PART II – OBSERVATIONS AND RECOMMENDATIONS

A. VALUE FOR MONEY AUDIT

Fund utilization for CYs 2015-2017

1. The DENR recorded an increased fund utilization rates from 87.84 to 96.49
percent for CYs 2015 to 2017. However, only 79.65 percent, 83.94 percent and
71.94 percent of the obligations were disbursed for CYs 2015, 2016 and 2017,
respectively, which is indicative of programs/projects/activities not being
implemented on time, thus, the expected benefits from full utilization of funds
were not attained.

The annual General Appropriations Act (GAA) provides that, as a general rule,
departments, bureaus and offices of the national government, including
Constitutional Offices enjoying fiscal autonomy and SUCs shall spend what is
programmed in their respective appropriations.

The DENR’s allotments for CY 2015 to 2017, and corresponding obligations and
disbursements are presented in Table I, with the details shown in Annex A.
Table I - Allotments, Obligations and Disbursements for CYs 2015 -2017
In Million Pesos Utilization Rate (%)
Obligations Disbursements
Year
Allotments Obligations Disbursements Over Over
Allotments Obligations
(A) (B) (C) (D) (E) = (C/B) (F) = (D/C)

2015 23,238.307 20,412.275 16,259.298 87.84 79.65

2016 22,980.874 20,609.922 17,299.913 89.68 83.94
2017 25,495.015 24,600.871 17.698.51 96.49 71.94

The implementation of Foreign-Assisted Projects (FAPs) got the biggest chunk for
the low disbursements, as DENR disbursed 26.87 percent, 25.99 percent and 18.69
percent for CYs 2015, 2016 and 2017, respectively. Said data is reflective of
substantial implementation delays of on-going projects notably the Forest
Management Project (FMP) and Integrated Natural Resources and Environmental
Management Project (INREMP), which are both way past their mid-term of
implementation.

The FMP, which is for a period of ten (10) years effective July 3, 2012 to July 3,
2022, aims to strengthen forestland management in three critical river basins
through the implementation of collaborative and comprehensive Community-Based
Forest Management strategies.

The regions implementing the FMP reported low disbursements for CY 2017 as
shown in Table II.

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 Table II – Regions implementing FMP with Low Disbursements in CY 2017
Region Reasons for Low Disbursements
Cordillera Administrative - The SAA was only released in November 2017 upon
Region (CAR) approval of the realignment from MOOE to Capital
Outlay, thus, procurement process and perfection of the
contract took place only in the latter part of the year.
PENRO Ifugao - Insufficient cash/unavailability of cash
- Replenishment of imprest fund takes time
- Delay in the hiring of Assisting Professionals
- Prioritization of prior year backlogs in seedling
production and plantation establishment
PENRO Quirino - POs were not able to claim payments due to non-
attainment of the required 85% survival rate of their
established plantation
- Delay in mobilization of POs
PENRO Nueva Vizcaya - Delay in mobilization of POs
- WFP attached to the SD contract with POs not strictly
followed
PENRO Iloilo - WFP attached to the SD contract with POs not strictly
followed
PENRO Nueva Ecija - Insufficient cash/delayed release of cash

The INREMP, on the other hand, is a seven year project from August 9, 2013 to
December 31, 2020. It aims to manage the upper river basins and component
watersheds to support poverty reduction, watershed management, biodiversity
conservation and climate change policy objectives with emphasis on developing the
capacities of the local governments, institutions and upland communities as
development partners.

For CY 2017, INREMP showed a fund utilization rate of 92.82 percent but only
16.84 percent of the obligations were disbursed. Likewise, the project reported an
actual physical accomplishment rate of 16.7 percent for the same year as a result of
the minimal accomplishment for activities in all components.
The DENR Central Office explained that the very low disbursements for INREMP
are attributed mainly on the implementation of Natural Resources Management
(NRM) subprojects due to the three year contract spread under the Comprehensive
Site Development scheme. Moreover, the peace and order situation in Marawi City
also contributed much in the delayed implementation of activities in the Lake Lanao
River Basin in ARMM.

Although these issues have been resolved through measures instituted by

Management, we believe that the implementation of activities have been greatly
affected which could also affect the timely completion of the projects.

For the Regular Fund (Fund 101), the low utilization rate in the Central Office is
due to the projects/activities under Major Final Output (MFO) 2 - Ecosystem
Management Services and MFO 3 – Ecosystem Regulation Services that were not
implemented in CY 2017. The Department budgeted a total amount of

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 P18,597,042.00 for activities under MOOE but there are no obligations incurred
under these projects/activities. List of these projects/activities is shown in Table III.
Table III - Projects/Programs/Activities of DENR CO for CY 2017
 Allotment of
Projects/Program/Activities
Central Office
MFO2 – Ecosystem Management Services
Management of Protected Areas, Wildlife, Coastal and Marine
Resources/Areas
Protected Areas Development and Management P 1,758,000.00
Management of Coastal and Marine Resources/Areas 922,042.00
Clonal Nursery and Production of Quality Planting Materials (QPM) of Premium
14,711,000.00
and Indigenous Forest Species for National Greening Program
For the requirements of the Comprehensive Agrarian Reform Program
Program beneficiaries development 500,000.00
MFO 3 – Ecosystem Regulation Services
Enforcement of Laws, Rules and Regulations
Permit issuance and monitoring of land and land resource use 222,000.00
Issuance of protected area community-based resource management agreement and
484,000.00
monitoring of protected areas, wildlife, coastal and marine resources
Total P 18,597,042.00

