PART II – OBSERVATIONS AND RECOMMENDATIONS

A. FINANCIAL AUDIT

Unreliable Cash Balance

1. Stale checks totaling P83,086.41 were not adjusted and/or recorded in the
books as of December 31, 2020 contrary to the provisions of Chapter 6, Section
44 of the GAM Volume 1, resulting in the understatement of the Cash-
Modified Disbursement System (MDS) - Regular and Accounts Payable
accounts by the same amount.

1.1 Chapter 6, Section 44 of the GAM, Volume 1 states that:

Checks may be cancelled when they become stale, voided or spoiled. The
depository bank considers a check stale, if it has been outstanding for over
six months from date of issue or as prescribed and reported as follows:

a) Voided, spoiled or unclaimed stale checks with the Cashier shall be

reported as cancelled in the List of Unreleased Checks that will be
attached to the RCI.

b) New checks may be issued for the replacement of stale/spoiled checks

in the hands of the payees or holders in due course, upon submission of
the stale/spoiled checks to the Accounting Division/Unit. A certified
copy of the previously paid DVs shall be attached to the request for
replacement. A JEV shall be prepared.

1.2 Treasury Circular No. 03-2017, however, reduced the expiry period of MDS
check from six (6) months to three (3) months from date of issue to reduce
large balances of outstanding MDS checks and to simplify accounting,
reconciliation and monitoring of the age profile and composition of check
floats.

1.3 Verification of Cash - MDS, Regular includes reconciling items, totaling

P83,086.41, representing stale checks which remained outstanding and not
adjusted in the books as of December 31, 2020. Details are shown below:

Date Check No. Payee Particulars Amount

02/18/2020 1415145 Casa Miguel Payment of Hotel P 8,859.38
Accommodations
03/11/2020 1415194 PICPA MMR Payment of registration 7,687.50
fee for the attendance to
the Seminar
03/13/2020 1415201 PLDT INC. Payment of telephone bill 4,916.16

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 Date Check No. Payee Particulars Amount
charges
03/13/2020 1415202 PLDT INC. Payment of telephone bill 23,165.41
charges
03/01/2020 1416221 GSIS Payment of GSIS 4,380.23
Insurance fee for the
service vehicle.
03/26/2020 1416259 Lotico Payment of honorarium 10,440.00
Gerson
Villanueva
03/26/2020 1416266 Gilda Payment of honorarium 5,220.00
Gaurino
04/22/2020 1416312 Aser B. Payment for the 9,717.73
Javier replacement of staled
check: No. 1408383 dated
June 17, 2019
06/30/2020 1416425 Jan Michael Payment of Resource 8,700.00
Alexander Speaker
Bernadas
TOTAL P 83,086.41

1.4 Entries for the cancellation and replacement of stale/voided/spoiled MDS

checks issued in the current year should be as follows:

Cash-Modified Disbursement System (MDS), Regular xxx

Accounts Payable xxx

To recognize the cancellation of stale/voided/spoiled MDS checks

Accounts Payable xxx

Cash-Modified Disbursement System (MDS), Regular xxx

To recognize the replacement of stale/voided/spoiled MDS checks.

Cash-Modified Disbursement System (MDS), Regular xxx

Appropriate Account xxx

To recognize the cancellation of stale/voided/spoiled MDS checks without

replacement

1.5 As a result of the above errors, the accounts Cash - MDS, Regular and
Accounts Payable were both understated by P83,086.41 due to non-
adjustment of the stale checks.

1.6 It is informed that due to COVID-19 pandemic, payees of MDS checks were
not able to collect payments due them; thus, MDS checks became stale.

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 1.7 We recommended that Management direct the Accountant to
immediately effect necessary adjusting entries pertaining to stale checks
totaling P83,086.41, to reflect the correct balances of the affected
accounts.

1.8 As of March 11, 2021, the Management immediately prepared the adjusting
entries for errors found. Further, to prevent recurring error, the Management
required the preparer of the BRS to submit a Notice of Stale Checks Report
with the corresponding JEV.

1.9 Auditor Rejoinder:

JEV effecting adjustments of stale checks, including attachments thereof, was

not submitted to the Audit Team.

Unreliable balance of Inventories

2. The balance of the Inventory accounts amounting to P6,652,998.20 is

unreliable due to: (a) non-recording of issued supplies inventory and semi-
expendable properties and equipment amounting to P62,128.36 and
P1,175,572.51, respectively; (b) non-reconciliation of Supplies Ledger Card
(SLC) by the Accounting Division (AD) and Stock Card (SC) by the Property
Division; and (c) non-submission of Report on the Physical Count of
Inventories (RPCI) contrary to the provisions of Chapter 8 of the GAM for
NGAs, Volume I.

2.1 Chapter 8 of the GAM, Volume I provides that:

Section 7 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. If there is no related
revenue, the expense is recognized when the goods are distributed
or the related service is rendered.

Section 9 Supplies and materials purchased for inventory purpose shall be

recorded using the perpetual inventory system, resulting in a more
accurate inventory records and a running total for the cost of
goods sold in each period. The system requires accounting
records to show the amount of inventory on hand at all times
through the maintenance of the SLC (Appendix 57) by the
Accounting 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.

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 Section 17 The following records, forms and reports are prescribed for use:

a.) Stock Card (SC) (Appendix 58) – shall be used to record all
receipts and issues of supplies and the balance in quantity at
any time. It shall be maintained by the Property and/or Supply
Division/Unit for each item in stock. The IAR, RIS, PO and DR
serve as the original sources of information for making entries
on the card.

b.) Supplies Ledger Card (SLC) (Appendix 57) – shall be used to

record materials received, issued and the balance both in
quantity and amount at any time. It shall be maintained by the
Accounting Division/Unit for each kind of supplies and
materials. The IAR, RIS, RSMI, PO and DR serve as the
original sources of information for making entries on the card.

c.) Report on the Physical Count of Inventories (RPCI) (Appendix

66) – shall be used to report the physical count of supplies by
type of inventory as at a given date. It shows the balance of
inventory items per card and per count and shortage/overage,
if any. These include the semi-expendable property wherein the
issue is covered by ICS.

