2017 Bir

OBSERVATIONS AND RECOMMENDATIONS
Financial Audit
Accounting Errors/Omissions
1. Accounting errors in the recording of transactions of the Bureau resulted in

the misstatement of affected accounts.
The Philippine Public Sector Accounting Standards (PPSAS) 1 provides that

financial statements (FS) shall present fairly the financial position, financial
performance and cash flows of an entity. Fair presentation requires the faithful
presentation of the effects of transactions, other events and conditions in accordance
with the definitions and recognition criteria for assets, liabilities, income and
expenses set out in the PPSASs.
In the preparation of FS, the highest standards of honesty, objectivity, and

consistency shall be observed in the keeping of accounts to safeguard against
inaccurate or misleading information.1 Each government ag ency shall record
its financial transactions and operations conformably with the generally accepted
accounting principles and in accordance with pertinent laws, rules and regulations.2
Examination and verification of the general ledgers (GLs), subsidiary

ledgers (SLs), journal entry vouchers (JEVs), Reports of Collections and Deposits
(RCDs), Report of Dishonored and Redeemed Checks (RDDC), Consolidated
Inventory of Seized and Forfeited Assets (CISFA), and other documents in NO and
ROs disclosed errors and omissions that resulted in the misstatements as shown in
Table 1 and presented in detail in Annex B:
Table 1. Summary of Accounting Errors

Amount of
Nature of Error Accounts Affected Remarks
Misstatement
Non-adjustment of closed Cash in Bank - 43,308.12 Overstatement of Cash
bank accounts Foreign Currency, and Cash Equivalents
Savings Accounts and Accumulated
Cash in Bank - 1,927,072.15 Surplus/(Deficit)
Foreign Currency,
Savings Accounts
Accumulated Surplus/ 1,970,380.27
(Deficit)
Erroneous recognition of Due from National 717,819.40 Overstatement of Office

1
Section 111 (2), Presidential Decree (PD) No. 1445
2
Section 112, PD No. 1445
63
Amount of
Misstatement
advance payment to PS- Government Supplies Inventory and
DBM as Office Supplies Agencies (NGAs) understatement of Due
Inventory instead of Due Office Supplies 717,819.40 from NGAs
from NGAs Inventory
Unrecognized deliveries Inventories 38,360,435.14 Undertatement of Office

from PS-DBM Due from NGAs 38,360,435.14 Supplies Inventory and
overstatement of Due
from NGAs
Unrecognized refund of Cash and Cash 3,293,033.25 Undertatement of Cash

advances to PS-DBM Equivalents and Cash Equivalents
Due from NGAs 3,293,033.25 and overstatement of
Due from NGAs
Non-impairment of Other Receivables 390,862,455.68 Overstatement of Other

balances which were non- Accumulated Surplus/ 390,862,455.68 Receivables and
moving for more than 10 (Deficit) Accumulated Surplus/
years (Deficit)
Unrecognized Dishonored Other Receivables 110,717,976.15 Understatement of

Checks (DCs) Accumulated Surplus/ 110,717,976.15 Other Receivables and
(Deficit) Accumulated Surplus/
(Deficit)
Unrecognized Other Receivables 100,644,734.16 Overstatement of Other

redemption of DCs Accumulated Surplus/ 100,644,734.16 Receivables and
(Deficit)
Double recording of Other Receivables 201,302.00 Understatement of

redemption of 27 DCs Accumulated Surplus/ 201,302.00 Other Receivables and
(Deficit)
Penalties that were Other Receivables 360,872.86 Understatement of

inadvertently credited to Accumulated Surplus/ 360,872.86 Other Receivables and
Other Receivables. (Deficit) Accumulated Surplus/
(Deficit)
Unrecognized issuances Non-Accountable 568,467.87 Overstatement of

of Inventories and Forms Inventory Inventories, Semi-
Semi-Expendable Accountable Forms, 417,907.00 Expendable Properties
Properties Plates and Stickers and Accumulated
Inventory Surplus/ (Deficit)
Office Supplies 1,936,611.88
Inventory
Semi-Expendable 32,006,496.53
Properties
(Deficit)
Non-existent and obsolete Accountable Forms, 4,450.01 Overstatement of
64
Amount of
Misstatement
Accountable Forms Plates and Stickers Accountable Forms,
Inventory Plates and Stickers
Accumulated Surplus/ 4,450.01 Inventory and
(Deficit)
Acquisition of various Semi-Expendable 9,168,255.00 Overstatement of Semi-

Semi-Expendable Properties Expendable Properties
Inventories were Accumulated Surplus/ 9,168,255.00 and Accumulated
recognized as outright (Deficit) Surplus/ (Deficit)
expense
Semi-expendable PPE 15,317,745.60 Overstatement of PPE,
inventories that were not Semi-Expendable 6,033,708.19 Semi-Expendable
reclassified from the PPE Properties Properties and
accounts Accumulated Surplus/ 9,284,037.41 Accumulated Surplus/
(Deficit) (Deficit)
Unrecognized Furniture, Land 1,722,770.00 Understatement of PPE,

Fixture and Books, two Furniture, Fixture and 1,533,150.00 and Accumulated
parcels of land acquired Books Surplus/ (Deficit)
thru donation and PPE 8,980,990.62
various PPE items Accumulated Surplus/ 10,703,760.62
(Deficit)
Unrecognized disposal of PPE 900,000.00 Overstatement of PPE,

unserviceable PPE Accumulated Surplus/ 900,000.00 and Accumulated
(Deficit) Surplus/(Deficit)
Undelivered generator PPE 3,532,000.00 Overstatement of PPE

set was already Accounts Payable 3,532,000.00 and Accounts Payable
recognized as Payables
Erroneous or non- PPE 51,917,118.13 Overstatement of PPE,

provision of depreciation Accumulated Surplus/ 51,917,118.13 and Accumulated
of PPE items. (Deficit) Surplus/(Deficit)
Non-amortization of Computer Software 1,769,821.92 Overstatement of

Computer Software with Accumulated Surplus/ 1,769,821.92 Computer Software, and
finite life of five years (Deficit) Accumulated
acquired in CY 2011 Surplus/(Deficit)
Prepayments recorded as Other Prepayments 79,488.75 Overstatement of Other

outright expense Accumulated Surplus/ 79,488.75 Prepayments and
(Deficit)
Unrecognized expired Other Prepayments 300,989.65 Overstatement of Other
portion of Prepaid Accumulated Surplus/ 300,989.65 Prepayments and
Insurance and Other (Deficit) Accumulated Surplus/
Prepayments (Deficit)
Erroneous classification Prepaid Insurance 79,339.37 Understatement of
65
Amount of
Misstatement
of Prepaid Insurance as Other Prepayments 79,339.37 Prepaid Insurance and
Other Prepayments overstatement of Other
Prepayments
Abnormal SL balances Prepaid Insurance 22,230.91 Overstatement and

due to erroneous posting Due to Officers and 1,719,273.41 understatement of SL
Employees balances of the affected
accounts
Unrecognized Forfeited Forfeited Assets / 4,053,181.00 Understatement of FA/P

Assets/Property (FA/P) Property (FA/P)
(Deficit)
Liabilities which had been Accounts Payables 342,630.92 Overstatement of
setup were credited again Accumulated Surplus/ 342,630.92 Accounts Payable and
upon payment (Deficit) understatement of
Accumulated Surplus/
(Deficit)
Unreverted payables aged Accounts Payables 29,085,045.83 Overstatement of

more than two years, Due to Officers and 11,691,661.17 Accounts Payable, Due
without valid claimant Employees to Officers and
and supporting documents Other Payables 1,404,905.09 Employees, Other
Accumulated Surplus/ 42,181,612.09 Payables and
(Deficit) understatement of
(Deficit)
Deliveries from suppliers Accounts Payables 537,394.00 Understatement of

were not accrued as Accumulated Surplus/ 535,704.00 Accounts Payable,
liabilities. (Deficit) Office Supplies
Office Supplies 1,690.00 Inventory and
Inventory Accumulated Surplus/
(Deficit)
Semi-Expendable items Accounts Payables 1,254,110.00 Understatement of

not yet delivered were Accumulated Surplus/ 1,254,110.00 Accounts Payable and
taken up as expenses and (Deficit) overstatement of
payables Accumulated Surplus/
(Deficit)
Duplicate recording of Due to Officers and 468,480.36 Overstatement of Due

expenses, upon accrual Employees to Officers and
and upon payment, Accumulated Surplus/ 468,480.36 Employees and
instead of debiting the (Deficit) Understatement of
accrued balance upon Accumulated Surplus/
payment (Deficit)
Unadjusted overpayment Due to Officers and 5,140.62 Understatement of Due
66
Amount of
Misstatement
of salaries Employees to Officers and
Accumulated Surplus/ 5,140.62 Employees and
(Deficit) overstatement of
(Deficit)
Erroneous recording of Guaranty/Security 198,435.43 Overstatement of

the release of Retention Deposits Payable Guaranty/Security
Fees Accumulated Surplus/ 198,435.43 Deposits Payable and
(Deficit Understatement of
(Deficit)
Erroneous classification Due to BIR, (2,168,523.23) Understatement of Inter-

of liability accounts as Due to GSIS 3,410,221.72 Agency and Intra-
Other Payable Due to PhilHealth 12,269.92 Agency Payable
Due to Pag-IBIG (300,851.09) accounts and
Due to Regional 23,972,135.35 overstatement of Other
Offices Payables
Other Payables 24,925,252.67
Various expenses Other Maintenance 1,860,218.52 Overstatement of Other
erroneously recorded as and Operating 1,860,218.52 Maintenance and
Other Maintenance and Expenses and various Operating Expenses and
Operating Expenses Expense accounts understatement of
various Expense
accounts
Unrecognized penalties Tax Revenue – Fines 14,008,619.96 Understatement of Tax

for the redemption of DCs and Penalties Revenue – Fines and
Accumulated Surplus/ 14,008,619.96 Penalties and
(Deficit Accumulated Surplus/
(Deficit
We recommended and Management agreed to:
a) Instruct the Chiefs of Accounting Division, NO and the Chiefs of

Regional Finance Divisions (RFDs) to prepare the necessary adjusting
journal entries to correct the aforementioned errors; and henceforth,
observe the proper recording of accounts and transactions in
accordance with the GAM and other existing accounting rules and
regulations; and
b) Require the Chiefs of Accounting Division, NO to monitor and ensure

that the recommended adjustments at the RROs are complied with by
the respective Chiefs of RFDs.
67
Accounting Deficiencies
2. Various accounting deficiencies in recording and reporting financial

transactions amounting to P1.129 million undermine the qualitative
characteristics of information in the FS.
Analysis of the accounts and transactions of the BIR – National Office (NO)
and 20 Revenue Regional Offices (RROs) revealed various errors deficiencies that
have an impact on the fair presentation of the year-end consolidated assets, liabilities,
and net assets/equity, as summarized in Table 2 and shown in detail in Annex B of
this Report.
Table 2. – Summary of Deficiencies

Balance
Accounts/Issue Office Criteria Remarks
(in P)
ASSETS
Cash and Cash Equivalents

Undocumented/ RRO 9B 16,387,929.77 Section 6 (e),  These are accounts
Unadjusted Chapter 19, lumped as “reconciling
forwarded balances GAM Volume I items” during the e-
of Cash – NGAS implementation
Collecting Officers in CY 2005
Difference with the NO-RA, 19,616,227.71 Sec. 5, Chapter  In NO, the bank has not
confirmed bank RRO 15 1, Vol. I of submitted credit and
balance of Cash in GAM debit advices to BIR,
Bank (CIB) – resulting to
Local Currency, unaccounted
Current Account transactions.
(LCCA)  In RRO 15, the balance
exists only in the
books, but per bank’s
record the accounts had
been closed. The
account remains open
in the agency books
pending the receipt of
bank statement from
the bank for
reconciliation of
records.
Dormant, NO-RA 442,873,058.20 COA Circular  Confirmation with the

unnecessarily 2015-001 BTr shows that there is
maintained and no reciprocal balance
unadjusted CIB – pertaining to the
Treasury / Agency account;
Deposit (TAD),  The balance has been
Special Accounts dormant for 15 years;
and is no longer
68
Balance
(in P)
necessary.
Unreconciled GL RRO 15 1,853,817.17 Sec. 5, Chapter  The balance of GL