While in the field offices, among the reasons cited for the low utilization are
delayed/non-implementation of projects; project spill over caused by the delayed
downloading of funds from the Regional Office; late releases of sub-allotment
advices (SAAs) from the central and regional offices without cash back- up;
delayed submission of claims or billings from the contract-implementor; and non-
payment of contractors due to inability to meet the required 85 percent survival
rates for NGP established plantations and/or non-completion of maintenance and
protection activities.

The agency has yet to consider promoting greater budget efficiency through
implementation of programs, projects and activities in a timely manner. It must take
actions to address issues and concerns that hamper the implementation of projects
so that optimum results and benefits would be realized on time as intended.

We recommended and Management agreed to require the heads of the

concerned Offices to cause the full utilization of funds through close
monitoring of programs and projects for immediate resolution of identified
risks and issues and timely execution of all planned activities.

National Greening Program

2. Delayed provision of funds and inadequate monitoring of maintenance and

protection activities of NGP sites had manifested into stunted growth and low
survival rates of planted trees as reported in certain regions. Moreover,
expenditures not related to the implementation and attainment of the goals
and objectives of the enhanced NGP amounting to P2.302 million were charged
by the FMB to the funds allocated for the program.

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Delayed provision of funds for maintenance and protection activities

Maintenance and protection is considered contributory to a good survival rate of the

plantation. The presence of weeds, uneven distribution of nutrients in the soil,
drought, forest fire, among others are some issues that need to be addressed in order
for the trees to survive. For this reason, the DENR under NGP projects established
maintenance and protection activities to continuously improve the growth of the
trees, which include the activities below.

Activity
a) strip brushing - Taking out the weeds along the row of trees
b) ring weeding - Taking out the weeds around the tree
c) spot cultivation - Loosening and breaking up the soil to
facilitate air and water penetration for plants
use
d) procurement and - Treatment for uneven distribution of nutrients
application of fertilizer in the soil
e) replanting - Replacement of tree/s that failed to survive
f) establishment/maintenance - Ten-meter partition after 10 hectares
of fire lines plantation to minimize damage during fire
g) establishment/maintenance - An access road for easy monitoring of
of foot patrol plantation

The agencies in Regions III and IV-A attained significant accomplishments on its
maintenance and protection of established NGP sites. In Region XI, maintenance
and protection for the 3rd year cycle for 2015 and 2nd year cycle for 2016
correspond to the areas contracted for Comprehensive Site Development (CSD) in
2015 and 2016.

The result of the audit into the site maintenance and protection activities covering
areas contracted in prior years (2015 and 2016) is shown in Table IV.
Table IV – Observations on the Maintenance and Protection Activities for Prior Years’ Planted Areas
RO/PENRO Observation
RO II
PENRO Majority of planted trees of each open area were not fully grown based on their
Cagayan expected/standard height and diameter after the third year cycle for plantation
establishment. The trees are doomed not to survive due to absence of financial
support for the maintenance and protection of the plantation sites and tenurial
instruments to encourage the POs to continue to maintain and protect these newly
replanted timber trees.

Expenditures on the maintenance and protection of NGP Plantation Sites

established in CY 2015 for the 2nd Year (CY 2016) and 3rd (CY 2017) were not
fully paid.

Payment to the beneficiaries for the maintenance and protection is being made on
a onetime payment only, inconsistent with the related work and financial plan that
indicated payment must be on a quarterly basis. The balancing of priorities in
favour of the PO’s or beneficiaries for quarterly payments of their
accomplishments on the maintenance and protection targets indicated in the
WFP, will serve as incentive for them to undertake maintenance and protection