2.2 As of December 31, 2020, the Inventory accounts of LGA have an aggregate
balance of P6,652,998.20, consisting of the following:

Balance as of
Account Title
12/31/2020
Medical, Dental and Laboratory Supplies for Distribution P 188,705.51
Office Supplies Inventory 3,209,797.74
Other Supplies and Materials Inventory 95,120.49
Semi-Expendable Office Equipment 94,247.04
Semi-Expendable Information and Communication 213,055.31
Technology Equipment
Semi-Expendable Communication Equipment 90,052.36
Semi-Expendable Printing Equipment 98,923.17
Semi-Expendable Sports Equipment 25,922.50
Semi-Expendable Other Equipment 6,427.65
Semi-Expendable Furniture and Fixtures 2,235,908.23
Semi-Expendable Books 394,838.20
Total Inventories as of December 31, 2020 P 6,652,998.20

2.3 The balance of inventory accounts as enumerated above is considered

unreliable for the following reasons:

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 a. non-recording of issued supplies inventory and semi-expendable
properties and equipment amounting to P62,128.36 and P1,175,572.51,
respectively;
b. non-reconciliation of SLC by the AD and SC by the Property Division;
and
c. non-submission of RPCI.

a. Non-recording of issued supplies inventory and semi-expendable properties

and equipment amounting to P62,128.36 and P1,175,572.51, respectively

2.4 Section 7, Chapter 8 of the GAM for NGAs, Volume I provides that when
inventories are distributed or related service is rendered, expense should be
recognized. The following schedule shows the total purchases and issuances
for the year 2020:

Beginning Ending
Purchases Issuances
Account Title Balances Balances
In Pesos (P)
Medical, Dental and
Laboratory Supplies for - 1,020,864.00 832,158.49 188,705.51
Distribution
Office Supplies 3,199,335.9 3,209,797.7
1,009,718.20 999,256.36
Inventory 0 4
Other Supplies and
61,691.36 150,947.95 117,518.82 95,120.49
Materials Inventory
3,261,027.2
Sub-total 2,181,530.15 1,948,933.67 3,493,623.74
6
Semi-Expendable
51,150.00 43,097.04 94,247.04
Office Equipment -
Semi-Expendable ICT - 213,055.31 - 213,055.31
Equipment
Semi-Expendable
Communication 21,600.00 68,452.36 90,052.36
-
Equipment
Semi-Expendable
55,475.00 43,448.17 - 98,923.17
Printing Equipment
Semi-Expendable
25,922.50 - - 25,922.50
Sports Equipment
Semi-Expendable - 6,427.65 - 6,427.65
Other Equipment
Semi-Expendable
502,796.25 1,733,111.98 - 2,235,908.23
Furniture and Fixtures
Semi-Expendable
394,838.20 - - 394,838.20
Books
1,051,781.9
Sub-total 2,107,592.51 - 3,159,374.46
5
GRAND TOTAL 4,312,809.2 4,289,122.66 1,948,933.67 6,652,998.20

34
 Beginning Ending
Purchases Issuances
Account Title Balances Balances
In Pesos (P)
1

2.5 It could be observed that there were no issuances made for the eight semi-
expendable property accounts; hence, the reason for accumulated balance of
P3,159,374.46 at year-end. Likewise, the balance includes properties that were
reclassified from PPE to semi-expendable in compliance to Section 10
Chapter 8 of the GAM for NGAs which provides the capitalization threshold
of P15,000 for PPE. Nonetheless, these items were already issued to end-users
upon reclassification; hence, corresponding expenses totaling P1,175,572.51
for the following semi-expendable properties should have been recognized:

Account Title Issuances

Semi-Expendable Office Equipment P 43,097.04
Semi-Expendable ICT Equipment 51,655.31
Semi-Expendable Communication Equipment 68,452.36
Semi-Expendable Printing Equipment 43,448.17
Semi-Expendable Other Equipment 6,427.65
Semi-Expendable Furniture and Fixtures 962,491.98
TOTAL P 1,175,572.51

2.6 Further, upon inspection and review of documents submitted, it was observed
that inventories totaling P62,128.36 were already issued per Stock Cards as of
December 31, 2020. However, the balance remains outstanding in the books
as the RSMI, particularly for the month of December, was not submitted on a
timely manner to the Accounting Division, thereby overstating the inventory
account by the same amount. Details are as follows:

Issuances Adjusted
Ending
Account Title per Stock Ending
Balances
Card Balances
Medical, Dental and Laboratory
188,705.51 37,964.60 150,740.91
Supplies for Distribution
Office Supplies Inventory 3,209,797.74 17,191.47 3,192,606.27
Other Supplies and Materials
95,120.49 6,972.29 88,148.20
Inventory
Total 3,493,623.74 62,128.36 3,431,495.38

2.7 Thus, the non-recording of issued inventories and semi-expendable properties

and equipment amounting to P62,128.36 and P1,175,572.51, respectively,
renders the Inventory accounts overstated by P1,237,700.87 while the
corresponding expenses understated by the same amounts.

b. Non-reconciliation of SLC by the Accounting Division and SC by the

Property Division

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 2.8 As previously discussed, the SCs maintained by the Property Division and
SLCs maintained by the Accounting Division did not reconcile; thus, causing
discrepancies totaling P62,128.36 between the actual and recorded inventories
as reported by the two offices.

c. Non-submission of Report on the Physical Count of Inventories (RPCI)

2.9 The RPCI is a form used to report the physical count of inventory items by
type such as Office Supplies Inventory; Accountable Forms Inventory;
Medical, Dental and Laboratory Supplies Inventory, etc. which are owned by
the agency/entity. It shall be reconciled with the SLCs and SCs maintained by
the Accounting Division/Unit, and Property and/or Supply Division/Unit,
respectively and shall be prepared semi-annually by the Inventory Committee
and by fund cluster. The report shall be submitted to the COA Auditor
concerned not later than July 31 and January 31 of each year for the first and
second semesters, respectively. However, to date, no RPCI was submitted by
the Property and Supply Division to COA for audit and evaluation, as no
physical count was conducted at year-end

2.10 We recommended that Management require the:

a. Property and Supply Division (PSD) to submit RSMI for the month
of December to the AD in order to promptly record issuances of
inventories and make corresponding adjusting entries for
reclassified semi expendable properties already issued;

b. AD and PSD to update and regularly reconcile SLCs and SCs; and

c. PSD to immediately submit the RPCI to COA in conformity with

the pertinent provisions of GAM for NGAs Vol 1.

