EXECUTIVE SUMMARY

A. Introduction

Article VII of the 1987 Constitution vests the executive power upon the
President of the Republic of the Philippines. The President exercises control over
all the executive departments, bureaus and offices. He ensures that laws are
faithfully executed and he is expected to attend to the service requirements of the
people in the immediate time possible. He is also responsible for preserving and
defending the Constitution of the Philippines, for executing its laws and doing
justice to every man, for the pursuit of national harmony and for exercising overall
management of the total development effort and administration of justice.

As provided for under the Administrative Code of 1987, the Office of the
President (OP) consists of the OP Proper and the agencies under it.

The OP Proper is headed by the President of the Republic of the Philippines

and assisted by the Executive Secretary as well as by the following offices:

1. Bodies under the Chairmanship of the President

2. Private Offices
3. Presidential Advisers/Assistants/Consultants
4. Office of the Deputy Executive Secretary (ODES) for Internal Audit
5. ODES for General and Administration
6. ODES for Legal Affairs
7. ODES for Finance and Administration
8. Task Forces (TFs)/Locally Funded Projects (LFPs)/Other Executive
Offices (OEOs)/Government Owned and Controlled Corporations
(GOCCs)

The OP directly supervises 39 other executive offices, agencies, commissions

and committees that require the special attention of the President.

As of December 31, 2015, the OP had a total manpower of 1,677, consisting

of 537 regular plantilla position employees, 275 co-terminous, 408 non-plantilla
employees, 83 consultants and 205 contract of service.

The OP Proper maintains offices at the Malacañang Palace, San Miguel,

Manila.

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B. Financial Highlights

The financial position, financial performance and sources and utilization of

funds of the agency for Calendar Year (CY) 2015 with corresponding figures for
CY 2014 are as follows:

Particulars 2015 2014

Financial Position
Assets 13,902,233,278.54 13,164,346,218.86
Liabilities 1,716,133,978.51 104,311,327.34
Net Assets/Equity 12,186,099,300.03 13,060,034,891.52
Financial Performance
Revenue 300,426,823.58 1,792,255.81
Current Operating Expenses 8,075,435,300.43 2,205,140,267.37
Subsidy from National Government 7,622,965,957.06 2,320,085,574.00
Gains/(Losses) (3,292,990.97) (5,097,193.64)
Surplus/(deficit) for the year 155,335,510.76 111,640,368.80
Sources and Utilizations of Funds
Appropriations 12,240,730,896.43 4,876,342,580.00
Allotments 10,671,536,661.00 4,876,342,580.00
Continuing Appropriations 1,569,194,235.43 687,678,218.97
Obligation Incurred 8,563,129,710.25 3,453,709,214.87
Disbursements 6,741,980,726.52 2,054,967,733.49
Unobligated Allotments 3,677,601,186.18 2,110,311,584.10

The Summary of Appropriations, Allotments, Obligations, Disbursements and

Balances as of December 31, 2015 is shown in Annex A.

C. Operational Highlights

The Aquino Administration stands by the Social Contract forged with the
Filipino People back in 2010. The programs, projects and activities for Fiscal Year
(FY) 2015 proved the Administration’s solid commitment to fulfill the Social
Contract.

This Social Contract has been fleshed out in the Philippine Development Plan
for 2011 to 2016 and has been operationalized by Executive Order (EO) No. 43,
which defines the five Key Results Areas (KRAs) of the Social Contract:

1. Transparent, accountable and participatory governance;

2. Poverty reduction and empowerment of the poor and vulnerable;
3. Rapid, inclusive and sustained economic growth;
4. Just and lasting peace and the rule of law; and

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 5. Integrity of the environment and climate change adaptation and
mitigation.

