world bank documentdocuments.worldbank.org/curated/en/... · republic act (ra) no. 9155, the...

8 August 2018

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EnCorr

Republic of the Philippines COMMISSION ON AUDIT

Commonwealth Ave., Quezon City

CONSOLIDATED ANNUAL AUDIT REPORT

on the

DEPARTMENT OF EDUCATION

For the Year Ended December 31, 2017

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EXECUTIVE SUMMARY

A. Introduction Republic Act (RA) No. 9155, the “Governance of Basic Education Act of 2001” changed the name of the agency from Department of Education, Culture and Sports (DECS) to Department of Education (DepEd). The Department is organized into two major structural components: the Central Office and the Field Offices, which consists of 17 Regional Offices (ROs), 221 Division Offices (DOs) with 13,396 secondary schools (public 7,976 and 5,420 private) and 49,209 elementary schools (38,648 public, and 10,561 private). Under the Office of the Secretary (OSEC) at the Central Office are five support services, namely: Curriculum and Instruction, Finance and Administration, Strategic Management, Governance and Operations, and Legal and Legislative Affairs. The delivery of a relevant responsive, and effective basic education curriculum is undertaken by the four staff bureaus: the Bureau of Curriculum Development (BCD), Bureau of Learning Delivery (BLD), Bureau of Education Assessment (BEA), and Bureau of Learning Resources (BLR). The centers/units attached to the Department similarly provide technical and administrative support towards the realization of its vision, namely: Early Childhood Care and Development Council (ECCDC), National Book Development Board (NBDB), National Council for Children’s Television (NCCT), National Museum and the Philippine High School for the Arts (PHSA). Also, there are three coordinating councils, namely: Adopt-a-School Program (ASP) Coordinating Council, Literacy Coordinating Council (LCC), and Teacher Education Council Secretariat. The Secretary is assisted by six undersecretaries and five assistant secretaries. The directors and assistant directors of support services, staff bureaus, centers/units and attached agencies also assist the key officials of the Department. In addition, the following are DepEd’s basic education profile as of December 31, 2017:

Total Personnel Complement: 815,623

• Teaching personnel 755,573 • Non-teaching personnel 60,050

Number of public schools offering basic education curriculums:

53,043

• Kindergarten and Elementary Schools 38,913 • Junior High Schools 8,554 • Senior High Schools 6,476

Total Learners: 22,096,820 • Kindergarten 2,023,322

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• Elementary pupils 12,266,123 • Junior High School students 6,412,233 • Senior High School students 1,395,142

B. Operational Highlights

The DepEd reported the following major accomplishments per Major Final Output (MFO)/Key Result Area (KRA) and Performance Indicator for Calendar Year (CY) 20171:

Major Final Output/Key Result Area/

Performance Indicator Target Actual

% of Accomplish-

ment

Operations MFO 1: Basic Education Policy Services Number of plans and policies formulated, reviewed, issued and disseminated Percentage of policies updated over the last three years

4

25%

40

31%

1,000

129

MFO 2: Basic Education Services

Phase 1: Public Kindergarten and Elementary Education Number of learners ages 5-11 years old enrolled in Kindergarten and Elementray Education Percentage of learners who completed the school year

12,523,929

85%

14,342,879

93%

115

109

Phase 2: Public Secondary Education Number of learners ages 12-15 years old enrolled in Secondary Education Percentage of learners who completed the school year

5,246,596

82%

6,589,849

82%

126

100

Phase 3: Alternative Learning System Number of learners above 15 years old served thru Alternative Learning System (ALS) Program

720,000

641,584

89

MFO 3: Regulatory & Devt’l Services Number of Government Assistance and Subsidies

(GAS) grantees 4,489,195 3,502,769 78

1DepEd Physical Report of Operation as of 31 December 2017

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Major Final Output/Key Result Area/ Performance Indicator

Target Actual % of

Accomplish-ment

Major Programs/Projects

KRA 2: Poverty Reduction and Empowerment of the Poor and the Vulnerable

Number of teaching items created 53,831 54,077 100 Number of classrooms constructed 63,361 19,501 31 Number of school seats provided 148,145 33,124 22 Number of Textbooks and Instructional/Learning Materials procured

115,080,515 66,632,595 58

Number of Textbooks and Instructional/Learning Materials printed/ delivered

152,225,331 92,983,091 61

Number of GASTPE grantees 4,489,195 3,547,135 79 Number of Science and Mathematics packages provided to the schools

98,320 89,484 91

Number of schools received Information and Communications Technology (ICT) package

79,029 1,325 2

Number of beneficiaries fed under the School-Based Feeding Program

3,741,907 2,997,912 80

C. Financial Highlights For CY 2017, DepEd has a total appropriations of P499,739,788,576.01 which includes the Regular Budget of P432,838,038,413.42, the Special Purpose Funds of P5,233,838,172.89 and the Automatic Appropriations of P26,584,782,597.85 as provided for in the General Appropriations Act (GAA) for Fiscal Year (FY) 2017 or the RA No. 10924 and Prior Year’s Continuing Appropriations of P35,083,129,391.85. During the year, the Department received a total allotment of P471,982,544,895.73, out of which, total obligations of P456,247,971,743.00 were incurred leaving an unexpended balance of P15,734,573,152.73 as at year-end, the details of which are presented below.

Source of Funds Appropriations Allotment Obligation Incurred Unobligated Balance

Current Year (CY) Appropriations Agency Specific Budget Personal Services (PS)

327,308,332,812.92

299,700,815,011.72

295,123,597,440.03

4,577,217,571.69

Maintenance and Other Operating Expenses (MOOE)

79,199,469,600.00

79,199,469,600.00

75,991,902,313.88

3,207,567,286.12

Capital Outlay (CO)

26,330,236,000.50

26,187,056,201.00

24,251,822,240.10

1,935,233,960.90

Sub - Total 432,838,038,413.42 405,087,340,812.72 395,367,321,994.01 9,720,018,818.71 Special Purpose Funds Miscellaneous Personnel Benefits Fund PS 3,566,156,469.32 3,566,156,469.32 3,392,117,274.08 174,039,195.24 Retirement Benefits Fund PS 1,661,757,503.57 1,661,757,503.57 1,654,294,649.32 7,462,854.25 Productivity

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Source of Funds Appropriations Allotment Obligation Incurred Unobligated Balance

Enhancement Incentive (PEI) PS 1,930,000.00 1,930,000.00 1,930,000.00 - Reserve PS 3,994,200.00 3,994,200.00 3,994,195.47 4.53

Sub - Total 5,233,838,172.89 5,233,838,172.89 5,052,336,118.87 181,502,054.02 Automatic Appropriations PS 26,584,782,597.85 26,584,782,597.85 26,355,041,583.90 229,741,013.95

Sub - Total 26,584,782,597.85 26,584,782,597.85 26,355,041,583.90 229,741,013.95 Total CY’s Appropriations 464,656,659,184.16 436,905,961,583.46 426,774,699,696.78

10,131,261,886.68

Prior Years (PY) Continuing Appropriations Unobligated Allotment PS 260,973,000.00 260,973,000.00 260,973,000.00 - MOOE 19,691,075,407.20 19,683,404,775.64 15,846,933,586.16 3,836,471,189.48 CO 15,131,080,984.65 15,132,205,536.63 13,365,365,460.06 1,766,840,076.57 Total PY’s Continuing Appropriations 35,083,129,391.85 35,076,583,312.27 29,473,272,046.22 5,603,311,266.05 Grand Total 499,739,788,576.01 471,982,544,895.73 456,247,971,743.00 15,734,573,152.73 Other fund sources during the year came from foreign donations of the Philippine Response to Indigenous Peoples and Muslim Education (PRIME), Education Performance Incentive Partnership (EPIP), and from the United Nation Children’s Emergency Fund (UNICEF) with the amount of P684,400,000.00, P598,133,924.00, and P4,864,400.00, respectively, and a transferred fund received from Philippine Amusement and Gaming Corporation (PAGCOR) during the year in the amount of P2,000,000,000.00. The Department’s financial position and financial performance for CY 2017 with comparative figures for CY 2016 are shown in the table below:

Particulars Amount

2017 2016 Financial Position Assets 189,597,420,489.77 167,892,011,422.80 Liabilities 42,936,584,184.74 37,543,190,657.78 Equity 146,660,836,305.03 130,348,820,765.02

Financial Performance Revenue 3,313,689,418.43 1,240,115,912.31 Less: Current Operating Expenses PS 324,764,623,661.90 294,405,199,209.93 MOOE 36,934,701,627.91 29,419,957,006.39 FE 1,776,959.11 1,874,327.07 Non-Cash Expenses 5,299,573,841.49 4,426,542,472.52

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Particulars Amount

2017 2016 Surplus (Deficit) from Current Operations (363,686,986,671.98) (327,013,457,103.61) Financial Assistance/Subsidy from the National Government

Less: Financial Assistance/ Subsidy to National Government Agencies

Net Financial Assistance/Subsidy 381,936,802,436.65 346,834,287,451.80 Sale of Assets 982,408.57 14,989.95 Gains/(Losses) 8,258,922.81 5,576,491.55 Surplus (Deficit) for the Period 18,259,057,096.05 19,826,421,829.69

D. Scope of Audit

The audit covered the review of the accounts and operations of the DepEd for CY 2017, except for the ROs, DOs and National High Schools under the jurisdiction of the Regions IV-A, VI, VII, X, XII, Negros Island Region and Autonomous Region in Muslim Mindanao (ARMM), in accordance with the Philippine Public Sector Standards on Auditing (PPSA). The audit was conducted to: a) verify the level of assurance that may be placed on the Management’s assertion on the financial statements; b) determine the propriety of transactions as well as the extent of compliance on the applicable laws, rules and regulations; c) recommend agency’s improvement opportunities; and d) determine the extent of implications of prior year’s audit recommendations. Review of DepEd’s Redesigned Technical-Vocational High School Program, DepEd Computerization Program, Basic Educational Facilities Program for Repairs and Rehabilitation, Public-Private Partnership for Infrastructure Program, School Furniture Program, budget utilization, payroll system, and safekeeping and disposal of learning materials were also undertaken to determine whether operations were conducted in an economical, efficient and effective manner.

E. Independent Auditor’s Report The Auditor rendered a qualified opinion on the fairness of the presentation of the consolidated financial statements of the DepEd for CY 2017 in view of the deficiencies noted in the accounts as stated in the Independent Auditor’s Report and discussed in detail in Part II of the Report.

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Audit Observations and Recommendations The following is a summary of significant observations and recommendations, among others, the details of which are discussed in Part II-Observations and Recommendations of the Report:

1. The DepEd year-end reports reflected a favorable improvement in the utilization of allotment in CY 2017 compared to previous years, as only P15,734,573,153 or three percent had remained unutilized as of year-end. However, achieving the desired physical outputs for the year were not fully realized as operational lapses in budget utilization were still noted, such as: a) unutilized allotment of P8,319,938,425 caused by delay in the implementation of Government Assitance to Students and Teachers in Private Education (GASTPE) grants and Science and Mathematics Equipment (SME) procurement in Central Office (CO), unfilled positions for teaching and non-teaching personnel and unmet number of school children served in the implementation of School-Based Feeding Program (SBFP) in National Capital Region (NCR), and the late fund releases to operating units and schools reported in five Regions; b) obligations for programs/projects of P56,271,465,649 incurred in CO were only made in the latter part of the year, including the amount of P13,701,515,748 as fund transfer to Department of Budget and Management – Procurement Service (DBM-PS), thus deliveries of their physical targets are definitely deferred to succeeding year; and c) obligations incurred without valid and legitimate claims of P1,283,242,303 in NCR. Moreover, other deficiencies relating to fund utilization also exist, such as incurrence of overdrafts in allotment and obligation in CO, low capacity on disbursement in CO and Corillera Administrative Region (CAR) and not fully utilized cash allocations for the year in CO, RO IX and NCR. (Observation No.1)

We recommended that the Management require: CO to – a. make thorough and careful study on the viability of transfers with

DBM-PS and conduct reconciliation of balances to ensure that fund transferred were fully liquidated in terms of delivery;

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

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

c. disregard all obligations without legitimate claimants and valid

supporting documents, adjust the records/reports on allotment and

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obligations in the budgetary records and Financial Accountability Reports (FARs), and refrain from certifying the same as accounts payable;

CO and ROs to – d. identify the bureaucratic bottlenecks in the procurement system and

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

e. strictly monitor through maintenance of subsidiary records

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

f. henceforth, ensure the optimum utilization of funds received vis a vis timely delivery of basic education services.

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

showing: a) ninety-nine percent overall CYs 2015 to 2017 physical target deficiency or at least 77,704 schools still awaiting for the Information and Communcations Technology (ICT) packages, including the 17,016 identified recipient schools with undelivered packages out of the P2,059,940,765.59 from CY 2015 budget transferred to DBM-PS in CY 2016; b) extended contract execution timeline up to 25 days from approval of Resolution to Award on awarded procurement under DCP CY 2017; and c) deficiencies observed in the deliveries and utilization of ICT packages such as unmet counterpart readiness requirements for the schools, defective/ incomplete items/ uninstalled delivered packages, poor after sales service by suppliers and weak financial reporting compliance, among others. These gaps deferred the timely provision of necessary learning interventions to intended users of DCP packages and weakened controls in proper safeguarding of public funds and property.(Observation No.2)

We recommended that the Management in CO undertake the following actions to address the foregoing deficiencies cited: a. inquire into the unutilized DCP funds with DBM-PS as the benefits

for the intended beneficiaries are at stake;

b. come up with an effective monitoring and evaluation system to be able to identify key issues and other major factors affecting DCP’s implementation as well as the related actions to be taken;

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c. review the Agency’s internal processes related to procurement in order to further improve its service delivery and its compliance with timeline requirements of the Revised IRR of RA No. 9184;

d. institute effective reporting mechanism to immediately monitor supplier’s contract implementation so DepEd can timely enforce after sales responsibility of supplier;

e. come up with specific guidelines especially those affecting financial reporting compliance;

f. look into the reported deficiencies on deliveries and identify the responsible supplier for immediate rectification; and

g. consider performance feedback in the awarding of future contract to prevent wastage of government resources.

3. Eight regions fell short in achieving the objective of improved physical

facilities under the DepEd’s BEFF for CYs 2017 and 2016 and in complying with the related DepEd guidelines and COA regulations. Due to late issuance of sub-allotments from the Central Office, improper timing of projects during the schedule of classes and inadequate monitoring thereof resulted in the delayed completion of repair projects in 49 out of the 91 schools inspected and the poor workmanship/defects of the repairs done by contractors. Other deficiencies such as awarded contracts in DO that exceeded the P15 million threshold and paid contracts with incomplete supporting documents were also observed. (Observation No.3)

We recommended that the Management require:

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

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

ROs and DOs to – b. require the DO Engineers to strictly monitor, evaluate, and validate

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

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

projects to be undertaken by providing them with contracts, detailed

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POWs and such other related documents for them to know the project details and use as basis in checking if the repair works being done conform with the contract specifications;

d. see to it that the contract and POWs completely provide the specific

details as to the nature of the repair and rehabilitation works to be done including the actual number of classrooms/name of the school buildings to facilitate evaluation of the contractor’s project accomplishment;

e. notify the public through a tarpaulin signboard for infrastructure projects to be suitably framed for outdoor display at the project location;

f. secure authority from DepEd CO to implement projects with

contract cost exceeding the required P15 million threshold; g. submit the contracts and its supporting documents to the Audit Team

for proper review and/or evaluation; and h. impose corresponding liquidated damages on the late completion of

the repair works as stated in the approved contract.

4. The DepEd’s PSIP with aggregate contract cost of P20,140,027,526 to construct 9,303 classrooms for PSIP I and 4,371 classrooms for PSIP II experienced implementation setbacks, such as: a) lack of validation in allocation of sites reduced the targeted number of classrooms from 9,303 to 9,296 for PSIP I; b) delay by one and a half years in the completion of classrooms under PSIP I mostly attributed to the incidents considered as Excusable Delays in Construction under Section 12.8b of the contract agreement; c) 1,327 classrooms under PSIP II were still awaiting construction completion after more than two years of project implementation caused by hard access/clearing of sites, permits issues, force majeure, demolition of existing buildings, realignment, among others; and d) possible incremental consultancy cost due to extended project completion or consultancy contract termination/abandonment. Hence, the overall achievement of the program in supplementing the current initiatives of the DepEd to address classroom backlog and fast track classroom construction has not been achieved. (Observation No.4)

We recommended that the Management require the concerned CO Offices to:

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

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

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b. clearly define responsibility areas, strengthen coordination among involved offices and strictly enforce validation of proposed sites to immediately address issues/problems prior to project implementation;

c. evaluate and closely monitor project sites that were not yet completed

and ensure that the Proponents comply with their contractual obligations;

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

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

e. impose necessary and appropriate penalty to contractors, if

warranted.

5. The desired outcome of addressing furniture needs of schools thru the School Furniture Program (SFP) under the CYs 2016 and 2015 BEFF was not fully met in seven regions due to the: a) delay in the downloading of funds by the DepEd CO and execution of procurement activities; b) non/delayed deliveries of at least 70,124 pieces of armchairs and 2,242 sets of teachers’ tables and chairs; c) non-utilization of 19,493 pieces of armchairs and 286 sets of teachers’ tables and chairs that were stored in vacant rooms, covered courts, roof deck and along the corridors/Principals’ Office due to, among others, delayed completion of the school buildings, oversupply of furniture and poor workmanship/ inferior materials used resulting in 3,049 and 54 damaged/broken armchairs and teachers’ tables and chairs, respectively; and e) deliveries/transfers to non-recipient schools of excess 4,962 pieces of armchairs and 85 sets of teachers’ tables and chairs due to lack of coordination among the DepEd procuring offices and between the DepEd and the Local Government Units (LGUs) resulting in the deliveries of the same items.(Observation No.5)

We recommended that the Management require: a. DepEd CO to: i) be prompt in the downloading of funds to the

operating units; ii) coordinate with the DPWH to synchronize timelines in the construction of school buildings with the provision of school furniture; iii) ensure that the DepEd guidelines are consistently observed and provide for sanctions in case of defiance by responsible persons; and iv) observe coordination among the DepEd procuring offices and require ROs to coordinate with the LGUs to rightfully address the furniture needs of the school, thereby avoiding oversupply thereof; and

b. concerned ROs/DOs (procuring entities) to: i) comply with Section 7.6 of the 2016 Revised IRR of RA No. 9184 and DepEd Guidelines

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regarding the undertaking of procurement activities short of awarding prior to the release of funds to facilitate procurement of goods and the procedures on pre and post inspection of items to ensure its quality; ii) closely monitor the delivery and condition of the goods delivered and advise the Principals, Property Custodians and other concerned DepEd officials of the recipient schools to immediately report deliveries, reject outright defective deliveries, indicate the date of receipt of deliveries and keep record of Delivery Receipts (DRs), Inspection and Acceptance Report (IAR), Certificate of Acceptance and other related documents on file for future reference; iii) require the supplier to expedite the delivery of the undelivered items and replace the defective items delivered; iv) impose the equivalent liquidated damages for late delivery; and v) conduct inventory of unutilized excess furniture for transfer to other schools with furniture needs.

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

School Program in nine regions was negated by: a) delayed/non-delivery of Technical Vocational Livelihood tools, materials and equipment costing P386,834,786.39; b) underutilized/ unutilized delivered items due to, among others, unreadiness of at least 104 SHSs to implement the program and defects in the specifications of the procured items delivered in 45 schools; c) recording and procedural deficiencies; and d) other issues and concerns encountered in the implementation thereof, thereby depriving the students of productive, relevant, and quality vocational education.(Observation No.6)

We recommended that the Management of the concerned ROs and DOs to: a. strictly monitor the suppliers’ compliance with the contract

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

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

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

SHSs enabling them to gain new enrollees or increase its number; d. instruct the concerned Property Custodians of the DOs and the

recipient schools to report immediately to the ROs the TVL tools,

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materials and equipment that were found defective and still covered within the warranty period for the replacement thereof from the suppliers or adjustment in the prices of items not in accordance with the required specifications;

e. advice and provide with documents the schools’ Property Custodians

about the expected deliveries in their respective schools which will serve as its basis for its comparison with the actual deliveries; and

f. instruct the Supply Officer of DOs and IUs to transmit the PTR to the

Accounting Division of the ROs as well as the Accountant of the ROs to transmit the JEV to the DOs and IUs for the proper recording of the transferred TVL tools, materials and equipment in their respective books.

7. The current payroll system of the DepEd caused several drawbacks such as:

a) net under-remittance of payroll requirements amounting to P74,388,234.21 and unreconciled reciprocal account balances of the Due from Operating Units and Due to Regional Office per books of DepEd NCR ROP and DOs with a net discrepancy of P82,817,183.64; b) non-compliance with the order of priority for authorized deductions and uncontrolled types of loans offered by private lending institutions (PLIs) in ROs NCR, CAR, I, IV-B, IX and XIII that led to undeducted obligations in favor of the GSIS, HDMF/Pag-IBIG and PLIs amounting to P377.73 million, P16.56 million, and P1.80 billion, respectively; c) non-observance with the required minimum net take home pay of P4,000.00 in ROs NCR, I, VIII, IX and XI; d) inadequate controls in processing payrolls in ROs NCR, I, VIII, IX and XI resulting in over or underpayment of salaries, erroneous computation of contributions, unsupported payroll transactions and exposure of government funds to the risk of loss or misuse with the adoption of payrolls thru cash advance; and e) continuous payroll preparation and processing by the Regional Payroll Servicing Unit (RPSU) in ROs III and IX despite readiness of its concerned IUs to implement the school-based payroll preparation. (Observation No.7)

We recommended that the Management require ROs to:

a. strictly require the DOs/IUs to transfer funds based on the actual monthly payroll requirements of the DOs/IUs per approved Summary of Cash Disbursement Report (SCDR) and immediately provide the RO with relevant documents to facilitate the recording and reconciliation of financial records/reports relative to the payroll transactions;

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

Fund account maintained by ROP, instead, revert the same to the National Treasury. Any transfer of excess cash allocations to prevent

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the lapsing thereof and for invalid obligations shall be disallowed in audit;

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

accurate budget allocation for PS of DOs/IUs; d. reconcile the ROP’s records with those of the DOs/IUs in order to

resolve the disparities between the balances of the reciprocal accounts Due from Operating Units and Due to RO;

e. ensure that the authorized deductions are done in accordance with the

order of preference in the salary deductions with due consideration on the NTHP threshold of P5,000.00, as required in Section 48 of the General Provisions of the GAA for FY 2018. Restudy DepEd’s policy on the accreditation of PLIs which should include the limit on the types of loans to be offered by them to regulate the extension of loans to DepEd employees for their protection and financial stability;

f. reinforce sound internal control system in the preparation and

processing of payrolls and payment of salaries and allowances through:

f.i diligent review and proper approval by the concerned officials; f.ii timely submission of complete supporting documents to

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

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

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

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

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

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

820,682 damaged Grade 2 Learning Materials (LMs) at the contractor’s warehouse due to insufficient warehousing facilities to house the deliveries and lack of prudence on the part of DepEd to ensure the safety of the LMs. Likewise, out of the 2,673,384 Textbooks (TXs)/ Teachers’ Manual (TMs) buffer stocks proccured from CYs 2013-2016, 79 percent or 2,101,670 TXs/TMs worth at least P56,750,598.00 remained undistributed as of inspection date which may eventually result in wastage of government

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resources due to time obsolescence, loss, damage or deterioration of the learning materials. Moreover, observed control weaknesses in the proper safekeeping and inventory system of TXs/TMs can bring further damage or loss of TXs/TMs.(Observation No.8) We recommended that the Management:

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

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

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

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

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

b.ii require the officers concerned to explain the deficiencies noted and

when warranted by circumstances should be meted out with appropriate sanctions as a consequence of their improper act;

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

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

c. revisit existing DepEd guidelines on TXs and TMs and to consider in

the evaluation the following as regard control on buffer stocks: c.i provision/allocation for buffer stocks on procurement/reprinting

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

c.ii provision of specific guidelines and procedures, including

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

c.ii.i Delivery of Inventory Items (receipt, inspection and

reporting/recording), c.ii.ii Requisition/Replenishment, Issuance and Disposal of

Inventory Items (including reporting/recording), c.ii.iii Monitoring and Inventory Taking;

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d. provide for a suitable facility and thereafter ensure that the buffer

stocks are properly stored in protected places/warehouses; and

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

The foregoing audit observations and recommendations were communicated through Audit Observation Memoranda (AOM) and discussed during the Exit Conference with concerned DepEd officials and employees on June 13, 2018. Their comments were incorporated in this Report, where appropriate. F. Status of Settlement of Audit Suspensions, Disallowances and Changes

Out of total suspensions, disallowances and charges of P3,573,484,451.62, P839,801,164.56, and P7,182,742.91, respectively, issued in CO, ROs, and DOs of DepEd, only a total of P602,657,509.07 was settled leaving a balance of P3,116,395,597.72, P694,524,722.37, and P6,890,529.93, respectively, as of year-end.

G. Status of Implementation of Prior Year’s Audit Recommendations

We enjoin Management to ensure full implementation of all partially implemented audit recommendations in prior years to improve the operational as well as financial efficiency of the agency.

Out of the 101 prior years’ audit recommendations, 14 of which were fully implemented, 81 were partially implemented, and 6 were not implemented as shown below. The details are discussed in Part III of this Report.

Status of Implementation Number Percentage Fully Implemented Partially Implemented Not Implemented

14 81 6

14 80 6

Total 101 100

TABLE OF CONTENTS

PART PARTICULARS

PAGE

I

AUDITED FINANCIAL STATEMENTS

• Independent Auditor’s Report

• Statement of Management’s Responsibility for Financial Statements

• Consolidated Statement of Financial Position

• Consolidated Statement of Financial

Performance

• Statement of Changes in Net Assets/Equity

• Consolidated Statement of Cash Flows

• Statement of Comparison of Budget And Actual Amount

• Notes to Financial Statements

1 5 6 7 8 9

11

12

II OBSERVATIONS AND RECOMMENDATIONS

92

III STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

327

PART I

AUDITED FINANCIAL STATEMENTS

PART II

OBSERVATIONS

AND RECOMMENDATIONS

PART III

STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Republic of the Philippines COMMISSION ON AUDIT

Commonwealth Avenue, Quezon City

INDEPENDENT AUDITOR’S REPORT Honorable Secretary LEONOR M. BRIONES Department of Education Meralco Avenue, Pasig City

Opinion We have audited the accompanying financial statements of the Department of Education which comprise the Statement of Financial Position as at December 31, 2017, and the Statements of Financial Performance, Changes in Net Assets/Equity, Cash Flows, Comparison of Budget and Actual Amounts, and Notes to Financial Statements comprising a summary of significant accounting policies and other explanatory information. In our opinion, except for the effects on the financial statements of the matters described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Department of Education as at December 31, 2017, and its financial performance, changes in net assets/equity, cash flows, comparison of budget and actual amounts, and notes to financial statements, including a summary of significant accounting policies in accordance with Philippine Public Sector Accounting Standards (PPSASs). Basis for Qualified Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the agency in accordance with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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As discussed in Part II – Observations and Recommendations of this report, there were accounting errors/omissions and deficiencies that affected the fair presentation of the financial statements, such as:

1. Misstatements in Cash and Cash Equivalents due to discrepancy of P1,130,121,420.19 between the Cash account balance and as confirmed by the bank; and erroneous/unrecorded transactions amounting to P9,763,983.10;

2. Unreliable Receivables balance due to: a. The account Due from National Government Agencies-Department of Budget

and Management-Procurement Service (DBM-PS) with confirmation variance of P4,471,988,027 with DBM-PS account balance; dormant and long outstanding accounts of P898,581,407; and errors/omissions in recording fund transfers and deliveries in the amount of P1,778,289.30;

b. Inclusion in the Inter/Intra-Agency and Other Receivables balances of dormant and long outstanding accounts in the amount of P199,195,914 aged 10 years and over pertaining to unliquidated fund transferred to various government agencies (GA) and non-government organizations (NGO); confirmation variance of P28,297,851 with GA/NGOs’ balances; and unaccounted and unsubstantiated balances of P122,520,809; and

c. Past due Loans Receivable of P15,112,752.42 that have been outstanding for more than one to 15 years;

3. Misstatements in the Inventory accounts due to non-existing inventory items, unrecorded issuances and utilization, and various errors and omissions in recording which overstated the account balance by P44,906,185.44; and centrally/regionally procured items worth P4,510,960,267.30 already distributed/ transferred to end users but remain accounted in the books of the central/regional office;

4. Inaccurate balance of Property, Plant and Equipment (PPE) due to unreconciled

difference of P39,941,045,473.48 between the accounting and property records; non-performance of physical inventory to verify existence and completeness of the reported assets worth at least P23,483,751,530.60; non-maintenance of subsidiary records and existence of undocumented PPE balances in total amount of P53,364,537,261.43; and various errors and omissions in recording transactions affecting PPE accounts like inclusion of semi-expendable items costing at least P46,235,897.02, unrecorded unserviceable/ demolished/ razed by fire/ losses/ transferred/ disposed PPEs amounting to P14,452,858.69, unrecorded properties of P3,016,356,877, PPE items not yet dropped from books of accounts of central/regional offices of P10,819,693,024.50;

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5. Doubtful validity of Advances due to existence of outstanding accounts in total amount of P1,448,096,479.51 granted to officers and employees which remained unliquidated as of year-end, hence, the corresponding expenses incurred out of the cash advances were not recognized in the proper accounting period; existence of unsubstantiated balances in total amount of P191,576,136.12; and errors in recording of transactions in the amount of P102,317,679.28; and

6. Misstatements in the Liabilities due to recognition of invalid claims pertaining to

undocumented payables of P107,318,863.108 and inclusion of dormant/long outstanding payables of P69,986,894.98; and errors and omissions of entries affecting the Liability accounts by the amount of P3,704,818.43.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with PPSASs,

and for such internal control as management

determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Out audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s professional judgment, including the assessment of the risk of material misstatement of the financial statements whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the agency’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the agency’s internal control. Our audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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COMMISSION ON AUDIT By: MARIVEL C. BROÑOLA State Auditor V Supervising Auditor DepEd Audit Group A1 20 June 2018

Note 2017 2016ASSETS

Current Assets

Cash and Cash Equivalents 6 ₱ 15,190,411,638.50 ₱ 13,993,230,541.06Investments 7 42,670,668.93 9,180,798.09Receivables 8 19,399,609,421.86 20,109,845,047.11Inventories 9 8,255,764,043.64 5,521,087,461.75Other Current Assets 10 6,457,016,215.72 5,572,508,821.28

Total Current Assets 49,345,471,988.64 45,205,852,669.29

Non-Current AssetsInvestment Property 11 4,971,507.20 15,309,545.62

12 139,596,881,477.92 122,264,496,424.69Biological Assets 13 1,516,892.00 1,176,167.00Intangible Assets 14 231,335,763.25 11,698,569.48Other Non-Current Assets 15 417,242,860.77 393,478,046.72

Total Non Current Assets 140,251,948,501.14 122,686,158,753.51

Total Assets 189,597,420,489.77 167,892,011,422.80

LIABILITIES

Financial Liabilities 16 22,771,919,750.53 19,378,179,571.28Inter-Agency Payables 17 11,042,897,023.43 9,330,895,935.25Intra-Agency Payables 18 330,476,571.74 658,667,402.94Trust Liabilities 19 1,327,634,408.89 1,305,928,229.35

20 23,394,997.29 58,789,354.17Provisions 21 18,000,000.00 143,122.51Other Payables 22 7,422,261,432.86 6,810,587,042.28

Total Liabilities 42,936,584,184.74 37,543,190,657.78

Total Assets Less Total Liabilities 146,660,836,305.03 130,348,820,765.02

NET ASSETS/EQUITY

Accumulated Surplus/Deficit 146,660,836,305.03 130,348,820,765.02Total Net Assets/Equity p 146,660,836,305.03 p 130,348,820,765.02

DEPARTMENT OF EDUCATIONCONSOLIDATED STATEMENT OF FINANCIAL POSITION

ALL FUNDSAs at December 31, 2017

Deferred Credits/Unearned Income

Property, Plant and Equipment

6

Note 2017 2016This statement should be read in conjunction with the accompanying notes.

7

Note 2017 2016 (as restated)

REVENUE

23 ₱ 1,376,811,711.15 ₱ 1,067,673,689.06 24 1,896,299,528.49 168,878,342.43 25 59,590.00 24,040.00

Miscellaneous Income 26 40,518,588.79 3,539,840.82 Total Revenue 3,313,689,418.43 1,240,115,912.31

Less: Current Operating ExpensesPersonnel Services 27 324,764,623,661.90 294,405,199,209.93

28 36,934,701,627.91 29,419,957,006.39 Financial Expenses 29 1,776,959.11 1,874,327.07 Non Cash Expenses 30 5,299,573,841.49 4,426,542,472.52

Current Operating Expenses 367,000,676,090.41 328,253,573,015.91

(363,686,986,671.98) (327,013,457,103.61)

31 381,936,802,436.65 346,834,287,451.80 Sales of Assets 32.1 982,408.57 14,989.95 Gains 32.2 10,200,708.27 6,204,184.29 Losses 32.3 (1,941,785.46) (627,692.74)

Surplus/(Deficit) for the Period ₱ 18,259,057,096.05 ₱ 19,826,421,829.69

This statement should be read in conjunction with the accompanying notes.

Net Financial Assistance/ Subsidy

Maintenance and Other Operating Expenses

Surplus (Deficit) from Current Operations

Shares, Grants and Gains

DEPARTMENT OF EDUCATIONCONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

ALL FUNDSFor the Year Ended December 31, 2017

Service Income and Business Income

7

2017 2016(as restated)

Balance at January 1 ₱ 131,501,787,753.01 ₱ 113,795,396,448.93 Changes in accounting policy 180,714,221.25 (70,904,298.05) Prior period errors 2,542,409,684.87 2,313,661,684.79 Other Adjustments (2,432,307,290.47) (4,245,257,040.31) Restated Balance 131,792,604,368.66 111,792,896,795.36

Surplus for the period 18,259,057,096.05 19,826,421,829.69 Adjustment of net revenue recognized directly in net assets/equity (249,784,279.62) (117,530,872.04) Others (3,141,040,880.05) - Total recognized revenue and expense for the period 14,868,231,936.38 19,708,890,957.65

Balance at December 31 ₱ 146,660,836,305.04 ₱ 131,501,787,753.01


DEPARTMENT OF EDUCATIONCONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS/EQUITY


Changes in Net Assets/Equity for the Calendar Year

8

Note 2017 2016

Cash Flows From Operating Activities

Cash InflowsReceipt of Notice of Cash

Allocation 33 ₱ 432,455,704,108.97 ₱ 365,182,495,317.99 Collection of Income/Revenues 741,215,898.86 722,940,342.04

Subsidy from Other NGAs, LGUs and GOCCs 302,026,560.36 1,410,519,636.89

Collection of Receivables 20,235,192,482.14 22,742,345,686.82

Transfers 5,575,727,591.69 6,786,506,797.90

Transfers 104,433,952,231.67 101,029,222,780.74 Trust Receipts 824,005,198.34 831,071,689.35 Other Cash Receipts 1,581,412,911.43 724,630,059.95 Adjustments 2,195,313,846.78 3,458,864,336.51 Total Cash Inflows 568,344,550,830.24 502,888,596,648.19

Cash Outflows

MDS Checks (for BTr) - 172,621.65 Remittance to the National Treasury 831,800,851.37 1,051,644,117.78 Payment of Expenses 255,395,239,474.31 244,641,021,052.97 Purchase of inventories 1,288,729,615.51 1,286,015,524.37 Grant of Cash Advances 14,610,393,604.05 13,132,402,250.16 Prepayments 776,767,894.97 3,865,504,355.43 Refund of Deposits 70,221,453.59 142,399,629.00 Payment of Accounts Payables 11,850,719,562.85 6,534,273,155.58

Benefit Contributions and Mandatory Deductions 164,585,540,890.33 136,494,579,565.22

Grant of Financial Assistance/Subsidy 614,898,121.37 773,625,445.28 Release of Inter-Agency Fund Transfers 9,403,900,497.39 7,709,233,642.81 Release of Intra- Agency Fund Transfers 56,062,313,875.36 43,285,649,591.17 Payment from Trust Liabilities/

Fund Transfers 326,842,777.50 333,154,881.32 Other Disbursements 4,127,167,051.62 10,218,550,789.32 Adjustments 41,812,525,241.34 28,068,719,878.29 Total Cash Outflows 561,757,060,911.55 497,536,946,500.37

DEPARTMENT OF EDUCATIONCONSOLIDATED STATEMENT OF CASH FLOWS


Replenishment of Negotiated

Receipt of Inter-Agency Fund

Receipt of Intra-Agency Fund

Receipt of Assistance and

Remittance of Personnel

9

Net Cash Provided by Operating Activities 6,587,489,918.69 5,351,650,147.82

Cash Flows from Investing Activities

Cash Inflows

of Property, Plant and Equipment - 97,838.00 Total Cash Inflows - 97,838.00

Cash Outflows

Investment Property - 58,470.36

Property, Plant and Equipment 3,768,781,529.70 3,132,188,255.72 Purchase of Bearer Biological Assets 29,125.00 - Purchase of Intangible Assets - - Grant of Loans 1,622,197,150.31 1,260,351,296.30

Total Cash Outflows 5,391,007,805.01 4,392,598,022.38

(5,391,007,805.01) (4,392,500,184.38)

Cash Flows from Financing Activities

Cash InflowsProceeds from insurance of bills

and bonds 978,767.76 - Total Cash Inflows 978,767.76 -

Cash OutflowsRedemption of Bills/Bonds Issued 279,784.00

Tota Cash Outflows 279,784.00 -

698,983.76 -

1,197,181,097.44 959,149,963.44

Cash and Cash Equivalents, January 1 13,993,230,541.06 13,034,080,577.62

Cash and Cash Equivalents, December 31 ₱ 15,190,411,638.50 ₱ 13,993,230,541.06


Net Cash Provided by Financing Activities

Increase (Decrease) in Cash and Cash Equivalents

Net Cash Provided by Investing Activities

Proceeds from Sale/Disposal

Purchase/Construction of

Purchase/Construction of

10

Original Final

RECEIPTS NotesTax Revenue 3.13 & 3.15 24,225.00 24,225.00 24,225.00 - Services and Business Income 3.14 & 3.15 2,138,498,311.14 2,138,498,311.14 2,200,982,535.86 (62,484,224.72)Assistance and Subsidy 3.13 & 3.15 - - - - Shares, Grants and Donations 3.13 & 3.15 - - - - Gains 3.13 & 3.15 8,901,124.31 8,901,124.31 8,901,124.31 - Others: 3.15

Other Non-Operating Income 652,000.00 652,000.00 652,000.00 - Other Non-Operating Receipts: 3,466,733,336.41 3,466,733,336.41 6,320,967,582.58 (2,854,234,246.17)

Total Receipts 5,614,808,996.86 5,614,808,996.86 8,531,527,467.75 (2,916,718,470.89)

PAYMENTSPersonnel Services 3.15 352,211,725,000.00 359,387,926,583.66 320,460,465,342.37 38,927,461,241.29

3.15 79,240,225,000.00 98,891,669,559.18 56,465,830,299.24 42,425,839,259.94

Capital Outlay 3.15 135,639,591,000.00 41,461,316,984.65 6,502,505,085.16 34,958,811,899.49 Financial Expenses 3.15 - - - - Others - - - - Total Receipts 567,091,541,000.00 499,740,913,127.49 383,428,800,726.77 116,312,112,400.72

NET RECEIPTS/PAYMENT (561,476,732,003.14) (494,126,104,130.63) (374,897,273,259.02) (119,228,830,871.61)

DEPARTMENT OF EDUCATION

Note 3.13, 3.14-3.15: Based from GAARD 2016 (Original Budgeted Amounts - Receipts & Payments) 3.13, 3.14-3.15: Based from No. FAR 1/1A - (Final Budgeted Amounts - Receipts Far 5. Column 3-Revenue Target/Payments - FAR 1, Col 5 Adjusted Appropriation)

Note: 3.13, 3.14-3.15: Based from FAR No. 5 (Actual Receipts) 3.15: Based from No. FAR 1/1A-(Actual Payments)

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTFor the Year Ended December 31, 2017

Maintenance and Other Operating Expenses

ParticularsBudgeted Amount Actual Amounts on

Comparable BasisDifference

Final Budget and Actual

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DEPARTMENT OF EDUCATION Notes to Consolidated Financial Statements

For the year ended December 31, 2017 1. General Information /Agency Profile

The consolidated financial statements of the Department of Education (DepEd) were authorized for issue as shown in the Statement of Management Responsibility for Financial Statements signed by Ms. Victoria Catibog, Undersecretary for Finance Disbursements and Accounting.

The DepEd is the primary agency of the government responsible to provide the framework for the governance of basic education, which shall set the general directions for educational policies, standards, established authority, accountability and responsibility for achieving higher learning outcomes. It shall also fulfill the mandate embodied in the Constitution per Article XVI, Section 1, which provides that: “The State shall protect and promote the right of all citizens to quality education at all levels and shall take steps to make such education accessible to all.” Its mission is to provide quality education that is equitably accessible to lay the foundation for holistic, life-long learning through critical and creative thinking. Its ultimate aim is to develop Filipinos to be functionally literate, economically secure, socially and morally responsible and nationalistic citizens who will contribute to sustain global development.

On August 11, 2001, RA No. 9155 or the “Basic Education Governance Act of 2001” came into law and on August 22, 2012, the then DepEd Secretary Edilberto C. De Jesus signed the Implementing Rules and Regulations (IRR) of RA No. 9155.

RA No. 9155 renamed among others, the Department of Education, Culture and Sports (DECS) to the Department of Education wherein the functions and programs related to sports competition was transferred to the Philippine Sports Commission (PSC) but the programs for school sports and physical fitness still forms part of basic education curriculum. RA No. 9155 put emphasis on the decentralization of functions and governance in basic education through the school based management framework and mechanisms and stresses the principles of “shared governance.” The Act and its IRR also call for an equitable, direct, immediate release of resources to field offices and assuring that financial resources are within the reach of the schools. The Department of Budget and Management (DBM) and the DepEd issued Joint Circular (JC) No. 2004-1 dated January 1, 2004 which covers the release of funds to DepEd-Central Office (CO), Regional Offices (RO) s, Division Offices (DO) and Secondary Schools (SS) for their respective regular operating requirements, locally-funded and foreign-assisted projects and the nationwide/region-wide lump-sum appropriations as provided in the General Appropriations Act (GAA). RA No. 10533, the Enhanced Basic Education Act of 2013, was signed by President Benigno S. Aquino III on May 15, 2013 and its IRR was promulgated on September 3, 2013. Under RA No. 10533, the enhanced basic education program encompasses at least one year kindergarten education, six years elementary education, six years secondary education wherein in the secondary education includes four years of Junior High School (JHS) and two years Senior

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High School (SHS). The K to 12 Program under RA No. 10533 envisions to provide sufficient time for mastery of concepts and skills, develop lifelong learners, and prepare graduates for tertiary education, middle-level skills development, employment, and entrepreneurship.

The Agency registered office is located at DepEd Complex, Meralco Avenue Pasig (formerly University of Life Complex).

DepEd Management Structure

To carry out its mandates and objectives, the Department is organized into two major structural components. The Central Office maintains the overall administration of basic education at the national level. The Field Offices are responsible for the regional and local coordination and administration of the Department’s mandate. RA 9155 provides that the Department should have no more than four Undersecretaries and four Assistant Secretaries with at least one Undersecretary and one Assistant Secretary who are career service officers chosen among the staff of the Department. In 2015, the Department underwent a restructuring of its office functions and staffing. The result of which was the Rationalization Plan for the new organizational structure. Details of the new structure are further explained in DepEd Order No. 52, s. 2015, also known as the New Organizational Structures of the Central, Regional, and Schools Division Offices of the Department of Education. At present, the Department operates with four Undersecretaries in the following areas: • Curriculum and Instruction • Finance and Administration • Governance and Operations • Legal and Legislative Affairs

Four Assistant Secretaries are assigned in the following areas: • Curriculum and Instruction • Finance and Administration • Governance and Operations • Legal and Legislative Affairs

http://www.deped.gov.ph/orders/do-52-s-2015

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Supporting the Office of the Secretary (OSEC) at the Central Office are the different strands, services, bureaus, and divisions.

There are five strands under OSEC: • Curriculum and Instruction • Finance and Administration • Governance and Operations • Legal and Legislative Affairs • Strategic Management

Five attached agencies: • Early Childhood Care and Development (ECCD) Council • National Book Development Board (NBDB) • National Council for Children's Television (NCCT) • National Museum • Philippine High School for the Arts

Three coordinating councils: • Adopt-a-School Program (ASP) Coordinating Council • Literacy Coordinating Council (LCC) • Teacher Education Council (TEC)

At the sub-national level, the Field Offices consist of the following: • Seventeen Regional Offices, and the Autonomous Region in Muslim Mindanao

(ARMM*), each headed by a Regional Director (a Regional Secretary in the case of ARMM).

• Two hundred twenty-one Provincial and City Schools Divisions, each headed by a Schools Division Superintendent. Assisting the Schools Division Offices are 2,602 School Districts, each headed by a District Supervisor.

Under the supervision of the Schools Division Offices are 62,605 schools, broken down as follows: • 49,209 elementary schools (38,648 public and 10,561 private) • 13,396 secondary schools (7,976 public and 5,420 private)

*ARMM is included in the budget of the Department on the following: creation of teaching and non-teaching positions; funding for newly-legislated high schools; regular School Building Program; and certain foreign-assisted and locally-funded programs and projects.

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Central Office Organizational Structure

Shown below is the overview of the new organizational structure of the Department's Central Office. A more detailed chart can be viewed at DepEd Order No. 5, s. 2015.

PROVIDENT FUND The DepEd Provident Fund (PF) was established by virtue of Administrative Order No. 279 dated May 5, 1992 and implemented through DECS Order No. 97, s. 1992 dated October 1, 1992 which was amended by DECS Order No. 12, s. 2004 dated February 24, 2004 and DepEd Order No. 36 dated June 1, 2007.

The Fund aims to provide DepEd officials and employees with benefits and loans for emergency needs; for their education and that of their children; for their hospitalization and that of their immediate dependents; for minor but immediately needed repair of their houses; and for other similar purposes as determined by the Board of Trustees. The beneficiaries of the fund are the teachers as defined in the Magna Carta for Public School Teachers and administrative support staff of the Central, Regional, Division and field offices of the Department who have permanent/regular status of employment.

The DepEd Provident Fund derives its funding from the Service Fees (SF) collected from Private Lending Institutions (PLIs) and Insurance Companies (ICs) on the implementation of the Automatic Payroll Deduction Scheme of the then IBM-PSD, RPSUs and school-based or office-based payroll preparation. The SF collected monthly are deposited to the National Treasury which is later requested for release of Notice of Cash Allocation in favor of the DepEd PF. In previous years, some regions were able to request directly from their respective PF.

http://www.deped.gov.ph/orders/do-52-s-2015

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However, as the DepEd Central Office move to standardize operations, such procedure is no longer allowed. Instead, certifications of deposits from the National Treasury are submitted to the Central Office as integral document for issuance of Notice of Cash Allocations (NCAs) from the DBM and subsequently allocated to the Regional Offices following certain criteria and procedures.

The following is the manner of allocation and distribution of service fee (which form part of the additional equity/capital of the PF) per Resolution No. 01, s. 2010 issued by the National Board:

• Twenty percent of the service fee collections shall be transferred to the National Common

Fund; • Fifty percent of the amount of service fee collected by the concerned regional implementing

units shall be returned to them; and • The remaining balance shall be distributed among the regional implementing units based on

equity and performance on a 60/40 ratio.

The types of loan that can be availed by the borrowers with six percent per annum interest add-on and diminishing computation is stated below:

A. Regular loans – for emergency needs of the teachers/employees, or immediate and other

members of his/her family up to the fourth degree of consanguinity and affinity (up to P100,000.00)

• Hospitalization and/or medical expenses resulting from an accident/ illness; • Death of immediate and /or other members of his/her family; • Minor but immediately needed repair of the house of the teacher/ employee; • Educational loans; • Other emergency expenses to be specified by the teacher/employee-applicant;

B. Additional loan (up to P100,000.00) can be granted at the discretion of the Secretary to

teachers and non-teaching employees, suffering from extreme financial difficulty because of an immediate need for financial assistance and whose final recourse is the DepEd Provident Fund;

C. Calamity loan (maximum of P20,000.00) may be availed in areas and provinces declared under State of Calamity.

The accumulated interests earned from the lending operations over the years also work as a revolving fund for continuous loaning operations. Administrative expenses to support the operations are allowed but not to exceed 20 percent of the current year interest income earned. The fund is being managed by the (1) National Board of Trustees which promulgate rules and policies governing operations of the Fund, (2) the Regional Board of Trustees which implement the policies, rules and regulations promulgated by the National Board and supervises the Fund operations to their respective regions, (3) and along with them are the designated Secretariats of

17

the National/Regional Boards that serve as the implementing arm of the Fund. Currently, the Chairman for the National Board of Trustees is Undersecretary Victoria M. Catibog and Assistant Secretary Jesus L.R. Mateo sits as Vice-Chairman of the Board. DEPARTMENT OF EDUCATION - REGIONAL EDUCATION CENTERS (RELC) The Department of Education has incomes derived from business-type activities operating under the Revolving Fund concept. The incomes are derived from the rentals and use of DepEd facilities, such as the Regional Education Learning Centers (RELC), The Ecological Technology Livelihood Community Center (Ecotech Center), Baguio Teacher’s Camp, the National Educators Academy of the Philippines (NEAP), Applied Nutrition Center (ANC) and the National Science Teacher Instrumentation Centers (NSTIC). Most of the Regional Offices have operating RELCs except for Region IV-B; the Ecotech Center, ANC and NSTIC are located in Cebu City; as the name implies, the Baguio Teacher’s Camp is situated in Baguio City.

• Regional Educations Learning Centers (RELC)

RELCs have been established under the Program for Decentralized Educational Development (PRODED) to sustain the capability of the regions to effectively and efficiently manage their staff. As envisioned, this center was designed to meet the educational needs of school officials and teachers in the regions in relation to education innovations and program implementation. On March 25, 1987, DECS Order No. 30, s. 1997 – Guidelines for the Effective Utilization of the Regional Educational Learning Centers was issued.

• National Educator’s Academy of the Philippines (NEAP)

Letter of Instruction No. 1487 dated December 10, 1985 created the National Education Learning Center (NELC). This is to sustain gains derived from the Program for Decentralized Educational Development (PRODED). It mainly addressed concerns related to the improvement of the curricula and development of better instructional materials, the reorientation and retraining of teachers and the improvement of the management capabilities of superintendents, supervisors and administrators at the elementary level. On May 27, 1992, Administrative Order No. 282 was issued renaming NELC to NEAP.

• Ecological Technology Livelihood and Community Center (Ecotech) The Ecological Technology Livelihood Community Center, usually referred to as “ECOTECH CENTER” is an inter-agency project by and between the Department of Education and the defunct Ministry of Human Settlements. The center was established in 1978 and acquired by DECS on August 25, 1989 from the Strategic Development Corporation (SIDCOR) as stipulated in a Deed of Assignment executed by both parties on August 9, 1989 for a considerable amount of P9,055,594.00. The lot where the center is situated was donated by the Provincial Government of Cebu

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and was transferred in the name of DepEd on February 8, 1999 per TCT No. 150266.

• Baguio Teacher’s Camp The Baguio Teachers’ Camp is a year-round center for conferences, seminar-workshops, and training and human resource development program for the Department of Education (DepEd). Whenever possible, the Camp is also open for the housing and conference needs of other government agencies, student and professional organizations holding conferences in Baguio City. It also accommodates teachers, school officials and other DepEd personnel and their guests who are vacationing in Baguio City. This is a privilege extended to teachers as a fitting tribute to their role in education in the country. The Camp, with an area of 23.7 hectares, has 12 dormitories that can accommodate 1,208 guests, 47 cottages with a bed capacity of 446, seven conference halls and other facilities such as the water system. The Camp provides the upkeep and maintenance of these facilities, including its grounds and gardens. A staff of very competent personnel attends to these various areas.

• National Science Teaching Instrumentation Center (NSTIC) The National Science Teaching Instrumentation Center (NSTIC) is part of the Science Teaching Improvement Project (STIP), which started in 1989. The project was implemented by DECS-EDPITAF and GTZ, the German Agency for Technical Cooperation. On July 1993, President Fidel V. Ramos institutionalized the Center through Executive Order No. 112 mandated to undertake the following tasks: • to develop prototypes of science teaching equipment using locally available materials

and technology; • to develop user’s and experimentation manuals; • to facilitate technology transfer to the private sector that will mass-produce the science

equipment developed by the Center; • to provide training programs for science teachers; • to undertake quality control; and • to implement a system of repair and maintenance for the science equipment

• School Health and Nutrition Center

The Department of Education, through the School Health and Nutrition Center (SHNC), established in 1975 four nutrition centers nationwide to oversee the implementation of the nutrition and health activities throughout the country. These centers were named Applied Nutrition Center (ANC).

The facilities are not only for the learning centers of the Department but also compete in the market for affordable venues for conferences, seminars, workshops and trainings and other related activities. Not only the trainings and workshops of the Department are held in these facilities but other Government Agencies and Private Entities as well appreciate and choose the

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decent services that these Centers can offer.

1.1 Financial Reforms for CYs 2016 – 2017 President Rodrigo Roa Duterte signed into law the General Appropriations Act (GAA) embodying the Php 3.350 trillion National Budget of the Philippine Government for 2017. He used four compound words to describe this first budget of his Administration - pro-people, pro-investment, pro-growth, and pro-development. The significance of these words is not in their parallel construction that makes for good rhetoric, but in the impact on the lives of the people when these four ideals – which on occasion can work against each other and result in counter-productivity – authentically describe and are truly present in the programs and projects. As the first budget of the Duterte Administration, this 2017 National Budget sets the tone and pace for the next six years. It defines the priorities of the government that will be seriously pursued, in order to realize the leadership’s pledge and commitment to the people. It underscores the goals that will direct the course leading the nation to change – REAL change that makes a felt and lasting positive difference in the people’s lives. Thus, we see in this 2017 People’s Budget, presented by the Department of Budget and Management (DBM) in a clear, concise and comprehensible format, a budget that is genuinely for and by the people. (DBM Website People’s Budget 2017) No. 7 in President Rodrigo Duterte’s 10-Point Agenda is: Investing in human capital development, including health and education systems, as well as matching skills and training to meet the demands of businesses and the private sector. (President Duterte’s Ten (10) Point Agenda) Public Financial Management GROUP drafts roadmap for 2017-2022 The Public Financial Management principals – Department of Budget and Management (DBM) Secretary Benjamin Diokno, Department of Finance (DOF) Secretary Carlos Dominguez 3rd and Commission on Audit (COA) Chairman Michael Aguinaldo–along with officials from their agencies, met to review key accomplishments of the reforms of PFM in the Philippines from the last six years and approved the roadmap for 2017 to 2022. From 2011 to 2016, the PFM reforms succeeded in designing programs and systems that enhanced efficiency and transparency of managing public funds. Two major programs for the development of a government-wide integrated financial management information system include the establishment of a Treasury Single Account, a cash management system that consolidates government accounts and will optimize the utilization of the National Government’s cash resources. The other is the implementation of a Unified Account Code Structure, a government-wide accounting code classification framework that will facilitate the inter-operability of diverse financial reports. Central to the PFM reforms is the development of a government integrated financial management information system, being undertaken in a phased manner. Building on these successful initiatives, the PFM principals adopted a new roadmap for the next six years. by The Manila Times on February 14, 2017

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Budget Reform Bill Seen to Modernize PH Budgetary System In line with the government’s thrust for more efficient, transparent, and accountable delivery of public services, the Department of Budget and Management is pushing for the passage of the Budget Reform Bill, a measure that seeks to modernize budgetary practices in the Philippines. It is an encompassing reform initiative covering the entire budget process – from budget planning, to budget execution, tracking, and so forth. The said bill will change the way we do budgeting as it will address age-old problems like under spending and the usurpation of Congress’ power of the purse. This is especially important in view of the government’s expansionary fiscal policy, where spending for infrastructure and social services is projected to increase significantly. Among the pertinent features of the reform bill is the shift from a multi-year obligation budget to an annual cash-based budget. The common budgetary practice in the Philippines is to allow appropriations and obligations until the next fiscal year, extending the validity of funds to two years. This has led to slow budget utilization on the part of line agencies. Note that the two-year validity of funds has not been allowed in the 2017 General Appropriations Act (GAA) by virtue of a line-item veto by the President. In effect, appropriations must be utilized within the fiscal year. The Budget Reform Bill then seeks to institutionalize this initiative to promote the disciplined execution of the budget. On top of limiting the lifespan of appropriations, it will also enforce a cash-based rather than an obligation-based budget. Obligations are intentions, not expenditures. Hence, a cash-based budget will more accurately reflect the annual development plan of the government. A reform that will be institutionalized by the Budget Reform Bill is the comprehensive release of funds to line agencies with the passage of the GAA (previously called WYSIWYG – What You See Is What You Get – and later on, GAARD – General Appropriations Act as Release Document). Early procurement activities short of award, meaning pre-procurement conference until post-qualification, will also be authorized to speed up project implementation for line agencies. As for technology, an integrated financial management information system (IFMIS) will be adopted by the bureaucracy. It will serve as a single portal for all financial transactions of the government which will provide real-time information on the budget and the country’s finances. Beyond efficiency measures, the Budget Reform Bill will also ensure that future national budgets will be fully compliant with the laws governing public finance, especially the landmark Supreme Court decisions on the Disbursement Acceleration Program (DAP) and the Priority Development Assistance Fund (PDAF).

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In particular, “savings” has been defined as portions or balances of any released appropriations which have not been obligated because the government program, project or activity has already been completed, discontinued, or abandoned. “Savings” may also be incurred as a result of more efficient operations that result to lesser costs. However, “savings” cannot be declared if it is due to the fault or negligence of the agency. The Budget Reform Act has already been filed in both chambers of Congress. HB 5590 was filed by Hon. Karlo Nograles, the Chairman of the House Committee on Appropriations, last May 9, 2017. The first committee hearing was held on May 23, 2017 under the Committee on Appropriations. At the Senate, SB 1450 was filed by Sen. Loren Legarda, the Chairman of the Senate Committee on Finance, on May 11, 2017. A committee hearing was also conducted under the Committee on Finance last August 7, 2017. Looking ahead, a technical working group (TWG) meeting is tentatively set on September 25, 2017 to iron out the provisions of SB 1450. 5 DBM Secretary Benjamin E. Diokno talks with media during “Breakfast with Ben” at the DBM Executive Lounge in Manila. | 20 September 2017 DepEd DOs 2017 DO 1, s. 2017 - Guidelines on the National Inventory of DepEd Public School Buildings for School January 6, 2017 The Department of Education (DepEd) issues the enclosed Guidelines on the National Inventory of DepEd Public School Buildings for School Year 2016-2017 which aims to ensure an accurate and comprehensive data of school buildings in all DepEd public schools for use in planning, budgeting, resource allocation, and decision making. These guidelines provide the procedures, accountable persons or offices, roles and responsibilities, forms and system in updating the National School Building Inventory (NSBI). All public schools comprising of the Elementary School, Junior High School (JHS), JHS with Senior High School (SHS), Stand Alone SHS, and Integrated School (Elementary and JHS/SHS) are directed to participate in the NSBI, which will commence on January 16, 2017. The National School Building Inventory Day will be conducted on January 16, 2017, which aims to enjoin all concerned personnel from the DepEd Central Office (CO) down to the school level and other stakeholders to participate in the said activity. Regional offices, through the Policy, Planning and Research Division (PPRD) and Education Support Services Division (ESSD), and schools division offices, through the School Governance and Operations Division (SGOD), shall be responsible in providing technical assistance and support mechanism in conducting the inventory.

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Official Activities Organized and Conducted by the Department of Education January 26, 2018 The Department of Education (DepEd) issued DepEd Order (DO) No. 15, s. 2017 entitled Guidelines on the Allocation of Funds for Venue, Meals and Snacks, and Room Accommodation for Official Activities Organized and Conducted by the DepEd, particularly. However, in consideration of the prevailing rates of hotels and other training facilities, Item No. 2 of said DO is hereby amended as follows:

Per DO 15, s. 2017 Amendment For activities utilizing DepEd training venues such as the Regional Education Learning Centers (RELCs), ECOTECH Center, National Educators Academy of the Philippines (NEAP), and Baguio Teachers Camp (BTC), the allowable rates for facilities, meals and snacks, and room accommodation per participant per day shall not exceed One Thousand Two Hundred Pesos (P1,200.00). The following are the allowable rates for activities, which are less than one day or for activities which do not require three meals:

Meal Rate

Breakfast P150.00

Snacks (a.m./p.m.) 75.00

Lunch/Dinner 350.00

For activities utilizing DepEd training venues such as the Regional Education Learning Centers (RELCs), Applied Nutrition Center, ECOTECH Center, National Educators Academy of the Philippines (NEAP), and Baguio Teachers Camp (BTC), the allowable rates for facilities, meals and snacks, and room accommodation per participant per day shall not exceed One Thousand Five Hundred Pesos (P1,500.00). The following are the allowable rates for activities, which are less than one day or for activities which do not require three meals:

Meal Rate

Breakfast P200.00

Snacks (a.m./p.m.) 100.00

Lunch/Dinner 400.00

DO 3, s. 2017 - Multi-Year Implementing Guidelines on the Allocation and Utilization of the Indigenous Peoples Education Program Support Fund January 18, 2017 Pursuant to DO No. 62, s. 2011 entitled Adopting the National Indigenous Peoples Education (IPEd) Policy Framework and DepEd Order No. 43, s. 2013 entitled Implementing Rules and Regulations of RA No. 10533 otherwise Known as the Enhanced Basic Education Act of 2013, the DepEd has instituted the National IPEd Program.

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To support the implementation plans and priorities on IPEd, DepEd shall provide the Program Support Fund to the regional and schools division offices on an annual basis. The availment, release, utilization, and liquidation of the said fund shall be subject to the enclosed Multi-Year Implementing Guidelines on the allocation and Utilization of the IPEd Program Support Fund. DO 5, s. 2017 - Compliance with the Mandatory Use of the PhilHealth Electronic Premium Remittance System and Related Matters January 18, 2017 In relation to the fulfillment of its mandate to establish an efficient premium collection mechanism and to maintain an updated membership and contribution database as stipulated in the National Health Insurance Act (Republic Act 7875), the Philippine Health Insurance Corporation (PhilHealth) is requiring the use or adoption of the Electronic Premium Remittance System (EPRS) as the mode of preparation and submission/transmission of the Employer Remittance Report (RF-1) through the issuance of PhilHealth Circular (PC) Nos. 25, s. 2012 and 004-2015. DO 7, s. 2017 - Guidelines on the Utilization of Fiscal Year 2017 Program Support Fund for Monitoring of FY 2016 Bottom-Up Budgeting Projects February 8, 2017 The DepEd hereby issues the DO entitled Guidelines on the Utilization of Fiscal Year (FY) 2017 Program Support Fund (PSF) for Monitoring of FY 2016 Bottom-Up Budgeting (BUB) Projects which aims to identify eligible activities and expenditure items supporting the effective and efficient implementation of BUB projects. These guidelines amend Section 9.2 of DepEd Order No. 63, s. 2016 entitled Guidelines on the Implementation and Monitoring of FY 2016 Bottom-Up Budgeting Projects. A total amount of Nine Million Six Hundred Sixty Thousand Pesos (P9,660,000.00) charged to FY 2016 Planning and Management Information Systems Fund shall be released by the Financial Assistance Management Service–Budget Division (FMS–BD), Central Office, through the issuance of SUB-ARO to regional Offices (ROs) and schools division offices (SDOs) with approved Work and Financial Plans (WFPs) as endorsed to the Planning Service–Planning and Programming Division (PS–PPD). The ROs and SDOs with more than four BUB Projects under FY 2016 listed in Enclosure No. 1 are qualified to receive the FY 2017 Program Support Fund.

DO 12, s. 2017 - Implementation of P 4,000.00 Net Take Home Pay for Department of Education Personnel March 6, 2017 This DO emphasizes the new threshold on Net Take Home Pay of the DepEd personnel as stipulated in Section 47 (Authorized Deductions) of the General Provisions of Republic Act No. 10924, General Appropriations Act for Fiscal Year 2017, entitled An Act Appropriating Funds for the Operation of the Government of the Republic of the Philippines from January One to December Thirty One, Two Thousand and Seventeen, and for Other Purposes, shall be Four Thousand Pesos (P 4,000.00).

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DO 15, s. 2017 - Guidelines on the Allocation of Funds for Venue, Meals and Snacks, And Room Accommodation for Official Activities Organized and Conducted by the Department of Education March 14, 2017 In consideration of the prevailing rates of hotels and other training facilities necessary for the conduct of trainings, seminars, workshops and other capacity development activities, the DepEd issues this Order on the revised Guidelines on the Allocation of Funds for Venue, Meals and Snacks, and Room Accommodation for Official Activities Organized and Conducted by the Department. For activities utilizing DepEd training venues such as the Regional Education Learning Centers (RELCs), ECOTECH Center, National Educators Academy of the Philippines (NEAP), and Baguio Teachers Camp (BTC), the allowable rates for facilities, meals and snacks, and room accommodation per participant per day shall not exceed One Thousand Two Hundred Pesos (P 1,200.00). DO 16, s. 2017 - Research Management Guidelines March 20, 2017 In support of the Department’s policy development process, research agenda, and policy and program development and implementation, the Department of Education (DepEd) continues to promote and strengthen the culture of research in basic education. DepEd hereby establishes the Research Management Guidelines (RMG) to provide guidance in managing research initiatives in the national, regional, schools division, and school levels. The enclosed policy also improves support mechanisms for research such as funding, partnerships, and capacity building. This policy which is built on the gains in evidence-based decision-making from various education reforms or initiatives shall strengthen the culture of research in the Department. In addition, it improves the fund-sourcing mechanisms, and reinforces the link of research to education processes through research dissemination, utilization, and advocacy. DO 17, s. 2017 - Guidelines on the Provision of Science and Mathematics Equipment for Grades 4–6 Pupils in Public Elementary Schools and Grades 11–12 Students in Public Senior High Schools April 7, 2017 Learning Resources (BLR), in coordination with the Bureau of Curriculum Development (BCD), and the Bureau of Learning Delivery (BLD), shall distribute packages of basic Science and Mathematics Equipment (SME) for Grades 4–6 pupils in Public Elementary Schools and Grades 11–12 students in Public Senior High Schools. This is to ensure the effectiveness of teaching and learning of Science and Mathematics in basic education.

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The appropriated funds in the General Appropriations Act under DepEd Operations Major Final Output (MFO2) Basic Education Services for Fiscal Years (FYs) 2015 and 2016 will be utilized to procure the Science and Mathematics Equipment. DO 18, s. 2017 - Guidelines on the Utilization of the 2017 Every Child a Reader Program Funds for the Early Language, Literacy, and Numeracy Program: Professional Development Component April 19, 2017 The DepEd issued the Guidelines on the Utilization of the 2017 Every Child a Reader Program (ECARP) Funds for the Early Language, Literacy, and Numeracy Program: Professional Development Component. These guidelines cover the expansion of the professional development component of the program described in DepEd Order No. 12, s. 2015 entitled Guidelines on the Early Language, Literacy, and Numeracy Program: Professional Development Component. The Program aims to develop in Filipino children the literacy and numeracy skills, and attitudes, which will contribute to lifelong learning. With this, it is the goal of the Department to improve the literacy and numeracy skills of learners from Kindergarten to Grade 3 following the K to 12 Basic Education Curriculum by establishing a sustainable and cost-effective professional development system for teachers. In line with the K to 12 Program and the goal of making every child should be a reader, the DepEd is strengthening its reading program through the implementation of the Early Language, Literacy, and Numeracy Program. DO 19, s. 2017 - Guidelines on the Implementation of the Senior High School Voucher Program Effective School Year 2017-2018 April 20, 2017 The Expanded Government Assistance to Students and Teachers in Private Education Act as expanded in the Enhanced Basic Education Act of 2013, provides for the Senior High School Voucher Program (SHS VP). Grounded on the principles of public–private partnership, the SHS VP, which is a mechanism to provide financial support to qualified students, is a demonstration of the Government’s commitment to maintaining the viability of private education, in recognition of the private education sector as a key partner in the delivery of quality basic education. In support of this commitment, the DepEd has issued the Guidelines on the Implementation of the Senior High School Voucher Program Effective School Year 2017-2018 to ensure effective and efficient program implementation. DO 20, s. 2017 - Guidelines on the Implementation of the Educational Service Contracting and Teachers' Salary Subsidy Programs in Junior High School Effective School Year 2017-2018 April 20, 2017 The Expanded Government Assistance to Students and Teachers in Private Education Act, which provides for the Educational Service Contracting (ESC), and the Teachers’

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Salary Subsidy (TSS) Programs, is a demonstration of the Government’s commitment to maintaining the viability of private education, in recognition of the private education sector as a key partner in the delivery of quality basic education. In support of this commitment, the DepEd has issued the Guidelines on the Implementation of the Educational Service Contracting and Teachers’ Salary Subsidy Programs in Junior High School Effective School Year 2017-2018 to ensure effective and efficient program implementation. DO 21, s. 2017 - Guidelines on the Utilization of the 2017 Financial Support for Multigrade Schools April 20, 2017 One of the continuing initiatives of the DepEd along its thrust of increasing access to quality elementary education is strengthening the implementation of the Multigrade Program in Philippine Education (MPPE) to address pressing concerns and issues on the provision of customized teaching and learning materials for multigrade classes and professional

DO 19, s. 2017 - Guidelines on the Implementation of the Senior High School Voucher Program Effective School Year 2017-2018 April 20, 2017 The Expanded Government Assistance to Students and Teachers in Private Education Act as expanded in the Enhanced Basic Education Act of 2013, provides for the SHS VP. Grounded on the principles of public–private partnership, the SHS VP, which is a mechanism to provide financial support to qualified students, is a demonstration of the Government’s commitment to maintaining the viability of private education, in recognition of the private education sector as a key partner in the delivery of quality basic education. In support of this commitment, the DepEd has issued the Guidelines on the Implementation of the Senior High School Voucher Program Effective School Year 2017-2018 to ensure effective and efficient program implementation.

DO 26, s. 2017 - Addendum to DepEd Order No. 51, s. 2015 May 10, 2017 Relative to DO No. 51, s. 2015 entitled Guidelines on the Implementation of the Senior High School (SHS) Program in Existing Public Junior High Schools (JHSs) and Integrated Schools (ISs), Establishment of Stand-Alone Public SHSs, and Conversion of Existing Public Elementary and JHSs Into Stand-Alone SHSs, a provision on approving the establishment of a stand-alone SHS is hereby added. In this connection, Part VI B, Item No. 6 of the guidelines enclosed to said DO shall read as follows: Consistent with Section 7B par. (13) of RA No. 9155, otherwise known as the Governance of Basic Education Act of 2001, the regional director shall issue a

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certification approving the establishment of stand-alone SHSs. The Secretary, through the Planning Service, shall confirm the JHSs and ISs that will implement the SHS Program, the stand-alone SHSs to be established, and the existing Elementary and JHSs to be converted into SHSs, through the issuance of a DepEd Memorandum, copy furnished the DBM. The Planning Service shall issue the DepEd School ID to all stand-alone SHSs and existing Elementary or JHSs converted into SHSs confirmed by the Secretary. DO 28, s. 2017 - Guidelines on the Allocation and Utilization of the Human Resource Training and Development Funds June 5, 2017 The DepEd strongly supports capacity building activities which are meant to enhance the knowledge and skills of the teaching and non-teaching personnel of the Department towards a more effective and efficient delivery of basic education services. Acknowledging the need to build manpower capability, the DepEd has been allocating funds for training and professional development activities of the Central Office units, Regional Offices, Schools Division Offices, and schools or learning centers under the Human Resource Training and Development (HRTD) Funds. These guidelines shall serve as a guide in the availment, release, utilization, liquidation, monitoring, and reporting of the HRTD Funds. DO 35, s. 2017 - Revised Guidelines on the Implementation of the Basic Educational Facilities Fund July 17, 2017 The Basic Educational Facilities Fund (BEFF) is an annual budget of the Department for its School Building Program, which covers the improvement and maintenance of school facilities. It shall be utilized for the provision of classroom and workshop buildings, replacement of old dilapidated buildings, provision of furniture, repair and rehabilitation of classrooms, including heritage buildings, as well as water and sanitation facilities, and electrification. DO 49, s. 2017 - Revised Guidelines on Accreditation/Re-Accreditation of Private Lending Institutions (PLIs) under the Automatic Payroll Deduction System (APDS) Program September 18, 2017 In line with its continued thrust to protect its personnel from private lenders charging excessive rates on loans and engaging in unscrupulous practices, the Department of Education (DepEd) issued the Revised Guidelines on Accreditation and Re-Accreditation of Private Lending Institutions (PLIs) under the APDS Program and announces the re-opening of the said accreditation and re-accreditation. All APDS–Memorandum of Agreement (APDS–MOA) for lending business of accredited PLIs shall be effective until October 31, 2017 for the simultaneous implementation of the revised guidelines. The effectivity of existing APDS–MOA expiring earlier and later than the said date is hereby amended accordingly.

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DO 53, s. 2017 - Guidelines on the Grant of Performance-Based Bonus for the Department of Education Employees and Officials for Fiscal Year 2016 October 20, 2017 This DepEd Order aims to establish a set of guidelines that provides for systematic, credible and evidence-based policy of linking organizational and individual performance to personnel incentives, and of recognizing and rewarding exemplary accomplishment to foster teamwork and meritocracy. The process, mechanism and criteria on the grant of Performance-Based Bonus (PBB) shall guide all DepEd schools and offices in evaluating the performance of each delivery unit and personnel, and determining the level of personnel incentive corresponding to the level of achievement of their expected outputs. DO 55, s. 2017 - Revised Guidelines on the Implementation of P4,000.00 Net Take Home Pay for Department of Education Personnel October 26, 2017 The DepEd hereby issues this Revised Guidelines on the Implementation of P4,000.00 Net Take Home Pay (NTHP) for Department of Education Personnel pursuant to Section 47 (Authorized Deductions) of the General Provisions of RA No. 10924, or the GAA of 2017. DO 56, s. 2017 - Guidelines on the Allocation and Utilization of the Downloaded Funds for the 2017 Training Program for Senior High School, TVL, Teachers Under the STVEP and Teachers of Alternative Learning System October 31, 2017 The DepEd hereby issues the enclosed Implementing Guidelines on the Allocation and Utilization of the Downloaded Funds for the 2017 Training Program for SHS, TVL, Teachers under the Strengthened Technical-Vocational-Education Program (STVEP), and Teachers of Alternative Learning System (ALS) for the information and guidance of all concerned. DO 60, s. 2017 - Guidelines on the Application for the Senior High School Voucher Program for School Year 2018-2019 December 1, 2017 The Department of Education (DepEd) issues the enclosed Guidelines on the Application for the Senior High School (SHS) Voucher Program (VP) for School Year (SY) 2018-2019 to provide clear and detailed guidelines on the procedures and flow of activities in voucher application, from prequalification to redemption, and other processes related to the application for vouchers. These guidelines shall have national applicability, effective for vouchers that will be redeemed in SY 2018-2019.

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DO 61, s. 2017 - Amendments to Certain Provisions of DepEd Order No. 35, s. 2017 (Revised Guidelines on the Implementation of the Basic Educational Facilities Fund) December 1, 2017 Relative to DepEd Order No. 35, s. 2017 entitled Revised Guidelines on the Implementation of the Basic Educational Facilities Fund, the contents of the enclosures, particularly Enclosure No. 3 (Guidelines on the Implementation of the School Furniture Program) and Enclosure No. 4 (Guidelines on the Implementation of the Electrification of Schools On-Grid Program) are hereby amended for further details and emphases for the field offices and for the DepEd officials as well. DO 62, s. 2017 - Allocation and Utilization of Support to Operations Fund for the Alternative Learning System to the Regional and Schools Division Offices for Calendar Year 2017 December 1, 2017 The DepEd, through the Bureau of Learning Delivery (BLD), issues the enclosed implementing guidelines on the Allocation and Utilization of Support to Operations (STO) Fund for the ALS to the Regional and Schools Division Offices for Calendar Year 2017. This is in line with the thrust of DepEd to strengthen and expand ALS. DO 67, s. 2017 - Use Personnel Services Appropriations for Fiscal Year 2017 December 28, 2017 Relative to the two sets of request, which the DepEd submitted to the Department of Budget and Management (DBM) for the release of additional funds to cover deficiencies in the allocations for Hazard, Subsistence and Laundry Allowance pursuant to Republic Act No. 7305, Magna Carta for Public Health Workers, and Special Hardship Allowance in accordance with Republic Act No. 4670, Magna Carta for Public School Teachers, the DBM, in its letter-reply dated December 8, 2017, reiterated the following policies (see enclosed guidelines).

Financial Management Updates Public Financial Management (PFM) The Public Financial Management (PFM) Reform Program aims to improve efficiency, accountability and transparency in public fund use in order to ensure the direct, immediate, substantial and economical delivery of public services especially to the poor. The Program implements the key strategies of the Philippine PFM Reform Roadmap: Towards Improved Accountability and Transparency (2011-2016), a comprehensive reform agenda that seeks to clarify, simplify, improve and harmonize the government’s financial management processes and information systems. The integrated systems will cover all transactions of government and apply uniformly to all government agencies.

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Budget Treasury and Management System (BTMS) The Budget and Treasury Management System (BTMS) is an integrated, web-based information management system that will replace the existing budget management, execution, accounting and reporting systems to be used initially by the Department of Budget and Management (DBM) and the Bureau of the Treasury (BTr) under the Department of Finance for budget execution and accountability. The objective of implementing BTMS is to improve convenience, efficiency, accuracy and timeliness in fiscal management and reporting through the establishment of a common, integrated system covering budget execution and reporting in the oversight agencies the DBM and the BTr.

Scope of BTMS System Interfaces for BTMS a. Budget Management b. Commitment Management c. Payments Management d. Receipts Management e. Cash Management f. Accounting and Fiscal

Reporting g. BTMS Portal

a. Debt Management and Financial Analysis

System (DMFAS and nROSS) b. Payroll systems c. Tax and Revenue Management Systems

(e-TIS/Customs Systems/NCS) d. Systems at banking institutions (Central

Bank/ Government Servicing Banks/ Authorized Agent Banks /Authorized Government Depository Banks)

e. Budget Preparation Management System (BPMS)

f. Budget Accountability System (URS) Budget Circular No.2017-1 April 26, 2017 - Amending Budget Circular (BC) No. 2016-05 Entitled, "Revised Guidelines on the Acquisition and Use of Government Motor Vehicles" dated August 22, 2016 This Circular is being issued to provide the following:

• Revised and updated definition/description, classification and specifications of certain motor vehicles that are being allowed for acquisition and use by government agencies under BC No. 2016-5; and

• Allowable vehicles that could be used by agencies concerned for immediate disaster response and rescue/relief operations during calamities.

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Budget Circular 2017-2 May 8, 2017 - Rules and Regulations on the Grant of the Mid-Year Bonus for FY 2017 and Years Thereafter This Circular is issued to prescribe the rules and regulations on the grant of the Mid-Year Bonus to government personnel for FY 2017, and years thereafter, pursuant to Executive Order (EO) No. 201, s. 2016, entitled "Modifying the Salary Schedule for Civilian Government Personnel and Authorizing the Grant of Additional Benefits for Both Civilian and Military and Uniformed Personnel," and Section 57 of the General Provisions under Republic Act (RA) No. 10924 or the FY 2017 General Appropriations Act (GAA). Budget Circular No. 2017-3 November 16, 2017 - Guidelines on the Grant of Collective Negotiation Agreement (CNA) Incentive for FY 2017 Administrative Order (AO) No. 1351, s. 2005 authorizes the grant of CNA Incentive to government employees and directs the Department of Budget and Management (DBM) to issue the necessary policy and procedural guidelines for its implementation.1.2 Item (4)(h)(ii)(aa) of the Congress Joint Resolution (JR) No. 4,s. 20092, institutionalizes the grant of the CNA Incentive as a form of reward to motivate employee efforts toward higher productivity, to wit:"(aa) Collective Negotiation Agreement (CNA) Incentive -This may be granted to both management and rank-and-file employees of agencies with approved and successfully implemented CNAs in recognition of their efforts in accomplishing performance targets at lesser cost, in attaining more efficient and viable operations through cost-cutting measures and systems improvement xxx." Section 71 of the General Provisions of the FY 2017 GAA authorizes the grant of CNA Incentive sourced from the allowable Maintenance and Other Operating Expenses (MOOE) allotments identified by the DBM. Budget Circular 2017-4December 4, 2017 - Guidelines on the Grant of the Productivity Enhancement Incentive (PEI) to Government Employees for Fiscal Year (FY) 2017 and Years Thereafter This Circular is issued to prescribe the rules and regulations on the grant of the PEI to government personnel for FY 2017 and years thereafter, pursuant to Executive Order (EO) No. 201, s. 2016 entitled, "Modifying the Salary Schedule for Civilian Government Personnel and Authorizing the Grant of Additional Benefits for Both Civilian and Military and Uniformed Personnel," as approved by the President on February 19, 2016. Section 6 of the EO states, to wit: "Beginning FY 2016, the Productivity Enhancement Incentive shall be given not earlier than December 15 of every year to all qualified government employees at Five Thousand Pesos (P5,000) each for the purpose of improving the government employees' productivity."

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Budget Circular No. 2017- 8 April 20 , 2017 - Clarification Relative to Applicability of the Prescribed Health Insurance Premium (HIP) Contributions to the Philippine Health Insurance Corporation (PhilHealth) Effective FY 2017 Pursuant to Circular Letter (CL) No. 2017-3 dated January 3, 2017 This Circular is issued to clarify the applicability of the premium rates prescribed under CL No. 2017-3 for the employer (government)/employee share in the HIP contributions of National Government Agencies (NGAs) including SUCs, Constitutional Offices, GOCCs, GFIs and LGUs, while taking into consideration the PhilHeatth cash flow position. Budget Circular No. 2017 - 9 May 16, 2017 - Clarification on the Guidelines on the Procurement of Consulting Services 1.0 The procurement of consulting services, either through an Individual Consultant or a Consultancy Firm, is covered by the provisions of Republic Act (RA) No. 91841 and its 2016 Revised Implementing Rules and Regulations (IRR). As such, agencies shall be guided by the provisions of RA No. 9184, its IRR and the Generic Procurement Manuals, Volume 4— Manual of Procedures for the Procurement of Consulting Services, issued by the Government Procurement Policy Board (GPPB) on June 14, 2006,2 or its later edition, in the engagement of consultants. RA No. 9184 and its IRR, including the Manual of Procedures for the Procurement of Consulting Services, contain the step-by-step procedure in the procurement process and the factors to be considered in determining the appropriate "Approved Budget for the Contract" (ABC), and the bases for computing and arriving at the cost of consultancy or consultancy rate, among others. Circular Letter No. 2017- 13 November -22, 2017 - Modification on Period for the Encashment of MDS Checks and Payment through Advice to Debit Account (ADA) under the MDS for the Rest of FY 2017 In order to facilitate settlement of valid government payables within the current year, and avoid spill-over pressure of outstanding payables to the incoming year's cash disbursement program through immediate payment to government creditors/payees through ADA or encashment of MDS checks issued, this circular is issued to prescribe the disbursement procedures to be observed for the rest of the current year, FY 2017.

Circular Letter No. 2017- 14 December 4, 2017 - Cash Management Reforms The Department of Budget and Management (DBM) issued Circular Letter (CL) No.2017- 12 (dated October 19, 2017), prescribing the guidelines and formats to be observed starting FY 2018, for the Budget Execution Documents (BEDs) following the implementation of the Program Expenditure Classification (PREXC)-based Performance-Informed Budgeting (PIB). As part of government efforts to continuously explore

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measures to facilitate the timely and appropriate planning and execution of programs and projects, the shift from a multi-year obligation-based budget to a one-year cash-based budget, shall be pursued. The adoption of the one-year cash based budget calls for the implementation of reforms in cash management to ensure the availability of accurate and timely estimates of agency cash disbursements required to support the Monthly Disbursement Programs (MDP) per Budget Execution Document (BED No. 3). As a further refinement to enhance the management of cash, this CL requires the preparation and submission of more detailed estimates of cash requirements for each quarter, including updates considering actual disbursements as well as latest policy directions. DBM Circular Letter No. 2017 - 3 January 3,2017 - Government Share on the Health Insurance Premium (HIP) Contributions of Government Employees to the Philippine Health Insurance Corporation (PhilHealth) Effective FY 2017 This Circular is issued to prescribe policy and procedures to be adopted for the employer (government)/employee share in the HIP contributions for employees of national government agencies including SUCs, Constitutional Offices, GOCCs, GFIs and LGUs. Department of Education (DepEd), Department of Budget and Management (DBM), Department of The Interior and Local Government (DILG) Joint Circular (JC) No. 1, s. 2017 - Revised Guidelines on The Use of the Special Education Fund (SEF) Under RA No. 7160 (Local Government Code [LGC] of 1991), a province or city, or a municipality within the Metropolitan Manila Area, may levy and collect an annual tax of one percent (1%) on the assessed value of real property in addition to the basic real property tax. The additional 1% tax on real property collected in the province is shared equally by the province and the municipality within its territorial jurisdiction. On the other hand, cities keep all of their collection. The proceeds from this special levy accrue to the SEF and are automatically released to the LSBs.

Civil Service Commission, Commission On Audit Department of Budget and Management Joint Circular No. 1 s. 2017 June 15, 2017 - Rules and Regulations Governing Contract of Service and Job Order Workers in the Government Government agencies, including GOCCs, have been authorized in previous executive issuances and general appropriations acts to enter into contracts with government entities, private firms or individuals, and non-government organizations for services related or incidental to their respective functions and operations, whether on part-time or full-time basis. Agencies have used this provision as basis for directly hiring individual workers on contract of service or job order to perform specific jobs or to supplement their current manpower. Civil Service Commission (CSC) Memorandum Circular (MC) No. 40, s. 1998, prescribed the policies and guidelines regarding contracts of service (COS) and job orders (J0s) entered into by all government agencies on both individual and institutional basis. Said CSC policy clarified that workers under contract of service or job order are not covered by Civil Service law, rules, and regulations; and that services rendered thereunder are not considered as government service. However, the proliferation of

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individual Job Order and Contract of Service workers in the government and their involvement even in the performance of regular agency functions have been observed. This situation gave rise to the following issues:

a) lack of social protection for the workers and inequality in benefits, and b) obscure accountability of JO/COS workers due to lack of employee-employer relationship with the hiring agency. In view of the foregoing, there is a need to clarify the guidelines on availing of the services of COS and Job Order workers.

Policy Statement - Government agencies are authorized to enter into service contracts with other government agencies, private firms, non-government agencies or individuals for Joint CSC-COA-DBM Circular re Rules and Regulations Governing Contract of Service Workers in the Government / p.2 of 6 pages X X services related or incidental to their respective functions and operations, whether on a part-time or full time basis. Commission on Audit Department of Budget and Management Department of Finance Joint Circular No. 1 August 11, 2017 - Modification of The Unified Accounts Code Structure (UACS) Due To The Adoption Of The Program Expenditure Classification-Based Performance Informed Budgeting (PREXC-PIB) For Fiscal Year 2018 The Department of Budget and Management (DBM), Commission on Audit (COA), and Department of Finance (DOF) —Bureau of Treasury (BTr) issued Joint Circulars numbered 2013-1 and 2014-1 dated August 6, 2013 and November 7, 2014, respectively, to prescribe the Unified Accounts Code Structure (UACS), and provide a harmonized budgetary and accounting code classification that took effect on January 1, 2014. To strengthen the integration of planning, budgeting, and performance management, the government shall continue to use performance information as one of the bases to inform resource allocation and management through the Performance-Informed Budgeting (PIB). The National Expenditure Program (NEP) and the General Appropriations Act (GAA), starting in fiscal year 2018 onwards, shall adopt a structure based on a Program Expenditure Classification (PREXC). Activities and projects, that contribute to a common particular objective or outcome shall be grouped into a program. The PREXC will replace Major Final Outputs (MF05) as the means of structuring the Agency Budget. Accordingly, the 15-digits of the Major Final Output (MFO)/ Program, Activity, Project (PAP) Code of the UACS shall be modified into the Cost Structure/Program, Activity, Project (PAP) Code National Budget Memorandum I No. 128 Date: March 23, 2017 - Budget Priorities Framework for The Preparation of The FY 2018 Agency Budget Proposals Under Tier 2 of The Two-Tier Budgeting Approach The FY 2018 Budget will be the first budget that will be fully prepared and owned by the Duterte Administration. As such, it should be the government's primary instrument to advance this Administration's 0+10 Socioeconomic Agenda as envisioned in the 2017- 2022 Philippine Development Plan (PDP), laying a stronger foundation for inclusive

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growth of a high trust society, and a globally competitive economy. By being so, it will provide the bedrock for achieving the Ambisyon Natin 2040 — our collective long-term vision and aspirations as a Filipino people, as a strong, united and prosperous nation. The FY 2018 Budget will be crafted under the guiding principles of fiscal discipline, allocative and operational efficiency so that it continues to be strategic, responsive and responsible, cognizant of the resounding clamor for real and transformative change. It will try to address past failures and gaps in governance that have resulted in low growth, uneven development and widespread poverty. And being a country in a community of nations, it will also try to achieve the targets under the Sustainable Development Goals (SDGs). Budget Circular No. 568 January 5, 2017 Implementation of the Second Tranche Compensation Adjustment for Civilian Personnel, and Military and Uniformed Personnel in the National Government 1.0 Background Executive Order (EO) No. 201, s. 2016, entitled —Modifying the Salary Schedule for Civilian Government Personnel and Authorizing the Grant of Additional Benefits for Both Civilian and Military and Uniformed Personnel" was signed by the President in accordance with the authority vested in him under Presidential Decree (PD) No. 9851, PD No. 15972, Republic Act (RA) No. 67583, and Congress Joint Resolution (JR) No. 44, s. 2009. The issuance of EO No. 201 is consistent with the governing principle of the Compensation and Position Classification System, as espoused under Congress JR No. 4, that compensation of government personnel shall be generally comparable with those in the private sector doing comparable work in order to attract, retain, and motivate a core of competent civil servants. EO No. 201 provided for a four-year (2016-2019) implementation of the compensation adjustment. This Circular is issued to prescribe the guidelines, rules, and regulations for the implementation of the second tranche compensation adjustment stipulated under EO No. 201, s. 2016. National Budget Circular No. 569 February 8, 2017 - Adoption Of Program Expenditure Classification-Based Performance-Informed Budgeting (PREXC-PIB) For The Preparation Of The Proposed National Budget For Fiscal Year 2018 The government continues to explore measures that would improve accountability and integrity in the use of public resources by ensuring transparency, fiscal responsibility, results-orientation, efficiency, and effectiveness. To strengthen the integration of planning, budgeting, and performance management, the government will continue to use performance information as one of the bases to inform resource allocation and management through the Performance-Informed Budgeting (PIB). The Proposed National Budget, starting in fiscal year 2018 onwards, will also adopt a budget structure based on a program expenditure classification (PREXC). Recurring activities and projects, that contribute to a common particular organizational objective or outcome shall be grouped into a program under that outcome. The PREXC will replace Major Final Outputs

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(MF05) as the means of structuring the National Budget. This is being done to better articulate in the agency budget the programs and strategies being employed by the agency to achieve its organizational outcomes. The shift from the focus on agency outputs to programs or strategies provides a better handle in assessing agency performance and tradeoffs. More so, that performance information is provided for each program, revising the agency-wide approach under the Organizational Performance Indicator Framework (OPIF). Adopting a PREXC-based PIB (PREXC-PIB) therefore, aims to facilitate the evaluation of the impact of agency strategies or interventions and provide better information for planning, prioritization, and the organizational management of agencies. Budget Circular l No 570 May 19, 2017 - Prescribing Guidelines for Issuance of Multi-Year Obligational Authority (MYOA) for Multi-Year Projects (MYPs) Covering the Procurement of Regular and Recurring Services To provide guidelines relative to the application of Section 26 of the General Provisions (GP) of Republic Act (R.A.) No. 10924, FY 2017 General Appropriations Act (GAA) specifically where regular and recurring multi-year projects may require issuance of MYOA. These include janitorial and security services, telecommunication requirements, provision for water, rental of office space and equipment, and lease purchase agreements. MY0As may be issued to cover such regular/recurring services to: Promote prudent government spending in terms of reasonable costs in the provision of quality services in a timely manner. Enable agencies to tap Multi-Year Contracts (MYCs) with the following options during the contract period, without prejudice to annual performance evaluation: Flexibility of adopting rates advantageous to the government; and Adoption of locked-in contract for specific cases, e.g., IT contracts of proprietary conditions, etc. This Circular covers all departments, bureaus, offices, agencies and operating units of the national government, including commissions/offices under the CFAG and SU0s, undertaking MYCs approved by the DBM, for the following specific support services: J

• Janitorial and security services • Supply of mineral/purified/distilled water; • Telecommunications requirements; • Rental of office space and equipment; • Lease-purchase agreements; and • Others as may be identified in later issuances.