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RO/PENRO Observation
activities more thoroughly.
PENRO Out of the planted area of 6,097 hectares in CY 2015, only 1,606 or 26.34% of the
Isabela total land area planted attained the survival rate of 85%, leaving the 73.59% or
4,491 hectares below the survival rate. On the other hand, out of the 3,596 planted
areas in CY 2016, 1,000 hectares or 27.91% did not attain the 85% survival rate.
PENRO The areas targeted to be developed and planted were 100% accomplished but the
Quirino planted sites are not well maintained and protected. The low survival rate is an
issue which should be given proper attention otherwise funds and efforts shall be
put into waste. For the 3rd year where there is still a P2,000.00/hectare fund for
protection and maintenance, survival rate is already very low thus, it is inevitable
that on the 4th year where there will be no funds for maintenance, the more that the
planted areas will not be protected and maintained.
PENRO 85% survival rate on planted seedlings were not attained on 311 hectares
Nueva established plantation, as some of the planted sites are not well maintained and
Vizcaya protected.
RO V
PENRO The practice of replanting in order to achieve one-hundred percent
Sorsogon accomplishment and payment thereof under the maintenance and protection
activities (2nd and 3rd year) does not guarantee the survival of the replanted
seedlings without regular maintenance and protection after the contract duration.
Management should have either issued a tenure or legal instrument to
POs/Contractors for them to continue the maintenance and protection activities.
This is to ensure higher survival rates of the established plantations.
PENRO The area maintained for 2015 plantation of 1,643.75 hectares was 66 percent of
Catanduanes the target area of 2,489 while the fund utilized also corresponds to 66 percent of
the budget. The CSD project under the Mechanized and Modernized Forest
Nursery (MMFN) with 469 hectares was to be implemented in 2015 but due to
late receipt of funds from the Regional Office, the project was implemented in
2016. Consequently, the funds intended for 2016 was used in 2017
implementation, hence, the project which should be 100 percent accomplished in
2017 was extended to 2018.
PENRO There were no innovative management or maintenance systems/procedures to
Camarines enhance fertility of the cogonal open areas (plantation sites), and prevent the
Sur occurrence of fire, except the provision of minimal fertilizer and construction of
fire lines that are proven not effective.
PENRO Seedlings procured for replanting in the different NGP sites were abandoned at the
Masbate temporary nursery, thus putting to waste an estimated 2,000 pieces costing
₱21,000.00 which have either overgrown, withered or died.
RO VI
PENRO The 70% survival ratio fell short by 15% from the minimum 85% survival ratio
Aklan of seedlings planted in NGP project sites initiated in 2015, with CYs 2016 and
2017 as the 2nd and final years of projects maintenance and protection,
respectively, which was not commensurate to the cost of P14,490,975.21, thus, the
objectives of the program was not fully achieved.

Some seedlings planted were found to be smaller than the required pencil sized
seedlings. Further, in its initial year, replanted seedlings were raised together with
seedlings initially planted in 2015. Some seedlings were covered with fast
growing cogon grass and tigbao/talahib forcing the seedlings to stoop.

Further, seedlings raised in the nursery for replanting in the initial year together
with seedlings to be utilized for plantation establishment may have already been
outgrown come the time for replanting. Seedling production started in the 1 st

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RO/PENRO Observation
quarter of 2015 and planting occurred in the whole of the 3 rd quarter. Replanting
took place in the 4th quarter, by this time seedlings were already overgrown
because some of its root collars have already grown on the ground. Transfer from
the nursery to the planting sites of this kind would cause stress and damage to the
seedlings and will ultimately cause its mortality.
PENRO Inspection of the 75 has. NGP project in Brgy. Nayawan, Tapaz, Capiz with a total
Capiz project cost amounting to P1,386,500.00. The project was initiated in the Calendar
Year 2015 amounting to P1,004,000.00. The 2nd year M&P activities was
contracted at P225,000.00 in 2016, and the final M&P activities in 2017 at
P157,500.00. Some seedlings planted were found to be smaller than the required
pencil sized seedlings and the portion supposed to be introduced only with timber
was mixed with fruit tree seedlings and some were intercropped with coffee.
Assessment of the survival ratio of seedlings, which was confirmed by the agency
and the People’s Organization (PO) representatives, was only 65 percent or 20
percent short of the required 85 percent minimum survival ratio.
PENRO The survival rate of the CY 2015 planted mangroves in the five municipalities in
Guimaras the Province of Guimaras under the National Greening Program ranges from 85 to
90 percent, or an average of 87 percent, which satisfied the required survival ratio
of 85 percent, thereby, showing efficient and effective utilization of the
₱700,000.00 budget allocation for the third year maintenance and protection of the
established plantations. However, the trend of the survival ratio is declining from
the second to the third year and if it will continue to do so, the 85 percent
minimum survival rate may not be met in the succeeding years.
PENRO PENRO Antique has attained a 100 percent accomplishment of its plans and
Antique targets in the 2nd and 3rd years maintenance and protection of the NGP plantations
established in CYs 2015 and 2016, which is parallel to its fund utilization for CY
2017, thus, showing an efficient use of its funds, thereby achieving its desired
outcome of maintaining the 85 percent survival rate of the plants and minimizing
higher mortality rate.
NIR
PENRO Low accomplishments and utilization of funds by PENRO Negros Oriental for
Negros maintenance and protection activities. Two (2) CENROs - Ayungon and
Oriental Dumaguete failed to fully utilize the budget intended for maintenance and
protection activities. People’s Organizations (POs) failed to conduct maintenance
and protection for the established NGP plantation sites due to the increase in
seedlings per hectare and no additional cost was being paid by the agency .
Region IX
PENRO Monitoring of NGP activities was limited on the number of hectares and seedlings
Zamboanga planted hence, no inspections were conducted to check on the status of the planted
del Sur seedlings as of year-end as required by the CY 2012 DENR NGP Implementation
Manual. As such, the needed remedial actions like replanting and proper care and
maintenance were not undertaken so as to achieve the desired survival rate of 85
percent of the planted seedlings, on the third year of implementation which is the
key success indicator of the program.