In FY 2015, the Key Programs/Activities/Projects (P/A/Ps) of OP were

restructured in order to strengthen their link to Major Final Outputs (MFOs) and to
be consistent with the on-going Public Expenditure Management (PEM) Reforms,
as follows, with details shown below.

a. MFO 1: Executive, Technical and Management Services

a.1 Action documents submitted to the Executive Secretary

a.2 Policy papers/instruments and issuances submitted to the
President
a.3 Government offices engaged/consulted on various policy
directives/good governance

b. MFO 2: Advisory Services

b.1 Policy recommendations translated to Presidential directive

b.2 Publication of Presidential Issuances

c. MFO 3: Legal Services

c.1 Orders/Decisions/Resolutions submitted to the Deputy

Executive Secretary for Legal Affairs/Executive Secretary
c.2 Legal opinions and legal actions
c.3 Resolutions on Disciplinary actions involving Presidential
appointees

d. MFO 4: Presidential Executive Staff Services

d.1 Presidential events managed

d.2 Documents managed for the President
d.3 Presidential events covered

D. Scope of Audit

The audit was focused on the accounts and operations of the OP for the CY
2015. The audit was aimed to ascertain the propriety of the financial transactions
and determine the fairness of the presentation of the financial statements and to
ascertain compliance with laws, rules and regulations.

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E. Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the

financial statements of the OP as at December 31, 2015 due to the audit
observations as discussed in the succeeding paragraphs, which affected the fair
presentation of the financial statements.

F. Observations and Recommendations

The following are the significant audit observations and corresponding

recommendations, which were discussed with Management officials concerned,
details of which are further discussed in the report. Management views and
comments were incorporated in the report, where appropriate.

1. The balance of trust receipts reported under the Cash in Bank - Local
Currency, Current Account amounting to P55,984,804.39 and deposited with
the Land Bank of the Philippines was not remitted to the National Treasury
contrary to EO No. 338 dated May 17, 1996.

We recommended and Management agreed to deposit the balance of the LBP

Current Account No. 3092-1003-58 to the National Treasury as required
under EO No. 338 and Budget Circular No. 2004-5A, and record the same
under the Cash – Treasury/Agency Deposit, Regular for the refunded
unutilized fund transferred from NGAs and Cash – Treasury/Agency Deposit,
Trust account for the balances of the excess income from sale of bid
documents and Provident Fund in accordance with the Revised Chart of
Accounts for National Government Agencies prescribed under COA Circular
No. 2013-002 dated January 30, 2013.

2. Trust Receipts and Payroll Account under the Cash in Bank – Local Currency,
Current Account of P77,125,393.36 as at December 31, 2015 was understated
by P15,149,485.93 due to unrecorded credit memos and advices from various
Philippine Embassies and Consulates.

We recommended and Management agreed to instruct the Chief Accountant

to immediately identify the sources of the credit memos and request from
various Philippine Embassies and Consulates the corresponding supporting
documents for recording in the books and to correct the double recording of
remittances to reflect the correct balance of the Cash in Bank – Local
Currency, Current Account and other related accounts.

3. The President’s Social Fund (PSF) - One Town One Project (OTOP) Trust
Fund and Trust Account of the PSF-Livelihood Assistance Program (LAP)

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 and OTOP Investments totaling P278,526,278.45 transferred to OP from
Presidential Management Staff (PMS) in October 2014 were not recognized in
the books of OP, thereby, understating its Cash in Bank, Other Investment and
Marketable Securities and related accounts.

We recommended and Management agreed to record in its books the PSF-

OTOP Trust Fund and the PSF-LAP and OTOP Investment Balance totaling
P278,526,278.45 transferred by PMS under LBP Account No. 3092-1011-33
pursuant to MO No. 72 dated October 8, 2014 for the fair presentation of the
financial position.

4. The balance of fund transfers sourced from the International Commitment

Fund (ICF) to nine National Government Agencies (NGAs) of
P2,552,270,615.50 for the hosting of Asia-Pacific Economic Cooperation
(APEC) was not yet liquidated as at December 31, 2015 contrary to the
provisions of the MOA and COA Circular No. 94-013 dated December 13,
1994, hence, total expenses incurred for the hosting of APEC could not be
determined.

We recommended and Management agreed to coordinate with the IAs to

determine completion of intended purposes of fund transfers and demand
liquidation for proper accounting in the books of accounts in accordance with
existing COA rules and regulations.

5. The Inter-Agency Receivables as at December 31, 2015 totaling

P784,030,939.46 or 23.50 percent could not be relied upon due to a total
discrepancy of P126,213,758.78 between the results of confirmation and the
balance per books.