National Budget Circular No. 571 December 4, 2017 - Guidelines on the Provision of Free Quarters to Certain Officials This Circular is issued to prescribe the guidelines on the provision of free quarters to certain officials, consistent with Section 56 of the General Provisions of the FY 2017 GAA, and pertinent provisions of subsequent GAAs.

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Definition of Free Quarters As used in this Circular, free quarters shall mean the free use of government-owned or leased place of lodging (fully furnished) which may include telephone, water and electricity for basic needs.

2. Statement of Compliance and Basis of Preparation of Financial Statements

The consolidated financial statements of the Department of Education have been prepared in accordance with and comply with the Philippine Public Sector Accounting Standards (PPSAS) issued by the Commission on Audit per COA Resolution No. 2014-003 dated January 24, 2014. Financial Statements as at December 31, 2017 are prepared by fund cluster as prescribed under COA Circular No. 2015-002 dated March 9, 2015. These financial statements are Regular Agency Fund, Special Accounts – Foreign Assisted/Foreign Grants, Business Related, Trust Receipts Funds and Provident Fund, combined and presented as the Department of Education Region Consolidated Financial Statements with accompanying Notes to Financial Statements, for the year then ended. The consolidated financial statements have been prepared on the basis of historical cost, unless stated otherwise. The Statement of Cash Flows is prepared using the direct method.

3. Summary of Significant Accounting Policies and Other Information

3.1 Basis of Accounting

a. The consolidated Financial Statements are prepared on an accrual basis in accordance

with the Philippine Public Sector Accounting Standards (PPSAS). All expenses are recognized when incurred and reported in the financial statements in the period to which they relate. Income is on accrual basis, except for transactions where accrual basis is impractical or when other methods are required by law.

b. Notices of Cash Allocation (NCAs) received from the Department of Budget and

Management are recorded in the Regular Agency (RA) books, as well as, those income/receipts which the agency is not authorized to use and are required to be remitted to the National Treasury.

c. The Modified Obligation System is used to record allotments received and obligations

incurred. Separate registries are maintained to control allotments and obligations for each class of allotment.

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d. Allowance for doubtful accounts is maintained at a level adequate to provide for potential non-collectability of receivables. A review of the receivables, designed to identify accounts to be provided with allowance, is made on a regular basis.

e. The one fund concept is adopted in accounting for all funds received from the National

Government and other donor agencies such as the funds from the local government received by our operating units and the financial assistance from the World Bank (WB), Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC), United Nations Children’s Fund (UNICEF), Australia Agency for International Development (AusAID), The Government of Spain (GOS), etc. are accounted for and recorded separately.

f. Transactions in foreign currencies are recorded in Philippine Peso based on Bangko

Sentral ng Pilipinas (BSP) rate of exchange prevailing at the date of transaction.

g. Correction of Fundamental Errors-Fundamental errors of prior years are corrected as direct adjustments to Accumulated Surplus/ (Deficit) Account. Errors affecting current year’s operation are charged to the current year’s account.

h. Subsequent Events - Non-adjusting entries after the balance sheet date which are so

significant that non-disclosure would affect the ability of the users of the financial statements to make proper evaluation and decisions, have to be disclosed by stating the nature of the event and an estimate of its financial effects. Information received after the balance sheet date about conditions that existed at that date has to be stated to update the disclosures made.

3.2 Consolidation

Consolidated entities

The Consolidated Financial Statements reflect the assets, liabilities, revenues and expense of the DepEd Central Office and all 16 Regional Offices, 209 Division Offices, 2,505 Implementing Units, Attached Agencies of the Department namely: DepEd Ecotech Center, Applied Nutrition Center, Baguio Teachers’ Camp, National Educators’ Academy of the Philippines (NEAP), and National Science Teaching and Instrumentation Center (NSTIC) as well as the RELC/Dormitory operations in 13 regions and the DepEd Provident Fund. This also includes Foreign Assisted Projects namely, Educational Performance Incentive Partnership (EPIP) and School Based Program for Basic Education (SBP4BE).

3.3 Financial instruments

a. Financial assets

Initial recognition and measurement

Financial assets within the scope of PPSAS 29 - Financial Instruments: Recognition

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and Measurement are classified as financial assets at fair value through surplus or deficit, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. The DepEd determines the classification of its financial assets at initial recognition.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the DepEd commits to purchase or sell the asset.

DepEd’s financial assets include: cash and short-term deposits; trade and other receivables; loans and other receivables.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification.

Financial assets at fair value through surplus or deficit

Financial assets at fair value through surplus or deficit include financial assets designated upon initial recognition at fair value through surplus and deficit.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Losses arising from impairment are recognized in the surplus or deficit.

Held-to-maturity

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Agency has the positive intention and ability to hold it to maturity.

After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The losses arising from impairment are recognized in surplus or deficit.

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Derecognition

DepEd derecognizes a financial asset or, where applicable, a part of a financial asset or part of an Agency’s of similar financial assets when:

• The rights to receive cash flows from the asset have expired or is waived; and • DepEd has transferred its rights to receive cash flows from the asset or has

assumed an obligation to pay the received cash flows in full without material delay to a third party; and either: (a) the Agency has transferred substantially all the risks and rewards of the asset; or (b) the agency has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

The Agency assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include the following indicators:

• The debtors or a group of debtors are experiencing significant financial difficulty • Default or delinquency in interest or principal payments • The probability that debtors will enter bankruptcy or other financial reorganization • Observable data indicates a measurable decrease in estimated future cash flows

(e.g. changes in arrears or economic conditions that correlate with defaults)

Financial assets carried at amortized cost

For financial assets carried at amortized cost, the Agency first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Agency determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment Investments.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the

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present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in surplus or deficit. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or transferred. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in surplus or deficit.

b. Financial Liabilities

Initial recognition and measurement

Financial liabilities within the scope of PPSAS 29 are classified as financial liabilities at fair value through surplus or deficit or loans and borrowings, as appropriate. The entity determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, plus directly attributable transaction costs.

The DepEd’s financial liabilities include loans, borrowings such as Service Concession Arrangements Payable, Treasury Bills, Bonds Payable, Due to GOCCs/NGAs/LGUs, Guaranty Deposits Payable, Internal Revenue Allotment Payable etc.

Subsequent measurement

The measurement of financial liabilities depends on their classification. Financial liabilities at fair value through surplus or deficit

Financial liabilities at fair value through surplus or deficit include financial liabilities designated upon initial recognition as at fair value through surplus or deficit. Loans and borrowing

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in surplus or deficit when the liabilities are derecognized as well as through the effective interest method amortization process.

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Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in surplus or deficit.

3.4 Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

3.5 Inventories

Inventory is measured at cost upon initial recognition. To the extent that inventory was received through non-exchange transactions (for no cost or for a nominal cost), the cost of the inventory is its fair value at the date of acquisition. Costs incurred in bringing each product to its present location and conditions are accounted for, as follows:

• Raw materials: purchase cost using the weighted average cost method; • Finished goods and work in progress: cost of direct materials, labor and a proportion

of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs.

After initial recognition, inventory is measured at the lower of cost and net realizable value. However, to the extent that a class of inventory is distributed or deployed at no charge or for a nominal charge, that class of inventory is measured at the lower of cost and current replacement cost.

Net realizable value is the estimated selling price in the ordinary course of operations, less the estimated costs of completion and the estimated costs necessary to make the sale, exchange, or distribution.

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Inventories are recognized as an expense when deployed for utilization or consumption in the ordinary course of operations of the Agency.

3.6 Investment Property

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the replacement cost of components of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day maintenance of an investment property. Investment property acquired through a non-exchange transaction is measured at its fair value at the date of acquisition. Subsequent to initial recognition, investment properties are measured using the cost model and are depreciated over its estimated useful life.

Investment properties are derecognized either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit or service potential is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the surplus or deficit in the period of derecognition.

Transfers are made to or from investment property only when there is a change in use.

The DepEd use the cost model for the measurement of investment property after initial recognition.

3.2 Property, Plant and Equipment Recognition

An item is recognized as property, plant, and equipment (PPE) if it meets the characteristics and recognition criteria as a PPE.

The characteristics of PPE are as follows:

• Tangible items; • Are held for use in the production or supply of goods or services, for rental to

others, or for administrative purposes; and • Are expected to be used during more than one reporting period.

An item of PPE is recognized as an asset if:

• It is probable that future economic benefits or service potential associated with

the item will flow to the entity; and • The cost or fair value of the item can be measured reliably.

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Measurement at Recognition

An item recognized as property, plant, and equipment is measured at cost.

A PPE acquired through non-exchange transaction is measured at its fair value as at the date of acquisition.

The cost of the PPE is the cash price equivalent or, for PPE acquired through non-exchange transaction its cost is its fair value as at recognition date.

Cost includes the following:

• Its purchase price, including import duties and non-refundable purchase taxes,

after deducting trade discounts and rebates; • expenditure that is directly attributable to the acquisition of the items; and • initial estimate of the costs of dismantling and removing the item and restoring

the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

Measurement After Recognition

After recognition, all PPE are stated at cost less accumulated depreciation and impairment losses. When significant parts of PPE are required to be replaced at intervals, the Agency recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major repair/replacement is done, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.

All other repair and maintenance costs are recognized as expense in surplus or deficit as incurred.

Depreciation

Each part of an item of PPE with a cost that is significant in relation to the total cost of the item is depreciated separately.

The depreciation charge for each period is recognized as expense unless it is included in the cost of another asset.

Initial Recognition of Depreciation

Depreciation of an asset begins when it is available for use such as when it is in the location and condition necessary for it to be capable of operating in the manner intended

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by management.

For simplicity and to avoid proportionate computation, the depreciation is for one month if the PPE is available for use on or before the 15th of the month. However, if the PPE is available for use after the 15th of the month, depreciation is for the succeeding month.

Depreciation Method

The straight line method of depreciation shall be adopted unless another method is more appropriate for agency operation.

Estimated Useful Life

The Agency uses the Schedule on the Estimated Useful Life of PPE by classification prepared by COA.

DepEd uses a residual value equivalent to at least five percent of the cost of the PPE.

Impairment

An asset’s carrying amount is written down to its recoverable amount, or recoverable service amount, if the asset’s carrying amount is greater than its estimated recoverable service amount. Derecognition

The DepEd derecognizes items of PPE and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognized.

DepEd Region VIII derecognizes items of property, plant and equipment and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the surplus or deficit when the asset is derecognized.

The DepEd Regional Office VIII derecognized its property, plant and equipment due to the damaged brought about by super Typhoon Yolanda last November 8, 2013.

3.3 Leases

Finance Lease

Finance leases are leases that transfer substantially all of the risks and benefits incidental

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to ownership of the leased item.

Assets held under a finance lease are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the future minimum lease payments. The Agency also recognizes the associated lease liability at the inception of the lease. The liability recognized is measured as the present value of the future minimum lease payments at initial recognition.

Subsequent to initial recognition, lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in surplus or deficit.

An asset held under a finance lease is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Agency will obtain ownership of the asset by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating Lease

Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased item. Operating lease payments are recognized as an operating expense in surplus or deficit on a straight-line basis over the lease term.

Finance Lease

The Agency recognizes lease payments receivable under a finance lease as assets in the statements of financial position. The assets are presented as receivable at an amount equal to the net investment in the lease.

The finance revenue is recognized based on a pattern reflecting a constant periodic rate of return on the net investment in the finance lease.

Operating Lease

Leases in which the Agency does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases.

Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term.

Rent received from an operating lease is recognized as income on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned.

The depreciation policy for PPE is applied to similar assets leased by the entity.

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3.4 Intangible Assets

Recognition and Measurement

Intangible assets are recognized when the items are identifiable non-monetary assets without physical substance; it is probable that the expected future economic benefits or service potential that are attributable to the assets will flow to the entity; and the cost or fair value of the assets can be measured reliably. Intangible assets acquired separately are initially recognized at cost.

If payment for an intangible asset is deferred beyond normal credit terms, its cost is the cash price equivalent. The difference between this amount and the total payments is recognized as interest expense over the period of credit unless it is capitalized in accordance with the capitalization treatment permitted in PPSAS 5, Borrowing Costs.

Subsequent Expenditure on an Acquired In-process Research and Development Project

Subsequent expenditure on an in-process research or development project acquired separately and recognized as an intangible asset is:

• Recognized as an expense when incurred if it is research expenditure; • Recognized as an expense when incurred if it is development expenditure that does

not satisfy the criteria for recognition as an intangible asset; and • Added to the carrying amount of the acquired in-process research or development

project if it is development expenditure that satisfies the recognition criteria for intangible assets.

Intangible Assets Acquired through Non-Exchange Transactions

The cost of intangible assets acquired in a non-exchange transaction is their fair value at the date these were acquired.

Internally Generated Intangible Assets

Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in surplus or deficit in the period in which the expenditure is incurred. Recognition of an Expense

Expenditure on an intangible item was recognized as an expense when it is incurred unless it forms part of the cost of an intangible asset that meets the recognition criteria of an intangible asset.

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Subsequent Measurement

The useful life of the intangible assets is assessed as either finite or indefinite. Intangible assets with a finite life are amortized over its useful life:

The straight line method is adopted in the amortization of the expected pattern of consumption of the expected future economic benefits or service potential.

An intangible asset with indefinite useful lives shall not to be amortized.

Intangible assets with an indefinite useful life or an intangible asset not yet available for use were assessed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method, for an intangible asset with a finite useful life, were reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset were considered to modify the amortization period or method, as appropriate, and were treated as changes in accounting estimates. The amortization expense on an intangible asset with a finite life is recognized in surplus or deficit as the expense category that is consistent with the nature of the intangible asset.

Gains or losses arising from de-recognition of an intangible asset were measured as the difference between the net disposal proceeds and the carrying amount of the asset and were recognized in the surplus or deficit when the asset is derecognized.

Research and development costs

The DepEd expenses research costs as incurred. Development costs on an individual project were recognized as intangible assets when the DepEd can demonstrate:

• The technical feasibility of completing the asset so that the asset will be available

for use or sale • Its intention to complete and its ability to use or sell the asset • How the asset will generate future economic benefits or service potential • The availability of resources to complete the asset • The ability to measure reliably the expenditure during development

Following initial recognition, intangible assets were carried at cost less any accumulated amortization and accumulated impairment losses.

Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit.

During the period of development, the asset is tested for impairment annually with any impairment losses recognized immediately in surplus or deficit.

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3.5 Provisions

Provisions are recognized when the Agency has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Agency expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain.

The expense relating to any provision is presented in the statement of financial performance net of any reimbursement.

Provisions were reviewed at each reporting date, and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, the provisions are reversed.

Contingent liabilities

The Agency does not recognize a contingent liability, but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

Contingent assets

The Agency does not recognize a contingent asset, but discloses details of a possible asset whose existence is contingent on the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Agency in the notes to the financial statements.

Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the asset’s value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs.

3.6 Changes in accounting policies and estimates

The DepEd recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy were applied prospectively, if retrospective application is impractical.

The DepEd recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit.

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The DepEd corrects material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by:

• Restating the comparative amounts for prior period(s) presented in which the error

occurred; or

• If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented.

3.7 Foreign Currency Transactions

Transactions in foreign currencies are initially recognized by applying the spot exchange rate between the function currency and the foreign currency at the transaction.

At each reporting date:

• Foreign currency monetary items are translated using the closing rate; • Nonmonetary items that are measured in terms of historical cost in a foreign

currency shall be translated using the exchange rate at the date of the transaction; and

• Nonmonetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising (a) on the settlement of monetary items, or (b) on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements, are recognized in surplus or deficit in the period in which they arise, except as those arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation.

Transactions in foreign currencies are recorded in Philippine Peso based on Bangko Sentral ng Pilipinas (BSP) rate of exchange prevailing at the date of transaction.

3.8 Revenue from non-exchange transactions

Recognition and Measurement of Assets from Non-Exchange Transactions

An inflow of resources from a non-exchange transaction, other than services in-kind, that meets the definition of an asset are recognized as an asset if the following criteria are met:

• It is probable that the future economic benefits or service potential associated with

the asset will flow to the entity; and • The fair value of the asset can be measured reliably.

An asset acquired through a non-exchange transaction is initially measured at its fair value as at the date of acquisition.

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Recognition of Revenue from Non-Exchange Transactions

An inflow of resources from a non-exchange transaction recognized as an asset is recognized as revenue, except to the extent that a liability is also recognized in respect of the same inflow.

As the Agency satisfies a present obligation recognized as a liability in respect of an inflow of resources from a non-exchange transaction recognized as an asset, it reduces the carrying amount of the liability recognized and recognizes an amount of revenue equal to that reduction.

Measurement of Revenue from Non-Exchange Transactions

Revenue from non-exchange transactions is measured at the amount of the increase in net assets recognized by the entity, unless a corresponding liability is recognized.

Measurement of Liabilities on Initial Recognition from Non-Exchange Transactions

The amount recognized as a liability in a non-exchange transaction is the best estimate of the amount required to settle the present obligation at the reporting date.

Taxes

Taxes and the related fines and penalties are recognized when collected or when these are measurable and legally collectible. The related refunds, including those that are measurable and legally collectible, are deducted from the recognized tax revenue.

Fees and fines not related to taxes

The Agency recognizes revenues from fees and fines, except those related to taxes, when earned and the asset recognition criteria are met. Deferred income is recognized instead of revenue if there is a related condition attached that would give rise to a liability to repay the amount.

Other non-exchange revenues are recognized when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the fair value of the asset can be measured reliably. Gifts and Donations

The Agency recognizes assets and revenue from gifts and donations when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably. Goods in-kind are recognized as assets when the goods are received, or there is a binding arrangement to receive the goods. If goods in-kind are received without conditions

52

attached, revenue is recognized immediately. If conditions are attached, a liability is recognized, which is reduced and revenue recognized as the conditions are satisfied.

On initial recognition, gifts and donations including goods in-kind are measured at their fair value as at the date of acquisition, which were ascertained by reference to an active market, or by appraisal. An appraisal of the value of an asset is normally undertaken by a member of the valuation profession who holds a recognized and relevant professional qualification. For many assets, the fair value is ascertained by reference to quoted prices in an active and liquid market.

Transfers

DepEd recognizes an asset in respect of transfers when the transferred resources meet the definition of an asset and satisfy the criteria for recognition as an asset, except those arising from services in-kind.

Services in-Kind

Services in-kind are not recognized as asset and revenue considering the complexity of the determination of and recognition of asset and revenue and the eventual recognition of expenses.

Transfers from other government entities

Revenues from non-exchange transactions with other government entities and the related assets are measured at fair value and recognized on obtaining control of the asset (cash, goods, services and property) if the transfer is free from conditions and it is probable that the economic benefits or service potential related to the asset will flow to the Agency and can be measured reliably.

3.9 Revenue from Exchange transactions Measurement of Revenue

Revenue shall be measured at the fair value of the consideration received or receivable.

Rendering of Services

The DepEd recognizes revenue from rendering of services by reference to the stage of completion when the outcome of the transaction can be estimated reliably. The stage of completion is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours.

Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred were recoverable.

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Sale of Goods

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, usually on delivery of the goods and when the amount of revenue can be measured reliably and it is probable that the economic benefits or service potential associated with the transaction will flow to the DepEd. Interest income

Interest income is accrued using the effective yield method. The effective yield discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. The method applies this yield to the principal outstanding to determine interest income each period.

Dividends

Dividends or similar distributions are recognized when the Agency’s right to receive payments is established.

Rental income

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in revenue.

3.10 Budget information The annual budget is prepared on a cash basis and is published in the website of the Department of Budget and Management under the General Appropriations Act CY 2016.

A separate Statement of Comparison of Budget and Actual Amounts (SCBAA) were prepared since the budget and the financial statements were not prepared on comparable basis. The SCBAA was presented showing the original and final budget and the actual amounts on comparable basis to the budget. Explanatory comments are provided in the notes to the annual financial statements.

The annual budget figures included in the financial statements were for the Department of Education and include the budget for the sixteen (16) Regional Offices, (209) Division Offices 2,505 implementing units, Attached Agencies and Foreign Assisted Projects as reflected in the General Appropriation Act for CY 2017, as approved.

3.11 Impairment of Non-Financial Assets

Impairment of cash-generating assets

At each reporting date, the Agency assesses whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset

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is required, the Agency estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or the cash-generating unit (CGU) exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Agency estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in surplus or deficit.

Impairment of non-cash-generating assets

The DepEd assesses at each reporting date whether there is an indication that a non-cash-generating asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the DepEd estimates the asset’s recoverable service amount. An asset’s recoverable service amount is the higher of the non-cash generating asset’s fair value less costs to sell and its value in use.

Where the carrying amount of an asset exceeds its recoverable service amount, the asset is considered impaired and is written down to its recoverable service amount. The DepEd classifies assets as cash-generating assets when those assets were held with the primary objective generating a commercial return. Therefore, non-cash generating assets would be those assets from which the DepEd does not intend (as its primary objective) to realize a commercial return.

3.12 Service concession arrangements

The DepEd analyzes all aspects of service concession arrangements that it enters into in determining the appropriate accounting treatment and disclosure requirements. In

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particular, where a private party contributes an asset to the arrangement, the DepEd recognizes that asset when, and only when, it controls or regulates the services the operator must provide together with the asset, to whom it must provide the, and at what price.

In the case of assets other than ‘whole-of-life’ assets, it controls, through ownership, beneficial entitlement or otherwise – any significant residual interest in the asset at the end of the arrangement. Any assets so recognized were measured at their fair value. To the extent that an asset has been recognized, the Agency also recognizes a corresponding liability, adjusted by a cash consideration paid or received.

3.13 Borrowing Costs

The benchmark treatment is used by the DepEd in the recognition of borrowing costs pertaining to loans borrowed by the National Government (NG) which were recorded in the Bureau of the Treasury (BTr). Under the benchmark treatment, borrowings costs were recognized as expense in the period in which they were incurred, regardless of how the borrowings were applied.

3.14 Employee benefits

The employees of DepEd are members of the Government Service Insurance System (GSIS), which provides life and retirement insurance coverage.

The Agency recognizes the undiscounted amount of short term employee benefits, like salaries, wages, bonuses, allowance, etc., as expense unless capitalized, and as a liability after deducting the amount paid.

The Agency also recognizes expenses for accumulating compensated absences when these are paid (commuted or paid as terminal leave benefits). Unused entitlements that have accumulated at the reporting date are not recognized as expense. Non-accumulating compensated absences, like special leave privileges, are not recognized.

3.15 Measurement uncertainty

The preparation of consolidated financial statements in conformity with PPSAS, requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of the revenues and expenses during the period. Items requiring the use of significant estimates include the useful life of capital assets, estimated employee benefits, rates for amortization, impairment of assets, liability for contaminated sites, etc.

Estimates are based on the best information available at the time of preparation of the consolidated financial statements and are reviewed annually to reflect new information as

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it becomes available. Measurement uncertainty exists in these consolidated financial statements. Actual results could differ from these estimates.

3.16 Other Information

To support the implementation of the Philippine Government’s educational reform agenda, the following development partners have extended their assistance to DepEd through the Official Development Assistance Loans: IBRD Loan No. 8344 PH - Learning, Equity and Accountability Program Support (LEAPS)

The Learning, Equity and Accountability Program Support (LEAPS) is a USD300 million project under the Results-Based Lending program of the International Bank for Reconstruction and Development (IUBRD, or the Bank). The Project was designed to improve the quality of Grades 1 to 3 reading and math skills of children in Target Regions (V, VIII, IX CAR and CARAGA) and target schools, with a special focus on those belonging to Target Disadvantaged Groups (children with learning and physical disabilities, children from remote/hard to reach areas, children belonging to an IP group, out of school children youth).

The target results or Disbursement Linked indicators (DLIs) are specified within the following three major project components:

Component 1 Improvement of Teaching and Learning in Grades 1

to 3 Reading and Math Component 2 Strengthening of Accountability and Incentives of

Employees of the Department of Education Component 3 Improvement of Program Design for Targeting

Disadvantaged Groups

The project’s outcome indicator will be measured through the administration of the Early Grade Reading Assessment (EGRA) and Early Grade Math Assessment (EGMA) tools to sample elementary schools in the five targeted LEAPS Regions. These Assessment tools conceptualized in the dominant mother tongues of the five Regions (Bikol, Waray, Iloko, Chavacano and Sinugbuanong Binisaya) pertain to measuring the performance of students from regular schools and those belonging to the disadvantaged groups in early grades’ reading and math.

For CY 2017, the following were the disbursements of the Department of Education for the Eligible Expenditures for the Project (EEPs) of LEAPS which were included in the CY 2017 Consolidated Status of Appropriations, Allotments, Obligations, Disbursements and Balances (SAAODB):

School Maintenance and Other Operating Expenses P 20,795,622,262.00 Human Resource Training and Development 3,417,027,708.00 In-Service Training 494,997,405.00

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Alternative Learning System 297,705,642.00 Abot-Alam Program 236,000.00

Of the above disbursements, the following amounts were submitted to World Bank as Eligible Expenditures for LEAPS 7th Loan Withdrawal Application:

School Maintenance and Other Operating Expenses P 20,805,621,262.00 Human Resource Training and Development 2,954,028,653.00 In-Service Training 494,997,405.00 Alternative Learning System 309,581,720.00 Abot-Alam Program 0.00

The difference in the amounts for Eligible Expenditures for LEAPS 7th Loan Withdrawal Application submitted to World Bank, specifically School Management and Other Operating Expenses (MOOE), Human Resource Training and Development, Alternative Learning System, and Abot-Alam Program and the disbursements in the DepEd’s CY 2017 Consolidated SAAODB, was due to the adjustments made in the 2017 SAAODB after the Interim Financial Report (IFR) was finalized and submitted. ADB LA No. 3237-PH – Senior High School Support Program (SHSSP)

The Asian Development Bank (ADB), referred to as the “Bank”, entered into a loan agreement with the Government of the Philippines (GPH), with DepEd as the beneficiary to support the SHS subsector. The Bank will finance a total of USD300 million, which is 6.8 percent of the estimated total cost of implementing the SHS program until 2019.

The SHSSP financed by ADB, will cover activities from 2014-2019 relating to math and science teachers, the technical-vocational and livelihood track, classroom facilities, and engagement of private education providers.

A Results-Based Loan (RBL) modality is being used for the SHSSP. Under the RBL, financing is triggered by the achievement of mutually agreed results called Disbursement-Linked Indicators (DLIs) which is a subset of DepEd’s overall results framework for SHS. To achieve the intended results, six DLIs were identified broken down into a sequence of time-bound targets. Disbursements shall be made following the achievement and verification of the agreed DLIs.

As provided for in the Loan Agreement, the Philippine Government may apply for advanced financing for the purposes of meeting its requirements, provided however, that drawdown made in this way will not exceed 25 percent of the loan amount.

Likewise, a semi-annual implementation review mission will be jointly undertaken by ADB and DepEd with other implementing partners and government agencies to review the implementation of the project and provide assistance to the Department.

For Fiscal Year 2017, the following are the key Program/Activity/Project (PAPs) which

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included programmed budgets for the Senior High School (SHS) Program:

Program/Activity/Project Total Appropriations

Amount Obligated vs. Total

Appropriations

Programmed Amount Intended

for SHS Creation and hiring of teaching and non-teaching positions

55,072,794,000.00 22,425,181,000.00 9,970,580,000.00

Provision and Maintenance of Basic Education Facilities (New Classroom Construction)

65,408,555,000.00 104,890,178,000.00 29,468,150,000.00

Provision and Maintenance of Basic Education Facilities (Construction of Technical Vocational and Livelihood Workshops)

43,905,000,000.00 43,905,000,000.00

Provision and Maintenance of Basic Education Facilities (Provision of School Furniture)

2,474,573,000.00 2,189,416,000.00 36,210,000.00

Provision of Technical Vocational Livelihood Tools and Equipment

7,276,246,000.00 7,209,369,000.00 7,260,000,000.00

Textbooks and Instructional Materials (Provision of Grade 11 and 12 LMs for 176 unique subjects)

3,040,831,000.00 2,983,200,000.00 153,236,000.00

Provision of Science and Mathematics Tools and Equipment

4,543,176,000.00 3,016,060,000.00 4,133,870,000.00

DepEd Computerization Program (Provision of computer packages)

6,853,359,000.00 6,735,415,000.00 66,770,000.00

Operations of Schools – Secondary Schools (School MOOE) Central Office

3,562,090,000.00 3,339,882,000.00 3,562,090,000.00

Human Resource Training and Development (HTRD) Fund (Training of Teachers)

3,752,397,000.00 3,233,898,000.00 1,342,760,000.00

Senior High School Voucher Program for Private Schools and State and Local Colleges and Universities

26,313,577,000.00 25,917,533,000.00 26,313,577,000.00

Total 222,202,598,000.00 181,940,132,000.00 126,212,243,000.00

Of the Department of Education’s Appropriations of P222,202,598,000.00 per GAA for FY 2017, funds amounting to P126,212,243,000.00 is programmed for the SHS Program. Out of the Total Appropriations, funds amounting to P109,313,555,000.00, are “transferred appropriations” to the Department of Public Works and Highways (DPWH) categorized as “For Later Release” under the Department of Budget and Management’s (DBM) Circular No. 567 issued on January 3, 2017. Of this amount, P73,373,150,000.00 is intended for the SHS Program.

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Based on financial report submitted by DPWH as of December 31, 2017, a total amount of P104,890,178,000.00 has been obligated/utilized out of the transferred appropriations provided for SHS school building program. Meanwhile, based on the DepEd’s Consolidated SAAODB as of end of December 2017, the amount of P77,049,954,000.00 has been obligated/utilized out of the Total Appropriations released to and managed by the Department. The total funds utilized as of the end of FY 2017 is P181,940,132,000.00 or 82 percent of the Total Appropriations of P222,202,598,000.00.

4. Changes in Accounting Policies

The Agency recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical. DepEd recognizes the effects of changes in accounting estimates prospectively by including in surplus or deficit. The Agency also corrects material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by:

• Restating the comparative amounts for prior period(s) presented in which the error

occurred; or

• If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and net assets/equity for the earliest prior period presented.

The DepEd changed its accounting estimates on the use of residual value equivalent to five percent to 10 percent of the cost of the PPE starting CY 2014. During prior years (2013 and below), residual value is pegged at 10 percent of the cost of PPE.

5. Prior Period Adjustments

Name of Account Affected Particulars Amount

Net Effect to Accumulated

Surplus /(Deficit)

Beginning Balances,

January 1, 2017 Subsidies - Others Payment for Senior High School Voucher Program

(SHS-VP) Subsidy for School Year 2016-2017 216,311,025.72 (216,311,025.72)

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Surplus /(Deficit)

Beginning Balances,

January 1, 2017 Textbooks and Instructional Materials Expenses

VIBAL GROUP, INC. Payment for the various manuscripts (in camera ready form)

26,105,600.00 (26,105,600.00)

Printing and Publication Expenses

TRI-MEGA BUSINESS INTERNATIONAL, INC. Partial payment for the supply and delivery of printing services for SY 2016-2017 National Career Assessment Examination (NCAE) - Package 1.

21,524,522.28 (21,524,522.28)

Training Expenses - Board & lodging

Payment of Board and Lodging to various training centers.

14,934,464.99 (14,934,464.99)

Textbooks and Instructional Materials Expenses

FILIPINAS COPYRIGHT LICENSING SOCIETY, INC. Payment for the License Agreement on Grades 1, 2, 3, 4, 7, 8, 9, 10 and Yolanda Project Learning Resources.

9,533,018.25 (9,533,018.25)


TRI-MEGA BUSINESS INTERNATIONAL, INC. To record set up of payables representing printing and delivery of SY 2015-2016 Language Assesment for Primary Grades (LAPG) and SY 2015-2016 National Achievement Test (NAT) to Grade 6-Package 3.

8,433,535.00 (8,433,535.00)


SYREX CORPORATION To set up payables representing 1st partial billing for the printing and delivery of SY 2016-2017 National Career Assessment Examination (NCAE) Package 2.

8,366,884.65 (8,366,884.65)

Repairs and Maintenance - Buildings and Other Structures

BLUE STAR INTERIORS, INC. Payment for the Supply/Delivery/Installation of Awning windows and window blinds.

5,133,067.52 (5,133,067.52)


BOOK MEDIA PRESS, INC. Payment for the printing, packaging and labelling of PEPT Test booklets and non classified materials.

3,065,955.20 (3,065,955.20)


BOOK MEDIA PRESS, INC. To payment for the printing, delivery and packaging of DRRM Manuals covered by Contract No. 2016-05-DRRM(046&047AMP004)-BI-NP2FB041-C015.

3,060,000.00 (3,060,000.00)

Representation Expense Payment of the food served/catering services during various events and meetings conducted by DepEd in CY 2016.

2,142,385.40 (2,142,385.40)

Office Supplies Expenses To record supplies used for December 2, 5, 8, 12, 15, 20, 23, 27 & 29, 2016.

1,839,538.50 (1,839,538.50)

Security Services LOCKHEED GLOBAL SECURITY & INVESTIGATION SERVICES, INC. Payment of salary of security service for the period of September and October, 2016.

1,359,494.47 (1,359,494.47)

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Surplus /(Deficit)

Beginning Balances,

January 1, 2017 Other Professional Services

Payment of professional fees for various services rendered in cy 2016.

1,211,050.00 (1,211,050.00)


SYREX CORPORATION To correct entry made under JEV No. 01-2017-09-40741 dated 9/11/17 which was debited to Accounts Payable.

1,000,000.00 (1,000,000.00)


CENTER FOR EDUCATIONAL MEASUREMENT To record Guaranty Deposit Payable which was not taken up under JEV No. 01-2016-12-35536 dated 12/2/16.

731,146.77 (731,146.77)

Terminal Leave Benefits RIZALINO D. RIVERA To payment of 140.00 days Terminal Leave pay covering the period from April 1 to October 22, 2016 under RA 2625 at the rate of Php 97,543.00.

658,120.48 (658,120.48)

Traveling Expenses - Local

Payment for plane fare booked in CY 2016 to various airline companies.

315,618.56 (315,618.56)

Other Supplies and Materials Expenses

RIVERA MASTERCRAFT, INC. Payment for the supply and delivery and installation of office signages under Sales Invoice # 35753 dated December 16, 2016

255,750.00 (255,750.00)

PhilHealth Contributions PHILIPPINE HEALTH INSURANCE CORPORATION To correct entry made under Jev No. 01-2017-01-1530 dated 1/16/17 which was erroneously recorded as Accounts Payable. No set-up of AP for Philhealth contribution for the month of December 2016.

233,415.50 (233,415.50)

Training Expenses Payment of honorarium as Resource Speaker/facilitator in various trainings/workshop in CY 2016.

179,387.24 (179,387.24)

Consultancy Services Payment of salary for the services rendered as Consultants in CY 2016.

128,000.00 (128,000.00)

Overtime and Night Pay Payment of overtime to various employees for services rendered in CY 2016

119,838.23 (119,838.23)


SYREX CORPORATION To record set up of Guaranty Deposit for ORS No. 15-12-601 and to payment retention fee for the printing and delivery of November 2015 and July 2016 PEPT Test.

86,189.59 (86,189.59)

Extra Ordinary and Miscellaneous Expense

Payment of extra ordinary allowance for the months of July to December 2016. (T.M.C. Umali & A.T. Muyot)

84,000.00 (84,000.00)

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Surplus /(Deficit)

Beginning Balances,

January 1, 2017 Prizes FCF MINERALS CORPORATION

Payment for the prizes of winners for the Outstanding Literacy program Category for the 2016 National Literacy Awards held at SEAMEO Innotech, Commonwealth, Diliman, Quezon City on December 8, 2016.

60,000.00 (60,000.00)

Hazard Pay Payment of Hazard Benefits of BLSS-SHD permanent employees covering the months of December 2016.

55,287.32 (55,287.32)

Semi-Expendable Machinery and Equipment Expenses

To record supplies used for December 2, 5, 8, 12, 15, 20, 23, 27 & 29, 2016.

47,399.04 (47,399.04)

Salaries and Wages plus PERA/ Personnel Economic Relief Allowance (PERA)

Payment of salaries (John Carlo B. Dino & Gerard M. Sayas) covering the period of November 1-9, 2016 & June 1-30, 2016

40,442.82 (40,442.82)

Other Bonuses and Allowances

Payment of Productivity Enhancement Incentive payroll (differential) for the year 2016.

27,500.00 (27,500.00)


SYREX CORPORATION Full payment of supply and delivery of printing services for SY 2016-2017 NCAE and printing and processing of individual test results in the Certificate of Rating (COR) forms.

12,497.21 (12,497.21)

Longevity Pay Payment of Loyalty CY 2016. (Sonia deLeon & Fortunato C. Cruz)

10,000.00 (10,000.00)

Salaries and Wages - Regular

Payment of salary differential due to salary adjustment of various employees in CY 2016.

7,676.51 (7,676.51)

Net Effect 327,072,811.25 (327,072,811.25) 6. Cash and Cash Equivalents

Total major account group balance amounted to ₱ 15,190,411,638.50 as of December 31, 2017 and is broken down into the following general ledger accounts such as:

Cash and Cash Equivalents

Accounts 2017 2016

Cash on Hand 34,646,861.38 22,406,387.23 Cash in Bank-Local Currency 14,157,213,451.78 13,203,620,217.14 Treasury/Agency Cash Accounts 998,551,325.34 767,203,936.69 Total 15,190,411,638.50 13,993,230,541.06

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Cash and Cash Equivalents include:

Cash - Collecting Officers – This account represents undeposited collections of various collecting officers on the last working day of the year. The same was deposited on the first working day of January, 2018.

Petty Cash - This account pertains to amount of cash granted to designated officers for payment of authorized petty or miscellaneous expenses. Cash in Bank- Local Currency, Current Account – The bulk amount pertains to Regional Offices and Operating Units account amounting to ₱14,032,913,994.46. This represents the remittances of the implementing units of payroll deductions and government shares to various government and private financial institutions which were transferred to cover the RPSU payrolls for the month of December which were received by the Regional Office few days before the cut-off date and disbursements were not affected during the reporting period.

This also includes intra-agency fund transfers from DepEd Central Office intended to cover funding requirements for the implementation of various Centrally-Managed Projects as well as fund transfers emanating from the Regional Office to cover funding requirements of the operating units. Furthermore, the same consists of cash balances of trust collections of secondary schools intended for student related activities. This also includes deposit of unused collection of seminar fees during the conduct of various conference/workshops and registration fees from the Philippine Educational Placement Test (PEPT) examinees.

In Region III, Cash in Bank – Local Currency, Current Account includes transferred funds from Schools Division Offices and Implementing Units to the Regional Office for the remittance of salary deductions of payrolls prepared by the Regional Payroll Services Unit (RPSU) due on January 2018, balances of the Provident Fund and NEAP III (formerly Regional Education Learning Center) revolving fund. Cash in Bank – Local Currency, Current Account in the Regular Fund represents the cash balance of SBP4BE Fund closed to the Regular Fund per Memorandum issued by the DepEd Central Office dated June 09, 2017. Said amount will be subsequently remitted to the National Treasury.

Cash in Bank- Local Currency, Savings Account – This account represents fund for income generating project of operating units which was recorded in the books as trust liability account. Interest earned on this account was recorded as Interest Income.

In Region III, Cash in Bank – Local Currency, Savings Account represents the cash balance per bank of Division of Aurora for Trust and EPIP Funds.

Cash in Bank – Foreign Currency, Savings Account – This account is used to record deposits and withdrawals of foreign currency in savings account maintained with authorized government depository banks (AGDBs).

Cash in Bank- Treasury/Agency Deposit, Regular – This account is used to record in the agency books the amount of collections remitted to the BTr under the General Fund, either directly or

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thru the authorized agent banks (AABs) and AGDBs. At year-end this account was credited to close to the Accumulated Surplus/ (Deficit).

Cash in Bank- Treasury/Agency Deposit, Trust – This account represents the amount deposited to BTr for service fees collected by the agency from private lending institutions and cooperatives. The account is credited upon receipt of Certificate of Deposit from BTr which is transmitted to DepEd Central Office for transfer of liability to request Notice of Cash Allocation (NCA) from Department of Budget and Management-Central Office (DBM-CO). Furthermore, part of this account pertains to the PAGCOR-SBP Fund deposited by the Division Offices to BTr subject to request of NCA upon progress billing of various creditors.

Cash - Modified Disbursement System (MDS), Regular - The receipt of NCA, an authorization issued by the DBM to the agency to withdraw cash from the National Treasury is recorded using the MDS wherein an MDS account is being maintained. All disbursements are being done by issuing an MDS check which is chargeable against the account of the Treasurer of the Philippines. The unused balance minus the unreleased checks of the MDS account as of December 31, 2017 is automatically reverted to the National Treasury. The unreleased checks are restored to the corresponding cash account vis-a-vis the appropriate payable/liability account as of December 31, 2017 and then again reverted back to the corresponding liability account on the first working day of January 2018.

7. Investments

Accounts 2017 2016 Financial Assets-Held to Maturity 42,670,668.93 9,180,798.09 Total 42,670,668.93 9,180,798.09

The total amount consists of the following:

Particulars Amount

10% Cumulative Shares Series “B” re: Installation of MERALCO

538,560.00

Bill Deposit to MERALCO 1,271,690.00 10% Cumulative Shares Series “B” re: Installation of MERALCO Electric Facilities

1,078,790.00

Meter Deposit to MERALCO 522,240.00 Amount is still for reconciliation/verification 5,769,518.09 Estate of Don Esteban Jalandoni (Trust Fund) - Investments in Treasury Bills – Local in Region VI

33,456,934.84

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8. Receivables

Included in the above major account group as of December 31, 2017 are the following general ledger accounts such as:

8.1 Loans and Receivables Accounts

Accounts 2017 2016

Accounts Receivable 77,474,802.56 41,688,534.60 Allowance for Impairment - AR (20,552.30) (86,347.70) Net Value- Accounts Receivable 77,454,250.26 41,602,186.90 Notes Receivable 3,500.00 3,500.00 Allowance for Impairment-Notes Receivable

0.00 0.00

Net Value- Notes Receivable 3,500.00 3,500.00 Interests Receivable 27,113,745.17 19,040,506.86 Allowance for Impairment-Interests Receivable

0.00 0.00

Net Value- Interests Receivable 27,113,745.17 19,040,506.86 Loans Receivable - Others 3,159,262,919.94 3,116,686,656.79 Allowance for Impairment-Loans Receivable - GOCCs

(475,414.06) (436,247.34)

Net Value- Loans Receivable-GOCCs 3,158,787,505.88 3,116,250,409.45 Totals 3,263,359,001.31 3,176,896,603.21

Accounts Receivables represents amount due from customers/clients resulting from services rendered, trading/business transactions, and sale of merchandise or property which are expected to be collected in the regular course of business or over a definite period.

8.2 Lease Receivable - ₱ 40,401,391.08

This account represents the accrual of lodging fees and rental of facilities in Baguio Teachers’ Camp and Region VI Esteban Jalandoni Estate.

8.3 Inter-Agency Receivables

Accounts 2017 2016 Due from National Government Agencies 8,940,274,220.15 9,526,164,364.49 Due from Government-Owned and/or Controlled Corporations

538,046,310.13 168,844,757.72

Due from Local Government Units 118,377,954.92 76,706,032.11 Total Inter-Agency Receivables 9,596,698,485.20 9,771,715,154.32

Due from National Government Agencies (NGAs) – This account represents receivables from various national government agencies such as cash advances released to the Department of Public Works and Highways (DPWH) and also that of DBM Procurement Service (pre-payment).

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In the Central Office books, included in this account are fund transfer to DSWD amounting to P500,000,000.00 for the construction of 605 classrooms in Regions IX, X, XI, XII and XIII for indigenous peoples’ communities through KALAHI-CIDSS Program in Mindanao per MOA between DepEd and DSWD dated May 18, 2016. Additional P22,500,000.00 of funds was transferred for the extension of the MOA period from May 31, 2017 to December 31, 2017. On December 2017, a second MOA extension was being requested for an additional fund request of P27,000,000.00 to cover operating costs until December 2018.

Due from Government Owned and Controlled Corporations (GOCCs) – This account consists of claims from government-owned/controlled corporations arising from over-remittances of contributions and other deductions due them. The account also includes over-remittance to GSIS due to cancelled checks which were not deducted from the succeeding monthly remittances. This is the accumulated amount of over remittances since the start of operations of the RPSU in CY 2002.

In the Central Office books, ₱372,093,000.00 of Due from GOCC pertains to fund transfer to Development Academy of the Philippines (DAP) for the Intensified Abot Alam Program (IAAP) a collaborative initiative of DepEd and DAP Due from Local Government Units (LGUs) account is used to record the amount due from provinces, cities, municipalities, barangays and other LGUs.

8.4 Intra - Agency Receivables

Accounts 2017 2016 Due from Central Office 64,847,632.95 68,681,008.17 Due from Bureaus 17,529,898.25 18,123,461.02 Due from Regional Offices 228,279,988.91 443,609,580.56 Due from Operating Units 4,322,369,392.28 3,119,027,756.98 Due from Other Funds 10,886,743.77 53,617,406.91 Total Intra-Agency Receivables 4,643,913,656.16 3,703,059,213.64

Due from Central Office account is used to record inter-office transactions in the books of Regional Offices/Staff Bureaus/Operating Units. For the DepEd, these are receivables arising out of cancellation of payroll checks by the PSD (RPSU), Central Office which were already remitted to the Central Office, the amount of which shall be deducted to the following year’s fund transfer to CO and unfunded Sub-Allotment Release Orders (Sub-AROs) received by ROs from CO.

Due from Bureaus is used to record transfer of funds not covered by allotment to the Department/Offices from their Bureaus and Offices. It also includes fund transfers to a Bureau/Office from another Bureau/Office of the same Department/Office.

Due from Regional Office/Staff Bureaus is used to record inter-office transactions in the books of CO/OUs. It includes receivables from RO/Staff Bureaus at year-end equivalent to the unobligated balance of allotment covered by funding check. For DepEd, these are largely RPSU checks cancelled by the Division Offices. Cash covering net payment and deductions of said cancelled checks were already transferred to the ROPs. Likewise, this includes receivables by the Regional Office Desks (RO Desks-CO) from the Regional Offices’ funding requirements for personal and

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Government shares of teachers’ deductions serviced by the Payroll Services Division for remittance to various GOCCs and private institutions. Due from Operating Units – This account is used to record inter-office transactions in the books of Central/Regional/Division Offices (CO/RO/DO). It also includes receivables from OUs at year-end equivalent to the unobligated balance of allotment covered by funding check. The big portion of this account pertains to receivables due to the timing difference of deposits from the operating units’ funding requirements for payment of salaries of all teaching and non-teaching personnel.

8.5 Other Receivables

Accounts 2017 2016 Receivables - Disallowances/Charges 469,523,574.45 421,882,061.58 Due from Officers and Employees 58,369,473.47 95,459,655.81 Due from Non-Government Organizations/ People's Organizations

1,225,908,987.67 2,837,254,656.70

Other Receivables 101,434,852.53 94,074,992.85 Total Other Receivables 1,855,236,888.11 3,448,671,366.94

Receivables-Disallowances/Charges – This account refers to amounts due from officers and employees and those outside of government agencies for audit/disallowances/charges, which have become final and executory. It also includes claims from retired accountable officials and employees which remained unsettled to date.

Due from Officers and Employees – This account is used to record amount of claims from agency’s officers and employees for overpayment, cash shortage, loss of assets and other bills issued by the agency.

Due from Non-Governmental Organizations/Peoples’ Organizations (NGOs/POs) – This account represents fund releases entrusted to NGOs/POs for the implementation of government projects.

Other Receivables – This account is used to record amount due from debtors and other agencies not falling under any of the specific receivable account.

9. Inventories

The huge amount of inventories totaling ₱ 8,255,764,043.64 consists mainly of Textbooks & Instructional Materials Inventory, Other Supplies and Materials Inventory, Textbooks & Instructional Materials for Distribution and Office Supplies Inventory as of December 31, 2017. Breakdown of Inventories as to Sub-Major Account Group are as follows:

9.1 Inventory Held for Sale

Accounts 2017 2016

Merchandise Inventory 156,117.19 202,437.17

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9.2 Inventory Held for Distribution

Accounts 2017 2016 Welfare Goods for Distribution 11,455.00 21,505.00 Drugs and Medicines for Distribution 2,630,899.21 937,475.43 Medical, Dental and Laboratory Supplies for Distribution

6,342,247.99 2,719,773.63

Textbooks and Instructional Materials for Distribution

509,328,185.35 518,834,855.29

Construction Materials for Distribution - - Property and Equipment for Distribution 106,245,700.14 25,287,952.07 Other Supplies and Materials Distribution 21,919,400.98 22,876,379.01 Total Inventory Held for Distribution 646,477,888.67 570,677,940.43

Textbooks & Instructional Materials for Distribution - This account is used to record the cost of textbooks and instructional materials including flipcharts, video clips/slides, and the like, purchased/received for distribution.

Textbook and Instructional Materials Inventory amount represents the buffer stocks of textbooks & supplementary materials of the Central Office including those purchased from various book publishing companies. The same shall be dropped in the books of accounts upon receipt of inventory reports from the IMCS/Property Division.

9.3 Inventory Held for Consumption

Accounts 2017 2016 Office Supplies Inventory 567,592,791.14 477,434,269.40 Accountable Forms, Plates and Stickers Inventory

3,212,373.51 3,524,101.29

Non-Accountable Forms Inventory 93,085.40 152,641.50 Animal/Zoological Supplies Inventory 53,451.24 77,555.26 Food Supplies Inventory 2,014,111.87 - Drugs and Medicines Inventory 17,041,816.70 12,511,715.55 Medical, Dental and Laboratory Supplies Inventory

44,126,005.22 23,843,203.15

Fuel, Oil and Lubricants Inventory 664,344.35 640,343.48 Agricultural and Marine Supplies Inventory 423,248.61 313,102.61 Textbooks and Instructional Materials Inventory

4,589,939,183.08 3,827,734,552.98

Chemical and Filtering Supplies Inventory - 24,810.00 Construction Materials Inventory 8,614,350.94 7,356,136.08 Other Supplies and Materials Inventory 500,656,809.52 440,765,307.73 Total Inventory Held for Consumption 5,734,431,571.58 4,794,377,739.03

Office Supplies Inventory - This is used to record the cost or value of purchased/acquired office supplies such as bond papers, inks, and small tangible items like staple wire removers, punchers, staplers and other similar items for government operations.

Bulk of Inventory items are attributed to Textbook & Instructional Materials Inventory. This

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balance represents prior year inventories that need to be dropped from the books of accounts of the regional/division offices/operating units. Reconciliation efforts and monitoring of these inventories are still on-going at all levels.

Other Supplies and Materials Inventory represents items that cannot be classified under any specific inventory accounts held for consumption. It also includes costs of obsolete books, destroyed chairs, tools and materials which are due for condemnation. Dropping of these obsolete items in the books of accounts should further reduce this account.

9.4 Semi - Expendable Machinery and Equipment

Accounts 2017 2016 Semi-Expendable Machinery 58,206,855.94 10,130,061.96 Semi-Expendable Office Equipment 31,751,571.16 14,783,731.24 Semi-Expendable Information and Communications Technology Equipment

49,103,657.24 13,917,352.00

Semi-Expendable Agricultural and Forestry Equipment 318,089.00 545,879.92 Semi-Expendable Communications Equipment 4,473,377.93 3,574,497.62 Semi-Expendable Disaster Response and Rescue Equipment

1,857,573.70 179,639.00

Semi-Expendable Medical Equipment 6,028,204.18 445,614.68 Semi-Expendable Printing Equipment 669,341.35 703,551.12 Semi-Expendable Sports Equipment 3,533,559.93 1,729,678.66 Semi-Expendable Technical and Scientific Equipment 780,322,869.85 3,045,347.33 Semi-Expendable Other Machinery and Equipment 160,287,325.81 12,009,494.37 Total Semi - Expendable Machinery and Equipment 1,096,552,426.09 61,064,847.90

Semi-Expendable Machinery and Equipment account is used to recognize the cost/fair value of the purchased/acquired Machinery and Equipment costing less than ₱15,000.00.

9.5 Semi - Expendable Furniture, Fixtures and Books

Accounts 2017 2016 Semi-Expendable Furniture and Fixtures 769,237,361.15 91,659,615.52 Semi-Expendable Books 2,576,796.96 3,104,881.70 Total Semi - Expendable , Fixtures and Books 771,814,158.11 94,764,497.22

Semi - Expendable Furniture, Fixtures and Books account is used to recognize the cost/fair value of the purchased/acquired Furniture, Fixtures and Books costing less than ₱15,000.00.

10. Other Current Assets - ₱ 6,457,016,215.72

Included in the above major account group as of December 31, 2017 are the following General Ledger (GL) accounts such as:

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Advances

Accounts 2017 2016 Advances for Operating Expenses 3,383,321,803.77 2,616,967,860.43 Advances for Payroll 594,797,178.63 704,043,622.15 Advances to Special Disbursing Officer 1,184,854,250.60 1,074,102,394.47 Advances to Officers and Employees 330,009,845.26 429,226,340.60 Total Advances 5,492,983,078.26 4,824,340,217.64

For this year under Regular Fund, the Consolidated Status of Cash Advances of the Agency totaled to ₱5,456,849,486.42. Total Cash Advances for current year amounted to ₱22,077,737,058.26 of which a total of ₱17,451,800,408.10 or an equivalent of 79.05 percent was liquidated. This reveals an over-all increase in liquidation of 3.24 percent from that of last year 78.81 percent. For prior years’ account balance of ₱4,476,352,171.20 (inclusive of adjustment) a total of ₱3,645,439,334.94 or an equivalent of 81.44 percent was liquidated thereby leaving a total balance of unliquidated cash advances amounting to ₱5,456,849,486.42 for both current and prior years’ account at year end.

Aging of Cash Advances (Regular Fund) as of December 31, 2017 are as follows:

Age Amount

Current: Less than 30 days 2,329,656,555.60 31-60 days 844,289,721.80 61-90 days 536,265,936.01 91-365 days 1,076,361,164.78 Past Due: Over 1 year 330,941,808.47 Over 2 years 118,598,067.94 3 years & above 220,736,231.82 Total 5,456,849,486.42

At the regional level, Advances for Operating Expenses account represents unliquidated MOOE downloaded to Elementary and Non-Implementing Units Secondary Schools. The account is used to establish accountabilities of School Heads for their regular operating requirements downloaded monthly.

Advances for Payroll account represents unclaimed payroll of teaching and non-teaching personnel and reimbursement for transportation and monitoring for various program.

Advances to Special Disbursing Officers account represents unrefunded balance of cash advances made for special programs and projects.

Advances to Officers and Employees account represents the amount granted as cash advances for payment of various expenses, for specific purpose like MOOE downloaded to Elementary and Secondary Schools without fiscal autonomy, which is subject to liquidation.

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10.1 Prepayments

Accounts 2017 2016 Advances to Contractors 943,111,893.75 731,401,535.95 Prepaid Rent 78,064.00 57,564.00 Prepaid Registration 16,703.63 17,309.18 Prepaid Interest - 4,543.83 Prepaid Insurance 6,140,785.81 4,729,105.15 Other Prepayments 5,569,539.32 3,559,338.99 Total Prepayments 954,916,986.51 739,769,397.10

Advances to Contractors account represents unrecouped advance payments or mobilization costs granted to various contractors for infrastructure projects implemented by the agency and advance payments (equivalent to 15% of the contract price) made to contractors in the implementation of the school building program.

Prepaid Rent account represents the amount advanced for payment of rent.

Prepaid Insurance account represents the amount advanced for the insurance of government vehicles and office building.

Other prepayments refer to other prepayments to various creditors.

10.2 Deposits

Accounts 2017 2016 Guaranty Deposits 8,834,482.90 8,118,992.83 Other Current Assets 281,668.05 280,213.71 Total Deposits 9,116,150.95 8,399,206.54

Guaranty Deposits refers to deposits made to various creditors to guarantee compliance with the terms of an agreement.

Total Prepayments and Deposits as of December 31, 2017 amounted to ₱ 954,916,986.51 and ₱9,116,150.95 respectively. The two sub-major accounts consist of prepaid expenses, advances to contractors for their unrecouped mobilization fee in the implementation of projects under School Building Program, deposit on letters of credit and guaranty deposits to water district, water and electric meters as well as other installation provided by them.

11. Investment Property

This account pertains to the cost of the buildings of Baguio Teachers’ Camp held to earn rentals.

Accounts 2017 2016

Investment Property, Buildings 7,710,896.29 21,252,309.67 Accumulated Depreciation - (2,739,389.09) (5,942,764.05)

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Accounts 2017 2016 Investment Property, Buildings Net Value 4,971,507.20 15,309,545.62

In 2017, the Commercial building that was previously leased to DSWD in 2016 was utilized by the administration of BTC as supply/storage room and office spaces. As such, the net carrying value of ₱10,338,658 was reclassified from the Investment Property account to the Buildings account beginning January 2, 2017.

12. Property, Plant and Equipment (PPE)

The total balance of PPE accounts amounting to ₱ 139,596,881,477.92 are carried at cost less accumulated depreciation and impairment losses. These accounts are subject to reconciliation and valuation based on the actual physical count. Minor replacements and maintenance expenses of fixed asset accounts are charged to MOOE as incurred while major additions and improvements that extend the estimated economic life of the assets are capitalized.

Particulars 2017 2016

Land 13,412,696,176.21 12,798,249,011.15 Land 13,412,696,176.21 12,798,249,011.15 Net Value 13,412,696,176.21 12,798,249,011.15 Land Improvements 157,192,828.53 160,546,657.25 Land Improvements, Aquaculture Structures 11,474,255.37 12,180,486.52 Accumulated Depreciation-Land Improvements, Aquaculture Structures

(7,267,038.15) (5,646,678.61)

Net Value 4,207,217.22 6,533,807.91 Other Land Improvements 304,512,526.38 302,265,845.91 Accumulated Depreciation-Other Land Improvements

(151,526,915.07) (148,124,746.57)

Accumulated Impairment Losses-Other Land Improvements

- (128,250.00)

Net Value 152,985,611.31 154,012,849.34 Infrastructure Assets 40,636,743.37 133,643,763.74 Water Supply Systems 20,829,060.34 26,034,742.11 Accumulated Depreciation-Water Supply Systems (3,621,792.55) (2,851,587.10) Net Value 17,207,267.79 23,183,155.01 Power Supply Systems 16,107,643.65 13,473,265.54 Accumulated Depreciation-Power Supply Systems (4,838,651.50) (2,140,872.76) Accumulated Impairment Losses-Power Supply Systems

(8,574.50) (8,574.50)

Net Value 11,260,417.65 11,323,818.28 Communication Networks 23,330.60 - Accumulated Depreciation-Communication networks (20,997.54) - Net Value 2,333.06 - Other Infrastructure Assets 12,469,424.29 99,322,838.45 Accumulated Depreciation-Other Infrastructure Assets

(302,699.42) (186,048.00)

Net Value 12,166,724.87 99,136,790.45 Buildings and Other Structures 76,569,707,876.26 68,565,312,521.97 Buildings 4,294,481,358.05 3,981,999,419.15

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Particulars 2017 2016 Accumulated Depreciation-Buildings (1,320,987,213.62) (1,271,750,059.79) Accumulated Impairment Losses-Buildings (32,493.76) (104,000.66) Net Value 2,973,461,650.67 2,710,145,358.70 School Buildings 95,893,280,423.91 86,412,340,427.84 Accumulated Depreciation-SB (23,753,951,678.81) (21,970,834,946.00) Accumulated Impairment Losses-SB - (6,538,922.51) Net Value 72,139,328,745.10 64,434,966,559.33 Slaughterhouses 259,000.00 - Net Value 259,000.00 - Hospitals and Health Centers - 908,851.92 Hostels and Dormitories 110,795,699.57 104,786,131.35 Accumulated Depreciation-Hostels and Dormitories (50,663,539.56) (46,914,757.18) Net Value 60,132,160.01 57,871,374.17 Other Structures 1,857,587,033.48 1,743,902,170.08 Accumulated Depreciation-Other Structures (461,060,713.00) (382,148,120.23) Accumulated Impairment Losses-Other Structures - (333,672.00) Net Value 1,396,526,320.48 1,361,420,377.85 Machinery and Equipment 15,568,348,151.82 11,280,187,979.76 Machinery 72,182,241.79 38,323,490.89 Accumulated Depreciation - Machinery (21,841,390.71) (19,966,951.56) Net Value 50,340,851.08 18,356,539.33 Office Equipment 2,224,922,662.88 2,113,177,436.83 Accumulated Depreciation-Office Equipment (1,196,052,772.83) (1,145,627,607.24) Accumulated Impairment Losses - Office Equipment (117,485.00) (6,645.33) Net Value 1,028,752,405.05 967,543,184.26 Information and Communication Technology Equipment

14,118,535,210.64 11,053,550,585.90

Accumulated Depreciation-Information and Communication Technology Equipment

(3,864,141,012.35) (3,787,493,276.21)

Accumulated Impairment Losses -ICT Equipment (493,686.40) (1,717,682.85) Net Value 10,254,117,087.42 7,264,339,626.84 Agricultural and Forestry Equipment 9,581,547.58 32,525,037.08 Accumulated Depreciation-Agricultural and Forestry Equipment

(3,278,407.44) (3,240,829.47)

Accumulated Impairment Losses-Agricultural and Forestry Equipment

(11,205.12) (11,205.12)

Net Value 6,291,935.02 29,273,002.49 Marine and Fishery Equipment 1,445,292.00 5,011,552.00 Accumulated Depreciation-Marine and Fishery Equipment

(1,174,468.00) (1,083,555.30)

Net Value 270,824.00 3,927,996.70 Communication Equipment 222,839,599.65 225,493,929.88 Accumulated Depreciation-Communication Equipment

(136,957,813.53) (140,549,849.64)

Accumulated Impairment Losses-Communication Equipment

- (12,776.00)

Net Value 85,881,786.13 84,931,304.24 Construction and Heavy Equipment 2,757,859.73 2,650,059.73 Accumulated Depreciation - Construction and Heavy Equipment

(553,300.41) (541,196.29)

Net Value 2,204,559.32 2,108,863.44 Disaster Response and Rescue Equipment 16,410,174.91 16,988,567.32

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Particulars 2017 2016 Accumulated Depreciation-Disaster Response and Rescue Equipment

(11,426,568.32) (10,952,564.15)

Accumulated Impairment Losses-Construction and Heavy Equipment

- (3,520.00)

Net Value 4,983,606.59 6,032,483.17 Military, Police and Security Equipment 335,130.00 387,361.12 Accumulated Depreciation-Military and Police Equipment

(200,534.39) (154,692.10)

Net Value 134,595.61 232,669.02 Medical Equipment 62,925,804.18 65,815,193.91 Accumulated Depreciation-Medical Equipment (35,445,888.58) (39,294,070.76) Net Value 27,479,915.60 26,521,123.15 Printing Equipment 6,335,399.09 2,445,047.72 Accumulated Depreciation-Printing Equipment (922,331.08) (501,117.12) Net Value 5,413,068.01 1,943,930.60 Sports Equipment 46,234,743.86 48,740,358.64 Accumulated Depreciation-Sports Equipment (15,298,293.60) (16,555,545.12) Accumulated Impairment Losses-Sports Equipment - (4,772.55) Net Value 30,936,450.26 32,180,040.97 Technical and Scientific Equipment 3,945,381,425.01 2,800,178,452.24 Accumulated Depreciation - Technical and Scientific Equipment

(263,530,006.83) (271,751,954.79)

Net Value 3,681,851,418.19 2,528,426,497.45 Other Machinery and Equipment 585,942,820.06 507,470,414.65 Accumulated Depreciation - Other Machinery and Equipment

(195,998,934.13) (193,042,530.85)

Accumulated Impairment Losses-Other Machinery and Equipment

(254,236.37) (57,165.70)

Net Value 389,689,649.56 314,370,718.10 Transportation Equipment 228,442,676.67 136,206,022.62 Motor Vehicles 501,342,819.57 392,080,290.48 Accumulated Depreciation - Motor Vehicles (274,100,412.83) (257,237,474.01) Accumulated Impairment Losses-Motor Vehicles - (37,800.00)

Net Value 227,242,406.74 134,805,016.47 Watercrafts 1,150,322.75 1,150,322.75 Accumulated Depreciation - Watercrafts (464,877.09) (349,116.60) Accumulated Impairment Losses - Watercrafts (7,671.75) - Net Value 677,773.91 801,206.15 Other Transportation Equipment 1,686,377.91 1,695,267.66 Accumulated Depreciation-Other Transportation Equipment

(1,163,881.89) (1,095,467.66)

Net Value 522,496.02 599,800.00 Furniture, Fixtures and Books 4,597,929,532.34 3,916,139,453.38 Furniture and Fixtures 6,611,827,601.65 5,817,123,013.77 Accumulated Depreciation-Furniture and Fixtures (2,228,470,998.63) (2,126,153,832.76) Accumulated Impairment Losses - Furniture and Fixtures

(645,004.88) -

Net Value 4,382,711,598.14 3,690,969,181.01 Books 511,677,998.35 539,652,529.10 Accumulated Depreciation- Books (296,452,968.46) (313,852,372.30) Accumulated Impairment Losses - Books (7,095.70) (629,884.43) Net Value 215,217,934.20 225,170,272.37

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Particulars 2017 2016 Leased Assets 23,333.28 - Leased Assets, Machinery and Equipment 23,333.28 - Net Value 23,333.28 - Investment Property, Buildings 321,876.77 3,108.56 Other Leased Assets Improvements 333,723.77 3,108.56 Accumulated Depreciation-Other Leased Assets Improvements

(11,847.00) -

Net Value 321,876.77 3,108.56 Heritage Assets 7,902,755.54 618,343.68 Historical Buildings 8,375,284.96 1,043,897.66 Accumulated Depreciation-Historical Buildings (472,529.42) (425,553.98) Net Value 7,902,755.54 618,343.68 Service Concession Tangible Assets 13,245,555,601.31 10,060,495,680.46 Other Service Concession Assets 18,601,366,568.56 13,871,131,308.12 Accumulated Depreciation-Other Service Concession Assets

(5,355,810,967.25) (3,810,635,627.66)

Net Value 13,245,555,601.31 10,060,495,680.46 Other Property, Plant and Equipment 231,361,104.03 228,120,151.25 Work/Zoo Animals 1,082,546.10 1,250,258.00 Accumulated Depreciation-Work/Zoo Animals (111,155.00) (92,250.00) Net Value 971,391.10 1,158,008.00 Other Property, Plant and Equipment 511,061,775.35 498,662,489.38 Accumulated Depreciation-Other Property, Plant and Equipment

(280,568,037.42) (271,525,350.21)

Accumulated Impairment Losses-Other Property, Plant and Equipment

- (174,995.92)

Net Value 230,493,737.93 226,962,143.25 Construction in Progress 15,536,658,796.78 14,984,973,730.87 Construction in Progress- Land Improvements 3,749,625.64 1,930,469.59 Construction in Progress- Infrastructure Assets 28,500.00 19,461,619.96 Construction in Progress-Buildings and Other Structures

15,531,441,813.63 14,963,581,641.32

Construction in Progress-Leased Assets 1,438,857.51 - Totals 139,596,881,477.92 122,264,496,424.69

For OSEC – The School Building account consists of completed projects implemented by the Department and other NGAs. The same shall be dropped in the books of accounts once the project is completed and transferred to implementing units. It also includes current and prior years’ completed projects implemented by the DPWH.

The carrying amounts of Property, Plant and Equipment with costs below the ₱15,000.00 threshold as at December 31, 2017 were charged to Accumulated Surplus/ (Deficit).

Reclassifications were made for some PPE items during the year.

Included in the balance of Construction in Progress – Building and Other Structure account were ongoing projects implemented by the Department such as School Building Program, repair of various buildings and the on-going projects implemented by other NGAs. The same shall be credited upon project completion.

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13. Biological Assets

Biological Assets pertains to livestock, breeding stock including livestock held for consumption/sale/distribution of fiscally autonomous and technical-vocational schools. This major account group includes the following general ledger accounts in the Books of Region I, II, III, VIII, XI and CAR such as Breeding Stocks, Livestock and Livestock Held for Consumption/Sale/Distribution with the following balances as of December 31, 2017.


Bearer Biological Assets 1,502,681.00 1,161,956.00 Breeding Stocks 558,816.00 529,316.00 Livestock 926,225.00 615,000.00 Other Bearer Biological Assets 17,640.00 17,640.00 Consumable Biological Assets 14,211.00 14,211.00 Livestock Held for Consumption/Sale/Distribution 14,211.00 14,211.00 Totals 1,516,892.00 1,176,167.00

14. Intangible Assets

Balance pertains to the purchase costs or capitalized development costs of Computer Software program for use in government operation as of December 31, 2017.

Accounts 2017 2016

Patents/Copyrights 6,790,478.05 6,786,800.00 Computer Software 689,847,279.37 9,132,873.51 Accumulated Amortization - Computer Software (465,301,994.17) (4,283,017.97) Net Value 224,545,285.20 4,849,855.54 Other Intangible Assets - 61,913.94 Total Intangible Assets 231,335,763.25 11,698,569.48

Computer Software was purchased during the year by Central Office from DBM-PS with net value amounting to ₱218,094,553.50. Patents/Copyrights pertains to Copyright authorization fee of Horizon: Music and Arts Appreciation for young Filipinos from Grade 10 Learners Materials and Teachers Guide paid to Tawid Publication.

15. Other Non-Current Assets

Asset accounts that cannot be classified properly as PPE or current asset are being booked in this account. This account is also used to record fully depreciated assets. Likewise, obsolete and unserviceable assets awaiting final disposition as well as those assets still serviceable but are no longer being used form part of this account.

Accounts 2017 2016

Acquired Assets 101,778.00 75,740.00

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Accounts 2017 2016 Abandoned Property Assets 236,038.15 236,038.15 Other Assets 419,058,940.01 394,490,549.77 Accumulated Impairment Losses - Other Assets (2,153,895.39) (1,324,281.20) Net Value 416,905,044.62 393,166,268.57 Total Other Assets 417,242,860.77 393,478,046.72

For OSEC - Other Asset amounting to ₱123,162,875.34 pertains to the cost or accumulated value of imported items already paid but could not be recorded in the books of accounts due to the inaccessibility of the supporting documents. This account remained dormant and outstanding since CY 2004 and should be requested for write-off upon availability of supporting documents as per COA recommendation.

16. Financial Liabilities

Included in the above major account group as of December 31, 2017 are the following General Ledger accounts:

Accounts 2017 2016

Accounts Payable 7,763,843,098.35 5,761,301,004.71 Due to Officers and Employees 4,381,132,679.52 4,356,250,439.58 Internal Revenue Allotment Payable 5,920.60 - Bonds Payable - 70,000,50 Service Concession Arrangements Payable 10,626,923,290.56 9,260,558,126.49 Total Payables 22,771,919,750.03 19,378,179,571.28

Accounts Payable – This account pertains to the obligations/indebtedness to contractors/suppliers arising from the purchase of goods and services and other obligations in connection with the agencies’ operation/trade/business. It also includes prior year obligations and unreleased checks of the MDS account as of December 31, 2017 which are subject for reversion. The unreleased checks are restored to the corresponding cash account vis-a-vis the appropriate payable/liability account as of December 31, 2017 and then again reverted back to the corresponding liability account on the first working day of January 2018. The principle of recognizing payables only when there is actual delivery and inspection of goods and services is being applied for MOOE and Capital Outlay projects. However, recognition of payables in the books of accounts is subject to availability of released allotments, hence unpaid prior years step increments which are not provided allotments are not recognized in the books of accounts. Due to Officers and Employees – This account is used to record incurrence of liability to officers and employees for salaries, benefits and other emoluments including authorized expenses advanced by them. Service Concession Arrangement Payable is used to recognize the liability arising from unconditional obligation of the grantor entity to make series of payments to the operator upon recognition of service concession assets, excluding finance charge and service components of the payments. It is the financial liability recognized relative to Public- Private Partnership for School

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Infrastructure Project (PSIP) of the Department. Recapitulation: PSIP Particulars Amount Payment Balance Bright Future Educational Facilities, Inc. PSIP I PACKAGE A,

REGION I 3,441,882,285.67 1,243,172,338.68 2,198,709,946.99

Citicore-Megawide Consortium, Inc. PSIP I PACKAGE B,

REGION III 5,229,899,136.00 1,876,461,096.72 3,353,438,039.28

Citicore-Megawide Consortium, Inc. PSIP I PACKAGE C,

REGION IV-A 7,593,214,406.06 2,518,439,101.77 5,074,775,304.29

Megawide Construction Corporation PSIP II PACKAGE A 1,358,019,761.73 1,358,019,761.73 -

Bsp & Company, Inc./Vicente T. Lao Construction (Jv)

PSIP II PACKAGE E 978,301,979.10 978,301,979.10 -

Total 18,601,317,568.56 7,974,394,278.00 10,626,923,290.56

Bonds Payable – Domestic – This account is used to record issuances/flotations of peso-denominated bonds.

Bills/Bonds/Loans Payable


Treasury Bills Payable 0.50 0.50 Bonds Payable - Domestic - 70,000.00 Totals 0.50 70,000.50

17. Inter-Agency Payables


Due to BIR 1,003,522,104.50 881,144,003.22 Due to GSIS 7,413,559,364.37 6,181,790,232.28 Due to PAG-IBIG 400,770,335.51 316,462,045.44 Due to PHILHEALTH 1,112,809,304.00 999,047,519.87 Due to NGAs 1,076,891,666.02 917,801,931.09 Due to GOCCs 3,235,981.95 2,448,887.17 Due to LGUs 32,108,267.08 32,201,316.18 Totals 11,042,897,023.43 9,330,895,935.25

Due to BIR – this account pertains to taxes withheld from internal/external contractors and creditors subject to remittance to the Bureau of Internal Revenue (BIR) either thru the Tax Remittance Advice (TRA) payment scheme upon receipt of Notice of Cash Allocation (NCA) for regular operating expenses from the Department of Budget and Management (DBM) in CY 2016 or thru bank debit system.

Due to GSIS, Pag-Ibig and PhilHealth – the accounts represent unremitted life and retirement contributions/loans, Pag-Ibig premiums/loans and Medicare contributions due to the Government Service Insurance System (GSIS), Home Development and Mutual fund (HDMF) and Philippine Health Insurance Corporation (PHIC), respectively.

The DepEd contributes together with its employees to the GSIS in accordance with Republic Act No. 8291 (GSIS Act of 1997). The GSIS administers the plan, including payment of compulsory life insurance, optional life insurance, retirement benefits including pension and disability

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benefits for work-related contingencies and death benefits to employees to whom the act applies.

Due to NGAs – This account is used to record the amount of liabilities due to National Government Agencies including those inter-agency transferred funds received for the implementation of specific programs/projects.

Due to LGUs – This account is used to record the receipt of funds from LGUs for delivery of goods/services as authorized by law, fund transfers for the implementation of specific programs or projects and other inter-agency transactions.

The aforementioned accounts particularly the mandatory deductions for the month of December 2017 and as of the closing of books are due for remittance by January 2018. Reconciliations are also being done regularly to effect some adjustments on the remittances made by the Agency to these GOCCs and Bureau of Internal Revenue.

18. Intra- Agency Payables

Particulars 2017 2016 Due to Central Office 122,230,805.53 157,472,634.82 Due to Bureaus 13,756,769.38 13,528,129.64 Due to Regional Offices (79,570,398.49) (56,689,222.91) Due to Operating Units 92,256,978.28 339,752,686.15 Due to Other Funds 181,782,417.04 204,603,175.24 Total Intra-Agency Payables 330,456,571.74 658,667,402.94

Due to Central Office – This account is used to record the receipt of funds not covered by allotment from Central Office by Bureaus/Regional Offices/ Operating Units of the same agency for the implementation of specific program or project and other intra-agency transactions.

Due to Bureaus – This account is used to record the receipt of funds not covered by allotment from a Bureau by the Central Office/ Regional Offices/ Operating Units or another Bureau within the same agency for the implementation of specific program or project and other intra-agency transactions.

In the Central Office Books, Due to Bureaus pertains to cash advances made in previous years from DECS Salaries/Deployed Employees (Trust Account) due to insufficient OSEC Regular Cash Allocation to cover payments of salaries and other operating expense. This balance is subject for reconciliation. It includes also the refunds of cash advance from Trust Accounts (Unicef, EPIP) which were erroneously deposited to OSEC Regular Fund.

Due to Regional Offices – This refers to amount payable by Central Office/Bureaus/Operating Units of NGAs to their Regional Offices.

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19. Trust Liabilities

Particulars 2017 2016 Trust Liabilities 106,159,692.19 120,590,120.36 Guaranty Deposits Payable 1,220,208,316.11 1,184,128,206.40 Customers' Deposit Payable 1,266,400.59 1,209,902.59 Total Trust Liabilities 1,327,634,408.89 1,305,928,229.35

Trust Liabilities account is used to record the receipt of amount held in trust for specific purpose.

Guaranty/Security Deposits Payable – This pertains to the withheld portion of payments to contractors of school buildings and other infrastructures to guarantee performance which are refundable/ returnable to the depositor upon the completion of the purpose for which it was given or may be used to cover possible future damage to the constructed/repaired property.

For the DepEd, Guaranty Deposits Payable represents 10 percent retention automatically deducted from the progress billing submitted by contractors and payment will be made after satisfying all the requirements.

20. Deferred Credits/Unearned Income

Other Deferred Credits account is used to record other transactions not falling under any of the specific deferred credit accounts. Balance of this account as of December 31, 2017 is ₱23,394,997.29.


Other Deferred Credits 23,203,597.29 58,583,654.17 Other Unearned Revenue 191,400.00 205,700.00 Total Deferred Credits/Unearned Income 23,394,997.29 58,789,354.17

21. Provisions


Leave Benefits Payable 18,000,000.00 143,122.51 Total Provisions 18,000,000.00 143,122.51

Leave Benefits Payable account is used to record accrual of money value of the earned leave credits of government personnel. This account is debited upon monetization of earned leave and payment of terminal leave benefits.

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22. Other Payables – ₱ 7,422,248,732.84

Other Payables – Generally, this account is used to record other liabilities not falling under any of the specific payable accounts. It includes balances of trust liability accounts of operating units and amounts payable to Private Lending Institutions and Insurance Companies for loan repayments and insurance premium deducted from salaries of the employees.

23. Service and Business Income

Total Service and Business Income recorded for the year is ₱ 1,376,811,711.15. Large amount of income were derived from registration/seminar fees and service fee collected from the Private Lending Institutions (PLIs).


Service Income 530,312,315.09 380,135,766.37 Permit Fees 3,375,425.00 4,385,190.00 Registration Fees 29,838,028.98 30,539,457.28 Clearance and Certification Fees 126,647.11 2,805,115.65 Legal Fees 130,645.00 12,610.00 Inspection Fees 7,643,530.00 9,361,373.18 Verification and Authentication Fees 37,350.00 47,950.00 Processing Fees 22,269,257.86 18,499,144.58 Fines and Penalties-Service Income 12,363,663.79 83,537,673.61 Other Service Income 454,510,567.35 230,947,252.07

Business Income 846,499,396.06 687,537,922.69 School Fees 2,535,293.37 2,956,171.42 Affiliation Fees 92,000.00 83,100.00 Examination Fees 8,085,024.00 7,298,382.00 Seminar Fees/Training Fees 67,510,537.38 112,514,487.25 Rent/Lease Income 16,336,872.72 13,761,364.47 Waterworks System Fees 15,000.00 - Power Supply System Fees 675.59 - Income from Hostels/Dormitories and Other Like Facilities

390,405,094.48 234,130,726.44

Income from Printing and Publication 3,416,624.83 1,102,149.95 Interest Income 233,874,208.25 218,629,775.54 Fines and Penalties - Business Income 60,293,645.54 41,264,908.69 Other Business Income 63,934,419.90 55,796,856.93

Total Service and Business Income 1,376,811,711.15 1,067,673,689.06

For the Department of Education, clearance and certification fees are for the collections from individuals requesting certification/authentication of names and from private schools requesting for certification/authentication/recognition as to their status to operate.

Inspection fees are collections from private schools applying for permit to operate and offer courses.

Fines and Penalties – Service Income are for penalties imposed to the supplier for late delivery of various procurement.

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Examination fees are for collections for various students, teachers, principals and superintendents’ tests.

24. Shares, Grants and Donations

Total Shares, Grants and Donations for the year is ₱ 1,896,299,528.49 which is composed of donations in kind and in cash, the Regional breakdown are as follows:


Income from Grants and Donations in Cash 22,315,091.43 35,667,479.78 Income from Grants and Donations in Kind 1,873,984,437.06 133,210,862.65 Total Shares, Grants and Donations 1,896,299,528.49 168,878,342.43

25. Gains – ₱ 59,590.00

Total Gains recorded for the year is ₱59,590.00 representing gains in agricultural produce in Regions II and XI.

26. Miscellaneous Income

Particulars 2017 2016 Proceeds from Insurance/Indemnities - 555,216.10 Miscellaneous Income 40,518,588.79 2,984,624.72 Total Miscellaneous Income 40,518,588.79 3,539,840.82

27. Personnel Services

Total Expenses for personnel services for the year is ₱ 324,764,623,661.90 which is 88% of the total operating expenses for the year. The Agency being the largest Executive Agency of the National Government and having a workforce almost half of the total public employees spends and accounts most of its appropriations for personal services expenses.

27.1 Personnel Services

Particulars 2017 2016 as restated

Salaries and Wages - Regular 217,861,543,576.56 194,680,653,663.71 Salaries and Wages – Casual/Contractual 1,311,180,269.96 1,274,507,654.57 Total Salaries And Wages 219,172,723,846.52 195,955,161,318.28

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27.2 Other Compensation


Personnel Economic Relief Allowance (PERA) 18,785,800,415.61 17,751,951,393.71

Representation Allowance (RA) 91,642,791.43 79,238,756.56

Transportation Allowance (TA) 69,829,033.62 69,367,380.91

Clothing/Uniform Allowance 4,029,738,185.65 3,668,930,727.38

Subsistence Allowance 50,188,905.84 45,288,516.10

Laundry Allowance 5,748,785.69 4,984,310.52

Quarter Allowance 322,775.17 341,328.44

Productivity Incentive Benefits 343,220,349.97 404,522,184.97

Honoraria 37,113,226.48 41,957,011.33

Hazard Pay 688,683,738.14 303,766,414.98

Longevity Pay 253,724,056.45 237,806,488.45

Overtime and Night Pay 103,478,185.22 102,608,572.03

Year End Bonus 28,784,233,606.20 29,723,309,305.55

Cash Gift 3,798,833,676.70 3,553,832,988.63

Other Bonuses and Allowances 13,631,829,162.29 10,546,123,128.41

Total Other Compensation 70,674,386,894.46 66,534,028,507.97

27.3 Personnel Benefits Contributions


Retirement and Life Insurance Contributions 25,856,259,186.29 23,192,139,084.66 Pag-IBIG Contributions 981,633,172.86 905,360,162.09 PhilHealth Contributions 2,519,533,104.19 2,336,877,999.26 Employees Compensation Insurance Premiums 944,099,129.22 884,103,460.90 Provident/Welfare Fund Contributions 30,180.03 53,766.60 Total Personnel Benefits Contributions 30,301,554,772.60 27,318,534,473.51

27.4 Other Personnel Benefits


Pension Benefits 2,248,643.00 485,681.50 Retirement Gratuity 60,263,202.32 78,715,402.60 Terminal Leave Benefits 1,101,549,133.91 830,195,048.01 Other Personnel Benefits 3,451,897,169.10 3,688,078,778.07 Total Other Personnel Benefits 4,615,958,148.33 4,597,474,910.18

28. Maintenance and Operating Expenses

Total Maintenance and Operating Expenses incurred during the year amounted to ₱36,934,701,627.91 wherein large amount of expenses were incurred for travelling expenses, training and scholarship expenses, supplies and materials, utility expenses, repair and maintenance and other MOOEs:

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28.1 Travelling Expenses


Traveling Expenses – Local 2,186,225,819.89 1,581,922,415.50 Traveling Expenses – Foreign 81,923,947.03 13,532,363.47 Total Travelling Expenses 2,268,149,766.92 1,595,454,778.97

28.2 Training and Scholarship Expenses


Training Expenses 6,868,450,009.12 4,174,485,261.76 Scholarship Expenses 8,482,258.34 6,270,992.58 Total Training and Scholarship Expenses 6,876,932,267.46 4,180,756,254.34

28.3 Supplies and Materials Expenses


Office Supplies Expenses 4,033,314,587.07 3,718,757,288.65 Accountable Forms Expenses 11,890,470.97 11,132,674.36 Non-Accountable Forms Expenses 3,015,536.97 4,035,174.22 Animal/Zoological Supplies Expenses 279,781.27 372,502.13 Food Supplies Expenses 1,769,768,910.79 1,411,271,558.83 Welfare Goods Expenses 439,893.02 80,946.20 Drugs and Medicines Expenses 105,972,790.67 72,614,701.08 Medical, Dental and Laboratory Supplies Expenses 84,172,132.69 66,243,251.82 Fuel, Oil and Lubricants Expenses 92,163,434.20 80,232,815.08 Agricultural and Marine Supplies Expenses 4,550,803.47 2,905,402.36 Textbook and Instructional Materials Expenses 1,660,853,534.81 1,001,892,835.63 Military, Police and Traffic Supplies Expenses 24,614.03 19,500.00 Chemical and Filtering Supplies Expenses 773,453.99 168,943.68 Semi-Expendable Machinery and Equipment Expenses

723,901,986.89 223,094,139.39

Semi-Expendable Furniture, Fixtures and Books Expenses

476,640,617.49 307,464,680.07

Other Supplies Expenses 3,317,514,416.71 2,471,596,013.09 Total Supplies and Materials 12,285,276,965.03 9,371,882,426.59

28.4 Utility Expenses


Water Expenses 589,233,439.02 508,282,253.25 Electricity Expenses 2,210,899,293.11 1,776,699,322.58 Total Utility Expenses 2,800,132,732.13 2,284,981,575.83

28.5 Communication Expenses


Postage and Courier Services 12,800,048.84 7,545,232.15 Telephone Expenses 317,021,013.99 276,705,737.03 Internet Expenses 485,583,633.57 416,728,721.21

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Particulars 2017 2016 Cable, Satellite, Telegraph, and Radio Expenses 6,385,042.18 5,845,589.42 Total Communication Expenses 821,789,738.58 706,825,279.81

28.6 Awards/Rewards and Prices Expenses


Awards/Rewards Expenses 5,500,148.97 3,767,568.75 Prices 10,218,794.79 9,138,879.79 Total Award/Rewards and Prices 15,718,943.76 12,906,448.54

28.7 Survey, Research, Exploration and Development Expenses


Survey Expenses 7,525,740.47 995,764.01 Research, Exploration and Development Expenses 19,493,535.19 2,769,824.71 Total 27,019,275.66 3,765,588.72

28.8 Demolition and Relocation Expenses


Demolition and Relocation Expenses 717,266.58 57,000.00 Total Demolition and Relocation Expenses 717,266.58 57,000.00

28.9 Generation, Transmission and Distribution Expenses


Generation, Transmission and Distribution Expenses

- 1,030.00

Total Generation, Transmission and Distribution Expenses

- 1,030.00

28.10 Confidential, Intelligence and Extraordinary Expenses


Confidential Expenses 28,042.50 20,460.00 Extraordinary and Miscellaneous Expenses 46,631,679.67 46,734,975.66 Total Confidential, Intelligence and Extraordinary Expenses

46,659,722.17 46,755,435.66

28.11 Professional Services


Legal Services 6,511,998.52 6,607,049.19 Auditing Services 5,950,375.51 6,382,579.00 Consultancy Services 19,993,592.22 38,748,517.68 Other Professional Services 452,195,042.59 468,719,567.96 Total Professional Services 484,651,008.84 520,457,713.83

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28.12 General Services


Environment/Sanitary Services 2,817,020.61 2,504,229.98 Janitorial Services 526,229,752.54 402,502,329.41 Security Services 652,062,157.11 495,755,519.44 Other General Services 614,002,977.85 512,119,542.37 Total General Services 1,795,111,908.12 1,412,881,621.20

28.13 Repairs and Maintenance


Repairs and Maintenance-Investment Property 315,350.47 456,425.74 Repairs and Maintenance-Land Improvements 46,245,604.78 40,356,121.01 Repairs and Maintenance-Infrastructure Assets 9,680,302.89 9,313,754.63 Repairs and Maintenance-Buildings and Other Structures

4,831,401,582.61 4,794,056,280.51

Repairs and Maintenance-Machinery and Equipment 99,125,260.92 102,439,126.27 Repairs and Maintenance -Transportation Equipment 48,134,352.89 41,298,714.61 Repairs and Maintenance - Furniture and Fixtures 82,702,242.47 66,307,245.94 Repairs and Maintenance - Leased Assets Improvements

194,130.82 70,640.80

Restoration and Maintenance - Heritage Assets 3,510.00 - Repairs and Maintenance-Semi-Expendable Machinery and Equipment

12,613,649.32 2,378,840.28

Repairs and Maintenance-Semi-Expendable Furniture, Fixtures and Books

2,469,359.22 674,478.11

Repairs and Maintenance - Other Property, Plant and Equipment

15,900,558.64 15,532,129.78

Total Repairs and Maintenance 5,148,785,905.03 5,072,883,757.68

28.14 Taxes, Insurance Premiums and Other Fees

Particulars 2017 2016 Taxes, Duties and Licenses 14,415,878.42 5,309,722.29 Fidelity Bond Premiums 92,950,491.37 82,165,530.26 Insurance Expenses 25,263,211.71 16,625,680.71 Total Taxes, Insurance Premiums and Other Fees 132,629,581.50 104,100,933.26

28.15 Labor and Wages


Labor and Wages 157,572,798.40 130,943,039.80 Total Labor and Wages 157,572,798.40 130,943,039.80

28.16 Other Maintenance and Operating Expenses


Advertising Expenses 10,979,232.72 8,788,692.46 Printing and Publication Expenses 771,958,686.21 713,901,047.07

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Particulars 2017 2016 as restated Representation Expenses 114,909,569.70 98,898,980.65 Transportation and Delivery Expenses 125,471,875.15 70,350,808.74 Rent/Lease Expenses 27,487,557.74 35,984,514.80 Membership Dues and Contributions to Organizations

1,861,241.48 821,216.88

Subscriptions Expenses 8,801,171.24 9,975,907.32 Donations 18,102,073.61 620,168,781.93 Litigation/Acquired Assets Expenses 14,811.58 11,801.00 Other Maintenance and Operating Expenses 2,993,967,528.30 2,416,402,371.30 Total Other Maintenance and Other Operating Expenses

4,073,553,747.73 3,975,304,122.16

29. Financial Expenses


Management Supervision /Trusteeship Fees 30,600.00 24,753.36 Interest Expenses 69,175.33 9,713.02 Guarantee Fees 543,500.00 - Bank Charges 1,096,287.98 970,881.87 Other Financial Charges 37,395.80 868,978.82 Total Financial Expenses 1,776,959.11 1,874,327.07

30. Non-Cash Expenses

The Non-cash expenses represent the recorded depreciation of various property, plant and equipment of the Department as well as amortization of some intangible assets. Total Non-cash expenses for the year amounted to ₱ 5,299,573,841.49.

30.1 Depreciation


Depreciation - Investment Property 825,103.42 944,243.99 Depreciation-Land Improvements 7,313,114.32 12,358,841.97 Depreciation-Infrastructure Assets 2,486,542.75 1,643,352.50 Depreciation-Buildings and Other Structures 2,620,128,177.94 2,223,664,479.66 Depreciation-Machinery and Equipment 356,770,010.63 313,213,599.15 Depreciation-Transportation Equipment 21,956,573.41 15,946,399.71 Depreciation-Furniture, Fixtures and Books 252,157,420.33 285,856,588.35 Depreciation-Leased Assets - - Depreciation - Heritage Assets 46,975.44 46,975.39 Depreciation - Service Concession Assets 1,545,174,604.59 1,545,174,603.66 Depreciation - Other Property, Plant and Equipment 29,439,075.33 24,155,422.90 Total Depreciation 4,836,297,598.17 4,423,004,507.28

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30.2 Amortization


Amortization - Intangible Assets 460,211,315.66 110,022.71 Total Amortization 460,211,315.66 110,022.71

30.3 Impairment Loss


Impairment Loss-Loans and Receivables - 33,436.20 Impairment Loss- Investment Property - 128,305.38 Impairment Loss-Property, Plant and Equipment 3,044,177.89 2,726,791.21 Impairment Loss-Biological Assets 9,500.00 - Impairment Loss-Intangible Assets 3,000.00 - Impairment Loss-Other Assets 8,249.77 539,409.74 Total Impairment Loss 3,064,927.66 3,427,942.53

31. Net Financial Assistance/Subsidy

Financial Assistance/Subsidy from NGAs, LGUs, GOCCs


Subsidy from National Government 405,298,699,631.48 359,965,608,261.17 Subsidy from Other National Government Agencies

430,549,152.98 1,337,018,778.71

Assistance from Local Government Unit 77,344,356.34 97,372,551.42 Assistance from GOCCs 933,500.00 954,556.75 Subsidy from Other Funds 36,586,919.89 13,619,336.96 Subsidy from Central Office 109,567,586.76 39,078,252.65 Subsidy from Regional Office/Staff Bureau 43,484,204.89 336,368,235.77 Total Financial Assistance/Subsidy from NGAs, LGUs, GOCCs

405,997,165,352.34 361,790,019,973.43

Less: Financial Assistance/Subsidy to NGAs, LGUs, GOCCs, NGOs, POs


Subsidy to National Government Agencies 13,727,312.03 57,869,163.73 Financial Assistance to NGAs 696,519,030.74 1,092,620,166.54 Financial Assistance to LGUs 966,830.18 4,949,676.06 Budgetary Support to GOCCs 110,000.00 - Financial Assistance to NGOs/POs 104,719,000.00 14,077,080.00 Subsidy to Regional Offices/Staff Bureaus 39,650,000.00 - Subsidy to Operating Units 272,303,181.80 91,342,278.20 Subsidy to Other Funds 10,000.00 - Subsidies - Others 22,932,357,560.94 13,694,874,157.10 Total Financial Assistance/Subsidy to NGAs, LGUs, GOCCs

24,060,362,915.69 14,955,732,521.63

Net Financial Assistance/Subsidy 381,936,802,436.65 346,834,287,451.80

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32. Other Non-Operating Income

32.1 Sale of Assets


Sale of Unserviceable Property 982,408.57 14,989.95 Total Sales of Assets 982,408.57 14,989.95

32.2 Gains


Gain on Sale of Property, Plant and Equipment 2,400.00 55,420.00 Other Gains 10,198,308.27 6,148,764.29 Total Gains 10,200,708.27 6,204,184.29

32.3 Losses


Loss on Sale of Property, Plant and Equipment - 105,267.68 Loss of Assets 1,611,009.93 497,668.65 Other Losses 330,775.53 24,756.41 Total Losses 1,941,785.46 627,692.74

33. Receipt of Cash Allocation

Notices of Cash Allocation (NCAs) received from the Department of Budget and Management are recorded in the Regular Agency (RA) books as well as those income/receipts which the agency are not required to use and are required to be remitted to the National Treasury. Total NCAs received by the Agency for the year to settle its current and prior years’ obligations are stated below.