Balance of CIB- 1, Vol. I of amounted to
LCCA against SL GAM P9,590,566.49 is not
balances reconciled with the
eight bank accounts
totaling P7,736,749.31
Unreconciled CIB- RRO 15 8,436,811.41 Sec. 5, Chapter  This pertains to the SL

LCCA SL balance 1, Vol. I of balance of CIB- LCCA
against Tax GAM which is maintained as
Refunds Payable the reciprocal account
(its reciprocal for Tax Refunds
account) Payable.
Sub-total 489,167,844.27
Receivables
Abnormal balances NO-NG, 22,963,063.69 GAAP on  SLs with abnormal
of SLs RRO 5 normal balances balances in Due from
of accounts Officers and
Employees account
NO-NG 5,302,017.17 GAAP on  SLs with abnormal

normal balances balances in Other
of accounts Receivables account
Dormant accounts, NO-RA 55,059,718.60 Paragraph 29(b)  Due from NGAs which
impairment of of PPSAS had been dormant for
which is not more than 29 years
warranted
RRO 5 243,549.14 Paragraph 29(b)  Due from Officers and
of PPSAS Employees which had
been dormant for more
than 10 years
Improper RROs 2, 11,887,267.49 Appendix 6 of  Maintenance of SLs per

maintenance of 6 GAM Vol II RDO balance instead of
SLs of Other per taxpayers resulting
Receivables for to improper monitoring
DCs and reconciliation with
monthly list of
dishonored/redeemed
checks.
Sub-total 95,455,616.09
Inventories RROs 1, 19,434,879.25 Paragraph 29(b)  Unreconciled GL and

2, 5, 7, of PPSAS Report on the Physical
8, 11 Count of Inventories
(RCPI)
69
Balance
(in P)
Section 13,  Non-conduct of

Chapter 8, physical count of
Volume I, Inventories
GAM
RRO 8 Appendix 58,  SCs were not updated
Volume II, and not prepared in all
GAM inventory items
RROs 7, Appendix 59,  Non-issuance of ICS

8, 11 Volume II,
GAM
RRO 17 Appendix 61,  PO not properly

Volume II, accomplished.
GAM
NO Appendix 67,  Non-preparation of the

RRO 8 Volume II, Report of
GAM Accountability for
Accountable Forms
(RAAF)
Sub-total 19,434,879.25
Property, Plant and Equipment (PPE)

NO-RA 393,299,000.76 Paragraph 29(b)  Unreconciled GL
RROs 1, of PPSAS balances and Report on
2, 4, 5, the Physical Count of
8, 9B, PPE (RCPPE)
11, 16
RROs 3, Section 79 of  Unserviceable

11 PD No. 1445 properties in Regions 3
and 11 were not yet
disposed.
RRO 7 COA Circular  Property Cards (PCs)

96-010 and were either not
Appendix 61, maintained or updated
Volume II,
GAM
RRO 7 Item F, Section  Non-issuance and non-

42, Chapter 10, renewal of Property
Volume I, Acknowledgement
GAM Receipt (PAR)
RROs 7 Appendix 73,  Unsigned inventory

and 9A Volume II, reports from different
GAM offices in RRO 7; Non-
conduct of physical
count in RRO 9A.
70
Balance
(in P)
RRO 8 Appendix 73,  RPCPPE was not
Volume II, certified correct and
GAM signed by the Inventory
Committee Members
and the columns for
Quantity-Per Property
Card, Quantity-Per
Physical Count and
Shortage/Overage were
not filled out.
Sub-total 393,299,000.76
Intangible Assets NO-RA 419,906,929.62 Paragraphs 88,  The NO assessed its

Non-amortization 91, PPSAS 31; Computer Software to
of Computer Sections 9 & have indefinite useful
Software 10, Chapter 12, life thus, no
GAM Volume I amortization was
provided, contrary to
the indicated
classification in PPSAS
as asset with definite
useful life.
Sub-total 419,906,929.62
Other Assets
Forfeited Assets/ NO-NG 127,522,677.23 Philippine  The policy on

Property and Valuation recognition of BIR is
Inappropriate RROs Standards based on ownership
accounting policy rather than control of
on recognition and and economic benefits
measurement from properties;
(valuation) of  The policy on
seized, acquired measurement is based
and forfeited on zonal values or
properties declared value
(whichever is higher)
rather than the Fair
Value (FV) on the
initial recognition;
 No periodic revaluation
is conducted to assess
the FV of FA/Ps as of
year-end;
 No reconciliation of
Consolidated Inventory
of Seized and Forfeited
Assets (CISFA) and
SLs were conducted.
Other Assets NO-RA 17,571,241.68 Paragraph
71
Balance
(in P)
Inclusion of 29(b) of  These accounts were
dormant CIB- PPSAS originally recorded
LCCA balances of under the Old
several RROs in Government
the Other Assets Accounting System
account (OGAS) wherein the
recording of
transactions of the
Abnormal SL NO-RA 1,789,772.14 GAAP on different RROs was
Balances normal balance centralized in the BIR-
of accounts NO. These have been
dormant for more than
10 years, impairment of
which is not warranted
Sub-total 146,883,691.05
Total 1,564,147,961.63
LIABILITIES
Financial Liabilities
Discrepancy RRO 5 6,896,353.80 Paragraph  Confirmation sent to 13
between SL 29(b) of creditors for Accounts
balances and PPSAS Payable totaling
confirmed amounts P22,857,213.56,
yielded a discrepancy
of P6,896,353.80 from
seven creditors
Abnormal SL RRO 7 1,482,884.70 GAAP on  Abnormal SL balances

balances normal balance of Accounts Payable
of accounts
Sub-total
8,379,238.50
Inter-Agency Payables
Abnormal SL NO-RA 986,922.35 GAAP on  Abnormal SL balances
balances normal balance of Due to BIR, Due to
of accounts GSIS, Due to
Philhealth, Due to
Pag-Ibig
 Over and under
remittances of withheld
amounts;
 Non-reconciliation
between Human
Resource Division
(HRD) and AD;
 Incomplete
maintenance of the
Index of Payments.
Sub-total 986,922.35
72
Balance
(in P)
Total 9,366,160.85
Total Deficiencies 1,573,514,122.48
73
We recommended and Management agreed to instruct the Chief of
RAD and AD, NO and/or the concerned RRO Chiefs to:
For the deficient Cash and Cash Equivalents:
a) Demand from the banks copies of credit and debit advices, or any
document substantiating the bank’s transactions, accompanying the
periodic banks statements;
b) Prepare the adjusting entries for the accounts with zero balance per bank;
c) Revert the unutilized fund/close the dormant CIB-TAD, Special Accounts;
d) Give priority in reducing and eventual elimination of the subject

reconciling items;
For the deficient Receivable Accounts:
e) Conduct an in-depth analysis of the abnormal SL balances to determine its

nature and causes;
f) Periodically assess the collectability of accounts and provide for the

impairment or initiate write-off, as appropriate;
g) Maintain the SL by taxpayers with adequate references, such as Tax

Identification Number (TIN) and RDO;
For the deficient Inventory Accounts:
h) Analyze the discrepancies between the GL and RPCI and prepare the
necessary adjustments;
i) Ensure that the Property Division conducts the required physical count of
inventories at the prescribed frequency, reconcile the records of the
physical count with the Accounting Division and prepare the RPCI;
j) Require the Supply/Property Officer to: (i) prepare/update regularly the

SC for each type of inventory upon receipt/issuance to ensure timely
recording and accuracy of the accounts; and (ii) issue ICS upon
distribution of semi-expendable properties to its end-users;
k) Require the Accountable Form Custodian to prepare and submit the

RAAF monthly, as basis for determining the accountability of the
accountable officer concerned and serve as basis for determining the
movement and levels of accountable forms for requisition and procurement
purposes.
74
For the deficient PPE Accounts:
l) Analyze the differences between the GLs and RCPPEs and prepare the
adjustments;
m) Require the Property Section to prepare the Inventory and Inspection

Report of Unserviceable Property and cause the immediate disposal of all
unserviceable properties pursuant to Section 79 of PD No. 1445;
n) Derecognize the unserviceable properties upon disposal;
o) Require the Property Section to maintain properly accomplished and

updated PCs;
p) Require the Property Section to prepare the PAR on PPE issued;
q) Require the Inventory Committee to submit a properly accomplished

RPCPPE
For the non-amortization of Intangible Assets:
r) Reclassify the Computer Software as with definite useful life, determine the
useful life, and provide the amortization;
For the deficient Other Assets:
s) Revise the accounting policies, conduct physical count, reconciliation and

revaluation of these FA/Ps;
t) Check the details and validity of the SLs under Other Assets and locate the
underlying documents and make necessary actions pursuant to the
provisions of COA Circular 97-001 dated February 5, 1997;
For the deficient Payable Accounts:
u) Conduct reconciliation between SLs and Statement of Accounts (SOA)

from creditors;
v) Conduct an in-depth analysis of the abnormal SL balances to determine its

nature and causes; and
w) Conduct regular reconciliation of the Inter-Agency Payable accounts or

withheld mandatory deductions;
75
Adequacy of disclosures in the Notes to FS
3. The BIR has not disclosed information on Tax Arrears (Accounts Receivable
and Delinquent Accounts), undermining the fair presentation of the FS.
The Notes to FS, as part of the complete set of FS 3, shall:4 (i) disclose the
information required by PPSASs that is not presented on the face of the statement
of financial position, statement of financial performance, statement of changes in
net assets/equity, or cash flow statement; and (ii) provide additional information
that is not presented on the face of the statement of financial position, statement of
financial performance, statement of changes in net assets/equity, or cash flow
statement, but that is relevant to an understanding of any of them.
Review of the Notes to FS disclosed that BIR has not disclosed assets and
contingent assets arising from Accounts Receivable and Delinquent Accounts
(ARDA)5 and litigations pursued by the BIR pursuant to its mandate to enforce the
National Internal Revenue Code of 1997, as amended (NIRC), required under the
provisions in PPSAS 19, as follows:
a. Contingent assets usually arise from unplanned or other unexpected events that
(a) are not wholly within the control of the entity, and (b) give rise to the
possibility of an inflow of economic benefits or service potential to the entity.
An example is a claim that an entity is pursuing through legal processes, where
the outcome is uncertain;6
b. A contingent asset is disclosed where an inflow of economic benefits or service
potential is probable;7
c. Where an inflow of economic benefits or service potential is probable, an entity
shall disclose a brief description of the nature of the contingent assets at the
reporting date, and, where practicable, an estimate of their financial effect.8
ARDA refers to the amount of tax due from a taxpayer who failed to pay the
same within the prescribed period for its payment, which includes self-assessed tax
liability and deficiency assessment issued by BIR. The BIR have instituted
policies, procedures and guidelines in managing their tax arrears through RMO No.
11-20149 dated February 13, 2014, which provides, among others, the following:
a. Periodic inventory and verification of accuracy of the ARDA;

b. Establishing the ARDA profile, classification and status;
3
Paragraph 21, PPSAS 1
4
5
As defined in BIR Revenue Memorandum Order No. 11-2014, dated February 7, 2014
6
7
Paragraph 42, Ibid
8
Paragraph 105, Ibid
9
RMO No. 11-2014 dated February 13, 2014 re: Prescribes the policies, guidelines and procedures in the
periodic clean-up of Accounts Receivable/Delinquent Accounts
76
c. Determining the level of collectability of ARDA; and
d. Establishing the reportorial requirement for ARDA.
Potentially recoverable arrears refer to pending ARDAs which are not

eligible for write-off or to be placed under the suspense ARDA file under the
existing criteria, hence, can still be collected, either fully or partially, through the
enforcement of collection remedies.10 These are measurable and legally
enforceable under the civil remedies of the BIR in the NIRC. These ARDAs
11
qualify as assets under Philippine Application Guidelines of PPSAS 23.
At the least, ARDAs qualify for disclosure in the notes to FS. The disclosure
thereof for use of policymakers, lawmakers, and the public is BIR’s accountability.
The BIR’s Performance Governance System (PGS) Agency Scorecard 12 reported
potentially recoverable arrears, as follows:
Table 3. – Potentially Recoverable Arrears

