsupported disbursements in several IUs due to -*
and Marikina laxity of officials in the discharge of their financial
responsibilities over disbursement of government
funds.
RO II NEAP-Fund Cash advances under the National Educators Academy 320,837.64
of the Philippines Fund 106 granted to Special
Disbursing Officers for the payment of salaries and
extra day services of job order employees were not
supported with the necessary documents.
339,279.80
Cash advances for payment of extra day services or
overtime to job order employees has no legal basis
resulting in the doubtful validity of the transactions.
ROP Gasoline expenses were not supported with properly 204,554.30
accomplished Driver’s Trip Tickets.
Isabela Honorarium paid to BAC, Technical Working Group 1,094,500.00
(TWG) and BAC Secretariat were not supported with
documentary requirements to prove the validity and
correctness of payments made which is not in
accordance with Section 4.6 of PD No. 1445 and DBM
Circular No. 2004-5A dated October 7, 2005.

Payment for overtime services of employees and Job

Order workers were not supported with the required 636,296.83
documents.
RO III Cabanatuan, Various disbursements that were either contrary to 364,401,539.88
Gapan , Muñoz, existing government laws, rules and regulations or not
Bulacan, supported with adequate documentation cast doubts on
Pampanga, the validity and propriety of expenditures.
Aurora, Malolos
and Zambales
272
 CO/
DO/IUs Deficiencies Amount
Region
Surigao del Norte Hazard pay of teaching and non-teaching personnel 988,000.00
without complete supporting documents and was
charged against the appropriation for PS, and booked
as Salaries and Wages-Regular.
RO IV-B ROP and DOs Unsupported payments of purchases rendering 5,010,362.00
Mindoro and doubtful the validity thereof.
Romblon
RO VIII DOs Leyte, Unsupported claims of Carigara NHS and Lalawigan 205,785.67
Borongan City, NHS for the period January to June 2017.

Northern Samar Cash advances for salaries and allowances for regular
and casual/job order employees of Lorenzo S. Menzon
Agro-Industrial School and San Antonio Agricultural
and Vocational School without the required approved 7,497,663.33
payrolls nor list of payees with indications of their
corresponding net payments.
Eastern and Travelling expenses were not supported with travel 202,657.00
Northern Samar , orders, itinerary of travel and other needed supporting
Borongan and documents.
Biliran
Samar Various disbursements were approved despite 9,939,412.30
incomplete documentation .
ROP and 13 DOs DVs covering the period January to March 2017 were 5,770,249.46
processed and paid with incomplete signatures.

Disbursements out of PCFs were not supported with

adequate documentation and PCFR was not maintained
by the Petty Cash Custodian.
Leyte Procurement of goods and services of Kawayan, Allen 235,481.70
and Manlabang NHS, and Naval School of Fisheries
were allowed despite incomplete documentation.

Omission of vital financial information as well as

inconsistencies in the submitted supporting documents 3,153,500.00
including incomplete documentation were observed
relative to the claim of 15 percent mobilization fee to J.
Custorio Construction regarding the Repair of School
Buildings located at Jubay ES, (Calubian), Butason I
ES (Tabango) and Banat-i ES (San Isidro).
Calbayog RATA was granted to four DO Officials even if lacking 208,000.00
in supporting documents
RO IX Zamboanga del Salaries were paid in the absence of daily time records, 155,706.64
Norte thus, rendering doubtful their validity and propriety.
Sibugay Almost all claims charged against cash advances for -*
MOOE of School Principals/Heads for the period
January 1 to December 31, 2017 were not supported
with complete documentation.
Zamboanga del 103 DVs on claims for monetization of leave credits of 575,507.59
Sur Balongating NHS and Mahayag NHS were not
adequately documented, thus, rendering doubtful their
validity and propriety
273
 CO/
DO/IUs Deficiencies Amount
Region
Isabela CA for the payment of hardship post allowance to 1,886,743.14
qualified teachers was: a) credited to the personal bank
account of Concesa S. Luna, Division Cashier but was
still intact until October 31, 2017 as shown in her
passbook; b) not supported with processed payroll and
other supporting documents; c) drawn without specific
purpose; and d) not covered by a valid obligation, was
granted purposely to avoid the reversion of the
unutilized NCA for the quarter ending September 30,
2017.

Payment of hazard pay to officials, teaching and non- 543,063.75

teaching personnel of the Begang NHS for CYs 2016
and 2017 was sourced from the savings of their
appropriations for PS for the last quarter of CYs 2016
and 2017 and not supported with proper
documentation.
RO XIII Agusan del Norte Payments of longevity pay to a School Nurse covering 668,103.00
the period 1997 to 2017 were not properly authorized
and/or not supported with an approved DV and
likewise, modification in the allotment was not
approved by the DBM.

Travelling expenses were not supported with proper 36,027.10

and complete documentary requirements.

Payments for office use and for salaries of services 135,241.44

rendered were not properly and appropriately
supported with the necessary documents.
Agusan del Sur Disbursements were made without complete 1,605,087.69
supporting documents.
Disbursements for Special hardship allowance were not 3,523,113.84
supported with the required supporting documents.
Surigao del Norte Hazard pay of teaching and non-teaching personnel 988,000.00
without complete supporting documents.
Butuan 172 DVs for payment of operating expenses were not 786,720.36
supported with the required documents, DVs were not
properly filled-up and copies of POs were not furnished
to the Office of the Auditor.

80 DVs representing financial assistance from ROP 1,556,230.00

and Local Government Units were not supported with
the required documents.
Dinagat 96 transactions paid in CY 2017 were not supported 3,897,910.00
Siargao Island with complete documentation. 3,816,164.55
Siargao Island Payments were not supported with sufficient and 1,075,506.00
relevant documents.
Total 422,275,649.24
*Amount not indicated

274
 c.) Payments that deviated the standard process and procedures on
disbursement

Moreover, various expenses amounting to P108,674,503.42 were paid without

observing the appropriate standard and procedures of processing disbursements
which will lead to unauthorized disbursement of public funds.
CO/ DO/IUs Deficiencies Amount
Region
NCR Marikina, Contribution for PhilHealth by the teachers/employees of 242,537.50
Pasig the Pinagbuhatan HS in DO Pasig City covering January
to March 2017 was paid twice by effecting monthly
remittance to DepEd-NCR and subsequent direct payment
to the PhilHealth. As a result, P242,537.50 was disbursed
without a valid obligation as prescribed in Paragraph 2
Section 37, Volume I of the GAM.
A total of P2,767,357.85 had been reverted from the PS
fund of the Parang HS of DO Marikina in CY 2016.
However, an aggregate amount of P278,937.25 in
mandatory contributions of employees was not remitted
either to GSIS, PhilHealth and Pag-ibig. A
penalty/interest amounting to P500,399.50 is estimated to
be imposed on account of the unremitted obligation.
Quezon City, Procurement of common use supplies were made from 973,667.61
Caloocan different suppliers instead of availing the services
provided by the PS-DBM.
RO I Dagupan Payment by the Division of Dagupan City of unbooked 255,127.46
prior year’s expenditures of CYs 2015 and 2016
Proportional Vacation Pay to eight personnel from funds
of the current year in violation of the provision of Section
17 of GAA of 2017 and Section 119 of PD No. 1445.
Laoag City Payments of expenditures such as office supplies, snacks, 427,974.90
and Batac City gasoline and maintenance of vehicles were made through
reimbursement method instead of the procurement and
disbursement procedures prescribed under RA No. 9184,
thereby rendering the procurement process doubtful and
exposed the Agency funds to the personal discretion and
disposition of the authorities concerned which positioned
the interest of the government at risk.
RO IV- Occidental Expenses for the SBFP and MOOE amounting to 4,556,605.95
B Mindoro P606,584.50 and P3,950,021.45, respectively, were done
on reimbursement basis thus, casting doubts whether the
effectiveness of the programs and efficiency in operations
of the school were achieved.
Cash advances amounting to P6,612,079.00 and 19,699,751.55
P13,087,672.55 respectively, for SBFP and MOOE were
granted in lumped amount during the last month of the
year 2017.
RO IX Zamboanga In CY 2017, disbursement amounting to P41,971,303.00 41,971,303.00
del Norte representing payment for 2016 Special Hardship
Allowance was released to teachers and school

275
 CO/ DO/IUs Deficiencies Amount
Region
heads/administrators instead of the total SHA supposed to
be granted by the Division of P97,877,663.00.
Previous years’ grantees of SHA were not validated.
Priority was not given to teachers and school heads
assigned in hardship posts, instead, available funds were
prorated in order to grant SHA to all qualified teachers.
Granting SHA on a pro rata basis is due to limited funds.
RO XIII ROP Cash advances were granted to Contract of Service 12,918.00
Workers.
Dinagat Island Certifications of Travel Completed were not properly 189,353.00
accomplished for the travelling expenses incurred for the
period covered January 1 to December 31, 2017.
Dinagat Island Incurrence of unnecessary expenditures due to inadequate 158,738.91
Surigao del Sur mechanism in determining the appropriate provisions of 891,633.21
Tandag the participants for trainings/seminars conducted for 124,346.00
Bislig teaching and non-teaching personnel. 1,219,372.00
Agusan del The DO failed to make confirmation to ensure complete 82,619.75
Sur attendance of projected participants for its teaching and
non-teaching personnel that resulted in the incurrence of
additional expenses due to over reservations for meals and
snacks which could have been avoided, had a mechanism
been established to determine the exact number of
participants.
Delayed in the payment of maternity benefits ranging 605,552.17
from six months to almost two years, due to lack of
appropriation, thus, depriving the concerned employees of
the desired benefits granted by law.
Surigao del Reimbursements of travelling expenses were not directly 117,726.00
Norte paid to the teachers and non-teaching personnel of the
School through individual checks but were channeled
through cash advance of the Disbursing Officer.
Surigao City Paid to two deputized government lawyers from January 165,000.00
and Surigao 2016 to February 2017 for DO Surigao City and up to June 270,000.00
del Norte 2017 for DO Surigao del Norte without adhering to the
prescribed rate as provided under the the GAA and despite
the absence of proof of appearance on court hearings
attended and other necessary documents
Agusan del Observations on the Payment of Salaries and other 33,576,137.40
Norte and del personnel benefits: 1) incomplete supporting documents
Sur, Surigao to verify the validity and propriety of claims; 2) net take
del Norte and home pay below the required amount of P4,000.00; and 3)
del Sur, non-compliance with DepEd’s full implementation of the
Tandag City, ATM Payroll System contrary to pertinent provisions of
Bislig City and PD No. 1445, GAA of 2017, DepEd Orders and other
Bayugan City applicable rules and regulations on the matter.
Bayugan City Payments to contractors for Repairs/Rehabilitation of 3,134,139.01
classroom/school buildings were supported with receipts
which are no longer valid since August 31, 2013.
Total 108,674,503.42

276
 a. strictly comply with the prescribe rules and regulations on the payment
of salaries and wages, other compensation and personnel benefits,
traveling, training, communication, procurement of goods and services
and other expenses;

b. ensure that all disbursements/utilization of governments funds are

authorized and properly supported with the necessary documents;

c. observe the proper standard procedures in processing disbursements;

and

d. require the refund of unauthorized claims of benefits and allowances.

18.6 The Management gave their respective comments on the deficiencies cited as
follows:

CO/Region Management’s Comments

CO The Management has not given their definite stand on the audit issues raised, except
for the individual/independent comments coming from different offices citing their
own independent concerns.
NCR DO Marikina
The DO Management explained that its disbursing officer, bookkeeper and property
custodian were considered staff authorized for P350.00 monthly cellphone usage
allowance due to their functions in school. It was also added that the three mentioned
cellphone usage plans were discontinued on June 2017 upon expiration of the contract.
Furthermore, during the Exit Conference, the Principal of Marikina HS in DO Marikina
asserted that the School already attended the matter on the absence documentary
requirements and has adopted the recommendation cited therein.
RO I DO Laoag City
During the Exit Conference, employees explained that the Agency could not avoid
reimbursements due to petty expenses such as photocopying of materials, repairs, etc.
Also, Management explained that PLDT doesn’t want to accept check as payment for
rental and installation of fiber biz 200, hence, it was paid through cash advance by the
Accountable Officer.
DO San Carlos City
The Supply Officer and the Accountant assured the Audit Team to work hand in hand to
comply with the audit recommendation.
DOs Dagupan and Urdanete
Both Managements pledged to stop the practice of paying the transportation allowance
to the concerned SDS and ASDS.
RO II Regional Office Proper
Through the Asset Management Section, the ROP shall strictly and faithfully comply
with provisions of the said COA Circular that were inadvertently violated. Also,
Management expresses sincere regret that there were some lapses in regard to treatment
of and/or payment for gasoline/fuel expenses for the year/s that passed, particularly in
2017. This doesn’t necessarily mean however that their Office compromised the validity
of fuel transactions in as much as the Officer-in-Charge exercised due circumspection
and prudence by instituting internal measures and mechanisms to ensure that the Drivers
and other concerned staff conform to ethical standards for government employees,
277
CO/Region Management’s Comments
imbued with the values of honesty and integrity. Henceforth, they offer their
commitment to comply with requirements as embodied in COA Circular No. 77-61 and
PD No. 733.
DO Isabela
The employees who rendered overtime services had complied with DepEd Order No.
31, series of 2014, which allowed grace period of 15 minutes to be exempted from
tardiness and to claim overtime pay.
The Management of DO Isabela will review the guidelines and the work and financial
plan of different delivery unit to come up with a uniform basis of communication
expenses. The 3 IUs agreed to secure guidelines from the Schools Division
Superintendent.
DOs Cauayan, Santiago and Batanes
The Management of the DOs agreed to comply with the recommendations.
RO III DO Aurora-
Management explained that there is no available service provider for telephone landlines
and there is a valid need for the provision of communication/cell card allowances. They
recognized
that payment of such has no sufficient legal basis. In line with this, they have already
stopped payment of communication allowance to selected DO personnel effective
October 2017. As per their coordination with Central Office Finance Service during the
Accounting Field Monitoring on November 8-11, 2017, they have been informed that
there is an ongoing revision of the Memorandum on the provision of
communication/cell card allowance to DepEd personnel.
The Management of DO Cabanatuan City conformed to the recommendations.
Management of seven DOs gave their comments/justifications and assured of the
implementation of the audit recommendations.
RO IV-B DO Calapan and Canubing NHS
Management commented that the legal basis in the granting of the anniversary bonus
last December 22, 2017 cannot be submitted, instead the amount will be deducted from
their Mid-year bonus this year. Moreover, the Management of Managpi NHS
commented that since the Anniversary Bonus be given this CY 2018 in consonance with
the founding anniversary of the DepEd on June 23, 2018, such bonus will no longer be
given this year in consideration of the payment last CY 2016.
DO Marinduque and Bangbang NHS
The Management commented that they will settle their obligation and will pay back the
said amount to be deposited to the BTr. They said that the payment will be done upon
the request of the teachers on or before the month of May, since they will be receiving
PBB and Mid-Year Bonus to pay in full.
RO VIII ROP and 13 DOs
During the Exit Conference, Management of ROP assured the Team that payment of
Transportation Allowance to those not authorized to claim will be stopped, and they will
strictly comply with the guidelines prescribed for the payment of RATA. Also, the
Management admitted the deficiency on the grant of COC. In the submitted
Management’s comment, it was emphasized that they already informed the concerned
personnel to pay for the corresponding value of the COC. They further explained that
the submission of DVs and ORs is dependent on the submission made by the Cash
Section to the Finance Division. Management also promised to strictly comply with the
discussed recommendation.

