DEPARTMENT OF EDUCATION

LEYTE AGRO-INDUSTRIAL SCHOOL

SUMMARY OF AUDIT OBSERVATIONS AND RECOMMENDATIONS (SAOR)

AUDIT PERIOD JANUARY TO DECEMBER 2018

FOR DISCUSSION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED FINAL

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OBSERVATIONS RECOMMENDATIONS MANAGEMENT COMMENTS AUDITOR’S REJOINDER
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The school granted Collective Negotiation Agreement (CNA) We recommend 1. Management commented that it
1. AOM No.
Incentive in CY 2018 to its employees in the amount of management the presumed that the DBM Budget
LAIS-2019-
P13,000.00 for every employee totaling P793,000.00 without following: Circular No. 2018-5 dated 14
001 (2018)
supporting documents as proof of the legality of the claim November 2018 was issued to
instruct the grant of CNA
contrary to Section 73 of the General Provisions of the FY 1. Not to disburse funds
Incentive without taking into
2018 General Appropriations Act (GAA) and Item 4 of DBM in payment of other consideration of the other criteria.
Budget Circular No. 2018-5 dated November 14, 2018 thus, personnel benefits
the disbursement is considered irregular and is subject to without conforming to The management had no
disallowance. prescribed rules and intention of not conforming the
regulations relating to prescribed rules and regulations
Section 73 of the General Provisions of the FY 2018 that particular relating to the said Circular.
General Appropriations Act (GAA) provides the rules in the disbursement.
grant of CNA Incentive as follows: In relation to this, management
will ensure that it will comply for
“Sec. 73. Rules in the grant of Collective any necessary documentations
needed for proper compliance.
Negotiation Agreement Incentive. Departments,
bureaus, and offices of the National Government,
including Constitutional Offices enjoying fiscal
autonomy and SUCs may grant collective
negotiation agreement (CNA) Incentive sourced
from the allowable MOOE allotments identified
by the DBM, subject to the following:

(a) There a valid CNA executed between the

agency and the recognized employee
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organization which includes a provision on
cost-cutting measures to be undertaken
collectively by the agency and its personnel;

(b) The one-time annual payment of CNA

Incentive shall be made through a written
resolution signed by the agency
representatives from both labor and
management, and approved by the agency
head;

(c) The CNA Incentive that may be granted shall

be limited to the amount determined by the
DBM; and

(d) The payment of the CNA Incentive shall be

subject to approval by the DBM and made
only during the validity of appropriations.
Any excess amounts therefrom after
payment of the CNA Incentive shall revert to
the General Fund.

X x x . . . x x x.

Item 4 of DBM Budget Circular No. 2018-5 dated

November 14, 2018 provides:

Policy Guidelines

4.1 Conditions for the Grant of the CNA

Incentive

4.1.1 Existence of a CNA

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(a) There should be a valid and subsisting

CNA executed between the
representatives of the management
and the employees’ organization
accredited by the CSC as the sole and
exclusive negotiating agent for the
purpose of collective negotiations with
the management of a department, line
bureau, attached agency, GOCC,
LWD, or LGU.

(b) The grant of the CNA Incentive must

be stipulated in the CNA or in
supplements thereof.
X x x . . . x x x.

In December 20, 2018 a cash advance was granted to the

Cashier for payment of Collective Negotiation Agreement
(CNA) Incentive for CY 2018 amounting to P793,000.00. The
disbursement voucher (DV) covering the cash advance was
supported only with Obligation Request and Status. Verification
of the liquidation report disclosed that no other supporting
documents attached except for the payroll with the names and
signatures of the payees acknowledging receipt of the incentive.

Pursuant to the above-mentioned rules and regulations

pertaining to the grant of CNA Incentive, the agency is required
before the grant to have the following:

1. A valid and subsisting CNA executed between the

representatives of the management and the
employees’ organization accredited by the CSC as the
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sole and exclusive negotiating agent for the purpose of
collective negotiations with the management wherein
the grant of CNA Incentive must be stipulated in the
agreement or in supplements thereof.

