EXECUTIVE SUMMARY

A. Introduction
The Department of Agriculture (DA) is the main agency of the Philippine
Government responsible for the promotion of agricultural development. Reorganized
under Executive Order No. 116 dated January 30, 1987, the DA is mandated to provide
the policy framework and help direct public investments. In partnership with the Local
Government Units (LGUs), it provides the support services necessary to make agriculture
and agri-based enterprises profitable and helps spread the benefits of development to the
poor, particularly those in the rural areas.

On August 25, 2016, President Rodrigo Roa Duterte appointed Mr. Emmanuel F.
Piñol as DA Secretary. The Secretary is assisted by five Undersecretaries for Operations;
Administration, Agribusiness and Marketing and Regional Engagement; Special
Concerns; Policy and Planning; High Value Crops and Rural Credit; and Chief of Staff;
and six Assistant Secretaries. The DA-Office of the Secretary (OSEC) supervises the
following 15 Regional Field Offices (RFOs), five staff bureaus and seven attached
agencies performing staff and support functions:

RFOs Staff Bureaus Attached Agencies

CAR, I - Agricultural Training Institute Agricultural Credit and Policy Council (ACPC)
XIII (ATI)
Bureau of Animal Industry Bureau of Fisheries and Aquatic Resources
(BAI) (BFAR)
Bureau of Agricultural Research
Philippine Fiber Industry Development
(BAR) Authority (PFIDA)
Bureau of Plant Industry (BPI)
Philippine Council for Agriculture and Fisheries
(PCAF)
Bureau of Soils and Water National Meat Inspection Service (NMIS)
Management (BSWM) Philippine Carabao Center (PCC)
Philippine Center for Postharvest Development
and Mechanization (PhilMech)

DA has authorized plantilla positions of 4,852. At the end of 2016, DA-OSEC had
a total personnel complement of 9,197, consisting of 4,252 filled-up positions, 727 co-
terminus employees and 4,218 contracts of service/job orders. It has hired 4,240 as
contracts of service/job orders in FY 2016.

B. Financial Highlights

The DA’s financial position, performance and sources and application of funds
for FY 2016 and FY 2015 are presented as follows:

Particulars 2016 2015

Financial Position
Assets ₱75,155,028,701.14 ₱71,355,476,923.33

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 Particulars 2016 2015
Liabilities 4,514,896,709.64 5,697,049,938.84
Net Assets/Equity 70,640,131,991.50 65,658,426,984.49
Financial Performance
Revenue 563,509,111.53 464,947,985.99
Current Operating Expenses 14,788,814,801.14 12,685,312,634.98
Surplus/(Deficit) from Current Operations (14,225,305,689.61) (12,220,364,648.99)
Net Financial Assistance/ Subsidy 29,435,755,030.27 24,653,911,211.98
Gains 42,562,333.88 32,405,624.69
Losses (52,590,191.29) (11,424,594.59)
Surplus/(Deficit) for the Period 15,200,421,483.25 12,454,527,593.09
Sources and Application of Funds
Allotments 41,692,184,829.66 44,633,912,903.70
Obligations 35,828,587,544.56 37,460,347,872.64
Unobligated Balance ₱ 5,863,597,285.10 ₱ 7,173,565,031.06

C. Scope and Objective of Audit

The report includes audit observations covering the financial transactions and
operations for FY 2016 of the DA-Central Office, five Staff Bureaus and Regional Field
Offices except RFO VII. The audit was conducted to (a) ascertain the level of assurance
that may be placed on management’s assertions on the financial statements;
(b) determine the propriety of transactions as well as the extent of compliance with
applicable laws, rules and regulations; (c) recommend agency improvement
opportunities; and (d) determine the extent of implementation of prior years’ audit
recommendations.

A Value for Money Audit was also conducted on five projects covering the major
programs of the Department and focused areas determined during the planning
conference.

D. Independent Auditor’s Report

A qualified opinion was rendered on the fairness of presentation of the financial

statements of the DA due to accounting errors/omissions and deficiencies which are
discussed in detail in Part II of the report.

E. Other Significant Observations and Recommendations

1. The financial and physical targets of the Rice Program with an appropriation of
₱7.032 billion were not fully achieved due to various deficiencies in its
implementation. (Observation No. 1)

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 We recommended and Management agreed to require the concerned DA officials to
undertake the following measures:

a. RFO II, to direct the LGUs to complete immediately the

construction/rehabilitation of Small Scale Irrigation Projects;

b. RFO V, to instruct the Regional Agricultural Engineering Division (RAED) to

periodically monitor the construction and rehabilitation of infrastructure
projects and ensure full completion thereof;

c. RFO VI, to expedite the distribution of the remaining undelivered registered

seeds; and

d. BAR, RFOs VI and XII, to submit the required acceptance reports/masterlists of

actual recipients so that evaluation of the effectiveness and efficiency of the
project implementation be undertaken by the audit team.