2.11 Management commented that the JEV taking up the issuance of Office
Supplies, Medical, Dental and Laboratory Supplies and Other Supplies and
Materials inventory was submitted to COA. Accordingly, restructuring of the
Property and Supply Division will be made by assigning a dedicated
personnel to reconcile records with the Accounting Division.

2.12 Auditor Rejoinder:

No adjusting entries were made on the issuance of Semi-Expendable

Properties.

Recurring gaps in PPE

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3. Recurring gaps in the physical count of the agency’s PPE were noted.
Further, unserviceable PPE of the LGA-TC were not disposed. Thus, exposing
it to further deterioration and devaluation contrary to the provisions of COA
Circular No. 2020-006 dated January 31, 2020 and Section 79 of PD 1445.

3.1 In the physical inspection conducted last February 1, 2021 at the LGA-TC,
Los Baños, Laguna, gaps contrary to the provisions of COA Circular No.
2020-006 were noted. Details are as follows:

Lapses found during Physical

COA Circular No. 2020-006
Inventory Taking
Sec 5.6 Each government agency shall adopt a  The property tag varies in
uniform property identification system for PPE format making it difficult to
wherein a unique Property Number shall be locate the items listed in the
assigned for each PPE item. Inventory Count Form (ICF).
Sec 5.9 In coordination with the Property  No Physical Inventory Plan
Division/Unit, the Inventory Committee shall (PIP) was submitted to COA
plan/strategize on how to conduct and complete 10 calendar days before the
the physical inventory within the prescribed scheduled start of inventory
period. It shall prepare a PIP containing, at the taking activities.
least, the specific assignments/duties of the
Committee members, the cut-off date and a
schedule specifying the dates and locations of
the inventory taking activities from start up to
the targeted completion of the physical
inventory.
Sec 6.2(2) The Inventory Committee shall use  Still included as inventory
the inventory working papers provided by the are properties under the
Property Unit as basis for inventory taking capitalization threshold of
activities, taking into consideration the P15,000.00 for PPE.
capitalization threshold of P15,000.
Sec. 6.2(3) The physical count shall be  The Inventory Committee
recorded/documented daily in a standard did not use the
Inventory Count Form (ICF), using the format recommended format of
in Annex A of this Circular, which shall be ICF, pursuant to the above-
used as the basis in the preparation of the mentioned Circular to
RPCPPE after the physical count. indicate current condition
and location of properties
found.
Sec 6.2(5) All PPE items counted shall be  The properties were not
tagged with new property stickers containing tagged with new property
the information provided under Paragraph 5.7 stickers during the count.
of this Circular.

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3.2 Further, Section 79 of PD 1445 provides the guidelines in the destruction or
sale of unserviceable property. It requires that when government property has
become unserviceable for any cause, or is no longer needed, it shall, upon
application of the officer accountable therefore, 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.

3.3 During the physical count of PPE, various unserviceable properties were
found in the area, which if remained undisposed will be exposed to further
deterioration and devaluation. Also, unserviceable properties include old bed
frames and old furniture, which are made of fire-hazard materials. These light
materials, if exposed to fire, could pose a threat to life and limb of personnel
deployed in the area. As required under Section 40(d) Chapter 10 of the
GAM for NGAs, Volume I, an IIRUP shall be prepared by the Property
Officer indicating therein the complete details of unserviceable properties
subject to disposal.

3.4 It should also be noted that the RPCPPE was not submitted to COA Audit
Team which is an annual report that shall also be prepared by the Supply
and/or Property Division to be submitted to the Auditor concerned and
Accounting Division not later than January 31 of each year. Non-submission
thereof, shall prevent the Audit Team from validating the accuracy of reports
of the Management. The physical count of PPE was only conducted last
February 1, 2021; hence, the reason for the delayed submission of the
required report.

3.5 We recommended that Management require the PSD to:

a. strictly comply with the procedural guidelines in the conduct of

physical count of PPE as provided under COA Circular No. 2020-
006 dated January 31, 2020; and

b. immediately prepare and submit the IIRUP and RPCPPE as

required under the pertinent provisions of the GAM for NGAs
Volume I.

3.6 The Management acknowledged the lapses noted in the conduct of physical
count of PPE and committed to: 1) use the ICF and issue uniform property tag
with property number conforming with the format prescribed by the said COA
Circular; 2) provide a copy of PIP ahead of time during the next count; 3)
drop the semi-expendable properties from the list of PPEs and likewise issue
Inventory Custodian Slip (ICS) replacing the Property Acknowledgement
Receipt (PAR); and 4) submit the IIRUP and RPCPPE as soon as possible.

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 Further, during the Exit Conference the Management informed COA that the
LGA has already organized a Disposal Committee to make further action on
the undisposed properties, so as not to become hazardous to the Training
Center.

3.7 Auditor’s Rejoinder:

The RPCPPE was submitted to COA on March 10, 2021 only. However,
balances thereof did not reconcile with the balances in the books.
Unserviceable PPEs were already excluded from the RPCPPE, while the
semi-expendable properties are already dropped from the books.

Further, Management is encouraged to prioritize the disposal of unserviceable

properties and reconciliation of balances between the Accounting and
Property Division in order to cleanse the PPE accounts.

Unliquidated Fund Transfers

4. Fund transfers to National Government Agencies (NGAs), Local Government

Units (LGUs) and Non-Government Organizations/Civil Society Organizations
(NGOs/CSOs) totaling P72,835,649.93 remained unliquidated as of December
31, 2020 of which 64 percent of the total balances or P46,607,025.97 had been
outstanding from one to over three years, casting doubt as to whether or not
the Academy’s resources are being used effectively and the projects’ objective
towards the delivery of the desired outputs are efficiently implemented.