Region Amount

I 23,728,879,627.61 II 16,514,344,287.38 III 40,364,495,372.56 IV-A 43,114,223,656.86 IV-B 15,082,446,427.18 V 28,242,333,334.03 VI 31,736,449,956.90 VII 29,476,551,818.16 VIII 25,158,541,575.65 IX 16,902,173,902.19 X 18,627,770,100.22 XI 19,456,490,264.38 XII 18,045,210,805.94 CARAGA 14,101,303,197.67 CAR 9,381,477,910.03 NCR 35,066,889,424.04 Central Office 47,438,761,229.15

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Region Amount Attached Agencies 17,361,219.01 Total NCA Received 432,455,704,108.97

34. Reversal of Unutilized NCA

The following is the breakdown of the unutilized NCAs that was reverted back to the National Treasury:

Region Amount

I 185,637,287.83 II 172,222,796.32 III 1,694,863,972.74 IVA 644,069,320.31 IV-B 190,303,816.12 V 883,205,402.77 VI 842,530,919.61 VII 642,535,388.65 VIII 992,309,491.40 IX 265,198,418.06 X 337,913,791.60 XI 1,495,366,537.07 XII 186,610,071.23 CARAGA 822,095,239.35 CAR 196,379,382.37 NCR 4,433,354,337.01 Central Office 12,284,420,652.53 Attached Agencies 450,981.42 Total Reversal of Unutilized NCA 26,269,467,806.39

35. Events after the Reporting Period

A fire incident transpired last January 7, 2018 which caused the damage and loss of all financial transaction documents of the Division Office (DO) of Agusan del Norte for the month of December 2017 and some if not all, for the month of November 2017. Furthermore, all other fixed assets established within the vicinity of the razed structure of the Division of Agusan del Norte were part also of the destruction which led to their impairment. The said documents could no longer be retrieved and delivered as evidence in the release of fund for payment and disbursement. Certification on the relief of accountability of property and loss of financial documents are then furnished by the DO to provide transparency and credibility of the claims.

36. Other Matter All personnel and accounting records were burned when the Office of the Division of Cagayan de Oro City was razed by fire last August 12, 2012. These financial statements still include those accounts that still to be adjusted once requests of the relief of the accountability of all concerned

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accountable officers of the Agency will be approved by the Commission on Audit. As of December 31, 2017, the COA has approved two out of the seven of the said requests.

In FY 2017, the Trust Funds pertaining to collections other than from DepEd Offices were culled out from the Fund 01 (Regular Agency Fund) to be incorporated in the Fund 07 (Trust Receipts). Cash amounting to P19,614,490.14 was transferred to the Fund 07 and the applicable assets, liabilities, income and expenses were also adjusted and transferred.

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OBSERVATIONS AND RECOMMENDATIONS

Value for Money Audit Budget Utilization 1. The DepEd year-end reports reflected a favorable improvement in the utilization

of allotment in CY 2017 compared to previous years, as only P15,734,573,153 or three percent had remained unutilized as of year-end. However, achieving the desired physical outputs for the year were not fully realized as operational lapses in budget utilization were still noted, such as: a) unutilized allotment of P8,319,938,425 caused by delay in the implementation of Government Assitance to Students and Teachers in Private Education(GASTPE) grants and Science and Mathematics Equipment (SME) procurement in Central Office (CO), unfilled positions for teaching and non-teaching personnel and unmet number of school children served in the implementation of School-Based Feeding Program (SBFP) in National Capital Region (NCR), and the late fund releases to operating units and schools reported in five Regions; b) obligations for programs/projects ofP56,271,465,649 incurred in CO were only made in the latter part of the year, including the amount of P13,701,515,748as fund transfer to Department of Budget and Management – Procurement Service (DBM-PS), thus deliveries of their physical targets are definitely deferred to succeeding year; and c) obligations incurred without valid and legitimate claims of P1,283,242,303 in NCR. Moreover, other deficiencies relating to fund utilization also exist, such as incurrence of overdrafts in allotment and obligation in CO, low capacity on disbursement in CO and Corillera Administrative Region (CAR) and not fully utilized cash allocations for the year in CO, RO IX and NCR.

1.1 The DepEd is mandated to formulate, implement, and coordinate policies, plans,

programs and projects in the areas of formal and non-formal basic education and to provide for the establishment and maintenance of a complete, adequate, and integrated system of basic education relevant to the goals of national development.

1.2 National Budget Circular (NBC) No. 567 dated January 3, 2017 issued by the

Department of Budget and Management provides for the Guidelines on the Release of Funds for Fiscal Year (FY) 2017, as follows:

a. The appropriations authorized under RA No. 10924 shall be valid for release

and obligation for the purpose specified and subject to the pertinent special and general provisions:

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

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• For Maintenance and Other Operating Expenses (MOOE), Capital Outlays and Financial Expenses - until December 31, 2018.

b. The President’s veto message for Item III.A of the FY 2017 budget directed

all agency heads to ensure obligation of programs, activities and projects funded under FY 2017 General Appropriations Act (GAA) not later than December 31, 2017.

c. Other Timelines –

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

• FY 2016 Continuing Appropriations for MOOE and Capital Outlay

until December 31, 2017; and

• All FY 2017 programmed amounts under Automatic Appropriations for PS, MOOE, and Capital Outlay until December 31, 2017.

1.3 In FY 2017, DepEd has a total consolidated available allotment1of

P471,982,544,896,of which only three percent or P15,734,573,153 remained unutilized as of year-end. Details are as follows:

Office Year Allotment Transfer/

Sub-allotment Available Allotment

Obligations Incurred Unutilized Balance Overall Unutilized

% Amount % Amount %

a b c=a+b d d/c e=c-d e/c CO 2017 79,950,158,350 (16,757,290,821) 63,192,867,529 59,442,626,208 94 3,750,241,322 6 24

2016 28,501,438,719 (6,584,642,139) 21,916,796,580 18,179,693,879 83 3,737,102,701 17 24 Sub-total 108,451,597,069 (23,341,932,960) 85,109,664,109 77,622,320,087 91 7,487,344,023 9 48

RO 2017 356,955,803,234 16,757,290,821 373,713,094,054 367,332,070,248 98 6,381,023,806 2 41 2016 6,575,144,593 6,584,642,139 13,159,786,732 11,293,581,408 86 1,866,205,324 14 12

Sub-total 363,530,947,827 23,341,932,960 386,872,880,786 378,625,651,656 98 8,247,229,130 2 52 Total 471,982,544,896 - 471,982,544,895 456,247,971,743 97 15,734,573,153 3 100

1.4 A three year period analysis of DepEd’s budget utilization showed a decline in

the unutilized amount, wherein from the 12 percent unutilized budget in 2015 and 10 percent in 2016, it was further reduced to three percent in 2017,to wit:

Year Allotment Obligations Incurred Unutilized Allotment % 2015 351,113,569,961 308,135,967,600 42,977,602,361 12 2016 412,434,829,282 369,435,120,445 42,999,708,837 10 2017 471,982,544,896 456,247,971,743 15,734,573,153 3

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

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

1FY 2017 Status Of Appropriations, Allotments, Obligations,Disbursements and Balances as of March 6, 2018

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

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

CO/Regio

n Unutilized Amount Remarks

CO

7,487,344,023

The amount ofP7,487,344,023unutilized allotments from several programs/projects/activities (PPA) includes huge balances of the following PPAs: Assistance to Students and Teachers in Private Schools and in Non-DepEd Public Schools (GASTPE) – P2,293,760,114

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

Program Physical Targets

Physical Accomplishment Difference

Educational Service Contracting (ESC) for Private Junior High School

2,139,819 1,906,505 233,314

Senior High School Voucher Program (SHS-VP)

2,037,729 1,550,434 487,295

Voucher Program for Non- DepEd Public SHS

211,647 90,196 121,451

Joint Delivery for Technical- Vocational- Livelihood (TVL) Specialization

100,000 - 100,000

Total 4,489,195 3,547,135 942,060

Science and Mathematics Equipment – P2,193,177,344 Most of the unutilized allotment was due to recurring problems in the procurement of SME’s which eventually caused the derailment of planned activities for the year. Based on the 2017 Procurement Monitoring Report, P592,816,132 or 27 percent of the unprocured equipment was attributed to failed biddings.

Details 2017 2016 Total Allotment 4,543,176,000 2,400,346,000 6,943,522,000

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CO/Region

Unutilized Amount Remarks

Awarded Contracts 3,016,059,906 1,734,284,750 4,750,344,656 Details 2017 2016 Total

Unprocured SMEs 1,527,116,094 666,061,250 2,193,177,344 % of Unprocured SMEs 34 28 32 Failed Bidding 177,394,913 415,421,219 592,816,132 % of failed bidding on unprocured SMEs 12 62 27

NCR 733,715,404 Of the total allotments of P30,538,617,491.74, a total of P29,804,902,087.06 or 97.60 percent was obligated, leaving an unutilized balance of ₱733,715,404.68 or 2.40 percent, of which P621,500,267.88 pertains to the following: Unobligated PS allotment amounting to P546,197,741.12 The amount is part of the allocation for the hiring and creation/filling up of positions for elementary and secondary schools teaching and non-teaching personnel and the corresponding Retirement and Life Insurance Premiums (RLIP). The non-obligation thereof was attributable to the 6,433 unfilled positions of teaching and non-teaching personnel for the new items and natural vacancies (retirement/resignation/transfer),over-allotment provided to Implementing Units (IUs), unavailability of new applicants for specific track/strand and transfer of plantilla items from IUs to Non-IUs.

Unobligated MOOE allotment of P38,856,116.76for School Based Feeding Program (SBFP) for SY 2017-2018 The unutilized balance of SBFP funds amounting to P38,856,116.76 as of December 31, 2017 was caused by the decrease in the actual number of beneficiaries as against the target number thereof, wherein NCR targeted the 174,811 beneficiaries but only 158,403 or 91 percent were actually served or a difference by 16,408 school children. Unobligated MOOE allotment ofP36,446,410.00 for Basic Educational Facilities Fund-School Furniture Program (BEFF-SFP) of CY 2017 The procurement activities for the SFP started only on November 9, 2017. The Sub-ARO from DepEd CO was released on December 12, 2017. There was also a failure of bidding that occurred in the opening of bids on December 6, 2017 that became the main cause of the unprocured school furniture for the recipient schools with a total amount of P36,446,410.00.

Particulars Amount Elementary Education (Elementary Schools) 16,358,916.35 Secondary Education ( Secondary Schools) 434,266,484.70 Creation and Filling - up of Positions 36,549,726.97 RLIP - Elementary Education 2,139,667.01 RLIP - Secondary Education (Secondary Schools) 54,822,703.72 RLIP - Creation and Filling-Up of Positions 2,060,242.37 Unobligated PS allotment 546,197,741.12

RO III 840,809 DO Mabalacat City had unutilized allotment of P840,809 as of December 31, 2017 for its special programs/projects. Among the reasons cited were lack of program preparation and having no

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CO/Region


filedclaims from program-takersindicating that intended delivery of physical outputs out of the fund was not achieved.

RO IX

34,084,930 The Regional Office Proper (ROP) reported unutilized Sub-AROs from CO amounting to P34,084,930. Validation revealed that 83 percent or P28,356,300 of the unutilized Sub-AROs were only sub-allotted and received by the ROP in December 2017. This resulted to the non-implementation of scheduled program/project/activity (PPA) during the year, among which are the following:

PPAs Amount Provision and Maintenance of Basic Education Facilities

9,926,100

Human Resource Development for Teaching, Teaching-Related, Non-Teaching and Other Personnel

6,960,000

Basic Education Madrasah 3,998,400 Implementation of Alternative Learning and Delivery Mode Programs including Requirement of Learning Centers

3,000,000

Department of Education Computerization Program (DCP)

783,200

RO XI 40,016,226 The unutilized budget pertains to the allocations for MOOE in the DOs of Davao City, Compostela Valley and Davao Oriental,consiting of 284 schools that were not able to request all their CY 2017 MOOE allocation caused by, among the reasons cited, delayed release of budget allocation, delay in the processing of cash advance requests and liquidaton reports.

RO XIII

23,937,033

Verification revealed that the unutilized budget were sub-allotments receivedfrom CO by the ROP, Nasipit National Vocational School, DOs Agusan del Norte, Agusan del Sur and Bayugan City for the programs listed below. Factors that contributed to the low utilization of funds are: i) incurrence of delay in the release of funds; ii) unsettled previous cash advances which prevents the SBFP Coordinator from drawing another cash advance for the next feeding period; and iii) lack of proper coordination between the Curriculum Implementation Division and Budget Unit.

PPAs Amount Human Resource Development for Teaching, Teaching-Related, Non-Teaching and Other Personnel

10,177,000

Implementation of Alternative Learning and Delivery Mode (ALDM) Programs, including Requirement of Learning Centers

4,084,057

SBFP 3,295,773 Implementation of Alternative Learning System Integrated Education and Skills Training (ALS-IEST) Program

2,693,278

Textbooks/ Instructional Materials (TX/IMs),including ₱100 Million for

2,077,725

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CO/Region


Children with Special Needs PPAs Amount

DCP 1,609,200 Total 23,937,033

Total 8,319,938,425

b. Obligations totaling P56,271,465,649incurred in the latter part of the

yearincluding committed fund transfer to DBM-PSthat deferred the delivery of physical targets to succeeding year

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

Program/Project

Total Obligated Allotments

As of December 31,

2017

Allotments Obligated

only in December

2017

% Remarks

1) Implementation of the Redesigned Technical-Vocational High School (RTVHS) Program

7,823,449,349 7,815,960,303 99 Out of the physical target of 15,707 TVL packages, no items were procured. Thus, the amount of P7,812,673,323 out of the obligated amount of P7,815,960,303 in December 2017 was transferred to DBM-PS.

2) TX/IMs, including ₱100 Million for Children with Special Needs

6,327,286,828 6,162,466,134 97 Out of the physical target of 77,425,496 Textbooks/Teacher’s Manuals (TX/TMs), only 22,270,000 or 29 percent was delivered in CY 2017, expecting the completion of distribution of 55,155,496 TX/TMs or 71 percent in CY 2018.

3) DCP 11,491,878,829 10,968,268,292 95 Out of the physical target of 50,567 Information and Communication Technology (ICT) packages, only 889 or two percent was delivered in CY 2017, expecting the completion of distribution of 49,678 ICT packages or 98 percent in CY 2018.

4) SME 4,750,344,656 3,373,114,756 71 Out of the physical target of 15,627 SME packages, only 3,948 or 25 percent was delivered in CY 2017, expecting the completion of distribution of 11,679 SME packages or 75 percent in CY 2018.

5) GASTPE 41,116,305,954 25,535,009,076 62 The December 2017 disbursements revealed that total amount of P22,783,072,346 were mostly for the account of the SHS-VP, where theparticipating schools must create

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Program/Project

Total Obligated Allotments

As of December 31,

2017

Allotments Obligated

only in December

2017

% Remarks

the billing statement for the first semester from July 1, 2017 to October 31, 2017 and the billing statement for the second semester from December 1, 2017 to March 31, 2018 for SY 2017-2018 grants.It was, however, noted from paid claims that P5,817,269,688 or 14 percent of the total obligated allotments of P41,116,305,954 are late payments from previous school years’ billings, which includes SYs 2014-2015, 2015-2016 and 2016-2017.

6) Provision and Maintenance of Basic Education Facilities

2,771,985,130 1,100,054,145 40 The DepEd CO shall procure school furniture from cooperatives of Persons with Disability (PWD) using the 10 percent budget allocation earmarked for the government’s assistance to PWDs. There was no delivery out of the physical target of 21,952 school furniture in CY 2017, expecting the accomplishment of the physical target in CY 2018.

7) Other Programs and Projects

2,844,802,046 1,316,592,943 46 Human Resource Development for Teaching, Teaching-Related, Non-Teaching and other personnel is one of the major programs having unutilized budget which was affected by recruitment gaps wherein for the FY 2017 funding, only 28,680 or 53 percent of the targeted 53,831 plantilla positions were filled-in.

Total 77,126,603,443 56,271,465,649 73

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

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

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

1.9 Forming part of the obligation incurred in December 2017 in DepEd CO, the allotment of P13,701,515,748 allocated for various major programs and projects was committed as fund transfer to DBM-PS covered by a Memorandum of

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Agreement2 executed by the DepEd and DBM-PS. Such amount registered a significant increase of 469 percent compared with fund transfer in 2016 as shown below.

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

Program/Project Total Allotment Description Obligation %

Implementation of the RTVHSProgram – Current

7,276,246,000 Tools and Equipment for 11,154 TVL Specializations of 3,152 Public Senior High Schools for Grades 11 and 12Technical and Scientific Equipment

7,062,830,333 97

Implementation of the RTVHS Program – Continuing

2,096,191,420 749,842,990 36

TX/IMs, including ₱100 Million for Children with Special Needs – Current

3,040,831,000 Textbooks and Instructional Materials

2,480,017,738 82

TX/IMs, including ₱100 Million for Children with Special Needs – Continuing

3,623,313,635 1,699,213,710 47

DCP– Continuing 4,901,663,888 Information and Communications Technology Equipment

630,301,452 13

DCP– Current 6,853,359,000 332,000,000 5

SME – Current 4,543,176,000 Technical and Scientific Equipment

196,159,855 4

Implementation of ALDM Programs, including Requirement of Learning Centers – Current

653,436,000 Information and Communications Technology Equipment

100,000,000 15

Provision and Maintenance of Basic Education Facilities – Current

526,947,959 Furniture and Fixtures 164,541,780 31

National Assessment Systems for Basic Education – Continuing

284,617,442 Printing and Publication Expenses

753,551 .3

National Assessment Systems for Basic Education – Current

479,048,000 Assessment Test Materials 64,991,924 14

Disaster Preparedness Program– Continuing

288,933,622 Personal Protective Equipment

8,812,000 3

Hiring of consultants 250,000 Site Development Plan – Current 100,000,000 Service Provider for the

preparation of school site development plans covering 3,853 schools

100,000,000 100

Education Information and Communication Services – Current

32,417,000 Consultant 660,000 2

2Notarized date of December 28, 2017

Description Year Increase 2016 2017 Amount %

Amount Transferred to DBM-PS

2,416,622,629 13,759,529,478 11,342,906,489 469

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Program/Project Total Allotment Description Obligation %

Development and Implementation of Education Projects – Continuing

51,456,233 Service Provider for monitoring of conduct of DCP

3,000,000 6

General Management and Supervision - Central Office – Current

1,138,426,201

Air conditioner 9,805,000 7

Motor Vehicles 49,110,000

Furniture and Fixtures 15,000,000

Fleet Card Services for DepEd Officials Vehicles

4,000,000

Renovation of the Office of the Secretary

3,088,090

Consultant/ Programmer for the Cash Disbursement and Receipts Databases System

420,000

General Management and Supervision - Central Office – Continuing

539,617,282 Office Equipment 12,850,000 5 Structural Investigation and Detailed Engineering for the rehabilitation of Mabini and Bonifacio Dorm D and E and repair of gutter and downspout

7,617,325

Consulting Services for the Assessment of existing DepEd Electric Power System

6,250,000

Total 36,429,680,682 13,701,515,748 38

1.11 Although transfer of funds to DBM-PS is permissible, the year-end obligation in favor of DBM-PS of P13.70 billion would eventually increase the current outstanding balance ofP7 billion to P20.70 billion as unliquidated fund transfer of DBM-PS due to DepEd CO,once such transfer shall be effected.

1.12 Moreover, DBM-PS requires two percent service charge estimated atP274

million procurement cost, which in effect reduces DepEd’s allotted budget for its programs/projects. This additional cost could reduce expected deliverables of programs/projects or could have been savings generated if DepEd was able to utilize its available resources by efficiently carrying out the planned activities for the program implementation.

1.13 It has to be reminded that fund transfer would somehow improve budget

utilization but it does not demonstrate the Agency’s competence to administer its own programs and projects to serve its mandated functions. Because in reality, DepEd CO still fell short in its expected education service delivery in terms of equivalent physical outputs out of the utilized budget.

c. Obligations incurred in total amount ofP1,283,242,303.45 without valid and

legitimate claims

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1.14 In NCR, out of the total obligated balance of P29,804,902,087.06, the amount of P1,283,242,303.45 was obligated without any valid and legitimate claims or specific payees, apparently to avoid the adverse effect on future budget level of the agency for its failure to obligate its CY 2017 appropriations as provided under Item III.A of the President’s Veto Message in the GAA for FY2017. These obligations which werefound not properly supported by sufficient evidence to establish validity of their incurrence violatedSection 46 of PD 1177.DOs with invalid obligations are listed in the table below.

Division Office Amount of Invalid Obligation

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

d. Other deficiencies

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

disbursements in excess of obligations incurred

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

Program/Project/Activity (PPA) Allotment Obligated Amount Overdraft

General Administration and Support 15,915,939.51 15,935,496.12 (19,556.61) Pre-Regional and Regional Palaro and Conduct of the "Palarong Pambansa"

416,000.00 509,949.00 (93,949.00)

Education Information and Communication Services

1,862,113.00 2,059,791.84 (197,678.84)

1.16 The overdraft incurred may be minimal but it signifies weakness in monitoring

proper controls in budget allocation and utilization, and likewise indicates poor planning.

1.17 The SAAODB also showed existence of excessive amount of disbursements

vis-a-vis the obligated amount for the year for the following PPA:

Program/Project/Activity (PPA) Obligated Amount Disbursement Excess

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Program/Project/Activity (PPA) Obligated Amount Disbursement Excess

General Administration and Support 209,842,650.88 209,862,142.09 (19,491.21)

Pre-Regional and Regional Palaro and Conduct of the "Palarong Pambansa"

4,888,092.17 6,078,668.68 (1,190,576.51)

National Assessment Sytems for Basic Education

20,141,832.37 20,552,923.56 (411,091.19)

Development and Promotion of Campus Journalism

2,228,958.82 2,521,073.50 (292,114.68)

Department of Education Computerization Program

9,183,129.00 13,696,149.53 (4,513,020.53)

Retirement Benefits Fund (PGF) - Monetization of Leave Credits

6,807,196.29 6,809,119.34 (1,923.05)

Educational Project Development and Implementation Task Force

1,021,993.92 1,026,533.40 (4,539.48)

School Health and Nutrition Center 918,002.64 980,860.20 (62,857.56) Continuing Fund Curricular Programs, Learning Management Models, Standards and Strategy Development

143,250.00 220,539.00 (77,289.00)

Implementation of Indigenous Peoples Education Program

20,601,978.59 21,607,978.49 (1,005,999.90)

1.18 This is a serious mistake which should have been avoided. It has to be

emphasized that payment or disbursement in excess of obligation is contrary to budgetary regulations where the approving officers/employees may be held personally liable/accountable.

d.2 Lowdisbursement capacity

1.19 NBC No. 567 dated January 3, 2017 provides for the guidelines for the validity

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

1.20 Chapters 2 and 3 of the GAM, Volume 1 provide for the guidelines

fordisbursements and budget monitoring.

1.21 In CY 2017, DepEd CO has a total available allotment3 of P85,109,664,109 of which 91 percent or P77,622,320,087 was fully obligated, with only 33 percent or P25,753,997,695 had been paid, leaving unpaid obligations of P51,868,319,152 at the end of the year. Details are as follows:

Appropriation’s Obligations Incurred Disbursements Unpaid Obligations

3FY 2017 Status Of Appropriations, Allotments, Obligations,Disbursements And Balances as of March 16, 2018

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FY Amount Amount % Amount % 2017-Current 59,442,626,208 19,261,724,017 32 40,180,902,191 68 2016-Continuing 18,179,693,879 6,492,273,678 36 11,687,416,961 64 Total 77,622,320,087 25,753,997,695 33 51,868,319,152 67

1.22 The low disbursement rate of 33 percent out of the obligated allotment

obviously indicates that the contracted projects had missed the expected physical targets. Programs with low disbursement rates are the following:

Program/Projects Total Obligated

Amounts Disbursements %

Implementation of the RTVSHP 7,823,449,349 4,489,516 0.1 TX/IMs, including P100 Million for Children with Special Needs

6,327,286,828 86,765,481 1

DCP 11,491,878,829 534,732,974 5 SME 4,750,344,656 746,016,742 16 GASTPE 41,116,305,954 21,634,320,222 53 Provision and Maintenance of Basic Education Facilities 2,771,985,130 816,568,691 29 Other Programs and Projects 3,341,069,341 1,931,104,069 50 Total 77,622,320,087 25,753,997,695 33

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

some programs/projects, in which 95 percent or P126,199,412.82 had been obligated; however, only 12 percent or P15,245,312.68 had been disbursed, details are as follows:

Source of

Funds Program/ Project Office Allotment

Obligation Disbursement

Amount % Amount %

Current

Classrooms and SBs

DO Apayao 13,450,000.00 13,320,000.00 99 3,190,000.00 24 DO Ifugao 30,455,966.24 30,402,620.49 100 11,867,772.68 39

School Furniture ROP 42,737,900.00 42,531,610.00 100 - RTVHSP DO Apayao 2,000,000.00 -

-

Sub - total 88,643,866.24 86,254,230.49 97 15,057,772.68 17

Continuing School Furniture ROP 2,355,001.52 2,342,257.50 99 - RTVHSP ROP 41,714,098.80 37,602,924.83 90 187,540.00 0.45

Sub - total 44,069,100.32 39,945,182.33 91 187,540.00 0.00 Total 132,712,966.56 126,199,412.82 95 15,245,312.68 12

1.24 The low disbursements also signifies that expected outputs for the year from the

foregoing projects were not fully attained.

d.3 Cash allocations not fully utilized

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

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Office Quarter Received Utilized Lapsed NCA

Amount %

CO 1st 8,194,431,972 7,957,367,041 237,064,931 3 2nd 6,507,065,272 3,882,319,280 2,624,745,992 40 3rd 5,911,985,051 5,826,482,813 85,502,238 1 4th 25,508,469,165 16,172,902,133 9,335,567,032 37 Total 46,121,951,460 33,839,071,267 12,282,880,193 27

RO IX 1st 74,558,877 - 74,558,877 100 2nd 28,663,602 - 28,663,602 100 Total 103,222,479 - 103,222,479 100

1.26 The lapsed NCAs are indications that funded programs/projects were not

completely implemented as planned, as the supposed financial resources allocated had not been fully utilized.

1.27 While in the NCR, the use of cash allocations posted unauthorized transfer of

unutilized/excess NCAs/Notice of Transfer of Allocations (NTAs) totaling P1,612,348,892.22 from the MDS Accounts to the Current Accounts, details of which are as follows: No. Office Bank Account No. Amount Collected 1 ROP LBP Account No. 0692-1020-61 114,231,115.24 2 DO Quezon City LBP Account No. 0692-1020-70 644,449,095.78 3 DO Manila City LBP Account No. 1982-1001-07 595,212,996.92 4 DO Caloocan City LBP Account No. 0482-1044-44 27,529,164.61 5 DO Valenzuela City LBP Account No. 0252-1050-42 15,872,702.68 6 DO Malabon City LBP Account No. 0652-1019-68 37,258,825.06 7 DO Navotas City LBP Account No. 1592-1010-64 95,520.21

LBP Account No. 1521-10-10-56 2,012,676.03 8 DO Pasig City LBP Account No. 0672-1073-93 28,259,321.70 9 DO Marikina City LBP Account No. 2272-1017-18 462,193.78 10 DO San Juan City No data provided 6,862,372.96 11 DO Pasay City No data provided 46,650,719.38 12 DO Muntinlupa City LBP Account No. 0392-1027-87 31,625,355.81 13 DO Parañaque City LBP Account No. 1562-1020-74 12,709,252.94 14 DO Las Piñas City LBP Account No. 1552-1018-60 49,117,579.12 Total 1,612,348,892.22

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

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

1.29 We recommended that the Management require:

CO to –

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

NCRto –

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

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

c. disregard all obligations without legitimate claimants and valid

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

CO and ROsto –

d. identify the bureaucratic bottlenecks in the procurement system and

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

e. strictly monitor through maintenance of subsidiary records incurrence

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

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

timely delivery of basic education services.

1.30 Below are the Management’s comments/responses relative to the forementioned observations/recommendations.

CO/

Region Management’s Comments

CO Management sincerely acknowledged the findings on favorable improvements the Department achieved in the utilization of allotment. This financial performance can be attributed to the program, financial management, procurement process reforms and strategic interventions instituted by the Executive Team of the Department that will also address the COA recommendations:

Recommendation Management’sReform/Intervention In identifying the bureaucratic bottlenecks in the procurement system that tend to delay program implementation, as well as, budget non-utilization

• Re-constituted six BACs under DepEd Order No. • 2018-008 dated March 7, 2018 primarily to undertake

the functions mandated under RA No. 9184 and its Revised Implementing Rules and Regulations(IRR) and to focus on specific programs and transactions;

• Updated the processes and procedures on Activity Request (AR) and Authority to Procure (ATP) minimizing documents needed for each type of

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CO/ Region Management’s Comments

request. In making a thorough and careful study on the viability of transfers to DBM-PS and conduct reconciliation of balances to ensure the funds transferred were fully liquidated in terms of delivery

• Created the DepEd Task Force to monitor the progress and status of funds transferred to DBM-PS under Office Order No. 00-Osec-2018-028 dated April 16, 2018;

• Outsourced the procurement tasks of some items to DBM-PS under the MOA entered into by DepEd with the DBM-PS wherein DepEd is still accountable for the transferred funds.

In ensuring the optimum utilization of funds received vis a vis timely delivery of basic education services

• It will continue to enjoin program planners and implementers across the governance levels in the Department to make the necessary adjustments in their work systems and processes, to continue to conduct emergency and regular collaboration sessions with program teams and executive leads in the Department to diagnose bottlenecks, constraints and challenges being faced in the program implementation.

NCR The Management of DOs of Malabon City and Navotas City commented that they will stop the practice of making obligations without valid claimants, and also commented that some funds for special programs were received on the last quarter of the year which prompted them to transfer it to current account in order not to hamper its implementation.

RO III The Management of DO Mabalacat City commented that the Budget Unit was already implementing the proper communication of receiving Sub-AROs by channeling it to its respective program taker. The recommendation will be highly considered and with compliance with cited provisions, laws and regulations.

RO IX Management commented that FY 2017 Budget Circular Guidelines prohibits the RO to issue funding checks to the IUs notwithstanding the Allotment are sub-alloted, hence the lapsing. The lack of material time to complete the procurement process due to the late release of the Sub-AROs by the Central Office to the RO is also one of the main reasons why allotments were not utilized.

RO XIII The Management of Nasipit National Vocational School -DO Agusan del Nortewas advised to write a letter of withdrawal so that it will not be recorded as unutilized. The withdrawal letter until now has no reply. Management of Agusan Del Sur agreed that the budget was not utilized and all the items were not delivered in CY 2017. Management of Bayugan City stated that the main reason why the allocation for the Distribution Fund for the delivery of learning resources remained unutilized is because the school heads/property custodians did not anymore claim for the transportation cost of these books to their schools because the books were picked up from the DO during occasions when there are Mancon Meetings or conferences.

Implementation of DepEd Computerization Program (DCP) 2. The DepEd Computerization Program (DCP) revealedimplementation gaps

showing: a) ninety-nine percent overall CYs 2015 to 2017 physical target deficiency or at least 77,704 schools still awaiting forthe Information and Communcations Technology (ICT) packages,including the 17,016 identified recipient schools with undelivered packages out of theP2,059,940,765.59 from

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CY 2015budget transferred to DBM-PS in CY 2016; b) extended contract execution timeline up to 25 days from approval of Resolution to Award on awarded procurement under DCP CY 2017; and c) deficiencies observed in the deliveries and utilization of ICT packages such as unmet counterpart readiness requirements for the schools, defective/ incomplete items/ uninstalled delivered packages, poor after sales service by suppliers and weak financial reporting compliance, among others. These gaps deferred the timely provision of necessary learning interventions to intended users of DCP packages and weakened controls in proper safeguarding of public funds and property.

2.1. Over the years, the implementation of the DCP Program has never been easy as

management continuously struggling to lessen if not to eliminate, recurring problems of delayed procurement, late delivery, non-readiness of the selected recipient schools, poor monitoring strategy and delineation of property accountability which adversely affected the attainment of the program’s objective. DepEd tapped the services of DBM-PS and United Nations Development Programme (UNDP)despite the fact that it entailed additional cost and encountered difficulty in tracking deliveries due to deficient reporting requirements. However, it also failed to deliver the expected results because some of the problem lies in the internal system, project’s size and volume and that the transfer was apparently not carefully planned and studied but was opted to secure and place the allotted budget on hold, to minimize the impact of delayed implementation.

2.2. Audit revealed that deficiencies still persist affecting the timely provision of

necessary learning interventions of intended users of DCP packages.

a. Ninety-nine percent physical target deficiency in schools to have ICT packages or at least 77,704 schools still awaiting for ICT learning equipment,including the 17,016 identified recipeint schools as beneficiaries fromtransferred funds of P2,059,940,765.59 to DBM PS in CY 2016

2.3. The Agency’s Physical Report on Operations as of December 31, 2017

disclosed that out of the 78,140 targetted school recipients of ICT Packages under the DCP for CY 2015-2017, only 436 received delivery showing an overall 99 percent deficiency vis-a-vis expected physical target. The details are provided in the next table.

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Budget Year/Batch Particulars

No. of Schools to Receive ICT Package

Remarks4 Physical Target

Physical Accomplish-

ment Variance

CY 2015 Batches 29 to 32 (K to 10)

13,158 - (13,15) Allotted budget was transferred to DBM-PS.

Batch 33 (SHS) 991 436 (555) Remaining items are for rebid at DBM-PS. Delivered items were procured by DepEd.

Batch 34 (Unenergized ICT for Luzon and Mindanao)

11,070 - (11,070) Allotted budget was transferred to UNDP with scheduled delivery of ICT before June 2018.

Batch 34 (Unenergized ICT for Vizayas)

3,303 - (3,303) Allotted budget was transferred to DBM-PS.

Sub-total 28,522 436 (28,086) CY 2016

Batch 35 (K to 10) 715 - (715) Awarded to winning bidder in December 2017 with ICT delivery schedule before June 2018.

Batch 36 (SHS) 4,426 - (4,426)

Sub-total 5,141 - (5,141) CY 2017

Batches 39-46 and 48 (K to 10)

44,417 - (44,417) Remaining batches 40-44awarded to winning bidder in December 2017 with ICT delivery schedule before June 2018.

Batches 47, 49 and 50 (SHS)

60 - (60) Committed o be transferred to DBM-PS.

Sub-total 44,477 - (44,477) Grand Total 78,140 436 (77,704)

% to Total 100 1 (99)

• DCP CY 2015

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

2.5. For Batch 34 on the provision of Unenergized DCP Package for Luzon and

Mindanao, funds were transferred to UNDP with original timeline for delivery per Project Document of June to December 2016. But validation from the ICTS report shows that the project is still on-going as of December 31, 2017. It has also been observed that the number of recipient schools has a discrepancyof 6,669 between the Agency’s Physical Report of 11,070 schools and as per

4Taken from the Information and Communication Technology Service (ICTS) year-end report

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UNDP Project Document of 4,401 schools which ICTS was not able to account as of audit date.

• DCP CY 2016 and 2017

2.6. Total available budget for DCP 2017 wasP11,484,254,584.52consisting of

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

Name of Supplier No. of Con-tracts

Lots Awarded

No. of Packages

Total Contract Cost

Date of Receipt of

NTP

Expected Completion

Date RedDot Imaging Philippines Inc. JV With Shenzen Kstar Science and Technology Co.,LTD

2 1,6,8 14,780 3,999,859,904.13 12/14/2017 7/12/2018

Columbia Technologies Inc. 2 2,4 8,953 2,693,156,569.00 12/15/2017 7/13/2018

Girlteki Inc. JV with Shenzhen Hasee Computer Co., LTD 1 5,7 9,389 2,557,047,068.95 12/14/2017 7/12/2018

Allcard Plastics Philippines Inc., JV with Silicon Valley Computer Group Phils., Inc.

1 3 3,003 738,738,685.28 1/9/2018 8/7/2018

Total 6 8 36,125 9,988,802,227.36

2.7. The DepEd’s Physical Report of Accomplishment clearly shows no delivery yet

for the P9.9 billion awarded contracts as five out of six contracts were perfected in December 2017 and one was perfected only in January 2018. As per contract stipulation, delivery is to be made within 210 calendar days from the receipt of Notice to Proceed by the suppliers. Hence, the delivery is expected to be completed in July and August 2018.

2.8. Also noted was a discrepancy in the Physical Target for the CY 2017 DCP

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

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

Resolution to Award

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

2.10. It was also noted that contract signing activities were completed in two to 25

days after the date of Notice to Award (NOA) for contracts; while the number of days that lapsed from the approval of Resolution to Award (RTA) to winning bidders’ receipt of NOA ranges from one to eight days. Detail of which are shown below:

Lot No. Contract No. Approval of

RTA

Winning Bidder's Date of

Receipt of NOA

No. of Days

lapsed from

Approval of RTA

Date of Contract Mandated Contract Signing

No. of Days of Delay in Contract Signing

3 2017-08-ICTS1 (001,002 &004 to 016)-BII-CB022-C038

11/17/2017 12/5/2017 18 1/9/2018 12/15/2017 25

4 2017-08-ICTS1 (001,002 &004 to 016)-BII-CB022-C030

10/26/2017 11/3/2017 8 No date (Date of Notary Public 12/5/17)

11/13/2017 22

5,7 2017-08-ICTS1 (001,002 &004 to 016)-BII-CB022-C031


11/12/2017 22

8 2017-08-ICTS1 (001,002 &004 to 016)-BII-CB022-C032


11/12/2017 22

1,6 2017-08-ICTS1 (001,002 &004 to 016)-BII-CB022-C035


12/4/2017 2

2.11. Nevertheless, the Audit Team observed improvements in the conduct of several

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

c. Recipient schools’ feedback for UNDP procured computer packages and

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

2.12. On March 23, 2016, DepEd and the UNDP entered into an agreement for

development support services in the course of the implementation of 2016 K to

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12 Basic Education Program. Under the Cost-Sharing Agreement between the UNDP and DepEd, the latter will place at the disposal of UNDP the fund transfer of P2,404,329,480.00 for DCP, breakdown of batches is shown in the table.

DepEd Budget

Allocation/ Fund Source

Description

Number of Recipient

Schools and Packages

ABC Status

2016 DCP Batch 37 - SHS Regular Package (Stand Alone)

184 150,792,600.00 Completed

Batch 38 - SHS Special Package (arts and design, technical drafting , illustration TVL, programming, medical transcription TVL) + Pen Tablet

889 1,146,702,984.00 Completed

2015 DCP Batch 34 - DCP Package for Unenergized Schools

4401 1,106,833,896.00 To be updated by ICT Service

Total 2,404,329,480.00

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

2.14. The Audit Team of DepEd CO validated thru confirmation procedure the

delivery of the completed batches for DCP 2016, Batches 37 and 38. Confirmation letters were sent to 604 selected recipientschools out of the total 1,073 schools. Out of the 604 confirmation sent,only 113 replied as of report date.

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

Item Nature of Deficiency No. of

RecipientSchools 1 Items not recorded in the books of account as assets 113 2 Not fully compliant with school readiness requirement 12 3 Items not in good operating condition 10 4 Incompete/lacking items 3 5 Not properly installed and tested by supplier 3 6 Other Issues to be addressed 5

2.16. Moreover, summarized hereunder are the deficiencies in the deliveries and

utilization of ICT packages in different ROs observed by respective Audit Teams:

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c.1 Partial/Non-utilization of ICTpackages due to unreadiness of recipient schools

Region DCP Batches Observations/Deficiencies

NCR 37,38 DCP packages recieved by 24 SHS were either transfered to other SHS for safekeeing or transferred to other buildings until the construction of the SHS where they will be housed are completed.

About 53 recipient SHS in 16 DOs have not adequately provided the counterpart requirement such as multi-media rooms, computer tables, windows and doors with iron grills, proper electrical wirings with circuit breaker and/or standard electrical outlets with appropriate load capacity duly certified by the Municipal / City Electrician hindering the full utilization of the delivered packages.

RO III 29,30,31,33 No adequate security measures noted in various schools in Pampanga, Nueva Ecija and Zambales, such that 101 IT equipment worth P7.5 million were lost thru robberies.

RO IV-B 38 Computer laboratories in four out of seven recipient High Schools of Division of Romblon have no iron grills on its doors, thus, rendering these schools non-compliant with the Counterpart Requirements as part of assessing School’s Readiness for the program.

RO XI 26,27,30,33 About 95 out of 185 recipient schools for the batches were considered partially/not ready because they were not able to meet all the counterpart requirement.

The poor condition of the Multi-media room, among others, is contributory to the very short lifespan of the computer packages. Some schools reported that they only get to use their computer packages for six months to one year.

c.2 Defective ICT packages and poor after sale assistance from supplier


NCR 37,38 Noted items delivered to eight SHS in five DOs were found defective or damaged and unreplaced during the Audit Teams’ inspection.

CAR 16, 19, 20, 24, 26, 27, 33

Items delivered in 77 schools in Ifugao costing P4.71 million were no longer functioning. These packages were delivered by Red Dot Imaging Philippines Inc., and Advance Solutions, Inc.The defects are already reported to the supplier's representative and DepEd RO and CO as per ICT Coordinator of DO Ifugao. However, no feedback was received to date. Thus, the defective computer packages were left unutilized at the computer rooms, libraries or offices of the school heads, resulting in wastage of P4.71 million in government resources.

RO II 38 Three schools reported a total of five defective units, three of which were not yet resolved.

RO IV-B 38 Of the seven recipients schools in DO Romblon, three schools have reported malfunctioning of computers, uninterruptible power supply and printer after months of use. Interview with the ICT Coordinators and Property/Supply Officers revealed that they tried to contact the supplier but the latter was out of

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Region DCP Batches Observations/Deficiencies reach.

RO XI 26,27,30,33 Pablo Lorenzo National High School reported that seven LCD Projectors under DCP Batch 33 received last January 2017 are no longer functional.

Forty schools under Batch 26 while eight schools under Batch 27 have defective components that need replacement, repairs and/or reconfigurations.

Most of the recipient schools that reported to have defective computer units and have not fully utilized their DCP Packages was due to lack of proper and conducive Multi-media classrooms.

Many of recipient schools reported a defective Host PC which affected the performance of the entire computer packages.

c.3 Incomplete or absence of documents for the recognition in the books of

accountsand transfer of accountability of delivered ICT equipment in the recipient DOs/Implementing Units (IUs)

Region Division DCP Batch/es Observations/Deficiencies

NCR Quezon City, Manila, Caloocan, Valenzuela, Malabon, Navotas, Pasay, Parañaque, Las Piñas, Munitinlupa, Pasig, Marikina, San Juan, Makati, Mandaluyong, Makati, Taguig/Pateros

37,38 All DOs of NCR showed that the cost of the delivered computer packages as well as its depreciation remained unrecorded in their books, which resulted in the understatement of the account balances of the ICT Equipment, Subsidy from Central Office, Depreciation Expense and Accumulated Depreciation-ICT Equipment. Section D.1 of the DCP Orientation Handbook, UNDP Edition, provides the procedures in recording the receipt of DCP packages among which is the issuance by the DepEd CO of the Property Transfer Report (PTR) and Journal Entry Voucher (JEV) dropping from the DepEd CO’s books of the procured computer packages, which will serve as the DO/IU’s basis for recording the receipt thereof.

RO I Ilocos Norte 26, 27, 28, 29, 34, 37,38

Delivered ICT Equipment and computer packages were not booked up by the DO Accountant due to the absence of documents.

The required PTR to support the property procured by DepEd CO was not yet issued to the DO which resulted to unrecorded property in the books of the agency. The request for relief from property accountability for DCP Equipment lost due to robbery cannot be acted by the Management of the DO and the Audit Team because there is no basis as to the exact valuation of the lost property as required under COA Memorandum No. 92-751 dated February 24, 1992.

Ilocos Sur 27, 28, 29, 30,33

Dagupan City 7, 13, 14, 16, 18, 19, 24, 25, 26, 27, 29, 30,

33, 38 Urdaneta City 14, 16, 24, 25,

26, 29, 30, 31,38

La Union 19, 20, 24, 26, 27, 28, 29, 30,

33, 37,38 Laoag City 26, 29, 30,

33,38

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Region Division DCP Batch/es Observations/Deficiencies RO II Isabela 38 The PTRs for ICT Packages fromDepEd CO-

Asset Management Division indicate the total cost per recipient school but not the cost of each item. PTRs serve as basis for the CO in dropping from its books the computer packages and the DO to recognize such in its books.

Isabela 14,16,13,25

Ilagan 26-28

RO III Tarlac Province and Tarlac City

29,30,31,33 The ICT Packages were not yet recognized in the books of accounts of the DO due to the absence of the necessary documents as bases in recording. It was also observed that the acquisition costs were not indicated in any of the documents in the custody of the supply officers of the recipient schools.

RO IV-B Romblon 38 The ICT packages remained unrecorded in the books of the DO and IUs. It was noted that the DO Accountant had not received JEVs from CO. Thus, ICT Equipment and Subsidy from Central Office accounts as well as the corresponding depreciation on the property remained not recognized in the books of the DO and IUs.

c.4 Other related issues/concerns

Region DCP

Batches Observations/Deficiencies

NCR 37,38 • ICT Packages under Batch 37 were delivered to the three schools in DO Navotas, namely: Kaunlaran HS, Tangos HS and San Roque HS, instead of delivering Batch 38 as indicated in the list provided by the DepEd CO.

• Camarin HS, Cielito Zamora HS, MB Asistion Sr. HS Unit 1 and Caloocan City Business HS received computer packages for Batches 37-38; however, the said schools were not included in the list of recipient of computer packages provided by the DepEd CO.

• No package was delivered to Taguig Elementary School (ES)

which was identified as one of the recipient school under DCP Batch 37.

• The package intended for Pateros ES under DCP Batch 37 was

delivered and installed to Pateros NHS.

• One package under DCP Batch 37 was allotted to Brgy. Fort Bonifacio, Taguig City, but there is no such school under DO of Taguig City and Pateros, so no allotted computer package was delivered to the Division or to any school within the DO.

• DCP Batch 38 intended for Isaac Lopez Integrated School was

delivered at night time and was received by the school guard.

• Some items of the computer packages were noted unutilized during inspection in eight recipient schools of six DOs due to reasons other than the aforementioned deficiencies: a) Head phones and projector screen were stored in stock room. b) Pen Tablets were unutilized due to adequate units held by

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schools (e.g from Donations from LGUs) or recipient do not offer subject or course intended for the items.

RO I Not indicated

• Weak internet access and shortage of computer units in most elementary and secondary schools in the DOs of Pangasinan II and La Union.

RO IV-B 38 • In DO Romblon, the graphics tablets were not yet utilized or underutilized because the schools do not offer the Arts and Design program.

2.17. DepEd should look into the foregoing deficiencies which can be detrimental to

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

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

actions to address the foregoing deficiencies cited:

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

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

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

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

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

d. institute effective reporting mechanism to immediately monitor

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

e. come up with specific guidelines especially those affecting financial

reporting compliance;

f. look into the reported deficiencies on deliveries and identify the responsible supplier for immediate rectification; and

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

prevent wastage of government resources.

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2.19. The Management of CO duly noted the observations and will ensure to continue

to endeavor together with other offices to comply with the timelines prescribed in the Revised IRR of RA No. 9184.

Basic Educational Facilities Fund (BEFF) – Repairs and Rehabilitation of School Buildings 3. Eight regions fell short in achieving the objective of improved physical facilities

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

appropriated annually starting FY 2011 GAA to address the classroom, water and sanitation facilities, and furniture requirements of the schools.

3.2. From FY 2013, the BEFFs were appropriated for the provision and maintenance

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

3.3. DepEd under the GAA for FYs 2013 to 2017 was provided the following

appropriations on BEFF: Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

PPA No. A.III.e.17.o 302070000 302070000 302070000 302070000 Repair, rehabilitation and renovation of school buildings and the repair of water and sanitation facilities

4,936,995,000 2,850,840,000 2,938,367,000 4,006,000,000 4,994,325,000

Acquisition of school desks, furniture and fixtures

1,645,665,000 1,117,845,000 1,206,212,000 3,406,390,000 2,474,573,000

PPP-SBP 4,000,000,000 1,628,071,000 1,628,071,000 1,628,000,000 1,628,071,000 Total 10,582,660,000 5,596,756,000 5,772,650,000 9,040,390,000 9,096,969,000

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

3.5. Section 10 of the DepEd Order No. 94 states that, “x x x Division Offices as

implementing units shall undertake the contract implementation up to Php15 Million worth of projects per contract whether single or clustered while the Regional Offices shall undertake the contract implementation of more than Php15 Million up to Php20 Million worth of projects per contract whether single or clustered.

3.6. Enclosure No. 2 of the DepEd Order further provides the Guidelines on the

Implementation of Repair/Rehabilitation of Classrooms including Heritage Buildings, and Water and Sanitation Facilities funded under the BEFF. The guideline has set the manner of allocations for the said project which shall be equitably distributed to all legislative districts on the basis of the following:

a. Data on reported school with structural defects; b. Data on shortage of toilet and water facilities from the latest Basic

Education Information System (BEIS); c. Unfunded requirements for school damaged by typhoon and other

calamities; d. Data on the reported costs of restoration of Gabaldon and other types of

heritage buildings; and e. Other priority schools reporting needing immediate repair/rehabilitation.

3.7. The Audit Teams of Regions NCR, CAR, I, III, IX, XI, and XIII conducted

auditorial review of the contracts, verification of the related documents and inspection of the implementation of repair of classrooms funded in CYs 2017and 2016 and noted the following observations:

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

Classrooms Sub-Allotment Release Orders (Sub-AROs) amounting to P260,976,903.01to the ROs NCR, CAR, and I, of which SAROs with total allocation ofP240,113,554.50 was onlyreleased during the third and fourth quarters of 2017 and 2016 that hindered the timely implementation of the projects as planned. Details are as follows:

Region/DO Sub-AROs

No. Date Amount CY 2017

NCR Quezon City OSEC-NCR-17-5539 03-Jul-17 32,488,850.00 Malabon City OSEC-NCR-17-5345 03-Jul-17 8,974,350.00 Makati City OSEC-NCR-17-0301 1st quarter 10,012,043.73 Pasay City OSEC-NCR-17-05340 03-Jul-17 24,990,000.00 Muntinlupa City OSEC-NCR-17-05344 03-Jul-17 3,880,800.00 Parañaque City OSEC-NCR-17-05341 03-Jul-17 5,880,000.0

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Region/DO Sub-AROs No. Date Amount

Las Piñas City OSEC-NCR-17-05346 03-Jul-17 23,185,800.00 CAR OSEC-CAR-17-05166 03-Jul-17 24,500,000.00 RO I La Union OSEC-1-17-5186 03-Jul-17 36,600,695.93 San Fernando OSEC-1-17-5191 03-Jul-17 3,512,910.77 Sub-total 174,025,450.43

CY 2016 NCR Quezon City OSEC-NCR-16-4596 07-Sep-16 49,543,202.60

Pasay City OSEC-NCR-16-4594 07-Sep-16 2,934,840.00 OSEC-NCR-16-7334 23-Dec-16 3,695,916.35

Muntinlupa City OSEC-NCR-16-4591 07-Sep-16 8,768,388.16 Parañaque City OSEC-NCR-16-4593 07-Sep-16 11,157,800.69 Las Piñas City OSEC-NCR-16-1670 2nd quarter 10,851,304.78 Sub-total 86,951,452.58 Total 260,976,903.01

b. It was noted that the NCR-DO of Quezon City executed contracts for the

repair projects to four contractors with contract amounts of more than the P15 million threshold, contrary to the provision of Section 10 of the DepEd Order No. 94, s. 2011. The contracts on repair projects that exceeded the threshold were awarded to the following:

Year

Awarded Region/DO Name of Contractors Contract Amount

2017 NCR – DO Quezon City

I.M. Construction Corporation 16,248,969.33 Aylan Construction and Trading 15,531,727.75

2016 J. Simeon Construction 15,774,648.82 Aylan Construction and Trading 16,249,575.79 Tapnio and Tan Construction and Development 16,800,014.46

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

50 recipient schools for CY 2016 BEFF were inspected in the NCR, CAR and RO I on February 19 to March 2, 2018, which revealed delay in the repair works 49 inspected schools. Details of the project status of the recipient schools are shown below.

Region

No. of schools Status of Repair Works

BEFF Recipient Inspected

Completed On-going Repair Remarks Within

Contract Period

Beyond Contract

Period

Within Contract

Period

Beyond Contract Period

CY 2017 NCR DOs Quezon City, Malabon City, Pasay City, Muntinlupa City,Parañaque City, Las Piñas City

40 19 6

- 3

10 With variation order; Repair works are suspended due to ongoing classes. According to the DO Engineer, the repair may start on summer so that the students will not be displaced during the critical work of repair. On-going due to on-going classes with time extension period

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Region

No. of schools Status of Repair Works

BEFF Recipient Inspected

Completed On-going Repair Remarks Within

Contract Period

Beyond Contract

Period

Within Contract

Period

Beyond Contract Period

CAR DO Ifugao

15 8 - - - 8 The main cause for the delay in the execution of the works was the lack of temporary learning shelters for the pupils to use while repair works on the school buildings were underway, thus the pupils had to vacate the rooms on rotation.

RO 1 DOs La Union, San Fernando

38 38 22 - 16 Various beneficiary schools remained unfinished due to the contractor’s failure to comply with the provisions of the contract.

4 4 2 - - 2 Partition wall in the first room has big crack, four windows need some glass replacement, ceiling need some retouch in Sacyud ES and Bangbangolan NHS.

Sub-Total 97 69 30 - 3 36 CY 2016

NCR DOs Quezon City, Pasay City, Muntinlupa City, Parañaque City, Las Piñas City

48 20 9 - - 11 Repair works in five schools are substantially complete but there are corrective works to be done to address the noted problems by the schools and to conform with the project specifications /program of works (POWs).

Due to unavailability of rooms to temporarily hold classes, repair works could not be done full blast by contractor/laborers With delay because repair works are only done on weekend; with variation order and contractor negligence

RO I DOs Pangasinan II, Candon

2 2 - 1 - 1

Out of the 11 classrooms that supposed to be repaired, as per Contract, Program of Works and Statement of Work Accomplishment, only six classrooms were completely repaired in time of COA Inspection. No repair were made for the remaining five classrooms.

Sub-total 50 22 9 1 - 12 Total 147 91 39 1 3 48

d. Repair works in 21 schools of NCR (10 for CY 2017 and 11 for CY 2016

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

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

Region/DO Year Reasons for the delay

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Region/DO Year Reasons for the delay NCR-DOs Quezon City, Malabon, Pasay City, Muntinlupa, Parañaque, Las Piñas

2017

• Repair projects at DO Quezon City did not commence as scheduled. Based on the Notices to Proceed, the repair projects should have been started on December 23, 2017; however, upon verification with the recipient schools, these were started only in February 2018 that may cause delay in the completion thereof.

• Repair projects in two schools, the Poblacion ES and Muntinlupa Science HS, are still on-going and already beyond the completion date with approved time extension.

• Repair projects is still on-going at Philippine School for the Deaf and already beyond the target completion date but the extension of completion period was requested and approved by the DO.

• Repair projects in two schools, the La Huerta National HS and Parañaque ES Unit II of DO Parañaque City, are still suspended due to on-going classes. Projects may start in summer so that the students will not be displaced during the critical repair works.

• Repair project in one school, the CAA ES Main, DO Las Pinas is still on-going and with approved time extension due to on-going classes.

2016 • Completion of project at Bagong Pag-Asa ES, DO Quezon City was delayed because according to the Principal the workers did not do the repair works as they were not being paid by the contractor.

• Repair works in five recipient schools were not yet completed as of December 31, 2017 due to the late start of the projects which commenced during the opening of classes wherein workers only do the repair works during weekend and there are still corrective works to be done to conform with the specifications based on scope of works. As of date of inspection, the contractor has already left the school’s premises; however, further verification disclosed that any unfinished works will be repaired and liquidated damages will be deducted from their claims.

2017/ 2016

• The repair works at Philippine School for the Deaf, DO Muntinlupa could only be done during nighttime and weekends due to unavailability of rooms where classes can be temporarily conducted.

CAR-DO Ifugao 2017 • The execution of contracts covering the repair and rehabilitation of 13 school buildings in DO Ifugao incurred delay with slippage of up to 168.33 percent as of year-end mainly because of lack of temporary learning shelters for the pupils to use while the works were under way.

RO I-DOs Pangasinan, La Union and San Fernando

2017 • Repairs of school buildings in various beneficiary schools remained unfinished due to the contractor’s failure to comply with the provisions of the contract.

RO XIII-DOs Surigao del Sur, Bislig City

2017 • Repair/Rehabilitation of 138 classrooms for the 45 identified school sites in Surigao del Sur with allocated budget of P42,505,000.00 and 38 classrooms for the 14 identified school sites in Bislig City with allocated budget ofP6,832,083.33, respectively, was not yet completed as of December 31, 2017 due to delayed execution of procurement activities caused by failure to execute detailed implementation plan.

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

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

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Region/DO Year Deficiencies

Implementation of the projects NCR-DOs Quezon City, Malabon

2016 • Electrical capacity of the buildings at Krus na Ligas HS and Fort Aguinaldo ES of DO Quezon City was not considered in the pre-inspection of the repair works to be done which resulted in uninstalled and unutilized sets of lamps and duplication of work that indicate inefficient use of resources. Also at Fort Aguinaldo ES, the absence of the specific details such as the actual number of classrooms/name of the school building to be repaired in the contracts resulted in the overlapping of the scope of works of projects implemented by the Local Government Unit of Quezon City.

2017 • At Tañong National HS of DO Malabon, the number of tiles was overestimated. In addition, only two were installed out of the 26 electric fans included in the POWs. The work done on the ceiling was with poor workmanship as the plywood seemed to collapse and paints were already peeling off.

NCR-DOs Quezon City, Malabon, Pasay City, Muntinlupa City, Parañaque City, Las Piñas City RO IX-DO Zambonaga del Sur

2017/ 2016

• The Principals and Property Custodians of some recipient schools were not provided with copies of the contracts and detailed POWs relevant in determining the scope of works. Consequently, the said school officials were not able to check if the repair works were completely finished, in accordance with the contract specifications, within the contract period, and undertaken by the contractors themselves.

• Tarpaulin signboard was not posted for the repair projects contrary to Section 2.2.3 of COA Circular No. 2013-004 dated January 30, 2013.

NCR -DOs Quezon City, Malabon, Muntinlupa City, Parañaque City, Las Piñas City

2017/ 2016

• The Audit Team had encountered difficulty to identify the project during the ocular inspection conducted in the schools since the specific classrooms and buildings for repair/rehabilitation were not stated in the contracts or even in the POWs.

• Due to the absence of specific information regarding the damaged/deteriorated portion/s of the buildings to be repaired, it could not be established with certainty whether the repair works are minor or major repairs; thus, may result in the incorrect classification of accounts either as expense or capitalized as Property, Plant and Equipment (PPE), as provided under Section 24, Chapter 10, Volume I of the GAM.

RO I -DOs Pangasinan, La Union and San Fernando

2017 • Partition wall in the first room has big crack, four windows need some glass replacement, ceiling need some retouch in Sacyud ES and Bangbangolan NHS.

RO III -DOs Malolos, SJDM, Bataan, Balanga DO Zambales

2016 • Schools Principal failed to secure copies of the contracts, and POWs, precluding the appropriate verification of the projects.

• Delays in the completion of repairs and rehabilitation of classrooms, thus depriving the school children of the immediate use thereof.

RO XI DO Davao City

2016 • Repair of four schools revealed several complaints coming from the end-users or recipients of the projects due to poor workmanship by the contractor.

Audit of the payments made

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Region/DO Year Deficiencies NCR DO Quezon City

2016 • Final billings as well as the retention fee pertaining to two contracts were fully paid despite the noted deficiencies and non-issuance of Certificates of Completion as at year-end contrary to Paragraph 6.2, Annex E of the Revised IRR of RA No. 9184.

• The surety bonds callable on demand were issued by the two contractors to guarantee the 10 percent which was intended to cover uncorrected discovered defects and third party liabilities. However, validation revealed that these bonds will expire 12 months from October 2017 which should have guaranteed the retention for one year after project completion. These bonds were also accepted even though the projects were not yet finished within the prescribed period.

RO IX DO Zamboanga

2015/ 2016

• During the review of the contracts and inspection it was noted that: a. Most of the contracts did not contain the date the instruments were

executed by the parties, which could make the contract defective; b. Technical/Engineering documents submitted did not contain the

detailed breakdown of estimates per Approved Budget for the Contracts and per estimates of the winning bidders, which could likely affect the timely implementation of the projects;

c. Notices to Proceed issued to the winning bidders were not dated, while some did not contain the date received by the contractors, thus the determination of the agreed number of days for project implementation became difficult;

d. Five of the completed projects are with total deficiency of P1,938,292.37 due to various deviations from the approved plans/POWs or non-performance of works, of which the amount of P1,500,718.90 was disallowed in audit, the amount of P328,454.91 could also result to disallowance in audit unless immediately corrected;

e. No written requests from principal for the postponement of projects implementation due to non-availability/shortage of classrooms, or time extensions (from contractors) for the completion of projects, making it difficult in the determination of delay or negative slippage;

f. Absence of agency’s inspection report on some of the completed projects;

g. Full payment made to non-peformed portion of the project-repair of one school building at Pasonanca ES, an indication that no inspection or monitoring was conducted on the project.

RO XI DO Davao City

2016 • Repair of classrooms at Catigan ES with a contract amount of P3,911,558.42 was accepted and paid despite the failure of the contractor to fully complete the repairs of the classrooms.

Submission of contracts and supporting documents as well as quarterly status reports NCR DOs Quezon City, Malabon, Pasay City Muntinlupa City

2017/ 2016

• Contracts and supporting documents for the implementation of the projects were not submitted to the Audit Teams within the prescribed period, contrary to Sections 3.1 and 3.2 of COA Circular No. 2009-001 dated February 12, 2009.

• DOs of Muntinlupa City and Pasay City failed to comply with the set timelines in the submission of the quarterly status report on projects, programs and activities thereby hindering the timely review thereof and preventing the Audit Team to submit the same ontime to the

• Commission on Audit for consolidation purposes.

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Region/DO Year Deficiencies NCR DO Makati City

2017 • Based on the review of the submitted documents, incompleteness of documentation was noted contrary to Paragraphs 5 and 6, Section 4 of PD No. 1445 and COA Circular No. 2009-001 which require among others that claims against government funds shall be supported with complete documentation.

RO III-DOs Nueva Ecija and Pampanga

2016 • Omission to submit pertinent documents such as approved design plan, technical specifications and other documents that are integral and vital part of the contract.

• Omission to submit the necessary documents as required. In addition the agency failed to forfeit the bid security, amounting to P45,000.00, of the winning bidder for the repair of Gulap ES for his failure to accept the Notice of Award and execute the contract.

3.8. We recommended that the Management require:

COto –

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

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

ROs and DOsto –

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

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

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

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

d. see to it that the contract and POWs completely provide the specific

details as to the nature of the repair and rehabilitation works to be done including the actual number of classrooms/name of the school buildings to facilitate evaluation of the contractor’s project accomplishment;

e. notify the public through a tarpaulin signboard for infrastructure

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

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

cost exceeding the required P15million threshold;

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

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

repair works as stated in the approved contract.

3.9 The following are the comments of Management of concerned Offices:

Region/DO Management’s Comments NCR DO Quezon City

During the exit conference, the Management clarified on the P15Million threshold and commented that they will abide with the recommendations. In addition, the Principal of Bagong Pag-asa ES confirmed that there are still parts/portions which remained undone and there are no documents which have been signed nor accepted regarding the completion of the repair works in the school. Likewise, any updates or developments have not been communicated by the contractor to the school.

CAR DO Ifugao

The DO agreed to impose liquidated damages, which will be deducted from the final billing of the contractors.

ROI DO La Union DO San Fernando

To validate the completion of the repairs of the 161 classrooms for Division of La Union under SARO No. OSEC-17-5186 dated July 3, 2017 amounting to P36,600,695.93, the Management has submitted a request for the technical assistance of a COA Technical Audit Service on February 8, 2018 to assist in the ocular inspections of these BEFF Projects. During the Exit Conference, the DOSF Management replied that they were always been reminding their Inspectorate Team about their duties and responsibilities to ensure fulfilment/ completion of contracts prior to payments.

RO IX DO Pagadian DO Zamboanga del Sur

Management commented that the Office has already made a presentation and requested for the release of funds for the electrification of the newly completed 2-storey Division Office to the DepEd Central Office. Management also assured compliance on the recommendations. Management of DO-Zamboanga del Sur explained that it overlooked to include the provision of signboard in the scope of works.

RO XI DO Davao City

Management committed for an immediate action on the complaints raised the concerned School Heads.

BEFF –Public Private Partnership (PPP) for School Infrastructure Program (PSIP) I and II 4. The DepEd’s PSIP with aggregate contract cost of P20,140,027,526 to construct

9,303 classrooms for PSIP I and 4,371 classrooms for PSIP II experienced implementation setbacks, such as: a) lack of validation in allocation of sites reduced the targeted number of classrooms from 9,303 to 9,296 for PSIP I; b) delay by one and a half yearsin the completion of classrooms under PSIP I mostly attributed to the incidents considered as Excusable Delays in Construction under Section 12.8b of the contract agreement; c) 1,327 classroomsunder PSIP II were still awaiting construction completion after more than two years of project implementation causedbyhardaccess/clearing of

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sites,permits issues,forcemajeure, demolition of existing buildings, realignment, among others; and d) possible incremental consultancy cost due to extended project completion or consultancy contract termination/abandonment. Hence, the overall achievement of the program in supplementing the current initiatives of the DepEd to address classroom backlog and fast track classroom construction has not been achieved.

4.1. Over the years, the total seating capacity of existing primary and secondary

classrooms has never been enough to accommodate students enrolled. This suggests a severe overcrowding in many schools, and the need to build more classrooms. The classroom requirement will increase even more because of a number of factors such as: (a) the implementation of K to 12 program;(b)government target to achieve universal participation of students in line with its commitment to Education for All; (c) damage to classrooms caused by typhoons and other calamities; and (d) the many old and dilapidated classrooms that need to be rebuilt.

4.2. Given the huge demand for classrooms, various strategies are laid down in the

Philippine Development Plan to ensure the adequate provision of classrooms. One of these strategies is the use of PPP scheme through the PSIP.

4.3. The first phase of the PSIP adopted a “Build-Lease-Transfer” (BLT) modality

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

4.4. The PSIP II follows the implementation of the first phase of PSIP adopting the

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

4.5. The BOT Agreements for theSchool Infrastructure Projects were both entered

into by and between the Department of Education, represented by its former secretary, and the respective authorized representatives of the contractors, for the following contract packages:

Contractor Contract Date

Contract Package RO No. of

Classrooms Amount

PSIP I Bright Future Educational Facilities, Inc.

October 8, 2012 A I 2,157 3,445,903,120.00

Citicore-Megawide Consortium, Inc.

October 8, 2012

B III 2,885 5,229,899,136.00 C IV-A 4,261 7,604,904,384.00

Sub-total 9,303 16,280,706,640.00 PSIP II

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Contractor Contract Date

Contract Package RO No. of

Classrooms Amount

Megawide Construction Corporation

October 17, 2013 A

I 523 2,255,923,096.49 II 459 III 1,103

CAR 353 Sub-total 2,438

Consortium of BSP & Co., Inc. and Vicente T. Lao Construction

October 17, 2013

E

X 1,224 1,603,397,790.00 CARAGA 709

Sub-total 1,933 Sub-total 4,3715 3,859,320,886.49 Total 13,674 20,140,027,526.49

4.6. The Agreements also require that there shall be an Independent Consultant (IC)

procured through competitive bidding to provide independent services to the parties in relation to the design and construction of the project. In line with this, the contracts for the Procurement of IC referred/called the “Consulting Services”, were entered into by and between the Department of Education, represented by its former Secretary, and the authorized representatives of the winning ICs, wherein half of the total contract cost is to be shared proportionately by the Proponent and the remaining 50 percent to be shouldered by DepEd:

Contract No. Contractor/IC Contract

Date Proponent Share Deped Share Total

Contract Amount

PSIP I PFSED-BI-2012-021A-060

MOHRI & P.A. Associates

January 23, 2013

Bright Future Educational Facilities,Inc.

19,434,056.48 19,434,056.48 139,888,888.88

Citicore-Megawide Consortium,Inc.

50,510,387.96 50,510,387.96

PSIP II Package A: 2013-OPS4-019-BI-016A-064

Engineering & Development Corp of the Philippines

March 28, 2014

Megawide Construction Corporation

24,983,800.00 24,983,800.00 49,967,600.00

Package E:

Urban Integrated Consultants Inc.

March 28, 2014

Consortium of BSP & Co., Inc. and Vicente T. Lao Construction

16,449,908.00 16,449,908.00 32,899,816.00

5 Due to various realignment and change of site, the original classrooms (CL) per contract of 4,370 CLs were increased to 4,371 CLs. For Package A, from the initial 2,440 it was decreased to 2,438 due to various realignment and exclusion of two projects, one in Kalinga and the other in Mt. Province. The deficiency in CL requirement was realigned to sites in package B wherein additional three CLs were added from the initial 1,930 CLs to 1,933 CLs, two in RO X and one in CARAGA, based on the Memorandum dated January 22, 2016 by the Physical Facilities and Schools Engineering Division regarding the Approval of the Replacement Sites for “No Go”Sites/Sub-Projects under the PSIP II Contract Package E.

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

Details PSIP I PSIP II

BLT/BT Contract Date (Signing Date) October 8, 2012 October 17, 2013 Original Contract Completion Date from the Signing Date (16 months for PSIP I; 14 months for PSIP II)

February 8, 2014 December 17, 2014

End of period for procurement of IC from the Signing Date (60 days PSIP I; 45 days PSIP II)

December 7, 2012 December 1, 2013

Actual Contract Date of IC January 23, 2013 March 28, 2014 Delay in the procurement of IC (Time Extension) 46 calendar days 117 calendar days Revised BLT/BT Contract Completion March 26, 2014 April 13, 2015 Contract Completion6 2015 Pending with 31

percent uncompleted 4.8. The following observations were noted in the review of the implementation of

the PSIP:

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

4.9. The awarded contracts required for the construction of 9,303 classrooms; but on

the final construction completion accomplishment, it was reduced to 9,296, attributed to the contract provision allowing possible realignment based on the actual buildable space.

4.10. The Closure Report7 of the Independent Consultant MOHRI & P.A. Associate

Inc. disclosed the following conditions in classroom adjustments:

a. Several project variations in Pangasinan, Ilocos Sur, and La Union resulted in a shortage of six classrooms, which was replaced by one-storey, five-classrooms in Ubagan Elementary School in La Union.

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

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

4.11. The final actual accomplishment for PSIP I therefore, is still short in RO I under

Contract Package A by one classroom and in ROIV-A for Contract Package C by six classrooms, or total of seven against the total classrooms to be constructed per contract.

6 Summary of Sub-Projects for PSIP I and II as of December 31, 2017 7 Public-Private Partnership For School Infrastructure Project Phase- Closure Report by MOHRI & P.A. Associates Inc.

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4.12. It was verified that the exclusion of seven classrooms for completion adjusted

total contract cost from P16,280,706,640 to P16,264,995,828. Contract cost adjustment is shown in the following table:

Contractor Contract Package RO

Awarded Contract Adjusted Contract Decrease No. of

CL Amount No. of CL Amount No. of

CL Amount

Bright Future Educational Facilities, Inc.

A I 2,157 3,445,903,120.00 2,156 3,441,882,286.00 1 4,020,834.00


B III 2,885 5,229,899,136.00 2,885 5,229,899,136.00 - -

C IV-A 4,261 7,604,904,384.00 4,255 7,593,214,406.00 6 11,689,978.00 Total 9,303 16,280,706,640.00 9,296 16,264,995,828.00 7 15,710,812.00

4.13. The payments made to the Proponents also indicated subsequent adjustments in

the annual lease payments. To wit:

Contractor Contract Package RO Original Annual

Lease Payment Revised Annual Lease Payment

Decrease in Annual Lease

Bright Future Educational Facilities, Inc.

A I 344,590,312.00 344,188,228.56 402,083.44


C IV-A 760,490,438.00 759,321,440.60 1,168,997.40

b. The Closure Report of the IC clearly disclosed the delayed completion of

classrooms under PSIP I that are mostly attributable to incidents considered as Excusable Delays in Construction under Section 12.8b of the BLT agreement.

4.14. As previously presented, the PSIP I was not accomplished on the original

targeted completion date on February 8, 2014, but was subsequently moved to March 26, 2014 or extended by 46 days in view of the delay in the procurement of IC. However, setbacks encountered during the construction implementation necessitated another extension of the completion period; thus, the projects suffered delay of one and half years until November 2015, the final completion of the 9,296 classrooms in the following Regions:

RO No. of Schools

No. of CL

Construction Completion

I 667 2,156 2/10/2015 III 597 2,885 8/30/2015 IV-A 964 4,255 11/30/2015 Total 2,228 9,296

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4.15. The Closure Report cited that the delayed completion of PSIP I was mostly attributable to incidents covered by Section 12.8b of the BLT agreement, wherein major causes of delays were identified as follows:

Major Causes of Delay

Attributable to Contractor Attributable to DepEd A. Poor selection of sub-contractors resulting in

termination of contract or abandonment of sub-projects, inadequate supervision from sub-contractor’s engineering staff, lack of logistical support of sub-contractors to proponent;

B. Inefficient distribution of materials from distribution center to various sub-contractors;

C. Inadequate supervision from sub-contractors

engineering staff.

a. Incidents covered by Section 12.8b of the BLT Agreement:

• Variation; • Delay in the issuance of consents

required/delay in the issuance of building permit;

• Delay by DepEd in providing access to Project Site;

• Failure to Appoint the IC within 60 days from execution date;

b. Delayed or late resolution of sub-projects for “No Go” sites, or projects with site issues.

4.16. The IC Report also mentioned the following:

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

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

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

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

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

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

also be taken into account in nominating recipient schools.

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e. There must be flexibility to adapt different building designs as well as material specifications that are adaptable to the different geographical locations of the school sites.

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

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

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

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

4.17. It was further highlighted in the report that dividing the financial payment for its

services being shared equally by the DepEd and the Proponent has its disadvantage because the Proponent may take advantage of delaying the payments of its 50 percent share to get even with the IC for its strictness during the implementation.

4.18. From the foregoing observations, it can be inferred that DepEd, being the

principal implementing agency, had been lax in the performance of its duties and responsibilities in providing access to the site and in securing the necessary permits as well as in attending on the variation requirements the soonest possible time to complete the construction on schedule.

c. After more than two years of program implementation, PSIP II remained

uncompleted with 1,327 classrooms or 30 percent still awaiting construction completion.

4.19. The revised contract completion for PSIP II was due on April 13, 2015.

However, after more than two years of program implementation, only 3,044 classrooms or 70 percent were completed as of December 31, 2017 based on the monitoring of the final list of sub-projects for PSIP II. Consider the following table:

RO Target

No. of Classrooms (CL) Completed Uncom-pleted CLs

With Certificate of Completion (COC) With-out

COC Total

% FY

2014 % **

FY 2015

% **

FY 2016 % ** FY

2017 % **

Contract Package A CAR 353 8 2 146 43 136 82 25 89 10 325 92 28 RO I 523 27 5 110 26 77 41 14 44 - 228 44 295 RO II 459 131 29 229 78 95 99 1 99 2 458 99 1 RO III 1,103 56 5 444 45 247 68 51 72 22 820 74 283 Sub total 2,438 222 9 929 47 555 70 91 74 34 1,831 75 607 Contract Package E RO X 1,224 - - 385 31 424 66 68 72 - 877 72 347 CARAGA 709 - - 121 17 113 33 102 47 - 336 47 373 Sub total 1,933 - - 506 26 537 54 170 63 - 1,213 63 720 Total 4,371 222 5 1,435 38 1,092 63 261 69 34 3,044 70 1,327

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RO Target

No. of Classrooms (CL) Completed Uncom-pleted CLs

With Certificate of Completion (COC) With-out

COC Total

% FY

2014 % **

FY 2015

% **

FY 2016 % ** FY

2017 % **

Remarks Within the Construction Completion Deadline

1,657 CL

Beyond the Construction Completion Deadline 1,387 CL

1,327 CL Remained Uncompleted

**Percentage of completion is on a cumulative basis.

4.20. Of the 1,327 uncompleted classrooms, 1,305 are still on-going, while 22 classrooms have not yet been started. Details are shown in the next table:

RO No. of Classrooms (CL)

Completed % On-going Construction % Not Yet

Started % Total

Contract Package A CAR 325 92 26 7 2 1 353 RO I 228 44 295 56 - - 523 RO II 458 99 1 1 - - 459 RO III 820 74 263 24 20 2 1,103

Sub total 1,831 75 585 24 22 1 2,438 Contract Package E RO X 877 72 347 28 - - 1224 CARAGA 336 47 373 53 - - 709

Sub total 1,213 62 720 38 - - 1,933 Total 3,044 70 1,305 30 22 1 4,371

4.21. Based on the monitoring report,8 the non-completion of the project is mainly

attributed to the accessibility issues in the site, including the issuance of building permit and other force majeure instances like weather, security threat, damaged bridge, labor scarcity, among others. An equivalent of 46 percent of the constructed classrooms was beyond the completion deadline. Although these factors are deemed to be a part of excusable delay provision in the contract, the incurrence of delay of more than two years is indicative that these problems were not addressed by DepEd promptly. Also, the 24 percent realigned projects is an indication that some schools sites with classroom allocation had in fact do not have any classroom shortages. Others are apparently attributed to the lack of proper planning in the allocation procedure which greatly affected the overall completion of the project. Details are as follows:

Status No. of CL

Reason for Delay in Construction CL

Remarks Package A

Package E No. %

Completed 158 - Realigned

795 24 Beyond the

Construction Completion

Deadline 3,241 CL 74 percent

On-Going 558 57 Not yet Started

22 -

Completed 49 - Change in Design

58 2 On-Going 9 -

Completed 808 10 Delay/Hard Access in Site, Permits 1,499 46 8Summary of Sub-Projects for PSIP I and II as of December 31, 2017

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Status No. of CL

Reason for Delay in Construction CL

Remarks Package A

Package E No. %

On-Going 18 663 Issues Force Majeure (Weather, Security Threat, Damaged Bridge, Labor Scarcity, Legal Holidays, Port Congestion),

Completed 219 - Clearing of Site, Demolition of Existing Building

219 7

Completed - 670 No Data; 2016-2017 670 21 Completed 597 533 Within the construction completion 1,130 26 Within the

Construction Completion Deadline 1,130 CL 26 percent

Total 2,440 1,933 4,371

4.22. Validation based on the standard time for preliminary activities and the actual construction provides that the overall project duration should be as early as 145 days for two classrooms and as late as 195 days for 12 classrooms based on the construction schedule of Bright Future Educational Facilities, Inc.9

Activity Description Early Start Early Finish Duration

Providing Access to Project Sites 8/7/2012 9/5/2012 30 Construction Permit 2/3/2013 2/17/2013 15 Procurement and Delivery of Materials 8/7/2012 11/4/2012 90 CL Construction:

Landoc ES 2CL 12/12/12 12/21/2012 10 Alaminos CS 4 CL 11/22/2012 12/11/2012 20 Candon NHS 6CL 2/6/2013 3/7/2013 30 Manlued ES 8CL 7/23/2013 8/31/2013 40 Bonuan Boquig NHS 10CL 2/23/2013 4/13/2013 50 Alaminos NHS 12CL 3/12/2013 5/10/2013 60

4.23. As can be gleaned from the foregoing information, the PSIP II project likewise

suffered delay in the construction implementation as 31 percent of the targeted classroom provisions were uncompleted despite more than two years of program implementation. Based on standard time, an ordinary construction with 12 classrooms should have been completed within six months.

4.24. The PPP was supposed to address the backlog in classroom requirement the

soonest possible time, but such expectation did not materialize as the process turns out to be slow.

9Annex D Construction Schedule Build Lease Transfer Agreement PPP for School Infrastructure Contract Package A

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

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

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

4.26. Whereas, accounting records would show that the IC for Package A,

Engineering & Development Corp of the Philippines (EDCOP), has almost been fully paid in its last billing on June 29, 2016, with outstanding balance of P2,848,153.20 as of December 31, 2017, summarized as:

Particulars Amount

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

4.27. Analysis shows that the outstanding amount due to EDCOP represents 12

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

4.28. There was no provision in the IC contracts allowing for automatic service

extension in case of prolonged project completion for incidental causes attributable to DepEd, thus the probability of project management abandonment of the IC until the matter has been resolved by the DepEd. This problem is again a contributing factor to the timely delivery of the needed classrooms.

4.29. PSIP is an initiative created to fast track the classroom construction. Thus, the

continuous delay in program implementation defeats the purpose why the strategy has been opted to. DepEd therefore, was not able to address the provision of classrooms in identified priority areas in due time as targeted.

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Further, the overall procedural requirement was more complicated and apparently more costly.

4.30. We recommendedthat the Management require the concerned

DepEdOffices to:

a. be more prudent and objective in its evaluation/assessment, and to consider the availability of needed machinery before venturing into new strategy/undertaking to serve its mandate;

b. clearly define responsibility areas, strengthen coordination among

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

c. evaluate and closely monitor project sites that were not yet completed

and ensure that the Proponents comply with their contractual obligations;

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

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

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

4.31. The Management through the Assistant Secretary for Procurement, Project

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

BEFF – School Furniture Program (SFP) 5. The desired outcome of addressing furniture needs of schools thru the School

Furniture Program (SFP)under the CYs2016 and 2015 BEFF was not fully met in seven regions due to the: a) delay in the downloading of funds by the DepEd CO and execution of procurement activities; b) non/delayed deliveries of at least 70,124 pieces of armchairs (AC)and 2,242 sets of teachers’ tables and chairs(TTC); c) non-utilization of 19,493 pieces of AC and 286 sets of TTCthat were stored in vacant rooms, covered courts, roof deck and along the corridors/Principals’ office due to, among others, delayed completion of the school buildings, oversupply of furniture and poor workmanship/ inferior materials used resulting in 3,049 and 54 damaged/broken AC and TTC, respectively; and e) deliveries/transfers to non-recipient schools of excess 4,962 pieces of AC and 85 sets of TTC due to lack of coordination among the

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DepEd procuring offices and between the DepEd and the LGUs resulting in the deliveries of the same items.

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

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

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

5.2. Pursuant to the above provision of the IRR of RA No. 9184, the revised

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

a. DOs to proceed with the procurement activities short of award while the

DepEd CO is processing the Sub-allotment Release Orders (Sub-AROs). The Sub-AROs will be released to the Division Offices immediately.

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

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

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

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

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

following regions:

Region Office

Date of Sub-ARO issued by the CO

Amount

Remarks

NCR ROP, Quezon City, Manila City, Caloocan City, Valenzuels City, Malabon City, Navotas City, San Juan City, Muntinlupa City Parañaque City and Las Piñas City

August to December

2016

January, February,

March and August 2017

103,902,221.53 All Sub-AROs have validity period until December 31, 2017, except for the two Sub-AROs received in 2016 by DO Las Piñas totaling P6,264,977.09 and DO Caloocan amounting to P995,505.91 which are effective until December 31, 2016.

RO I Ilocos Norte, Batac City, Laoag City and Ilocos Sur

October 2016

23,593,650.00 Most of the procurement activities at DOs Laoag and Ilocos Sur from advertisement up to award of contracts were done only after the receipt of the Sub-AROs.

RO III ROP October 2016

20,347,279.50 Delayed procurement activities with Invitation to Bid issued only on September 28, 2017 or almost one year after the issuance of Sub-ARO. Allotment was obligated only on December 28, 2017. Notice to Proceed was issued only on January 31, 2018

RO V Albay and Tabaco City

June and October

2016

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

Total 164,511,333.44

As shown in the above table, the releases of the Sub-AROs only in the last quarter of 2016 and subsequent releases in the 1st and 3rd quarters of 2017 in the case of NCR, delays the procurement activities of school furnitures and their subsequent deliveries to schools as planned.ROs NCR, I, III and V prolonged the start of their procurement activities, which were mostly done after the receipt of the Sub-AROs, resulting in additional undue

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delays in the procurement of school furniture despite Section 7.6 of the 2016 Revised IRR of RA No. 9184 and the DepEd guidelines provided that the operating units to undertake preliminary procurement activities short of award to facilitate the immediate implementation of the procurement of goods.

b. Undelivered/Delayeddeliveries of school furniture totaling 70,124

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

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

Region Division No of

Recipient Schools

Quantity Remarks AC TTC

NCR Quezon City, Manila, Navotas City

12 6,391 139 At DO Quezon City, three schools which are Project 6 ES; Rosa L. Susano-Novaliches ES and Don Alejandro Roces waived acceptance of the deliveries due to adequate number of chairs while Payatas B ES refused to accept the items delivered due to insufficient storage space.

RO I Ilocos Norte, Batac City, Laoag City and Ilocos Sur

81 (excluding DO Batac

City- schools

not stated)

20,522 538 Status Report submitted by the Division Engineers/Supply Officers revealed that out of the contracted 29,905 pieces of ES/HS/JHS AC and 739 sets of TTC, only 9,388 pieces of ES/HS/JHS AC and 201 sets of TTC were delivered, leaving 20,522 pieces of ES/HS/JHS AC and 538 sets of TTC undelivered as of year-end

RO IV-B Palawan 17 -* -* The School Principals have submitted signed Certification that they have not received any deliveries of AC and TTC set from Fhellus Trading and Wood Workshop.

RO V Catanduanes 6,845

558 A review of the submitted Quarterly Report of PPAs for the 4th Quarter of 2017, disclosed that BEFF Batches 3 and 4 with contract costs

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Region Division No of

Recipient Schools

Quantity Remarks AC TTC

of ₱2,938,480.00 and ₱2,800,945.00, respectively, were not yet delivered as of December 31, 2017. The 1st semester had already ended and yet the school furniture was not yet available.

Total undelivered school furniture 110 33,758 1,235

*not stated

ii. Delivery of 36,366 AC and 1,007 sets of TTC were considerably delayed in the following regions:

Region Division AC TTCs Remarks

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

RO IV-B Puerto Princesa City, Palawan, and Occidental Mindoro

18,975 464 School furniture under the CY 2015 and 2016 BEFF in the Division of Puerto Princesa City totaling P11,422,706.50, 18,975 pieces of AC and 464 sets of TTC amounting to P15,049,570.00 in Division of Palawan, and school furniture for CY 2017 in the amount of P7,111,090.00 in the Division of Occidental Mindoro were not delivered within the stipulated date in the contract. In DO Occidental Mindoro, deliveries to recipient schools of 8,280 AC (all plastic) and 184 sets of TTC (all wood) were delayed ranging from 4 to 218 days,

RO V Albay and Catanduanes

9,943 394 At DO Albay, there were delays in the delivery of the ACs ranging from 180 to 318 days and 216 to 320 days for TTCs intended for 33 recipient elementary and secondary schools. It was only on January 11, 2018 that the supplier started to deliver the TTCs. For the contract amount of ₱3,812,715.00 under BEFF 2015 of DO Catanduanes,only 43 percent was delivered within the target date and the rest were delivered three to 11 months beyond the target date.

Total 36,366 1,007

Undelivered/Delayed deliveries of school furniture by defaulting supplier shall be subject to the imposition of corresponding liquidated damages at

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

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

Region Division Office Recipient School Quantity

Remarks AC TTCs NCR Quezon City Rosa L. Susano-Novaliches

ES; Eulogio Rodriguez, Jr. HS; SHS in Kaligayahan; Commonwealth HS; San Agustin ES; NagkaisangNayon ES; KrusnaKigas HS; Ernesto Rondon HS; BagongPag-asa ES; BagoBantay ES; Esteban Abada ES; Balara ES; North Fairview ES; Project 6 ES

8,557 115

Manila City Gregorio del Pilar ES; P. Gomez ES; Pres. Sergio Osmena, Sr. HS Annex; Claro M. Recto HS; SHS within Bacood ES; Eulogio Rodriguez Vocational HS

3,257

Caloocan City Maria Clara HS 720 16 Valenzuela City Pio Valenzuela ES 540 12 Malabon City Tinajeros ES 21 Marikina City Fortune Elementary School 180 4 San Juan City Pedro Cruz ES; Salapan ES;

San Juan ES; Pinaglabanan ES; Sta. Lucia ES

2,297 43

Pasay City Phil. National School for the Blind

60 3

Muntinlupa City

Muntinlupa Senior HS 480

Paranaque City SHS within Sto. Nino ES; Paranaque ES-Central

1640

Las Pinas City CAA ES-Main 28 Sub-Total 17,731 242

RO V Albay Not indicated 8 AC were already broken despite of being just delivered as they were brittle. Eight

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Region Division Office Recipient School Quantity

Remarks AC TTCs AC were returned by the advisers to the Supply Officer as the same cannot be used anymore.

RO IX Zamboanga City

Tukuran TVHS, Aurora NHS, Midsalip NHS and Guipos NHS

1,707 About 1,707 unused plastic AC are either located beside the Principal’s Office (covered pathway), in front of the school stage and in front of the Office of the Principal in threeschools. The AC are vulnerable to sun and rain that will cause immediate deterioration of the plastic materials causing them to become brittle and adding stress to the already low quality AC.

Pagadian City Pagadian Science High School, Pagadian City NHS (PCNHS_ and Norberta Guillar NHS.

47 There are 47 unused wooden AC located outside the school building covered only with worn-out sack-like canvass, while 17 are located just outside the classroom exposed to rain thus leg parts are starting to deteriorate.

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

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

and inferior materials used

Region Division Office Recipient School

Quantity Deficiencies AC TTCs

NCR Quezon City, Manila, Caloocan, Valenzuela, Malabon, Navotas, Muntinlupa, Las Pinas and San Juan

33 schools 2,743 50 Leg, backrest, writing boards, table top, table drawers partially/totally damaged, cracked, detached from the chair; chipping off of plastic parts of ACs; surface of TTCs was made of cheap materials, thus, were easily damaged, termites infestation on ACs in five schools; broken armrest; unstable due to poor quality of wood; writing boards and table drawers were detached; cracks in arms of chairs; rough surfaces of armchairs; TTCs not neatly varnished.

RO IV-B Palawan 15 schools in Southern and Northern Palawan

Not stated

Not stated

Some bolts were inadequate/ sizes not fit to the receptacle holes of the armrest; AC materials were too brittle; AC delivered in 15 schools were not assembled contrary to what was agreed in the contract.

Occidental Mindoro

Sta. Cruz Mulawin ES and San Jose National Agricultural and Industrial HS

Not stated

Not stated

Teachers’ tables were not fully varnished, ruler guides of the drawers were not heavy duty and drawers difficult to open; screws on armchairs beneath the writing board were not properly installed in slanting manner; some armrests of the chairs were easily removed due to loose-threading of the screws. Some teachers complained that the chairs might not withstand prolonged use due to

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Region Division Office Recipient School

Quantity Deficiencies AC TTCs

poor quality of production. Some chairs are not within the specifications with substandard and/or inferior quality of plastic thus, the writing boards were easily deformed.

RO V Albay One elementary and one secondary schools

Not stated

Not stated

The AC were already broken despite being just delivered as they were brittle.