Funds appropriated for Maintenance and Protection for 2 nd year 2016 and 3rd year
2015 of NGP established plantation were not fully utilized, which is only 65%.
While actual accomplishment on the target area of the Maintenance and Protection
for Year 2 & 3 on payments made to P.Os as of September 2017 ranges from 15%
to 90% only.
PENRO Delay in the implementation of NGP Year 1 (2016) CSD activities resulted in
Zamboanga Year 2 (2017) CSD activities not being undertaken in four NGP sites leaving an
Sibugay approximately 6,972,210 planted trees in 3,885 hectares without maintenance and
protection at a total contract price of P11,655,000.00

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 RO/PENRO Observation
Region XII The variances in the reporting of NGP accomplishments as per Consolidated
Physical and Financial Accomplishment Report prepared by the Planning and
Management Division as compared to the Consolidated NGP Accomplishment
and Status report prepared by the Conservation Development Division reflect
weak monitoring and reporting of project accomplishments.

On a per province wide data, the PENROs under the DENR-Region XII did not
meet the desired survival rate of 85% on NGP plantations. The average survival
rates for the region ranged to 58% for CY 2016, 45% for CY 2015 and 41% for
CY 2014.

The above noted deficiencies could have been avoided and the goal of meeting the
desired 85 percent survival rate of plantations satisfactorily met in all regions had
there been adequate and timely provision of funds and close monitoring of the
maintenance and protection activities of NGP sites.

Ineligible expenses charged to NGP

The DENR Executive Committee headed by the Secretary is responsible for the
overall management and supervision of the implementation of the NGP while the
Forest Management Bureau (FMB) is responsible for providing overall technical
support to program implementation.

For FY 2017, the FMB was provided under the line item budget Forest
Development, Rehabilitation and Protection of MFO 2 –Ecosystem Management
Services an appropriation of P46,000,000.00 for MOOE and P8,800,000.00 for
Capital Outlay (CO) or a total of P54,800,000.00 for the implementation of
activities under the enhanced NGP. An additional funding of P0.355 million was
received from the DENR CO for the payment of contractual fee of ten extension
workers.

Of the amount allocated for MFO2, P40,248,000.00 or 73.45 percent was disbursed,
of which P2,301,933.01 were incurred for activities that were not programmed
under MFO 2 and/or not related to the implementation of enhanced NGP, with
details shown in Table V.
Table V – Ineligible Expenses Charged to enhanced NGP
Type of Expense Particulars Amount
a. Foreign travels Expenses for the foreign-travel (i.e, pre-travel P 1,253,320.45
allowances, Daily Subsistence Allowances, plane
fares) of FMB officials and personnel in relation to
attendance to international commitments such as the
United Nations Forum on Forests, ASEAN Senior
Officials in Forestry, ASEAN Ministerial Meeting
on Agriculture and Forestry, and United Nations
Framework Convention on Climate Change that
were programmed and budgeted under MFO 1-
Ecosystem Policy Services, Formulation and
Monitoring of ENR Sector Policies, Plans,

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 Type of Expense Particulars Amount
Programs and Projects
b. Repairs and Expenses for the repairs and maintenance (e.g., 386,060.00
maintenance of procurement of tires, batteries, and minor repairs) of
motor vehicles motor vehicles not assigned to or used by NGP,
which should have been charged to General
Administration and Support program/ project/
activity (P/A/P)
c. Donations Sponsorships of various activities of the University 340,000.00
of the Philippines Los Baños (UPLB) Association,
UPLB Foundation, Inc., UPLB Trust Project Fund,
and Philippine Forestry Education Network, Inc. the
purposes of which were not related to NGP.
d. Semi- Semi-expendables - furniture and fixtures procured 322,552.56
expendables - for offices under the Bureau other than the NGP
furniture and Coordinating Office
fixtures
Total P 2,301,933.01

The abovementioned expenditures could not be considered as contributory factors

in the attainment of NGP’s goal and objectives since these were not programmed
under the said MFO.

The Management comments and Auditor’s rejoinder relative to the above

observation are presented in Table VI.
Table VI – Management Comments and Auditor’s Rejoinder
Management Comment
a. Foreign travels
The foreign travel budget was utilized to
fund the representation of the Philippines
in the annual international
commitments/meetings as part of sharing
the learnings and experiences in the
implementation of the NGP.
The amount allotted for foreign travels
under MFO 2 – Ecosystem Management
Services was also programmed as
additional budget or reserve fund to cover
budget deficiencies relative to the
attendance in international commitments/
meetings. The augmentation of allotment is
allowed under DBM National Budget
Circular (NBC) No. 567 dated January 3,
2017.
Auditor’s Rejoinder
The purpose of attendance of FMB officials
and employees to international commitments/
meetings were not related to the
implementation of NGP.
Budget for foreign travels under MFO 2 could
not be considered as a reserve fund or can be
used to cover the deficiencies in the budget of
other MFOs. While DBM NBC No. 567
provides that modification in the allotment
could be made, the same Circular and the
General Provisions of the GAA state that such
modification/s shall be made within a
program, activity or project. There was no
provision either in the said Circular or the GAA
which states that modification of allotment
could be made from one MFO to another.