278
CO/Region Management’s Comments
It was assured that provisions of the Circular pertaining to the grant of overtime pay will
be strictly adhered.
Management of Villa Jacinta National Vocational High School in DO Southern Leyte
commented that they have the desire to religiously and faithfully comply with the
completeness of document for submission; however, due to personnel shortage in the
Accounting Section and the voluminous work of the designated bookkeeper, among
others, segregation of disbursement voucher with the attached necessary document
cannot be done. But it was assured that the Management will faithfully and continually
exert their effort for its compliance as specifically required on the date of submission.
The Management of Bato School of Fisheries in DO Leyte gave assurance that they will
discontinue the granting of monetization of accumulated leave credits to employees with
insufficient balances. Moreover, during the Exit Conference, the Management of Bato
School of Fisheries and Carigara National High School cited the reasons for the delayed
submission was due to some DVs which were still not signed by the concerned officials
and also some claims still lacked the necessary documentations. However, they
promised to comply with the recommendations of the Audit Team. Furthermore, DO
Leyte admitted that there were errors committed in the documentation of some
transactions as the same were copy-pasted from previous similar documents
During the Exit Conference, the Management of Eastern Samar National
Comprehensive High School (ESNCHS) in DO Borongan City justified that such
transactions were only approved due to humanitarian consideration. The Management
then agreed to apply the audit recommendation. Moreover, the Accountant claimed that
they are in the process of completing the Disbursement Vouchers for submission and
that the delay was caused by technical problems with their Electronic Financial
Reporting System (EFRS). The Management agreed to submit all the lacking
documents.
Allen National High School in DO Northern Samar replied that the monetization of 50
percent of the accumulated leave was approved based on valid and justifiable reasons
per Section 23 of the Omnibus Rules on Leave of the CSC. The said monetization was
used by the employee for health and medical needs, educational, payment of loans and
to answer emergency needs to sustain their basic needs. They also assured that they will
comply/observe strict adherence to the documentary requirement and ensure that all
future disbursement to be made must be approved by the compliance officer whose
function is to check the sufficiency, correctness and completeness of the documents
before the processing of claims. Moreover, during Exit Conference, it was explained
that the reasons for using only one check for reimbursement of travelling expenses to a
group of employees is to minimize the cost of check, and although, a single check is
prepared, there is a corresponding payroll attached together with the supporting
documents. Likewise, the Management of Lorenzo S. Menzon Agro-Industrial School
agreed to refrain from giving benefits to the JO personnel knowing that they are not
qualified for such. In addition, Management of Silvino Lubos Vocational High School
replied that they strongly adhere to follow the recommendations. During the Exit
Conference, Management of Lorenzo S. Menzon Agro-Industrial School admitted the
observations; however, they assured that they will comply with the recommendation.
They also submitted the supporting documents for the questioned transactions.
During the Exit Conference, Management of Don Juan F. Avalon National High School
and San Jose Technical High School in DO Northern Samar admitted the deficiencies
and assured that they will comply with the audit recommendation.
Management of DO Biliran committed to abide and implement the recommendations
and gave assurance that for the next transactions they will be extra careful in the
disbursement of their funds and will stick to the applicable provisions of the law.

279
CO/Region Management’s Comments
Management of Hinabangan NHS in DO Samar (Western) commented that the grant of
Communication Allowance was made in good faith. On the same stand, the said
allowance is intended for fast and effective communication between and among
Administrative personnel. Likewise, they committed not to release any allowance if
not in consonance with the law. While the School Head of Clarencio Calagos Memorial
School of Fisheries explained that the grant of rice allowance was made during the
previous administration and in good faith banking on the provisions of the Manual of
Operations for the Technical and Vocational Public Secondary Schools embodied under
DepEd Order No. 89 s. 2010. Moreover, they promised not to grant such rice allowance
in the future if based only on the aforesaid Manual of Operations.
During the Exit Conference in DO Samar, the School Division Superintendent
commented that she has already issued a Division Memorandum prohibiting the
rendition of overtime services unless extremely necessary and the payment of such
overtime services rendered will be on compensatory time off.
The Principal of Lalawigan National High School in DO Borongan City stated that he
approved the request in order to accomplish the work that needs to be done and to
compensate the efforts of the personnel. Also, the Management committed to submit the
duly signed DVs and payrolls.
During the Exit Conference the Bookkeepers and the Accountant of San Jose National
High School (SJNHS), Sagkahan National High School (SNHS) and Tacloban City
National High School (TCNHS) in DO Tacloban City explained the delay in the
submission of DVs, but committed and assured that they are going to religiously adhere
to COA rules and regulations.
Management of DO Baybay City and Baybay National High School responded that
noted unsubmitted DVs and supporting documents were already submitted to COA.
Both Agency promised to fully comply with the recommendations.
The Management of DO Catbalogan promised to facilitate submission of lacking
documents and other unsubmitted accounts/reports. A division memorandum on the
submission of monthly reports was already drafted for approval of the SDS to ensure
timely submission of the required reports.
In the Exit Conference, Management of 13 DOs admitted their non-compliance with the
requirement on submission of the liquidation reports/documents. To address the
situation, the RO prepared a Memorandum requiring the Special Disbursing Officers of
the different DOs in the region to submit the said report/documents for the 2017
downloaded financial assistance fund. Likewise, they committed to strictly conform to
the rules in their future transactions.
Assurance to implement the audit recommendations was given by the SDS of DO
Ormoc City in his letter reply to the AOM issued.
RO IX Management of DO Zamboanga Del Norte explained that they committed error in the
granting of Special Hardship Allowance. Management added that the amount paid by
the Office has been augmented by DepEd RO. Also, Management explained that the
disbursement made were for travelling expenses of teachers for the CY 2016 Teacher’s
Day Celebration which were submitted late by their respective School Heads. They
admitted payment of the said traveling expenses could have been rejected; however,
they received various complaints from the concerned teachers through the local radio
station. Management assured that they will ensure that all obligations during the year
shall be supported with appropriations. Moreover, Management explained that they will
commit to reduce or eliminate unnecessary expenses on food. They further added that
supporting documents were properly attached to the DVs and might be detached upon
transfer of documents to the DepEd bodega. Further, Management explained that the
schools were not deprived of the releases of their respective school MOOE. They
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CO/Region Management’s Comments
further added that the unreleased portion of the local school fund as at year end were
obligated and released to the respective schools on the succeeding year.
Management of DO Zamboanga Del Sur explained that some personnel were on a
detailed appointment who were assigned in other schools, thus, DTRs were submitted
late to support the payroll. The Agency further explained that to avoid non-deduction
and non-remittance of premiums and loan amortizations and other humanitarian reasons
among others, Management opted to include the personnel in the payroll hoping that the
employee concerned will submit later on the said required documents. Lastly,
Management assured that a strong internal control will now be established particularly
in the payment of salaries to employees.
Moreover, Balongating NHS in DO Zamboanga Del Sur commented that the lapses of
required attachments on payments of travel expenses, failure to secure RER and claims
of per diems instead of actual traveling expenses will be looked into and would be
rectified. Management will see to it that no succeeding travel payments will be paid
without observing the existing rules and regulations. Likewise, Mahayag NHS
commented that the Management will comply with the recommendations.
The Management of DO Isabela City commented that a Sub-Allotment Release Order
was received from the DepEd Regional Office on June 30, 2017 for the payment
of Special
Hardship Allowance for SY 2017-2018. Using the common fund system, the Agency
opted to pay the Special Hardship Post Allowance so as funds for the 3rd Quarter will
not lapse. However, due to time constraint, the Agency was not able to prepare the
payroll and check the bank accounts of the qualified teachers. Hence, CA was made in
the amount of P1,886,743.14 and deposited to the personal account of the Cashier on
September 28, 2017. From the personal account of the Cashier, an authorization was
issued to the Authorized Government Depository Bank (AGDB) to transfer to the
individual bank accounts of the teachers, and was certified by the latter. The
Management further commented that they can comply with all the recommendations
except to refund and remit to the BTr since the hardship allowance was already credited
to the respective accounts of the teachers.
The Management of Begang National High School in DO Isabela City commented that
they are not aware that the Certification from the Local Police is not enough as a
supporting document for the payment of Hazard Pay. They assured the Audit Team that
the School will secure a certification from the Secretary of the Department of National
Defense. They further commented that they are willing to refund if they cannot comply
with the recommendation. Likewise, the Management of Basilan National High School
commented that the salaries of SHS Job Orders (JO) were charged to the MOOE funds
of the School due to matter of urgency where the release of the SHS MOOE was late
for more than two months and considering that the Job Orders have already rendered
their service.
Management of DO Pagadian City assured compliance on the recommendations.
Furthermore, Pagadian City NHS commented that the submission of documentary
requirements as indicated in the said observation is in process and to be submitted as
soon as possible upon its completion. Likewise, ZSSAT commented that Management
will strictly follow the aforementioned laws and regulations pertaining to travel
expenses starting April 2018.
RO XIII ROP committed to comply with the recommendations. The tickets were purchased
through travel agencies because of lack of material time to prepare the travel documents
because the advice/memorandum from the DepEd Central Office is received one or two
days prior to the date of the activity. In addition, there are occasions where the
signatories to the travel documents are also not available. Nevertheless, this Office will
endeavor to cut this practice of purchasing tickets from travel agencies.
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CO/Region Management’s Comments
Management also commented that regarding the attendance of teaching and non-
teaching personnel to trainings sponsored by DepEd RO XIII, they respectfully submit
to the recommendation. A Memorandum was issued to all Chiefs of Functional
Divisions of DepEd RO XIII to require the inclusion in the processing of the claims for
payment, the memorandum or office order issued by DepEd RO XIII indicating the
positions/titles of the participants coming the Regional Office Proper and those from the
12 School Divisions of the Region.
Regional Memorandum was issued directing the Accountant not to process claims for
cash advances of COS or JOs of the Regional Office.
The Management of DO Siargao Island commented that necessary documents to
support the payment of leave monetization were submitted to COA Office on January
30, 2018.
In DO Tandag, Division Memoranda was issued for the conduct of any trainings or
seminars, to identify the expected participants but not their specific names except for
trainings or seminars to be conducted wherein participants are already pre-identified by
the proponent or the training Management Team Leader. In addition, the School Heads
will be the one to identify the teachers who will attend the activity. With the observations
being noted, Management promised to strictly implement the recommendations starting
Calendar 2018 and will advise all concerned personnel to adhere to the
recommendations including the preparation of attendance sheets following the
prescribed format. Further, Management commented that the basis for implementing the
Net take home pay of P4,000.00 was the aforementioned DepEd Order. Jacinto P. Elpa
National High School also noted the date found at the bottom part of the said order was
on February 15, 2017. Hence, they took effect the threshold only on February 2017 and
onwards.
The Management of DO Bislig City accepted the findings regarding the insufficiency
of documentation.
Management of San Francisco NHS in DO Surigao del Norte commented that they will
call the attention of the employees concerned to comply with the lacking required
documents and submit it to COA. They will make sure that all succeeding transactions
related to the payment of monetization will be supported with appropriate documents.
Moreover, Management of Gigaquit NSHI commented that if they truly exceed to the
authorized entitlement of travel claim per EO No. 298, they will humbly comply with
the observation and eventually cause the refund if found not in order. Likewise,
Management of Mainit NHS commented that they immediately called the attention of
the bookkeeper, disbursing officer, and other accounting personnel and discussed the
matters. The teachers and employees were informed of the unauthorized receiving of
medical allowance and they are willing to refund and payments as scheduled.
Management of DO Surigao del Sur commented that it is known for a fact that Surigao
del Sur is prone to typhoons, floods, landslides and other disaster due to location which
is facing the Pacific Ocean, which made them vulnerable to natural disasters. The
teachers are in dire need to be trained on beginning reading using these kits in order to
minimize non-readers especially Grade I to Grade III and to answer the DepEd Order
on Every Child A Reader Program (ECARP) and no non-readers policy of learners at
Grade III and onwards. The Reading Kit has been used in the previous years during the
time of Schools Division Superintendent Valeroso and it was found effective. In
response also to RA No. 9155 on School Governance Act of 2001, the school
administrators are accountable on the learning outcomes of the pupils and we know for
a fact that reading is basic tool for learning, thus, the purchase of Reading Kit is deemed
necessary. The Management already sent a letter to the Office of the Secretary for
Finance and Administration. Moreover, Management explained that the personnel with

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CO/Region Management’s Comments
monthly net take home pay below P4,000.00 was from RPSU paid personnel, hence,
this circumstance was not under the control of the payroll in-charge of the DO. In fact,
for the division paid personnel such as, SHS teaching and non-teaching personnel, IPED
and newly-hired teachers, the Management adheres to the General Provision of RA
No.10924.
Management of Surigao City commented that the observations are well taken. In the
humble perspective of the Division, the allowances given to the Solicitors Ramos and
Cundangan from the OSG were therefore not the “special counsel allowance”
contemplated under RA No. 10717, Sections 56 and 5.6 of COA Circular No. 2012-
001. It should be separately treated as an allowance granted under a special law, RA
No. 9417. In addition, it is noteworthy that it was the Office of the Solicitor General
who drafted the Memorandum of Agreement. Upon seeing that the same has a legal
basis coming from such a distinguished office, and that the law itself (RA 9147, Sec. 8)
allows the giving of allowance or honoraria to the Solicitors representing the Division
in cases pending in court, this Division acquiesced thereto. After all, this has been
practiced even before and also in other Divisions of DepEd were the service of the OSG
has been availed.
During the Exit Conference, School Heads in DO Agusan del Sur commented that the
approval of monetization of leave credit as well the updating of leave credit balance
were handled by the DO. That they processed the longevity pay of the school nurse due
to the following basis; DBM-DOH Joint Circular No.1, series of 2012 dated November
29, 2012 and Rules and Regulations on the Grant of Compensation-Related Magna
Carta Benefits to the Public Health Workers. Moreover, Management of Surigao NHS
commented that there was no proper turn-over of documents and work responsibilities
of the Disbursing Officer and that she is not aware of the proper procedure and
documentation to be submitted for PCF. The practice has always been to submit the
original receipts along with the Petty Cash Replenishment Report. Rest assured that the
Management will adhere to the recommendation from the receipt of the AOM and will
ensure that proper petty cash management shall be observed.
Management of DO Butuan City commented that they will include all the names of the
participants in the division memorandum for a certain seminar/training that they have
to attend. Also, they will not process the payment for the catering services during the
seminar unless the documents submitted are complete and proper. Likewise,
Management commented and promised not to give financial assistance for the next time
unless supported with complete and proper documents and release it directly to the
payee/supplier, not to the Principal.

18.7 The following are the respective Audit Team’s rejoinder:

Region RO/DO Auditor’s Rejoinder
RO I DO Ilocos The Audit Team disagreed with the justifications/explanation of the
Norte Management for the reason that the subject procurement was established
to be extravagant, lavish, luxurious and unnecessary. Moreover, the
procurement has not undergone competitive public bidding and tailored
canvass were prepared instead. The delivery of such high-end furniture
and fixtures neither was crucial or essential to the efficient discharge of
the mandate and functions of the division nor addresses its mission and
vision.
RO II ROP, DOs The Audit Team in DO Ilagan City highlighted that immediate action of
Ilagan, the Management is needed since the Agency suffered material loss.
Isabela, and
Nueva The Audit Team appreciated the commitment of DO Isabela on the
Vizcaya preparation of contract and will monitor the submission of the contract for

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Region RO/DO Auditor’s Rejoinder
review. Moreover, the Team emphasized that all claims should be
properly documented. For payment of honoraria to be valid, his/her
participation in the entire procurement process is a must. Such entitlement
can be proved through the submission of Notice of Award, approved
contract agreement, and attendance sheets. In addition, the Audit Team
requested the BAC Secretariat to submit approved APP for CY 2017 to
the Team and emphasized that no procurement is to be undertaken unless
it is in accordance with the approved APP. The Audit Team also requested
the Management to furnish them copy of the written guidelines on the
grant of communication expenses. Furthermore, the Audit Team required
the responsible officials of DO to fast-track the registration of the
vehicles under the name of the Division to avoid disallowance of repairs
and maintenance on these vehicles. We instructed them to comply with
the requirements of the authorities on loss OR/CR for immediate transfer
of ownership. The Team stressed that payment of repairs and other
expenses should be limited to the vehicles owned by the Division only.
The Audit Teams stressed to ROP, DOs Ilagan, Isabela and Nueva
Vizcaya the importance of the Ledgers in the reconciliation of balances.
The Team will conduct walkthrough on the use of the system and the
process followed by the Accounting Section. We also instructed the
Accountant and Bookkeepers to attach SLs in the Financial Statements to
be submitted which will serve as supporting schedules.
RO IV-B ROP The Audit Team maintained that the submission of reproduced copies of
perfected contracts and Purchase Orders with the supporting documents
should henceforth be within the reglementary period otherwise, the
purpose of timely review would be defeated.
RO VIII DOs Southern The Audit Team maintain their audit opinion on the DO Southern Leyte’s
Leyte, Leyte, comment that the grant of honorarium should not be based on the number
Baybay City of batches composing an entire project. It should only be based on the
and Maasin entirety of the project. It is their opinion that the main objective of the
City conduct of bidding which is to procure quality goods and services at the
lowest and/or reasonable prices through exhaustive competition is
defeated by the grant of excessive honorarium.
The justification of Management of DO Leyte, Bato School of Fisheries,
and Carigara National School was actually not in consonance to prescribed
COA rules and regulations since this just showed its conformity to the
erroneous practice of undertaking of payments to claims, despite the
absence of necessary signatures and supporting documents.
Our stand in the audit of Baybay National High School and DO Baybay
City is that complete not partial submission shall be undertaken as failure
in this aspect still constitutes contradiction to relevant laws and rules. In
addition, documents that are not turned-over for audit on the prescribed
deadline are to be subjected to suspension during post-audit.
Though the the AuditTeam understands the predicament of designated
Bookkeeper of Maasin National Vocational High School in DO Maasin
City, yet this should definitely not be made an excuse for the continued
defiance of the regulation. Considering the minimal workload of the
bookkeeper, he should manage his time effectively so that he could be
efficient in performing his assigned tasks for the meantime that a regular
employee is not yet hired. Considering also the status of his employment,
there is a great need to relieve him of his bookkeeping tasks and assigned
this instead to a regular employee.