Per Cent Target
CY Amount of Arrears Collection
Collected (%)
201713 133,761,374,846.12 2,121,423,422.50 1.59 10.00
2016 215,992,015,410.51 4,556,385,732.60 2.11 8.00
2015 177,340,203,398.57 4,061,533,857.89 2.29 8.00
2014 199,147,793,681.76 2,987,251,305.77 1.50 6.00
2013 365,454,092,228.33 13,299,498,056.99 3.63 6.00
2012 145,585,654,391.86 1,989,958,132.13 1.37 6.00
On 10 January 2018, the Audit Team requested, among others, the inventory
list of ARDAs and General Control Ledgers (GCL) for CY 2012 to 2017, in order
to assess accuracy of information and adequacy of reporting thereof in accordance
with PPSAS and GAM. To date, the BIR has not submitted such reports. The non-
disclosure deprives the decision-makers, legislators, and resource providers of
needed information14, thus, a non-discharge of BIR’s accountability obligation.
Moreover, non-submission of the inventory list of ARDA and GCL is a
management imposed limitation in obtaining sufficient and appropriate evidence for
the audit.
10
Section II (18), RMO No. 11-2014
11
Philippine Application Guidelines No. 2 of PPSAS 23, requires recognition of asset when these are
measurable and legally collectible.
12
https://www.bir.gov.ph/index.php/performance-governance-system/agency-scorecard.html
13
Amount reported, only 1st Semester of CY 2017
14
Chapter 2, The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities
as adopted under COA Resolution No. 2014-03 dated January 24, 2014
77
We recommended that Management, in order to adequately discharge
its accountability:
a) Require the Accounts Receivable Monitoring Division (ARMD), in

coordination with the Enforcement and Advocacy Service (EAS), to
provide the RAD, the necessary information for the disclosure of the
ARDA in the notes to FS, including, among others:
i. ARDA balance per Implementing Office (RRO/LTS/Arrears

Management Team) for CY 2016 and 2017;
ii. Classification of balances as relevant to the understanding of the
information, such as self-assessed or BIR-assessed deficiency
(classified per Source Code, Nature Code, Status Code,
collectability)15;
iii. The movement in the ARDA balance which include, among others,
the amounts collected, suspended, and prescribed/written-off; and
iv. Assessments and amounts under protest and litigation, evaluation of
the outcome thereof;
b) Require the EAS to provide the RAD disclosure on the litigation and
civil remedies currently pursued for the collection of internal revenue
taxes, and coordinate with the ARMD for the necessary disclosure of
ARDA; and
c) Provide COA the inventory list of ARDAs and GCL for CYs 2015 to
2017 for audit purposes.
Management commented that unlike in a profit-oriented entity wherein

accounts receivable arises when there is a sale of goods or rendition of services, the
AR/DAs referred to in RMO No. 11-2014 for financial purposes cannot be equated
as the same because these are proposed assessments for unpaid taxes and deficiency
taxes wherein the taxpayer may avail of the remedies provided in the NIRC.
However, Management committed to revisit RMO No. 11-2014 in order to come up
with a more appropriate term so as not to complicate the financial reporting process
of the Bureau. But for the time being, while the accuracy and propriety of the term
in use is still being established, the Management is constrained in providing the data
so as not to distort the financial reporting process of the Bureau.
Auditor’s Rejoinder:
In the Status of Implementation of Prior Years’ Audit Recommendations

(Collection Books) submitted to this Office on 27 December 2017, the then BIR
Commissioner espoused the disclosure of AR/DA transactions and information in
the Notes to FS.
15
Section IV (A.2), RMO No. 11-2014
78
We also emphasized that these disclosures are required as part of the
objective of the financial reporting to meet the information needs of the legislature
and the decision-makers and in order for us to appropriately and sufficiently gather
evidence for audit, as basis for our rendering an opinion on the fairness of
presentation of the FSs.
Enforcement of collections and imposition of sanctions on Receivables arising from

regular operations resulting in loss of financial assets
4. The Bureau was unable to enforce the timely collection of Receivables and
impose the sanctions for non-settlement thereof, thus, the eventual loss of its
financial assets or foregone collectibles of P75.453 million and the possible loss of
P514.682 million.
It is the declared policy of the State that all government resources shall be
managed in accordance with laws and regulations, and safeguarded against loss or
wastage through illegal or improper disposition.16 The responsibility to take care
that such policy is faithfully adhered to rests directly with the chief head of the
government agency concerned.17
Aside from the fact that it is the duty of Management to safeguard

government funds, prompt action and exhaustion of all remedies for the enforcement
of collection and imposition of sanctions for unsettled accountabilities of employees,
accountable officers and collection agents encourages adherence with prescribed
managerial policies, rules and regulations.
As of 31 December 2017, the Bureau’s Receivable Accounts, 18 net of

allowance for impairment amounted to P1,139.043 million, as shown in Table 4.
Table 4. – Receivable Accounts

Accounts Amount
Due from National Government Agencies (NGAs) 60,032,562.69
Receivables-Disallowances/Charges 44,370,786.61
Due from Officers and Employees 51,481,374.37
Other Receivables 1,019,767,798.24
Allowance for Impairment- Other Receivables (36,609,378.55)
Total 1,139,043,143.36
The balances are composed of receivables arising from dishonored checks,

cash shortages of BIR collecting officers and agents, overpayment of salaries and
allowances, and unsettled Notices of Charge/Disallowances.
16
Section 2, PD No. 1445
17
Ibid
18
Excludes Tax Credit Certificates - P9,915.678 million and Advances to PS-DBM and Philippine
Information Agency (PIA) and Old Accounts - P494.061 million.
79
Verification of the balances of these receivables shows that at least P514.682
million, or approximately 45 per cent are aged more than 10 years, as summarized in
Table 5.
Table 5. - Aging of Receivables

Age of the Receivable
Account Total More than 10 to More than 15 More than 20
Unverified Age
15 years to 20 years years
Due from NGAs P 60,032,562.69 P - P - P4,972,844.09 P55,059,718.60
Receivables-
Disallowances/
Charges 44,370,786.61 5,417,929.54 - - 38,952,857.07
Due from Officers and
Employees 51,481,374.37 22,589,314.85 243,549.14 - 28,648,510.38
Other Receivables 1,019,767,798.24 632,963,291.88 378,622,126.08 8,182,380.28 -
Total P1,175,652,521.91 P660,970,536.27 P378,865,675.22 P13,155,224.37 P122,661,086.05
Per Cent to Total 100.00 56.22 32.23 1.12 10.43
It is understood that the age of Receivables is inversely related to its

collectability – meaning the higher the age, the lesser the probability of collection.
This is reinforced by the fact that for the past five years a total amount of P75.453
million of the BIR’s Receivables were written-off 19, among the major factors of
which, are dormancy of accounts, absence of supporting documents to enforce
claims, and other factors, such as death and retirement of debtors. Moreover, the
total amount of P514.682 million, which are aged more than 10 years, may
eventually be recognized as impairment loss under the PPSAS.
The following raises question against the effectiveness of the BIR in

enforcing collection and imposing sanctions to safeguard government funds in its
regular operations:
a. In NO, unsettled accountabilities totaling P11.498 million of the DFA FOs and
BIR RAs remain unenforced;
b. Total unsettled balances of P377.973 million representing accountability for

Accountable Forms, tax revenue collections, and dishonored checks remain
outstanding for at least 14 years;
c. Total amount of P38.953 million out of P44.371 million, or approximately 88

per cent of Notices of Charges and Disallowances remained outstanding for
more than 20 years. Total amount of P37.505 million pertains to 196 payees
who are no longer in service with BIR;
19
Notes to Financial Statements No. 7.3
80
d. In RRO 2, cash shortages of two BIR employees amounting to P554,893.09 that
have been outstanding for 10 years, were only sanctioned through a Notice of
Dismissal in CY 2014, and to date were not settled. No indication whether
Management was able to recover the amount through reduction of salaries or
amounts due to the employees20, or demand of accountability upon dismissal;
e. Shown in Table 6 are accounts with remote collectability.
Table 6. - Other Accounts with Remote Collectability

RRO Account Amount Remarks
3 Other P 59,077.27 Pertains to six employees who are already retired,
Receivables deceased, and on absent without leave status.
5 Due from 243,549.14 Pertains to 41 accounts of employees who are
Officers already retired, resigned, deceased, or transferred
and to other regions; unsettled for more than 10 years.
Employees
8 Other 94,676.27 Unsettled accounts since CY 2000. Verification of
Receivables the status of employees showed that they were still
in service from CY 2002 to 2009.
15 Receivables 12,979,429.03 Pertains to unremitted tax collections of collecting
officers. No complete and updated records to
enable enforcement of collections or validation.
Under existing regulations21 and standards22, separation from service, lack of

documents to enforce collection, and dormancy are significant factors of the
impairment of Receivables – resulting to loss. Notwithstanding, the cost of money
and the inability of the National Government to utilize these Government fund for its
operations, the noted trend in the BIR’s enforcement of timely collection and
imposition sanctions eventually leads to loss of financial assets.
a) Require the Collection Service to coordinate and initiate a meeting with

DFA – Office of the Fiscal Management to: (i) enforce settlement of
outstanding balances of DFA-FOs who are still in active service, which
maybe through salary deduction, and if warranted, file charges against
those FOs who refuse to settle; (ii) locate the whereabouts of FOs who
are no longer in active service and pursue collection efforts; and, (iii)
request DFA not to issue clearance for employees with unsettled
accountabilities with the BIR;
b) Enforce collection of the Receivables from debtors who are still in active
service with the government;
20
Section 37, PD No. 1445 re: Retention of money for satisfaction of indebtedness to government
21
COA Circular No. 2016-005 dated December 19, 2016
22
Chapter 7, Government Accounting Manual (GAM) Volume I; and PPSAS
81
c) Verify accountabilities of BIR employees before issuance of clearances;
and
d) Henceforth, enforce the timely collection, exhaust all available means,

and impose sanctions on BIR employees who have not settled
accountabilities within the prescribed timelines.
Budgetary Controls and Accountability
5. The BIR had unused allotment of P10.780 billion, or approximately 30 per cent
of the total allotments received from CYs 2015 to 2017, resulting mostly from
over-budgeting and non-implementation of projects/activities within the budget
year.
Our audit of the BIR’s budgetary control and accountability from CYs 2015
to 2017, showed the following:
a. Unused or unobligated allotment of P10.780 billion, or approximately 30 per

cent of the total P35.358 billion received from CYs 2015 to 2017 (as evident in
Figure 1 and Table 7);
b. Out of the unused allotment, P3.655 billion lapsed, thus, the Bureau effectively
by passed the operational benefits thereof (as shown in Table 7 and Figure 1);
and
c. The unused allotment was mainly due to over-budgeting, failure to implement

program/projects/activities (PPAs) within the budget year (underspending23), as
evident in abandoned and delayed procurement activities, and absence of reliable
basis for budget-estimation.
23
The deviation of utilization from programmed expenditure in the budget is underspending.
Underspending refers to the budget utilization of the agency below the annual budget authorized under the
GAA. Underspending means that the agency has not implemented their planned P/APs during the year.
The slow spending of the budget is mainly because of institutional weaknesses, such as, weak budget
planning and program preparation resulting to delayed procurement
(https://beta.philstar.com/business/2017/12/27/1772298/yearender-budget-reforms-reduce-underspending-
2017 and FAQs on Underspending and Savings, DBM Official Website)
82
Figure 1 - Appropriations, Allotments, Obligations and Unobligated Allotments
CYs 2015-2017
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2015 2016 2017
Appropriation Allotment Obligation Unobligated Allotment
Table 7. – Appropriations, Allotments, Obligations and Unobligated and Lapsed