4.1 COA Circular 94-013 dated December 13, 1994 provides that:

Section 4.6 Within ten (10) days after the end of each month/end of the agreed
period for the Project, the IA shall submit the Report of Checks
Issued (RCI) and the Report of Disbursement (RD) to report the
utilization of the funds. Only actual project expenses shall be
reported. The reports shall be approved by the Head of the IA.

Section 4.9 The IA shall return to the SA any unused balance upon completion
of the project.

Section 6.7 The Implementing Agency shall return to the Source Agency any
unused balance upon completion of the project.

4.2 Further, item 3.1.1 of COA Circular No. 2012-001 as amended by COA
Circular No. 2016-002 dated May 31, 2016 requires: “certification by the
Accountant that funds previously transferred to the Implementing Agency (IA)
has been liquidated and accounted for in the books” as part of the
documentary requirements for fund transfers.

39
4.3 As of December 31, 2020, the balance of funds transferred to NGAs, LGUs
and NGOs/CSOs amounted to P72,835,649.93 for the implementation of
various capacity development projects and activities, summarized as follows:

Due from Due from Due from

Age Totals
NGAs LGUs NGOs/POs

Current (2020) 25,043,083.96 1,185,540.00 26,228,623.96

-
Over 1 year
(2019)
25,938,261.21 1,323,478.12 27,261,739.33
-
Over 2 years
(2018)
8,593,677.76 - - 8,593,677.76
3 years and over
(2017 & beyond)
6,564,121.10 4,037,487.78 150,000.00 10,751,608.88
Sub-total 41,096,060.07 4,037,487.78 1,473,478.12 46,607,025.97
Total as of
66,139,144.03 4,037,487.78 2,659,018.12 72,835,649.93
12/31/2020

4.4 A significant decrease of prior years’ balances was observed during 2019,
however, the following practices are still presently contributing to the
accumulation of unliquidated fund transfers, to wit:

a. Continuous release of fund transfers despite outstanding balances and

without certification by the Accountant that funds previously transferred
to the IA has been liquidated and accounted for;

b. Period of implementation of specific projects funded by the transfer not

specified in the MOA between LGA and IAs; and

c. Circuitous manner of releasing funds and liquidation thereof.

a. Continuous release of fund transfers despite outstanding balances

4.5 Additional fund transfers totaling P39,796,497.87 were made during the year
despite previous years’ unliquidated balances and no certification was issued
by the Accountant confirming that funds previously transferred to the IAs has
been liquidated and accounted for in the books. Details are as follows:

NGOs/CSO
  NGAs LGUs Total
s
Prior Years’ Balance
136,738,545.9
Beg. Balance 119,098,354.81 13,990,191.10 3,650,000.00
1
Liquidation 78,002,294.74 9,952,703.32 2,176,521.88 90,131,519.94
Balance
41,096,060.07 4,037,487.78 1,473,478.12 46,607,025.97
December 31,

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 NGOs/CSO
  NGAs LGUs Total
s
2020 (a)
Percentage (a/c) 62.14% 100.00% 55.41% 63.99%
Current Year’s Balance
Fund Transfers 38,610,957.87 0.00 1,185,540.00 39,796,497.87
Liquidation 13,567,873.91 - - 13,567,873.91
Balance
December 31, 25,043,083.96 0.00 1,185,540.00 26,228,623.96
2020 (b)
Percentage (b/c) 37.86% 0.00% 44.59% 36.01%
Grand Totals (c) 66,139,144.03 4,037,487.78 2,659,018.12 72,835,649.93
4.6 From the above data, it can be inferred that out of the total unliquidated fund
transfers of P72,835,649.93 as of December 31, 2020, 63.99 percent or
P46,607,025.97 are balances from the prior years’ fund transfers, while
P26,228,623.96 or 36.01 percent are current year balances. Details are as
follows:

NGAs/LGUs/ NGOs/CSOs Current Past Due Total

NGAs
DILG BARMM - 82,316.88 82,316.88
DILG REGION I 504,800.00 129,134.76 633,934.76
DILG REGION II 1,299,858.00 21,194.26 1,321,052.26
DILG REGION III 2,578,928.53 124,060.84 2,702,989.37
DILG Region IV-A
(CALABARZON) 909,768.64 1,078,591.19 1,988,359.83
DILG MIMAROPA 1,670,700.00 863,557.37 2,534,257.37
DILG Region V 3,644,998.10 3,542,111.89 7,187,109.99
DILG Region VI 2,252,196.00 4,776,498.42 7,028,694.42
DILG Region VII 548,700.00 1,783,518.42 2,332,218.42
DILG Region VIII 879,596.05 6,997,194.18 7,876,790.23
DILG Region IX 3,729,095.23 5,276,055.28 9,005,150.51
DILG Region X 1,181,650.00 2,676,916.81 3,858,566.81
DILG Region XI 1,120,100.00 2,712,893.66 3,832,993.66
DILG Region XII 1,169,200.00 4,727,690.27 5,896,890.27
DILG Region XIII (CARAGA) 727,619.00 2,012,847.59 2,740,466.59
DILG CAR 253,933.70 6,648.48 260,582.18
DILG NCR 117,084.32 1,668,452.22 1,785,536.54
DILG Central Office - 2,248,432.92 2,248,432.92
Total DILG ROs 22,588,227.57 40,728,115.44 63,316,343.01
DBM-Procurement Service 2,454,856.39 9,828.10 2,464,684.49

