Executive Summary

A. Introduction

The Bureau of Fisheries and Aquatic Resources (BFAR) is the government

agency responsible for the development, improvement, management and conservation of
the country’s fishery and aquatic resources.

The Congress of the Philippines enacted Republic Act (RA) No. 177 creating the
present Bureau which took effect on July 1, 1947. With the passage of RA No. 8550,
otherwise knows as the (Philippine Fisheries Code of 1998), it was reconstituted as a line
bureau of the Department of Agriculture (DA).

The Bureau is headed by Commodore Eduardo B. Gongona PCG (Ret.) Director,

and supported by Ms. Drusila Ester E. Bayate, Assistant Director for Technical Services
and Mr. Sammy M. Malvas, Assistant Director for Administrative Services. Tasked to
implement the programs in the regional level are 15 Regional Field Offices (RFOs), each
headed by a Regional Director. Under the six RFOs (II, IV, V, VII, VIII and IX) are the
six Regional Fisheries Training Centers (RFTCs). The RFTC of Panabo, Davao del
Norte, which is now a National Mariculture Center (NMTC), was retained under the
Bureau’s Central Office (CO) together with the six Technology Centers under the BFAR
CO.

The research arm of the Bureau is the National Fisheries Research and
Development Institute (NFRDI), headed by Ms. Drusila Esther E. Bayate. It was created
by virtue of Section 82 of RA No. 8550, in recognition of the important role of fisheries
research in the development, management, conservation and protection of the country’s
fisheries and aquatic resources.

The Bureau also leads the implementation of the FishCORAL Project, an

International Fund for Agricultural Development (IFAD)-assisted project with the DA as
the executing agency, through the Project Support Coordination Office (PSCO)
supervised by the Project Coordinator.

As of December 31, 2018, BFAR had 1,466 permanent employees, 32 casual

employees and 5,236 Contract of Service (COS)/job order individuals.

B. Financial Highlights

The financial position, financial performance and sources and application of funds
of BFAR as of December 31, 2018 compared with that of the previous year are presented
on the next page.
 Particulars 2018 2017 Restated
Financial Position
Assets ₱10,679,563,298.15 ₱9,608,349,038.01
Liabilities 1,231,866,117.10 1,076,923,838.39
Accumulated Surplus 9,447,697,181.05 8,531,425,199.62
Financial Performance
Revenues 194,923,542.88 157,814,607.89
Current Operating Expenses 5,098,847,141.80 4,961,987,008.26
Surplus/(Deficit) from Current Operations (4,903,923,598.92) (4,804,172,400.37)
Net Financial Assistance/Subsidy 5,936,094,216.86 7,108,909,382.68
Net Gains/Losses 964,775.68 -
Surplus/(Deficit) for the period 1,033,135,393.62 2,304,736,982.31
Sources and Application of Funds
Allotments 6,329,947,210.00 8,037,353,908.04
Obligations 5,882,536,233.56 7,299,254,639.21
Unobligated Balance ₱ 447,410,976.44 ₱ 738,099,268.83

C. Scope and Objectives

Financial and Compliance audits were conducted on the transactions, accounts

and operations of the BFAR for Calendar Year (CY) 2018 to (a) ascertain the level of
assurance that may be placed on management’s assertions on the financial statements;
(b) determine the propriety of the transactions as well as the compliance with applicable
laws, rules and regulations; (c) recommend agency improvement opportunities; and
(d) determine the extent of implementation of prior years’ audit recommendations.

D. Independent Auditor’s Report

A qualified opinion was rendered on the financial statements due to accounting

errors/omissions and deficiencies amounting to ₱288.436 million, which exceeded the
materiality level of ₱213.591 million, as shown in detail in Part II of this report.