2. A written resolution signed by agency representatives

from both labor and management the payment of the
one-time annual CNA Incentive, and approved by the
agency head.

3. Approval by DBM on the payment of CNA Incentive.

The absence of the above documents renders the

disbursement irregular and thus disallowed in audit.

2. AOM No. Anniversary Bonus was granted by the school to its We recommend Management commented that it
LAIS-2019- personnel in CY 2018 amounting to P3,000.00 each totaling management the presumed that the employee who
was a transferee from an LGU will be
002 (2018) P186,000.00 without complete documentation contrary to following: entitled as this will be considered as
Section 4 (6) of PD 1445 and Section 36 (f), Chapter 2, a continuance of service in the
Volume I of the Government Accounting Manual (GAM) 1. To enforce strict government in compliance of the
thus, validity of said disbursement as well as the authority by compliance of the requirement ‘’…have rendered at
some employees to claim such benefits is not assured. pertinent provisions least one (1) year of service as of the
date of milestone year (i.e. June 23)
embodied in Section are eligible to the grant of the
SECTION 4 (6) of PD 1445 states: 4(6) of PD 1445 and Anniversary Bonus’’.
Sections 36(f) Chapter Nevertheless, management will
SECTION 4. Fundamental principles. – Financial 2, Volume I of the ensure that only eligible employees
transactions and operations of any government agency Government will be granted and will adequately
attach the full documentations for the
shall be governed by the fundamental principles set forth Accounting Manual proper compliance.
hereunder, to wit: (GAM) in order that
Xxx... disbursement
(6) Claims against government funds shall be transactions and
supported with complete documentation. financial reports are
X x x . . . x x x. assured of validity and
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propriety.
On the other hand, Section 36 (f), Chapter 2, Volume I of
the GAM provides: 2. To submit the lacking
supporting documents
Sec. 36. Basic Requirements for Disbursements such as among others:
and the Required Certifications. Disbursements of Service Records of
government funds shall comply with the following basic all employees who
requirements and certifications: were granted
Anniversary Bonus
Xxx... and copy of the law or
f. Submission of proper evidence to establish enactment relative to
validity of the claim. The Head of the the creation of school
Requesting Unit shall certify on the necessity or the Department of
and legality of charges to allotments under Education, as the case
his/her supervision as well as the validity, maybe.
propriety and legality of supporting
documents. All payments of government
obligation and payables shall be covered by
Disbursement Vouchers (DV)/Payrolls
together with the original copy of the
supporting documents which will serve as basis
in the evaluation of authenticity and authority
of the claim. It should be cleared, however,
that the submission of the supporting
documents does not preclude reasonable
questions on the funding, legality, regularity,
necessity and/or economy of the expenditures
or transactions; . . . x x x.

In November 22, 2018 a cash advance was granted to the

Cashier for payment of Anniversary Bonus for CY 2018
amounting to P793,000.00 paid under check number
0002081829. The disbursement voucher (DV) covering the cash
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advance was supported only with Summary of Payroll.
Verification of the liquidation report disclosed that no other
supporting documents attached except for the payroll with the
names and signatures of the payees acknowledging receipt of the
incentive.

It was noted during verification of the payroll, that

majority of the employees of the school received or were granted
anniversary bonus. Service records of all those who receive the
benefits were not submitted or attached to the DV covering the
grant of the cash advance as well as on the liquidation report as
proof that all of them are entitled, thus, casting doubt on the
validity of their entitlement.

Moreover, there was no information or document

provided as to what date is the anniversary and which
anniversary the school is celebrating, whether for the whole of
DepEd or for the school only, thus, the reckoning date could not
be determined which could have aided in the determination of
who are entitled.

The absence of the above documents renders the

authority of the employees to receive the anniversary bonus of
doubtful validity and thus could result in the disallowance of
those determined to be not entitled upon the submission of the
lacking documents.