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 NGAs/LGUs/ NGOs/CSOs Current Past Due Total
DPWH LAGUNA 2ND DISTRICT 325,718
ENGINEERING OFFICE - .20 325,718.20
Miscellaneous Trust Fund DOH 32,398
CHD WV - .33 32,398.33
Total Other NGAs 2,454,856.39 367,944.63 2,822,801.02
Sub-total NGAs 25,043,083.96 41,096,060.07 66,139,144.03
LGUs
City Government of Angeles - 3 38
MDG FACES - 87.95 7.95
City Government of Antipolo - 60,0
MDG FACES - 00.00 60,000.00
City Government of Balanga - 150,0
MDG FACES - 00.00 150,000.00
City Government of Bayawan - 60,0
MDG FACES - 00.00 60,000.00
City Government of Bayugan - 32,6
MDG FACES - 11.43 32,611.43
City Government of Bogo - MDG 210,0
FACES - 00.00 210,000.00
City Government of Cabadbaran - 150,0
MDG FACES - 00.00 150,000.00
City Government of Cadiz - MDG 56,8
FACES - 58.25 56,858.25
City Government of Cagayan de 150,0
Oro - MDG FACES - 00.00 150,000.00
City Government of Calbayog - 90,000.00 90,000.00
City Government of Carcar - MDG
FACES - 153,463.00 153,463.00
City Government of Dasmariñas - 34,1
MDG FACES - 44.00 34,144.00
City Government of Dumaguete - 14,4
MDG FACES - 12.15 14,412.15
City Government of El Salvador - 151,7
MDG FACES - 52.00 151,752.00
City Government of Escalante - 150,0
MDG FACES - 00.00 150,000.00
City Government of Gapan - MDG 154,0
FACES - 85.39 154,085.39
City Government of General Santos - 210,000.00 210,000.00
City Government of Koronadal- 60,0
MDG FACES - 00.00 60,000.00
City Government of Lucena - MDG 137,3
FACES - 98.00 137,398.00
City Government of Manila (MHD- 100,0
SHC-Mass Hot Project) - 00.00 100,000.00
City Government of Masbate - 112,6
MDG FACES - 24.50 112,624.50

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 NGAs/LGUs/ NGOs/CSOs Current Past Due Total
City Government of Oroquieta - 4,700.00 4,700.00
City Government of Panabo- MDG 60,0
FACES - 00.00 60,000.00
City Government of Puerto 5
Princesa - MDG FACES - 20.50 520.50
City Government of San Jose Del 90,0
Monte - MDG FACES - 00.00 90,000.00
City Government of Silay - MDG 126,9
FACES - 54.00 126,954.00
City Government of Sipalay -
MDG FACES - - -
City Government of Sta. Rosa - 60,0
MDG FACES - 00.00 60,000.00
City Government of Tacloban - 300,0
MDG FACES - 00.00 300,000.00
City Government of Talisay - MDG 51,7
FACES-Region VI - 36.95 51,736.95
City Government of Tanjay - MDG 149,1
FACES - 70.50 149,170.50
City Government of Tayabas - 3,2 3,21
MDG FACES - 11.00 1.00
City Government of Vigan - MDG
FACES - - -
City Gov't of Las Piñas - MDG 58,5
FACES - 24.75 58,524.75
City Health Office - Parañaque City - 50,000.00 50,000.00
City Health Office - Santiago City - 50,000.00 50,000.00
DRR Phase II for the Concreting of 350,0
Hulo-Malaya Dolores Road - 15.57 350,015.57
Municipal Government of Aliaga of
Brgy. Poblacion West III, Aliaga, 444,9
Nueva Ecija - 17.84 444,917.84
Subtotal LGUs - 4,037,487.78 4,037,487.78
Cebuplus Association, Inc. (CPA) - 150,000.00 150,000.00
Galing-Pook Foundation 1,185,540.00 823,478.12 2,009,018.12
Polytechnic University of the 500,000.0 500,000.0
Philippines - 0 0
Subtotal NGOs/CSOs 1,185,540.00 1,473,478.12 2,659,018.12
GRAND TOTAL 26,228,623.96 46,607,025.97 72,835,649.93

4.7 Meanwhile, it should be noted that only 34.09 percent (P13,567,873.91/

P39,796,497.87) of the current year’s fund transfers have been liquidated,
indicating that there are still lapses in the liquidation of fund transfers to date.
Remaining balances of current year’s fund transfers amounting
P26,228,623.96 shall continue to accumulate unless the Management restricts
granting of additional fund transfers provided however, previous cash
advances are liquidated.

43
4.8 Despite liquidations made in 2020, the remaining unliquidated fund transfers
casts doubt to the efficiency of implementation of projects for which the fund
transfers were made.

b. Period of implementation of specific projects funded by the transfer was

not specified in the MOA between LGA and IAs

4.9 The transfer of funds to DILG Regional Offices (DILG-ROs) was covered by
a Memorandum of Agreement; however, this pertains to the whole year fund
transfers and does not stipulate the specific activity to be conducted by the IAs
and including the corresponding period of implementation for each project.
Indicating the period of implementation in the MOA will be useful to facilitate
the liquidation of fund transfers to IAs and imposition of penalties, if
applicable.

c. Circuitous manner of releasing funds and liquidation thereof

4.10 The outstanding balance of P72,835,649.93 includes funds released by DILG-

CO to DILG-ROs through LGA amounting to P63,316,343.01 for the
implementation of various DILG programs and activities. This manner is
deemed circuitous considering that the Department can release such funds
directly to its ROs. Funds could have been downloaded directly to DILG-ROs
to implement activities/programs for which the transfer was made.

4.11 Confirmation letters were sent to NGAs/LGUs/NGOs/CSOs to verify the

correctness of the remaining balances recorded in the books. However, out of
59 confirmation letters sent, only 26 replies were received, of which only one
IA has the same balance as recorded in the books. Other IAs have differences
in the timing of recording, while majority claimed that they have fully
liquidated the amounts reflected in the balances of LGA.

4.12 Due to this circuitous manner of releasing funds, some liquidation reports did
not reach the LGA because these were allegedly submitted to either DILG or
COA-IA. Hence, the liquidation of fund transfers for those NGAs/LGUs
cannot be recorded accordingly. Difficulty in communicating with IAs and
lack of coordination is evident in the replies to confirmation (Annex B).

4.13 We recommended that Management:

a. issue demand letters to IAs requiring the submission of liquidation

reports and require the return of unused funds especially for long
outstanding fund transfers (FTs); otherwise, strictly refrain from
granting additional FTs unless previous CAs are first liquidated to
minimize the accumulation of unliquidated balances;

44
 b. revisit the MOA with the IAs to ensure that timelines/completion date
of every project funded by the FT are indicated therein; and

c. coordinate with concerned ROs and LGUs and make necessary

adjustments on the outstanding FTs based on the results of the
confirmation.

