PART II - OBSERVATIONS AND RECOMMENDATIONS

VALUE FOR MONEY

Survival rate of planted seedlings/propagules under NGP not fully attained

1. The plantation sites established in CY 2011 under the NGP by PENROs Iloilo
and Pangasinan had attained the targeted 85 percent survival rate of planted
seedlings at the end of the third year. However, 22 of the 36 plantation sites in
seven PENROs did not meet the 85 percent required survival rate of planted
seedlings.

1.1 The National Greening Program (NGP) is implemented in pursuit of

sustainable development for poverty reduction, food security, biodiversity
conservation, environmental stability, and climate change mitigation and
adaptation.

1.2 Section 5 of DENR Memorandum Circular No. 2011–01 dated March 08,
2011 states that the “DENR field offices shall be responsible for the
preparation of the selected sites for planting and plantation establishment.”

1.3 Section 5.1 provides that the “DENR field offices, in coordination with DA,
DAR, DepEd/CHED, DILG, DND, DOJ, DOST, DOTC, DPWH, DSWD,
GOCCs, LGUs, and SUCs, private sector and civil society shall conduct
massive information and education campaign (IEC) and mobilize and
organize communities in the preparation of sites for planting. The DENR
field offices shall be primarily responsible for site preparation activities such
as staking, brushing and digging of holes and may access the support of
Peoples’ Organizations (POs) and civil society groups, among others.

1.4 Moreover, Section 5.4 states that “Planting shall be done by government
employees, students, private sector, and civil society groups, under close
supervision by DA, DAR, DENR, and LGUs concerned to ensure higher
survival of seedlings.”

1.5 The status of selected plantation sites established in 2011 in the

PENROs/regions, as reported by the respective DENR team during CY 2013
validation, follows:

Survival
PENRO/CENRO/Location
Rates
PENRO - Iloilo 93%
CENRO Iloilo City 90%
CENRO Barotac Nuevo 97%
CENRO Sara 88%

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 Survival
PENRO/CENRO/Location
Rates
PENRO-Negros Occidental
All NGP 2011 Planting Sites except Brgy. IV, Sipalay City Below 85%
PENRO Benguet-647 sites
232 sites below 85%
415 sites above 85%
Region V (6 PENROs) 79.20%
Region IX –
PENRO Zamboanga City 47.21%
PENRO ZamboangaSibugay
CENRO – Ipil 69%
CENRO – Buug 71%
PENRO Zamboanga Del Norte
Dapitan 49.35%
Dipolog 42.25%
Liloy 43.52%
Siocon 40.06%
PENRO Zamboanga Del Sur
Brgy. Rebokon, Dumaliano 26%
Brgy. Katipunan, Guipos 25%
Brgy, Bulisong, Kumalarang, ZDS 7%
Brgy. Bollisong, Sicade, etc. Kumalarang, 50%
Brgy. Lourdes, Pagadian City 14%
Brgy. Lipawan, Dumingag, ZDS 21%
Region II -PENRO Cagayan
CENRO - Tuguegarao 20%
CENRO Solana 36%
CENRO Alcala 47%
CENRO Aparri 59%
CENRO Sanchez Mira 87%

1.6 Management cited the following reasons for the low survival of the
plantation in CY 2013:

 Most of the planted seedlings were procured from far nurseries;

transported to the nearest road and manually carried from roadside to the
planting sites resulting to crashing of soil media of the seedlings;
 No close supervision of DENR personnel during the out-plating done
through social mobilization involving students, NGOs, and other
government agencies due to limited number of employees;
 Plantations that were planted through Social Mobilization were
unattended;
 Some PO’s did not visit their 2011 plantation sites since they focused on
new sites;
 2011 plantation operations were urgently undertaken that is why the
basic reforestation techniques were not considered;
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  Seedlings planted were not suitable with the poor soil condition;
 Coffee seedlings were planted on open areas and died during summer;
 POs awarded with the seedling production were just newly trained to be
technically capable in the production and raising of rubber seedlings.
 Seedlings were planted at the start of the dry season to meet the target of
100 percent plantation establishment which contributed to high
percentage of mortality.
 Reported rat infestation devastated the newly planted rubber seedlings.
 No funds were allocated for the protection and maintenance on year 2
for the 2011 plantations.
 Stress condition of the seedlings that were procured thru PHILGEPS
brought about by several loading and unloading activities undergone by
the seedlings from the main nursery of the contractor to individual
planting lots of the beneficiaries.
 Strong typhoon/soil erosion, stray animals and claimants damaged the
planted seedlings; and
 Some areas were burned (Kaingin) and were subjected to riprap
construction and irrigation canal.

1.7 To address the low survival in 2013 and to get better results come year 2014
(the third year of the 2011 plantation sites), management has prepared catch-
up plans for the restoration of the said sites and has replanted numerous
seedlings through the aid of the POs, DENR Personnel, and other
partners/groups.

1.8 The results of the 2014 validation conducted by the DENR Regional Offices
and the respective PENROs on the CY 2011 plantation sites follows:

PENRO Results of In-House Validation in CY 2014

PENRO Iloilo The results of CY 2014 validation are still on its finalization
stage
PENRO Negros Occidental At least 85percent for all CY 2011 NGP Planting Sites
PENRO Benguet Only one (1) plantation site fell below the 85 percent
survival rate among the 647 plantation sites established in
2011
Region V – 6 PENROs An average of 79.10 percent survival rate was attained
Region IX
PENRO Zamboanga City Attained an average of 89.21 percent survival rate
PENRO Attained an average of 91 percent survival rate
ZamboangaSibugay
PENRO Zamboanga Del CENROs Dapitan attained 83.00 percent survival rate
Norte CENROs Dipolog, Liloy and Siocon attained survival rate
of 88.27, 91.08 and 93.56 percent, respectively.
PENRO Zamboanga Del All areas attained 85 percent to 93 percent survival rates or
Sur an average of 87 percent
PENRO Cagayan CENROs Solana, Aparri and Sanchez Mira attained
survival rates of 90-95 percent while CENROs Tuguegarao
and Alcala attained 80 percent and 82 percent, respectively.
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1.9 The Audit Teams in PENROs Iloilo, Pangasinan, Bukidnon and Lanao del
Norte confirmed, through its inspection/validation, that actual
accomplishment exceeded the target of 85 percent survival rate.
1.10 However, 22 of the 36 plantation sites inspected by the audit team in seven
PENROs did not attain the 85 percent survival rate.

Number of
Number
Region/ sites with less
of sites Remarks
PENRO than 85%
inspected
survival rate
Region VI – Negros 9 2 80percent and 50percent of the areas in
Occidental Brgy. San Isidro, Calatrava, and Brgy.
Talacdan, Cauayan, respectively, were
not planted
Region X- Misamis 2 1 With 80percent survival rate only in
Occidental Clarin Settlement, Oroquieta City
CAR
Benguet 3 1 The survival rate was 72percent only
Abra 5 5 Survival rate was 61.50percent to
77.38percent
Ifugao 6 6 Survival rate was 41.00percent to
84percent
Region IX – ZDS 6 4 Survival rate was 19percent to 70
percent
PENRO Cagayan 5 3
Totals 22 18

1.11 In addition, the audit team in Region IX reported that despite the
implementation by CENROs East Zamboanga City and West Zamboanga
City of their catch-up plan, 82 PO members’ lot holder beneficiaries, with a
total land area of 185 hectares, still have below 85 percent survival rate.
1.12 Aside from the survival rates, the following were observed.

Observations RO PENRO/Areas
Implementation and validation of Catch-
up plan
 Majority of the plants/propagules are VI Loong, Concepcion, Iloilo
newly planted. Negros Occidental
 Some plantations are just replanted or San Isidro, Calatrava
are just newly planted with seedlings Bacuyangan, Hinoboan,
which would not warrant their Talacdan, Cauayan
survival. Kumaliskis, Salvador Denedicto
Bunga, Salvador Benedicto
Bagong Silang, Salvador Benedicto
Rizal, San Carlos City
V.F. Gustilo, Cadiz City
CAR PENROs Benguet, Abra and Ifugao
II PENRO Cagayan
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 Observations RO PENRO/Areas
 Catch-up plan implemented towards the
end of CY 2014 are already expected to
raise survival rate to 85 percent.
 Validations were conducted right after Zamboanga City – CENROs East and
the implementation of catch-up plan West
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reporting a high percentage of survival ZamboangaSibugay – CENROs Ipil
rate inclusive of the newly planted and Buug
seedlings which were still in critical
stage, thus, with no assurance yet of
survival.
 No proper maintenance VI Iloilo
 Growth is suppressed due to presence Loong, Concepcion
of tall bushes, shrubs and vines. Matambog, San Enrique,
 Substantial number of seedlings died Matambog, San Joaquin
from trampling by livestock like Negros Occidental
carabao. Bacuyangan, Hinobaan
 Planting site is exposed to risk of fire Talacdan, Cauayan
due to the presence of tall and dry Bagong Silang, Salvador Benedicto,
cogon. V.F. Gustilo, Cadiz City
 Seedlings were eaten or uprooted by Rizal, San Carlos City
goats and other stray animals CAR PENROs Benguet, Abra and Ifugao
 Domesticated cattle, carabao and horses V PENRO Masbate
are commonly tied for grazing;
Plantation Sites X Tikalaan, Talakag, Bukidnon
 Some planted mangroves are exposed VI Iloilo
to high waves and strong water current. Talisay, Dumangas
Matambog, San Joaquin
Negros Occidental - San Isidro,
Calatrava,
 Planted trees and fruit trees in open and VI Matambog, San Joaquin, Iloilo
cogonal areas exhibits poor growth; Bagong Silang, Salvador Benedicto,
Negros Occidental
 Cultivated lands were included in the VI Matambog, San Joaquin, Iloilo
Map of the 2011 NGP Site.
 There were seedlings which were IX Zamboanga City
planted outside the map polygon of the
lot holder beneficiaries.
 There were no permanent corner posts V Masbate
or markers as references to measure and
pinpoint exact area delineation of
plantation sites which may result in the
possibility of overlapping or duplication
of sites covered, especially in
Cabangrayan, Pio V. Corpus and Ubo,
Balud, in as much as these areas were
previously with plantation
establishments;
 There are scattered areas planted to
rice, corn, root crops and vegetables
which invariably reduced the total land
area of the plantation sites; and
 The earth’s contour is not shown on the

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 Observations RO PENRO/Areas
map thus could be construed as
relatively flat ground. Actual terrain
revealed some areas within the
plantation sites which are impossible to
be planted, such as very steep ravines
densely covered with thorny vines and
undergrowth or rocky crevices where
poisonous snakes thrive.
Manner of Planting
 Seedlings were planted in a very VI Bacuyangan, Hinobaan, Negros
irregular spacing. Occidental
 Growth of trees are evident along the II CENROs Alacala, Sanchez Mira
perimeter but in clusters.
 The roots of the rubber trees are
disturbed/ destabilized every time the Bel-is Farmers Association,
X
area is ploughed, the growth is stunted Kolambugan, Lanao del Norte
and unhealthy.
 Seedlings were planted very close to or
right on the road shoulder, thus,
trampled either by vehicles, passers-by
V PENRO Masbate
or animals or exposed to stress or cut
down for regular roadside
maintenance/ widening.
 Seedlings under catch-up were still not
planted by the concerned lot holder IX Zamboanga City
beneficiary.

1.13 It was also gathered during interview by the Audit Team in Masbate that
local residents in the plantation sites were reluctant to allow establishments
of plantation sites in the area as they foresee the project will interfere with
their way of life and deprive them of the means for food production and
consumption. Others refused for fear that seedlings will outgrow and
destroy/dominate their agricultural crops and plants.

1.14 In PENRO Iloilo, Management justified that majority of the areas especially
in the open field were newly planted since Northern Iloilo was hardly hit by
typhoon Yolanda that caused the destruction of the planted seedlings, thus,
they should replant the 2011 NGP sites and that there is no proper
maintenance and protection of the 2011 NGP planting site because it is not
provided from years three and four of the program. The PO member present
during inspection also said that seedlings planted wilt during summer and
re-grow again during rainy days every year which resulted in its bonsai-like
appearance. In contrast, it was observed that fruit trees planted in 2011 in
some NGP sites are productive already.

1.15 In PENRO Negros Occidental, Field Extension Officer explained that the
original seedlings/propagules planted were washed out by big waves during
the typhoon that hit the area.

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1.16 The audit team, especially in PENRO Iloilo, however, believed that if the
concerned NGP Site Coordinators properly monitored and followed-up the
implementation of the NGP, the following remedial actions could have been
made:

a. Replanting of the mangrove areas;

b. Representations with the LGU and PO beneficiaries to take charge for
the proper maintenance and protection of the site; and
c. Replanting of trees and fruit trees in shaded and/or partially shaded areas
has been resorted to since it is observed that trees and fruit trees planted
in shady areas exhibits good growth compared to those planted in open
areas.

1.17 The lack of the agency to properly monitor and follow-up the maintenance
and protection of the 2011 NGP site deprived the intended beneficiaries of
the benefits which can be derived from the program.

1.18 Also, selection of site is very critical in mangrove plantations such that
presence of tidal height must be considered. Areas constantly battered by
waves especially during stormy days are critical for planting. As much as
possible, these areas shall be avoided and endeavor to plant in good sites.

1.19 In PENRO-Ifugao, there was no implementation of rigid selection process

and the absence of constant/religious monitoring of plantation sites resulted
in non-attainment of the required 85percent survival rate of seedlings
planted, hence, adversely affecting the attainment of the objective of the
NGP.

1.20 The team also gathered during interview that PENRO Benguet did not
conduct 100 percent physical count of the surviving seedlings of all NGP
plantation sites established in 2011 and 2012 that previously fell below 100
percent survival and for all 2013 established plantations contrary to DENR-
CAR issued Special Order and the claim of the Regional Office of 100
percent counting of planted seedlings.

1.21 On the other hand, PENRO Rizal reported replanting of seedling in the
plantation sites established in 2011 that did not reach the 85 percent survival
rate during CY 2013 validation and accordingly come up with the required
85 percent and more survival rate. The DENR validation team also
recommended the following measures, among others, to addressed the
problems and concerns noted during the field monitoring: (1) SMP and
plantation establishment should be conducted simultaneously by DENR
personnel; (2) regular maintenance should be conducted by the regularly
employed laborers/bantay gubat; (3) establishment of firebreaks and lookout

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 towers; extension officers should be at the area regularly; and (4) strict
monitoring and daily supervision of laborers. However, there was no final
validation conducted in CY 2014, hence, the accuracy of the 85percent
survival rate as well as the effectiveness of the measures taken in addressing
the problems identified during the monitoring and validation in 2013 cannot
be determined.

1.22 We recommended that Management require the concerned DENR

officers to:

a) closely monitor and supervise the maintenance of planted seedlings

and conduct consultations with Field Extension Officers and PO
beneficiaries to identify and apply appropriate corrective measures
on sites that did not attain the 85 percent survival rates;

b) conduct a study to (i) identify suitable species for a particular

planting site and require the POs/beneficiaries to plant only the
identified suitable seedlings; (ii) identify measures that would lessen
the effect of natural calamities on plantation sites; and (iii) identify
measures that would protect propagules from the battering big
waves;

c) intensify IEC in areas where local residents are reluctant to have the
project in their localities and emphasize the long-term
benefits/effects of the project;

d) coordinate with the DPWH, local government units and other

concerned government agencies in the identification of urban
greening projects to avoid areas that would eventually be affected
by road widening projects;

e) review the mapping of the plantation sites per member beneficiary

lot holder for possible errors and necessary rectification;

f) ensure that validations are made by personally inspecting the

planted area so that the assessments on the survival of the planted
seedlings are reliable;

g) evaluate the capacity of the POs/IPs and Barangay LGUs concerned

both financially and technically and institute appropriate measures
as provided in the MOA/Contract or other forestry laws, rules and
regulations;

h) indicate in the validation reports whether the validated sites were

subjected to 100 percent physical count or sampling count to

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 present genuine information and to guide DENR–Central Office and
other users in making balanced decisions/conclusions and to achieve
a transparent and accurate reporting; and

i) conduct final validation in PENRO Rizal to determine whether the

survival rates of the previously reported sites with survival rate of
85 percent have been maintained.

1.23 The Regional Offices and the PENROs commented that they instituted the
following corrective measures, among others, for the improvement of
survival rates:

 Utilization of FY 2014 and 2015 capital outlay savings for the

production of seedlings, hiring of laborers for replanting of CY 2011 and
2012 sites with low survival rates;
 Coordinated with the Department of Agriculture re: provision of
technical assistance in the prevention and control of pests;
 Submission of catch-up plan of field offices for NGP CY 2011 and 2012
sites with low survival rates;
 Rectification/revision and submission of shape files to the Central Office
of NGP sites that were transferred to another area due to unsuitability of
species and/or project areas; and
 Included in the Work and Financial Plan of NGOs/POs for the
intensification of IEC.

Deficiencies and discrepancies in reporting accomplishments of the NGP

2. There were discrepancies between and among the reports of the PENROs, ROs
and those uploaded in the NGP Website. Moreover, the details of the yearly
accomplishment of the NGP, including the number of hectares established,
seedlings produced and geo-tagged photos submitted by other government
agencies and implementing partners, were not published in the NGP website to
promote transparency and accountability.

2.1 The NGP seeks the attainment of sustainable human development, and
economic and ecological security. As a strategy, it aspires the planting of
some 1.5 billion trees in around 1.5 million hectares of public lands for six
years, starting 2011 to 2016.

2.2 The DENR maintains a website for its NGP activities. Maintaining a
website dedicated for the NGP promotes transparency and accountability.

2.3 From CY 2011 to 2014, the following accomplishments were reported by

the DENR in its NGP website as of May 8, 2015:
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 No. of
Jobs
Percent (%) Percent Volunteer
Generated (No.
Accom- Accom Number of Planters (POs,
Area POs, Extension
Year plishment plishment Seedlings Students,
Planted Officers and
Of Area Of Area Planted NGAs, OGAs,
Laborers
Planted Planted NGOs, Private
Hired)
Sector, Others)
Total 1,500,000 1,005,013 112% 592,839,159 2,148,971 1,918,647
2011 100,000 128,558 129% 89,624,121 335,078 715,552
2012 200,000 221,763 111% 125,596,730 380,696 387,472
2013 300,000 333,160 111% 182,548,862 466,990 471,717
2014* 300,000 321,532 107% 195,069,446 966,207 343,906
2015 300,000
2016 300,000
*As of March 2015

2.4 While the yearly accomplishment of the NGP is being published in the NGP
website, details of the yearly accomplishments of other government
agencies and implementing partners such as the number of hectares
established, seedlings produced and geo-tagged were not.

2.5 The number of hectares planted during CY 2011-2014 under the NGP as
reported were already 1,005,013 hectares. This represents 112 percent of
the total target of 900,000 hectares for the period. Of the total area planted,
901,264 hectares were accomplishments of the government, of which
803,929 hectares or 80 percent were of DENR and 97,335 hectares or 9.68
percent belong to other government agencies. Other implementing partners
such as the ARMM, mining companies and others planted 10.32 percent or
103,749 hectares of the total accomplishments. Details are shown in Annex
B.

2.6 Moreover, there are two plantation sites in Region I which were assigned
with the same number that corresponds to the series of plantation sites in the
region for CY 2012, as follows:

Page of the Report

Area
Site code Location in the NGP
Planted
Website
Caruan, Pasuquin, Bangui,
12-012804-0351-0004 3.5 34
IlocosNorte
Naguyudan, Paoay, Laoag
12-012812-0351-0000 0 35
City, IlocosNorte

2.7 The area planted per year by DENR NCR and Region I, as published in the
NGP website showed discrepancies when compared with the total per report
provided by the NGPO-NCO, as follows:

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 2011 2012 2013
Regio
n NGP NGP –NCO NGP NGP-NCO NGP NGP-NCO
Website Report Website Report Website Report
NCR 114.70 330.00 128.30 330.00 91.70 801.00
I 5,084.20 5,080.00 9,044.20 7,307.00 12,981.80 12,851.00
Total 5,198.90 5,410.00 9,172.50 7,637.00 13,073.50 13,652.00

2.8 Moreover, the DENR Regional Office No. VIII indicated that 2,004 hectares
were established in PENRO Leyte with 1,032,500 seedlings planted in CY
2011. However, PENRO Leyte reported that 2,105 hectares were established
and 1,032,500 seedlings were planted or discrepancies of 101 hectares and
39,250 seedlings.

2.9 One of the causes of the discrepancies was the over reporting by 20 hectares
wherein two BLGUs in CENRO Albuera, BLGU Calubian and Herera
reported an area of 20 hectares each or a total of 40 hectares but the project
with site code 11-083703-0026-0020 was actually 20 hectares only. The
NGP focal person said that they will check their report.

2.10 Further, comparison of the reported accomplishment as to the total number

of hectares planted of PENRO Rizal and the NGP National Coordinating
Office as reported in the NGP website shows a difference of 5 hectares in
the plantation in Laiban, Tanay. DARPO Rizal reported a total of 125
hectares plantation, while the NGP website shows 130 hectares. Moreover,
the plantation in Sta. Inez Tanay consisting of 200 hectares was reported as
2012 accomplishment, based on the DARPO NGP Code, but it was reported
as 2011 plantation based on the NGP website.

2.11 The Chief of Forest Management Sector (FMS) affirmed that the 2011
plantation in Laiban, Tanay is only 125 hectares, as also reflected in their
reported accomplishment in the DENR Regional Office. It is the Regional
Office that submits the report to the NGP National Coordinating Office
hence they cannot explain the reason for the difference of 5 hectares. As to
the plantation in Sta. Inez, Tanay, they explain that it was indeed a 2011
plantation however, the project was finished in 2012 so they reported it as
2012 but the plantation was actually declared in 2011, hence the difference
in the year in the NGP Code reflected in the report.

2.12 The aforementioned circumstances affected the accuracy of reports being

published in the NGP website.

2.13 We recommended that Management require the:

a) NGP National Coordinating Office to(i)publish in the NGP Website

the details of the yearly accomplishments showing the implementing
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 agencies and their corresponding accomplishments;and (ii)review
the correctness and completeness of the data being published in the
NGP website against the total accomplishment of each regional
offices;

b) PENROs and Regional Offices to review the data of accomplishment

uploaded in the NGP website and report to the NGP Coordinating
Office for the necessary correction, if any; and

c) PENRO Leyte to ensure that all the required records and reports on
the project validation and monitoring are complete to support the
undertaken activities and records of the action taken to address the
problems in the implementation of the NGP Program.

2.14 Management commented that they will scrutinize reports coming from the
regions and be as equally attentive to details in the publication of
accomplishment reports.

Established monitoring mechanisms not replicated in other implementing partners

plantations

3. While DENR established a monitoring mechanism that would easily identify a

certain plantation site and its attributes by assigning a unique identification
number, the mechanism was not replicated or applied on plantation sites
established by other government agencies and implementing partners.

3.1 In monitoring the development of greening initiatives even in high elevation

and other far flung project sites, the DENR uses the geo-tagging technology.
This technology is being used to validate and monitor the accomplishments
reported by the DENR regional offices/PENROS/CENROS.

3.2 The Department of Budget and Management (DBM) also required, under
the 2013 General Appropriations Act (GAA), the submission of Geographic
Information System (GIS) – based maps indicating the 2012 identified sites
for the target planting sites and actual number of seedlings planted, FY 2013
identified planting sites for the target planting activities and 2012 actual
planted areas. Likewise, under the 2014 GAA, the DBM required the DENR
to submit geo-tagged photos of the FYs 2012 and 2013 planted sites, FY
2014 identified sites for the target planting activities and FY 2013 target
planting sites and actual planted sites.
3.3 To ensure the continuous and effective implementation of the NGP, the
DENR is also required to submit to DBM yearly geo-tagged photos of all
planted sites indicating the status of accomplishment of its planting

86
 activities including the survival rates of seedlings planted for a period of
three years counted from the completion of each batch of planting activities.

3.4 The DENR also assigned a unique identification (ID) number for each
plantation sites developed by the DENR Regional Offices. The unique
identification number would easily identify the year of establishment, the
location, the series of plantation sites established in a certain region and the
number of hectares established. Electronic files of maps and geo-tagged
photos of each plantation site are kept. Geo-tagged photos including the
attributes of the plantation sites are published in the NGP website.

3.5 However, the plantation sites established by the various implementing

partners of the DENR were not assigned ID numbers and were not published
in the NGP website. As can be gleaned in Annex B, 201,084 hectares or 20
percent of the reported accomplishment of 1,005,013 hectares during CYs
2011 to 2014 were established by other government agencies and
implementing partners. It is worth mentioning that during CYs 2011 to
2014, the DENR has downloaded at least P127,736,371.00 to various
government agencies for the establishment of 9,845 hectares and the
production of 19,937,364 seedlings. Of the amount downloaded,
P110,375,371.00 or 86.40 percent were for the Autonomous Region of
Muslim Mindanao (ARMM) for the establishment of 6,509 hectares and
production of 15,510,838 seedlings. As shown in the table, NGP reported
that the ARMM established 4,726 hectares of plantation sites and produced
11,462,514 seedlings as of December 31, 2014.

3.6 While there are mechanisms established to improve monitoring and

reporting accomplishments of DENR Regional Offices, these, however,
were not replicated or applied in the accomplishment reported by other
government agencies and other implementing partners. Thus, the benefits
that could be derived from the established monitoring mechanisms were not
maximized.

3.7 We recommended and management agreed to require the NGP

National Coordinating Office to:

a) dedicate a section in the NGP website for geo-tagged photos of the

accomplishments of other implementing agencies especially those
downloaded with funds for the establishment of plantation sites and
production of seedlings; and

b) consider the possibility of assigning a unique identification number

to plantations established by other government and private
implementing partners and store in its data/permanent files the

87
 necessary attributes including maps to identify such established
plantation sites;

3.8 The NGP National Coordinating Office commented that it has been the
intent of the DENR to upload to the NGP Website the reported
accomplishments including geo-tagged photos of plantations established by
other government agencies and implementing partners primarily to
recognize their significant contribution in the attainment of the NGP’s over-
all target. They further commented that the following activities were already
done:

 instructed their field officers to validate on the ground submitted reports

by the Department of Agrarian Reform (DAR) and submit geo-tagged
photos for uploading to their website;

 trained ARMM implementers in geo-tagging and GIS-mapping so that

their accomplishment reports shall be supported with maps and geo-
tagged photos;

 a team from the NGP Coordinating Office was dispatched to the planting
site of the University of the Philippines (UP) land grant area in Real,
Quezon to validate reported accomplishments and to geo-tag their
established plantations; and

 sent letters to the Department of National Defense (DND) and UP-Los

Baños reiterating their request for the submission of geo-tagged photos
of areas they had already planted.

3.9 Management also aims to assign unique identification numbers to

plantations established by other government agencies and implementing
partners as a means to easily determine other initiatives besides those
established by the Department. This information shall be incorporated in
the attribute tables of GIS-generated maps of established plantations.

Cadastral Survey Program

4. The Land Management Bureau (LMB) implemented at least 99.85 percent of

its target monitoring activities for CY 2014 by utilizing P5.848 million or 86.76
percent of the allotted budget ofP6.740 million. However, 148 of the 746
projects targeted to be completed by the Land Management Services (LMS)
are yet to be completed/submitted by the various private contractors/
consultants as of year-end.

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4.1 Cadastral Survey involves the systematic survey of the whole municipality
(or an extensive portion) for the purpose of identifying and delineating the
individual claims of all land owners and claimants which will serve as basis
for the issuance of titles or patents. It also includes the delineation of
boundaries of various political units (barangay, municipality and cities) as
well as the boundaries between the forested area and the alienable and
disposable land.

4.2 The main objective of cadastral survey is to determine the metes and bounds
of all parcels within the entire municipality/city for systematic land
adjudication and Internal Revenue Allotment (IRA) and other purposes. It is
also the basic policy of DENR to expedite the conduct of cadastral surveys
in support of the government’s land use planning and public land titling
activities.

4.3 There are three (3) categories of Cadastral Survey Projects namely:

 Category “A” – refers to the complete Cadastre. This includes the

establishment of control, political boundary and lot survey with project
duration of two years.

 Category “B” - includes the establishment of control and political

boundary with project duration of one year.

 Category “C” – includes the establishment of lot survey with project

duration of one year.

4.4 The Cadastral Survey Program (CSP) of the DENR is directly implemented
by the following:

Responsible Center Offices Function

Land Management
Regional Offices Actual Survey of the projects
Services (LMS)
Land Management National Cadastral
Monitors the accomplishments of
Bureau (LMB) Project
the projects based on the Reports
Coordinating Office
from the Regional Offices
(NCPCO)

4.5 The LMS is responsible for the procurement, contract enforcement and all
other activities of the actual survey projects. The cadastral funds are directly
downloaded by the DENR Central Office to the Regions.

4.6 The Work and Financial Plan and Accomplishment Report of the LMB-
NCPCO on the Monitoring of Cadastral Survey Project disclosed that all of
the planned activities were put into practice which resulted in their

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 satisfactory accomplishment of 91.83 percent, by utilizing P5,847,860.07 or
86.76 percent only of its total budget of P6,740,000.00.

4.7 The CSP of the DENR is targeted to be finished by May 2015 and different
strategies were implemented to ensure the success of the Program.

4.8 Moreover, LMB reported that the CSP had completed 1,419 cities and
municipalities or 86.84 percent of the total universe of 1,634 as of year-end
as follows:

Number of
Percentag Area
Status Period Municipalities
e (hectares)
/ Cities
CY 1913-CY 2009 753 46.08 13,969,774
Completed CY 2010-Dec. 31, 666 40.76 14,780,772
2014
Total Completed 1,419 86.84 28,750,546
On-going FWIP 157 9.61 3,400,218
Remaining ARMM 58 3.55 1,767,838
GRAND TOTAL 1,634 100% 33,918,602

4.9 While the LMB-NCPCO posted a high percentage of accomplishment, the

Status of CSP prepared by the NCPCO showed that out of the 746 projects
targeted by the LMS from CY 2011 to December 31, 2014, 80.16percent or
598 projects were completed/submitted and 148 projects or 19.84percent are
yet to be completed as of year-end. The breakdown follows:

Period Target(Projects) Completed/Submitted Not Yet submitted

CY 2011 78 73 5
CY 2012-2013 512 414 98
SY 2014 156 111 45
Total 746 598 148
Percentage 100% 80.16% 19.84%

4.10 The Status of Cadastral Survey Projects for CY 2014 submitted by Region
VI showed that the cadastral survey maps (project control and political
boundary) were submitted to LMS two to 104 days beyond the expected
date of completion. Such survey returns were approved by the LMS 72 to
236 days after its submission.

4.11 Likewise, two projects in DENR-CAR were delayed by 39 and 63 days due
to either unjustified failure by the contractor to complete the projects within
the prescribed period or due to suspension orders or time extensions. The
Management of CAR commented that causes of delays were as follows:

a) Monuments planted were non-compliant to the requirements;

b) Series of meetings on joint ground validation of boundaries;
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 c) Political boundary disputes;
d) On-going tribal war/conflicts;
e) Refusal for the implementation of the project by the municipality/tribes;
and
f) Heated arguments posing danger to the contractors.

4.12 The LMS of DENR Region VI justified that the causes of delay in the
submission of the cadastral survey maps were due to the following factors:

a) Delayed response of LGU to the contractors’ request for a formal

launching;
b) Limited period given by DENR to accomplish the project; and
c) Force majeure

4.13 Delays were also observed in Regions IX and V. In region V, of the 32

projects which were due for completion as of December 31, 2014, only 19
or 59 percent were approved, 10 or 31 percent have on-going inspection,
verification and approval of surveys (IVAS) while three or nine percent is
still in fieldwork activities. Though management considers that submission
of survey returns as completed, still there are three projects where fieldwork
activities are still in progress. As of May 2015 report, only one of the three
projects was approved and two were still for IVAS.

4.14 The delay in the completion and approval of cadastral surveys is contrary to
the basic policy of the Department of expediting the conduct of cadastral
surveys and will affect the timely resolution of boundary conflicts among
neighboring municipalities as well as timely titling of untitled areas.
Although the corresponding amounts of liquidated damages were deducted
from the claims of the concerned contractors, still it could not be denied that
the end-users or the public and the government were deprived of the
immediate benefits and privileges the projects were supposed to offer.

4.15 We recommended and Management agreed to require the:

a) NCPCO to work more closely and strengthen its coordination with

the Regional Offices to ensure attainment of the objectives of the
Cadastral Survey on or before the May 2015 set deadline;

b) concerned officials of LMS to fast track the submission of the survey

returns within the expected time of completion and/or fast track the
inspection, verification and approval of the survey returns;

c) contractors to adhere strictly to the terms/provisions of the Contract

of Agreement; and

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 d) concerned officials of the agency to closely supervise and
periodically monitor the accomplishments during the
implementation of the project/s.

4.16 The Management of Region V committed to fast track approval of the

cadastral surveys before the end of the first semester of CY 2015. However,
there are still two projects with survey returns undergoing IVAS.

4.17 The Management of LMB also commented that they are closely monitoring
the regions to ensure that the May 2015 deadline set by the DENR Secretary
shall be complied with which was an offshoot of the directive of the
President during his 5th State of the Nation Address to finish the Cadastral
Survey of the entire country during his term and submitted the latest status
of Cadastral Survey Program, as follows:

 1,484 cities and municipalities or 98percentof the 1,516 universe net of

118 ARMM cities/municipalities were completed as of April 30, 2015;

 The remaining 32 cities/municipalities or 2percentof the universe shall

be completed by the end of May 2015;

 1,506 cities and municipalities have been cadastrally surveyed

comprising 92percent of the 1,634 total universe (including the 118
ARMM cities/municipalities. The remaining 128 cities/municipalities or
8 percent of the universes shall be completed by the end of May 2015;

 Six regions (CAR, II, VI, X, XI and XIII) have already completed their
projects ahead of the May 2015 deadline, while the rest of the regions
will be on May 2015.

Low Survival rate due to unsuitable plantation sites of CBFMMP

5. The DENR Regional Office VIwas not able to determine suitable plantation
site in the Municipality of Anini-y, Antique for the Mangrove Reforestation
Model under the Community-Based Forest Mangrove Management Project
(CBFMMP) which resulted in a survival rate of 70 percent.

5.1 As specified in Forest Rehabilitation Model 4: Mangrove Reforestation of

the Community-Based Forest Mangrove Management Project CBFMMP
Reforestation Guidelines, Version 2010 November 21, the sites for
Mangrove Reforestation may be lagoons, coves, bays, mud/sand flats not
directly exposed to high waves.

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5.2 There was a minimal survival rate of planted propagules in the 5.05 hectares
of mangrove reforestation area in the Municipality of Anini-y, Antique. The
planted propagules were directly exposed to high waves, hence, resulted in
the minimum survival rate. The majority of the propagules which were
planted near the land and not directly exposed to high waves, exhibit a good
growth performance attaining a height of more than one (1) meter.

5.3 The minimal survival rate of the propagules may be attributable to the
following factors:

a) The reforestation area was mostly occupied by hard coral reefs/ large
rocks;
b) The reforestation area was directly exposed to strong water currents/
waves;
c) The planted propagules were not properly staked as there were remnants
of stakes in the area. The Forest Rehabilitation Model 4: Mangrove
Reforestation of the CBFMMP Refo Guidelines provided that there
should be proper staking of the planted propagules.

5.4 The accomplishment report of the Regional Monitoring and Evaluation

Team disclosed that the 5.05 hectares subject of Mangrove Reforestation in
Municipality of Anini-y, Antique, has a survival rate of 70percentafter one
year from planting calculated using the Line Plot Sampling Method.

5.5 The agency personnel present during the inspection explained that the target
area to be planted was surveyed, mapped and approved by the DENR
Regional Office and included in the terms and conditions in the MOA.
Hence, the beneficiary has to plant only those identified and mapped areas.

5.6 The failure of the agency to determine suitable mangrove plantation site,
resulted in the low survival rate, thus, not meeting the time frame of the
project. The People’s Organization in-charge of the area that are required to
replace and replant propagules several times, without any additional benefit
on their part, may not have been provided with proper technical supervision.

5.7 We recommended that Management require the DENR Region VI to:

a) determine a plantation site which is suitable for Mangrove

Reforestation taking into consideration the guidelines set forth in
Annex 6 CBFMMP Reforestation Guidelines, Version 2010
November 21 to avoid or prevent wastage of propagules and
increase the rate of survival. Once those suitable plantation sites
were all covered, only then that the area for planting may be
expanded; and
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 b) extend technical supervision and guidance to the Peoples
Organizations and the LGUs.

5.8 Management, through its letter dated March 9, 2015, commented that the
site for mangrove plantation in the Municipality of Anini-y, Antique is
limited thereby setting the target to only 5.0 hectares. As much as the LGU
is concerned, it is the desire to establish mangrove plantation with the end
view of protecting their coastlines, to control erosion and for maintenance of
fisheries. Due to the limited area, however, the LGU opted to continue with
the plantation establishment on areas deemed applicable. Moreover, though
some areas are open to or directly exposed to strong currents/waves, same
were included in the target plantation considering that they contain patches
of existing mangrove and also due to the said limited area. Management said
that proper technical supervision and guidance will be extended to the
concerned Peoples Organization and LGU especially on specific activities as
reflected in the Work and Financial Plan in order to attain the target survival
rate of 80 percent during the final billing as provided in the Project
Operations Guidelines.

Non-adherence to the time frame set and on the specific provisions under CBFMMP-
Agroforestry

6. The adherence of the beneficiary LGU in PENRO-Iloilo to the time frame as

provided in the CBFMMP Refo Guidelines, Version 2010 November 21 and
the implementation of the maintenance and protection activities reflected in
the Work and Financial Plan were not properly monitored by the DENR.

6.1 The CBFMMP Reforestation Guidelines, Version 2010 November 21 for

Agroforestry provides that the Nursery Operation and Plantation
Establishment should be done in the first and second year of the CBFMMP
implementation, while the third to fifth year is for Maintenance and
Protection. In addition, the work and financial plan for Reforestation
revealed that there was a budget allotted for the Maintenance and Protection
in the third to fifth year of the project and one of the activities included in
the maintenance and protection is the ring weeding. The Work and
Financial Plan of the project is part of the MOA entered into and in between
the DENR RO VI and the Municipality of Dumarao, Capiz which was
executed on July 4, 2011.

6.2 Ocular inspection conducted on February 5, 2015 on the implementation of

the CBFMMP in the Municipality of Dumarao, Capiz, specifically in Brgy.
Taslan, revealed that reforestation component was not properly maintained
by the beneficiary LGU. Although the high survival rate of the planted

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 mangiums is noticeable, the presence of tall shrubs and bushes growing with
the planted mangiums are evident, which compete in the sunlight and soil
nutrients and eventually may cause danger to the area planted during
summer months in cases wherein bush fires may happen.

6.3 On the other hand, the Agroforestry plantation ocular inspection disclosed
the poor growth of the planted fruit trees (lanzones, rambutan and coconut),
despite the high survival rate of the seedlings planted. The farmer
beneficiary revealed that he planted those fruit trees only a year ago. It
would be noted, however, that the fruit trees would have been two to three
years already if the time frame of the CBFMMP was strictly followed. The
farmer beneficiary also said that the poor growth of the fruit trees may be
attributable to the lack of fertilizers and the incompatibility of the fruit trees
planted with the kind of soil in the area.

6.4 Moreover, while the Work and Financial Plan of the CBFMMP of Dumarao,
Capiz showed that ring weeding is one of the activities in the CBFMMP,
there were tall shrubs and bushes in the area reflecting poor maintenance on
the project. As to Agroforestry, fertilization and ring weeding were not
evident due to the poor growth of the newly planted fruit trees.

6.5 The non-strict adherence to the time frame of the project and the non-
implementation of some protection and maintenance activities had deprived
intended beneficiaries of the early benefits that can be derived therefrom.

6.6 Management through its letter dated March 9, 2015, commented that the
LGU Dumarao, Capiz is one of the performing LGUs under the CBFMMP.
From the contract amount of P10 Million, an amount of P6.830 Million was
already disbursed to the said LGU as of February 28, 2015. The remaining
amount of P3.17 Million pertains to the maintenance and protection
activities such as ring weeding and fertilizer application in the case of
agroforestry. However, with the onset of summer or dry season, the LGU
deferred the ring weeding and similar activities to prevent the plants from
exposure to direct sunlight brought about by the said activity. Fertilizer
application as stated in the Work and Financial Plan shall likewise be
undertaken by the LGU and its beneficiaries and the Office, through the
Monitoring & Evaluation Team will see to it that such activities will be done
so that corresponding payment will likewise be made.

6.7 We recommended that Management instruct the project chief to

properly monitor and supervise the implementation of the projects,
especially the protection and maintenance activities, to sustain the high
survival rate already achieved.

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Low physical accomplishment of Integrated Coastal Resource Management Project
(ICRMP)

7. The ICRMP posted a low physical accomplishment of 75.45 percent due to

non-accomplishments of certain activities under components A, B and C of the
project. Moreover, there was no Project Sustainability Plan developed by
FASPO to ensure that the desired results of the project could be sustained
after project completion.

7.1 The Integrated Coastal Resources Management Project (ICRMP) is a

foreign-assisted project that promotes the “ridge-to-reef” approach in
managing coastal resources.  This management approach -- addressing
threats in the uplands, lowlands and coastal areas in an integrated way is
expected to result in the development of coastal resources that is sustainable,
allowing these resources to continue providing environmental services to
support livelihood, eco-tourism, industrial and other socio-economic
activities.

7.2 The project is funded by a combination of loan and grant package from the
Asian Development Bank (ADB) and the Global Environment Facility
(GEF) and implemented in Regions II, III, IVB, 5, 7 and XI. The DENR is
the implementing agency together with the Bureau of Fisheries and Aquatic
Resources (BFAR), Municipal Development Fund Office (MDFO) and
Local Government Units (LGUs).

7.3 The ICRMP is a six-year project (July 2007 to June 2013) but was extended
up to June 2014 which served as a catch-up phase for the completion of all
project targets. It has four components namely; (i) Component A: Policy
and Institutional Strengthening and Development, (ii) Component B: ICRM
and Biodiversity Conservation, (iii) Component C: Enterprise Development
and Income Diversification, and (iv) Component D: Social and
Environmental Services and Facilities.

7.4 The ICRMP reported a physical accomplishment of only 75.45 percent due
to the non-accomplishment of certain activities under components A, B and
C.

7.5 In Region V, a research study under Component B aimed to promote ICRM

best practices and sustain the protection and management of coastal
ecosystems in the threatened areas of high biodiversity was conducted.
However, the study, entitled Biometric Analysis of the Scallop
Decatopecten Striatus between the Recodo Marine Reserve and its Open
Fishing Ground in Asid Guld, Masbate (BIOSCAL)was not completed due
to the agency’s non-enforcement of compliance to submit certain documents
from the host institution.Under the MOA between DENR ROV and the

96
 Masbate School of Fisheries(MSF)-TESDA, MSF was chosen as the host
institution of Regional ICRMP Center (RIC), while Bicol University (BU)-
Tabaco Campus and MSF were the proponents of the project.

7.6 Section 2.1.2 of the agreement required the DENR to regularly monitor and
evaluate the implementation and progress of the research study and ensure
that the specific work and financial plans were achieved according to the
proposal and budget. It was not stated, however, in the agreement the
frequency of monitoring and what report to prepare to document the
monitoring and evaluation performed.

7.7 The ICRMP Regional Coordinator said that the second tranche was not
released due to non-submission by the MSF of the lacking requirement.
Further, the whole ICRMP project was completed as at June 30, 2014 and
the remaining funds for the project were already returned to the Foreign
Assisted and Special Projects Office (FASPO) of the DENR central office.
She further stated that according to BU- Tabaco, the research study was
actually completed but the research paper was not submitted because MSF
did not pay BU – Tabaco.

7.8 Although the DENR has conducted follow-ups on the submission of

documents to support the billing, it has not prepared a report to show that it
has evaluated the actual accomplishments/activities for the project as
required under the MOA.

7.9 Due to the non-completion of the research study as far as the ICRMP is
concerned, the research study did not attain its objectives and therefore did
not contribute to the promotion of ICRM best practices. Further, the amount
already disbursed in the amount of P555,594.00 would be considered waste
of government resources if no benefit/return would be derived from its
usage.

7.10 Overall, the following activities were not pursued during implementation of
the ICRMP which may have contributed in the delay or non-achievement of
the project objectives:

 An Operations Manual was not prepared to serve as guide in the smooth

implementation of the activities towards the timely achievement of
project objectives.

 An assessment using the coastal baseline data at the end of the project to
determine whether the project objectives have been attained was not
conducted.

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  A Gender Action Plan was not prepared for the project as required in the
Loan Agreement nor was it included in the Work and Financial Plan
although the Project Completion Report shows that there are women
beneficiaries from the project.

7.11 Furthermore, the project does not have a Project Sustainability Plan to
ensure that the desired results of the project could be sustained after project
completion. The development of a Project Sustainability Plan would
somehow increase the assurance that these activities would be
accomplished. This plan would lay down the concrete activities for the
concerned agencies or individuals to pursue even after the project has been
completed so that the ultimate goals will be achieved.

7.12 We recommended that Management require the:

a) FASPO to cause the preparation of a Sustainability Plan for

ICRMP;

b) DENR Region V to (i) conduct an assessment of the project to

determine if indeed the research study was completed, and if found
complying and acceptable, to facilitate submission of the report and
effect corresponding payment to the researcher; (ii) require
Masbate School of Fisheries to submit the liquidation report or
refund the remaining balance of P77,806.00; and (iii) consider in its
future agreements the inclusion of more specific provisions
pertaining to monitoring and evaluation of projects and ensure strict
and timely compliance by partner agencies;

c) FASPO, in the implementation of other foreign assisted projects,to

(i)prepare an Operations Manual to serve as guide in the timely
implementation of projects towards the attainment of the objectives;
(ii)prepare a Gender Action Plan or include them in the Work and
Financial Plan; and (iii)require the preparation of a Project
Sustainability Plan as one of the outputs before the project closing
date to ensure sustainability of the project;and

d) If FASPO will no longer release the amount returned, the DENR

Region V may consider including the project for funding by other
institutions so that the completed activities will not be wasted. The
research study conducted by the Bicol University-Tabaco City
Campus, one of the proponents of the project, if indeed completed
will greatly contribute to the attainment of the objectives of
Component B of ICRMP.

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 7.13 Management of Region V commented that they will include Monitoring and
Evaluation in the future agreement. However, for the recommendation to
pay the researchers for the completed project activities, they will confer with
the Central Office considering that all unexpended amount for the project
was returned to the Foreign Assisted Projects Office (FASPO).

Low fund utilization of foreign assisted special projects

8. The overall Foreign Assisted Projects’ performance vis-à-vis the planned

activities was generally low, as it was able to utilize only 23.34 percent of its
budget of P961.003 million or P224.318 million.

8.1 The Work and Financial Plan (WFP) versus Fund

Utilization/Accomplishment Report for CY 2014 of Foreign Assisted
Projects (FAPs) disclosed an unused budget of P736,685,498.89 or 76.66
percent of the total budget of P961,003,330.10, as presented below:

Utilization
Project Budget Utilization
Rate (%)
Loan Funded
Integrated Coastal Resources P50,357,000.00 P43,176,000.00 85.74
Management Project (ICRMP)
Community-Based Forest and 8,600,000.00 8,095,000.00 94.13
Mangrove Management Project
(CBFMMP)
Forest Management Project (FMP) 486,977,410.10 69,080,080.02 14.19
Integrated Natural Resources and 245,029,000.00 81,130,772.23 33.11
Environmental Management Project
(INREMP)
Grant Funded
Philippine Chillers Energy Efficiency 13,533,000.00 2,257,000.00 16.68
Project - Multilateral Fund (PCEEP-
OTF)
Philippine Chillers Energy Efficiency 42,673,500.00 6,608,498.10 15.49
Project-Global Environment Facility
(PCEEP-GEF)
Integrated Persistent Organic 74,743,820.00 4,130,336.13 5.53
Pollutants Management Project
(IPOPsMP)
Philippine Climate Change 11,792,000.00 7,762,700.00 65.83
Adaptation Project (PhilCCAP)
Community-Based ForestMangrove 22,357,600.00 0.00 0.00
Management Project (CBFMMP)
Manila Bay Integrated Water Quality 4,940,000.00 2,077,444.73 42.05
Management Project (MBIWQMP)
Total P961,003,330.10 P 224,317,831.21
% of Total Fund Utilization 23.34%

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 8.2 Further, the physical accomplishments for the major targeted activities for
the said FAPs are shown in details inAnnex C.

8.3 Except for CBFMMP (Loan) with a project delivery rate of 98.09 percent,
FASPO did not assign corresponding percentage weights for each project
component or output of the other projects hence, a more accurate project
delivery rate cannot be computed.

8.4 There are components in each project which were not accomplished while
others were partially accomplished as reflected by the percentage rates per
project component.

8.5 The non-accomplishment of some planned activities during the yearshowed

slow delivery that may lead to extension of the projects’ end date and could
consequently result in possible incurrence of commitment fees. This would
likewise greatly impact the timely attainment of the objectives of the
project.

8.6 We recommended and Management agreed to:

a) strategize and exert extra effort to keep up with the schedule of

activities as per plan to ensure the timely and full attainment of set
objectives for the effective and successful undertaking of the project;

b) fast track procurement activities and preparation of reports

necessary for the accomplishment of the various activities of the
project; and

c) prepare and submit a more accurate and detailed Accomplishment

Report which is aligned with the Work and Financial Plan with
corresponding percentage weights per component or output.

Uncollected/unrealized Income - P28.463 million

9. Income amounting to P28.463 million from occupation fees, lease rentals and
IPAF share was not realized in six CENROs, three Regional Offices, PENROs
in Batangas and Camarines Sur and BMB due to absence of/unupdated
documents, non-enforcement of provision of certain regulations and/or
vagueness of the MOA.

a) Uncollected Occupation Fees, Revocable Permit Applications (RPA)

and Lease Rentals under the Foreshore Lease Agreement – P27.307
million

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9.1 DENR Administrative Order (DAO) No. 2004-24 dated August 24, 2004
provides for the rules governing the administration, management and
development of foreshore areas. It further provides the following:

 DENR shall tap all resources that can generate income to carry out and
implement developmental programs;

 An application for a new and renewal of Foreshore Lease

Agreement/contract shall be accepted only when accompanied by an
application fee in the amount of One Thousand (P1,000.00) pesos for
corporations, associations, or partnerships; and Five Hundred (P500.00)
pesos for individuals plus documentary stamps. The fee is non-
refundable.

 The lessee shall be required to pay the annual lease rental within fifteen
(15) days after receipt of the approved lease contract for the first year.
Thereafter, said lease rental shall be paid annually or before the fifth day
of the first month of the year during the life of the lease and without the
need of notice of demand to pay;

 The rental shall be paid to the CENRO having jurisdiction over the land
subject of lease and all rentals shall be remitted to the National Treasury;

 Non-payment of annual lease rental for two (2) consecutive years shall
be a ground for cancellation of the lease agreement.

9.2 Section 12 of the DAO also provided the procedural steps and timeframe for
the purpose of fast tracking the processing of foreshore lease applications.
The timeframe of processing applications is more or less 110 days
depending on the approving official.

9.3 Six CENROs in Regions V, VI and VIII did not collect the occupation and
lease rental from Foreshore Lease Applicants and Lessees, details presented
below:

Number of
Foreshore Surcharges/ Total Amount
CENRO Office Amount Due
Applicants/ deficiency Due
Occupants
Region V
CENRO Sipocot,
55 P 2,677,040.70 P 2,677,040.70
Camarines Sur
CENRO Goa,
143 59,500.00 8,100.00 67,600.00
Camarines Sur
Region VI - CENRO Not
20,836,172.13 20,836,172.13
Iloilo available
Region VIII

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 Number of
Foreshore Surcharges/ Total Amount
CENRO Office Amount Due
Applicants/ deficiency Due
Occupants
CENRO Palo 15 351,067.80 10,013.25 361,081.05
CENRO Albuera 234 2,601,271.66 201,622.51 2,802,894.17
CENRO Baybay 31 540,594.00 21, 928.76 562,522.76
Total 478 P27,065,646.29 P241,664.52 P27,307,310.81

9.4 The failure of these offices to enforce collections were due to un-updated
and/or absence of documents/records and lack of monitoring activities
and/or non-compliance to regulations as manifested in the following
circumstances:

 CENRO-Sipocot, Camarines Sur- Defaults in the payment of

lease/permit fees ranged from one (1) year to 18 years and demand
letters were sent to only few lessees/permittees. Also, management
merely relied on the lessee’s/permittee’s initiative to pay, that is, when
they want to renew their lease agreement/permit to occupy the foreshore
areas.

 CENRO-GOA, Camarines Sur - Management of CENRO-Goa,

Camarines Sur accepted some new and renewal Revocable Permit
Applications (RPA) and Foreshore Lease Applications (FLA) even
without payment of non-refundable application fee. The Management
also allowed payments of application fee of only P50.00 for individuals,
thus, a deficiency of P450.00. Some applications were filed since CY
2009 and always being renewed without complete payment of the
correct amount of the application fees. The total amount of deficiency
was P8,100.00.

Moreover, as of December 31, 2014, the processing of FLA applications

of 23 applicants was already 940 to 4,406 days but still not yet approved.
Compared with the timeframe of 110 days prescribed under the
department order mentioned above, there was already significant delay
of 830 to 4,406 days or 27 months to 146 months.

Management of CENRO Goa, Camarines Sur cited the following causes

of the delays in the approval of RPA/FLA:

a) There are instances that some documents were lost or others were
no longer returned after approval was made in the Central Office,
thereby leaving CENROs and PENRO to wonder whether or not
they were approved; and

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 b) Approval of RPA/FLA is with the DENR Central Office and
beyond the control of the PENRO.

These circumstances shows Management’s disregard and open defiance

of DAO No. 2004-24 as well as not grabbing opportunity to improve
collections to augment funds for projects/activities for the regulation,
utilization and occupancy of foreshore lands.

 CENRO-Iloilo- Of the 120 Foreshore Lease Applicants and Lessees,

only eleven (11) payments for CY 2013 and only three updated their
payments in CY 2014.

The FLA applicants and lessees as well as the index of payments were
not updated; hence, the period covered by the payment of leasecould not
be identified. The agency personnel further said that they have no idea
if these lessees still exist or the FLAs were cancelled.

These lapses resulted in the minimal collection of P3,887,390.09 of the

CY 2007 balance of P24,723,562.22 leaving a balance of
P20,836,172.13 as of December 31, 2014. The last settlement of the
accounts were made on CY 2012.

The LMS Chief, admitted that FLA was not given emphasis in CY 2014
since their focus was on the other activities. He also added that he only
assumed as LMS Chief last July 2014 and there was no proper turn-over
of the inventory of the FLA Applicants and Lessees. Also, of the 14
LMS personnel, seven of them retired in CY 2014 availing the benefits
of E.O. 366 rendering the LMS undermanned. He also admitted that
they failed to monitor the enforcement of the collection of the
occupation fees and lease rentals from the applicants and lessees of FLA
during the year and no demand letters were sent to FLA applicants and
lessees.

 Region VIII - CENROs PALO, Albuera and Baybay in PENRO-Leyte, -

Records like the approved foreshore contracts/permits and updated
appraisal report of the land used by the occupants which serve as the
basis in determining the rental fees as well as the report indicating the
actual existing foreshore occupants were not availablerendering the
reported total uncollected rental fees amounting to P3,726,497.98
unreliable.

The schedules for uncollected rental fees indicated that the contract are
still on process and that applicants for lease contracts/revocable permits
were not yet approved and transmitted even after twenty-six (26) years
which violated the above-mentioned provision. It was explained by the
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 Land Management Officers of concerned CENROs that the application
is either not yet approved or the applicant is still preparing the required
documents or did not proceed with the applications. They further said
that all Revocable Permit Applications (RPA) and Foreshore Lease
Agreements/Contracts were submitted to the Regional Office for
approval. However, the Regional Office, Land Management Division
(LMD) said that all RPAs and FLAs were already returned to the
CENRO Leyte Offices for their approval and that they do not have these
applications for FLAs in their office.

The preparation of order of payment for foreshore lease is the

responsibility of the CENRO Office which has the direct control of the
transaction instead of the Accounting Section for check and balance.
This practice, coupled with the absence of records of lease rental,
precluded the Accounting Section to check the correctness of rental fees
being paid by the lessor. Likewise, with the absence of the contract of
lease, proper monitoring and enforcement of the conditions set forth in
the contract specially the timeliness and regularity of payment of rental
fees by the lessee could not be conducted.

The management agreed and disclosed that they would be having

difficulty of collection because of conflicting orders such as the 40-
meter no build zone. They further said that the government can actually
collect occupancy fees/rental even in the absence of FLA, the problem is
that the DENR does not have police power to implement the
aforementioned AO and to force the occupants to vacate the area due to
non-payment of occupancy fee.

9.5 The failure of the agency to enforce the provisions on DAO No. 2004-24
dated August 24, 2004, as well as the terms and conditions of lease contract
agreement, on the collection of occupation fees and lease rentals on FLA
and to collect its “Accounts Receivables” amounting to P24,562,670.11
deprived the government from additional revenues it needed to finance its
programs and projects.

b) Non-Collection of IPAF – Regions IV-A and V – P790,500.00

9.6 The Taal Volcano Protected Landscape (TVPL) Protected Area

Management Board (PAMB) Resolution No. 17 series of 2011, amending
Resolution No. 22 series of 2009 establishing Integrated Protected Area
Fund (IPAF) for the TVPL, provides, among others, that the Ways and
Means Subcommittee of the PAMB identified the source of IPAF and
resolved to collect an annual fee of P500.00 per cage per year.

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9.7 During CY 2014, collections from annual fee paid by fish cage owners
amounted to only P1,459,500.00 representing 2,919 fish cages instead of
P2,250,000 based on 4,500 fish cages as indicated in their masterlist as of
December 31, 2014, summarized below.

Annual fee per fish cage P 500.00

Number of fish cages per Masterlist as
of December 31, 2014
Municipality of Agoncillo 1,500
Municipality of Talisay 2,000
Municipality of San Nicolas 1,000 x 4,500
Should be collection for CY 2014 2,250,000.00 100%
Actual collection (2,919 fish cages) 1,459,500.00 65%
Uncollected balance P 790,500.00 35%

9.8 The Administrative Officer of PASu Office informed that no individual

record for each of the fish cage owner was maintained hence, they cannot
monitor the status of each account.

9.9 The failure of Management to strictly enforce the provisions of the above
Resolution and the absence of individual record of each fish cage owner
deprived the TVPL additional funds that could have been used to finance its
projects and activities.

9.10 In Region V, the DENR and the City Government of Naga entered into a
Memorandum of Agreement (MOA) for the co-management of the Mount
Isarog National Park (MINP) on June 17, 2011.

9.11 Under the MOA, the LGU-Naga shall take charge in the collection of
entrance fees and other related fees and remit to DENR through MINP-
PAMB on or before the 10th day of the month immediately succeeding
whatever IPAF share in the MINP Manual of Operations. The DENR shall
monitor collection of fees and other form of contribution, endowment,
donations/grants from private individuals, institution and entities for the
conservation of the MINP.

9.12 In view of the audit team’s observation of non-collection of IPAF share

from LGU Naga relative to the co-management of MINP, the PAMB
instructed the PASu, PENRO-Camarines Sur to collect from LGU-Naga
City the IPAF share from CY 2011 to 2014. However, until the end of
December 2014, the PAMB through the PASu has not received any payment
thereon.

9.13 The non-collection of the IPAF share was due to the vagueness of the
provisions in the MOA executed on June 17, 2011. While the MOA
provides that the LGU-Naga shall remit to DENR through MINP-PAMB on
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 or before the 10th day of the month immediately succeeding whatever IPAF
share in the MINP Manual of Operations, the PAMB Manual of Operations
did not clearly specify how much shall be remitted to the DENR as IPAF
share.

c) Rental fees by BMB not collected – P365,346.02

9.14 The Contract of Lease entered into by and between PAWB (now BMB) and
Smart Communications, Inc. and with Digitel Mobile Phils. Inc. already
expired on November 25, 2013 and June 5, 2014, respectively, but both
lessees still occupy the premises without new contract of lease and without
paying the corresponding monthly rental fees, thus potential revenue on the
said leased property estimated at P365,346.02 as of year-end were not
realized.

9.15 On November 25, 2003, the then PAWB and Smart Communications Inc.
entered into a contract of lease for the use of 200 square meters for the
installation of telecommunications facilities purposes. The lease is for a
period of ten (10) years with a monthly rental of P15,000.00.

9.16 Likewise, on April 30, 2004, the PAWB and Digitel Mobile Phils. Inc.
entered into a contract of lease for the use of 64 square meters for the
installation of telecommunications facilities purposes, for a period of ten
(10) years with a monthly rental of P15,000.00.

9.17 The Contracts of Lease by and between the PAWB and Smart
Communications, Inc and Digitel Mobile Phils. Inc. already expired on
November 25, 2013 and June 4, 2014, respectively. However, as of to date
no renewal has been made.

9.18 Both Smart Communications, Inc. and Digitel Mobile Phils continued
occupying the areas without authority and without valid contract and are not
paying the corresponding monthly rental fees. This resulted in unrealized
potential income estimated at P365,346.02 as of year-end computed based
on the rate prescribed in the expired contract.

9.19 The Digitel Mobile Phils. is already owned by Smart Communications, Inc.
and a letter dated January 14, 2014 was sent by BMB to Smart
Communications, Phils. informing them of the Bureau’s intention to renew
their contracts with an increase in monthly rental, however, the Lessee was
not amenable, thus, up to this date the contract of lease was not renewed.

9.20 As of to date, the Bureau had already sent a Final Notice through its letter
dated May 22, 2015 requesting the Lessee to vacate the premises and to
decommission and dismantle the said facilities and to pay the rent using the

106
 rate prior to contract expiration, for the continuous use of the areas from the
time of contract expiration up to this date. Still, there was no response from
the Lessee.

9.21 We recommended that Management require the:

a) concerned CENROs of Regions V, VI and VIII to(i) conduct

inventory of Foreshore Lease Applications to determine the status of
the applicants; (ii) send demand letters to FLA lessees and
applicants who have existing accounts to settle their accounts
immediately; (iii) henceforth, strictly enforce the collection of
application fees, annual occupation fees, and lease rentals from the
applicants and lessees of FLA, pursuant to DAO No. 2004-24 dated
August 24, 2004, and the terms and conditions of the Lease Contract
Agreement; (iv) take appropriate action to ensure that
contract/agreement of lease are executed with the occupants of
foreshore land and government properties managed by the
CENROs/PENROs; and (v) furnish the Accounting Section with
copy of the contract/agreement as basis for billing and eventually to
issue order of payment to lessors of foreshore land;

b) DENR Region 4A to (i) instruct concerned officials of PASu Office

to adopt a workable plan on how to intensify their fish cage
collection and strictly enforce the provisions of TVPL PAMB
Resolution; and (ii) maintain an individual record of each of the fish
cage owner in order to properly monitor the status of each account;

c) DENR Region V to (i) instruct concerned officials to collect correct

application fees and attach the corresponding Official Receipt
before assigning Application Number, accepting and processing the
applications; (ii) collect the deficiency of P450.00 from the
applicants whose applications were processed, approved and issued;
(iii) facilitate processing of FLA applications within the timeframe
prescribed under DENR Administrative Order No. 2004-24 dated
August 24, 2004; (iv) require the PAMB to demand accounting
from LGU-Naga City the fees collected and other form of
contribution, endowment, donations/grants from private
individuals, institution and entities from the effective date of the co-
management of 664 hectares of the Mount Isarog National Park
(MINP), Barangay Panicuason, Naga City; (v) require LGU-Naga
City to immediately remit the equitable share of DENR that may be
agreed upon; (vi) direct the DENR to henceforth thoroughly review
the provisions of future similar agreements and ensure that
provisions are specific/definite specially on the amount of
income/remittances to be made to the DENR so that these will not be

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 subject to different interpretations by the contracting parties; and
(vii) instruct the Management of CENRO - Goa, Camarines Sur to
adopt measures that would keep track the applications and institute
actions to be undertaken by persons responsible; and

d) BMB to (i) send a bill of collection to the Lessee; (ii) forge a new
contract of lease with Smart Communications, Inc. taking into
consideration the prevailing rental rate, otherwise, require them to
vacate the premises as soon as possible; and (iii) refer the matter to
the DENR Legal Department for appropriate legal action to enforce
collection in case of continued defiance on the part of Smart
Communications, Inc.

9.22 The PASu of Region IV-A explained that they are already implementing
procedures to facilitate and attain a higher percentile of IPAF collection and
continuous coordination with concerned LGUs will be undertaken to collect
the uncollected income for CY 2014.

9.23 The Management of CENRO Sipocot, Camarines Sur commented that the
lease/rental were unpaid because of increase in the re-appraisal contested by
one of the lessees with substantial unpaid rentals. Also, the PASu of Region
V said they are awaiting final action on the part of the LGU-Naga.

FINANCIAL AND COMPLIANCE

Unreliable balance of Cash accounts – P1,205.709 million

10. The balances of the various cash in bank accounts were not fairly presented
due to (a) unreconciled book and bank balance which resulted in net difference
of P583,781.40; (b) non-restoration of unreleased checks to the cash accounts
amounting to P22.753 million; (c) non/inaccurate recording of transactions
resulting in net understatement of cash in bank accounts by P1.192 million;
(d) delayed or non-submission of the Monthly Bank Reconciliation Statements;
and (e) unupdated subsidiary ledgers to support bank balances.

10.1 Section 112 of Presidential Decree (PD) 1445 provides that each
government agency shall record its financial transactions and operations
conformably with generally accepted accounting principles and in
accordance with pertinent laws and regulations.

a) Unreconciled difference between book and bank balance -(P583,781.40)

(CO, FMB)

10.2 Confirmation with the bank revealed the following discrepancies

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 Office Bank Account Per Book Per Bank Difference
Account No. 0712-1004-
P 1,703,547.01 P 0.00 P 1,703,547.01
94 (SECAL)
CO
LBP Trust Account No.
10,213,118.17 10,153,425.23 59,692.94
0712-1005-91
Various Local Currency
28,927,436.78 30,209,329.98 (1,281,893.20)
Current Accounts
FMB
Local Currency Savings
25,547.76 13,975.31 11,572.45
Accounts
PENRO
Two Current Accounts 10,509,376.76 11,458,604.65 (949,227.89)
Albay
PENRO Two Current Accounts 3,058,544.56 3,186,017.27 (127,472.71)
Catanduanes with LBP and one with
PNB
Total P52,734,024.03 P55,021,352.44 P(583,781.40)

10.3 In the CO, confirmation with the bank revealed that bank balance per books
of P1,703,547.01 under Bank Account No. 0712-1004-94 has no actual cash
as of December 31, 2014. The account was formerly under Sectoral
Adjustment Loan (SECAL), a completed foreign assisted project under
Fund 102.

10.4 This observation has been raised under AOM Nos. 2013-18(12)-101 dated
May 2, 2013 and 2014-022-101(13) dated May 26, 2014 but still not acted
upon, thus we are reiterating the same considering the impact in the cash
account balance.

10.5 On the other hand, the difference of P59,692.94 pertains to unidentified

book reconciling items in the bank reconciliation statement as early as
November 2013.

10.6 In FMB and PENROs Albay and Catanduanes, the difference between book
and bank balances could not yet be determined due to late preparation and
submission of Bank Reconciliation Statements (BRS) which ranged from 26
to 624 days in PENRO Albay and two to four months in FMB.

10.7 PENROs Albay and Catanduanes cited the lack of personnel and
voluminous work in the Accounting Section and the late receipt of bank
statements from the servicing banks as reasons for the late/non-preparation
of bank reconciliation statements.

b) Non-restoration of unreleased/stale checks to cash – P23,192,496.21

(CO, FMB, PENROs Aklan, Capiz and Leyte, R4A, RO XI)

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10.8 The unreleased checks were not restored to cash by the following offices as
required under Sections 2.4 of GAFMIS Circular Letter No. 2002-001 dated
December 16, 2002, which provides that at the end of the year, a JEV shall
be prepared to record the entry for the restoration of cash equivalent of the
unreleased checks and recognition of the appropriate payable/liability
accounts, based on Schedule of Unreleased Checks prepared by the Cashier
at year-end.

Office Amount
Unreleased checks
CO P 4,524.41
FMB 861,955.46
PENRO Aklan, Region VI 1,206,015.16
PENRO Capiz, Region VI 2,117,646.12
PENRO Leyte 17,178,029.85
R4A 188,000.00
RXI 1,196,651.20
Sub-total 22748297.790
Stale checks
PENRO-Camarines Sur 31,808.10
PENRO-Masbate 31,484.32
PENRO-Zamboanga del Sur 376,381.59
Sub-total 45936269.59
Total P23,192,496.21

c) Non/inaccurate recording of transactions – P1,191,639.16(PENRO

Leyte, NCR, FMB, PENRO Zamboanga Del Norte)

10.9 Non/erroneous recording of transactions resulted in the net understatement

of the cash in bank accounts amounting to P1,191,639.16, details are shown
below:

Over/
Office Particulars Remarks
(under)statement
Cash Modified Disbursement System, Regular
PENRO Erroneous recording of (P20,000.00) NCA received in the
Leyte NCA amount of
P10,385,000.00
recorded as
P10,365,000.00
Cash in Bank, Local Currency, Current Account
NCR Unrecorded refund of (1,650.00) Return of cash advance
cash advance per Check No. 087629
erroneously deposited
to the Local Currency
Current Account was
not recorded.
Over recording of (2,100.00) Over recording of
disbursement disbursement per
110
 Over/
Office Particulars Remarks
(under)statement
Check No. 425744.
(66,756.00) Mowel Fund benefits
Unrecorded collections (5,000.00) credited by the bank

Unrecorded Return of (6.69) Deposited refund of

cash advance cash advance
Unrecorded bank charges 200.00 Late debit memos
charged by the bank on
out-of-town deposits
Sub-total (200)
FMB Unrecorded adjusting 18,408.26 The November 2013
entries beginning balances of
the Cash, Local
Currency Current
Account in the amount
of P18,408.26 was
posted interchangeably
with the Due from
National Government
Agencies account; thus,
both accounts were
understated by
P18,408.26.

This was an observation

in CY 2013 but was not
yet adjusted in CY 2014.
Unrecorded bank These bank accounts
accounts maintained at remained unrecorded
the LBP despite prior year’s
 Acct No. 3212-1025-03 (331,600.00) recommendations.
 Dollar Savings
Account No. 3214-
(42,178.68)
0017-98 ($945.35
*P44.617)
Sub total (355,370.42)
Region IX- Unrecorded various (614,483.30) These are reconciling
PENRO deposits and stale checks items dating back in
Zamboanga Overstatement of 908,002.25 2004.
Del Norte recorded deposits
Unrecorded disbursement 13,448.95
and bank debit memo
Erroneous recording/ (164,862.06) Erroneously credited to
posting of transactions to the Cash in Bank
Cash in Bank (Fund 102) account (Fund 102),
of P910,965.10. without actual issuance
of check.
(201,164.34) Credited to the Cash in
Bank account dated
June 30, 2014 while the
actual remittance and

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 Over/
Office Particulars Remarks
(under)statement
issuance of check.was
April 15, 2015.
(544,938.70) Credited the Cash in
Bank account in June
30, 2014 representing
refund of unused/
unutilized cash
allocation under Fund
102 (SIM Loan) while
the actual issuance of
check was April 15,
2015.
Unrecorded LBP (83,160.11) The balance has been
Depository Account No. dormant and
0512-1095-35 unremitted to the BTr.
The Accounting could
no longer determine the
purpose for which this
fund was established
nor can they provide
the Subsidiary Ledger
or any documents
which would show the
nature of this account.
Sub-total (687,157.31)
PENRO Six cancelled checks (53,798.74)
Leyte included in the
outstanding checks
Total Cash in Bank, LCCA (1,171,639.75)
Net Understatement P (1,191,639.16)

10.10 Because of the foregoing deficiencies/errors or non-recording of

transactions, the accounts Cash Modified Disbursement System Regular and
Cash in Bank – Local Currency Current Account were understated by
P20,000.00 and P1,171,639.16 respectively, hence, affecting the reliability
of the accounts.

d) Improper, delayed preparation or non-submission of bank reconciliation

statement(PENROs Leyte, Ifugao, Guimaras, Negros Occidental,
Misamis Oriental, and FMB, CO, RO XI, RO XII)

10.11 Bank reconciliation is a process of reconciling Cash in Bank balances

between the Bank Statement and the General Ledger to arrive at the correct
and adjusted Cash in Bank balances for a particular period.

10.12 Six PENROs, RO Nos. XI-XII including FMB and CO either prepared late
or did not submit Bank Reconciliation Statements (BRSs), thus, complete
reliance on the balance of the cash accounts may not be ensured and

112
 discrepancies which may surface at any point in time could not be adjusted
immediately.

10.13 On the other hand, in PENRO Leyte, the monthly BRSs were not properly
prepared. The BRSs covering the period January 2014 to November 2014
showed that only the Bank Balance and Outstanding Checks were the filled-
up items; the monthly balance of account in the books and all other
information such as the Book Balance, items requiring adjustments by the
agency and by the bank, and Adjusted Book and Bank Balances were left
blank. Also, the amount of Bank Balance and the Outstanding Checks were
always the same in all the BRSs. The reconciling items amounting to
P7,198,356.23, representing unrecorded receipt of cash allocations,
cancelled checks and stale checks were not included as adjustments under
the book balance column. As a result of the above practice, the balance of
Cash - MDS as at any given time could not be ascertained and relied upon.

10.14 In the same manner, in RO XI, there were variances between the monthly
balances of the Report of Checks Issued (RCI) and Check Disbursement
Journal (CDJ) or a net variance of P67,738,839.46 as of yearend which was
caused by typographical errors, unrecorded disbursements in either RCI or
CDJ, errors in footing, pending submission of LDDAP-ADA disbursements.
The delay in the preparation and submission of reports poses questions on
the efficiency and effectiveness of report preparation process of
management. It also hinders management to promptly review, detect and
correct errors, if any.

e) unupdated subsidiary ledgers (PENRO Sultan Kudarat)

10.15 Moreover, the Cash In Bank - LCCA account balance of RO XII and
PENRO Sultan Kudarat in the total amount ofP18,984,373.46 is not
supported with updated subsidiary ledgers and Bank Reconciliation
Statements.

10.16 We recommended and Management agreed to require the:

a) OIC-Chief, Accounting Division of Central Office to (i) review the

Sectoral Adjustment Loan account to establish the propriety of the
cash balance of P1,703,547.01 transferred to Fund 101 without cash
back up with the bank; and(ii) exert extra effort in identifying the
causes of unreconciled amounts and make the necessary
adjustments in the books to correct balance of the affected accounts;

b) Accountants concerned to (i)prepare and submit correct and timely

monthly bank reconciliation statements; (ii) update subsidiary
ledgers to support Cash-in-Bank balances; and (iii) effect the

113
 adjustments for the deficiencies/errors noted to reflect the correct
balances of the affected accounts;

c) Management of PENROs Albay and Catanduanes to assign

additional personnel to the Accounting Unit to augment the work of
the Accountant; and

d) Management of RO XI to (i) ensure that preventive internal controls

must be embedded within the reporting process to eliminate the
occurrence of error; (ii) make use of other means that can facilitate
report preparation and ensuring submission of the same within the
given timeframe. Management can avail of the services of
LANDBANK’s “we Access” internet banking facility, especially its
capability to print or download the account statement for the
current and previous month’s transactions; and (iii) make
representation with the bank to facilitate early releasing of bank
statements and its supporting documents.

Collections and NCA about to expire deposited to current account and dormant account
not remitted to BTr– P61.495 million (Regions I, IV-A, V and IX, NCR and FMB)

11. Collections amounting to P32.488 million were deposited to the current

account instead of to the BTr while Notice of Cash Allocation (NCA)
amounting toP28.568 million about to expire on December 29, 2014 were
withdrawn from the MDS Account and deposited also to the current account
instead of reverting to the BTr. Also, dormant unrecorded bank accounts
amounting to P438,530.53 of FMB and PENRO Zamboanga del Norte
andrefunds of excess cash advances in PENRO Leyte were not deposited to the
BTr.

11.1 Section 7 of the General Provisions of the General Appropriations Act of

2014 provide that Performance bonds and deposits filed or posted by private
persons or entities shall be deposited with the National Treasury as trust
receipts under the name of the agency concerned in accordance with E.O.
No. 338, as implemented by COA-DBM-DOF J.C. No. 1-97.

11.2 DOF-DBM-COA J.C. No. 4-2012 dated September 11, 2012 requires all
departments, bureaus, offices and agencies revert to the General Fund
balances of Special Funds which remained dormant for a reasonable length
of time, or whose terms have expired.

11.3 Likewise, Section 12 of the GAA also requires that proceeds derived from
each seminar, conference and training shall be deposited with the National

114
 Treasury as Income of the General Fund pursuant to Section 44, Chapter 5
and Book VI of E.O. No. 292.

11.4 As of year-end, the following offices have unremitted collections/unutilized

bank balance and expired NCAs which were withdrawn from the MDS
account and transferred to the Local Currency Account in the total amount
of P61,494,790.29.

Region/PENRO Amount Particulars

Collections not remitted to BTr
RO 1 and PENRO 565,700.00 Performance/Bidders Bonds and Income from
Pangasinan Seminars and Workshops remained under the
account Cash in Bank – LCCA
Region IV-A 1,734,904.42 Represents balances of completed projects,
miscellaneous collections/ receipts and sale of
bid documents.
Region V 30,127,182.36 Represents idle cash and excess collections of
training fees, bidders bond, sale of bidding
documents, bond for confiscated motor
vehicles and checks/cash advances for
payment received from DENR CO, ERDB,
DBM and other national government agencies
for the purpose of paying personnel benefits
and technical and joint projects.
NCR 6,500.00 Represents bid bond on sales of unserviceable
assets.
54,050.00 Proceeds of sales of unserviceable assets.
Total 32488336.78
NCA about to expire withdrawn from MDS account and transferred to Local Currency
Current Account
PENRO Camarines 26,486,664.39 Pertains to the balance of Notice of Cash
Sur Allocation (NCA) about to expire on
December 29, 2014 which was withdrawn and
deposited to Bank Account No. 2004-90069-4
a Cash-in-Bank, LCCA. Hence, payables at
the end of the year were paid in the ensuing
year from the current account.
PENRO 2,081,258.59 Pertains to the balance of the NCA for CY
ZamboangaSibugay 2014 which was transferred to the Local
Currency Current Account to avoid lapsing
and being reverted automatically to the BTr,
but this amount was eventually remitted to the
BTr in February 2015. The current account
should have been closed because the purpose
for which the account was opened can no
longer be recalled by the accountant and
documents pertinent to its opening could not
be located anymore aside from being dormant
for five years.
Total 28567922.98
Dormant unrecorded bank accounts not remitted to the BTr
FMB 355,370.42 Represents dormant unrecorded bank
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 Region/PENRO Amount Particulars
PENRO 83,160.11 accountswhich were not remitted to the BTr.
Zamboanga del
Norte
Total 438530.53
Grand Total P877061.06

11.5 On the other hand, refunds for excess cash advances and overpayments in
PENRO Leytewere deposited to the current account being maintained by the
agency rather than to the BTr which is inconsistent to COA Circular No.
2013-002 dated January 30, 2013. According to the accountant they use the
money to pay/disburse succeeding traveling allowances of PENRO
employees and for other operating expenses of the agency.

11.6 We recommended and Management agreed to require the:

a) Cashiers and the Accountants of the DENR-NCR, Regions IV-A and

I and PENRO Pangasinan to facilitate the immediate remittance of
collections for Performance/Bidders Bonds and Income from
Seminars and sale of unserviceable assets amounting to
P2,361,154.42 to the Bureau of the Treasury as required under the
pertinent provisions of the GAA for CY 2014;

b) The Finance Division/Accounting Unit of Region V to (i) identify the

breakdown of the balance of cash in bank per type of fund, i.e.,
terminal leave benefits, special projects, cash advance, sale of bid
documents, etc. that is merged/pooled in the current account; and
(ii) henceforth, maintain subsidiary records for cash advances or
fund transfers deposited in current accounts for proper monitoring;

c) FMB and PENRO Zamboanga Del Norte to remit to BTr the

P355,370.42 andP83,160.11representing the balances of their
respective unrecorded and dormant bank accounts;

d) Cashier of PENRO Leyte to stop the practice of depositing refund of

cash advances to the current account and utilizing for future travel
claims and ensure that all collections on refunds of cash advances
are always remitted to the BTr;

e) PENROCamarines Sur (i) immediately remit the amount of

P26,486,664.39 to the Bureau of the Treasury and (ii) henceforth, all
payables of the prior years shall only be paid of NCA requested and
released for the purpose in the ensuing year; and

f) PENRO ZamboangaSibugay to require the OIC-Accountant to

comply with the provisions DOF-DBM-COA Joint Circular 4-2012
116
 dated September 11, 2012 on the proper disposition of the
dormant/unnecessary account.

11.7 Management of PENRO Camarines Sur made an appeal not to return the
P26,486,664.39 but use the amount for the payment of unpaid vouchers
instead of remitting it to the Bureau of the Treasury, since majority of the
unpaid vouchers are for payment of contractors of NGP projects.
Prolonging the payment of their claims may create another problem for them
because they know for a fact that delayed payment may cause burning or
destroying their NGP projects.

11.8 The transfer of the NCA about to expire to the Cash in Bank-Local Currency
Current Account is in defiance of an existing regulation. The transfer itself
was without authority. If there was proper budgeting and planning of the
implementation of the NGP projects, there can be no delayed payments and
no problem will arise. In fact, Accounts Payable was not only for NGP
projects but also included payables for Training Expenses, Office Supplies,
Other Professional Services, and Construction of Eco-Tourism Building.

Unreliable balance of various receivables accounts – P2,660.082 million

12. The balance of the Receivable accounts amounting to P2,660.082 million was
not fairly presented due to (a) various accounting errors/ omissions and
deficiencies understating receivable accounts by P117.944 million;
(b) unreconciled difference of P213.182 million between the DENR books and
the implementing agencies and other partners; (c) presence of “unreconciled”
and negative balances amounting to P8.372 million in the SLs and/or
unreconciled general ledger and subsidiary ledger balances of P493,188.41;
and (d) absence of SLs.

12.1 Section 111 of PD No. 1445 provides that (1) the accounts of an agency
shall be kept in such detail as is necessary to meet the needs of the agency
and at the same time be adequate to furnish the information needed by fiscal
or control agencies of the government and (2) the highest standards of
honesty, objectivity and consistency shall be observed in keeping of
accounts to safeguard against inaccurate or misleading information.

12.2 The various receivables accounts revealed various accounting errors and
deficiencies which affected the reliability of the receivable and other
accounts.

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 a) Non/Erroneous recording/reclassification of fund transfer (CO, NCR,
CAR, FMB, RV)

12.3 There were various errors in recording and/or reclassification of accounts by

the following offices thereby understated the various receivable accounts by
P117,943,708.38, Due to Regional Offices by P145,000.00, Accumulated
Surplus by P2,821,404.39 and overstated various PPE accounts by
P114,977,303.99 as shown below:

Office Account Overstatement Remarks

(understatement)
CO Buildings P 3,954,450.25 The unliquidated fund transferred to
Due from National (3,954,450.25) DPWH-QCFED of P3,954,450.25 on
Government Agencies December 12, 2014 for the construction/
completion of DENR Hostel Phase 3 was
reclassified to Buildings account, hence
understated the Due from National
Government Agencies and overstated the
Buildings both by P3,954,450.25.
Due from Government 460,487.88 The liquidation of PITC on the
Owned and Controlled procurement of furniture and fixtures
Corporations amounting to P460,487.88 covered by
Furniture and Fixtures (460,487.88) Credit Notice No. 2014-22 dated May 23,
2014 issued by the Audit Team Leader of
PITC, was not recorded in the books.
NCR Other Infrastructure The Accounting Section recorded the
14,483,341.62
Assets P14,483,341.62 fund transferred to Pasig
Due from National River Rehabilitation Commission to
Government Agencies (14,483,341.62) Other Infrastructure Assets account
instead to Due from NGAs account.
Due toRegional Erroneous recording of receipt and
(145,000.00)
Offices liquidation of funds received from
Due from Regional (145,000.00) DENR-IVA, IVB and V. The Due from
Offices NGAs account was credited upon receipt
of funds while Due to NGAs account was
debited upon payment even without the
set-up of liability account.
Due from National Double recording of various liquidation
Government Agencies (2,101,404.39) reports due to submission of advance
Various Expenses copies and poor monitoring of liquidation
2,101,404.39 reports.

R4A Due from Government

Owned and Controlled 800,000.00 Fund transferred to UP Los Baños
Corporations recorded as Due from Government
Due from National Owned and Controlled Corporations
(800,000.00)
Government Agencies
Buildings 97,000,000.00
Funds transferred to PS-DBM
Due from National
(97,000,000.00) erroneously debited to Buildings
Government Agencies
RV Other Receivables (720,000.00) Unremitted financial support for the
Other Business (720,000.00) period July to December 2014 of Bicol
118
 Office Account Overstatement Remarks
(understatement)
Income Hydropower Corporation not accrued as
at year-end.

12.4 In summary, the following accounts were affected:

Account Name Overstated Understated

Due from National Government Agencies P118,339,196.26
Due from Government-Owned and Controlled P1,260,487.88
Corporations
Due from Regional Offices 145,000.00
Other Receivables 720,000.00
Total 1,260,487.88 119,204,196.26
Net effect on Receivables P117,943,708.38
Other Accounts
Buildings P100,954,450.25
Furniture and Fixtures P 460,487.88
Other Infrastructure Assets 14,483,341.62
Due to Regional Offices 145,000.00
Accumulated Surplus 2,821,404.39

b) Unreconciled difference between the books of the DENR and concerned

NGAs – P190,512,614.36

12.5 Confirmation with various agencies revealed differences, as follows:

Per
Office Per Books Difference Remarks
Confirmation
Due from National Government Agencies
CO P0 P698,811,451.18 P200,847,183.28 One of the reasons for the
huge difference was the
receivables from PS-
DBM in the amount of
P205,953,392.17.

Deliveries made by the

PS-DBM in CYs 2013
and 2014 amounting to
P46,475,004.72 were not
recorded in the books of
the DENR-CO due to
non-submission by the
Property Office of AREs
for equipment delivered.
The accounting division is
yet to determine the
causes of the
discrepancies.

On the other hand, a

difference of
119
 Per
Office Per Books Difference Remarks
Confirmation
P13,000,000.00 between
the DENR-CO book
balance and the
Department of National
Defense (DND) balance
pertains to funds
transferred by Ecosystem
Research and
Development Bureau
(ERDB) to DND for
bamboo project which
were recorded by DND as
payables to DENR-CO.
NCR 7,321,687.35 18,656,256.27 (11,334,568.92) Among the identified
causes of the difference is
the unclaimed check of
the PS-DBM amounting
to P818,360.77 and
erroneous recording to
Other Infrastructure assets
instead of Due from
NGAs in the amount of
P14,483,341.62 the funds
transferred to Pasig River
Rehabilitation
Commission (PRRC).

The negative balance of

P145,000.00 for DENR-
IVA, IVB and V was due
to the erroneous recording
of liquidations for the
funds received on
management training.

Due from Local Government Units

NCR 1,000,000.00 0.00 1,000,000.00 Pertains to fund
transferred to City of
Marikina, however, the
Treasurer informed that
they have nothing to
liquidate with the DENR-
NCR.
Total P907,980,321.81 P717,467,707.45 P190,512,614.36

c) Subsidiary ledgers (SL) with “Unreconciled” and negative balances of

P8,372,496.88 and/or P493,188.41 difference between general ledger
and subsidiary ledger balances (CO, NCR, CAR)

12.6 The SLs of the following receivable accounts contained either

“unreconciled” and/or “negative” balances.
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 Amount
Office Account Negative
Unreconciled
balances
CO Due from National Treasury P 16,503.39
Receivables- Disallowances and Charges 215,223.09 P 281,280.00
Due from Regional Offices 210,420.00
Other Receivables 7,185,041.16 169,302.21
NCR Due from Officers and Employees 2,197.46
CAR Due from Officers and Employees 11,884.18
Due from GOCCs 99,000.00
Other receivables 181,645.39
Total P7,907,833.03 P464,663.85

12.7 The Accounting Section/Division said that the description “unreconciled” in

the SLs were used during the conversion from manual recording to “e-
NGAS” and are still for further verification.

12.8 Also, the Prepaid Insurance account of CAR, has GL and SL balances of
P1,105,535.08 and P1,598,723.49, respectively, thus, having a difference of
P493,188.41.

d) Absence of SLs - FMB, PENROs Aklan, and Antique

12.9 Subsidiary Ledgers for the different implementing agencies/debtors were

not maintained as required under Section 12 of the Manual on NGAS,
Volume II, thus balances of each recipient could not be readily determined
at any given time.

12.10 The FMB, PENROs Aklan, and Antique failed to maintain subsidiary
ledgers resulting in the difficulty of ascertaining the validity and existence
of the year-end balances.

12.11 We recommended and Management agreed to require the Accountants

of:

a) CO, NCR, RO IV-A, and RO V to make the necessary adjusting

entries to correct the erroneous recording/reclassification of various
receivable accounts;

b) CO and NCR to coordinate with the Accountants of the concerned

National Government Agencies and reconcile their respective
records and make the adjusting entries, if necessary;

c) CO, NCR and CAR to exert all efforts to analyze, verify, confirm
and reconcile the “unreconciled” and negative balances by
referring to the earliest available records and make necessary
adjustments in the books to correct the balances of the accounts;
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 d) CAR to establish the cause/s of the difference in the balances
between the general and subsidiary ledgers of the affected accounts
and make the necessary adjustments; and

e) FMB and PENROs Aklan and Antique to maintain Subsidiary

Ledgers and retrieve the pertinent data for all recipients of funds
transfer to support the GL accounts and for monitoring purposes as
to their respective liquidation and balances.

Unliquidated inter-agency and other receivables - P1,747.566 million

13. Various inter-agency and other receivable accounts amounting to P1,747.566

million remained unliquidated, of which P684.133 million or 39.15 percent
were aged over one year to more than three years.

13.1 Section 4.6 of COA Circular No. 94-013 dated December 13, 1994 requires
that within ten days after the end of each month or the end of the agreed
period for the project, the Implementing Agency (IA) shall submit to source
agency the Report of Checks Issued (RCI) and the Report of Disbursement
(RD) to report the utilization of the funds. Only the actual project expenses
shall be reported. The reports shall be approved by the Head of the
Implementing Agency.

13.2 Section 4.9 of same Circular further requires that the IA shall return to the
Source Agency (SA) any unused balance upon completion of the project.

13.3 The various inter-agency and other receivable accounts which were subject
to liquidation were aged less than one year to more than three years, as
presented below:

Office Total Amount Less than 1 year Over 1 – year Over 2 years 3 years and above

Inter-Agency Receivables
Due from National Government Agencies
CO P1,373,466,439.99 P1,028,194,447.23 P98,281,343.38 P127,819,498.36 P119,171,151.02
Region 5 9,271,096.39 6,890,112.15 77,506.00 1,906,227.52 397,250.72
RO No. IX 8,703,787.08 8,703,787.08
Due from Government Owned and Controlled Corporations
CO 0 0.00 0.00 0.00 0
R4A 1,700,000.00 900,000.00 800,000.00
Due from Local Government Units
RO VI 1,258,750.00 58,750.00 1,200,000.00
Penro
Kalinga, 572,932.20 572,932.20
CAR
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 Office Total Amount Less than 1 year Over 1 – year Over 2 years 3 years and above

RV 5,679,575.29 2,100,000.00 2,554,000.00 1,025,575.29

PENRO
Zamboanga
399,190.50 399,190.50
Del Sur
(ZDS)
PENRO 622,316.33 622,316.33
Sultan
Kudarat
Sub-total 1,740,867,451.26 1,063,274,346.46 361,938,789.38 189,125,725.88 126,528,589.54
100% 61.08% 20.79% 10.86% 7.27%
Other Receivables
Due from Non-Government Organizations/Peoples Organizations
Penro
Kalinga, 71,848.60 71,848.60
CAR
Region I 4,843,446.71 158,712.70 4,684,734.01
RO IX 96,000.00 96,000.00
PENRO 912,563.97 912,563.97
ZDS
Other Receivables
NCR 355,704.59 355,704.59
Region I 335,504.40 335,504.40
PENRO 83,654.17 83,654.17
Sultan
Kudarat
Sub-total 6,698,722.44 158,712.70 0.00 4,684,734.01 1,855,275.73
100% 2.37% 0.00% 69.93% 27.70%
Grand Total P1,747,566,173.70 P1,063,433,059.16 P361,938,789.38 P193,810,459.89 P128,383,865.27
P684,133,114.54
100% 60.85% 39.15%

13.4 The table showed that P684,133,114.54 or 39.15percent were outstanding

for over one year to more than three years.

 Inter-Agency Receivables

 Due from National Government Agencies

In the Central Office, of the P119,171,151.02 outstanding balance for three

years and over, P11,677,019.81 pertains to the forwarded beginning
balances of 25 NGAs and transferred receivables in the amount of
P11,548,643.65 to eight NGAs of various completed foreign-assisted
projects or an aggregate amount of P23,225,663.46 which lack documents to
warrant existence thereof.

Also included in this account is the P35,000,000.00 fund transferred on

September 19, 2013 to the DPWH-NCR as part of the Memorandum of
123
 Agreement (MOA) dated September 5, 2012 amounting to P220,000,000.00
for the construction of seven-storey Green Data Center. It was noted,
however, that the amount of P220,000,000.00 was charged to IT Equipment
and Software instead to Office Building which is not in accordance to COA
Circular No. 2004-008 dated September 20, 2004, the Updated Description
of Accounts Under the New Government Accounting System.

 Due from Government Owned and Controlled Corporations

The table showed that of the P339,193,363.48 transferred by the DENR-CO

to various GOCCs, P3,140,173.48 or .93 percent remained unliquidated for
more than three years which included the following:

GOCC Transferred Particulars

Amount Year
NRDC P67,340.00 2004 For payment of 3,000 liters Biodiesel for use
of the Motorpool Section of DENR-CO
PFC 1,000,000.00 2008 For the establishment of 20 hectares Jatropha
Demo Plantation in Barangay Liyang, Pilar,
Bataan
PADCC 1,972,833.48 2011 Share of DENR in the Agraryo Trade Fair
(ATF).
Total P2978856.48
Legend: NRDC - Natural Resources Development Corporation
PFC - Philippine Forest Corporation
PADCC - Phil. Agricultural Development and Commercial Corp.

It was also noted that all funds transferred to the PITC in the aggregate
amount of P336,053,190.00 for the procurement of various goods and
services were supported with one and the same MOA executed on June 27,
2012 which is merely for appointing and engaging PITC as either provider
of Procurement Outsourcing Services or Supplier of DENR’s goods and
services requirements. There was no specific MOA or any agreement that
refers to a specific fund transfer with the following necessary provisions:

a) Kinds of goods/services being contracted upon

b) Contract amount
c) Contract duration
d) Timelines for the delivery of the deliverables
e) Place of delivery
f) Imposition of liquidated damages in case of non or delayed
delivery of the contracted goods/services by the PITC

It is commonsensical that the terms of reference in the contract must include

the provisions under letters a to e, while Section 68 of the Revised
Implementing Rules and Regulations (IRR) of R.A. 9184 provides that all

124
 contracts shall contain provision on liquidated damages which shall be
payable by the contractor in case of breach thereof.

Moreover, funds transferred already expended/utilized were not yet

liquidated, unutilized/unexpended balance not refunded, and succeeding
fund transfers were not supported with a Certification by the Accountant
that funds previously transferred to the Implementing Agency has been
liquidated, post audited and accounted for in the books.

In Region 4A, the amount of P800,000.00 transferred to UPLB on

December 3, 2013 for the Conduct of Study on Watershed Characterization,
Vulnerability Assessment and Preparation of Integrated Watershed
Management Plan for San Cristobal-Macabling Rivers Watershed located in
the Provinces of Cavite and Laguna should have been liquidated within 30
days from completion of the activities on March 31, 2014.

 Due from Local Government Units

In Region VI, the purpose of the fund transferred to various LGUs have
already been attained, hence should have been liquidated.

On the other hand, the funds transferred by PENRO- Kalinga and Region V
to the LGUs amounting to P572,932.20 and P1,025,575.29, respectively,
were under the Social Reform Agenda, Poverty Alleviation Fund II (PAF II)
implemented in CY 1997. In like manner, funds transferred by PENRO
Sultan Kudarat to the LGUs were outstanding since CY 1998.

The Management of PENRO Kalinga had issued demand letters in October

2004 to the implementing agencies but no follow up were done to track
these fund transfers. Likewise, the audit team has also issued confirmation
letters but has not received any reply as of finalization of the consolidated
management letter in May 4, 2015.

In PENRO Zamboanga Del Sur, the accountant informed that the fund
transfers have remained unliquidated for more than ten years because the
concerned LGUs denied settling their obligation despite of repeated
demands/tracers for reason that the fund transfers happened during the
previous administration of the LGUs.

The existence of long outstanding balances of Due from Local Government

Units for more than 15 years showed lacking efforts by management to
closely monitor utilization and liquidation of funds transferred to
implementing agencies and to strictly enforce the provisions of COA
Circular No. 94-013 dated December 13, 1994 and Paragraphs 3.1.2 and
3.1.3, COA Circular No. 2012-001 dated June 14, 2012.

125
 Other Receivables

 Due from Non-Government Organizations/People’s Organizations

The funds transferred by PENRO Kalinga were part of the Social Reform
Agenda, Poverty Alleviation Fund II (PAF II) way back in November 1997
as previously discussed wherein Management had issued demand letters in
October of 2004 to the implementing agencies but no follow up were done
to track these fund transfers.

In Region I, of the balance of P4,843,446.71 as of November 30, 2014, the

amount of P4,684,734.01 were still outstanding for two years despite
completion of the projects.

The P96,000.00 funds transferred by RO No. IX and PENRO Zamboanga

Del Sur to NGOs/PO’s remained unliquidated for more than nine years. The
Accounting personnel of RO IX informed that they have no knowledge as to
the status of the said receivables since the balances of the accounts already
existed when she assumed Office. It was also noted that management had
not instituted any legal/appropriate actions against the concerned NGAs and
NGOs/POs for non-submission of liquidation reports. On the other hand, the
accountant of PENRO Zamboanga Del Sur explained that liquidation is not
anymore possible due to incomplete addresses and more than ten years had
elapsed.

Inclusion of the unliquidated fund transfer in the financial statements

overstated the receivable account and either understated the expense
accounts and/or overstated the Accumulated Surplus account.

 Other Receivables

The P355,704.59 receivables of DENR-NCR is undocumented rendering the

account doubtful.

On the other hand, the receivables of Region I represents refund of

scholarship remuneration which has a collection of only P34,364.22 or
9.31percent collectability rate from last year’s balance of P369,228.62 due
to management’s authorization of settlement by the personnel through salary
deductions at P2,000.00 per month, instead of immediate and full
settlement. The salary deductions scheme was not approved by the COA.

It is worth-mentioning that at the NCR, the Due from Officers and

Employees account includes the net balance of P732,516.48 for the refund
of scholarship grants by two employees. It is also informed that one
applied for separation from the service due to the approval of the agency’s

126
 rationalization plan while the other transferred to the Ecosystems Research
and Development Bureau (ERDB).

13.5 We recommended and Management agreed to:

a) require the Accountants of

 CO, NCR, ROs I, IV-A, V, VI and IX and PENROs Kalinga,

Zamboanga del Sur and Sultan Kudarat to enforce and monitor
the liquidations of fund transfers to the implementing agencies
and strictly adhere to the provisions of COA Circular No. 94-013
to avoid the accumulation of huge and long outstanding
balances; and

 PENRO Sultan Kudarat conduct in-depth analysis and

verification of the dormant receivable account, and determine
those deemed uncollectible after all efforts have been exerted for
possible write-off in accordance with COA Circular No. 97-001.

b) stop the release/transfer of additional funds to the concerned

implementing agencies until such time that the
liquidation/accomplishment reports on the use and implementation
of the projects are submitted to ensure that specific activities are
implemented within the specified timelines to prevent delays in the
implementation of the projects;

c) request the implementing agencies to return any unused balances

for projects that have long been concluded;

d) closely review the documents of all the proposed projects prior to

the release of funds to implementing agencies in order to avoid risk
of misapplication and/or inappropriate use of the project funds;

e) consider initiating necessary legal measures to compel concerned

LGUs and NGOs/POs to settle their long outstanding accounts;

f) execute a separate and distinct MOA for each and every transaction
not only with the PITC but with all other contractors and make sure
that the MOA contains all the pertinent provisions for the benefit of
both contracting parties;

g) require the Budget Officer to make representations with the

Department of Budget and Management (DBM) for realignment of
P220,000,000.00 from IT Equipment and Software to Office
Building; and

127
 h) request the Head of the Ecosystems Research and Development
Bureau (ERDB), thru the Accountant, to withhold the salary of
concerned employee until such time that her obligation with the
DENR-NCR is settled.

13.6 The Management of CO commented thatthe Accounting Division has been

sending demand letters to recipient NGAs thus resulting in liquidation of
transferred funds in the total amount of P137,786,428.92 recorded under
various Journal Entry Vouchers (JEVs) from January to March 2015. They
will also send the demand letters to the 25 NGAs with unmoving balances
including those transferred balances from completed foreign assisted
projects. Coordination between PSMD and other offices is also being done
so that necessary documents for items already delivered by PS-DBM will be
submitted to the Accounting Division so that necessary recording in the
books will be effected. The Accounting Division has already reclassified
from Office Building to Due from NGAs the P3,954,450.25 transferred to
DPWH. Moreover, guidelines on the proper preparation of the MOA will be
established and appropriately coordinated with Legal Service to ensure
submission of duly accomplished MOA.

13.7 Management of PENROCamarines Norte and Camarines Sur likewise

commented that demand letters were sent to all concerned LGUs and will
coordinate with the concerned LGU’s for the immediate liquidation of the
fund transfers.

Unreliable balances of Inventory accounts – P359.531 million

14. The balances of the Inventory accounts in the amount of P359.531 millionwere
not fairly presented due to(a) non-conduct of physical count of supplies and
materials in ROs I, X, XIII to determine their existence; (b) errors/omissions in
recording of deliveries/transfers/issuances of inventories in ROs I, V, XIII and
FMB, thus, understating inventories by P10.953 million;(c)non-updating
andnon-maintenanceof SLCs inLMB, ROs I, V and X; and (d) unreconciled
balances between the GL and RPCIin LMB and FMB amounting P6.653
million.

14.1 As of December 31, 2014, the total balance of the Inventory accounts was
P359,531,182.45.

14.2 Audit of the Inventory accounts disclosed the following deficiencies in the
recording of inventory and related transactions and lapses in the
management thereof:

128
 a) Non-conduct of physical count of supplies and materials, hence, non-
submission of RSMI and RPCI

14.3 ROs I, X and XIII did not conduct physical inventory-taking of office
supplies, and other supplies and materials, hence, non-submission of the
Report on Physical Count of Inventory (RPCI) as required under NGAS
Manual to determine their existence. The RPCI shall be prepared every six
months in three copies and shall be certified by the Inventory Committee
and approved by the head of the agency. It shall be submitted to the Auditor
concerned and Accounting Unit not later than July 31 and January 31 of
each year for the first and second semester.

14.4 In RO XIII, the Report of Supplies and Materials Issued (RSMI) was
prepared but not submitted by the General Services Section to the
Accounting Section on a timely manner, details follow:

CY 2014 Submission of RSMI

January Not submitted
February March 3, 2014
March April 14, 2014
April May 23, 2014
May July 15, 2014
June September 1, 2014
July October 14, 2014
August October 14, 2014
September November 27, 2014
October November 27, 2014
November January 16, 2015
December January 16, 2015

b) Errors/omissions in recording transactions-P10,953,345.95

14.5 Errors and omissions in the recording of deliveries, transfer and issuances of
supplies resulted in the understatement of inventory accounts by
P10,953,345.95:

Over/(Under)
Office Deficiency Accounts Affected
statement
RO I Inclusion of undelivered Office Supplies Inventory P1,580,689.77
goods
Purchase of Carpet are Office Supplies Inventory (275,100.00)
recorded as outright
expense
RO V Non-recording of the Accountable Forms, Plates (618,616.00)
129
 Over/(Under)
Office Deficiency Accounts Affected
statement
judicial forms in the and Stickers Inventory
books
FMB Issued supplies and Fund 101: (146,207.66)
materials for Fund 158 Office Supplies Inventory
recorded under Fund Fund 158: 146,207.66
101 Office Supplies Inventory
RO Recording as outright Office Supplies Inventory
XII expenses of purchased Construction Supplies (11,640,319.72)
Office and Construction Inventory
Materials
Total P (10,953,345.95)

14.6 In RO V, accountable forms costing P618,616.00 were not recorded in the

books as inventories because the Accounting Section is not being informed
of the receipt and disposition of forms, therefore, corresponding journal
entries are not made and no accounting records maintained.

14.7 Also, Report of Accountability for Accountable Forms (RAAF) were not
prepared and submitted monthly as required under Section 68 of NGAS
Manual, hence, the movement and status of the judicial forms in the
possession of the accountable officer were not regularly reported.

c) Non-maintenance/Non-updating of Supply Ledger Cards

14.8 In LMB and RO I, SLCs are not being updated while in ROs V and X, the
SLCs are not being maintained.

d) Unreconciled balance between the GL and RPCI (LMB and FMB) –

P6,653,149.43

14.9 There was a difference of P6,653,149.43 between the balance of GL of

P44,949,604.25 and the RPCI of P38,296,454.82, shown as follows:

Balance
Office Inventory Account Difference
GL RPCI
LMB Office Supplies P5,762,497.95 P0.00 P5,762,497.95
Accountable Forms, 38,357,520.00 37,411,652.00 945,868.00
Plates, and Stickers
Other Supplies and 90,991.14 0.00 90,991.14
Materials
FMB Office Supplies 738,595.16 884,802.82 (146,207.66)
Total P44,949,604.25 P38,296,454.82 P6,653,149.43

14.10 In LMB, the RPCI for office supplies and other supplies and materials were
not submitted by the Supply/Property Officer to the COA and Accounting

130
 Unit while the difference of P945,868.00 for accountable forms were due to
the following which resulted in the net overstatement of the GL:

Over/(Under)
Particulars
Statement
Dormant portion P20,000.00
Unrecorded receipt of accountable forms from NPO (280,000.00)
(Agricultural Patent)
Overstatement of recorded issuance of forms (Oct-Dec 2014, (396,000.00)
Residential Patent) JEV 2014-06-54 dtd June 30, 2014
P3,300,000.00 – P2,904,000.00
Unrecorded issuance of Agricultural Patent (Dec. 2014) 140,000.00
Unrecorded purchase of Check booklets 10,000.00
Unrecorded issuances of forms (Oct-Dec 2014, Residential 1,451,868.00
Patent) 10,999 x 2 x P66.00
Net Overstatement P945,868.00

14.11 In FMB, the discrepancy of P146,207.66 was due to erroneous recording in

the books of Fund 101 for supplies and materials issued under Fund 158.

14.12 We recommended and Management agreed to requirethe:

a) concerned offices toconductPhysical Inventory of Supplies every

semester and prepare the Report on Physical Count of Inventory
copy furnish the COA, not later than July 31 and January 31;

b) concerned accountable officer to regularly prepare the RAAF;

c) concerned Supply/Property Officer to submit the RPCI and RSMI

regularly to the Accountant; and

d) respective Accountants to make the necessary adjustments in the

books for fair presentation of the financial statements.

Unreliable Other Assets accounts –P817.302million

15. The balance of Other Assets accounts amounting to P817.302 million was
unreliable due to(a) discrepancy of P164,151.29 between the GL and Schedule
of Unliquidated Advances to Special Disbursing Officers account in
FMB; and (b) errors/omissions in recording advances and prepayments in
CAR resulting in a net understatement of Other Assets and Accumulated
Surplus accounts both in the amount of P4.302 million.

15.1 As of December 31, 2014, the total Other Assets has a balance of
P817,302,013.33

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15.2 The general ledger and other related reports revealed the following:

a) Discrepancy between GL and Schedule of Unliquidated Advances to

Special Disbursing Officer (FMB) – P164,151.29

15.3 In FMB, the GL of the Advances to Special Disbursing Officer account

showed a total balance of P4,720,224.00 as of December 31, 2014. On the
other hand, the Schedule of Unliquidated Advances to Special Disbursing
Officer showed a balance of P4,556,072.71, thus a difference of
P164,151.29.

b) Errors/omission in recording advances and prepayments in CAR, FMB

and CO – P4,301,853.42

15.4 Various errors or non-recording of advances and prepayments resulted in

understatement of Advances to Contractors account by P4,252,751.00,
Advances to Special Disbursing Officers account by P15,341,165.68 and
Other Prepayments account by P49,102.42 and overstatement of Advances
to Officers and Employees account by P15,241,165.68 or a net
understatement of P4,301,853.42.

Offic Account Over/(Under) Remarks

e Statement
CAR Advances to P(4,252,751.00) Crediting the account for the
Contractors Recoupment even without the
corresponding debit entry for
mobilization. The errors occurred way
back in CY 2007
Other Prepayments (49,102.42) Various adjustments without the
recorded original entries and double
recording of lapsed premiums.
FMB Advances to Officers 324,000.00 The cash advance granted to Special
and Employees Disbursing Officer was erroneously
debited to Advances to Officers and
Advances to Special (324,000.00) Employees account instead of Advances
Disbursing Officer to Special Disbursing Officers account.
Upon adjustment, the account Payroll
Fund/Advances for Payroll was debited
instead of Advances to Special
Disbursing Officers; and account
Advances to Special Disbursing Officers
was credited instead of Advances to
Officers and Employees. Subsequently,
the liquidation report was recorded by
debiting the account Training Expenses
and credited the Advances for Payroll
account.
CO Advances to Officers 15,017,165.68 Balance of advances granted to Special
and Employees Disbursing Officers included in the
Advances to Officers and Employees.
132
 Offic Account Over/(Under) Remarks
e Statement
Advances to Special (15,017,165.68)
Disbursing Officers
Net Understatement P4,301,853.42

15.5 We recommended and Management agreed to require the Accountants

of CAR, FMB and Central Office to reconcile their respective records
and make the correcting/adjusting entries.

16. Cash advances were not liquidated at year end and additional cash advances
were given to various employees even if the previous cash advances were not
yet liquidated, thus, resulted in the accumulation of unliquidated cash
advances amounting to P36.565 million.

16.1 Section 89 of Presidential Decree No. 1445 states that “No cash advance
shall be given unless for a legally authorized specific purpose. A cash
advance shall be reported and liquidated as soon as the purpose for which it
was given had been served. No additional cash advance shall be allowed to
any official or employee unless the previous cash advance is first settled or a
proper accounting thereof is made”.

16.2 Likewise, COA Circular No. 97-002 dated February 10, 1997 also provides,
among others, that:

 A cash advance shall be reported on as soon as the purpose for which it

has been given has been served.

 The Accountant shall obligate all cash advances granted. He shall see
that cash advances for a particular year are not used to pay expenses of
other years.

 All cash advances shall be fully liquidated at the end of each year.
Except for Petty Cash Fund, the Accountable Officer (AO) shall refund
any unexpended balance to the Cashier/Collecting Officer who will issue
the necessary official receipt.

16.3 The failure to liquidate the cash advances which were already considered
expended as of year-end overstated the Advances to Special Disbursing
account and understated the related expense accounts.

133
 a) Unliquidated cash advances – P36,565,345.69 (CO, FMB, PENROs
Antique and Agusan Del Sur, ROs IX and XII)

16.4 The Other Assets account Advances to Officers and Employees of the
following offices has a balance of P36,565,345.69 as of December 31, 2014,
summarized as follows:

Offices 1-30 Days 31-365 Days Over 1 Year Over 2 Years TOTAL
CO P2,775,289.10 P11,846,233.16 P375,860.03 P14,997,382.29
FMB 931,395.00 3,624,677.71 4,556,072.71
PENRO
844,058.12 844,058.12
-Antique
RO IX 1,526,847.00 1,405,856.00 170,050.63 832,825.49 3,935,579.12
PENRO
Agusan 1,650,273.14 41,022.92 1,691,296.06
Del Sur
RO XII 5,443,772.01 669,180.17 4,362,322.24 65,682.97 10,540,957.39
Total P11,521,361.23 P19,196,220.18 P4,573,395.79 P1,274,368.49 P36,565,345.69
16.5 The balance in the CO showed that the outstanding balance for over two
years as at year end of P375,860.03 or 2.51 percent of the P14,997,382.29
pertains to the unliquidated cash advances of forty-two (42) DENR officers
and employees who are not anymore connected with the Department. Part of
the unliquidated cash advances pertains to the unliquidated cash advances of
the former Assistant Secretary for Legislative Affairs Office of the DENR in
the amount of P125,967.50 which was the subject of investigation by the
Office of the Ombudsman since August 2010.

16.6 Demand letters were already sent to officials/employees with unliquidated

cash advances for over three years but said letters remained unanswered.

16.7 Included also were cash advances of the Director for Intelligence and
Confidential activities for Calendar Year 2014 amounting to
P13,950,000.00, representing 88.90 percent of the unliquidated cash
advances of P15,692,516.45, which were liquidated and issued with Credit
Advice on January 28, 2015.Also, P431,165.68or 40 percent of the
P1,067,165.68 unliquidated cash advances of the disbursing officer has been
liquidated as of January 31, 2015.

16.8 In FMB, the cash advances were granted for special purposes which,
supposedly, have been completed as of year-end, thus, the same should have
been liquidated.

16.9 In PENRO-Antique, unliquidated cash advances to Officers and Employees

amounted to P210,594.00 while the year-end balance of Advances for
Payroll accountfor payment of wages of contractual employees and laborers
amounted to P633,464.12.

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16.10 In Region XII, cash advances included unliquidated balances amounting to
P5,097,185.38 which is beyond the reglementary period as prescribed under
existing rules and regulations.

b) Granting of cash advances without liquidating the previous cash

advance (PENRO-Leyte and RO Nos. IX and XII)

16.11 In Regions IX and XII and PENRO-Leyte, additional cash advances were
granted to officers and employees even if the previous cash advances were
not liquidated.

16.12 The Management of PENRO-Leyte also allowed partial settlements/

liquidations of cash advances, contrary to the abovementioned provision that
cash advance shall be reported and liquidated as soon as the purpose for
which it was given had been served.

c) Outstanding Prepayments and Advances to Contractors (FMB and

PENRO-Sibugay) – P617,477.94

16.13 The various Other Current accounts includes unliquidated cash advances
which should have been liquidated and advances to contractors which
should have been already recouped as of year-end, details follows:

Less than Over 1 3 years and

Office Total Amount Over 2 years
1 year year above
FMB
Other
221,879.19 P221,879.19
Prepayments
PENRO-Sibugay
Advances to
395,598.75 P395,598.75
Contractors
P617477.9
Total 0.00 0.00 P395,598.75 P221,879.19
4477.94

16.14 In PENRO ZamboangaSibugay, the Advances to Contractors of

P395,598.75 represents mobilization fees for NGP CY 2012 projects which
has remained outstanding for over two years.

16.15 Section 4.1 Annex E of the Revised Implementing Rules of Republic Act
9184 states that the procuring entity shall, upon written request of the
contractor which shall be submitted as a contract document, make an
advance payment to the contractor in an amount not exceeding fifteen
percent of the total contract price which shall be repaid by the contractor by
deducting fifteen percent from his periodic progress a percentage equal to
the percentage of the total contract price used for the advance payment.

135
16.16 The latest date of completion for the release of the mobilization fees is
December 2013 or after year one of the established plantation. However, the
mobilization fees remained outstanding or unrecouped as of December 31,
2014.

16.17 The accountant said that there might be an error in recording of the progress
payments. Instead of deducting the mobilization fee from the progress
payments, they instead record the progress payments at net of the
mobilization fee, resulting in the understatement of the Construction in
Progress account and overstatement of the Advances to Contractors account
by the same amount.

16.18 We recommended and Management agreed to require the:

a) Accountable Officers to settle their cash advances on or before

December 31 of each year or within the prescribed period (CO,
FMB, PENROs Antique and Agusan del Sur, ROs IX and XII);

b) Accountants to refrain from granting another cash advance without

liquidating the previous ones (PENRO-Leyte, ROs IX and XII);

c) Accountants to exhaust all efforts in locating the former officials

and employees, such as coordination with appropriate government
agencies and thereafter send last and final demand letters. If
proved futile, initiate action required under COA Circular No. 97-
001 dated February 5, 1997 (CO);

d) Cashier to withhold or deduct from the salaries of the officials and

employees who are still active in service their unliquidated cash
advances and administer appropriate sanctions to those with long
overdue accounts in order to enhance/enforce collections (CO);

e) Accountant to establish the nature and details of the dormant Other

Prepayments account and request the write-off of the account in
accordance with COA Circular No. 97-001, if warranted (FMB);
and

f) OIC-Accountant to verify the Advances to Contractors account with

relevant records, and to record the appropriate adjustments to
reflect the correct balance in the financial statements (PENRO
Zamboanga Sibugay).

16.19 The Management of Central Office commented that various Journal Entry
Vouchers (JEVs) were already drawn by the Accounting Division to take up
various liquidations of Advances to Officers and Employees thereby
decreasing the outstanding balance from P14,997,382.29 to P453,231.27 as
136
 of January 31, 2015 and that effort is being exerted to locate the
whereabouts of the concerned former employees.

16.20 On the other hand, the Accountant of FMB commented that she had already
identified the Project concerned and she was directed by Management to
issue a memorandum/demand letter to PENRO Quirino.

Unreliable balances of Property, Plant and Equipment accounts – P16,942.181million

17. The balances of Property, Plant and Equipment accounts in the amount of
P16,942.181 million were unreliable due to (a) unreconciled GL and RPCPPE
balances of the CO, NCR and PENROs Cavite and Camiguin and Regions V
and XIII amounting to P476.999 million; (b) non/delayed submission of
RPCPPE by the CO for NPS-ENRMP and RO IV-A amounting to P331.456
million; (c) presence of negative and “unreconciled” balances amounting to
P46.977 million and P547.778 million, respectively, in the PPE Schedule of the
CO; (d) non-provision/understatement of depreciation at the CO, ROs II and
V, and PENRO-Cagayan amounting to P13.439 million; and (e) erroneous and
non-recording of PPE transactions in CO, BMB, CAR, RO Nos. I, II, XII and
V amounting to P184.324 million.

17.1 The Property, Plant and Equipment (PPE) accounts have a total balance of
P16,942,181,316.18.

a) Unreconciled GL and RPCPPE balances – P476,999,005.16

17.2 There was a difference of P476,999,005.16 between the balances of the GL

of P1,271,738,655.65 and RPCPPE of P794,739,650.49, as shown below:

Balance per Unreconciled

PPE Balance per GL
RPCPPE Difference
DENR-CO
Motor Vehicles P261,290,214.40 P90,317,627.28 P170,972,587.12
Building/ Building 406,949,722.49 388,563,212.56 18,386,509.93
Improvement
Other Structures 6,441,359.49 11,695,232.84 (5,253,873.35)
413391081.98 400258445.4 13132636.580
DENR-NCR
Various PPE
212,284,126.05 35,681,002.40 176,603,123.65
accounts
Other PPE account 5,236,604,74 5,854,623.46
(618,018.72)
217,520,730.79 41,535,625.86 175,985,104.93
PENRO-Cavite
Various PPE 7,796,522.26 7,920,346.83 (123,824.57)

137
 Balance per Unreconciled
PPE Balance per GL
RPCPPE Difference
RO V
Various PPE 18,702,477.52 17,656,582.19 1,045,895.33
accounts
Other PPE account 129,160.66 131,757.00 (2,596.34)
18,831,638.18 17,788,339.19 1,043,298.99
PENRO-Camiguin
Various PPE
account 3,388,119.04 2,326,224.55 1,061,894.49
Region XIII
Various PPE
account 349,520,349.00 234,593,041.38 114,927,307.62
Total P1,271,738,655.65 P794,739,650.49 P 476,999,005.16

17.3 In the CO, the FASPO building demolished during CY 2014 is still included
in the RPCPPE – Office Buildings as of December 31, 2014. However, the
PPE Schedule for Office Building did not include any reference to the
FASPO Building. The RPCPPE indicated that the FASPO Building with
remarks “under renovation” and formerly known as NFDO Building was
acquired on May 10, 1979 at a cost of P20,065,971.75 and was improved
on March 31, 2011 for P360,761.30, hence, the total cost of the building was
P20,426,733.05. The Accounting Division could not provide the book value
of the building due to absence of subsidiary ledger.

b) Non/delayed submission of RPCPPE (FASPO, PENROs Misamis

Occidental, Lanao del Norte and RO IV-A) – P331,455,865.36

17.4 The RPCPPE for National Support Program-Environment and Natural

Resources Management Project (NPS-ENRMP) of FASPO and PENROs
Misamis Occidental and Lanao del Norte were not submitted by their
respective Property Officers:

Office PPE Cost

CO-Funds 102 and Office Equipment P 404,793.28
171 Information and Communication 40,398,150.33
Technology Equipment
Communication Equipment 49,999.95
Other Property, Plant and Equipment 1,049,410.00
Sub-total P 41,902,353.56
PENRO Misamis Various PPE 151,768,174.28
Occidental
PENRO Lanao del Various PPE 137,785,337.52
Norte
Total P331,455,865.36

138
 On the other hand, while the RPCPPE was prepared in RO IV-A, it was
submitted to COA only on April 27, 2015.

c) Negative and “unreconciled” balances recorded in the PPE Schedule

(CO) – P46,977,475.32 and P547,778,057.85, respectively.

17.5 The PPE Schedule of the CO Accounting Division showed negative and
“unreconciled” balances amounting toP46,977,475.32and P547,778,057.85,
respectively, details follow:

PPE Account Negative Unreconciled

Balance Balance
Watercrafts P 4,753,332.14
Aircrafts and Aircrafts Ground
P27,809,053.40 (27,809,053.40)
Equipment
Other Machinery and Equipment 11,412,714.18
Technical and Scientific Equipment 14,000.00 6,243,889.51
Firefighting Equipment and
293,903.32
Accessories
Communication Equipment 3,195,460.56 (2,936,018.82)
Information and Communication
6,754,528.34 (6,524,078.41)
Technology Equipment
Books 3,059,857.52
Machinery 19,500.00
Furniture and Fixtures 59,152,307.90
Office Equipment 5,136,583.65
Other Structures 5,246,126.65
Land Improvements 111,591,420.37
Office Buildings 158,309.49 241,231,531.71
Motor Vehicles 9,046,123.53 121,354,014.03
Land 15,552,027.50
Total P46,977,475.32 P547,778,057.85

139
17.6 The “unreconciled” balances were balances from way back 1980 to
2009which the Accounting Division could not reconcile due to lack of
documents.

d) Non-provision/understatement of depreciation (CO, ROs II and V, and

PENRO-Cagayan)–P13,438,717.51

17.7 Accumulated depreciation of various equipment in the CO, RO V, RO II

and PENRO Cagayanwas understated by P13,438,717.51, as tabulated
below:
Over/(Under)
Project PPE Per Books Per Audit
Statement
CO- Funds 102 and 171
INREMP ADB IT Equipment P27,596.00 P225,300.44 (197,704.44)
INREMP IFAD IT Equipment 0.00 48,183.85 (48,183.85)
FMP Motor Vehicles 42,424.96 272,776.21 (230,351.25)
PCEEP OTF Various equipment 497,340.37 568,000.73 (70,660.36)
CBFMMP Various equipment 681,315.62 692,375.76 (11,060.14)
ICRMP 102 Various equipment 1,125,336.62 1,184,357.70 (59,021.08)
ICRMP 171 Technical Equipment 112,361.66 127,118.07 (14,756.41)
IPOPMP IT Equipment 373,759.59 373,416.41 343.18
Sub total 2832538.82 3266228.73 (631,394.35)
RO No. II Various furniture 13,622.40 7,094.70 6,527.70
PENRO Cagayan Various PPE 5678700.040 6539552.16 (10,005,522.37)
Sub-total 11357400.080 13079104.32 -10630045.84
Total P10,113,048.72 P 20,743,437.74 P(10,630,389.02)
Newly reconstructed
Region V Not provided Not provided (2,808,328.49)
assets
Net Understatement P(13,438,717.51)

17.8 The depreciation expenses for various PPE provided by the CO and ROs for
CY 2014 were understateddue to non-revision of estimated residual value
from ten to five percent, non-provision of depreciation for newly
reconstructed assets, and non-recognition of equipment through lease as
required under PPSAS 17 and PPSAS 13. In RO No. II and PENRO
Cagayan, accumulated depreciation as of year-end was also understated by a
net amount of P9,998,994.67.Thus, accumulated depreciation was
understated by at least P13,438,717.51 thereby overstating the carrying
amount of PPE and net surplus as presented in the financial statements.

17.9 Various deficiencies in recording accumulated depreciation were also noted

in the PPELC of the CO, as follows:

The PPELC showed that thirty-four (34) motor vehicles with zero
acquisition cost have accumulated depreciation in the total amount of
P295,556.15, thus, the subject motor vehicles have a negative book
values in the total amount of P295,556.15.

140
 Motor vehicle with a balance of P89,006.80 has a recorded accumulated
depreciation of P8,582,676.80.

Twenty-eight (28) motor vehicles with total acquisition cost of

P120,040,225.80 acquired from 1974 to 2001 were without accumulated
depreciation.

17.10 On the other hand, the NCR did not provide depreciation on some PPE, like
Information and Communication Technology Equipment (ICTE) purchased
in CY 2014, thus overstating the book value of the affected PPE accounts
and understating the related depreciation expenses.
e) Erroneous and non-recording of PPE transactions - P184,323,525.61

17.11 Various errors and non-recording of PPE transactions shown as follows:

Accounts Affected Over/(Under)

Office Particulars
Real Nominal Statement
Payment of ERDS-assisted Repair and
seedling productions taken Maintenance - Land 69,313,072.00
up as outright expenses Improvements
CAR
amounting to Land Improvements-
P69,313,072.00. Reforestation (69,313,072.00)
Projects
Projects amounting to Land Improvements,
P33,303,419.86 were Reforestation 32,354,023.36
recorded as Land Projects
Improvements, Financial Assistance
(30,423,575.65)
Reforestation Projects to NGAs
instead of recording to Donations (853,890.57)
appropriate accounts as Agricultural Produce
prescribed in the Revised (60,412.51)
for Distribution
Chart of Accounts. The
RO V
amount includes Project
Management and Loss of Assets (1,016,144.63)
Supervision Cost of
P949,396.50.
Machinery and Equipment Office and ICT
(1,845,335.00)
acquired thru lease Equipment
purchase agreement not
capitalized amounting to Rent Expenses 1,845,335.00
P1,845,335.00
Central Various deliveries of PS Various PPE (122,853,426.98)
Office and PITC either to DENR
Central Office or directly Due from National 46,453,426.98
to Regional Offices, Government
DENR Bureaus and Local Agencies
Government Units were
not recorded in the books Due from 76,400,000.00
because the Accounting Government Owned
Office was not furnished and Controlled
141
 Accounts Affected Over/(Under)
Office Particulars
Real Nominal Statement
with documents for Corporations
recording:

PS - P46,453,426.98
PITC - 76,400,000.00
P122,853,426.98
Deliveries made in CY
2014 paid in CY 2015
were unrecorded due to
non-recognition of
liabilities.

INREMP ADB IT Equipment (3,823,306.96)

INREMP IFAD IT Equipment (1,291,630.00)
IPOPMP IT Equipment (300,000.00)
FMP Motor Vehicle (1,580,000.00)
Accounts Payable (6,994,936.96)
Unrecorded donations
from United Nations Various PPE (8,079,348.37)
BMB Development Programme- Accumulated Surplus (8,079,348.37)
New CAP
Unrecorded Mitsubishi
Adventure costing
P720,000.00 thru rental
Agreement and 2014 Motor Vehicles (2,258,888.00)
Chevrolet Colorado 4x4 Accumulated Surplus (2,258,888.00)
Region I 2.8L costing
P1,538,888.00 donated by
LGU Piddig, Ilocos Norte
to DENR-RO I
Erroneous recording of Various PPE (2,261,511.66)
PPE Accumulated Surplus (2,261,511.66)
Three unrecorded motor Motor Vehicles (2,142,000.00)
RO II
vehicles Accumulated Surplus (2,142,000.00)
Unrecorded Land located
Land (929,030.00)
RO XII in Koronadal City and
Accumulated Surplus (929,030.00)
Kidapawan City

17.12 In summary, the following accounts were affected:

Account Name Overstated Understated

Land Improvements-Reforestation Projects P36,959,048.64
Office and ICT Equipment 1,845,335.00
Various PPE 133,194,287.01
IT Equipment 5,414,936.96
Motor Vehicles 5,980,888.00
Land 929,030.00
Total understatement on PPE P184,323,525.61
Other Accounts
Agricultural Produce P60,412.51

142
 Account Name Overstated Understated
Due from National Government Agencies P46,453,426.98
Due from Government-Owned and Controlled 76,400,000.00
Corporations
Accounts Payable 6,994,936.96
Accumulated Surplus 54,535,574.18

17.13 Because of the erroneous and non-recording of PPE transactions, there was
a net overstatement of receivables accounts byP122,853,426.98and net
understatement of PPE accounts byP184,323,525.61, Inventory account by
P60,412.51, Accounts Payable by P6,994,936.96 and Accumulated Surplus
by P54,535,574.18.

17.14 We recommended and Management agreed to require the:

a) Heads of the Property and Accounting Division/Section of the

respective offices to have a thorough review and reconciliation of
their respective records and make the necessary adjustments in
order to have the correct balance of the PPE accounts;

b) Accounting Division and the Property and Supply Management

Division of the Central Office to establish the book value of the
demolished building by gathering related documents thereof;

c) Accountants of the concerned offices to recompute the accumulated

depreciations and depreciation expenses of various PPE and make
the necessary adjustments;

d) Accountant of RO V to properly allocate the cost of the PMS to

specific project/asset;

e) Accountant of CAR Regional Office to (i) draw the necessary

Journal Entry Vouchers to record the adjustment in the books;and
(ii)furnish the Accountant of concerned PENRO of the JEV on
transfer to serve as basis in taking up the asset account in their
respective books of accounts;

f) Accountants of the respective offices to record in the books the

unrecorded PPE for proper accountability; and

g) BMB Management to(i) secure and furnish the Accounting and

Property Section copies of the required/necessary documents such
as the Deed of Donation and List of Donated PPEs; (ii) require the
Property Section to immediately conduct inventory of the donated
PPEs and prepare a Report on the Physical Count of Property,
Plant and Equipment (RPCPPE) thereon; and(iii)instruct the
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 personnel in-charge at the Accounting Section to record the donated
equipment in the books of accounts upon receipt of the required
documents and RPCPPE.

17.15 Management of DENR-CO replied that the various Journal Entry Vouchers
(JEVs) were drawn to make the necessary adjustments which the team found
in order.

Unserviceable government vehiclesand confiscated goods/products left deteriorating

under the elements

18. Nine unserviceable motorcycles and one motor vehicle were not disposed of
and left deteriorating in open space at the DENR-CO compound. Likewise,
confiscated goods/products in PENROs Pangasinan, La Union, Ilocos Sur and
CENRO-Batangas City in the amount of P5.189 million were also exposed to
elements and left deteriorating because of inadequate storage facilities.

18.1 During inspection by the DENR-CO Team on March 17, 2015, one KIA
Ceres with Plate No. SEU 452 which, according to the auto mechanic, is
already for condemnation. As reported in the RPCPPE said vehicle was
returned to the GSD for repair.

18.2 On March 20, 2015, nine government motorcycles were found deteriorating
in open space at the DENR-CO, seven of which have no attached Plate
Numbers, and three out of seven were covered with chopped woods.

18.3 Further deterioration of the equipment and property could have been
avoided and higher appraised value could have been gained had there been
an immediate disposal of the unserviceable government property as
provided under the Manual on the Disposal of Government Property which
was circularized through National Budget Circular No. 425 dated January
28, 1992.

18.4 To facilitate the disposal of the increasing quantity of unserviceable

equipment and property, the head of department/agency have been
authorized to dispose of such equipment and property. Together with such
authorization, a uniform procedure of government property disposal is
prescribed in the Manual.

18.5 Moreover, the Property Management Section (PMS) was not able to prepare
the Inventory and Inspection Report of Unserviceable Property (IIRUP) as
required under Section 64 and Appendix 61, Vol. of MNGAS.

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18.6 The IIRUP will serve as guide in making decision on the disposal of
unserviceable equipment and property and the basis for dropping from the
books the unserviceable properties carried in the PPE accounts.

18.7 In PENROs Pangasinan, La Union, Ilocos Sur and CENRO-Batangas City,

ocular inspection of confiscated goods/forest products in the amount of
P5,189,035.28 disclosed that there were no enough storage facilities to
safely keep and preserve them from deterioration due to exposure to heat,
rain, termites and other elements as well as possible loss thru theft.

Office Goods/Products Amount Place Stockpiled

PENRO- Logs, lumber, charcoals, P194,724.94 PENRO’s bodega
Pangasinan trucks, tricycle,
chainsaw
Trucks and its contents 100,000.00 PENRO
compound
Sub-total 294,724.94
PENRO-La Various lumbers 787,942.70 Private Lumber
Union Storage/Shipside
Compound
Various logs and 261,183.45 Private Lumber
lumbers which are Storage/Private
already deteriorated Storage/Shipside
Compound/
ADPLS, Sta.
Rita, Agoo
Sub-total 1,049,126.15
PENRO-Ilocos Forest products, 390,926.60 CENROs
Sur conveyances, Tagudin and
tools/equipment Bantay
Various goods/products 2,902,378.04
Sub-total 3,293,304.64
CENRO- Various forest products 551,879.55 CENRO-
Batangas City and conveyance Batangas City
Sub-total 551,879.55
TOTAL P5,189,035.28
18.8 Chapter 4, E2-4 of the Primer on Illegal Logging provides that
confiscated/seized forest products/conveyances in the custody of
PENROs/CENROs should be provided with a place for adequate
safekeeping/preservation during the pendency of the case.

18.9 The absence of adequate storage facilities for the seized forest products
exposed the items to rapid deterioration which not only diminishes the
realizable economic value of these assets but most importantly, amounted to
wastage of valuable products harvested from nature.

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 18.10 We recommended and Management agreed to require the:

a) PMS of DENR-CO to prepare the IIRUP anddispose unserviceable

motor vehicles and motorcycles in accordance to the Manual on the
Disposal of Government Property; and

b) PENR Officers of Pangasinan, La Union, Ilocos Sur and Batangas to

ensure proper care and storage is provided for the confiscated
products to preserve their economic values and to obtain optimum
benefits therefrom. And if warranted, request for the DENR-CO to
include in the budget the acquisition of storage facility. Otherwise,
source out for available spaces from other government offices for
the safekeeping of the items.

Unreliable balance of Confiscated Property/Assets – P178.924 million

19. The balance of the Confiscated Property/Assets accountof P178.924 million

was unreliable due to (a) unrecorded confiscated forest products and
implements with an estimated value of P12.700 million in four PENROs;
(b) unreconciled difference between the general ledger and RPCI amounting to
P2.006 million in PENROs Catanduanes and Sorsogon.

19.1 Under the 2014 Revised Chart of Accounts for NGAs, the
Confiscated/Abandoned/Seized Goods Inventoryis now converted to Other
Assets with account names Foreclose Property/Assets, Forfeited
Property/Assets, Confiscated Property/Assets and Abandoned Property
Asset, all with corresponding Accumulated Impairment Losses.

19.2 Section 53, Vol. III of the Government Accounting and Auditing Manual
(GAAM), requires the comparison between the recorded accountability with
existing assets to determine whether the actual assets agree with the
recorded accountability. Likewise, Section 491 i(b), Vol. I of same Manual
provides that all discrepancies between physical and book inventories must
be investigated and cleared immediately.

a) Unrecorded confiscated forest products and implements –

P12,700,539.80

19.3 Forest products and implements with an estimated value of P12,700,539.80

were not recorded in the books of PENROs La Union, Pangasinan, Laguna
and Lanao del Norte, detailspresented on the next page.

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 Items Estimated Place
Office Remarks
Confiscated Value Stockpiled
PENRO-La One unit STIHL P10,000.00 PENRO-La Apprehended on Jan. 26, 2014
Union 070 Chainsaw Union and confiscated per Resolution
dated April 4, 2014
Imported 671,148.00 Shipside Apprehended on May 19, 2013
Malaysian Compound and confiscated per Order dated
Lumber April 16, 2014. Products are still
intact but exposed to elements.
26 Mahogany 4,700.00 Private Lumber Apprehended on July 29, 2012
Lumber (0.44 Storage and confiscated per Resolution
cu. M.) dated Sept. 11, 2014.
12 Akleng 8,084.75 Private Lumber Apprehended on April 25, 2014
Parang Lumber Storage and confiscated per Resolution
(0.76 cu. m.) dated Sept. 11, 2014
PENRO- Trucks and 100,000.00 PENRO-
Pangasinan contents Pangasinan

PENRO- Forest products 10,727,394.75 DENR Laguna Based on the estimated List of
Laguna and Impounding Apprehended/Confiscated Forest
conveyances Area Products/Conveyances/
for CY 2013 Machineries for the years 2010 to
2014, estimated value is
P12,207,956.50 while the
recorded balance was only
P1,480,561.75
PENRO- Forest products 1,179,212.30 PENRO-Lanao Per books the recorded amount is
Lanao del and del Norte P800,439.00 but during ocular
Norte conveyances inspection and per report
submitted the total amount should
be P1,979,651.30
P12,700,539.80

b) Unreconciled difference between the general ledger and physical count–

P2,006,009.37

19.4 In PENROs Catanduanes and Sorsogon, the RPCI and the general ledger
balances of Confiscated and Abandoned Properties had an unreconciled net
difference of P2,006,009.37, as follows:

PENRO RPCI General Ledger Difference

Catanduanes P1,743,246.82 P5,933,209.69 (P4,189,962.87)
Sorsogon 4,301,780.44 2,117,826.94 2,183,953.50
Total P6,045,027.26 P8,051,036.63 (P2,006,009.37)

19.5 We recommended and Management agreed to require the –

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 a) Accountants of concerned PENROs to record in their books the
confiscated forest products and implements under the appropriate
accounts in the Revised Chart of Accounts and maintain subsidiary
ledgers;

b) Property Officer to submit the status of confiscated assets as of

December 31, 2014 and every semester thereafter for consolidation
and posting in the stock cards and submit the consolidated report to
the Accountant;

c) Forest Management Section to submit all the necessary documents

to the Accountant and Property Officer and coordinate with the
Accounting and Property Sections to reconcile their records at least
every semester;

d) PENR Officers of concerned PENROs to fast-track summary

administrative proceedings for expeditious rendering of a decision.
For cases under court litigation, refer to Legal Division of the
Regional Office as an initial action in making representation with
the courts for the immediate disposal of confiscated goods/products;
and

e) Property Officers of the concerned PENROs to coordinate with the

Regional Bids and Awards Committee for the immediate disposal
thru public auction of the remaining items/products in custody
while the same can still command better price.

Unreliable balances of payable accounts – P1,188.940 million

20. The balance of the Accounts Payable in the amount of P1,188.940 million was
unreliable due to (a) inclusion of P140.830 millionundocumented and
outstanding liabilities for over three years which remained unreverted to the
Accumulated Surplus; (b) existence of P14.820 million accounts payable which
were already paid to suppliers/consultants; (c) discrepancy of P2.985 million
between the general and subsidiary ledger balances; (d) erroneous account
classification in recording payables of P249,869.40; (e) existence of negative
balances of P105,300.00; (f) discrepancy of P1.887 million between the payable
records and per confirmation; and (g) non-adjustment of stale checks
amounting to P439,674.01.

20.1 As at year-end, the consolidated balance of Accounts Payable of DENR

amounted to P2,115,063,117.80.

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 a) Undocumented and outstanding accounts payables for over two years –
P140,829,635.56

20.2 The consolidated accounts payables of P140,829,635.56 as of year-end of

the following offices were not supported with documents:

Offices Accounts Age Amount

CO
Accounts Payable Over 3 years P1,680,509.58
ICRMP 102
Other Payables Over 3 years 2,000.00
ICRMP 171 Accounts Payable Over 3 years 884,905.60
LMB Due to NGAs dormant 6,828,694.93
NCR Various Payables undocumented 1,336,518.32
CAR Accounts Payable Over 3 years 1,587,745.65
Region 1 Accounts Payable Over two years 110,386,975.99
PENRO-Leyte Accounts Payable Over one year 10,171,296.00
Region XI Accounts Payable Over 3 years 118,082.40
PENRO-South Cotabato Accounts Payable Not indicated 7,832,907.09
Total P140,829,635.56

20.3 The above payables were not substantiated with documentation such as
disbursement vouchers, delivery receipts, purchase orders and such other
proofs of indebtedness, or have been outstanding for over two years and
which no actual claims, administrative or judicial contracts, has been filed or
which were not covered by perfected contracts on record, or both. As a
result, the balances of said payables as of December 31, 2014 were
overstated byP140,829,635.56.

20.4 Considering that thesaidpayables were undocumented, these should have

been reverted to Government Equity as required under Section 98 of PD No.
1445 which provides that “the Commission on Audit, upon notice to the
head of agency concerned, may revert to the unappropriated surplus of the
general fund of the national government, any unliquidated balance of
accounts payable in the books of the national government, which has been
outstanding for two years or more and against which no actual claim,
administrative or judicial, has been filed or which is not covered by
perfected contracts on record”.

b) Non-adjustment of Payables already paid by ADB – P14,820,389.02

20.5 The ADB has already made direct payments to various

suppliers/contractors/consultants in total amount of P14,820,389.02.
However, credits to the account have not been recorded due to the absence

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 of Non-Cash Availment Authority (NCAA) from DBM, details on the next
page.

Project Amount
ICRMP 102 P8,770,989.09
ICRMP 171 6,049,399.93
Total P14,820,389.02

20.6 Verification showed that the request for the issuance of NCAA from DBM
was made in March 2015 only.

c) Unreconciled General and Subsidiary Ledger Balances –

P2,985,311.70

20.7 The general and subsidiary ledger balances of the following payable
accounts were not reconciled:

Offices Accounts GL Balances SL Balances Difference

NCR Due to National P 1,046,429.38 P 474,467.08 P 571,962.30
Government
Agencies
LMB Due to National 2,413,349.40 0.00 2,413,349.40
Government
Agencies
Total P3,459,778.78 P474,467.08 P2,985,311.70

20.8 In the NCR, the Due to National Government Agencies account comprised
of funds transferred from the various NGAs while in LMB, the amount
ofP2,413,349.40 pertains to the fund transfers received from the National
Mapping and Resource Information Authority (NAMRIA).

d) Erroneous account classification in recording payables – P249,869.49

20.9 In the NCR, there were erroneous account classification of payables

resulting in the net overstatement of the account Due to National
Government Agencies by P253,880.16 and understatement of Due to Bureau
of Internal Revenue by P4,010.67 or a net overstatement of Payable
accounts by P249,869.49.

Amount
Accounts
Overstated Understated
Due to NGAs P253,880.16
Due to BIR P4,010.67
Total 253,880.16 4,010.67
Net Effect on Payable Accounts (Net
P249,869.49
Overstatement)

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 e) existence of negative balances of P105,300.00

20.10 The accounts of two consultantsamounting to P105,300.00have negative

balances in the ICRMP 171 books due to erroneous posting in the subsidiary
ledger.

f) Discrepancy between the balance per books and per confirmation (NCR)
– P1,887,132.91

20.11 There is a difference of P1,887,132.91 between the balance per book of

account Due to Other National Government Agencies of P53,701.79 and the
Team’s confirmation of P1,940,835.70 with NAMRIA.

g) Unadjusted stale checks (PENROs Masbate, Camarines Sur, and

Zamboanga del Sur) – P439,674.01

20.12 As defined in Section 187 (c), Government Accounting and Auditing

Manual (GAAM), Volume I, a check is considered stale when it is
outstanding for over two (2) years from the date of issuances or as
prescribed by the government authorized depository banks which is six
months after issuance.

20.13 The following offices have unadjusted stale checks as of year-end:

Office Amount Remarks

PENRO-Camarines Sur P31,808.10 Consisted of two unclaimed
checks
PENRO-Masbate 31,484.32 Composed of 34 checks issued in
prior years (2008-2013) as
shown in the BRS as December
31, 2014
PENRO-Zamboanga del 376,381.59 The BRS as of December 31,
Sur 2014 showed that stale checks in
the total amount of P376,381.59
issued during the year remained
part of the reconciling items.
Total P407865.91

20.14 Checks may be cancelled when they become stale and shall be marked
“cancelled” on its face and reported as follows:

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 a. Unclaimed stale checks which are still in the possession of the Cashier
shall be cancelled and reported in the List of Unreleased Checks as
cancelled.

b. For stale checks which are in the hands of the payees or holders in due
course and requested for replacements, new checks may be issued upon
submission of the stale checks to the Accounting Section.

20.15 Section 55 (4.b) of the Manual on the New Government Accounting System
(MNGAS), Volume I, requires that stale MDS Checks issued in prior years
for replacement should be recorded as follows:

Check Cancellation
Accumulated Surplus (Deficit) ₽xxx
Accounts Payable ₽xxx

Check Replacement

Accounts Payable ₽xxx

Cash-MDS, Regular ₽xxx

20.16 We recommended and Management agreed to require the:

a) Accountants of CO, LMB, NCR, CAR, RO 1, and two PENROs to

analyze and validate long outstanding/undocumented payables
before reversion thereof;

b) Accountants of LMBand NCR to exert all efforts in reconciling the

account balances, review accounting entries, determine any
discrepancies in the accounts and make the necessary adjustments
in the books;

c) CO OIC-Accountantto prepare adjusting entries for the accounts of

Accent Micro Products, Inc.;

d) Overall Director, FASPO to(i) follow up the clearance from ADB

regarding the accounts of Agri consulting S.P.A. in Association with
CEST, Inc. and Nippon Jogesuido Sekkei Co., Ltd. and Silliman
University; and (ii) require the Project Manager of ICRMP to see to
it that the request for NCAA is made to DBM for all liabilities which
were directly paid to suppliers/consultants/contractors on a regular
basis to reflect a more accurate balance of Accounts Payable in the
Financial Statements;

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 e) PENRO-Camarines Sur Accountant to cause adjustments in the
books by restoring to cash account the amount of P31,808.10 and
recognizing payable/liability;and

f) PENROs Masbate and Zamboanga del Sur to (i) communicate with

the payees and require that the stale checks be surrendered for
cancellation and request issuance of replacement checks and
(ii) require the Accountant to record the cancelled checks in
accordance with Section 55 of the MNGAS, Volume I.

Non-inclusion in the Notes to Financial Statements the Reconciliation of Net Cash Flows
from Operating Activities to Surplus/(Deficit)

21. The DENR did not include in the Notes to Financial Statements (NFS) the
Reconciliation of Net Cash Flows from Operating Activities of P3,891.751
million to Surplus/(Deficit) amounting to P7,581.771 million.

21.1 The Philippine Public Sector Accounting Standard (PPSAS) 2 sets out the
requirements for the preparation and presentation of cash flow statements
and related disclosures. The Philippine Application Guidance (PAG) 2 of
PPSAS 2 requires that for uniformity, Philippine public sector entities other
than Government Business Enterprise (GBEs) shall adopt the direct method
in reporting cash flows.

21.2 Under paragraph 29 of PPSAS 2, entities reporting cash flows from

operating activities using the direct method are also encouraged to provide
reconciliation of the surplus/deficit from ordinary activities with the net cash
flow from operating activities. The reconciliation may be provided as part of
the cash flow statement or in the NFS. Likewise, paragraph 56 of PPSAS 2
requires that an entity shall disclose the components of cash and cash
equivalents, and shall present a reconciliation of the amounts in its cash flow
statement with the equivalent items reported in the statement of financial
position.

21.3 The DENR prepared the statement of cash flows for the year ended
December 31, 2014 whereinnet cash flows from operating activities was
reported at P3,891,750,905.10. However, the Accounting Office did not
present in the NFS the reconciliation of the net cash flows to surplus/deficit
reported at P7,581,771,391.60. According to the accounting staff, she was
not able to prepare the reconciliation because of time constraints and
unfamiliarity of preparing the same.

21.4 We recommended and Management agreed to:

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 a) capacitate employees in the preparation of financial statements in
accordance with the PPSAS; and
b) require the Accountant to henceforth include in the Notes to
Financial Statement as required under PPSAS 2 the Reconciliation
of Net Cash Flows for Operating Activities to Surplus/(Deficit).

Inadequate controls in hostel operations

22. The DENR’s internal control in the operation of the hostel is inadequate as
manifested in the (a) non-issuance of official receipts to the hostel guests for
room accommodations resulting in the non-recording of actual income and
expenditures; (b) non-bonding of the hostel in-charge who personally kept and
handled the collections; (c) acceptance of payments by other personnel,
including security guards on duty; and (d) deficiencies in the documents which
affected the reliability of the DENR Hostel Guest Accommodation Report
(2014) which may lead to misappropriation of funds.

22.1 In order to effectively manage, provide quality service, and maintain the
proper use of the DENR-CO Hostel, Memorandum Order (M.O.) No. 2001-
13 dated August 27, 2001 was issued.

22.2 On November 10, 2005, DENR Memorandum No. 2005-18 was issued
revising the guidelines on the use of the DENR-CO Hostel to include among
others the following fees per day:
a) P100 for DENR officials/employees on official travel
b) P150.00 for DENR officials/employees on personal business
c) P200 for non-DENR officials/employees

22.3 The documents submitted by the Personnel Division showed that Engr.
Hannibal Ramos was the Hostel In-Charge from CY 2011 to January 31,
2015. Records, however, showed that he was officially assigned as Hostel
In-Charge only on July 27, 2012 per DENR Special Order No. 2012-591, in
view of the organizational development of the Human Resource
Development Service.

22.4 From CY 2011 to January 31, 2015, payments made by hostel guests were
received/kept by the Hostel In-Charge even though he is not bonded as an
accountable/collecting officer, contrary to Section 101(2) of P.D. 1445
which provides that every accountable officer shall be properly bonded in
accordance with law.

22.5 Official receipts were not issued to the guests to acknowledge payments for
room accommodations inconsistent with Section 68 of Presidential Decree
(P.D.) No. 1445 dated June 11, 1978, which reads:

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 “No payment of any nature shall be received by a collecting
officer without immediately issuing an official receipt in
acknowledgment thereof. The receipt may be in the form of
postage, internal revenue or documentary stamps and the like,
or officially numbered receipts, subject to proper custody,
accountability, and audit”.

22.6 The Hostel-in-Charge explained that he issued unofficial acknowledgement

receipts and that collections were personally kept and handled by him.

22.7 Also, he did not maintain any logbook for incoming and outgoing guests nor
cashbook to record income received and expenses incurred for the upkeep of
the hostel, such as laundry. Hence, the number of guests who checked-in
and out of the hostel, and correctness of the income received and expenses
incurred could not be determined.

22.8 Upon entry to the hostel, guests were made to accomplish Hostel Entry
Form for the following information:

 Room Assignment
 Guest Name
 Office/Region
 Date/Time of Check-In
 No. of days will stay
 Purpose of travel
 S.O./T.O. Number
 Date of Check-Out
 Amount deposited
 Balance
 Signature of Guest
 Hostel Attendant Assign/Signature above the Name

22.9 Most of the accomplished forms lack the vital information needed for the
computation of the supposed bill such as:

 Purpose of travel – to know whether the travel is official or personal

 Special Order (SO) or Travel Order (TO) Number – if travel is official,
DENR employees are required to submit SO or TO.
 Check-out date – to know the actual days the guest stayed

22.10 Further, the forms revealed the following:

 Some forms had no signatures of the guests and the hostel attendants.
Moreso, the printed names of the hostel attendants were not written,

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 hence, the difficulty of identifying the hostel attendant assigned for the
day.

 Noticeably, in some forms, the signatories as Hostel Attendants were the

security guards. Being so, they were the ones who received the guests’
payments.

 In some forms, amounts were written in pencil which could easily be

altered.

22.11 Considering that different signatures appeared under “Hostel Attendant

Assign” and that the hostel attendant accepted guests payments, printed
names should have been written for easy identification.

22.12 Also, it bears stressing that security personnel are not management
personnel, hence, they should not be assigned as hostel attendants who may
accept payments from guests.

22.13 Needless to say, there were no controls in cash which may lead to
misappropriation of the collections on hand.

22.14 As reported by the Hostel-in-Charge in the DENR Hostel Guest

Accommodation Report (2014), the total collections and disbursements were
P400,500.00 and P177,630.00, respectively, as shown below:

Per Hostel Guest Accommodation Report Amount Cashier’s

Collections Remitted to Official
CY 2014 received Disbursements made Cashier’s Receipt
Office No./Date
drinking water P1,050.00
January P22,550.00
laundry 8,900.00
drinking water 1,050.00 1984599
February 20,550.00 P37,375.00
laundry 7,800.00 May 9, 2014
drinking water 1,225.00
March 27,150.00
laundry 12,850.00
drinking water 1,190.00
April 33,850.00
laundry 13,800.00
1984766
drinking water 1,400.00
May 41,150.00 62,335.00 July 18,
laundry 15,900.00
2014
drinking water 1,225.00
June 35,550.00
laundry 14,700.00
drinking water 1,155.00 62,415.00 1984990
July 30,150.00
laundry 12,900.00 Oct 23, 2014
drinking water 1,260.00
August 37,800.00 laundry 14,300.00
others (no receipt) 850.00
September 43,750.00 drinking water 1,470.00
laundry 15,650.00

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 Per Hostel Guest Accommodation Report Amount Cashier’s
Collections Remitted to Official
CY 2014 received Disbursements made Cashier’s Receipt
Office No./Date
2 sets door knobs 1,700.00
drinking water 1,225.00
October 33,300.00
laundry 13,600.00
1985139
drinking water 1,400.00 60,745.00
November 40,100.00 Jan 7, 2015
laundry 15,900.00
drinking water 1,330.00
December 34,600.00
laundry 13,800.00
Total P505575.00 P66925.00 P8124989.00

22.15 As can be gleaned from the tabulation, there is no specific period or date the
net collections are remitted to the Cashier’s Office further putting such
collection to risk of misappropriation.

22.16 Also, included under disbursements was payment of P850.00 not supported
with an official receipt.

22.17 The official receipts issued by Aqua Corene Purified Water Refilling
Station, MMB Laundry and Aerith Nicole Laundry Shop revealed the
following.

 The series of the official receipts were closely issued even if the dates
were seven to thirty (30) days apart.

 The following official receipts issued by MMB Laundry were tampered:

 last two digits of the number of official receipt dated May 31, 2014
for 91.25 kgs of laundry amounting to P3,650.00

 last digit of the number of official receipt dated June 23, 2014 for
87.5 kgs of laundry amounting to P3,500.00

22.18 Interview with Aerith Nicole Laundry Shop on April 27, 2015 disclosed the
following:

 they boughtthe MMB Laundry shop in April 2013 and continuously use
MMB Laundry’s official receipts until November 2014 and issue official
receipts only upon request by the clients;
 they have no any written contract with the DENR for the laundry
services, just verbal agreement;
 their last laundry services with the DENR was on December 2014 and
they still have receivables from the DENR of aboutP8,000.00

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22.19 Per documents submitted, Aerith Nicole Laundry Shop started issuing their
own official receipts in September 2014 not November 2014.

22.20 Income from the hostel could have been properly accounted for had
Management adopted control procedures in the management of the hostel.

22.21 We recommended and Management agreed to–

a) formulate guidelines in the proper management of DENR-CO

Hostel, including among others, the procedures in the collection of
fees from hostel guests, issuance of Order of Payment and official
receipt, and remittance/deposit of the same to the Cashier/DENR
bank account;

b) require the Collecting Officer to assign separate Official Receipt

booklets exclusively for DENR-CO Hostel collections and report the
same to Accounting Division;

c) instruct the Accounting Division to record in the books of the

DENR-CO the hostel income and expenses for proper accounting of
the government funds;

d) designate a bonded Collecting Officer to receive payments from the

hostel guests; and

e) investigate the tampering of the official receipts and impose

appropriate sanctions to the employee/s concerned, if warranted.

22.22 Management of CO replied that –

Starting February 2015, the Accounting Division, in close coordination with

the Director, Administrative Service, implemented the issuance of Order of
Payment as basis for payment by the guests. Likewise, a separate
Subsidiary Ledger has been dedicated for the Hostel collection in the
meantime that a revolving Fund has not been established.

On May 18, 2015, the amended guideline on the use of the DENR Hostel
was signed, including the procedures in the collection of fees.

The opening of a Revolving Fund account under the name of DENR CO –

Hostel was requested by the OIC Cashier thru a letter to Land Bank of the
Philippines (LBP) dated May 20, 2015. The request was granted on May
27, 2015.

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 Due to these developments, the hostel collection from February to May
2015 of P344,990.00 which was temporarily deposited under the Regular
Trust Fund was already transferred to DENR CO – Hostel Account No.
0712-1040-40 on May 28, 2015.
Control deficiencies on cash collections

23. Cash examination conducted disclosed control deficiencies which exposed

government funds to loss or misuse.

23.1 Section 38, Vol. II of The Manual on the New Government Accounting
System (MNGAS) states that the Cash Receipts Record (CRR) shall be used
by the designated Collecting Officer to record his/her collections and
deposits. The CRR shall be certified by the Collecting Officer at the end of
each month, or when required to do so by proper competent authority.

23.2 During the conduct of cash examination, the Collecting Officer presented
Warrant Register where daily collections were recorded but same was not
updated noting that the last entry was January 2014. Also, the
remittances/deposits made were not recorded.

23.3 Further, the Reports of Collections and Deposits (RCDs) were not
accomplished properly as prescribed under Appendix 54, Vol. II of same
Manual, thus, the correct balance of the total collections could not be
immediately determined.The RCD shall be prepared in two copies daily and
certified by the Collecting Officer on the last sheet of the report after the
totals.

23.4 Moreover, the Report of Accountability for Accountable Forms (RAAF)

(Appendix 65) was not prepared/submitted, contrary to Section 68, Volume
II of same Manual which provides that the RAAF shall be prepared by the
Accountable Officer to report on the movement and status of accountable
forms in his possession. The accountable forms include those with or
without face value.

23.5 We recommended and Management agreed torequire the Collecting

Officer/Bill Collector to:

a) maintain Cash Receipts Recordduly certified at the end of each

month, or when required to do so by proper competent authority;

b) accomplish the Report of Collections and Deposits in accordance

with the instructions under Appendix 54 and prepare the report in
two copies daily to be distributed to the Accounting Division
(original) and Cash Unit/Collecting Officer’s file (duplicate copy);
and

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 c) prepare/submit the duly certified Report of Accountability for
Accountable Forms (Appendix 65).

Unauthorized demolition of FASPO Building intended to be repaired and renovated only

– P20.427 million

24. The FASPO building costing P20.427 million intended to be repaired and
renovated only for a cost of P5 million was totally demolished, contrary to the
MOA entered into by and between the DENR and the DPWH.

24.1 A MOA was entered into by and between the DENR, as the Source Agency
(SA), and DPWH-QCFED, as the Implementing Agency (IA).

24.2 The MOA stipulated, among others, the following:

 That the DENR, has allocated P5,000,000.00 for the proposed

renovation of Foreign-Assisted and Special Project Office (FASPO)
Building, referred to as the Project in the MOA;

 That the DENR shall set aside and transfer to the DPWH-QCFED, the
amount of P5,000,000.00 for the renovation and repair of the Building
which will be released in accordance with the following schedule:

o 30 percent of the total project cost, including the 2 per cent

engineering supervision and administrative overhead (ESAO), upon
signing of the MOA;

o 40percent of the total project cost upon submission of Statement of

Work Accomplishment that the Project is 50percent complete by the
(implementing agency) IA;

o 30 percent of the project cost upon submission of the following:

 Report of Liquidation of cash advances duly verified by the

Resident Auditor of the IA;

 Certificate of Completion by the IA; and

 Final Acceptance of the Project by the source agency (SA).

 The SA shall provide the IA with copies of the approved development

plan, prints of drawings and structural specifications necessary for the
projects.

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24.3 On October 23, 2013, the DENR-CO transferred the amount of
P1,600,000.00 to the DPWH-QCFED under Check No. 603559 sourced
from the Maintenance and Other Operating Expenses (MOOE).

24.4 The documents supporting the fund transfer revealed that there were no
other documents that would show the basis of the amount of P5,000,000.00
transferred except for the MOA. The approved development plan, prints of
drawings and structural specifications were not provided by the DENR to
the DPWH-QCFED. There was no computation on how the amount of
P5,000,000.00 was arrived at.

24.5 The FASPO personnel informed that the work commenced sometime in
January 2014. But instead of repairing and renovating, the FASPO Building
was totally demolished.

24.6 Further, the DPWH-QCFED subcontracted the project as construction of a

building instead of renovation and repair which is not in accordance with the
MOA. As such, the contractor of the DPWH totally demolished the FASPO
Building to pave way to a new building. It is, however, unacceptable that
the DPWH’s contractor was able to demolish the building without the
consent or knowledge of the DENR considering that there was no revised
MOA or even funding for the construction of a new building. This shows
weak internal control and lack of monitoring fund transfers.

24.7 Since the demolition of the building is not in accordance with the MOA and
the purpose of the fund transfer, the DPWH-QCFED could not submit the
liquidation for the 1st tranche of P1,600,000.00. As a consequence,
construction is pending due to funding problem.

24.8 The demolition of building for construction of a new one requires funding
from approved Capital Outlay specifically intended for the purpose and
documentary requirements that should have been present before demolition
of the building was conducted.

24.9 Presently, the place where the building was formerly located is now a huge
pit that poses risks to the adjacent building due to weakening land
foundation and to the health and welfare of the employees as the place is
now a breeding ground for mosquitoes and other possible harmful insects.

24.10 We recommended and Management agreed to –

a) demand from DPWH-QCFED for an immediate refund of the

P1,600,000.00 fund transfer considering that liquidation thereof is
impossible; and

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 b) investigate and impose appropriate sanctions to official/s and
employees who may be found responsible for the improper
implementation of the MOA with the DPWH-QCFED that caused
the demolition of the FASPO building without the preliminary
requisites thereof.

Inadequate documentation of expenses- P240.332 million

25. Various expenses of Regions XI and XII and four PENROsamounting to

P174.431 millionand funds transferred to DPWH by BMB amounting to
P65.901 million for various infrastructure projects and the corresponding
liquidation were not adequately supported with necessary documents.
Likewise, the MOAs lacked the necessary provision for the timely
implementation of the projects and other information to enforce liquidation.

25.1 Section 4 of P.D. 1445 provides that financial transactions and operations of
any government agency shall be governed by certain fundamental
principles. Paragraph 6 thereof states that all claims against government
funds shall be supported with complete documentation.

25.2 COA Circular No. 2012-001 dated June 14, 2012 was issued prescribing the
revised guidelines and documentary requirements for common government
transactions. Section 3.1.1 of the said circular provides the general
guidelines in the Transfer of Funds to Implementing Agencies. Likewise,
Section 3.1.2 and 3.1.3 provides the general guidelines on implementation
and liquidation thereof.

Inadequate supporting documents in payments and liquidation-

P240,332,250.47

25.3 Various expenses and liquidation reports were not supported with adequate
documentation.

Offices Nature of Expense Amount

Region XI Travel Expenses P 1,289,709.06
Other professional services 1,595,102.00
CNA 2,300,000.00
Terminal Leave Benefits 59,076,773.22
Total P62971875.22
Region XII Consultancy Contracts 32,788,000.00
PENRO Sultan Kudarat Various expenses 4,156,163.44
PENROs Agusan del Seedling procurement 73,225,368.07
Norte and Sur and
Surigao del Sur
Total P173141406.73
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 Offices Nature of Expense Amount
Biodiversity Fund transfer 65,901,134.68
Management Bureau
Total P239042541.41
25.4 Seedling procurement of PENRO-Agusan Del Norte, Agusan del Sur and
Surigao del Sur in the total amount of P73,225,368.07 were not supported
with the distribution list of identified recipients/beneficiaries to receive the
seedlings as provided for under Section 1 of DENR Memo Circular No.
2011-01; thus, cast doubt on the authenticity of the recipients and may result
in wastage of government funds.

25.5 In Region XI, aside from inadequate documentation, the amount of

P1,487,678.00 of the total amount of Other Professional Services of
P1,595,102.00 were inappropriately classified to Other Professional
Services instead to the following accounts:

Account Amount
Repairs and Maintenance-Reforestation P1,412,320.00
Other Supplies and Materials Expense 46,900.00
Training Expense 25,316.00
Office Supplies 1,942.00
Other MOOE 1,200.00
Total P1,487,678.00

25.6 From February 2012 to October 31, 2014, funds amounting to

P65,901,134.68 were transferred by the BMB to the DPWH for the
implementation of various infrastructure projects. The funds were
transferred to the DPWH even though there were no Approved Program of
Work, Certification by the Accountant that funds previously transferred to
the Implementing Agency (IA) has been liquidated, post audited and
accounted for in the books, and Copy of OR issued by the IA to the SA
acknowledging receipts of funds transferred (for post-audited activities) as
required under Section 3.1.1 of COA Circular No. 2012-001 dated June 14,
2012.

25.7 The MOA provides the turn-over of the project to BMB upon completion
and issuance of Inspection Report and Certificate of Acceptance. Also, the
DPWH is required to submit the Liquidation Report duly verified by the
Resident Auditor thereat within 30 days upon final acceptance of BMB. The
MOA, however, has no provision on the target timelines/date of delivery of
the completed projects. Also, for funds transferred in tranches, the provision
is not in accordance with the aforementioned COA Circular which provides
that no additional funds previously transferred to the IA has been liquidated,
post audited and accounted for in the books.

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25.8 The Liquidation Report also showed that the following documents were not
attached, as required under Section 3.1.3 of COA Circular No. 2012-001
dated June 14, 2012, as shown in the next page.

 Report of Checks Issued and Report of Disbursements certified correct

by the Accountant, approved by the Head of the Implementing Agency
(IA), and duly audited by the Auditor of the IA;
 Copy of Credit Notice issued by the Auditor of the IA; and
 Copy of OR issued for the refund of unexpended/unutilized balance of
fund transferred, if any.

25.9 Moreover, the Certificate of Acceptance by the BMB Management were all
undated, thus, the actual date the project was accepted and turned over to the
Bureau by the DPWH could not be determined. Records showed that funds
transferred to DPWH amounting to P18,030,376.29 remained unliquidated
as of year-end.

MOAs not submitted to COA within the time prescribed by the regulation

25.10 Section 3.1.1 of COA Circular No. 2009-001 dated February 12, 2009
states that, “Within five (5) working days from the execution of a contract
by the government or any of its subdivisions, agencies or instrumentalities,
including government-owned and controlled corporations and their
subsidiaries, a copy of said contract and each of all the documents forming
part thereof by reference or incorporations shall be furnished to the Auditor
of the agency concerned.”

25.11 Approved MOAs and all its attachments were not submitted to the COA
within the time frame prescribed contrary to the above COA Circular, thus
precluded the timely auditorial review thereon to evaluate compliance with
requirements of applicable laws, rules and regulations, completeness of
documentary requirements and initially determine that the contractual
covenants are not disadvantageous to the government; and for management
to implement any corrective measure which may be identified during the
auditorial and technical review.

25.12 We recommended andManagement agreed to require the:

a) offices concerned tosubmit the required documents to ascertain the

validity and regularity of the transactions and henceforth strictly
follow the provisions of COA Circular No. 2012-001 dated June 14,
2012;

b) BMB to ensure that(i) all documents are properly filled-up and

dated; and(ii)all contracts be submitted to COA within the
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 prescribed period after perfection thereof for a timely review of the
documents; and

c) concerned Accountants to use the appropriate account codes in

recording expenditures based on the Revised Chart of Accounts for
National Government Agencies.

Deficient controls in the issuance, use, and maintenance of vehicles

26. The proper controls for the issuance, utilization and maintenance of motor
vehicles were not observed such as(a)two or more vehicles were
assigned/receipted to some DENR officials; (b) motor vehicles were brought to
the repair shopswithout proper documentation; (c) motor vehicles were not
appropriately marked with “For Official Use Only”; and (d) therequired
Monthly Report of Official Travels were not submitted to the Office of the
Auditor, hence, official travels as well as fuel consumption of each vehicle
cannot be readily determined.

a) Some officials assigned with two or more vehicles (CO)

26.1 The RPCPPE revealed that some DENR officials are assigned/receipted two
or more vehicles which is prohibited under Section 8.2 of National Budget
Circular (NBC) No. 446 dated November 24, 1995, which provides that an
official entitled or authorized to use an official transport shall be allowed
only one motor vehicle. However, a Cabinet Secretary or an official holding
a position of equivalent rank may be allowed a back-up vehicle for security
personnel.

26.2 The issuance of two or more vehicles to an official entitled or authorized

thereto limits the access of other officials and employees who are equally
entitled to use vehicles for official business.

26.3 The motor vehicles assigned for general dispatch are limited and mostly in
the verge of dilapidation/deterioration.

b) Vehicles brought to repair shops without documentations

26.4 The motor vehicles reported in the RPCPPE, either for repair or undergoing
repair, revealed two motor vehicles which were brought to the repair shops
as early as 2008 bythe former Mechanical Shop Foreman and Mechanic II
of the DENR-CO without the required documentations contained in Annex
“Q” of COA Memorandum No. 2005-027 dated February 28, 2005:

 Approved Job Order

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  Complete technical description of the vehicle
 Detailed breakdown of the contract amount showing in sufficient detail
the derivation of the direct and indirect costs
 Pre-repair evaluation report by the agency showing in sufficient detail
the scope of work/extent of repair to be done
 History of Repair

26.5 ISUZU Ext. Cab with Plate No. SED 530, for general dispatch, was brought
to Dick Motor Shop sometime in July 2008. During inspection on March
17, 2015, the shop owner averred that when the vehicle was brought to the
shop, he made an assessment and gave to the DENR’s Mechanical Foreman
and Mechanic II the scope of work to be done. But more than six years had
passed, still no approved job request and job order nor further instructions
were received from the DENR-CO, hence, no repair was done. The General
Services Division (GSD) explained that they want to pull-out the motor
vehicle from the motor shop but they cannot do so since Dick Motor Shop
will charge storage fee to be computed upon retrieval.

26.6 Management informed that the vehicle is now located within the compound
after convincing the shop owner to waive the charges and allow the vehicle
to be towed back to DENR compound.

26.7 Mitsubishi Lancer Sedan with Plate No. SEW 265, for general dispatch, was
brought to C. Mercado Motor Works, now LG Madrigal Motor Works in
2012. During inspection on March 18, 2015, the audit team noticed that the
motor vehicle has no Plate Number. Both frontal and rear plates were
detached from the motor vehicle and were presented only when the team
asked for it. According to GSD the vehicle was brought to the repair shop
on September 18, 2013 on an emergency, therefore without documentation.
GSD further commented that GSD’s instructions on the prohibition of direct
turnover of vehicles to repair shops without proper documentation hampered
the completion of the repair.

26.8 Moreover, two motor vehicles were brought by the Senior Administrative
Assistant V to the repair shops in October and November 2014 as follows:

 Nissan Double Cab Pick-up with Plate No. SDC 299, for general
dispatch vehicle, was brought to Triple G Repair Shop on November 12,
2014. During inspection on March 17, 2015, the owner informed that
the repair was finished in December 2014 and he is awaiting payment
prior to the release of the vehicle.

 Toyota Land Cruiser with Plate No. SED 572/UCC 503, a borrowed
motor vehicle from Protected Areas and Wildlife Bureau (PAWB) for
general dispatch, was brought to Dick Motor Shop sometime in October
166
 2014 as averred by the shop owner duringinspection on March 17,
2015.The repair was finished in December 2014 but the shop owner is
awaiting payment prior to the release of the vehicle.

26.9 Both motor vehicles will be transferred to PENRO-Antipolo, as such,

expenses for repairs for both vehicles will be charged to PENRO-Antipolo.

26.10 It is unusual that motor vehicles were brought to repair shops without the
required documents.

c) Non-markings of motor vehicles

26.11 It was also observed that motor vehicles maintained by CAR and Region XI
were not appropriately marked with “For Official Use Only” contrary to
COA Circular No. 75-6 dated November 7, 1975.

d) Non-preparation/submission of Driver’s Trip Ticket, Monthly Report of

Official Travels, and Report of Fuel Consumption

26.12 Manual on Audit for Fuel Consumption was prescribed under COA Circular
77-61 dated September 26, 1977. Among the objectives of the manual are
(1) to ascertain that wasteful, excessive and unnecessary expenditures for
fuel consumption are minimized, and (2) to ascertain that expenditures for
fuel consumption are effectively controlled and properly accounted for.

26.13 Item No. 2 of the Manual states that “Use of government vehicles shall be
properly controlled and regulated. The use of government vehicles should
be controlled through properly accomplished and duly approved Driver’s
Trip Tickets which should be serially numbered, a summary of which shall
be made at the end of the month in a Monthly Report of Official Travel, for
audit purposes.”

26.14 In RO IV-A, the Driver’s Trip Ticket (DTT) for government vehicle with
Plate No. SKV-748 remained not properly accomplished and not serially
numbered for control purposes. Also, the gasoline procured and consumed
during the trip could not be determined due to the absence of an odometer
reading, the gasoline’s beginning balance in tank, issuance from
stock/procured and ending balance at the end of the trip were not indicated
in the Driver’s Trip Tickets for proper reporting.

26.15 In RO V, it was noted that the DTTs were approved way ahead of the
planned trip, and for multiple trips and destinations. For the Lands
Management Services (LMS) and Forest Management Services (FMS), the
average duration of each approves DTT was 11 days which covered two to
three trips. In the case of Protected Areas, Wildlife, and Coastal

167
 Management Services (PAWCZMS), the average duration was for five days
which usually covered two trips. For other offices, DTTs were approved for
one up to maximum of 26 days. The actual number of trips undertaken,
however, was not determined due to unavailable data but all DTTs do not
indicate specific destinations.

26.16 In Regions I and XI, and PENRO-Pangasinan, the DTTs, Monthly Report of
Official Travels, and Report of Fuel Consumption were not submitted to the
COA, thus,official travels as well as fuel consumption of each vehicle
cannot be readily determined.

26.17 We recommended and Management agreed to –

a) limit the issuance of motor vehicles to concerned DENR officials to

only one as required under Section 8.2 of National Budget Circular
(NBC) No. 446 dated November 24, 1995, except for the Department
Secretary who is allowed to use back-up vehicle;

b) require the concerned officials to return to the Property and Supply

Management Division (PSMD) of the DENR-OSEC all excess motor
vehicles to maximize the utilization of the same for official business;

c) complete the required documentations first before bringing the

vehicles for repair to motor shops;

d) require the General Services Division and PSMD to strengthen the

controls in the motor vehicles and exercise due diligence in the
utilization and safekeeping of these assets;

e) make the necessary markings “For Official Use Only” and the name
of the agency written under it to all government vehicles owned by
the agency (CAR and Region XI);

f) require the Driver of each vehicle to prepare and certify Monthly

Report of Official Travels, supported by original copies of DTTs to
be approved by the Administrative Officer and submitted to the
COA (CAR, Regions I, IV-A, V and XI); and

g) require the Chief, General Services Section, to ensure that all

procurement of gasoline, oil, and lubricants as well as its
consumption be recorded in a properly accomplished and serially
numbered Driver’s Trip Ticket; and ensure that the Speedometer is
regularly checked by the authorized personnel before and after the
trip to determine if the fuel consumed is proportionate with the

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 distance travelled (CAR, Regions I, IV-A, V and XI, and PENRO-
Pangasinan).

26.18 Central Office Management commented that –

a) They will require DENR CO officials to return excess vehicles to the

Property Office.

b) The GSD has issued policies since 2011 to strengthen the monitoring
and control of fuel consumption, use and repair of motor vehicles.

c) PSMD is the official caretaker of all property of DENR Central Office.

GSD simply supervises dispatching of vehicles in compliance with
instructions and requests of DENR officials and employees. It does not
have the complete control of the vehicles as enunciated under Section
149 of COA Circular 92-386 dated October 20, 1992.

26.19 Regional Office’s Management of CARcommented that they had already

implemented the recommendations, except, for the markings of three motor
vehicles, which the Regional Office plans to request for an exemption. Two
of the motor vehicles are assigned at the Office of the Regional Director and
the other one is assigned at the Asst. Regional Director for Administration.

Management further commented that PENRO-Abra had complied with the

necessary markings. PENRO-Benguet already submitted the Monthly
Report of Official Travels to the Office of the Auditor.

26.20 The Team of DENR - CO recognizes the controls being implemented by

GSD to safeguard motor vehicles and commend them for being able to
retrieve the motor vehicle from the repair shop without paying the
diagnostic and storage fees being charged by the shop owner. However,
there was opportunity lost in terms of resale value of the vehicle and the
time elapsed that proceeds from sale could have been used by the
government. Hence, implementation of established procedures and
processes such as those provided under GSD Memorandum dated March 16,
2011 should be strictly imposed so as not to repeat the noted deficiencies.

26.21 The audit team of CAR stated that a request for exemption on the non-
markings ofthree vehicles should be addressed to the Commission on Audit
(COA) considering that said ruling was issued by the COA through the
aforementioned Circular.

Various PPE not safeguarded from possible loss – P102.462 million

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27. The Property, Plant and Equipment of CENRO-Talakag, Bukidnon
amounting to P5.709 million were not safeguarded from possible loss thru theft
and land squatting due to the absence of perimeter fence surrounding the
vicinity. Also, various PPE in LMB with a total net book value P96.753 million
are not insured with the General Insurance Fund and the Property
Replacement Fund of the Government Service Insurance System (GSIS).

27.1 Section 2 of PD 1445 states that “It is declared policy of the state that all
resources of the government shall be managed, expended or utilized in
accordance with law and regulations and safeguarded against loss or
wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government. The
responsibility to take care that such policy is faithfully adhered to rests
directly with the chief or head of the government agency concerned.”

27.2 COA Circular No. 92-390 dated November 17, 1992 was issued to assist the
General Insurance Fund and the Property Replacement Fund of the
Government Insurance Service System (GSIS) in:

1. determining the physical assets of the national and local government

including those of government-owned and controlled corporations and
their subsidiaries and affiliates; and

2. ensuring that all insurable assets and properties of the government are
adequately covered/insured with the General Insurance Fund of the
GSIS.

27.3 Ocular inspection of the vicinity of CENRO-Talakag, Bukidnon disclosed

that there was not enough perimeter fence to safeguard its PPE amounting to
P5,708,957.00 from possible loss thru theft and land squatting, details
follow:

PPE Fund 101 Fund 102 Fund 158 Total

Land P1,100,000.00 P1,100,000.00
Building 2,522,912.00 2,522,912.00
Office Equipment 30,645.00 P44,924.00 P126,065.00 201,634.00
Furniture and Fixtures 173,089.00 26,400.00 13,677.00 213,166.00
Information and
Communication
87,796.00 788,354.00 876,150.00
Technology
Equipment
Communication 66,200.00 66,200.00
Equipment
Technical and 241,250.00 241,250.00
Scientific Equipment
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 PPE Fund 101 Fund 102 Fund 158 Total
Motor Vehicles 487,645.00 487,645.00
Total P3,826,646.00 P646,765.00 P1,235,546.00 P5,708,957.00

27.4 In LMB, there were no payments made for the insurance of the following
PPE except for motor vehicles where insurance is a requisite for renewal of
registration:

Accumulated Net Book

PPE Cost
Depreciation Value
Buildings P 9,870,098.00 P 0.00 P 9,870,098.00
Office Equipment 24,176,180.32 1,159,235.82 23,016,944.50
ICT Equipment 31,997,082.22 2,367,833.28 29,629,248.94
Communication Equipment 1,106,420.64 34,569.24 1,071,851.40
Tech. and Scientific Equip. 27,073,175.73 2,993,876.60 24,079,299.13
Furniture and Fixtures 8,707,321.38 504,655.69 8,202,665.69
Books 367,212.39 36,064.69 331,147.70
Other PPE 568,584.04 17,247.61 551,336.43
Total P103,866,074.72 P7,113,482.93 P96,752,591.79

27.5 The Property Officer informed that the LMB has no existing insurance
coverage for various PPE including the LMB Building.

27.6 In the absence of insurance coverage, LMB building and various PPE are
exposed to risk of not being compensated for any damage or loss due to fire
of other force majeure.

27.7 We recommended and Management agreed to require the:

a) CENR Officer to see to it that the construction of the perimeter

fence be completed the soonest possible time to safeguard the assets
of CENRO-Talakag; and

b) LMB Property Officer to prepare and submit the inventory of all

insurable physical assets to the GSIS so that properties could be
insured under the General Insurance Fund and the Property
Replacement Fund pursuant to COA Circular No. 92-390.

27.8 Managementcommented that the Finance Division of RO X provided

CENRO-Talakag with P500,000.00 for the construction of the perimeter
fence. In fact, during the team’s recent inspection, construction has started.

Procurement Law (RA 9184) and its Revised IRR not strictly observed

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28. The procurement of goods and services amounting to P183.597 milliondid not
conform with the governing principles on procurement as provided under
Section 3 of the Procurement Law and its Revised IRR.Moreover, the
procurement of common-use supplies amounting to P16.192 million is not in
accordance with Section 22 of the General Provisions of the General
Appropriations Act for FY 2014 (RA 10633).

Deficiencies in the implementation of Procurement Law – P183,597,355.63

28.1 Section 3 of the Procurement Law (RA 9184) provides that the procurement
of the GOP shall be governed by the following principles:

a) Transparency in the procurement process and in the implementation of

procurement contracts through wide dissemination of bid opportunities
and participation of pertinent non-government organizations.

b) Competitiveness by extending equal opportunity to enable private

contracting parties who are eligible and qualified to participate in public
bidding.

c) Streamlines procurement process that will uniformly apply to all

government procurement. The procurement process shall be simple and
made adaptable to advances in modern technology in order to ensure an
effective and efficient method.

d) System of accountability where both the public officials directly or

indirectly involved in the procurement process as well as in the
implementation of procurement contracts and the private parties that
deal with GOP are, when warranted by circumstances, investigated and
held liable for their actions relative thereto.

e) Public monitoring of the procurement process and the implementation of

awarded contracts with the end in view of guaranteeing that these
contracts are awarded pursuant to the provisions of the Act and this IRR,
and that all these contracts are performed strictly according to
specifications.

28.2 The procurements of ROs I, IV-A, V, VI, and XI; PENROs Mt. Province,
Benguet, Ifugao, Laguna, Oriental Mindoro, Leyte and Misamis Oriental;
and CENROs Sabangan and Paracelis of Mt. Province amounting to
P183,597,355.63(Annex D) did not conform with the above cited
governing principles on procurement, such as:

 Non-posting for seven days in the PhilGeps and at any conspicuous

place

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  Program of Work was prepared after the issuance of Notice of Award
 No provision for liquidated damages in the contract
 Non-withholding of the ten percent (10%) retention money
 Invitation to Apply for Eligibility and to Bid was not posted in at least
three conspicuous places
 Bidder was awarded the contract despite the absence of proper eligibility
check/screening
 Non-submission of the –

Financial Envelope:
Duly signed bid prices in the Bill of Quantities
Duly signed Cash Flow by Quarter and Payment Schedule

Technical Envelope:
Authority of signatory
Duly signed Construction Schedule and S-Curve
Duly signed Manpower Schedule
Duly signed Construction Methods in narrative form
Duly signed Equipment Schedule
Duly signed Construction Safety and Health Program
Duly signed Certificate in compliance with existing labor laws
standards
 Non-submission of Minutes of Bid opening and Post Qualification
Report
 No PO No., date of payee’s acknowledgement on the face of the DV
and no OR or AR as evidence of payment
 Performance securities were not posted by the winning bidders
 No clear and vivid specifications stated in the bidding documents (ITB,
etc.), Purchase Request and Purchase Order
 Inconsistencies of information on the interrelated documents of the
transaction
 Non-submission of a contract similar to the contracted project which
have been completed within three years from the date of the submission
and receipt of bids
 Actual dates of inspection and acceptance not indicated in the Agency
Inspection and Acceptance Report
 Unnumbered and undated Delivery Receipt (DR), and DR not registered
with the BIR

28.3 In RO XI, fourteen (14) units Multi-Cab for NGP implementation were
procured in the total amount of P1,800,000.00. The contract was awarded to
JFB Car Trading on December 16, 2013 for the supply and delivery of the
14 units Multi-Cab within 30 days from January 3, 2014 the date of receipt
of the Notice to Proceed (NTP), or on or before February 2, 2014.

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28.4 But on January 24, 2014, JFB Car Trading requested for time extension for
the delivery of the 14 units Multi-Cabs from the original deadline to May
16, 2014 or an additional 102 days on top of the 30 days delivery term, for
the following reasons, viz.

a. It involves importation from Japan wherein they are not in command on

its shipment;

b. There will be mechanical works on steering wheels, changing from right

to left position;

c. There will be electrical, repainting and upholstery works.

28.5 The BAC in its Resolution No. 355 dated February 4, 2014, granted the
request of JFB Car Trading to deliver the 14 units Multi-Cabs until May 16,
2014.

28.6 The approval for the extension of delivery period from 30 days to 132 days
(from January 3, 2014 to May 16, 2014) implied:

a. Misrepresentation on the part of the supplier that the items are available
and can be delivered within the 30 day period as the reasons cited for the
request were already considered in setting the desired delivery time. It is
understood that multi-cabs are imported from Japan, are acquired as
right hand driven and should be converted to left-hand drive when use in
the Philippines, thus this circumstances should have been openly stated
in the bid; or

b. Error on the part of the BAC and management in not considering that
multi-cabs are imported from Japan and require conversion of the drive.
This error discouraged other prospective bidders who could not deliver
within the required 30 days, thus put the agency at a disadvantage
situation.

28.7 Result of inspection by the COA Technical Audit Specialist identified the
following deficiencies, among others:

 The delivered fourteen (14) units 4 x 4 Multi-Cab were surplus units; tires
not in top shape; other visible accessories were found to be of second rated
quality; engine/ piston displacement is only around 600cc way below the
required specification of not exceeding 1800cc for gasoline fed engines.

 The company that insures for “Third Party Liability” is a private firm with
coverage of one day instead of one year.
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  The Certificates of Registration for all vehicles dated April 3, 2014 were
issued by the Land Transportation Office – Koronadal District Office in
Region XII (not in Region XI); the temporary plate issued to all 14 units is
an identical/ same number of “122604” valid for thirty (30) days from
April 3, 2014.

28.8 To date, management has not yet submitted their comments on the
deficiencies mentioned in the COA Technical Inspection Report.

28.9 The documents submitted relative to the procurement of Multi-Cabs showed

inconsistencies/deficiencies shown in AnnexD.

28.10 These actions or inactions by those responsible permitted the processing of

the irregular transaction, causing injury to the government this disallowable
in audit.

28.11 Until the day of the exit conference, management has not yet replied,
however, they committed to submit their reply to the issued AOM.

Non-procurement of common-use supplies from PS-DBM. – P16,192,285.77

28.12 Section 8.2.3(b) of the RIRR of RA No. 9184 provides that Procuring
Entities shall procure common-use goods, supplies, materials and equipment
from the Electronic Catalogue in the PhilGeps.

28.13 The procurement of common-use supplies of the following PENROs

revealed that out of the P16,845,459.67 cost of supplies in CY 2014, only
P653,173.90 or 3.88 percent were procured from the PS-DBM,
P16,192,285.77 or 96.12 percent were procured from outside suppliers
through shopping and without certification that the items were not available
at the PS-DBM.

Amount of
Amount of
Purchases from
Purchases from
PENRO Outside
PS-DBM Total Percentage
Suppliers
(A) (C) (A/C)
(B)
IlocosNorte P 21,179.10 P8,251,058.04 P8,272,237.14 0.26%
Ilocos Sur 179,742.55 3,171,021.31 3,350,763.86 5.36
Pangasinan 337,315.60 3,509,014.50 3,846,330.10 8.77
La Union 114,936.65 1,261,191.92 1,376,128.57 8.35
Total P653,173.90 P16,192,285.77 P16,845,459.67 3.88%

28.14 We recommended and Management agreed to require/directthe:

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a) PENRO-Mt. Province to (i) enforce necessary measures to ensure
that the contractor correct the deficiency in the rehabilitation of
CENRO-Sabangan and supervise closely the works to be done,
(ii) instruct officials and BAC members to submit written
justifications on why the transactions will not be disallowed in audit
despite non-adherence to pertinent provisions of RA 9184, and
(iii) require concerned employees to properly accomplish
documents;

b) respective offices to adhere strictly to the provisions of RA 9184;

c) RO VI to avoid issuance of several Purchase Orders in one bidding

process pursuant to COA Cir. No. 76-41 dated July 30, 1976;

d) contractors to provide the agency with an irrevocable standby letter

of credits equivalent to the retention money to cover the costs of
undiscovered defects and third party liabilities until the final
acceptance of the projects;

e) PENROs IlocosNorte, Ilocos Sur, Pangasinan and La Union to

procure common-use goods, supplies, materials and equipment from
PhilGeps;

f) RO XI to require the personnel responsible in the procurement,

delivery, acceptance and inspection of the 14 Multi-Cabs to account
for the irregularities that occurred;

 The supplier, JFB Car Trading, be made to answer for the

misrepresentation on the availability of the items procured, the
insurance and the registration, the Delivery and Official
Receipts;

 The members of the BAC for its oversight in checking the track
record of the bidder, the discrepancies in the stated time of
delivery; and

 The officers responsible for the acceptance and inspection of the

delivered items not in accordance with the specifications as well
as for the missions of the date when such activities were
conducted.

g) RO XI to observe good governance by going through the process

prescribed by laws, rules, and regulations such as the following:

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  Plan procurement activities to ensure that needs and
requirements are specific and relevant to the program/project.
The basis for the procurement of multi-cabs should be identified
with the activity in pursuance to the objectives of the program/
project. Thus, quantity and descriptions as well as end-users are
clear.

 Responsibilities for the review of timelines should be delegated to

specific persons accountable for the results. Thus, discrepancies
between expected and actual date of delivery are avoided;
discrepancies on the specifications such as the engine capacity
will be definite and clear, including the effects of deviations; and

 Responsibilities for the review of documents to ensure regularity

of transactions and identify indications of irregularity should be
delegated to specific persons who should be accountable for the
results.

Unnecessary/excessive procurement of various field shoes/rubber shoes by PENRO-

Benguet –P1.864 million

29. The PENRO-Benguet purchased numerous field/rubber shoes amounting to

P1.864 million, of which some were issued to various finance, administration
and support personnel who were not directly involved in the conduct of
validation or other field works. Further, two or more pairs were issued to
various personnel, thus, deemed unnecessary and excessive.

29.1 Section 3.1 of COA Circular 2012-003 defines Unnecessary Expenditures

as:

“Unnecessary expenditures are those not supportive of the implementation

of the objectives and mission of the agency relative to the nature of its
operation. This would also include incurrence of expenditure not dictated
by the demands of good government, and those the utility of which
cannot be ascertained at a specific time. An expenditure that is not
essential or that which can be dispensed with without loss or damage to
property is considered unnecessary.”

29.2 Further, Section 5.1 of the same Circular defines Excessive Expenditures as:

“Excessive expenditures signify unreasonable expense or expenses incurred

at an immoderate quantity and exorbitant price. It also includes expenses
which exceed what is usual or proper, as well as expenses which are

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 unreasonably high and beyond just measure or amount. They also include
expenses in excess of reasonable limits.”

29.3 The agency has emphasized, in its prior year’s justification on a similar
observation, the necessity of purchasing field shoes for the use of its
employees who go regularly on fieldworks.

29.4 The CY 2014 transactions showed that the agency has purchased a total of
447 pairs of field shoes/rubber shoes for CY 2013 and 2014 amounting to
P1,864,090.00 which were distributed to 250 personnel from different
divisions.

29.5 Included in the list of recipient of field/rubber shoes were seven DENR-
CAR, Regional Office personnel, of which a total of 11 field shoes were
issued. Moreover, various Administrative and Finance employees and other
support staff had been issued numerous pairs of shoes, ranging from three to
six pairs.

29.6 Based on prior year’s justification, NGP Coordinators, Foresters, and

Extension Officers, were frequently on field, conducting validations and
other NGP related activities, thus, the need for a heavy-duty field shoes for
safety purposes.

29.7 It was observed, however, that most personnel issued with field/rubber
shoes were stationed in PENR/CENR offices to perform office works
making the issuance of field shoes to these personnel unnecessary.

29.8 Further, some employees, whether conducting fieldwork or not were even
issued two or more pairs of shoes. Thus, unreasonable and excessive,
pursuant to the above-cited regulation.

29.9 Management justified that the procurement of field shoes was intended to
safeguard the employees’ social and economic well-being as well as their
physical safety and health. They also assured the Team that no purchase of
field shoes will be made in the future.The Audit Team, however, maintains
that the purchase of field/rubber shoes is unnecessary and excessive as
defined in Section 3.1 of COA Circular 2012-003, thus, Notice of
Disallowance No. 15-001-101(13/14-Benguet) dated August 11, 2015
amounting to P1,864,090.00 was already issued on said purchase of
field/rubber shoes.

29.10 We recommendedthat Management cause the immediate refund of the

disallowed amount and henceforth refrain from making unreasonable
and excessive disbursement of funds.

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Hiring of Contract of Service/Job Order exceeded the number of regular positions

30. The DENR hired 7,176 Contract of Service for CO, four staff bureaus, and
twelve (12) regional offices representing additional workforce to augment the
7,493 regular employees and provide administrative and technical assistance
and such other related functions as may be assigned. However, the total
number of hired contract of service personnel and the actual personnel
assigned in the respective offices exceeded the number of regular positions
under the Indicative Staffing Pattern (ISP) approved by the DBM.

30.1 On July 22, 2013, DBM Circular Letter No. 2013-5 was issued to provide
the policies and guidelines on the filling of positions and hiring of
temporary/casual/contractual/contract of service/job order personnel and
consultants for the following Departments/Agencies:

a. Whose Plan is yet to be approved by the DBM

b. Whose Plan was withdrawn, returned without action or not submitted
within the deadline; and
c. Whose Plan has been approved by the DBM.

30.2 Paragraph 2.3.2 of the above Circular provides, among others, that agencies
whose Plan has already been approved by the DBM are allowed to
outsource certain services, thru hiring of the consultants/job order/contract
of service personnel, where no employer-employee relationship exists.

30.3 During the year, the following DENR offices hired 7,176 Contract of
Service to augment the 7,493 regular employees and provide administrative
and technical assistance and such other related functions as may be
assigned:

No. of No. of No. of Total No. of

Approved Contractual Filled Contractual
Regular Personnel Positions Personnel and
Positions Filled Positions Difference
Office
(d)
(a) (b) (c) (a-d)
Central Office 807 310 345 655 152
Ecosystems Research 298 220 144 364 (66)
Development Bureau
(ERDB)
Forest Management 231 167 106 273 (42)
Bureau (FMB)
Land Management 272 135 84 219 53
Bureau (LMB)

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 No. of No. of No. of Total No. of
Approved Contractual Filled Contractual
Regular Personnel Positions Personnel and
Positions Filled Positions Difference
Office
(d)
(a) (b) (c) (a-d)
Biodiversity 88 125 50 175 (87)
Management Bureau
(BMB)
CAR 1,195 288 686 974 221
RO II 1,549 568 750 1,318 231
RO III 1,141 444 494 938 203
RO IV-A 919 533 420 953 (34)
RO IV-B 1,186 993 575 1,568 (382)
RO V 911 573 528 1,101 (190)
RO VI 1,073 558 573 1,131 (58)
RO VIII 1,111 380 770 1,150 (39)
RO IX 1,049 451 373 824 225
RO X 1,226 109 851 960 266
RO XII 845 449 425 874 (29)
RO XIII 1,104 873 319 1,192 (88)
Total 15005 7176 7493 14669

30.4 As an internal policy in the renewal/hiring of contracts of service in all

DENR offices, the actual number of personnel assigned in an office,
including persons hired under contract of service, shall not exceed the total
number of regular positions under the Indicative Staffing Pattern (ISP)
approved by the Department of Budget and Management (DBM).

30.5 As can be gleaned from the Table, the hired Contract of Service/Job Order
personnel and the actual number of personnel assigned in ERDB, FMB,
BMB, ROs IV-A, IV-B, V, VI, VIII, XII, and XIII exceeded the number of
regular positions under the ISP approved by DBM in their respective offices
ranging from 29 to 382.

30.6 We recommended and Management agreed to:

a) hasten the hiring of qualified personnel to fill up the approved

plantilla position so as not to disrupt the Department’s operation;

b) observe the rules on hiring contract of services/job orders as

required under DBM Circular Letter No. 2013-5 and Wage Order
No. NCR-17;and

c) instruct the concerned DENR Offices not to renew the contract of

service of contractual personnel who are already in excess of the
approved regular positions.

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Unnecessary hiring of Public Relations Consultant

31. RO V hired a Public Relations Consultant and paid a fixed monthly salary of
P20,000.00 continuously for a period of one and a half years, a service
considered unnecessary under COA Circular No. 1012-003.

31.1 COA Circular No. 2012-003 dated October 29, 2012 provides the Updated
Guidelines for the Prevention and Disallowance of Irregular, Unnecessary,
Excessive, Extravagant and UnnecessaryExpenditures. Section 4.1 defines
“Unnecessary” expenditure as expenditures which could not pass prudence
of a good father of a family, thereby denoting non-responsiveness to the
exigencies of the service. An expenditure that is not essential or that which
can be dispensed with without loss or damage to property is considered
unnecessary.

31.2 Annex C of the same Circular enumerates the cases of expenditures

considered unnecessary among which are hiring of PR companies and hiring
of consultants whose functions are redundant to the respective functions of
concerned officials, for example, hiring of procurement consultant, financial
consultant or media consultant.

31.3 RO V hired a Public Relations Officer II/Consultant through Contract of

Service at a monthly rate of P20,000.00 for eighteen months or a total
amount of P360,000.00.

31.4 Said contract of service is among the cases considered unnecessary as

enumerated in Annex C of the aforementioned COA Circular.Moreover, the
hiring of the consultant did not adhere to the guidelines prescribed in RA
9184.

31.5 We recommended and Management agreed to –

a) stop the practice of hiring consultant whose duties can be performed

by regular employees;

b) adhere to the provisions of RA 9184; and

c) specify in the contract the deliverables in case there is really a need

for hiring consultant.

Enforcement of Settlement of Audit Suspensions, Disallowances, and Charges

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32. The non-compliance with laws, rules and regulations of the DENR resulted in
unsettled suspensions, disallowances and charges in audit of various
transactions amounting to P17.780 million, P75.538 million and P71.983
million, respectively.

32.1 Section 7.1 of COA Circular No. 2009-06 dated September 15, 2009
provides that the head of the agency, who is primarily responsible for all
government funds and property pertaining to his agency, shall ensure that
the settlement of disallowances and charges is made within the prescribed
period; initiate the necessary administrative and/or criminal action in case of
unjustified failure/refusal to effect compliance with the foregoing
requirements by subordinate officials; enforce the COA Order of Execution
(COE) by requiring the withholding of their salaries or other compensation
due to person liable in satisfaction of the disallowance or charge; and ensure
that all employees who are retiring or transferring to other agencies shall
first settle the disallowances and charges for which they are liable.

32.2 The total audit suspensions, disallowances and charges found in the audit of
various transactions based on the Notice of Suspension (NS)/ Notice of
Disallowance (ND)/ Notice of Charges (NC)/ Notice of Settlement of
Suspensions and Disallowances/Charges (NSSDC) issued by this
Commission, is summarized below:

Particulars Balance as of During the Year Balance as of

Jan. 1, 2014 Issuance Settlement Dec. 31, 2014
Suspensions P 0 P 0 P 0 P 0
Disallowance
s 0 0 0 0
Charges 71,983,306.08 0.00 0.00 71,983,306.08
Total P176,346,256.98 P18,893,457.95 P29,938,246.94 P165,301,467.99

32.3 Of the suspended amounts, P5,939,562.24 was already issued with Notice of
Disallowance in CY 2015 for non-submission of the required documents
while the documents submitted for P1,151,500.00 is still for evaluation of
the Team. On the other hand, P27,951,686.49 of the disallowed amounts are
under appeal of which P5,469,000.00 was already issued with a Notice of
Finality of Decision by the Commission Proper in June 2015. The
employees requested management that settlement be made through payroll
deduction for P200.00 to P300.00 a month. Management had not acted on
such request yet.

32.4 There was no settlement of the Notice of Charge with COE issued to LMB
in the amount of P46,760,431.08 because Management is reviewing the
case and enforcement of settlement will be made pending result of the study.
The appeal of one of the accountable officer was denied by the NGS Cluster

182
 8 in May 2015. On the other hand, Management will file an appeal on the
decision of NGS Cluster 8 relative to the Notice of Charge for
P31,222,875.00 issued to DENR-NCR.

32.5 We recommended and Management agreed to:

a) intensify the settlement of disallowances, chargesand suspensions;

and

b) adhere to the provisions of the Rules and Regulations on Settlement

of Accounts (RRSA) under COA Cir. 2009-006 dated September 15,
2009, requiring the settlement of disallowances and suspensions
within the prescribed period to prevent accumulation of unsettled
NS and ND.

Compliance with Tax Laws

33. The DENR-OSEC, its Staff Bureaus, Regional Offices and PENROs withheld
taxes amounting to P342.622 million and remitted to BIR the total amount of
P301.893 million, with a balance of P40.729 million, of which the amount of
P31.296 was remitted in January to April 2015, leaving an unremitted amount
of P9.432 million.

33.1 For CY 2014 and prior years, the following DENR offices collected taxes
amounting to P342,621,892.37 and remitted to the Bureau of Internal
Revenue (BIR) the total amount of P301,893,320.30 leaving an unremitted
amount of P40,728,572.07. Of this amount, P9,432,123.76 remained
unremitted as of June 30, 2015, details on the next page.

Office CY 2014 Prior Years Total Amount

CO P228,831.31 P1,513,702.46 P1,742,533.77
NCR 171,679.59 171,679.59
LMB 1,149,571.96 1,149,571.96
FMB 643,757.85 643,757.85
CAR 1,175,577.54 1,175,577.54
RO V 1,099,793.15 1,099,793.15
RO VI 3,262,977.45 186,232.45 3,449,209.90
Total P5,482,823.74 P3,949,300.02 P9,432,123.76

33.2 The amount of P3,949,300.02 which pertains to prior years taxes are for
further verification and reconciliation. The absence of subsidiary ledgers
hinders the accounting office from verifying the correctness of the amounts.
There was also no Aging Report/Schedule being prepared to serve as guide
by the Accounting Office in monitoring unremitted taxes that were long
outstanding.

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 33.3 We recommended and management agreed to require the concerned
Accounting Office to:

a) trace the transactions for prior years and cause the immediate
reconciliation;

b) maintain subsidiary ledgers and prepare aging schedule to show the

details/information of the accounts and determine the unremitted
withheld taxes aged over 30 days; and

c) enforce strict compliance with the BIR withholding tax regulations.

Compliance with the Government Service Insurance System Act

34. The CO, Staff Bureaus, Regional Offices and PENROs collected GSIS monthly
contributions and loan payments amounting to P212.340 millionand remitted to
GSIS the total amount of P209.065 millionin compliance with Republic Act No.
8291, otherwise known as the Government Service Insurance System Act of 1997
requiring the member and employee to pay monthly contributions. Out of the
balance of P3.275 million, P1.003 million was remitted in January and February
2015. The unremitted amount of P2.272 million is still for reconciliation.

Gender and Development

35. The allocation of the GAD activities and programs of the DENR-CO, its Staff
Bureaus, Regional Offices and PENROs were lower than the 5 percent of the
agency’s appropriations. Moreover, the GAD Plan and Accomplishment
Report of CAR, PENRO-La Union, PENRO-Leyte, PENRO-Misamis
Occidental and PENRO-Camiguin did not comply with DBM-NEDA-NCRFW
Joint Circular No. 2004-01 dated April 5, 2004.

35.1 Except for PENRO-Antique, Region VI with 9.51percent of their

appropriation, the DENR-Central Office, its staff bureaus and four regional
offices and PENROs did not comply with the 5 percent allotment of budget
for GAD purposes.

35.2 Moreover, the Annual GAD Plan and Budget of the DENR-CO and its
attached bureaus, regional and filed offices were not reviewed and approved

184
 by the PCW, hence, DENR’s GPBs were not endorsed by PCW for
submission to the DBM as required under the aforementioned Joint Circular.

35.3 The proposed DENR’s GPBs for CY 2014 and the Accomplishment Reports
were received by PCW on April 8, 2013 three months behind the scheduled
submission which is January.

35.4 In the absence of the PCW endorsement, there was no assurance that
Management fully and properly identified all GAD issues which are to be
addressed under existing regulations.

35.5 We recommended and Management agreed to:

a) provide sufficient budget allocation for Gender and Development

(GAD) plan and activities to ensure proper implementation of GAD
projects;

b) ensure that the GAD Plan and Budget (GPB) includes both client-
focused and organization-focused activities and are reviewed,
approved and endorsed by the Philippine Commission on Women
(PCW) to fully and properly identify all GAD issues and concerns;
and

c) encourage the involvement of the DENR men and women employees

in order to gather information on GAD issues and concerns and the
gender needs of the employees which are to be addressed.

Senior Citizens and Persons with Disability

36. Plans, projects and programs intended for the benefit of Senior Citizens and
Persons with Disability were not formulated. Also, LMB and PENRO-Misamis
Occidental were unsuccessful in executing their planned activities and did not
utilize the amount for specific programs.

36.1 The following DENR offices did not formulate plans nor allocate their
budgets for the program:

 Staff Bureau – FMB

 Regional Offices - DENR-NCR and Region VI
 Region I PENROs - Ilocos Sur, Ilocos Norte, Pangasinan, La Union
 Region IV-A PENRO-Batangas
 Region V PENRO-Albay
 Region VI PENROs - Iloilo, Guimaras, Aklan, Antique, Capiz, Bohol
 Region VII PENROs - Cebu, Negros Oriental, Siquijor
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  Region VIII PENROs - Leyte
 Region X PENRO - Camiguin

36.2 PENRO-Albay did not prepare/formulate plans for SC and PWD for CY
2014, however, the following projects/activities aligned under such program
were undertaken:

 Provided special lane and signage in the parking area;

 Upgraded a comfort room to cater to the needs of senior citizens and
persons with disability; and
 Maintained special receiving area in the Office and assigned personnel
to assist the concern of senior citizens and disabled clients.

36.3 PENRO-Guimaras did not prepare any plans and programs for SC and PWD
for CY 2014 but has allotted P7,000.00 in compliance with the requirement
of Section 34 of the General Provincials of the GAA, FY 2014 and has
expended the same amount for the support of senior citizens and persons
with disability.

36.4 PENROs - IlocosNorte, Ilocos Sur, Pangasinan and La Union did not
formulate a detailed action plan for the provision of opportunities for senior
citizens and differently-abled individuals during the year under review.
Nevertheless, the following activities were undertaken for the benefit of
senior citizens and different abled persons:

Office Activity

Repaired the agency’s visitor center costing

PENRO - IlocosNorte
P20,000.00

PENRO - Ilocos Sur Installation of railings amounting to P20,000.00

P9,000.00 was provided in the Work and Financial

PENRO - Pangasinan
Plan but was not fully utilized.

Construction of sturdy and non-slippery tiles and

PENRO - La Union
putting/maintenance of the receiving room.

36.5 Also, although LMB and PENRO Misamis Occidental prepared the plans
for the activities and program and allocated funds for the purpose, they
failed to execute the planned activities due to delay in the designation of the
focal person and failed to utilize the budgeted amount for the purpose.

36.6 On the other hand, the following DENR Offices complied with theGeneral
Provisions of Republic Act No. 10633:

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 Amount
DENR Offices
Budget Utilized Percentage
DENR-CO P 300,000.00 P 292,880.00 98%
DENR-RO I 40,000.00 37,000.00 92.5%
DENR-RO X 117,000.00 117,000.00 100%
PENRO Negros Occidental 30,000.00 30,000.00 100%

36.7 We recommended and Management agreed to require concerned offices

to formulate plans and allocate funds for the programs, activities and
projects that would enhance the mobility, safety and welfare of the
senior citizens and persons with disability in compliance with Section 34
of the General Provisions of Republic Act 10633.

Non/delayed submission of accounting reports

37. Some DENR Offices did not submit or submitted late various accounting
reports, hence, precluded their timely verification, analysis, examination and
audit and deficiencies were not immediately communicated to the Management
and could have been addressed appropriately.

37.1 As of December 31, 2014, the following DENR Offices have not
submitted/submitted late the required documents to the COA, hence,
deficiencies and defects observed during the verification, analysis,
examinations and audit of transactions were not communicated immediately
to the Management:

Office Unsubmitted Documents Effect

LMB Report of Checks Issued (RCI) Delay in the post audit of
NCR including DVs transactions, analysis of accounts
FMB Report of Collections (ROC) and late preparation of audit
BMB Financial statements (FS) reports.
Bank Reconciliation Statement
(BRS)
Budget and Financial
Accountability Reports (BFARs)
PENRO-Ifugao BRS Cash in Bank balances could not
be established
PENROs Apayao and BFARs Propriety and legality of
Kalinga transactions could not be easily
ascertained
PENRO Cavite Late submission of DVs and Delay in the post audit of
financial reports transactions and analysis of
accounts.
PENRO-Camiguin BFARs. Propriety and legality of
Financial Reports were submitted transactions could not be easily
but not in the prescribed format in ascertained.
COA-DBM Joint Circular No.
2014-1 dated July 2, 2014.
PENRO-Lanao del Norte Monthly Trial Balance, Liquidation Delay in the review and
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 Office Unsubmitted Documents Effect
Reports, Bank Reconciliation verification on the propriety and
Statements validity of the transactions
recorded in the books

37.2 LMB informed that that the failure to submit the financial documents,
reports and year-end Financial Statements within the prescribed timelines
was due to lack of manpower since most of the regular employees assigned
at the Accounting Units availed of the Rationalization Plan. Filling-up of the
retained positions is still on-going.

37.3 PENROs Apayao and Kalinga informed that they were unable to prepare the
reports required due to the little awareness of the foregoing COA-DBM
Joint Circular.

37.4 We recommended and Management agreed to:

a) fast-track the hiring of qualified personnel to fill-up the positions at

the Accounting Unit;

b) conduct seminars/updates regarding the new guidelines prescribing

the use of modified formats of the Budget Financial Accountability
Reports (BFARs) for the awareness of budget and accounting
personnel; and

c) observe early submission of all the necessary documents for a timely

action on the deficiencies which may be found in audit.

PDAF and DAP

38. The DENR did not receive Priority Development Assistance Fund (PDAF) and
Disbursement Acceleration Program (DAP) fund during the year and in CY 2013.In
the CO, the records of the Budget Division for the unreleased unutilized amount of
P186,269.00 of the P49,586,000.00 DAP fund received under SARO No. E-
11011868 dated December 5, 2011 was already negated to close the obligation
made in CY 2011. The CY 2013 CAAR embodied the audit team’s observations
and recommendations for PDAF and DAP received from CY 2010-2012.
Compliance/action taken on the team’s recommendation is reflected in Part III of
this report.

Comprehensive Agrarian Reform Program (CARP)

Payment of honorarium out of CARP Fund despite issuance of Notices of Disallowance

for previous similar claim
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39. Honorarium for CYs 2013 and 2014 amounting to P397,600.00 was paid to
various employees of PENRO-Benguet out of the CARP Fund, despite the
Notices of Disallowances previously issued for the same claim.

39.1 Section 4.3 of Presidential Decree (PD) No. 1445 provides that trust funds
shall be available and may be spent only for the specific purpose for which
the trust was created or the funds received.

39.2 In CY 2013, Notice of Disallowance (ND) No. 13-001-158 (CARP)(12)

dated September 10, 2013 was issued to various employees of
PENRO/CENRO Benguet and some Regional Office officials and
employees for claiming honoraria for the period January to December 2012
charged against CARP fund. The total amount disallowed and is currently
on appeal to the Commission on Audit was P298,800.00.

39.3 Despite the ND issuance, the agency again paid the same honorarium to the
PENRO/CENRO Benguet employees and some Regional Office officials
and staff for the period January to December 2013 and January to December
2014 amounting to P164,000.00 and P233,600.00, respectively.

39.4 ND No. 15-001-158 (CARP) (13) dated February 2, 2015 was already
issued on the payment of P164,000.00.

39.5 The honoraria paid from January to December 2014 were charged to Survey
Expenses, an account which should only be used in the conduct of survey
projects.

39.6 A total of twenty-two (22) personnel were paid honorarium, five of whom
were assigned at the Regional Office, ten were in the finance and
administrative office whose jobs are not directly related to CARP, and seven
were assigned at the Office of the PENRO/CENRO Benguet and the Land
Management Services (LMS). Moreover, the required authority to claim
honorarium and other documents to support such claim were not attached.

39.7 We recommended that Management:

a) stop the unauthorized payment of honorarium considering that the

previously issued Notice of Disallowance is still under appeal;

b) direct the Accountant to (i)use the appropriate expense account for

fair presentation of the financial statements;(ii) ensure that
disbursement vouchers are properly supported with documents to
establish propriety of claims; and

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 c) submit the specific job assignments of the twenty-two personnel
under Fund 158 who were paid honorarium to determine if their job
assignments are CARP related.

CBFM-CARP plantation sites not properly maintained and protected

40. CBFM-CARP established plantation in PENRO Davao Oriental was not

properly maintained and protected by recipient PO due to non-availability of
funds after the completion of the project.

40.1 The Community-Based Forest Management-CARP established plantation

sites for CY 2014 of different PO beneficiaries implemented by the Binondo
Upland Farmers Cooperative (BUFC) at Brgy. Binondo, Baganga, Davao
Oriental costing P1,005,028.00 was not properly maintained and protected
by the recipient PO, as provided in the MOA between the DENR and the
PO.

40.2 Item 3.2, paragraph J of the MOA requires the recipient POs to conduct re-
planting, ring weeding, fertilizer application and regular maintenance and
protection until such time that the CBFM area is deemed productive and
sustainable.

40.3 Management said that plantation sites were not maintained and protected by
some recipient POs since there is no funding for these activities after the
completion of the project. In like manner, monitoring and evaluation of the
completed projects were not conducted due to lack of funds.

40.4 Failure of the Management to enforce the provisions of the MOA

particularly the roles and responsibilities of the PO is an indication that the
established plantations were not monitored after the completion of the
project to ensure the sustainability and productivity of the CBFM areas,
thus, may result in loss of government funds.

40.5 We recommended that Management:

a) remind the POs concerned of their responsibilities as stipulated in

Item 3.2, paragraph J of the MOA in the maintenance and
protection of the CBFM area; and

b) provide funding for the conduct of regular monitoring and

evaluation of the established plantation sites even after the
completion of the CBFM-CARP project to ensure the sustainability
and productivity of the area and recommend to higher management
the result of assessment of various issues, problems and constraints

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 related to the development and strengthening of the CBFM-CARP
implementation.

41. The payments of CBFM-CARP related transactions in PENRO-Davao del Sur

lack the supporting documents that could establish their validity and
propriety.

41.1 Item 3.2 of the MOA for CBFM stipulates the Roles and Responsibilities of
the Recipient PO. Among others, is the submission of the recipient PO of
the following documents and reports:

 Progress Report following the prescribed format on a quarterly basis

together with a sketch map of the area developed, photo documentation
on the implementation of the activities, based on the WFP which shall
serve as basis for the release of payments.

 Final Report accompanied with a map indicating the areas developed,

list of actual recipients and their respective areas developed, and photo
documentation.

41.2 The payments made to nine POs for the implementation of CBFM as of
December 31, 2014 revealed that: (a) retention fees were released in the
absence of a final report and other required documents as called for in the
MOA; and (b) payments were made without supporting documents such as
the progress report of the PO and for the final billing, a final report
accompanied with a map indicating the areas developed and list of actual
recipients and their respective areas developed.

41.3 Moreover, the inspection and validation reports prepared by the validating
team and the Certificate of Completion and Acceptance issued by the OIC -
CENROs for the release of retention fees made no mention about the
attainment of survival rate which management set at 90 percent, hence, no
information as to the achievement status of the target outputs and the desired
outcomes.

41.4 The Certificates of Completion and Acceptance attached to the disbursement

vouchers (DVs) for the payments of retention fees of two POs amounting to
P193,740.37 were issued by OIC-CENROs days before the conduct of
inspection and validation which is not in accordance with Clause 49 of the
General Conditions of the Contract (GCC) provided for under the revised
IRR of RA 9184 which provides that “the Contractor shall request the
Procuring Entity’s Representative to issue a Certificate of Completion of the
Work, and the Procuring Entity’s Representative will do so upon deciding
that the work is completed”.
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41.5 The issuance of the Certificate of Completion and Acceptance declaring the
works of the POs to have been fully and satisfactorily completed prior to
inspection and validation casts doubt on the integrity of the certification.

41.6 Also, three DVs with an aggregate amount of P468,449.65 were not
supported with official receipts or other evidence of receipt of payment.

41.7 Further, seven out of nine POs did not comply with the requirement set forth
in Item C.7 of unnumbered Memorandum of Forest Management Bureau
(FMB) dated March 10, 2011, pertaining to CBFM-CARP Project
Implementation Guide, which provides that mobilization fee shall be at 15
percentof the project cost and shall be recouped on the first and second
billings. And progress billings should not exceed four.

41.8 We recommended and Management agreed to require:

a) all the persons responsible to explain in writing the processing of

progress payments and releasing of retention fees without
complete documentation; and

b) the Accountant to (i) check thoroughly the attached documents

prior to processing any transaction to assure that attached
documents are correct and complete and that the claims are valid;
and (ii) submit the lacking documents to the Office of the Auditor
for audit purposes.

41.9 During the exit conference, the CBFM Coordinator explained that
implementation of the 2013 recommendations for CBFM just started in
February 2015 and some of the CENROs have not really complied with the
requirements.

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