b. Repairs and maintenance of motor vehicles

The implementation of NGP requires the
The trip tickets and inventory of motor vehicles
frequent travels for the provision of
submitted to the Audit Team showed that only
technical assistance to implementing units,
one (1) vehicle was assigned and used for NGP
monitoring and evaluation, field validation

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 Management Comment Auditor’s Rejoinder
of accomplishments, investigation on
implementation. There was no proof that all the
reported cases on NGP accomplishment,
other vehicles of the Bureau were used in the
conduct of capacity building and learning
monitoring and validation of NGP activities
events, coordination and consultation
and accomplishments as claimed.
meetings/workshops with partner agencies
and stakeholders.
Insufficiency of budget allocation under GASS
is not a valid reason to charge the expenses for
The frequent use of vehicles requires
activities programmed therein to the NGP.
regular check-up/repair and maintenance to
ensure the safety of Bureau officials and
personnel during travels in performance of
the functions and responsibilities for the
NGP.
The budget allocated under the General
Administration and Support Services
(GASS) is not sufficient to cover the repair
and maintenance of twelve (12) service
vehicles of the Bureau.
c. Donations
Sponsorship to various activities may not The purposes of financial assistance/
have direct impact on NGP, but the sponsorship made to various institutions
attendance and participation of FMB showed that these were not specifically related
foresters to lectures, symposiums wherein to the attainment of the goals of NGP but to the
new approaches and recent developments forestry sector as a whole.
on environmental conservation and
management and landscape restoration are
introduced and discussed provides
additional learnings which can be applied in
the implementation of NGP as well as
forestry- related projects.

d. Semi-expendables - Furniture and fixtures

Various furniture and fixtures procured using
The furniture and fixtures procured were
NGP funds did not serve the purpose of the
installed in the FMB Conference Room and
program and were not being used by the NGP
are being used by FMB for its day-to-day
Coordinating Office (NGPCO). The items
activities, meetings, workshops/trainings
were intended for the use of various offices
wherein NGP as the priority program is a
under the Bureau and were neither
regular agenda. This likewise serves as a
budgeted/programmed nor requested for
venue for the discussion of NGP progress,
procurement by the NGPCO.
and implementation concerns.

We recommended and Management agreed to:

a) undertake a stricter monitoring of implementation of maintenance and

protection of NGP projects;

b) continue to establish maintenance standards for the success of the

program; and

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 c) direct the FMB Director and NGP Coordinator to: (i) utilize the budget in
accordance with the purpose for which it was released; and (ii) strictly
adhere with the provisions of law regarding the release and use of funds for
the program.

Non-maximization/utilization of equipment and constructed structures

3. Equipment and completed structures costing P205.895 million remained idle

and/or not being used in accordance with their intended purpose.

Various equipment purchased and completed structures with an aggregate cost of

P205,894,696.20 remained idle and/or not being used in accordance with their
intended purpose, as listed in Table VII.
Table VII – List of Idle /Not Properly Used Equipment and Structures
Office Item
Central Eight sets In-Situ Water
Office Quality Monitoring
Equipment (WQME)-
WQME is an equipment
used to monitor the
quality of water to
evaluate the physical,
chemical, and biological
character of water in
relation to human health,
ecological conditions,
and designated water
uses.
CAR
PENRO Two (2) constructed
Benguet Small Water Impounding
Structure (SWIS) in
Botanical Garden and
Busol Forest Reserve
(Note: The DENR,
through its Regional
Director, has entered into
an agreement with the
City Government of
Baguio through the City
Mayor on January 5,
2016 for the construction
of the SWIS. The City
Government of Baguio
has sub-contracted the
project to a private
contractor)
Cost Status/Condition
P183,780,000.00 The procured WQME do not address the
problem on water pollution in Manila Bay
as there are no policy nor strategies
developed by the MBCO on the data
generated from the equipment. Moreover,
the absence of project implementation plan
resulted in the non-utilization of the
equipment in accordance to its purpose
1,200,000.00 Still not utilized because of unconnected
distribution tanks to the water source.
Moreover, based on the Statement of Work
Accomplished signed by the City Engineer,
only 73.43% were satisfactorily
accomplished by the private contractor due
to a total of 26.57% underrun noted. Thus,
the City Government of Baguio has paid
the said contractor the amount of
₱701,245.09 only. This did not tally with
the validation report of the DENR which
stated that the project was fully completed,
and for which a total of ₱1,080,000.00, net
of retention fee, was paid to the City
Government of Baguio through check
number 41091750 dated December 29,
2016. The City Government of Baguio has
committed to return the excess payment to
the DENR, which to date, has not yet
materialized.