Of the total common-use supplies procured by the school in We recommend for Management agrees with the
3. AOM No. recommendations made in this audit,
LAIS-2019- CY 2018 amounting to P183,597.25, only P4,752.00 was management to impose
and the following action will be taken
003 (2018) procured from DBM-Procurement Service (PS); P178,845.25 mandatory compliance to improve the situation. We will have
or 97.41% thereof were from private suppliers contrary to with the provisions of each procurement of common-use
Section 1 and 4 of Administrative Order No. 17 dated July Administrative Order No. supplies to the DBM-PS first and
28, 2011 and Section 20 of the General Provisions of RA 17 and the 2016 secure a Certification of Non-
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10924 or the General Appropriations Act (GAA) of FY 2017 Implementing Rules and availability of the items duly signed
thus, there is no assurance that cost as well as the quality of Regulations of RA 9184 before resorting in shopping outside.
Action has been taken already on the
the items procured are advantageous to the school. particularly in the onset of year 2019 and will regularly
procurement of common- exercise these procedures to assure
Administrative Order (AO) No. 17 dated July 28, 2011 use supplies in order that that the prices are reasonable and
entitled: “Directing the Use of the Procurement Service (PS) and there is assurance that the the product qualities are in
the Phil. Government Electronic Procurement System price is reasonable and the accordance with the standard
specifications.
(PhilGEPS) in procurement activities in accordance with product quality is in
Republic Act (RA) 9184, and Improving the Operation of the accordance with the
Procurement Service” prescribed the following: standard specifications.

“SECTION 1. Reiteration of Policy. The national

government hereby reiterates the policy that procurement
of government supplies, materials, and equipment shall
be done in the most transparent and competitive manner
by purchasing from legally, technically, and financially
capable sources in economic lot sizes, by observing cost-
efficient specifications, and by making prompt payment.
In line with this, all government agencies shall procure
their common-used supplies from the PS and use the
PhilGEPS in all their procurement activities, including
publishing all their bid opportunities and posting all
thgeir awards and contracts in it, in accordance with
R.A. No. 9184.”

“SECTION 4. Procurement of Common-Use

Supplies. Common-use supplies shall be procured
directly from the PS or its depot without need of public
bidding as provided in Section 53.5 of the Implementing
Rules and Regulations (IRRs) of R.A. 9184.”

Section 20 of the General Provisions of RA 10924 or the

General Appropriations Act (GAA) of FY 2017 likewise
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provides:

“Sec. 20. Procurement of Common-Use Supplies.

All agencies of the government shall purchase common-
use supplies from the Procurement Service (PS) as
mandated under LOI No. 755 dated October 18, 1978, E.
O. No. 359, s. 1989, A.O. No. 17, s. 2011 and such
guidelines issued thereon. Common-use supplies shall
refer to those included in the Electronic Catalogue of the
PS which shall regularly updated to include all items
commonly procured by agencies of the government:
Provided, That there shall be no transfer of funds from
the agencies to PS within three (3) months before the
lapse of the obligation authority for the purpose.”

Verification of disbursement transactions of Leyte Agro-

Industrial School involving procurement of common-use
supplies for the year 2018, disclosed a total procurement of
P183,597.25. From this amount, P4,752.03 was procured from
DBM-PS and P178,845.25 or 97.41% were sourced from various
private suppliers. It was noted that for the entire year,
procurement from DBM-PS happened only once.

Moreover, majority of payments to private suppliers were

not supported by proof of non-availability of the items procured
from the PS duly signed by authorized DBM-PS official, an
indication that the school did not conduct inquiry before
resorting to the private suppliers as their source.

The failure to exercise proper procurement procedures in

accordance with pertinent laws, rules and regulations on
procurement may put to question the reasonableness of the price
paid as well as the quality of the items procured which could be
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disadvantageous to the school.

PREPARED BY: APPROVED BY:

JOSE MARI V. BALURAN TEODORICO N. SULLA

Accountant I School Principal II

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