Allotments, CYs 2015-2017
Particulars 2015 2016 2017 Total
Appropriations P9,419,105,185.77 P12,743,279,125.96 P13,785,134,095.97 P35,947,518,407.70
Allotments 9,368,353,783.77 12,598,511,527.37 13,391,283,836.56 35,358,149,147.70
Obligations 6,917,398,931.92 7,503,144,853.42 10,157,327,270.53 24,577,871,055.87
Unobligated
Allotments 2,450,954,851.85 5,095,366,673.95 3,233,956,566.03 10,780,278,091.83
Per cent of
unobligated 26.16 40.44 24.15 30.49
allotment
Lapsed
Allotment P1,292,231,386.48 P 764,345,873.39 P 1,599,270,556.79 P3,655,847,816.66
Unused allotment due to deficiencies in budget planning and execution
We have noted samples of evident deficiencies in budget planning and

execution, particularly on: (a) Non-Accountable Forms; (b) Implementation of the Tax
Information and Education (ITIE); and, (c) Revenue Information Systems Development
and Maintenance (RISDM) which underlies the unused allotment.
a. Over-budgeting for Non-Accountable Forms
Non-Accountable Forms pertains to pre-printed application forms, tax

returns forms, accounting forms and the like. Significant portion of these pertain to
BIR Forms. The annual average utilization of the appropriations for Non-
Accountable Forms from CYs 2015 to 2017 is only 12 per cent, and dropped to
zero in CY 2017 as shown in Table 8.
83
Table 8. – Budget and Utilization for Non-Accountable Forms
Allotment Rate
CY Appropriation Obligation Utilized Unutilized
Received
2015 P171,031,000.00 P121,031,000.00 P53,513,567.50 44.21 55.79
2016 137,968,000.00 87,968,000.00 1,154,859.80 1.31 98.69
2017 137,329,000.00 137,329,000.00 665,000.00 0.48 99.52
Total P446,328,000.00 P346,328,000.00 P55,333,427.30 15.98 84.02
The BIR is well aware of the substantial decline in the use of the Non-
Accountable Forms as its records show that the quantity of tax returns
electronically filed skyrocketed in CY 2016 to 17.548 million or by 2,534 per cent
from 692,581 in CY 2008, as highlighted in Figure 2. This condition implies
decrease in the demand for Non-Accountable Forms for the CYs 2015 to 2017,
thus, budget estimates should have been curtailed.
Figure 2 – Annual Number of Tax Returns Filed Electronically
The Non-Accountable Forms inventory undeniably validated such decline

in the use of these forms as it consistently increased, and the actual stock issued
from CYs 2015 to 2017 averaged only five per cent annually (Table 9).
Table 9. - Comparison of Available Non-Accountable Forms against Usage

Inventory P82,733,716.61 P83,022,521.83 P84,755,382.90 P331,348,223.07
Expense 3,759,550.94 7,320,354.08 6,894,873.52 18,120,483.07
Per cent of Usage 4.54 8.82 8.14 5.47
It must also be pointed out that the availability of editable soft copies of
these forms in the BIR official website allows the taxpayers to print their own tax
returns. This is another matter that should have been considered by the BIR in
reducing its budget for Non-Accountable Forms.
Despite the underlying condition, the BIR’s CY 2018 appropriations for

Non-Accountable Forms amounted to P137.329 million.
84
Management confirmed that the unobligated allotments for Non-
Accountable Forms resulted from the usage of the Electronic BIR Forms
(eBIRForms) System by taxpayers.
b. ITIE Program
The budget for the ITIE Program showed an average utilization rate of
only 56 per cent of total allotment from CYs 2015 to 2017. At this rate, the validity
of P92.846 million, or significant 35 per cent of total allotment lapsed (Table 10).
The combination of persistent unused and lapsed allotments proves over-budgeting
for the ITIE program.
Table 10. - Budget Information on ITIE

Allotment Unobligated Lapsed Utilization
Obligation
CY Received Allotment Allotment Rate
2015 P 93,125,000.00 P 37,650,144.69 P 55,474,855.31 P 5,775,330.95 40.43
2016 98,743,120.74 56,930,487.79 41,812,632.95 55,102,252.17 57.66
2017 74,017,022.12 53,911,026.18 20,105,995.94 31,968,035.00 72.84
Total P265,885,142.86 P148,491,658.66 P117,393,484.20 P92,845,618.12 55.85
To analyze if there have been unimplemented PPAs or delayed

procurement under the ITIE Program, we requested for BIR’s Budget and
Financial Accountability Reports (BFARs), Office Performance Commitment and
Review (OPCR) Forms, Project Procurement Management Plan (PPMP) and
Procurement Monitoring Report (PMR) for the period CY 2015 to 2017. Review
showed that no physical targets were formulated for the ITIE Program during the
budget planning stage. Furthermore, the OPCR Forms for the period examined
does not correlate physical outputs/accomplishments with the amount of budget.
Thus, budget estimates could not be concluded as reasonably valued based on
cost-quantity principle of budget planning.
Analysis revealed that 91 per cent or P107.267 million out of P117.393

million unobligated allotment consists of MOOE allotment, showing that the
predominant deficiency lies in the estimation of MOOE. This is confirmed by the
comparison of actual MOOE against the annual MOOE for the ITIE program,
amounting to only 12 per cent, with actual MOOE increase at an average rate of
only 11 per cent or P696,631.16 (Table 11).
Table 11. – Actual MOOE Versus Budget

MOOE Allotment P66,006,000.00 P54,706,894.00 P31,783,000.00 P152,495,894.00
Actual MOOE 5,160,139.61 5,859,490.80 6,553,401.92 17,573,032.33
Percent of MOOE
Incurred to Allotment 7.82 10.71 21 11.52
Received
Management justified that an amount of P100.000 million unobligated

allotment for Tax Raffle Promo (TRP) Fund for CY 2015 and 2016 was initially
85
proposed under Enforcement of Internal Revenue Laws Program by its proponents
and subsequently released under ITIE Program. No PPAs were implemented to
utilize the TRP Fund. Nevertheless, the unimplemented PPAs bear in the Bureau’s
capacity to execute its planned PPAs.
c. RISDM Program
Planning and execution deficiencies are noted in the RISDM Program. Of

the total lapsed allotment of the BIR amounting to P3.657 billion, approximately
49 per cent or P1.795 billion comes from the RISDM Program because the
utilization rate of the program’s allotment was only 44 per cent (Table 12).
Table 12. – Budget Information on RISDM

Allotment Unobligated Lapsed Utilization
Obligation
CY Received Allotment Allotment Rate
2015 P1,458,837,000.00 P1,009,311,855.27 P449,525,144.73 P603,210,220.74 69
2016 1,222,882,436.77 392,053,995.10 830,828,441.67 378,314,601.47 32
2017 1,695,508,852.69 521,815,846.07 1,173,693,006.62 813,654,391.30 31
Total P4,377,228,289.46 P1,923,181,696.44 P2,454,046,593.02 P1,795,179,213.51 44
The decreasing utilization rate matched by the decreasing nominal amount of

obligation shows that the capacity to deliver the RISDM Program within the budget
year is diminishing. However, despite the decreasing utilization, the subsequent
factors show deficiencies in the budget planning.
On the average, 99 per cent of the total unobligated allotment of the RISDM
Program consists of MOOE and CO (Table 13).
Table 13. – Unobligated Allotments for RISDM

% of
CY PS MOOE CO Total MOOE and
CO to Total
2015 P14,663,143.26 P375,410,127.78 P59,451,873.69 P 449,525,144.73 97
2016 12,637,705.56 818,184,736.11 6,000.00 830,828,441.67 98
2017 2,004,805.01 1,145,697,111.85 25,991,089.76 1,173,693,006.62 100
Total P29,305,653.83 P2,339,291,975.74 P85,448,963.45 P2,454,046,593.02 99
The annual budgetary allocation proposed by an agency for a specific

program or project must be appropriately detailed in and supported with the required
planning documents.24 For MOOE and CO budgetary allocations, among the
required planning documents are the Project Procurement Management Plans
(PPMP) and Annual Procurement Plan (APP).25
Verification of planned procurement samples for RISDM Program in the

APP and Procurement Monitoring Report (PMR) showed, among others, that:
24
“3. How are government funds appropriated?”, Primer on Government Budgeting, DBM Official Website
25
Section 7, Rule II, Revised Implementing Rules and Regulations (IRR) of Republic Act No. 9184
86
a. For CY 2015 to 2017, 30 initially planned procurement with estimated budget
of P986.006 million, were reduced by P409.893 million or 42 per cent (Table
14);
Table 14. – Revision/Reduction in Planned Procurement
No. of Revision/ Per cent of
CY Procurement Estimated Budget Reduction Reduction
Activities to total
2015 5 164,380,400.00 27,811,853.81 17
2016 9 361,983,000.00 88,359,242.20 24
2017 16 459,642,878.00 293,721,963.61 64
Total 30 986,006,278.00 409,893,059.62 42
b. For CY 2017, of the total initial planned procurement totaling P986.999 million,
P424.422 million (for 16 procurement programs/projects), or 43 per cent were
dropped; and
c. For CY 2015 to 2016, out of the 84 planned procurement programs/projects

totaling P1.921 billion, only 10 per cent costing to P461.139 million were
reported procured during the year (Table 15)26.
Table 15. – Comparison of Planned and Actual Procurement

APP PMR
No. of Planned No. of Actual
Actual Contract
CY Procurement Budget Procurement
Activities Activities Cost
2015 46 P 967,975,681.00 3 P 52,629,097.90
2016 38 953,337,353.00 7 408,510,035.48
Total 84 P1,921,313,034.00 10 P461,139,133.38
These significant changes in the planned procurement bear on the absorptive

capacity of the Bureau. Although one can aver that there is no monetary loss, human
resources could have been utilized in other productive undertaking rather than
planning and revising.
The Procurement Division and Bids and Awards Committee (BAC) of the
Bureau informed that delayed and incomplete procurement activities of project
proponents were not supported with procurement planning documents, such as the
Terms of Reference. This is contrary to meticulous and judicious procurement
planning, resulting to inaccurate estimates and budget allocations for unnecessary
procurement activities as evidence by the significant dropping and scaling down of
procurement activities.
Inquiry revealed that there are challenges in the execution of the procurement
activities for the RISDM Program due to the highly customized and technical needs
in the information system of the BIR. This hardly justifies non-implementation
because this should have been considered at the budget planning stage.
26
Based on APP and PMR made available to the Audit Team
87
The failure to implement within the budget year certain RSIDM projects and
activities contributed significantly to the BIR’s unused and lapsed allotment.
Eliminating cost efficiency as a factor of unused allotment
The available Performance Indicator (PI) embodying the physical targets of the
BIR, as shown in the General Appropriations Act (GAA) and Quarterly Physical Report
of Operations (QPRO), are the collection performance and collection growth. The
collection performance and collection growth of the BIR have been moderately consistent
for CYs 2013 to CY 2017. The collection increased at an average of P141.084 billion or
10 per cent annually. The spike in collection growth during CY 2017 is partly attributed
to a non-recurring tax settlement of Mighty Corporation amounting to P27.180 billion, or
13.35 per cent of such growth. Correspondingly, the total obligation for the current year
allotment increased by an average amount of P675.527 million, or nine per cent. The
collection and corresponding obligation increased at roughly the same rate (Figure 3).
Given the steady increase of obligations in relation to collections, the persistent

and increasing unobligated allotments of the BIR cannot be inferred as results of cost
efficiency.
Figure 3 – Collection vs. Obligations

20,000.00
15,000.00
10,000.00
5,000.00
0.00
2013 2014 2015 2016 2017
Collection (In hundred millions)