Further the 4,338 meter pipes costing

₱571,411.57 (part of the P1.2M cost of the
project) allegedly installed based on the
Validation Report signed by agency

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 Office Item Cost Status/Condition
personnel were not completely accounted,
as only an estimated 150 meter pipes were
found during the ocular inspection
conducted by the audit team together with
some agency personnel and private
contractor’s representative on September
22, 2017.
Region V
PENRO Six (6) air conditioning 86,994.00 Remained stockpiled in one corner of the
Masbate units CENRO San Jacinto office building since
delivery in October 2017, to be installed
upon completion of the construction of
cubicles
PENRO Agricultural and 7,247,717.91 Not yet installed since receipt from DENR-
Albay Forestry Equipment CO in May 2016 due to lack of
consisting of one set coordination with the supplier through the
Complete Nursery CO, despite completion of the installation/
Seeder and one set energization of three phase transformer as
Double Rail Irrigation initially required
Boom for the
Mechanized and
Modernized Forest
Nursery (MMFN)
PENRO SWIS consisting 2 units 2,191,778.38 Completed in Dec. 2016 but not yet utilized
Sorsogon impounding dam, 2 units due to structural defects and other issues.
intake box, one unit Total project costs were paid in three
spring box and one unit tranches, between November 2016 to
combination of spring March 2017.
and intake box installed
in various locations
Region V Various equipment 1,952,069.00 The pieces of equipment were found to be
(ICRMP) intended for underwater in good condition under the safekeeping of
assessments/researches the RIC personnel but left unutilized since
or scientific studies their transfer from the DENR Central
Office in CY 2014 due to lack of technical
expertise of personnel in operating the
equipment
Region VI Agricultural and 7,247,717.91 Not yet utilized and without proper storage
Forestry Equipment area due to unfinished construction of the
consisting of One set facilities for the Mechanized and
Complete Nursery Modernized Forest Nursery
Seeder and One set
Double Rail Irrigation
Boom for the MMFN
Locally procured nursery 2,188,419.00
equipment
Total P 205,894,696.20

Non-utilization of the defeated the purpose for procuring/constructing these assets,

hence, proper planning and coordination is essential. Before the procurement
process, qualified recipients/end-users should have been identified and
documents/facility been prepared in anticipation of the transfer/receipt of
equipment.

Moreover, allowing the equipment and structures to remain idle or unutilized for a
long time exposes these assets to deterioration and, consequently, may render the
same no longer functional.

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The comments and action taken by Management on the idle and unused equipment
and constructed structures are shown in Table VIII.
Table VIII – Management Comments and Action Taken
Office Comments and Action Taken
CO- The MBCO has facilitated the signing of the Deed of Donation (DOD) to concerned
MBCO LGUs covering the turn0ver of the in situ WQME. Said DOD states, among others,
that:

“6. Use the data from the WQME in its information dissemination and education campaigns for the
rehabilitation and cleanup of Manila Bay;

8. Develop an action plan, in coordination with the DENR, EMB and other concerned stakeholders, for the
improvement of water quality of waterways and coastal areas within its jurisdiction utilizing the results
generated by the WQME.”
The MBCO will be holding a small group discussion on the establishment of Real
Time WQME Data Reporting and Utilization Protocol. The results of this discussion
will be forwarded to the DENR Policy Technical Working Group for consideration in
the updating of the Manual on Ambient Water Quality.
PENRO Management has already coordinated with the City Government of Baguio regarding
Benguet the implementation of remedial measures and the return of the unspent amount from
the total contract cost.
PENRO The OIC-CENR Officer of San Jacinto assured full compliance with the
Masbate recommendation within forty-five (45) days to install the subject air conditioning units
as soon as the construction of cubicles are completed.
PENRO Management have coordinated the matter with the Regional Office which has direct
Albay and control on the operation of the MMFN. The request for installation from the
Central Office has not been acted and follow-up will be made in order to fully
operationalize the MMFN at Banao, Guinobatan, Albay.
PENRO Management had invited the Contractor together with the Regional CIT representative
Sorsogon for a meeting on February 22, 2018 to address the issue. Likewise, the Inspection
Team was advised to closely monitor all projects implemented by this Office and to
ensure that the same are functional before recommendation for issuance of certificate
of completion/acceptance is made.
Region V Management will ask assistance from the Central Office in the training of personnel
(ICRMP) on the proper utilization of the equipment. For the meantime that the RIC has no
existing research being conducted, said equipment can be utilized by other interested
parties such as the LGUs or Bicol University, through the execution of a MOA.

We recommended and Management agreed to direct the Heads of :

a) MBCO to: (i) formulate policy, guidelines and strategies, in coordination

with the other mandamus agencies, that will ensure the data collected from
the Water Quality Monitoring Equipment can be used to address the
water pollution in the Manila Bay; and (ii) formulate a project
implementation plan in order to maximize the proper utilization of the
WQME and to prevent the unnecessary delay in its operation.

b) PENRO Benguet to: (i) re-assess the SWIS established in Botanical Garden
and Busol Forest Reserve and coordinate with the City Government of
Baguio for remedial measures to address the deficiencies noted in order to