4.14 Management explained that they have been continuously sending demand
letters to IAs for them to liquidate. Further, the Management emphasized that
a regular coordination is also established with DILG-ROs via Local
Governance Regional Resource Center (LGRRC) Quarterly Meetings and
during these meetings, status of FTs is one of the major point of concern.
During the exit conference, Management added that they are implementing
internal control measures to prevent granting of additional FTs to IAs with
low liquidation rate.

4.15 Auditor’s Rejoinder:

We maintain our position that Management continue to coordinate with IAs to

reconcile records. Further, the LGA should also consider seeking assistance
from the DILG Central Office in order to oblige the Regional Directors to
fully liquidate prior years’ accumulated unliquidated fund transfers.

B. COMPLIANCE AUDIT

Non-remittance of Trust Receipts to the National Treasury

5. Unutilized fund balances/receipts from various sources totaling P19,111,308.61

intended for various purposes covering the period 2008 to 2020 were not
remitted to the BTr or returned to Source Agencies (SAs) contrary to the
provisions of Section 6 of the General Provisions of RA No. 11465 or the GAA
for FY 2020 and EO No. 431 dated May 30, 2005.

5.1 It is a declared policy by the State that unless otherwise specifically provided
by law, all income collected by agencies of the government by virtue of the
provisions of law, order and regulations shall be deposited with the National
Treasury, and shall accrue to the unappropriated surplus of the General Fund
of the Government.

5.2 Section 6 of General Provisions of the GAA (RA 11465) requires that the
following be deposited to the National Treasury:

a. Receipts collected or received by departments, bureaus, offices and

instrumentalities of the National Government, including Constitutional
Offices enjoying fiscal autonomy and SUCs: (i) from non-tax sources,
45
 such as insurance proceeds, acting as trustee, agent or administrator; (ii)
as guaranty for the fulfillment of an obligation; or (iii) donations
authorized by law or contract with a term not exceeding one (1) year; and

b. Those classified by law or regulations as trust receipts.

5.3 EO No. 431 dated May 30, 2005, on the other hand, requires reversion of all
dormant accounts, unnecessary special and trust funds to the General Fund
and for other purposes.

5.4 This was further clarified by the guidelines provided in COA Circular No.
2015-001 dated January 29, 2015 which prescribes that the head of the
Accounting Unit of the NGA conduct thorough analysis of the cash accounts,
providing cash mapping of cash accounts, special and trust funds maintained
by the government agencies with AGDBs but without valid claimants, or are
no longer necessary for the attainment of the purposes for which the said
funds were established/received and/or the project implementation has been
completed, terminated, cancelled or abandoned.

5.5 As of December 31, 2020, the CIB-LCCA maintained by LGA with AGDB
includes receipts accumulating to P19,111,308.61. This account is made up of
receipts from various sources such as refunds of unused funds from IAs,
receipt of funds from SAs/donors/financing entities, and others, to wit:

Date Payor Particulars Amount

03/04/1 ASEAN Plus Grant by ASEAN Plus Three 9,133,093.64
9 Three Cooperation (Approved amount
Cooperation Fund $197,502.20, Initial
(APTCF) payment/transfer $177,751.9)
8/30/19 None Interest Income Less 2,618.10
Withholding Taxes for the
Quarter
09/20/1 DILG NCR 247,465.74
9 Special Project Refund of unutilized fund
LGA transfer
09/30/1 Mandaue City 15,150.00
9
None Interest Earned for the 3rd 2,427.10
11/29/1
Quarter
9
DILG Region 127,069.89
XIII
Refund of unutilized fund 1,000.00
12/31/1 transfer 1,330.00
DILG BARMM 4,330.00
9
337.00
2,417.02

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 Date Payor Particulars Amount
Dangerous Drugs Direct Deposit from Source 1,830,000.00
Board Agency
Region XIII Refund of unutilized fund 703.94
transfer
12/31/1 None Interest Earned and Withholding 3,038.45
9 Taxes for the Quarter

02/21/2 DILG Region VII 1,650,000.00

0
Refund of unutilized fund
02/28/2 DILG Region XI 500,000.00
transfer
0
DILG CAR 500,000.00
3/31/20 DILG ARMM 1,029,490.78
None Interest Earned Less 3,408.87
Withholding Taxes
6/30/20 DILG CAR Refund of unutilized fund 500,000.00
6/30/20 DILG CAR transfer 45,244.25

9/30/20 None June 2020 Interest and 3,485.13

Withholding Taxes
9/30/20 DILG Region X Refund of unutilized fund 2,607,945.95
transfer
Subtotal 18,210,555.86
  Other unaccounted amounts/ 900,752.75
balances from 2008 to date
Grand Total 19,111,308.61

5.6 It should be noted that the grant from ASEAN amounting to P9,133,093.64
for the implementation of the project entitled, "Baseline Study on Governance
Systems among ASEAN Plus Three Countries" was made last March 2019.
However, it was observed that the grant remained unutilized for more than
one year.

5.7 We recommended that Management require the Accounting Section to:

a. determine proper disposition of all cash balances of LGA as

prescribed in COA Circular No. 2015-001 dated January 29, 2015;

b. prepare the DV and check to support the withdrawal of fund from the
AGDB and subsequently remit the same to the BTr or return to the
SA; and

c. in case of grants from foreign donors, determine from the attendant

agreement if unused funds are required to be returned to the grantor.

47
 5.8 Management commented that they have exhausted efforts to scrutinize the
details of DILG-LGA Account No. 0672-1075-12 and all funds found subject
for refund/return were already remitted and recorded accordingly. With regard
to the grant from ASEAN amounting to P9,133,093.64 for the implementation
of the project entitled, “Baseline Study on Governance Systems among
ASEAN Plus Three Countries”, Management clarified that the project is
supposed to be fully implemented last 2020. However, due to the pandemic,
the project implementation was halted. A request for extension for its
implementation was already made to ASEAN and awaiting the official
document of approval.

5.9 Auditor’s Rejoinder

JEVs covering the remittance of dormant fund balances to the BTr are not yet
submitted to the Audit Team for validation and audit purposes.