284
 Region RO/DO Auditor’s Rejoinder
RO IX DO The Audit Team maintains however that the Division should ensure that
Zamboanga the school MOOE not yet downloaded/released to the different schools
Del Norte should not be used by the DO and should strictly adhere to the provisions
provided under DepEd Order No. 13, series 2016, in the use of MOOE.
RO XIII DOs Surigao As admitted by the Management of Gigaquit NSHI and Masgad NHS in
del Norte, DO Surigao del Norte, the gender issues to be addressed were not
Surigao City explicitly stated/identified prior to the decision to travel to Tagbilaran City
and Surigao for the benchmarking activity. It can be gleaned that the said activity was
del Sur not a result of gender analysis made by the Focal Point System, thus fall
under a social, rest and recreation activities. Likewise, charging of
traveling expenses of the Division Office personnel and District
Supervisors to school’s continuing MOOE allocations, specifically
appropriated for school’s operations, indicates unauthorized use of public
funds, thus considered irregular.
The Audit Team rejoined and maintained its stand that the payment of
legal services of DO Surigao City should comply with the requirements
as prescribed under the GAA. The prescribed rate of ₱2,500.00 per court
appearance or the maximum amount of ₱10,000.00 per month for FY 2016
payments; not to exceed 50 percent of the government lawyer’s basic
salary per month, as amended in GAA FY 2017 should be followed and it
is duly emphasized that payment is restricted only to the legal counsel’s
appearance or attendance to court litigations. Hence, court appearance to
support the monthly payments made should be submitted for our
evaluation in audit.
The Audit Team recognized the noble intention of the Management of DO
Surigao del Sur to provide reading materials to Schools that needed it
most, direct procurement of the same without adhering to the laws, rules
and regulations is still irregular. The Management should have complied
first all the documentary requirements and secure approval from the OSEC
prior to the procurement of supplementary reading, reference, and other
instructional materials.

Delayed/non-submission of Financial and Budgetary Reports

19. The delay/non-submission by the ROs, DOs and Schools of financial and other
reports and documents contrary to PD No. 1445 and other pertinent rules and
regulations, as well as deficiencies noted in reporting, prevented the Audit Teams
to conduct timely review and evaluation of recorded transactions for the
immediate corrections of any deficiencies noted and lessened the usefulness or
value to the intended users thereof.

285
 a. Section 7.1.1(a) of COA Circular No. 2009-006 dated September 15, 2009
provides that, “the head of the agency, who is primarily responsible for all
government funds and property pertaining to his agency, shall ensure that:
a) the required financial and other reports and statements are submitted by
the concerned agency officials in such form and within the period prescribed
by the Commission, xxx.”

b. Section 122 of PD No. 1445 provides that, “ xxx require the agency heads,
chief accountants, x x x to submit trial balances, x x x, and such other reports
as may be necessary for the exercise of its functions. (2) failure on the part
of the officials concerned to submit the documents and reports mentioned
herein shall automatically cause the suspension of payment of their salaries
until they shall have complied with the requirements of the Commission.”

c. Section 2, Chapter 1 of the Government Accounting Manual - Coverage.

This Manual presents the basic accounting policies and principles in
accordance with the Philippine Public Sector Accounting Standards
(PPSAS) adopted thru COA Resolution No. 2014-003 dated January 24,
2014 and other pertinent laws, rules and regulations. It includes the Revised
Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002
dated January 30, 2013, as amended; the accounting procedures, books,
registries, records, forms, reports, and financial statements; and illustrative
accounting entries. It shall be used by all NGAs in the:

1) preparation of the general purpose FS in accordance with the PPSAS and

other financial reports as may be required by laws, rules and regulations;
and

2) reporting of budget, revenue and expenditure in accordance with laws,

rules and regulations.

Report Title Deadline Basis

Report of Collections and Deposits Every 10th day after the end Sec.7.2.1.a of the Rules and
(RCD), Report of Disbursements of each month Regulations on the
(ROD), Report of Checks Issued (RCI), Settlement of Accounts
Liquidation Reports (LR), Report of (RRSA) as prescribed
Accountability for Accountable Forms under COA Circular No.
(RAAF) 2009-006 dated Sept. 15,
2009
Monthly Trial Balances (TBs) and 10 days after the end of the Section 60b, Chapter 19
supporting Journal Entry Vouchers month GAM Vol. I
(JEVs)
Quarterly Financial Statements (FS) and 10 days after the end of the
supporting schedules (SS) quarter

286
 Report Title Deadline Basis
Yearend TBs, FSs, SSs On or before January 20 of
the following year
Bank Reconciliation Statements (BRS) 20 days after the receipt of Section 7, Chapter 21,
the monthly BS GAM Vol. I
Statement of Appropriations, 30 days after the end of Section 32a, Chapter 3,
Allotments, Obligations, each quarter GAM Vol. I
Disbursements and Balances – FAR
No. 1 (SAAODB)
Summary of Appropriations, 30 days after the end of
Allotments, Obligations, each quarter
Disbursements and Balances by Object
of Expenditures – FAR No. 1.A
(SAAODBOE)
List of Allotments and Sub-Allotments 30 days after the end of
– FAR No. 1.B each quarter
Aging of Due and Demandable On or before 30th day
Obligations – FAR No. 3 following the end of the
year
Monthly Report of Disbursements – On or before 30th day of the Section 32c, Chapter 3,
FAR No. 4 following month covered GAM Vol. I

Quarterly Report of Revenue and Other 30 days after the end of

Receipts – FAR No. 5 each quarter

a.) Delayed submission of Financial Reports, Records and Documents

Number of
Region/DO/IU Reports
Days Delayed
NCR
Quezon City w/ 42 IUs 1-371 TB/FS/RCI/RADAI/BRS/Liquidation Reports
Manila City w/ 32 IUs 21-345 RCI & DV/JEVs/TB/BRS/FS/Liq Reports/Payrolls
Caloocan City w/ 15 IUs 1-204 FS/BRS/RCI/DVs/JEVs/FARs
Malabon City w/ 6 IUs 112-447 RCI/DVs/JEVs/TB/FS/BRS/RAAF/RCD/OR
Pasig City w/ 10 IUs 1-1069 RCI & Paid DVs/Liquidation/BRS/TB/FS/RCD
Marikina City w/ 4 IUs 2-265 RCI & Paid DVs/Liquidation/BRS/TB/FS
San Juan City w/ 1 IU 3-296 RCI & DVs/Liquidation/BRS/TB/FS/PAYROLLS
Mandaluyong City 11-314 ADA/RCI/DVs/JEVs/TB/FS/BRS/Liquidation
Taguig City and Pateros
1-361 ADA/RCI/DVs/TB/FS/BRS/RCD
with 5 IUs
RO I
Ilocos Norte BFARs, BRs, FS, Trial Balance, Journals, Reports of
Check Issued, Disbursement Record/ Vouchers

287
 Number of
Region/DO/IU Reports
Days Delayed
Ilocos Sur BFARs, BRs, FS, Trial Balance, Journals, Reports of
Check Issued, Disbursement Record/ Vouchers,
Cashier's Report - Report of Collection & Deposit,
OR, RAAF
Pangasinan II BFARs, BRs, FS, Trial Balance, Journals, Reports of
Check Issued, Disbursement Record/Vouchers,
Cashier's Report - Report of Collection & Deposit,
OR, RAAF, CDR (MOOE Downloading),
Liquidation Report
San Carlos BFARs, BRs, Reports of Check Issued,
Disbursement Record/ Vouchers
Alaminos FS, Trial Balance, Journals, Reports of Check
Issued, Disbursement Record/Vouchers, Cashier's
Report - Report of Collection & Deposit, OR, RAAF
Dagupan City Liquidation Report
RO III
Cabanatuan City 4 months Monthly/Quarterly Trial Balance and Financial
Pampanga 1-93 Statements
Malolos BRS (Marcelo Del Pilar NHS)
RO IV - B
Puerto Princesa 6 months QRROR, TB, FS, BRS,RCD with the supporting
official receipts, RCI with the disbursement
vouchers and supporting documents, RAAF, JEV,
RADAI, SLIIAE - supported with the LDDAP-
ADA, Quarterly Physical Report of Operation
Romblon with 2 IUs 13-856 Corcuera National HS - Disbursement Vouchers,
Payrolls, Receipts, Check/Cash Disbursement
Journals, Cash Receipts Journal, Report of Checks
Issued, JEV, Trial Balances and FS
Concepcion NHS - Disbursement Vouchers,
Payrolls, Receipts, Check/Cash Disbursement
Journals, Cash Receipts Journal, Report of Checks
Issued, JEV, Trial Balances and FS
Occidental Mindoro with Disbursement Vouchers (DVs), payrolls, liquidation
2 IUs reports and Bank Statements
Palawan with 2 IUs SAAODB, SAAODBOE, LASA, SABUDB,
SABUDBBOE, Aging of Due and Demandable
Obligations, QRROR, RAAF, JEV, RCD, RCI,
RADAI AND (SLIIAE) - supported with the
LDDAP-ADA

Rio Tuba NHS - TB, FS with Schedules

Quezon NHS - RCI, RS, RADAI - PS, RCI - MOOE
and RADAI - MOOE, JEV, TB, FS with Schedules,
BRS and RAAF
RO VIII
Southern Leyte Division not indicated Quarterly Physical Report of Operation, Budget
Accountability Reports, SAAODBs

288
 Number of
Region/DO/IU Reports
Days Delayed
RO IX
DO Sibugay and 8 IUs RCI, Liquidation Report and ADA
DO Pagadian City Cancelled Check were not attached to the RCI
(ZSSAT)
DO Zamboanga Del Sur RCI, RADAI, SLIIAE and LDDAP-ADAs and
(Bayog NHS and likewise, no copies from of Tukuran TVHS of the
Tukuran TVHS) SLIIAE and LDDAP-ADAs issued attached to the
disbursement vouchers, RANCAS, IoPs
DO Zamboanga Del
Norte Year-end Financial Reports
RO XI
Comval DO with 7 IUs FS/TB, DV, Liquidation Report/ Cdreg, RCD
Davao City DO with 13 Paid DVs - MOOE / PS
IU's
Panabo City DO with 2 TB - EPIP and Provident Fund, DVs - PS and MOOE
IU's (Panabo and Southern Davao NHS)
Davao Del Sur DO with Bank Reconciliation Statement, DTR and Number or
8 IU's Leaves, DVs - LDDAP and Checks, BFARs
Matanao NHS - Check / ADA Disbursement and
General Journal, CRJ, DVs, Payroll, DTR and
Approved Leave, Jev and BRS
Davao Oriental DO with Caraga NHS - TB, FAR No. 4 (MRD), Paid DVs -
6 IU's PS and MOOE, RCI
Lupon National Comprehensive HS - TB, Paid DVS
Mati City DO with 8
- PS and MOOE, GJ/GL, BRS, RCI and FAR No. 4
IU's
(MRD)
RO XIII
DO Surigao Del Norte 7-81 Disbursement Vouchers, Report of Disbursement
and Bank Reconciliation Statement
DO Dinagat Islands 21-242 Reports of Checks Issued, Disbursement Vouchers
and Report of Disbursements of the SDO and its nine
(9) IUs for the period January 1 to December 31,
2017, Quarterly Report on GPPAs

b.) Non-submission of Financial Reports, Records and Documents

Region/DO/IU Reports Period Covered
RO II
RO SL
DO Iligan GL & SL (DO, Isabela NHS, Isabela School
of Arts and Trades)
DO - Isabela GL & SL (DO, Callang NHS, Benito Soliven
NHS, Cabatuan NHS, Sta. Maria NHS,
Mabini NHS and Tumauini NHS)
DO Nueva Vizcaya SL

289
 Region/DO/IU Reports Period Covered
RO III
RO Proper Monthly/Quarterly Trial Balance and 1. Fund 101-May-
Financial Statements, Report of Collections Aug 2017
and Deposits (RCD)/Ors, Liquidation Report 2. RELC-June-Aug
2017
3. Provident – July –
Aug. 2017
4. EPIP & SBP4BE-
May-Aug. 2017
Tarlac Province Monthly/Quarterly Trial Balance and 1. MDS-May-Dec
Financial Statements, RCI, DVs, RADAI 2017
2. Provident-Jan-
Dec 2017
3. Trust Fund-Jan-
Dec. 2017
Zambales Monthly/Quarterly Trial Balance and TalTal NHS - Jan-
Financial Statements, JEV, Contracts / PO March 2017 and
Sept-Dec. 2017
San Jose Del Monte Bank Reconciliation Statements BRS for Towerville
NHS
Aurora Contracts / PO, Budget and Financial Dingalan NHS
Accountability Report
Bulacan Contracts / PO
Cabanatuan - Gapan Contracts / PO, Notice of Delivery, Monthly Driver’s trip ticket
Report of Official Travels and Monthly not prepared and not
Report of Fuel Consumption properly
accomplished
Mabalacat Contracts / PO Mabalacat NHS,
Camachiles NHS,
Dona Asuncion Lee
Ingrated School and
Madapdap NHS
Munoz Contracts / PO, Notice of Delivery, Monthly Driver’s trip ticket
Report of Official Travels and Monthly not prepared and not
Report of Fuel Consumption, SAAODB – properly
FAR No 1, QRROR- FAR 5, ADDO-FAR accomplished
No. 3, MRD – FAR No. 4, Consolidated
SAOB
Olongapo Contracts / PO
San Jose City Contracts / PO, Notice of Delivery, Monthly Driver’s trip ticket
Report of Official Travels and Monthly not prepared and not
Report of Fuel Consumption, SAAODB – properly
FAR No 1 accomplished
Angeles City Budget and Financial Accountability Report
Cabanatuan - NE SAAODB – FAR No 1
CSEF
RO IV-B
Puerto Princesa City BRS, RCI, RADAI, RAAF, JEV, Trial Jan – Dec 2017
Balance and Financial Statements with
corresponding schedules

290
 Region/DO/IU Reports Period Covered
RO IX
Zamboanga monthly trial balances, BRS, financial reports
- such as RCI, Reports of Disbursements,
RCD, and all their supporting documents-
disbursement vouchers, liquidation reports,
supporting schedules
Zamboanga Del Sur GSIS electronic billing/actual remittance of
Bayog NHS for CY 2017 with corresponding
variance representing the
unremitted/undeducted amounts of the
Agency in violation to Section 122 of PD
1445
Sibugay Monthly Fuel Consumption and Monthly Jan – Dec 2017
Official Travel

Zamboanga Del Norte Monthly, quarterly and semestral financial Only the year-end
reports financial reports
were submitted on
February 14, 2018
which is not within
the timeframe
prescribed by
regulation which is
on or before January
20, of the following
year.
RO XIII
RO DVs and the supporting documents of 1,945 Jan 1 to Dec 31,
transactions in the total amount of 2017
P1,699,899,547.09
Agusan del Sur BAR and Financial Accountability Reports
(FAR) – Nos. 2, 2A,
FAR No. 4 and FAR No.3 CY 2017
Quarterly Financial Statements (DO and 4th Quarter of 2017
Consolidated)
Agusan del Sur Monthly Financial Reports: Trial Balance, Dec 2017
Check Disbursement Journal, Advice to Debit
Disbursement Journal, Cash Disbursement
Journal, General Journal and Cash Receipt 

Subsidiary Ledges and General Ledgers  July to Dec 2017

Various Disbursement Vouchers and Report July to Dec 2017
of Check Issued (RCI) 
Bayugan City FAR No. 1 3rd and 4th Quarters
FAR No. 2A  2nd Quarter
FAR No. 3  1st to 4th Quarters
2nd Quarter
FAR No. 5

291
 Region/DO/IU Reports Period Covered
Surigao del Norte PS - Sept – Dec
Disbursement Vouchers – PS and MOOE
2017
Provident Fund (PF), MDS-Trust, Trust Fund, MOOE – Oct – Dec
BRS, 2017
PF - Nov - Dec
Financial Statements
2017
MDS-Trust – Sept –
Dec 2017
Trust Fund -Feb,
May and July 2017
BRS – Nov – Dec
2017
FS – Jan - Dec
2017
Claver NHS Disbursement Vouchers  Oct to Dec 2017
Bank Reconciliation Statements  June to Dec 2017
Financial Statements (Trial Balance, Jan - Dec 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity) 
Gigaquit NSHI Disbursement Vouchers Aug - Dec 2017
Bank Reconciliation Statements  Aug - Dec 2017
Financial Statements (Trial Balance, Nov - Dec 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity) 
Masgad NHS Disbursement Vouchers  Oct - Dec 2017
Bank Reconciliation Statements  March, April and
Aug to Dec 2017
Financial Statements (Trial Balance, Jan - Dec 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity)
Matin-ao NHS Disbursement Vouchers  Oct - Dec 2017
Bank Reconciliation Statements  Oct - Dec 2017
Financial Statements (Trial Balance, December 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity)
Placer NHS Disbursement Vouchers  Aug - Dec2017
Bank Reconciliation Statements  Jun – Dec 2017
Financial Statements (Trial Balance, Jul – Dec 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity)


Taganaan NHS Disbursement Vouchers Sept – Dec 2017
292
 Region/DO/IU Reports Period Covered
Bank Reconciliation Statements  December 2017
Financial Statements (Trial Balance, December 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity) 
Tubod NHS Disbursement Vouchers Aug – Dec 2017
Bank Reconciliation Statements  Jul – Dec 2017
Financial Statements (Trial Balance, Mar – Dec 2017
Statement of Financial Position, Statement of
Financial Performance, Statement of Cash
Flows, Statement of Changes in Net
Assets/Equity) 
Surigao City Disbursement Vouchers  Jul – Dec 2017
Bank Reconciliation Statements  Jan – Oct 2017
Liquidation Reports  Aug – Dec 2017
Dinagat Islands Monthly and/or quarterly BFARs (SDO Last three quarters
Proper & Consolidated BFARs)  of CY 2017
Quarterly Report on GPPAs  3rd and 4th Quarters
of 2017
Surigao del Sur and 24 Disbursement vouchers and its supporting
Implementing Units documents totaling ₱633.296 million for CY
(UIs) 2017 transactions
Financial Statements / Trial Balance 
Bank Reconciliation Statements
Tandag City and 2 IUs Disbursement vouchers and its supporting CY 2017
documents in the total amount of transactions
P55,347,006.66 
Financial Statements / Trial Balance 
Bank Reconciliation Statements
Bislig City and 2 IUs Disbursement vouchers and its supporting CY 2017
documents in the total amount of ₱115.532
million 
Financial Statements / Trial Balance
Bank Reconciliation Statements
Siargao 512 Disbursement Vouchers with amounts
aggregating ₱225,924,595.23 and paid
through the issuance of Checks and List of
Due and Demandable Accounts Payable with
Advice to Debit Account (LDDAP-ADA) and
its related supporting documents
Del Carmen NHS and Disbursement Vouchers, Payrolls and other Oct – Dec 2017
Socorro NHS supporting documents 
Bank Reconciliation Statement  Aug – Dec 2017

293
 c.) Non-compliance with Revised Chart of Accounts and Government
Accounting Manual
Region/ Audit Observations/Deficiencies
DO/IU
RO IX
Isabela City Examination of the SL/GL for CY 2017 disclosed that the financial transactions of
the DO-Isabela City were not recorded in chronological order. The Cash Division
submitted the paid Disbursement Vouchers together with the Checks and ADA
Disbursements Record (CkADADRec) to the Accounting Division
weekly/monthly as a basis for recording in the books of accounts, except for few
Disbursement Vouchers when the payees do not have account maintained with the
Authorized Government Depository Bank (AGDB). However, some of the cash
disbursements were recorded after several months and not as payment occurred.
NCAs were recorded at the end of the month or the following month.
Furthermore, the Audit Team noted that the Designated Personnel prepared BRS
based on the cash balance per CkADADRec instead of the GL Balance. The
Accounting and Cash Division do not reconcile their records on a regular basis
contrary to Section 181 of the GAAM. For this reason, there is no way of
determining the accurate cash balance per GL/SL. Thus, several reconciling items
and adjustments were not immediately recorded in the books of accounts.
DO The claimant/payee of Bayog NHS often fails to indicate critical information such
Zamboanga as the number and the date of the check, bank name and account number, and
Del Sur - official receipt (OR) number and date of other relevant documents issued to
Bayog NHS acknowledge the receipt of payment in the Box E of the Disbursement Vouchers as
required under Volume I of the GAM (Appendix 32).
DO Verification of registries maintained by the Budget Officer disclosed that the
Zamboanga RAOD for Personnel Services (PS), MOOE and Capital Outlay (CO) are not in the
Del Sur and precribed forms. The RAODs do not have the specific columns for Due and
Mahayag Demandable and Not Yet Due and Demandable. Moreover, they do not have a
NHS column for the date of the reference document. Although, columns for “Payee”
and “Particulars” were added for additonal information, however, the reference
number for GARO/SARO/ ORS/Reports of Checks Issued (RCI)/Report of Advice
to Debit Account Issued (RADAI)/Tax Remittance Advice (TRA)/JEV/Notice of
Obligation Request and Status Adjustment (NORSA) with the original ORS
number adjusted are not recorded.
DO Verification of registries maintained by the Budget Officer of DO of Pagadian City
Pagadian disclosed that the RAOD for PS and MOOE are not in the prescribed forms. The
City and allotments, obligations and disbursements for CO were recorded in the RAOD for
three IUs MOOE instead of recording them in a separate RAOD for CO. Likewise, PCNHS,
(PCNHS, ZSNHS and ZSSAT disclosed that their Budget Sections did not maintain the
ZSNHS and RAOD and RAPAL as prescribed in the aforementioned provisions of the GAM,
ZSSAT) Volume I and its corresponding appendices in their new forms. Moreover, Registry
of Revenue and other Receipts for Internally Generated Funds (RROR-IG/Off-
Budgetary Funds/Retained Income Funds)/Business Related Funds) and RAPAL
were not maintained as required under the Volume I of the GAM.
DO In the reconciliation of accountability in the accounts of the AO, it was observed
Sibugay that the Cash Disbursement Record (CDR) for advances were not kept separately
in accordance with its purpose such as Advances for Payroll, Advances to Special
Disbursing Officer and Advances for Operating Expenses. The monthly closing of
CDRs including the Petty Replenishments Record (PRR) and updating of records
were not also practiced by the AO as observed during the cash count as it failed to
present the above stated records. It was also noted that the accounting records based
on the certification issued by the Accountant, the accountability of the AO was not
294
 Region/ Audit Observations/Deficiencies
DO/IU
properly classified in accordance with its purpose. The recorded SL incurred so
many adjustments resulting in abnormal balance and was compensated by
acknowledging or establishing CAs of which the amount does not reflect the actual
CA granted to the AO in order to arrive at a normal balance of the account
DO Dapitan Evaluation of the existing accounting processes and procedures adopted by the DO
City using the internally created accounting software known as Government Accounting
and Financial Reporting (GAFR) revealed several major deviation of vital
processes contrary to GAM as summarize hereunder.

Particulars GAM GAFR

Disbursements through
check and ADA - basis
for preparing JEV
Report of Check Issued (RCI) Individual
or Report of ADA Issued disbursement voucher
(RADAI) together with the and classified further
supporting documents (e.g. into sub-fund.
paid DVs)

Disbursements through Report of Cash Disbursement Report of Cash

cash - basis for (RCDisb) together with the Disbursement
preparing JEV supporting documents (e.g. (RCDisb) together
paid payroll) with the supporting
documents (e.g. paid
payroll)
Recording of receipt of Report of Collections and Report of Collections
cash through Collecting Deposit (RCD) together with and Deposit (RCD) and
Officer – basis for official receipts (ORs) and classified further into
preparing JEV validated deposit slips sub-fund.
Form of JEV With prescribed form Not in prescribed form
(Appendix 36)
Maintenance of Special The Special Journals to be Features for Special
Journals maintained are Check Journals were present
Disbursement Journal (CkDJ), in the system but were
Advice to Debit Account not maintained.
Disbursement Journal
(ADADJ), Cash Disbursement
Journal (CDJ) and Cash
Receipts Journal (CRJ)
Form of Special With prescribed form Special Journals were
Journals CkDJ – Appendix 4 not in accordance with
ADADJ – Appendix 52 the prescribed forms.
CDJ – Appendix 3
CRJ – Appendix 2
Maintenance of General Journal shall be used General Journal was
General Journal to record transactions not maintained but
qualified under any of the subdivided into
Special Journals (e.g. adjusting Responsibility Centers
entry) (e.g. MOOE –
Elementary, MOOE –
Secondary)
Form of General With prescribed form Not in prescribed form
Journal (Appendix 1)
Aggregation of Based on the Special Journals Based on sub-fund
financial data in the and General Journal category
General Ledger
Form of General With prescribed form Not in prescribed form
Ledger (Appendix 5)

295
 Region/ Audit Observations/Deficiencies
DO/IU
The accounting procedures adopted by the DO through the use of GAFR were
contrary to the GAM. The manner in the preparation and recording of JEV up to
the posting to the General Ledger as well as the use of prescribed forms were not
in conformity with the provisions in the GAM.
RO XIII
DO Agusan The School Head of four Implementing Units certifies as to the correctness of the
del Sur journal entry in the JEV instead of the Accountant/Bookeeper.
The Status of Obligation in the ORS attached in the DVs of six IUs were not
accomplished.
DO Surigao Use of prescribed cashbooks and recording of transactions of the Accountable
del Norte Officer were either not maintained or updated regularly by the Disbursing Officer
as, a) all cashbooks maintained were not GAM-compliant; b) Check and ADA
Disbursements Record for PRIME Fund was not maintained; and c) monthly
adjustments and lapsed NCAs were not recorded and reflected in the cashbooks.
Alegria The Disbursing Officer failed to support the corresponding liquidation of her cash
NHS (DO advances in the proper RCDisb and submit it separately together with the
Surigao del supporting documents to COA; but were instead attached in the Disbursement
Norte) Voucher for its cash advance transaction.
DO Dinagat Box “A” of 213 DVs of 1 Empowered National High School, which contain
Islands certifications such as the necessity and legality of the expenses/cash advances, were
not signed by the School Head or Head of the Requesting Party.
DO Siargao The Disbursing Officer failed to prepare the Report of Cash Disbursements to
Islands present the utilization of cash advances, thus, details in the
utilization/disbursements of cash advances and its balances, if any could not be
properly monitored.
Receipt of Notices of Cash Allocation (NCA) and non-cash transactions recorded
in the books of accounts were not supported with complete documentation.
DO Surigao Cash Advances granted to the Disbursing Officer of Solomon National High
del Sur School includes traveling expenses for other Accountable Officers, thereby
indicating transfer of cash advances from one Accountable Officer to another.
DO Tandag Cash Disbursements Records were not properly maintained.
City

296
 a. direct the Accountant/Bookkeepers and Budget Officers to submit the
accounting and budgetary reports in the required form, within the
period prescribed to enable the Audit Team to render a more timely
audit of financial transactions;

b. cause the suspension of payment of salaries of the Accountant and

Bookkeepers for failure to comply with the reporting requirements of
the Commission on Audit in accordance with Section 122 of PD No.
1445; and

c. observe strict compliance with the applicable provisions of the GAM

and the RCA for NGAs as prescribed under COA Circular No. 2013-
002 dated January 10, 2013.

Non-compliance with RA No. 9184 and other issuances on government procurement

20. The DepEd CO and nine ROs did not faithfully adhere to laws, rules and
regulations on government procurement prescribed under RA No. 9184 and its
Revised Implementing Rules and Regulations (IRR), existing COA regulations on
the submission of contract and related documents, and DepEd relevant guidelines
on the matter, that resulted in lapses in the procurement process, and likewise
precluded the conduct of timely auditorial review on the legality, validity and
reasonableness of the terms and conditions of the contract, and to ascertain
completeness of delivery and compliance to specification requirement, hence,
casting doubts on the integrity and reliability of the procurement processes and
reasonableness of the awarded contracts amounting P1,568,147,479.12.
20.1 Section 3 of the revised Implementing Rules and Regulations (IRR) of
Republic Act No. 9184, otherwise known as the Government Procurement
Reform Act enumerates the governing principles on Government Procurement.
These are as follows:

a. Transparency in the procurement process and in the implementation of

procurement contracts through wide dissemination of bid opportunities
and participation of pertinent non-government organizations.

b. Competitiveness by extending equal opportunity to enable private

contracting parties who are eligible and qualified to participate in public
bidding.

c. Streamlined procurement process that will uniformly apply to all

government procurement. The procurement process shall be simple and
made adaptable to advances in modern technology in order to ensure an
effective and efficient method.

297
 d. System of accountability where both the public officials directly or
indirectly involved in the procurement process as well as in the
implementation of procurement contracts and the private parties that
deal with GOP are, when warranted by circumstances, investigated and
held liable for their actions relative thereto.

e. Public monitoring of the procurement process and the implementation

of awarded contracts with the end in view of guaranteeing that these
contracts are awarded pursuant to the provisions of the Act and this IRR,
and that all these contracts are performed strictly according to
specifications.

20.2 The revised IRR is promulgated pursuant to Section 75 of RA No. 9184,

otherwise known as the “Government Procurement Reform Act,” for the
purpose of prescribing the necessary rules and regulations for the
modernization, standardization and regulation of the procurement activities of
the Government of the Philippines (GOP).

20.3 On the other hand, COA Circular No. 2009-001 dated February 12, 2009
provides the guidelines on the submission of copy of government contracts,
purchase orders and their supporting documents to the Commission on Audit,
as well as the related penalty clause on non-compliance thereto. The pertinent
provisions are as follows:

“1.3.1 Within five (5) working days from the execution of a contract
by the government or any of its subdivisions, agencies or
instrumentalities, including government-owned and controlled
corporations and their subsidiaries, a copy of said contract and
each of all the documents forming part thereof by reference or
incorporation shall be furnished to the Auditor of the agency
concerned. In case of agencies audited on an engagement basis,
submission of a copy of the contract and its supporting
documents shall be to the Auditor of the mother agency or parent
company, as the case may be.

1.3.3 Any unjustified failure of the officials and employees concerned

to comply with the requirements herein imposed shall be subject
to the administrative disciplinary action provided in (a) Section
127 of Presidential Decree No. 1445; (b) Section 55, Title I-B,
Book V of the Revised Administrative Code of 1987; and (c)
Section 11 of Republic Act No. 6713.”

20.4 DepEd Order No. 12, s. 2014 dated March 6, 2014 provides that the School
Division Office (SDO) are prohibited from undertaking centralized
procurement of any good or service out of school MOOE intended for
distribution to schools in kind.

298
 20.5 Audit of procurement transactions in CY 2017 disclosed that the Management
of CO and several DepEd ROs/DOs and schools have not complied with the
provisions of RA No. 9184 and other existing rules and regulations covering
government procurement. These are summarized as follows:

CO/ Operating
Deficiencies/Lapses Amount
Region Unit
CO OSEC Deficiencies in the terms and specification in the bidding 100,605,701.85
documents, procedural lapses in the evaluation process
and non-compliance to timelines under the Revised IRR
of RA No. 9184, resulted in filing of protest/charges
against DepEd Officers and Bids and Awards Committee
(BAC) members and created doubts as to the
reasonableness of the award. The the awarded contracts
were higher by an aggregate amount of P100,605,701.85,
a substantial savings missed/forgone.
NCR DO Manila The five repair projects were not included in the Annual 4,978,921.39
Procurement Plan (APP) for CY 2017 of the Division of
City School Manila.

Non-observance of the provisions in Section 48.2

requiring the Procuring Entities to adopt public bidding as
the general mode of procurement and alternative methods
to be resorted to only in the highly exceptional cases
provided for in this Rule.

There is a clear indication of splitting for the purpose of

evading or circumventing the requirements of the 2016
Revised IRR of RA No. 9184, especially the necessity of
public bidding.
DOs Pasig Five secondary/implementing schools with separate
City, books of accounts had not prepared/submitted the APP
Marikina for CY 2017, contrary to Section 7 of the Revised IRR of
RA No. 9184.
City, Makati
City, Taguig Actual cost incurred on repair and maintenance of four 3,837,221.94
City and IUs under three DOs exceeded the estimated budget per
Pateros approved APP for CY 2017, contrary to Sections 7.1 and
7.2 of the Revised IRR of RA No. 9184.
DO Taguig/ Taguig NHS and Gen. Ricardo G. Papa Sr. Memorial HS -*
Pateros had not furnished the COA Audit Team with advance
copies of contracts, purchase and job orders within five
days from the execution thereof, as well as notice and/or
documents of deliveries made. Consequently, it
prevented the Audit Team to conduct timely review of
contracts, inspection of items delivered and for
Management to have the opportunity to correct any
deficiencies at the earliest time possible.
RO I La Union Non-conduct of Public Bidding for the procurement of 2,354,466.00
printed test materials and violation of DepEd Oorder No.
13 s. 2016 on the prohibition from undertaking
centralized procurement of any good or service out of
school MOOE intended for distribution to schools in kind.