RO IX Zamboanga del Sur, Pagadian City

Tukuran TVHS, Aurora NHS, Midsalip NHS and Guipos NHS. Pagadian Science High School, Pagadian City NHS (PCNHS_ and Norberta Guillar NHS.

306 4 Either damaged/ defective/ with flaws, beyond use or have visible cracks At DO Pagadian City 256 AC do not have writing boards when delivered; teachers’ tables are not properly varnished/ painted. Plywood used starts to peel-off. drawers are misaligned; and TCs have wormholes. Wood used easily chips off.

Total 3,049 54

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

Division Office

Transferred/Delivered Quantity

From To AC TTCs Quezon City San Francisco HS San Bartolome HS 400 10

Payatas B ES Sta. Luica HS 150 3 Manila City Pres. Sergio Osmena, Sr. HS Old Osmena (Torres HS) 352 8

CENTEX A. Mabini ES 540 12 G. Santiago ES 225 5 J. Luna ES 225 5 HJ Atienza ES 90 2

Manila Science HS Araullo HS 283 A. Quezon ES 197

Valenzuela City

Valenzuela City Science HS LawangBato NHS 50 Bagbaguin NHS 50 Dalandanan 58 Canumay East NHS 22 Dalandanan NHS VeinteReales Annex

4

San Juan City San Juan Senior High School San Juan ES 1,080 24

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Division Office

Transferred/Delivered Quantity

From To AC TTCs Las Pinas City

Las Pinas City National Senior High School

Las Pinas National HS 300

CAA ES-Main Las Pinas National HS-Main

150 3

Manuyo SHS 90 9 CAA Jr. HS 400 Las Pinas National HS-Almanza

300

Total 4,962 85

At DO Manila, CENTEX waived the delivery of 1,080 units of ACs and 24 sets of TCCs, thus, the DO decided to transfer the same to other schools as there is no available storage space because the school buildings are not yet completed. Further, no deliveries were made to San Juan Senior High School. Instead, the allotted 1,081 armchairs and 24 sets of TCCs were also delivered to San Juan ES.

f. Lack of coordination between the DepEd and the Local Government Units

in NCR resulting in the delivery of the same itemsand surplus in the supply thereof

Division Office Recipient School School Furniture Received

Manila City Eulogio Rodriguez Vocational HS AC Pasay City Phil. National School for the Blind;

Pasay City East HS TTC

Muntinlupa City Muntinlupa National HS-Tunasan Annex; Muntinlupa National HS-Main; Muntinlupa Science HS

AC and TTC

Paranaque City Tambo ES; La Huerta ES AC Las Pinas City Las Pinas City National Senior HS;

Daniel Fajardo ES; Las Pinas National HS-Main

AC and TTC

g. Sixteen schools in RO XIII with seat shortage

The Accomplishment Report of the Division of Cabadbaran City, RO XIII as of December 31, 2017 disclosed that 16 elementary and secondary schools have shortage in the number of seats as compared with the actual number of enrollees, as summarized below.

School No. of Pupils No. of Seat Shortage

Elementary Schools Comagascas ES 367 218 149 South Cabadbaran CES 1,313 1,073 240 Calamba ES 474 286 188 La Union ES 1,108 977 131 Antonio Luna ES 248 125 123 Putting Bato Elementary School 475 358 117 Sanghan ES 530 438 92

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School No. of Pupils No. of Seat Shortage Antonio C. Dagani CES 754 693 61 Del Pilar CES 420 360 60 Mahaba ES 246 203 43 Soriano ES 271 243 28 Alfonso B. Dagani ES 466 464 2 Cabinet ES 221 220 1 Sub-total CES/ES 1,235

Secondary Schools La Union NHS(Calamba Annex) 439 410 29 Puting Bato NHS 112 100 12 Norcases ISS 170 150 20 Sub-total NHS 61 Total 1,296

h. Other deficiencies

Region/DO Deficiencies

NCR Quezon City

Some recipient schools under CY 2016 BEFF were also recipients of SFP under other funding sources resulting in surplus of seat provision; Commonwealth HS and Esteban Abada ES requested for the pull-out of armchairs delivered due to either poor workmanship or inferior quality of materials used. Replacement was done by Hope Metal Furniture Manufacturing, Inc., an affiliate of Top Asia Furniture Producers COOP; and Two sets of TCCs delivered to Pura V. Kalaw ES were utilized by the staff of the Administration Office.

Manila City Two recipient schools, Pres. Sergio Osmena Sr. HS and Claro M. Recto HS under 2016 BEFF were also recipients of SFP under other funding sources resulting to surplus of armchairs; and All of the delivery receipt for RO procured school furniture were not dated.

Valenzuela City

Invoice Receipt from the RO to the DO was not provided by Caruhatan NHS.

Marikina City

There were other units of furniture stored in front of the building being constructed. These DO-procuredfurniture were received by FES from other schools to fill-up the other vacant classroom of the building upon completion.Since the furniture were stored outside, it exposed the units to the elements and risk of loss.

On the other hand, delay is likewise observed in the delivery of centrally-procured furniture under CY 2015 BEFF. San Roque NHS is entitled to receive 640 ACs and 16 TCCs amounting to P512,768.00 under the said program and these were delivered in February 21, 22, 27 and March 16, 2018 only. The final date of completion of deliveries should have been on September 12, 2016 following the grant by the Regional Director of DepEd – NCR on the requested extension by the Supplier.

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NCR (DOs Quezon City, Manila City, Pasay City, Muntinlupa City, Las Pinas City); IVB (DO Palawan); IX Pagadian City

There were ACs/TCCs not properly labeled with the funding source and year as well as the name of supplier for proper and easy identification as required under DepEd Order No. 61, s. 2009.

NCR (DOs Manila City, Muntinlupa City); IVB, IX-(DO Zamboanga City)

Delivery Receipt/ Inspection and Acceptance Report were not presented to the Audit Teams during inspection by Pres Sergio OsmenaSr HS and Claro M Recto HS (DO Manila), Muntinlupa National HS-Main Muntinlupa Science HS and by concerned officials of DepEd RO IV-B.

The DO (Zamboanga del Sur) was not furnished with delivery receipts and Acceptance Reports by the school heads. It was gathered that the Division Office did not formally constitute Division Inspectorate Team for the procurement of furniture.

RO IV-B The request for extension of delivery time due to insufficient supply of wooden

materials was not supported by certification from Department of Trade and Industry (DTI). Moreover, the granting of the request was not in accordance with No. 7 provision in contract which states that:“No extension of contract whatsoever shall be granted to the supplier due to ordinary unfavorable weather conditions, non-availability of equipment or supplies to be furnished by the same, labor problems and such causes for which the government is not directly responsible, or when time affected activities do not fall within the critical path of the network. Extension of time shall be granted only the equivalent of delay due to major calamities.”

RO IX-DOs Zamboanga del Sur and Pagadian City

The 292 plastic ACs and 337 wooden ACs intended for SHS are used by the Junior HS students at DOs Zamboanga del Sur and Pagadian City. At DO Pagadian City, there were only 438 wooden armchairs accounted for out of the 450 delivered furniture, therefore 12 wooden armchairs were missing as of inspection dates.

5.4. We recommended that the Management require:

a. DepEd CO to: i) be prompt in the downloading of funds to the

operating units; ii) coordinate with the DPWH to synchronize timelines in the construction of school buildings with the provision of school furniture; iii) ensure that the DepEd guidelines are consistently observed and provide for sanctions in case of defiance by responsible persons; and iv) observe coordination among the DepEd procuring offices and require ROs to coordinate with the LGUs to rightfully address the furniture needs of the school, thereby avoiding oversupply thereof;and

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b. concerned ROs/DOs (procuring entities) to: i) comply with Section 7.6 of the 2016 Revised IRR of RA No. 9184 and DepEd Guidelines regarding the undertaking of procurement activities short of awarding prior to the release of funds to facilitate procurement of goods and the procedures on pre and post inspection of items to ensure its quality; ii) closely monitor the delivery and condition of the goods delivered and advise the Principals, Property Custodians and other concerned DepEd officials of the recipient schools to immediately report deliveries, reject outright defective deliveries, indicate the date of receipt of deliveries and keep record of DRs, IAR, Certificate of Acceptance and other related documents on file for future reference; iii) require the supplier to expedite the delivery of the undelivered items and replace the defective items delivered; iv) impose the equivalent liquidated damages for late delivery; and v) conduct inventory of unutilized excess furniture for transfer to other schools with furniture needs.

5.5. Management commented, thus:

Regions Management’s Comments

NCR

The Schools were advised to communicate with the concerned DepEd-NCR ROP personnel in the instance that they encounter problems in the delivered school furniture. The DO Quezon City conducted meetings wherein various solutions were resolved and implemented and that compliance by the supplier has reached 95 percent. It will issue a memorandum to all concerned school officials regarding the noted audit issues. The Physical Facilities Education Division of DepEd OSEC is in constant coordination with DPWH in the construction of school building, however, delay in its completion caused DO Caloocan to transfer the delivered armchairs to schools in need of the said furniture. The DO Caloocan property custodians and respective schools kept their ICS records on file. Further, the suppliers of DO Caloocan, Valenzuela, Navotas were informed of damaged armchairs and tables and requested for their replacements, which for DO Valenzuela were immediately replaced. For those transferred armchairs, the concerned schools of DO Valenzuela will be instructed to prepare Property Transfer Report. DO Navotas -Tangos NHS preferred the wood and steel materials but no bidder, so they resorted to all wood which caused the delay in the procurement process. DO Marikina explained that the delay in the delivery of school furniture is beyond their control since it is a contract between the Central Office (CO) and the supplier. However, report is being made to the CO on the actual date of receipt of the delivery of the furniture and it is up to the CO to claim for liquidated damages from the supplier in case of delay or breach of contract. Efforts are being made to expedite the construction of the building so that the school furniture could already be put in place.

RO I

In DO Ilocos Norte, the supplier had requested for extension of 60 calendar days due to force majeure brought about by typhoon and extreme weather conditions that affected the province of Isabela, the supplier’s base of operations and source of materials. Somehow, the supplier has admitted his default for the delayed delivery of the furniture and has agreed to fully deliver and finish the project until the 2nd week of October 2017. Also, he was amenable to be charged liquidated damages equivalent to an amount of one-tenth of one percent of the cost of the delayed goods for everyday of delay until

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Regions Management’s Comments such goods are fully delivered and accepted by the Division. Management made an assurance that this particular procurement experience will be greatly considered in the determination of the eligibility of supplier in future procurement of furniture of the Schools Division of Ilocos Norte. In DO Batac City, the defective tables and chairs were already fixed by the contractor/supplier. In addition, the accounting section will be imposing the provisions of liquidated damages based on the Revised IRR of RA No. 9184 once section obtains the attachments and supporting documents of the project procurement for TCCs and learners’ chair for the senior high school. The management assured that the TTCs and learners’ chair were already completely delivered to the recipient schools as confirmed by the heads of schools.

DO Laoag City has already rescinded their contract. While in DO Ilocos Sur, the supply officer contacted the contractor and it was agreed upon that liquidated damages will be deducted to contractor’s billing.

RO IV-B

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

RO V Management of DO Albay averred that reliance was made on the submitted Delivery Receipts by the supplier and that validation from the recipient schools as to the date indicated in each DR was no longer done. Accordingly, this would result to inaccurate computation of the liquidated damages. Also, Management committed to conduct a reorientation to all Designated Property Custodian/Supply Officers reminding them of the importance of indicating the actual date of delivery of the items. DO Catanduanes officials concerned explained that they had many times called up the suppliers to deliver the furniture, but still, only partial delivery was made on the first contracts awarded and none for the last contract. DO Management and BAC offered no objections to the audit observations and assured the Audit Team of their compliance with the recommendations.

RO IX

DO Zamboanga del Sur admitted that the designated personnel was not able to closely monitor the delivery of school furniture. They justified that it intended to specify all wood type of school furniture in the procurement as it usually did in the prior years. However, the DepEd Central Office advised the Management to have it open to all types (i.e. all wood, all plastic, combination of wood and steel or plastic and steel) to avoid failure of bidding which commonly happened to other Division Offices due to scarcity of good lumber with the “Log Ban” program of the Department of Environment and Natural resources (DENR). Furthermore, Management needed to award the contract before the sub-ARO will lapse considering the procurement was already on the 4th

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Regions Management’s Comments quarter of the year. The management found the documents and the samples submitted during bidding were sufficient and compliant and relied on them thus, it no longer conducted self-testing and research. However, management has not yet paid the supplier. According to Management, with the observations and recommendations, it is now compelled to require the supplier to do repair or replace all the defective items, to complete delivery of the lacking writing boards and other parts, to fix issues on self-loosening bolts and nuts and to provide markings on furniture as specified in DepEd Order No.61, s.2009. Moreover, management assured the creation of an Inspectorate Team for school to ensure compliance with the technical specifications prior to issuance of acceptance certificates. DO Pagadian City assured the implementation of the recommendations.

RO XIII

The management is sending a participant in the person of Engr. Alvin Marion C. Orboc – Division Engineer on February 20-23, 2018 to be an active participant of the Workshop on the Preparation and Finalization of the Five Year Comprehensive School Facilities Development Plan that would include the discussion of the Replacement of Old School Furniture and Provision of Furniture to Newly Constructed Classroom.

Redesigned Technical-Vocational High School (RTVHS) Program 6. The effective implementation of the Redesigned Technical-Vocational High

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

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

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

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

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

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

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

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

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

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

education through the Alternative Learning System (ALS) and the Madrasah Education Program. Several intervention strategies were applied for the successful implementation of the program, among which are the provision for tools, facilities and equipment, and infrastructure support that includes repair, rehabilitation and construction of workshop buildings.

6.4. The emergence of the K to 12 program, which covers 13 years of basic

education, not only re-established the Technical-Vocational education but also strengthened it by integrating TVL tracks in the last key stage of the program, the SHS, implementation of which started in the SY 2016-2017. One of the requirements of an effective implementation of the SHS particularly in the TVL tracks is the provision of facilities, tools, materials and equipment.

6.5. DepEd Order No. 8, series of 2016 dated February 15, 2016 provides, among

others, the following guidelines for the procurement of TVL specialization tools, equipment and materials for SY 2016-2017:

a. The regions shall consult with their SHS Coordinators and the Divisions

concerned regarding the specific requirements of schools per specialization, including details such as quantity per item and points of delivery;

b. Technical specifications of goods for procurement shall be guided by the

standards set by the Office of the Undersecretary for Curriculum and Instruction as contained in the SHS Tools and Equipment Database file provided during the Regional Orientation-Workshop held on February 1-3, 2016. In general, the items to be procured must meet specified standards, x xx, must be safe for use by high school students, x xx.

6.6. Likewise, the Senior High School Manual of Operations, Volume I, was issued

per DepEd Memorandum No. 76, series of 2016 which aims to help School Heads of SHSs in carrying out all the necessary preparations before the opening of the classes for the SY 2016-2017. The said Manual serves as a guide to School Heads to ensure that requirements and provisions in schools are ready and complete when SHS Program is implemented in the said SY.

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6.7. Based on the GAA for the FY 2016, the DepEd has allocated a total of P4,600,612,000.00 to implement the RTVHS Program in SY 2016-2017, as summarized below:

Office/Region Amount

CO 128,459,000.00 NCR 145,075,000.00 CAR 107,799,000.00 I 348,584,000.00 II 186,382,000.00 III 420,114,000.00 IV-A 399,965,000.00 IV-B 178,322,000.00 V 434,219,000.00 VI 364,704,000.00 VII 536,981,000.00 VIII 233,733,000.00 IX 125,934,000.00 X 221,643,000.00 XI 236,755,000.00 XII 242,800,000.00 XIII 289,143,000.00 Total 4,600,612,000.00

6.8. The ROs submitted the approved RTAs to the DepEd CO which became its

basis in releasing funds to implement the program. Utilization by the audited four regions of the FY 2016 appropriations for the said program as of year-end is shown below.

Region Appropriation Contracted Amount Unutilized Budget

NCR 145,075,000.00 126,245,254.60 18,829,745.40 RO II 186,382,000.00 172,789,802.60 13,592,197.40 RO V 434,219,000.00 401,472,590.65 32,746,409.35 RO XI 236,755,000.00 210,522,214.00 26,232,786.00 Total 1,002,431,000.00 911,029,861.85 91,401,138.15

6.9. Moreover, evaluation of the implementation of the program in the aforesaid

regions, as wellas inROs of CAR, III, IV-B, XII and XIII, revealed deficiencies such as: (a) delayed/non-delivery of TVL tools, materials and equipment costing at least P386,834,786.39; (b) underutilized/unutilized delivered items due to, among others, unreadiness of at least 104 SHSs to implement the program and defects in the specifications of the procured items delivered in at least 45 recipient schools; (c) recording and procedural deficiencies; and (d) other issues and concerns encountered in the

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implementation thereof. The aforesaid deficiencies are discussed in detail below:

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

The delay or non-delivery of procured TVL tools, materials and equipment was mainly caused by the delay in the procurement thereof affecting the timely program implementation to the detriment of the program’s intended beneficiaries. Relative observations noted in eight regions are as follows:

Region Cost of Items Observations/Deficiencies

NCR DOs of Manila, Valenzuela, Pasay, Parañaque and Las Piñas City

634,418.42 Thirty-three undelivered items were noted in the comparison between the Delivery Receipt (DR) and actual items delivered in seven selected recipient schools.

RO II 11,748,713.71 Based on the report submitted by the Supply Section, 5,256 TVL materials, tools and equipment remained undelivered as at year-end.

RO III -* Delays were incurred in the deliveries of items especially for those contracts that were awarded and started in 2016. Although majority of the items procured in CY 2016 were 100 percent delivered, all the contracts started only in September 2016. The suppliers were given 90 days to deliver the procured items and were likewise approved with 60-day extension to complete the delivery hence the contract completion was further moved to February 2017.

RO IV-B DO Romblon

105,789.61 Four items included in the DRs, Invoice Receipt for Property (IRP) and Inspection and Acceptance Report (IAR) were not delivered.

RO V 374,345,864.65 Target dates of delivery for the 13 awarded Lots were not met by the concerned suppliers. It was noted that not even a single delivery was made by the supplier for Lot 12 which prompted the Management to terminate the contract with the supplier whereas the procured items for Lots 1 to 4, 6 to 11 and 13 with a total contract amount of P374,345,864.65, though completely delivered to the recipient schools, incurred delay ranging from four to 427 days resulting in imposition of liquidated damages totaling P5,860,331.97.

RO XI -* Comparison between the list and actual delivery disclosed items that were not yet delivered.

RO XII -* A total of 566 items were left undistributed to its respective beneficiaries. The processing of documents for transfer of ownership from Supplier to DepEd RO XII and the construction of the canal at the exit gate were both delayed. Moreover, the procurement of the packages had undergone a lengthy process since despite of reposting the procurement notice in the PhilGEPS on May 2016, still there were no interested bidders for some items in some specializations. Notice to Award was received late on May 2017 and delivery of the packages to RO happened in late 2017.

RO XIII -* The schools responded that the tools and equipment were

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Region Cost of Items Observations/Deficiencies Nine DOs not delivered and installed in time for the start of classes

in SY 2016-2017. Total 386,834,786.39 *Amount not stated

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

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

The SHS unreadiness was observed in view of the absence of technical-vocational laboratories, lack of space or room to accommodate the items delivered, deferred or no TVL track/course offerings, absence of enrollees and non-provision of supplies necessary for the delivered TVL equipment to function properly. Likewise noted were delivered items that were of poor quality, for commercial or industrial use, and non-compliant with the required specifications. Details are shown below:

Region Unreadiness of the

SHS

Defects in the Specifications of

the Procured Items

Observations/Deficiencies

No. of Recipient Schools NCR 44 12 As to the schools unreadiness, seven schools

were observed without technical-vocational laboratories since there were no SHS buildings constructed as at inspection date, with on-going or completed construction thereof but was deemed un-operational due to lack of electricity and water supply or operational but not suitable for TVL courses as its design were classroom type. Items delivered were housed in different classrooms, buildings, guidance office, school clinic or in a stock room. Lack of space or room to accommodate the items delivered were likewise noted in 20 schools. Moreover, 19 schools were delivered with TVL equipment for TVL tracks not currently offered or were no longer offered by them and Bread and Pastry Production (BPP) course activity such as baking of bread which involves the use of bread slicer was not incorporated in the course syllabus thus, delivered TVL equipment were unutilized. Two schools of DO Manila and one in DO Parañaque City no longer have SHS enrollees. Furthermore, 10 schools were noted with unutilized TVL tools and equipment due to lack of necessary supplies such as power supply, gas tank for the gas range and blade for the circular saw. Defects in and/or poor quality of the items delivered in 12 recipient schools were also

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SHS


the Procured Items


No. of Recipient Schools noted. TVL equipment such as commercial mixers with attachments, mechanical dough rollers, decker ovens, uprights freezers, refrigerators and welding tables were found unsuitable for teaching purposes as its size, quantity and capacity were for industrial or commercial use.

CAR 6 None Six schools lacked laboratory rooms. Hands-on activities for BPP, Cookery and Food Services were done in Science Laboratories. Demonstration for organic agriculture and carpentry were conducted at any available space in the school premises. One school offering EIM and carpentry used a regular classroom as laboratory which was a disturbance to other classes in the adjacent rooms because of the noise during practicum.

RO III Not stated Not stated In August 2017, an order was issued by the Regional Director to the supplier to pull out items that did not meet the specifications. Inquiry with the Management disclosed that these items were not yet paid but were still in the custody of the respective schools. Other items were put on hold, with the instructions to not utilize the said items yet or to await go signal for its use. Eventually on January 12, 2018, Regional Memorandum No. 12 was issued allowing the use of the NC II BPP tools, NC II masonry equipment and tools, NC II tile setting equipment and NC I plumbing tools and equipment. On the other hand, other schools received tools and equipment even though the programs were not offered while other schools have no enrollees in some TVL tracks. Items such as portable disc grinders were reported not usable due to breakage of grinding disc.

RO IVB 1 1 Alcantara NHS was provided with TVL tools that are of poor quality and were easily damage after few uses. Romblon NHS was provided with TVL items (Cluster II, Lot 1 - Home Appliances and Cluster V, Lot 1 - Hardware) amounting to P192,794.70 however, it does not currently offer the SHS tracks.

RO V 11 7 In DO Albay, TVL tools, equipment and materials costing P1,389,886.00 were found defective/non-functional/of poor quality. Some equipment had sizesand capacity that appeared to be for commercial or industrial

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SHS


the Procured Items


No. of Recipient Schools use. Three tractors each costing P0.445 million were not utilized due to lack of enrollees on TVL tracks of Oas Polytechnic School and non-availability of farm at Marcial O. Rañola Memorial School and Cagmanaba NHS. Some school heads reported that the SHS enrolled under the TVL tracks were not provided with workshops required for the effective implementation of the program. Limited electricity supply and need for additional transformer to augment the power supply was also noted. Since they do not have capital outlay for the procurement of transformers and because of the limited power supply during daytime, they devised a system wherein the students would use it at 5 PM as electricity consumption at this time is not as much as compared to regular teaching time of 7 AM to 5 PM. In DOs of Legazpi City and Tabaco City, various tools, materials and equipment with a total cost of P3,072,849.20 remained unused, untested, defective and inappropriately stored.

RO XI 13 9 Nine schools reported low quality of delivered items, based on the result of survey. Upon inspection, defective or poor quality items, lack of supplies needed to utilize TVL tools, lack of laboratory or with on-going construction thereof, lack of space to accommodate deliveries and deferred course offering, were also noted in 13 recipient schools.

RO XIII 29 16 The required specifications of TVL equipment such as reach-in refrigerator, LCD projector and airbrush cake decorating set with compressor were not observed. Moreover, replies from the survey questionnaires sent to various recipient schools disclosed deficiencies in the delivered items such as poor quality, defective, non-compliant with the required specifications, lack necessary supplies for it to function properly, no proper storage area/facility, and no available technical-vocational laboratory.

Total 104 45

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c. Recording and procedural deficiencies

As provided in the DepEd Financial Management Operations Manual, the procedural flow of documenting delivered TVL tools, materials and equipment are enumerated below:

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

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

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

and provide fully signed IAR to the supplier;

c. Supplier provides copy of DR and IAR to Central Office (CO)/Regional Office (RO) Asset Management Division;

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

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

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

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

Office Accountant for dropping from book of accounts; and;

g. The CO/RO Accountant transmit Journal Entry Voucher to respective DO Accountant for booking-up.

Validation of records and interview with the concerned personnel in seven regions disclosed recording and procedural lapses as follows:

Region Observations/Deficiencies

NCR Transferred TVL tools, materials and equipment were not yet recorded in Implementing Units’ (IUs) respective books pending receipt of JEVs from the RO thus, resulting in the unreliable presentation of affected accounts in the financial statements.

RO II TVL materials, tools and equipment were taken up in books of the RO as Property, Plant and Equipment (PPE) items and were entered as debit entries to the Technical and Scientific Equipment account. The said items were still accounted for as property of RO as of year-end when the items were already in the custody of the recipient schools. Further, allocation to each school could not be determined due to the absence of acquisition cost of each item in the DRs and IARs. This resulted in the non-booking up in the books of DO Isabela and its IUs since the items' delivery in November 2016. The DOs and IUs had not received JEVs from CO/RO to effect the recognition of TVL tools, materials and equipment in the books. As a result, the Technical and Scientific Equipment account was misstated in the books of the RO and DOs since there was no transfer documents for all deliveries made to facilitate the proper recording thereof.

RO III Delays in the re-bidding process of the RO was observed so that contracts were awarded in May 2017 and the NTPs were issued in July 2017, more than the seven-day requirements of RA No. 9184. Moreover, additional delays were also noted in the

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Region Observations/Deficiencies receipt of NTPs for contracts in CY 2017, as the suppliers received the notices one to three months after NTP date.

RO IV-B Schools were not provided with list of TVL tools, materials and equipment to be delivered as well as its specifications thus, on delivery, the designated custodians could not ascertain whether the school is actually the intended recipient of the delivered items or that the specifications of the actual products delivered were compliant with the contract agreement. This compelled custodians to simply accept the deliveries and rely on the DRs to inspect the same. Moreover, TVL tools, materials and equipment delivered in recipient schools remained unrecorded in the books of the DO and its IUs as at year-end. The DO and IUs had not received JEVs from the RO to effect the recognition of delivered TVL tools, materials and equipment in the books. In like manner, depreciation for the equipment could not be recognized as well.

RO V Based on the reviewed reports and documents, out of the 14 Lots subjected for public bidding, only Lots 1 to 13 have been awarded to the winning bidders. The procurement of Automotive Servicing (Lot 14) did not push through due to the failure of two successive biddings conducted on April 19 and June 6, 2016, for which the BAC recommended that procurement thereof be made through alternative method under the Negotiated Mode of Procurement. The Management requested for quotations from prospective suppliers however, only one supplier responded and submitted quotation amounting to P3,196,093.00 which exceeded the ABC of P2,449,515.00 by P746,578.00. Schools have no copy of DRs from suppliers hence, delay in delivery could not be determined.

RO XI Four schools reported that they did not receive the list of items to be delivered hence completeness of the deliveries made by the suppliers could not be easily determined.

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

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d. Other deficiencies

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

Region Observations/Deficiencies

NCR Due to the deficiencies observed in the inspection and audit of relative disbursements, Notices of Suspension with a total suspended amount of P67,038,558.33 were issued requiring submission of documents/justifications which to date were still not yet completely submitted for evaluation. Excessive supply of TVL tools, materials and equipment was noted in 10 schools which was caused, among others, by small population of SHS enrollees and duplicate supply from the local government. A school building was constructed in Tanza NHS intended for SHS students use however, due to the demolition of the JHS school building, the SHS students were displaced to different schools prioritizing the JHS students. The TVL laboratory in Sta. Elena HS was not properly ventilated. The Property Custodian of Senator Renato Compañero Cayetano Memorial Science and Technology HS declared missing tools, materials and equipment amounting to P26,887.71. The items were fully accounted when delivered to the school but were temporarily stored in the bartending room commonly used as their stock room. According to the custodian, the investigation is still on-going. The incident remains unreported to the RO.

CAR Most schools used tools donated by Secondary Education Development and Improvement Project (SEDIP). The lack of appropriate classrooms, specialized tools and equipment, as well as supplies and materials for the TVL program resulted in the low turnout of assessment passers. As of December 2017, there were 348 Grade 12 students of whom only 65 were assessed and only 41 passed the assessment tests.

RO IV-B In Looc NHS and Ferrol NHS, of the six units of gas range delivered to the schools, only three were utilized because similar equipment were provided by private group and DOLE. In San Jose Agricultural HS, there were enrollees for Commercial Cooking (NC II) and Barbering and Hairdressing (NC II) courses/specialization however, no TVL tools, materials and equipment were provided thereof.

RO XI In Cateel Vocational HS, three units of high-speed machine with attachment button holder and one set of jack hammer were delivered but not included in the list of items to be received by the school. Nonetheless, the said items were being used by the students. In DRANHS, the electrical and installation equipment were not utilized pending inspection by the Inspectorate Team.

RO XIII Procurement process for TVL tools and equipment delivered to recipient SHS were not carefully undertaken as prices for items such as reach-in refrigerator, fire extinguisher, TV, LED projector, four-burner gas range, airbrush cake decorating set with compressor and arc welding machine AC/DC and accessories were considerably costly. Review and comparison of prices per Sales Invoice and as researched online through the internet revealed price variances. Likewise noted was the insufficiency of tools and equipment delivered. The items were shared by the students thus, some were personally bought by the students or borrowed from ALS program. There was also insufficiency in the number of teachers of Bayugan

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Region Observations/Deficiencies City SHS. Currently, the school have 31 teachers that handle 1,099 SHS students. According to the school head, the ideal student-teacher ratio is 1:40. However, existing condition of the school showed a 1:60 ratio thus, the classrooms were not conducive to learning.

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

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

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

b. establish proper coordination among the concerned DepEd Offices on

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

c. formulatestrategies to promote the TVL tracks offered by the public

SHSs enabling them to gain new enrollees or increase its number;

d. instruct the concerned Property Custodians of the DOs and the recipient schools to report immediately to the ROs theTVL tools, materials and equipment that were found defective and still covered within the warranty period for the replacement thereof from the suppliers or adjustment in the prices of items not in accordance with the required specifications;

e. advice and provide with documents the schools’ Property Custodians

about the expected deliveries in their respective schools which will serve as its basis for its comparison with the actual deliveries; and

f. instruct the Supply Officer of DOs and IUs to transmit the PTR to the

Accounting Division of the ROs as well as the Accountant of the ROs to transmit the JEV to the DOs and IUs for the proper recording of the transferred TVL tools, materials and equipment in their respective books.

6.11. The following are the comments of the Management:


NCR They were given order by the CO to start with the procurement of TVL tools, materials and equipment despite of the delay in the construction of the TVL laboratories where the said tools, materials and equipment will be kept. To address the issue on lack of laboratories, the recipient schools were advised to receive the deliveries and undertake coping strategy wherein the existing classrooms will be converted to TVL laboratories. On the issue of non-utilization of the delivered items due to the absence of SHS enrollees

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Region Management’s Comments for TVL tracks, the Management averred that 80 per cent of the incoming SHS from public schools tend to enroll in private schools. The remaining 20 per cent that will be enrolled in the public SHS were programmed to be provided with the needed TVL tools, materials and equipment. However, the actual enrollment did not coincide with the expected number of enrollees which consequently affected the utilization of the deliveries. The Management further argued that although the deliveries were not utilized, it was able to secure the required materials and equipment for the TVL courses. Should there be an increase in the number of SHS enrollees for TVL courses, there will be no issues on the insufficiency of its material and equipment requirements.As to the question on the specification of the items delivered, the Management commented that they intentionally procured items of industry-based specifications to prepare SHS students to the world of work. The Management of DOs of Caloocan and Pasig will be in close coordination with the RO and CO regarding the specific requirements of the SHS with TVL courses, the recording of the TVL items delivered and defects on the deliveries, if there are any.

RO II The Management of RO commented that despite frequent follow-ups on the undelivered items, the suppliers failed to comply hence, they imposed liquidated damages. Further, they commented that PTRs will be issued upon completion of deliveries. In DO Isabela, the Management directed all concerned officials to coordinate with the RO/CO on the listing of the procured TVL tools, materials and equipment and undelivered tools. The Accountant will direct recipient schools to submit IAR for booking-up.

RO III

The Management acknowledged that there were delays in the implementation of the project and gave assurance that they will continue to implement the program properly and expeditiously for the benefit of the learners.

RO IV-B The Management, during the Exit Conference, commented that the TVL tools and equipment were procured by the CO and RO and selected the recipient schools without validating whether the schools offer vocational courses intended for the tools and equipment bought.

RO XI During the Exit Conference, the Management committed to look into the materials that were not yet delivered. As to the demonstration of the different equipment, the TVL coordinator of the RO will coordinate to the suppliers to expedite the demonstration so that the tools/equipment will be available for use. The Regional Director stressed that the non-utilization of the TVL was due to the absence of enrollees. As a result, the schools who have the TVL tools but have no enrollees opted to lend the equipment to other SHS with enrollees of the specific track, with the condition that once the school will have enrollees, the latter will return the equipment to them. The Regional Director also confirmed the existence of low quality equipment during his visit to some schools and instructed them to return the item if such do not meet with the qualifications set during the bidding. Further, he acknowledged the problem with the unreadable manual and committed to address the problem as soon as possible.

RO XIII The RO Management commented, on the items which were noticed to be costly and not in conformity with the specifications, that they strictly followed the provisions of RA No. 9184 and its IRR. Four competitive biddings were held and two negotiated procurements were conducted to ensure transparency. Further, they commented that the online prices could not be the basis for the RO in its procurement because the prices online are on a cash basis. Freight and handling costs are not included and in all probability, the bidders also considered the length of time that they will be paid in the computation of their bids. Moreover, Memorandum dated March 16, 2017 was issued by the RO directing the Division Coordinators to conduct an inventory of the TVL tools and equipment and submit Inventory Report to the RO.

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Region Management’s Comments The Management of DOs Agusan del Norte, Butuan City, Cabadbaran City, Bayugan City, Dinagat Islands, Surigao City, Surigao del Norte and Tandag City confirmed the deficiencies noted in the delivered TVL tools, materials and equipment and the same has already been brought to the attention of the RO.

Payroll System 7. The current payroll system of the DepEd caused several drawbacks such as: a)

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

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

• Authorized Deductions. Deductions from salaries and other benefits

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

o The BIR, PHILHEALTH, GSIS AND HDMF; o Non-stock savings and loan associations and mutual benefits

associations duly operating under existing laws and cooperatives which are managed by and/or for the benefit of government employees;

o Associations or provident funds organized and managed by government employees for their benefit and welfare;

o GFIs authorized by law and accredited by appropriate government regulating bodies to engage in lending;

o Licensed insurance companies; and o Thrift banks and rural banks accredited by the BSP.

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

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

• Employees’ contributions or obligations to the Government Service

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

• The “First-In, First Served” queuing system shall be observed except that

deductions due to GSIS and HDMF shall be accorded first order of preference and the P4,000.00 threshold is observed.

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

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

7.3. However, prior to the issuance of the aforementioned DepEd Order in October

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

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

7.4. The DepEd Payroll Servicing Manual, issued on June 21, 2006, serves as a reference guide to the DepEd CO, RO, Divisional and Field officials on the

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decentralization of the payroll servicing system from the Central Office to the Regional Payroll Servicing Unit (RPSU). Chapter III of the said Manual provides the general procedures in the preparation of the payroll, which starts from the submission by the Schools to the RPSU of the duly accomplished Form 7, based on the Daily Time Records (DTRs) of teaching and non-teaching personnel. The RPSU reviews the Form 7 and other relevant documents from which the former will prepare the payroll, payroll slips, paychecks, etc. From the payroll printed by the RPSU, the Regional Accountant informs the DOs/Schools of the amount to be transferred for the payroll. Other than the payroll, the RPSU generates a Summary of Cash Disbursement Report (SCDR) which also shows the amount to be transferred by the DOs/IUs for the salaries of their respective employees.

7.5. Procedures applied in the centralized payroll system of DepEd were observed

ineffective that resulted in several drawbacks, details of which are discussed as follows:

a. Net under-remittance of P74,388,234.21 and unreconciled reciprocal account balances of the Due from Operating Units and Due to Regional Office in the books of DepEd NCR ROP and DOs with a net discrepancy of P82,817,183.64

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

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

accounts Due from Operating Units and Due to RO reported in the books of DepEd NCR ROP and 13 DOs, respectively, revealed a net discrepancy of P82,817,183.64. Likewise noted was the erroneous closing of the year-end balance of the Due from Operating Units account amounting to P48,547,333.00, net of unaccounted deposits of P122,935,567.21 in the Payroll Fund maintained by ROP, to the Subsidy from Other National Government Agencies account to effect reciprocal account’s elimination in the Consolidated Financial Statement prepared by the ROP. The same thing occurred in the records of six DOs/IUs in NCR wherein the account balance of the Due to RO account was closed either

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to the Financial Assistance to National Government Agencies account, in case of over-remittances or Subsidy from Other National Government Agencies, in case of under-remittances, as advised by the Finance Division of ROP. The aforesaid entries in the books of ROP and concerned DOs/IUs rendered with doubtful validity the accuracy of the reported account balances of the reciprocal accounts used in recording payroll transactions.

b. Non-compliance with the order of priority for authorized deductions and

uncontrolled types of loans offered by the PLIs that led to undeducted obligations in favor of the GSIS, HDMF/Pag-IBIG and PLIs amounting to P377.73 million, P16.56 million, and P1.80 billion, respectively

7.8. The order of preference for the authorized deductions from the salaries and

allowances accruing to government employees in favor of GSIS and HDMF/Pag-IBIG, as provided in Section 47 of the General Provisions of the GAA for FY 2017, was disregarded in the NCR, CAR and ROs I, IVB, IX and XIII due to the accommodation of various PLIs that offer numerous types of loans and the “First In, First Served” queuing system which was silent as to the classification of lenders to be given priority over salary deductions, which resulted in undeducted GSIS and HDMF/Pag-IBIG loans and/or premiums amounting to P377,728,531.98 and P16,559,367.86, respectively. Details are as follows:

Region Amount of Undeducted Obligations

Period Covered GSIS HDMF/Pag-IBIG

NCR 154,765,915.13 12,944,660.22 January to December 2017 CAR 27,242,772.74 3,361,372.35 January to December 2017 RO I 6,245,501.76 - As of December 31, 2017 RO IV-B 74,735,403.16 253,335.29 January to December 2017 RO IX 2,188,491.00 - January to December 2017 RO XIII 112,550,448.16 - October 2016 to August 2017 Total 377,728,531.95 16,559,367.86

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

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7.10. Moreover, loans and/or premium payments due to PLIs had the most significant undeducted amount of P1,795,378,486.54, as observed in the

payrolls of teaching and non-teaching personnel in the NCR and RO IX. This is a result of the uncontrolled offer and approval by various PLIs of several types of loans/policies to DepEd employees that could no longer afford to pay the same due to insufficiency of their net take home pay. Breakdown of undeducted loans and premiums due to PLIs for ROs NCR and IX is shown in the following table:

Region Amount of Undeducted

Obligations due to PLIs Period Covered

NCR 1,780,087,257.09 January to December 2017 RO IX 15,291,229.45 January to December 2017 Total 1,795,378,486.54

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

P2,189,666,386.35 payable to the GSIS, HDMF/Pag-IBIG and PLIs remained undeducted in the payroll of DepEd employees, application of which could adversely affect their existing financial condition. Summary of the undeducted obligations are as follows:

Agencies Undeducted Loans/Premiums

GSIS 377,728,531.95 HDMF/Pag-IBIG 16,559,367.86 Various PLIs 1,795,378,486.54 Total 2,189,666,386.35

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

7.12. Audit of the payroll submitted to the Audit Teams likewise revealed the

existence of number of employees ranging from a low of three to a high of 873 with salaries below the required net take home pay of P4,000.00 due to various personal loans availed of by DepEd employees in the following ROs:

Region No. of Employees with

NTHP Below P4,000.00 Remarks

NCR All DOs

3 to 873 The existence of employees with NTHP below the P4,000.00 threshold was noted from the payrolls for the months of January to October 2017.

RO I DOs of Urdaneta City, Dagupan City, San Carlos City, Alaminos City and Ilocos Norte

10 to 185 Employees incurred NTHP below the threshold amount of ₱4,000.00 thereby affecting the employees’ productivity, motivation towards work, and capacity to meet their families’ basic needs.

RO VIII Hinabangan NHS and DO Baybay City

8 employees in Hinabangan NHS; range not provided for DO Baybay City

Inquiry from agency personnel disclosed that the noted deficiency is mainly due to various personal loans availed of by employees.

RO IX One IU under DO Zamboanga del Sur and

One to 22 employees of one IU in DO Zamboanga del Sur; and

The existence of employees with NTHP below the P4,000.00 threshold was noted from the payrolls for the months of January

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Region No. of Employees with NTHP Below P4,000.00 Remarks

two IUs of DO Pagadian three to 79 employees of two IUs in DO Pagadian

to December 2017.

RO XI Davao City NHS and 14 schools under DO Davao del Sur

44 to 84 employees of Davao City NHS; range not provided for the 14 schools under DO Davao del Sur

The minimum NTHP of P4,000.00 was not implemented and complied with exposing the employees concerned to the risks of unfavorable work and undignified economic conditions.

7.13. Despite NTHP below the threshold of the noted employees, loans from the

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

d. Inadequate controls in processing payrolls resulting in over or

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

7.14. Deficiencies noted in the following ROs:

Region Amount Deficiencies

NCR DOs of Marikina, Pasig, Mandaluyong, Taguig City/Pateros and Malabon

Not indicated Delay or non-submission of SCDRs and payroll registers to establish validity of disbursements

RO I DOs of La Union and San Fernando City

4,409,947.14 Inaccurate deduction of teachers’ Leave of Absence Without Pay (LWOP) covering the period June 1, 2016 to May 31, 2017 resulted in over-deduction of salaries and PERA, and under-deduction of government contributions due to GSIS, HDMF, and PHIC.

RO I DO Ilocos Norte

268,975.59 Inclusion of eight retired/resigned teachers and personnel in the payroll of the DO resulted in overpayment of salaries and allowances.

RO I DO Laoag

112,855.61 Inadequate control and procedures to ensure the regular grant of the step increments based on length of service to the qualified personnel of the DO resulted in underpayment and/or delayed payment of authorized salaries.

RO VIII 44,212.50 Erroneous deduction of PhilHealth Contributions for

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Region Amount Deficiencies DO Tacloban City, San Jose NHS, Sagkahan NHS and Tacloban City NHS

both employers and employees shares was disclosed due to the failure of the agency to review/evaluate and examine Health Insurance Premium (HIP) contributions received from the RPSU, thus casting doubt on the reasonableness of premium contributions and causing inaccuracies of recorded expenses per the agency’s books and financial statements. The total erroneous deduction consists of discrepancy in the computation of employees share of P25,462.50 in DO Tacloban City and overpayment of employee and employer share totaling P18,750.00 in San Jose NHS, Sagkahan NHS and Tacloban NHS.

RO VIII Not indicated Unsupported payroll transactions with the necessary documents such as, but not limited to, Daily Time Records (DTRs), travel orders/office orders, application for leaves, original copies of validated deposit slips, and original copies of computer-generated payroll registers.

RO IX DO Zamboanga del Sur

158,717.36 Over-remittance of premium contributions deducted from the payroll that was not actually paid.

RO XI DOs of Davao del Norte and Panabo City

Not indicated Incorrect salary rates reflected in the payroll journal of the 14 IUs under the concerned DOs which was not the same as the rates indicated in the Personnel Services Itemization and Plantilla of Personnel (PSIPOP) for FY 2017 creating confusion as to the accurate positions and basic salaries of the employees concerned.

RO XI DO Davao del Sur and Davao City NHS

14,589,305.40 Grant of cash advances to two accountable officers of the DO and Davao City NHS for the payment of year-end benefits, cash gift, PEI, salary differential, hardship allowance and other employee benefits instead of paying the same thru Automated Teller Machine (ATM) Payroll System, exposing government funds to risk of loss or misuse.

RO XI DO Digos City

34,759,972.92 Unsupported disbursements for the payment of regular employees’ salaries and allowances with necessary documents such as application for leave, travel authority, certificate of appearances except duly approved DTRs.

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

7.15. Preparation and processing of the monthly payrolls of the concerned IUs in ROs III and IX, which have financial staffs capable of administering its own funds, are continuously handled by their respective RPSUs, contrary to DBM-DepEd Joint Circular No. 2004-1 and DepEd Order No. 30, series of 2011 dated January 1, 2004 and March 24, 2011, respectively, requiring the implementation

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of school-based payroll preparation. Details of the deficiencies noted are as follows:

Region No. of

Concerned IUs

Remarks

RO III DOs of Tarlac City, Tarlac Province and Aurora

34 Review of the records showed that, since the payrolls are processed/paid by the RPSU, the IUs do not maintain individual index of payment of paid salaries, allowances, contributions, etc. of school officials and employees, contrary to Section 18, Volume I of the GAM. Hence, the actual salaries paid, unclaimed or refunded, including over or under-remittances of personal share of mandatory contributions and other deductions, were hardly monitored. Drawn JEVs to record fund transfers to the RO to cover the payment of mandatory deductions like GSIS, PhilHealth and HDMF were not supported with appropriate acknowledgment receipts/official receipts with the list of employees and the amounts remitted for monitoring purposes. The payroll preparation could already be done by the IUs; however, the RO and Systems Division at the CO have not conducted the required training or briefing of the schools’ staff to acquire the skills and knowledge on the operation of the school-based payroll system and the APDS.

RO IX DOs Zamboanga del Sur and Sibugay

20 In DO Sibugay, the preparation and payment of salaries are still with the RO hence, the continuous fund transfers for the purpose. It was noted that conditions required in the DBM-DepEd Joint Circular No. 2004-1 were already satisfied when the seven IUs were recommended as capable and ready to implement the school-based payroll preparation. The same is true in DO Zamboanga del Sur. Review of the status of implementation of the Audit Team’s recommendations revealed that the preparation and processing of the schools’ payroll payments are still being handled by the RPSU. The Audit Team likewise noted that payments for the net pay of the employees were already made directly to the bank by the schools, but SLs are still being maintained by the RPSU and are not available in the school. Moreover, the integration of any salary adjustments or inclusion for newly-hired employees or any other changes to payroll, cannot be promptly effected. Delay in the integration of any changes/adjustments in the payroll reached several months or up to almost two years. The schools already requested from the RO for the transfer of the payroll preparation however, no status was provided as of this writing.

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f. Other deficiencies

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

Region/DO Other Deficiencies

NCR Delay in the deposit of payroll requirements by the DOs to the ROP which contributed to the improper use of over-remittances and/or accumulated funds from the Payroll Fund account maintained by the ROP. The delay in the remittances in January 2017 ranged from two days to up to almost a month.

NCR DOs of Quezon City and Pasay

Errors in the recording of payroll transactions resulted in the understatement of the Due to RO account of P3,232,409.37 in the books of DO Quezon City and overstatement amounting to P7,476,235.66 in the books of DO Pasay

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

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

a. strictly require the DOs/IUs to transfer funds based on the actual monthly payroll requirements of the DOs/IUs per approved SCDR and immediately provide the RO with relevant documents to facilitate the recording and reconciliation of financial records/reports relative to the payroll transactions;

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

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

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

budget allocation for PS of DOs/IUs; d. reconcile the ROP’s records with those of the DOs/IUs in order to

resolve the disparities between the balances of the reciprocal accounts Due from Operating Units and Due to RO;

e. ensure that the authorized deductions are done in accordance with the

order of preference in the salary deductions with due consideration on the NTHP threshold of P5,000.00, as required in Section 48 of the

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General Provisions of the GAA for FY 2018. Restudy DepEd’s policy on the accreditation of PLIs which should include the limit on the types of loans to be offered by them to regulate the extension of loans to DepEd employees for their protection and financial stability;

f. reinforce sound internal control system in the preparation and

processing of payrolls and payment of salaries and allowances through:

f.i diligent review and proper approval by the concerned officials; f.ii timely submission of complete supporting documents to

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

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

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

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

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

7.19. The Management commented as follows:

Region Management’s Comments NCR Memoranda were issued by the Management requiring the DOs/IUs to transfer exact

amounts indicated in the SCDR. They are now implementing procedures in the RPSU to simplify the processing, preparing, paying and recording of payroll transactions. They have plans of downloading payroll processing to the DOs/IUs however, the new payroll system is still being developed by the DepEd CO. Effective January 2018, cash allocations for net pays are no longer transferred to ROP current account, with the DOs/IUs directly paying the salaries of their teaching and non-teaching personnel. They also commented that the implementation of the P5,000.00 NTHP per GAA of FY 2018 has already been implemented effective February 2018. However, as to the order of preference on authorized deductions, they are still waiting for the guidelines and program to be issued by the DepEd CO. As regards excessive/deficient remittances, the concerned DOs/IUs committed to stop the practice of excessive transfer and to update its PSIOP on a regular basis for proper budgetary allocation. Lastly, a complete set of payroll documents will be submitted by the concerned DOs/IUs for proper audit.

CAR The RO is drafting a Memorandum to all DepEd employees concerned through the DOs informing them of their GSIS and HDMF loan amortizations that were not deducted in 2017. It also informed that safeguards shall be added in the existing policy on the issuance of certifications on the net pay of employees for purposes of loan applications.

RO I The Management informed the teachers regarding the refund of overpayment of salaries and allowances as well as the contributions to GFIs. The overpayment of salaries and allowances of the retired/resigned employees of DO Ilocos Norte was

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Region Management’s Comments disallowed in audit. Moreover, they have requested to the RPSU of DepEd RO I to download the payroll preparation to the DO. Furthermore, they committed to strictly comply with the provisions of the GAA relative to the required minimum NTHP.

RO VIII The remittance of the Pag-IBIG contributions and loans was already downloaded to the DOs. They gave instructions to submit to the Audit Team the payrolls with DTRs and other necessary documents within the reglementary period. They further responded that they are prudent in approving GSIS loans however, the teachers can directly avail loans from the PLIs without their approval hence, their effort to curtail loans has been a struggle. As regards the observation on overpayment of PhilHealth contributions, it has already been raised to the PhilHealth and they suggested that overpayments will be applied to the succeeding monthly premiums upon reconciliation of accounts.

RO IX The Management also committed to ensure that the over-remittance will be off-set with the succeeding remittances to PhilHealth. They also explained that the deficiency on premium payments and loan deductions was due to the contributions of teachers who were on leave without pay and request of concerned teachers for the exclusion of its deductions from their salaries. The NTHP below the threshold, on the other hand, was due to negligence of the bookkeeper and deductions pertaining to absences of employees however, the Management assured that the relative DepEd Order will be strictly followed and that it will assess loan applications by employees before approving. The concerned IUs communicated with the RO regarding the implementation of school-based payroll preparation and is still awaiting for the latter’s response.

RO XI The Management advised the concerned offices to submit, on a regular basis, the required payroll documents otherwise, provide an explanation on failing to do so. Cash advances was resorted to by the Management in view of the lack of time in preparing the ADA. However, they have committed to stop this practice and employ the payment of payroll thru the ATM.

Procurement and Warehousing of Learning Materials (LMs)/Textbooks (TXs)/ Teachers’ Manual (TMs)Bufferstocks 8. DepEd suffered loss amounting to P25,213,511.10 representing the cost of

820,682 damaged Grade 2 Learning Materials (LMs) at the contractor’s warehouse due to insufficient warehousing facilities to house the deliveries and lack of prudence on the part of DepEd to ensure the safety of the LMs. Likewise, out of the 2,673,384 Textbooks (TXs)/ Teachers’ Manual (TMs) buffer stocks proccured from CYs 2013-2016, seventy nine percent or 2,101,670 TXs/TMs worth at leastP56,750,598.00 remained undistributed as of inspection date which may eventually result in wastage of government resources due to time obsolescence, loss, damage or deterioration.Moreover, observed control weaknesses were observed in the proper safekeeping and inventory system of TXs/TMs which can bring further damage or loss of TXs/TMs.

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Damaged LMs worth P25,213,511.10

8.1. During the last quarter of CY 2015, DepEd through the Instructional Materials

Council Secretariat (IMCS), now the Bureau of Learning Resources (BLR) had commenced the procurement process for the following projects:

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

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

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

Delivery to DepEd Central Office Warehouse.

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

Procurement Scope of Work

Printing of LMs (Printing Company)

Reprinting of LMs and Delivery to DepEd Central Office Warehouse.

Delivery of LMs to ROs/DOs/Schools (Forwarding Company)

The scope of work shall cover but not limited to the delivery of Learner's Materials from DepEd CO Warehouse to Public School Districts and Public High Schools. The works include handling, lifting, loading and unloading.

8.3. Records showed that the signing/approval of contract with the awarded

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

Lot Item Description Quantity Amount

3 Grade 2 English LMs 288,628 28,489,450.80 Grade 2 ESP LMs 373,016 Grade 2 MTB-MLE LMs 373,016

4 Grade 2 Araling Panlipunan LMs 373,016 20,403,207.48 Grade 2 Filipino LMs 286,628

5 Grade 2 MAPEH LMs 373,016 23,231,436.48 Grade 2 Mathematics LMs 373,016

Total 2,440,336 72,124,094.76

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

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8.5. Payment to be made to the contractor under LDDAP-ADA No. 01-101-101-07-137-2016 dated July 21, 2016 in the amount of P64,190,444.33 net of tax and 10 percent retentionwas verified. Subsequently, on November 26, 2016, the 10 percent retention in the amount of P7,212,409.48 was released after the lapsed of the three months warranty period. Therefore, the contract was 100 percent paid as of December 31, 2016.

8.6. However, sometime in August 2017, the Audit Team received information that

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

8.7. The report on the damaged Grade 2 LMs transmitted on March 17, 2017 to

Atty. Revsee A. Escobedo, Assistant Secretary for Procurement Service, revealed the extent of the damaged LMs at Lexicon Press, Inc. warehouse, with computed value of P25,213,511.10, broken down as follows:

Items Description Quantity

% of Loss

Cost Per Unit 10 Amount Per

Contract11 Damaged

LMs 2

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

8.8. Analysis of the incidents associated to the damaged unutilized LMs worth

P25,513,511.10 revealed the following observations:

a. Procurement of forwarding services and the refurbishment of the BLR warehouse which did not coincide with the delivery of the LMs depicted poor

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

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planning that resulted in non-availability of the needed services and storage facilities for delivered Grade 2 LMs.

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

8.10. Review of the Annual Procurement Plan (APP) revealed several lapses in the

procurement planning for the printing of the LMs, as both the procurement of forwarding services and the refurbishment of the needed warehouse were only done months after the expected delivery date of the LMs which was on November 30, 2015. As noted, the forwarding services has an expected contract completion date in four months, which commenced on March 31, 2016, while the refurbishment of the DepEd-BLR warehouse was only contracted six months following the delivery date of the LMs. Detailed information are also presented in the table.

Particulars Code Procurement Program

Schedule of Procurement Activity12 Pre-

Procurement Conference

Contract Signing

Issuance of NTP

Delivery

Printing of LMs IMCS 073

Re print of Grades 2,3,8 & 9 LMs

August 21, 2015

November 9, 2015

November 23, 2015

November 30, 2015

Forwarding Services

IMCS 038

Delivery of Additional copies of Reprinted Grades 2, 3, 8, 9 & buffer stocks LMs to recipient field offices.

December 21, 2015

March 10, 2016

March 24, 2016

March 31, 2016

Refurbishment of Warehouse

ADMS4 26

Procurement of Repair and Rehabilitation of DepEd Warehouse in Taguig City

January 26, 2016

May 24, 2016

- -

8.11. The deficiency in planning was apparently a contributing factor for the loss,

which can also be directly attributed to the prevalent delay in the

12 DepEd Annual Procurement Plan 2015-2016

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bidding/procurement activities of DepEd. This is evident in the analysis of the procurement undertakings per contract, wherein all of the planned procurement activities showed delay vis a vis the APP. This is illustrated in the table below.

Supplier Lexicon LBC Express

Inc. All Transport Network Inc.

E.B. Matias Construction &

Trading Contract No. 2015-10-

IMCS(073,075&079)

2016-04-IMCS(038)BIII CB010-C010

2016-04-IMCS(038)-BIICB010a-C016

2016-10-AdmS4(026AMp017)-BI-NP2FB097a-C047

Purpose For reprinting of LMs

For delivery of the LMs to school

For delivery of the LMs to school

For the refurbishment of the BLR warehouse

Approved Authority to Procure (ATP)

9/24/2015 1/11/2016 1/11/2016 2/1/2016

Issuance of Notice of Award

12/29/2016 1/11/2016 (received by supplier)




Contract Preparation and Signing /PO

2/18/2016 8/19/2016 10/25/2016 2/17/2017

Issuance of Notice to Proceed





8.12. It can be gleaned from the foregoing information that the necessary storage

facilities were not readily available in time for the scheduled delivery of the reprinted Grade 2 LMs. Hence, as indicated in the BLR’s report on damaged LRs, the LMs remained in the Lexicon’s warehouse until the damaged materials were reportedly discovered. However, the delivery, inspection and acceptance reports were processed and made to appear that the deliveries were actually undertaken at the DepEd central office warehouse as stipulated in the contract, and the same were completed and accepted as certified by the BLR, undermining the possible risks of such arrangement poses to the interest of the government.

8.13. The BLR in its justification dated July 18, 2016, claimed that it requested

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

8.14. DepEd seemingly failed to consider possible remedy measures to address the

urgent need for spacious storage facilities during the procurement planning of LMs. It should have first assessed the availability of needed facilities to store deliveries before it opted to separate the procurement of forwarding company to

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handle the distribution of LMs to the various recipients. As noted, even during the planning stage, the APP showed that the refurbishment was planned months after the purchase of LMs. Under the circumstances, prudence and diligence would dictate the necessity to plan for an appropriate contingency measures to prevent or minimize the probability of any event or action to happen that may have harmful or unfavorable effects to the delivery of program implementation. b.Procedural lapses in the receipt and inspection by officers/employees having

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

8.15. Payment to Lexicon Press, Inc. for Contract No. 2015-10-IMCS (073,075, and

079) – BI-CB026-C047 in total amount of P72,124,094.76 was made based on Certification of Completed (COC) Delivery dated July 19, 2016 issued and signed by Ms. Besy C. Agamata, Chief Education Program Specialist, and Ms. Edel B. Carag, Director III, supported by other relevant documents on the reprinted Grade 2 LMs delivered by Lexicon.

8.16. Review of documents attached to payment showed that Lexicon’s Delivery

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

8.17. The general guidelines on inspection of deliveries pursuant to DepEd Order No.

5, s. 2010, require that:

a. The inspection of deliveries shall be handled by the Inspectorate Team composed of representatives from property, finance, and procuring/end-user’s units with technical knowledge about the deliveries.

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

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

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c. Inspection shall be conducted only on deliveries properly receipted and upon receipt of a written request for Inspection by the Property/Supply Office.

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

Order/Contract. e. Alterations, erasures or modifications on the perfected Purchase

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

f. Inspection and Acceptance Report must state items actually inspected and

conclusive remarks or findings and recommendations relative to the inspection conducted. The inspectorate Team shall affix their signature over their printed name and designation and indicate the date of inspection on the said report.

8.18. Apparently, based on the signed IAR, the deliveries were inspected, verified and

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

8.19. Further, the personnel with a plantilla position of Warehouseman III assigned at

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

8.20. The Audit Team also noticed that there were visible erasures in the supporting DRs and IARs which was also noted by the Accounting Division in the processing of payment. Through a document dated July 18, 2016, the BLR Supervising Education Program Specialist, provided the following justifications about the erasures: a. The contract of Lexicon Press, Inc. is to deliver the Grade 2 LMs to the BLR

warehouse; but the BLR requested Lexicon to defer delivery because the

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BLR warehouse in Taguig City has no adequate space to accommodate the said LMs.

b. Lexicon agreed to defer deliveries, temporarily safe keep the LMs, and wait

for the go signal from BLR to effect deliveries. The deliveries had been deferred for about 45 days.

c. The BLR informed Lexicon that the receipt of the goods shall be ante dated

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

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

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

8.22. As mentioned, the DRs and IARs issued in favor of Lexicon stipulated the date

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

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

a. The goods supplied under this contract shall be fully insured by the supplier in a freely convertible currency against loss or damage incidental to manufacture or acquisition, transportation, storage and delivery. The goods remain at the risk and title of the supplier until their final acceptance by the procuring entity. (Underscoring supplied)

b. For goods supplied from within the Philippines, Risk and title will pass

from the supplier to the procuring entity upon receipt and final acceptance of the Goods at their final destination. (Underscoring supplied)

8.24. The issued IARs and COC signify final acceptance, therefore in effect, relieves

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

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8.25. The BLR’s report on damaged LRs narrated the discovery of the damaged

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

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

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

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

majeure.

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

• Section 79. Destruction or sale of unserviceable property.

When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsalable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the auditor concerned or other duly authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission.

8.27. When warranted by circumstances that the officers/employees concerned who by reason of their duty failed to exercise due prudence, they could be held answerable pursuant to Section 105 of PD 1445 which provides that:

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

8.28. As of audit date, the Audit Team’s verification disclosed that the receipt of

delivered LMs have been accounted in the records of Accounting but not the disposal of the materials; while the Asset Management Division (AMD) has no records showing its disposition about the LMs’ delivery and disposal.

Unutilized/Undistributed TXs/TMs buffer stocks

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

stocks.

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

8.31. Inspection conducted on September 14, 2017 at the DepEd-BLR warehouse

showed undistributed/unissued buffer stocks, which according to the BLR report has a total quantity of 2,101,670 copies of various TXs/TMs. To wit:

Year

Delivered Total

Deliveries Released/ Pulled out

Existing Buffer at Warehouse

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

8.32. The TX/TM buffer stocks had accumulated from CYs 2013-2016, and this

number could possibly be increased if the unissued buffer stocks in

13Policies and Guidelines on the Allocation of Textbooks and Teacher’s Manuals

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schools/districts and DOs nationwide shall also be accounted. Based on the previous report on procurement, the cost per textbook ranges from P27 to P50 per copy, hence, the value of the undistributed/unissued textbooks approximately ranges from P56,750,598 to P105,093,700.

8.33. The percentage of issuance as shown in the preceding table, reflected a

minimum quantity of filled up requests that caused the accumulation of stocks which can be possibly attributed to excessive allocation of buffer stocks, lack of proper monitoring and coordination to determine the needs of schools, and the time, distance and inconvenience in the processing and filling up of request.

8.34. Further, 18 percent of the total remaining buffer stocks or 371,241 LMs are

Mother Tongue-Based Multilingual Education (MTB-MLE) LMs. Currently, DepEd uses 19 languages in MTB-MLE implemented in two modules: 1) as a learning/subject area; and 2) as medium of instruction. The mother tongue is used in all learning areas from Kinder to Grade 3 except in teaching Filipino and English subjects. The remaining LMs which are MTB-MLE related are as follows:

Year

Delivered Existing Buffer at Warehouse

MTB-MLE LMs

%

2014 266,845 129,778 49 2015 1,297,868 187,712 14 2016 536,751 53,751 10 Total 2,101,464 371,241 18

8.35. Since the MTB-MLE LMs are only designated to a particular RO, the needs

should be carefully assessed and validated.

Other Weaknesses

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

c. Non-compliance to DepEd Property Manual

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

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

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

the full capacity of the storage area.

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

4) Several books are loose from the boxes exposing the materials to

possible loss/misplacements.

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

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

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

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

1) DepEd was not able to provide for a suitable warehouse for undistributed TXs/TMs. Thus, P25 million worth of buffer stocks were damaged at the contractor’s warehouse, as already discussed.

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

warehouse located in Brgy. Pasong Tamo Quezon City.

e. The following observations indicate control weaknesses in the inventory system of TXs/TMs:

1) Interview with the Property Officer revealed that the AMD was only

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

2) During the inspection conducted, it was learned that the warehouse man

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

3) In the absence of stock cards and bin cards or any record on that matter

that will monitor the stock position of TXs/TMs, reconciliation of

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records for check and balance or control purposes cannot be made possible.

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

Requisition and Issue Slip was not accomplished.

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

8.37. Further, the Inspection Team was not able to validate accuracy of the reported

inventory due to insufficient records/reports maintained by the BLR. This was also aggravated by the warehousing/warehouse conditions.

8.38. It is important to emphasize that property custodianship does not only refer to

guardianship, safekeeping, receipts and issuance, but it likewise includes the accountability, responsibility and liability of accountable or responsible officers arising from loss, misuse, damage or deterioration of government property due to fault or negligence in the safekeeping. It may be physical/actual or constructive.

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

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

8.40. We recommended that the Management:

a. exercise due diligence in procurement planning for an effective service delivery, allowing for appropriate contingency measures to prevent losses of government resources;

b. for failing to observe the rules under Sections 73 and 79 of PD No. 1445

indisposing the damaged materials –

b.i conduct investigation to establish persons who should be held responsible and accountable for the loss incurred and institute recovery procedures;

b.ii require the officers concerned to explain the deficiencies noted and

when warranted by circumstances should be meted out with appropriate sanctions as a consequence of their improper act;

b.iii revisit DepEd’s guidelines on supply and property management and strengthen the system of accountability of involved DepEd

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

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

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

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

c.ii provision of specific guidelines and procedures, including

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

c.ii.i Delivery of Inventory Items (receipt, inspection and

reporting/recording), c.ii.ii Requisition/Replenishment, Issuance and Disposal of

Inventory Items (including reporting/recording), c.ii.iii Monitoring and Inventory Taking;

d. provide for a suitable facility and thereafter ensure thatthe buffer

stocks are properly stored in protected places/warehouses; and

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

8.41. The followingpresents the comments of Management and Audit Team’s

response:

Management’s Comments Audit Team’s Rejoinder On damaged LMs worth P25,213,511.10: The BLR Director narrated the following comment: a. Lexicon and DepEd mutually agreed to defer

the delivery and subsequently temporarily safe keep the LMs pending awarding of contract for the forwarding services.

b. As early as June 2016, BLR was already

requesting for a storage facility at the DepEd CO thru the Office of Undersecretary for Curriculum and the Office of the Undersecretary for Administrative Service.

c. DepEd in entrusting the LMs to Lexicon

The BLR stated that Lexicon and DepEd mutually agreed to defer the delivery and subsequently temporarily safe keep the LMs pending awarding of a winning bidder for the forwarding services. This supposed agreement was not supported with evidence as there were no communications or any document presented to support the same. It was a not even stipulated who represented in behalf of DepEd for the said arrangement. During the last quarter of 2015, it was already foreseeable that there will be shortage of storage facilities because of the expected volume of

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Management’s Comments Audit Team’s Rejoinder exercise due diligence and by ensuring that the LMs were in a good and safe place. That the BLR acted in good faith thinking that such act is beneficial to DepEd since no additional cost will be incurred in doing so. While they admit that the risk and title already pass from the contractor to DepEd, by acting in good faith and as mutually agreed upon, they expected that the goods will be safe in Lexicon’s warehouse and such will be taken cared of also with due diligence on their part.

d. They had no knowledge on the intention to

separate the printing and delivery, but they saw it as an opportunity to fast track the request for repair/refurbishment of the warehouse.

e. They admitted that the forwarding service and all planned activities state in the APP are their responsibility but the repeated failed biddings and the approval of their request is not within their control.

f. That the report of Lexicon on damaged LMs was acted upon and they had immediately dispatched personnel to verify the veracity and extent of the damage and reported the incident to the Assistant Secretary for Procurement, Project Management and Field Operations.

g. They had no control on the action taken by Lexicon in disposing the items for sanitation purposes, and they are fully aware of the procedure for disposal but then the action of the contractor is not within their control.

On the other hand, Undersecretary Escobedo, in his capacity as the Chairman of the Disposal Committee, narrated the following: h. He received a report from the Office of

Director, BLR regarding the damage Grade 2 LMs last July 6, 2017 and immediately thereafter, he issued a Memorandum dated July 12, 2017 directing the inspection of the warehouse by the members of the Disposal Committee.

i. The Disposal Committee submitted a report which was forwarded to the Secretary through a Memorandum dated September 28, 2017 recommending an investigation relative to the reported damaged LMs.

j. That his Office is fully aware of its responsibility under Section 79 of PD No.

deliveries for printed LMs. But as observed, there were no clear plans laid down to at least lessen the possible impact on the deficiency. Issuing a COC Delivery where in fact there was none and was only based on undocumented agreement is an act of negligence, placing at stake the interest of the government. It was also stated that they acted in good faith thinking that such act is beneficial to DepEd since no additional cost will be incurred in doing so; and because it was mutually agreed upon, they expected that the goods will be safe in Lexicon’s warehouse, and that it will be taken care of with due diligence on their part. Entrusting the government properties worth millions of pesos without proper documentation but based only on undocumented mutual agreement and on the assumption that it will be taken care of by somebody who has no interest over the safety of the property and has no accountability over said properties negates the presence of good faith and diligence. As stated in the reply, on January 17, 2017, the winning service forwarder LBC Express had verbally reported to BLR the damaged learning materials, but it appears that the report was not urgent enough to require immediate attention since it’s only on February 9, 2017 that BLR sent their personnel to verify and validate the report, and it was only on March 17, 2017 that BLR submitted the total damage report of 820,682 copies valued at P25,041,4321.69 to the Assistant Secretary for Procurement, Project Management and Field Operations. It was further explained by the BLR that they had no control on the action taken by Lexicon in disposing the items for sanitation purposes, as this may be hazardous if taken too long to dispose and that they are fully aware of the procedure for disposal but then the action of the contractor is not within their control. This statement is just an admission that they are actually entrusted the government properties at their own risk and without due regard of its safety. How can they expect or demand from the contractor that the damage textbooks to be preserved to comply with rules and regulation when in fact they even cannot actually demand due diligence to insure good condition and safety of the LMs. The Assistant Secretary for Procurement, Project Management and Field Operations in his

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Management’s Comments Audit Team’s Rejoinder 1445.

k. That the Resolution drafted by the Disposal Committee there were no damaged LMs found in the ware house, as the same were already disposed of by Lexicon Press. Inc. without knowledge and authority of the Department.

capacity as the Chairman of the Disposal Committee also explained that upon receipt of the report from the BLR regarding the damaged Grade 2 LMs, he immediately issued Memorandum dated July 12, 2017 directing the inspection of the warehouse by the members of the Disposal Committee. Such action denotes absence of urgency as the BLR report was communicated to his Office only on March 17, 2017 and it took him almost four months to properly act on the report. Hence, the Audit Team reiterates the conduct of investigation and impose appropriate sanction to those found to be liable/accountable for the loss.

On unutilized/undistributed TXs/TMs buffer stocks: Since 2013-2016 budget of the BLR, the budget for pull-out or delivery of stocks was not included in the Annual Plan, hence, expenses for the distribution were not undertaken resulting in the accumulation of buffer stocks in the warehouse.

The BLR made clarification that refurbishment of the warehouse is within the jurisdiction of the Administrative Office. The stock pile of debris which filled the biggest storage capacity in the warehouse was not from BLR. That as part of the office refurbishment plan, the Administrative Service used the warehouse to store old documents/files, unserviceable chairs, tables and the like. That these materials came from different bureaus and offices, which are not kept in their respective officesbecause of limited space.

It is the normal practice of the BLR to stock pile textbooks and teacher’s manual without proper labels. But the warehouseman keeps record as to when these learning resources were purchased, the name of the suppliers and the copyright year for easy identification. In regard to books that were found loose, this was the result of incomplete packing of books requested.

In the series of meetings with the AMD, it was decided that the management of the buffer stocks will be solely lodged with BLR as it pertains to textbooks, hence, the AMD did not maintain stock cards.

The BLR admits absence of stock and bin cardsresulting in the lack of check and balance. This was due to BLR’s limited permanent plantilla position. That the previous property custodian only

As being understood, buffer stocks are issued upon request, hence, funds needed for the filling up of request can be augmented from other sources if properly requested and coordinated. It is unconscionable for the Department to purchase millions worth of textbooks then allowed it to remain on stock and to become obsolete due to lack of funding. Granting that lack of fund was indeed the root cause, this can also be attributed to inability to plan and lack of coordination of the concerned offices to allocate funds from procurement down to distribution. It is true that refurbishment of the warehouse is within the jurisdiction of the Administrative Office, but BLR is expected to know and regularly report the existing condition of the warehouse to the concerned Office for appropriate action. The Audit Team invites attention to the provisions of Chapter 8, Section 17 of the GAM and DepEd Property Manual as to the Major functions of the Property and Supply Division for the control and proper management of inventories.

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Management’s Comments Audit Team’s Rejoinder maintains digital record file of DR and IAR of the accepted buffers and records in excel inventory form.

The BLR will conduct a thorough monitoring and inspection of the buffer stocks in Taguig warehouse to reconcile the existing records of BLR and properly label the boxes according to grade level.

Financial and Compliance Audit Unauthorized maintenance of bank accounts, retention of receipts/income and unutilized/excess NCAs 9. The Cash in Bank - Local Currency, Current Account (LCCA) includes trust

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

9.1. Section 2.1 of the Permanent Committee Joint Circular No. 4-2012 dated

September 11, 2012 provides for the rationale for the reversion of all dormant accounts, unnecessary special and trust fund to the general fund. It states that, “It is hereby declared a policy of the State that unless otherwise specifically provided for by law, all income collected by agencies of the government by virtue of the provisions of law, orders and regulations shall be deposited in the NT, and shall accrue to the unappropriated surplus of the General Fund of the Government.”

9.2. Section 10, General Provisions of the GAA for FY 2017 provides that,

“departments, bureaus, offices and instrumentalities of the National Government, xxx are mandated to close or revert all balances of Special Accounts, Fiduciary or Trust funds and Revolving Funds to the General Fund in any of the following instances: (i) when there is no legal basis for its creation; (ii) when their terms have expired; or (iii) when they are no longer necessary for the attainment of the purposes for which said funds were established. xxx”

9.3. Item 5.2.1.4 of National Budget Circular (NBC) No. 567 dated January 3, 2017 provides that,“NCAs issued and credited to the Regular MDS Sub-Accounts of

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agencies/OUs for their regular operations, shall be valid until the last working day of the 3rd month of that quarter pursuant to DBM CL No. 2013-125.”

9.4. Sections 6 and 7of the same GAA provides that trust receipts, and performance

bonds and deposits shall be deposited with the NT and recorded as trust receipts in accordance with Executive Order No. 338, as implemented by COA-DBM-DOF Joint Circular No. 1-97 dated January 2, 1997.

9.5. Audit of the account Cash in Bank - LCCA in the books of the different

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

a. In CO and five Regions, trust accounts under Cash in Bank - LCCA are

maintained without specific authority/legal basis or are being used for the unauthorized retention of various receipts/income amounting to P90,180,032.55,which should have been properly remitted to the NT, broken down as follows:

CO/Region Nature of Collection Account Amount CO Bid Security/Performance Bond OSEC Trust 0672-1000-20 1,266,498.67

Donations OSEC Trust 0672-1000-20 800,000.00 Adopt A School Trust 0672-1080-20

107,405.00

Registration Fees OSEC Trust 0672-1000-20 221,000.00 Interest Income OSEC Trust 0672-1000-20 110,654.62

DRRM Calamity Fund 3342-1012-82

48,644.50

Refund of Excess Cash Advance OSEC Trust 0672-1000-20 131,646.25 NETRC Trust 6675-1010-37 920.00

Miscellaneous Income OSEC Trust 0672-1000-20 1,046.00 NETRC Trust 6675-1010-37 407,144.00

Net Proceeds from sale of bid docs OSEC Trust 0672-1000-20 7,728,200.00

Net Proceeds of Examination Fees NETRC Trust 6675-1010-37 5,930,642.74

NCR Various collections DOs Manila, Caloocan, Valenzuela, Malabon, Pasig, Marikina, San Juan and Pasay trust accounts

13,682,771.55

RO III Performance bonds/bid securities of contractors, collection of bid documents and seminar fees

ROP, DOs Pampanga and Nueva Ecija trust accounts

18,085,592.85

RO V Trust fund ROP 7,660,236.79 Proceeds from sale of the bid documents, bid security, performance bond and registration fees for seminars and other activities

DO Albay trsut account 4,412,102.41 DO Legazpi trust account 2,136,131.36

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CO/Region Nature of Collection Account Amount Trust fund DO Ligao City 334,352.11

RO IX Fund transfers from the regional office, guaranty/security deposits, sale of bidding documents, income from rentals, registrations of trainings and seminars, refund of excess CA, excess funds for completed programs, activities and projects, payment for lost government properties, fund transfers from the general fund and other collections

Zamboanga del Sur DBP 0840-19177-080

16,937,657.17

Zamboanga del Sur DBP 0-05532-840-1

222,448.58

Proceeds from the sale of bidding docs, financial assistance for the implementation of various programs and activities, refund of erroneous downloading of fund, salaries and other emoluments, returned of unutilized funds and registration fee

DO Zamboanga del Norte Dipolog Branch under Account No. 0815-015919-080

2,262,641.90

Proceeds from the sale of bidding docs, and registration fee

DO Dipolog City - LBP Dipolog Branch

556,648.74

Trust fund DO Sibugay DBP - Ipil 0825-026124-030

302,783.06

Sphere fund DO Sibugay LBP - Ipil 1252-1107-94

148,131.32

RO XIII Excess collections from registration fees, refund of cash advances, unutilized fund transfers, idle cash balances and other trust receipts and income

DO Butuan City trust account 6,684,732.93

Total 90,180,032.55

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

b. Current Accounts are being used to facilitate the transfer of unutilized/excess

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

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

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Region Division Office Amount Deficiencies

NCR ROP, DOs Quezon City, Manila, Caloocan, Valenzuela, Malabon, Navotas, Pasig, Marikina, San Juan, Pasay, Muntinlupa, Parañaque, and Las Piñas

1,612,348,892.22

The unutilized NCAs/NTAs pertain to allocations for the unimplemented programs/activities and unsettled obligations of PS and MOOE for the current and previous year/s. The non-implementation of various programs/activities during the year is attributable to the Management’s deficient planning.

RO I DOs La Union, San Fernando City, Dagupan City and Urdaneta City

2,552,347.40

The amount of the trust receipts are savings/unobligated balances for activities that has been implemented and achieved and for which these balances are no longer necessary. Hence, these are due for reversion but were not remitted to the National Treasury.

RO II ROP and Nueva Vizcaya 6,082,142.07 Management transfers unused balance of NCA for DepEd projects and activities and some Personal Services items to the account at the end of the year to avoid lapsing of cash allocation. Moreover, refunds from excess disbursements out of the general fund were collected and remitted in the trust fund account.

RO VIII DO Leyte 205,605,043.49 In DO Leyte, funds were transferred from the MDS account to other bank accounts maintained by the Agency. It was also learned that the DO maintains four other MDS accounts in violation of existing rules and regulations.

RO IX DO Dipolog City 5,944,318.49 The DO made transfers of fund from the

MDS account to current account to avoid the automatic lapsing of unutilized NCAs.

Total 1,832,532,743.67

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

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

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

9.9. Section 5.2 of DOF Department Circular No. 001-2015 provides that, “As part

of the Government’s effort to strengthen its overall fiscal position, all NGAs, GOCCs, and LGUs specifically allowed by law, rules and regulations to retain income and/or for operations and/or working balances shall deposit and

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maintain accounts with GFIs with a universal bank license and a CAMELS rating of a least 3.”

9.10. In compliance with said DOF Circular, DepEd Memorandum No. 2015-0007

was issued directing all IUs to transfer their accounts to GFIs that comply with the conditions stated in theDOFCircular. The DepEd Memo further provides that, should a DepEd IU find it necessary to continue maintaining its account with non-GFI, the DepEd IU should request for prior approval from the DOF through the DepEd CO in accordance with Sections 5.4 and 5.5 of the said DOF Circular.

9.11. However, contrary to said rules and regulations, the following Regions maintain

bank accounts with non-GFI:

Region Bank Account Amount RO I Philippine Veterans Bank (PVB) CA 0020-007322-001 13,112.52

PVB - CA 0020-005498-001 69,960.00 RO IX DO Zamboanga - PVB 31,265,824.53 Total 31,348,897.05

9.12. The current accounts maintained with the PVB in Region I (DO Pangasinan

II)arealready dormant.

9.13. We recommended that the Management in concerned Offices:

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

b. discontinue the practice of transferring unutilized funds from MDS

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

9.14. The following are the Management’s comments:

CO/Region Management’s Comments CO During the Exit Conference (June 13, 2018), Management stated that BALS Trust

Account No. 0672-1001-27 has already been closed, while there are on going verification and reconciliation for other trust accounts for closure and for cash balances for remittance to BTr.

NCR The remaining balance will be remitted to the BTr as soon as the same has been coordinated to the program owners/coordinators. The SDO is exertingefforts to revert the unused funds that have no valid claims, dormant for an unreasonable length of time and the terms of validity have expired.They will seek authority from the Permanent Committee through DepEd NCR ROP to maintain Current

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CO/Region Management’s Comments Accounts for the continuous implementation of programs and projects by the DO.

RO I Management apologized for the belated closing of the agency’s Philippine Veterans Bank accounts for Payroll and Sphere Funds, which have exceeded the period allowed by the Section 6 of DOF Circular 002-2015 enumerating the transitory provisions. As of July 5, 2016, there were no more transactions of deposits and disbursements made to these accounts and the necessary actions for the immediate transfer of the said cash balances to Land Bank of the Philippines Accounts will be undertaken.

RO II In the ROP, the Management commented that they will adhere to the recommendation of the Audit Team to remit to the National Treasury the unutilized CIB- LCCA except for the unutilized fund in prior years such as the bid documents, qualifying exam for Principal and proceeds from sale of scrap material totaling to P222,344.34 wherein they will utilize this for some related programs/projects in the Regional Office. In DO Nueva Vizcaya, the Management will remit the unused NCAs of MOOE for year 2013 to 2015 to the National Treasury and will remit the remaining funds, specifically the unused NCAs of PS, until June 2018.

RO III Management commented that as of December 31, 2017, the total unidentified amount has reached P18 Million, P7.6 Million of which are for identification and reconciliation and will be ultimately remitted to BTr once identified. Management of DO Nueva Ecija commented through the Accounting Division, in her letter reply dated February 8, 2018, that a total of P767,653.41 was deposited to the National Treasury on February 8, 2018. All other excess fund of their Trust fund collections will be immediately returned to the Bureau of Treasury after payment of remaining claims.

RO V In ROP, Management was informed by the Accountant of CO that the account has been closed and the remaining balance was deposited to the Bureau of Treasury. The necessary journal entry for the adjustment will also be recorded in the books of accounts. In DO Albay, Management expressed that they will seek authority from Bureau of Treasury to maintain said account. In DO Legazpi, Management agreed to comply with the above recommendations and informed that starting CY 2018, all collections will be remitted to the National Treasury. As partial compliance, Management had already deposited the amount of ₱1 million from the CY 2017 balance with the Bureau of the Treasury last December 2017. At year end, the account had a balance of ₱460,759.42, which will be remitted in the ensuing year. In DO Ligao City, Management was amenable with the recommendation. Accordingly, immediate communication with the LBP-Ligao Branch will be made regarding the closure of the bank account.

RO VIII In DO Leyte, Management commented that the decision to open a new Cash in Bank – Local Currency Current Account No. 106-2-775-3 was part of the new procedure required by the Regional Office on the payment of regular salaries of teachers and employees paid by the Regional Payroll Services Unit. A formal letter shall be sent to the Regional Office inquiring on the legality of the opening/maintenance of the accounts in question.

RO IX Management of DO Zamboanga del Sur commented that it had not yet obtained authority from the BTr but as per GAA 2017, it had been stated that a current account may be maintained for the collections of income for the repair and maintenance of the income-generating project such as the Teachers’ Center of the Division Office.

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CO/Region Management’s Comments For the collections and deposits made in prior years as enumerated in the previous AOM, the said collections and excess funds had already been deposited in the BTr as per advice by the Audit Team DO Zamboanga del Norte Management committed that the said bank account will be closed by the end of June 2018. DO Dapitan City Management commented that the accounting unit is coordinating with other concerned section/units to facilitate utilization of funds for planned activities and/or identified payables and the remaining balances to be remitted/deposited to the Bureau of Treasury. Management of DO Sibugay commented that they are considering to close the DBP-Ipil Trust Account right after the last transaction for Madrassah has been settled. The remaining balance will be remitted immediately to the Bureau of Treasury. However, the SPHERE –Trust account will be used for the transactions of EPIP Fund. Copy of the authority for the opening of SPHERE Trust account will be submitted to COA for review and validation.

RO XIII Management of DO Butuan City commented that they have purchases during seminars that were not yet paid. However, they have received ₱3,700,000.00 from the Regional Office for the payment of FY 2016 Hardship Allowance which was already paid in full.

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

Internal control weaknesses that hindered the process of ascertaining the accuracy and reliability of the Cash-in-Bank-LCAA account balance 10. Non-preparation or delayed submission of the monthly Bank Reconciliation

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

Likewise, other deficiencies such as unrecorded receipts/collections, non-

issuance of official receipts, and late or non deposit of collections, as noted in six regions, exposed government funds to possible misuse or misappropriation.

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

items and unaccounted discrepancy between the GL and SL.

10.1. Cash is the most vulnerable asset.Hence, internal control over this asset must be properly in place and be strictly observed. It is normal that at certain period of time, the Cash in bank balance per book does not reconcile with the actual Cash balance per bank due to timing difference. There are transactions already recognized in the agency books but not yet accounted for in the bank, in like

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manner that there are transactions already recognized in the bank but not yet accounted for in the agency books. This timing differences create reconciling items in the BRS that requires immediate attention to determine possible errors committed and to ascertain that the reported cash in bank per books, actually exists and available per bank.

10.2. Sound internal control on cash requires prompt and correct recording and

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

10.3. Items 3.1 and 3.2 of COA Circular No. 96-011 set the general policy/guidelines

on the preparation and submission of the BRS and provides that:

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

3.2 The Accountant shall within ten (10) days from receipt of the BRS,

reconcile the same with the General Ledgers and prepare the BRS.

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

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

submit the monthly reconciliation of cash account balance per book and per bank, identify the discrepancy between the cash account balance per GL andSLs, and to effectadjustment/recording of reconciling items thus, hindered the process of determining the accuracy and reliability of the account Cash-in-Bank-LCCA balance totallingP3,106,088,129.44in the following offices/schools as shown in the table below:

CO/

Region

Unaccounted Discrepacy/

Variance Observation

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

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

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

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CO/ Region



or unaccounted funds to only P4,573,326.11. NCR

281,255,684.76 ROP & 16 DOs

• Unascertained difference of P281,255,684.76 between the balance of the account Cash in Bank-LCCA per books and per bank due to delayed or non-submission of BRS.

RO II

318,750.84 ROP and 8 DOs

• Net understatement in the balance per books totaling ₱318,750.84 due to non-adjustment of the reconciling items found in BRS in prior years.

RO III

Not indicated

28,479.69

ROP & DOs San Jose City, Muñoz City, Gapan City, Cabatuan City, Angeles City, San Fernando, Zambales and Olongapo City- • The Accountant/Bookkeepers failed to regularly prepare and

submit the monthly reconciliation of cash account balance per book and bank, and effect adjustment/recording of reconciling items

• Stale checks not adjusted back to Cash in Bank account

RO IV-B 2,351,830.63

Not indicated

649,712.39

DO Romblon • Delay in the submission of BRS ranges from 15 to 144 days

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

DO Palawan • The bookkeeper of Gaudencio Abordo Memorial High School

did not prepare BRS for the period January to December 2017.

DO Mindoro • BRS were not prepared that resulted in unreconciled

discrepancy between the book and bank balance of P649,712.39.

RO V Not indicated

6,955,111.20

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

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

DO Legazpi City • No BRS was submitted for the calendar year 2017 for six bank

accounts. RO VIII

818,648,819.29

ROP • Existence of net unreconciled difference of P818,648,819.29

between the stated balances per the agency’s books and confirmed Bank Statement of P999,891,286.67 and delay in the submission/non-preparation of BRS.

RO IX

Not indicated ROP and 2 DOs • The Accountant/Bookkeeper failed to regularly prepare and

submit the monthly reconciliation of the cash account per book

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CO/ Region



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

RO XI

Not indicated ROP and four DOs • The completeness and reliability of the balances of CIB –

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

RO XIII Not indicated DO Surigao del Sur • Non-preparation and/or delayed submission of the monthly

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

10.6. The delayed preparation and submission of the BRS precluded the Audit Teams

from immediately ascertaining the accuracy of the cash balance as reflected in the books of accounts. Moreover, errors or discrepancies requiring corrections/adjustments either by the bank or in the books could not be effected at once.

10.7. Further, the unreleased checks as at year-end of two regions

totallingP9,622,439.09 were not restored back or adjusted to Cash Account to reflect a reliable Cash in Bank balance, to wit:

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

• Unreleased checks at the end of the year which were not restored back to the cash account

RO III 7,033,640.29 DOs Science City of Muñoz, San Jose City, Cabanatuan City and Gapan City • There were unreleased checks at the end of the year, which were not

reverted to the cash account . Total 9,622,439.09

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

collections

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

• Sections 63 - Except as may otherwise be specifically provided by law or competent authority, all moneys and property officially received by a public officer in any capacity or upon any occasion must be accounted for as government funds and government property and shall be taken up in the books of the agency concerned xxx;

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

officer without immediately issuing an official receipt in

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acknowledgement thereof. The receipt may be in form of postage, internal revenue or documentary stamps and the like, or officially numbered receipts, subject to proper custody, accountability and audit.

• Section 69 - Public officers authorized to receive and collect moneys

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

10.9. COA Memorandum No. 2012-004, The Revised Cash Examination Manual,

Chapter II item 32 dictates that “All Collecting Officers shall deposit intact all their collections, as well as collections turned over to them by sub-collectors/tellers, with authorized government depositary bank(AGDB) daily or not later than the next banking day.”

10.10. The General Provisions of the 2017 General Appropriations Act, specifically

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

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

following:

Region Amount of deficiency Observations/Deficiencies

CAR 113,064.32 DO Abra • Unrecorded collections as at year-end

RO I

Not indicated

Not indicated

DO Pangasinan II • An average of three to 28 calendar days of time lags before

depositing the collections to the authorized depository banks. DO Ilocos Norte • There were delayed and staggered deposits of collections.

RO II

Not indicated

274,755.00

DO Nueva Viscaya • Four National High Schools (NHS) did not deposit their collections

with the Bureau of Treasury and three NHS did not deposit their collections since no bank account is maintained by the School

Division of Ilagan • Collections were either deposited in the personal account of the

Principal, designated as collecting officer or not deposited due to absence of bank account maintained.

RO IV-B 456,145.38 DO Puerto Princesa • Collections not deposited with the Bureau of the Treasury through

the Authorized Government Depository Bank (AGDB)and remained in the hands of the Cashier from one month to more than

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Region Amount of deficiency Observations/Deficiencies

one year. RO III

Not indicated San Jose del Monte National Trade • Collections made were not deposited intact daily resulting in

accumulation of cash in the custody of the Cashier. RO VIII

96,883.03

Not Indicated

Not Indicated

DO Catbalogan City • Collections were not deposited in full/intact by the cashier, despite

the proximity of her office to the depository banks, thereby exposing government funds to probable misuse or loss.

DO Ormoc • Registration fees collected from participants coming from the

different schools were no longer issued with ORs nor were the proceeds thereof deposited to the agency’s depository bank.

Hilongos National Vocational School • Revenues collected by the school from its income generating

projects (IGP) were received by the designated treasurer without issuing ORs as acknowledgment.

RO XI

Not indicated

Not indicated

290,356.71

ROP • Collections for DepEd NEAP Funds under DepEd Regional Office

XI were collected by the Dormitory Manager who was not designated as collecting officer.

DO Compostela Valley • Daily collections were not deposited intact at least on the next

banking day contrary to Section 69 of PD 1445. Deposits of collections takes two to 29 calendar days, and done on a piecemeal.

DO Tagum City • The registration fees and contributions for school activities

amounting to P290,356.71 were not covered with official receipts. RO XIII 2 IUs

20,060.10 Collections were not deposited to the National Treasury within the prescribed period. Likewise, the non-preparation of Reports of Collections and Deposits by the Collecting Officer at the close of the business day implies that collections and deposits were not properly monitored.

10.12. We recommended that the Management require the Accountants of

concerned offices to:

a. trace unaccounted funds and deficiencies/variance and make necessary adjustment in the books;

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b. strictly comply with the provisions on record keeping and reconciliation of accounts as required under Section 74 of PD No. 1445 and COA Circular No. 96-011;

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

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

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

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

10.13. We further recommended that Management require concerned officials to

strictly adhere to laws, rules and regulations in the handling, recording and utilization of collections pursuant to Sections 63, 68 and 69 of PD No. 1445 and Section 4 of the General Provisions of the GAA for FY 2017.

10.14. The respective Management’s comments to the audit observations are as

follows:

Region Management’s Comment CO According to the Accountant, the unaccounted discrepancy in OSEC books are already

existing severalyears ago. The Accounting Division find it difficult to trace the composition of the unreconciled amount because many of the records are no longer available. Efforts will be exerted to locate documents that would reduce the variance between GL and SL balances.

NCR The differences between book and bank balances are bank reconciling items, which do not require adjustments in the books.