2. The DA-CO and FAPs had the lowest disbursement rate of 55.11 percent for the
implementation of various DA programs and projects out of the total cash allocation
of ₱34.310 billion. Moreover, cash allocation for the scholarship program of ACEF
had a low disbursement rate of only 27 percent of the ₱230.445 million.
(Observation No. 2)

We recommended and Management agreed to require the Program Directors of:

a. DA-CO, to fast track the program implementation to improve the low financial
performance and facilitate the payment to all qualified scholars under the ACEF
Scholarship Program; and

b. FAPs, to facilitate its procurement process and ensure that claims are supported
with complete documentation to prevent the lapsing of cash allocations.

3. The implementation of the Farm to Market Roads Development Program (FMRDP)

with an appropriation of ₱45.969 billion in FYs 2010 – 2016 was not fully
accomplished. (Observation No. 3)

We recommended and Management agreed to:

a. fast track the implementation of the FMR projects, address issues and concerns
that hinders its completion; and/or remit the unused funds to the National
Treasury for projects that can no longer be implemented;

b. undertake repairs of the roads in accordance with the standards on FMRDP;

c. submit the approved realignment for the projects constructed by the DPWH not
included in the GAA;

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 d. approve only projects that will ensure the complete provision of transport
facilities for agricultural commodities of the farmers to prevent the construction
of projects not connected to the road of equal or higher quality/ roads that are
not continuous;

e. monitor and validate the FMR projects implemented by the DPWH through
geo-tagging activity in accordance with Special Provisions of the GAA and
prepare a report thereon; and

f. require LGU beneficiaries to immediately comply all documents being required

by DA RFO I so that proposals will be immediately processed/approved and
indorsed for its implementation.

4. Loans Receivable in DA-CO amounting to ₱5.054 billion were not collected and
already past due for more than five years. (Observation No. 4)

We recommended and Management agreed to:

a. fast track the collection effort under Fund 101 and ACEF, particularly from
those proponents with past due and non-moving balances;

b. enforce a penalty of 24% per annum on the total loan outstanding computed
from the occurrence of an event of default;

c. take actions, judicial or extrajudicial, against the proponents for the full
protection and enforcement of DA’s rights and interests; and

d. coordinate with OSG for the collection of past due accounts.

5. Fund transfers to implementing agencies in DA-CO amounting to ₱6.234 billion

were unliquidated as of December 31, 2016, of which ₱705.922 million were aged
more than ten years. (Observation No. 5)

We recommended and Management agreed to require the:

a. Accountant, to enforce the IAs to submit the liquidation reports, including but
not limited to, project progress reports and/or terminal reports for completed
projects; and cause the refund, if any, of long outstanding unused funds of
various proponents; and

b. ACEF National Technical Committee, to cause the refund of the balance of

₱340,683,713.20 transferred to LBP under ACEF and remit the same to the BTr
due to the transfer of the loaning facility to the LBP instead of DA since the
previous approved loans may no longer be released to proponents named in the
loan documents.

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6. Cash in bank balances in BAI and collections received by RFO-V and RFO-VIII
amounting to ₱81.365 million were not remitted to the National Treasury at year-
end, depriving the government from the use of such funds. (Observation No. 11)

We recommended and Management agreed to require:

a. BAI to remit to the National Treasury the balance of Revolving Fund which it
had no authority to use from the Permanent Committee;

b. the Accountant in RFO-VIII to prepare DVs to remit all the collections that are
due for remittance; and

c. RFO V to submit the legal authority for the retention of income in the LCCA
accounts and/or draw a check from the respective AGDB accounts and remit to
the Bureau of Treasury the amount of ₱5.239 million for income collected from
various sources.

The observations and recommendations were discussed with agency officials in an

exit conference conducted on May 30, 2017. Management comments were considered in
the report, where appropriate.

F. Enforcement of Settlement of Accounts

Of the total disallowances and suspensions amounting to ₱645.958 million and

₱12.050 billion, respectively, only ₱10.413 million or 1.61 percent and ₱723.163 million
or 6.00 percent, respectively, were settled during the year.

G. Implementation of Prior Years’ Audit Recommendations

Of the 148 audit recommendations contained in prior years’ Consolidated Annual

Audit Reports, 42 or 28.38 per cent were fully implemented, 75 or 50.68 per cent were
partially implemented and 31 or 20.95 per cent were not implemented. Details are
discussed in Part III of this report.