We recommended and Management agreed to:

 Create a Monitoring Team that would coordinate with the IAs to

determine status of fund transferred and completion of intended purposes
of fund transfers, and to demand proper liquidation and accounting thereof
in accordance with COA Circular No. 94-013; and

 Direct the Accounting Division to intensify its effort to reconcile its books
with those of the IAs.

6. The balance of the Due from NGOs/POs account totaling P25,562,301.91 was
unreliable due to inclusion of dormant accounts of P23,075,219.23 and
discrepancy of P4,783,500.00 between the balance per books and results of
confirmation. Moreover, monitoring and inspection of projects
implementation and verification of financial records and reports of the
NGOs/POs was not conducted by Management contrary to COA Circular No.
2007-001.

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 We recommended and Management agreed to:

 Ensure compliance with the provisions of the MOAs and COA Circular
No. 2007-001 dated October 25, 2007;
 Monitor and inspect the project implementation and verify the financial
records and reports of the NGOs/POs; and
 Issue demand letter with sanction or whatever course of action by OP.

7. The cost of Plant, Property and Equipment (PPE) totaling P2,276,234,763.39

was not fairly presented due to discrepancy between the books and the Report
on the Physical Count of Property, Plant and Equipment (RPCPPE) of
P64,914,162.19 which mainly resulted from a) incomplete recognition of
properties amounting to P38,270,786.92 in the books and P23,802,833.57 in
the RPCPPE; and b) non-derecognition in the books of the disposed/donated
PPE totaling P12,151,849.66.

We recommended and Management agreed to require the FO and AMO to

analyze and reconcile the discrepancies noted between the balances per book
and RPCPPE, update their respective records, and effect the necessary
adjustments on the noted discrepancies.

8. Collectibility of Due from Officers and Employees of P1,862,774.19 could not

be ensured due to inclusion of a) dormant accounts totaling P341,855.23; b)
receivables of P1,027,972.70 from employees who were no longer in the
service; and c) negative balances totaling to P180,913.43.

We recommended and Management agreed to:

 Direct the HRMO and the FO to exert effort to cause the settlement of
overpaid salaries and fringe benefits of officers and employees who are no
longer in the service, particularly those who transferred to other
government agencies. Likewise, revisit the policy on the issuance of
clearances to officers and employees who are about to resign or transfer,
if any;

 Require the HRMO to submit the Summary of Leave Without Pay

incurred by Officers and Employees on a regular basis or five to ten days
after the following month to the FO, so that the latter could immediately
deduct the overpaid salaries and allowances; and

 Instruct HRMO to revisit agency’s policy on absenteeism, if any, or to

enforce the rules and regulations of the CSC.

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 9. Fuel, Oil and Lubricants Inventory of P444,828.60 had been outstanding in
the books for more than five years, thus, its existence was doubtful and the
reliability of the account balance could not be determined.

We recommended and Management agreed to compel the Motorpool Office to

submit to the FO the consumption reports on the balance of fuel, oil and
lubricants for prior years for reconciliation purposes and appropriate
adjustment of the records and books of accounts.

10. The report on the utilization of donation to the United Nations Ebola
Response Multi-Partner Trust Fund amounting to P90,000,000.00 was not
submitted by the Department of Foreign Affairs (DFA) to the Office of the
President (OP) as required under the Deed of Donation (DOD) dated January
22, 2015, hence, the Team could not ascertain whether the fund was used for
its intended purpose or not.

We recommended and Management agreed to require DFA to submit the

report on the utilization of the donation made to the UN Ebola Response
Multi-Partner Trust Fund thru UNDP in fulfillment of the requirements of the
DOD and to ensure that the donated amount was actually used according to
the intended purpose.

11. Management did not withhold five percent final VAT from the purchases of
the agency out of the Petty Cash contrary to Revenue Memorandum Circular
No. 23-2007 dated March 20, 2007.

We recommended and Management agreed to comply with the provisions of

Revenue Memorandum Circular No. 23-2007.

G. Implementation of Prior Year’s Audit Recommendations

Of the 27 audit recommendations contained in the CYs 2014 and 2013Annual

Audit Reports, 10 were fully implemented, 13 were partially implemented and four
were not implemented by Management. The details are presented in Part III of this
report.

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