RO I Management, as the overseer of the activities of the administrative services, welcomed the observations of the Audit Team.

RO II Management commented that the non-preparation and non-submission of the BRS was due to the delay of the government depository bank to issue the bank statements for the given period. Management agreed to comply with the recommendations made.

RO III Management of the concerned offices all agreed to comply with the recommendations. Management of San Jose del Monte National Trade School will be creating policy/scheme on the daily collection and deposit of cash to ensure adherence to relevant laws and rules.

RO IV-B Cashier assured to deposit the unremitted amount. RO V In ROP, Management commented that most of the prior years’ reconciling items pertain to the

current accounts for net-pay (elementary and secondary) which are now the subject of the ongoing reconciliation of accounts by the Accounting Section and the School Division Offices which started on March 16, 2018 until May 25, 2018. Said accounts will soon be closed after the reconciliation of reciprocal accounts Due to Regional Office versus Due from Operating Units has been settled. In DO Legazpi City, Management agreed to comply and as of March 13, 2018, this has been partially complied with. Only three out of sixbank accounts remained not updated pending receipt of the bank statements from the concerned depository bank.

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Region Management’s Comment RO VIII The Management commented that they already directed the Bookkeeper Designate to book-up

the collections from Trust Fund Account starting this year. In addition, they assured to work back in the tracing of unrecorded collections covering the period September 11, 2013 to November 22, 2016 totaling P924,106.00 and would make necessary adjusting entries. The Management will be creating a policy/scheme on the daily collection and deposit of cash to ensure adherence to related laws and rules.

RO IX In the exit conference, Management commented that the late submission was due to the lack of manpower in the Accounting Division. Nonetheless, they promised to remedy the situation by assigning a separate employee to do the BRS to comply with the requirement.

RO XI The agency, thru Office Order No. 02, s.2017, has designated a special collecting officer for NEAP. The Cashier of DO COMVAL committed to comply on the daily and intact deposit of collections. Management of DO Tagum City is amenable to the audit observation.

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

Unliquidated Cash Advances

11. Unliquidated cash advances at year-end had accumulated to P1,448,096,479.51 in DepEd CO and 11ROs due to laxity in the granting and liquidation of cash advances and the monitoring thereof, contrary to existing COA rules and regulations and DepEd guidelines. Likewise, validity and reliability of year-end account balances and full settlement thereof cannot be assured due to: a) long outstanding/dormant accounts amounting to P144,043,472.85; b) absence of complete/updated subsidiary ledgers/details to substantiate the total cash advances of P191,576,136.12; c) errors in recording/posting of transactions that understated the reported advances balance by P102,317,679.28; and d) other deficiencies noted that further exposed government funds to loss and non-recovery.

11.1 COA Circular No. 97-002 dated February 10, 1997 provides, among others, the

following rules and regulations on the granting, utilization and liquidation of cash advances:

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

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

b. All cash advances shall be fully liquidated at the end of each year. Except

for petty cash fund, the accountable officer shall refund any unexpended balance to the cashier/collecting officer who will issue the necessary official receipt.

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c. When a cash advance is no longer needed or has not been used for a period

of two months, it must be returned to or refunded immediately to the collecting officer.

d. Failure of the Accountable Officer to liquidate his cash advance within the

prescribed period shall constitute a valid cause for the withholding of his salary and the institution of other sanctions as provided for under paragraphs 9.2 and 9.3 hereof.

11.2 Section 12 of DepEd Order No. 13 s. 2016 dated March 11, 2016 provides

that the elementary and secondary schools without financial staff shall:

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

b. submit to the SDO on or before the 5th day of the following month the

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

11.3 Section 25 (b), Chapter 6, Volume I of the GAM provides that officials and

employees authorized to travel shall be granted cash advance to cover traveling expenses. The amount to be granted shall be accounted as “Advances to Officers and Employees”.

11.4 Section 1, Chapter 3, Volume III of the GAM requires the use of the account

Advances for Operating Expenses to recognize in the agency books the amount of advances granted to accountable officers for payment of operating expenses of operating/field units and foreign posts not maintaining complete set of books of accounts.

11.5 DepEd Order No. 13, s. 2016 dated March 11, 2016 prescribes the

Implementing Guidelines on the Direct Release and Use of Maintenance and Other Operating Expenses (MOOE) Allocations of Schools, including other Funds Managed by Schools, which aims to: provide guidance to all public schools on the derivation, release and the utilization of school MOOE; ensure timely and optimal use of school resources; and institute mechanisms for transparency and accountability.

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11.6 Paragraph 6 of Department Order No. 46 series of 2004 directs, among others, that heads of elementary schools and secondary schools without financial staff have to open current accounts in the name of the schools and report to the SDO for monitoring purposes, if funds are not spent immediately. In no instance shall school funds be deposited in personal bank accounts.

11.7 As of December 31, 2017, the reported total unliquidated cash advances in the

CO and 11 ROs had accumulated to a huge aggregate amount of P1,448,096,479.51, broken down as follows:

CO/Region Office/DO/IUs Amount

CO Office of the Secretary (OSEC) 170,258,883.47

NCR ROP, Quezon City, Manila, Caloocan, Valenzuela, Pasig, San Juan, Mandaluyong, Taguig/Pateros, Muntinlupa, Parañaque, Las Piñas

404,001,963.44

CAR

Apayao, Baguio, Benguet, CCNHS, Kalinga NHS 5,278,840.31

RO I ROP, Alaminos, Dagupan, Ilocos Norte, Ilocos Sur, Laoag City, Pangasinan I, La Union

33,954,688.39

RO II ROP, Cagayan, Nueva Vizcaya, Cauayan City, Quirino

60,024,005.98

RO III ROP, Pampanga, Zambales, Olongapo, Nueva Ecija, Malolos

135,885,374.15

RO IV-B Palawan, Puerto Princesa City, Marinduque, Oriental Mindoro, Romblon

102,733,296.62

RO V Camarines Norte, Tabaco City 86,767,588.62 RO VIII Biliran, Southern Leyte, Maasin City, Calbayog

City, Ipil NHS, Allen NHS, Catbalogan, Northern Samar

170,613,016.37

RO IX ROP,Dipolog,Isabela,Zamboanga, ZNHS-West, ZNHS-Main

124,789,534.90

RO XI ROP, Davao del Sur, Digos City, Compostella Valley, Davao Oriental

65,847,596.79

RO XIII ROP, Agusan del Sur, Bayugan City, Surigao del Norte, Surigao City, Dinagat Island, Tandag City

87,941,690.47

Total 1,448,096,479.51

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

CO/ Region

Amount

Total Advances to Officers and Employees

Advances to Special

Disbursing Officers

Advances for Payroll

Advances for Operating Expenses

Due from Officers and Employees/

Other Receivable

Cash Advances without

specific details

CO 4,779,098.81 115,461,230.60 19,078,333.80 0.00 30,940,220.26 170,258,883.47 NCR 156,662,383.08 23,818,287.07 15,505,388.73 208,015,904.56 - 404,001,963.44

CAR 64,340.06 702,150.31 0.00 4,512,349.94 - 5,278,840.31

RO I 1,725,528.37 12,716,369.15 319,861.46 19,192,929.41 - 33,954,688.39

RO II 4,234,459.16 479,909.68 29,313,516.54 25,996,120.60 - 60,024,005.98

RO III 3,031,070.88 69,897,811.82 1,153,125.94 61,803,365.51 - 135,885,374.15

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CO/ Region

Amount

Total Advances to Officers and Employees

Advances to Special

Disbursing Officers

Advances for Payroll

Advances for Operating Expenses

Due from Officers and Employees/

Other Receivable

Cash Advances without

specific details

RO IV-B 1,335,169.20 3,272,360.00 0.00 98,125,767.42 - 102,733,296.62 RO V 1,728,080.83 34,362,113.05 29,000.00 50,648,394.74 - 86,767,588.62 RO VIII 35,742,333.74 16,198,102.66 0.00 54,644,573.11 185,006.35 63,843,000.51 170,613,016.37 RO IX 124,789,534.90 124,789,534.90 RO XI 701,234.31 22,535,364.70 5,294,193.69 37,316,804.09 - 65,847,596.79 RO XIII 11,542,906.35 76,398,784.12 87,941,690.47 Total 210,003,698.44 299,443,699.04 70,693,420.16 571,799,115.73 31,125,226.61 265,031,319.53 1,448,096,479.51

11.9 The accumulation of unliquidated cash advances was mostly attributed to

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

CO/Regio

n Office/DO/IUs Observations/Deficiencies

CO OSEC The accumulation of the unliquidated cash advances was caused by the granting of additional cash advances even though the previous cash advance has not been liquidated, and by the absence of monitoring for the settlement/liquidation.

NCR ROP, All DOs Additional cash advances were granted to the AOs despite the existence of unliquidated balances.

Quezon City, Caloocan, Pasig, San Juan, Taguig/Pateros, Muntinlupa, Parañaque

Absence of complete/updated subsidiary ledgers/details to substantiate the total cash advances reported in the books.

Pasig, San Juan Delayed recording and/or non-processing of liquidation reports at the Accounting Unit as well as the inability of Management to monitor and enforce settlement.

CAR Apayao, Baguio, Benguet, CCNHS, Kalinga NHS

Non-compliance to the provision under COA Circular No. 97-002 stating that cash advances should be liquidated at the end of each year.

RO I RO, Alaminos, Dagupan, Ilocos Norte, Ilocos Sur, Laoag City, Pangasinan I, La Union

Granting, utilization and liquidation of cash advances were not in accordance with COA rules and regulations and DepEd guidelines.

RO II ROP Management failed to strictly enforce the controls over the grant, utilization, and liquidation of cash advances. Documentary requirements to support liquidation report were not in accordance with DepEd guidelines.

Cagayan, Nueva Viscaya Cash Advances were granted to School Heads/Disbursing Officers despite existing unliquidated cash advances.

Cauayan City, Quirino Late submission and non-submission of liquidation report. Isabela, Ilagan Cash Advances were transferred to other employees that

caused the delay in the submission of liquidation report. RO III ROP Late submission of liquidation report (LR) and delayed

processing/recording of LR in the books by the Accounting Division.

Pampanga, Malolos Cash advances were granted despite the existence of the previous cash advances not yet liquidated.

Zambales, Olongapo, Nueva Failure to monitor and enforce strictly the liquidation of

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CO/Region Office/DO/IUs Observations/Deficiencies

Ecija outstanding cash advances. RO IV-B Palawan, Puerto Princesa

City, Marinduque, Oriental Mindoro, Romblon

Failure to enforce timely liquidation of cash advances during the year, and full liquidation by year-end.

Palawan, Puerto Princesa Cash advances were not liquidated despite fulfillment of the purpose for which it was granted and despite outstanding previous cash advances.

RO V Camarines Norte, Cash advances remained unliquited for over a year. Tabaco City Cash advances were not liquidated as soon as the purpose/s

for which these were given have been served. New/additional cash advances were granted to Accountable Officers/ Employees although their previous cash advances have not yet been fully liquidated. Likewise, all cash advances were not fully liquidated at the end of the year.

RO VIII Biliran Prior years’ cash advances remained unliquidated despite demands made to liquidate the accounts.

Ormoc, Biliran, Southern Leyte, Maasin, Ipil NHS, Allen NHS

Grant of multiple cash advances to the Division’s Cashier and Disbursing Officer (CDO) despite non-liquidation of previously granted advances.

Catbalogan, Northern Samar Cash advances of School Heads/Teachers-In-Charge remained unliquidated as of year-end contrary to relevant rules; and payments were made notwithstanding the absence of some supporting documents, thereby casting doubt on the utilization of the fund.

RO IX ROP

Cash advances were granted despite non-settlement of previous CAs. This condition transpired because funding for the various programs or undertakings were handled by the different Education Programs Coordinators that lacks the proper knowledge on the requirements of the transactions, hence the delay in liquidation.

Dipolog,Isabela Failure to liquidate cash advances after the due date for its liquidation or as soon as the purpose of the cash advances have been served. Additional cash advances were granted despite failure on the part of the official and/or employee concerned to liquidate previous cash advances.

ROP, Dipolog, Isabela, Zamboanga, ZNHS-West, ZNHS-Main

Laws, rules and regulations in the granting, utilization and liquidation of cash advances as well as the recording, maintenance of proper records and submissions of required reports, required under pertinent provisions of PD No. 1445, COA Circular Nos. 97-002, 2009-002 and 2012-004 were not strictly observed

RO XI ROP Delayed processing/encoding by the Accounting Unit of submitted liquidation reports from the SDOs.

ROP, IGACOS Disbursements for salaries, allowances, cell card allowance, and RATA are made thru cash when these can be done thru Automatic Debit Advice (ADA).

ROP, Davao City, Compostela Valley

Granting of additional cash advances despite previous cash advance was not liquidated or properly accounted for.

Compostela Valley, Davao del Norte, Davao del Sur

Delayed downloading by DepEd Central Office of Sub-AROs compelled the Division Offices to grant of additional cash advances

RO XIII ROP Cash advances for official travel were liquidated beyond the prescribed period to settle and after the respective purposes had been served.

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CO/Region Office/DO/IUs Observations/Deficiencies

Agusan del Sur, Bayugan Despite non-settlement of previous cash advances, additional ones were granted. Unliquidated cash advances exceeded the maximum accountability of the Accountable Officer.

Agusan del Norte

Lack of strict implementation of the prescribed guidelines in the granting, utilization and liquidation of cash advances.

Agusan City Cash advances were either not supported with legal basis to determine its specific purpose, remained unliquidated to date, or granted with additional advances despite non-liquidation of the previous ones.

Surigao del Norte, Tandag City

Of the total amount of School MOOE funds downloaded through cash advance of ₱48,300,647.13, only ₱36,757,740.78 were reported as liquidated, leaving an unliquidated balance of ₱11,542,906.35 as of year-end.

11.10 Over the years, the foregoing deficiencies have been prevalent and recurring in

DepEd offices. If not properly addressed, millions of government funds will be at stake for being exposed to risk of loss through malversation and/or improper disposition.

11.11 Further audit of the accounts Advances revealed the following deficiencies that

rendered unreliable the reported balances, and full settlements thereof cannot be assured:

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

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

CO/Region Office/DO/IUs Amount Period of Overdue CO OSEC 59,996,407.91 Overdue for over one to three

years and above

RO I

ROP, La Union 60,000.00 Over one year Alaminos 25,461.37 Over one year Ilocos Norte 2,215,787.04 Over one year Ilocos Sur 1,290,722.66 Over one year La Union 1,166,953.60 Over one year

RO II ROP 1,539,137.62 Over one year RO III Nueva Ecija 27,646,808.75 Over one year

RO IV-B Palawan 2,510,340.50 Over one year to 5 years Puerto Princesa 4,624,641.00 Over one year Marinduque 176,635.00 Over one year

RO V Camarines Norte 753,534.21 Over ten years

RO IX ROP 7,458,860.16 Over one year to 2 years Zamboanga City 34,348,461.27 Over one year to 13 years

RO XI Compostela Valles 229,721.76 Over one year to 8 years Total 144,043,472.85

In Region XIII-DO Surigao del Norte, it was also reported that there were unliquidated cash advances of P14,209,257.73 that has been due for 31 days to over three years. Moreover, in NCR, the unliquidated cash advances include accounts due from retired/resigned/deceased/former personnel of City DOs of

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Mandaluyong, Quezon, and Parañaque amounting to P2,735,689.89, P1,090,074.97, and P5,775,649.89, respectively.

b. Absence of complete/updated subsidiary ledgers/details to substantiate the

total cash advances of P191,576,136.12 in NCR.

DO Amount Remarks Quezon City 4,101,568.86 Described as "for reconciliation"; have no details,

supporting schedules and subsidiary ledgers Caloocan City 14,998,752.60 Prior years’ balances amounting P14,998,752.60 which

lack supporting details. Pasig City 96,007,442.19 Accounting Unit does not maintain complete and updated

subsidiary ledgers. San Juan City Not stated Absence of SL in the previous years and proper turnover

of documents, reports and record from outgoing to incoming Accountants

Taguig City and Pateros

65,078,868.34 Accounting Unit does not maintain complete and updated subsidiary ledgers.

Muntinlupa City

4,152,751.90 Described as "for reconciliation"; have no details, supporting schedules and subsidiary ledgers

Parañaque City

7,236,752.23 Described as "for reconciliation"; have no details, supporting schedules and subsidiary ledgers

Total 191,576,136.12

c. Errors in recording/posting of transactions that understated the reported accounts advances by P102,317,679.28.

CO/

Region Office/DO/IUs Deficiency Overstatement/ (Understatement)

CO OSEC Negative balances of Bureaus transferred to CO

(5,329,988.61)

NCR Quezon City Negative balances (5,434,446.98) San Juan Negative balances (675,994.81) Muntinlupa Negative balances (2,955,749.42) Quezon City Exclusion from the Consolidated Trial Balance

of transactions prior to CY 2016 (92,952,069.03)

Las Piñas Unrecorded Liquidation Report 6,434,304.00 RO XIII Surigao del Sur Cash Advance recorded as outright expense (1,403,734.43) Net Understatement (102,317,679.28)

11.12 Other deficiencies that further exposed government funds to loss and non-

recovery were noted as follows:

Region DO/IUs Deficiency NCR Caloocan Cash advances amounting to P296,305.16 were granted to a

Finance Officer and one of its personnel who are not authorized as they are not properly bonded and is a signatory in the DVs.

RO III Angeles, Aurora, Balanga, Bataan, Bulacan, City of San Fernando, Gapan, Mabalacat, Meycauyan,

Several DOs granted cash advances to the Division personnel and School Heads/concerned personnel of Non-Implementing Units (IUs) and Implementing Units (IUs) which were deposited to the personal bank accounts of the accountable officers contrary to Section 63 of PD No. 1445 and paragraph 6 of Department Order No. 46, series of 2004, thereby endangering loss of government

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Region DO/IUs Deficiency Olongapo, Pampanga, San Jose City, Science City of Muñoz, Tarlac Province, Tarlac City, Zambales

funds through misappropriation.

Bataan, San Jose Del Monte

Accountable Officers are not covered by fidelity bond in violation of Section 101 of PDNo. 1445.

Olongapo, Zambales

Fidelity bond of Accountable Officers had expired.

RO VIII RO XI

Catbalogan City, Samar, Northern Samar

Downloaded to the personal accounts of concerned Division Personnel and Head Teachers/Teachers-In-Charge of their respective schools since there was no depository account maintained under the name of the school.

Davao City, Panabo City

The downloading of the school’s funds directly to the personal accounts of the SDOs in defraying cash advances.

Davao del Norte The AO continued to perform their duties and functions as SDOs even if their fidelity bonds had expired, in violation to Section 101 of PD No. 1445.

Davao City Cash advances granted to SDO coursed thru their ATM Payroll Accounts could wrongfully considered as their salaries, personal money and /or loan proceeds, etc. Thus, these cash advances are exposed to unintentional misuse by the SDO especially when crediting of said cash advances are not communicated to the SDOs prior to its credit to their payroll accounts.

RO XIII Bislig Fidelity Bond of the Cashier of Bislig City National High School was inadequate to cover the maximum accountability which the accountable officer handled, contrary to Section 5.1 of Treasury Circular No. 02-2009 dated August 6, 2009.

11.13 We recommended that the Management require concerned offices to:

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

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

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

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

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

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

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d. instruct the Accountants/Bookkeepers to pay salaries, RATA, allowances and other personnel’s claims thru Automatic Debit Advice to simplify the transactions and efficiently reach the recipients on time.

11.14 Management of CO, NCR, ROs I, II, III, IV-B, VIII, XI and XIII commented

that they will comply with the recommendations. Other comments are the following:

CO/ Region Office/DO Management’s Comments

CO OSEC The Accounting Division commented that due to the simultaneous conduct of activities by all bureus/offices, it is impossible to impose the “no additional cash advance (CA) if the other CA remains unliquidated”. Nevertheless, they have imposed some rules to regulate the issuance of cash advance such as: a) Cash advance should be liquidated within two months from the date

it was issued, otherwise, no additional CA will be granted. b) Quarterly issuances of Demand Letters to Special Disbursing

Officers with unliquidated cash advance. c) Recommendation to withhold the salary Other plans for consideration are:limit the number of SDOs per office; consider the track record in handling CAs in designating SDOs; expenses to be paid through reimbursement. Initial steps are also being undertaken to request the write-off of some dormant unliquidated cash advance. Further, during the exit conference, Management replied that the granting of cash advances shall now be minimized as activity expenses to be conducted in the regions are being downloaded/sub-allotted in the respective ROs/DOs. Additional SDOs have also been designated, but their designation shall be revisited to regulate and control the number of SDOs.

NCR Quezon City To avoid the granting of additional cash advance despite non-liquidation of previous ones, a certification from the Accountant stating that the previous cash advance has been settled should be submitted.

It committed to scrutinize and reconcile the accounts to reflect the correct balance per AO and to apply for write-off the long outstanding cash advances due to death.

Pasig City, Mandaluyong City, Taguig/Pateros, Las Piñas

The DO Accountant explained that due to lack of personnel/manpower, the Accounting Unit could not record the submitted liquidations immediately. The DO Accountant committed to submit written justification and adjustments on April 15, 2018.

San Juan City The former Accountant claimed that the negative balance existed because the electronic accounting system cannot capture cash advances drawn and recorded from prior years; so, recognized liquidations are without the corresponding cash advances to settle. That advances corresponding to the liquidation or settlement submitted by the AOs may have still been recorded at the DO Pasig, when these were drawn before the DO San Juan became financially independent.

Caloocan During the Financial Management seminar, it was emphasized that the DO will be employing the replenishment method, that is, the amount being liquidated will be the same amount to be downloaded

RO I ROP, Alaminos The Management will monitor the submission of unliquidated cash

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City, Dagupan City, La Union

advance and will stop the practice of granting additional cash advances unless the previous ones are settled and will issue demand letters. Management assured the Audit Team that they will faithfully adhere to the provision of paragraph 5.8 of COA Circular No. 97-002 and Section 89 of PD No. 1445.

Ilocos Sur During the Exit Conference, the accountant mentioned that they have already notified the accountable officers specifically school heads, that they will not be downloading any cash advance without settlement of their previous unliquidated/unspent cash advances.

Laoag City Management informed that the cash advances as at December 31, 2017 has been liquidated by the concerned employees. However, the documents are still at the Accounting Office due to minor queries regarding completeness of documents, etc.

RO II ROP, Cagayan, The Management justified that demand letters has been sent to the concerned accountable officers with unliquidated cash advances but no response was received from most employees with long outstanding cash advances. They justified that they have been enforcing controls in the granting of Cash Advances to employees/officials with unliquidated cash advances. They added that two employees are now being deducted from their salary to pay their cash advances.

RO III Zambales The Management commented that additional finance personnel were being deployed to aid in the close monitoring and enforcement of liquidation of cash advances. Moreover, additional cash advances were not granted to accountable officers with outstanding cash advances.

Olongapo City, Zambales

The Management noted that several accountable officers have renewed their fidelity bonds; and assured observance of prompt renewal of fidelity bonds.

RO IV-B Romblon, Oriental Mindoro, Puerto Princesa City, Palawan

Management of the DOs of Romblon, Oriental Mindoro, Puerto Princesa City, and Palawan are amenable to the Teams’ recommendations. The Accounting Unit of the DO of Romblon, however, commented that they cannot control the release of another cash advance to those with unliquidated/unsettled previous cash advances especially when the fund due for release was received at a later date.

RO VIII Southern Leyte The Management commented that they encountered difficulty in religiously complying some rules and regulations on the granting, utilization, liquidation of cash advances, especially those cash advances granted to the cashier. DO undertakings with varied degree of urgency sometimes have overlapping period of activity implementation thus resulting to release of additional cash advances despite the presence of unsettled or unliquidated previous cash advances. However, the management will comply with the recommendations they instructed the Cashier or Disbursing Officer to liquidate every cash advance granted to her within the prescribed period and they will also bond another DO personnel assigned at the cash section to diminish if not entirely avoid the presence of multiple unliquidated cash advances.

Northern Samar The Management of DO Northern Samar explained that the substantial amount of unliquidated cash advances for operating expenses pertains mostly on school MOOE in which some of them are already liquidated before the end of the year. However, there were liquidations submitted at year-end but were recorded only in January of the following year due to the time constraints in prioritization in the preparation and submission of year end reports. Moreover, during the exit conference, Management answered thatthey have been discussing with the DBP management

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regarding the issuance of a separate ATM account for the downloaded MOOE but still under the name of the school head, however, after drawing the amount downloaded to them, the ATM Card will be deposited in the DO.

Samar The Management of DO Samar explained that their practice of downloading the MOOE funds to the school head was pursuant to Part IV item C, No. 11.2 of DepEd Order No. 13, s. 2016, hence trusted that practice was valid.

RO XIII Surigao del Norte Tandag City

The recommendations of the Auditor are properly noted of DO Surigao del Norte. The Management of DO Tandag City is very strict with the policy of no liquidation means no downloading of MOOE. Hence, no cash advances were granted to some School Heads during the last quarter of the year which resulted in various reimbursement claims at year end. However, they acknowledged the observation and assured adherence to the audit recommendations.

Accumulation of unliquidated fund transfers to DBM-PS 12. Lack of coordination between the Asset Management and Accounting Divisions;

laxity in the control and monitoring of DBM-PS fund transfers for the procurement and deliveries of various office supplies, materials and equipment; absence of periodic reconciliation of records; and insufficient DepEd guidelines resulted in: a) unreconciled variance of P4,471,988,027 between the CO and NCR balances, and DBM-PS account balance; b) dormant and long outstanding accounts of P898,581,407 in CO; and c) other recording deficiencies in NCR. 12.1. EO No. 359 dated June 2, 1989 provides that,“the Procurement Service (PS) of

the Department of Budget and Management (DBM) xxx shall be maintained as the regular organizational unit to implement and operate a central procurement system.” Section 4 (b) thereof further provides that,“agencies shall remit to the Procurement Service the funds needed to service their requirements for supplies, materials and equipment as reflected in the Work and Financial Plan.”

12.2. COA Circular No. 2016-005 dated December 19, 2016 prescribed rules and

regulations on the monitoring and liquidation of fund transfers. To wit: Section 6.1 – All government entities shall conduct regular monitoring and analysis of receivable accounts to ensure that these are collected when these become due and demandable and that cash advances and fund transfers are liquidated within the prescribed period depending upon their nature and purpose. Section 7.1 – Conduct regular and periodic verification, analysis, and validation of the existence of the receivables, unliquidated cash advances, and fund transfers, and determine the concerned debtors, accountable officers

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(Regular and Special Disbursing Officers, Collecting Officers, Cashiers) and the source and implementing government entities concerned. Section 7.2 – Reconcile the unliquidated fund transfers between the source and implementing government entities, prepare the adjusting entries for the reconciling items noted, and require liquidation of the balances. Section 7.4 – Prepare aging of dormant receivables, unliquidated cash advances, and fund transfers on a quarterly basis to support the request for write-off, and indicate in the remarks column the existence of the applicable conditions, such as, “absence of records or documents to validate/support the claim and/or unreconciled reciprocal accounts”.

12.3. The deficiencies noted in the Due from National Government Agencies account

of CO and NCR are as follows:

Deficiencies CO NCR Total Long outstanding and dormant receivables 10 years or more

898,581,407 - 898,581,407

Errors/omissions in recording - 1,778,289 1,778,289 Confirmation difference with DBM PS (Unreconciled Amount)

4,470,198,958 1,789,069 4,471,988,027

Unrecorded DBM liquidation 3,250,095,275 - 3,250,095,275 Unrecorded DBM reversion to BTr 643,290,419 - 643,290,419 Total 9,262,166,059 3,567,358 9,265,733,417

a. DepEd-CO

12.4. A three-year period analysis of fund transfers to DBM-PS and result of the

confirmation made revealed significant variance in the respective account balances, to wit:

Particulars 2015 2016 2017 Balance per DepEd 4,897,365,764 7,899,015,533 7,635,605,905 Balance per DBM 1,337,938,654 1,607,836,811 3,165,406,947 Difference 3,559,427,110 6,291,178,722 4,470,198,958 % 74 80 59

12.5. The above information revealed that throughout the three-year period, DepEd

CO and DBM-PS failed to reconcile the significant billion peso difference. Crucial is the fact that most of the unreconciled difference pertains to long-outstanding balances from prior years’ transactions, which shows laxity on the part of DepEd to regularly monitor advances made to DBM-PS.

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12.6. TheAging Schedule of CO as of December 31, 2017 showed that out of the P7,635,605,905 year-end balance, 93 percent or P7,092,553,440 pertains to prior years’ fund transfers as presented hereunder:

Current Past Due

Grand Total 60 days-1 year Over 1 year-5 years Over 5 years-10

years Over 10 years

543,052,465 5,700,643,829 493,328,204 898,581,407 7,635,605,905 7,092,553,440 7% 93% 100%

12.7. Analysis of the Subsidiary Ledger also revealed that only 49 percent or

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

Year Procurement

/Fund Transfers Liquidation/

Deliveries Balance

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

12.8. The balance per category is presented below.

Purpose Beginnng Balance 2016

2017 Fund

Transfers Liquidation/

Deliveries Adjustments Total

Common-Used Office Supplies/ Equipment 113,706,184 42,801,949 21,301,424 (55,745,769) 79,460,940

IT Equipment 6,640,862,067 513,884,098 - 727,118,767 6,427,627,398 Armchairs 305,300,796 - - - 305,300,796 Textbooks 556,196,923 - - - 556,196,923 Vehicles 7,907,364 - - - 7,907,364 Others 259,112,484 - - - 259,112,484 Total 7,883,085,818 556,686,047 21,301,424 671,372,998 7,635,605,905

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

a. For common-use office supplies, most of the accounts are those with dormant balances from year 2004 and below, which had remained unaccounted, to wit:

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Year Procurement /Fund Transfers

Liquidation/ Deliveries Balance

2004 and below 377,373,051 248,350,815 129,022,236

2005-2010 43,916,830 80,924,480 (37,007,650) 2011-2015 170,178,043 142,674,138 27,503,905 2016 13,054,389 18,866,695 (5,812,306) 2017 50,337,374 84,582,619 (34,245,245) Total 654,859,687 575,398,747 79,460,940

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

computer hardwares and softwares for distribution to various public elementary and secondary schools nationwide for the DepEd Computerization Program. As of audit date, accounting records showed that there were still P6,426,903,920 unliquidated advances, summarized as follows:

DCP Year

Agency Procurement Request No.

Batch 2016 Balance Prepayments Liquidation/ Deliveries in

2017 2017 Balance

Balances prior to 2009 78,198,505 - - 78,198,505

2009 09-0279s 6 825,872 - - 825,872

2010-2011

10-0070s-75s, 11-0111s to 11-

0113s 7-15 794,391,235 - 140,969,192 653,422,043

2012-2014

12-0147s to 12-0149s, 13-0144s,

13-0210s, 14-0096s, 14-

146s,14-246s

16-27 2,861,805,798 - 586,149,575 2,275,656,223

2015

15-0091s, 16-0051s, 16-0052s

16-0350s 17-0009s

29, 30 and 31 Software,

Unenergized Package, Batches

4,7,12,13,16 and 20, SHS

Software

2,266,657,909 - - 2,266,657,909

2016 16-0082s & 16-0184s

35, 36 and 37 Software 638,259,270 - - 638,259,270

2017 17-02095 Microsoft License - 513,884,098 - 513,884,098

Total 6,640,862,067 513,884,098 727,118,767 6,426,903,920

Comparison made by the Audit Team of DepEd CO and DBM-PS records revealed that there were IT equipment/software deliveries/settlements amounting to P3,250,095,275, which are not yet recognized in the CO accounting records for the years,as shown below:

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DCP Year APR No. Batch Deliveries Per

DepEd Deliveries Per

DBM PS Difference

2009 various Various 310,653,620 268,293,527 42,360,093 210-2011

10-0070S-75S, 11-0111s to 11-0113s 7-15 1,645,522,487 2,107,043,747 (325,887,768)

2012-2014

12-0147s to 12-0149s, 13-0144s, 13-

0210s, 14-246s 16-27

265,600,825 2,016,103,242 (1,750,502,417)

2015 15-0091s 29, 30 and 31 401,755,131 509,192,617 (42,369,688)

2016 16-0082s, 16-0184s, 16-0052s, 16-0350s

35, 36 and 37 Software

- 679,886,024 679,886,024)

2017 17-02095 Microsoft

License - 493,809,471 (493,809,471)

Total 2,623,532,063 6,074,328,628 (3,250,095,275)

c. The recorded armchairs and textbooks pertain to 2004 and prior years’ fund

transfers wherein at that time, procurement was delegated and entrusted to DBM-PS with total unliquidated advances of P861,497,719, which has been non-moving since 2007.

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

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

12.10. Confirmation reply dated April 19, 2018 from DBM-PS disclosed its

outstanding accounts to DepEd COamounted to P3,165,406,948, to wit:

Year

Unutilized Balance per DBM-PS Refunded to

BTr Common-use Supplies and Equipment

Non Common-use Supplies

and Equipment Balance

2017 28,443,997 1,743,196,644 1,771,640,641 - 2016 1,776,411 561,369,297 563,145,708 - 2015 585,233 55,078,096 55,663,328 - 2014 (233,846) 74,028,942 73,795,095 - 2013 (2,022,086) 59,893,843 57,871,757 - 2012 2,374,014 104,783,121 107,157,135 107,157,135 2011-2002 (33,539,312) 568,714,692 535,175,380 535,175,380 2001 and below Various 957,904 957,904

Total (2,615,589) 3,167,064,635 3,165,406,948 643,290,419

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

12.12. It was also learned that DBM-PS already reverted a total amount of

P643,290,419 to the Bureau of the Treasury (BTr) but the same has not been derecognized in the CO outstanding receivable account from DBM-PS.

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

P4,470,198,958 and the long time unaccounted fund transfers, DepEd CO still made another commitment, as CY 2017 allotment of P13,701,515,748 allocated for various major programs and projects was obligated as fund transfer to DBM-PS through a Memorandum of Agreement14. Although such transfers are permissible, DepEd should have first reconciled the reporting difference to be able to optimize the use of its financial resources. The unutilized balance per DBM-PS records of P2,522,116,529 (P3,165,406,948 - P643,290,419) also requires proper coordination so that the fund may be immediately reverted to the BTr. If DepEd’s fund transfer merely resulted in budget reversion, then this procurement mechanism to DBM-PS should not be considered as an option just to reflect favorable improvement in DepEd’s budget utilization.

12.14. Verification further disclosed that the material discrepancy of P4.4 billion

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

12.15. The unaccounted and unreconciled balance of Receivable account Due from

National Government Agencies-DBM-PS has already been brought to Management’s attention in the previous Annual Audit Reports.But as noted, the audit recommendations were not implemented by the concerned offices.

14Notarized date of December 28, 2017 15 Based on the DBM-PS Standard Memorandum of Agreement 2.3. The DBM PS reserves the right to adjust the ABC based on its price monitoring, as may be deemed necessary, but subject to availability of funds and to the written consent of the (agency). 3.1 A four percent (4%) Service Fee to be computed on the basis of the contract award price shall be imposed for services to be rendered by the PS and its BAC. The Service Fee shall be taken from the Project Fund and shall accrue to the PS after the issuance of the Resolution recommending the award of Projects to (agency).

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

b. NCR

12.17. The aforementioneddeficienciesare also subsisting in NCR.

12.18. The account Due from National Government Agencies in ROP and six DOs has

a total balance of P1,835,793.15at year-end. Confirmation of their procurement transactions revealed discrepancies in the beginning balances, fund transfers, deliveries and ending balances, with the PS-DBM records implying absence of regular reconciliation and deficient monitoring of both records resulting in misstatements of Due from National Government Agencies account and other affected accounts. As at year end, the unreconciled difference amounted to P1,733,594.27, due the following reasons:

Office Amount Difference

Reasons for the Difference Per Books Per PS-DBM Over/(Under)

Ending Balance, December 31, 2017 ROP 1,022,249.16 712,000.32 310,248.84 Unidentified difference prior to 2016 Navotas City

45,280.80 79,651.46 (34,370.66) The P34,370.66 difference refers to unascertained discrepancy in beginning balance of P33,992.07 and recorded deliveries of P15,839.18 and the non-adjustment of cancelled checks on fund transfer of (P15,460.59)

Caloocan City

55,474.80 49,428.08 6,046.72 Pertaining to prior years’ balance which cannot be identified by the incumbent Accountant as there was no subsidiary ledger turned-over by the former Accountant.

Manila City 112,133.96 2,137,691.81 (2,025,557.85) Unascertained difference prior to 2016. Quezon City

578,400.98 364,009.84 214,391.14 Unreconciled undelivered items in prior years of P247,347.64, unrecorded fund transfers in 2017 (P183,836.50) and unrecorded deliveries in 2017 P150,880.00

Pasig City 606.66 226,574.98 (225,968.32) Unreconciled discrepancy of P225,968.32 between the two records was mainly due to failure on the part of the Accounting Unit to record the transactions with Procurement Service in Due from NGAs account. Instead, Office Supplies Inventory is debited upon purchase of PS items regardless whether the same were advance payments. The book balance of the DO pertains to beginning balance.

San Juan Unrecorded fund transfer in 2017 of

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Office Amount Difference

Reasons for the Difference Per Books Per PS-DBM Over/(Under)

City 21,646.79 30.93 21,615.86 (P213.00) and unrecorded deliveries in 2017 of P21,828.86

Total Ending Balance

1,835,793.15 3,569,387.42 (1,733,594.27)

12.19. Furthermore, errors/omissions in recording fund transfers and deliveries resulted

in the net overstatement amounting toP1,778,289.30 of the Due from National Government Agencies account balance in ROP, DOs Quezon City and Navotas, as shown below.

Office Particulars Amount Over (Under)

statement ROP Unrecorded deliveries in the agency’s books but were included

in the Statement of Account-Customers of the PS-DBM 238,654.54 -

- 236,690.34 Double recording of deliveries by the agency (1,964.70)

Over recording of delivery by the agency 0.50 DO Quezon City

Misclassified fund transfers (1,710,545.63) - - -

(2,030,440.23)

Unrecorded fund transfers (316,206.50) Unrecorded deliveries 574,610.60 Exclusion of prior years’ balances in the consolidated trial balance

(578,298.70)

DO Navotas City

Non-adjustment of cancelled checks on fund transfer of P15,460.59

15,460.59 15,460.59

Total (net) 1,778,289.30

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

a. direct the Accountant to exert efforts to reconcile records with Property Officer on advances made to DBM-PS, coordinate with DBM-PS for the reversion of unitized/dormant funds, and make necessary adjustments in the Agency book balances;

b. limitfund transfer to programs/project already due for implementation

to avoid accumulation of receivable account in the books; and c. establish guidelines to cover the processes of fund transfer, settlement

(deliveries, cancellations, sales return, change in price per item, service fee charges)and reporting with proper coordination/consultation with the DBM-PS.

12.21. Below are the Management’s comments/responses relative to the aforementioned observations/recommendations.

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CO/Region Management’s Comments CO During the exit conference, Management assured the Audit Team that DepEd has a

working group to trace and reconcile records of DBM-PS with the records of the Accounting Division. Accounted Delivery Receipts shall be submitted to Accounting Division for proper derecognition of settlements made by DBM-PS. In CY 2017, P992,549,426.00 has been liquidated pertaining to PY balances for ICT equipment and P63,281,193.00 for various common used office supplies.

NCR ROP During the exit conference, the Audit Team was informed that the Property Officer and the Accountant went to the PS-DBM for purposes of reconciliation of records, but records obtained from PS-DBM were not solely for DepEd-NCR. It included balances of fund transfers and deliveries from and to RELC and DO QC. They requested PS-DBM to provide the statement of account pertaining exclusively to DepEd-NCR transactions. DO Quezon City In a letter dated March 20, 2018, the Accounting Unit committed to review the noted errors and make the necessary adjustments and that it reconcile its records with the Supply Unit. Moreover, in its reply to the AOM issued, the Property Section informed the Audit Team that it has verbally requested the PS-DBM to refund the cost of the undelivered items but to no avail because it promised to deliver the items on a certain date. It regularly monitors the delivery of items thru telephone and visits the PS-DBM once in a while. DO Manila City The Accounting Services will coordinate with the Property Services for the record keeping of the transactions with DBM-PS, with a team to be sent to coordinate with DBM-PS for the reconciliation of DO accounts. DO Caloocan City Proper coordination between two departments should be in place to properly implement the procedures on procurement from DBM-PS. Recommendation was duly noted for compliance.

Unreliable Intra/Inter Receivables and Other Receivables Account Balances 13. Non-monitoring of the submission of Liquidation Reports; laxity in the control

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

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13.1. Deficiencies noted on Intra/Inter Receivables and Other Receivablesaccount balances as of December 31, 2017 are presented hereunder:

Deficiencies CO CAR RO I RO III RO V RO VIII RO IX RO XI

Long outstanding and dormant receivables 10 years and more

78,687,544 6,398,291 30,166,484 605,259

5,659,371

- 75,463,126 2,215,839

Unaccounted balances 31,379,546 - - - - - - -

Accounts with Negative Balance

(3,264,594) - - - - - - -

Lack of documents and insufficient /incomplete records

7,928,030 - - 83,205,621 - 7,612 - -

Confirmation difference 28,297,85 - - - - - - -

Disallowance 10,000,000 - - - - - - - Misclassified Accounts - 117,676 - - - 88,622 - -

Errors/omissions in recording - 200,000 - - - 14,532 - -

a. CO

13.2. This is a reiteration of the previous year’s audit findings and recommendations,

which were not addressed or properly acted upon as evidenced by the P2,059,780,754 unliquidated fund transfers. The long outstanding accounts already aged over one year to more than ten years, are presented in the next table.

Accounts Outstanding Balance

Prior Years Over 1-5 years 6-10 years Over 10 years

Due from NGAs* 393,525,753 282,509,540 80,549,654 30,466,559 Due from LGUs 24,983,942 6,227,909 18,756,033 - Due from NGOs/POs 1,224,965,460 1,190,711,142 135,000 34,119,318 Due from OUs 19,286,787 6,006,942 3,456,391 9,823,454 Due from GOCC 373,525,649 372,093,000 - 1,432,649 Due from BUs 16,605,872 15,404,277 3,274,751 (2,073,156) Due from ROs 6,887,291 - 4,041,727 2,845,564

Total Balance 2,059,780,754 1,872,952,810 110,213,556 76,614,388 *Excluding long outstanding accounts made to DBM-PS

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• Due from National Government Agencies

13.3. The aging schedule for Due from National Government Agencies accounts with

long outstanding balance of P393,525,753 pertains to the following National Government Agencies, to wit:

Per Subsidiary

Ledger/ Implementing

Agency

Outstanding Balance

Prior Years

Over 1-5 years 6-10 years Over 10 years

DPWH 48,157,947 - 48,138,576 19,371 DSWD 266,634,081 266,634,081 - - DENR 10,172,959 10,172,959 - - DND 914,346 - 914,346 - NADESCOM 5,445,000 5,445,000 - - EDPITAF* 62,256 - 62,256 - RO-TRANSFER 32,250,276 257,500 1,545,588 30,447,188 TESDA 29,888,888 - 29,888,888 - Total 393,525,753 282,509,540 80,549,654 30,466,559 % 100 72 20 8

*does not include the balance of P7,928,030 pertaining to completed projects wherein documents cannot be obtained.

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

Implementing

Agency Details Remarks

DPWH

Pertains to school building construction, which also includes regional transfers to ARMM as this is part of the Regular School Building Program (RSBP) wherein the said project shall be spearheaded by DPWH.

99.9 percent or P48,124,360 of the outstanding balances are from the DOs of ARMM. Previous confirmation revealed discrepancy of P13,329,786 in which DepEd was not yet able to reconcile. Details as follows:

Name of Debtor Balance per SL (CO)

Amount per Confirmation Difference

DPWH DepEd DO Tawi-tawi 4,908,000 - 4,908,000

DepEd DO Lanao Del Sur II

Per check No. 909826 177,121 - 177,121 Per check No. 485087 302,916 - 302,916 Per check No. 983306 3,858,661 - 3,858,661 RO Transfer

DepEd ARMM RO 4,083,088 - 4,083,088 Total 13,329,786 - 13,329,786

DSWD Transfer of funds to DSWD shall be for the construction of 605 classrooms in ROs IX, X, XI, XII, and XIII for indigenous peoples communities

As of December 31, 2017, thirty seven percent or 221 classroomshas been completed and P253,865,919 or 49 percent has been liquidated mostly owing to the operating expenses incurred in the program.

DENR Includes Surveying and Titling of School Sites of ROs I, II, III, IV-A, and V

The transfer made in 2014 amounting to P15,000,000.00 still have a remaining balance of P5,172,959.00; while for the 2016 transfer, no liquidation was submitted.

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Implementing Agency Details Remarks

DND Fund Transfer for the Rehabilitation of Schools in Mindanao

Transfer was made in 2010, but to date, 2 percent or P914,346 remained unliquidated.

NADESCOM Pertains to fund transfer to the 2nd District of Bohol for the Requirement of Basic Education Facilities

The agency was reported to have been abolished in May 2012, but the amount had remained unliquidated in the books. There were no information or report that reached this office on the management action taken to address this problem, and to whom or what office the required settlement shall be demanded.

RO TRANSFER

Includes Financial Assistance to cover Maintenance and other Operating Expenses of various schools in ARMM

Confirmation result on fund transfer granted to DepEd ARMM RO to cover various financial assistance to ARMM amounting to P32,250,276 revealed that P4,083,088 or 13 percent of which have already been liquidated based on copy of the liquidation report provided to the Audit Team. DepEd ARMM however was not able to confirm the balances prior to 2004 amounting to P28,167,188 in the absence of details on the account and/or supporting documents, which DepEd-CO record could not also account.

TESDA Pertains to the Phase 2 of the Alternative Learning System Cum Madrasah Education for Muslim Out -of-School Youth (OSYS) program which covers TVET with ALIVE (Arabic Language and Islamic Values Education).

Project implementation has a duration of 10 years from 2009-2019. However, as of this date, TESDA was not able to submit their progress report during the eight years project implementation covering the School Years from 2009-2017, in violation of Article IV of the agreement between DepEd and TESDA, which states that TESDA shall submit progress report and liquidation of expenses incurred from the project funds to DepEd, at the end of every school year.

EDPITAF Consist of completed projects amounting to P7,928,030 and transfers to NEAP amounting to P62,256 for the training fees regarding the implementation of Capacity Building for Trainors in the Bicol and CARAGA ROs.

EDPITAF’s unliquidated balance of P7,928,030 pertains to already completed projects, but per CO books, the amount had remained unliquidated and non-moving for years. It was informed that the documents pertaining to the completed projects could no longer be located.

• Due from LGUs

13.5. The aging schedule of Due from Local Government Units account as of

December 31, 2017 showed the balance of P65,873,434 wherein38 percent or P24,983,942 pertains to prior years’ balances. Further analysis revealed that from the prior years’ balances, 75 percent or P18,756,033 have been outstanding from six to 10 years.As shown in the table next page.

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Particulars Current Year Prior Year Total

Due from LGUs 40,889,492 24,983,942 65,873,434 % 62 38 100

Name and Address of Debtor Prior Year Balances

Ageing of Outstanding PY Balance Prior Years

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

13.6. Confirmation reply received from the City of Valenzuela showed full

liquidation of the amount P3,520,339. Thus, Management should follow-up the submission of the liquidation reports to update/correct its receivable account from the City.

13.7. On the other hand, fund transfer granted to the City of Puerto Princesa

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

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

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

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

16The Chief Accountant shall, on the basis of the NFD [Notice of Finality and Decision], record in the books of accounts, the disallowance and/or charge as a receivable.

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NGO Outstanding Balance

No. of Years

Dormant Remarks

Buklod ng Pagkakaisa ng Bacood 711,000

21

- Philippine Rural Reconstruction Movement (PRRM) 1,200,000 Confirmation reply reflected a

zero account balance Cahriba Foundation, Los Baños 139,305 - Philippine Federation of Teachers and Employees Cooperatives (PFTEC) 11,500,000 20 Confirmation reply reflected

P1,252,274 depleted balance17 Quest Foundation 6,000,000 18 - Foundation for Upgrading the Std. of Education 3,250,000 17 -

Tagipusuon Foundation 8,171,000 16 - National Anti-Poverty Commission 18,013 13 - Creative Education Exponents & Developers 330,000 12 -

YMCA Open Education Development Foundation Inc. 2,800,000 11 -

Filipino Chinese Chamber of Commerce and Industry 135,000 9 -

United Nations Development Programme

1,190,711,142 2 The fund transfer has already 57% liquidation. Based on the agreement, the amount should have been fully settled by December 2016, but the outstanding account was affected by delay in the distribution of deliveries, still unprocured un-energized packages and computer packages cost variance.

Total 1,224,965,460

13.9. How DepEd previously managed to transfer millions of funds to these NGOs

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

• Due from Government Owned and Controlled Corporation

13.10. The Due from Government Owned and Controlled Corporation as of December

31, 2017 showed a total balance of P373,525,649, which includes P1,432,649 pertaining to prior years long outstanding accounts aging 10 years. Details areshown in the next pages.

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

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GOCC Balance Remarks

Laoag 112,000 Advances made to Land Bank of the Philippines for the Techvoc Daily Subsistence Allowance for the training conducted by DepEd and TESDA during the period from May 2007- June 2008 have been dormant for ten years. Status of this fund transfer was not determined since the Accounting Division of DepEd-CO cannot give concrete information on the nature of the fund transfer, how and why this was considered as an option to pay the allowances due to participants, and most importantly how this fund transfer be liquidated or settled.

Cabarroguis 128,000 Balanga 200,000 Sara Ilo-Ilo 16,000 Bajada 288,000 Matina Davao 656,000 Valencia 16,000 Santiago Isabela 16,000 Pasig 649 Sub Total Landbank Servicing Branches 1,432,649 Development Academy of the Philippines (DAP)

372,093,000 Collaborative Initiative of the DepEd and the DAP for an Intensified Abot Alam Program (IAAP): The fund transferred was intended to intensify the Abot Alam implementation by integrating the education and skills training components into one program for learners, which is expected to increase the interest in the participation and completion of the program. Given that the program will require initiating a collaboration process among different institutions/organizations, as well as developing the framework and benchmark content of the skills training component, which does not fall within the immediate capacity of DepEd, the Department engaged the services of DAP to provide technical and consultancy services for the program. The transfers were made in July 2017 and December 2017, but no settlement was yet recognized to comply with the monthly report utilization requirement of the MOA.

Total 373,525,649

• Due from Regional Office

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

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• Due from Operating Units

13.12. The account Due from Operating Units as of December 31, 2017 in DepEd CO

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

• Due from Bureaus

13.13. The account Due from Bureaus as of December 31, 2017 showed a total amount

of P16,605,872. Details of the account are as follows:

Bureau/Office Outstanding Balance

Aging of Outstanding Balance Prior Years

Over 1-5 years 6-10 years Over 10

years CO Proper 16,082,800 16,082,800 - - Education Partnership Incentive Program

(699,243) (699,243) - -

Literacy Coordinating Council (5,000) - (5,000) - Bureau of Physical Education and School Sports

(73,034) - - (73,034)

Bureau of Secondary Education 717,601 - 2,717,723 (2,000,122) Bureau of Alternative Learning System

(16,151) (16,151) - -

National Educational Testing and Research Center

2,400 2,400 - -

Bureau of Elementary Education 496,124 1,124 495,000 - Deployed Account 0672-1017-78 94,147 30,397 63,750 - Provident Fund 3,278 - 3,278 - Others 2,950 2,950 - - Total 16,605,872 15,404,277 3,274,751 (2,073,156)

13.14. Balance of this account had not been traced, and because of the implementation

of the Rationalization Plan, the outstanding accounts in the abolished/dissolved bureaus/offices of the Department were merged with DepEd CO without undertaking the necessary reconciliation procedure, thus, discrepancy had

18Test of English Proficiency for Teachers (TEPT); National Achievement Test (NAT); Philippine Educational Placement Test (PEPT); National Diagnostic Test (NDT); National Elementary Achievement Test (NEAT); National Secondary Assessment Test (NSAT); National College Entrance Examination (NCEE); National Technical and Vocational Examination (NTVE)

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increased and made the process more difficult and complicated on the part of DepEd CO as no turn-over of documents and records was done.

13.15. The accumulation of the unliquidated fund transfers only showed that the

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

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

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

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

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

wit:

Region Observation CAR DOs Kalinga, Abra, Apayao and Benguet

The funds transferred by DO Kalinga to the Provincial Government of Kalinga amounting to P200,000.00 for the regional athletic meet was recorded as Due from National Government Agencies resulting in the overstatement of the account and understatement of the Due from Local Government Units account. In DOs Abra and Apayao, dormant receivables amounting to P6.39 million remained in the books of accounts because the guidelines on the write-off of dormant accounts as prescribed in COA Circular No. 2016-005 were not observed. These balances represented the counterpart funds of local government units in the TEEP that was implemented from 2000 to 2006. Thus, these receivables were dormant for over ten years. In DO Benguet, the advances granted by DO Benguet for the MOOE of schools with a balance of P117,675.88 were misclassified as Due from Operating Units.

RO I Various

The Accountants failed to reconcile the accounts affecting fund transfers from various DOs to the DepEd CO and RO, Other NGAs and Bureaus, Operating Units, Officers and Employees, resulting in dormant balances of P30,166,483.99 in the various accounts for “Intra-Agency Receivables”, “Inter-Agency Receivables” and “Other Receivables,” which is not in accordance with GAM thereby affecting the fair presentation of the Financial Statements.

RO III Various

ROP transfers made to various LGUs amounting to P605,259.05 in 1998 for the Non-formal Education Project – School Readiness Assessmentremained unliquidated due to lack of monitoring and appropriate follow-up. On the other hand, balances of the Due from Government Owned and Controlled Corporations in ROP and DO Cabanatuan City amounting to P62,760,890.99 remained stagnant for more than 12 months. Management needs to inquire and investigate as regards the proper treatment and validate if the amount still exists as a receivable and the rights still belong to DepEd RO III.

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Region Observation Moreover, the balance of Due from Regional Office account of P19,839,471.09 as of December 31, 2017 of seven DOs could not be ascertained for lack of supporting documents. These were GSIS premiums and other GSIS related deductions from cancelled checks or portion of cancelled checks remitted by the RO to GSIS, when the salaries of the employees used to be paid by checks and not yet through ATMs.

RO V ROP

Due from Local Government Units totaling ₱5,659,371.30 reported by the DepEd ROV Proper to have been requested for write-off in CY 2011 remained dormant and outstanding as of year-end due to inadequacy of documentary requirements prescribed in COA Circular No. 94-013, as amended by COA Circular No. 2016-005, to support such request. Its continued existence in the books affected the presentation of receivable account in the financial statements.

RO VIII DO Calbayog City

In DO Calbayog City, the receivable of P88,622.18 represents taxes due from the J.A Construction contractor covering payment of services rendered in connection with the construction of school building, which were not initially withheld; while the refund of salary from teachers amounting to P14,531.91 were inadvertently recorded as Due from OUs instead of Due from Officers and Employees.

RO IX The outstanding balance on accounts Due from National Government Agencies and Due from Operating Units with a total amount of P103,412,930.74 is aged one to five years. The Management failed to review, analyze and reconcile the balances with the other related accounts in the trial balance especially on the composition of the beginning balances of P45,967,986.61 which represented 44.45 percent of the total and P29,495,139.52 or 28.52 percent of the total on accounts Due from National Government Agencies and Due from Operating Units, respectively.

RO XI DO Davao del Sur

The Other Receivables account balance amounting to P2,215,839.34 of DO of Davao del Sur had long been overdue and were uncollected for over nine to 14 years and had a very low collection efficiency rate of only 0.22 percent or only Ᵽ4,984.38 had been collected for CY 2017, thus indicating a very low collection efficiency rate.

13.18. We recommended that the Management in concerned offices:

a. create a committee or team to –

a.i trace, analyze and reconcile prior years intra-agency fund transfers; a.ii conduct investigation and validation of long outstanding inter-

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

a.iii submit a report with recommendations as to appropriate actions to be undertaken, such as the:

a.iii.i proposed adjusting entries for identified errors/misstatements,

a.iii.ii demand for submission of financial reports through appropriate legal process,

a.iii.iii request for authority for the possible write-off of dormant accounts in compliance with COA Circular No. 2016-005,

a.iii.iv proposed accounting guidelines, or a.iii.v other procedures deemed most appropriate, and

b. henceforth, instruct the Accounting Division to closely monitor all fund transfers, keep records/documents relative thereto for future reference,

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and to immediately prepare the necessary adjusting journal entries to reflect more accurate receivable account balances.

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

aforementioned observations/recommendations.

CO/ Region Management’s Comments CO Management sent various demand letters requiring liquidation of outstanding accounts

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

RO I DOs San Fernando City, Dagupan City and La Union has directed the Accountant to work back on the balances, identify the composition of the account balances, and do the necessary actions to trace the breakdown of the dormant receivable accounts, which has occurred several years ago. DOs Ilocos Norte, Laoag City, Candon City, Vigan City, Ilocos Sur and Urdaneta City committed to verify the veracity of the recorded receivables and make the necessary procedures to reconcile balances.

RO II For ROP, the Management commented that the Due from GOCCs account is being reconciled and was already brought to the attention of the DepEd Central Office and GSIS to provide necessary documents to substantiate the settlement of the amount. In DO Cabanatuan City, the Management have communicated the matter to the RO. Reconciliation and settlement, if appropriate, shall be made. However, RO informed them to transfer this account to Due from RO.

RO VIII The Accountant agreed to set-up impairment loss by January 2018 including the issuance of Demand Letters to employees as supporting documents for write-off.

RO V Demand letters will be sent to the responsible officials of the LGUs included in the schedule for immediate liquidation and submission of the documentary requirements. If the records are no longer available since the transaction had transpired in CY 1996, a certification under oath of the concerned accountable officers and/or municipal accountant will be requested to effect the recording of settlement /liquidation of the fund transfer. After all the remedies for settlement and liquidation have been fully exhausted, the Management will again request for write-off of the account with the necessary documentary requirements.

RO IX Management committed to exhaust effort to arrive at the breakdown of the accounts involved. They will send confirmation requests with other Operating Units connected with DepEd RO IX for possible data available concerning the receivable balance. The Accountant commented that the unreconciled beginning balances were just inherited by him from the previous Accountant and that no details were available since the turn-over. But he promised to exert effort to identify the compositions and reconcile it with other accounts in the trial balance to determine the accounts subject to request for write-off.

RO XI It was admitted by Management that indeed the collection of these receivables were not given so much focus. They made a commitment to intensify the collection effort and send demand letters.

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Past due loans receivables from Provident Fund 14. Laxity in the grant of Provident Fund loans to DepEd officials and employees in

ROs I, III, IV-B and V resulted in the accumulation of loans receivable balance to P194,432,009.38 consisting of ₱15,112,752.42 past due accounts of more than one to 15 years, out of which P11,624,028.86 or 75.65 percent are receivables from deceased, retired, resigned, AWOL, transferred or can no longer be located borrowers,thus depleting the funds available for prospective borrowers and the slim probability of its full collectibility, contrary to Section X.10 of DepEd Order 36, s. 2007 and negating the purpose for the creation of Provident Fund of providing loan facility in case of emergency.

14.1 The Provident Fund granted is embodied in DepEd Order No. 50 s. 2001 dated

September 26, 2001, which aims to provide DepEd officials and employees with various benefits and loans as follows:

a. For emergency needs; b. For their education and that of their children; c. For their hospitalization and that of the immediate dependent; d. For minor but immediately needed repair of their houses; and e. For other similar purposes to be determined by the National Board of

Trustees (AO 279).

14.2 Pursuant to Administrative Order No. 279, the Provident Fund was established to provide, among others, the officials and employees of the DepEd loan facility in case of emergency. The interest is six percent and a co-maker is required for all the borrowers. The payment of the loan is made in equal monthly installments applied through automatic deduction from the salary of the borrower.

14.3 Section X.10 of DO 36, s. 2007, Amendments and Addendum to DepEd Order

No. 12, s. 2004 (Revised Implementing Guidelines for the DepEd Provident Fund),states that repayment period shall be at the option of the borrower, subject to his/her capacity to pay and computation of his/her net take home pay which shall not be reduced to less than Three Thousand Pesos (P3,000.00)19 after all deductions including the Provident Fund loan amortization. The borrower may opt for a repayment schedule of 12 months (one year) up to a maximum period of 60 months (five years) equal monthly installments. In all cases, repayment of loans shall be through automatic deduction from the borrower’s salary, either by agency payroll or PSD-IBM deduction. Also, Section X.11 provides that the National Regional Boards may allow renewal of loan provided that 50 percent of the previous loan has been paid, there are no pending applications for new loans, and the balance of the principal amount shall be deducted from the new loan.

19Net take home pay for CY 2017 is P4,000 per DO No. 12, s. 2017

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14.4 Audit of the Provident Fund loans receivables amounting to ₱194,432,009.38 as of December 31, 2017 disclosed that a total of ₱15,112,752.42 are past due accounts for more than one year to 15 years, of which at least ₱11,624,028.86 are due from deceased/retired/resigned/AWOL/transferred or no longer located borrowers in the following ROs:

Region Current (1 year)

Past Due Over 1 Year) Total

Due from deceased/retired/ resigned/ AWOL/

transferred/ no longer located

borrowers

No. of deceased/retired/ resigned/ AWOL/

transferred/ no longer located

borrowers

RO I – DOs Ilocos Sur, Candon City, Pangasinan I, Pangasinan II, Dagupan City, Urdaneta City

90,235,331.58 8,774,793.87 99,010,125.45 8,488,344.65 1,171

RO III – DOs Angeles City, San Fernando City, Mabalacat, Cabanatuan, Muñoz City, San Jose City, Gapan City

69,981,936.12 5,073,248.03 75,055,184.15 1,870,973.69 Incomplete data

RO IV-B – DOs Calapan City, Romblon -* 464,786.56 464,786.56 464,786.56 30

RO V – DO Tabaco City 17,892,987.92 799,923.96 18,692,911.88 799,923.96 Not indicated RO XIII – DOs Agusan del Sur and Bayugan City 1,209,001.34 -* 1,209,001.34 -* -*

Total 179,319,256.96 15,112,752.42 194,432,009.38 11,624,028.86 * No data provided

14.5 In RO I (DOs Ilocos Sur, Candon, Dagupan City and Urdaneta City), the

P1,008,743.81 loans receivables from the deceased/retired/resigned/ transferred/retired employees have been dormant and carried in the books for more than five years. At DOs Pangasinan I and II, a total of ₱7,479,600.84 receivables were already considered delinquent loans. Poor collection performance thereat was caused by granting loans to employees havingwith net take home pay below minimum threshhold.

14.6 In RO III (DOs Cabanatuan City, Muñoz City, San Jose City, Gapan City,

Angeles City and San Fernando City), loan borrowers were granted new loans eve though 50 percent of the previous loan has not been paid, while the balance of the principalamountof the previous loan was not deducted from the new loan; each loan was accounted separately. Also, some borrowers were granted more than theP100,000.00 maximum loanable amount. This was due to filing and approval of several loans. The age of the borrower was also not considered in the approval and granting of the loan, and retiring borrowers were not required to pay their outstanding loan balances in full or issue a notarized promissory note stating that the outstanding loan balance shall be paid in full upon the receipt of his/her retirement/terminal leave benefits. In DO Mabalacat

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City, the Management disclosed that its borrowers with past due account amounting to P250,423.27 could not be located anymore.

14.7 In RO IV-B (DOs Calapan City and Romblon), verification of the overdue

accounts disclosed that only 2.73 percent of the total loans from the Provident Fund were collected by the DOs in CY 2017.

14.8 In RO V (DO Tabaco City), audit of the Provident Fund loans receivables

amounting to₱18,692,911.88 as of December 31, 2017, disclosed that a total of ₱799,923.96 are past due accounts for more than one to ten years from deceased, retired,resigned borrowers. Review of records also revealed that officers and employees were granted additional loans without deducting the balance of their previous loansfrom the new loan proceeds. Similarly, a number of borrowers with outstanding/unpaid loan were granted new loan without being required to fully settle their previous loan balances. Such being the practice, those who were extended loans in an amount more than their allowable monthly deductions can cover, most likely cannot settle their obligations on the supposed amortization period they should have been settled. A discrepancy of P6,166,179.14 was also observed between the loans receivable balanceper FS of P24,859,091.02 and SL balance of P18,692,911.88.

14.9 In RO XIII (DOs Agusan del Sur and Bayugan City), provident loans

aggregating ₱484,240.09 were released to 20 DepEd employees without considering the remaining net take home pay after the deduction of the loan amortization, contrary to what is indicated in the guidelines. Also, disbursements under the provident fund of the two DOs disclosed that provident loans aggregating ₱724,761.25 were released to 34 employees without a Budget Utilization Request Status (BURS) document. Box A of the BURS shows certification as to legality and the necessity of the charges, while Box B shows the availability of funds. As a result, the legality and necessity of the transactions are doubtful.

14.10 We recommended that the Management require:

a. DepEd CO to revisit DepEd Order No. 36, s. 2007 and study the possibility of providing stricter sanction or penalty for borrowers who have defaulted in the repayment of their loans;

b. Concerned RO/DO to –

b.i observe strict compliance as regards the provision limiting the borrower’s maximum loanable amount of P100,000.00;

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b.ii consider borrower’s ability to pay before granting loans and stop granting of loans to those with net pay of less than the required monthly net pay;

b.iii strictly enforce collection of loans through payroll deductions

in compliance with the existing rules and regulations of the Provident Fund and enjoin the co-maker to pay their obligations on the delinquent borrowers being the secondary persons liable;

b.iv determine the delinquent borrowers with past due accounts

and issue Demand Letters for the recovery of past due accounts;

b.v instruct the concerned officials to strictly enforce the

provisions of DepEd Order No. 12, s. 2004 in the administration and/or management of the Provident Fund and determine the persons responsible for not implementing Section X, Item 13 of DepEd Order No. 12, s. 2004 causing the failure of collection on the remaining balances of loans;

b.vi ensure that borrowers who are about to retire, resign, or

transfer shall only be cleared from accountabilities upon full settlement of their obligations; and

b.vii direct the Budget Officer to ensure that provident loan

transactions are covered by a Budget Utilization Request Statusto support the legality and necessity of the transactions.

14.11 The Management in ROs submitted the following comments:


RO I Management of DOs Candon City, Pangasinan I, Pangasinan II, Muñoz City, San Jose City, Gapan City, and San Fernando City gave assurance to the Audit Team that they will comply with the recommendations.

Management of DOs Ilocos Sur, Dagupan City and Cabanatuan City will strengthen its credit policies to maximize the timely collection of receivables and avoid accumulation thereof, regularly review outstanding accounts receivables, prepare aging schedule and send collection letters/ statement of account to debtors.

RO III Management of DOs Angeles City and Mabalacat City will review the list and contact the co-maker of the borrowers to settle the balance. For the transferees, it will bill the DOs where they transferred; and ensure that borrowers who are about to retire, resign, or transfer shall be cleared from accountabilities upon settlement of their obligation.

RO IV-B In DO Calapan City, the co-makers of some borrowers working in DepEd were already informed and have agreed to deduct the amortizations of the loans from their salaries. The DO also committed to exert more efforts in collecting from those personnel who have retired and/or transferred.

RO XIII In DO Agusan del Sur, the use of BURS will be adopted and the necessary adjusting entries will be drawn. In DO Bayugan City, Management will adhere to the recommendation of ensuring BURS

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Region Management’s Comments for their provident loan transactions and will be mindful in evaluating loan applications.

Doubtful validity of Inventory accounts 15. The completeness and existence of the Inventory accounts with total balance of

P16,920,929,513.84 in nineROs is of doubtful validity due to: a) non-compliance with proper procedures and controls on inventory such as the required complete maintenance of property and accounting records and reports as well as thereconciliation thereof;b) erroneous recording/non-recording of transactions affecting inventory accounts resulting in net overstatement of P44,906,185.44; c) non-observance of proper adjustment for inventory items already distributed to respective schools amounting to P4,510,960,267.30; and d) other deficiencies inconsistentwith applicable provisions of Chapter 8, Volume I of the GAM.

15.1 The pertinent provisions of Chapter 8, Volume I of the GAM relative to

Inventories provide the following:

a. Weighted Average Method. The weighted average method shall be used for the costing of inventories, which calls for the recalculation of the average cost of all items in stock after every purchase. The weighted average cost is determined by dividing the total cost of all units subsequent to the latest purchase by the total number of units available.(Section 6)

b. Recognition as an Expense. When inventories are sold, exchanged or

distributed, their carrying amount shall be recognized as an expense in the period in which the related revenue is recognized or if there is no related revenue, the expense is recognized when the goods are distributed. (Section 7)

c. Perpetual Inventory System, requires accounting records to show the

amount of inventory on hand at all times through the maintenance of the Supplies Ledger Card by the Accounting Division/Unit and Stock Card by the Supply and/or Property Division/Unit for each item in stock. Regular purchases shall be coursed through the inventory account and issues thereof shall be recorded as they take place except for supplies and materials purchased out of PCF for immediate use or on emergency cases which shall be charged directly to the appropriate expense accounts. (Section 9)

d. Semi-expendable Property – Tangible items below the capitalization

threshold of P15,000 shall be accounted as semi-expendable property. The following policies apply:

• Semi-expendable property which were recognized as PPE, shall be

reclassified to the affected accounts.

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• These tangible items shall be recognized as expenses upon issue to

the end-user. (Section 10). • Inventory Custodian Slip (ICS) shall be issued to end-user of Semi-

expendable property to establish accountability over them. (Section 11)

e. Physical count/inventory, which is required semi-annually, is an

indispensable procedure for checking the integrity of property custodianship. (Section 13)

15.2 The Inventory accounts in the following DepEd offices have an aggregate year-

end balance of P16,920,929,513.84.Breakdown is as follows:

CO/Region Operating Unit Balance as Dec. 31, 2017

CO Office of the Secretary 16,607,217,219.00 NCR ROP and all DOs 130,549,295.76 CAR DOs Ifugao, Abra, CCNHS and RNSAT 31,600,059.02 RO II DOs Cauayan City, Santiago City, Cagayan and Nueva Viscaya 1,346,984.07 RO III DOs Bulacan, Mabalacat, Nueva Ecija, Olongapo, Pampanga,

Tarlac, Tarlac City, and Zambales 48,107,133.10

RO VIII ROP and DOs 28,869,336.64 RO IX ROP, DOs Zamboanga Del Sur, Dipolog city, Dapitan City, and

Sibugay 14,568,851.31

RO XI ROP and DOs 17,307,697.23 RO XIII DOs Surigao del Norte, Surigao City, Surigao del Sur, Tandag

City, Bislig City and IUs 41,362,937.71

Total 16,920,929,513.84

15.3 Analysis of these accounts disclosed the following deficiencies, which rendered the completeness and existence of the account balances of doubtful validity:

a. Non-compliance with proper procedures and controls pursuant to Chapter

8, Volume I of the GAM in the following ROs:

Region Observations/ Deficiencies

NCR (DOs Pasig, Marikina, San Juan, Muntinlupa, Parañaque, Las Piñas, Pasay)

RO III (DOs Bulacan, Mabalacat City and 1 IU, DO Nueva Ecija, DO Olongapo, Tarlac, Tarlac City, Zambales, BVRHS)

RO VIII (ROP) RO IX (DO Dipolog City) RO XIII (DOs Surigao Del Norte, Surigao City, Surigao del Sur)

Non-maintenance of updated Supplies Ledger Cards and Stock Cards

NCR (DO Pasay) RO III (MNHS, BVRHS) RO XI (DO Davao City)

Issuance of inventory items without the corresponding ICS

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Region Observations/ Deficiencies

RO XIII (Surigao Del NHS of DO Surigao DN, CARAGA RSHS of DO Surigao City) NCR (DO Pasig, San Juan, Taguig and Pateros, Pasay, Muntinlupa,

Parañaque, Las Piñas) CAR (DO Abra and 1 secondary school) RO II (DOs Cagayan, Nueva Vizcaya) RO III (DOs Nueva Ecija, Olongapo, Pampanga and 12 IUs, Tarlac,

Tarlac City, Zambales, MNHS) RO VIII (ROP) RO IX (ROP, DO Dipolog City) RO XI (DOs Igacos, Tagum City, 1 secondary school of DO Davao

City) RO XIII (DOs Surigao Del Norte, Surigao del Sur, Tandag City and

IUs, Bislig City

Absence of the semi-annual physical inventory taking and/or inventory report as well as the corresponding Report on the Physical Count of Inventory (RPCI)

NCR (ROP) RO III (DOs Pampanga, Tarlac, Tarlac City, Zambales) RO VIII (ROP) RO IX (DOs Dipolog, Dapitan) RO XI (Cabantian NHS of DO Davao City) RO XIII (DO Surigao

Unreconciled discrepancies between the book balances as against the Inventory Report/records

NCR (DO Marikina) CAR (DOs Kalinga and Tabuk and 3 schools) RO II (DO Nueva Vizcaya) RO III (DOs Bulacan, Olongapo, Zambales, DO Nueva Ecija) RO IX (DOs Isabela City, Dipolog) RO XI (DOs Tagum City, Davao del Norte)

Non-observance of Perpetual Inventory System in recording the procurement of inventory items and of Weighted Average Method in costing inventories

b. Misstatement of the Inventory accounts due to the following reasons:

15.4 Erroneous recording/Non-recording of transactions affecting inventory account

balances resulted in a net overstatement of P44,906,185.44 in the following ROs:

Region Operating Units

Over/(Under- statement) Observations/Deficiencies

NCR ROP DO Pasay

377,358.19

2,622,112.35

Inventory items no longer found in the Inventory Room

Improper inclusion of inexistent inventory items with

non-moving balances CAR DO Ifugao

RNSAT DO Kalinga DO Tabuk CBGMHS

19,284,747.05 1,953,960.18

835,564.68 559,363.21 323,700.00

Issuances of inventory items were not recognized as expenses due to non-submission of Report of Supplies and Materials Issued (RSMI) to Accounting Unit

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Region Operating Units

Over/(Under- statement) Observations/Deficiencies

RO II DO Cauayan City DO Santiago City

121,661.00

51,300.00 37,500.00 12,500.00

36,040.00

Inventory Held for Distribution which inventory items were already issued to end-users butissuances thereof were not taken up in the books Should be adjusted to Semi-expendable expense Should be adjusted to Semi-expendable expense Should be adjusted to Office supplies expense Procurement of laptop was recorded as semi-expendable property instead of PPE – ICT Equipment account

RO III DO Olongapo DO Pampanga and IUs DO Zambales

3,838,142.46

703,667.70

1,677,913.40

Some inventories recorded in the books were already issued and utilized The reported Other Supplies and Materials Inventory of Natividad HS, totaling P30,656.46 was non-existent because it was just recorded at year-end to obligate the available allotment to avoid its lapsing. Further, inventories totaling P271,161.24 still remained as asset even though they were already issued to end-users. In addition, equipment totaling P401,850.00 were recorded as Semi-Expendable Technical and Scientific Equipment instead of PPE Inventories recorded in the books were already issued and utilized

RO VIII DO Borongan City

(21,039.00) Recorded as PPE but did not meet the capitalization threshold of P15,000.00

RO XIII DO Agusan Del Sur

14,484,089.56 Common-use supplies which were procured by the DO last CY 2015 from PS-DBM and recorded under Office Supplies Inventory remained unadjusted as of November 31, 2017. The Common-use supplies were already released by the DBM-PS to the school personnel of the different elementary schools in CY 2016. However, the necessary adjusting entry to record the issuance were not prepared.

DO Surigao del Sur

(1,992,395.34) Procurement of Medical, Dental and Laboratory supplies and Textbooks & Instructional Materials intended for distribution to different schools was recorded as outright expenses.

Net overstatement/ (understatement)

44,906,185.44

15.5 In CAR (DOs Kalinga and Tabuk and RNSAT, TNHS and TVS), the cost of

purchased supplies and materials in CY 2017 amounting to ₱6,504,974.17 was directly charged to the expense accounts.Thus, the cost of supplies on stock at yearend was not recognized.

15.6 Centrally-procured items as well as regionally-procured items, which were

already distributed in respective schools, remain in the books of CO and RO, thereby overstating the Inventory account of CO and RO while understating the Inventory account of DOs/IUs, as follows:

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Office Amount Description

CO 4,428,076,191.00 Textbooks/Learning Materials, Scientific and Mathematics Equipemt and Furniture and Fixtures already distributed in public schools nationwide

NCR ROP 82,884,076.30 TVL materials already distributed Total 4,510,960,267.30

15.7 Other deficiencies noted are shown below:

Region DO/IUs Deficiencies NCR ROP • Unsubstantiated reclassification/adjustment of Inventories

accounts amounting P18,736,458.74 • Double recording of adjustment to negative balance of account

Property and Equipment for Distribution which resulted from erroneous recording of issuances of kitchen tools equipment without first recording the Inventory account.

DOs Muntinlupa and Las Piñas

• Unrealistic balance compared to the minimal quantities of stock in the storage rooms

• Non-recognition of delivered semi- expendable items DO Parañaque • Non-recognition of delivered items under the Provision of

Science and Mathematics (SME) due to lack of data which resulted in the understatement of Semi-Expendable Inventories account.

RO II RNHS SNHS

• Balance of the accounts Textbooks and Instructional Materials Inventory and Other Supplies and Materials Inventory did not change due to non-submission of Report of Supplies and Materials Issued by the Supply Unit to the Accounting Unit

DO Nueva Vizcaya

• DO Supply Officer did not prepare and submit to the Accounting Unit the original copy of RIS and RSMI

RO III DO Mabalacat City

• The Office Supplies Inventory account for the year 2017 has no corresponding credits to record issuances.

DO Nueva Ecija

• The Supplies and Materials Expenses account totaling P75,919,826.34 as of December 31, 2017 has no corresponding credits in the agency’s inventory account.

MNHS in DO Mabalacat

• Non-preparation of RIS by the requesting office/personnel and properly filled-up and approved RIS for supplies issuances;

• Non-submission ofRSMI by the Property and/or Supply Custodian to the Accounting Unit as basis for recording issuances;

DO Nueva Ecija

• The RIS on file in the Supply Unit did not identify the requisitioner and the recipient of the items. The RIS were all signed by the Supply Officer and her assistant, thereby casting doubt on the issuance of the supplies;

• No RSMI from October to December 2017 was submitted to Accounting Unit to record issuances.

DO Pampanga • Stock Cards were prepared/maintained for every Purchase Order (PO) such that an item of similar description purchased in various orders/transactions carries as many stock cards as the POs.

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Region DO/IUs Deficiencies • The RIS was not properly accomplished; • Entries in the Stock Cards were not made chronologically;

• The Accounting Unit did not maintain Supplies Ledger Cards.

DO San Jose City

• Unnecessary and excessive purchase of accountable forms in excess of the three months requirement resulting in overstocking.

DO Tarlac • There was a delay in the submission of monthly RSMI, supported with RIS, by the DO Supply Officer to the Accounting Unit.

BVRHS • Non-preparation of RSMI by the Property and/or Supply Custodian for submission to Accounting Unit to record issuance;

• Incomplete records to keep track of the actual inventories on hand and to monitor consumption of supplies of the different requesting office; and some supplies were issued without necessary approval.

RO VIII ROP • Verification of actual stocks on hand revealed that items of inventories as presented in the financial statements were no longer available.

• The RSMI, RIS and other necessary documents to report the issuances/distribution of the inventory items were not submitted to Accounting Unit.

• Most of the RIS furnished to COA Office by the Supply Section were not signed by requesting and approving officers.

RO IX DO Zamboanga Del Sur

• Office Supplies Inventory Account that were procured in the prior year were not yet dropped or recorded as expense pending receipt of RSMI

DO Sibugay • Instructional Materials like alphabet posters, picture cards, and charts amounting to P7,700,000.00, which were already distributed to 385 recipient schools, was erroneously recorded as a debit to Other Supplies and Materials Inventory instead of as a debit to Textbooks and Instructional Materials Inventory with its subsequent issuance should have been recorded as a debit to Textbooks and Instructional Materials Expenses.

RO XI Cabantian National HS – DO Davao City

• The Accounting Unit had no basis in recognizing the utilization of office supplies and materials since the Supply Unit had not submitted the RSMI to them.

DOs Tagum City and Davao Del Norte

• The Property Custodian failed to summarize the issuances or usage of supplies inventory in the RSMI for submission to the Accounting Unit for recording of issuances.

15.8 We recommended that the Management of concerned offices to:

a. conduct physical count of inventories semi-annually and submit the

RPCI not later than July 31 and January 31 of each year for the first and second semesters, respectively;

b. require the Property and Accounting Divisions/Units to maintain their

respective records and reconcile balances regularly, and for the:

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b.i Property/Supply Officer to – b.i.i issue ICS for every issuance of semi-expendable tangible items

for control and monitoring of accountability over the item; b.i.ii prepare the RSMI, based on RIS, to be submitted to the

Accounting Division/Unit as basis in preparing the JEV to record supplies and materials issued;

b.i.iii apply the weighted-average method of costing inventories;

b.ii Accountant/s to –

b.ii.i record purchases using the appropriate Inventory accounts, in accordance with the Perpetual Inventory System;

b.ii.ii draw the appropriate adjustment for erroneous recording/non-recording of transactions affecting inventory account;

b.iii Property/Supply Officer and Accountant/s to address all other

procedural lapses by strict observance of rules and regulations for Inventory as prescribed in Chapter 8, Volume I of the GAM for NGAs.

15.9 Management in respective CO, NCR, ROs II, III and XIII all agreed to comply

with the recommendations.

Unreliable Property, Plant and Equipment (PPE) Account Balances

16. The existence, completeness and valuation of PPE account balances cannot be fully relied upon due to noteddeficiencies and weakness in the internal control inDepEdCO and 11ROs,such as, a) unaccounted reporting difference of P39,941,045,473.48 between the accounting and property records;b) non-performance of physical inventory to verify existence and completeness of the reported assets worth at least P23,483,751,530.60 in nineregions;c) non-maintenance of PPELC and PC or other records supporting PPE balances worth at least P51,363,611,820.21; and d) the existence of dormant/undocumented balances of P2,000,925,441.22.

Moreover, errors and omissions in the recording of transactions affecting PPE accountswere also observed, such as, a) inclusion of semi-expendable items costing at leastP46,235,897.02; b) unrecorded unserviceable/demolished/razed by fire/losses/transferred/disposed PPEs amounting to P14,452,858.69;c)unrecorded properties of P3,016,356,877; d) PPE items not yet dropped from books of accounts of CO and ROs of P10,819,693,024.50;and e) other errors and omissions in classification to proper PPE accounts and provision of depreciation, undocumented PPEs, titling and non-recognition of asset with respect to land accounts.

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16.1 Chapter 10, Volume I of the GAM prescribes the accounting policies, guidelines for the accounting treatment, recognition/derecognition, measurement and reporting requirements of PPE accounts.

16.2 Review of the financial statements disclosed the following deficiencies affecting the fair presentation of the PPE accounts:

a. Reporting difference of P39,941,045,473.48between the accounting and

property records of Central Office (CO) and eight other regions

16.3 The GL disclosed cost of PPE account balances in aggregate amount of P48,094,015,146.27, while the RPCPPE reported a total amount of only P8,152,969,672.79, showing a huge discrepancy of P39,941,045,473.48.Details are shown below:

Office/Region OUs/DOs Balance per

Books Balance per

RPCPPE Discrepancy

CO OSEC 33,955,800,015.21 1,348,266,789.51 32,607,533,225.70

NCR Manila, Mandaluyong, and Makati 3,268,344,282.70 2,342,147,048.49 926,197,234.21

CAR ROP, Baguio City National High School, Pines City National High School

622,818,005.15 154,009,289.42 468,808,715.73

RO I Vigan, Candon 79,694,082.72 63,326,263.46 16,367,819.26

RO II

DO Batanes Proper, DO Cauayan City, DO Santiago City Proper, DO Quirino Proper, DO Tuguegarao City Proper

804,450,824.90 765,272,702.80 39,178,122.10

RO III

ROP, Aurora, Balanga City, Bataan, Bulacan, City of Meycauayan, Nueva Ecija, Pampanga, Tarlac City, Tarlac Province

7,938,612,240.74 3,364,609,977.63 4,574,002,263.11

RO VIII Tacloban City, Calbayog City 715,006,371.91 24,155,913.39 690,850,458.52 RO XI ROP 632,328,805.71 20,146,624.93 612,182,180.78 RO XIII ROP 76,960,517.23 71,035,063.16 5,925,454.07 Total 48,094,015,146.27 8,152,969,672.79 39,941,045,473.48

16.4 In DepEdCO, the current year’s discrepancy of P9,193,205,951.56 out of the

total variance of P32,607,533,225.70 between the Accounting Division and Asset Management Division (AMD) records pertains to the material differences in certain PPE items such as ICT Equipment, Other Service Concession Asset, Technical Science Equipment, and Furnitures and Fixtures in their respective records. It was observed that the net increase in the amount of P9,196,802,250.43 in PPE accounts in the accounting records during the year represents the aggregate cost of centrally procured items in line with the DepEd’s PAPs such as DCP, Supply and Delivery of Science and Mathematics Equipment (SME) and Supply and Delivery of School Furnitures. Since

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deliveries ofthese items were made directly to identified recipient schools, these were not included in the records of AMD. As of reporting date, the cost of these properties remained in the CO books, since the needed reports to drop the same were not accomplished, hence, proper accountability was not also established.

16.5 Carrying in the books the cost of centrally procured PPEs overstated the PPE

accounts at the CO and non-recognition of the same by the OUs raises accountability issues as to who should be responsible for the property’s control, proper usage, and safety.

16.6 In addition to the above,out of the P2.800 billion transferred fund by DepEd to

United Nations Development Programme for delivery of DCP ICT packages, a total of P1.693 billion worth of computer packages was considered delivered based on the items per contract requirements. However, only P1.610 billion cost of ICT equipment was recognized as settlement, as shown in the following table:

DepEd Budget

Allocation /Fund Source

Description Number

of Recipient Schools

Number of

Packages

Amount Transferred

Amount Recorded as

ICT Equipment

Effect to Due from NGO/PO Account– Over

(Under) statement

2016 DCP

Batch 37 - SHS Regular Package (Stand Alone)

184 184 150,792,600.00 124,421,878.35 26,370,721.65

Batch 38 - SHS Special Package (arts & design, technical drafting, illustration TVL, programming, medical transcription TVL) + Pen Tablet

889 889 1,146,702,984.00 1,250,896,823.75 (104,193,839.75)

2016 GAS Division Offices IT Equipment

209

13,042

396,310,000.00 234,609,635.58 161,700,364.42

Total 1,693,805,584.00 1,609,928,337.68 83,877,246.32

16.7 The amount transferred was initially recognized as debit to Due from Non-Government Organizations (NGOs)/People’s Organizations (PO) in the books of account. This account is only adjusted when Information and Communication Technology Equipment(ICTE) account is already recognized in the books upon delivery by the United Nations Development Programme. As can be observed however, the amount of ICTE recognized in the books only amounted to P1,609,928,337.68 despite the reported complete delivery, thus leaving a balance of P83.87 million and resulting tonon-closure of the receivable account in caseno further settlement/deliveryis expected or refund of the balance shall be effected. It is worth-mentioning that the P83.87 million represents unexpended fund which under Clause No. 10 of the relevant Project Document, DepEd has the option to request for reversion.

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16.8 On the otherhand, the reported discrepancies in eightregions (NCR,CAR,I, II, III, VIII, XI and XIII) weremainly due to absence of regular reconciliation of records maintained by the Division Accountant and the Division Supply Officer and failure to conduct the required physical inventory-taking.

b. Absence of physical inventory to verify existence and completeness of the

reported assets worthP23,483,751,530.60

16.9 Section 38, Chapter 10, Volume I of the GAM provides that the entity shall have a periodic physical count of PPE, which shall be done annually and presented on the Report on the Physical Count of PPE (RPCPPE) as at December 31 of each year. This shall be submitted to the Auditor concerned not later than January 31 of the following year. Equipment found at station and losses discovered during the physical count shall be reported to the Accounting Division/Unit for proper accounting/recording.

16.10 Physical inventory-taking being an indispensable procedure for checking the

integrity of property custodianship has to be regularly enforced. Failure to conduct physical count of PPE casts doubt on the correctness and existence of the PPE recorded in the Agency’s books of accounts, thereby also affecting the fairness of presentation of accounts in the financial statements.

16.11 The absence of the required periodic physical count of PPE and the incomplete

physical inventory report submitted by ROs and its DOs rendered unreliable as to the completeness and existence of the reported PPE account balances in the following regions:

Region ROs/DOs/OUs Amount

NCR CitiesSan Juan, Pasay 144,196,745.18

CAR Abra, Baguio, Benguet, Abra HS, MNAS, Pilar Rural HS, BCNHS, PCNHS 1,221,162,844.25

RO I La Union, San Fernando, Laoag, Batac, Pangasinan I, Pangasinan II 4,189,413,212.35

RO II ROP, Cagayan, Cauayan City, Ilagan City, Isabela, Nueva Vizcaya, Tuguegarao City 2,798,994,429.26

RO III

Angeles City, Cabanatuan City, City of San Fernando Pampanga, Gapan City, Olongapo City, San Jose City, Science City of Muñoz, Tarlac City, Tarlac Province, Bilad High School, Caluluan High School, Cristo Rey High School, Estipona High School, Guevarra High School, La Paz High School, Tarlac National HS, Victoria High School, Zambales, Nueva Ecija

3,828,821,510.75

RO IV-B ROP 14,842,980.42 RO V Camarines Norte, Legazpi, Tabaco and Catanduanes 1,578,832,538.27

RO VIII

Tacloban City, Baybay City, Southern Leyte, Maasin City, Maasin National Vocational High School, Catbalogan City, Calbayog City, Samar, Sta, Margarita National High School, Northern Samar, Allen National High School, San Antonio Agricultural and Vocational School, San Jose Technical High School, Silvino Lubos Vocational High School

4,796,423,741.35

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RO XI Davao del Sur, Digos City, IGACOS, Tagum City, Davao del Norte, Panabo City, Davao Oriental, Mati City 3,278,215,667.53

RO XIII Surigao del Norte, Surigao City, Surigao del Sur, Tandag City, Bislig City 1,632,847,861.24

Total 23,483,751,530.60

16.12 It is noted that the failure of the above units to perform the required inventory-taking is mainly due to Management’s laxity in the creation of a Division Inspectorate Team to perfrom the task.

c. Non-maintenance of Property, Plant and Equipment Ledger Card (PPELC)

and Property Card (PC) or other records supporting PPE account balances

16.13 Section 42, Chapter 10, Volume I of the GAM, provides that the Chief

Accountant shall maintain the PPELC for each category of PPE including work and other animals, livestock, etc. The PPELC shall be kept to record promptly the acquisition, description, custody, estimated useful life, depreciation, impairment loss, disposal and other information about the asset.

16.14 For check and balance, the Property and Supply Office/Unit shall likewise

maintain PC for PPE in their custody to account for the receipt and disposition of the same. The balance per PC shall be reconciled with PPELC maintained by the Accounting Division/Unit. They shall also be reconciled with other property records like the Property Acknowledgment Receipt (PAR).

16.15 The non-maintenance of the PPELC and PC, absence of breakdown/details of

PPE balances, deficient RPCPPE and lapsing schedules rendered the reported PPE balances unreliable as shown in the following offices:

CO/


CO OSEC 33,806,627,897.68

NCR Manila, Marikina, Pasig, San Juan, Mandaluyong, Makati, Pasay, Muntinlupa, Las Piñas

4,395,966,688.78

RO I La Union, San Fernando, Ilocos Norte, Batac, Ilocos Sur, Pangasinan II, Dagupan, Laoag City, Pangasinan I

6,080,541,379.46

RO II ROP, Cagayan, Cauayan City, Ilagan City, Isabela, Nueva Vizcaya, Tuguegarao City

2,798,994,429.26

RO III ROP, Angeles City, Aurora, Balanga City, Bataan, Bulacan, Cabanatuan City, City of Meycauayan, City of San Fernando Pampanga, Gapan City, Nueva Ecija, Olongapo City, San Jose City, Science City of Muñoz, Zambales

-*

RO IVB ROP 329,036,862.90 RO VIII Tacloban City, Baybay City, Southern Leyte, Maasin City, Maasin

National Vocational High School, Catbalogan City, Calbayog City, Samar, Sta, Margarita National High School, Northern Samar, Allen National High School, San Antonio Agricultural and Vocational School,

3,814,662,543.40

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CO/ Region ROs/DOs/OUs Amount

San Jose Technical High School, Silvino Lubos Vocational High School

RO XI IGACOS, Tagum City 137,782,018.73 RO XIII ROP, Surigao del Norte, Surigao City, Surigao del Sur, Tandag City,

Jacinto P. Elpa NHS -*

Total 51,363,611,820.21 *Amount not stated

d. Existence of dormant/undocumented accounts in the following offices with an aggregate balances of P2,000,925,441.22

CO/

Region ROs/DOs/OUs Amount Remarks

CO OSEC 987,395,919.95 Unidentified properties, which have no movement for several years. These PPE account balances were not supported by PPELC or PCs, thus the details and validity of the same cannot be fully ascertained.