E. Significant Observations and Recommendations

1. Notwithstanding the BFAR’s high rate of fund utilization of 92.3 percent for CY
2018, two programs/projects/activities (PPAs) amounting to ₱326.976 million
have zero fund utilizations and were not implemented in the current year caused
by the: (i) ineligibility of the winning bidder for the implementation of Integrated
Marine Environmental Monitoring System (IMEMS) under the terms of the
Financial Protocol of the French Embassy, hence was requested to be locally
funded; and (ii) late release of Special Allotment Release Order (SARO) by the
Department of Budget and Management (DBM) for the livelihood project; while
Foreign Assisted Project (FAP) fund amounting to ₱56.327 million have lapsed
due to non-obligation/utilization. Also, obligations incurred in CY 2018 for FAP
amounting to ₱3.594 million were inconsistent with FY 2018 General
Appropriations Act (GAA). (Observation No. 1)

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 We recommended and Management agreed to direct the Accountant and Budget
Officer to:

a) review the operations to resolve bottlenecks to match the budgetary and

disbursement requirements the soonest possible time for the agency’s plans,
programs and activities to achieve its purpose;

b) make a representation with the Department of Budget and Management

(DBM) to request that SAROs should not be released almost by the end of
the current year, which would be very difficult to obligate/disburse at the
same year, thus, adding to the low reporting of fund utilization rate of the
Agency;

c) submit the approved RAF to support the modification of allotment in the

PSCO; and

d) ensure that programs, projects and activities are ready for implementation
upon the release of the allocated funds.

2. BFAR reported high cash utilization rate of 99.98 percent for CY 2018, however,
deficiencies were noted such as: (a) transfer of unutilized cash allocations
amounting to ₱76.000 million of BFAR RFOs to BFAR-CO apparently to avoid
lapsing; (b) continued issuance by BFAR CO of Notice of Transfer of Allocation
(NTA) amounting to ₱185.646 million to its RFOs to fund the Centrally-Managed
Items (CMIs); and (c) unutilized Notice of Cash Allocation (NCA) of FAP
amounting to ₱15.615 million. (Observation No. 2)

We recommended and Management agreed to direct the:

a) stop the inappropriate scheme of transferring unutilized cash allocation to

avoid reversion, instead focus on improvement of the planning and
budgeting process by strengthening collaboration among officials concerned
in order to come up with feasible estimates/targets for the year;

b) strictly comply with the submission of SBR to DBM for CMIs or Lump-sum
Appropriations in the budget of BFAR, for which the recipient ROs or OUs
and the specific amounts allocated for each have not been identified in the
GAA, to avoid the issuance of NTAs; and

c) fast track the disbursement process to prevent the lapsing of cash allocations
and non-implementation of planned activities for the ultimate attainment of
the project goals and objectives.

3. Cash advances for official local and foreign travels and special purpose/time-
bound undertakings amounting to ₱20.084 million or 32 percent of the cash
advances granted during the year in BFAR CO, NFRDI and six RFOs were not

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 liquidated in accordance with COA Circular No. 97-002 dated February 10, 1997.
Also, there were still unliquidated cash advances in prior years amounting to
₱23.277 million or 58 percent of prior year’s balance of ₱40.410 million.
Moreover, BFAR CO and RFOs II and IX granted additional cash advances even
if previous cash advances were not yet liquidated. (Observation No. 3)

We reiterated our prior year’s recommendations and Management agreed to direct

the officials concerned of:

a) BFAR CO, NFRDI and RFOs II, III, IV-B, V, X and XII to (i) strictly
enforce liquidation of outstanding cash advances within the prescribed
period; and (ii) send demand letters to the officials and employees
concerned and require them to fully liquidate their cash advances
immediately, supported with complete documentation together with the
refund of excess amount of cash advances, if any and withhold the salaries
or any amount due to them, if they fail to settle their accountabilities until
their balances have been fully liquidated; and

b) BFAR CO and RFOs II and IX to refrain from granting additional cash

advances unless previous ones have been liquidated.