Obligation (In millions)
Weaknesses in budget performance measurement
To establish the status of the implementation of the BIR’s P/APs within the
budget year, the Audit Team looked into the BIR’s Budget Accountability Report
(BAR) No. 1: Quarterly Physical Report of Operations (QPRO). In the process we
observed that the overbudgeting is attributable to the following:
a) Inadequate physical plans (performance measurement and targets for key

functions, process and output) were formulated and established that are linked
and associated to its P/APs outlined in the annual GAA; and
88
b) PIs and targets included in the GAA for the Organizational Outcome and Major
Final Output (MFO) level are deficient. This condition goes against the fiscal
discipline measures of the government in its budget policy and approach, as
follows:
 The budget shall be supportive of and consistent with the socio-economic

development plan and shall be oriented towards the achievement of explicit
objectives and expected results, to ensure that funds are utilized and operations
are conducted effectively, economically and efficiently (Section 3, Chapter 2,
Executive Order No. 292 or Administrative Code of 1987);
 The analysis of agency operating performance, the evaluation of

performance relative to costs incurred and the review of agency operating
systems and procedures are inherent parts of the budget process. Agencies shall
therefore design and implement (1) management information systems yielding
both performance and financial information which will adequately monitor and
control budget implementation, and (2) improvements in operating systems,
procedures and practices, so as to ensure that the targets approved in budget
authorization are in fact attained at minimum cost (Section 9, Chapter 2,
Executive Order No. 292 or Administrative Code of 1987);
 The performance measurement and evaluation of an agency involves

assessment of quantity, quality, timeliness and cost (OPIF Reference Guide,
DBM Official Website); and
 Proposed activities, whether new or on-going, shall be evaluated using a

zero-base approach and on the basis of, among others, agency capability as
demonstrated by past performance and other similar criteria (Section 16,
Chapter 2, Executive Order No. 292 or Administrative Code of 1987).
The weighty ramifications include: (i) lesser accountability; (ii) lack of

reliable and robust performance measurement for meaningful assessment and
evaluation of the BIR’s operation; and (iii) lack of dependable tool for activity-based
cost estimation in the budget planning and accountability, which tends to foster
overestimation of proposed annual budget.
The PIs serve as the physical targets of the BIR for its P/APs, linking
processes and outputs to the budget given for the specific program. These PIs and
targets were required to be formulated by the BIR during the budget planning
process.27 Corollary, these PIs and targets are required to be reflected in its budget
plans, monitored and reported quarterly in the BARs and QPRO.
27
Through: (i) Budget Preparation (BP) Form 201-Schedule D: Program Expenditure Plan; (ii) BP Form
No. 202: Profile and Requirements of Programs/Locally-Funded Projects (for Information and
Communications Technology); and (iii) BP Form B: Agency Performance Measurement.
89
No PIs and targets were embedded in the GAA and BFARs directly linking
the P/APs (process and output) of the BIR to the annual budget. Consequently, no
monitoring of PIs and targets were reported.
Lack of appropriate PIs and targets measuring/evaluating budget

performance pervaded in the performance measurement system (PMS) at the
implementing unit level. Verification of and inquiry on the BIR’s Strategic
Performance Management System (SPMS) or the Office Performance and
Commitment Review Form for CYs 2015 to 2017, showed that outputs are not
associated with the amount of budget. Thus, a meaningful evaluation of budget
performance cannot be readily conducted, and unit managers were not made
accountable for outputs on the amount of their budget proposals.
The lack of PIs and targets eventually deprives the BIR of reliable basis of
activity standard costing to ensure that planned budgets are within reasonable
estimates.
The P10.780 billion unused allotment means bypassed improvement in the

BIR’s operation as well as forgone economic benefits (societal impacts and
economic multiplier effect) realizable from the utilization of such allotment. It bears
belaboring that budgeting is intended to create the most economic impact.
In order to minimize, if not totally avoid, the unused budget, we

recommended and Management agreed to:
a) Require the Planning and Management Service and Finance Service to:
i) Address the weaknesses in the BIR’s performance measurement

system by establishing the appropriate and adequate PI’s for each
outlined P/APs in the annual budget, among others;
ii) Install the PI’s and targets for each P/APs in the BP Forms during
the planning stage;
iii) As PI’s are identified, develop standard costs for each P/APs using,
among others, historical cost;
iv) Using the PI-based standard cost: (i) derive the physical targets per
P/APs of the BIR based on, among others, the BIR’s absorption
capacity, budget ceiling and collection target; and (ii) estimate the
reasonable budget for the targets set by the implementing units;
v) Develop capacity and budget utilization evaluation of implementing

units by accumulating historical data on budget versus actual
expense, and incorporate in the SPMS of the BIR;
90
vi) Strengthen the monitoring of established PIs and accumulate in a
database for, among others, program evaluation purposes and
target setting; and
vii) Scale down the annual budget for Non-Accountable Forms, ITIE
and RISMD to reflect current needs and, in the proper case,
absorption capacity;
b) Require the Procurement Division and the Bids and Awards Committee
(BAC) to expedite procurement activities and improve the efficiency
thereof; and
c) In coordination with the DICT, improve the budget delivery for resource
sharing and capacity building of the RISDM Program.
For the unobligated allotment under the RISDM Program, Management

explained that there were certain projects whose payment will be determined based
on Quantum Meruit principle28 by the COA, through the Commission Proper. These
projects include: (i) 10 projects in 2015 amounting to P440.150 million; and (ii) 10
projects in 2016 amounting to P310.913 million. For CY 2017, there was P781.500
million budgets for 29 projects which was deferred by BIR and earmarked for the
Department of Budget and Management for the Fuel Marking Project of the Bureau
of Customs. The said project was not implemented.
Transparency and Accountability Information in the BIR Official Website
6. The BIR has not complied with certain transparency and accountability
requirements of the GAA of FYs 2015, 2016, and 2017 and NBC No. 542,
undermining the participatory governance and public access of information.
In order to enhance transparency, enforce accountability and ensure public

access to information, the government required the maintenance in the agency
official website of the Transparency Seal with complete and timely updated
information, in accordance with:
a. Transparency Seal provision of the General Appropriations Act (GAA);

b. National Budget Circular (NBC) No. 542, re: reiterating compliance with the
Transparency Seal of the GAA, dated 29 August 2012;
c. NBC No. 507 and 507A, dated 31 January 2007 and 12 June 2007, respectively;
and
d. COA and DBM Joint Circular (JC) No. 2014-1 dated 1 July 2014.
28
COA is the adjudicating body of claims arising from void government contracts, for determination
whether or not recovery against the government under such contracts may be allowed on the basis of the
quantum meruit principle. COA Resolution No. 86-58 dated November 15, 1986
91
Similarly, the General Provisions (GP) and BIR Special Provisions (SP)
under the GAA of FY 2017 require the posting in the agency’s website of various
reports and information.
On 11 October 2016, through Executive Order No. 5, the government

adopted the Philippine Development Plan (PDP) 2017-2022, with the expressed
outcome of enhanced social fabric by making government worthy of people’s trust.
Among the sub-sector outcome included in the PDP framework are to: (a) Promote
participatory governance and (b) Ensure public access to information.29
We have explored the BIR Official Website and noted that the
Transparency Seal lacks information as shown in the following table.
Table 19. – Unposted Reports and Schedules in the BIR Website

Timetable per Not posted (x)
Information GAA for FY 2015,
2016 and 2017 2015 2016 2017 2018
1. Annual Budget Execution Documents (BEDs):
BED 1 Physical and Financial Plan On or before 15th of
February of each x x x
year
BED 2 Monthly Cash Program -do- x x x
BED 3 Estimate of Monthly Income -do- x x x x
st
BED 4 List of Not Yet Due and On or before 31 of
Demandable Obligations January of each x x x x
year
2. Financial Accountability Reports (FARs)
FAR 3 - Aging of Due and Demandable On or before the
Obligations (ADDO) 30th day following x x
end of the year
Deficiency in the maintenance of the Transparency Seal may be considered

as a violation of Section 57 of Chapter 6 (Budget Accountability) of Book VI of the
Administrative Code of 1987; without prejudice to such other liabilities, penalties,
and/or measures as may be undertaken to curb non-compliance.30
We also observed that the BIR has not posted the Accountability Reports
required under the GP and BIR SP of the Annual GAA.
These deficiencies preclude the general public in assessing the agency

performance on specific programs, determining propriety of budget utilization,
monitoring agency programs/activities and being apprised of the agency’s action
plan on audit findings and observations,
29
Pg. 66, Ibid
30
National Budget Circular No. 542, dated August 29, 2012
92
Management informed that the regular updating of information in the
Transparency Seal of the BIR was delegated to specified owners through RMO No.
31-2014 dated 26 August 2014, made possible by the Content Management System.
Under RMO No. 60-2016 dated 28 October 2016, it is the responsibility of those
assigned to regularly update the information. The posting of specific information
requirements by the GP and BIR SP is on-going.
Auditor’s Rejoinder:
Section 93, GP of the GAA FY 2017 and Section 5.4 of the NBC No. 542
charge the responsibility of ensuring compliance with the Transparency Seal
requirements to the heads of the agencies and web administrators or their
equivalent. Hence, the updating may be delegated to specific owners but,
ultimately, the responsibility remains with the Commissioner of Internal Revenue
and the Assistant Commissioner of the Client Support Service.
a) Instruct the Web Administrator to update the information in the BIR

Official Website, particularly the Transparency Seal; and
b) Comply with the requirements of the GP and BIR SP under the Annual
GAA with regards to the posting of the required reports.
Maintenance of separate bank account for payroll transactions; dormant bank accounts
7. The maintenance of Cash in Bank – Local Currency, Savings Account as

depository account for payroll transactions in NO and RRO 7, and Cash in Bank
– Local Currency, Current Account in RRO 3, which had been dormant, is not in
accordance with DBM Circular Letter No. 2013-16 and COA Circular No. 2015-
001, respectively.
Item 5.9 of the DBM Circular Letter No. 2013-16 dated 23 December 2013
prescribes the payment procedure thru Expanded Modified Direct Payment Scheme
(ExMDPS), whereby the Modified Disbursement System, Government Servicing
Banks (MDS-GSB) shall pay the creditors/payees listed in the List of Due and
Demandable Accounts Payable with Advice to Debit Account (LDDAP-ADA) not
later than 48 hours but not earlier than 24 hours upon receipt of the said document
from the National Government Agency/Operating Unit (NGA/OU), thru:
a. Direct credit to the creditor’s current/savings/ATM account (CA/SA/ATM)

maintained with the MDS-GSB; or
93
b. Bank transfer, if creditor’s account is maintained outside the agency’s MDS-
GSB, where corresponding bank charges shall be borne by the creditor/payee
concerned.
Item 5.4 of the same Circular Letter provides for the definition of
Creditors/Payees which refer to internal and external creditors/payees of the
NGA/OU. This includes employees of the department or agency.
Our examination disclosed that the Management in NO and RRO 7 regularly

transfer funds equivalent to the total monthly salaries, RATA and other benefits of
the officers and employees from its regular MDS account to the said Savings
account.
The maintenance of the savings account is unnecessary considering that

payments can be made directly to the payees concerned thru their respective
savings/ATM account.
On the other hand, COA Circular No. 2015-001 dated 29 January 2015 was
issued to provide guidelines and procedures in reverting to the General Fund (GF)
all dormant unauthorized cash accounts, unnecessary special and trust funds and
related accounts and the transfer of the cash balance of unauthorized accounts to the
National Treasury.
In RRO 3, examination of the Cash in Bank–Local Currency, Current

Account (CIB–LCCA) revealed that bank accounts totaling P243,215.37 which were
created as depository accounts for trust funds and payment of tax refunds had been
dormant for years. These accounts are no longer necessary for which these were
established, thus, should have been remitted to the National Treasury.
We recommended and Management agreed to require the concerned

Accountants to:
a) Use Cash in Bank -MDS, Regular account for payroll transactions;
b) Revert the unutilized fund in the Cash in Bank – Local Currency,