299
 CO/ Operating
Deficiencies/Lapses Amount
Region Unit
Laoag Copies of POs and perfected contracts with notice of -*
City,Batac deliveries during the year 2017 together with their
City and San supporting documents were not submitted to the Audit
Team within the prescribed period, thus hindered the
Carlos City
Audit Team to timely verify the validity and propriety of
the procurement.
RO II Isabela Non-preparation of APP for CY 2017 and Project 340,656,700.98
Procurement Management Plans (PPMPs) contrary to
Section 7 of the Revised IRR of RA No. 9184, thus it
could not be ascertained whether the procurements during
the year were meticulously and judiciously planned which
is also crucial to the effective discharge of government
functions.
ROP Failed to furnish the Audit Team with purchase orders and 157,596,018.60
Isabela copies of perfected contracts together with its supporting
Ilagan documents within five days from the execution of the
Batanes contract as required under COA Circular 2009-001 dated
Cauayan February 12, 2009.
Santiago
RO III Aurora Failure to terminate contracts despite the incurrence of 19,453,547.52
negative slippage of more than 15 percent. The BAC
composition of the school consists of only three members,
the BAC Chairman and the two BAC Members in
violation of Section 11.2.1 of the Revised IRR of RA No.
9184.
Casiguran Contract was awarded without scope of work, specified 9,964,858.11
NHS approved budget, approved program of work and plan in
violation of Section 17.6 of the Revised IRR of RA No.
9184.
Nueva Ecija Procurement of common-use supplies was made thru 3,335,030.73
shopping rather than thru the Procurement Services,
Department of Budget and Management (PS-DBM).

Pampanga Submitted contracts have lacking documents pursuant to

the requirement set forth under RA No. 9184.
Zambales Imposed an insufficient Liquidated Damages for late 12,966.88
deliveries resulting to overpayment to the supplier
DOs Bulacan, Seven DOs and six schools failed to submit copies of -*
Cabanatuan Government Contracts, POs and their supporting
City, Gapan documents to the Office of the Auditor for the payments
City, Muñoz made to various suppliers for the procurement of training
City, materials, office supplies, medical supplies and Job
Olongapo Orders for repairs, thus, precluding timely review of the
City, San Jose transactions and inspection of deliveries.
City and
Zambales
RO IV-B ROP and Copies of perfected contracts/POs together with the -*
DO supporting documents were not submitted to the Office
Romblon of the Auditor within five working days from the
execution/issuance thereof, thereby precluding the
immediate auditorial review and communication to the

300
 CO/ Operating
Deficiencies/Lapses Amount
Region Unit
Management in case there may be deficiencies noted
thereon.
Oriental Variation Orders included extra works that were not 6,066,522.13
Mindoro within the general scope of the projects as bidded and
Calapan City awarded. Variation Orders in 45 schools in both Division
Offices were not supported with documents showing the
justification for Change Order and Extra Work Orders, the
date and results of inspections conducted, and the detailed
breakdown of cost for variation orders, contrary to Item
1.5.a of Annex E of the Revised IRR of RA No. 9184.
Romblon Invitation to Bid and Request for Quotations (RFQs) were -*
not posted at any conspicuous place in the premises of the
procuring entity. Likewise, the Notice of Award, Notice
to Proceed and the approved contract were not posted in
the PhilGEPS.

No invitations were sent to a private group, like Philippine

Institute of Civil Engineers (PICE) who has expertise
relevant to infrastructure projects to observe the BAC
proceedings in all stages of procurement process.
Occidental Although P4,117,750.68 out of the total costs of 77,245,509.75
Mindoro Contracts/POs of P81,363,260.43 or 5.06 percent was
submitted to the Office of the Auditor, still 94.94 percent
did not undergo timely auditorial review due to the failure
of Management to comply with the provisions of COA
Circular No. 2009-001 dated February 12, 2009.
Oriental Out of P1,597,153.50 supplies purchased by the DO, 1,266,158.25
Mindoro P1,266,158.25 or 79.28 percent pertains to purchase
orders with amounts exceeding P50,000.00 each.
Invitation or request for price quotations of these
purchases should have been posted in the PhilGEPS to
conform to the prescribed procedure of Shopping and
Small Value Procurement as provided in Section 54.2 of
2016 Revised IRR of RA No. 9184.
RO VIII Don Juan F. Management omitted the creation of BAC to facilitate the 224,804.13
Avalon NHS attainment of valid and appropriate processes and the
absence of APP renders all procurements doubtful as to
Sta. Margarita validity.
NHS
Calbayog City Several deficiencies concerning procurement on 12,609,225.16
Infrastructure, mostly comprising of incomplete
documentation and omission in submitting pertinent
contracts to COA for review as to legality and propriety
as well as delivery delays not sanctioned with liquidated
damages were noted in audit.
Biliran APP for CY 2017 was submitted by the Management; -*
however, the plan was not supported with the PPMP of
each Division/Office/Unit of the Agency. Thus, it is not
clear how the agency was able to arrive at the total
requirement for supplies and office equipment sought to
be procured during the year. Moreover, the APP showed
several supplemental APPs that were attached to it.
301
 CO/ Operating
Deficiencies/Lapses Amount
Region Unit
Northern The propriety and legality of the payment for various 254,824,898.06
Samar Repair and Rehabilitation of School Buildings Damaged
by Typhoon Glenda and Nona in different locations for
CY 2017 could not be ascertained due to the absence of
relevant procurement documents and the failure to submit
them together with pertinent Contracts.
Lalawigan Procurement of goods and services were thru 475,604.66
NHS reimbursement instead of having been paid by checks
Culaba NVS directly to suppliers. The said transactions neither passed
Kawayan thru the required procurement processes contrary to COA
NHS Circular No. 97-002 and Section 48.2 of the Revised
San Antonio RIRR of RA No. 9184. Also, no APP was likewise
Agricultiral prepared as guide for undertaking the procurement.
and
Vocational
School
Sta. Margarita
NHS
Hinabangan
NHS
DO Eastern Copies of contracts, POs and their corresponding 217,044.29
Samar supporting documents of total procurements amounting to
P217,044.29 were not submitted to the Audit Team within
the reglementary period, thus, preventing timely review,
evaluation, and validation of the physical existence,
desired quality of goods, and satisfactory completion of
services required in the agreements.
Ormoc City Shopping was resorted to in the procurement of goods and 6,107,641.41
Eastern Samar services aggregating P3,949,576.41 as well as
P2,158,065.00 covering catering services and
instructional materials, respectively, even if the cost
thereof exceeded the thresholds prescribed in Annex “H”
of the 2016 IRR of RA No. 9184.
Boronggan Purchases of office supplies and equipment were not 20,806.00
City awarded to the bidder with Lowest Calculated and
Responsive Bid (LCRB) based on price per item in
contravention to the procedures outlined in Annex H of
the 2016 IRR of RA 9184 leading to a calculated loss of
government fund.
Leyte Fourteen contracts for Repair/Rehabilitation of School 49,052,142.00
Buildings aggregating P49,052,142.15 with variation
costs of more than ten percent were not covered by
another contracts that should have been bidded out as
prescribed under item 1.1 and 1.4, Annex “E” of the 2016
IRR of RA 9184.
RO IX Pagadian City Non-adherance to the requirements on the procurement of 1,281,728.52
Zamboanga tables, chairs, armchairs, internet services provider,
Sibugay printing machines, gasoline, fuel, lubricants which were
Molave VTS- made thru either reimbursement or small value
SHS procurement, as well as failure to submit documentary
Bayog NHS requirements and to justify for use of the alternative mode
of procurement and procurement not based on the
approved APP have been noted in audit.
302
 CO/ Operating
Deficiencies/Lapses Amount
Region Unit

At DO-Sibugay, the implementation and completion of

the repairs and rehabilitation of school buildings were
executed even without the design plans with technical
specifications required in the bidding documents and
Section 17 or Revised IRR of RA No. 9184.
ROP and Management failed to submit copies of perfected 160,020,000.00
DOs government contracts and its supporting documents in
Zamboanga violation of Section 39 of PD No. 1445 and COA Circular
del Sur and No. 2009-001 dated February 12, 2009, depriving the
del Norte, timely evaluation of the legal and technical aspects of the
Pagadian contract.
City,
Sibugay,
Isabela City
and Dapitan
City
RO XI RO Non Posting of the Notice of Award (NOA), the Notice to 63,760,152.71
Davao Del Proceed (NTP), and the contract/purchase order in the
Norte website of the Philgeps, the website of the HOPE, if any,
Panabo City and in any conspicuous place reserved for this purpose in
Tagum City the premises of the Procuring Entity, and use of Small
Value Procurement as an alternative mode of procurement
on training and transportation were deficiencies observed
in various procurement.
Tagum Procurement of goods was still undertaken by the BAC 180,861.00
despite evident reference to brand names in violation of
Section 18 of Revised IRR of RA No. 9184.
Davao Del Procurement of goods and services for CY 2017 were 253,745.00
Sur undertaken without the approved APP and the PPMP in
Davao violation of Revised IRR of RA No. 9184, hence may
Oriental invalidate the procurement process for lack of legal basis.
DOs Davao Non-submission of perfected contracts and PO and the 114,629,870.77
del Sur and incomplete details in the PO issued by the ROP constitute
Tagum City non-compliance to COA Circular 2009-001 and Volume
II of GAM, hence the control mechanism intended to
ascertain legality, reasonableness, valid obligation and
elimination of errors and/or inadvertence of non-
obligation during the year may not be achieved.
RO XIII DO Butuan Procurement for meals, food supplies, and other supplies 2,538,201.98
ranges from ₱64,000 to ₱500,000 and above were not
posted in the electronic catalogue facility or PhilGEPS.
DO Agusan Liquidated damages were not imposed from the final 121,852.20
del Sur billings of the contractors despite delay in the completion
of the projects, while the liquidated damages imposed for
DO Baguyan the delayed completion of the repairs/rehabilitation of
City classroom school building is doubtful in accuracy due to
non-submission of verified Statement of Work
Accomplishment as of the targeted completion date.

303
 CO/ Operating
Deficiencies/Lapses Amount
Region Unit
Agusan Del Various disbursements were paid on a reimbursement 4,360,634.46
Sur basis and/or were done through shopping, direct
Surigao del negotiation and cash advance instead of competitive
Norte bidding or availed through DBM-PS. Various
San Francisco disbursements were also paid on a reimbursement basis,
NHS instead of making payments directly to the suppliers.
Surigao del
Norte NHS,
Alegria,
Campo and
Tubod NHS
Caraga
Regional
Science High
School
Siargao Island
Carrascal
NHS,
Gamut
(Barobo)
NHS,
Solomon
NHS
Tidman NHS
Tandag City
Balite Construction of school canteen and perimeter fence were 478,101.31
National High done without Competitive Public Bidding.
School (DO
Surigao del
Norte)
Bayugan City Procurement of food and accommodation for the Grade 6 1,073,726.5
Surigao del Mass Training of Teachers under the Implementation of
Sur K to 12 Basic Education and Program was awarded to a
supplier who failed to qualify one of the eligibility
requirements and bids were not evaluated on equal
footing.

40 contracts were awarded to a cooperative of which 24

DO Surigao contracts were not actually the lowest calculated quotation
del Sur due to non – inclusion of tax in the evaluation of bids for
tax-exempt cooperatives.
DO Surigao Contracts on the procurement of goods and services were 168,542,814.83
del Norte either not submitted to the Auditor within 5 days after
Dinagat Island signing; not supported with the complete necessary
Surigao del documents; done without adhering to the proper bidding
Sur procedures, or were not fully disclosed in the report of
Tandag City publicized PAPs.
Bislig City
Total 1,568,147,479.12
*Amount not indicated

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 20.6 Non-compliance had defeated the purpose of the law on transparency,
competitiveness and accountability and may have placed the agency and its
officer to possible risk of protests/complaint or charges filed by the losing
bidders.

20.7 We recommended that the Management require concerned offices/schools

to observe strict compliance with the applicable provisions of the Revised
IRR of RA No. 9184 and of other rules and regulations on government
procurement.

20.8 The concerned offices and schools submitted their comments/justifications on

the aforementioned audit observations to the Audit Teams. Most of them
replied that compliance with RA No. 9184 on agency procurement shall be
strictly observed.

Gender and Development (GAD)

21. The implementation of Gender and Development Plan (GAD) Program for CY
2017 in DepEd CO and various ROs and DOs disclosed deficiencies, such as: (a)
non-submission of the Annual Plan and Budget as well as the Accomplishment
Reports to the Philippine Commission on Women (PCW); and (b) non-
allocation/non-utilization of amount equivalent to five percent of total
appropriations as GAD budget, contrary to the pertinent provisions of Section 30
of Republic Act No. 10924, otherwise known as the GAA of 2017, and Philippine
Commission on Women (PCW)-National Economic Development Authority
(NEDA)-Department of Budget and Management (DBM) Joint Circular No.
2012-01, thus limiting the process and benefits that may address gender issues.

21.1. Section 30 of the General Provisions of the GAA for FY 2017 provides that
“All agencies of the government shall formulate a GAD Plan designed to
address gender issues within their concerned sectors or mandate…xxx. The
GAD Plan shall be integrated in the regular activities of the agencies which
shall be at least five percent of their budgets. xxx”.

21.2. For this purpose, activities currently being undertaken by agencies which relate
to GAD or those that contribute to poverty alleviation, economic empowerment
especially of marginalized women, protection, promotion, and fulfilment of
women’s human rights, and practice of gender-responsive governance are
considered sufficient compliance with said requirement. Utilization of the
GAD budget shall be evaluated based on the GAD performance indicators
identified by said agencies.

21.3. Section 8.2 of the PCW-NEDA-DBM Joint Circular No. 2012-01 provides that
the GAD Focal Point System (GFPS) shall submit the final GAD Plan and
Budget (GPB) and the corresponding GAD Accomplishment Reports (AR) to
the PCW for review and endorsement to the DBM and Section 8.7 thereof
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 requires agencies to submit their PCW-endorsed GPB to the DBM along with
their annual GAD AR for the previous year in accordance with the budget call.

21.4. Furthermore, Section 1 of the PCW Memorandum Circular (MC) No. 2014-05
dated November 28, 2014 provides that, “Agencies shall regularly collect and
generate sex-disaggregated data and statistics in support of the MCW
indicators relevant to their agency. Such data shall be stored and maintained
in the agency’s GAD database or similar system, updated as needed, and used
in their policy and program development to address gender issues in their
respective sectors, particularly in the preparation of their Annual GAD plans
and budgets and accomplishment reports”.

21.5. Review/Audit of the implementation of GAD programs and projects for CY

2017 revealed the following observations/deficiencies:

a. Non-submission of the annual GAD Plan and Budget as well as the

Accomplishment Reports to the Philippine Commission on Women (PCW)
for review, approval and endorsement to the DBM reported in Regions –
NCR (ROP, DOs Quezon City, Manila, Caloocan, Valenzuela, Malabon,
Navotas, Pasig, Marikina, San Juan, Makati, Pasay, Parañaque, and Las
Piñas); CAR (DOs Apayao, Baguio, Benguet, Ifugao, and Kalinga); Region
II (DOs Batanes, Cagayan, and Tuguegarao City); Region III (DOs Science
City of Muñoz, San Jose City, Cabanatuan City, Gapan City, Nueva Ecija,
and Zambales); Region V (ROP, DOs Legazpi, Tabaco City, and Camarines
Norte); Region VIII (DOs Maasin City, Ormoc City, Biliran, Samar,
Catbalogan City, and Northern Samar); Region IX (ROP, DOs Zamboanga
del Norte, Zamboanga del Sur, Pagadian City and IUs); Region XI (DOs
Davao City, Davao del Sur and Digos City); and Region XIII (ROP,DOs
Tandag City and Bislig City).

b. Non-allocation/non-utilization of the full amount of allocated budget for

GAD plan activities equivalent to five percent of total appropriations of the
following regions:

Total
Actual Budget Actual GAD
Region Operating Units Appropriations
for GAD Expenses
for FY 2017
NCR ROP, DOs Quezon 29,399,409,531.90 17,275,625.00 9,017,082.34
City, Manila,
Caloocan,
Valenzuela,
Malabon, Navotas,
Pasig, Marikina,
San Juan, Makati,
Pasay, Parañaque,
Las Piñas
RO I DOs Ilocos Norte, 2,759,207,691.23 137,960,384.56 15,271,862.04
Laoag City, Ilocos
Sur, Pangasinan II

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 Total
Actual Budget Actual GAD
Region Operating Units Appropriations
for GAD Expenses
for FY 2017
RO II ROP, DOs 5,928,419,815.61 271,065,953.33 164,927,696.46
Batanes, Cagayan,
Cauayan City,
Santiago City
RO IV-B ROP , DOs 6,212,770,220.23 168,600,131.82 102,800,749.34
Marinduque,
Palawan, Oriental
Mindoro
RO V DO Legazpi City 456,845,000.00 1,641,069.28 1,048,017.00
RO VIII DOs Southern 6,576,458,173.10 65,515,161.09 1,459,660.00
Leyte, Calbayog
City, Northern
Samar, Maasin
City, Ormoc City,
Biliran
RO IX DO Zamboanga 4,345,005,283.15 30,197,668.09 -*
del Sur and 7 IUs,
DO Pagadian City
and 3 IUs
*Amount not indicated

21.6. On the other hand, DepEd CO was able to present to the Audit Team the
Department’s GAD plan and budget amounting to P10,166,910,000.00 or two
percent of the agency’s total budget of P543,185,614,000.00 but did not make
a separate GPB for DepEd OSEC. Based on the accomplishment report
submitted, the only activity related to GAD conducted by CO was the conduct
of Capacity Building Workshop for GAD Focal Point System (GFPS) for
Technical Working Group (TWG) members. However, during the year, DepEd
Order No. 32 s. 2017 on Gender-Responsive Basic Education Policy was
issued on June 29, 2017, where it committed to integrate the principles of
gender equality, gender equity, gender sensitivity, non-discrimination and
human rights, in the provision and governance of basic education. Moreover,
the Department through the issuance of DepEd Memorandum No. 52, s. 2017
showed support for the 2017 National Women’s Month Celebration with this
year’s theme “We Make Change Work for Women”, and encourage all DepEd
offices, including the regional and schools division offices and schools to
undertake the following activities:

a. Production of Information, Education and Communication,

b. Participation to Women’s Month Online Advocacy, and
c. Organizing of their own or participation to Women’s Month information
campaigns/advocacy activities.