Delayed submission of Bank Reconciliation Statements

6. Bank Reconciliation Statements (BRS) were not submitted to COA within the
prescribed period, contrary to Section 5, Chapter 21 of GAM for NGAs,
Volume I, thereby precluding the Audit Team from conducting timely audit of
accounts and informing the Management of any deficiencies or errors that
may be noted thereat.

6.1 The BRS shall be prepared in order to check correctness of both the bank’s
and agency’s/entity’s records, to prevent fraud and to enable the agency/entity
or bank to take up charges or credits recognized by the bank or agency/entity
but not yet known to the agency/entity or bank.

6.2 Section 74 of PD 1445 requires the agency head to see to it that reconciliation
is made between the balance shown in the reports of the depositary banks and
that in the books of accounts of the agency.

6.3 Preparation of the BRS as discussed in Section 5, Chapter 21 of the GAM for
NGAs, Volume I requires that the Chief Accountant/Designated Staff shall
within ten days from receipt of the monthly Bank Statement (BS) together
with the paid checks, original copies of Debit Memoranda (DM)/Credit
Memoranda (CM) from the GSB, reconcile the BS with the GL and prepare
the BRS in four copies.

6.4 The Chief Accountant/Designated Staff shall then prepare a JEV to recognize
all reconciling items that require adjustment and correction in the books of
accounts. The BRS shall be submitted within 20 days after receipt of the
monthly BS to the following:

48
 Original – COA Auditor (with all the supporting documents and JEVs)
Copy 2 – Head of Agency/Entity
Copy 3 – Accounting Division/Unit file
Copy 4 – Bank, if necessary

6.5 The BRS as of December 31, 2020 should have been submitted to the Audit
Team last January 20, 2021. However, to date the latest BRS submitted are
only up to March 2020 and August 2020. Details are as follows:

Account Number Latest BRS Submitted Book Balance

2067-9004-41 March 2020 -
0672-1075-12 August 2020 P 17,012,073.47
0672-1093-96 August 2020 3,286,651.96
0672-1091-91 August 2020 24,870,479.80
0672-1092-13 August 2020 93,704.00

6.6 Inquiry with the personnel concerned, BS are hard to obtain from the bank
especially in the midst of the COVID-19 pandemic.

6.7 BRS, among others served as proof that cash exist. To be effective, the BRS
should be accurate and prepared on time. Reconciling items needing
adjustments should be done immediately to ensure correctness of balances of
affected accounts.

6.8 We recommended that Management exhaust all efforts to obtain copies of

BS and immediately prepare and submit the BRS in order to address
possible lapses and deficiencies that could be found thereof.

6.9 Management has already submitted the remaining BRS for December 2020
except for MDS Account No. 2067-9004-41. Management commented that
they are in resolute communication with the AGDB, Landbank of the
Philippines (LBP), Pasig Capitol Branch for the immediate release of the
December 2020 BS. They further commented that they have also tried to
secure the weAccess (Institutional Internet Banking) online facility even
before the pandemic broke out. However, there has been difficulty of
securing signatures of the Board of Trustees of the Academy.

Programs/Projects Related to Gender and Development (GAD)

7. The LGA failed to secure endorsement of the GAD Plan and Budget (GPB) for
CY 2020 from the Philippine Commission on Women (PCW) and the
corresponding Accomplishment Report (AR) thereof were not submitted to the
Audit Team contrary to Section 31 of the GAA for CY 2020 and COA
Circular No. 2014-001 dated March 18, 2014.

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 7.1 Section 31 of the General Provisions of the GAA for FY 2020 provides that:

All agencies of the Government shall formulate a Gender and Development

(GAD) Plan designed to address gender issues within their concerned sectors
or mandate and implement the applicable provisions under R.A No. 9170 of
the Magna Carta of Women, Convention on the Elimination of All Forms of
Discrimination Against Women, the Beijing Platform for Action, the
Philippine Plan for Gender-Responsive Development (1995-2025) and the
Philippine Development Plan (2017-2022).

7.2 Section V of COA Circular No. 2014-001 dated March 18, 2014 further
requires that:

The audited agency shall submit a copy of the Annual GAD Plan and Budget
to the Audit team assigned to the agency within five (5) working days from
the receipt of the approved plan from the PCW or their mother or central
offices, as the case maybe. Likewise, a copy of the corresponding
Accomplishment Report shall be furnished to the said audit team within five
(5) working days from the end of January of the preceding year.

7.3 For CY 2020, the GAD Focal Person failed to secure endorsement of its GPB
for CY 2020 from the PCW contrary to the provisions cited above.
Consequently, the Management failed to submit it GPB CY 2020 to the Audit
Team while corresponding Accomplishment Report (AR) was not submitted
for review and validation, contrary to the provisions of COA Circular No.
2014-001 dated March 18, 2014.

7.4 We recommended that the GAD Focal Point Person immediately submit
copies of the GPB as approved by PCW and the corresponding Report of
Accomplishments to the Audit Team in accordance with existing laws
and regulations.

7.5 Management admitted their lapses relative to the Programs/Projects

concerning GAD and therefore committed to submit GAD Accomplishment
Reports of the agency.

Programs/Projects in support of Senior Citizens and Persons with Disability

8. The LGA failed to prepare plans, programs and projects for senior citizens
(SCs) and person with disabilities (PWDs), as required under Section 32 of the
General Provisions of the GAA FY 2020.

8.1 Section 32 of the General Provisions of the GAA for CY 2020, requires that:

50
 “All agencies of the government shall formulate plans, programs and
projects intended to address the concerns of senior citizens and person with
disability, insofar as it relates to their mandated functions, and integrate the
same in their regular activities.”

8.2 The LGA failed to prepare and submit plans, programs, and projects intended
to address the concerns of the SCs and PWDs as required in the above-cited
provision of the GAA.

8.3 We reiterated our prior year’s recommendation that Management

comply with the provision of Section 32 of the GAA.