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 fully utilize the project, attain its purpose and ensure that government
funds are not put into waste; (ii) conduct investigation on the discrepancy
noted in the number of pipes installed and hold the agency personnel who
signed the validation report among the accountable persons; and
(iii) require the City Government of Baguio to return the unspent amount
of the contract and furnish the Audit Team with proof of refund;

c) PENRO Masbate to compel the immediate installation and use of the air
conditioning units to provide CENRO employees relief from uncomfortable
work conditions and ensure improved employee performance and output;

d) PENRO Albay to immediately and closely coordinate with the Central

Office on the installation/commissioning of the MMFN equipment in order
to fully maximize the benefits from its operation;

e) PENRO Sorsogon to: (i) require the contractor to make the necessary
repairs, adjustments and conduct test trials to make the projects ready and
functional; (ii) instruct the Inspection Committee and project in charge to
closely monitor the implementation of SWIS projects to ensure that the
projects are implemented properly (iii) require the Inspection Team to
make necessary tests if the projects are really functioning properly, and not
only ocular inspection;

f) Region V to coordinate with the Central Office for provision of technical

and capability building to RIC personnel on the proper utilization of
equipment to fully maximize the benefits that can be derived therefrom;
and

g) Region VI to make representation with the DPWH RO VI for the

immediate completion of the Facilities for the Mechanized and Modernized
Forest Nursery and to properly install the equipment for the project to
maximize its intended use.

Uncollected/unrealized revenue

4. Additional revenue estimated at P93.383 million could have been generated by

seven PENROs had there been strict implementation of the laws, rules and
regulations on leasing of foreshore lands and sanctions for non-payment
thereof.

The DENR is the primary government agency responsible for the conservation,
management, development and proper use of the country’s environment and natural
resources, specifically forest and grazing lands xxx and lands of the public domain
xxx.

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Foreshore land, being a part of public domain is under the jurisdiction of the DENR
and is not alienable but can only be disposed through lease and that the disposition
is expressly governed by the laws, rules and regulations on leasing of foreshore
lands.

In order to rationalize and regulate the utilization and occupation of foreshore lands,
the DENR issued Department Administrative Order (DAO) No. 2004-24 dated
August 24, 2004 which provides for the Revised Rules and Regulation Governing
the Administration and Management of Foreshore Lands.

An estimated amount of P93,382,644.26 was not collected on foreshore areas being

managed and under the administration of seven PENROs, as presented in Table IX.
Table IX – Uncollected Revenue from Foreshore Lease
Region Office Period Covered Amount
I PENRO Pangasinan 2014 – 2017 P 37,661,450.16
III PENRO Bataan No data 20,925,742.82.
PENRO Zambales No data 23,215,820.21
IV-A PENRO Batangas 2007-2017 3,936,197.91
X PENRO Misamis Oriental 2004-2017 1,899,381.12
PENRO Lanao Del Norte 2015-2016 1,166,856.00
XII PENRO Dinagat Islands 2010-2017 4,577,196.04
Total P 93,382,644.26

The shortfall of collections was attributed to the following deficiencies:

a. Non-monitoring of occupational/rental fee payments due to lack of inventory

of property and incomplete records of transactions;

b. Failure to conduct regular appraisal/re-appraisal of the foreshore area and the

improvement thereon every ten (10) years from the date of the approval of the
lease contract, pursuant to Section 14 of DENR Administrative Order (DAO)
No. 2004-24 dated August 24, 2004;

c. Non-issuance of Notice of Cancellation to defaulting lessees who continue to

occupy/utilize the land without paying the rental fees due from them, contrary
to Section 16 of DAO No. 2004-24 which states that non-payment of annual
lease rental for two consecutive years shall be a ground for cancellation of
Contract of Lease; and

d. Non-provision of sanction for non-payment of the occupation/user’s fees on

existing DENR rules and regulations, thus, agency officials have no basis to
enforce its power to collect from non-paying occupants.

The said deficiencies deprived the agency the opportunity to collect revenues which
can be utilized for other developmental projects.

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 This is a reiteration of previous years’ audit observation, whereby partial
implementation was undertaken by Management on the audit recommendations.

We reiterated our prior years’ recommendations and Management agreed to

direct the concerned Offices to:

a) conduct regular inventory and maintain database buildup of all property to

facilitate monitoring of collections falling on a given date/period;

b) conduct regular appraisal/re-appraisal in accordance with the period

prescribed under DAO No. 2004-24 to implement increase in rental fee
rates;

c) implement collection strategies to optimize collections from foreshore lease

and occupational fees such as sending collection bills and demand letters;

d) enforce the cancellation of lease contracts for lessees with overdue accounts
of two or more consecutive years pursuant to Section 16 of DAO 2004-24;
and

e) revisit/update policies, rules, regulations and guidelines on foreshore areas

to include sanctions for the non-payment of the occupational fees.

Confiscated assets

5. Confiscated forest products and conveyances worth P32.077 million are

susceptible to loss and continue to deteriorate, thereby reducing their economic
value due to: a) lack of adequate and proper storage facilities; and b) non-
representation with the court to request authority for immediate disposal of
the confiscated items. Moreover, no accounting was rendered on the actual
usage of confiscated items in the construction of the Arboretum Park project
located at the La Mesa Watershed amounting to P3.029 million.

a. lack of adequate and proper storage facilities

Chapter 4, E2-4 of the Primer on Illegal Logging provides that confiscated/seized

forest products/conveyances in the custody of PENRO/CENR offices should be
provided with a place for adequate safekeeping/preservation during the pendency of
the case.