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 21.7. We recommended that the Management:

a. identify gender issues and concerns in GAD Plans and prioritize the
preparation and submission of the annual GAD plan and budget to the
PCW for review, approval and endorsement to the DBM, in adherence
to the aforesaid regulations; and

b. strictly comply with the GAD annual budget allocation of at least five
percent of the appropriation thru attribution to the agencies/DOs
regular projects and programs, and ensure the full implementation
thereof, to address identified gender related issues.

Senior Citizens and Persons with Disability

22. Various DepEd ROs and DOs have failed to implement programs/projects and
fully integrate in their regular activities at least one percent of their budget for
plans/programs/projects that will address the concerns of senior citizens and
persons with disability contrary to Section 31 of the General Appropriation Act
(GAA) of CY 2017, thus the beneficiaries were deprived of the benefits due them.
Nevertheless, the DepEd, in line with its thrust in providing quality and inclusive
basic education for all, continues to provide the necessary educational
interventions for learners with certain exceptionalities through its Special
Education (SPED) program.
22.1 Section 31, General Provisions of the GAA for CY 2017, RA No. 10924
requires that “All agencies of the government shall formulate plans, programs
and projects intended to address the concerns of senior citizens and persons
with disability, insofar as it relates to their mandated functions, and integrate
the same in their regular activities. The fund allocation for this purpose shall
be at least one percent of the agency’s budget. Section 6.7 of the IRR of RA
No. 9442 provides the same percentage of allocation”.

22.2 Moreover, all government facilities, including infrastructure, non-

infrastructure and civil works projects of the government, as well as office
buildings, streets and highways, shall provide architectural or structural
features, designs, or facilities that will reasonably enhance the mobility, safety
and welfare of persons with disability pursuant to Batas Pambansa Bldg. 344
and RA No. 7277.

22.3 RA No. 7277 otherwise known as the Magna Carta for Persons with Disability,
as amended by RA No. 9442, provides privileges and incentives for persons
with disability. The RA No. 9442 and its IRR grants additional privileges,
incentives, and prohibitions on verbal, non-verbal ridicule and vilification
against persons with disability. Section 2 of the IRR prescribes the procedures
and guidelines for the implementation of the RA in order to facilitate
compliance therewith and to achieve its objectives.

308
22.4 The purpose of granting privileges and incentives to persons with disability
was aimed to enhance their health, physical fitness, economic and social well-
being and their integration into the mainstream of society.

22.5 Disabled persons have the same rights as other people to take their proper place
in society. They should be able to live freely and as independently as possible.
This must be the concern of everyone in the family, community and all
government and non-government organizations. The rehabilitation of the
disabled persons shall be the concern of the Government in order to foster their
capability to attain a more meaningful, productive and satisfying life.

22.6 Verification revealed that the following agencies did not formulate plans,
programs and projects for the benefits of senior citizens and differently-abled
persons – NCR (DOs Taguig, Pateros, Pasig, Manila, Parañaque, Las Piñas,
Marikina, Caloocan, and Muntinlupa); Region I (ROP, DOs Dagupan, Ilocos
Norte, Ilocos Sur, and Urdaneta City); Region II (DOs Cagayan and
Tuguegarao City); Region III (ROP, DOs Aurora, Zambales, Olongapo, Nueva
Ecija, Cabanatuan City, San Jose City, Gapan City and Science City of Muñoz,
Mabalacat City); Region V (ROP and its DOs), Region IX (ROP, DO Isabela
City); and Region XIII (DOs Cabadbaran and Surigao City).

22.7 As a result, the issues and concerns of senior citizens and persons with
disabilities were not addressed during the year, thus beneficiaries were
deprived of the benefits due to them.

22.8 The Department, however, in line with its thrust in providing quality and
inclusive basic education for all, continues to provide the necessary educational
interventions for learners with certain exceptionalities through its Special
Education (SPED) program. The SPED program of DepEd provides a holistic
approach in catering to the needs of learners with various exceptionalities. This
program ensures that learners with exceptionalities will have access to quality
education by giving them their individual and unique learning needs. This
initiative caters to learners with visual impairment, hearing impairment,
intellectual disability, learning disability, autism spectrum disorder,
communication disorder, physical disability, emotional and behavioral
disorder, multiple disability with visual impairment, and to those who are
orthopedically handicapped, chronically ill, and gifted and talented. Up to date,
DepEd has recognized a total of 648 SPED Centers and regular schools
offering the program, 471 of which are catering to Elementary students and
177 are catering to High School students.

22.9 We recommended that the concerned Management formulate plans,

programs and projects, and allocate funds amounting to at least one
percent of its budget intended to address the concerns of senior citizens
and differently-abled persons, and to ensure the proper implementation
thereof in compliance with Section 31 of the General Provisions of the
GAA for FY 2017.

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Compliance with Property Insurance Law

23. The insurable properties in 10 ROs with a total carrying amount of

₱16,219,553,250.54 were not insured with the General Insurance Fund (GIF)
administered by the Government Service Insurance System (GSIS) despite the
mandatory requirement to insure all government properties with the GIF
pursuant to Administrative Order No. 33 dated August 25, 1987, COA Circular
No. 92-390 dated November 11, 1992 and Republic Act No. 656, the Property
Insurance Law as amended by PD No. 245 dated July 13, 1973, thereby, exposing
these properties to the risk of not being compensated in the event of damage or
loss due to any fortuitous events such as fire, earthquake, typhoon and/or flood.
23.1 Administrative Order No. 33 dated August 25, 1987 requires the Government,
except a municipal government below first class, to insure its properties with the
General Insurance Fund against any insurable risk. It further requires the
submission of an updated inventory of all the insurable properties to the General
Insurance Fund on forms prescribed by Government Service Insurance System.
23.2 Section 3.1 of COA Circular No. 92-390 dated November 17, 1992 provides
that, all heads of national agencies, local government units and government
owned or controlled corporations shall be responsible for the preparation and
submission of the inventory of all insurable physical assets; while, Section 3.2
thereof requires submission of said inventory report to the GSIS not later than
October 31 of the ensuing year.
23.3 Republic Act No. 656, as amended by PD No. 245 or the Property Insurance
Law requires all government agencies to have their insurable properties, assets
and interests insured with the GIF administered by the GSIS to ensure
compensation of the equivalent value thereof in case of loss thru fire, theft,
earthquake or any unforeseen events.
23.4 The GSIS shall require the inventory of the property belonging to each
government, determine the value thereof for purposes of insurance, and advise
the government concerned of the total premiums each shall pay to the Fund. The
government concerned shall, upon receipt of advice from the System, set aside
from any savings in its appropriation the amount needed for such premiums. The
premium corresponding to the insurance of properties belonging to an entity
operated with a special fund shall be payable from said fund, otherwise, from
the general fund.
23.5 In recent years, the weather conditions in the Philippines have drastically
changed. Typhoon and flooding has become more frequent while earthquakes
have turned into a risk that is difficult to ignore. Different catastrophic threats
may either damage or completely destroy building/school structures and other
properties that are important education resources. To protect these properties,
Fire and Allied Perils Insurance should be secured with the GSIS General
Insurance Fund to cover for any eventual loss or damage and to guarantee
immediate damage control, repair and/or replacement thereof to reduce any
interruption of office work or student’s learning process.
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 23.6 Audit of the consolidated PPE accounts balances as of December 31, 2017
showed non-compliance with the Property Insurance Law, exposing government
properties to the risk of non-indemnification in case of loss arising from fire,
earthquake, typhoon and/or flood, theft and/or robbery. Breakdown of the
uninsured assets by regions is shown in the table below:
ROs Number of DOs/ROs Carrying Amount of
NCR 14 6,025,225,885.72
Properties
RO I 5 2,061,221,430.87
RO II 2 221,594,507.83
RO III 10 4,109,885,231.72
RO IV-B 3 991,474,466.95
RO V 1 172,440,456.06
RO VIII 2 205,293,860.09
RO IX 2 2,196,719,053.58
RO XI 1 175,786,781.59
RO XIII 1 59,911,576.13
Total 16,219,553,250.54

23.7 In the absence of insurance coverage, the government will not be indemnified in
case of damage to its property due to fire, loss or other acts. As observed,
replacement/repair of building damaged through flood and other fortuitous
events were funded through meager funds of the Department.

23.8 We recommended that the concerned Management:

a. immediately secure property insurance for its uninsured assets, in

compliance with the rules and regulations of RA No. 656 as amended by
PD No. 245 dated July 13, 1973 and the provisions of COA Circular No.
92-390 dated November 17, 1992;

b. submit RPCPPE to the GIF of the GSIS within the prescribed timeline
in order to ensure indemnification of insurable assets’ equivalent value
in case of loss; and

c. allocate a yearly budget for the insurance premiums of insurable assets.

Otherwise refer the matter to DBM for the availability of funds.

Compliance with Tax Laws

24. The DepEd CO and eight ROs substantially complied with the revenue
regulations on withholding of taxes on salaries, benefits and procurement of
goods and services and the subsequent remittance thereof pursuant to Revenue
Memorandum Circular No. 23-2007 dated March 23, 2007 and BIR Tax Revenue
Regulation No. 10-2008 dated July 8, 2008. However, weaknesses in the control
were observed as the account still showed unremitted prior years’ taxes
amounting to P610,597,730.62 and other deficiencies were noted as regard
compliance to BIR regulations.

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 24.1 Revenue Regulations No. 10-2008 dated July 08, 2008 provides the pertinent
provisions relative to the withholding of income taxes on compensation while
Revenue Memorandum Circular No. 23-2007 dated March 20, 2007 provides
clarifications on the computations of withholding taxes and other requirements
on government money payments due or payable to suppliers of goods and/or
services.

24.2 Revenue Regulations No. 1-2013 dated January 23, 2013 provides that “the
filing of return and payment of tax due should be on or before the 10th day
following the month in which withholding was made, except for taxes withheld
for the month of December of each year, which shall be filed on or before
January 15 of the succeeding year”.

24.3 The DepEd Offices substantially complied with the revenue regulations on
withholding of taxes on salaries, benefits and procurement of goods and services
and the subsequent remittance thereof. However, reported balances of
unremitted taxes in DepEd CO and eight ROs amounted to P610,597,730.62,
broken down as follows:

CO/ Beginning
Taxes Withheld Total Taxes Remitted Ending Balance
Region Balance
CO 118,655,877.80 466,867,012.26 585,522,890.06 517,327,662.11 68,195,227.95
NCR 3,819,955.61 1,550,537,012.53 1,554,356,968.14 1,396,522,578.65 157,834,389.49
RO I 0.00 1,354,325,384.92 1,354,325,384.92 1,330,934,623.48 23,390,761.43
RO II 662,812.31 807,316,685.83 807,979,498.14 804,162,652.93 3,816,845.21
RO III 73,392,267.84 1,899,457,206.69 1,972,849,474.53 1,872,621,804.84 100,227,669.69
RO IV-B 29,957,759.99 758,651,533.58 788,609,293.57 756,794,594.61 31,814,698.96
RO V 175,309,954.64 1,585,435,252.30 1,760,745,206.94 1,593,575,758.84 167,169,448.10
RO VIII 20,038,855.58 534,284,404.63 554,323,260.21 506,615,985.04 47,707,275.17
RO XIII 155,406.92 628,128,130.10 628,283,537.02 617,842,122.41 10,441,414.61
Total 421,992,890.69 9,585,002,622.84 10,006,995,513.50 9,396,397,782.91 610,597,730.62

24.4 All the outstanding balance of RO I amounting to P23,390,761.43 was remitted

in January and February 2018, while the amount of P62,917,203.63 outstanding
taxes withheld in RO III were remitted thru TRA in January 2018.

24.5 There is an apparent indication of substantial compliance by DOs of RO VIII –

Leyte, Baybay City, Tacloban City, Biliran and Southern Leyte, Borongan City,
Eastern Samar DO and Maasin National Vocational High School as there was
no outstanding balance due for remittance during the year as of December 31,
2017. While the balance of P3,966,826.69 of DO Ormoc City was remitted on
January 10, 2018.

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24.6 The following are some of the observations/deficiencies noted as regards
compliance with revenue regulations in different offices:

CO/
Observations/Deficiencies
Region
a. Non-maintenance of Subsidiary Ledger and unaccounted prior year’s balance
CO The amount of ₱58,224,980.04 pertains to the CY 2016 and prior year’s balance, the
details of which could not be determined due to non-maintenance of Subsidiary Ledger
(SL) by the Accounting Division.
NCR DO Taguig City and Pateros does not maintain SL for Due to BIR account by
classification of taxes such as compensation, expanded VAT or percentage tax.

At DO San Juan, ₱1,083,337.35 out of the year-end balance of ₱1,246,236.37, or 87

percent pertains to prior years’ balances without supporting schedule and SL to support
the amount.
b. Non-remittance of taxes withheld to BIR
RO II DO Nueva Vizcaya and Itbayat National Agricultural High School under DO Batanes
showed that a balance of ₱416,134.25 and ₱989,250.51, respectively, were not remitted
on time. The unremitted balance of Nueva Vizcaya pertains to taxes withheld in CY 2016
while the unremitted taxes for Itbayat NAHS pertains to taxes withheld in CYs 2016 and
2017.
RO VIII The year-end balance of DO Northern Samar amounting to ₱42,512,356.33 has
accumulated to a large sum due to the failure of the Agency to remit the 2016 year-end
balance plus the amount of taxes withheld in CY 2017 for the months of January, May
and June 2017.
RO IX In DO Zamboanga del Sur, taxes on certain purchases of goods and services rendered by
contractors as well payment of compensation to various personnel totaling
₱2,210,566.74 remained unremitted.
c. Non-withholding of taxes
CAR Taxes amounting to ₱1,151,968.93 were not deducted and withheld from payments made
by DOs Apayao and Kalinga and six secondary schools on account of purchases of goods
and services resulting in loss of government revenue.
RO IV-B Additional tax revenue accruing to the National Government was not realized
accordingly due to the failure of the Division of Oriental Mindoro to withhold taxes
totaling ₱118,813.52 from payments of Overtime and Night Pay to Division personnel
and of IT equipment and office supplies purchased.
RO VIII There were procurements/purchases by the Hinabangan NHS and Lorenzo S. Menzon
Agro-Industrial School that were not subjected to withheld taxes.
RO IX Tukuran TVHS of DO Zamboanga del Sur failed to withhold and remit taxes on payment
of internet services. Likewise, percentage taxes on supplies and materials purchased and
paid out of CAs of Basilan NHS of DO-Isabela City were not deducted, withheld and
remitted.
RO XIII The DO of Butuan City failed to withhold taxes in payment for telephone expenses,
office supplies and other operating expenses.
d. Over withheld and over remitted taxes
RO XI Failed to apply the prescribed ceiling and exceptions of Revenue Regulation (RR) No.
2-98 with its amendments resulting in over withheld and remittance of taxes on
compensation of its employees amounting to ₱215,593.29.