Savings Account, including the interest earned, to the National Treasury
and close the account as instructed by the Treasurer of the Philippines;
c) Revert the balances of the abovementioned bank deposits to the Bureau

of Treasury pursuant to the provisions of EO 431, following the
procedures enumerated under COA Circular No. 2015-001 dated 29
January 2015.
Unreconciled size of land area in three documents
94
8. The land area appearing in the Deed of Donation differs from the land area
appearing in the Tax Declaration and the Original Certificate of Title Special
Patent, casting doubt on the actual land area owned by the BIR-RR1, where its
office building is built.
Presentation of information, including accounting policies, should be in a

manner that provides relevant, reliable, comparable and understandable information.31
Reliable information is free from material error and bias, and can be depended on by
users to represent faithfully that which it purports to represent or could reasonably be
expected to represent. The information in financial statements should be complete
within the bounds of materiality and cost.32
Review of documents evidencing ownership of the land occupied by RDO 2

in Bantay, Ilocos Sur, RRO 1 disclosed that a Deed of Donation (DOD) was executed
between the Province of Ilocos Sur, (Donor) as represented by its Governor, and
RDO Vigan, Ilocos Sur, (Donee) as represented by its Revenue District Officer, on 29
December 1997, donating 644 square meters. The copy of Tax Declaration No. xxx,
however, showed 664 square meters, thus, showing a difference of 20 square meters
more as compared with the DOD, while the copy of the Original Certificate of Title
No. xxxxx in the name of RDO 2 disclosed 570 square meters only, thus, a difference
of 74 square meters less as compared with the land area stated in the Deed of
Donation.
We recommended and Management agreed to make the necessary

action immediately to rectify the differences noted in the DOD, Tax Declaration,
and Original Certificate of Title in order to reflect the correct land area it
rightfully owns.
Compliance with the provisions of RA No. 9184 and its RIRR
9. The procurement process of the Bureau showed various omissions and practices
which are not strictly in compliance with the 2016 Revised IRR of RA No. 9184
that affected the validity and propriety of the procurement activities.
Assessment of the procurement activities of the Bureau for the contracts

submitted showed the following omissions and deficiencies which tend to affect the
validity and propriety of the procurement activities as a whole:
Table 20. – Deficiencies Noted in the Procurement Activities of the BIR

Office Deficiencies Noted Section of RIRR
RRO 7 Bidding documents submitted by bidders did not include Sec. 25.3
31
Paragraph 29 (b) of PPSAS 1
32
Appendix A of PPSAS 1
95
Office Deficiencies Noted Section of RIRR
Omnibus Sworn Statement (OSS). This OSS contains
representations of the bidders which if proven to be false,
may render them liable for perjury since the document is
made under oath and notarized to become a public
document.
Non-posting of the Notice to Proceed and Approved Sec. 37.4.2
Contract in the PhilGEPS and BIR website.
RROs 7 Delayed serving of the Invitation to Observers. Secs. 13.1 and 13.3
and 17
RRO 8 Non-preparation of minutes of meeting for pre-bid and Sec. 14.1 (c) and 22.4
opening of bids.
RRO 17 The submitted Approved Budget for the Contract (ABC) Sec. 3.g of Annex A
was not in the prescribed format as it lacks the Detailed
Engineering Activities and was not approved by the Head
of the Procuring Entity (HOPE) but was certified only by
the Accountant.
Non-notification of all losing bidders Sec. 37.1.1
Liquidated damages amounting to P871,317.80 from 46 Sec. 68
POs were not imposed on delayed deliveries.
RRO 19 Various procurement for supplies & materials and training Sec. 7
& scholarship expenses were not in accordance with the
approved Annual Procurement Plan for CY 2017
We recommended and Management agreed to ensure that the BAC and

concerned employees:
a) Require the bidders to include the OSS in the bidding documents;
b) Cause the posting/publication in the PhilGEPS and the BIR website of

all contracts entered into by the RRO 7, for transparency and a well-
informed public;
c) Send the invitations to observers days ahead of the date of the

procurement activity to give them ample time to attend and participate
in the procurement activities of the agency. Proof of service of the
invitation letter may be allowed as evidence of invitation to observers;
d) Prepare and finalize the minutes of meeting not later than five days
after each procurement activity to serve as reference in the resolution of
significant matters and issues discussed during the meeting. To address
the delayed preparation of the Minutes, the BAC Secretary may assign
a member to take note of significant issues/matters, to be
counterchecked with the recorded proceedings of the procurement
activities;
96
e) Meticulously and judiciously plan and prepare the ABC and have the
HOPE or his duly authorized representative approve the same;
f) Inform all losing bidders of the BAC’s recommendation within the

required period;
g) Strictly impose liquidated damages to suppliers who failed to deliver the

goods and services on the dates stipulated in the PO;
h) Examine the formulation of the APP for the succeeding calendar year,
taking into consideration provisions for foreseeable emergencies based
on historical records; and
i) Ensure that all procurements must be within the ABC as reflected in

the APP or PPMP which shall be at all times consistent with the
appropriations for the project authorized in the GAA, and prepare a
revised or update the individual PPMPs and consolidate/revise APP, if
warranted.
Submission of Mandatory Reports and documents
10. Financial reports, contracts, DVs, and mandatory reports and documents were
not submitted or submitted beyond the prescribed period, thus, affected the
timely verification of financial accounts/transactions and communication of
audit results to Management.
One of the standards to achieve fair presentation and reliable information of

the FS is timeliness in the preparation and submission of reports. All needed reports
should be provided promptly to be of maximum usefulness.
Analysis on the submission of these reports showed that the Bureau had not
been compliant, as shown in Table 21.
Table 21 - Status of Submission of Financial Statements and Reports

Documents/Criteria Deficiencies
Contracts and Supporting Not submitted
Documents: Within five RRO 1- 10 Contracts, 77 POs/ JOs;
working days from RRO 4 - 1 Contract;
execution/perfection and RRO 5- 11 Contracts of P240.908 million;
issuance thereof (Section 3.1 of RRO 7- 80 POs of P25.769 million;
COA Circular No. 2009-001) RRO 8 – 13 contracts of P78.078 million;
RRO 17- 20 POs of P269,498.14
Delayed Submission
NO - 55 Contracts, 15 to 102 days; 81 POs/JOs -1 to 10
Purchase/Job/Letter Orders
days due to the tedious routing procedures of
(POs/ JOs /LOs) Within five
97
working days from issuance documents
(Section 3.2.1 of COA Circular RRO 3- Contracts, POs/JOs, Notice of Delivery;
No. 2009-001) RRO 5- 6 Contracts of P46,359,829.42, 73 to 171 days;
Notice of Delivery Within 24 RRO 6- 14 Contracts of P10,441,660.32, 45 to 89 days;
hours after acceptance of 19 POs/ JOs, 36 to 116 days;
deliveries of goods and services RRO 7- 40 POs, 1 to 8 days; Contracts of
(Section 6.9 of COA Circular P85,407,186.00, 9 to 242 days
No. 2009-002). RRO 9B- Contract’s Supporting Documents of
P88,888,888.00
RRO 11- POs/ JOs/ LOs, Notice of Delivery
RRO 17- 143 POs of P1,799,143.14, 1 to 56 days
Bank Reconciliation Statements Not submitted
Within 20 days after receipt of RRO 2- January to December 2017; because of the
the monthly Bank Statement delayed release of the bank statements despite verbal
(Section 7, Chapter 21, Volume and written requests
I of GAM) Delayed Submission
RRO 5- 2017 , 44 to 270 days;
RRO 9A- February to December 2017, 1 to 8 months;
RRO 9B- January to December 2017, 1 to 10 months
RRO 16- January to March 2017, 74 days
Section 5.3 of COA and DBM Not submitted
Joint Circular No. 2014-01: RRO 2 - March & April 2017 FAR No. 4
 BAR No. 1, FAR No. 1, 2 & Delayed submission
5- Within 30 days after the RRO 2 - BAR No. 1
end of each quarter
 FAR No. 3- On or before 30th
day following the end of the
year
 FAR No. 4- On or before 30th
day of the following month
covered by the report
Monthly/Quarterly Trial Not submitted
Balances (TBs), FSs, Supporting RRO 2- April 2017 TB
Schedules (SSs) - Within 10 Delayed submission
days after the end of the RRO 2- Monthly TBs, TBs & FSs 1st to 3rd Qtr., 13 to
month/quarter (Section 60, 50 days;
Chapter 19, Volume I of GAM) RRO 5- Monthly TBs, 10 to 126 days; FSs 1st to 4th
Qtr., 15 to 152 days;
RRO 12- Monthly TBs, 12 to 315 days;
RRO 16- January to March TBs, 17 to 87 days
RPCI - Not later than July 31 Not submitted
and January 31 of each year for RRO 2 - 2016 & 2017 RPCI for Semi Expendable
the first and second semesters, RRO 15
respectively (Appendix 66, RRO 16 & 19- 2017 RPCI for Supplies and Materials
Volume II, GAM) Delayed Submission
RRO 7
RPCPPE - Not later than Not submitted

January 31 of each year RROs 7, 9A, 15
(Appendix 73, Volume II,
98
GAM)
IIRUP - Section 40 (d), Volume Not submitted

I, Chapter 10 of the GAM RRO 11
DVs, Reports of Checks Issued Non-submission

(RCI), LDDAP-ADA, Payroll & RRO 12 – September to December 2017 DVs
DTRs, JEVs - Within the first 10 Delayed submission
days of the ensuing month RR0 2- 2017 DVs, 22 to 75 days; 2017 Payroll &
(Section 10, Chapter 6, Volume DTRs, 14 to 101 days;
1, GAM; Sections 100 and 122, RRO 5- 2017 DVs & JEVs, 45 to 164 days; 2017 RCI,
PD 1445) 43 to 165 days; Payroll March to August 2017 &
October to December 2017, 1 to 123 days;
RRO 9A- May to December 2017 RCI, LDDAP-ADA
& DVs of P165,048,822.76;
RRO 9B- January to December 2017 RCI, LDDAP-
ADA & DVs of P226,815,504.46;
RRO 10- 2015, 2016 & 2017 DVs of P3,829,608.78,
P10,498,224.92 & P69,776,284.09;
RRO 11- 2017 DVs, 11 to 97 days
RRO 12- 2017 DVs, 117 to 179 days due to the volume
of DVs they are keeping and transactions they are
recording manually. Request for the update of
eNGAs facility was already sent to the NO-
Revenue Data Center on 19 February 2018
RRO 16- March 2017 DVs, 28 days; January to March
2017 JEVs, 87 days
a) Ensure that all concerned officials/personnel observe compliance on the

submission to COA of FSs, Contracts, POs/JOs, RPCI, and other
pertinent documents, within the prescribed period;
b) Integrate the timeliness of the submission of reports and documents as

part of the Key Performance Indicator (KPI) in the Individual
Performance Commitment and Review (IPCR) of the responsible
personnel;
c) Apply for the Landbank’s internet banking facility to check/monitor

the balances and movements of bank accounts at any given time; and
d) Impose suspension of salaries over all responsible personnel for

unjustifiable causes of persistent non-compliance on the submission of
the aforementioned reports and documents as provided under Section
122 of PD No. 1445.
Deduction of Forced Leave (FL) and Procedures in the recording of leave credits
99
11. In NO, mandatory leave totaling 170 days, with total equivalent money value of
P212,207.69, were not deducted from the leave credits of employees in violation
of the Omnibus Rules on Leave, thus may result in possible loss of government
funds. Moreover, uniform procedure in the recording of leave credits was not
observed.
Non-deduction of Mandatory FL in the leave credits
The mandatory annual five-day vacation leave, if not availed, shall be

forfeited during the year. However, in cases where the scheduled leave has been
cancelled in the exigency of the service by the head of the agency, the scheduled
leave not enjoyed shall no longer be deducted from the total accumulated vacation
leave.33
Examination disclosed that there were 29 out of 127 employees whose force
leaves (FLs) were not deducted from their leave credits, equivalent to 170 days FL
with a money value of P212,207.69.
Earned leave has equivalent money value and accumulates through the years
of government employment, and can be commuted/monetized, upon approval of the
agency head. Hence, incorrect computation of earned/deduction of leave credits
may either mean loss to the employee or to the government.
Non-observance of a uniform procedure in the recording of leave credits and other

deficiencies
It was also noted that there is no systematic or uniform procedure in the

maintenance of leave cards because some are maintained manually, while others are
done thru MS Excel. This method is prone to errors and entails wastage of time and
effort.
Examination also revealed that corrections in the leave cards were not
initialed, thus, the identity of the person who made the correction cannot be
identified. This may pose to be a future concern due to unauthorized alterations.
We recommended and Management agreed to require the