8.4 Management commented that they are still looking for ways to be able to
provide/conduct programs/projects for SCs and PWDs

Report on COVID-19 Funds and Related Expenses

9. COVID-19 Hazard Pay amounting to P1,164,000.00 was granted to LGA

employees, contract of service (COS) and job order (JO) personnel, who
physically reported for work during the period of implementation of the ECQ.
The payment was compliant to the parameters set under Section 2 of AO No.
26 of 2020 dated March 23, 2020.

9.1 On March 8, 2020, through Proclamation No. 922 by the President of the
Philippines, a state of public health emergency throughout the Philippines was
declared due to the COVID-19 pandemic, threatening national security. The
declaration enabled the government agencies and LGUs to immediately act to
prevent loss of life by utilizing appropriate resources to implement urgent and
critical measures to contain and prevent the spread of COVID-19, mitigate its
effects and impact to the community, and prevent serious disruption of the
functioning of the government and the community.

9.2 Relative thereto, the LGA realigned a total of P4,532,600.27 of its Regular
Agency funds and incurred COVID-19 related expenses amounting
P4,316,123.06 (Details are shown in Annex C).

9.3 Further, on March 23, 2020, AO No. 26 was issued authorizing the grant of
Hazard Pay to government personnel who physically report for work during
the period of implementation of an Enhanced Community Quarantine (ECQ)
relative to COVID-19 pandemic subject to the following conditions under
Section 2 thereof:

Conditions on the Grant of the COVID-19 Hazard Pay:

51
 a. The personnel are occupying regular, contractual of casual positions or
are engaged through contract of service (COS), job order (JO) or other
similar schemes;

b. The personnel have been authorized to physically report for work at their
respective working hours by the head of agency or office during the
implementation of Enhanced Community Quarantine (ECQ) measures in
the area of such office or workstation; and

c. The rate of COVID-19 hazard pay shall be based on the number of days
an employee physically reports for work.

9.4 The LGA, an attached agency under the DILG, responsible for human
resource development and training of local government officials and the
department personnel, rendered services in the midst of pandemic and
therefore granted COVID-19 Hazard Pay to LGA employees, contract of
service and job order personnel totaling P1,164,000.00 for the period March
17, 2020 to May 31, 2020 and August 4 to August 18, 2020. Details are as
follows:

Quarantine Measure Amount of COVID-

Period Covered 19 Hazard Pay
LGA LGA-TC Granted
March 17 to 31, 2020 ECQ ECQ P 169,000.00
April 1 to 15, 2020 ECQ ECQ 179,000.00
April 16 to 30, 2020 ECQ ECQ 217,000.00
May 1 to 15, 2020 ECQ ECQ 239,500.00
May 16 to 31, 2020 MECQ* MECQ* 142,500.00
August 4 to 18, 2020 MECQ* MECQ* 217,000.00
TOTAL P 1,164,000.00
*MECQ (Modified Enhanced Community Quarantine)

9.5 Scrutiny of documents submitted to the Audit Team revealed that various
trainings, meetings and fora were still conducted in the Academy despite the
implementation of the ECQ in Metro Manila and Laguna. Some pertinent
activities are, but not limited to the following:

a. Workshop: Revisiting the LGA Strategic Plan (2019-2023)

b. Various Listong Ugnayan COVID-19 ay Labanan Online Talakayan
- Online Discussion with DILG Officials and Field Officers
- Online Discussion with LGU Officials and Functionaries

9.6 It was noted that the claim for COVID-19 Hazard Pay during implementation
of Modified Enhanced Community Quarantine (MECQ) from May 16 to 31,

52
 2020 and August 4 to 18, 2020 were supported with clarification from DBM
allowing such grant.

9.7 Therefore, based on the work performed described in this report, nothing has
come to the attention of the Audit Team on non-compliance by the LGA, in
all material respects, with Section 2 of AO No. 26 of 2020 dated March 23,
2020.

Statement of Audit Suspensions, Disallowances and Charges (SASDC)

For CY 2020, no Notice of Disallowance/Notice of Suspension/Notice of Charge was

issued to the Academy.

Compliance with Tax Laws (RA 8291 (GSIS), RA 9679 (Pag-IBIG), RA 7875
(PhilHealth)

The Academy is compliant with the existing laws on the withholding of taxes, GSIS, Pag-
IBIG and PhilHealth contributions from salaries of personnel, remitting the same
regularly with balances as of December 31, 2020 as follows:

Balances
Account January 1, December
Withheld Remittance
2020 31, 2020
Due to BIR 2,304,385.10 8,191,766.21 8,069,447.13 2,426,704.18
Due to GSIS 329,131.89 4,132,238.94 3,880,144.68 581,226.15
Due to Pag-IBIG 669.93 1,144,280.71 1,074,289.30 1,500.00
Due to PhilHealth 43,312.11 346,326.66 343,422.18 46,216.59
TOTAL 2,677,499.03 13,814,612.52 13,367,303.29 3,055,646.92

Due to BIR - Out of P2,426,704.18 balance, the amount of P1,694,461.24 was

remitted in January 2021 with details as follows:

Tax Remittance Advice (TRA) Amount of

Serial No./Reference No. Remittance
07B0432021385339/172100039533414 518,471.79
07B0432021385330/012100039533260   247,058.01
07B0432021385378/402100039533943 928,931.44
Total Remittance 1,694,461.24

Due to GSIS – Out of the P581,226.15 balance, P18,926.28 was remitted in

February 2021. The amount of P549,564.53 was not remitted due to pending
approval of the Agency Remittance Advice (ARA) of the Academy for those with
increase in salaries due to promotion and Salary and Standardization Law (SSL)
while the remaining balance of P12,735.40 is subject to verification and
adjustment.

53
 Due to Pag-IBIG – The remaining balance of P1,500.00 is subject to verification
and adjustment.

Due to PhilHealth – Out of P46,216.59, the amount of P1,447.91 was remitted in

February 2021, while the remaining P44,768.68 is subject to verification and
adjustment.

Marawi/Yolanda Funds

The LGA did not receive Marawi or Yolanda Funds for CY 2020.

National Task Force to End Local Communist Armed Conflict (NTF-ELCAC) Funds

The LGA did not receive ELCAC Funds for CY 2020.

54