AOM No.: 00Date: June 3, 2011 AUDIT OBSERVATION MEMORANDUM (AOM) For: Mr. Emmanuel R. Ledesma Jr.

President and CEO PSALM Corporation Makati City Attention: Ms. Yolanda d. Alfafara Department Manager, Controllership We have audited the Other Personnel Benefits (GL 749) for the period January 1, 2010 to December 31, 2010 and observed the following deficiencies/errors: 1. The Power Sector Assets and Liabilities Management (PSALM) Corporation granted Loyalty Allowance to its employees and officials before the completion of the prescribe No. of continuous years of service in the total amount of P20,000.00 for CY 2010 in violation of CSC Memorandum Circular # 6, s. 2002. For CY 2010, the period of audit, PSALM granted Loyalty allowance to its employees and officials prior to the completion of the required No. of years in service to be qualified for the Loyalty Award which is in violation of CSC MC NO. 6 s. 2002 in the amount of P20, 000.00, computed as follows:
Grantee of Date of grant for Loyalty Award Date Grante d Amount grante Per d Audit

Loyalty Award PAISO, RAMONCITO Date of transfer to PSALM Nov 3,2003 Schedule of Grant for Loyalty Award 10th year in Service 15th year in Service 20th year in service 2-Nov-2003 3-Nov-2008 3-Nov-2013

Gran tor

Referen ce

Varianc e

DOE PSAL M PSAL M

25-Oct05 14-Apr10

H005107 069 H010041 206

5,00 0.00 5,00 0.00

5,00 0.00 5,00 0.00

Diaz, Alvin Date of transfer to PSALM 16-Jul-2004 Schedule of Grant for Loyalty Award 10th year in Service 16-Jan-2000 DOF

15th year in Service 20th year in service

1-Jan-2007 1-Jan-2012

PSAL M PSAL M

25-Oct05 23-Nov10

H005107 069 P010111 272

5,00 0.00 5,00 0.00

5,00 0.00 5,00 0.00

Policarpio, Sheryl Lyn Date of transfer to PSALM 16-Jun-2005 Schedule of Grant for Loyalty Award 10th year in Service TOTAL 1-Jan-2012 PSAL M 19-Jan-11 P010121 808 5,00 0.00 10,00 0.00 20,00 0.00

It was observed that PSALM had included the years of service in other government agencies prior to January 1, 2002 in granting the loyalty award. CSC MC No. 6 s. 2002-revised Policies on the grant of Loyalty Award Section # 4 provides that Effective January 1, 2002, continuous and satisfactory services in the government for purposes of granting loyalty award shall include services in one or more government agencies without any gap. Services rendered in other government agencies prior to January 1. 2002 shall not be considered for purposes of granting the loyalty award. (Emphasis supplied) 2. Grant of leave Credit monetization is in violation of Sec. 22 of Omnibus rules on leave, Rule XVI of the omnibus rules Implementing Book V of Executive order No. 292 and PSALM Memorandum Order no. 09-01, January 14, 2009.
"Section22. Monetization of leave credits - Officials and employees in the career and non-career service whether permanent, temporary, casual, or coterminous, who have accumulated fifteen (15) days of vacation leave credits shall be allowed to monetize a minimum of ten (10) days: Provided, that at least five (5) days is retained after monetization and provided further that a maximum of thirty (30) days may be monetized in a given year." ( Emphasis Supplied)

The above provision is also provided for under rule 1 of Memorandum order No. 9-01 dated January 14, 2009. In the audit of Other Personnel Services for CY 2010, it was discovered that some of the transaction involving the grant of leave monetization violated the Omnibus Rules on Leave and PSALM Memorandum Order no. 09-01, January 14,2009 as follows: It was found out that the condition that at least five (5) days is retained on the vacation leave credit balance after monetization is not met. Audit revealed that PSALM had approved the monetization of leave even if the remaining leave balance is less than five days and it had allowed monetization of leave even if the total leave

credit is less than five (5), furthermore PSALM allowed some of its Employees to monetized all leave credits. In addition, the certification on leave credit balances on some application for leave monetization is not updated. It must be updated to determine if it adhere to the Omnibus Rules on Leave and to avoid overpayment of leave credits.

Recommendations:
1. It is recommended that Management require all affected officers and

employees who were recipient of said allowances to refund amount received. 2. Update the certification of leave credit balance before the application for leave monetization is approved to avoid overpayment. 3. Adhere to the provisions on the Omnibus rules Implementing Book V of Executive Order No. 292 and PSALM Memorandum Order no. 09-01, January 14, 2009. May we have your comments on the foregoing audit observations within five (5) calendar days from receipt hereof.

MINERVA T. CABIGTING Audit Team Leader

Proof of Receipt of AOM: Mr. Emmanuel R. Ledesma Jr. Date: ___________