Administrative Services to:
a) Adhere strictly to the rules and regulations provided under the

Omnibus Rules of Leave;
b) Instruct the concerned personnel to maintain a systematic and

uniform approach of recording and updating the leave cards, and to
do it in a correct and accurate manner; and
33
Sec. 25 (b), Rule XVI on Omnibus Rules on Leave
100
c) Look into the possibility of enhancing the system of monitoring the
attendance and leave credits of the BIR employees, by adopting
software which generates not only the Daily Time Records but also a
report of attendance, leave card ledgers and other related
reports/schedules.
Income from Dormitory Operations
12. Income of P1.003 million received from the use of Dormitory was not properly
receipted, of which an almost the same amount was used for its operations
without authority from the Permanent Committee. Moreover, some prescribed
procedures in the disbursement of the funds were not observed.
Unless otherwise specifically provided by the law, all income accruing to

the agencies by virtue of the provisions of law, orders and regulations shall be
deposited in the National Treasury or in any duly authorized government depository,
and shall accrue to the unappropriated surplus of the General Fund of the
Government.34
No payment of any nature shall be received by a collecting officer without

immediately issuing an official receipt in acknowledgement thereof and that the
receipt should be officially numbered, subject to proper custody, accountability and
audit. 35
For CY 2017, the dormitory of the BIR-NO which charges a daily rate of
P100 per transient border was able to cater to 2,267 employees assigned in the NO
and its RROs, and collect a total of P1.003 million from its operations. Total
expenses reached around the same amount, with the difference of P507.13 that was
receipted under OR No. 2018-004823-00712 and remitted to the National Treasury as
income of the GF.
Our examination of the CY 2017 Annual Report on Income and Expenses for
the dormitory operations disclosed the following deficiencies:
a. Collections were used to defray the operational expenses of the dormitory without
authority from the Permanent Committee to use the same;
b. No official receipt was issued to acknowledge the payment of P100.00 per day of
stay in the dormitory. The payment was only reflected on the Registration Form
(RF);
c. Collections totaling P28,406.40 was used for the conduct of trainings of Value
Orientation Workshop-Public Service Ethics and Accountability despite the
allocated budget of the Bureau for this purpose;
34
Section 65 of P.D. 1445
35
Section 68 of P.D. 1445
101
d. Some RFs did not have the signatures of the guards on duty to check the in-and-out
of the employees, while others did not indicate the number of days of stay to
ascertain the correctness of the amount paid;
e. Disbursements were not approved by the proper officials and not supported by
appropriate documents; and
f. Income and expenses were not recognized in the books but only recorded in a
logbook.
Likewise, issuances to end-users of furniture and equipment totaling

P582,276.89 were not covered by either PAR or ICS which are required to establish
accountability over these assets.
These practices were not in keeping with the proper safeguarding of the
resources of the government.
We recommended and Management agreed to instruct the concerned

employees to:
a) Request for the maintenance of Petty Cash Fund for the operations of
the Dormitory in the absence of a Revolving Fund approved by the
Permanent Committee and observe proper recording and reporting of
the pertinent income and expenses in the General Fund;
b) Issue official receipt upon receipt of payment from borders;
c) Stop using the collections for the conduct of the in-house trainings of
the Bureau; and
d) Issue PAR and ICS to the end-user of the property and conduct semi-
annual inventory of properties of the dormitory to establish
accountability. Include all items found in the dormitory.
102
Compliance with Net Take Home Pay of P4,000.00
13. Some employees in RRO 3 have net take home pay lower than the required
P4,000.00 threshold due to various loan amortizations deductions, which is not
in accordance to the provisions of Section 47 of RA No. 10924.
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:
a) The BIR, PhilHealth, GSIS and HDMF;

b) 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;
c) Associations or provident funds organized and managed by government
employees for their benefit and welfare;
d) GFIs authorized by law and accredited by appropriate government regulating
bodies to engage in lending;
e) Licensed insurance companies; and
f) 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).36
Verification made on the payroll of the agency for the period January to
November, 2017 showed that the monthly net take home pay of some of the
employees fall below the required threshold of P4,000.00. This is due to bulk of loan
amortizations deducted from the salaries of the employees.
a) Instruct the personnel in-charge of payrolls to strictly comply with the

provisions of Section 47 of RA No. 10924; and
b) Review the system of approving loans to avoid employees from receiving

monthly net take home pay lower than P4,000.00.
36
Sec. 47 of RA 10924 (General Appropriations Act for CY 2017)
103
Compliance with Installation of Signboards for various PPAs
14. In RRO 11, signboards on various Infrastructure PPAs amounting to ₱30.543

million were not installed in the required designated areas, thus, deprived the
public of the information on PPAs being undertaken by the agency.
All government agencies, or the implementing unit, office or division as the

case may be shall notify the public of their PPA by posting relevant information in
signboards, blackboards, whiteboards, posters, tarpaulins, streamers, electronic
boards or similar materials (collectively, “Signboards”) in conspicuous places within
the agency premises, and in the venue where the PPA is located or carried out. This
requirement applies to all government PPAs, regardless of amount or source of funds.
37
Random inspection and validation revealed that there were no signboards

installed in conspicuous places within the agency premises and in the venue where
the PPA is located or carried out for PPAs, presented in Table 22, being undertaken.
Table 22. - List of PPA without Installed Signboards

Date of
Location PPA Amount
PO/Contract
27 Nov. 2017 RDO No. 72 Roxas Renovation of four Comfort Rooms ₱469,365.00
City
27 Nov. 2017 RDO No. 72 Roxas Construction of Child Minding and 68,124.00
City Breastfeeding Stations
6 Dec. 2017 RDO No. 75 Zarraga, Construction of a three-storey 26,406,136.28

Iloilo Office Building
29 Dec. 2017 RR No. 11 Molo, Renovation of Comfort Rooms 3,599,134.16
Iloilo City
Total ₱30,542,759.54
Non-installation of Signboards and/or public notices deprives the public of

the relevant information on the various PPAs being undertaken by the agency; thus,
transparency on government transactions is not attained.
We recommended and Management agreed to post relevant

information in conspicuous places within the agency premises and install
signboards in the venue where the PPA is located.
37
Section 2.2.1 of COA Circular No. 2013-004 dated January 30, 2013
104
Compliance with Other Mandatory Accounts/Areas
Gender and Development (GAD)
15. The Bureau was not able to carry out some of the planned GAD activities nor
maximize the use of its approved budget, thus, the intended benefits of the plan
were not fully achieved. Moreover, the GAD Accomplishment Report was not
submitted within the prescribed period, thus, precluded the Audit Team from
conducting timely evaluation and audit of GAD funds.
Section 30 of RA No. 10924 provides that all agencies of the government

shall formulate a GAD Plan designed to address gender issues within their mandate
and implement the applicable provisions under RA No. 9710 or the Magna Carta of
Women 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.
The GAD Plan shall be integrated in the regular activities of the agencies,
which shall be at least five per cent of their budgets. The preparation and submission
of the annual GAD Plan and annual GAD Accomplishment Report shall be subject to
the guidelines issued by the agencies concerned.
Examination of the plans and projects related to GAD revealed that NO was
not able to implement six out of the 20 planned activities. Also, RROs 2, 3, 4, 5, 6, 7,
9A, 9B, 10, 11, 12, 15, 16, and 17 reportedly were also not able to fully implement
the GAD activities, citing among others, the following reasons:
a. Majority of the personnel assigned in the Region were not allowed to

participate due to the urgency of the attainment of collection goal;
b. Other programs of the Region were given priority; and
c. Lack of material time or schedule constraints.
Other deficiencies noted were as follows:
a. Non- submission of the GAD Plan and Budget by RRO 1;
b. Non-submission of GAD Accomplishment Report within five working

days from the end of January 2018 by RROs 1 and 3, contrary to the
provisions of COA Circular No. 2014-001;
105
We recommended and Management agreed to require the concerned
GAD Focal Point System to:
a) Ensure the full-implementation of all programs/projects/activities

embodied in the GAD Plan with corresponding budget in order to
achieve the desired goals and objectives of the Plan; and
b) Submit the GAD Plan and Budget and the corresponding

Accomplishment Report within the prescribed period.
16. Senior Citizens and Differently-abled Persons
All agencies of the government shall formulate plans, programs and projects
intended to address the concerns of senior citizens and persons with disability, insofar
as it relates to their mandated functions, and integrate the same in their regular
activities. Moreover, all government infrastructure and facilities shall provide
architectural features, designs of facilities that will reasonably enhance the mobility,
safety and welfare of persons with disability.38
The following is the status of compliance for CY 2017 of the NO and RROs
on the foregoing provisions:
Table 23. – Status of Compliance on the Senior Citizen Act

NO/
Accomplishment
RRO
NO The office building is provided with facilities and structural features and designs to
enhance the mobility, safety and welfare of differently-abled persons. Likewise, the NO
gives priority to the concerns of its senior citizens and differently-abled clients. However,
NO did not submit its plans and programs intended to address the concerns and issues of
senior citizens and differently-abled persons.
1 Budgeted in its Annual Procurement Plan the amount of ₱550,000 for Senior Citizens
and Differently-abled Persons but did not formulate specific plans that would address
their respective concerns and issues.
3 Formulated plans and programs intended to address the concerns of senior citizens and
differently-abled persons. Likewise, the office building is provided with facilities and
structural features and designs that shall reasonably enhance the mobility, safety, and
welfare of differently-abled persons.
10 Included in the GAD Program activities to improve the mobility of senior citizens,
pregnant women and persons with disability taxpayers. The agency enhanced queuing
system facilities of the RO and seven District Offices. Restroom facilities were improved.
RRO budgeted ₱420,000.00 and spent the amount of ₱292,000 for the program.
11 Continued implementation of client-focused programs providing prerogative to senior
citizens, pregnant women and persons with disabilities in the delivery of services.
15 Implemented priority services to senior citizen & persons with disability; office building
38
Section 31 of the GAA of FY 2017
106
NO/
Accomplishment
RRO
was provided with ramp for easy access & mobility. Wheelchairs were also purchased to
cater their needs.
17 Furnished the Senior Citizen and Persons with Disability Lounge necessary furniture.
The lounge is situated at the Public Assistance and Complaint Desk (PACD) building
where senior citizens are entertained and served.
17. Tax Laws and Regulations, GSIS Premiums and Other Loan Amortizations, and
PhilHealth and Pag-IBIG Contributions
The agency was not able to comply with the timely remittance of mandatory
deductions pursuant to the regulations issued by the BIR, Government Service
Insurance System (GSIS), PhilHealth, and Pag-IBIG, including loan amortizations.
The withholding and remittances for the CY 2017’s mandatory deductions

are summarized in Table 24:
Table 24. – Compliance with Mandatory Deductions

Amounts in Million P
Account Beg. Balance Withheld Remitted Ending Balance
Due to BIR 37.881 590.162 575.120 52.923
Due to GSIS 13.500 591.759 581.935 23.324
Due to PhilHealth 1.069 71.256 69.555 2.771
Due to Pag-IBIG 1.571 32.497 32.171 1.897
Total 54.021 1,285.675 1,258.782 80.914
Due to BIR
As of 31 December 2017, the Due to BIR account has a balance of P52.923

million, of which P44.923 million was remitted in January 2018 and P4.022 million
was refunded to employees, leaving a balance of P6.955 million to be reconciled by
the DAD/FD of NO and RROs concerned, broken down as follows:
NO/RRO Amount
NO P5,596,592.23
2 7,665.52
5 (2,743,743.45)
6 1,740,141.73
7 1,248,865.77
8 1,490.11
9A 910,729.60
9B 6,510.91
15 187,093.55
Total P6,955,345.97
Due to GSIS
107
The balance of the Due to GSIS account as of 31 December 2017 totaling
P23.324 million, includes P20.629 million remittance made in 2018 and P2.695
million due for reconciliation of NO, RROs 3, 5, 7, 13 and 17.
Due to PhilHealth
The year-end balance of account Due to PhilHealth of P1.897 million

includes P1.446 million remitted in January 2018 and P450,602.46 which is for
reconciliation.
Due to PagIBIG
Out of the P2.771 million balance of the Due to PagIBIG account as of 31