NCR ROP, Quezon City, Manila City, Pasay City, San Juan City,, Marikina City

571,390,601.99 This includes the following deficiencies: Recording of transactions in the CIP account not supported with statement of work accomplished; CIP account is inclusive of a negative balance; transfer of accountability of School Buildings to different Schools, thereby reducing the account balance but cannot be verified due to lack of proper documentation; School Buildings transferred from the DPWH and DepEd NCR have no breakdown and detailed description of the structures/school buildings and are not properly identified and described in the Subsidiary Ledgers or PPELC.

RO I San Fernando, La Union

255,942,193.70 Dormant accounts since December 2014 or even earlier and no provision for Accumulated Depreciation/Impairment Losses were provided. Also, no breakdown/composition of the accounts are prepared/maintained such as PPE Ledger Card/Property Card by the Accounting and Supply Units. Accordingly, the condemnation/disposal of the PPE accounts cannot be recorded or dropped from the books of accounts since the Accountant and the Supply Officer cannot readily identify the particular items to be dropped from the books.

RO III ROP, Bulacan, Pampanga

186,196,725.58 Most of the balance recorded as CIP pertained to projects which were already completed. These negatively affected the fair presentation of the financial position of the agency concerned. The result of non-classification to proper asset account understated the expense account due to non-provision of depreciation and therefore overstated the income. At the same time, the School Building Account is understated as a result of non-classifying CIP to proper asset account

Total 2,000,925,441.22

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e. Moreover, there were errors and omissions in the recording of transactions affecting PPE accounts as follows:

e.1. Inclusion of semi-expendable items costing at leastP46,235,897.02

16.16 Deficiencies were noted on the reclassification of some PPE items following the P15,000.00 threshold prescribed in the GAM, thus resulting in the overstatement of the affectedPPE accounts in the financial statements. As provided in the GAM Volume I, tangible items below the capitalization threshold shall be reclassified or removed from the PPE accounts. These tangible items shall be recognized as expenses upon issuance to the end-user.

16.17 Inclusion of items in the PPE categorized as semi-expendable property which

were below the capitalization threshold had amounted to P46,235,897.02 as reported in the following regions:


NCR ROP, Manila City, Valenzuela City, Makati City, Pasay City, Muntinlupa City, Las Piñas City 22,417,921.76

CAR ANIAHS, BAIS, Kalinga NHS, RNSAT, Tanudan VS, Tuga NHS 5,538,992.72

RO V Camarines Norte 138,114.73

RO IX ZDS, Pagadian City, Sibugay, Isabela City, Zamboanga, 7,790,446.94

RO XI Panabo City 6,896,200.99 RO XIII ROP 3,454,219.88 Total 46,235,897.02

16.18 The failure of the Bookkeeper to reclassify the items below the threshold of

P15,000.00 to the proper Inventory accounts overstated the affected PPE accounts, its corresponding accumulated depreciation expenses including Accumulated Surplus/(Deficit), as well as understated the affected Semi-Expendable Supplies Expenses.

e.2. Unrecordedunserviceable/demolished/razed by fire/losses/transferred/disposed PPEs amounting to P14,452,858.69.

16.19 Unserviceable properties,equipments and demolished buildings were still

included in the books in the following regions:

Region ROs/DOs/OUs Amount Remarks/Reason NCR Valenzuela City, Marikina

City, Pasig City 218,600.00 Various PPE Items

RO I ROP,Dagupan, Pangasinan II, Urdaneta City

5,352,242.65 The Accounting Unit did not prepare any accounting entries to drop the demolished school buildings from the PPE account. The Accounting Unit was not furnished with the accomplished and approved Inventory & Inspection Report and Report of Waste Materials as the

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Region ROs/DOs/OUs Amount Remarks/Reason basis in dropping the school buildings from the books of account.

RO II Batanes 599,250.00 The building is included in the PPE balance and in the RPCPPE, but Management’s assertion of existence cannot be substantiated and the reliability and correctness of the account is doubtful.

RO III ROP, City of Malolos, City of San Jose del Monte

2,871,320.54 Various PPE items

RO V ROP 3,060,141.88 Documentary requirements for the transfer of the said unserviceable property were complied with, only that some transfer documents were not dated, which failed to show the actual dates of receipt by the recipient schools’ officials and/or representatives.

RO VIII Maasin City 2,351,303.62 Various PPE items Total 14,452,858.69

e.3. Unrecorded properties of P3,016,356,877

16.20 Unrecorded properties in the books of the following ROs were uncovered.

Region/DOs

Asset Account Affected

Total Remarks/Reason for

Unrecorded Asset Transaction Const. In

Prog. Land School Bldg.

Motor Vehicles ICTE

Semi-Expend

-able

Other Equipment

NCR Quezon City, Manila City, Pasig City, Mandaluyong City, Pasay City, Las Piñas City, Marikina City and Muntinlupa City

85,633,559 -* 327,945,422 5,088,004 -* 2,920,106 421,587,091 For School Bldg., the DO Engr. requested the DPWH to provide the list of schools constructed under the latter’s supervision. However, the DPWH can no longer provide documents for the same.

CAR Tabuk, Mtn. Province, Ifugao, Benguet, Apayao

-* 693,650 306,724,385 -* 6,083,904 -* 431,155 313,933,094 SEDIP school building

RO I Candon City, Pangasinan I, Urdaneta, San Carlos City,Dagupan City

133,896,219 -* 400,349,647 -* 8,078,411 484,363 -* 542,808,640 Cannot record the transfer due to the absence of supporting documents as basis for recognition in the books of accounts of the DOs. Construction implemented by PAGCOR, DPWH, LGU and repairs implemented by the DO were not recognized in the books of the school CY 2016 Senior High

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Region/DOs

Asset Account Affected

Total Remarks/Reason for

Unrecorded Asset Transaction Const. In

Prog. Land School Bldg.

Motor Vehicles ICTE

Semi-Expend

-able

Other Equipment

School Building projects implemented by DPWH were not yet recorded in the books of accounts of the DOs because there was no proper turn-over between the IUs and the DOs.

RO II Ilagan City, Isabela, Tuguegarao City

-* -* -* -* 546,265 -* -* 546,265 Supply Officer did not forward the PTR to DO Accountant.

RO III ROP Cabanatuan City, Gapan City, Science City of Muñoz, Nueva Ecija, Olongapo City, San Jose City, Tarlac City and Tarlac Province, Zambales

-* -* 1,535,325,825 1,134,964 3,076,312 -* -* 1,539,537,101 Not yet recorded in the books of respective DOs despite issuance of JEV and/or turn-over by the DPWH.

RO IX ROP, Pagadian City, ZDS

-* 9,000,000 -* -* -* 136,225 -* 9,136,225

RO XI ROP, Davao del Norte, Panabo City, Southern Davao NHS

-* -* -* 795,003 -* -* 22,030,490 22,825,493 Transfers from the Regional Office not recorded in the books due to the failure of the Property Officer to furnish copies of the documents to the Accounting Section

RO XIII ROP,Surigao del Norte, Surigao City, Surigao del Sur

-* -* 163,692,971 -* 2,289,996 -* -* 165,982,967 The Accountant was not formally informed of the transfer of equipment and had not received copies of documents to support the journal entry to be taken up in the books of the Agency. However, to correct the deficiency, the Accountant was directed to retrieve copies of documents from the Supply/Property Custodian for record purposes.

Total 219,529,778 9,693,650 2,734,038,250 7,017,971 20,074,888 620,588 25,381,751 3,016,356,877

*Amount not stated

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e.4. PPE items not yet dropped from books of accounts of CO and ROs ofP10,819,693,024.50

16.21 The following PPE items in total amount of P10,819,693,024 were already

distributed/delivered in respective schools but were not yet dropped from books of accounts of CO/ROs/DO:

CO/

Region ROs/DOs/

OUs Amount Remarks/Reason

CO OSEC 10,226,026,815 Comprising the four asset accounts that recognized the centrally procured goods related to DepEd PAPs.

CAR ROP 289,886,258.07 The necessary documents/information and the PTR were not provided to the DOs and the secondary school, thus, the school buildings costing ₱289.88 million remained with the RO.

RO IV-B ROP 3,677,613.88 Various textbooks and instructional materials received from the Regional Office for CY 2017 were delivered to different schools without acknowledgement receipt for the items. These items should have been recognized as inventories in the books of the DO and be included in the Report of Physical Count of Inventory to be prepared by the Supply Officer every six months, certified by the Inventory Committee and approved by the Head of the Agency. A copy of which shall be furnished the Auditor.

RO IX Pagadian City

110,148,170.55 PPEs belonging to five new IUs of DO-Pagadian City were not carried over and reflected in the latter’s financial records. An IU is mandated to prepare and maintain their own set of books of accounts and generate their own FS and other reports to the DO for purposes of consolidation and also directly to the government regulatory agencies.

RO XI ROP 189,954,167.00 Technical Vocational and Learning Tools (TVL) were still booked in the accounting records of DepEd Regional Office XI which should have already been transferred to the books of their recipient schools and divisions.

Total 10,819,693,024.50

e.5. Other errors and omissions

16.22 Other errors and omissions were observed which resulted in a net understatement of PPE by P309,333,849.46for the year ended December 31, 2017 as follows:

Region ROs/DOs/OUs Net Effect

Over/(Under) statement

Affected Accounts

NCR ROP, Quezon City, Marikina City

(301,733,236.23) Other PPE, Accumulated Surplus/Deficit, Construction in Progress

CAR Ifugao, Apayao, Apayao National Industrial Agricultural High School

(1,374,094.90) ICT Equipment, Agricultural and Forestry Equipment, Office Equipment, Other PPE, Power Supply Systems, Other Structures, Water Supply Systems

RO III Angeles City 1,387,333.00 Semi-expendable Property Expenses RO IV-B Occidental Mindoro, (7,613,851.33) Furniture and Fixtures, Semi-Expendable Furniture,

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Region ROs/DOs/OUs Net Effect


Affected Accounts

Romblon Fixtures and Books, Office Equipment, ICT Equipment,

Total (309,333,849.46)

16.23 While errors and omissions in recording depreciation resulted in the net overstatement of PPE carrying value by at least P366,769,090.40 for the year ended December 31, 2017 as noted in the following ROs:

Region RO/DO/ OU Net Effect


Deficiencies

RO V ROP, Catanduanes -* Failure to provide and/or recognize monthly depreciation on PPEs amounting to P659,242,891.74 from January to September of CY 2017 in RO and from January to December CY 2017 in DO Catanduanes.

RO VIII Northern Samar (1,900,877.72) Negative balance for ICT Equipment was due to overstatement in the recorded accumulated depreciation which already exceeded the costs or booked up value of properties they pertain.

RO IX ZDS, Pagadian City, Zamboanga (Ayala NHS and Maria Clara Lorenzo Lobregat NHS)

368,648,045.52 Non-recording of depreciation of School Buildings.

RO XI Davao City 21,922.60 Non-taking up of the depreciation expense for two months.

Total 366,769,090.40 *Amount not stated

16.24 The foregoing errors and omissions were primarily due to the following:

a) SL Balances not included in the Control Account; b) Wrong basis of recognition of an item of PPE; c) Recognition of an expense account instead of PPE; and d) Insufficient provision and/or non-provision of depreciation

16.25 Errors were also committed in recording BEFF financial transactions which

resulted in the misstatements of accounts affected, as follows:

Over(under) statement Region Particulars Construction

in Progress Accounts Payable

Guaranty Deposits Payable (GDP)

Other Accounts Affected

Over (under) statement

NCR-DO Quezon City

Progress billings which have not been set-up (44,552,464.18) (38,633,639.67) Advances to

Contractors 2,174,345.80

Other MOE 8,210,695.82 Erroneous entries made on the payment of progress billings

6,406,927.04

(1,194,283.03)

Cash NT– MDS 3,732,134.47

Due to BIR 1,393,946.91

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Over(under) statement Region Particulars Construction

in Progress Accounts Payable

Guaranty Deposits Payable (GDP)

Other Accounts Affected

Over (under) statement

Release of retention money was debited to AP instead of GDP

(3,304,959.03) 3,304,959.03

Payment of a final billing to one of the contractors which has not been recorded as at year-end

2,169,887.11 (255,280.84) Cash NT– MDS 1,755,055.75

Due to BIR (159,550.52)

RO I- DO San Fernando

Erroneous recording of the capital expenditures thus, the proper accountability of the beneficiary schools were not properly established due to the erroneous accounting entries made

Repairs and Maintenance Expenses-school Building

3,467,489.81

School Building

(3,467,489.81)

Net over (under) statement (44,552,464.18) (33,361,784.55) 1,855,395.16

16.26 Moreover, there were titling, ownership issues and non-recognition of asset in the books with respect to Land account.

Region ROs/DOs/OUs Amount Remarks

RO I Pangasinan I 278,918,216.50 Cannot claim ownership over the property due to the absence of either original Certificate of Title/Transfer Certificate of Title or a Torrens Title ownership over the property,hence the validity and propriety of the Land account could not be ascertained.

RO II Cauayan City and Villa Luna NHS, Santiago City, Nueva Vizcaya

-* Audit observartion includes 116 unrecorded lots and 102 unregistered lots.

RO III Aurora, Cabanatuan City, City of San Jose del Monte, Gapan City, Pampanga, San Jose City, Science City of Muñoz, Zambales

35,278,460.00 Land valued at P7.7M has no available schedule or breakdown; and land with a total cost of P27.4M was not yet recognized in the books although there were already documents and Transfer of Certificate of Title.

RO V Camarines Norte, Albay 51,842,009.29 Ownership and existence cannotbe ascertainedduetotheabsenceoftitles,inventory listandsupportingdocumentstoprovethat thebalanceshown in thefinancialstatements werevalid and accurate.

RO VIII ROP 3,350,000.00 The correctness of the reported balance cannot be ascertained due to the absence of supporting documents to prove that the amount shown in the financial statements were valid and accurate.

*Amount not stated

16.27 In Region III, Mobile Dental Vehicle (MDV) donated by the Department of Health with a total value of P3,950,000.00 had remain unutilized from the

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time it was received from DOH Central Office. Further, it was not accounted in the inventory and not recorded in the books of the Regional Office due to absence transfer papers, such as Deed of Donation, JEVs for accounting and recording purposes, Official Receipt, Certificate of Registration, Insurance papers and other needed documents. It was also noted that as of reporting date, the RO has no dentist or any legible health personnel who can operate the equipment.

16.28 We recommended that the Management of concerned offices:

a. conduct and complete the annual physical count of PPE, maintain and

regularly update PPELC and PC as prescribed under the GAM, and conduct regular reconciliation of Accounting and Property records to facilitate adjustments of discrepancies or make corrections where applicable;

b. require the Accounting Division to review, analyze and trace the unidentified/unaccounted assets so that appropriate action on disposition of undocumented accounts can be properly undertaken;

c. prepare adjusting entries for the noted deficiencies and reclassify all

PPE items costing below the capitalization threshold of P15,000.00 to the appropriate Inventory account. For items that had been issued to end-users, debit the appropriate Semi-Expendable Expense account if issued in the current year or Accumulated Surplus or Deficit account if issued in prior years and for monitoring of accountability, the issuances thereof should be covered by ICS;

d. observe complete and proper documentation of PPE account balance

and other adjustments related thereto.

16.29 We further recommended that the Management in CO:

a. revisit DO No. 45 as regards to the dropping of centrally/regionally procured PPE itemsto introduce possible updates/amendments, and to orient or re-orient the Operating Units(DOs and recipient schools), particularly those personnel involve in the process; and

b. coordinate with the UNDP for the proper disposition of the P83.87 million transferred fund balance that remains outstanding despite complete delivery of the subject DCP Batches. DepEd should also consider requesting for the reversion of such fund pursuant to Clause 10 of the UNDP Project Document.

16.30 Management commented that:

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CO/Region Management’s Comments CO Management commented that Accounting Division (AD) immediately records the PTRs

received from AMD as long as the same reconciles with Accounting Records. However the time consumed in the retrieval of PTRs from IUs/SDOs by AMD contributed to the delays in dropping of the accounts and recording the transfer accountability to various IUs,Non-IUs and SDOs.

AMD, AD, and Project Implementers (PI) agreed in the process to be followed to further streamline the process of dropping centrally procured assets for CY 2017 and below.

Management commits to trace,analyze and reconcile unaccounted balance of PPE.

On the non-maintenance of PPELC, AD have submitted additional four PPELC on May 18, 2018 – a total of 10 PPE accounts as of June 1, 2018. Due to the manual preparation of PPELC and considering voluminous PPE items (i.e 50-2,528 for OSCA alone), and Computer application capacity (non-responding MS - Excel), AD is having a hard time to comply. However, on-going creation/update of PPELC is done daily by concerned personnel. AD also maintain separate report that is the basis of computation of depreciation expense which can be use as an alternative record in reconciliation with AMD.

NCR

ROP agreed to implement the audit recommendations as to the conduct of physical inventory and reconciliation.

DO Quezon City committed to secure COC for the 150 projects to facilitate reclassification of accounts. The SDO thru the Infrastructure Development Unit will prepare schedule of projects indicating the dates of progress billings and completion.

In DO Pasig City, Division Memorandum No. 42 s 2018 was issued on March 12, 2018 providing the Process Flow to be observed in the recording and physical checking of PPE. DO Accountant explained that the amount P141,546,686.78 was reclassified to Other Asset account because these were fully depreciated school buildings. The Management admitted that cost and year of acquisition of several school buildings can no longer be traced, thus, appraisal of the existing buildings are now being considered.

DO Marikina City Division Engineer explained that the DO already requested the DPWH to provide the list of schools constructed under the latter’s supervision. However, the DPWH can no longer provide documents for the same.

CAR ROP Management instructed the Property Officer to secure the documents of all properties transferred and/or being used by schools and Division Offices so that the affected accounts could be dropped from the books. DOs Ifugao and Benguet agreed to implement the recommendation. DO Apayao informed that the Delivery Receipts on the DCP equipment were still being reconciled for the issuance to the DO of the Property Transfer Report, while other concerned DOs and schools agreed to implement the recommendations.

RO I ROP is in the process of crafting a resolution wherein if approved, unserviceable property will be auctioned or will be subjected to public bidding. DO La Union Management replied that they will take the audit recommendations positively and that this time they will conduct physical inventory of property. DO San Fernando City agreed with the Audit Team to conduct the physical inventory taking Emphasis is hereby made that most of the balances have been dormant.Also, they agreed that adjustments should be done in the books of accounts and have the Supply

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CO/Region Management’s Comments Officer to maintain and reconcile their records on the said PPE accounts. DO Ilocos Norte commented that the Division is currently conducting inventory of property. DO Laoag City mentioned that they will revisit the guidelines on recognition and derecognition of PPE assets. Furthermore, the Division Accountant and the Division Supply Officer have signified their willingness to reconcile their respective records. DO Batac City committed to submit the Report of Physical Count of Plant, Property and Equipment (RPCPPE) conducted for CY 2017. DO Ilocos Sur replied that the preparation of such reports was in process but delayed due to the upcoming 2018 PALARONG PAMBANSA wherein meetings and conferences were being attended and held. DO Vigan City admitted that the Agency had fallen short on the establishment of strong internal control even at least with the recording, reconciliation and physical count of PPE due to capacity issues.They again committed that a team of technical personnel will be created to formulate necessary measures to ensure compliance. DO Candon City committed to adhere with the Audit Team’s recommendations.DO Accounting Unit also committed to account and to follow-up again to the Central Office documents needed in the transfer of records and eventually for recording in the financial statements. DO Pangasinan I commented that inventory-taking is ongoing. Management commented that JEV has been prepared dated January 31, 2018, thus, the correct amount of Construction-in-Progress has been properly booked. DO Pangasinan II commented that the absence of Physical Count of PPE is due to time and personnel constraints. Conducts PPE accounting on a sampling basis only since it is a large division. It also commits itself to undertake the necessary activities related to proper disposal of properties. DO Dagupan City committed to enforce the physical count of inventory items and all PPE accounts.The Management will also instruct Division Accountant to make initiative to draw a JEV to reclassify the costs of the completed projects to the School Building account in order to present fairly the balance of the said account and the Construction in Progress – Agency Asset account. It will also have its accountant coordinate with DO Engineer for the application of Relief from Accountability with COA. DO San Carlos will have the Accountant and DO Officials coordinate with the proper authority for the proper turn-over of the school building. DO Urdaneta Management committed to comply with the audit recommendation.

RO II ROP, DO Cagayan and IUs, DO Cauayan City, DO Ilagan City, DO Isabela and IUs, DO Nueva Vizcaya, Gosi National High School under DO Tuguegarao City all agreed to create an Inventory Committee to conduct a physical inventory of the properties to establish the existence and condition of the PPE. After the conduct of the physical inventory, reconciliation of preperty and accounting records for the PPE accounts shall be undertaken.

DO Batanes Proper, BNSHS and INAHS, Cauayan City NHS under DO Cauayan City, DO

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CO/Region Management’s Comments Santiago City Proper, Santiago City NHS and Rizal NHS, DO Quirino Proper,DO Tuguegarao City Proper, Cagayan NHS and Linao NHS agreed to comply with the recommendations for the reconciliation of the PPE accounts.

DO Cauayan City will assign a responsible person to facilitate the titling of the lots in the name of the agency for proper recording in the book of accounts.

DO Santiago City Management mentioned that they will propose the titling of the 32 school lots under the Special Education Fund.

DO Nueva Vizcaya Management is on the process of acquiring ownership of the lot through Special Patent at the Office of the DENR as the school lot being occupied by DepEd SDO Vizcaya is a public land.

IUs under DO Ilagan City, DO Isabela, DO Tuguegarao City requested the Property Transfer Receipt (PTR) from the Supply Officer and will record the IT Equipment in the books of accounts.

RO III ROP specifically required the Accounting Division and Asset Management Division to expedite the reconciliation of PPE accounts especially buildings and motor vehicles. Moreover, Management commented in the Exit Conference that the land being in the name of the Province of Leyte has hampered the effort of the department for titling. However, the Agency exerted effort to make negotiations with the Provincial Government to issue a Deed of Conveyance in favor of DepEd to establish its ownership. Management commented that a dentist was already hired and he will be responsible and accountable for the operation of the MDV. Management also commented that to maximize the use of the MDV, it will be offered for use to different Division Offices subject to the approval of the Regional Director and upon renewal of the GSIS Comprehensive Insurance. DO Angeles City assured the Audit Team the following: a) the current Bookkeeper will closely coordinate with the current Supply Officer so that he would be able to trace and prepare the PPELC of the current list of PPE and conduct a periodic physical count; b) they will exert effort to review the available documents for property, plant and equipment and facilitate the recording of allowance for depreciation in the books; and c)that they will comply with the recording of items with acquisition cost of less than P15,000.00 as semi-expendable properties. DO Aurora said they are also in the process of reconciling PPE as to corrected amount. DO Cabanatuan City thru Division Memorandum No. 170 s. 2017, has already created an Inventory Committee to facilitate inventory of PPE to comply with the audit recommendations and assured the the Audit Team the following: a) the accounting office has already booked school building items upon receipt from COA of the list of buildings to be booked;b) Accounting Unit already coordinated with the Division Engineer to facilitate for the compliance on the appraisal of land which titles are already under the Division or school, as well as those which have deed of donations in favor of the division or school; c) reorientation regarding proper disposal; and d) monthly depreciation shall be recognized starting January 2018. DO San Fernando Pampanga responded that they will conduct annual physical count of all PPE.

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CO/Region Management’s Comments DO Gapan Management assures the Audit Team the following: a) follow-up the transfer JEVs of all completed School Building from DPWH and transfer them in the books of the Division; b) comply with the recommendation to record the acquisition of service car in the books of the School; and c) recognize depreciation expense on a monthly basis. DO Nueva Ecija Accounting and Property Office will reconcile their records and adhere to the corrective measures. They will also adhere with the recommendation to coordinate with the 1st and 2nd District Offices of the DPWH for the recording of the transferred school buildings. DO Olongapo City agreed to implement the recommendations pertaining to reconciliation and physical count. DO San Jose City and DO Science City of Muñoz already created an Inventory Team who will perform periodic physical count of all PPE of the Divisions. Maintenance and reconciliation of records between the Supply and Accounting Unit will also be observed. They assured the Audit Teamsthat they will reconcile the with the DPWH for the completion of all the required supporting documents and thatdepreciation expense shall be prepared on a monthly basis. DO Science City of Muñoz Management already created an Inventory Team who will perform periodic physical count of all PPE of the Division and that reconciliation of records will be regularly done.For purposes of reconciliation of school buildings, they will make representations to their DPWH counterpart regarding projects which were not yet transferred to their end. Also, they will recognize depreciation expense on a monthly basis in accordance with the GAM. DO Zambales stated that school buildings and structures turned over by the DPWH remained unrecorded in the accounting records for the reason that the Certificate of Completion presented to the DO were certified by School Heads which should have been signed by the SDS in accordance with DepEd Order No.1, s. 2010. Management will conform to the guidelines to enable recognition of the assets.

RO IV B ROP commented that the Supply Officer conducted the actual physical count of PPE and that the respective reports were submitted to the Office of the Auditor. They assured the Team that actual physical count of PPE and Inventory for the ensuing year will be scheduled on an earlier date. Management of the Divisions of Romblon and Occidental Mindoro are amenable to the recommendations.

RO V In ROP, they already recorded the annual depreciation on PPE for CY 2017. Assurance was made that the required monthly computation of depreciation will be implemented this CY 2018. In DO Catanduanes, Agency Officials concerned promised to complete the inventory taking which is in progress as of January 2018 and committed to submit the report upon completion of the undertaking. Also, they committed to exert all efforts to locate the report of the previous Accountant and to make necessary adjustment in the books for past years’ unrecognized depreciation. In DO Camarines Norte, Management assured that the Audit Team will form an Inventory Committee and thereafter conduct a thorough physical inventory of all its properties. As to the capitalization of properties below the threshold, Management responded with the observation and immediately complied by reclassifying the items mentioned from a normal Property and Equipment account into a Semi-Expendable Equipment account as suggested.

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CO/Region Management’s Comments In DO Legazpi, Management made an assurance that the recommendation will be complied this ensuing year.

RO VIII DO Tacloban City committed that for CY 2018, the Management will heed to the advice of the Audit Team to maintain an updated property ledger cards.The significant difference was due to error in recording the of CIP account. Necessary adjustments will be made this 1st quarter of 2018. DO Baybay City responded of their willingness to create an Inventory Committee to regularly conduct a physical count of PPE,to maintain hard copy of PPELC instead of soft copy to record promptly the acquisition, description, custody, estimated useful life, depreciation, impairment loss, disposal and other information about the asset. Likewise, the Supply Section shall maintain property cards for PPE to account for the receipt and disposition of the same. DO Southern Leyte will adhere to the audit recommendation to conduct a physical inventory on the Agency’s PPE as well as Inventories. DOs Maasin City, Samar Division and Sta. Margarita NHS, Northern Samar Division and Lorenzo S. Menzon Agro-Industrial School gave assurance to follow the audit recommendations. Maasin National Vocational High School Property Custodian has other teaching duties aside from being a custodian.He disclosed that these are the deterrents on doing his assigned tasks efficiently and effectively. DOs Catbalogan City and Calbayog City agreed to create an Inventory and Inspection Committee that required in conducting periodic actual inventory of PPE and to reconcile their respective property and accounting records. Allen National High School stated they already created a School Inventory Committee responsible for the conduct of actual physical inventory of all properties every end of the year. DO Maasin City replied that a new Schedule of Land Valuation – Elementary and Secondary Schools is already made.

RO IX DOs ZDS, Pagadian, Sibugay, Isabela City, Zamboanga commited to implement the recommendations.

RO XI ROP Finance Officer committed to exert effort to prioritize retrieval of old files in 2018 to come up with schedules that will serve the purpose of reconciliation of accounting and property records.

RO XIII ROP replied that a Memorandum was issued to complete the reconciliation by June 30, 2018. It assured that the Ledger Cards will be updated by June 30, 2018.Regarding PPE items below capitalization threshold of ₱15,000.00, Management commented that the Accounting Unit was able to issue the Journal Entry Vouchers (JEVs). However, per schedule it was not dropped. It is assured that this concern will be accomplished by June 30, 2018.On completed projects still recorded in the CIP account, Management replied that a memorandum was issued as early as May 2017 establishing the Composite Team. The Acceptance Reports are ready for signature by the Regional Director. As soon as said reports are signed, the documents will be submitted to the Accounting Unit for

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CO/Region Management’s Comments reclassification/adjustments of accounts.

DO Surigao del Norte will direct the personnel concerned to observe the specific guidelines in the deployment of IT equipment to its intended recipients and ensure that the distribution of laptops and desktop computers are duly supported with the corresponding Property Acknowledgment Receipt.

DO Surigao City will strengthen the proper coordination between the Supply and Accounting Units so that properties will be recorded properly in the books of the Agency and reconciliation of books of accounts will be done at least quarterly. They commented that the main reason for the failure of the Accountant to record the transferred ICT equipment from DepEd Central Office is that she was not formally informed of the said transfer of equipment and had not received copies of documents to support the journal entry to be taken up in the books of the Agency. However, to correct the deficiency, the Accountant was directed to retrieved copies of documents from the Supply/Property Custodian for recording purposes.

DOs Tandag City and Bislig City committed to comply with the recommendations.

Unreliable Liability Accounts 17. The Liability account balances are not reliable due to: a) recognition of invalid

claims pertaining to undocumented payables of P107,318,863.108and dormant/long outstanding payables of P69,986,894.98, which should have been reverted to Accumulated Surplus pursuant to Section 98 of PD No. 1445; b) net understatement of the account by P3,704,818.43 due to erroneous recording/omission of entries; c) misclassification of Liability Accounts; and d) liability account balance in RO III not supported by subsidiary ledgers to validate existence.

17.1 Section 6.1.2 of DBM Circular Letter No. 2013-16 dated December 23, 2013

provides that “obligations, for which goods/services/projects have not yet been delivered/rendered/completed by the creditor and accepted by the NGA/OU, shall not be recorded as accounts payable at the end of the year. These obligations shall only be recognized as accounts payable on the date of delivery/rendition/completion and acceptance of the goods/services/projects, regardless of the year of incurrence of such obligations.”

17.2 Likewise, Section 37, Chapter 2, Volume I of the GAM states that, “no

obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence.”

17.3 Section 98 of PD No. 1445 provides that an agency, upon notice to the head of

the agency concerned, may revert to the unappropriated surplus of the general fund of the national government, any unliquidated balance of accounts payable for two years or more and against which no actual claim, administrative or

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judicial, has been filed or which is not covered by perfected contracts on record xxx.

17.4 The Liability accounts in CO and eight Regions have an aggregate year-end

balance of P22,958,069,644.87.Breakdown are as follows:

CO/Region Operating Unit Balance as of December 31, 2017

CO Office of the Secretary 19,734,779,867.08 NCR NCR ROP, Dos Quezon City and Manila City 860,600,265.99 CAR Kalinga 6,286,848.71 RO II DO Batanes and

Cauayan City NHS 4,399,974.66

79,566.53 RO III Dos San Jose del Monte, City of Malolos, Bulacan, Nueva

Ecija, Pampanga, Science City of Munoz, Cabanatuan City, Guiguinto National Vocational HS, San Miguel National HS, Dr. Felipe de Jesus National HS

135,573,114.28

RO V DOs Legazpi City, Tabaco City, Albay 1,565,491,530.54 RO VIII ROP 105,509,537.47 RO IX ROP, DOs Dapitan City, Sibugay, Zamboanga de Sur, 452,982,882.80 RO XI ROP 92,366,056.81 Total 22,958,069,644.87

17.5 Audit of the Liability accounts disclosed that the payables are either invalid,

dormant, undocumented, with no specific creditors or with deficient/erroneous schedules, with erroneous entries resulting in net overstatement of the balance/abnormal balances and/or with unreconciled GLs and SLs balances as discussed below.

a. Invalid claims totaling P107,318,863.108 are undocumented/without specific

creditors.

CO/Region/OU Payable Account Amount Observations/Deficiencies NCR ROP, Manila, Quezon City

Accounts Payable Other Payables Due to NGAs

20,155,521.54

14,005,549.26 50,931.56

No specific names of creditors of which P1,388,174.04 was captioned only as various creditors and P2,826,000.00 as 16 Schools Division Offices. Also, the payable was not supported with progress billing and contract. Unsubstantiated balance due to absence of subsidiary records.

CAR Kalinga

Accounts Payable

2,570,791.19

Not supported by any contract, statement of work accomplished, inspection report, obligation request, or any other document.

RO V Legazpi City

Accounts Payable Due to Offcers and Employees

1,907,001.31 1,059,732.88

Audit of liability accounts disclosed that the payables are either invalid, dormant, undocumented and with no

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CO/Region/OU Payable Account Amount Observations/Deficiencies Tabaco City

Due to Officers and Employees

1,200,000.00

specific creditors The amount is under the name of the Schools Division Superintendent and not duly supported with valid documents and purportedly for the unpaid claims for Personnel Services (PS) for CY 2017.

RO VIII ROP

Accounts Payable

2,475,799.72

Not supported with valid claims or transaction documents that would warrant the recognition of liability accounts

RO IX Zamboanga del Sur


61,917,642.00

Inadequate supporting documents. The only documents attached and presented to the Audit Team as basis in recording such pertinent obligations were Letter Request, Obligation Request Status (ORS), Purchase Request (PR) and the School Operating Budget (SOB).

RO XI ROP

Accounts Payable

1,975,893.64

Not supported with Charge Invoice or Delivery Receipt to attest rendered service or goods are accepted

Total 107,318,863.10

b. Payable accounts of P69,986,894.98have been dormant/long outstanding for two years or more.

CO/Region/OU Payable Account Amount Observations/Deficiencies CO Accounts Payable 9,641,190.00 Already aged more than two years with no

feedback from proponents of the projects to determine the status of compliance to the contract or if already due for termination.

CAR DO Kalinga


130,241.58 Carried in the books since 2011 with no subsidiary ledgers, schedules or other records on this account.

RO II DO Batanes Iybayat NAHS

Accounts Payable Due to RO

4,300,688.93 The accounts have been outstanding for more than one year to seven years and the Management is still searching for documents or records to establish validity of liabilities.


Due to GSIS, Due to Philhealth

Due to NGAs

Due to BIR

69,930.81

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CO/Region/OU Payable Account Amount Observations/Deficiencies Sabtang NSF Cauayan City NHS

Other Payables 29,354.92

Other Payables 79,566.5 Not supported with subsidiary ledger, undocumented and dormant/outstanding for more than two years resulting in the overstatement of the liability account

RO III

DOs Science City of Munoz

Cabanatuan City Nueva Ecija

Accounts Payable

2,184,092.38

Past due account remained dormant for three years due to the failure of the Accounting Division to maintain subsidiary ledgers.

Accounts Payable 1,075,770.77 Due to Officers and Employees

44,273.19 Payment of salary differentials, step increment and Proportional Vacation Pay remained outstanding in the books for over two years.

RO V DO Albay

Accounts Payable 52,065,861.27 Unreverted payable accounts aged two years or more

RO IX Dapitan

Accounts Payable

365,924.63

Unpaid obligations aged two years and above. Management could not present any supporting document.

Total 69,986,894.98

c. There were erroneous recording/omission of entries which resulted in net understatement of the Liability accounts by P3,704,818.43.

CO/Region/OU Observation/deficiencies Payable account affected

Effect on the Liability account Under(Over)state

d CO Balance for Lot 9 – Region VII was

already paid but the same was still incorporated in the AP schedule. Expenses to be incurred in CY 2018 were already recorded in the A/P

Accounts Payable Accounts Payable

(1,428,850.00)

(59,235.54)

NCR ROP-NEAP Manila Quezon City

Unrecorded payables of NEAP to the Multi-Purpose Cooperative of NCR. Erroneous set up of payables for goods/ services/projects not yet delivered/rendered/ completed SL balances that were excluded from the FS; inclusion in the FS and SL of the account Due to National Treasury; erroneous entry in taking up liquidation of cash advances; and errors in taking up grant of DSWD SBFP for the Search for Riceponsible Champions from Philippine

Accounts Payable Other Payables Due to NGAs

17,519,309.19

(3,281,440.10)

(8,260,344.60)

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CO/Region/OU Observation/deficiencies Payable account affected

Effect on the Liability account Under(Over)state

d Rice Research Institute of (P500,000.00). Prior years’ transactions of the DOP that were excluded in the FS; and CYs 2016 and 2017 transactins which should have been abnormal balances but were converted to credit balances thru an unrecorded adjustment to Accumulated Surplus/Deficit for consolidation purposes

Other Payables

(3,682,074.38)

RO III Nueva Ecija Pampanga

Stale checks which remained unnegotiated for over two years were not cancelled. Claims already paid/recorded twice.

Due to Officers and Employees Accounts Payable

(95,544.80)

(1,892,193.88) RO VIII ROP

Erroneous recording of DVs in the Schedule of Accounts Payable

Accounts Payable

(23,832.24)

RO IX Dapitan

With the recognition of the said liabilities, the related expenses have been recorded in the books of accounts even if these were not yet incurred

Accounts Payable

(2,500,612.08)

Total 3,704,818.43

d. Misclassification toAccounts Payable were noted as disussed below.

CO/Region Observations/deficiencies Amount Should be CO Retention fee deducted to supplier still

remains in the Accounts Payable for over 3 years despite the payment of the amount due in CY 2013.

465,009.60 Guaranty Security Deposit Payable

RO III Pampanga

Error in recording to AP. 2,172,014.26 Due to Officeres and Employees

RO V DO Albay

Erroneous inclusion to AP 61,086,378.85 Due to BIR

Total 63,723,402.71

e. Moreover, in RO III, unreconciled balances between the GL and SL of the Accounts Payable and Due to Officers and Employees as of December 31, 2017 resulted in a variance of P8,026,607.48 and P193,925.00, respectively.

17.6 We recommended that the Management:

a. recognize liability on the date of delivery/rendition/completion and

acceptance of the goods/services/projects, regardless of the year of incurrence of such obligations in accordance with the Section 37, Chapter 2,Volume I of the GAM, and DBM Circular Letter No. 2013-16 dated December 23, 2013;

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b. revert all outstanding balances without valid claims as well as payables aging two years or more and against which no actual claim, administrative or judicial, has been filed or which is not covered by perfected contracts on record in accordance with Section 98 of PD No. 1445; and

c. perform account analysis and prepare the necessary adjusting entries

to reflect the accurate balances of the affected accounts for fair presentation in the financial statements.

17.7 Management commented, thus:


NCR ROP Management already prepared an adjusting entry per JEV No. 2018-02-556 dated February 28, 2018 to adjust the balance of Accounts Payable for the creditor Cooperative de Muebles Filipinas which pertains to the liquidated damages incurred in CY 2012. All other audit observations were duly noted by the Management particularly the Accounts Payable by RELC NEAP. Quezon City The Accounting Unit will carefully review the noted understatement of the account Due to NGAs, make reconciliation as soon as possible to reflect the correct balances and use the appropriate entries in recording transactions. The Accounting Unit committed to carefully review and reconcile the account balances of Other Payables before consolidation to ensure accuracy of consolidated balances and that it will exercise due diligence in the preparation of financial reports. Manila Management usually coordinates with the end user at the time the goods and services are accepted or rendered and establishes that there is a valid claim once the Statement of Account/Bills for payments are received and strictly monitors the supporting documents. For any undocumented/invalid claims, Management will comply to the Audit Observation Memoranda for the reversion thereof to Accumulated Surplus/Deficit.

CAR The Accountant of DO Kalinga agreed to adjust the payables account. The Budget Officer, however, asserted that obligations amounting to ₱1.16 million were valid.

RO II Batanes Management agreed to exhaust all remedies to trace/gather the documents of the recorded payable accounts and to request for write-off for the unreconciled differences/balances. Cauayan City NHS Upon review of the 2015 Electronic Financial Reporting System or eFRS, it was found out that the said payable amounting to P79,566.53 is a forwarded balance from CY 2014.Various actions were initiated to trace the said payable but failed to find the composition of this account, thus leaving it to the Payable Account. The Management will comply with the audit recommendation to revert the Other Payable account to Accumulated Surplus.

RO V DO Tabaco City Management promised to comply with the recommendations. DO Legazpi Management reasoned out that they recorded the payables with documentation. If found out

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Region Management’s Comments during the processing of transaction that claims still lack other necessary documents, they usually return all the documents to the claimants for compliance, but some claimants did not return back the documents. Verily, only claims with complete documentation are being paid. With the above recommendations, Management is very much willing to comply wtih the recomendation on making the necessary adjusting entry in CY 2018.

RO VIII ROP Accountant assured the Team that the outstanding Accounts Payable of 2015 and 2016 will be dropped, while the 2017 payables will still be validated as to existence of documents, and will consequently draw the necessary adjusting entries to reflect accurate balances of the payable accounts.

RO IX Dapitan Management of DO-Dapitan City gave assurance that they will comply with the rules and regulations of the Commission on Audit in consonance with the existing reportorial requirements of the DBM and timely utilization of funds.They also explained that the Accountant still has reservation to hasten the reversion of the claims of Stars and Stripe Construction and Westmin Construction which were recorded in 2013. Payable to Mr. Benedick Inoferio amounting to P5,000.00 was already reverted to accumulated surplus. Sibugay The Management of DO-Sibugay commented that to correct the erroneous entry made in 2017 and per recommendation, a journal entry will be made to reflect the correct balance of the accounts. To avoid the error from recurring, the accounting personnel in-charge of remittances is required to submit a monthly report of the SL of the account.They are assigned to handle and to be able to check with the monthly trial balance to detect immediately errors committed and make immediate adjustments. Zamboanga del Sur Management commented that it has been a practice of DO- ZDS to obligate whenever it runs out of cash and that there are still requests of school MOOE, SBFP and other programs from the various schools at the end of the year which are duly supported with SOBs and Work and Financial Plan (WFP). Management assumed that all those items embodied in SOB and WFP are deemed incurred/rendered and payments are already due to suppliers/payees of the schools. Complete supporting documents are attached upon submission of liquidation reports. Upon pre-audit of the liquidation, Management ensures that all transactions had transpired in the year wherein such payables were recorded. According to Management, if the finding of the Audit Team is really valid and for the Management to also have sound internal control over recording of obligations, the DO- ZdS will no longer accept request from schools without the required documentation and eventually, only those transactions that are submitted to the Office with complete and valid supporting documents will be accepted, obligated and recorded as payables in the next year-end.

RO XI During the Exit Conference, the Accountant III committed to submit a list of valid creditors and suppliers by May 2018. The Team also appreciated that the Finance Division has already submitted the list of creditors for the AP account prior to the exit conference, which leaves the Due to NGAs and Due to GOCCs to be submitted on May 2018. The Accountant III also informed that they already adjusted the account affecting the adjustments identified. As to the beginning balances, the Accountant III committed to ask a certification from GSIS citing that they no longer have previous year balances to be able to drop the beginning balance by May 2018.

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Disbursements lacking proper documentation or wanting legality of expenditures 18. Total disbursements of P251,672,610.30were found to be contravening to the

existing government rules and regulations, while total amount of P422,275,649.24 were not supported with adequate documentation, and P108,674,503.42 deviated from the proper standard process/procedures on disbursements, thus, casting doubts as to the validity and propriety of expenditures.

18.1 Section 17, General Provisions of the GAA of CY 2017 provides that,

Government funds shall be utilized in accordance with the appropriation authorized for the purpose and comply with applicable laws, rules and regulations, such as the following:

Expenditure Laws, Rules and

Regulations References

Specific Requirement/Provision

All type Section 4, PD No. 1445

Disbursements or disposition of government funds or property shall 1) invariably bear the approval of the proper officials, 2) claims against government funds shall be supported with complete documentation, (3) all laws and regulations applicable to financial transactions shall be faithfully adhered to.

All type Section 36.f of Chapter 6, Volume I of GAM for NGAs

Submission of proper evidence to establish validity of the claim. The Head of the Requesting Unit shall certify on the necessity and legality of charges to allotments under his/her supervision as well as the validity, propriety and legality of supporting documents. All payments of government obligations and payables shall be covered by DVs/Payrolls together with the original copy of the supporting documents which will serve as basis in the evaluation of authenticity and authority of the claim. It should be cleared, however, that the submission of the supporting documents does not preclude reasonable questions on the funding, legality, regularity, necessity and/or economy of the expenditures or transactions.

Overtime Pay CSC and DBM Joint Circular No. 02 dated November 25, 2015 and as adopted by the Department in DepEd Order No. 30, dated May 19, 2016. DBM Budget Circular No. 10

The rendition of overtime services shall be authorized only when extremely necessary, such as when a particular work or activity cannot be completed within the regular work hours and that non-completion of the same will: a) cause financial loss to the government or its instrumentalities; b) embarrass the government due to its inability to meet its commitments; or c) negate the purposes for which the work or activity was conceived. The payment in cash of overtime services through Overtime Pay may be authorized only in exceptional cases when the application of CTO for all overtime hours would adversely affect the operations of the agency. Overtime work should be avoided by adequate planning of work activities.

Hiring of Consultant/Contract of

COA Circular No. 2012-003 dated October 29, 2012

Updated Guidelines for the Prevention and Disallowance of Irregular, Unnecessary, Excessive, Extravagant and Unconscionable Expenditures.

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Service Section 1 of Civil Service Commission Resolution No. 020790

Individual Contract or Services/Job Order refers to employment as follows: a) The contract covers lump sum work or services such as

janitorial, security, or consultancy where no employer-employee relationship exists between the individual and the government;

b) The job order covers piece work or intermittent job of short duration not exceeding six months and pay is on a daily basis;

c) The contract of services and job orders are not covered by Civil Service law, rules and regulations, but covered by COA rules;

d) The employees involved in the contract or job order do not enjoy the benefits enjoyed by the government employees, such as PERA, ACA and RATA; and

e) Services rendered thereunder are not considered as government service.

Hazard Pay DBM and DOH Joint Circular No. 1 s, 2012 dated November 29, 2012

Hazard pay of public health workers effective January 1, 2013 shall be based on the degree of exposure to high risk or low risk hazard and the number of workdays of actual exposure over 22 days in a month as:

Level of Risk Actual Exposure High Risk Low Risk

12 or more days 25% of Monthly Basic Salary (MBS)

14% of MBS

6 to 11 days 14% of MBS 8% of MBS Less than 6 days 8% of MBS 5% of MBS

Monetization Section 22-23 of Rule NIR of the Civil Service Omnibus Rules Implementing Book V of EO 292

Monetization for a minimum of 10 days, provided that at least five days is retained after monetization and provided further that a maximum if 30 days may be monetized in a given year. Monetization of 50 percent of vacation/sick leave credits may be allowed for valid and justifiable reasons subject to the discretion of the Agency Head and the availability of funds.

Specific expenditure

COA Circular No. 2012-001 dated June 14, 2012

The Circular provides the documentary requirements for common government transactions such as: Procurement through alternative modes to include, but not limited to: Duly Approved Purchase Order; Approved Purchase Request; Price Quotations from at least three bonafide reputable manufacturer/ suppliers/ distributors; and/or Abstract of Canvass Claims for last salary: Clearance from money, property, and legal accountabilities, and duly approved DTR Monetization of leave credits: Approved leave application (ten days) with leave credit balance certified by the Human Resource Office; Request for leave covering more than ten days duly approved by the Head of Agency Monetization of 50 percent ormore: Clinical abstract/medical

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procedures to be undertaken in case of health, medical and hospital needs; Barangay Certification in case of need for financial assistance brought by calamities, typhoons, fire, etc. RATA payment: Certification that the official/employee did not use government vehicle and is not assigned any government vehicle; and Certificate or evidence of service rendered Telephone/Communication Services payment: Statement of Account, Invoice/Official Receipt, Certification by Agency Head or his authorized representatives that all National Direct Dial (NDD), National Operator Assisted Calls and International Operator Assisted Calls are official calls. Liquidation of travel expenses for Local Travel: Paper/electronic plane, boat or bus tickets, boarding pass, terminal fee; Certificate of Appearance/Attendance; Copy of previously approved itinerary of travel; Revised or supplemental Office Order or any proof supporting the change of schedule; Revised Itinerary of Travel, if the previous approved itinerary was not followed; Certification by the Head of Agency as to the absolute necessity of the expenses xxx Liquidation Report: Reimbursement Expense Receipt (RER); OR in case of refund of excess cash advance; Certificate of Travel Completed; Hotel room/lodging bills with official receipts xxx

a.Various disbursement not in accordance with existing rules and regulations

18.2 For CY 2017, disbursements totaling P251,672,610.30 incurred in DepEd

Central, Regional and Division Offices and Schools were found not adhering to pertinent laws, rules and regulations, as follows:

CO/Region DO/IUs Deficiencies Amount

1) Payment for overtime services CO Payment of overtime services not in accordance with Civil

Service Commission (CSC) and Department of Budget and Management (DBM) Joint Circular No. 02 dated November 25, 2015

38,200,451.87

CAR Kalinga Overtime pay of nine employees of Pinukpuk Vocational School without authority and supporting documents

88,308.76

RO II Isabela Overtime time paid to employees who incurred late/undertime on regular workdays

77,034.07

RO VIII ROP Compensatory Overtime Credit were granted to 35 personnel even if said employees were on travel status as evidenced by their travel claims attending the Palarong Pambansa held in Antique last April 2017.

87,203.12

Calbayog, Borongan, Northern Samar

Overtime pay was granted to some employees despite lacking in supporting documents and which activities performed involved regular/routine duties.

1,815,286.88

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2) Hiring of Consultant/Contract of service/Job Order Contract CO N/A DepEd-CO incurred expenses for the salaries of hired

consultants, contract of service personnel, the incurrence of which was not founded on necessity and reasonableness, and had apparently defeated the objective of the rationalization plan of the government.

120,908,062.55

RO XIII RO The salary given to the newly hired JO Personnel acting as the Public Information Officer is the same as that of the Administrative Officer V, SG 18, Step 1, holding the previous position amounting to P35,693.00, which is deemed excessive considering the employment status and qualification of the concerned JO as compared to the present rates of JO employees ranging from P350.00 to P736.00 per day depending on the individual’s length of service.

35,693.00

3) Payment for travelling expenses/Attendance in Trainings and Seminars RO I Batac City Expenses were taken from the Regular MOOE for the

conduct of 3rd Division ICT Congress held on March 17-18, 2017 which was found to be unreasonable due to the lack of legal basis or budget and non-conformity with DepEd Order DO 32, s. 2011 dated March 31, 2011

1,077,624.64

Dapitan, Urdaneta City

Various purchases of equipment and repairs undertaken by different Senior High Schools (SHS) of the Division Offices of Dagupan City and Urdaneta City amounting to at least P15,000.00 per item, were charged against their Maintenance and Other Operating Expenses (MOOE)

3,602,861.88

RO VIII Calbayog City

Thirty percent of the monthly school MOOE allocation to 181 Non-Implementing Units under the DO amounting to P4,424,174.04 were collected to cover expenses of the Eastern Visayas Regional Athletic Association (EVRAA), contrary to DepEd Order No. 13 s. 2016 dated March 11, 2016, thus, depriving the schools of the use thereof for their normal operations.

4,424,174.04

RO IX Zamboanga del Norte

Procurement for a three day live-in training on Facilitation for School-Based Contextualization of Teaching and Learning for the K to 12 Curriculum 2016 which funds were taken from the CY 2016 unreleased school MOOE and is not in accordance with DepEd Order No. 13 series of 2016, thus, depriving the beneficiary schools of the use thereof.

4,039,200.00

RO XI ROP, Davao del Norte, Panabo

Attendance of teaching and non-teaching personnel to trainings and seminars conducted by DepEd Regional Office XI without Office Order and/or authority to attend issued by the Regional Director

-*

RO XIII ROP Payments of plane fares were exorbitantly higher by 5 percent to 220 percentcompared to the actual plane fares confirmed from the websites of the airline companies. Attendance of teaching and non-teaching personnel was not covered with Office Order and/or authority to attend.

511,738.28

24,701,111.00

Surigao del Sur

Unnecessary traveling expenses were incurred by several DO personnel and District Supervisors for GAD benchmarking activities held at Tagbilaran City and Cebu City.

372,400.00

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Bayugan Traveling expense and room accommodation for the conduct of personality development of division personnel thru Team Building Activity held at Samal, Island Garden City of Samal, Davao del Norte, is found to be excessive.

110,250.00

Zamboanga del Sur, Pagadian

Reimbursements of traveling expenses were not in accordance with the provisions of EO 298, COA Circular No. 2017-001 and GAM Volume II, that define, prescribe documentary requirements and set limits to claims for actual transportation and travel expenses rendering the disbursements irregular and excessive.

154,703.28

Surigao del Sur, Tandag, Bislig

Attendance of teaching and non-teaching personnel was not covered with Office Order and/or authority to attend issued by the Regional Director and/or the respective SDS.

17,931,851.69

4) Payment of Representation and Transportation Allowance (RATA) RO I Dagupan,

Urdaneta Unauthorized payment of transportation allowance to Schools Division Superintendent (SDS) and Assistant Schools Division Superintendent (ASDS) due to provision of a government vehicle.

249,375.00

RO VIII ROP Payment of commutable RATA to ROP officials despite: a) assignment of five motor vehicles under the custody of the Agency, two of which were directly identified as for use by the recipients of the allowance; and b) absence of certification that claimants did not use government vehicle nor assigned with any government vehicle, thus is contrary to Section 54 of the 2017 GAA and COA Circular No. 2012-001.

873,000.00

5) Payment of Communication Expenses CO Unbilled/unpaid excess usage, and inequitable attachment

of accountability/liability over the free cell phone unit included in the plan

210,341.25

NCR Marikina Unauthorized communication expenses were incurred at Malanday and Parang NHS due to payment for unauthorized personnel’s cellphone usage and excess claim from the allowable rates prescribed in DO Memorandum dated January 24, 2013 and pursuant to DepEd Regional Memorandum No. 209 s 2010.

67,840.81

RO II Isabela and 3 IUs

Communication Allowance were paid through reimbursement, allowance, and prepaid cell cards in varying amount ranging from P300 to P1,500 monthly to some officials and employees without legal basis or guidelines.

985,616.42

RO III Aurora, Tarlac

Absence of authority/specific guidelines from DepEd CO for the payment of cell card allowance to the DOs of Aurora and Tarlac Province resulted to discretionary claims or grants of the said benefit, which is not in conformity with DepEd Office Memorandum dated February 6, 2007.

1,587,856.62

RO V ROP, Albay, Camarines Norte and Ligao

Cell card/cell phone plan allowances were granted to officials and employees without proper authority.

1,045,722.54

RO VIII Western Samar

Grant of the said allowance to selected regular employees of Hinabangan NHS was without legal basis.

12,000.00

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6) Payment for monetization of leave credits RO VIII DOs Leyte,

Borongan City, Northern Samar

Payment of monetization of vacation leave credits to personnel with insufficient leave credits and incomplete documentation.

434,528.47

RO IX Dipolog Payment of monetization of leave credits was not in accordance with existing regulations.

959,254.37

RO XIII Surigao del Norte

Monetization of 20 to 50 days leave credits were either not duly approved by the Agency Head and/or not supported with the required documents.

5,947,713.29

Siargao Island

Monetization of leave credits was not in accordance with the guidelines and was not duly supported with sufficient and relevant documents.

1,075,506.00

Agusan del Sur

Monetization of leave credits of teaching and non-teaching personnel of nine IUs for CY 2017 was not in accordance with the guidelines and was not duly supported with the documentary requirements.

1,734,141.68

7.) Payment of Collective Negotiation Agreement (CNA) RO XIII Surigao del

Norte CNA were continuously paid to 15 school personnel even if already paid by the DO.

454,500.00

8) Payment of Rice Allowance/Grocery Allowance RO VIII Western

Samar Grant of rice allowance to officials and employees of Clarencio Calagos Memorial School of Fisheries was contrary to Section 12 of RA No. 6758 or the Salary Standardization Law of 1989.

442,500.00

RO XIII Surigao del Norte

Grocery/Rice Allowance were continuously paid to 17 school personnel despite the previously issued NDs relative to the same allowance for reasons such as absence of legal basis, irregularity of transactions, and inappropriate charging of accounts.

170,000.00

9) Grant of mid-year bonus, clothing allowance, Cash gift, PEI and PBB to JO workers RO VIII Northern

Samar Grant of mid-year bonus, clothing allowance and PBB to JO workers in violation to Budget Circular No. 2017-2 dated May 8, 2017 and 2012-1 dated February 23, 2012

82,500.00

RO XIII Siargao Mid-year and year-end bonuses, Cash Gift and Productivity Enhancement Incentive were paid to two JO personnel and one personnel with casual appointment paid under Provident Fund

95,305.00

10) Payment of honoraria for the BAC & TWG RO VIII Calbayog

City Southern Leyte

In DO Calbayog, payment of Honoraria for the BAC & TWG was excessive and not in consonance with relevant rules. The officials and employees of DO Calbayog City were granted with honoraria ranging from P2,000 to P30,000 as Resource Speakers or members of the TWG involving the conduct of seminar/trainings relevant to the mandates of their agency. At DO Southern Leyte, the grant of honoraria was made out of savings rather than from the proceeds of sold out bidding documents, thus putting to question the validity as well as

2,432,941.00

1,270,941.00

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propriety of said claims.

11) Payment of Power Supply System RO XIII Agusan del

Sur Labor cost incurred for the repair and restoration of electrical connections is viewed to be unnecessary since the performance was unsatisfactory. Said expenditure could have been avoided had the Management immediately availed the services of ASELCO which is the sole power distributor in Agusan del Sur. Furthermore, we have observed the following: a) total disbursements do not coincide with the approved POW; b) splitting of payment for the procured materials; c) items purchased relative to the re-wirings were recorded as expense instead of a PPE account.

69,528.48

12) Payment of Performance Based Bonus (PBB) RO VIII Biliran Absence of a guideline on the grant of PBB for the DepEd

employees and officials for Fiscal Year 2015 contrary to Section 7.1 of COA Circular No. 2012-003 dated October 29, 2012.

883,239.81

RO XIII Surigao City FY 2015 PBB was paid without compliance to the individual eligibility and documentary requirements.

1,729,600.00

Surigao del Norte

FY 2015 PBB was paid to 11 retired personnel and one personnel with unliquidated cash advance.

115,500.00

13) Payment of Hazard Pay RO XIII ROP Hazard pay of the Nutritionist-Dietician for the period May

2016 to August 2017, even though, 59 percent of her working days were spent in the ROP

81,024.46

Surigao del Norte NHS (DO Surigao del Norte)

Hazard Pay were paid to teaching and non-teaching personnel without complete supporting documents and was charged against the appropriation for Personnel Services, and booked as Salaries and Wages-Regular.

988,000.00

14) Procurement of Supplementary Reading, Reference and Other Instructional Materials RO XIII Surigao del

Norte Centralized procurement of Supplementary Reading, Reference and Other Instructional Materials sourced out from schools’ MOOE funds were resorted to by the Division Office without pertinent documents.

4,000,000.00

15) Payment Cash Allowances RO XIII Tandag Payment for allowances on administering various school

examination for CY 2017 were granted to officers and employees without legal basis.

39,000.00

Bislig No basis for the computation of the amount paid for orientation allowances, transportation allowance and special transportation allowance given to the examiners and working committee’s for administering various examinations within Bislig City which varied from P150.00 to P800.00.

91,960.00

Surigao del Sur

No basis for the computation of the amount paid for expenses for meals, snacks and transportation given to the examiners and working committee’s in the form of direct cash allowances for administering various examinations which varied from P300.00 to P2,500.00.

199,060.00

16) Disbursements without appropriate funding

273


CAR Abra Use of current year cash allocations from the National Treasury by Northern Abra NHS to pay FY 2015 PBB, Productivity Enhancement Incentive, CNA and a one-month bonus, to five employees which were not authorized in the GAA, and without the covering allotment in violation of Section 45, Subtitle B, Title I, Book V of the Administrative Code of 1987, rendering the expenditures irregular as defined under COA Circular No. 2012-003

178,676.00

17) Payment of Anniversary Bonus and Medical Allowance

RO IV-B Calapan, Marinduque

Payment of Anniversary Bonus to the officials and employees of the DO Calapan City and its three IUs in CYs 2016 and 2017 and Medical Allowance to employees of Bangbang NHS, and IU in DO Marinduque were inconsistent with the rules and regulations. Thus, considered irregular expenditures that would necessitate the issuance of Notice of Disallowance. Payment of medical allowances for CY 2015 and 2017 are considered irregular as specifically stated under Item 1.8 of Annex A of COA Circular No. 2012-003 dated October 29, 2012

3,264,000.00

638,403.35

18) Payment of Food Expenses


Incurrence of food expenses of the DO in CY 2017 for the entertainment of visitors, celebrations, performance assessment and other activities of the Division. These expenses could not be justified especially that top officials of the Division are receiving monthly representation expenses. Most of these activities were part of the routinary management functions which should not entail additional expenses from the government.

1,125,079.69

Total 251,672,610.30 *Amount not indicated

b. Disbursements without proper documentation

18.3 Results of the post-audit of transactions in the different Offices/Operating Units for CY 2017 disclosed that various disbursements amounting to P422,275,649.24 were made even without the necessary supporting documents in violation of Section 4(6) of PD No. 1445 and COA Circular No. 2012-001 dated June 14, 2012.

274

CO/Region DO/IUs Deficiencies Amount NCR Quezon City Errors/omissions and unsubstantiated transactions of the

Balingasa HS for the period January to July, such as: a) payments were not supported with approved disbursement vouchers (DVs) and supporting documents; b) LDDAP-ADA payments of security services and some personnel benefits in the name of an employee instead of the service provider and employee claimants without proofs of receipt.

-*

Marikina Issuance of 10 checks to the Marikina HS Disbursing Officer to reimburse accumulated transactions ranging from P33,825.47 to P160,041.74 per check without specific purpose.

818,404.23

Mandaluyong and Marikina

Unsupported disbursements in several IUs due to laxity of officials in the discharge of their financial responsibilities over disbursement of government funds.

-*

RO II NEAP-Fund Cash advances under the National Educators Academy of the Philippines Fund 106 granted to Special Disbursing Officers for the payment of salaries and extra day services of job order employees were not supported with the necessary documents. Cash advances for payment of extra day services or overtime to job order employees has no legal basis resulting in the doubtful validity of the transactions.

320,837.64

339,279.80

ROP Gasoline expenses were not supported with properly accomplished Driver’s Trip Tickets.

204,554.30

Isabela Honorarium paid to BAC, Technical Working Group (TWG) and BAC Secretariat were not supported with documentary requirements to prove the validity and correctness of payments made which is not in accordance with Section 4.6 of PD No. 1445 and DBM Circular No. 2004-5A dated October 7, 2005. Payment for overtime services of employees and Job Order workers were not supported with the required documents.

1,094,500.00

636,296.83 RO III Cabanatuan,

Gapan , Muñoz, Bulacan, Pampanga, Aurora, Malolos and Zambales

Various disbursements that were either contrary to existing government laws, rules and regulations or not supported with adequate documentation cast doubts on the validity and propriety of expenditures.

364,401,539.88

Surigao del Norte

Hazard pay of teaching and non-teaching personnel without complete supporting documents and was charged against the appropriation for PS, and booked as Salaries and Wages-Regular.

988,000.00

RO IV-B ROP and DOs Mindoro and Romblon

Unsupported payments of purchases rendering doubtful the validity thereof.

5,010,362.00

RO VIII DOs Leyte, Borongan City, Northern

Unsupported claims of Carigara NHS and Lalawigan NHS for the period January to June 2017. Cash advances for salaries and allowances for regular and

205,785.67

275

CO/Region DO/IUs Deficiencies Amount Samar

casual/job order employees of Lorenzo S. Menzon Agro-Industrial School and San Antonio Agricultural and Vocational School without the required approved payrolls nor list of payees with indications of their corresponding net payments.

7,497,663.33

Eastern and Northern Samar , Borongan and Biliran

Travelling expenses were not supported with travel orders, itinerary of travel and other needed supporting documents.

202,657.00

Samar Various disbursements were approved despite incomplete documentation .

9,939,412.30

ROP and 13 DOs

DVs covering the period January to March 2017 were processed and paid with incomplete signatures. Disbursements out of PCFs were not supported with adequate documentation and PCFR was not maintained by the Petty Cash Custodian.

5,770,249.46

Leyte Procurement of goods and services of Kawayan, Allen and Manlabang NHS, and Naval School of Fisheries were allowed despite incomplete documentation. Omission of vital financial information as well as inconsistencies in the submitted supporting documents including incomplete documentation were observed relative to the claim of 15 percent mobilization fee to J. Custorio Construction regarding the Repair of School Buildings located at Jubay ES, (Calubian), Butason I ES (Tabango) and Banat-i ES (San Isidro).

235,481.70

3,153,500.00

Calbayog RATA was granted to four DO Officials even if lacking in supporting documents

208,000.00


Salaries were paid in the absence of daily time records, thus, rendering doubtful their validity and propriety.

155,706.64

Sibugay Almost all claims charged against cash advances for MOOE of School Principals/Heads for the period January 1 to December 31, 2017 were not supported with complete documentation.

-*

Zamboanga del Sur

103 DVs on claims for monetization of leave credits of Balongating NHS and Mahayag NHS were not adequately documented, thus, rendering doubtful their validity and propriety

575,507.59

Isabela CA for the payment of hardship post allowance to qualified teachers was: a) credited to the personal bank account of Concesa S. Luna, Division Cashier but was still intact until October 31, 2017 as shown in her passbook; b) not supported with processed payroll and other supporting documents; c) drawn without specific purpose; and d) not covered by a valid obligation, was granted purposely to avoid the reversion of the unutilized NCA for the quarter ending September 30, 2017.

Payment of hazard pay to officials, teaching and non-teaching personnel of the Begang NHS for CYs 2016 and 2017 was sourced from the savings of their appropriations for PS for the last quarter of CYs 2016 and 2017 and not

1,886,743.14

543,063.75

276

CO/Region DO/IUs Deficiencies Amount supported with proper documentation.

RO XIII Agusan del Norte

Payments of longevity pay to a School Nurse covering the period 1997 to 2017 were not properly authorized and/or not supported with an approved DV and likewise, modification in the allotment was not approved by the DBM.

Travelling expenses were not supported with proper and complete documentary requirements.

Payments for office use and for salaries of services rendered were not properly and appropriately supported with the necessary documents.

668,103.00

36,027.10

135,241.44

Agusan del Sur

Disbursements were made without complete supporting documents.

1,605,087.69

Disbursements for Special hardship allowance were not supported with the required supporting documents.

3,523,113.84

Surigao del Norte

Hazard pay of teaching and non-teaching personnel without complete supporting documents.

988,000.00

Butuan 172 DVs for payment of operating expenses were not supported with the required documents, DVs were not properly filled-up and copies of POs were not furnished to the Office of the Auditor. 80 DVs representing financial assistance from ROP and Local Government Units were not supported with the required documents.

786,720.36

1,556,230.00

Dinagat Siargao Island

96 transactions paid in CY 2017 were not supported with complete documentation.

3,897,910.00 3,816,164.55

Siargao Island

Payments were not supported with sufficient and relevant documents.

1,075,506.00

Total 422,275,649.24 *Amount not indicated c. . Payments that deviated the standard process and procedures on disbursement

18.4 Moreover, various expenses amounting to P108,674,503.42 were paid without

observing the appropriate standard and procedures of processing disbursements which will lead to unauthorized disbursement of public funds.

CO/Region DO/IUs Deficiencies Amount NCR Marikina,

Pasig Contribution for PhilHealth by the teachers/employees of the Pinagbuhatan HS in DO Pasig City covering January to March 2017 was paid twice by effecting monthly remittance to DepEd-NCR and subsequent direct payment to the PhilHealth. As a result, P242,537.50 was disbursed without a valid obligation as prescribed in Paragraph 2 Section 37, Volume I of the GAM.

A total of P2,767,357.85 had been reverted from the PS fund of the Parang HS of DO Marikina in CY 2016. However, an aggregate amount of P278,937.25 in mandatory contributions of employees was not remitted either to GSIS,

242,537.50

277

CO/Region DO/IUs Deficiencies Amount PhilHealth and Pag-ibig. A penalty/interest amounting to P500,399.50 is estimated to be imposed on account of the unremitted obligation.

Quezon City, Caloocan

Procurement of common use supplies were made from different suppliers instead of availing the services provided by the PS-DBM.

973,667.61

RO I Dagupan Payment by the Division of Dagupan City of unbooked prior year’s expenditures of CYs 2015 and 2016 Proportional Vacation Pay to eight personnel from funds of the current year in violation of the provision of Section 17 of GAA of 2017 and Section 119 of PD No. 1445.

255,127.46

Laoag City and Batac City

Payments of expenditures such as office supplies, snacks, gasoline and maintenance of vehicles were made through reimbursement method instead of the procurement and disbursement procedures prescribed under RA No. 9184, thereby rendering the procurement process doubtful and exposed the Agency funds to the personal discretion and disposition of the authorities concerned which positioned the interest of the government at risk.

427,974.90

RO IV-B Occidental Mindoro

Expenses for the SBFP and MOOE amounting to P606,584.50 and P3,950,021.45, respectively, were done on reimbursement basis thus, casting doubts whether the effectiveness of the programs and efficiency in operations of the school were achieved. Cash advances amounting to P6,612,079.00 and P13,087,672.55 respectively, for SBFP and MOOE were granted in lumped amount during the last month of the year 2017.

4,556,605.95

19,699,751.55


In CY 2017, disbursement amounting to P41,971,303.00 representing payment for 2016 Special Hardship Allowance was released to teachers and school heads/administrators instead of the total SHA supposed to be granted by the Division of P97,877,663.00. Previous years’ grantees of SHA were not validated. Priority was not given to teachers and school heads assigned in hardship posts, instead, available funds were prorated in order to grant SHA to all qualified teachers. Granting SHA on a pro rata basis is due to limited funds.

41,971,303.00

RO XIII ROP Cash advances were granted to Contract of Service Workers. 12,918.00 Dinagat Island

Certifications of Travel Completed were not properly accomplished for the travelling expenses incurred for the period covered January 1 to December 31, 2017.

189,353.00

Dinagat Island Surigao del Sur Tandag Bislig

Incurrence of unnecessary expenditures due to inadequate mechanism in determining the appropriate provisions of the participants for trainings/seminars conducted for teaching and non-teaching personnel.

158,738.91

891,633.21

124,346.00 1,219,372.00

Agusan del Sur

The DO failed to make confirmation to ensure complete attendance of projected participants for its teaching and non-teaching personnel that resulted in the incurrence of additional expenses due to over reservations for meals and

82,619.75

278

CO/Region DO/IUs Deficiencies Amount snacks which could have been avoided, had a mechanism been established to determine the exact number of participants. Delayed in the payment of maternity benefits ranging from six months to almost two years, due to lack of appropriation, thus, depriving the concerned employees of the desired benefits granted by law.

605,552.17

Surigao del Norte

Reimbursements of travelling expenses were not directly paid to the teachers and non-teaching personnel of the School through individual checks but were channeled through cash advance of the Disbursing Officer.

117,726.00

Surigao City and Surigao del Norte

Paid to two deputized government lawyers from January 2016 to February 2017 for DO Surigao City and up to June 2017 for DO Surigao del Norte without adhering to the prescribed rate as provided under the the GAA and despite the absence of proof of appearance on court hearings attended and other necessary documents

165,000.00 270,000.00

Agusan del Norte and del Sur, Surigao del Norte and del Sur, Tandag City, Bislig City and Bayugan City

Observations on the Payment of Salaries and other personnel benefits: 1) incomplete supporting documents to verify the validity and propriety of claims; 2) net take home pay below the required amount of P4,000.00; and 3) non-compliance with DepEd’s full implementation of the ATM Payroll System contrary to pertinent provisions of PD No. 1445, GAA of 2017, DepEd Orders and other applicable rules and regulations on the matter.

33,576,137.40

Bayugan City Payments to contractors for Repairs/ Rehabilitation of classroom/school buildings were supported with receipts which are no longer valid since August 31, 2013.

3,134,139.01

Total 108,674,503.42 18.5 We recommended that the Management of concerned offices:

a. strictly comply with the prescribe rules and regulations on the payment of salaries and wages, other compensation and personnel benefits, traveling, training, communication, procurement of goods and services and other expenses;

b. ensure that all disbursements/utilization of governments funds are

authorized and properly supported with the necessary documents; c. observe the proper standard procedures in processing disbursements;

and d. require the refund of unauthorized claims of benefits and allowances.

279

18.6 The Management gave their respective comments on the deficiencies cited as follows:

CO/Region Management’s Comments CO The Management has not given their definite stand on the audit issues raised, except for the

individual/independent comments coming from different offices citing their own independent concerns.

NCR

DO Marikina The DO Management explained that its disbursing officer, bookkeeper and property custodian were considered staff authorized for P350.00 monthly cellphone usage allowance due to their functions in school. It was also added that the three mentioned cellphone usage plans were discontinued on June 2017 upon expiration of the contract. Furthermore, during the Exit Conference, the Principal of Marikina HS in DO Marikina asserted that the School already attended the matter on the absence documentary requirements and has adopted the recommendation cited therein.

RO I

DO Laoag City During the Exit Conference, employees explained that the Agency could not avoid reimbursements due to petty expenses such as photocopying of materials, repairs, etc. Also, Management explained that PLDT doesn’t want to accept check as payment for rental and installation of fiber biz 200, hence, it was paid through cash advance by the Accountable Officer. DO San Carlos City The Supply Officer and the Accountant assured the Audit Team to work hand in hand to comply with the audit recommendation. DOs Dagupan and Urdanete Both Managements pledged to stop the practice of paying the transportation allowance to the concerned SDS and ASDS.

RO II

Regional Office Proper Through the Asset Management Section, the ROP shall strictly and faithfully comply with provisions of the said COA Circular that were inadvertently violated. Also, Management expresses sincere regret that there were some lapses in regard to treatment of and/or payment for gasoline/fuel expenses for the year/s that passed, particularly in 2017. This doesn’t necessarily mean however that their Office compromised the validity of fuel transactions in as much as the Officer-in-Charge exercised due circumspection and prudence by instituting internal measures and mechanisms to ensure that the Drivers and other concerned staff conform to ethical standards for government employees, imbued with the values of honesty and integrity. Henceforth, they offer their commitment to comply with requirements as embodied in COA Circular No. 77-61 and PD No. 733. DO Isabela The employees who rendered overtime services had complied with DepEd Order No. 31, series of 2014, which allowed grace period of 15 minutes to be exempted from tardiness and to claim overtime pay. The Management of DO Isabela will review the guidelines and the work and financial plan of different delivery unit to come up with a uniform basis of communication expenses. The 3 IUs agreed to secure guidelines from the Schools Division Superintendent. DOs Cauayan, Santiago and Batanes The Management of the DOs agreed to comply with the recommendations.

RO III DO Aurora- Management explained that there is no available service provider for telephone landlines and there is a valid need for the provision of communication/cell card allowances. They recognized

280

CO/Region Management’s Comments that payment of such has no sufficient legal basis. In line with this, they have already stopped payment of communication allowance to selected DO personnel effective October 2017. As per their coordination with Central Office Finance Service during the Accounting Field Monitoring on November 8-11, 2017, they have been informed that there is an ongoing revision of the Memorandum on the provision of communication/cell card allowance to DepEd personnel. The Management of DO Cabanatuan City conformed to the recommendations. Management of seven DOs gave their comments/justifications and assured of the implementation of the audit recommendations.

RO IV-B

DO Calapan and Canubing NHS Management commented that the legal basis in the granting of the anniversary bonus last December 22, 2017 cannot be submitted, insteadthe amount will be deducted from their Mid-year bonus this year. Moreover, the Management of Managpi NHS commented that since the Anniversary Bonus be given this CY 2018 in consonance with the founding anniversary of the DepEd on June 23, 2018, such bonus will no longer be given this year in consideration of the payment last CY 2016. DO Marinduque and Bangbang NHS The Management commented that they will settle their obligation and will pay back the said amount to be deposited to the BTr. They said that the payment will be done upon the request of the teachers on or before the month of May, since they will be receiving PBB and Mid-Year Bonus to pay in full.

RO VIII

ROP and 13 DOs During the Exit Conference, Management of ROP assured the Team that payment of Transportation Allowance to those not authorized to claim will be stopped, and they will strictly comply with the guidelines prescribed for the payment of RATA. Also, the Management admitted the deficiency on the grant of COC. In the submitted Management’s comment, it was emphasized that they already informed the concerned personnel to pay for the corresponding value of the COC. They further explained that the submission of DVs and ORs is dependent on the submission made by the Cash Section to the Finance Division. Management also promised to strictly comply with the discussed recommendation. It was assured that provisions of the Circular pertaining to the grant of overtime pay will be strictly adhered. Management of Villa Jacinta National Vocational High School in DO Southern Leyte commented that they have the desire to religiously and faithfully comply with the completeness of document for submission; however, due to personnel shortage in the Accounting Section and the voluminous work of the designated bookkeeper, among others, segregation of disbursement voucher with the attached necessary document cannot be done. But it was assured that the Management will faithfully and continually exert their effort for its compliance as specifically required on the date of submission. The Management of Bato School of Fisheries in DO Leyte gave assurance that they will discontinue the granting of monetization of accumulated leave credits to employees with insufficient balances. Moreover, during the Exit Conference, the Management of Bato School of Fisheries and Carigara National High School cited the reasons for the delayed submission was due to some DVs which were still not signed by the concerned officials and also some claims still lacked the necessary documentations. However, they promised to comply with the recommendations of the Audit Team. Furthermore, DO Leyte admitted that there were errors committed in the documentation of some transactions as the same were copy-pasted from previous similar documents

281

CO/Region Management’s Comments During the Exit Conference, the Management of Eastern Samar National Comprehensive High School (ESNCHS) in DO Borongan City justified that such transactions were only approved due to humanitarian consideration. The Management then agreed to apply the audit recommendation. Moreover, the Accountant claimed that they are in the process of completing the Disbursement Vouchers for submission and that the delay was caused by technical problems with their Electronic Financial Reporting System (EFRS). The Management agreed to submit all the lacking documents. Allen National High School in DO Northern Samar replied that the monetization of 50 percent of the accumulated leave was approved based on valid and justifiable reasons per Section 23 of the Omnibus Rules on Leave of the CSC. The said monetization was used by the employee for health and medical needs, educational, payment of loans and to answer emergency needs to sustain their basic needs. They also assured that they will comply/observe strict adherence to the documentary requirement and ensure that all future disbursement to be made must be approved by the compliance officer whose function is to check the sufficiency, correctness and completeness of the documents before the processing of claims. Moreover, during Exit Conference, it was explained that the reasons for using only one check for reimbursement of travelling expenses to a group of employees is to minimize the cost of check, and although, a single check is prepared, there is a corresponding payroll attached together with the supporting documents. Likewise, the Management of Lorenzo S. Menzon Agro-Industrial School agreed to refrain from giving benefits to the JO personnel knowing that they are not qualified for such. In addition, Management of Silvino Lubos Vocational High School replied that they strongly adhere to follow the recommendations. During the Exit Conference, Management of Lorenzo S. Menzon Agro-Industrial School admitted the observations; however, they assured that they will comply with the recommendation. They also submitted the supporting documents for the questioned transactions. During the Exit Conference, Management of Don Juan F. Avalon National High School and San Jose Technical High School in DO Northern Samar admitted the deficiencies and assured that they will comply with the audit recommendation. Management of DO Biliran committed to abide and implement the recommendations and gave assurance that for the next transactions they will be extra careful in the disbursement of their funds and will stick to the applicable provisions of the law. Management of Hinabangan NHS in DO Samar (Western) commented that the grant of Communication Allowance was made in good faith. On the same stand, the said allowance is intended for fast and effective communication between and among Administrative personnel. Likewise, they committed not to release any allowance if not in consonance with the law. While the School Head of Clarencio Calagos Memorial School of Fisheries explained that the grant of rice allowance was made during the previous administration and in good faith banking on the provisions of the Manual of Operations for the Technical and Vocational Public Secondary Schools embodied under DepEd Order No. 89 s. 2010. Moreover, they promised not to grant such rice allowance in the future if based only on the aforesaid Manual of Operations. During the Exit Conference in DO Samar, the School Division Superintendent commented that she has already issued a Division Memorandum prohibiting the rendition of overtime services unless extremely necessary and the payment of such overtime services rendered will be on compensatory time off. The Principal of Lalawigan National High School in DO Borongan City stated that he approved the request in order to accomplish the work that needs to be done and to compensate the efforts of the personnel. Also, the Management committed to submit the duly signed DVs and payrolls.

282

CO/Region Management’s Comments During the Exit Conference the Bookkeepers and the Accountant of San Jose National High School (SJNHS), Sagkahan National High School (SNHS) and Tacloban City National High School (TCNHS) in DO Tacloban City explained the delay in the submission of DVs, but committed and assured that they are going to religiously adhere to COA rules and regulations. Management of DO Baybay City and Baybay National High School responded that noted unsubmitted DVs and supporting documents were already submitted to COA. Both Agency promised to fully comply with the recommendations. The Management of DO Catbalogan promised to facilitate submission of lacking documents and other unsubmitted accounts/reports. A division memorandum on the submission of monthly reports was already drafted for approval of the SDS to ensure timely submission of the required reports. In the Exit Conference, Management of 13 DOs admitted their non-compliance with the requirement on submission of the liquidation reports/documents. To address the situation, the RO prepared a Memorandum requiring the Special Disbursing Officers of the different DOs in the region to submit the said report/documents for the 2017 downloaded financial assistance fund. Likewise, they committed to strictly conform to the rules in their future transactions. Assurance to implement the audit recommendations was given by the SDS of DO Ormoc City in his letter reply to the AOM issued.

RO IX

Management of DO Zamboanga Del Norte explained that they committed error in the granting of Special Hardship Allowance. Management added that the amount paid by the Office has been augmented by DepEd RO. Also, Management explained that the disbursement made were for travelling expenses of teachers for the CY 2016 Teacher’s Day Celebration which were submitted late by their respective School Heads. They admitted payment of the said traveling expenses could have been rejected; however, they received various complaints from the concerned teachers through the local radio station. Management assured that they will ensure that all obligations during the year shall be supported with appropriations. Moreover, Management explained that they will commit to reduce or eliminate unnecessary expenses on food. They further added that supporting documents were properly attached to the DVs and might be detached upon transfer of documents to the DepEd bodega. Further, Management explained that the schools were not deprived of the releases of their respective school MOOE. They further added that the unreleased portion of the local school fund as at year end were obligated and released to the respective schools on the succeeding year. Management of DO Zamboanga Del Sur explained that some personnel were on a detailed appointment who were assigned in other schools, thus, DTRs were submitted late to support the payroll. The Agency further explained that to avoid non-deduction and non-remittance of premiums and loan amortizations and other humanitarian reasons among others, Management opted to include the personnel in the payroll hoping that the employee concerned will submit later onthe said required documents. Lastly, Management assured that a strong internal control will now be established particularly in the payment of salaries to employees. Moreover, Balongating NHS in DO Zamboanga Del Sur commented that the lapses of required attachments on payments of travel expenses, failure to secure RER and claims of per diems instead of actual traveling expenses will be looked into and would be rectified. Management will see to it that no succeeding travel payments will be paid without observing the existing rules and regulations. Likewise, Mahayag NHS commented that the Management will comply with the recommendations. The Management of DO Isabela City commented that a Sub-Allotment Release Order was received from the DepEd Regional Office on June 30, 2017 for the payment of Special Hardship Allowance for SY 2017-2018. Using the common fund system, the Agency opted to

283

CO/Region Management’s Comments pay the Special Hardship Post Allowance so as funds for the 3rd Quarter will not lapse. However, due to time constraint, the Agency was not able to prepare the payroll and check the bank accounts of the qualified teachers. Hence, CA was made in the amount of P1,886,743.14 and deposited to the personal account of the Cashier on September 28, 2017. From the personal account of the Cashier, an authorization was issued to the Authorized Government Depository Bank (AGDB) to transfer to the individual bank accounts of the teachers, and was certified by the latter. The Management further commented that they can comply with all the recommendations except to refund and remit to the BTr since the hardship allowance was already credited to the respective accounts of the teachers. The Managementof Begang National High School in DO Isabela City commented that they are not aware thatthe Certification from the Local Police is not enough as a supporting document for the payment of Hazard Pay. They assured the Audit Team that the School will secure a certification from the Secretary of the Department of National Defense. They further commented that they are willing to refund if they cannot comply with the recommendation. Likewise, the Management of Basilan National High School commented that the salaries of SHS Job Orders (JO) were charged to the MOOE funds of the School due to matter of urgency where the release of the SHS MOOE was late for more than two months and considering that the Job Orders have already rendered their service. Management of DO Pagadian City assured compliance on the recommendations. Furthermore, Pagadian City NHS commented that the submission of documentary requirements as indicated in the said observation is in process and to be submitted as soon as possible upon its completion. Likewise, ZSSAT commented that Management will strictly followthe aforementioned laws and regulations pertaining to travel expenses starting April 2018.

RO XIII

ROP committed to comply with the recommendations. The tickets were purchased through travel agencies because of lack of material time to prepare the travel documents because the advice/memorandum from the DepEd Central Office is received one or two days prior to the date of the activity. In addition, there are occasions where the signatories to the travel documents are also not available. Nevertheless, this Office will endeavor to cut this practice of purchasing tickets from travel agencies. Management also commented that regarding the attendance of teaching and non-teaching personnel to trainings sponsored by DepEd RO XIII, they respectfully submit to the recommendation. A Memorandum was issued to all Chiefs of Functional Divisions of DepEd RO XIII to require the inclusion in the processing of the claims for payment, the memorandum or office order issued by DepEd RO XIII indicating the positions/titles of the participants coming the Regional Office Proper and those from the 12 School Divisions of the Region. Regional Memorandum was issued directing the Accountant not to process claims for cash advances of COS or JOs of the Regional Office. The Management of DO Siargao Island commented that necessary documents to support the payment of leave monetization were submitted to COA Office on January 30, 2018. In DO Tandag, Division Memoranda was issued for the conduct of any trainings or seminars, to identify the expected participants but not their specific names except for trainings or seminars to be conducted wherein participants are already pre-identified by the proponent or the trainingManagement Team Leader. In addition, the School Heads will be the one to identify the teachers who will attend the activity. With the observations being noted, Management promised to strictly implement the recommendations starting Calendar 2018 and will advise all concerned personnel to adhere to the recommendations including the preparation of attendance sheets following the prescribed format. Further, Management commented that the basis for implementing the Net take home pay of ₱4,000.00 was the aforementioned DepEd Order. Jacinto P. Elpa National High School also noted the date found at the bottom part of the said order was on February 15, 2017. Hence, they took effect the

284

CO/Region Management’s Comments threshold only on February 2017 and onwards. The Management of DO Bislig City accepted the findings regarding the insufficiency of documentation. Management of San Francisco NHS in DO Surigao del Norte commented that they will call the attention of the employees concerned to comply with the lacking required documents and submit it to COA. They will make sure that all succeeding transactions related to the payment of monetization will be supported with appropriate documents. Moreover, Management of Gigaquit NSHI commented that if they truly exceed to the authorized entitlement of travel claim per EO No. 298, they will humbly comply with the observation and eventually cause the refund if found not in order. Likewise, Management of Mainit NHS commented that they immediately called the attention of the bookkeeper, disbursing officer, and other accounting personnel and discussed the matters. The teachers and employees were informed of the unauthorized receiving of medical allowance and they are willing to refund and payments as scheduled. Management of DO Surigao del Sur commented that it is known for a fact that Surigao del Sur is prone to typhoons, floods, landslides and other disaster due to location which is facing the Pacific Ocean, which made them vulnerable to natural disasters. The teachers are in dire need to be trained on beginning reading using these kits in order to minimize non-readers especially Grade I to Grade III and to answer the DepEd Order on Every Child A Reader Program (ECARP) and no non-readers policy of learners at Grade III and onwards. The Reading Kit has been used in the previous years during the time of Schools Division Superintendent Valeroso and it was found effective. In response also to RA No. 9155 on School Governance Act of 2001, the school administrators are accountable on the learning outcomes of the pupils and we know for a fact that reading is basic tool for learning, thus, the purchase of Reading Kit is deemed necessary. The Management already sent a letter to the Office of the Secretary for Finance and Administration. Moreover, Management explained that the personnel with monthly net take home pay below ₱4,000.00 was from RPSU paid personnel, hence, this circumstance was not under the control of the payroll in-charge of the DO. In fact, for the division paid personnel such as, SHS teaching and non-teaching personnel, IPED and newly-hired teachers, the Management adheres to the General Provision of RA No.10924. Management of Surigao City commented that the observations are well taken. In the humble perspective of the Division, the allowances given to the Solicitors Ramos and Cundangan from the OSG were therefore not the “special counsel allowance” contemplated under RA No. 10717, Sections 56 and 5.6 of COA Circular No. 2012-001. It should be separately treated as an allowance granted under a special law, RA No. 9417. In addition, it is noteworthy that it was the Office of the Solicitor General who drafted the Memorandum of Agreement. Upon seeing that the same has a legal basis coming from such a distinguished office, and that the law itself (RA 9147, Sec. 8) allows the giving of allowance or honoraria to the Solicitors representing the Division in cases pending in court, this Division acquiesced thereto. After all, this has been practiced even before and also in other Divisions of DepEd were the service of the OSG has been availed. During the ExitConference,School Heads in DO Agusan del Surcommented that the approval of monetization of leave credit as well the updating of leave credit balance were handled by the DO. That they processed the longevity pay of the school nurse due to the following basis; DBM-DOH Joint Circular No.1, series of 2012 dated November 29, 2012and Rules and Regulations on the Grant of Compensation-Related Magna Carta Benefits to the Public Health Workers. Moreover, Management of Surigao NHS commented that there was no proper turn-over of documents and work responsibilities of the Disbursing Officer and that she is not aware of the proper procedure and documentation to be submitted for PCF. The practice has always been to submit the original receipts along with the Petty Cash Replenishment Report. Rest assured thatthe Management will adhere to the recommendation from the receipt

285

CO/Region Management’s Comments of the AOM and will ensure that proper petty cash management shall be observed. Management of DO Butuan City commented that they will include all the names of the participants in the division memorandum for a certain seminar/training that they have to attend. Also, they will not process the payment for the catering services during the seminar unless the documents submitted are complete and proper. Likewise, Management commented and promised not to give financial assistance for the next time unless supported with complete and proper documents and release it directly to the payee/supplier, not to the Principal.

18.7 The following are the respective Audit Team’s rejoinder: Region RO/DO Auditor’s Rejoinder

RO I

DO Ilocos Norte

The Audit Team disagreed with the justifications/explanation of the Management for the reason that the subject procurement was established to be extravagant, lavish, luxurious and unnecessary. Moreover, the procurement has not undergone competitive public bidding and tailored canvass were prepared instead. The delivery of such high-end furniture and fixtures neither was crucial or essential to the efficient discharge of the mandate and functions of the division nor addresses its mission and vision.

RO II

ROP, DOs Ilagan, Isabela, and Nueva Vizcaya

The Audit Team in DO Ilagan City highlighted that immediate action of the Management is needed since the Agency suffered material loss. The Audit Team appreciated the commitment of DO Isabela on the preparation of contract and will monitor the submission of the contract for review. Moreover, the Team emphasized that all claims should be properly documented. For payment of honoraria to be valid, his/her participation in the entire procurement process is a must. Such entitlement can be proved through the submission of Notice of Award, approved contract agreement, and attendance sheets. In addition, the Audit Team requested the BAC Secretariat to submit approved APP for CY 2017 to the Team and emphasized that no procurement is to be undertaken unless it is in accordance with the approved APP. The Audit Team also requested the Management to furnish them copy of the written guidelines on the grant of communication expenses. Furthermore, the Audit Team required the responsible officials of DO to fast-track the registration of the vehicles under the name of the Division to avoid disallowance of repairs and maintenance on these vehicles. We instructed them to comply with the requirements of the authorities on loss OR/CR for immediate transfer of ownership. The Team stressed that payment of repairs and other expenses should be limited to the vehicles owned by the Division only. The Audit Teams stressed to ROP, DOs Ilagan, Isabela and Nueva Vizcaya the importance of the Ledgers in the reconciliation of balances. The Team will conduct walkthrough on the use of the system and the process followed by the Accounting Section. We also instructed the Accountant and Bookkeepers to attach SLs in the Financial Statements to be submitted which will serve as supporting schedules.

RO IV-B

ROP The Audit Team maintained that the submission of reproduced copies of perfected contracts and Purchase Orders with the supporting documents should henceforth be within the reglementary period otherwise, the purpose of timely review would be defeated.

RO VIII

DOs Southern

The Audit Team maintain their audit opinion on the DO Southern Leyte’s comment that the grant of honorarium should not be based on the number of

286

Region RO/DO Auditor’s Rejoinder Leyte, Leyte,

Baybay City and Maasin City

batches composing an entire project. It should only be based on the entirety of the project. It is their opinion that the main objective of the conduct of bidding which is to procure quality goods and services at the lowest and/or reasonable prices through exhaustive competition is defeated by the grant of excessive honorarium. The justification of Management of DO Leyte, Bato School of Fisheries, and Carigara National School was actually not in consonance to prescribed COA rules and regulations since this just showed its conformity to the erroneous practice of undertaking of payments to claims, despite the absence of necessary signatures and supporting documents. Our stand in the audit of Baybay National High School and DO Baybay City is that complete not partial submission shall be undertaken as failure in this aspect still constitutes contradiction to relevant laws and rules. In addition, documents that are not turned-over for audit on the prescribed deadline are to be subjected to suspension during post-audit. Though the the AuditTeam understands the predicament of designated Bookkeeper of Maasin National Vocational High School in DO Maasin City, yet this should definitely not be made an excuse for the continued defiance of the regulation. Considering the minimal workload of the bookkeeper, he should manage his time effectively so that he could be efficient in performing his assigned tasks for the meantime that a regular employee is not yet hired.Considering also the status of his employment, there is a great need to relieve him of his bookkeeping tasks and assigned this instead to a regular employee.