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 24.7 We recommended that the concerned Offices/Schools:

a. require their Accountants to strictly implement the imposition of taxes

on income and money payments due or payable to all suppliers of goods
and/or services being a withholding agent of the government, and
immediately remit the balance of taxes withheld on or before the 10th
day of the month following the month of withholding; and

b. immediately settle the noted deficiencies and record the same on its
appropriate books of account on the confirmed TRA in accordance with
Joint Circular (JC) No. 1-2000. Penalties and interest, if any, should be a
personal liability of the official responsible for the delayed or non-
remittance thereof.

Compliance with RA No. 9679 on Further Strengthening the HDMF and for Other
Purposes

25. Premium contributions and loan amortizations with an indicative total amount
of P16,559,367.86 were not deducted in the payroll of teaching and non-teaching
personnel of DepEd NCR, CAR and RO IV-B due to faulty payroll system which
failed to observe the order of priority in the deduction of employees’ salaries, as
required in Section 47 of the General Provisions of the GAA for FY 2017.
Moreover, premium contributions and/or loan amortizations amounting to
P53,134,830.36 were reported not timely remitted in compliance to the provisions
of Home Development Mutual Fund (HDMF) Circular No. 275 dated January 22,
2010.

 Authorized Deductions. Deductions from salaries and other benefits accruing

to any government employee, chargeable against the appropriations for
Personnel Services, may be allowed for the payment of an individual
employee’s contributions or obligations due the following, and in the order
of preference stated below:

o The BIR, PHILHEALTH, GSIS AND HDMF;

o Non-stock savings and loan associations and mutual benefits
associations duly operating under existing laws and cooperatives which
are managed by and/or for the benefit of government employees;
o Associations or provident funds organized and managed by
government employees for their benefit and welfare;
o GFIs authorized by law and accredited by appropriate government
regulating bodies to engage in lending;
o Licensed insurance companies; and
o Thrift banks and rural banks accredited by the BSP.

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25.2 Likewise, Section e(4) of the Home Development Mutual Fund Circular
(HDMF) Circular No. 275 provides that:

 Employers shall remit the requirement monthly employer and employee

contributions to the nearest Pag-IBIG branch or its authorized collecting
banks, together with the duly accomplished Membership Contribution
Remittance Form, in accordance with the following remittance schedule:

First Letter of
Due Date
Employer’s Name
A to D 10th to the 14th day of the month following the period covered
E to L 15th to the 19th day of the month following the period covered
M to Q 20th to the 24th day of the month following the period covered
R to Z, Numeral 25th to the end of the month following the period covered

25.3 The summary of HDMF/Pag-IBIG contributions and loan payments with its
corresponding remittances as of December 31, 2017 are as follows:

Beginning
balance
Balance as of
CO/ Region Operating Units and current year Remittances
12/31/17
deductions/
contributions
CO OSEC 2,803,988.37 2,580,406.37 223,582.00
NCR Five DOs and two IUs -* -* 865,362.19
CAR DOs of Abra and -* -* 71,964.70
Kalinga
RO II ROP and 9 DOs 474,248,082.44 435,828,332.05 38,419,750.39
RO III 8 DOs including the 335,423,053.68 333,406,389.51 2,016,664.17
autonomous schools
RO IV-B DOs of Romblon, -* -* 169,250.00
Calapan City and
Marinduque
RO V ROP and 13 DOs 273,563,484.23 262,644,083.07 10,919,401.16
RO VIII DO Baybay -* -* -*
RO XIII DOs of Agusan del Sur 5,672,898.08 5,224,042.33 448,855.75
and Bayugan City; and
Nasipit NVS of DO
Agusan del Sur
Total 53,134,830.36
*Amount not indicated

25.4 Audit of the deductions from the salaries of DepEd teaching and non-teaching
personnel for the payment of Pag-IBIG premium contributions and loan
amortizations disclosed the following deficiencies:

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a.) Undeducted premium contributions and loan amortizations amounting to
P16,559,367.86 were observed in the NCR, CAR and RO IV-B due to non-
compliance with the order of priority in the deduction from the salaries of
employees. Details are as follows:

Region Amount Remarks

NCR 12,944,660.22 Premiums and loan amortizations were not deducted in the
ROP payroll of teaching and non-teaching personnel in CY 2017
alone due to lapses in the payroll system which failed to
observe the order of priority in the deduction of employees'
salaries
CAR 3,361,372.35 The order of preference in authorized deductions was not
ROP considered in the APDS of the RO thus, loan amortizations
due to HDMF were not deducted from the salaries of
employees for the period January to December 2017.
RO IV-B 253,335.29 Deductions made from the salaries of elementary and
ROP and secondary teaching and non-teaching employees were
Bulbugan NHS insufficient to pay the required amortizations that are due
of DO Oriental the HDMF. Inquiry with the RPSU of the RO disclosed
Mindoro that the actual deductions were computed in the payroll
system on a first come, first served basis after ensuring that
net take home pay will not be less than P4,000.00. This
system however does not give priority to the amortizations
due the GOCCs.
Total 16,559,367.86

b.) Unremitted contributions of P53,134,830.36 as at year-end as shown below:

CO/Region Amount Remarks

CO 223,582.00 From the unremitted balances in Due to Pag-IBIG, under
remittance in regular payroll amounting to ₱14,546.21
represents current year’s over deductions in loan
repayments that is unremitted to Pag IBIG and the amount
of ₱14,446.21 was already refunded to employees.
NCR 865,362.19 Premium contributions and/or loan amortizations of the
Five DOs and concerned DOs and IUs employees, including those that
two IUs are newly hired which were covered by Supplementary
Payrolls, were not remitted on time which could delay the
availment of loan privileges and such other benefits
accruing to the members thereof.
CAR 71,964.70 Premium contributions as well as loan amortizations
DOs of Abra and deducted by the concerned DOs from the salaries of
Kalinga employees, which were due for remittance, remained
outstanding as at year-end. As such, interest due to the
delay in the remittance thereof could be incurred and the
loan privileges of employees might be suspended.
RO II 38,419,750.39 The Summary of Pag-IBIG Contributions and
ROP and 9 DOs Remittances as of December 31, 2017 revealed deductions
were not remitted in full.

RO III 2,016,664.17 The concerned offices had been complying with the
ROP and 20 DOs proper deduction of contribution and short term loan

316
 CO/Region Amount Remarks
amortization from the salaries of employees, and the
remittance of said deductions. However, there were still
unremitted deductions as of December 31, 2017,
significant amount of which were due to some problems
encountered in the Pag-IBIG account number of some
employees.
RO IV-B 169,250.00 In DO Romblon, the reported year-end balance of the Due
DOs of Romblon, to Pag-IBIG could not be verified by the Audit Team due
Calapan City and to the failure of its Accounting Division to maintain SLs,
Marinduque casting doubt on the accuracy thereof. The unremitted
balances from DOs Marinduque and Calapan City consist
of contributions which were deducted from the salaries of
newly hired employees and substitute teachers that
remained unremitted as at year-end.
RO V 10,919,401.16 Details of HDMF deductions and remittances of
contributions by the ROP and DOs revealed that
deductions were not remitted in full.
RO VIII -* Remittance of employees' contribution were delayed from
DO Baybay five to 27 days which resulted to penalties due to the
absence of Membership Identification (MID) Number of
employees in the remittance list prepared by the DO. The
HDMF refuses to accept payment if the remittance list
does not include the said information.
XIII 448,855.75 Verification of the remittances to HDMF by the concerned
DOs of Agusan DOs and school disclosed that premiums and/or loan
del Sur and amortizations deducted from the monthly payrolls for the
Bayugan City; CY 2017 were not remitted in full.
and Nasipit NVS
of DO Agusan
del Sur
Total 53,134,830.36
*Amount not indicated

25.5 It is mandatory on the part of the agencies to withhold and remit all monthly
premium contributions within the timelines set by the governing agencies. It is
only when premiums are remitted that members are able to enjoy and access
whatever privileges or benefits accruing to them thus, unremitted HDMF/Pag-
IBIG premium contributions could result in delay in the availment of loan
privileges and other benefits offered to all HDMF/Pag-IBIG members.

a. ensure the strict compliance of the order of preference in authorized

deductions in accordance with the provision of Section 47 of the General
Provisions of the GAA for FY 2017 with due consideration on the net
take home pay threshold of P5,000.00 as required in Section 48 of the
General Provisions of the GAA for FY 2018; and

317
 b. immediately remit all premium contributions to the concerned
government agencies within the timelines set to avoid penalties/interests
and to enable all employees to enjoy the privileges and benefits accruing
to the members.

25.7 The Management comments are:

CO/Region Management's Comments

CO The recommendations on the account Due to Pag-IBIG will be handled by the
Personnel Division. The recommended adjustments/reclassification of accounts will
be made this year. All observations have been noted by the Management and will
serve as their guide in their subsequent actions.
NCR The Management commented that revisions are being made at the DepEd CO on the
payroll system taking into consideration the provisions of the GAA and other issues
involving loan deductions of teaching and non-teaching personnel. Nonetheless, the
Management asserted that the Office of the Undersecretary shall be informed of the
audit recommendations. The unremitted contributions noted during audit were either
partially or fully remitted in 2018.
CAR The RO is drafting a Memorandum to all DepEd employees concerned, through the
Dos, informing them of their HDMF loan amortizations that were not deducted in
2017. It also informed that safeguards shall be added in the existing policy on the
issuance of certifications on the net pay of employees for purposes of loan
applications.

Unremitted amounts in DO Kalinga pertain to the unfunded plantilla items that were
already reflected in the payroll, and that the withheld contributions were used to fund
the salaries of other employees. DO Kalinga informed the Audit Team that it has
already filed a request to the DBM for funding. It committed to comply with the
recommendation upon receipt of funds.
RO IV-B The RO commented that the system was adjusted as of November 2017 to
accommodate the prioritization of the GSIS and HDMF deductions and is currently
prioritizing such deductions over PLIs. The Management of the DO Calapan City,
on the other hand, was amenable with the Audit Team's recommendations. In CY
2017, the Regional and seven DOs withheld and remitted Pag-IBIG fund
contributions and short term loan amortizations in compliance with RA No. 9679.
RO VIII Pag-IBIG has required that each member should enroll online and obtain a MID from
the Pag-IBIG online portal effective October 2017. Since then, the DO was not able
to remit their contributions without delay. They are currently updating their records
of all employees and committed that once it is complete, there will be no more delays
in the remittance.

Compliance with RA No. 8291 on Proper Deductions and Remittances of Premium to

GSIS

26. The accommodation of private lending institutions (PLIs) and the “First-In, First
Served” queuing system for the deduction of loans in the payroll of teaching and
non-teaching personnel in six ROs that disregarded the prioritization of
deductions provided in Section 47 of the General Provisions of the GAA for the
FY 2017 resulted in undeducted GSIS premiums and loan amortizations
amounting to P377,728,531.94. As a consequence, compound interests, penalties
318
and/or surcharges could be incurred or worst, non-availment of retirement
benefits by the employees affected thereof. Furthermore, contributions and/or
loan amortizations totaling P649,908,531.20 deducted from the payrolls of
employees of 11 CO/ROs remained unremitted to GSIS as at year-end exposing
the concerned employees of penalties/interests that could result to undue
limitations in enjoying the privileges and benefits conferred under the GSIS law.

a. Authorized Deductions. Deductions from salaries and other benefits accruing

to any government employee, chargeable against the appropriations for
Personnel Services, may be allowed for the payment of an individual
employee’s contributions or obligations due the following, and in the order
of preference stated below:

1.) The BIR, PHILHEALTH, GSIS AND HDMF;

2.) Non-stock savings and loan associations and mutual benefits associations
duly operating under existing laws and cooperatives which are managed
by and/or for the benefit of government employees;
3.) Associations or provident funds organized and managed by government
employees for their benefit and welfare;
4.) GFIs authorized by law and accredited by appropriate government
regulating bodies to engage in lending;
5.) Licensed insurance companies; and
6.) Thrift banks and rural banks accredited by the BSP.

In no case shall the foregoing deductions reduce the employee’s monthly net
take home pay to an amount lower than Four Thousand Pesos (P4,000.00)

a. The “First-In, First Served” queuing system shall be observed except that
deductions due to GSIS and HDMF shall be accorded first order of preference
and the P4,000.00 threshold is observed.

b. The DepEd Authorized Approving Officers (AAOs) must exercise due

diligence in certifying the NTHP of DepEd personnel. The AAOs shall
reiterate to DepEd personnel the consequences of applying for loans with
various private lending institutions (PLIs) without considering their capacity
to pay. Delay in the payment of loans may result in the imposition of penalties
and accrued interests by the PLIs and the GSIS.

319
 c. All DepEd personnel shall ensure that they have the capacity to pay loans
being applied for under the Automatic Payroll Deduction System (APDS).
DepEd personnel whose loans are not deducted under the APDS are advised
to pay their loans directly to their respective lenders.

a. The DepEd shall strictly observe the “First-In, First Served” queuing system
in managing the order of salary deductions. If deduction cannot be made due
to insufficient take home pay, the claim of the Lender shall be given
preference in the order of queuing until such time that deduction may be
validly made.

a. Section 5(c) – It shall be mandatory and compulsory for all employees to

include the payment of contributions to include the payment of contributions
in their annual appropriations. Penal sanctions shall be imposed upon
employers who fail to include the payment of contributions in their annual
appropriations or otherwise fail to remit the accurate/exact amount of
contributions on time, or delay the remittance of premium contributions to
the GSIS. The head of offices and agencies shall be administratively liable
for non-remittance or delayed remittance of premium contributions to GSIS.

b. Section 6(b) – Each employer shall remit directly to the GSIS the employees’
and employers’ contributions within the first ten (10) days of the calendar
month following the month to which the contributions apply. The remittance
by the employer of the contributions to the GSIS shall take priority over and
above the payment of any and all obligations, except salaries and wages of its
employees.

c. Section 7 – Agencies which delay the remittance of any and all monies due
to the GSIS shall be charged interest as may be prescribed by the Board but
not less than two percent (2%) simple interest per month. Such interest shall
be paid by the employers concerned.

320
 Beginning
balance
CO/ Balance as of
Operating Units and current Remittances
Region 12/31/17
year deductions/
contributions
CO OSEC 44,780,803.11 43,840,186.01 940,617.10
NCR ROP and 15 DOs 5,456,312,020.64 5,137,903,684.14 318,408,336.50
CAR DOs Abra, Kalinga and -* -* 3,127,697.88
CCNHS
RO II ROP and 4 DOs 2,333,011,268.51 2,322,932,605.72 10,078,662.79
RO III 8 DOs including the -* -* 28,781,354.10
autonomous schools
RO IV-B ROP and 7 DOs 2,343,446,932.44 2,273,645,270.81 69,801,661.63
RO VIII Lorenzo S. Menzon Agro- 4,759,504,403.83 4,580,203,123.22 179,301,280.61
Industrial School
RO IX DOs Zamboanga Del Sur, 7,262,127.84 7,147,725.43 114,402.41
ZamboangaDel Norte,
Dipolog City and Dapitan City
RO XI DO IGACOS 164,630,679.75 126,368,474.20 38,262,205.55
RO XIII Four DOs and 50 IUs -* -* 1,092,312.63
Total 649,908,531.20
*Amount not indicated

a.) Undeducted premiums and loan amortizations totaling P377,728,531.94 in

six ROs resulting from defective payroll system which accommodated
several PLIs that offer several types of loans and the “first-in, first served”
queing system that disregarded the order of preference in authorized
deductions on employees’ salaries. Details are as follows:
Region Amount Observations
NCR 154,765,915.13 GSIS policy premiums and loan amortizations were undeducted from
ROP the payrolls of teaching and non-teaching personnel of DepEd NCR
signifying non-observance of the order of priority on authorized
deductions in the employees' salaries. The said deficiency is attributed
to the uncontrollable accreditation of PLIs which resulted in
accommodation of 94 accredited PLIs that offer 163 types of
loans/insurance policies to DepEd NCR personnel and the "first-in,
first served" queuing system of the DepEd which was silent as to the
classification of lenders to be given priority in the salary deductions. It
was relentlessly observed until the issuance of DepEd Order No. 55,
series of 2017 dated October 26, 2017 which provided that deductions
due to GSIS and HDMF/Pag-IBIG shall be accorded first order of
preference. This was noted by the Audit Team in the payrolls of DepEd
NCR starting only on September 2017 with a significant decrease in
the undeducted GSIS loans/policy premium. The undeducted GSIS
loans/policy premiums were not completely eliminated and still
observed in September to December due to incomplete list of
loans/premiums in the billings prepared by the GSIS, as explained by
RPSU.
CAR 27,242,772.74 The order of preference of salary deductions was not observed in the
ROP APDS of the ROP thus, loan amortizations were not deducted from the
salaries of employees for the period January to December 2017. RPSU
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 Region Amount Observations
Officials explained that the "first-in, first served" queuing system of
the APDS deducts from the salaries all mandatory premium payments
due to PhilHealth, GSIS and HDMF, in addition to the mandatory
withholding of taxes due to BIR. However, loan amortizations of
employees due to these government institutions have the same order
of preference as those of private lending institutions. The defect in the
APDS was corrected only in November 2017 wherein the GSIS and
HDMF loan amortizations have the same order of preference as those
of the mandatory contributions to the said GOCCs. However, there
were GSIS and HDMF loan amortizations that were not deducted in
December 2017 due to the increased taxes that were deducted first
from the gross salaries.
RO I 6,245,501.75 The Agency did not prioritize nor deduct any amount due to GSIS on
ROP loans availed by the employees resulting in the non-remittance to the
GSIS the loan repayments/amortizations for various loans availed by
the employees of DepEd RO I as of year-end.
RO IV-B 74,735,403.16 Audit of payment for PS of DepEd MIMAROPA Region for CY 2017
ROP and revealed that there were undeducted loan amortizations from the
Bulbugan salaries of elementary and secondary teaching and non-teaching
NHS of DO employees due to insufficiency of their net take home pay to
Oriental accommodate the said deductions. Inquiry with the RPSU of the ROP
Mindoro disclosed that actual deductions were computed on a "first-in, first
served" basis after ensuring that the net take home pay will not be less
than the required minimum net take home pay of P4,000.00 as stated
in the GAA for FY 2017. The system however, does not give priority
to the amortizations due the GOCCs as provided in the GAA for FY
2017
RO IX 2,188,491.00 Non-observance with the order of priority in the deduction of
Molave employees' salaries resulted in undeducted GSIS premiums and loan
VTS of DO amortizations which was attributable to the lack of accreditation and
Zamboanga accommodation of loans from the PLIs, and the first-in, first served
del Sur; queuing system which was silent as to the classification of lenders to
and be given priority in the salary deductions as well as the laxity of the
ZSNHS Authorized Approving Officers (AAOs) in exercising due diligence in
and ZSSAT certifying Net Take Home Pay (NTHP) of DepEd personnel in the loan
of DO applications. It was observed until DepEd Order No. 55 was issued.
Pagadian This was noted in the payrolls of the school starting only on October
City 2017 with a significant decrease in the undeducted GSIS loans/policy
premiums. However, the undeducted GSIS policy premiums were not
completely eliminated as well as the GSIS loans still remained
increasing as observed in October to December 2017.
RO XIII 112,550,448.16 Verification of the APDS of the RPSU for the period October 2016 to
ROP August 2017 disclosed that a total of P453,449,206.67 was billed by
GSIS to DepEd CARAGA Region for its employees' loan
amortizations. Of the total billed amount, only P340,898,758.51 or 75
percent was deducted through APDS and remitted by the region
leaving an undeducted balance of P112,550,448.16. The deficiency
could be attributed to the failure of the RPSU to strictly impose the
order of preference in deducting the obligations of the employees from
their respective salaries and other claims as mandated in Section 47 of
the GAA for FY 2017 and of the GSIS Act of 1997.
Total 377,728,531.94

322
 b.) Unremitted year-end balances payable to GSIS of P649,908,531.20
representing premium and loan amortizations deducted from the salaries of
DepEd employees, discussed in detail below:

CO/RO Amount Observations

CO 940,617.10 Out of the total amount unremitted, ₱437,167.72 represents
current year’s over deductions in loan repayments that is
unremitted to GSIS and is due for refund to various employees.
NCR 318,408,336.50 The monthly premium contributions and/or loan amortizations
Five DOs and withheld from the payrolls of teaching and non-teaching
Balingasa HS of personnel, including those covered by supplementary payrolls
DO Quezon City for newly hired personnel, in five DOs and two IUs remained
and Parang HS directly unremitted to GSIS as at year-end. One of the causes
of DO Marikina identified was due to mismatch between reports of the
concerned office and the GSIS database.
CAR 3,127,697.88 The year-end balance of the Due to GSIS account included
DOs of Abra and unremitted contributions and loan amortizations that were
Kalinga; and deducted from the salaries of employees from CY 2015 to
Conner Central November 2017 hence, considered overdue, contrary to the
NHS provision of GSIS Memorandum Circular No. 4-97 which
require contributions and loan amortizations to be remitted on
the 10th day of the following month.
RO II 10,078,662.79 The Summary of GSIS contributions and remittances as of
Four DOs December 31, 2017 showed that there was a noted delay in the
remittance to GSIS in four DOs.
RO III 28,781,354.10 Delay in the remittance of contributions and loan amortizations
Six DOs were observed which was caused, among others, by: a) late
submission of required documents by newly hired employees
for the issuance of BP number; b) remittance checks rejected
due to incorrect format or incomplete data in the remittance
list; c) failure to update/coordinate data of newly hired
employees and substitute teachers as well as salary
differentials and step increments with the GSIS; and d) failure
to submit Agency Remittance Advice (ARA).
RO IV-B 69,801,661.63 In DO Romblon, the Audit Team was unable to validate the
DOs of reported unremitted balance due to the failure of the
Romblon, Accounting Division to maintain SLs while review of
Calapan City transactions in DO Marinduque showed that mandatory
and Marinduque contributions deducted from the salaries of newly-hired
employees were not remitted within the prescribed period. The
year-end balance was due to accumulation of unremitted
contributions from prior years which were continuously
carried forward. In DO Calapan City, the amount unremitted

323
 CO/RO Amount Observations
included employees' personal share and government share
contributions from the salaries of substitute teachers and step
increments/salary differentials of regular employees for the
period January 2015 to November 2017. Interview with the
personnel of the said DO and RO disclosed that un-updated
personnel information and/or inconsistencies in the
information provided were the reasons in the delay of posting
by GSIS.
RO V 179,301,280.61 A substantial portion of the year-end balance pertains to prior
ROP and 13 years’ transactions which are still subject of the ongoing
DOs reconciliation by the concerned Offices.
RO VIII 114,402.41 The designated personnel of the school failed to observe the
Lorenzo S. required deadline for remittance of withheld contributions.
Menzon Agro- Remittances were not intact as observed in the analysis of
Industrial relative transactions. Delay ranging from eight to 50 days was
School; and DO observed in the remittance of GSIS contributions by DO
Baybay City Baybay City due to change of system. According to the
Accountant, the GSIS refused to accept payment if the names
of employees in the remittance list do not match with the
records of GSIS.
RO IX 38,262,205.55 Unremitted GSIS deductions for RO IX includes unremitted
DOs Zamboanga balances from DOs Zamboanga Del Sur, P24,786,748.31;
Del Sur, Zamboanga Del Norte, P24,786,748.31; Dipolog City,
Zamboanga Del P1,556,574.22; and Dapitan City, P3,149,880.95.
Norte, Dipolog
City and Dapitan
City
RO XI 1,092,312.63 Review of the Due to GSIS account revealed that it has a
DO IGACOS beginning balance of P1,092,312.63 which pertains to GSIS
contributions from January 2015 to December 2016 and a
portion of 2017 that were not remitted within the prescribed
period. However, validation of the checks issued revealed that
there was an attempt by the Management to remit partial
contribution amounting to P575,288.48 in May 2017, pending
acceptance of the GSIS. The reasons of their failure to remit
were: (a) using the eBCS facility requires the uploaded
electronic remittance list to be 100 percent matched with the
GSIS records, if not, remittance and payment cannot be
processed; and (b) office codes for clustered agencies
(elementary and secondary) were not included during the
creation of the RA users account in eBCS facility.
XIII 26,283,374.69 Verification of the remittances of GSIS disclosed that
DOs Agusan del premiums and/or loan amortizations deducted from the
Sur and Bayugan monthly payrolls for the CY 2017 were not remitted in full for
City DOs Agusan del Sur of P25,502,445.85 and Bayugan City of
P780,928.84
Total 649,908,531.20

324
 c.) Other deficiencies observed are as follows:

Region Observations
NCR and RO IX Failure of the Agency Authorized Officers (AAOs) in the concerned DOs in
assessing borrower's loan payment capacity resulted to approval of loan
applications to employees whose salaries were already below the required NTHP
of P4,000.00
RO III Over-remittance of contributions and policy loan payments amounting to
DO Pampanga P315,636.32 was due to un-updated amount of salaries of employees which is the
basis of the GSIS in computing contributions.
RO XI Erroneous computation of the government and personal share due to incorrect
DOs of IGACOS salary basis which did not consider the incurrence of LWOP by the concerned
and Tagum City employees.
RO XIII Remittances to GSIS for premiums and loan amortizations were not supported
15 IUs of DO with monthly billing statements.
Agusan del Sur
GSIS billings for premiums and loan amortizations for CY 2017 were not
correctly deducted due to failure of the Accounting Unit to deduct accurately the
GSIS premiums and loan amortizations amounting to P15,310,625.65

a. ensure the strict compliance of the provisions of DepEd Order No. 55,
series of 2017 especially on the order of preference in the salary
deductions with due consideration on the NTHP threshold of P5,000.00
as required in Section 48 of the General Provisions of the GAA for FY
2018;

b. restudy controls to limit the accreditation of PLIs in order to avoid

accommodation of excessive number of PLIs that offer several types of
loans for the protection of DepEd employees, most importantly their
financial stability;

c. require the DepEd Authorized Approving Officers and PLIs to exercise

due diligence in certifying and approving loan applications to avoid
accumulation of undeducted contributions and loan amortizations; and

325
 d. require the concerned Heads of DepEd Offices to impose sanctions for
the non-remittance of GSIS premiums and loan payments to employees
responsible thereof and remit all premium contributions to the GSIS
within the timelines set to avoid penalties/interests and to enable all
employees to enjoy the privileges and benefits accruing to GSIS
members.

CO/Regions Management’s Comments

CO The Bookkeeping-A Section of the Accounting Division together with the Personnel
Division will work on the Due to GSIS account. The recommended
adjustments/reclassification of accounts will be made this year. All observations have
been noted by Management and will serve as their guide in their subsequent actions.
NCR The Management commented that revisions are being made by the DepEd CO on the
payroll system taking into consideration the provisions of the GAA and other issues
involving loan deductions of teachers. Nonetheless, the Management asserted that the
Office of the Undersecretary shall be informed of the audit recommendations.
CAR The RO is drafting a Memorandum to all DepEd employees concerned through the DOs
informing them of their undeducted loan amortizations in 2017. It also informed that
safeguards shall be added in the existing policy on the issuance of certifications on the
net pay of employees for purposes of loan applications.

DO Kalinga explained that the unremitted amounts pertained to the unfunded plantilla
items that were already reflected in the payroll, and that the withheld contributions were
used to fund the salaries of other employees. DO Kalinga also informed that it has
already filed a request to the DBM for funding. It committed to comply with the
recommendation upon receipt of the funds.
RO I The Management has already implemented the updated APDS, wherein GSIS deductions
are prioritized. They will provide COA with the official receipts as a proof of the said
remittances. They will also strictly adhere to the provisions of DepEd Order Nos. 55, s.
2017 and 5, s. 2018.
RO II The Management of DO Ilagan City and Gosi NHS of DO Tuguegarao City committed
to remit the unremitted balance to GSIS in CY 2018. The Accounting Section of DO
Isabela is in the process of reconciling the difference in the amount reflected in the
financial statement as at year-end. For CY 2018, transaction will be recorded in the EFRs
for maintenance of GL and SL. In DO Nueva Vizcaya, the Accounting Office cited
inadequacy of data/information and documents to be submitted to GSIS, and
insufficiency of PS funds in CY 2017, as reasons on its failure to remit GSIS
contributions.
RO IV-B The RO commented that the system was adjusted as of November 2017 to accommodate
the prioritization of the GSIS deductions over PLIs. The Management of DO Calapan
City, on the other hand, was amenable with the Audit Team's recommendations.
RO VIII During the exit conference, the Management agreed to follow the audit recommendation
particularly on the remittance of interagency payables regularly.
RO IX The Management explained that the deficiency on premium payments and loan
deductions was due to the contributions of teachers who were on leave without pay and
request of concerned teachers for the exclusion of its deductions from their salaries. The
NTHP below the threshold, on the other hand, was due to negligence of the bookkeeper
and deductions pertaining to absences of employees however, the Management assured
that the relative DepEd Order will be strictly followed and that it will assess loan
applications by employees before approving.

326
 CO/Regions Management’s Comments
RO XIII The Management commented that it is only when DepEd Order No. 55 was issued that
the RPSU prioritized the deductions due the GSIS. Moreover, the reasons for delay in
the remittance of contributions, among others, was due to: (a) delay in the update of
records on the part of GSIS as regards transfer, resignation, leave and retirement of
employees; (b) lump payment of remittances of contributions from newly hired
employees; (c) absence of data/information or updates as required by GSIS; and (d)
unmatched remitting agency in service record.

Compliance with Settlement of Suspensions, Disallowances and Charges

27. Out of total suspensions, disallowances and charges of P3,573,484,451.62,

P839,801,164.56, and P7,182,742.91, respectively, issued in CO, ROs, and DOs of
DepEd, only a total of P602,657,509.07 was settled leaving a balance of
P3,116,395,597.72, P694,524,722.37, and P6,890,529.93, respectively, as of year-
end.

a.) Audit Suspensions and disallowances before effectivity of the RRSA:

Issued Adjustment Balances
CO/Region As of September 30, 2009 to Beginning Settled As of December 31, 2017
NS ND Balance NS ND
CO - 29,145,070.00 - 488,965.00 - 28,656,105.00
CAR - 13,274,945.44 (1,823,752.86) 8,264.69 - 11,442,927.89
RO I 23,984,381.28 - - - 23,984,381.28
RO IV-B 41,800.00 - - - 41,800.00
Total - 66,446,196.72 (1,823,752.86) 497,229.69 - 64,125,214.17

b.) Notice of Suspensions (NS), Notice of Disallowances (ND) and Notice of

Charges (NC) issued upon effectivity of the RRSA:
Issued Balances
CO/ DO/ from Oct. 1, 2009 to Dec. 31, 2017 As of December 31, 2017
Settled
Region School
NS ND NC NS ND NC
CO 1,665,515,642.78 14,981,119.56 1,828,519.10 58,464,528.31 1,607,091,514.47 14,940,719.56 1,828,519.10
BALS - 9,900.00 - - - 9,900.00 -
BEE 2,549,921.22 1,022,727.06 - - 2,549,921.22 1,022,727.06 -
BSE 5,215,849.94 657,118.75 - - 5,215,849.94 657,118.75 -
EDPITAF - 225,490.00 - 58,500.00 - 166,990.00 -
NETRC 5,000.00 1,256,408.72 - - 5,000.00 1,256,408.72 -
SHNC - 1,383,765.03 - - - 1,383,765.03 -
NCR ROP &
16 DOs 653,085,818.62 17,014,010.35 2,461,610.19 2,916,982.88 650,624,217.44 16,600,978.37 2,419,260.47
CAR ROP & 7
DOs 62,506,106.95 12,224,812.57 - 30,059,405.41 33,927,964.84 10,743,549.27 -
RO I ROP &
14 DOs 50,776,996.37 13,752,870.05 - 30,116,033.29 21,446,637.57 12,967,195.56 -
RO II ROP & 9
DOs 31,210,130.31 2,411,038.01 - 18,369,128.66 13,290,231.78 1,961,807.88 -

327
 Issued Balances
CO/ DO/ from Oct. 1, 2009 to Dec. 31, 2017 As of December 31, 2017
Settled
Region School
NS ND NC NS ND NC
RO III ROP &
20 DOs 135,217,323.11 144,172,474.40 2,844,988.62 131,138,728.98 5,220,738.67 143,280,193.12 2,595,125.36
RO IV-B ROP & 7
DOs 143,015,048.40 3,971,258.59 - 3,998,712.02 139,314,074.75 3,673,520.22 -
RO V ROP &
11 DOs 168,042,783.12 27,146,263.75 - 137,080,194.24 33,127,118.26 24,981,734.37 -
RO VIII ROP &
13 DOs 311,984,406.37 21,698,862.52 - 8,707,073.14 304,559,196.99 20,416,998.76 -
RO IX ROP & 8
DOs 210,497,952.69 223,438,783.46 - 23,430,606.21 188,124,958.28 222,381,171.66 -
RO XI ROP &
10 DOs 13,927,837.52 244,500,845.30 47,625.00 136,784,495.16 11,265,390.29 110,378,797.37 47,625.00
RO XIII ROP &
12 DOs 119,933,634.22 45,310,972.58 - 21,035,891.08 100,632,783.22 43,575,932.50 -
Total 3,573,484,451.62 775,178,720.70 7,182,742.91 602,160,279.38 3,116,395,597.72 630,399,508.20 6,890,529.93

328