4. Fund transfers to IAs and NGOs for the implementation of agency’s projects
amounting to ₱536.126 million or 88 percent of the funds transferred during the
year were not liquidated. Also, there were still unliquidated fund transfers in prior
years amounting to ₱1.658 billion or 52 percent of prior year’s balance of ₱3.177
billion. The accumulation of the huge balance of fund transfers may be attributed
to the granting of succeeding fund transfers despite partial/non-liquidation of
previous fund transfer. (Observation No. 4)

We recommended and Management agreed to direct the officials concerned of:

a) BFAR CO, PSCO, NFRDI, CAR and RFOs II, III, V, VI, VII, IX, X, XI and
XII to require their respective: (i) Accountants to coordinate with the IAs
and NGOs/POs concerned to submit liquidation reports/documents of
expended fund transfers and return unutilized balances for completed
projects, if any and send demand letters on a periodic basis; and (ii) Legal
Officers to resort to other legal modes of settlement of accountabilities in
case of failure of the IAs and NGOs/POs to settle the fund transfers due for
liquidation;

b) BFAR CO, RFO VI and FAP to refrain from granting additional fund
transfers unless previous ones have been liquidated;

c) RFO VI to assign a technical person to conduct ocular inspection, monitor

and assess the status of the projects and to require him/her to prepare a
status report as management reference in decision making on what
appropriate action has to be undertaken; and
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 d) RFO VII to call the attention of the concerned officials of the Negros
Oriental State University with the end view to further agree on whatever
plan of action has to be undertaken including provision for technical
assistance when needed to ensure completion of said long delayed projects.

5. BFAR CO, PSCO (FAP) and eight BFAR Offices have not complied on the
insurance of physical assets amounting to ₱1.048 billion against fire or theft, thus,
the agency is at risk of not being indemnified in case of damage or loss of
property contrary to RA No. 656, otherwise known as the “Property Insurance
Law”, as amended by PD No. 245 dated July 13, 1973. (Observation No. 6)

We reiterated our recommendations and Management agreed to instruct the

officers concerned of BFAR CO, PSCO (FAP), NFRDI, CAR and RFOs III, V,
VI, VII, IX and XIII to fully insure all its insurable property with the GSIS
pursuant to RA No. 656 to indemnify the Bureau in case of damage or loss of
property that may arise from fire, theft, and other causes.

6. Unserviceable property with a gross value of ₱113.835 million in BFAR CO,

NFRDI, and RFOs III, XII and XIII and undetermined amount in RFO VI
remained undisposed of contrary to Section 79 of PD 1445, thus, exposing them
to further deterioration and decreasing their realizable value. (Observation No. 7)

We recommended and Management agreed to instruct the Property Officer in

BFAR CO, NFRDI and RFOs III, VI, XII and XIII to institute the necessary
measures to properly dispose all the obsolete and unserviceable property pursuant
to Section 79 of P.D. No. 1445.

7. Dormant accounts amounting to ₱38.537 million in BFAR CO, CAR and RFO V
were not requested for authority to write-off, contrary to COA Circular No. 2016-
005 dated December 19, 2016. (Observation No. 8)

We recommended and Management agreed to direct the Accounting Sections of

BFAR CO, CAR and RFO V to:

a) exert effort in locating the pertinent supporting documents and reports of

disbursements/liquidations on long outstanding unliquidated fund transfers
and completed projects, submit the same to the respective source agencies, if
necessary, pursuant to COA Circular No. 94-013; and

b) file a request for authority to write-off for dormant accounts with COA in
accordance with COA Circular No. 2016-005 dated December 19, 2016.

The observations and recommendations were discussed with concerned agency

officials in an exit conference conducted on May 27, 2019. Management views and
comments were considered in this report, where appropriate.

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F. Enforcement of Settlement of Accounts

Out of the total audit suspensions and disallowances amounting to ₱1.039 billion
and ₱276.873 million, respectively, only ₱969.548 million and ₱4.653 million were
settled, leaving a balance of ₱69.217 million and ₱272.220 million, respectively.

G. Implementation of Prior Year’s Audit Recommendations

Out of the 86 prior year’s audit recommendations, 18 were implemented and 68

were not implemented as of December 31, 2018 and were reiterated with modification in
this report, where appropriate.

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