RO IX DO Zamboanga Del Norte

The Audit Team maintains however that the Division should ensure that the school MOOE not yet downloaded/released to the different schools should not be used by the DO and should strictly adhere to the provisions provided under DepEd Order No. 13, series 2016, in the use of MOOE.

RO XIII

DOs Surigao del Norte, Surigao City and Surigao del Sur

As admitted by the Management of Gigaquit NSHI and Masgad NHS in DO Surigao del Norte, the gender issues to be addressed were not explicitly stated/identified prior to the decision to travel to Tagbilaran City for the benchmarking activity. It can be gleaned that the said activity was not a result of gender analysis made by the Focal Point System, thus fall under a social, rest and recreation activities. Likewise, charging of traveling expenses of the Division Office personnel and District Supervisors to school’s continuing MOOE allocations, specifically appropriated for school’s operations, indicates unauthorized use of public funds, thus considered irregular. The Audit Team rejoined and maintained its stand that the payment of legal services of DO Surigao City should comply with the requirements as prescribed under the GAA. The prescribed rate of ₱2,500.00 per court appearance or the maximum amount of ₱10,000.00 per month for FY 2016 payments; not to exceed 50 percent of the government lawyer’s basic salary per month, as amended in GAA FY 2017 should be followed and it is duly emphasized that payment is restricted only to the legal counsel’s appearance or attendance to court litigations. Hence, court appearance to support the monthly payments made should be submitted for our evaluation in audit. The Audit Teamrecognized the noble intention of the Management of DO Surigao del Sur to provide reading materials to Schools that needed it most, direct procurement of the same without adhering to the laws, rules and regulations is still irregular. The Management should have complied first all the documentary requirements and secure approval from the OSEC prior to the

287

Region RO/DO Auditor’s Rejoinder procurement of supplementary reading, reference, and other instructional materials.

Delayed/non-submission of Financial and Budgetary Reports 19. The delay/non-submission by the ROs, DOs and Schools of financial and other

reports and documents contrary to PD No. 1445 and other pertinent rules and regulations, as well as deficiencies noted in reporting, prevented the Audit Teams to conduct timely review and evaluation of recorded transactions for the immediate corrections of any deficiencies noted and lessened the usefulness or value to the intended users thereof.

19.1. A number of DepEd ROs,DOs and Schools were reported delayed or failed to

submit financial reports, records and other required documents contrary to the pertinent provisions of PD No. 1445, Government Accounting Manual, COA Circulars and other applicable laws, rules and regulations. Moreover, some of these Offices also failed to maintain or update their books of accounts, financial records and registries precluding the timely audit of affected agency transactions

19.2. The pertinent laws, rules and regulations applicable to these observations are as

follows:

a. Section 7.1.1(a) of COA Circular No. 2009-006 dated September 15, 2009 provides that, “the head of the agency, who is primarily responsible for all government funds and property pertaining to his agency, shall ensure that: a) the required financial and other reports and statements are submitted by the concerned agency officials in such form and within the period prescribed by the Commission, xxx.”

b. Section 122 of PD No. 1445 provides that, “ xxx require the agency heads,

chief accountants, x x x to submit trial balances, x x x, and such other reports as may be necessary for the exercise of its functions. (2) failure on the part of the officials concerned to submit the documents and reports mentioned herein shall automatically cause the suspension of payment of their salaries until they shall have complied with the requirements of the Commission.”

c. Section 2, Chapter 1 of the Government Accounting Manual - Coverage.

This Manual presents the basic accounting policies and principles in accordance with the Philippine Public Sector Accounting Standards (PPSAS) adopted thru COA Resolution No. 2014-003 dated January 24,

288

2014 and other pertinent laws, rules and regulations. It includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002 dated January 30, 2013, as amended; the accounting procedures, books, registries, records, forms, reports, and financial statements; and illustrative accounting entries. It shall be used by all NGAs in the:

1) preparation of the general purpose FS in accordance with the PPSAS and other financial reports as may be required by laws, rules and regulations; and

2) reporting of budget, revenue and expenditure in accordance with laws,

rules and regulations.

19.3. Pertinent COA issuances set the timelines for the submission of various financial statements/reports, as follows:

Report Title Deadline Basis

Report of Collections and Deposits (RCD), Report of Disbursements (ROD), Report of Checks Issued (RCI), Liquidation Reports (LR), Report of Accountability for Accountable Forms (RAAF)

Every 10th day after the end of each month

Sec.7.2.1.a of the Rules and Regulations on the Settlement of Accounts (RRSA) as prescribed under COA Circular No. 2009-006 dated Sept. 15, 2009

Monthly Trial Balances (TBs) and supporting Journal Entry Vouchers (JEVs)

10 days after the end of the month

Section 60b, Chapter 19 GAM Vol. I

Quarterly Financial Statements (FS) and supporting schedules (SS)

10 days after the end of the quarter

Yearend TBs, FSs, SSs On or before January 20 of the following year

Bank Reconciliation Statements (BRS) 20 days after the receipt of the monthly BS

Section 7, Chapter 21, GAM Vol. I

Statement of Appropriations, Allotments, Obligations, Disbursements and Balances – FAR No. 1 (SAAODB)

30 days after the end of each quarter

Section 32a, Chapter 3, GAM Vol. I

Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of Expenditures – FAR No. 1.A (SAAODBOE)


List of Allotments and Sub-Allotments – FAR No. 1.B


Aging of Due and Demandable Obligations – FAR No. 3

On or before 30th day following the end of the year

Monthly Report of Disbursements – FAR No. 4

On or before 30th day of the following month covered

Section 32c, Chapter 3, GAM Vol. I

Quarterly Report of Revenue and Other Receipts – FAR No. 5


289

19.4. Evaluation of monitoring of reports/records of several DepEd Offices and Schools revealed the following deficiencies on the preparation and submission of the required financial reports/records and documents:

a. Delayed submission of Financial Reports, Records and Documents

Region/DO/IU Number of Days Delayed Reports

NCR Quezon City w/ 42 IUs 1-371 TB/FS/RCI/RADAI/BRS/Liquidation Reports Manila City w/ 32 IUs 21-345 RCI & DV/JEVs/TB/BRS/FS/Liq Reports/Payrolls Caloocan City w/ 15 IUs 1-204 FS/BRS/RCI/DVs/JEVs/FARs Malabon City w/ 6 IUs 112-447 RCI/DVs/JEVs/TB/FS/BRS/RAAF/RCD/OR Pasig City w/ 10 IUs 1-1069 RCI & Paid DVs/Liquidation/BRS/TB/FS/RCD Marikina City w/ 4 IUs 2-265 RCI & Paid DVs/Liquidation/BRS/TB/FS

San Juan City w/ 1 IU 3-296 RCI & DVs/Liquidation/BRS/TB/FS/PAYROLLS

Mandaluyong City 11-314 ADA/RCI/DVs/JEVs/TB/FS/BRS/Liquidation Taguig City and Pateros with 5 IUs 1-361 ADA/RCI/DVs/TB/FS/BRS/RCD

RO I Ilocos Norte BFARs, BRs, FS, Trial Balance, Journals, Reports

of Check Issued, Disbursement Record/ Vouchers Ilocos Sur

BFARs, BRs, FS, Trial Balance, Journals, Reports of Check Issued, Disbursement Record/ Vouchers, Cashier's Report - Report of Collection & Deposit, OR, RAAF

Pangasinan II BFARs, BRs, FS, Trial Balance, Journals, Reports of Check Issued, Disbursement Record/Vouchers, Cashier's Report - Report of Collection & Deposit, OR, RAAF, CDR (MOOE Downloading), Liquidation Report

San Carlos BFARs, BRs, Reports of Check Issued, Disbursement Record/ Vouchers

Alaminos FS, Trial Balance, Journals, Reports of Check Issued, Disbursement Record/Vouchers, Cashier's Report - Report of Collection & Deposit, OR, RAAF

Dagupan City Liquidation Report RO III Cabanatuan City 4 months Monthly/Quarterly Trial Balance and Financial

Statements Pampanga 1-93 Malolos BRS (Marcelo Del Pilar NHS) RO IV - B

290


Puerto Princesa 6 months QRROR, TB, FS, BRS,RCD with the supporting official receipts, RCI with the disbursement vouchers and supporting documents, RAAF, JEV, RADAI, SLIIAE - supported with the LDDAP-ADA, Quarterly Physical Report of Operation

Romblon with 2 IUs 13-856 Corcuera National HS - Disbursement Vouchers, Payrolls, Receipts, Check/Cash Disbursement Journals, Cash Receipts Journal, Report of Checks Issued, JEV, Trial Balances and FS Concepcion NHS - Disbursement Vouchers, Payrolls, Receipts, Check/Cash Disbursement Journals, Cash Receipts Journal, Report of Checks Issued, JEV, Trial Balances and FS

Occidental Mindoro with 2 IUs

Disbursement Vouchers (DVs), payrolls, liquidation reports and Bank Statements

Palawan with 2 IUs SAAODB, SAAODBOE, LASA, SABUDB, SABUDBBOE, Aging of Due and Demandable Obligations, QRROR, RAAF, JEV, RCD, RCI, RADAI AND (SLIIAE) - supported with the LDDAP-ADA

Rio Tuba NHS - TB, FS with Schedules Quezon NHS - RCI, RS, RADAI - PS, RCI - MOOE and RADAI - MOOE, JEV, TB, FS with Schedules, BRS and RAAF

RO VIII Southern Leyte Division not indicated Quarterly Physical Report of Operation, Budget

Accountability Reports, SAAODBs

RO IX DO Sibugay and 8 IUs RCI, Liquidation Report and ADA

DO Pagadian City (ZSSAT) Cancelled Check were not attached to the RCI DO Zamboanga Del Sur (Bayog NHS and Tukuran TVHS)

RCI, RADAI, SLIIAE and LDDAP-ADAs and likewise, no copies from of Tukuran TVHS of the SLIIAE and LDDAP-ADAs issued attached to the disbursement vouchers, RANCAS, IoPs

DO Zamboanga Del Norte Year-end Financial Reports RO XI

Comval DO with 7 IUs FS/TB, DV, Liquidation Report/ Cdreg, RCD

Davao City DO with 13 IU's Paid DVs - MOOE / PS Panabo City DO with 2 IU's TB - EPIP and Provident Fund, DVs - PS and

MOOE (Panabo and Southern Davao NHS)

Davao Del Sur DO with 8 IU's

Bank Reconciliation Statement, DTR and Number or Leaves, DVs - LDDAP and Checks, BFARs

291


Matanao NHS - Check / ADA Disbursement and General Journal, CRJ, DVs, Payroll, DTR and Approved Leave, Jev and BRS

Davao Oriental DO with 6 IU's

Caraga NHS - TB, FAR No. 4 (MRD), Paid DVs - PS and MOOE, RCI

Mati City DO with 8 IU's Lupon National Comprehensive HS - TB, Paid DVS - PS and MOOE, GJ/GL, BRS, RCI and FAR No. 4 (MRD)

RO XIII DO Surigao Del Norte 7-81 Disbursement Vouchers, Report of Disbursement

and Bank Reconciliation Statement DO Dinagat Islands 21-242 Reports of Checks Issued, Disbursement Vouchers

and Report of Disbursements of the SDO and its nine (9) IUs for the period January 1 to December 31, 2017, Quarterly Report on GPPAs

b. Non-submission of Financial Reports, Records and Documents

Region/DO/IU Reports Period Covered

RO II RO SL DO Iligan GL & SL (DO, Isabela NHS, Isabela School

of Arts and Trades)

DO - Isabela GL & SL (DO, Callang NHS, Benito Soliven NHS, Cabatuan NHS, Sta. Maria NHS, Mabini NHS and Tumauini NHS)

DO Nueva Vizcaya SL RO III RO Proper Monthly/Quarterly Trial Balance and

Financial Statements, Report of Collections and Deposits (RCD)/Ors, Liquidation Report

1. Fund 101-May-Aug 2017

2. RELC-June-Aug 2017 3. Provident – July –Aug.

2017 4. EPIP & SBP4BE-

May-Aug. 2017 Tarlac Province Monthly/Quarterly Trial Balance and

Financial Statements, RCI, DVs, RADAI 1. MDS-May-Dec 2017 2. Provident-Jan-Dec

2017 3. Trust Fund-Jan-Dec.

2017 Zambales Monthly/Quarterly Trial Balance and

Financial Statements, JEV, Contracts / PO TalTal NHS - Jan-March 2017 and Sept-Dec. 2017

San Jose Del Monte Bank Reconciliation Statements BRS for Towerville NHS Aurora Contracts / PO, Budget and Financial

Accountability Report Dingalan NHS

Bulacan Contracts / PO

292

Region/DO/IU Reports Period Covered Cabanatuan - Gapan Contracts / PO, Notice of Delivery, Monthly

Report of Official Travels and Monthly Report of Fuel Consumption

Driver’s trip ticket not prepared and not properly accomplished

Mabalacat Contracts / PO Mabalacat NHS, Camachiles NHS, Dona Asuncion Lee Ingrated School and Madapdap NHS

Munoz Contracts / PO, Notice of Delivery, Monthly Report of Official Travels and Monthly Report of Fuel Consumption, SAAODB – FAR No 1, QRROR- FAR 5, ADDO-FAR No. 3, MRD – FAR No. 4, Consolidated SAOB


Olongapo Contracts / PO San Jose City Contracts / PO, Notice of Delivery, Monthly

Report of Official Travels and Monthly Report of Fuel Consumption, SAAODB – FAR No 1


Angeles City Budget and Financial Accountability Report Cabanatuan - NE SAAODB – FAR No 1 CSEF RO IV-B Puerto Princesa City BRS, RCI, RADAI, RAAF, JEV, Trial

Balance and Financial Statements with corresponding schedules

Jan – Dec 2017

RO IX Zamboanga monthly trial balances, BRS, financial

reports - such as RCI, Reports of Disbursements, RCD, and all their supporting documents- disbursement vouchers, liquidation reports, supporting schedules

Zamboanga Del Sur GSIS electronic billing/actual remittance of Bayog NHS for CY 2017 with corresponding variance representing the unremitted/undeducted amounts of the Agency in violation to Section 122 of PD 1445

Sibugay Monthly Fuel Consumption and Monthly Official Travel

Jan – Dec 2017

Zamboanga Del Norte Monthly, quarterly and semestral financial reports

Only the year-end financial reports were submitted on February 14, 2018 which is not within the timeframe prescribed by regulation which is on or before January 20, of the

293

Region/DO/IU Reports Period Covered following year.

RO XIII RO DVs and the supporting documents of 1,945

transactions in the total amount of ₱1,699,899,547.09

Jan 1 to Dec 31, 2017

Agusan del Sur BAR and Financial Accountability Reports (FAR) – Nos. 2, 2A,

FAR No. 4 and FAR No.3 CY 2017 Quarterly Financial Statements (DO and Consolidated)

4th Quarter of 2017

Agusan del Sur Monthly Financial Reports: Trial Balance, Check Disbursement Journal, Advice to Debit Disbursement Journal, Cash Disbursement Journal, General Journal and Cash Receipt

Dec 2017

Subsidiary Ledges and General Ledgers July to Dec 2017

Various Disbursement Vouchers and Report of Check Issued (RCI)

July to Dec 2017

Bayugan City FAR No. 1 3rd and 4th Quarters

FAR No. 2A 2nd Quarter

FAR No. 3 1st to 4th Quarters

FAR No. 5 2nd Quarter Surigao del Norte Disbursement Vouchers – PS and MOOE PS - Sept – Dec 2017

Provident Fund (PF), MDS-Trust, Trust Fund, BRS, MOOE – Oct – Dec 2017

Financial Statements PF - Nov - Dec 2017

MDS-Trust – Sept – Dec 2017

Trust Fund -Feb, May and July 2017

BRS – Nov – Dec 2017

FS – Jan - Dec 2017

Claver NHS Disbursement Vouchers Oct to Dec 2017

Bank Reconciliation Statements June to Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

Jan - Dec 2017

Gigaquit NSHI Disbursement Vouchers Aug - Dec 2017 Bank Reconciliation Statements Aug - Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net

Nov - Dec 2017

294

Region/DO/IU Reports Period Covered Assets/Equity)

Masgad NHS Disbursement Vouchers Oct - Dec 2017 Bank Reconciliation Statements March, April and Aug to

Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

Jan - Dec 2017

Matin-ao NHS Disbursement Vouchers Oct - Dec 2017 Bank Reconciliation Statements Oct - Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

December 2017

Placer NHS Disbursement Vouchers Aug - Dec2017 Bank Reconciliation Statements Jun – Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

Jul – Dec 2017

Taganaan NHS Disbursement Vouchers Sept – Dec 2017 Bank Reconciliation Statements December 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

December 2017

Tubod NHS Disbursement Vouchers Aug – Dec 2017

Bank Reconciliation Statements Jul – Dec 2017 Financial Statements (Trial Balance, Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, Statement of Changes in Net Assets/Equity)

Mar – Dec 2017

Surigao City Disbursement Vouchers Jul – Dec 2017 Bank Reconciliation Statements Jan – Oct 2017 Liquidation Reports Aug – Dec 2017

Dinagat Islands Monthly and/or quarterly BFARs (SDO Proper & Consolidated BFARs)

Last three quarters of CY 2017

Quarterly Report on GPPAs 3rd and 4th Quarters of 2017

295

Region/DO/IU Reports Period Covered Surigao del Sur and 24 Implementing Units (UIs)

Disbursement vouchers and its supporting documents totaling ₱633.296 million for CY 2017 transactions

Financial Statements / Trial Balance Bank Reconciliation Statements

Tandag City and 2 IUs Disbursement vouchers and its supporting documents in the total amount of ₱55,347,006.66

CY 2017 transactions


Bislig City and 2 IUs Disbursement vouchers and its supporting documents in the total amount of ₱115.532 million

CY 2017


Siargao 512 Disbursement Vouchers with amounts aggregating ₱225,924,595.23 and paid through the issuance of Checks and List of Due and Demandable Accounts Payable with Advice to Debit Account (LDDAP-ADA) and its related supporting documents

Del Carmen NHS and Socorro NHS

Disbursement Vouchers, Payrolls and other supporting documents

Oct – Dec 2017

Bank Reconciliation Statement Aug – Dec 2017

c. Non-compliance with Revised Chart of Accounts and Government

Accounting Manual

Region/DO/IU Audit Observations/Deficiencies

RO IX Isabela City Examination of the SL/GL for CY 2017 disclosed that the financial transactions

of the DO-Isabela City were not recorded in chronological order. The Cash Division submitted the paid Disbursement Vouchers together with the Checks and ADA Disbursements Record (CkADADRec) to the Accounting Division weekly/monthly as a basis for recording in the books of accounts, except for few Disbursement Vouchers when the payees do not have account maintained with the Authorized Government Depository Bank (AGDB). However, some of the cash disbursements were recorded after several months and not as payment occurred. NCAs were recorded at the end of the month or the following month. Furthermore, the Audit Team noted that the Designated Personnel prepared BRS based on the cash balance per CkADADRec instead of the GL Balance. The Accounting and Cash Division do not reconcile their records on a regular basis contrary to Section 181 of the GAAM. For this reason, there is no way of determining the accurate cash balance per GL/SL. Thus, several reconciling items and adjustments were not immediately recorded in the books of accounts.

DO Zamboanga Del Sur - Bayog NHS

The claimant/payee of Bayog NHS often fails to indicate critical information such as the number and the date of the check, bank name and account number, and official receipt (OR) number and date of other relevant documents issued to acknowledge the receipt of payment in the Box E of the Disbursement

296

Region/DO/IU Audit Observations/Deficiencies Vouchers as required under Volume I of the GAM (Appendix 32).

DOZamboanga Del Sur and Mahayag NHS

Verification of registries maintained by the Budget Officer disclosed that the RAOD for Personnel Services (PS), MOOE and Capital Outlay (CO) are not in the precribed forms. The RAODs do not have the specific columns for Due and Demandable and Not Yet Due and Demandable. Moreover, they do not have a column for the date of the reference document. Although, columns for “Payee” and “Particulars” were added for additonal information, however, the reference number for GARO/SARO/ORS/Reports of Checks Issued (RCI)/Report of Advice to Debit Account Issued (RADAI)/Tax Remittance Advice (TRA)/JEV/Notice of Obligation Request and Status Adjustment (NORSA) with the original ORS number adjusted are not recorded.

DO Pagadian City and three IUs (PCNHS, ZSNHS and ZSSAT)

Verification of registries maintained by the Budget Officer of DO of Pagadian City disclosed that the RAOD for PS and MOOE are not in the prescribed forms. The allotments, obligations and disbursements for CO were recorded in the RAOD for MOOE instead of recording them in a separate RAOD for CO. Likewise, PCNHS, ZSNHS and ZSSAT disclosed that their Budget Sections did not maintain the RAOD and RAPAL as prescribed in the aforementioned provisions of the GAM, Volume I and its corresponding appendices in their new forms. Moreover, Registry of Revenue and other Receipts for Internally Generated Funds (RROR-IG/Off-Budgetary Funds/Retained Income Funds)/Business Related Funds) and RAPAL were not maintained as required under the Volume I of the GAM.

DO Sibugay In the reconciliation of accountability in the accounts of the AO, it was observed that the Cash Disbursement Record (CDR) for advances were not kept separately in accordance with its purpose such as Advances for Payroll, Advances to Special Disbursing Officer and Advances for Operating Expenses. The monthly closing of CDRs including the Petty Replenishments Record (PRR) and updating of records were not also practiced by the AO as observed during the cash count as it failed to present the above stated records.It was also noted that the accounting records based on the certification issued by the Accountant, the accountability of the AO was not properly classified in accordance with its purpose. The recorded SL incurred so many adjustments resulting in abnormal balance and was compensated by acknowledging or establishing CAs of which the amount does not reflect the actual CA granted to the AO in order to arrive at a normal balance of the account

DO Dapitan City Evaluation of the existing accounting processes and procedures adopted by the DO using the internally created accounting software known as Government Accounting and Financial Reporting (GAFR) revealed several major deviation of vital processes contrary to GAM as summarize hereunder.

Particulars GAM GAFR Disbursements through check and ADA - basis for preparing JEV

Report of Check Issued (RCI) or Report of ADA Issued (RADAI) together with the supporting documents (e.g. paid DVs)

Individual disbursement voucher and classified further into sub-fund.

Disbursements through cash - basis for preparing JEV

Report of Cash Disbursement (RCDisb) together with the supporting documents (e.g. paid payroll)

Report of Cash Disbursement (RCDisb) together with the supporting documents (e.g. paid payroll)

297

Region/DO/IU Audit Observations/Deficiencies Recording of receipt of cash through Collecting Officer – basis for preparing JEV

Report of Collections and Deposit (RCD) together with official receipts (ORs) and validated deposit slips

Report of Collections and Deposit (RCD) and classified further into sub-fund.

Form of JEV With prescribed form (Appendix 36)

Not in prescribed form

Maintenance of Special Journals

The Special Journals to be maintained are Check Disbursement Journal (CkDJ), Advice to Debit Account Disbursement Journal (ADADJ), Cash Disbursement Journal (CDJ) and Cash Receipts Journal (CRJ)

Features for Special Journals were present in the system but were not maintained.

Form of Special Journals

With prescribed form CkDJ – Appendix 4 ADADJ – Appendix 52 CDJ – Appendix 3 CRJ – Appendix 2

Special Journals were not in accordance with the prescribed forms.

Maintenance of General Journal

General Journal shall be used to record transactions not qualified under any of the Special Journals (e.g. adjusting entry)

General Journal was maintained but subdivided into Responsibility Centers (e.g. MOOE – Elementary, MOOE – Secondary)

Form of General Journal

With prescribed form (Appendix 1)


Aggregation of financial data in the General Ledger

Based on the Special Journals and General Journal

Based on sub-fund category

Form of General Ledger

With prescribed form (Appendix 5)


The accounting procedures adopted by the DO through the use of GAFR were contrary to the GAM. The manner in the preparation and recording of JEV up to the posting to the General Ledger as well as the use of prescribed forms were not in conformity with the provisions in the GAM.

RO XIII DO Agusan del Sur

The School Head of four Implementing Units certifies as to the correctness of the journal entry in the JEV instead of the Accountant/Bookeeper. The Status of Obligation in the ORS attached in the DVs of six IUs were not accomplished.

DO Surigao del Norte Use of prescribed cashbooks and recording of transactions of the Accountable Officer were either not maintained or updated regularly by the Disbursing Officer as, a) all cashbooks maintained were not GAM-compliant; b) Check and ADA Disbursements Record for PRIME Fund was not maintained; and c) monthly adjustments and lapsed NCAs were not recorded and reflected in the cashbooks.

298

Region/DO/IU Audit Observations/Deficiencies Alegria NHS (DO Surigao del Norte)

The Disbursing Officer failed to support the corresponding liquidation of her cash advances in the proper RCDisb and submit it separately together with the supporting documents to COA; but were instead attached in the Disbursement Voucher for its cash advance transaction.

DO Dinagat Islands Box “A” of 213 DVs of 1 Empowered National High School, which contain certifications such as the necessity and legality of the expenses/cash advances, were not signed by the School Head or Head of the Requesting Party.

DO Siargao Islands

The Disbursing Officer failed to prepare the Report of Cash Disbursements to present the utilization of cash advances, thus, details in the utilization/disbursements of cash advances and its balances, if any could not be properly monitored. Receipt of Notices of Cash Allocation (NCA) and non-cash transactions recorded in the books of accounts were not supported with complete documentation.

DO Surigao del Sur Cash Advances granted to the Disbursing Officer of Solomon National High School includes traveling expenses for other Accountable Officers, thereby indicating transfer of cash advances from one Accountable Officer to another.

DO Tandag City Cash Disbursements Records were not properly maintained.

19.5. The above deficiencies not only hindered the Audit Team from conducting a timely and thorough review and evaluation of the correctness of those reports, but also prevented the early detection and correction of any deficiency/error noted in audit. It also precluded the Audit Teams from submitting timely and complete reports to the Commission on Audit which data/information are culled from these monthly/quarterly accounting reports thereby adversely affecting the correctness of the consolidated reports.

19.6. The required financial/budgetary reports when not submitted promptly lose their

usefulness to the intended users. 19.7. We recommended that the Schools Division Superintendent/ Principals:

a. direct the Accountant/Bookkeepers and Budget Officers to submit the

accounting and budgetary reports in the required form, within the period prescribed to enable the Audit Team to render a more timely audit of financial transactions;

b. cause the suspension of payment of salaries of the Accountant and

Bookkeepers for failure to comply with the reporting requirements of the Commission on Audit in accordance with Section 122 of PD No. 1445; and

c. observe strict compliance with the applicable provisions of the GAM

and the RCA for NGAs as prescribed under COA Circular No. 2013-002 dated January 10, 2013.

299

Non-compliance with RA No. 9184 and other issuances on government procurement

20. The DepEd CO and nine ROs did not faithfully adhere to laws, rules and regulations on government procurement prescribed under RA No. 9184 and its

300

Revised Implementing Rules and Regulations (IRR), existing COA regulations on the submission of contract and related documents, and DepEd relevant guidelines on the matter, that resulted in lapses in the procurement process, and likewise precluded the conduct of timely auditorial review on the legality, validity and reasonableness of the terms and conditions of the contract, and to ascertain completeness of delivery and compliance to specification requirement, hence, casting doubts on the integrity and reliability of the procurement processes and reasonableness of the awarded contracts amounting P1,568,147,479.12.

20.1 Section 3 of the revised Implementing Rules and Regulations (IRR) of Republic

Act No. 9184, otherwise known as the Government Procurement Reform Act enumerates the governing principles on Government Procurement. These are as follows: a. Transparency in the procurement process and in the implementation of

procurement contracts through wide dissemination of bid opportunities and participation of pertinent non-government organizations.

b. Competitiveness by extending equal opportunity to enable private

contracting parties who are eligible and qualified to participate in public bidding.

c. Streamlined procurement process that will uniformly apply to all

government procurement. The procurement process shall be simple and made adaptable to advances in modern technology in order to ensure an effective and efficient method.

d. System of accountability where both the public officials directly or

indirectly involved in the procurement process as well as in the implementation of procurement contracts and the private parties that deal with GOP are, when warranted by circumstances, investigated and held liable for their actions relative thereto.

e. Public monitoring of the procurement process and the implementation

of awarded contracts with the end in view of guaranteeing that these contracts are awarded pursuant to the provisions of the Act and this IRR, and that all these contracts are performed strictly according to specifications.

20.2 The revised IRR is promulgated pursuant to Section 75 of RA No. 9184,

otherwise known as the “Government Procurement Reform Act,” for the purpose of prescribing the necessary rules and regulations for the modernization, standardization and regulation of the procurement activities of the Government of the Philippines (GOP).

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20.3 On the other hand, COA Circular No. 2009-001 dated February 12, 2009 provides the guidelines on the submission of copy of government contracts, purchase orders and their supporting documents to the Commission on Audit, as well as the related penalty clause on non-compliance thereto. The pertinent provisions are as follows:

1.3.1 Within five (5) working days from the execution of a contract by the

government or any of its subdivisions, agencies or instrumentalities, including government-owned and controlled corporations and their subsidiaries, a copy of said contract and each of all the documents forming part thereof by reference or incorporation shall be furnished to the Auditor of the agency concerned. In case of agencies audited on an engagement basis, submission of a copy of the contract and its supporting documents shall be to the Auditor of the mother agency or parent company, as the case may be.

1.3.3 Any unjustified failure of the officials and employees concerned to

comply with the requirements herein imposed shall be subject to the administrative disciplinary action provided in (a) Section 127 of Presidential Decree No. 1445; (b) Section 55, Title I-B, Book V of the Revised Administrative Code of 1987; and (c) Section 11 of Republic Act No. 6713.

20.4 DepEd Order No. 12, s. 2014 dated March 6, 2014 provides that the School

Division Office (SDO) are prohibited from undertaking centralized procurement of any good or service out of school MOOE intended for distribution to schools in kind.

20.5 Audit of procurement transactions in CY 2017 disclosed that the Management

ofCO and several DepEd ROs/DOs and schools have not complied with the provisions of RA No. 9184 and other existing rules and regulations covering government procurement. These are summarized as follows:

CO/Region Operating Unit Deficiencies/Lapses Amount CO

OSEC Deficiencies in the terms and specification in the bidding documents, procedural lapses in the evaluation process and non-compliance to timelines under the Revised IRR of RA No. 9184, resulted in filing of protest/charges against DepEd Officers and Bids and Awards Committee (BAC) members and created doubts as to the reasonableness of the award. The the awarded contracts were higher by an aggregate amount of P100,605,701.85, a substantial savings missed/forgone.

100,605,701.85

NCR

DO Manila The five repair projects were not included in the Annual Procurement Plan (APP) for CY 2017 of the Division of City School Manila.

Non-observance of the provisions in Section 48.2 requiring the Procuring Entities to adopt public bidding as the general mode of procurement and alternative

4,978,921.39

302

CO/Region Operating Unit Deficiencies/Lapses Amount methods to be resorted to only in the highly exceptional cases provided for in this Rule.

There is a clear indication of splitting for the purpose of evading or circumventing the requirements of the 2016 Revised IRR of RA No. 9184, especially the necessity of public bidding.

DOs Pasig City, Marikina City, Makati City, Taguig City and Pateros

Five secondary/implementing schools with separate books of accounts had not prepared/submitted the APP for CY 2017, contrary to Section 7 of the Revised IRR of RA No. 9184.

Actual cost incurred on repair and maintenance of four IUs under three DOs exceeded the estimated budget per approved APP for CY 2017, contrary to Sections 7.1 and 7.2 of the Revised IRR of RA No. 9184.

3,837,221.94

DO Taguig/ Pateros

Taguig NHS and Gen. Ricardo G. Papa Sr. Memorial HS had not furnished the COA Audit Team with advance copies of contracts, purchase and job orders within five days from the execution thereof, as well as notice and/or documents of deliveries made. Consequently, it prevented the Audit Team to conduct timely review of contracts, inspection of items delivered and for Management to have the opportunity to correct any deficiencies at the earliest time possible.

-*

RO I La Union Non-conduct of Public Bidding for the procurement of printed test materials and violation of DepEd Oorder No. 13 s. 2016 on the prohibition from undertaking centralized procurement of any good or service out of school MOOE intended for distribution to schools in kind.

2,354,466.00

Laoag City,Batac City and San Carlos City

Copies of POs and perfected contracts with notice of deliveries during the year 2017 together with their supporting documents were not submitted to the Audit Team within the prescribed period, thus hindered the Audit Team to timely verify the validity and propriety of the procurement.

-*

RO II Isabela Non-preparation of APP for CY 2017 and Project Procurement Management Plans (PPMPs) contrary to Section 7 of the Revised IRR of RA No. 9184, thus it could not be ascertained whether the procurements during the year were meticulously and judiciously planned which is also crucial to the effective discharge of government functions.

340,656,700.98

ROP Isabela Ilagan Batanes Cauayan Santiago

Failed to furnish the Audit Team with purchase orders and copies of perfected contracts together with its supporting documents within five days from the execution of the contract as required under COA Circular 2009-001 dated February 12, 2009.

157,596,018.60

RO III Aurora Failure to terminate contracts despite the incurrence of negative slippage of more than 15 percent. The BAC composition ofthe school consists ofonly three members, the BAC Chairman and the two BAC Members in violation of Section 11.2.1 of the Revised

19,453,547.52

303

CO/Region Operating Unit Deficiencies/Lapses Amount IRR of RA No. 9184.

Casiguran NHS Contract wasawarded without scope of work, specified approved budget, approved program of work and plan in violation of Section 17.6 of the Revised IRR of RA No. 9184.

9,964,858.11

Nueva Ecija Pampanga

Procurement of common-use supplies was made thru shopping rather than thru the Procurement Services, Department of Budget and Management (PS-DBM). Submitted contracts have lacking documents pursuant to the requirement set forth under RA No. 9184.

3,335,030.73

Zambales Imposed an insufficient Liquidated Damages for late deliveries resulting to overpayment to the supplier

12,966.88

DOs Bulacan, Cabanatuan City, Gapan City, Muñoz City, Olongapo City, San Jose City and Zambales

Seven DOs and six schools failed to submit copies of Government Contracts, POs and their supporting documents to the Office of the Auditor for the payments made to various suppliers for the procurement of training materials, office supplies, medical supplies and Job Orders for repairs, thus, precluding timely review of the transactions and inspection of deliveries.

-*

RO IV-B ROP and DO Romblon

Copies of perfected contracts/POs together with the supporting documents were not submitted to the Office of the Auditor within five working days from the execution/issuance thereof, thereby precluding the immediate auditorial review and communication to the Management in case there may be deficiencies noted thereon.

-*

Oriental Mindoro Calapan City

Variation Orders included extra works that were not within the general scope of the projects as bidded and awarded.Variation Orders in 45 schools in both Division Offices were not supported with documents showing the justification for Change Order and Extra Work Orders, the date and results of inspections conducted, and the detailed breakdown of cost for variation orders, contrary to Item 1.5.a of Annex E of the Revised IRR of RA No. 9184.

6,066,522.13

Romblon Invitation to Bid and Request for Quotations (RFQs) were not posted at any conspicuous place in the premises of the procuring entity. Likewise, the Notice of Award, Notice to Proceed and the approved contract were not posted in the PhilGEPS. No invitations were sent to a private group, like Philippine Institute of Civil Engineers (PICE) who has expertise relevant to infrastructure projects to observe the BAC proceedings in all stages of procurement process.

-*

Occidental Mindoro

Although P4,117,750.68 out of the total costs of Contracts/POs of P81,363,260.43 or 5.06 percent was submitted to the Office of the Auditor, still 94.94 percent did not undergo timely auditorial review due to the failure of Management to comply with the provisions of COA Circular No. 2009-001 dated February 12, 2009.

77,245,509.75

304

CO/Region Operating Unit Deficiencies/Lapses Amount Oriental Mindoro Out of P1,597,153.50 supplies purchased by the DO,

P1,266,158.25 or 79.28 percent pertains to purchase orders with amounts exceeding P50,000.00 each. Invitation or request for price quotations of these purchases should have been posted in the PhilGEPS to conform to the prescribed procedure of Shopping and Small Value Procurement as provided in Section 54.2 of 2016 Revised IRR of RA No. 9184.

1,266,158.25

RO VIII Don Juan F. Avalon NHS Sta. Margarita NHS

Management omitted the creation of BAC to facilitate the attainment of valid and appropriate processes and the absence of APP renders all procurements doubtful as to validity.

224,804.13

Calbayog City Several deficiencies concerning procurement on Infrastructure, mostly comprising of incomplete documentation and omission in submitting pertinent contracts to COA for review as to legality and propriety as well as delivery delays not sanctioned with liquidated damages were noted in audit.

12,609,225.16

Biliran APP for CY 2017 was submitted by the Management; however, the plan was not supported with the PPMP of each Division/Office/Unit of the Agency. Thus, it is not clear how the agency was able to arrive at the total requirement for supplies and office equipment sought to be procured during the year. Moreover, the APP showed several supplemental APPs that were attached to it.

-*

Northern Samar The propriety and legality of the payment for various Repair and Rehabilitation of School Buildings Damaged by Typhoon Glenda and Nona in different locations for CY 2017 could not be ascertained due to the absence of relevant procurement documents and the failure to submit them together with pertinent Contracts.

254,824,898.06

Lalawigan NHS Culaba NVS Kawayan NHS San Antonio Agricultiral and Vocational School Sta. Margarita NHS Hinabangan NHS

Procurement of goods and services were thru reimbursement instead of having been paid by checks directly to suppliers.The said transactions neither passed thru the required procurement processes contrary to COA Circular No. 97-002 and Section 48.2 of the Revised RIRR of RA No. 9184. Also, no APP was likewise prepared as guide for undertaking the procurement.

475,604.66

DO Eastern Samar Copies of contracts, POs and their corresponding supporting documents of total procurements amounting to P217,044.29 were not submitted to the Audit Team within the reglementary period, thus, preventing timely review, evaluation, and validation of the physical existence, desired quality of goods, and satisfactory completion of services required in the agreements.

217,044.29

Ormoc City Eastern Samar

Shopping was resorted to in the procurement of goods and services aggregating P3,949,576.41 as well as P2,158,065.00 covering catering services and instructional materials, respectively, even if the cost thereof exceeded the thresholds prescribed in Annex “H” of the 2016 IRR of RA No. 9184.

6,107,641.41

305

CO/Region Operating Unit Deficiencies/Lapses Amount Boronggan City Purchases of office supplies and equipment were not

awarded to the bidder with Lowest Calculated and Responsive Bid (LCRB) based on price per item in contravention to the procedures outlined in Annex H of the 2016 IRR of RA 9184 leading to a calculated loss of government fund.

20,806.00

Leyte Fourteen contracts for Repair/Rehabilitation of School Buildings aggregating P49,052,142.15 with variation costs of more than ten percent were not covered by another contracts that should have been bidded out as prescribed under item 1.1 and 1.4, Annex “E” of the 2016 IRR of RA 9184.

49,052,142.00

RO IX Pagadian City Zamboanga Sibugay Molave VTS-SHS Bayog NHS

Non-adherance to the requirements on the procurement of tables, chairs, armchairs, internet services provider, printing machines, gasoline, fuel, lubricants which were made thru either reimbursement or small value procurement, as well as failure to submit documentary requirements and to justify for use of the alternative mode of procurement and procurement not based on the approved APP have been noted in audit. At DO-Sibugay, the implementation and completion of the repairs and rehabilitation of school buildings were executed even without the design plans with technical specifications required in the bidding documents and Section 17 or Revised IRR of RA No. 9184.

1,281,728.52

ROP and DOs Zamboanga del Sur and del Norte, Pagadian City, Sibugay, Isabela City and Dapitan City

Management failed to submit copies of perfected government contracts and its supporting documents in violation of Section 39 of PD No. 1445 and COA Circular No. 2009-001 dated February 12, 2009, depriving the timely evaluation of the legal and technical aspects of the contract.

160,020,000.00

RO XI RO Davao Del Norte Panabo City Tagum City

Non Posting of the Notice of Award (NOA), the Notice to Proceed (NTP), and the contract/purchase order in the website of the Philgeps, the website of the HOPE, if any, and in any conspicuous place reserved for this purpose in the premises of the Procuring Entity, and use of Small Value Procurement as an alternative mode of procurement on training and transportation were deficiencies observed in various procurement.

63,760,152.71

Tagum Procurement of goods was still undertaken by the BAC despite evident reference to brand names in violation of Section 18 of Revised IRR of RA No. 9184.

180,861.00

Davao Del Sur Davao Oriental

Procurement of goods and services for CY 2017 were undertaken without the approved APP and the PPMP in violation of Revised IRR of RA No. 9184, hence may invalidate the procurement process for lack of legal basis.

253,745.00

DOs Davao del Sur and Tagum City

Non-submission of perfected contracts and PO and the incomplete details in the PO issued by the ROP constitute non-compliance to COA Circular 2009-001 and Volume II of GAM, hence the control mechanism intended to ascertain legality, reasonableness, valid obligation and elimination of errors and/or inadvertence of non-obligation during the year may not be achieved.

114,629,870.77

306

CO/Region Operating Unit Deficiencies/Lapses Amount RO XIII DO Butuan Procurement for meals, food supplies, and other supplies

ranges from ₱64,000 to ₱500,000 and above were not posted in the electronic catalogue facility or PhilGEPS.

2,538,201.98

DO Agusan del Sur DO Baguyan City

Liquidated damages were not imposed from the final billings of the contractors despite delay in the completion of the projects, while the liquidated damages imposed for the delayed completion of the repairs/rehabilitation of classroom school building is doubtful in accuracy due to non-submission of verified Statement of Work Accomplishment as of the targeted completion date.

121,852.20

Agusan Del Sur Surigao del Norte San Francisco NHS Surigao del Norte NHS, Alegria, Campo and Tubod NHS Caraga Regional Science High School Siargao Island Carrascal NHS, Gamut (Barobo) NHS, Solomon NHS Tidman NHS Tandag City

Various disbursements were paid on a reimbursement basis and/or were done through shopping, direct negotiation and cash advance instead of competitive bidding or availed through DBM-PS. Various disbursements were also paid on a reimbursement basis, instead of making payments directly to the suppliers.

4,360,634.46

Balite National High School (DO Surigao del Norte)

Construction of school canteen and perimeter fence were done without Competitive Public Bidding.

478,101.31

Bayugan City Surigao del Sur DO Surigao del Sur

Procurement of food and accommodation for the Grade 6 Mass Training of Teachers under the Implementation of K to 12 Basic Education and Program was awarded to a supplier who failed to qualify one of the eligibility requirements and bids were not evaluated on equal footing. 40 contracts were awarded to a cooperative of which 24 contracts were not actually the lowest calculated quotation due to non – inclusion of tax in the evaluation of bids for tax-exempt cooperatives.

1,073,726.5

DO Surigao del Norte Dinagat Island Surigao del Sur Tandag City Bislig City

Contracts on the procurement of goods and services were either not submitted to the Auditor within 5 days after signing; not supported with the complete necessary documents; done without adhering to the proper bidding procedures, or were not fully disclosed in the report of publicized PAPs.

168,542,814.83

Total 1,568,147,479.12 *Amount not indicated

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20.6 Non-compliance had defeated the purpose of the law on transparency, competitiveness and accountability and may have placed the agency and its officer to possible risk of protests/complaint or charges filed by the losing bidders.

20.7 We recommended that the Management require concerned offices/schools

to observe strict compliance with the applicable provisions of the Revised IRR of RA No. 9184 and of other rules and regulations on government procurement.

20.8 The concerned offices and schools submitted their comments/justifications on

the aforementioned audit observations to the Audit Teams. Most of them replied that compliance with RA No. 9184 on agency procurement shall be strictly observed.

Gender and Development (GAD) 21. The implementation of Gender and Development Plan (GAD) Program for CY

2017 in DepEd CO and various ROs and DOs disclosed deficiencies, such as: (a) non-submission of the Annual Plan and Budget as well as the Accomplishment Reports to the Philippine Commission on Women (PCW); and (b) non-allocation/non-utilization of amount equivalent to five percent of total appropriations as GAD budget, contrary to the pertinent provisions of Section 30 of Republic Act No. 10924, otherwise known as the GAA of 2017, and Philippine Commission on Women (PCW)-National Economic Development Authority (NEDA)-Department of Budget and Management (DBM) Joint Circular No. 2012-01, thus limiting the process and benefits that may address gender issues. 21.1. Section 30 of the General Provisions of the GAA for FY 2017 provides that

“All agencies of the government shall formulate a GAD Plan designed to address gender issues within their concerned sectors or mandate…xxx. The GAD Plan shall be integrated in the regular activities of the agencies which shall be at least five percent of their budgets. xxx”.

21.2. For this purpose, activities currently being undertaken by agencies which relate

to GAD or those that contribute to poverty alleviation, economic empowerment especially of marginalized women, protection, promotion, and fulfilment of women’s human rights, and practice of gender-responsive governance are considered sufficient compliance with said requirement. Utilization of the GAD budget shall be evaluated based on the GAD performance indicators identified by said agencies.

21.3. Section 8.2 of the PCW-NEDA-DBM Joint Circular No. 2012-01 provides that

the GAD Focal Point System (GFPS) shall submit the final GAD Plan and Budget (GPB) and the corresponding GAD Accomplishment Reports (AR) to

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the PCW for review and endorsement to the DBM and Section 8.7 thereof requires agencies to submit their PCW-endorsed GPB to the DBM along with their annual GAD AR for the previous year in accordance with the budget call.

21.4. Furthermore, Section 1 of the PCW Memorandum Circular (MC) No. 2014-05

dated November 28, 2014 provides that, “Agencies shall regularly collect and generate sex-disaggregated data and statistics in support of the MCW indicators relevant to their agency. Such data shall be stored and maintained in the agency’s GAD database or similar system, updated as needed, and used in their policy and program development to address gender issues in their respective sectors, particularly in the preparation of their Annual GAD plans and budgets and accomplishment reports”.

21.5. Review/Audit of the implementation of GAD programs and projects for CY

2017 revealed the following observations/deficiencies:

a. Non-submission of the annual GAD Plan and Budget as well as the Accomplishment Reports to the Philippine Commission on Women (PCW) for review, approval and endorsement to the DBM reported in Regions – NCR (ROP, DOs Quezon City, Manila, Caloocan, Valenzuela, Malabon, Navotas, Pasig, Marikina, San Juan, Makati, Pasay, Parañaque, and Las Piñas); CAR (DOs Apayao, Baguio, Benguet, Ifugao, and Kalinga); Region II (DOs Batanes, Cagayan, and Tuguegarao City); Region III (DOs Science City of Muñoz, San Jose City, Cabanatuan City, Gapan City, Nueva Ecija, and Zambales);Region V (ROP, DOs Legazpi, Tabaco City, and Camarines Norte);Region VIII (DOs Maasin City, Ormoc City, Biliran, Samar, Catbalogan City, and Northern Samar); Region IX (ROP, DOs Zamboanga del Norte, Zamboanga del Sur, Pagadian City and IUs); Region XI (DOs Davao City, Davao del Sur and Digos City); and Region XIII (ROP,DOs Tandag City and Bislig City).

b. Non-allocation/non-utilization of the full amount of allocated budget for

GAD plan activities equivalent to five percent of total appropriations of the following regions:

Region Operating Units Total

Appropriations for FY 2017

Actual Budget for GAD

Actual GAD Expenses

NCR ROP, DOs Quezon City, Manila, Caloocan, Valenzuela, Malabon, Navotas, Pasig, Marikina, San Juan, Makati, Pasay, Parañaque, Las Piñas

29,399,409,531.90 17,275,625.00

9,017,082.34

RO I DOs Ilocos Norte, Laoag City, Ilocos Sur, Pangasinan II

2,759,207,691.23 137,960,384.56 15,271,862.04

310

Region Operating Units Total

Appropriations for FY 2017

Actual Budget for GAD

Actual GAD Expenses

RO II ROP, DOs Batanes, Cagayan, Cauayan City, Santiago City

5,928,419,815.61 271,065,953.33 164,927,696.46

RO IV-B ROP , DOs Marinduque, Palawan, Oriental Mindoro

6,212,770,220.23 168,600,131.82 102,800,749.34

RO V DO Legazpi City 456,845,000.00 1,641,069.28 1,048,017.00 RO VIII DOs Southern

Leyte, Calbayog City, Northern Samar, Maasin City, Ormoc City, Biliran

6,576,458,173.10 65,515,161.09 1,459,660.00

RO IX DO Zamboanga del Sur and 7 IUs, DO Pagadian City and 3 IUs

4,345,005,283.15 30,197,668.09 -*

*Amount not indicated

21.6. On the other hand, DepEd CO was able to present to the Audit Team the Department’s GAD plan and budget amounting to P10,166,910,000.00 or two percent of the agency’s total budget of P543,185,614,000.00 but did not make a separate GPB for DepEd OSEC. Based on the accomplishment report submitted, the only activity related to GAD conducted by CO was the conduct of Capacity Building Workshop for GAD Focal Point System (GFPS) for Technical Working Group(TWG) members. However, during the year, DepEd Order No. 32 s. 2017 on Gender-Responsive Basic Education Policy was issued on June 29, 2017, where it committed to integrate the principles of gender equality, gender equity, gender sensitivity, non-discrimination and human rights, in the provision and governance of basic education. Moreover, the Department through the issuance of DepEd Memorandum No. 52, s. 2017 showed support for the 2017 National Women’s Month Celebration with this year’s theme “We Make Change Work for Women”, and encourage all DepEd offices, including the regional and schools division offices and schools to undertake the following activities:

a. Production of Information, Education and Communication, b. Participation to Women’s Month Online Advocacy, and c. Organizing of their own or participation to Women’s Month information

campaigns/advocacy activities.

21.7. We recommended that the Management:

a. identify gender issues and concerns in GAD Plans and prioritize the preparation and submission of the annual GAD plan and budget to

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the PCW for review, approval and endorsement to the DBM, in adherence to the aforesaid regulations; and

b. strictly comply with the GAD annual budget allocation of at least five

percent of the appropriation thru attribution to the agencies/DOs regular projects and programs, and ensure the full implementation thereof, to address identified gender related issues.

Senior Citizens and Persons with Disability

22. Various DepEd ROs and DOs have failed to implement programs/projects and fully integrate in their regular activities at least one percent of their budget for plans/programs/projects that will address the concerns of senior citizens and persons with disability contrary to Section 31 of the General Appropriation Act (GAA) of CY 2017, thus the beneficiaries were deprived of the benefits due them.Nevertheless, the DepEd, in line with its thrust in providing quality and inclusive basic education for all, continues to provide the necessary educational interventions for learners with certain exceptionalities through its Special Education (SPED) program.

22.1 Section 31, General Provisions of the GAA for CY 2017, RA No. 10924

requires that “All agencies of the government shall formulate plans, programs and projects intended to address the concerns of senior citizens and persons with disability, insofar as it relates to their mandated functions, and integrate the same in their regular activities. The fund allocation for this purpose shall be at least one percent of the agency’s budget. Section 6.7 of the IRR of RA No. 9442 provides the same percentage of allocation”.

22.2 Moreover, all government facilities, including infrastructure, non-infrastructure

and civil works projects of the government, as well as office buildings, streets and highways, shall provide architectural or structural features, designs, or facilities that will reasonably enhance the mobility, safety and welfare of persons with disability pursuant to Batas Pambansa Bldg. 344 and RA No. 7277.

22.3 RA No. 7277 otherwise known as the Magna Carta for Persons with Disability,

as amended by RA No. 9442, provides privileges and incentives for persons with disability. The RA No. 9442 and its IRR grants additional privileges, incentives, and prohibitions on verbal, non-verbal ridicule and vilification against persons with disability. Section 2 of the IRR prescribes the procedures and guidelines for the implementation of the RA in order to facilitate compliance therewith and to achieve its objectives.

22.4 The purpose of granting privileges and incentives to persons with disability was

aimed to enhance their health, physical fitness, economic and social well-being and their integration into the mainstream of society.

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22.5 Disabled persons have the same rights as other people to take their proper place

in society. They should be able to live freely and as independently as possible. This must be the concern of everyone in the family, community and all government and non-government organizations. The rehabilitation of the disabled persons shall be the concern of the Government in order to foster their capability to attain a more meaningful, productive and satisfying life.

22.6 Verification revealed that the following agencies did not formulate plans,

programs and projects for the benefits of senior citizens and differently-abled persons – NCR (DOs Taguig, Pateros, Pasig, Manila, Parañaque, Las Piñas, Marikina, Caloocan, and Muntinlupa); Region I (ROP, DOs Dagupan, Ilocos Norte, Ilocos Sur, and Urdaneta City); Region II (DOs Cagayan and Tuguegarao City); Region III (ROP, DOs Aurora, Zambales, Olongapo, Nueva Ecija, Cabanatuan City, San Jose City, Gapan City and Science City of Muñoz, Mabalacat City);Region V (ROP and its DOs), Region IX (ROP, DO Isabela City); and Region XIII (DOs Cabadbaran and Surigao City).

22.7 As a result, the issues and concerns of senior citizens and persons with

disabilities were not addressed during the year, thus beneficiaries were deprived of the benefits due to them.

22.8 The Department, however, in line with its thrust in providing quality and

inclusive basic education for all, continues to provide the necessary educational interventions for learners with certain exceptionalities through its Special Education (SPED) program. The SPED program of DepEd provides a holistic approach in catering to the needs of learners with various exceptionalities. This program ensures that learners with exceptionalities will have access to quality education by giving them their individual and unique learning needs. This initiative caters to learners with visual impairment, hearing impairment, intellectual disability, learning disability, autism spectrum disorder, communication disorder, physical disability, emotional and behavioral disorder, multiple disability with visual impairment, and to those who are orthopedically handicapped, chronically ill, and gifted and talented. Up to date, DepEd has recognized a total of 648 SPED Centers and regular schools offering the program, 471 of which are catering to Elementary students and 177 are catering to High School students.

22.9 We recommended that the concerned Management formulate plans,

programs and projects, and allocate funds amounting to at least one percent of its budget intended to address the concerns of senior citizens and differently-abled persons, and to ensure the proper implementation thereof in compliance with Section 31 of the General Provisions of the GAA for FY 2017.

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Compliance with Property Insurance Law 23. The insurable properties in 10ROs with a total carrying amount of

₱16,219,553,250.54 were not insured with the General Insurance Fund (GIF) administered by the Government Service Insurance System (GSIS) despite the mandatory requirement to insure all government properties with the GIF pursuant to Administrative Order No. 33 dated August 25, 1987, COA Circular No. 92-390 dated November 11, 1992 and Republic Act No. 656, the Property Insurance Law as amended by PD No. 245 dated July 13, 1973, thereby, exposing these properties to the risk of not being compensated in the event of damage or loss due to any fortuitous events such as fire, earthquake, typhoon and/or flood.

23.1 Administrative Order No. 33 dated August 25, 1987 requires the Government,

except a municipal government below first class, to insure its properties with the General Insurance Fund against any insurable risk. It further requires the submission of an updated inventory of all the insurable properties to the General Insurance Fund on forms prescribed by Government Service Insurance System.

23.2 Section 3.1 of COA Circular No. 92-390 dated November 17, 1992 provides

that, all heads of national agencies, local government units and government owned or controlled corporations shall be responsible for the preparation and submission of the inventory of all insurable physical assets; while, Section 3.2 thereof requires submission of said inventory report to the GSIS not later than October 31 of the ensuing year.

23.3 Republic Act No. 656, as amended by PD No.245 or the Property Insurance

Law requires all government agencies to have their insurable properties, assets and interests insured with the GIF administered by the GSIS to ensure compensation of the equivalent value thereof in case of loss thru fire, theft, earthquake or any unforeseen events.

23.4 The GSIS shall require the inventory of the property belonging to each

government, determine the value thereof for purposes of insurance, and advise the government concerned of the total premiums each shall pay to the Fund. The government concerned shall, upon receipt of advice from the System, set aside from any savings in its appropriation the amount needed for such premiums. The premium corresponding to the insurance of properties belonging to an entity operated with a special fund shall be payable from said fund, otherwise, from the general fund.

23.5 In recent years, the weather conditions in the Philippines have drastically

changed. Typhoon and flooding has become more frequent while earthquakes have turned into a risk that is difficult to ignore. Different catastrophic threats may either damage or completely destroy building/school structures and other

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properties that are important education resources. To protect these properties, Fire and Allied Perils Insurance should be secured with the GSIS General Insurance Fund to cover for any eventual loss or damage and to guarantee immediate damage control, repair and/or replacement thereof to reduce any interruption of office work or student’s learning process.

23.6 Audit of the consolidated PPE accounts balances as of December 31, 2017

showed non-compliance with the Property Insurance Law, exposing government properties to the risk of non-indemnification in case of loss arising from fire, earthquake, typhoon and/or flood, theft and/or robbery. Breakdown of the uninsured assets by regions is shown in the table below:

ROs Number of ROs/DOs

Carrying Amount of Properties

NCR 14 6,025,225,885.72 RO I 5 2,061,221,430.87 RO II 2 221,594,507.83 RO III 10 4,109,885,231.72 ROIV-B 3 991,474,466.95 RO V 1 172,440,456.06 RO VIII 2 205,293,860.09 RO IX 2 2,196,719,053.58 RO XI 1 175,786,781.59 RO XIII 1 59,911,576.13 Total 16,219,553,250.54

23.7 In the absence of insurance coverage, the government will not be indemnified in

case of damage to its property due to fire, loss or other acts. As observed, replacement/repair of building damaged through flood and other fortuitous events were funded through meager funds of the Department.

23.8 We recommended that the concerned Management:

a. immediately secure property insurance for its uninsured assets, in

compliance with the rules and regulations of RA No. 656 as amended by PD No. 245 dated July 13, 1973 and the provisions of COA Circular No. 92-390 dated November 17, 1992;

b. submit RPCPPE to the GIF of the GSIS within the prescribed

timeline in order to ensure indemnification of insurable assets’ equivalent value in case of loss; and

c. allocate a yearly budget for the insurance premiums of insurable

assets. Otherwise refer the matter to DBM for the availability of funds.

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Compliance with Tax Laws

24. The DepEd CO and eightROssubstantially complied with the revenue regulations on withholding of taxes on salaries, benefits and procurement of goods and services and the subsequent remittance thereof pursuant to Revenue Memorandum Circular No. 23-2007 dated March 23, 2007 and BIR Tax Revenue Regulation No. 10-2008 dated July 8, 2008. However, weaknesses in the control were observed as the account still showed unremitted prior years’ taxes amounting to P610,597,730.62 and other deficiencies were noted as regard compliance to BIR regulations. 24.1 Revenue Regulations No. 10-2008 dated July 08, 2008 provides the pertinent

provisions relative to the withholding of income taxes on compensation while Revenue Memorandum Circular No. 23-2007 dated March 20, 2007 provides clarifications on the computations of withholding taxes and other requirements on government money payments due or payable to suppliers of goods and/or services.

24.2 Revenue Regulations No. 1-2013 dated January 23, 2013 provides that “the filing of return and payment of tax due should be on or before the 10th day following the month in which withholding was made, except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the succeeding year”.

24.3 The DepEd Offices substantially complied with the revenue regulations on withholding of taxes on salaries, benefits and procurement of goods and services and the subsequent remittance thereof. However, reported balances of unremitted taxes in DepEdCO and eight ROs amounted to P610,597,730.62, broken down as follows:

CO/

Region Beginning Balance Taxes Withheld Total Taxes Remitted Ending Balance

CO 118,655,877.80 466,867,012.26 585,522,890.06 517,327,662.11 68,195,227.95 NCR 3,819,955.61 1,550,537,012.53 1,554,356,968.14 1,396,522,578.65 157,834,389.49 RO I 0.00 1,354,325,384.92 1,354,325,384.92 1,330,934,623.48 23,390,761.43 ROII 662,812.31 807,316,685.83 807,979,498.14 804,162,652.93 3,816,845.21 ROIII 73,392,267.84 1,899,457,206.69 1,972,849,474.53 1,872,621,804.84 100,227,669.69 ROIV-B 29,957,759.99 758,651,533.58 788,609,293.57 756,794,594.61 31,814,698.96 ROV 175,309,954.64 1,585,435,252.30 1,760,745,206.94 1,593,575,758.84 167,169,448.10 ROVIII 20,038,855.58 534,284,404.63 554,323,260.21 506,615,985.04 47,707,275.17 ROXIII 155,406.92 628,128,130.10 628,283,537.02 617,842,122.41 10,441,414.61 Total 421,992,890.69 9,585,002,622.84 10,006,995,513.50 9,396,397,782.91 610,597,730.62

24.4 All the outstanding balance of RO I amounting to ₱23,390,761.43 was remitted

in January and February 2018, while the amount of ₱62,917,203.63outstanding taxes withheld in RO III were remitted thru TRA in January 2018.

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24.5 There is an apparent indication of substantial compliance by DOs of RO VIII – Leyte, Baybay City, Tacloban City, Biliran and Southern Leyte, Borongan City, Eastern Samar DO and Maasin National Vocational High School as there was no outstanding balance due for remittance during the year as of December 31, 2017. While the balance of ₱3,966,826.69 of DOOrmoc City was remitted on January 10, 2018.

24.6 The following are some of the observations/deficiencies noted as regards

compliance with revenue regulations in different offices:

CO/ Region Observations/Deficiencies

a.Non-maintenance of Subsidiary Ledger and unaccounted prior year’s balance CO The amount of ₱58,224,980.04 pertains to the CY 2016 and prior year’s balance, the details of

which could not be determined due to non-maintenance of Subsidiary Ledger (SL) by the Accounting Division.

NCR DO Taguig City and Pateros does not maintain SL for Due to BIR account by classification of taxes such as compensation, expanded VAT or percentage tax. At DO San Juan, ₱1,083,337.35 out of the year-end balance of ₱1,246,236.37, or 87 percent pertains to prior years’ balances without supporting schedule and SL to support the amount.

b.Non-remittance of taxes withheld to BIR RO II DO Nueva Vizcaya and Itbayat National Agricultural High School under DO Batanes showed

that a balance of ₱416,134.25 and ₱989,250.51, respectively, were not remitted on time. The unremitted balance of Nueva Vizcaya pertains to taxes withheld in CY 2016 while the unremitted taxes for Itbayat NAHS pertains to taxes withheld in CYs 2016 and 2017.

RO VIII The year-end balance of DO Northern Samar amounting to ₱42,512,356.33 has accumulated to a large sum due to the failure of the Agency to remit the 2016 year-end balance plus the amount of taxes withheld in CY 2017 for the months of January, May and June 2017.

RO IX In DOZamboanga del Sur, taxes on certain purchases of goods and services rendered by contractors as well payment of compensation to various personnel totaling ₱2,210,566.74 remained unremitted.

c.Non-withholding of taxes CAR Taxes amounting to ₱1,151,968.93 were not deducted and withheld from payments made by

DOs Apayao and Kalinga and six secondary schools on account of purchases of goods and services resulting in loss of government revenue.

RO IV-B Additional tax revenue accruing to the National Government was not realized accordingly due to the failure of the Division of Oriental Mindoro to withhold taxes totaling ₱118,813.52 from payments of Overtime and Night Pay to Division personnel and of IT equipment and office supplies purchased.

RO VIII There were procurements/purchases by the Hinabangan NHS and Lorenzo S. Menzon Agro-Industrial School that were not subjected to withheld taxes.

RO IX Tukuran TVHS of DOZamboanga del Sur failed to withhold and remit taxes on payment of internet services. Likewise, percentage taxes on supplies and materials purchased and paid out of CAs of Basilan NHS of DO-Isabela City were not deducted, withheld and remitted.

RO XIII The DO of Butuan City failed to withhold taxes in payment for telephone expenses, office supplies and other operating expenses.

d.Over withheld and over remitted taxes RO XI Failed to apply the prescribed ceiling and exceptions of Revenue Regulation (RR) No. 2-98

with its amendments resulting in over withheld and remittance of taxes on compensation of its employees amounting to ₱215,593.29.

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24.7 We recommended that the concerned Offices/Schools:

a. require their Accountants to strictly implement the imposition of taxes

on income and money payments due or payable to all suppliers of goods and/or services being a withholding agent of the government, and immediately remit the balance of taxes withheld on or before the 10th day of the month following the month of withholding; and

b. immediately settle the noted deficiencies and record the same on its

appropriate books of account on the confirmed TRA in accordance with Joint Circular (JC) No. 1-2000. Penalties and interest, if any, should be a personal liability of the official responsible for the delayed or non-remittance thereof.

Compliance with RA No.9679 on Further Strengthening the HDMF and for Other Purposes 25. Premium contributions and loan amortizations with an indicative total amount

of P16,559,367.86 were not deducted in the payroll of teaching and non-teaching personnel of DepEd NCR, CAR and RO IV-B due to faulty payroll system which failed to observe the order of priority in the deduction of employees’ salaries, as required in Section 47 of the General Provisions of the GAA for FY 2017. Moreover, premium contributions and/or loan amortizations amounting to P53,134,830.36 were reported not timelyremitted in compliance to the provisions of Home Development Mutual Fund (HDMF) Circular No. 275 dated January 22, 2010.

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

• Authorized Deductions. Deductions from salaries and other benefits


o The BIR, PHILHEALTH, GSIS AND HDMF; o Non-stock savings and loan associations and mutual benefits


o Associations or provident funds organized and managed by government employees for their benefit and welfare;

o GFIs authorized by law and accredited by appropriate government regulating bodies to engage in lending;

o Licensed insurance companies; and

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o Thrift banks and rural banks accredited by the BSP.

25.2 Likewise, Section e(4) of the Home Development Mutual Fund Circular (HDMF) Circular No. 275 provides that:

• Employers shall remit the requirement monthly employer and employee

contributions to the nearest Pag-IBIG branch or its authorized collecting banks, together with the duly accomplished Membership Contribution Remittance Form, in accordance with the following remittance schedule:

First Letter of

Employer’s Name Due Date

A to D 10th to the 14th day of the month following the period covered E to L 15th to the 19th day of the month following the period covered M to Q 20th to the 24th day of the month following the period covered

R to Z, Numeral 25th to the end of the month following the period covered 25.3 The summary of HDMF/Pag-IBIG contributions and loan payments with its

corresponding remittances as of December 31, 2017 are as follows:

CO/ Region Operating Units

Beginning balance and current year

deductions/ contributions

Remittances Balance as of 12/31/17

CO OSEC 2,803,988.37 2,580,406.37 223,582.00 NCR Five DOs and two IUs -* -* 865,362.19 CAR DOs of Abra and Kalinga -* -* 71,964.70 RO II ROP and 9 DOs 474,248,082.44 435,828,332.05 38,419,750.39 RO III 8 DOs including the

autonomous schools 335,423,053.68 333,406,389.51 2,016,664.17

RO IV-B DOs of Romblon, Calapan City and Marinduque

-* -* 169,250.00

RO V ROP and 13 DOs 273,563,484.23 262,644,083.07 10,919,401.16 RO VIII DO Baybay -* -* -* RO XIII DOs of Agusan del Sur

and Bayugan City; and Nasipit NVS of DO Agusan del Sur

5,672,898.08 5,224,042.33 448,855.75


25.4 Audit of the deductions from the salaries of DepEd teaching and non-teaching personnel for the payment of Pag-IBIG premium contributions and loan amortizations disclosed the following deficiencies:

a. Undeducted premium contributions and loan amortizations amounting to

P16,559,367.86 were observed in the NCR, CAR and RO IV-B due to non-

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compliance with the order of priority in the deduction from the salaries of employees. Details are as follows:

Region Amount Remarks

NCR ROP

12,944,660.22 Premiums and loan amortizations were not deducted in the payroll of teaching and non-teaching personnel in CY 2017 alone due to lapses in the payroll system which failed to observe the order of priority in the deduction of employees' salaries

CAR ROP

3,361,372.35 The order of preference in authorized deductions was not considered in the APDS of the RO thus, loan amortizations due to HDMF were not deducted from the salaries of employees for the period January to December 2017.

RO IV-B ROP and Bulbugan NHS of DO Oriental Mindoro

253,335.29 Deductions made from the salaries of elementary and secondary teaching and non-teaching employees were insufficient to pay the required amortizations that are due the HDMF. Inquiry with the RPSU of the RO disclosed that the actual deductions were computed in the payroll system on a first come, first served basis after ensuring that net take home pay will not be less than P4,000.00. This system however does not give priority to the amortizations due the GOCCs.

Total 16,559,367.86

b. Unremitted contributions of P53,134,830.36as at year-end as shown below:

CO/Region Amount Remarks CO 223,582.00 From the unremitted balances in Due to Pag-IBIG, under

remittance in regular payroll amounting to ₱14,546.21 represents current year’s over deductions in loan repayments that is unremitted to Pag IBIG and the amount of ₱14,446.21 was already refunded to employees.

NCR Five DOs and two IUs

865,362.19 Premium contributions and/or loan amortizations of the concerned DOs and IUs employees, including those that are newly hired which were covered by Supplementary Payrolls, were not remitted on time which could delay the availment of loan privileges and such other benefits accruing to the members thereof.

CAR DOs of Abra and Kalinga

71,964.70 Premium contributions as well as loan amortizations deducted by the concerned DOs from the salaries of employees, which were due for remittance, remained outstanding as at year-end. As such, interest due to the delay in the remittance thereof could be incurred and the loan privileges of employees might be suspended.

RO II ROP and 9 DOs

38,419,750.39 The Summary of Pag-IBIGContributions and Remittances as of December 31, 2017revealeddeductions were not remitted in full.

RO III ROP and 20 DOs

2,016,664.17 The concerned offices had been complying with the proper deduction of contribution and short term loan amortization from the salaries of employees, and the remittance of said deductions. However, there were still unremitted deductions as of December 31, 2017, significant amount of which were due to some problems encountered in the Pag-IBIG account number of some employees.

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CO/Region Amount Remarks RO IV-B DOs of Romblon, Calapan City and Marinduque

169,250.00 In DO Romblon, the reported year-end balance of the Due to Pag-IBIG could not be verified by the Audit Team due to the failure of its Accounting Division to maintain SLs, casting doubt on the accuracy thereof. The unremitted balances from DOs Marinduque and Calapan City consist of contributions which were deducted from the salaries of newly hired employees and substitute teachers that remained unremitted as at year-end.

RO V 10,919,401.16 Details of HDMF deductions and remittances of contributions by the ROP and DOs revealed that deductions were not remitted in full.

RO VIII DO Baybay

-* Remittance of employees' contribution were delayed from five to 27 days which resulted to penalties due to the absence of Membership Identification (MID) Number of employees in the remittance list prepared by the DO. The HDMF refuses to accept payment if the remittance list does not include the said information.

XIII DOs of Agusan del Sur and Bayugan City; and Nasipit NVS of DO Agusan del Sur

448,855.75 Verification of the remittances to HDMF by the concerned DOs and school disclosed that premiums and/or loan amortizations deducted from the monthly payrolls for the CY 2017 were not remitted in full.


25.5 It is mandatory on the part of the agencies to withhold and remit all monthly premium contributions within the timelines set by the governing agencies. It is only when premiums are remitted that members are able to enjoy and access whatever privileges or benefits accruing to them thus, unremitted HDMF/Pag-IBIG premium contributions could result in delay in the availment of loan privileges and other benefits offered to all HDMF/Pag-IBIG members.

25.6 We recommended that the Management of concerned offices/schools to:

a. ensure the strict compliance of the order of preference in authorized

deductions in accordance with the provision of Section 47 of the General Provisions of the GAA for FY 2017 with due consideration on the net take home pay threshold of P5,000.00 as required in Section 48 of the General Provisions of the GAA for FY 2018; and

b. immediately remit all premium contributions to the concerned

government agencies within the timelines set to avoid penalties/interests and to enable all employees to enjoy the privileges and benefits accruing to the members.

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25.1The Management comments are:

CO/Region Management's Comments CO The recommendations on the account Due to Pag-IBIG will be handled by the

Personnel Division. The recommended adjustments/reclassification of accounts will be made this year. All observations have been noted by theManagement and will serve as their guide in their subsequent actions.

NCR The Management commented that revisions are being made at the DepEd CO on the payroll system taking into consideration the provisions of the GAA and other issues involving loan deductions of teaching and non-teaching personnel. Nonetheless, the Management asserted that the Office of the Undersecretary shall be informed of the audit recommendations. The unremitted contributions noted during audit were either partially or fully remitted in 2018.

CAR The RO is drafting a Memorandum to all DepEd employees concerned, through the Dos, informing them of their HDMF loan amortizations that were not deducted in 2017. It also informed that safeguards shall be added in the existing policy on the issuance of certifications on the net pay of employees for purposes of loan applications. Unremitted amounts in DO Kalinga pertain to the unfunded plantilla items that were already reflected in the payroll, and that the withheld contributions were used to fund the salaries of other employees. DO Kalinga informed the Audit Team that it has already filed a request to the DBM for funding. It committed to comply with the recommendation upon receipt of funds.

RO IV-B The RO commented that the system was adjusted as of November 2017 to accommodate the prioritization of the GSIS and HDMF deductions and is currently prioritizing such deductions over PLIs. The Management of the DO Calapan City, on the other hand, was amenable with the Audit Team's recommendations. In CY 2017, the Regional and seven DOs withheld and remitted Pag-IBIG fund contributions and short term loan amortizations in compliance with RA No. 9679.

RO VIII Pag-IBIG has required that each member should enroll online and obtain a MID from the Pag-IBIG online portal effective October 2017. Since then, the DO was not able to remit their contributions without delay. They are currently updating their records of all employees and committed that once it is complete, there will be no more delays in the remittance.

Compliance with RA No. 8291 on Proper Deductions and Remittances of Premium to GSIS 26. The accommodation of private lending institutions (PLIs) and the “First-In,

First Served” queuing system for the deduction of loans in the payroll of teaching and non-teaching personnel in six ROs that disregarded the prioritization of deductions provided in Section 47 of the General Provisions of the GAA for the FY 2017 resulted in undeducted GSIS premiums and loan amortizations amounting to P377,728,531.94. As a consequence, compound interests, penalties and/or surcharges could be incurred or worst, non-availment of retirement benefits by the employees affected thereof. Furthermore, contributions and/or loan amortizations totaling P649,908,531.20 deducted from the payrolls of employees of11 CO/ROs remained unremitted to GSIS as at year-end exposing the concerned employees of penalties/interests that could

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result to undue limitations in enjoying the privileges and benefits conferred under the GSIS law.

26.1Section 47 of the General Provisions of the GAA for FY 2017 provides that:

a. Authorized Deductions. Deductions from salaries and other benefits


1.) The BIR, PHILHEALTH, GSIS AND HDMF; 2.) Non-stock savings and loan associations and mutual benefits


3.) Associations or provident funds organized and managed by government employees for their benefit and welfare;

4.) GFIs authorized by law and accredited by appropriate government regulating bodies to engage in lending;

5.) Licensed insurance companies; and 6.) Thrift banks and rural banks accredited by the BSP. In no case shall the foregoing deductions reduce the employee’s monthly net take home pay to an amount lower than Four Thousand Pesos (P4,000.00)

26.2 DepEd Order No. 55, series of 2017 dated October 26, 2017 was issued to

revise the guidelines on the implementation of P4,000.00 net take home pay for Department of Education Personnel. Pertinent guidelines obtained therefrom are as follows:

a. The “First-In, First Served” queuing system shall be observed except that

deductions due to GSIS and HDMF shall be accorded first order of preference and the P4,000.00 threshold is observed.

b. The DepEd Authorized Approving Officers (AAOs) must exercise due diligence in certifying the NTHP of DepEd personnel. The AAOs shall reiterate to DepEd personnel the consequences of applying for loans with various private lending institutions (PLIs) without considering their capacity to pay. Delay in the payment of loans may result in the imposition of penalties and accrued interests by the PLIs and the GSIS.

c. All DepEd personnel shall ensure that they have the capacity to pay loans

being applied for under the Automatic Payroll Deduction System (APDS).

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DepEd personnel whose loans are not deducted under the APDS are advised to pay their loans directly to their respective lenders.

26.3 However, prior to the issuance of the aforementioned DepEd Order on October

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

a. The DepEd shall strictly observe the “First-In, First Served” queuing

system in managing the order of salary deductions. If deduction cannot be made due to insufficient take home pay, the claim of the Lender shall be given preference in the order of queuing until such time that deduction may be validly made.

26.4 Furthermore, pertinent sections of RA No. 8291 known as the Government

Service Insurance Act of 1977 state that:

a. Section 5(c) – It shall be mandatory and compulsory for all employees to include the payment of contributions to include the payment of contributions in their annual appropriations. Penal sanctions shall be imposed upon employerswho fail to include the payment of contributions in their annual appropriations or otherwise fail to remit the accurate/exact amount of contributions on time, or delay the remittance of premium contributions to the GSIS. The head of offices and agencies shall be administratively liable for non-remittance or delayed remittance of premium contributions to GSIS.

b. Section 6(b) – Each employer shall remit directly to the GSIS the

employees’ and employers’ contributions within the first ten (10) days of the calendar month following the month to which the contributions apply. The remittance by the employer of the contributions to the GSIS shall take priority over and above the payment of any and all obligations, except salaries and wages of its employees.

c. Section 7 – Agencies which delay the remittance of any and all monies due

to the GSIS shall be charged interest as may be prescribed by the Board but not less than two percent (2%) simple interest per month. Such interest shall be paid by the employers concerned.

26.5 As of December 31, 2017, deductions in the salaries of teaching and non-

teaching personnel of DepEd Offices for the GSIS premiums and loan amortizations, and its remittances during the year are summarized as follows:





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CO OSEC 44,780,803.11 43,840,186.01 940,617.10 NCR ROP and 15 DOs 5,456,312,020.64 5,137,903,684.14 318,408,336.50 CAR DOs Abra, Kalinga and

CCNHS -* -* 3,127,697.88

RO II ROP and 4 DOs 2,333,011,268.51 2,322,932,605.72 10,078,662.79 RO III 8 DOs including the

autonomous schools -* -* 28,781,354.10

RO IV-B ROP and 7 DOs 2,343,446,932.44 2,273,645,270.81 69,801,661.63 RO VIII Lorenzo S. Menzon

Agro-Industrial School 4,759,504,403.83 4,580,203,123.22 179,301,280.61

RO IX DOs Zamboanga Del Sur, ZamboangaDel Norte, Dipolog City and Dapitan City

7,262,127.84 7,147,725.43 114,402.41

RO XI DO IGACOS 164,630,679.75 126,368,474.20 38,262,205.55 RO XIII Four DOs and 50 IUs -* -* 1,092,312.63 Total 649,908,531.20 *Amount not indicated

26.6 Audit of the transactions relative to the GSIS deductions and remittances in DepEd Offices revealed the following deficiencies:

a. Undeducted premiums and loan amortizations totaling P377,728,531.94 in

six ROs resulting from defective payroll system which accommodated several PLIs that offer several types of loans and the “first-in, first served” queing system that disregarded the order of preference in authorized deductions on employees’ salaries. Details are as follows:

Region Amount Observations

NCR ROP

154,765,915.13 GSIS policy premiums and loan amortizations were undeducted from the payrolls of teaching and non-teaching personnel of DepEd NCR signifying non-observance of the order of priority on authorized deductions in the employees' salaries. The said deficiency is attributed to the uncontrollable accreditation of PLIs which resulted in accommodation of 94 accredited PLIs that offer 163 types of loans/insurance policies to DepEd NCR personnel and the "first-in, first served" queuing system of the DepEd which was silent as to the classification of lenders to be given priority in the salary deductions. It was relentlessly observed until the issuance of DepEd Order No. 55, series of 2017 dated October 26, 2017 which provided that deductions due to GSIS and HDMF/Pag-IBIG shall be accorded first order of preference. This was noted by the Audit Team in the payrolls of DepEd NCR starting only on September 2017 with a significant decrease in the undeducted GSIS loans/policy premium. The undeducted GSIS loans/policy premiums were not completely eliminated and still observed in September to December due to incomplete list of loans/premiums in the billings prepared by the GSIS, as explained by RPSU.

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Region Amount Observations CAR ROP

27,242,772.74 The order of preference of salary deductions was not observed in the APDS of the ROP thus, loan amortizations were not deducted from the salaries of employees for the period January to December 2017. RPSU Officials explained that the "first-in, first served" queuing system of the APDS deducts from the salaries all mandatory premium payments due to PhilHealth, GSIS and HDMF, in addition to the mandatory withholding of taxes due to BIR. However, loan amortizations of employees due to these government institutions have the same order of preference as those of private lending institutions. The defect in the APDS was corrected only in November 2017 wherein the GSIS and HDMF loan amortizations have the same order of preference as those of the mandatory contributions to the said GOCCs. However, there were GSIS and HDMF loan amortizations that were not deducted in December 2017 due to the increased taxes that were deducted first from the gross salaries.

RO I ROP

6,245,501.75 The Agency did not prioritize nor deduct any amount due to GSIS on loans availed by the employees resulting in the non-remittance to the GSIS the loan repayments/amortizations for various loans availed by the employees of DepEd RO I as of year-end.

RO IV-B ROP and Bulbugan NHS of DO Oriental Mindoro

74,735,403.16 Audit of payment for PS of DepEd MIMAROPA Region for CY 2017 revealed that there were undeducted loan amortizations from the salaries of elementary and secondary teaching and non-teaching employees due to insufficiency of their net take home pay to accommodate the said deductions. Inquiry with the RPSU of the ROP disclosed that actual deductions were computed on a "first-in, first served" basis after ensuring that the net take home pay will not be less than the required minimum net take home pay of P4,000.00 as stated in the GAA for FY 2017. The system however, does not give priority to the amortizations due the GOCCs as provided in the GAA for FY 2017

RO IX Molave VTS of DO Zamboanga del Sur; and ZSNHS and ZSSAT of DO Pagadian City

2,188,491.00 Non-observance with the order of priority in the deduction of employees' salaries resulted in undeducted GSIS premiums and loan amortizations which was attributable to the lack of accreditation and accommodation of loans from the PLIs, and the first-in, first served queuing system which was silent as to the classification of lenders to be given priority in the salary deductions as well as the laxity of the Authorized Approving Officers (AAOs) in exercising due diligence in certifying Net Take Home Pay (NTHP) of DepEd personnel in the loan applications. It was observed until DepEd Order No. 55 was issued. This was noted in the payrolls of the school starting only on October 2017 with a significant decrease in the undeducted GSIS loans/policy premiums. However, the undeducted GSIS policy premiums were not completely eliminated as well as the GSIS loans still remained increasing asobserved in October to December 2017.

RO XIII ROP

112,550,448.16 Verification of the APDS of the RPSU for the period October 2016 to August 2017 disclosed that a total of P453,449,206.67 was billed by GSIS to DepEd CARAGA Region for its employees' loan amortizations. Of the total billed amount, only P340,898,758.51 or 75 percent was deducted through APDS and remitted by the region leaving an undeducted balance of

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Region Amount Observations P112,550,448.16. The deficiency could be attributed to the failure of the RPSU to strictly impose the order of preference in deducting the obligations of the employees from their respective salaries and other claims as mandated in Section 47 of the GAA for FY 2017 and of the GSIS Act of 1997.

Total 377,728,531.94

26.7 The undeducted GSIS loans and/or policy premiums will remain arrears from the records of the GSIS and could possibly incur compound interests and penalties or surcharges. Employees with persistent delay in the deduction of loans from the GSIS could suffer the consequences later on through non-availment of benefits from their retirement and separation from the service due to offsetting of outstanding loan obligations including interests and/or penalties/surcharges incurred therefrom.

b. Unremitted year-end balances payable to GSIS of

P649,908,531.20representing premium and loan amortizations deducted from the salaries of DepEd employees, discussed in detail below:

CO/RO Amount Observations

CO 940,617.10 Out of the total amount unremitted, ₱437,167.72 represents current year’s over deductions in loan repayments that is unremitted to GSIS and is due for refund to various employees.

NCR Five DOs and Balingasa HS of DO Quezon City and Parang HS of DO Marikina

318,408,336.50 The monthly premium contributions and/or loan amortizations withheld from the payrolls of teaching and non-teaching personnel, including those covered by supplementary payrolls for newly hired personnel, in five DOs and two IUs remained directly unremitted to GSIS as at year-end. One of the causes identified was due to mismatch between reports of the concerned office and the GSIS database.

CAR DOs of Abra and Kalinga; and Conner Central NHS

3,127,697.88 The year-end balance of the Due to GSIS account included unremitted contributions and loan amortizations that were deducted from the salaries of employees from CY 2015 to November 2017 hence, considered overdue, contrary to the provision of GSIS Memorandum Circular No. 4-97 which require contributions and loan amortizations to be remitted on the 10th day of the following month.

RO II Four DOs

10,078,662.79 The Summary of GSIS contributions and remittances as of December 31, 2017 showed that there was a noted delay in the remittance to GSIS in four DOs.

RO III Six DOs

28,781,354.10 Delay in the remittance of contributions and loan amortizations were observed which was caused, among others, by: a) late submission of required documents by newly hired employees for the issuance of BP number; b) remittance checks rejected due to incorrect format or incomplete data in the remittance list; c) failure to update/coordinate data of newly hired employees and substitute teachers as well as salary differentials and step increments with the GSIS; and d) failure to submit Agency Remittance Advice (ARA).

RO IV-B DOs of Romblon, Calapan City

69,801,661.63 In DO Romblon, the Audit Team was unable to validate the reported unremitted balance due to the failure of the Accounting Division to maintain SLs while review of transactions in DO Marinduque showed that mandatory contributions deducted from

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CO/RO Amount Observations and Marinduque

the salaries of newly-hired employees were not remitted within the prescribed period. The year-end balance was due to accumulation of unremitted contributions from prior years which were continuously carried forward. In DO Calapan City, the amount unremitted included employees' personal share and government share contributions from the salaries of substitute teachers and step increments/salary differentials of regular employees for the period January 2015 to November 2017. Interview with the personnel of the said DO and RO disclosed that un-updated personnel information and/or inconsistencies in the information provided were the reasons in the delay of posting by GSIS.

RO V ROP and 13 DOs

179,301,280.61

A substantial portion of the year-end balance pertains to prior years’ transactions which are still subject of the ongoing reconciliation by the concerned Offices.

RO VIII Lorenzo S. Menzon Agro-Industrial School; and DO Baybay City

114,402.41 The designated personnel of the school failed to observe the required deadline for remittance of withheld contributions. Remittances were not intact as observed in the analysis of relative transactions. Delay ranging from eight to 50 days was observed in the remittance of GSIS contributions by DO Baybay City due to change of system. According to the Accountant, the GSIS refused to accept payment if the names of employees in the remittance list do not match with the records of GSIS.

RO IX DOs Zamboanga Del Sur, ZamboangaDel Norte, Dipolog City and Dapitan City

38,262,205.55 Unremitted GSIS deductions for RO IX includes unremitted balances from DOs Zamboanga Del Sur, P24,786,748.31; ZamboangaDel Norte,P24,786,748.31; Dipolog City,P1,556,574.22; and Dapitan City,P3,149,880.95.

RO XI DO IGACOS

1,092,312.63 Review of the Due to GSIS account revealed that it has a beginning balance of P1,092,312.63 which pertains to GSIS contributions from January 2015 to December 2016 and a portion of 2017 that were not remitted within the prescribed period. However, validation of the checks issued revealed that there was an attempt by the Management to remit partial contribution amounting to P575,288.48 in May 2017, pending acceptance of the GSIS. The reasons of their failure to remit were: (a) using the eBCS facility requires the uploaded electronic remittance list to be 100 percent matched with the GSIS records, if not, remittance and payment cannot be processed; and (b) office codes for clustered agencies (elementary and secondary) were not included during the creation of the RA users account in eBCS facility.

XIII DOs Agusan del Sur and Bayugan City

26,283,374.69 Verification of the remittances of GSIS disclosed that premiums and/or loan amortizations deducted from the monthly payrolls for the CY 2017 were not remitted in full for DOs Agusan del Sur ofP25,502,445.85 and Bayugan City ofP780,928.84

Total 649,908,531.20

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26.8 It is mandatory on the part of agencies to withhold and remit all monthly premium contributions within the timelines set by the governing agencies. It is only when premiums are remitted that members are able to enjoy and access of whatever privileges or benefits accruing to them. Thus, failure by the DepEd Offices to remit the premium contributions deprived the teachers of the opportunity to avail of loan privileges, earn yearly dividends and such other benefits offered to all GSIS members, thereby causing undue injury on them. Not only that, appropriate sanctions will likewise be imposed on the concerned offices for non-remittance of premiums.

c. Other deficiencies observed are as follows:

Region Observations

NCR and RO IX Failure of the Agency Authorized Officers (AAOs) in the concerned DOs in assessing borrower's loan payment capacity resulted to approval of loan applications to employees whose salaries were already below the required NTHP of P4,000.00

RO III DO Pampanga

Over-remittance of contributions and policy loan payments amounting to P315,636.32 was due to un-updated amount of salaries of employees which is the basis of the GSIS in computing contributions.

RO XI DOs of IGACOS and Tagum City

Erroneous computation of the government and personal share due to incorrect salary basis which did not consider the incurrence of LWOP by the concerned employees.

RO XIII 15 IUs of DO Agusan del Sur

Remittances to GSIS for premiums and loan amortizations were not supported with monthly billing statements. GSIS billings for premiums and loan amortizations for CY 2017 were not correctly deducted due to failure of the Accounting Unit to deduct accurately the GSIS premiums and loan amortizations amounting to P15,310,625.65

26.9 We recommended that the Management of concerned offices/schools to:

a. ensure the strict compliance of the provisions of DepEd Order No. 55, series of 2017 especially on the order of preference in the salary deductions with due consideration on the NTHP threshold of P5,000.00 as required in Section 48 of the General Provisions of the GAA for FY 2018;

b. restudy controls to limit the accreditation of PLIs in order to avoid accommodation of excessive number of PLIs that offer several types of loans for the protection of DepEd employees, most importantly their financial stability;

c. require the DepEd Authorized Approving Officers and PLIs to

exercise due diligence in certifying and approving loan applications to avoid accumulation of undeducted contributions and loan amortizations; and

d. require the concerned Heads of DepEd Offices to impose sanctions for

the non-remittance of GSIS premiums and loan payments to

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employees responsible thereof and remit all premium contributions to the GSIS within the timelines set to avoid penalties/interests and to enable all employees to enjoy the privileges and benefits accruing to GSIS members.

26.10 The Management commented, thus:

CO/Regions Management’s Comments CO The Bookkeeping-A Section of the Accounting Division together with the Personnel

Division will work on the Due to GSIS account. The recommended adjustments/reclassification of accounts will be made this year. All observations have been noted by Management and will serve as their guide in their subsequent actions.

NCR The Management commented that revisions are being made by the DepEd CO on the payroll system taking into consideration the provisions of the GAA and other issues involving loan deductions of teachers. Nonetheless, the Management asserted that the Office of the Undersecretary shall be informed of the audit recommendations.

CAR The RO is drafting a Memorandum to all DepEd employees concerned through the DOs informing them of their undeducted loan amortizations in 2017. It also informed that safeguards shall be added in the existing policy on the issuance of certifications on the net pay of employees for purposes of loan applications. DO Kalinga explained that the unremitted amounts pertained to the unfunded plantilla items that were already reflected in the payroll, and that the withheld contributions were used to fund the salaries of other employees. DO Kalinga also informed that it has already filed a request to the DBM for funding. It committed to comply with the recommendation upon receipt of the funds.

RO I The Management has already implemented the updated APDS, wherein GSIS deductions are prioritized. They will provide COA with the official receipts as a proof of the said remittances. They will also strictly adhere to the provisions of DepEd Order Nos. 55, s. 2017 and 5, s. 2018.

RO II The Management of DO Ilagan City and Gosi NHS of DO Tuguegarao City committed to remit the unremitted balance to GSIS in CY 2018. The Accounting Section of DO Isabela is in the process of reconciling the difference in the amount reflected in the financial statement as at year-end. For CY 2018, transaction will be recorded in the EFRs for maintenance of GL and SL. In DO Nueva Vizcaya, the Accounting Office cited inadequacy of data/information and documents to be submitted to GSIS, and insufficiency of PS funds in CY 2017, as reasons on its failure to remit GSIS contributions.

RO IV-B The RO commented that the system was adjusted as of November 2017 to accommodate the prioritization of the GSIS deductions over PLIs. The Management of DO Calapan City, on the other hand, was amenable with the Audit Team's recommendations.

RO VIII During the exit conference, the Management agreed to follow the audit recommendation particularly on the remittance of interagency payables regularly.

RO IX The Management explained that the deficiency on premium payments and loan deductions was due to the contributions of teachers who were on leave without pay and request of concerned teachers for the exclusion of its deductions from their salaries. The NTHP below the threshold, on the other hand, was due to negligence of the bookkeeper and deductions pertaining to absences of employees however, the Management assured that the relative DepEd Order will be strictly followed and that it will assess loan applications by employees before approving.