December 2017, P2.581 million was remitted in January 2018 and the balance of
P0.190 million is for reconciliation.
Management commented that the balance which appears to be unremitted

pertains to the following:
a. Carry over balances during the e-NGAS implementation

b. Amounts to be refunded to BIR employees
c. Accounts for adjustment
a) Require the DAD to: conduct an in-depth reconciliation/analysis of the

inter-agency payable accounts; remit the balances, if any; and revert
those without valid claimants; and
b) Require the personnel in-charge of the Payrolls in the HRD and DAD to
conduct a regular reconciliation of the so that what is deducted from
the employees’ salaries should be the same amount to be remitted on or
before their due dates.
18. GSIS Property Insurance Law
All government agencies are required to insure its property with the GSIS
against any insurable risk therein provided and pay the premiums thereon. 39 Any
responsible officials or employees who fail to comply with the said requirement
shall be held liable for the payment of the premium and shall pay GSIS a fine of
two per cent per month of the said premiums from their due date until payment is
received by the latter.40
39
Sec. 5 of RA 656
40
Sec. 6, Ibid
108
Moreover, the said circular states that, All Heads of National agencies,
Local government units and Government-owned and controlled corporation
(GOCC) shall be responsible for the preparation and submission of the inventory of
all insurable physical assets.
RROs 1, 4, 7, and 16 were not able to insure all its insurable properties with
the Government Insurance Fund (GIF) of the GSIS contrary to RA No. 656, or the
“Property Insurance Law”, thus, exposing the Bureau to the risk of not being
indemnified in the event of damage or loss of such assets.
In RRO 1, the three-story main building was not insured due to insufficiency
of insurance documents, while in RRO 7, the insurance coverage of government
properties was inadequate due to non-submission of an updated inventory report of
PPE by the Property Unit to the GIF of the GSIS.
Moreover, RROs 4 and 16 both did not insure all its insurable assets and
properties, thus, posing risks of non-indemnification of insurable assets in case of
loss.
a) Instruct their respective Property Officers to comply with all the

documentary requirements in applying for insurance coverage for the
properties of the Bureau; and
b) Allocate funds for the insurance premium of all insurable assets and
properties of the Bureau in order to protect the government and be
indemnified in case of damage or loss of property due to fortuitous
events.
19. Supreme Court’s Decisions on PDAF and DAP
For CY 2017, no funds from the Priority Development Assistance Fund

(PDAF) and Disbursement Acceleration Program (DAP) were received by the BIR.
20. Hiring of Casual, Job Orders, Contractuals, and Consultant
109
DBM Circular Letter No. 2013-5 dated 22 July 2013 was issued to provide
the policies and guidelines on the filling of positions and hiring of
temporary/casual/contractual/contract of services/job order personnel and
consultants.
For CY 2017, the BIR-NO did not hire Job Orders or contractual employees,
while the list provided by the Chief, Personnel Division, disclosed that in RROs, the
job orders (JO)/contractual employees hired are as follows:
Office No. of JO/Contractual

RRO 1 4
RRO 3 8
RRO 5 1
RRO6 12
RRO 8 2
RRO 11 1
RRO 15 5
RRO 16 1
RRO 19 4
Total 38
21. Status of Suspensions, Disallowances, and Charges
Section 9.4 of the 2009 Rules and Regulations on the Settlement of

Accounts provides that a suspension should be settled within 90 calendar days from
receipt of the Notice of Suspension (NS); otherwise, the transaction covered by it
shall be disallowed/charged after the Auditor shall have satisfied himself that such
action is appropriate. Consequently, the Auditor shall issue the corresponding
Notice of Disallowance/Notice of Charge (ND/NC). Also, Section 10.4 states that
the disallowance shall be settled within six months from receipt of the ND by the
persons liable.
The balances of suspensions, disallowances, and charges of P23.185 million,

P51.379 million, and P12.820 million, respectively, remained unsettled contrary to
Sections 9.4 and 10.4 of the 2009 Rules and Regulations on the Settlement of
Accounts.
Details of the Audit Suspensions, Disallowances and Charges as of 31

December 2017, together with its breakdown, are shown in Table 25.
Table 25. – Status of Suspensions, Disallowances and Charges
110
Beginning This period January 1 to December
Ending Balance,
Balance, 31, 2017
December 31
January 1 NS/ND/NC NSSDC
Suspension P26,710,036.34 P17,014,096.22 P20,538,687.47 P23,185,445.09
NO - 24,479.56 24,479.56 -
RRO 2 3,028,285.75 16,856,294.22 6,885,100.00 12,999,479.97
RRO 7 79,650.00 - 79,650.00 -
RRO 11 - 152,302.00 152,302.00 -
RRO 13 240,670.00 5,500.00 246,170.00 -
RRO 1641 23,350,612.59 - 13,164,647.47 10,185,965.12
RRO 19 10,818.00 - 10,818.00 -
Disallowance P51,418,524.06 P362,116.41 P401,674.12 P51,378,966.35
NO 45,369,056.21 - 34,767.58 45,334,288.63
RRO 2 3,255,267.78 352,644.74 92,060.20 3,515,852.32
RRO 5 460,433.88 - - 460,433.88
RRO 10 303,612.04 - 19,200.00 284,412.04
RRO 11 21,543.47 - 21,543.47 -
RRO 13 229,031.20 9,471.67 234,102.87 4,400.00
RRO 16 1,777,429.48 - - 1,777,429.48
RRO 18 2,150.00 - - 2,150.00
Charges P12,821,372.82 P - P1,000.00 P12,820,372.82
RRO 1 568,109.30 - - 568,109.30
RRO 5 3,615,384.27 - - 3,615,384.27
RRO 9 7,464,909.31 - - 7,464,909.31
RRO 13 26,709.97 - 1,000.00 25,709.97
RRO 17 1,146,259.97 - - 1,146,259.97
Out of the P51.379 million ending balance of disallowances, P11.490

million is under appeal with the: (a) COA Commission Proper; (b) Cluster 2 -
National Government Sector; and (c) CARAGA Administrative Region. However
as of 30 April 2018, decisions were already rendered in several appealed NDs
totaling P5.549 million.
On the other hand, the NC balance of P12.820 million as of year-end is

composed of the following:
Particulars RRO Balance

No appeal made RROs 9 and 13 P7,490,619.28
Under appeal RRO 5 3,615,384.27
Under appeal 42 RRO 17 1,146,259.97
With issued NFD RRO 1 568,109.30
Total P12,820,372.82
We recommended that Management enforce settlement of the

disallowances and compliance with the requirements of the suspension.
41
The beginning balance pertains to CY 2015, in the absence of ML for CY 2016 which was submitted
beyond deadline.
42
with decision as of April 30, 2018
111

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OBSERVATIONS AND RECOMMENDATIONS

1. Accounting errors in the recording of transactions of the Bureau resulted in

The Philippine Public Sector Accounting Standards (PPSAS) 1 provides that

In the preparation of FS, the highest standards of honesty, objectivity, and

Examination and verification of the general ledgers (GLs), subsidiary

Table 1. Summary of Accounting Errors

Erroneous recognition of Due from National 717,819.40 Overstatement of Office

Unrecognized deliveries Inventories 38,360,435.14 Undertatement of Office

Unrecognized refund of Cash and Cash 3,293,033.25 Undertatement of Cash

Non-impairment of Other Receivables 390,862,455.68 Overstatement of Other

Unrecognized Dishonored Other Receivables 110,717,976.15 Understatement of

Unrecognized Other Receivables 100,644,734.16 Overstatement of Other

Double recording of Other Receivables 201,302.00 Understatement of

Penalties that were Other Receivables 360,872.86 Understatement of

Unrecognized issuances Non-Accountable 568,467.87 Overstatement of

Non-existent and obsolete Accountable Forms, 4,450.01 Overstatement of

Acquisition of various Semi-Expendable 9,168,255.00 Overstatement of Semi-

Unrecognized Furniture, Land 1,722,770.00 Understatement of PPE,

Unrecognized disposal of PPE 900,000.00 Overstatement of PPE,

Undelivered generator PPE 3,532,000.00 Overstatement of PPE

Erroneous or non- PPE 51,917,118.13 Overstatement of PPE,

Non-amortization of Computer Software 1,769,821.92 Overstatement of

Prepayments recorded as Other Prepayments 79,488.75 Overstatement of Other

Erroneous classification Prepaid Insurance 79,339.37 Understatement of

Abnormal SL balances Prepaid Insurance 22,230.91 Overstatement and

Unrecognized Forfeited Forfeited Assets / 4,053,181.00 Understatement of FA/P

Unreverted payables aged Accounts Payables 29,085,045.83 Overstatement of

Deliveries from suppliers Accounts Payables 537,394.00 Understatement of

Semi-Expendable items Accounts Payables 1,254,110.00 Understatement of

Duplicate recording of Due to Officers and 468,480.36 Overstatement of Due

Unadjusted overpayment Due to Officers and 5,140.62 Understatement of Due

Erroneous recording of Guaranty/Security 198,435.43 Overstatement of

Erroneous classification Due to BIR, (2,168,523.23) Understatement of Inter-

Unrecognized penalties Tax Revenue – Fines 14,008,619.96 Understatement of Tax

We recommended and Management agreed to:

a) Instruct the Chiefs of Accounting Division, NO and the Chiefs of

b) Require the Chiefs of Accounting Division, NO to monitor and ensure

2. Various accounting deficiencies in recording and reporting financial

Table 2. – Summary of Deficiencies

Cash and Cash Equivalents

Dormant, NO-RA 442,873,058.20 COA Circular  Confirmation with the

Unreconciled GL RRO 15 1,853,817.17 Sec. 5, Chapter  The balance of GL

Unreconciled CIB- RRO 15 8,436,811.41 Sec. 5, Chapter  This pertains to the SL

NO-NG 5,302,017.17 GAAP on  SLs with abnormal

Improper RROs 2, 11,887,267.49 Appendix 6 of  Maintenance of SLs per

Inventories RROs 1, 19,434,879.25 Paragraph 29(b)  Unreconciled GL and

Section 13,  Non-conduct of

RROs 7, Appendix 59,  Non-issuance of ICS

RRO 17 Appendix 61,  PO not properly

NO Appendix 67,  Non-preparation of the

Property, Plant and Equipment (PPE)

RROs 3, Section 79 of  Unserviceable

RRO 7 COA Circular  Property Cards (PCs)

RRO 7 Item F, Section  Non-issuance and non-

RROs 7 Appendix 73,  Unsigned inventory

Intangible Assets NO-RA 419,906,929.62 Paragraphs 88,  The NO assessed its

Forfeited Assets/ NO-NG 127,522,677.23 Philippine  The policy on

Other Assets NO-RA 17,571,241.68 Paragraph

Abnormal SL RRO 7 1,482,884.70 GAAP on  Abnormal SL balances

For the deficient Cash and Cash Equivalents:

c) Revert the unutilized fund/close the dormant CIB-TAD, Special Accounts;

d) Give priority in reducing and eventual elimination of the subject

For the deficient Receivable Accounts: