09 GHQ AFP2018 Part2 Observations - and - Recommendations PDF

PART II – OBSERVATIONS AND RECOMMENDATIONS
Accounting Errors, Omissions and Deficiencies
1. Accounting errors, omissions and deficiencies resulted in the overstatement of

assets by P262,530,618.60, understatement of liabilities by P47,959,639.14 and
overstatement of equity by P310,490,257.74 which affected the fair presentation
of the Financial Statements.
1.1. Section 111 of the Government Auditing Code of the Philippines or PD 1445
provides that “(1) the accounts of an agency shall be kept in such detail as is
necessary to meet the needs of the agency and at the same time be adequate
to furnish the information needed by fiscal or control agencies of the
government. (2) The highest standards of honesty, objectivity and consistency
shall be observed in the keeping of accounts to safeguard against inaccurate
or misleading information.
1.2. Various accounting errors, omissions and deficiencies, affected the fair
presentation of the reported total Assets, Liabilities, and Net Assets/Equity.
These are summarized hereunder and discussed in detail in succeeding
paragraphs.
Account Group Balance Amount Effect

of Error (Over)/Under
ASSETS
Cash and Cash Equivalents 12,805,625,951.48 P61,896,101.34 P8,646,657.65
Receivables 4,408,799,429.34 59,291,733.50 40,049,537.99
Inventory 7,203,563,169.62 42,195,067.38 (40,550,271.60)
Property, Plant and
Equipment 78,572,516,161.48 207,197,383.33 (136,741,394.21)
Intangible Assets 7,960,950.00
Other Assets 34,268,394,594.78 133,935,148.43 (133,935,148.43)
Subtotal 137,266,860,256.70 (262,530,618.60)
LIABILITIES
Financial Liabilities 354,262,556.81 31,837,255.70 31,837,255.70
Inter-Agency Payable 2,563,189,459.22 0.00 0.00
Intra-Agency Payables 98,828,359.68 0.00 (5,457,870.89)
Trust Liabilities 821,357,301.33 0.00 0.00
Deferred Credits/Unearned
Income 640,224,976.33 0.00 0.00
Other Payables 1,054,773,003.55 0.00 21,580,254.33
Subtotal 5,532,635,656.92 47,959,639.14
NET ASSETS/EQUITY 131,734,224,599.78 0.00 (310,490,257.74)
Total Misstatements P536,352,689.68
92
Accounting Errors and Omissions
1.3. Section 27 of PPSAS No. 1 provides that Financial Statements shall present
fairly the financial position, financial performance, and cash flows of an
entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions
and recognition criteria of assets, liabilities, revenue and expenses set out in
IPSASs.
1.4. Audit of various accounts of the GHQ, AFP Program 4 disclosed the errors
and omissions totaling P536,352,689.68 as presented in the succeeding tables.
Cash and Cash Equivalents
Unit/
Particulars Amount Affected Accounts (Over) Under
Command
PSG Unrecorded 1,444,440.00 Cash-MDS Regular 1,444,440.00
cancellation of Due from NGA (1,444,440.00)
check payable to
Government Arsenal
AFPMATF Unrecorded residual 753,128.18 Cash in Bank -LCCA 753,128.18
balance from opened Accumulated 753,128.18
LC Surplus/(Deficit)
Unrecorded Debit 4,158,270.08 Cash in Bank -LCCA (4,158,270.08)
Memo Financial Assistance 4,158,270.08
to NGAs
AFPMATF Unrecorded interest 2,534,290.91 Cash in Bank -LCCA 2,534,290.91
Pension earned Interest Income 2,534,290.91
Fund
Pension Unrecorded 10,906,866.38 Cash in Bank LCCA 10,906,866.38
Fund reversion of prior Other Payables 10,906,866.38
years’ unclaimed
pension benefits of
pensioners with
invalid bank
accounts
Unrecorded 27,370,947.70 Cash in Bank LCCA 2,296,907.36
reconciling items Accumulated (3,327,399.01)
relating to pension Surplus/Deficit
disbursements Pension Benefits 7,628,014.70
Expense
Cash in Bank MDS (11,534,542.01)
Other Payables 1,717,779.06
GHQ Non-adjustment of 8,955,608.89 Cash in Bank -LCCA 8,955,608.89
Pension stale checks Other Payables 8,955,608.89
GHQ Unrecorded 5,772,549.20 Salaries and Wages 1,994,076.40

PSG reconciling items Expense
affecting payroll Due from OUs 587,102.00
Accountable Forms 850.00
Inventory
93
Unit/
Command
Cash in Bank – LCCA (564,810.70)
Cash in Bank – MDS
(2,017,217.70)
Total 61,896,101.34
Unrecorded Cancellation of Check
1.5. In CY 2018, PSG’s transaction with Government Arsenal for the procurement
of various ammunitions did not materialize, thus, the check covering the
supposed payment was belatedly cancelled on March 11, 2019. At year-end,
it remained an outstanding check in the books of PSG.
Unrecorded residual from Letters of Credit and Debit Memo
1.6. Unadjusted reconciling items in the Bank Reconciliation Statements of

AFPMATF include residual balance of Letters of Credit (LC) in CY 2012
amounting to P753,128.18 and Debit Memo representing transfer of funds to
Landbank of the Philippines, Villamor Branch amounting to P4,158,270.08.
Unrecorded Interest Earned
1.7. AFPMATF earn interest thru its Letters of Credit and High Yield Savings
Accounts. In CY 2018, its bank accounts were credited by a total of
P2,517,197.23. However, this amount remained unrecorded as at year-end.
Similarly, in Pension Fund, its current accounts earned interest income of
P17,093.68 which was also not recorded by the Accounting Center.
Unrecorded reconciling items in Pension
1.8. Review of the Bank Reconciliation Statements of Pension Fund revealed the
following unrecorded reconciling items which primarily pertain to the
disbursement of pension benefits:
Particulars Amount
Deposit for pension payments P11,534,542.01
Pension payments 12,488,119.66
Pension recoveries 1,581,606.46,
Reversion of rejected accounts 1,717,779.06
Reversion of online collection 45,335.25
Disbursement of prior year allotment 3,565.26
1.9. Failure to record the book reconciling items was due to the bank’s non-
submission of debit and credit memos to support the drawing of journal
entries.
94
Non-adjustment of stale checks
1.10. Chapter 6, Section 44 of the GAM Volume 1 states that “Checks may be
cancelled when they become stale, voided or spoiled. The depository bank
considers a check stale, if it has been outstanding for over six months from
date of issue or as prescribed.”
1.11. Stale checks at the GHQ amounting to P346,658.95 and for Pension account
of P8,608,949.94, or a total of P8,955,608.89, were not cancelled nor restored
to Cash in Bank account as required under Chapter 6, Section 44 of the GAM
Volume I.
Unrecorded reconciling items affecting payroll account
1.12. Review of payroll account revealed the following unrecorded reconciling

items:
Particulars Amount
Unrecorded reinstatement as payable of payroll rejected P586,651.55
due to “invalid account/non-existing account” in GHQ
Redistribution of rejected payroll 172,761.21
Deposit for payroll distribution in GHQ 2,017,217.70
Distribution of payroll to individual accounts 2,407,966.74
Purchase of check booklets 850.00
Transfer of cash to WESCOM 587,102.00
1.13. Non-recording of the above transactions was primarily due to Management’s

failure to investigate the nature of reconciling items in the Bank
Reconciliation Statement.
Receivables
Unit/
Command
AFPREO Unrecorded liquidation 3,323,571.42 Cash in Bank - 30,256.42
and refund from Major LCCA
Services and Operating Accumulated (3,293,315.00)
Units for the amount Surplus/(Deficit)
transferred in prior years. Due from NGAs (21,891.67)
Due from OUs (3,301,679.75)
Pension
Unrecorded overpayment 1,280,560.58 Other Receivables 1,280,560.58
Fund of Pension Benefits Accumulated 1,280,560.58
collectible from financial Surplus/(Deficit)
institutions.
AFPHSC Unrecorded unpaid 8,207,694.73 Accounts Receivable 8,207,694.73
hospital billings of Hospital Income 8,256,350.25
civilian patients in Accumulated (48,655.52)
95
Unit/
Command
AFPHSC. Surplus/(Deficit)
GHQ Unrecorded balance of 41,022,035.88 Other Receivables 41,022,035.88
PSG Repairs, Maintenance Accumulated 18,733,892.45
AFPHSC and Construction (RMC) Surplus/(Deficit)
Fund. Miscellaneous 22,288,143.43
Income
AFPREO Erroneous recording of 5,457,870.89 Due to Central (5,457,870.89)
checks issued by Office
AFPREO to GHQ-HSC. Due from OUs (5,457,870.89)
Total 59,291,733.50
Unrecorded Liquidation and Refund
1.14. Verification of the reported balance of Due from NGAs and Operating Units
revealed that liquidation totalling P3,293,315.00 and refund totalling
P30,256.42 were not recorded by the Accounting Center.
Unit Particulars Reference Refund Liquidation

SOLCOM Refund of the remaining OR#3757332 P358.25
balance of fund transfer
after liquidation
AFPMC Liquidation of check P1,135,888.80
number 381487
Liquidation of check 222,440.00
number 446540
Liquidation of check 264,460.20
number 90499
Philippine Return of unutilized fund. Check No. 21,891.67
Navy The amount includes 323895
discrepancy in the books of
AFP and PN amounting to
P3,091.13 due to unutilized
fund balance in Bonifacio
Naval Station.
PMA Liquidation of the balances 68,631.50
of check numbers 446525,
446542 and 446526
Liquidation and refund of 8,006.50 1,601,894.50
check number 352101
Total P30,256.42 P3,293,315.00
Unrecorded Overpayment of Pension Benefits
1.15. In our verification of the Report of Collections, we noted that the total
amount of overpayments of recovery from various financial institutions was
P36,040,816.93. The AFP Accounting Center did not set up the other
receivable account because the AFPPGMC failed to furnish the list of
pensioners with overpayment. As of December 31, 2018, the remaining
uncollected balance of overpayments amounted to P1,280,560.58.
96
Unrecorded unpaid hospital billings
1.16. Section 6(b), Chapter 2 of the GAM Volume I states that: the basic
government accounting and budget reporting principles dictates that each
entity shall recognize and present its financial transactions and operations on
accrual basis of accounting in accordance with the PPSAS.
1.17. However, analysis of the AFPHSC records showed that unpaid hospital bills
of civilian patients amounting to P8,256,350.25 were not recorded in the
books as of year-end.
1.18. Inquiry with Accounting Center revealed that the Registrar Department has
submitted Statement of Accounts (SOA) to their office; however, they opted
not to record the same since they are still in the process of locating the
whereabouts of the guarantors of the civilian patients who are mostly enlisted
personnel of the different branches of the AFP.
Unrecorded balance of Repairs, Maintenance and Construction Fund
1.19. The Agreement entered into by the Department of National Defense (DND)
with Petron Corporation for the supply and delivery of DND-Wide Petroleum
Requirements for CYs 2015 to 2017 contained a provision of rebates in favor
of the Agency, as a percentage of every payment made to the supplier. The
rebates shall be utilized by the supplier for the repairs, maintenance and
construction of fuel dumps of the Agency upon its request thru the
submission of the Program of Expenditures.
1.20. The unutilized balance of RMC Fund as of December 31, 2018 amounted to
P41,022,035.88.
Unit Amount
GHQ P35,412,419.16
PSG 2,388,192.55
AFPHSC 3,221,424.17
Total P41,022,035.88
1.21. Inquiry with Management revealed that the TQMG and the AFP Accounting
Center are still in the process of determining the proper balance of the fund
and the correct accounting treatment for the same.
Erroneous recording of fund transfers
1.22. Under the Government Accounting Manual Volume III, Due from OUs “is
used to recognize transfer of funds not covered by allotment to the Operating
Units from the Field Units with complete set of books or from the
Central/Regional Office/Bureaus of NGAs. It also includes fund transfers to
an Operating/Field Unit from another Operating/Field Unit of the same
agency. xxx”
97
1.23. Issuance of checks by AFPREO for the repair and maintenance of quarters
within Camp Aguinaldo was made thru LCCA account number 0552-1004-
17. These checks were deposited to LCCA account number 201-000027-4
managed by GHQ-HSC. The accounting entries to record the transaction
involves: (1) debit to Due from OUs and credit to Cash in Bank totaling
P5,457,870.89; and (2) debit to Cash in Bank and credit to Due to Central
Office totaling P5,457,870.89. However, since both bank accounts are
recorded under the AFPREO fund, Due from OUs and Due to Central Office
accounts were erroneously increased by P5,457,870.89.
Inventories
Unit/
Command
GHQ, Unrecorded deliveries from 821,972.89 Inventory 821,972.89
PSG, PS-DBM Due from NGAs (821,972.89)
AFPHSC
AFPHSC Unrecorded issuance of 16,096,602.15 Expenses 16,096,602.15
Inventory thru Report of Inventory (16,096,602.15)
Supplies and Materials
Issued (RSMI) in AFPHSC
PSG Unrecorded issuances of 3,456,134.56 Fuel, Oil and 3,456,134.56
Fuel, Oil and Lubricants in Lubricants Expense
PSG
Fuel, Oil and (3,456,134.56)
Lubricants
Inventory
GHQ Already issued semi- 21,820,357.78 Semi-Expendables 21,820,357.78
AFPDSC expendables to end-user were Expense
AFPHSC not recognized as expenses in Semi-Expendable (21,820,357.78)
the books of GHQ Inventory
Total 42,195,067.38
Unrecorded deliveries from PS-DBM
1.24. Section 2(b) of Executive Order No. 359 dated June 2, 1989 provides, among
others, that the PS-DBM shall be maintained as the regular organizational
units to implement and operate a central procurement system. Further,
Section 4(b) states that Agencies shall remit in advance to the Procurement
Service the funds needed to service their requirements for supplies, materials
and equipment as reflected on their Work and Financial Plan.
1.25. Deliveries amounting to P297,319.40 in AFPHSC, P493,418.22 in PSG and

P31,235.27 in GHQ were not recorded in the books due to delay/non-
submission of Delivery Receipts (DRs) and other supporting documents by
the SAO to the Accounting Center.
98
Unrecorded issuance of inventory thru RSMI
1.26. Section 17(g), Chapter 8 of GAM Volume 1 provides that the RSMI shall be
prepared by the Property and/or Supply Custodian based on the Report of
Issuances (RIS) and shall be used by the Accounting Division/Unit as basis in
preparing the Journal Entry Voucher (JEV) to record the supplies and
materials issued.
1.27. Delayed/non-submission of RSMI in AFPHSC and PSG resulted in

unrecorded issuances of inventories in the books amounting to
P16,096,602.15 and P3,456,134.56, respectively.
Unrecorded issuance of semi-expendables
1.28. Section 10 and 11, Chapter 8 of GAM Volume 1 provides that tangible items
below the capitalization threshold of ₱15,000.00 shall be accounted as semi-
expendable property. These tangible items shall be recognized as expense
upon issue to the end-user. Inventory Custodian Slip (ICS) shall be issued to
end-user of Semi-Expendable Property to establish accountability over them.
1.29. As of December 31, 2018, the Semi-Expendable Inventory Account of GHQ

and AFPHSC includes items totalling P21,820,357.78 which were already
issued to end-users. In GHQ, the Supply Accountable Office failed to prepare
the individual Inventory Custodian Slips (ICS) for the issued semi-
expendable items as basis of the Accounting Center to record the expense;
while in AFPHSC, issued semi-expendable items were not recorded by
Accounting Center despite the preparation of ICS.
Property, Plant and Equipment
Unit/
Command
AFPMAT Unrecorded transfer of 6,020,920.13 Accumulated (6,020,920.13)
F equipment to end users Surplus/(Deficit)
Military, Police and (6,020,920.13)
Security Equipment
AFPHSC Unrecorded receipt of 15,500,100.00 Medical Equipment 14,000,000.00
donated equipment Motor Vehicles 1,500,100.00
Accumulated 12,500,000.00
Surplus/(Deficit)
Income from 3,000,100.00
Donations
AFPHSC Unrecognized impairment 165,948,468.64 Impairment loss 165,948,468.64
loss Accumulated 165,948,468.64
Impairment - PPE
GHQ Unrecorded equipment 19,727,894.56 Property Plant and 19,727,894.56
WESCOM delivered and completed Equipment
WESMIN projects funded out of the Repair and 7,396,000.00
99
Unit/
Command
COM RMC in GHQ, WESCOM, Maintenance
AFPHSC WESMINCOM, AFPHSC Expense
PMA and PMA Accumulated 27,123,894.56
Surplus/(Deficit)
Particulars Amount
PPE 19,727,894.56
Repair in CY 7,396,000.00
Repair in PY 13,000.00
Total 27,136,894.56
Total 207,197,383.33
Unrecorded transfer of equipment to end users
1.30. In AFPMATF, 142 units of force protection equipment amounting to

P6,020,920.13 were transferred to Philippine Army, AFPHSC and Western
Mindanao Command in CY 2017. These transfers were not recorded in the
books of the Fund.
Unrecorded receipt of donated equipment
1.31. In CY 2017, AFPHSC received equipment including 500 hospital beds with
an aggregate value of P12,500,000.00 from San Miguel Corporation.
Furthermore, various incubator, vaccine refrigerators, and other equipment
used in the delivery of medical services with a total value of P3,000,100.00
were also donated by the Department of Health (DOH) during CY 2018. As
of December 31, 2018, these donations remained unrecorded in the books of
the AFPHSC.
Unrecorded impairment loss
1.32. PPSAS 21, Paragraph 26 states that “An entity shall assess at each reporting
date whether there is any indication that an asset may be impaired. If any
such indication exists, the entity shall estimate the recoverable service
amount of the asset.”
1.33. During CY 2017, the AFPHSC Audit Team noted various property and
equipment with aggregate cost of P165,948,468.64 tagged as unserviceable
by the Inventory Team. Monitoring revealed that SAO failed to prepare the
Inventory and Inspection Report of Unserviceable Property (IIRUP) to
properly serve as a basis of the Accounting Center to recognize the amount of
impairment.
100
Unrecorded acquired equipment and completed projects funded out of the
RMC
1.34. Rebates earned by the Agency pursuant to the 2015-2016 agreements with
Petron in the supply and delivery of Fuel, Oil and Lubricants were utilized for
the repair and construction of fuel dumps, and acquisition of equipment to be
used in the maintenance and safeguarding of fuel inventory. The value of
equipment and completed projects funded out of the RMC totaled to
P27,443,894.56. However, the cost of the equipment/project remained
unrecorded as of December 31, 2018.
Unit/Command Completed Projects/Acquired Equipment

GHQ P16,358,968.79
AFPHSC 421,330.00
WESMINCOM 2,597,431.09
WESCOM 7,396,000.00
PSG 626,000.00
PMA 44,164.68
Total P27,443,894.56
1.35. Management claimed that they are still in the process of collating the
supporting documents as basis of the Accounting Center to record the
transactions.
Other Assets
Unit/ Affected
Particulars Amount (Over) Under
Command Accounts
AFPMATF Unrecorded 133,935,148.43 Accumulated (133,935,148.43)
delivery/ Surplus/(Deficit)
acceptance of Guaranty (133,935,148.43)
equipment to Deposit
end user
Total 133,935,148.43
Unrecorded delivery/acceptance of equipment to end user
1.36. AFPMATF failed to record the delivery and acceptance of grenade launcher
and its subsequent transfer to the Philippine Army in prior years valued at
P133,935,148.43.
Financial Liabilities
Unit/ Affected
Command Accounts
GHQ Non-accrual of 31,837,255.70 Fuel, Oil and 31,837,255.70
Fleet Card and Lubricants
101
Unit/ Affected
Command Accounts
FOL expenses Expense
from September Accounts 31,837,255.70
to December Payable
2018 in GHQ
Total 31,837,255.70
Non-accrual of fuel expenses
1.37. In GHQ, the Statement of Accounts (SOA) for fuel usage of the agency from
fleet card transactions covering January to December 2018 totaled to
P93,829,027.55. It was noted that the consumption from January to August
totaling P61,991,771.85 was recognized as expense; however, the
consumption from September to December 2018 in the amount of
P31,837,255.70 was not recognized as expense during the year. This is due to
non-submission of SOA to the Accounting Center that would serve as basis in
recording the accrual for fleet card transactions.
1.38. The noted errors and omissions in recording and reporting financial
transactions had affected the fair presentation of the accounts in the Financial
Statements.
1.39. We recommended and Management agreed to:
a) direct the concerned units to coordinate with the AFP Accounting

Center and submit the pertinent documents necessary to correctly
record the transactions in the books; and
b) direct the AFP Accounting Center to prepare the necessary adjusting

entries to record/correct the transactions which were not taken up in
the books or erroneously recorded.
1.40. Management commented the following:
Unit/ Management Comments

Command
GHQ, Still in the process of determining the details of accounts,
Pension, PSG, finalizing and consolidating supporting documents for
AFPHSC submission to Accounting.
PSG The returned check from GA amounting to P1,444,440.00
was recorded under JEV No. 01-2019-03-0032 dated March
15, 2019.
AFPMATF Debit memo representing transfer of funds to LBP Villamor
was already adjusted in 2019.
AFPHSC For unpaid hospital billings of civilian patients, P483,130.65
102
Command
were paid/funded by DOH Medical Assistance Program,
P70,287.62 are billings of Reservists which should not be
billed as Accounts Receivable (AR). The amount of
P3,980,529.99 represents CY 2018 hospital billings of
guarantors which could not be recognized as receivables due
to non-submission of Statement of Accounts (SOA) by the
Registrar Department to the Accounting Center.
PSG Unrecorded deliveries of P493,418.22 were already
recorded in 2019.
AFPHSC Donations from San Miguel Corporation of 500 units
Hospital Beds are not yet recorded due to unavailability of
supporting documents from the donor. The Command will
secure the required deed of donation to facilitate recording
in the books of accounts.
GHQ Stale checks totalling P119,667.83 were already adjusted in
February 2019.
AFPREO The over recording of Due to Central Office and Due from
Operating Units was caused by lodging two offices under
the same unit fund source (07308501). The separation of
these two units in the books of accounts was recommended
and a conference among ONAF, AFPREO, AFPAC and
OTIA will be held to have an inventory of PPE or asset.
Accounting Deficiencies
2. Accounting deficiencies affecting asset accounts, improper use of costing

methods and non-maintenance of accounting records cast doubts as to the
reliability and fair presentation of balances in the financial statements (FSs).
Unverified debit and credit memos
2.1. Management failed to monitor bank debits and credits in prior years which
resulted in large amounts of unidentified transactions. To verify the account,
the Audit Teams sent letters to Authorized Government Depository Banks
requesting copies of debit and credit memos reflected in the bank statements.
Some items were identified and recommended for adjustment; however, for
others, the banks were having difficulty in retrieving the said memos due to
the volume and age of the requested documents.
2.2. The debit/credit memos pertaining to the bank accounts maintained by the
following offices remained unidentified to date:
103
Unit Debit Memo Credit Memo
GHQ P494,922.86 P626,381.12
AFPMATF 60.00 175,001.21
Pension 27,857,663.83 70,430,480.72
EBSO 33,250.00
Total P28,352,646.69 P71,265,113.05
Unliquidated Marawi and Yolanda Funds
2.3. Funds transferred to Major Services and Unified Commands for the victims
of Marawi and Yolanda remained unliquidated, to wit:
NGA/OU Funds Transferred Liquidated Balance

Marawi
PA P194,855,155.32 P0.00 P194,855,155.32
PAF 411,142.50 0.00 411,142.50
PN 54,450,923.36 54,450,923.36 0.00
WESMINCOM 1,521,047.21 0.00 1,521,047.21
AFPHSC 480,000.00 0.00 480,000.00
Subtotal P251,718,268.39 P54,450,923.36 P197,267,345.03
Percentage 21.63% 78.37%
Yolanda
PA P1,419,507.90 P739,685.70 P679,822.20
PAF 524,355.65 300,000.00 224,355.65
PN 1,104,256.60 1,104,119.10 137.50
CENTCOM 75,000.00 75,000.00 0.00
Subtotal P3,123,120.15 P2,218,804.80 P904,315.35
Grand Total P254,841,388.54 P56,669,728.16 P198,171,660.38
Unreconciled Balances (PS-DBM/PITC)
2.4. The unreconciled balances between Subsidiary Ledgers (SL) and

confirmation with PS-DBM and PITC were mainly due to the late/non-
recording of deliveries in the books of accounts caused by late submission of
Delivery Receipts (DRs) and other documents by the Chief, Supply
Accountable Officer (SAO) to the Accounting Center, as well as the non-
reconciliation of records between the AFP Accounting Center and PS-
DBM/PITC. Details as follows:
Unit/ Balance per

Balance per SL Difference Remarks
Fund confirmation
Due from NGAs – PS-DBM
AFPHSC P182,121.84 P 382,512.14 P 200,390.30 Various deliveries were
recorded in CY 2018
despite being delivered in
January 19, 2019 to
104
Unit/ Balance per
Balance per SL Difference Remarks
Fund confirmation
February 7, 2019
PSG 29,139,295.71 4,968,929.16 24,170,366.55 The difference was due to
the following:
Particulars Amount
Unclaimed 23,632,041.30
refunds
Unrecorded 493,418.22
deliveries
Unrecorded 44,907.45
Fund
transfer
Erroneous (0.42)
recording
Total 24,170,366.55
GHQ 327,644,712.17 109,004,225.89 218,640,486.28 Difference was mainly
due to unrecorded
deliveries.
Subtotal P356,966,129.72 P114,355,667.19 P243,011,243.13
Due from GOCC – PITC
PSG P143,113,186.96 P9,588,917.23 P133,524,269.73 The difference was due to
the following:
Particulars Amount
50 percent 9,649,269.73
completion
of
constructio
n of
barracks
not
recorded in
PSG books
Unrecorded 123,875,000.00
receipt of
fund
transfer by
PITC
Total 133,524,269.73
GHQ 234,193,100.35 228,330,124.50 5,862,975.85 Difference was mainly
due to unrecorded
deliveries, penalties and
interest.
Subtotal P377,306,287.31 P237,919,041.73 P139,387,245.58
Grand P734,272,417.03 P352,274,708.92 P382,398,488.71
Total
Unreconciled Balances (Inventories)
2.5. The non-coordination between the Accounting and SAO in reconciling the
differences and delayed submission of inventory reports for recording
105
purposes caused the unreconciled balances of Inventory Accounts in the GL
vs the RPCI.
Unit/Fund Per GL/SLC Per RPCI Difference

GHQ P1,024,117,153.82 P288,794,547.59 P735,322,606.23
DSC 851,575.65 344,275.43 507,300.22
Total 1,024,968,729.47 P289,138,823.02 P735,829,906.45
2.6. For CY 2018, out of 65 offices/commands in GHQ, only 49 RPCIs were

submitted to the Office of the Auditor as of date. In AFPHSC, the
RPCI/inventory report for medical inventories was already prepared but not
yet signed by the Head, SAO. As to non-medical inventories, no inventory
report was made.
Unreconciled Balances (Property, Plant and Equipment)
2.7. The failure of Accounting and SAO to conduct regular reconciliation of the
balances in the RPCPPE against the GL resulted in the accumulation of the
unreconciled amounts. Details of which are as follows:
Unit/Fund Per RPCPPE Per GL/PPELC Difference

GHQ P839,924,457.65 P721,206,612.39 668,565,211.08
AFPMATF 1,058,281,572.89 1,829,860,713.98 771,579,141.09
SOLCOM 39,713,196.54 59,820,402.54 22,760,018.00
WESCOM 236,221,781.89 242,216,222.85 7,788,219.84
PSG 1,149,372,583.69 1,374,446,353.98 225,073,770.29
Total P1,695,766,360.30
2.8. In GHQ, only 61 out of 65 units have submitted RPCPPE; in AFPMATF,

only six units completed and submitted the said report. Whereas in AFPHSC
and PSG, no RPCPPE was submitted.
Non-existent book balances
2.9. In EBSO, trust account recorded under Cash in Bank - Savings Account with
a balance in the books of P331,247.59 was already closed per bank
confirmation sent in CY 2017. The account was opened on September 4,
2012 intended for the payment of Trust Fee of the Special Deposit Account of
EBSO for CY 2013. However, the necessary closing entry was not made due
to the insufficiency of documents on the year of its closure.
2.10. In AFPHSC, the existence of the following accounts were considered

doubtful:
Account Amount per GL Remarks

Other P4,899,302.28 Pertains to Other Prepayments to Petron
Prepayments Corporation. Outstanding since CY 2013. The
106
Account Amount per GL Remarks
Accounting Center claimed that the balance
was already delivered but remained
unadjusted due to non-submission of
necessary documents, such as Delivery
Receipts (DRs), Sales Invoices (SIs), etc., to
support the JEV.
Other 23,285.65 Pertains to Other Prepayments to AFPCES.
Prepayments Could not be relied upon due to absence of
Subsidiary Ledger and other supporting
documents to establish the validity of the
claim.
Accounts 379,830.15 Outstanding for more than ten years, thus,
Receivable considered dormant
Due from 346,349.19 Pertains to receivables from PNP and
NGAs dissolved Civilian Home Defense Force
(CHDF). The supporting documents necessary
to establish the existence of claims are
missing.
Total P5,648,767.27
2.11. The details of the Other Receivables account of AFPREO amounting to

P39,317,840.61 is unknown. The only entry made to the account was a
reclassification from advances to officers and employees and advances to
SDO wherein the list of personnel cannot be substantiated/identified.
2.12. In AFPMATF, Deposit on Letters of Credit and Guaranty Deposits accounts

includes subsidiary ledger balances totalling P172,349,986.00 and
P430,232,775.65, respectively, which pertain to items already delivered in
previous years based on the Status of Projects submitted by OJ4 and Defense
Acquisition Office.
2.13. Efforts were made by Management to identify the accountable officers

comprising the balance such as creation of a Technical Working Group to
conduct the analysis. However, since no documents were available on which
to base the same, little or no progress has been done.
Long Outstanding Intra-/Inter-Agency Receivables
2.14. The non-monitoring of fund transfers and non-submission of the liquidation

reports/non-delivery of supplies and equipment by the Implementing
Agencies (IAs) resulted in the accumulation of long outstanding/unliquidated
transferred funds. The table below shows that out of the P641,153,345.67
balance of Due from NGAs, Due from OUs and Due from GOCCs, the
amount of P393,658,797.31 aged from one (1) year to over five (5) years,
remained unliquidated/unsettled to date.
107
Aging
Unit/Fund Total 1 year to 2 More than 2 5 years and
Less than 1 year
years years to 5 years above
Due from NGAs
GHQ –PS DBM P327,644,712.17 P5,715,295.56 P2,585,808.45 P11,753,326.82 P307,590,281.34
PSG – PS DBM 29,139,295.71 1,047,656.88 1,045,511.11 23,126,986.12 3,919,141.60
AFPREO 11,433,966.79 0.00 0.00 0.00 11,433,966.79
Subtotal 368,217,974.67 6,762,952.44 3,631,319.56 34,880,312.94 322,943,389.73
Due from OUs
AFPREO 10,487,436.35 1,295,235.00 0.00 1,577,452.48 7,614,748.87
Subtotal 10,487,436.35 1,295,235.00 0.00 1,577,452.48 7,614,748.87
Due from GOCC
GHQ - PITC 262,447,934.65 239,436,360.92 11,878,380.52 0.00 11,133,193.21
Subtotal 262,447,934.65 239,436,360.92 11,878,380.52 0.00 11,133,193.21
Grand Total P641,153,345.67 P247,494,548.36 P15,509,700.08 P36,457,765.42 P341,691,331.81
2.15. In response to the request for refund by the PSG, the PS-DBM prepared and
approved two checks totaling P23,632,041.30. However, the checks were not
claimed by the PSG to date; hence, the same became stale.
Use of purchase price instead of weighted average method of costing

inventories
2.16. In AFPDSC and AFPHSC, since most of the SLCs of Inventories were not
maintained by the 6th FASU, weighted average method of costing inventories
is not possible because this method requires updated recording of purchases
and issuances. The 6th FASU used actual purchase price in costing
inventories in RSMIs.
Non-maintenance of Supplies Ledger Cards and Stock Cards
2.17. In GHQ, Stock Cards for Fuel, Oil and Lubricants were not maintained.
2.18. Also, examination of records of AFPHSC and AFPDSC showed that SLCs
and SCs were not updated by the Accounting and SAO. Thus, the reliability
of the balances of the Inventory Accounts shown in the general ledgers of the
6th FASU is doubtful.
Non-disposal of unserviceable property
2.19. The Property Unit in AFPHSC failed to dispose the unserviceable property
included in the CY 2017 RPCPPE with an aggregate amount of
P165,948,468.64 as discussed earlier in the preceding observation. Non-
disposal of these property may result in further deterioration depriving the
Agency of recovering a higher value.
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Failure to notify auditor prior to disposal
2.20. In NOLCOM, Property, Plant and Equipment (PPE) totaling P2,130,803.77

were dropped from the books without accomplishing the Inventory and
Inspection of Unserviceable Property and notifying the auditor prior to
disposal.
Non-allocation of impairment loss on Work/Zoo Animals Account
2.21. In PSG, the Work/Zoo Animals with a carrying amount of P335,000.00 as of

December 31, 2018 was not provided with impairment cost.
Non-maintenance of PPE Ledger Cards
2.22. As in the past three years or more, AFPDSC was not able to maintain PPELC
for each category of PPE, while AFPHSC failed to update PPELCs and PCs
due to the on-going migration of financial data to the Electronic National
Government Accounting System (eNGAS).
Cash advances of retired, separated or deceased AOs
2.23. Accountable Officers in GHQ with total unliquidated balance of

P5,798,295.68 were either not active in service, deceased, retired, separated,
discharged or AWOL on status. The Accounting Center failed to implement
prior year audit recommendations such as to withhold of salaries and
pensions of AOs.
Terminated contracts with outstanding DLC
2.24. The contracts of AFPMATF with suppliers were already terminated;

however, the corresponding Letters of Credit were still outstanding with the
servicing bank as of December 31, 2018 with a balance of P570,884,343.60.
a) direct the Accounting Center to:
i. make representation with the Government Servicing Banks to

get the details of debit and credit memos;
ii. send demand letters to recipient agencies and accountable

officers to liquidate the amounts transferred and still
outstanding, respectively;
iii. conduct regular reconciliation with AGDBs, PS-DBM and

PITC and effect immediately any correcting/adjusting entries
on discrepancies identified;
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iv. intensify coordination with all concerned units to analyze and
identify causes of long-outstanding balances of receivable
accounts, explore all possible ways for the recovery/collection
of the balances and request write-off of dormant accounts
following the procedures and requirements under COA
Circular No. 2016-005, and non-existent book balances;
v. use weighted average method of costing inventory;
vi. properly maintain SLCs for all items of inventory, and PPELC
for PPE;
vii. coordinate with SAO to reconcile RPCI and RPCPPE with SC-
SLC and PC-PPELC, respectively, and prepare entries to
reflect the correct balance of Inventory Accounts;
viii. closely monitor the acquisition, transfer and disposal of

property/equipment and ensure that the correct amount is
reflected in all the pertinent records;
ix. allocate impairment loss to recognize the deterioration of work

animals caused by sickness, injury and aging;
x. strictly monitor status of terminated contracts and its

corresponding Letters of Credit;
b) direct the SAO to:
i. properly maintain SCs for all items of inventory, and PCs for
PPE;
ii. conduct physical count of Inventory and PPE, coordinate with

Accounting Center to reconcile RPCI and RPCPPE with SC-
SLC and PC-PPELC, respectively;
iii. initiate the process of transfer of unserviceable property of

AFPHSC to GHQ for proper disposal;
iv. stop the practice of turning-in the unserviceable assets for

disposal without accomplishing the Inventory and Inspection
of Unserviceable Property and not presenting them to the
auditor for validation of their actual condition prior to disposal
in compliance with Section 39 and 41, Chapter 10, Volume I of
GAM and Section 79 of PD 1445; and
110
c) direct all units to submit all necessary documents to AFP
Accounting Center as support for recording transactions in the
books of accounts.
Unit/Command Management Comment

GHQ • Credit memos totalling P141,786.67 and P33,250.00,
respectively, had been determined and recorded in 2019.
• Fund transfers to WESMINCOM was fully liquidated while a

total of P128,490,000.00 has been liquidated by PA as of
date. AFPHSC has committed to return the P480,000.00 it
received from GHQ.
• Follow up and coordination letters were sent to PS-DBM for

the delivery of items requested. Due to absence of reply,
management would seek return of the amount outstanding.
• Accounting Center already sent demand letters to some of the

retired Accountable officers in July and November 2018.
Based on GHQ ALAB Resolution No. 01-19, the AFP
Finance Center/Major Services Counterpart and AFPPGMC
shall effect deduction/collection from all active and retired
AFP military personnel and civilian employees with fund
accountabilities to the AFP.
EBSO • Management has already requested a copy of the reports from
the Landbank.
PSG • Unreconciled differences of Due from PS-DBM in the books
were identified and recorded as refunds, deliveries, fund
transfers and reissuance of check in 2019. The PITC
deposited to BTR the amount of P123,875,000.00 and was
recorded in the books per JEV No. 01-2019-02-0016 dated
February 20, 2019.
• The SOP on the Acquisition, Training, Utilization,

Maintenance, Breeding and Disposal of Military Working
Dogs is currently being finalized by the Logistics Policy
Development Board. PSG shall immediately compute and
record the corresponding impairment loss of the Work/Zoo
animals upon receipt of the copy of the approved policy from
the OJ4.
AFPMATF • SAO already submitted all available pertinent documents
relating to the items included in the RPCPPE and currently
being validated by AFP Accounting Center prior to recording
in the books of accounts.
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AFPHSC • SAO updated stock cards as of December 31, 2018. FAU is
currently maintaining a manual SLC but will be automated
upon activation of eNGAS, which is already 80 percent
accomplished. Weighted average method of costing
inventories will also be implemented upon eNGAS
implementation.
• As to the outstanding account of PNP, letters were addressed

to Chief, Health Services, PNP requesting payment of
confined patients amounting to P154,798.61 during CY 2008
but to date, no settlement has been made.
AFPDSC • RSMI totalling P507,300.22 were already recorded in 2019.
SOLCOM • Differences between RPCPPE and GL pertain to unrecorded
donations awaiting Deed of Donations and unrecorded
transferred PPE.
NOLCOM • As of January 2019, the Office of the Supply Accountable
Officer has a list of Unserviceable Equipment of the
Command for Turn-in with the accomplished Inventory and
Inspection Report of Unserviceable Property (IIRUP) to be
validated by COA prior to turn-in for disposal.
Recorded Absorptive Capacity
3. GHQ, AFP has recorded absorptive capacity of 86.49 percent obligation over
allotment caused by delayed implementation of various projects under the AFP
Modernization Program, Pension Fund, Quick Response Fund and Contingent
Fund.
3.1. In CY 2018, GHQ, AFP Program 4 has P85.979 Billion current year
allotment and P6.494 Billion continuing allotment or a total of P92.474
Billion, in which 13.51 percent or P12.489 billion remained unutilized.
3.2. Shown below is the breakdown of the Allotments and Expenditures of the
GHQ, AFP CY 2018 with the percentage of their absorptive capacity.
Particulars Allotment Expenditures/ Unutilized Percentage

Obligation
(a) (b) (a-b) (b/a)
Current Year
A. Agency Specific Budget 9,788,252,427.00 9,700,146,919.57 88,105,507.43 99.10%
Personal Services 3,834,975,447.00 3,811,465,528.07 23,509,918.93 99.39%
Maintenance and Other
5,897,200,980.00 5,849,201,391.50 47,999,588.50 99.19%
Operating Expenses
Financial Expenses 19,000.00 - 19,000.00 100.00%
Capital Outlay 56,057,000.00 39,480,000.00 16,577,000.00 70.43%
B. Projects 25,781,906,076.00 13,860,468,182.47 11,921,437,893.53 53.76%
Quick Response Fund 750,000,000.00 - 750,000,000.00 0.00%
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Particulars Allotment Expenditures/ Unutilized Percentage
Obligation
(a) (b) (a-b) (b/a)
AFP Resilience Fund 37,500,000.00 37,500,000.00 - 100.00%
Construction of Barracks 3,000,000.00 2,733,409.06 266,590.94 91.11%
AFP Modernization
24,981,046,076.00 13,810,554,773.41 11,170,491,302.59 55.28%
Program
Fixed Commo System 10,360,000.00 9,680,000.00 680,000.00 93.44%
C. Automatic
1,502,200,512.00 1,468,125,526.19 34,074,985.81 97.73%
Appropriation
RLIP 52,243,000.00 52,243,000.00 - 100.00%
Custom Duties/Tax
794,598,932.00 794,598,932.00 - 100.00%
Subsidy
Admin Expenses for
44,918,580.00 10,843,594.19 34,074,985.81 24.14%
Modernization
Fund 151 BCDA 610,440,000.00 610,440,000.00 - 100.00%
D. Special Purpose Fund 48,906,847,510.00 48,467,443,716.96 439,403,793.04 99.1%
Regular Pension 48,305,784,448.00 48,063,082,269.66 242,702,178.34 99.5%
MPBF 32,916,213.00 32,916,213.00 - 100.0%
Contingent Fund 568,146,849.00 371,445,234.30 196,701,614.70 65.4%
Total Agency Budget 85,979,206,525.00 73,496,184,345.19 12,483,022,179.81 85.48%
Prior Year 6,494,978,995.00 6,488,866,924.02 6,112,070.98 99.91%
Total Budget P92,474,185,520.00 P79,985,051,269.21 P12,489,134,250.79 86.49%
Modernization Fund
3.3. Of the P11.170 billion unutilized fund, P8.942 Billion pertains to the
programmed projects not implemented since procurement activities are still
on-going.
Pension Fund
3.4. Of the P242 Million unutilized allotment, P154 Million or 63.52 percent
pertains to prior years’ pension differential arrearages of deceased and tagged
pensioners deleted from the payroll.
Particulars Amount
Pension Benefit – Mil/UP P37,475,268.87
Prior Years Pension - Mil 153,727,524.12
Retirement Gratuity 51,499,362.94
Total P242,702,155.93
Quick Response Fund
3.5. The P750 Million allotment for the Quick Response Fund was not utilized
since the proposed projects for the rehabilitation and reconstruction programs
and projects of affected communities thru the AFP Engineering unit did not
fall under the original intent of the fund. As a result, no
obligation/disbursement was incurred during the year.
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Contingent Fund
3.6. Of the P196 Million unutilized allotment, P176 Million were released only on
December 28, 2018 thru SARO No. BDB-D-18-0035246 intended for
activities/programs of the AFP relative to the implementation of
Memorandum Order No. 32 (s.2018), which aim to suppress lawless violence
and acts of terror in the provinces of Samar and Negros, and Bicol Region.
Similarly, P20 Million intended for the construction of AFP-NOLCOM-FOB-
Mahatao, Batanes in relation to the Integrated Management Plan for the
Philippine Rise was released thru SARO No. BMB-D-0026623 dated
November 7, 2018. Hence, no obligation/disbursement was incurred during
the year.
3.7. We recommended and Management agreed to properly plan the

programs, projects and activities to be undertaken and to fast track their
implementation to ensure the attainment of the goals/objectives of the
Agency.
3.9. For AFP Modernization Fund, of the unutilized balance, a total of

P2,227,768,814.75 was already obligated. The OJ4 already implemented the
preparation of Project Catch-Up Plans by the DASATs/TWGs to be
monitored monthly.
3.10. For the Quick Response Fund OJ3 answered that the fund was not utilized
due to the restrictions stated in the FY 2018 GAA. The Department of
National Defense has issued DND Memorandum Circular dated March 14,
2018 with subject “Guidelines on the Utilization of Quick Response Fund”
but despite these guidelines, AFP still encountered difficulty in its utilization.
3.11. For Pension Fund, the unobligated amount was due to the changes of claims
from 36 months lump sum to direct pension, retirees with pending case and
deletion from payroll of deceased pensioners.
3.12. The allotment under Contingent Fund was not utilized due to late release of
SARO by DBM last 07 November and 28 December 2018. Consequently, the
allotment advice for NOLCOM was issued last 31 November 2018 and to
ISAFP on 07 January 2019 for its utilization since it is a continuing fund in
accordance with Joint Resolution Nr 03 as implemented by GHQ Letter
Directive Nr 22 dated 28 December 2018 and 01 February 2019, respectively.
3.13. Likewise, the OFM, AFP issued policies regarding cash utilization, fiscal
control of financial transactions and resource management to serve as
guidelines to effectively and efficiently obligate and utilize fund according to
its purpose.
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Uncollected Receivables
4. Eviction and cancellation of permit to operate were not enforced on

concessionaires/occupants with delinquent accounts; thus, at year-end,
collectibles for light, water and rental of leased spaces continue to accumulate at
P84,014,533.66.
4.1. Section 2 of PD 1445 states that “It is the declared policy of the State 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. The
responsibility to take care that such policy is faithfully adhered to rests
directly with the chief or head of the government agency concerned.”
4.2. The total balances of Other Receivables accounts which includes collectibles
for light, water and rental as of December 31, 2018, are as follows:
Units/Funds Amount
GHQ P84,014,533.66
NOLCOM 1,959,494.52
SOLCOM 1,473,462.00
WESCOM 1,184,076.12
CENTCOM 4,254,542.86
WESMINCOM 188,639.56
AFPHSC 3,308,722.98
PENSION 155,926,587.24
PSG 913,098.60
PMA 199,525.10
BCDA 1,566,724.95
AFPREO 39,402,323.11
AFPEBSO 42,100,000.00
Total P336,491,730.70
4.3. Verification of records made available by management revealed the following

observations:
GHQ failed to enforce collection of light and water usage and rental of leased
premises
4.4. Camp Aguinaldo covers total land area of 152.52 hectares, more than enough
to house the offices and barracks of soldiers residing therein. To maximize
the use of its land, it leases part of its land area to establishments such as the
Philippine Veterans Bank and lending institutions whose business primarily
involve providing services to AFP pensioners and employees. Furthermore, it
allows third party concessionaires to operate food stalls, mini groceries,
115
barber shops and similar trades to cater persons residing within the camp.
Also, spaces are leased out to advertising companies where electronic
billboards along major highways are posted.
4.5. Inquiry with Management revealed that these establishments are billed 15
days after the end of each month for light and water used and rental charges.
Standard Operating Procedure (SOP) No. 03-2015 dated December 14, 2015
provides that concessionaires/lease/renter/tenant shall settle their bills for
electric, water and rentals within ten (10) days from receipt of their Official
Billing statement. After the ten (10) day period has lapsed, a demand letter
shall be issued for the payment of arrears.
4.6. Amount due from the concessionaires is being paid directly to the AFP
Finance Center and subsequently deposited to the trust account of the
National Treasury.
4.7. As of December 31, 2018, the balance of Other Receivables pertaining to

uncollected billings for light, water and rental amounted to P84,014,533.66.
Sixty six and 1/10 percent of this amount or P55,532,131.80 pertains only to
eight establishments whose unsettled accounts consist of current and/or past
year billings. The details are shown in the succeeding table:
Prior Year Current Year

Name Collections Balance
Billings Billings
AFPCOC P17,955,661.65 P5,315,660.62 P0.00 P23,271,322.27
AFP Theater 18,227,138.14 2,589,448.21 3,503,843.20 17,312,743.15
Golf Club 9,010,504.38 2,275,476.18 2,326,747.47 8,959,233.09
AFP Museum 2,817,628.81 834,820.86 0.00 3,652,449.67
Association of
General and Flag
699,887.13 313,149.06 0.00 1,013,036.19
Officers Inc.
(AGFO)
Philippine Veterans
2,036,832.12 1,636,772.44
Bank 174,273.55 574,333.23
HDI Admix 651,036.25 3,008,919.51 3,115,475.25 544,480.51
Doubledee
1,254,147.06 1,257,834.90
Outdoors 208,221.53 204,533.69
Subtotal P49,744,351.44 P17,628,453.62 P11,840,673.26 P55,532,131.80
Others 25,640,268.59 24,365,131.01 21,522,997.74 28,482,401.86
Total P75,384,620.03 P41,993,584.63 P33,363,671.00 P84,014,533.66
4.8. The preceding table shows that AFPCOC, AFP Museum and AGFO did not
pay even a single billing in the current year. For those who paid, the amount
settled was not enough to cover the total amount of billings issued in prior
and current years. Hence, the balance accumulates over the years.
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Non-implementation of penalty clause in SOP No. 03-2015
4.9. SOP No. 03-2015 states that upon demand, the arrears must be paid within
five days. Failure to do so shall mean a 1.5 percent surcharge per month
[imposed] on the arrears, which shall take effect immediately.
4.10. Furthermore, the SOP provides that concessionaires who fail to settle their
arrears and the accumulated surcharge after two consecutive billing periods
shall be subjected to NOTICE OF EVICTION and CANCELLATION OF
PERMIT TO OPERATE.
4.11. Due to lack of monitoring mechanisms to compare the billing and collection
dates, Management have a hard time determining which among the
receivables were paid late. Also, Management failed to enforce or issue the
Notice of Eviction and Cancellation of Permit to Operate on the following
concessionaires with arrearages:
Account Delinquency
AFPCOC At least 50 months
AFP Theater At least 80 months
Golf Club At least 47 months
AFP Museum At least 53 months
AFPGO At least 39 months
4.12. In the meantime, AFP-GHQ pays the monthly light and water bills covering
the usage of these tenants out of the General Fund.
WESCOM failed to recover its receivable from Mabuhay Petron Service Station
4.13. WESCOM failed to fully exhaust criminal and civil remedies against
Mabuhay Petron Service Station to enforce settlement of its obligation to
deliver fuel, thereby resulting in long outstanding receivable and possible
wastage of resources valued at P1,047,413.14.
a) enforce strictly the penalty embodied in SOP No. 03-2015 and send
eviction notice to delinquent concessionaires and cancel their permit
to operate if they failed to settle their accounts within a reasonable
period of time from the service of notices;
b) devise a system of monitoring the dates of preparation and issuance of

billing for light, water and rental per month to properly implement
the provisions in the SOP regarding the imposition of surcharge and
cancellation of permit to operate as penalty for non-payment;
117
c) send demand letters to concessionaires with outstanding balances in
order to enforce collection. Henceforth, direct the AFP Accounting
Center to issue demand letters regularly to concessionaires who fails
to pay the amount due within the period set; and
d) exhaust criminal and civil remedies for the immediate collection of the
value of unrecovered fuel deposits with Mabuhay Petron including
penalties, provided such remedies have not prescribed.

Command
GHQ The Headquarters Service Command (HSC) issued demand
letter to establishments with arrearages.
GHQ & HSC in collaboration with the Communications

Electronics and Information System Service, AFP (CEISSAFP),
is in the process of updating a system of monitoring the
preparation and issuance of billing to properly implement the
provision in the SOP regarding the imposition of surcharge.
WESCOM A demand letter dated 06 September 2018 was sent to Mr. Oscar
Joseph P. Miguel, owner of Mabuhay Petron Service Station,
who acknowledged his outstanding obligation and is willing to
settle it.
Accumulation of the balance of Cash Advances
5. The unsettled accountabilities of Accountable Officers (AOs) with cash advances

for payroll, foreign and local travels and other operating expenses reached up to
P266,980,688.72 as of December 31, 2018 due to the a) failure of the Special
Disbursing Officers (SDOs) to liquidate their accountabilities aged 1 to 34 years;
and b) continuous granting of cash advances to AOs whose previous
accountabilities were not yet fully liquidated contrary to the pertinent provisions
of Presidential Decree No. 1445, and COA Circular Nos. 97-002 and 2016-005.
5.1. Section 2 of P.D. 1445 provides that “it is the declared policy of the State
that all resources of the government shall be managed, expended or utilized
in accordance with law 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. The
responsibility to take care that such policy is faithfully adhered to rests
directly with the chief or head of the government agency concerned.”
5.2. The outstanding cash advances of the unified commands, key budgetary units
and other AFP Wide Support and Separate Units are as follows:
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Units/Funds Amount
GHQ P247,893,106.42
NOLCOM 8,553,268.62
WESCOM 1,384,106.56
WESMINCOM 5,337,745.83
AFPHSC 833,422.97
AFPDSC 100,000.00
PSG 43.92
PMA 772,807.72
AFPMATF 2,059,598.31
AFPREO 46,588.37
Total P266,980,688.72
5.3. Our scrutiny of records showed that the accumulation of cash advances were
due to the following:
a. Failure of the Special Disbursing Officers (SDOs) to liquidate their

accountabilities after the purpose for which the cash advances have been
served.
5.4. Sections 4.1.3, 5.1.2 and 5.1.3 of COA Circular No. 97-002 provides that the
cash advance shall be reported on as soon as the purpose for which it was
given has been served and the accountable officer shall liquidate his cash
advance within twenty (20) days after the end of the year for Petty Operating
Expenses and Field Operating Expenses; within sixty (60) days after return to
the Philippines in case of foreign travel; or within thirty (30) days after return
to his permanent official station in case of local travel.
5.5. It was noted that cash advances in the General Headquarters (GHQ) and
Northern Luzon Command (NOLCOM) amounted to P70,380,332.13 and
P1,709,618.62, respectively, which remained outstanding for over one to 34
years or beyond the prescribed period of settling cash advances.
Units/Funds Account Name Current Year Prior Year Total

GHQ Advances for P15,600,780.63 P10,285,916.98 P25,886,697.61
Operating Expenses
Advances for Payroll 70,112,351.78 39,012,506.87 109,124,858.65
Advances to SDOs 82,048,908.93 7,917,589.50 89,966,425.24
Advances to OEs 9,750,806.14 13,164,318.78 22,915,124.92
Subtotal 177,512,847.48 70,380,332.13 247,893,106.42
NOLCOM Advances to SDO 6,843,650.00 1,709,618.62 8,553,268.62
Grand Total P184,356,497.48 P72,089,950.75 P256,446,375.04
5.6. Considering the period over which they remained unliquidated, these cash
advances most likely were already expended for the purpose for which they
were granted and, as such, tend to misstate, among others, the affected asset
and expense account.
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b. Granting of additional cash advances/cash advances used for other purposes
5.7. Section 4.1.2 of COA Circular No. 97-002 states that no additional cash
advances 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.
5.8. Records revealed that the accumulation of cash advances is attributable to the
granting of additional cash advances to accountable officers while previous
ones were not yet fully liquidated.
5.9. Our analysis on the selected sample of AOs in GHQ disclosed that despite the
unliquidated balances at the beginning of CY 2018, additional cash advances
were granted to them prior to the settlement or liquidation of their previous
accountabilities.
5.10. Furthermore, cash advances under GHQ and PMA amounting to P924,424.38
and P816,340.74, respectively, were utilized for purposes other than for
which it was granted contrary to COA Circular No. 97-002 dated February
10, 1997 which casts doubt on the validity and authority of the expenses
incurred.
5.11. The laxity of the GHQ Accounting Center in the implementation of the
provisions of the above-cited Circular resulted in the accumulation of
unliquidated cash advances and unreliable reporting of the assets/expenses of
the Agency.
5.12. We recommended and Management agreed to require accountable

officers to immediately settle their accountabilities, otherwise, impose the
sanctions provided under COA Circular No. 97-002 and Article 128 of
the Revised Penal Code; and
Unit/Command Management Comments

GHQ A total of P11,129,848.64 and P1,037,158.15 are liquidated
and recorded in CY 2019 for the account of Advances to
Special Disbursing Officers and Advances to Officers and
Employees, respectively.
The Accounting Center shall continuously send demand

letters to the concerned accountable personnel to settle all
outstanding cash advances.
Furthermore, the policy of “No liquidation, No cash

advance” was implemented.
NOLCOM The Chief, accounting Unit has sent Demand Letters to
various Special Disbursing Officers for settlement of cash
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advance. As of 22 March 2019, all outstanding cash
advances at the end of CY 2018 were liquidated by different
SDO’s of the Command, except for the dormant account
wherein the request for write-off has been submitted to
COA Resident Auditor for evaluation.
Transfer of additional funds to PS-DBM and PITC
6. Additional funds totaling P262,482,208.23 were transferred by GHQ to PS-DBM

and PITC, and by AFPHSC to PS-DBM, notwithstanding the inability of the two
procuring agencies to deliver the various supplies and equipment covered by
prior years’ advances amounting to P458,209,406.13. Furthermore, advance
payment totalling P288,700,000,00 was made by AFPMATF to PITC despite the
absence of an approved Notice of Award contrary to the provisions of the
Memorandum of Agreement between the parties.
6.1. Sec. 2 of Executive Order (EO) No. 359 dated June 2, 1989 provides that the
PS-DBM shall be maintained as the regular organizational units to implement
and operate a central procurement system.
6.2. Likewise, the Implementing Guidelines on Agency-to-Agency Agreements

under Section 53(e) of IRR of RA 9184, promulgated by the Government
Procurement Policy Board (GPPB) in its Resolution No. 18-2007 dated May
31, 2007, with revision under GPPB Resolution No. 03-2011 dated January
28, 2011, states the following rationale:
“It is the general policy of government to purchase its requirements

from the private sector. However, it acknowledges that, in some
exceptional cases, procurement from another agency of the
government is more efficient and economical for the government.”
6.3. In the verification of accounts, we noted the transfer of additional funds of

P262,482,208.23 to PS-DBM and PITC despite huge balances accumulating
to P458,209,406.13 pertaining to undelivered/unliquidated balances of both
agency, with details as follows:
Procurement Unliquidated Balance as of Additional Fund Transfer in

Agency December 31, 2017 CY 2018
GHQ AFPHSC GHQ AFPHSC
PS DBM 381,718,541.68 4,603,169.23 14,462,338.68 8,583,508.63
PITC 71,887,695.22 - 239,436,360.92 -
Total 453,606,236.90 4,603,169.23 253,898,699.60 8,583,508.63
Grand Total 458,209,406.13 262,482,208.23
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6.4. It was observed that the unliquidated prior year’s balance have been
outstanding for more than a year to 10 years, resulting in the accumulation of
idle funds with the two procuring agencies, which deprived the agency of
their needed supply requirements as stated in the Agency’s Annual
Procurement Plan as well as the use of funds to finance vital projects of the
agency.
6.5. Furthermore, the DND engaged the services of the PITC in CY 2018, for
AFP Modernization Projects totalling P288,700,000.00 transferring funds for
the purpose and were recorded as Due from GOCCs in the AFP
Modernization Trust Fund books. However, as at year-end, there was no
movement on the account since no deliveries and/or other transactions
transpired.
6.6. The Status of Fund Transferred – AFP Modernization of PITC showed that
the two projects have not proceeded yet with bidding activities since the
Technical Specifications were still not yet available/finalize, however, the
transfer of funds were already made, contrary to the Operating Flowcharts of
PITCs Procurement Service “Annex A” of the MOA which provides that
DND will facilitate the immediate transfer of funds to PITC only upon
approval of the Notice of Award.
6.7. Also, the payments to PITC were already obligated on December 29, 2017
even in the absence of Certification from the PITC BAC – Chairperson that
the project is ready for award with BAC Resolution recommending Award.
6.8. In effect, the successive fund transfers with no delivery resulted in huge
unliquidated balance of the account Due from GOCCs of P288,700,000.00 as
of December 31, 2018.
6.9. The late/non-deliveries of supplies/items defeat the very purpose for which
the agency availed the services of the PS DBM and PITC as well as the
rationale that procurement from another government agency is more efficient
and economical for the government.”
6.10. Finally, the failure of the PITC to deliver the goods and/or complete the
bidding process at least by the end of 2018 raises doubts on its ability to
ensure fast delivery of its obligations and/or commitments.
a) revisit the MOA between AFP and PITC and see to it that all
procurements through PITC must establish specific timelines of
activities especially on the deliveries of the procured
items/services;
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b) refrain from transferring funds to PS-DBM and PITC unless
previous procurements are completely delivered; and
c) request the refund of long outstanding balances for onward

remittance to the BTr.
Repairs, Maintenance and Construction (RMC) Fund
7. Out of the P64,937,506.26 rebates earned by GHQ, PMA, AFPHSC and

WESCOM from Petron Corporation from CY 2015 to CY 2018, only
P27,136,894.56 or 41.79 percent worth of equipment/projects were
delivered/completed. Furthermore, the Memorandum of Agreement with Petron
entrusting the control and management of the RMC Fund caused undue delays
in project implementation such as facilities/equipment to efficiently utilize and
safeguard its Fuel, Oil and Lubricants Inventory.
7.1. The Agreement entered into by the Department of National Defense (DND)
with Petron Corporation for the supply and delivery of DND-Wide Petroleum
Requirements for CYs 2015 to 2017 contained a provision for the
accumulation of rebates in favor of the Agency, as a percentage of every
payment made to the supplier. The rebates will be utilized by the supplier for
the repairs, maintenance and construction of fuel dumps of the Agency upon
its request thru the submission of the Program of Expenditures.
7.2. Summary of rebates earned from CY 2015 to CY 2018 and the corresponding
expenses charged to the fund and the balances as of December 31, 2018 are
presented hereunder:
Agreement/ Rebates Expenses % of Balance

POE Earned Utilization
2015 P14,333,330.62 P14,193,729.88 99.03% P139,600.75
2016 29,568,058.31 12,943,164.68 43.77% 16,624,893.63
2017 21,036,117.33 0.00 0.00% 21,036,117.33
Total P64,937,506.26 P27,136,894.56 41.79% P37,800,611.70
7.3. Total expenses charged against the rebates were used for the procurement of
equipment and projects presented in the following table.
Amount per
POE Particulars Unit Invoice
2015 GHQ Class III Phase 1 (Civil Works & GHQ P5,747,047.00
Dispensing Pumps)
Phase 2 (Furniture & Office equipment) GHQ 918,873.96
Additional requirement due to positive leaks in GHQ 3,759,720.00
the UGT that was found out during the
implementation of the project.
UGT Cleaning of AFPHSC POL DUMP AFPHSC 13,000.00
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Amount per
POE Particulars Unit Invoice
Replacement of Twin Nozzle Dispensing Pump AFPHSC 408,330.00
in AFPHSC
Air-conditioning units (1HP) GHQ 53,040.03
Laptop 184,457.15
Desktop computers 203,313.45
Printer (EPSON) 29,075.20
Projector 25,000.00
MAC Book 111,490.00
External Hard Drive (1TB) 9,600.00
Paper Shredder 69,000.00
Printer (Brother) 8,512.00
DLSR Camera 49,300.00
External Hard Drive (1.5TB) 4,636.00
Dip Stick 1,904.00
10KL Collapsible Tank WESMINC 906,094.33
40KL Collapsible Tank OM 1,391,593.75
Customs Duties, Shipment and Incidental Costs 299,743.01
2016 Repair and Rehabilitation of Existing POL WESCOM 7,396,000.00
Dumps
Water Lorry GHQ 5,184,000.00
Dip Stick PMA 952.00
Generator Set 35KVA Diesel PSG 319,000.00
Calibration Bucket PMA 2,550.00
Desktop Computer PMA 40,662.68
Total P27,136,894.56
7.4. In CY 2018, the Agency conducted a bidding for the supply of fuel, oil and
lubricants for which Petron Corporation was again determined to be the
Single Calculated and Responsive Bidder. Posting of invitation to bid until
the contract preparation lasted from April to November 2018, however, the
recommendation in the previous year regarding the inclusion of a provision of
timelines for the completion of RMC projects was still not complied with.
7.5. As a consequence of Management’s non-compliance with the above

recommendation, the same condition persisted in the current year. The
percentage of completion of projects was only 41.79 percent as of December
31, 2018. (Table, paragraph 7.2)
Implementation of the projects would be more efficient if managed by the

Agency
7.6. Provision for rebates started in the CY 2015 Agreement with Petron. As
earlier discussed, the Memorandum of Agreement vests upon the supplier the
control of the fund and may only be utilized by the Agency upon submission
of Program of Expenditures.
7.7. Through the years, we have consistently observed that this arrangement is a
tedious process which involves multiple layers of approval not only at AFP’s
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Management but also of Petron’s officials and ultimately results in delayed
implementation of projects. To resolve this, it would be best to transfer the
responsibility and control over the fund to the Agency.
7.8. Instead of paying the supplier the entire billing for fuel, oil and lubricants
requirements of the Agency, Management should negotiate a scheme to
simply withhold and deduct from the payment the portion for rebates and
deposit the same with the National Treasury under Special or Trust Account.
Management, however, should previously request from the Permanent
Committee an exemption from directly depositing the receipts to the General
Fund.
7.9. The process of preparing a Program of Expenditures every beginning of the

contract year, bidding, projects monitoring and subsequent technical
inspection before acceptance should still be observed, pursuant to the
provisions of Republic Act 9184. This practice, if properly implemented,
would greatly expedite the project completion.
a) continue exerting effort in monitoring the implementation of projects

programmed under the POE for CYs 2015-2017 pursuant to RMC
Memorandum of Agreement; and
b) negotiate a scheme to simply withhold/deduct the rebates from the

payment and deposit the same with the National Treasury under
Special or Trust Account. Request from the Permanent Committee
an exemption from directly depositing the receipts to the General
Fund.
7.11. The Office of the Quartermaster General commented the following:
7.12. Several factors influence the rate of implementation of RMC projects for each
contract year such as the date of payment by GHQ, timeliness of approval of
the Program of Expenditure of RMC projects and lead time to complete the
projects. For CY 2015, the full RMC fund became available in May 2016.
However, the POE was again revised to prioritize the AFP requirement for
POL equipment during the Marawi campaign which was only approved on 01
December 2017. Nevertheless, the programmed RMC projects are all
completed except for one which is the Refill of Fire Extinguishers of GHQ
Class III Station amounting to P14,262.27.
7.13. For CY 2016, the full RMC fund was only available in November 2017.
Conversely, the RMC POE was only signed by SND on 01 December 2017.
While for CY 2017, the full RMC fund became available only in October
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2018. At present, the RMC Project POE is being processed for approval and
signature of the Secretary of National Defense.
Marawi Fund
8. The absence of clear directives governing the grant/payment of financial

assistance to the victims of the Marawi siege resulted in the unequal distribution
of benefits to the beneficiaries.
8.1. Because of the threat posed by terrorist groups in Marawi City, President
Rodrigo Duterte issued Presidential Proclamation No. 216 on May 23, 2017
declaring Martial Law and suspending the privilege of the Writ of Habeas
Corpus in Mindanao within sixty (60) days effective 23 May 2017. In line
with this, the AFP subsequently issued an Operational Directive aimed to
enforce the declaration of Martial Law and intensify AFP’s operations to
destroy the foreign and local terrorist groups and their support structures in
order to crush the rebellion and to restore law and order in the whole of
Mindanao within sixty (60) days.
8.2. The concerted efforts of the Armed Forces of the Philippines, Philippine
National Police and the Local Chief Executives of municipalities resulted in
the death of terrorist leaders, their followers and the surrender of others who
survived.
8.3. However, in the course of conducting operations, AFP suffered a total

casualties of 2,266 composed of 287 Killed-In-Action (KIA) and 1,979
Wounded-In-Action (WIA).
8.4. Extensive media coverage of the Marawi siege prompted different individuals
and organizations to donate funds totaling P274,964,222.02 to be distributed
to AFP casualties as financial assistance.
Particulars Total
Donations Received P274,964,222.02
Transfers to Implementing Agencies 251,718,268.39
Disbursements under GHQ 23,140,000.00
Deposit to BTr 8,653.63 274,866,922.02
Balance P97,300.00
8.5. Donations received by GHQ were disbursed thru cash advances granted to
special disbursing officer (SDO) who travelled to the location of the wounded
personnel to give financial assistance. These cash advances were liquidated
by the SDO by submitting a payroll containing the names of the beneficiaries,
amount received per person and signature of recipient. Disbursements via
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check only pertain to the assistance granted to beneficiaries of eight personnel
who were killed in the battle. Details as follows:
Particulars Amount
Cash advances to SDO P15,140,000.00
Checks released directly to beneficiaries 8,000,000.00
Total P23,140,000.00
8.6. Summary of assistance granted are presented below:
Amount Received Number of recipients Total

P90,000.00 1 P90,000.00
85,000.00 2 170,000.00
66,000.00 1 66,000.00
50,000.00-55,000.00 83 4,296,000.00
40,000.00-48,000.00 33 1,477,000.00
30,000,00-35,000.00 66 2,110,000.00
20,000.00-27,000.00 90 1,879,000.00
10,000.00-18,000.00 227 3,048,000.00
6,000.00-8,000.00 19 142,000.00
5,000.00 265 1,325,000.00
3,000.00 139 417,000.00
2,000.00 23 46,000.00
Total 949 P15,066,000.00
8.7. Post audit of liquidation reports submitted by the SDO revealed that the funds
were given to a total of 949 personnel who received different amounts
ranging from P2,000.00 to P90,000.00. No clear guidelines exist to serve as
basis for the amount of assistance to be given to each personnel (e.g., wounds
obtained, number of days admitted in the hospital, etc.).
8.8. We recommended and Management agreed to submit guidelines

governing the utilization of funds received by GHQ, AFP as financial
assistance to the personnel killed and wounded during the Marawi siege.
8.9. Management submitted seven guidelines used for distribution of financial

benefits to Marawi beneficiaries. However, the team could not find any
justification on the guidelines as to who among the pool of killed- or
wounded-in-action personnel would receive one rate over the other except for
Letter Directive Nr 23 dated July 31, 2017 re: Distribution and Management
of the One Million Pesos financial assistance to KIA personnel of Marawi
Crises.
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Yolanda Fund
9. Out of the P3,123,120.15 Yolanda Fund transferred to other National

Government Agencies and Operating Units, P904,315.35 or 28.96 percent are
still unliquidated.
9.1. In November 2013, the Philippines was struck by typhoon Yolanda

(international name Haiyan) which was one of the strongest tropical cyclones
ever recorded killing at least 6,300 people in this country alone. The major
provinces affected were Aklan, Capiz, Cebu, Iloilo, Leyte, Palawan, and
Samar, which were placed under a state of national calamity. Additionally,
approximately P30 Million had been allocated for relief assistance by the
NDRRMC.
9.2. The Armed Forces of the Philippines (AFP) was among the agencies who
participated in the rescue, evacuation and rehabilitation of the places
devastated by the typhoon. In view of this, fund transfers from other
government agencies and donations from private individuals were received
by AFP to be used in the operations and as financial assistance to soldiers
who were victims of the typhoon.
9.3. The General Headquarters, AFP (GHQ, AFP) received P118,645,912.00 from
DND-OSEC and P4,035,887.00 from private organizations and other
agencies for Yolanda-related operations and as financial assistance. The
foregoing transfers and donations were deposited with the LBP.
Account Number Amount

Transfers/donations received P122,681,799.00
Less: Transfers to implementing agencies 3,123,120.15
Disbursements under GHQ 118,661,691.85
Remittance to BTr 101 896,971.40
Balance P15.60
9.4. We conducted an audit of the foregoing transactions and noted that out of the
P3,123,120.15 transfers to Other National Government Agencies and
Operating Units, P904,315.35 or 28.96 percent are still unliquidated.
9.5. Hereunder is the schedule of fund transfers to National Government Agencies

and Operating Units, amounts liquidated and outstanding balance, as follows:
NGA/OU Fund Liquidation Balance

Transfers
Philippine Army P1,419,507.90 P739,685.70 P679,822.20
Philippine Air Force 524,355.65 300,000.00 224,355.65
Philippine Navy 1,104,256.60 1,104,119.10 137.50
CENTCOM 75,000.00 75,000.00 0.00
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NGA/OU Fund Liquidation Balance
Transfers
TOTAL P3,123,120.15 P2,218,804.80 P904,315.35
9.6. We recommended and Management agreed to require the AFP

Accounting Center to send demand letters to recipient agencies to
liquidate the amounts transferred and to strictly comply with the rules
and regulations on the grant, utilization and liquidations of funds
transferred to NGAs as provided under COA Circular Nos. 94-013 and
2012-001 so that fund transfers are immediately liquidated by the
concerned agencies.
9.7. Management commented that the Accounting Center already sent Demand
Letters to the recipient agencies dated 18 December 2018 and 02 January
2019. These are to settle the amount transferred to the agencies and to strictly
comply with the rules and regulations on the grant, utilization and
liquidations of fund transferred to NGAs as provided under COA Circular
Nos 94-013 and 2012-001.
Failure to transfer funds to the General Fund of National Treasury
10. Management failed to remit to the Bureau of the Treasury (BTr)

collections/receipts, residual funds, liquidated damages, forfeited performance
security, terminated Letters of Credit, collections from pension benefit
overpayments and collection from bid documents net of honoraria paid during
the year totaling P628,526,145.44. Moreover, maintenance of six savings account
was without legal basis and contrary to the provisions of Section 6, General
Provisions of 2018 General Appropriation Act (GAA) and Executive Order (EO)
No. 338 which requires that all existing balances of trust receipts deposited with
authorized government depository banks shall be closed and deposited with the
National Treasury.
10.1. Section 6, General Provisions of 2018 GAA, provides that the following shall
be deposited with the National Treasury and recorded as trust receipts in
accordance with EO 338, s 1996 as implemented by COA-DBM-DOF J.C.
No. 1-97 dated January 2, 1997:
a. Receipts collected or received by departments, bureaus, offices, and

instrumentalities of the National Government, including constitutional
Offices enjoying fiscal autonomy and SUCs: (i) from non-tax sources, such
as insurance proceeds, acting as trustee, agent or administrator; (ii) as a
guaranty for the fulfillment of an obligation; or (iii) from donations
authorized by law or contract with a term not exceeding one (1) year; and
b. Those classified by law or regulations as trust receipts.
129
10.2. Furthermore, Section 5.m of the AFP-GHQ Standard Operating Procedures
No. 10 dated April 16, 2014 provides that all collections from recovered
pensions and unclaimed or dormant pension funds, due to overpayment of
unreported death with no qualified beneficiary/ies, payment to unauthorized
beneficiary/ies, and overpayment of miscomputed pension collected shall be
deposited in the authorized government servicing banks. The deposit slip
shall be for the account of the Bureau of the Treasury (BTr).
10.3. These collections/receipts consist of the following:

Name of Nature of Collection Amount
Bank
LBP Residual funds, liquidated damages imposed P582,628,356.89
to various suppliers, refund from terminated
Letters of Credits, proceeds of closed bank
accounts and forfeited performance security
under AFPMATF
UCPB/DBP/ Recovery of pension overpayments 41,659,450.87
LBP
LBP Cumulative collections from bid documents 4,238,337.68
UCPB/DBP/ Proceeds from liquidated damages and interest 629,172,870.67
LBP income
10.4. All of the above collections/receipts should be deposited to the BTr pursuant
to Section 6, General Provisions of 2018 GAA and EO 338.
a) immediately remit to the BTr the amounts due the National

Government; and
b) require the Collecting Officer of Pension Fund to coordinate with

servicing bank/s on the unsubmitted online collection reports for
remittance purposes.
10.6. Management commented that a total amount of P81,803,590.96 in

AFPMATF has already been remitted to the BTr.
10.7. In Pension, out of the P41,659,450.87, a total of P41,253,871.61 were already

remitted to BTr, leaving a balance of P405, 579.26 which is still subject to
verification.
Doubtful amounts of recorded expenses/expenditures and non-compliance with

Republic Act No. 9184
11. Regularity, accuracy and reliability of recorded expenses/expenditures during

the year were doubtful due to insufficient documentation, incorrect computation
and non-compliance with the relevant standards, rules and regulations.
130
11.1. Section 4, Paragraphs 2, 6 and 7 of PD 1445 state the fundamental principles
governing financial transactions and operations in government, among others,
which provide that: (a) government funds or property shall be spent or used
solely for public purposes; (b) the claims against government funds shall be
supported with complete documentation and (c) all laws and regulations
applicable to financial transactions shall be faithfully adhered to.
11.2. Audit of expenditures revealed the deficiencies/errors in processing and/or

computation of expenses incurred in the current year, to wit:
Unit/ Nature/Particulars Amount Laws, Rules and

Fund Regulations
Irregular Expenses
GHQ Overpayment of travelling expenses 22,400.00 Section 6 of
during the ASEAN 2017 event due to Executive Order
the claim of eight hundred pesos 248 (amended by
(P800.00) travelling allowance as well EO 298)
as reimbursement of the actual
lodging/hotel accommodation.
PMA Food expenses in the form of meals 8,351,004.03 Section 5.0 of
and snacks served to Command COA Circular
personnel during conferences, meetings No. 2012-003 and
and activities in immoderate quantities Section 43
qualifying under excessive General
expenditures. Provisions of the
GAA, FY 2018
WMC Funds received intended for 1,520,547.21 Letter Directive
distribution to Internally Displaced Number 24
Persons affected by the Marawi
Rebellion were used to procure goods.
PSG Actual expenditures during 2017 434,416,084.16 Section 4 of the
ASEAN Summit did not conform to GAA 2018
the Program of Expenditures approved
by CSPOEPR
WESCOM Catering services for the activities 500,000.00 Revised IRR of
conducted on November 10-15, 2017 RA 9184
were doubtful due to submission of two
After-Activity Reports for the same
event and difference between the After-
Activity Reports and Calendar of
Activities as to the date, number of
participants and amount spent.
Lack of supporting documents
Unit Particulars Lacking Documents Amount

GHQ Travelling Certification by the 61,570.00 Section 6 of
expenses head of the agency to Executive Order
incurred claim actual amounts, 248 (amended by
during thetravel orders and duly EO 298)
BSKE 2018 approved itineraries of
travel
Repairs and Waste Materials 6,830,017.85 Section 4.6 of
131
Fund Regulations
maintenance Reports PD 1445 and
of various Post-inspection Section 9.1.3.4 of
transportation Reports and document PD 1445
and indicating the repair
machinery history of the
equipment transportation/
machinery equipment
Payments Copy of 305,240,843.63 COA Circular No.
intended for Advertisement of 2012-001, Par.
Fuel, Oil and Invitation to Bid 17.3 Section IV
Lubricants Printout copy of General Conditions
(FOL) posting of Notice of of the Contract
Award, Notice to (GCC) and Section
Proceed and Contract V Specific
of award in the Conditions of the
PhilGEPS Contract (SCC)
Inspection and
Acceptance Report
Warranty Security
AFP Transfer of AOR, APP and TOR 328,372,924.06 MOA between
MATF funds to PITC which includes the (a) DND and PITC;
technical Revised IRR of RA
specifications; (b) 9184
required delivery
period/completion
period; and (c)
designation of
technical provisional
member to the PITC
BAC
Opening of Basic Requirements 10,062,429,966.66 Section 4.6 of PD
Letters of for all types of 1445 and Items 9.1
Credit and procurement through and 9.2 of COA
Wire Transfer public bidding and Circular No. 2012-
for the alternative modes of 001
purchase of procurement
equipment
WESCOM Food supplies Missing/inconsistent 24,576,754.90 Section 5.10 of
and food list of attendees COA Circular No.
catering 97-002 and PD
1445.
Procurement Process (RA 9184 and IRR)
Unit Particulars Violation Amount
GHQ 2015 APEC Summit Failure to plan/program the 55,802,916.84
2017 ASEAN procurement of catering services 81,122,541.19
Summit and instead resorted to purchase
thru cash advance per activity.
PSG Rental of service Not included in the CY 2018 APP; 5,289,729.60
vehicles no resolution by BAC
recommending alternative mode of
procurement and approval by the
Head of Procuring Entity.
WESCOM Use of special Not covered by APP. 12,274,292.00
132
Fund Regulations
releases in the
procurement of
goods and services
Procurement of Done thru cash advances using the 28,637,305.51
goods shopping method.
Common-use supplies were 2,764,558.21
procured from suppliers other than
the PS-DBM.
2017 ASEAN Provisions for alternative modes of 584,400.00
Summit procurement were not strictly
(procurement of adhered to.
catering services)
SOLCOM Purchase of semi- Public bidding not conducted. 945,198.21
expendable furniture
and fixtures for the
use of the Health
Service Center
AFPHSC Procurement of Not in conformity with the 294,930,266.10
medicines approved 2018 APP which resulted
in the incurrence of huge amounts
of Daily Medicine Requests and
Procurement of Medical Supply Requests in the 299,989,812.90
medical supplies absence of Purchase Orders and/or
required fund availability.
AFPMATF Procurement BAC failed to observe the prescribed period of action
activities on procurement activities;
actual timeline for procurement was overstretched.
Some BAC resolutions recommending to the HoPE
the award of contract were undated; thus, the
evaluation of the timeline of the procurement process
could not be facilitated
EMC Small value ▪ Date of Request for Quotation (RFQ) to Notice to
procurement Proceed (NTP) takes an average of 22 days which
exceeded the Latest Allowable Time of 15 days;
▪ Date of NTP to delivery, takes an average of 33
days which exceeded the Latest Allowable Time of
15 days; and
▪ Date of delivery to payment takes 58 days which
exceeded the Latest Allowable Time of 13 days.
a) immediately refund the overpayment of travelling allowances and

strictly adhere to the provisions of Executive Order No. 248
(amended by EO 298) for travelling allowances;
b) design a guideline on spending limit for meals and/or snacks by

setting a threshold on the budget for food during meetings,
conferences and other activities and request for additional funding
to cover expenses incurred during official activities and functions
of the AFP that are not part of the funded activities;
133
c) render written explanation, supported with documentary evidence,
to establish that the activity conducted on November 10-15, 2017
was ASEAN related and duly authorized by GHQ AFP;
d) submit the lacking documentary requirements to the Office of the

Auditor pursuant to PD 1445, GAM and COA Circular 2012-001;
and
e) strictly adhere to the provisions of Republic Act No. 9184 and the
2016 Revised Implementing Rules and Regulations of Republic
Act No. 9184, otherwise known as the Government Procurement
Reform Act, in the procurement of goods and services.

GHQ Overpayment of travelling expenses incurred in ASEAN were
already refunded back to the Agency.
As regards the traveling expenses incurred during the BSKE
2018, Accounting Center has received the submitted
documentary requirements for travel such as approved Travel
Order, Itineraries of Travel, Certificate of Travel Completed
and Certification from OJ2.
Management already submitted the lacking post-inspection
reports and report of waste material to COA. Only one failed to
submit their compliance.
Documents regarding the grant of the project were submitted in
May 2019, however, inspection and acceptance report and
warranty security are still for compliance.
PMA The meals and snacks during activities are programmed and
computed based on the memorandum issued by Command to
all units dated 10 March 2017 providing limitations on the
amount per meal per person.
PSG The corresponding proposed or programmed fund per item or
account title were based on the details of the protective security
plan for the ASEAN Summits i.e., the number of personnel to
be deployed; identified venues of the coordinating meetings,
rehearsals and actual security operation; and identified separate
local engagements of the leaders and their spouses. However,
these details have constantly changed while nearing the D-day
of the protective security operation. It is important to note that
this Command had no control over those changes.
For the rental of service vehicles, although these engagements
are foreseeable as a collective whole, the Command cannot
specifically determine the activities as well as the timing of the
engagement. This is the reason why the rental of vehicles was
134
not included in the APP because said APP requires specific
activities for each procurement project and the duration or
timing of the presidential engagements.
The non-conduct of public bidding or the resort to negotiation

thru emergency was undertaken because of the nature of the
services of this Command
WESCOM For the validity of activities on November 15-15, 2017, the
Command already submitted to COA thru a series of letters
dated 24 September 2018 and 19 March 2019 the required
documents substantiating the transactions incurred in the said
activity.
On the disbursements that were not supported with sufficient/
consistent documentary evidence, the Command was able to
partially consolidate the required documents such as
Requisition and Issue Slip (RIS), After Activity Reports
(AAR), Attendance Sheets, and List of Distribution of Cell
Cards with Recipients.
AFPHSC For CY 2019, the Command conducted advance bidding for
Medicines and Medical Supplies as early as September 2018,
however, some bidding failed. Some of the items that were
rebidded are now for preparation of NOA and items are for PQ
inspection by the winning bidder.
Non-imposition of Liquidated Damages
12. Management failed to impose the correct amount of liquidated damages totalling
P1,972,628.32 for late deliveries of goods/services contrary to the provisions the
Approved Contract Agreement and the Revised IRR of RA 9184.
12.1. Section 68 of the Revised IRR of RA 9184 provides that all contracts
executed in accordance with the Act and this IRR shall contain a provision on
liquidated damages which shall be payable by the contractor in case of breach
thereof. For the procurement of Goods, Infrastructure Projects and
Consulting services, the amount of the liquidated damages shall be at least
equal to one-tenth of one percent (0.001) of the cost of the unperformed
portion for every day of delay. Once the cumulative amount of liquidated
damages reaches ten percent (10%) of the amount of the contract, the
Procuring Entity may rescind or terminate the contract, without prejudice to
other courses of action and remedies available under the circumstances.
12.2. We have noted that Management of the following units failed to impose the
correct amount of liquidated damages of contracts totalling P496,114,500.09,
to wit:
135
Amount of Amount
Unit Contract Price Liquidated Imposed by Difference
Damages Management
AFPMATF P486,055,759.40 P21,912,706.84 P20,883,611.57 P1,029,095.27
EMC 767,212.50 29,204.87 0.00 29,204.87
GHQ 9,291,528.19 914,328.18 0.00 914,328.18
Total P496,114,500.09 P22,856,239.89 P20,883,611.57 P1,972,628.32
12.3. We recommended and Management agreed to collect the total amount of

liquidated damages from defaulting supplier.

Command
AFPMATF Elbit System Land and C41 Ltd paid the liquidated damages.
Remington Outdoor Company Inc. has not responded yet despite
reiteration by this Office for the payment of liquidated damages.
EMC Demand Letters were already served to Jerome Construction Supply,

DAVCARS MOTOR CENTER.
Prince Educational Supply paid the liquidated damages amouting to

2,860.78 and 6,628.14 per in OR Numbers 1378803 and 1378004.
GHQ The management has already imposed liquidated damages
amounting to P29,049.03 and subsequently paid by the supplier
under Check No. 1590527 dated March 19, 2019.
Compliance Audit
Private Practice of Medical and Paramedical Professionals
13. Medical and paramedical professionals engaged in private practice at the AFP
Health Service Command is not covered by a Memorandum of Agreement
(MOA) with the Chief of the Hospital stipulating the working hours for private
practice contrary to DOH Administrative Order No. 92, series of 2003.
13.1. Under DOH AO No. 92 series of 2003 dated September 22, 2003, all medical
and paramedical professionals employed in government hospitals are allowed
to practice their profession in private as an incentive and in recognition of
their commitment to remain as members of the hospital staff for a longer
period to bring about continuous quality improvement of the health delivery
service of the health facility.
136
13.2. Also, DOH AO No. 92 series of 2003 was issued to set the policies and
guidelines that determine the coverage, limitation and responsibility of all
concerned, in the delivery of quality health care services. The salient
provisions, among others, are as follows:
The Chief of Hospital (COH) shall approve the privilege for private
practice in the form of Memorandum of Agreement (MOA) between the
practicing professional and the hospital, represented by the COH and
witnessed by the Chief of Medical Professional Staff (CMPS). The signed
MOA must be duly notarized;
The medical and paramedical professionals allowed to enjoy the

privilege of private practice must render services without prejudice to
their scheduled working hours as government doctors;
The considered working hours of the private practitioners shall be

stipulated in the MOA;
Professional fees for the clinical and ancillary services shall be

collected at the Cashier’s Office which shall be acknowledged with the
issuance of an official receipt.
13.3. On October 30, 2018, the ACS for Personnel, H1 submitted the list of 63
military and regular civilian doctors assigned at V. Luna Medical Center or
AFPHSC who were granted permission to engage in private practice within
or outside office hours. However, there is no existing MOA as required under
the afore-mentioned regulation.
13.4. The absence of MOA stipulating the scheduled working hours as government
doctors is not in keeping with DOH AO No. 92 series of 2003. Absent the
MOA, there is no assurance that their private practice already encroached on
government time for which they are paid. Hence, VLMC will implement the
issuance of a permit to private practice of military and civilian doctors
assigned at VLMC subject to the approval of higher Headquarters. A copy of
draft MOA was already forwarded to the Office of the Surgeon General,
GHQ, AFP on October 24, 2018.
13.5. We recommended and Management agreed that an approved MOA

stipulating therein the specific working hours, among others, are signed
before they are allowed to avail the privilege to privately practice their
medical and paramedical profession.
13.6. Management commented that a letter addressed to the Surgeon General, AFP
was issued informing the development for policy consideration and
representation to higher headquarters prior to implementation of the
concerned physicians employed in AFP.
137
Overpayment of Pension Benefits
14. Inaccurate data/information on pensioners contained in the database of Pension

Management Information System (PenMIS) resulted in the overpayment to 325
beneficiaries of pension benefits amounting to P129,465,584.23.
14.1. Section 3 of R.A. 340, as amended by RA 3056 dated 17 June 1961 and
effective July 1, 1961 states that “Upon the death of an officer or enlisted
man who has been retired or would, at the time when he died, have been
entitled to retire under Section one of this Act, the surviving legitimate,
adopted or acknowledged natural children of such officer or enlisted man
and/or widow shall be entitled to receive, in equal shares and with the right
of accretion, seventy-five per centum of the annual retirement pay which the
officer or enlisted man was receiving or would have been entitled to receive if
he had not died, the said amount to be payable in equal monthly installments;
xxx.”
Section 22 of P.D. 1638 states: “The survivors of an officer or enlisted man

retired under Section 6… or separated under Section 13… shall be entitled to
a monthly annuity equivalent to fifty per centum of his base pay and longevity
pay based on his separation grade to be divided among them in equal shares
and with the right to accretion: Provided, That in the case of survivors of an
officer in the grade of Colonel/Captain (PN) and higher, the basis of
computation of their annuity shall be in the grade next higher than his
separation grade.”
14.2. We have noted that the data/information on pensioners in the PenMIS

database being maintained by the AFP Pension and Gratuity Management
Center (AFPPGMC) is inaccurate which resulted in either overpayment or
underpayment of pensioners’ monthly benefits.
14.3. Review and analysis of the pension benefit expenses from CYs 2000 to 2018
revealed that 325 surviving spouses with posthumous order were found to be
overpaid of their monthly pension benefits by P129,465,584.23. Using the
factors such as the pay grade, longevity pay and length of service, we
independently recomputed the monthly pension amount of each surviving
spouse. Monthly pension benefits of surviving spouses with posthumous
orders were differently computed in two ways:
a) those who retired under R.A. 340 with at least 20 years of satisfactory
service shall be computed with seventy five percent (75%) of their base
pay and longevity pay; and
b) those who retired under P.D. 1638 regardless of the length of service and
R.A. 340 with less than 20 years in service shall be computed with fifty
percent (50%) of their base pay and longevity pay.
138
Pensioners’ Information with noted discrepancies – P26,239,088.56
14.4. Out of the 325 surviving spouses noted with overpayments as computed by
the AFPPGMC, the pension benefits of 46 who retired under RA 340 were
computed at the rate of 75 percent, while the 279 retirees who retired under
PD 1638 were computed at 50 percent.
14.5. Further, analysis showed that the pension benefits of 23 out of the 46 retirees
who retired under RA 340 have discrepancies in their pay grade, longevity
pay and/or length of service; while 69 of the 279 who were computed at the
50 percent rate, have discrepancies in their data per PenMIS.
14.6. Comparison of the recomputed monthly pension benefits against the actual
payroll revealed overpayments of P6,537,483.47 for those who retired under
75 percent computation and P19,701,605.09 for those who retired under 50
percent computation or a total of P26,239,088.56.
Monthly pension benefits erroneously computed – P103,226,495.67
14.7. The information/data of the remaining 233 surviving spouses were without
any discrepancies in the PenMIS database after verifying their posthumous
retirement orders. However, recomputation of their monthly pension versus
the actual payroll paid by the AFP Finance Center revealed a total
overpayment of P93,347,261.27 for those under 50 percent computation and
P9,879,234.40 for those under 75 percent computation or a total of
P103,226,495.67. The discrepancies were due to incorrect pay grade, length
of service and longevity pay used in the computation of pension benefits.
14.8. We recommended and Management agreed to require the:
a) AFPPGMC and AFP Finance Center to conduct cross-matching of

pensioners’ information for monthly pension to avoid inaccurate
computation of pension benefits;
b) AFPPGMC to investigate and pinpoint persons responsible for

inaccurate database information;
c) AFPPGMC to recover the overpayment through deduction from

subsequent payment of benefits and furnish the AFP Accounting
Center the request for recovery of overpayment for immediate
recording of receivables; and
d) create a separate payroll division at the AFPPGMC responsible for

the preparation and printing of payroll to pinpoint responsibility and
accountability.
139
14.9. The PGMC requested NRD, OTAG in its letter dated 29 Mar 2019 copies of
retirement orders of 325 pensioners to verify the accuracy of the computation,
as well as to support the re-computation of their correct monthly pensions
which NRD, OTAG complied.
14.10. Further, upon findings of incorrect monthly benefits, the PGMC will
immediately request for recovery of the same from the AGDBs or thru B4
deduction, whichever is appropriate.
Delayed Submission of Financial and Mandatory Reports
15. Management failed to submit financial reports/statements, copy of contracts and

other supporting documents to the Office of the Auditor within the reglementary
period, with delays ranging from three to 853 calendar days, contrary to the
provisions of Presidential Decree (PD) No. 1445, Government Accounting
Manual (GAM) and Rules and Regulations on Settlement of Accounts (RRSA).
15.1. Section 43(1) of PD 1445 states that “The auditors shall exercise such powers
and functions as may be authorized by the Commission in the examination,
audit and settlement of the accounts, funds, financial transactions, and
resources of the agencies under their respective audit jurisdiction.”
15.2. Pertinent provisions which set the timeliness for the submission of various
reports and financial statements are stated as follows:
Report Deadline Basis

th
Report of Collection and Every 10 day after Section 7.2.1a of the
Deposits (RCD), Report of Cash the end of each Rules and
Disbursements (RoCD), Report month Regulations of the
of Checks Issued (RCI), Settlement of
Liquidation Reports (LRs), Accounts (RRSA) as
Report of Accountability for prescribed under
Accountable Forms (RAAF) COA Circular No.
2009-006 dated
September 15, 2009
Monthly Trial Balances and 10 days after the Section 60(c) of
Supporting Schedules (SSs) end of the month Chapter 19, GAM
including the Journal Entry Volume I
Vouchers (JEVs)
Quarterly Trial Balances, 10 days after the
Financial Statements and end of the quarter
Supporting Schedules
Year-end Trial balances, February 14 of the
Financial Statements and following year
Supporting Schedules
140
Report Deadline Basis
Bank Reconciliation Statements 20 days after receipt Section 7 of Chapter
(BRSs) of monthly Bank 21, GAM Volume I
Statements
Statements of Appropriations,
Allotments, Obligations,
Disbursements and Balances –
FAR No. 1 (SAAODB)
Summary of Appropriations,
Allotments, Obligations,
Disbursements and Balances by
Object of Expenditures – FAR
No. 1.A (SAAODBOE)
List of Allotments and Sub-
Section 32(a) of
Allotments – FAR No. 1.B 30 days after the
Chapter 3, GAM
(LASA) end of each quarter
Volume I
Statement of Approved Budget,
Utilizations, Disbursements and
Balances – FAR No. 2
(SABUDB)
Quarterly Report of Revenue
and Other Receipts – FAR No.
2.A (SABUDBOE)
Quarterly Report of Revenue
and Other Receipts – FAR No. 5
(QRROR)
Aging of Due and Demandable On or before 30th Section 32(b) of
Obligations – Far No. 3 (ADDO) day following the Chapter 3, GAM
end of the year Volume I
Monthly Report of On or before 30th Section 32(c) of
Disbursements – FAR No. 4 day of the following Chapter 3, GAM
(MRD) month covered Volume I
Consolidated Statement of On or before Section 32(d) of
Allotments, Obligations and February 14 of the Chapter 3, GAM
Balances per Summary of following Calendar Volume I
Appropriations under FCR under Year
GAA, GARO and SARO
Copy of approved contracts and 5 working days Section 3.1.1 COA
supporting documents from execution of Cir. No. 2009-001
contract
15.3. We have noted delays ranging from three to 853 calendar days in the
submission of reports and documents by different Units/Offices to their
respective auditors due to lack of manpower, voluminous transactions and on-
going update of records/documents for the implementation of eNGAS, to wit:
141
Reports/documents Units/Funds No. of days delayed
GHQ 53 days
AFPDSC 7-98 days
Financial Statements AFPHSC 62-337 days
AFPMATF 64-167 days
WESCOM 17-39 days
GHQ 53-84 days
AFPDSC 15-75 days
AFPHSC 17-76 days
Trial Balance
AFPMATF 33-138 days
Pension 31 days
WESCOM 17-39 days
GHQ 53-175 days
AFPDSC 20-87 days
Journal Entry Vouchers AFPHSC 18-76 days
AFPMATF 35-165 days
Pension 22-334 days
GHQ 53-145 days
AFPDSC 7-160 days
AFPHSC 27-102 days
Disbursement Vouchers
AFPMATF 35-165 days
Pension 31-122 days
WESCOM 27-49 days
GHQ 48-140 days
AFPMATF 46-143 days
AFPDSC 9-46 days
Bank Reconciliation Statements
AFPHSC 3-71 days
AFPMATF 46-143 days
Pension 26-240 days
GHQ 53 days
AFPHSC 12-75 days
Report of Collection
Pension 22-334 days
WESCOM 35-49 days
FAR No. 1 – SAAODB AFPHSC 14-197 days
FAR No. 1.A – SAAODBOE AFPHSC 14-197 days
FAR No. 1.B – LASA AFPHSC 14-197 days
FAR No. 2 – SABUDB AFPHSC 30-317 days
FAR No. 2.A – SABUDBOE AFPHSC 30-317 days
FAR No. 4 – MRD AFPHSC 53 days
FAR No. 5 – QRROR AFPHSC 80 days
Copies of approved contracts CY2018 AFPMATF 3-853 days
15.4. Further, the failure of Management to submit the required financial and
mandatory reports and supporting documents to the Office of the Auditor
within the prescribed period resulted in delayed conduct of audit and
verification of the accuracy of the financial records; hence, the Audit Team
could not promptly communicate to Management the deficiencies noted, if
any, for proper correction/adjustments.
142
15.5. We recommended and Management agreed to submit the required
reports/documents to the Office of the Auditor within the period
prescribed by existing rules and regulations.

Command
The Financial and Mandatory Reports for the period of January 1 to
GHQ
November 30, 2018 were already submitted.
As of 10 April 2019, the required JEVs, DVs, BRS and trial balance
AFPMATF
were already forwarded to COA.
Majority of the required data could not be acquired from Accounting
AFPHSC/
on time due to the ongoing updating of their records for
AFPDSC
implementation of eNGAS.
According to AFPAC, Trial Balances and Quarterly Financial
Statements are submitted on time, while Bank Reconciliation
Pension
Statements and other reports are submitted late due to the delays on
submission of supporting documents.
The concerned units (3rd AFP Field Accounting Service Unit and 18th
Finance Service Unit) will also ensure that all documents and reports
WESCOM
of the previous month shall be forwarded on or before the 5th day of
the following month to avoid the occurrence of said delay.
The 15th Finance Service Unit (15FSU) assured that they will
religiously submit to COA Resident Auditor the monthly RAAF to
EMC
comply with Section 17 (k) Chapter 8 and Appendix 67 both of the
Government Accounting Manual.
The 22nd FSU had already coordinated with LBP to ensure timely
PSG release of Bank Statements and for the enrolment to online banking
facility.
Enforcement of Settlement of Audit Suspension, Disallowances and Charges
16. Section 7.1 of the Revised Rules and Regulations on the Settlement of Accounts as
prescribed under COA Circular No. 2009-006, dated September 15, 2009 provides,
among others that, “The head of the agency, who is primarily responsible for all
government funds and property pertaining to his agency, shall ensure that: (a) xxx;
(b) the settlement of disallowances and charges is made within the prescribed period;
(c) the requirements of transactions suspended in audit are complied with; and (d)
appropriate actions are taken on the deficiencies noted as contained in the AOM.”
16.1. The total audit suspensions, disallowances and charges in audit as of

December 31, 2018, based on the Notice of Suspension (NS)/ Notice of
Disallowance (ND)/ Notice of Charge (NC)/ Notice of Settlement of
143
Suspensions and Disallowances/Charges (NSSDC) are summarized in the
succeeding table.
UNIT NS/ND/NC AMOUNT NSSDC BALANCE

GHQ NS P235,600,512.70 P30,546.79 P235,569,965.91
ND 7,999,995.99 0.00 7,999,995.99
NC 0.00 0.00 0.00
Subtotal 243,600,508.69 30,546.79 243,569,961.90
AFPMATF NS 377,897,181.51 0.00 377,897,181.51
ND 0.00 0.00 0.00
NC 0.00 0.00 0.00
Subtotal 377,897,181.51 0.00 377,897,181.51
AFPHSC NS 0.00 0.00 0.00
ND 777,221.06 0.00 777,221.06
NC 0.00 0.00 0.00
Subtotal 777,221.06 0.00 777,221.06
PMA NS 873,600.00 0.00 873,600.00
ND 9,211,648.19 40,722.88 9,170,925.31
NC 0.00 0.00 0.00
Subtotal 10,085,248.19 40,722.88 10,044,525.31
AFPDSC NS 0.00 0.00 0.00
ND 390,635.40 0.00 390,635.40
NC 0.00 0.00 0.00
Subtotal 390,635.40 0.00 390,635.40
Pension NS 0.00 0.00 0.00
Fund ND 401,045.62 11,000.00 390,045.62
NC 0.00 0.00 0.00
Subtotal 401,045.62 11,000.00 390,045.62
Grand Total P633,151,840.47 P82,269.67 P633,069,570.80
16.2. We recommended and Management agreed to continue the

strict/immediate settlement of suspensions and disallowances for a sound
fiscal responsibility, as provided for in Section 7.1 of the Revised Rules
and Regulations on Settlement of Accounts.
16.3. Management Commented the following:

GHQ Notice of Settlement of Suspension/Disallowance/Charge
(NSSDC) for the NS totalling P230,526,073.18 was issued in
January 2019, leaving a balance of P5,043,892.73 suspension.
GHQ Appeal memorandums of the persons identified to be liable in the
ND were received by COA on 11 January 2019, 08 April 2019
and 10 May 2019, respectively.
AFPMATF The NS Number 2017-002-172 with an amount of
P377,897,181.15 was already settled through the issuance of
COA of NSSDC No. 19-002 dated 27 March 2019.
PMA Out of the P873,600.00 NS, P115,500.00 was already settled
leaving a balance of P758,100.00.
PMA Out of the stated outstanding balance of ND, P29,621.00 was
144
settled per OR # 2998650 dtd 15 Mar 2019 leaving a balance of
P9,141,304.21
AFPHSC Per COA letter dated 13 July 2018, the case is still under
evaluation of the Claims and Adjudication Office National
Commission Proper Adjudication and Secretariat Support
Services Sector.
Pension The Center sent demand letter to respondent Marilen Recasa to
pay her outstanding balance of P390,045.62.
Compliance with Tax Laws and Regulations
17. Executive Order No. 651 dated February 16, 1981 requires every government office
or agency to show full and faithful compliance with tax laws and regulations, and
serve as model to the tax paying public. This directive was reiterated under Revenue
Regulations 1-87 dated April 2, 1987, Revenue Memorandum 8-2003 dated March 3,
2003 and Revenue Memorandum Circular No. 56-2009 dated August 10, 2009, which
prescribed the use of the Updated Government Money Payment Chart (withholding
tax rates to be used in the computation of taxes to be withheld on the sale of goods
and services).
17.1. The summary of taxes withheld, remittances and balances of units under
GHQ, AFP are presented in the succeeding table.
Units/Funds Amount Withheld Amount Remitted Balances

GHQ P219,664,469.14 P199,501,637.60 P20,162,831.54
NOLCOM 2,131,393.33 1,856,785.91 274,607.42
SOLCOM 901,878.36 793,600.86 108,277.50
WESCOM 854,012.95 854,012.95 -
EASTMINCOM 735,141.56 429,276.07 305,865.49
WESMINCOM 1,593,420.87 1,363,253.99 230,166.88
CENTCOM 200,259.62
AFPREO 912,578.33 840,025.14 72,553.19
AFPMATF 13,338,321.84 9,460,714.26 3,877,607.58
BCDA 4,541,969.45
PSG 19,521,085.22 19,091,626.11 429,459.11
PMA 55,959,611.32 55,959,611.32 -
AFPHSC 90,337,154.57 79,660,090.00 10,677,064.57
AFPDSC 223,246.81 177,746.68 45,500.13
Total P40,926,162.48
17.2. Unremitted taxes as of December 31, 2018 under NOLCOM, SOLCOM,

EASTMINCOM, AFPMATF, PSG and AFPDSC were remitted in January
2019. While in AFPHSC, only P9,938,900.49 were remitted in January 2019
leaving a balance of P738,164.08.
145
17.3. The remittance of P20,586,649.90 to BIR by GHQ in January 2019 resulted
in the over-remittance of P423,818.36, possibly caused by the current practice
where the Finance Center is the one who processes the remittances of taxes,
while the Accounting Unit is responsible for the recording of taxes withheld
and remitted contrary to Section 61, Chapter 6 of GAM Volume 1 which
prescribes the Accounting Division as the responsible office in preparing the
Summary of Taxes Withheld (STW) as basis for the remittance to the BIR;
files tax returns and payment through the e-TRA; and prepares the JEV and
record in the books the constructive receipt of NCA for TRA and remittance
of all taxes withheld thru TRA.
17.4. We recommended and Management agreed to continue the

withholding/remittance of taxes from suppliers/contractors pursuant to
the existing Revenue Regulations.
Programs/Projects for the Senior Citizens and the Differently-Abled Persons
18. Section 31 of the General Provisions of GAA 2018- Programs and Projects Related to
Senior Citizens and Persons with Disability- provides 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. Moreover, all
government infrastructures and facilities 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 Blg. 344 and RA No.
7277, as amended.
18.1. Compliance of the units under GHQ, AFP is presented below:
Units/Funds Status
No Plans, Programs and Projects and Accomplishment Report
GHQ
were submitted.
The Command allocated and spent P72,470.00 for Senior Citizen
and Persons with Disability (PWD) of which P51,235.00 was for
NOLCOM
Aging Awareness Seminar for Senior citizen and P21,235.00 was
for Depression Seminar for PWD.
The Command conducted health care program for Senior Citizens
(retired personnel and dependents) which includes Fasting Blood
SOLCOM Sugar, Lipid Profile, Blood Urea Nitrogen (BUN), Creatinine,
Uric Acid, Serum Glutamic Oxaloacetic Transaminase (SGOT)
and Serum Glatamic Pyravic Transaminase (SGPT).
Implemented the repair/renovation of comfort rooms and ramp for
the Senior Citizens and Persons with Disability in both the
EASTMINCOM
headquarters and administration buildings. It spent P210,835.00
for the said projects.
No allocation for projects and activities for the Senior Citizens and
WESMINCOM
the Differently-abled Persons was provided.
146
Units/Funds Status
The agency conducted medical & dental mission, free eye
PSG
consultation & free eyeglasses and other gatherings.
The Command integrated activities that addressed the concerns of
AFPHSC Senior Citizens (SCs) and Differently-Abled Persons (DAPs) in
their regular operations amounting to P44,595,614.90.
Plans, programs and projects for Senior Citizens and Persons with
AFPDSC Disability amounting to P57,200.00 were integrated in the
programmed activities of the Agency.
a) allocate funds for the 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 pursuant to Section 31 of the General
Provisions of GAA 2017; and
b) submit the approved plans, programs and projects and corresponding

accomplishment report for CY 2018.
Gender and Development
19. Section 30 of the General Provisions of RA 10964 provides that:
“All agencies of the government shall formulate a Gender and

Development (GAD) Plan designed to address gender issues within their
concerned sectors or mandate and implement the applicable provisions
under R.A. 9710 or the Magna Carta of Women, Convention on the
Elimination of All Forms of Discrimination Against Women, the Beijing
Platform for Action, the Philippine Plan for Gender-Responsive
Development (1995-2025) and the Philippine Development Plan (2017-
2022). The GAD Plan shall be integrated in the regular activities of the
agencies, which shall be at least five percent (5%) of their budgets. xxx.”
19.1. Compliance of the units under GHQ, AFP is presented in the table below.
Units/Funds Status
The actual GAD budget allocated was P220,910,393.66 which
is only 2.25 percent of the total agency appropriation of
GHQ
P9,813,119,000.00. The Agency has reported GAD
expenditures amounting to P233,911,595.94.
The Command budgeted P2,957,614.13 which is 5 percent of
NOLCOM the budget for MOOE of P58,972,000.00. Out of the budgeted
amount P4,066,031.24 was expended for GAD activities
SOLCOM The Command’s total expenditures for GAD amounted to
147
Units/Funds Status
P2,796,928.00 which is equivalent to at least five percent of the
agency’s budget.
The Command spent P4,458,181.04 or 8.00 percent of its total
EASTMINCOM
appropriation on different GAD activities
The CY 2018 different activities of the Command with the total
WESMINCOM amount of P2,507,346.03 were identified as GAD related
activities.
The allocated budget of P23,441,170.0 for GAD activities
failed to meet the five percent requirement, which should have
been P29,630,600.00 (P592,612,000.00 x 5%). The annual
PSG
GAD Accomplishment Report for CY 2018 showed that only
P21,842,490.75 or 93.2 percent of the programmed budget was
utilized for such activities.
The Command implemented various GAD programs and
activities such as training, provision of hospital service and
PMA
healthcare, improvement and maintenance of barracks, among
others.
AFPHSC had allocated P113,574,314.97 for GAD Plan and
Budget (GPB) which is 6.75 percent of the total budget
AFPHSC
amounting to P1,682,608,000.00. The total expenditure
amounted to P108,378,597.19.
Allocated/spent P282,000.00 representing five percent of total
AFPDSC
2018 budget allocation of P5,640,000.00.
a) continue to undertake activities on poverty alleviation, economic

empowerment especially of marginalized women, protection,
promotion and fulfilment of women’s rights and practice of gender-
responsiveness governance;
b) prepare a workable time-table of implementing the program of

activities to ensure that the set up GPB for the year are implemented;
and
c) submit GAD Plan and Budget and Annual Accomplishment Report as
required in PCQ-NEDA-DBM Joint Circular No. 2012-01.
Compliance with GSIS, Pag-ibig and Philhealth Laws
20. Compliance of the units under GHQ, AFP to the GSIS, Pag-ibig and Philhealth laws
is presented in the table below:
Unit/ GSIS Pag-ibig Philhealth

Command Withheld Remitted Withheld Remitted Withheld Remitted
GHQ P110,780,636.76 P110,278,618.95 P10,065,961.37 P10,066,734.71 P27,731,348.68 P27,718,575.83
NOLCOM
SOLCOM The salaries of all personnel of the Commands are centrally managed in the General Headquarters, AFP
148
Unit/ GSIS Pag-ibig Philhealth
Command Withheld Remitted Withheld Remitted Withheld Remitted
WESMIN (GHQ).
COM
WESCOM
EASTMIN
COM
PSG 2,936,929.42 2,936,929.42 220,705.02 220,705.02 278,373.43 278,373.43
AFPHSC 17,071,810.87 15,622,966.09 2,976,773.62 2,973,473.62 3,526,115.60 3,510,027.44
The balance was remitted to GSIS on January 28, 2019 through Checks No. 1026692 and 1026694 and to
HDMF on February 8, 2019.
AFPDSC All salaries and wages of military and civilian employees of the AFPDSC were paid in the GHQ, AFP.
AFPMATF All salaries and wages of employees assigned in the AFP Modernization Program were paid in the AFP-
GHQ and DND.
20.1. We recommended and Management agreed to continue to

withhold/remit contributions for GSIS, Pag-ibig, Philhealth and other
mandatory deductions.
Compliance with Insurance Law
21. GHQ, AFP’s buildings and equipment were insured with the GSIS under the
following Policy IDs:
Policy ID Coverage
FI-NM-GSISHO-010264433 April 12, 2018 to April 12, 2019
FI-NM-GSISHO-0028601 January 3, 2018 to January 3, 2019
FI-NM-GSISHO-0025901 February 21, 2018 to February 21, 2019
FI-NM-GSISHO-0028763 February 9, 2018 to February 9, 2019
21.1. We recommended and Management agreed to continue paying insurance

premiums for the buildings and equipment of GHQ, AFP.
149

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PART II – OBSERVATIONS AND RECOMMENDATIONS

Accounting Errors, Omissions and Deficiencies

1. Accounting errors, omissions and deficiencies resulted in the overstatement of

Account Group Balance Amount Effect

Cash and Cash Equivalents

GHQ Unrecorded 5,772,549.20 Salaries and Wages 1,994,076.40

Unrecorded Cancellation of Check

Unrecorded residual from Letters of Credit and Debit Memo

1.6. Unadjusted reconciling items in the Bank Reconciliation Statements of

Unrecorded Interest Earned

Unrecorded reconciling items in Pension

Unrecorded reconciling items affecting payroll account

1.12. Review of payroll account revealed the following unrecorded reconciling

1.13. Non-recording of the above transactions was primarily due to Management’s

Unrecorded Liquidation and Refund

Unit Particulars Reference Refund Liquidation

Unrecorded Overpayment of Pension Benefits

Unrecorded balance of Repairs, Maintenance and Construction Fund

Erroneous recording of fund transfers

Unrecorded deliveries from PS-DBM

1.25. Deliveries amounting to P297,319.40 in AFPHSC, P493,418.22 in PSG and

1.27. Delayed/non-submission of RSMI in AFPHSC and PSG resulted in

Unrecorded issuance of semi-expendables

1.29. As of December 31, 2018, the Semi-Expendable Inventory Account of GHQ

Property, Plant and Equipment

Unrecorded transfer of equipment to end users

1.30. In AFPMATF, 142 units of force protection equipment amounting to

Unrecorded receipt of donated equipment

Unrecorded impairment loss

Unit/Command Completed Projects/Acquired Equipment

Unrecorded delivery/acceptance of equipment to end user

Non-accrual of fuel expenses

1.39. We recommended and Management agreed to:

a) direct the concerned units to coordinate with the AFP Accounting

b) direct the AFP Accounting Center to prepare the necessary adjusting

1.40. Management commented the following:

Unit/ Management Comments

2. Accounting deficiencies affecting asset accounts, improper use of costing

Unverified debit and credit memos

Unliquidated Marawi and Yolanda Funds

NGA/OU Funds Transferred Liquidated Balance

Unreconciled Balances (PS-DBM/PITC)

2.4. The unreconciled balances between Subsidiary Ledgers (SL) and

Unit/ Balance per

Unreconciled Balances (Inventories)

Unit/Fund Per GL/SLC Per RPCI Difference

2.6. For CY 2018, out of 65 offices/commands in GHQ, only 49 RPCIs were

Unreconciled Balances (Property, Plant and Equipment)

Unit/Fund Per RPCPPE Per GL/PPELC Difference

2.8. In GHQ, only 61 out of 65 units have submitted RPCPPE; in AFPMATF,

Non-existent book balances

2.10. In AFPHSC, the existence of the following accounts were considered

Account Amount per GL Remarks

2.11. The details of the Other Receivables account of AFPREO amounting to

2.12. In AFPMATF, Deposit on Letters of Credit and Guaranty Deposits accounts

2.13. Efforts were made by Management to identify the accountable officers

Long Outstanding Intra-/Inter-Agency Receivables

2.14. The non-monitoring of fund transfers and non-submission of the liquidation

Use of purchase price instead of weighted average method of costing

Non-maintenance of Supplies Ledger Cards and Stock Cards

Non-disposal of unserviceable property

2.20. In NOLCOM, Property, Plant and Equipment (PPE) totaling P2,130,803.77

Non-allocation of impairment loss on Work/Zoo Animals Account