RO XIII The Management commented that it is only when DepEd Order No. 55 was issued that the RPSU prioritized the deductions due the GSIS. Moreover, the reasons for delay in the remittance of contributions, among others, was due to: (a) delay in the update of records on the part of GSIS as regards transfer, resignation, leave and retirement of employees; (b) lump payment of remittances of contributions from newly hired

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CO/Regions Management’s Comments employees; (c) absence of data/information or updates as required by GSIS; and (d) unmatched remitting agency in service record.

Compliance with Settlement of Suspensions, Disallowances and Charges

27. Out of total suspensions, disallowances and charges of P3,573,484,451.62, P839,801,164.56, and P7,182,742.91, respectively, issued in CO, ROs, andDOs of DepEd, only a total of P602,657,509.07was settled leaving a balance of P3,116,395,597.72, P694,524,722.37, and P6,890,529.93, respectively, as of year-end.

27.1 The table below shows the summary of Notices of Suspensions and

Disallowances (NS/ND) issued before and upon effectivity of the Rules and Regulations for Settlement of Accounts (RRSA):

a. Audit Suspensions and disallowances before effectivity of the RRSA:

CO/Region Issued Adjustment to

Beginning Balance

Settled Balances

As of September 30, 2009 As of December 31, 2017 NS ND NS ND

CO - 29,145,070.00 - 488,965.00 - 28,656,105.00 CAR - 13,274,945.44 (1,823,752.86) 8,264.69 - 11,442,927.89 RO I 23,984,381.28 - - - 23,984,381.28 RO IV-B 41,800.00 - - - 41,800.00 Total - 66,446,196.72 (1,823,752.86) 497,229.69 - 64,125,214.17

b. Notice of Suspensions (NS), Notice of Disallowances (ND) and Notice of

Charges (NC) issued upon effectivity of the RRSA:

CO/ Region

DO/ School

Issued from Oct. 1, 2009 to Dec. 31, 2017 Settled

Balances As of December 31, 2017

NS ND NC NS ND NC CO

1,665,515,642.78 14,981,119.56

1,828,519.10 58,464,528.31 1,607,091,514.47

14,940,719.56 1,828,519.10

BALS

- 9,900.00 - - -

9,900.00 -

BEE

2,549,921.22 1,022,727.06 - - 2,549,921.22

1,022,727.06 -

BSE

5,215,849.94 657,118.75 - - 5,215,849.94

657,118.75 -

EDPITAF

- 225,490.00 - 58,500.00 -

166,990.00 -

NETRC

5,000.00 1,256,408.72 - - 5,000.00

1,256,408.72 -

SHNC

- 1,383,765.03 - - -

1,383,765.03 - NCR ROP & 16

DOs 653,085,818.62 17,014,010.35

2,461,610.19 2,916,982.88 650,624,217.44

16,600,978.37 2,419,260.47 CAR ROP & 7

DOs 62,506,106.95 12,224,812.57 - 30,059,405.41 33,927,964.84

10,743,549.27 - RO I ROP & 14

DOs 50,776,996.37 13,752,870.05 - 30,116,033.29 21,446,637.57

12,967,195.56 - RO II ROP & 9

DOs 31,210,130.31 2,411,038.01 - 18,369,128.66 13,290,231.78

1,961,807.88 - RO III ROP & 20

DOs 135,217,323.11 144,172,474.40

2,844,988.62 131,138,728.98 5,220,738.67

143,280,193.12 2,595,125.36

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CO/ Region

DO/ School

Issued from Oct. 1, 2009 to Dec. 31, 2017 Settled

Balances As of December 31, 2017

NS ND NC NS ND NC RO IV-B ROP & 7

DOs 143,015,048.40 3,971,258.59 - 3,998,712.02 139,314,074.75 3,673,520.22 - RO V ROP & 11

DOs 168,042,783.12 27,146,263.75 - 137,080,194.24 33,127,118.26 24,981,734.37 - RO VIII ROP & 13

DOs 311,984,406.37 21,698,862.52 - 8,707,073.14 304,559,196.99

20,416,998.76 - RO IX ROP & 8

DOs 210,497,952.69 223,438,783.46 - 23,430,606.21 188,124,958.28

222,381,171.66 - RO XI ROP & 10

DOs 13,927,837.52 244,500,845.30

47,625.00 136,784,495.16 11,265,390.29

110,378,797.37 47,625.00 RO XIII ROP & 12

DOs 119,933,634.22 45,310,972.58 - 21,035,891.08 100,632,783.22

43,575,932.50 - Total

3,573,484,451.62 775,178,720.70

7,182,742.91 602,160,279.38 3,116,395,597.72 630,399,508.20 6,890,529.93

27.2 The NS, ND and NC issued as of September 30, 2009 or before the revised rules

took effect had remaining unsettled accounts of P64,125,214.17, while those issued from October 1, 2009 to December 31, 2017covered by the RRSA had an ending balances of P3,116,395,597.72, P630,399,508.20 and P6,890,529.93, respectively. The foregoing balances as of December 31, 2017 pertain to audit suspensions, disallowances and charges that shall continue to be monitored and enforced, pursuant to Section 28.3 of COA Circular No. 2009-006 dated September 15, 2009.

27.3 The total balances of NS, ND and NC issued before and upon effectivity of

RRSA amounted to P3,573,484,451.62, P839,801,164.56, and P7,182,742.91,respectively. Concerned persons responsible thereof made settlements amounting to P602,657,509.07 through compliance of audit requirements, submission of documents and refunds, ably complying the provisions of the RRSA. Thus, combined balances of unsettled accounts amounted to P3,116,395,597.72, P694,524,722.37, and P6,890,529.93, for suspensions, disallowances, and charges, respectively.

27.4 We recommended that the Management of CO/ROs/DOs including the

Schools require the concerned persons determined liable to immediately settle their suspensions,disallowances and charges in accordance with the Revised RRSA.

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STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Follow up and validation on the actions of management on audit recommendations contained in the Consolidated Annual Audit Report for Calendar Year 2016 noted that of the 101 recommendations, 14 or 14 percent were fully implemented, 81or 80 percent were partially implemented and 6 or six percent were not implemented. Details are as follows:

Observations and Recommendations Ref. Management's Actions

Status of Implementation and Results of

Auditor’s Validation

1. For CY 2016, DepEd has an unobligated allotment of P42,999,708,837.00, of which, the Central Office (CO) has 70 percent share amounting to P30,153,331,186.00; while the Regional Offices (ROs) has P12,846,377,651.00 or 30 percent. The unobligated balance includes lapsed CY 2015 allotments from CO of P3,230,719,122.00 and from the ROs of P1,843,868,656.00 that were automatically reverted to the General Fund at the end of CY 2016. Whereas, CO received total allotment of P60,515,744,274.00 from the current year’s appropriations, wherein P14,269,308,867.00 thereof was sub-allotted to ROs/Division Offices (DOs) for the implementation of various programs/projects; while P19,323,823,343.00 was obligated out of the available allotment of P46,246,435,407.00 thereby, leaving an unobligated balance

CAAR 2016 Paras. 1-1.41

Textbooks/Instructional Materials The Department seeks to document the long process of procuring manuscripts (taking into consideration the possible failures in bidding) and compute for the budgetary requirement per phase/activity. Moving forward, only those phases/activities that can be completed within the fiscal year would be funded to avoid non-utilization and lapsing of funds. Redesigned Technical-Vocational High School Program-The CY 2015 Capital Outlay funds were intended for Junior HS implementing the Agri-Fishery specialization under the Tech-Voc track. The list of validated recipients was only completed in the third quarter, thus, downloading of funds was only made in the fourth quarter. Some ROs/DOs were not able to procure or had failed biddings, which explains the unobligated allotment. The CY 2016 budget was allotted for Senior HS, the ROs are required to submit Resolution to Award (RTA) to

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of P26,922,612,064.00 at year-end. The deficiency in the budget utilization attributable to some gaps noted in carrying out the required processes/procedures in the program planning and implementation affected the DepEd’s timely delivery of its physical targets desired for basic education services.

We recommended that the Management require the concerned offices to: a. re-assess agency’s

processing of the sub allotment releases, procurement planning and procedures, as well as its approval and review processes to properly address the causes of the delays in the delivery of performance target/outputs; and

b. strengthen the

monitoring in the use of allotments to immediately respond to issues causing inefficient or non-utilization thereof so that other options/strategies could be considered to ensure the optimum utilization of funds to realize agency commitments towards delivery of the

effect downloading of funds. As of May 18, 2017, the total amount downloaded to ROs is P3.13 billion or 78 percent of total allotment of P4 billion. Computerization Program The new DepEd administration decided not to tap the UNDP facility in the procurement of DCP packages. The procurement activities only commenced in October 2016, in the first quarter of 2017, the technical specifications were reviewed and revisions were made to ensure that the same specs for the batches procured through the UNDP would be applied. Abot Alam Program The release of funds was made in the fourth quarter of 2016 because validated data on Alternative Learning System (ALS) and Abot Alam learners were made available by the end of October. School –Based Feeding Program The Department deemed it more prudent to ensure the utilization of the initial release funds before issuing additional releases, since the beneficiaries and number of feeding days under the program are fixed in the implementing guideline. This means that DepEd- Autonomous Region in Muslim Mindanao (ARMM) would have had a difficult time spending the allocated funds had these been released since this would be in excess of their

Fully

Implemented

Fully Implemented

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programs/projects’ objectives.

coverage already. Secondary Education-School MOOE The delayed downloading of second tranche was missing because the deadline for encoding of learners in the Learner Information System (LIS) extended until October 2016. The amount does not correspond to the allocation because ctual enrolment is much lower than the projected enrolment. The remaining P363 million may not be considered as savings.

2. The multi million contract of fund transfer ranging from P100 million to P163 million annually entered into by the DepEd in previous years with the Fund for Assistance to Private Education (FAPE) as a service provider, and now with the Private Education Assistance Committee (PEAC) as the trustee of FAPE, for the implementation of the GASTPE programs, over the years had restricted the COA’s audit authority due to misleading information or misrepresentation as to the legal personality of FAPE and PEAC, which from the very start had created an impression to be a private entity, where in fact, it is a public entity according to its creation, and is

CAAR 2016 Paras. 2-2.32

Management clarified that the DepEd has no intention to mislead the Audit Team, or any interested party for that matter, as regards the legal personality of FAPE/PEAC. That when this was first raised by COA in CY 2013, the Department responded that it is “not the competent authority to decide on the issue” since FAPE/PEAC is not an attached agency of the DepEd, that the team may wish to refer this matter to the Office of the President or the Department of Justice for proper adjudication. That there is some confusion between FAPE and PEAC caused by the interchangeability of these two terms in documents. It was clarified then that the appropriated agency which acts as service provider for the GASTPE Program is the PEAC, through its National Secretariat and not FAPE, since the latter is

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likewise vested with authority to perform public functions. Moreover, the Irrevocable Trust Fund created under EO No. 156, known as FAPE entrusted to PEAC which is being chaired by the DepEd Secretary, with a reported year-end equity of P184,378,049.69 has not been accounted as government funds, and was not subjected to COA audit, hence, the validity of the increase and charges made to the fund since its creation has not been validated. We recommended that the DepEd Secretary, in her capacity as Chairman of PEAC, and with reference to Sandiganbayan decision on Criminal Case No. SB-12-CRM-0134, to: a. initiate the opening of the

books and records pertaining to all receipts of and uses of funds and properties of PEAC/FAPE for the audit and examination of COA for transparency and public accountability;

b. direct preservation of all

PEAC/FAPE funds and properties including the

purely a trust fund created by EO No. 156 (s. 1963). That the contract between PEAC and DepEd is not a new arrangement, it has been existing for several year already. The legal basis for the CY 2016 contract is the Special Provision No. 14 of the 2016 General Appropriations Act (GAA) which states that “the implementation of the ESC and voucher programs shall be subject to the issuance of policies and guidelines by the DepEd and shall be jointly managed by the DepEd and the Private Education Assistance Committee. The responsibilities of PEAC in the SY 2016-2017 MOA, particularly Section 4.11 states the requirement for PEAC to submit to DepEd reports on a quarterly basis, or whenever necessary, including an annual report and liquidation of expenses with regard to funding provided by DepEd for the conduct of teacher and administrator training and research. That PEAC has been submitting these reports to DepEd-Accounting Division, and copies have been submitted to and are available to COA for further review and audit. It does not however, cover program management fees transferred to PEAC which is subject to submission of processed billing statements to CO.

Fully Implemented

Partially Implemented

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financial reports, records and documents from the time it has been in operation;

c. immediately submit

complete set of financial statements including the necessary schedules, for FAPE’s Account 00022594 TA 01, as well as financial reports on other funds, investments or financial interests of PEAC/FAPE for the CYs 2014 to 2016, to COA for audit/examination; and

d. instruct the officers

concerned to submit other documents and records when needed in the course of audit to establish unaccounted government funds and property entrusted to PEAC/FAPE.

That since the Irrevocable Trust Fund (FAPE) was created by and EO and was entrusted to PEAC and not the DepEd, the DepEd may not be the competent authority to compel PEAC to subject itself for COA Audit for this fund. However, management have requested for a special audit of FAPE (and management of GASTPE by PEAC) from the COA Special Audit Office, so that the Secretary, in her capacity as Chairman of PEAC, may be advised and ensure that it is spent correctly and judiciously.


Fully Implemented

3. The Public Secondary School’s unreadiness to accomodate the expected number of SHS entrants, that necessitated the utilization of Private Secondary Schools facilities/resources to accommodate the projected 1,445,107 enrollees nationwide, ensures the latter a guaranteed revenue, as 90 percent of their senior high enrollees are SHS VP

CAAR 2016 Paras. 3-3.28

On the SHS VP designed to utilize private high schools’ facilities resources as an option to address the limited number of fully equipped public secondary schools While the program also decongests public high schools, thus, gives more time for the DepEd to construct and equip schools and laboratories, this was not the main consideration in conceptualizing the SHS VP.

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grantees. On the part of DepEd, it incurred an additional expenses of P33,000,000.00 due to the corresponding increase in the administration cost to pay PEAC/FAPE. Further, the student’s financial capacity was not considered to qualify for the SHS Voucher Program (VP) and likewise, as recipient of other scholarship grants/programs, to conform with the provision of Section 22 of RA No. 10533. Thus, students enrolled in prestigious/high paying private schools/universities who are financially capable even without government’s financial assistance, were also SHS VP grantees. Moreover, DepEd did not closely monitor and supervise the implementation of the GASTPE Program to ensure the wise utilization of the funds and the effectiveness of the Program to address any deficiencies noted in the period of implementation.

We recommended that the Management:

a. ensure public secondary

schools’ readiness to implement the SHS Program by closely

Contrary to what was mentioned in the AOM, it was not designed to be “temporary” or a “remedial option.” The SHS VP is envisioned as a long-term program of the Department-not a stop-gap measure to be pursued only in the early years of K to 12 implementation. On the guaranteed revenue on the part of the private or non-DepEd institutions as 90 percent of their senior high school enrollees are SHS VP grantees That the SHS VP payment given to schools is meant to subsidize and defray the costs of the qualified voucher recipients (QVRs) enrolled with them. The high percentage of grantees in some schools is due to the fact that more than 90 percent of JHS completers (public and private ESC grantees) were already pre-qualified to the program. DepEd opened the applications to private non-ESC grantees to give them a chance to participate shoud they also need financial assistance. On entailing additional expenses for the program due to the corresponding increase in the administration cost of P33 million to pay PEAC/FAPE The increase in management fees payable to PEAC is due to the addition of the SHS VP to the programs being handled by the


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monitoring and timely addressing issues/deficiencies encountered so as not to rely on the capability and resources of private/non-DepEd schools and therefore funds set aside to support these institutions could be allocated to sustain and enhance the basic education services in public schools;

b. provide concrete

guidelines in assessing the financial capacity of the grantees in conformance with Section 22 of RA No. 10533 and impose reasonable limitations on the availment of financial grant;

c. determine reasonableness

and propriety of covering those students that are enrolled in the prestigious high paying schools/universities and those who are covered with other scholarship programs of the schools/universities;

d. consider the process that

the financial capacity of the JHS grantees be assessed before

committee. On determining reasonableness and validity of covering those students that are enrolled in the prestigious high-paying schools/univesities and those who are covered with other scholarship programs of the schools/universities The DepEd does not discriminate between students who choose to enroll in prestigious high-paying schools and those who do not. As the principle of the SHS VP is enabling student choice, they are allowed to enroll in a school with SHS permit if they can afford to pay the top-up fees or the difference between the voucher amount and the total school fees. The DepEd have different tier level depending of where the student completed JHS. Public completers receive 100 percent of the voucher amount, while private completers receive 80 percent with the assumption that these students have more capacity to pay. They required voucher applicants to submit documents that will help assess their financial capacity for purposes of priorization, but since it was only the first year of implementation of SHS and voucher program, DepEd decided to accept all students



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enrolment to SHS and not just for the initial (one-time) assessment; and

e. establish strategy to

validate and monitor compliance to rules and procedures of the program and to assess PEAC/FAPE performance at least annually.

who submitted their applications. Regarding those who are also recipients of other scholarships, the voucher subsidy is a fixed amount that is not given as cash to students, it is paid directly to the schools through fund transfer. On considering the process that the financial capacity of the grantees be assessed on a yearly basis and not just for the initial (one-time) assessment only To ensure that the Voucher Program Beneficiaries finish their SHS education, the SHS VP subsidy covers two years of education-Grades 11 and 12. The grantees shall continue to receive financial assistance as long as they get promoted to the next level and are enrolled in a non-DepEd SHS provider. The DepEd does not disqualify grantees if there are changes in their financial status. However, DepEd shall consider the COA Audit Team’s recommendation when reviewing and re-assessing the guidelines. On establishing strategy to validate and monitor compliance to rules and procedures of the program and to assess PEAC/FAPE performance regularly Pending the creation of a full-time unit that will manage the

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program, an interim Project Management Office (PMO) for GASTPE at the Central Office was created through DO 16, series of 2016. The interim GASTPE PMO coordinates with and performs monitoring and oversight functions on PEAC. Proposal for the creation of the GASTPE PMS was already submitted to the DBM.

4. Out of the total allotment of P8,966,176,422.00 for CYs 2014 to 2016 provision for Science and Mathematics Equipment (SME) program consisting of three projects, P1,220,123,879.00 was not utilized and had lapsed, while P792,790,343.00 is expected to lapse by end of CY 2017 if problems on delayed procurement cannot be remedied. Further, the awarded contracts for P2,443,289,053.00 was already due for termination on account of breach of contract/default of the supplier. In view of these deficiencies, the program suffers implementation setbacks, depriving the recipient schools with the needed SMEs as targeted by DepEd. Moreover, the Management through the Bids and Awards Committee (BAC), failed to

CAAR 2016 Paras. 4-4.35

The budget for 2014 was not utilized since the award for 2014 bidding did not push through and was bidded to the latter part of 2015, hence, the lapse of allotment for lack of time to bid the project; The obligation for termination involved only one contractor, Philab who has questionable deliveries since not all items passed the quality control inspection and also incomplete delivery to the sites. The budget for this contract amounting to P116,112,674.00 can still be utilized and can be subjected to another bidding once the termination becomes final since the fund was duly obligated. The contract was recommended for termination last March 15, 2017. BLR – Cebu concurred with COA observation that there was a delay in the FY 2014 bidding that caused the domino effect of the bidding of projects for FYs 2015 and 2016. DepEd is extra careful not to sacrifice established rules and standards

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institute appropriate remedy measures to immediately address the default in the contractual obligations incurred by Philab Industries Inc. in Joint Venture agreement with Zacto System Philippines, Inc., and China Educational Instrument & Equipment Corporation, as the company was able to participate in the subsequent biddings and was again awarded several contracts, undermining the possible risks it poses on the program’s implementation. Besides, two advance payments of P42,916,901.04 and P211,906,724.01 were granted to the same supplier for the subsequent awarded projects. We recommended the Management that: For unutilized SME Budget:

a. adhere with the

procurement law giving importance to the process of post qualification on which the DepEd made lapses in determining the suppliers responsiveness to the project that led to a huge setback on the SME project;

b. conduct a rigorous

market survey to obtain a

in order to fast track the awarding of projects. The huge budget for the SMEs has challenged the capacity of DepEd to handle bid ticket items but the small DepEd units involve in the bidding of the project has stretched their limits to vigorously conquer the high expectations.



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more objective and reasonable estimates to encourage more bidders to participate, or minimize failure of bidding;

c. consider decentralization

of procurement at least at the regional level or those regions which are already well equipped to handle the procurement;

d. assess the availability and

capabilities of local markets or manufacturers in the country to supply the needed SMEs;

e. strictly evaluate bidders’

track records in awarding contracts; and

f. revisit existing guidelines

and procedures in the procurement for possible enhancement and to consider previous problems encountered.

For breach of contract by Philab Industries Inc: g. conduct investigation on

the validity and propriety of the awarded contracts to Philab Industries Inc. and its Joint Venture Partners and institute

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appropriate sanctions against responsible officers/employees when warranted;

h. institute forfeiture of

performance bond/securities and immediately demand for the return of the advance payments of P254,823,625.05;

i. impose administrative

penalty against the Philab Industries Inc. and its Joint Venture partners as provided under Rule XXIII of the Revised IRR of RA 9184; and

j. require NSTIC

monitoring teams in coordination with the Asset Management Division to strictly monitor suppliers compliance to contractual commitments, especially for contracts under massive projects that will significantly affect the achievement of the Agency’s goals/mandate and address the issues causing the inefficient delivery of the project.

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5. The CYs 2014 and 2015 delivered SMEs to various recipient schools were not fully utilized due to non-readiness of the recipients to accept the deliveries for lack of suitable classrooms or laboratories, non/late/partial delivery of SME items in the package/kit allotted per recipient schools, lack of training and the reported missing or unaccounted items. Further, non-compliance with the DepEd Order No. 45, s. 2006 had resulted in unaccounted delivered SMEs in the books of the recipient DOs/IUs. We recommended that the CO and the officers of concerned DOs to:

a. strengthen coordination

and monitoring and ensure readiness of recipient schools in terms of facilities to ensure proper utilization of SMEs and to secure proper storage and safety;

b. strictly comply with the

provisions of DepEd Order No. 45 s. 2006 regarding the submission of required reports on

CAAR 2016 Paras. 5-5.11

NCR DOs Las Piñas, Muntinlupa, Pasay, Parañaque Management in DOs Las Piñas, Muntinlupa, Pasay and Parañaque agreed to implement the recommendations. DO San Juan SME items are being utilized to improve and enhance quality of learning and teaching Science and Math subjects, and the items when not in use are stored properly to prevent exposure to the risks of loss and deterioration. DO Marikina Inadequate space for Science Laboratory is still not addressed. DO Las Piñas SME packages are properly recorded and accounted for but still in process of filing and securing records and documents such as DRs, IARs. DO Pasay Some schools are just starting to prepare the proper procedure for the receipt and recording of properties.


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the delivery, inspection, acceptance and recording of the SMEs.

c. coordinate with and

inform in writing the concerned CO Officials regarding the undelivered packages of the SME Kits and those delivered with deficiencies. Monitor the delivery of the remaining undelivered packages;

d. observe the issuance of

Property Acknowledgment Receipts and Inventory Custodian Slips by the Property Custodian upon release of the items to coordinators and teachers, and maintenance of a log book to monitor the borrowings and returns of the said items; and

e. establish proper

accountability on the missing and/or unaccounted items as noted during inspection by the Audit Team. In case of neglect of duty, impose appropriate sanction against the erring personnel for the loss of the delivered items.

CAR DO Kalinga Coordinated with the CO for the cost allocation. However, no report on deliveries was prepared. RO I DOs San Fernando City, La Union, Candon City and Vigan City Management agreed to comply with the recommendations. RO II DO Nueva Vizcaya Management will require the submission of Property Form 1 to the SDO to facilitate the consolidation and recording of these assets in the books of the SDO. The Supply Officer informed that as of February 15, 2017, Package 19 and 13 of Philab Industries, Inc. and Eduresources Publishing, Inc., respectively, have just delivered the items for the SME and for the rest of the packages. They also informed that they will coordinate with the CO/RO to the suppliers for the immediate delivery of the undelivered SMEs. RO VI DOs Antique, Aklan DO Antique assured to comply




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with the regulation on the delivery, inspection, acceptance and recording of all properties including SME procured by CO. The Education Program Supervisors of Science and Mathematics in the DO Aklan commented that the list of recipient schools was not provided to them nor they were informed of the scheduled deliveries of the SME. Nevertheless, they will adhere to the recommendations as to the monitoring of the utilization of the equipment and the training of teachers to maximize the benefits that could be derived therefrom. The Supply Officer of DO Aklan commented that the district and school property custodians were reminded several times of the proper procedures in the delivery, inspection and acceptance of properties procured by CO. For the deliveries received from August to December 2016, the Supply Officer will require them to submit the DRs and IARs to her office. Copy of DRs and IARs of SME on file were already provided by the Division Supply Unit to the Accounting Unit for booking up. The Management assured the office of their plan of constructing laboratory rooms this 2017. Content of the findings will also be

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communicated to the CO who procured the SME for further actions. Moreover, the Management will meet with the School Heads to discuss possible actions while more permanent measures are being set-up. RO XIII DOs Agusan del Sur, Bayugan City Management in DO Agusan del Sur settled to look for a latest DepEd Order to support the current practice of the CO and the DO as to the reporting of delivery and inspection, as well as the recording of those items in the books of both the agencies. The Supply Office of DO Bayugan City was not provided with an allocation list or schedule of deliveries. The DO has disseminated the allocation list and the delivery schedule to the districts and recipient schools per DepEd Order No. 45, s. 2006. The school heads were required to confirm during the delivery of the SMEs whether there are discrepancies between the allocation list of SMEs as against the actual SMEs delivered.

6. The implementation of CY 2015 DCP with allocated budget of P7,400,223,434.82 was not fully attained due to extended timelines in the performance of some procurement activities and

CAAR 2016 Paras. 6-6.28

The AMD is in constant coordination with the Accounting Division in order to record and to transfer all ICTS equipment, however, the only problem is the late submission of the copies of DRs and IARs by the suppliers.

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inability of the awarded suppliers to comply with the targeted delivery period, thus, the ICT equipment was not made available to the intended beneficiaries at the most opportune time. Moreover, to address the perennial delay encountered in the program implementation, the DepEd transferred P2,800,639,480.00 to United Nations Development Programme (UNDP) to handle the procurement of ICT equipment covering the CYs 2015 and 2016 budgets. We recommended that the Management require the concerned offices to: a. re-assess the existing

procurement process and address the underlying causes for the delayed awarding of contracts and concerns that are within the DepEd’s control;

b. strictly observe the timelines provided in RA No. 9184 in the performance of procurement activities especially in contract approval or signing;

c. strictly adhere to the

As to UNDP packages, copy of the Transfer of Title of Assets for DepEd Lot 2 Computerization Package is submitted to the Audit Team. For other lots, AMD is still waiting for the transfer documents from UNDP.

On deficiencies noted in the procurement of ICT, the PMS Director explained that it took four bidding activities before the 14 lots were awarded out of the 20 lots. The first two failed bids were attributed to the non-submission of bids that resulted to the intensive review by the end-user ICTS of their technical specifications vis-a-vis the budget. Notably, the BAC started the procurement process earlier than the projected timelines indicated in the APP, however, the two failed biddings resulted in the delay of implemenation of the project. Likewise, the procurement of ICT equipment which requires the submission of samples, testing and post-qualification of the Lowest Calculated Bids is a rigorous process that resulted to the lengthening of the post-qualification period.

Management ensured to continue to endeavor together with other offices to comply with the timelines prescribed in the Revised IRR of RA No. 9184.



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Government Accounting Manual with regard to financial reporting compliance;

d. advise ICTS to submit a

justification for the grant of contract extension of the two identified suppliers, otherwise, it is recommended that the Accounting Division should impose the corresponding liquidated damages;

e. consider decentralization

of procurement in selected areas in line with the fiscal responsibility principle for an efficient and effective functioning of the DepEd’s procurement system;

f. for fund transfer made to

UNDP, provide necessary documents, such as the cost-benefit analysis, detailed breakdown of items to be procured including other components chargeable out of the transferred funds to UNDP, operating guidelines to include accounting and reporting requirements for the settlement thereof, to establish the propriety that the support services

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of UNDP is more advantageous to the DepEd and the government as a whole; and

g. designate or assign

specific unit which shall coordinate with UNDP regarding the transfer of ownership for the ICTS equipment and instruct the Accounting Division and AMD to coordinate and effect appropriate adjustment in the books.


7. Aside from the delayed procurement and deliveries to recipient schools, other factors adversely affecting the implementation of DCP such as non-utilization due to unreadiness of recipient schools, lost ICT packages, and defective poor after sale assistance from suppliers, were also reported that resulted in non-utilization and eventual deterioration of the ICT Equipment. We recommended that the Management require the concerned officers to: a. assess the readiness of the

intended school recipients particularly

CAAR 2016 Paras. 7-7.8

NCR DO Manila Submission of certificate of proper electrical wirings and outlets has been required from the City Electrician DO Quezon City ICT unit has been conducting the monitoring of the school readiness for the DCP. The Certification on proper electrical wirings and outlets will be submitted to the Audit Team. DO Caloocan The Division ICT Officer issued a Division Memorandum reiterating the proper storage of the delivered ICT equipments. Prior the delivery, all schools have e-classrooms and the delivery and installation were made by the supplier in their ICT


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infrastructure requirements before including them as beneficiaries of the ICT packages;

b. consider the allocation of

budget for the construction of computer classrooms especially for those without funds for the purpose;

c. revisit the guidelines and

procedure on the implementation of DCP at all levels, review the process involved in the recording of deliveries and establishing accountability over the ICT packages;

d. strictly enforce the

warranty and after sales support provision of the contracts against the suppliers by charging liquidated damages or blacklisting the same from other DCP procurement; and

e. impose appropriate

sanctions under RA No. 9184 on suppliers who refused to rectify defects or replace missing/incomplete/damaged units/parts on delivered items.

classroom. The ICT Officer already monitored the said packages and all schools were compliant. DO Navotas There was a delay in the delivery and installation of the DCP Packages for some schools in the Division of Navotas, because of the simultaneous transmission of batches 33 and 38. The Division Office informed the Central Office through email concerning this matter. DO Valenzuela The SDO Valenzuela organized a monitoring Inspectorate Team composed of the following: 1. EPS in TLE 2. ITO 3. Facility Officer/Engineer 4. Supply Officer 5. SEPS in M&E Conducted Quarterly Monitoring in the utilization of ICT equipment. CAR DO Ifugao was still gathering the DRs and IARs while DO Kalinga fully implemented the recommendation. On the other hand, DOs Apayao, Baguio and Benguet partially implemented the recommendation. RO III DO Tabaco City The DO released a Memorandum to all concerned schools, careful assessment on the adequacy and availability in





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infrastructure/counterpart during inspection and validation of the necessary requirements were made; and advised the recipient schools to immediately notify the suppliers of any deficiencies noted in the operation to address the defects while under warranty and continuous monitoring of these DCP packages. RO VI DO Antique The DO reported the Defective computers to the Supplier and to the Central Office and conducted troubleshooting and maintenance for schools monitored who have found defective computers. Laptops were delivered a week after the partial delivery of DCP Packages to schools for Batch 26. DO Passi City School Heads of Mambiranan and Salngan-Alimono Elementary Schools made the defective laptops repaired. DO XIII DO Surigao del Sur The Management crafted ICT Monitoring and Evaluation Tool and ICT Work Plan to assess the condition and utilization of the schools' computer laboratories and to closely monitor the status of DCP packages. DO Butuan City The Management directed immediately the IT Officer to conduct monitoring on the IT

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Equipment of the schools and assess the actual condition as to its functionality status as to the present. DO Dinagat Islands School ICT coordinators will contact the suppliers in case of problems with DCP packages and shall inform the Division IT Officer if there is a need to pull-out or change the unit.

8. The Repair and Rehabilitation of School Building Project in 12 Regions with an aggregate contract amount of at least P718,331,308.56 had reported several implementation lapses/deficiencies that affected the early achievement of the project’s physical target of increasing the provision of safe and structurally stable school facilities conducive to learning. We recommended that the Management require the concerned offices to:

a. exercise close monitoring

and strict supervision on the implementation of repairs and rehabilitation of school building projects to immediately resolve issues and lapses that will affect the delivery of DepEd’s physical targets of


NCR DO Quezon City All 2015 progress billings of four Contractors were fully paid but not all projects were supported with certificate of completion. DO Caloocan All repair works were completed on the prescribed time as evidenced by the Certificate of Completion and Certificate of Acceptance signed by the Division Engineer, PFSED Chief, Superintendent and the Principal. CAR Kalinga The repair and rehabilitation has already been completed. RO II Management commented that the projects were already substantially completed; however, during inspection/evaluation, there were punchlisted items for


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addressing resource gap in school facilities and the provision of adequate, safe, comfortable and functional facilities conducive to learning and teaching;

b. validate as necessary the

status of accomplishments of repair/ rehabilitation of projects through the Region/Division Engineers to ensure that projects are on schedule, that repair works are performed in accordance with the approved POW and that defects, if there are any, will be rectified accordingly; and

c. comply with applicable

provisions of RA No. 9184 and its Revised IRR in all phases of procurements activities, and with reporting requirements prescribed by DepEd policies and COA rules and regulations.

rectification, some of which were minor and deducted from the reported accomplishment by the contractor/s. The delay in the submission of supporting documents was due to inconsistency in the schedules of inspection. RO IV-A DO Calamba City It has coordinated with CO and RO regarding the availability of SARO for infrastructure project. DO Sta. Rosa The DO issued Office Memorandum reminding the BAC of their duties and directing them to strictly comply with the provisions of RA No. 9184 and its implementing rules and regulations. DO Lipa City Liquidated damages will be deducted to contractor’s next billing. RO VI Various DOs In DO Antique, a lot of variation orders were made in the repairs of school buildings since some parts of the buildings were already repaired through the school’s MOOE fund. Attention was called of the concerned Contractors for rectification as well as the imposition of liquidated damages for defects or delay in the construction of the projects.



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RO VIII The Management justified that the delay in the submission of contracts was due to lack of manpower to facilitate the submission of numerous documents. They promised to strictly comply with the recommendations. RO XI DO Davao City The SH informed that they cannot determine whether the repair/rehabilitation undertaken is in accordance with the Program of Work (POW) since they were not given a copy of the POW. Despite the fact that some classrooms remained uncompleted and/or possibly abandoned by the contractor, they were compelled to use the unfinished classroom considering that these classrooms were previously occupied by the pupils and displacing them for longer period could considerably affect their learning and interest in their education. RO XIII DO Agusan del Sur Management assured that they will comply with the recommendations and provide the requirements based on the checklist provided by COA. BCES-STEC The comfort rooms were already

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repaired by the contractor. Aside from the comfort rooms, the contractor also repaired the cracked slab of the second floor and poured about three inches concrete.The repair works were inspected by the Principal and the Regional Engineer. DO Surigao del Sur The DO Engineer assured the submission of the Implementation Plan for the BEFF projects and its status of implementation on April 2017.

9. Structural and other identified defects that were not rectified/fixed in the school buildings implemented under the Public-Private Partnership for School Infrastructure Programs (PSIP) resulted in either idle or structurally unstable/defective school facilities in Regions II, IV-A and VI. Likewise, there were noted documentary requirements of the National Building Code of the Philippines (NBCP) that were not yet submitted in Region IV-A. We recommended that the Management of concerned DOs in Regions II, IV-A and VI to:

a. immediately notify the

Division Physical


RO IV-A DO San Pablo City Management informed and notified the contractor through a letter dated February 8, 2016 regarding the observed defects on all PSIP I Projects. On-going inspection and rectification works are being conducted by the contractor. The requested copies of Certificates of Completion and Certificates of Building Occupancy are not yet forwarded to the DO. DO Sta. Rosa City The Management of DO Sta. Rosa City tried to coordinate with the contractor but the latter refused to coordinate with the DO. The case was also referred to the DepEd CO but as of this date, no advice or information was received from them. RO VI DO Antique


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Facilities Engineer on the defects identified for proper coordination and reporting with appropriate DepEd office in charged with PSIP to ensure that the Proponent comply with its obligation to repair or rectify, at its own cost, all defects and deficiencies on project’s compliance with the MPSS for the safety of the students/teachers; and

b. ascertain compliance

with the PD No. 1096, the 1997 NBCP and other relevant rules and regulations related to construction.

The Management commented that the defects were reported to the contractors for corresponding correction.


10. The late release of Sub-AROs by the CO for the implementation of the School Furniture Program (SFP), delay in the execution of procurement activities and the inability of suppliers to meet delivery dates had compromised the availability of school furniture amounting to at least P153,353,807.69 in six Regions, in disregard of the urgent nature of the program to timely address the need for school furniture. Other deficiencies such as: (a) noted defects/inferior quality/non-

CAAR 2016 Paras.

10-10.1

NCR ROP ROP Management commented that the cause of delay in the delivery of school furniture is due to some factors such as the size of the truck used for the delivery and road accessibility. Nonetheless, the Management will impose liquidated damages for the delay in the deliveries. School furniture which were found damaged during ocular inspection by the Audit Team have already been replaced. DO Marikina Management made follow-up of the CO and RO implemented

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compliance with the technical specifications of at least 2,043 delivered school furniture; (b) delay in the completion of new school buildings intended to accommodate the deliveries in 27 recipient schools; and (c) inconsistency/omission of the actual delivery dates in the DRs and non-compliance with documentary requirements contributed to the program’s unsatisfactory implementation. We recommended and the concerned Management agreed to:

a. make representation with

the DepEd CO to facilitate the downloading of funds and issuance of the authority to procure to ensure the timely implementation of the SFP;

b. observe timeliness in the

execution of procurement activities and ensure the proper utilization of the procured school furniture to meet the objective of the program;

c. coordinate and/or discuss

with the DepEd CO and the DPWH to synchronize timelines in the construction of school

procurement intended for San Roque National High School, Conception Integrated School, and Parang High School and informed them the need to deliver the furniture as the building of the recipient schools under the jurisdiction of the DO were nearing completion and ready for use on the opening of classes in June 2017. On the DO implemented procurement, construction of school buildings are nearly completed and partial deliveries have been made to schools which have not been delivered with complete armchairs, tables and chairs. DO Caloocan Already made representation with the DepEd Central Office and furnitures were already procured and delivered. DO Quezon City No penalties have been imposed on the Supplier. RO II Various Dos As of this date, all school recipients in the Divisions of Cauayan City, City of Ilagan and Tuguegarao City had been delivered with the corresponding allocation. Also, items that were found with defects during inspection were withdrawn for rectification and said items were already delivered on site. For the DO Batanes, the goods were not yet delivered due to

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buildings and provision of school furniture to ensure timely completion of the new school buildings and utilization of the school furniture, and eventually address the needs of the students;

d. report deliveries with

defects/inferior quality to procuring DepEd Office to require the supplier the repair or replacement of damaged school furniture covered within the Warranty Period;

e. consider the actual dates

of delivery indicated by the recipient schools in imposing liquidated damages. For future deliveries, require the designated Property Custodians/authorized school representatives to indicate the actual dates of deliveries before signing the DRs to properly determine supplier’s compliance with the delivery timelines and to ensure that liquidated damages, if there are any, are accurately computed;

f. require the submission of

the DRs, IAR, Certificate of Acceptance and other

Design Modification from steel and wood combination to all-wood composition which is more adoptable to weather condition in the area. RO III DO La Union All furnitures have been delived to all the recipient schools DO San Fernando City made all deliveries to all the schools after thorough analysis on the distribution of armchairs RO IV-A DOs San Pablo City; Sta. Rosa City; and DO Lipa City The Division Accountant of DO San Pablo City promised to comply with the recommendation and ensure that transactions with incomplete supporting documents will not be paid and the Supply Unit and the BAC assured that they will execute contracts in conformity with the Philippine Bidding Documents for the Procurement of Goods. In DO Sta. Rosa City, the OIC-Schools Division Superintendent will require all the members of the BAC to strictly comply with the provisions of RA No. 9184 and its IRR and regularly coordinate with the DepEd Central Office for the timely issuance and release of SAROs to ensure the efficient and effective implementation of BEFF.




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relevant supporting documents to determine the completeness of deliveries, to establish the propriety of claim/s for payment by the supplier and for proper recording by the Accounting and Property/Supply Divisions; and

g. direct the concerned RO

and DO personnel to strengthen the monitoring of the program implementation and inspection of the deliveries to ensure faithful performance by the contractors of their contractual obligation and ultimately address the urgent need of school furniture.

In DO Lipa City, the Management promised to settle the issue with Ma. Gracia Furniture and General Merchandise. The BAC and the Property and Supply Unit will firmly adhere to the pertinent rules and regulations with regard to inspection and acceptance as well as strict compliance to RA 9184. RO V DepEd Central Office already issued a Memorandum and SARO for the implementation of the School Furniture project even though construction have not yet been finished, thus they proceeded with the procurement. Management further explained that deliveries and inspection passed from inspection committee and were accepted by the School Heads in good condition. Management accepted and confirmed that in some schools, the furniture were only kept on the walkway of the building under construction due to acute shortage of classrooms. Considering the noted deficiencies, the DO immediately instructed the recipient schools to utilize the furniture in the classrooms and not in the stockrooms. The Schools Division Superintendent immediately instructed the Heads of the recipient schools to submit an Inventory Report of the damaged/deteriorated armchairs and teachers’ tables


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delivered in CY 2016 for immediate replacement by the Supplier since the items are still under the warranty period. Moreover, orientation will be conducted to School Heads and Property Custodians on the proper handling, stockpiling, storage, safekeeping and utilization of school furniture to avoid further deterioration and waste government funds. RO VI DO of Antique During random inspection prior to delivery, the furniture were in good condition. Due to lack of feedback from school recipients, they also issued a memorandum encouraging schools to submit reports to the DO if there are problems or defects in the furniture received and the same is forwarded to the supplier for rectification. Management assured to coordinate with the. BAC regarding the deficiencies in the procurement process. RO X The BAC and the BAC Secretariat were instructed to inform the supplier to fast-tract the delivery of armchairs in accordance to the stipulated number of days. The TWG or the assigned unit will conduct separate inspection and monitoring on said lapses and render liquidated damages to be imposed on the final billing of said contract.

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11. The Redesigned Technical-Vocational High School Program for SY 2016-2017 was not implemented as planned in eight Regions in view of the (a) late releases of Sub-ARO by the CO; (b) the delayed/non delivery of the Technical Vocational and Livelihood (TVL) tools, materials and equipment costing at least P218,431,506.66; and (c) non/limited use of the delivered items in at least 70 schools due to, among others, the defects in the items/specification, the schools’ unreadiness for the program, and lack of enrollees on TVL tracks. Further, a number of delivered TVL items were unutilized and still in sealed boxes and/or found stored separately in vacant rooms and hallways exposing these property to harmful elements and risk of being damaged or loss thru theft. We recommended that the Management of the CO and the respective ROs and DOs to: a. establish proper

coordination among the

CAAR 2016 Paras.

11-11.10

NCR The ROP Management will enforce supplier’s compliance with the delivery period, require the recipient schools to monitor the completeness of the deliveries and to coordinate with their respective SDOs. Likewise, the Management will reconcile the deliveries/inspected items and prepare necessary adjustments before final payment. DO Marikina will properly undertake corrective measures so as to be consistent with the goals of the program on TVL and will be prudent in observing the delivery protocol and no longer allow the incidents to happen again. Additionally, strands not offered will later on be opened. DO San Juan acknowledged the recommendations of the Audit Team. The unoffered tracks will be offered in the succeeding school year. CAR Management has already called the attention of the supplier to replace the delivered items that were determined to be substandard. However, not all defective/ non-compliant deliveries were replaced. RO II The Management has just issued a Notice of Meeting to all the suppliers directing them to

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CO, RO and DO to ensure timely release of funds;

b. require the School Heads

of SHSs to closely coordinate with their respective DOs and the ROs regarding the specific requirements of the TVL tracks offered by their schools particularly the need for a technical-vocational laboratory, qualified teachers with expertise in the TVL courses, quantity and technical specifications of the TVL equipment and point of delivery;

c. require the SHSs

designated Property Custodians to monitor the completeness of the deliveries and to report to their respective DOs and/or ROs goods delivered that are not in accordance with the technical specifications and/or damaged to facilitate their replacement by the concerned supplier;

d. strictly enforce the

supplier’s compliance with the delivery period, require them to

appear before their Office for a conference with the Management and the BAC to inform them of the observation but also to require them to rectify the noted deficiencies in their deliveries. The Management has also issued a demand letter to the concerned suppliers who have not fulfilled their obligations under the provisions of the contract for compulsory compliance otherwise appropriate actions provided for under the Procurement Law shall be exhausted against their interest. It will issue a Memorandum to the BAC directing them to strengthen the existing Post-qualifications procedures to ensure that prospective suppliers be strictly screened as to their capacity and eligibility. The Finance Division has been directed to strictly enforce the imposition of the liquidated damages to erring suppliers and to require them to rectify defects in their deliveries as well as to replace defective items, if needed.. The end-user (CLMD) has been directed to call all Schools Division Superintendents, and Principals of recipient schools in the region to make them aware of the observed deficiencies in the delivered tools and equipment as well to advise them to take necessary measures to ensure the safekeeping and




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immediately deliver all the remaining items and impose liquidated damages equivalent to one half of one percent of the cost of unperformed portion for every day of delay, as stipulated in the contract. See to it that the DRs are duly accomplished and indicate therein the actual date of receipt of deliveries by the recipient schools; and

e. check proper accounting

recognition of the TVL materials, tools and equipment and the corresponding depreciation where appropriate, immediately upon advice of the ROs on the transfer of accountability.

security of the delivered tools and equipment for the benefit of the students. The identified schools shall also be summoned for a meeting with the Management for them to submit or give a status report or update on their SHS Curricular offerings. They will also be asked to provide update on the utilization of the received tools and equipment. Additionally, the Office likewise formed a Committee which shall be tasked to conduct a recall of the items delivered to non-offering schools, in the event that a recall of the delivered items be needed or required. Management has assured strict compliance with the specifications by issuing a Memorandum designating school principals of the recipient schools along with two members to serve as First Level Inspectorate, over and above the Regional Office Inspectorate Team designated for the purpose. Compliance to the recommendations shall be fully implemented by April 2017 at DO Ilagan. Also, the Division will inquire and coordinate to the procuring entity on the procedure of booking up of the items. RO III A meeting was called to inform


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the supplier of the deficiencies and disregard the first inspection report. The Management made a standpoint on item being non-responsive and the course of action was to refer the items with found deficiencies to National Science Teaching Instrumentation Center (NSTIC, in Cebu) for technical matters and at the same time to TESDA and DOST being a third party inspectorate. No billing/payment for the meantime unless the receipt of report from NSTIC. This matter will be discussed in DepEd National Management Conference. RO IV-A Instructions were made to the concerned members of the Regional Inspection Team to inspect the delivered tools and equipment to all EIM recipient schools. Deliveries were made to 96 recipient schools and in section reports were already submitted to the concerned office. RO XIII The Deped Regional Office will abide with the recommendations. A Memorandum was issued to all Schools Division Superintendents advising them to direct their respective Division SHS coordinators to

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conduct an inventory of the tools and equipment delivered and submit to the Regional Office a Status Report to indicate particularly the tools and equipment which are not in good working condition or not readily usable.

12. Weakness in the procedures of the centralized payroll system and the leniency in budgeting, resulted in: a) presence of excess remittances amounting to P25,999,282.27 by the DOs/IUs of their payroll requirements to ROP to avoid the lapsing of Notice of Cash Allocations (NCAs) at the same time with under remittances of P103,754,171.82 due to insufficient allotment to cover the required remittance, which led to the improper use of the over remittances to augment the funding requirement of other DOs/IUs with budget deficit; b) discrepancies between the payrolls amount of P7,326,577,385.85 and deposits/remittances of P7,291,997,632.75 per books of the NCR (ROP) and its DOs/IUs as well as the unidentified/unreconciled lump sum and abnormal negative balances of Due from

CAAR 2016 Paras.

12-12.10

NCR The Accountant is providing the DOs/IUs on a quarterly basis with the status of remittances aimed at reconciling the balances of the reciprocal accounts. In a letter dated March 20, 2017, Management explained, that, it has implemented the following procedures to simplify payroll transactions: • GSIS remittances are now

being processed by all the DOs for elementary teachers/non-teaching personnel effective July 2014;

• Philhealth remittances were

already transferred to all the 16 DOs/IUs effective January 2017 to address the concerns on the Philhealth Electronic Premium Remittance System and updating of records;

• Issued DepEd-NCR

Memorandum Order dated September 26, 2016 requiring the preparation of only one check or LDDAP-ADA per every payroll

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Operating Units of ₱865,846,694.45 and ₱166,275,346.28, respectively, in Region V; and c) non-deduction and remittance of P92,905,087.58 required contribution for GSIS and P3,002,417.57 in favor of Pag-IBIG in Region XI; and over/double payment of salaries amounting to P1,172,558.40 in Regions I and X. We recommended that the Management undertake the following:

a. simplify the processing,

paying and recording of payroll transactions by decentralizing the same to the respective DOs/IUs. The DOs/IUs should implement the School-based payroll in accordance with DepEd Order No. 30 s. 2011 dated March 24, 2011;

b. strictly require the

DOs/IUs to: a) transfer funds based on the actual monthly payroll requirements/SCDR and return the excess to the BTr; b) for those with deficient payroll requirements, submit to the DBM an updated

month for easy monitoring of fund transfers/deposits; and

There are plans of downloading the payroll processing to the field and the agency is still waiting for the new payroll system developed by DepEd CO for the roll out of payroll. The Chief Accountant assured that the DO Navotas will comply with the submission of deposit slips to the RO. RO I DOs Pangasinan I, Pangasinan II, Alaminos, Dagupan committed to comply with the audit recommendations. The DO San Fernando has already informed the teachers of the unsettled overpayment of salaries while the DO Vigan issued a memorandum to the employee in charge of payroll preparation advising him/her to be more accurate in her computations. Moreover, the DO Candon submitted the required forms to the RPSU for LWOP deduction and during the exit conference, it was agreed that the corresponding Notice of Disallowance shall be issued for the overpayments made. While DO Urdaneta informed that Ms. Basbas has already paid the overpayment and committed to strictly monitor timely submission of DTRs and Form 48.



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plantilla to ensure realistic budget/ appropriations for Personnel Services; and c) regularly provide the ROP with a copy of deposit slips to facilitate recording and reconciliation of financial records/reports on payrolls;

c. direct the ROPs to

reconcile its records with those of the DOs/IUs in order to correct the discrepancies between the reciprocal accounts Due from Operating Units and Due to Regional Office and require DepEd NCR to refrain from closing the net balance of the said reciprocal accounts in the Subsidy to Other National Government Agencies or Financial Assistance to National Government Agencies;

d. require the

settlement/refund of the overpaid salaries in Regions I and X. Strictly ensure no duplication of records of employees in the payroll data base to avoid double payment of salaries and deduct in the payroll all monetary

RO III The autonomous schools under DO Pampanga informed that they will coordinate with the ROP and that their schools are not yet ready to implement the payroll system due to lack of manpower, equipment and supplies and trained personnel. The RPSU shall first update, reconcile records for GSIS remittances, loans and other records for proper and complete recording of payroll. DOs Nueva Ecija, Cabanatuan City, Science City of Munoz and Gapan will advise their schools to apply for the implementation of the school-based payroll system. RO IV-B This perennial problem of over/under remittances of payroll funds are being analyzed and will come up with the solution that the Summary of Disbursements will be net of the DOs’ under/over remittances. Management issued a Memorandum dated February 26, 2016 informing all Division Accountants of continuous monitoring of trust account-remittances. RO V Management replied that reconciliation of the reciprocal accounts Due to Regional Office versus Due from Operating Units is still being conducted by the



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value of leaves without pay using the formula prescribed under CSC Circular No. 08 s. 2014 and DepEd Memorandum No.78 s. 2016;

e. draw journal entry to

correct the inappropriate take up of payroll deductions in Region VIII; and

f. ensure that authorized

deductions are done in the order of preference in Region XI as prescribed in the GAA and the full implementation of the ATM payroll system in Region XIII to avoid the risk of possible loss or misapplication of public funds.

Regional Office-Finance Division and its Operating Units (DOs and Secondary Implementing Units). In this regard, several Secondary IUs had already submitted their Report of Reconciliation and necessary adjusting entries were made per JEV Nos. 01-2016-10-731; 01-2016-10-732; 01-2016-11-796; 01-2016-11-797, among others.

Management further commented that during the CY 2016 Year-End Seminar Workshop held last January 11-13, 2017 at the Avenue Plaza Hotel, Naga City, the Operating Units were given Subsidiary Ledgers of their Due from Operating Units account as of November 30, 2016 for reconciliation. They were also instructed to prepare their working papers of the unreconciled accounts, and submit the same with the attached deposit slips, validated LDDAP-ADA of the fund transfers made, Summary Payroll Disbursement and others to support their claim. RO X Starting September 2016, the policy of “no integration/adjustment of salaries will be effected without ensuring the deletion of its name from the former directory/station even in the absence of request of the DO for a Certificate of Last Payment (CLP). This is a deviation from the old system wherein deletion



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of the name is dependent on the request for the CLP. RO XIII Management had a hard time collecting all the DTRs of teachers assigned in the island schools; teachers have no ATM cards yet due to lacking requirements, however, it committed to implement the audit recommendation.

13. The Cash in Bank - Local Currency, Current Account (LCCA) includes trust accounts maintained without specific authority/legal basis or being used for the unauthorized retention of various receipts/income amounting to P190,907,758.61 and transferred unutilized/excess cash allocations amounting to P1,014,964,608.45, which should have been properly remitted to the National Treasury pursuant to pertinent provisions of the GAA for FY 2016 and other applicable rules and regulations on the matter. Moreover, bank accounts with total balance of P68,312,450.36 were maintained with banks without universal bank license and approval from the Department of Finance as prescribed in DOF Department Circular No. 001-

CAAR 2016 Paras. 13.-

13.20

CO The External Partnership Service (EPS), through Undersecretary Mario Deriquito requested for a six-month extension before the closure of the Tulong Barya and Adopt-a-School, to have enough time to finalize with donor partners on the proposed projects with identified school beneficiaries. The Bureau of Learning Resources (BLR) has requested the closure of BALS account 0672-1001-27 with the LBP. NCR The Accountant informed the Audit Team that the agency has already coordinated with the LBP on how to close the dormant SPHERE account and that it is now preparing the requirements for its transfer to the NT. DO Pasay It has started to stop the practice of transferring unused NCAs to the current account. Moreover,

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2015 and DepEd Memorandum No. 2015-007 dated July 27, 2015.

We recommended that the Management in concerned offices to: a. secure authority from the

Permanent Committee to maintain the current accounts considered extremely essential in the operation of the agency. Otherwise, close the unauthorized current accounts and remit existing balances to the NT, pursuant to Section 11, General Provisions of the GAA for FY 2016 and the DBM-DepEd Joint Circular No. 2004-01; and

b. discontinue the practice

of transferring unutilized funds from MDS Regular accounts to the Trust Fund account or to any other bank accounts not authorized by law.

it is now undertaking the efficient and effective planning of activities, programs and projects to strengthen project implementation and to maximize fund utilization. DO Pasig The Accountant informed that the DO is no longer practicing the transfer of unutilized NCA to Cash in Bank - LCCA. It is also in the process of improving its cash management program. Also, DO will strictly observe compliance with the provision of DBM Circular No. 2013-12 DO San Juan Management committed to look into the balances of Centrally – Managed Projects that still have to be utilized. Otherwise, these funds shall be remitted back to the NT. Other MOOE funds will also be remitted back to the NT. DO Manila Rest assured that through the ROP, they shall make representation with the DBM to request for the needed authority in maintaining current accounts. DO Marikina Management will implement the recommendations and apply them on all forthcoming SBFP fund releases. Further, they will continue to request the RO for the fund’s timely release.



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DO Quezon City Current Account is closely monitored. Balances found to be unused are being reverted before the BTr, including Feeding Program, SHS MOOE, and other funds. RO I The Management of DO Dagupan City will strictly comply to the guidelines and stop the practice of withdrawing and obligating unused NCA from Cash MDS at the end of each quarter. The Management of DO Kalinga committed to remit the balances for the accounts, except for the Trust Fund account, awaiting for the reply from the DBM and DepEd CO to the DO’s request to use the funds for the purchase of a vehicle. Should said request be denied, the DO committed to deposit the funds to the NT. RO II The Management agreed to comply with the recommendations. RO V During the exit conference, the Division Cashier of Albay committed to comply with the above recommendation. RO VIII The Accountant justified that they run out of MDS checks at that time, thus, they opted to

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transfer the NCA funds to Trust Fund account. Further she asserted that unutilized NCA will be used to pay the salaries of the teachers for the month of December 2016.

During the exit conference, the accountant agreed to close their accounts with UCPB and transfer the same to LBP-Trust Fund Account. They assured to maintain SL for every bank account. RO X Management will strictly comply with DBM Circular Letter No. 2013-12 dated November 21, 2013 that all unutilized NCA as of the last day of the quarter should be reverted to the NT. RO XIII The recommendation is well noted and management agreed that all collections with Official Receipts must be deposited to the BTr. Any unutilized fund at the end of the quarter should be reverted and the same be requested for release from DBM. They hope that with this Management action, possible risk of misuse of funds can be avoided. They will do their best to correct the deficiency, implement the recommendation made and do appropriate measure for the interest of the government.

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14. The non-completion/preparation and delayed submission of the monthly Bank Reconciliation Statement (BRS) as required under Section 74 of PD No. 1445 and COA Circular No. 96-001, failure to effect adjustments/recording of reconciling items, and the unaccounted discrepancy between the General Ledger and Subsidiary Ledger balances, resulted in difficulty of ascertaining the accuracy and reliability of Cash-in-Bank-Local Currency, Current Account (LCCA) balance of P2,984,963,121.69. We recommended that the Management require the Accountants of concerned offices to:

a. strictly comply with the

provisions on record keeping and reconciliation of accounts as required under Section 74 of PD No. 1445 and COA Circular No. 96-011;

b. enroll in an online

banking services where bank statement information can readily be obtained at any time and facilitate the timely preparation of the

CAAR 2016 Paras.

14-14.7

CO The accounting division will exert more effort on preparing the BRS and submit it on time. NCR DO Quezon City The reconciliation of the SL to GL balances is on-going. DO Pasig Balances remained un-reconciled and BRS for CY 2015 remained un-submitted. ROP and DO Manila BRS were submitted. DO Paranaque Still in the process of retrieving all the bank statements, to be able to get the beginning balance of the BRS and make the appropriate adjusting entries. CAR DOs of Abra, Ifugao & Kalinga Management prepared the necessary BRS. RO VI DOs Antique and Ilo-ilo City BRS for January to December 2016 were already submitted to the Audit Team. RO VIII DOs of Borongan and Catbalogan prepared the necessary BRS while DOs Biliran and Calbayog are yet to comply.



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BRS; and

c. cause the timely preparation of monthly BRS so that errors/omissions and/or reconciling items would be immediately detected for correction and adjustment in the books of accounts, thus, ensuring the accuracy and reliability of the Cash in Bank-Local Currency and Treasury/Agency Cash account balances in the agency’s financial statements.

RO XII DO Cotabato complied with the recommendations.


15. Lack of coordination between the Asset Management and Accounting Divisions; laxity in the control and monitoring of DBM-PS fund transfers for the procurement and deliveries of various offices supplies, materials and equipment; absence of periodic reconciliation of records; and insufficient DepEd guidelines resulted in: (a) unaccounted variance of P6,274,537,959.00 between the CO, NCR and Region V (DO Albay) balances, and DBM-PS account balance; (b) dormant and long outstanding accounts of P4,897,365,764.00 in CO;

CAAR 2016 Paras.

15-15.7

CO Management of CO commented that currently, for common-use supplies, the AMD is in the process of validating APRs and DRs to be able to identify which APR are with balances, closed, charged to another APR, and still pending for deliveries. As of April 26, 2017, a status report was submitted to the Undersecretary for Finance which covers the year 2011-2016 record of transactions with DBM-PS. For DCP, the Office is currently preparing PTRs for various batches procured by DBM-PS.The Office will meet with DBM-PS to secure copy of their ledger for validation and reconciliation. Reconciliation activities will be conducted this

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(c) increase of the unaccounted balance in CO by P15,929,715.00 due to the merged accounts of different offices with similar existing deficiencies; and (d) other lapses in recording and deliveries in Regions I and V. We recommended that the Management: a. direct the Heads of Asset

and Management/Property Division and Accounting Division to exert efforts to verify and reconcile outstanding advances made to DBM-PS and make necessary adjustments in the books or if warranted to demand from DBM-PS immediate delivery/settlement; and

b. demand refund of

advances not served or cancelled undertaking, and remit the same to the NT.

year to be participated by representatives from DBM-PS, Accounting Division, AMD and other involved offices in CO. NCR DO Manila Out of P1,847,505.77, P336,336.00 were delivered and additional amount of P287,800.74 was reconciled and ready for delivery. DO Makati Management will prepare the necessary adjustment to correct the unrecorded unutilized beginning balance to come up with correct balances to maintain Subsidiary Ledger for the Accountant Due from NGAs (PS-DBM) Account as prescribed in Appendix 6, GAM Vol. II. RO I- ROP Management made representation during the Full-Time Delivery Unit meeting held in March 2017. According to DBM, the office has a policy called FIFO and a 5-day pick up period once certificate of stock availability is issued to agency. If the agency fails to get the supplies, such items will be given to other procuring agencies. RO V- DO Albay The Accounting Section did not receive delivery receipts from the Supply Section thus, no recording was initiated.



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16. Fund transfers made by CO, NCR (ROP) and Region V (DO Camarines Sur) to various government agencies and non-government organizations taken up in the books as receivable account subject to liquidation includes long outstanding accounts as of year-end of P310,457,780.00 aged over one year to more than 10 years due to non-monitoring of the submission of Liquidation Reports as required under COA Circular No. 94-013 dated December 13, 1994, COA Circular No. 2007-001 dated October 25, 2007 and COA Circular No. 2016-005 dated December 19, 2016, thus, indicating the DepEd Offices’ inability to keep tract on the fund transfers made.

We recommended that the Management: a. validate the status of all

unliquidated/unsettled fund transfers and take appropriate action to demand immediate liquidation, or take appropriate legal process to demand compliance;

b. investigate fund

transfers made to

CAAR 2016 Paras.

16-16.20

CO On-going reconciliation NCR ROP Management committed to undertake the following: a) assign a specific staff to handle dormant accounts who will focus in retrieving the documents to support the balances thereof; b) secure copies of the Journal Entry Vouchers (JEVs) pertaining to the receivables from the GSIS of P1,665,009.13 and thereafter will make representations with the GSIS for possible refund of the overpayment; and c) the Accounting Unit will closely coordinate with the Supply Unit and the PS-DBM as to the status of the unliquidated fund transfers. RO V DO Camarines Sur The DO Management will file a request for the write-off of the dormant receivables account and will follow up liquidation from the LGU.


Not Implemented

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various NGOs and validate if these agencies are actually existing or had actually existed;

c. request authority from

COA for the possible write-off of dormant accounts following the guidelines provided under COA Circular No. 2016-005, duly supported with the necessary documents.

Not Implemented

17. Laxity in the granting of Provident Fund loans in Regions I, IV-B and V resulted in the accumulation of loans receivable balance to P269,270,862.34 consisting of ₱34,452,935.68 past due accounts of more than one to 15 years, of which at least P1,953,101.06 are receivables from deceased, retired, resigned, AWOL, transferred or no longer located borrowers, depleting, therefore, funds available for prospective borrowers and the slim probability of its full collectability, contrary to Section X.10 of DepEd Order 36, s. 2007 and negating the purpose for the creation of Provident Fund of providing loan facility in case of emergency.

CAAR 2016 Paras.

17-17.9

RO IV-B ROP Provided soft copy of the current contacts and sent demand letters to delinquent borrowers DO Palawan The loans were deducted from terminal leave benefits. RO I DO Candon City The management has sent demand letters to delinquent borrowers. Borrowers who are still in the service were also enforced to make additional payments thru over the counter. DO Vigan City no response from borrowers / co-makers. No document available to establish the collectability. requested for write –off RO IVB- ROP Regularly update the payment

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We recommended that the Management: a. revisit DepEd Order No.

36, s. 2007 and study the possibility of providing stricter sanction or penalty for borrowers who are on default in the repayment of their loans;

b. consider borrower’s

ability to pay before granting loans and stop granting of loans to those with net pay of less than the required monthly net pay of P4,000.00 for the CY 2017 as per DepEd Order No. 12, s. 2017;

c. strictly enforce collection

of loans through payroll deductions in compliance with the existing rules and regulations of the Provident Fund and enjoin the co-maker to pay their obligations on the delinquent borrowers being the secondary persons liable; and

d. ensure that borrowers

who are about to retire, resign, or transfer shall only be cleared from accountabilities upon full settlement of their obligations.

for Loan Receivable of Provident Fund.





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18. The completeness and existence of the Inventories with total account balance of P406,977,744.29 in 11 Regions is of doubtful validity due to: a) absence of physical inventory taking/supporting details or failure to submit Report on the Physical Count of Inventory (RPCI); b) non-maintenance of updated Supplies and Ledger Cards (SLC) and Stock Cards (SC); c) overstatement by P15,783,450.62 pertaining to unrecorded issuances and recognition of undelivered purchases; and d) other lapses, contrary to applicable provisions of Chapter 8, Volume I of the GAM. We recommended that the Management: a. conduct physical count of

inventories semi-annually and submit the RPCI not later than July 31 and January 31 of each year for the first and second semesters, respectively;

b. require the Property and

Accounting Divisions/Units to maintain their respective records, and reconcile balances regularly, and for the:

CAAR 2016 Paras.

18

a. Non-compliance with proper procedures and controls pursuant to Chapter 8, Volume 1 of the GAM NCR DO Quezon City Guidelines will be issued to reiterate the proper control in recording transactions. DO Pasig No SLC and Stock Cards maintained for supplies inventory. DO Pasay Started to maintain their respective records however, IUs still need to reconcile their records. RO X Management is conducting a monthly reconciliation of office supplies per record with the actual physical count. b. Misstatement of the Inventory accounts due to the following reasons: CAR Tabuk City NHS and Eastern Bontoc National Agricultural and Vocational HS fully implemented the recommendation by making the necessary adjustments. RO VII The Property and the Accounting department are still doing the necessary reconciliation for all



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b.i Accountant/s to record purchases using the appropriate Inventory accounts, in accordance with the Perpetual Inventory System, and to adjust the misstatements in the accounts for fair presentation thereof;

b.ii Property/Supply

Officer to prepare the RSMI, based on RIS, to be submitted to the Accounting Division/Unit as basis in preparing the JEV to record supplies and materials issued;

b.iii Property/Supply

Officer to issue ICS for every issuance of semi-expendable tangible items for control and monitoring of accountability over the item; and

c. observe close

coordination among the concerned DepEd offices officials for proper documentation, recording and complete accounting of the textbooks/instructional materials and SME packages procured by the

PPE and inventory asset account. RO X The Bookkeeper has written off the said accounts and reflects the same as a reduction to the government equity since these inventories are expense out in the prior years. c. Unreliable account balance of P11,261,659.29 compared to the minimal quantities of stock in the storage rooms of NCR-DO Muntinlupa DO Muntinlupa did not implement the recommendations. d. Dormant Inventories account balances totaling P279,206,604.67 NCR-DO Quezon City The SDO is currently complying with the standards. The SDO is also reconciling the dormancy of the balances and will take necessary adjustments for these transactions. Region V-DO Camarines Sur Division Absence of inventory count and unavailability of report of supplies and materials issued (RSMI) in prior years. Conduct of physical inventory count is on-going.


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CO and received by the DOs/IUs/Schools and draw the appropriate journal entry, and in case of issuances of the items, require the end-user/responsible person to acknowledge receipt in the ICS.

19. The existence, completeness and valuation of PPE accounts balances cannot be fully relied upon due to noted deficiencies in CO and 13 Regions such as: a) reporting difference of P23,414,327,275.25 between the CO accounting and property records; b) non-performance of physical inventory to verify existence and completeness of the reported assets worth at least P20,565,319,146.52 in the Regions; c) non-maintenance of PPELC and PC or other records supporting PPE balances; and d) various errors and omissions in recording transactions affecting PPE accounts like inclusion of semi-expendable items costing at least P154,068,245.61; unrecorded unserviceable/demolished/ 20. razed by fire/losses/transferred/disposed PPEs amounting to P125,870,052.52; unrecorded

CAAR 2016 Paras.

19-19.15

CO Reconciliation activity will be conducted by AMD together with other concerned offices to reconcile the discrepancies between property and accounting records. Absence of physical inventory to verify existence and completeness of the reported assets – P20,565,319,146.52 NCR Conducted physical count in ROP and DO Parañaque but no submission was made to the Audit Team while DO Las Piñas submitted their report to the Audit Team. On the other hand, in TAPAT no physical count of PPE were made. Likewise, no reconciliation was made in DO Parañaque. DO San Juan Directed the designated Property Officer to conduct physical stock-taking and prepare inventory report of all PPE items of the school.

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properties of P628,900,400.34; completed school buildings still in Construction in Progress account of P532,714,034.49; existence of unsubstantiated balances in total amount of P757,710,107.68; and other errors and omissions in classification to proper PPE accounts and insufficient and/or non-provision of depreciation. We recommended that the Management of concerned offices: a. create an Inventory

Committee who will validate the existence and completeness of items including their accurate details in the PCs and RPCPPE, and its reconciliation with PPELCs up to the PPE General Ledger accounts; henceforth, perform periodic physical count of all the PPE of the agency annually and submit the RPCPPE as at December 31 of each year not later than January 31 of the following year;

b. reclassify all properties

costing below the capitalization threshold

CAR ROP Physical inventory is on-going. DO Benguet Inventory Team for Office Supplies was created and will conduct Inventory of supplies. RO I DO La Union Management has already reclassified PPE costing below P15,000 as semi-expendable. The supply unit is currently con ducting the physical inventory for the whole division DO Laoag City The management designated a focal person that will be responsible in the titling of Land. The management started to reclassify PPE costing below the capitalization threshold. DO Candon The management has already created a Division Appraisal Committee. The Supply Officer is currently conducting a physical count of inventories of Division Office Properties DO Alaminos The inventory of equipment is on-going. DO Batac Management conducted Physical Inventory and submitted RPCPPE.



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of P15,000.00 to the appropriate Inventory account. If the items were already issued, record the appropriate Semi-Expendable Expense account for those procured in the current year or Accumulated Surplus or Deficit account for those purchased in the previous years; and

c. closely coordinate with

the concerned DepEd CO officials and other concerned offices for proper documentation, recording and complete accounting and/or necessary disclosures in the Notes to Financial Statements regarding status of ownership or rights over agency properties being held/used.

DO Pangasinan II The DO conducted PPE inventory validation of schools. DO Pangasinan I The management has already instructed its covered schools to submit to the responsible Department the physical inventory of their property, plant and equipment. RO V DO Legazpi City Physical inventory was made on August 31, 2017 and subject to reconciliation with the accounting records. DO Camarines Sur The Supply Officer has conducted orientation for all property officers of the different schools where he provided for a template on the inventory of PPE. 2) To ensure that all schools shall submit the PPE report, the Management requires that all school head/Principal must secure school year-end clearance in which a Report of Physical Count of Inventory is one of the requirements before clearance is granted. 3) The Accountant has already coordinated with the DPWH Accountants of the deficiencies noted in the documents submitted but was not yet returned for book up. DO Iriga City A conference had already been conducted by the SDS. The


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creation of Inventory Committee is on process. DO Naga City The Supply Unit has submitted the Report on the Physical Count of PPE - School Building Account at the COA office. The Division Supply Officer and the Division Accountant made an agreement to reconcile PPE account balances CY 2016 starting October 2017. RO VI- DO Passi City Supply Officer already submitted the RPCPPE and reconciled Property Cards with the PPE Ledger Cards of the Accounting Unit. RO XIII DO Surigao City Updating of PPE Ledger Cards by the accounting staff in-charge is on-going. Reconciliation of records will be done as soon as inventory report is done by the Supply Officer. Corresponding adjustment will be made when necessary to reconcile the actual inventory and the accounting records. DO Bislig City Reconciliation was done between the supply and accounting records to wit: Property Cards and Stock Cards reconciled with Supplies Ledger Cards and Property, Plant and Equipment Ledger Cards

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NIR DO Bago City The Management conducted physical inventory. DO Escalante City There was delay in gathering of supporting documents. Non-maintenance of PPELC and PC or other records supporting PPE account balances NCR DO San Juan Management directed the Accountant and the Property Officer in both offices to maintain PPELC and PC, respectively, for all PPE items and bring balances to agreement at any given time. Various errors/omissions in recording transactions affecting PPE accounts NCR Breakdown of construction projects transferred from DPWH to the Division of Marikina remained unidentified. While DO Valenzuela is still waiting for data from Schools. CAR DO Abra has yet to fully reclassify the cost of completed projects from CIP to the appropriate asset accounts while DO Kalinga has already made the required reclassification. With regards to the unrecorded DCP and SME, DO Apayao,

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Antadao NHS, Guinzadan NHS and MPGCHS obtained copies of the PTR from the CO and recorded the DCP packages. However DO Ifugao was still gathering the DRs and has yet to record the DCP packages amounting to ₱40.63 million and SME sets of ₱8.64 million, which were received in 2016.

20. School buildings and other school properties in eight regions with a carrying amount of P20,057,964,249.61 were not insured with the General Insurance Fund (GIF) of the Government Service Insurance System (GSIS) despite the mandatory requirement to insure all government properties with the GIF pursuant to Administrative Order No. 33 dated August 25, 1987, COA Circular No. 92-390 dated November 11, 1992 and Republic Act No. 656, the Property Insurance Law, as amended by PD No. 245 dated July 13, 1973, thus, exposing these properties to the risk of not being compensated in the event of damage or loss due to any fortuitous events such as fire, earthquake, typhoon and/or flood. We recommended that the Management:

a. immediately secure

property insurance for its

CAAR 2016 Paras.

20-20.8

CO DepEd CO issued a Memorandum requiring ROs and DOs to accomplish templates on insurable assets as an initial step in insuring the DepEd assets with the GSIS. NCR Inventory of all insurable PPE was not submitted to GSIS while in DO Caloocan, the inventory of school buildings is done on a regularly basis. While in DO Makati no data was submitted. An inventory report of all insurable asset was already submitted to CO, Asset Management Division last April 2017 by DO Malabon. CAR DO Mountain Province requested additional funds to cover the insurance of its property RO I DOs Alaminos City, San Carlos City, Batac City & Urdaneta City The DO is still waiting for Memo/guidelines/source of fund from CO/RO.


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uninsured assets, in compliance with the rules and regulations of RA No. 656 as amended by PD No. 245 dated July 13, 1973 and the provisions of COA Circular No. 92-390 dated November 17, 1992;

b. submit RPCPPE to the GIF of the GSIS within the prescribed timeline in order to ensure indemnification of insurable assets’ equivalent value in case of loss; and

c. allocate a yearly budget

for the insurance premiums of insurable assets. If not included in the 2017 budget, refer the matter to DBM for the availability of funds.

DO Candon City Payment has been made for insurance premiums. RO IV-B DO Occidental Mindoro Properly notify all accountable officers to address this matter to minimize in exposing risk of not being compensated or indemnified for any damages to, or loss of its property due to fire or any other force majeure. RO IV-B-DO Occidental Mindoro Properly notify all accountable officers to address this matter to minimize in exposing risk of not being compensated or indemnified for any damages to, or loss of its property due to fire or any other force majeure. RO V DO Albay There is no allotted budget for the insurance of the government property as of this time. DO Masbate City Already inquired at GSIS the requirements on insuring the properties and already identified the School Buildings to be insured initially. The Division Engineer has already assigned property number for those insurable properties and he is on the process of taking pictures or sketch of those buildings which are needed in the application form.



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21. The laws, rules and regulations on the granting, utilization and liquidation of cash advances under Section 89 of PD No. 1445, COA Circular Nos. 97-002 and 2012-004 dated February 10, 1997 and November 28, 2012, respectively, as well as DepEd Order No. 12 s. 2014 dated March 6, 2014 on downloading of MOOE to schools, were not strictly observed at the CO and in 14 Regions resulting in accumulation of unliquidated cash advances granted to officers and employees and school heads totaling P2,128,524,935.82 as of December 31, 2016. Moreover, misclassification of accounts, erroneous recording, absence of/unreconciled GL and SL, negative balances and deposit in the personal bank account of school heads cast doubts on the reliability of the Advances account balances. We recommended that the Management: a. demand from all officers

and employees with outstanding balances to liquidated/settle immediately their cash advances and/or refund all unexpected balances, otherwise cause the

CAAR 2016 Paras.

21-21.12

CO Issue demand letters to accountable officers. NCR DO Manila As of December 31, 2016, record showed the CA balance of P6,103,902.94. As of March 22, the said amount were reduced to P403,302.00. DO Caloocan Audit Demand Letters were issued for outstanding cash advances granted for the year 2016 and 2017. For the years 2015 and below, no Subsidiary ledgers were obtained from the previous accountant. DO Pasig Reconciliation for December 2015 and 2016 had been submitted to COA. DO San Juan Implemented stricter internal control on cash advances. DO Valenzuela All outstanding prior year's cash advances were already liquidated. Cash advances were not given to designated officers with expired bond. Newly designated School Heads are being required to be bonded before MOOE downloaded checks are processed and released.


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suspension of salaries of erring accountable officers and/or initiate available legal remedies pursuant to COA Circular Nos. 97-002 and 2012-004;

b. strictly comply with

Section 89 of PD No. 1445, COA Circular No. 97-002 and 2012-004 and DepEd Order No. 12, s. 2014 dated March 6, 2014 on the granting, utilization and liquidation of cash advances;

c. request for the write-off

of the long outstanding/dormant cash advances following the procedures in COA Circular No. 2016-005 dated December 19, 2016;

d. monitor the granting and

liquidation of cash advances through the maintenance of updated subsidiary ledgers and systematic record keeping to ensure immediate liquidation thereof and proper recording to prevent errors and negative balances; and

CAR DO Mountain Province The former school head of Besao Central School refunded the amount of ₱24,000.00 in January 2017. RO V DO Albay The Management is strict in sending demand letters and imposed that those with unliquidated cash advances shall not be considered /included for promotion. DO Tabaco SDO Tabaco City's Accounting Office sent several demand letters addressed to wife of the deceased principal, properly notified to submit documents for clearance of her husband in order to process his terminal leave benefit and deduct/settle the remaining amount of P78,229.52. DO Iriga There are AO's that can no longer be located for CA's granted in CY 2011 and beyond. Request for write-off cannot still be requested because the requirement for write-off must be at least 10 years per COA Circular No. 2016-005. No records are available to verify the CAs granted in CY 2011 and beyond. DO Naga Management issued another set of Demand Letters to concerned




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e. observe the Revised Chart of Accounts in GAM, Vol. III in classifying and recording of the different types of cash advances and prepare the necessary journal entries to correct the misclassification of accounts in order to reflect the correct balances of the affected accounts in the Financial Statements.

officials/ employees, reiterating prompt settlement of their unliquidated cash advances. As of quarter ended August 31, 2017 91 percent of the year-end balance for Advances for Operating Expenses and 70 percent for Advances for Special Disbursing Officers were already settled and credited to appropriate receivable accounts. RO VI DO Guimaras Demand Letters were sent to accountable officers for the liquidation of cash advances.


22. The Liability account balances are not reliable due to: (a) recognition of invalid claims pertaining to undocumented payables of P1,047,087,873.75 and dormant/long outstanding payables of P365,737,390.70, which should have been reverted to Accumulated Surplus pursuant to Section 98 of PD No. 1445; (b) net understatement of the account by P7,890,999.26 due to erroneous recording/omission of entries, (c) existence of abnormal debit balances of P147,531,029.75, and (d) liability account balance in CO amounting to P1,129,423,831.96 not supported by subsidiary ledgers to validate existence.

CAAR 2016 Paras.

22-22.8

NCR ROP The Management committed to look into the details of the payables with no specific creditors because there may have been only lapses in the recording thereof. DO Quezon City The accounting unit of DO QC will verify the validity of abnormal balances and will focus on adjusting the amount to its reliable and accurate balances. Further, only six out of seven IUs reverted the dormant accounts which are not supported with valid claims. Although, SLs were being maintained, aging schedules were not prepared and submitted to the Audit Team and not all liability accounts have SLs and supporting schedules containing the sum totals, names of creditors and the amounts due

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We recommended that the Management:

a. recognize liability on the

date of delivery/rendition/completion and acceptance of the goods/services/projects, regardless of the year of incurrence of such obligations in accordance with the Section 37, Chapter 2 GAM, Vol I and DBM Circular Letter No. 2013-16 dated December 23, 2013;

b. revert all outstanding

balances without valid claims as well as payables aging two years or more and against which no actual claim, administrative or judicial, has been filed or which is not covered by perfected contracts on record in accordance with Section 98 of PD No. 1445; and

c. perform account analysis

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

each of them. RO I The Management will account the eligible Accounts Payable and Due to Officers and Employees and will take up reversion thru preparation of JEV for the invalid claims. RO IV-A The Management of DO Tanauan City commented that all necessary adjustments in the Accounts Payable arising from incorrect account title used will be prepared in order to reflect its correct balance in the financial statements. Like DO Tanauan, the DO San Pablo City will submit to COA the required supporting documents for the payables and in addition, they will revert the set-up salary differential and make the necessary adjustments. The OIC of Lumbang National High School averred that they already submitted original documents supporting the payables taken up in the books and adjusted the Due to Officers and Employees and other affected accounts thru JEV No. 01-2017-01-0026 dated Jan. 31, 2017 to correct the balance in the Financial Statements. The Accountant of DO Batangas Province stated that prior year’s balances were not settled by concerned payees due to incomplete documentation.

Partially

Implemented



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The DO Quezon Province Management assured that all unused funds for the obligated balance of PS allotment which will lapse at year-end and charges to CO will be reverted back. The documents to support the Obligations for MOOE were submitted and partial supporting documents will also be submitted to support the claims for personal services which were taken up. The property custodian was instructed to collate delivery receipts from various suppliers and counter check them with file copies of the Supply Section. Likewise, the School Facilities Coordinator was already notified to submit statement of work accomplished by contractors. RO V The Regional Accountant agreed to comply with the audit recommendations. The Accounting Unit is presently in the process of correcting, updating and revising the Schedule of Other Payables as of December 31, 2016. Reconciliation at DO of Camarines Norte is being made to effect the necessary adjustment/s together with the long outstanding accounts payable, in the Accumulated Surplus account; while the SDS DO Camarines Sur required the Head of the PSU and OIC-Accountant to reconcile their records. The Head of the PSU assured the Audit Team that he will exert effort to determine the

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breakdown of the unreliable balances and that remittances will be on time. The SDS will assign a staff from the Task Force who will be provided with IT equipment to assist the Accountant. RO X The transactions were recorded as Accounts Payable because the contracts were already perfected in December 2015 as can be gleaned from the separate Notice of award to the various contractors all dated December 15, 2015. They henceforth will make the effort of ensuring the completeness of the attached documents. In Division of Malaybalay City, the unpaid obligations incurred in 2016 which were not submitted lack the required supporting documents at the time of verification. All accounts payable which has been existing in the books for more than years and accounts payable with incomplete documentary requirement shall be reverted and adjusted accordingly. The Division of Gingoog City will adhere to the audit recommendations. RO XIII The Accountant of DO Surigao del Sur acknowledged the foregoing observation and conveyed that they are still in the process of review and

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recomputation of liabilities prior to its reclassification in the books of accounts. The Accountant of Tanday City assured adherence to the audit recommendations. Further, he asserted that the adjusting entries for accounts payable will be recorded/adjusted. NIR In E.B. Magalona National High School, a thorough review and analysis of the transactions involving Due to Officers and Employees account were made and arrived at a conclusion that there were no cash disbursed for the said payable. Necessary documents were submitted to support the said conclusion. Journal entries were prepared to close the payables.

23. Various disbursements totaling P4,599,772,693.53 included payments of salary, RATA, monetization, traveling/training, and procurement which were found either contravening to existing government laws, rules and regulations or not supported with adequate documentation, thus casting doubts on the validity and propriety of expenditures. We recommended that the Management of concerned offices:

CAAR 2016 Paras.

23-23.4

Salaries and Wages RO I Urdaneta City The DO instructed Personnel to require school heads and all Division office staffs prompt submission of payroll supporting documents. Pangasinan II The Management submitted all the required supporting documents. RO XIII DO Siargao Islands

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a. comply with the

prescribed guidelines/pertinent rules and regulations on the payment of salaries and wages, other compensation, other personnel benefits, traveling, training, communication, repairs, procurement of goods and services and other expenses;

b. require to refund of the

amount claimed for cash allowance, loyalty award, hazard pay and subsistence and laundry and quarter allowance in excess of what is allowed by law; and

c. require the concerned

personnel and officials to submit the required pertinent documents to establish the propriety, reasonableness and regularity of the disbursements.

Upon verification with the payroll in-charge, corresponding Disbursement Vouchers were prepared and submitted with complete attached documents to the Cashier. Hence, Management will adhere to COA recommendation that payment of salaries and wages of employees shall be made through cash advance by the Agency's regular Disbursing Officer instead of paying it through issuance of individual checks. RO X The mentioned lacking/deficient documents have been submitted. In the future, all documentary requirements will be attached before the payment of any claims. Special Hardship Allowance RO XIII DO Siargao Islands Management will adhere to the recommendation. Hazard Duty Allowance RO X DO-Iligan City Require the Health and Nutrition Section to submit the required documents.

Partially

Implemented



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Performance-Based Bonus RO X- Various DOs Submitted the documentary requirements in the grant of PBB 2014. Quarter Allowance RO- DO-Puerto Princesa City Requested the officer to refund the excess amount. Monetization CAR The Personnel Officer required the submission of lacking documents from the concerned payees. The concerned payees subsequently complied. RO IV-B- DO-Palawan Magara School for Philippine Craftsmen (MPSC) Refunded OR No. 4393028 P315,844.69 and OR No. 4393050 P182,039.29. RO V ROP The agency had already adopted the interpretation of DBM in the computation of monetization of leave credits. DO-Ligao City Proper determination of the allowable number of days to be monetized chargeable against personnel's leave credits was done and ensured that all the needed documentary requirements were attached in

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the claims. RO VI DO Antique Required the concerned persons to comply with the requirements on leave monetization. RO X Bukidnon NHS Instructed the AO IV to exercise due prudence in the recommendation of approval of monetization of leave credits and directed the head of the Accounting Unit to adhere to the provisions of DBM Circular. Valencia NHS Abided and followed the existing CSC Rules on Leave and COA Circular and be guided accordingly. Travelling expenses of individuals under Contract of Service. RO X-ROP Discussed and justified exhaustively on our reply to that Office with the assurance that future essential travel expenses to be incurred by any of the personnel shall not be termed as per diem in compliance with the recommendation of that Office. RO VI- DO Antique Required the needed supporting documents for reimbursement.

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Procurement of Supplies DO Ilocos Norte All supplies available at DBM were procured. DO Vigan Out of several items requested from DBM-PS, only one or two items are available. Thus, issued a memorandum regarding the matter. DO Candon City The management will procure supplies good for three-month consumption. DOs Pangasinan II and Dagupan City Fully implemented DO Urdaneta City Instructed school heads to purchase office/school supplies through PS in bulk for at least three months supply coverage.

24. The adopted procedures in the procurement of goods and services made in the total amount of P3,639,281,550.19 at the CO and in some Regional and Division Offices as well as Schools were contrary to the provisions of RA No. 9184 or the Government Procurement Reform Act, and its Revised Implementing Rules and Regulations (IRR), and of

CAAR 2016 Paras.

24-24.10

RO IV-B DO Oriental Mindoro Letters have been sent notifying the contractors to rectify the identified defects. Weekly updates are submitted to COA for monitoring purposes and one of the two contractors imposed for liquidated damages have settled the amount determined. RO VIII DO Leyte Detailed examination of

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existing COA regulations. These cast doubt on the integrity and reliability of the procurement processes and have defeated the purpose of the law on transparency, competitiveness and accountability and may have as well deprived these offices from availing of volume discounts and reasonable prices. We recommended that the Management observe strict compliance with the applicable provisions of the Revised IRR of RA No. 9184 and of other rules and regulations on government procurement.

supporting documents relative to procurement is being done by the Internal Control Unit to ensure that the same are compliant with procurement guidelines. RO X Per transmittal dated July 20, 2015, the required documents were already submitted by the BAC Secretary to the COA as part of the documents for contract review.


25. The implementation of the GAD Program for CY 2016 in various ROs and DOs disclosed some deficiencies such as: a) non-submission to the Philippine Commission on Women (PCW) of the Annual GAD Plan and Budget (GPB) for approval as well as the GAD Accomplishment Reports; and b) non-utilization of the full amount of allocated budget for GAD plan activities equivalent to five percent of the agency’s total appropriation contrary to Section 35 of the General Provisions of the General Appropriations Act (GAA) for

CAAR 2016 Paras. 318-322

NCR DO Manila To date, action plan by allocating 5% of the agency's budget for future GAD activities was already submitted to proper authorities for validation. DO Caloocan The management continuously identifies issues and concerns in GADs plan and allotted budget for the year. The office already submitted their plan to the PCW. DO Valenzuela The DO thru the Human Resource and Development Section already conducted a series of GAD seminars and workshops to equip and enable

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FY 2016. We recommended that the Management: a. identify gender issues

and concerns in GAD Plans and allocate GAD budget equivalent to at least five percent of the total appropriation for the implementation of the GAD Plan pursuant to Section 35 of RA No. 10717, otherwise known as General Appropriations Act of FY 2016; and

b. faithfully adhere to the

guidelines on the preparation of GAD Plans and Budget and Accomplishment Reports as per Joint Circular No. 2012-01 of the PCW-NEDA-DBM.

the DOP and all schools with GAD requirements and GAD reports. RO I San Carlos City Focal Person will submit on time the activities ahead of time so as to allocate the 5 percent GAD. RO IV-B ROP and DO Oriental Mindoro fully implemented the recommendation. DO Palawan The DO conducted Division Training of trainers last July 7-8, 2017 and cascade the orientation down to school level until November 2017. RO VI DO Iloilo City Included in 2018 Budget Proposal a separate budget for GAD activities. DO Antique Close monitoring of GAD activities as identified in the WFP and results thereby will be reflected in the succeeding GAD Annual Reports for SY 2016-2017.



26. DepEd has substantially complied with Section 36 of the General Provisions of the GAA for FY 2016 on the implementation of programs, projects and activities that addressed the concerns of

CAAR 2016 Paras.

26

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senior citizens and persons with disability.

We commended the DepEd Management for continuously formulating programs and providing support for the implementation of projects and activities intended to address the concerns of senior citizens and persons with disabilities pursuant to Section 36 of the General Provisions of RA No. 10717.

Fully Implemented

27. DepEd Offices substantially complied with the revenue regulations on withholding taxes on salaries, benefits, and procurement of goods and services and the subsequent remittance thereof pursuant to Revenue Memorandum Circular No. 23-2007 dated March 23, 2007 and BIR Tax Revenue Regulation No. 10-2008 dated July 8, 2008. However, as shown in the financial statements of DepEd as of December 31, 2015, there were still unremitted taxes totalling P788,018,556.31.

We recommended that the Management of concerned Offices/Schools require their Accountants to strictly implement the imposition of

CAAR 2016 Paras.

27

NCR DO San Juan The DO continued vouching the prior year subsidiary ledgers for tax remittances. RO IV-B-ROP Lack of personnel to handle the Reconciliation


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taxes on income and money payments due or payable to all suppliers of goods and/or services being a withholding agent of the government and, immediately remit the balance of taxes withheld on or before the 10th day of the month following the month of withholding. 28. A substantial portion of the unremitted balance of P527,328,051.88 in seven Regions consists of prior years’ balances which were not reconciled with the GSIS records contrary to RA No. 8291 and to the prejudice of the affected members. We recommended that the Management: a. remit the GSIS premiums

of the employees and the corresponding government share on or before the 10th day of the following month in strict compliance with RA No. 8291 to ensure continued commitment of the system in promoting the welfare of government employees through an insurance system that will protect its members against adverse economic effects resulting from death, disability and old age and to avoid

CAAR 2016 Paras.

28

CAR Management in DO Apayao informed that a focal person will be assigned to communicate with the GSIS and that a database of employee records will be developed and deployed for real-time access of information. RO V ROP All GSIS contributions/ deductions for the month of December 2016 were already remitted on January 5, 2017. DO Camarines Sur Reconciliation of GSIS withholding and remittance is on-going. The Division PSU Head promised to remit the amount due to GSIS. DO Iriga City The DO remitted to GSIS the amount due. DO Sorsogon City The GSIS Contribution of Employees of the Division of Sorsogon City was remitted within the month. The Due to GSIS account of Sorsogon City


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incurring any interest or penalties due to delayed remittances. Any penalties due to late remittances shall be the personal liability of the concerned responsible personnel; and

b. ascertain the details of

prior years’ GSIS balances through reconciliation of their records with the GSIS, remit the adjusted balance immediately to the GSIS and effect the necessary adjustment in the books of account.

as of December 31, 2016 has zero balance. DO Tabaco City Recommendations complied. RO VIII DO Samar will take action to improve the situation. Moreover, they are exerting efforts to facilitate the immediate remittance of the GSIS withheld deductions.