As of December 31, 2017, confiscated forest products and conveyances valued at

P32,076,925.67 are kept within the vicinity of the PENRO/CENR offices with no
proper depository area for storage as listed in Table X.
Table X – Confiscated Assets

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 Regional
PENRO Item Amount
Office
Confiscated forest products, conveyances and
PENRO
I tools and machineries of CENROs Alaminos, 3,707,567.37
Pangasinan
Dagupan and Urdaneta from 2013-2017
PENRO Confiscated forest products already forfeited in
P 3,920,201.52
II Isabela favor of the Government
Confiscated forest products from the years 2009-
PENRO
2016 already forfeited in favor of the 1,166,166.22
Quirino
Government
PENRO Confiscated forest products already forfeited in
Nueva favor of the Government 1,860,952.30
Vizcaya
Confiscated forest products kept within the
IV-A PENRO compound of Calumpang Monitoring Station in
10,986,140.02
Quezon Tayabas, Quezon, CENRO Pagbilao and
CENRO Real – still subject to court litigation
Confiscated forest products (lumber, logs,
PENRO
X flitches, split/unsplit rattan), conveyances
Misamis 10,445,973.24
(trucks, jeepneys, tricycles, vans) and tools
Oriental
(chain saw) – still subject to court litigation
TOTAL P 32,076,925.67

Ocular inspections of the confiscated items disclosed that these were kept only
within the vicinity of CENR offices, with no sufficient storage facilities to safe keep
and preserve them from deterioration due to exposure to heat, rain, termites and
other environmental elements as well as possible loss thru theft.

In PENRO Pangasinan, some were even kept within the compound of a private
individual engaged in lumber business where there was no security guard to keep
watch over the confiscated items.

The PENRO Quezon management informed that in CENRO Pagbilao, they are
already building bigger structure for the storage/shelter of the confiscated forest
products.
During the CAAR exit conference, Management informed that in 2011, a budget of
P100,000 budget was allocated to field offices for the construction of sheds or
storage facilities for confiscated items.

As a rejoinder, we pointed out that such amount is no longer sufficient and

suggested, instead, that the PENROs/CENROs concerned be provided with
additional funds for construction of bigger facility to safe keep their confiscated
assets.

b. non-representation with the court for immediate disposal of confiscated items

In PENROs Quezon and Misamis Oriental, there was no representation made with
the courts handling the confiscation cases to facilitate the issuance of decisions or at
least to request for an authority for the immediate disposal of the confiscated
property while awaiting the resolution of the case to avoid loss of economic value

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 as allowed/permitted in Chapter 4, Section F (b) of the Primer on Illegal Logging,
which states that:
“Exception: Confiscated/Seized Forest Products that cannot be disposed
and/or sold public auction:

- Those that are subject of judicial proceedings until proper authority is

obtained for their disposition from court where the case is pending
(representations shall be made with the proper court for the immediate
disposition thereof through public auction to avoid loss of economic
value during pendency of the case. The proceeds of the sale shall be
deposited as the court directs and the same shall be awarded by the latter
to whoever shall be entitled thereto based on the final court decision.
[paragraph 5-b (iii), DENR Administrative Order No. 36, series of 1988]”

c. Confiscated items used in the construction of the Arboretum Park in La Mesa

Watershed

The Arboretum Park aims to feature native and endemic trees within the La Mesa
Watershed vicinity.
 
In line with the establishment of the arboretum, confiscated items in the amount of
P3,028,713.70 was approved to be used for its construction on August and
September 2016 by the then Undersecretary for Field Operations and Line Bureaus.

However, to date, the actual usage of the following confiscated items approved for
utilization in the construction of the Arboretum Park project located at the La Mesa
Watershed has not been accounted for as basis of recording in the books.
Table XI – Confiscated Items Approved for Utilization in the Construction Arboretum Park
Quantity Volume (bd.ft) Particular Estimated Value
Approved for utilization on Aug. 9, 2016
2,414 pcs 19,080.35 @ 46.00 Lauan Lumber 877,696.10
143 pcs 1,791.15@196.63 Narra 352,200.00
315 @ 40.00 Lauan 12,600.00
Mixed Dipterocarp with
19,043 pcs 43,763.84@40.00 1,750,553.60
miscellaneous species
Approved for utilization on Sept. 8, 2016
235 pcs. (27 pcs.) 118.28@ 38.00 Gmelina 35,664.00
P 3,028,713.70

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 We recommended and Management agreed to:

a. provide additional funds for the Offices concerned for the construction or
acquisition of storage facility for the confiscated items to preserve their
economic value and avoid losses thereof;
b. require the Heads of PENROs Quezon and Misamis Oriental to request for
authority from concerned courts to dispose of long confiscated
property/assets to prevent further deterioration and derive optimum
benefits therefrom; and
c. require the DENR-NCR Director to direct the Focal Person for the
implementation of the La Mesa Watershed Arboretum Park project to
submit report to account for the actual utilization of the confiscated items
in the amount of P3,028,713.70 in connection with the construction of the
Arboretum Park project located at the La Mesa Watershed.

Self-sustaining and income generating ventures not realized

6. The goal to transform into self-sustaining and income generating ventures the
Mt. Guiting-Guiting Natural Park (MGGNP) in Romblon and Baliangao
Protected Landscape and Seascape (BPLS) and Mt. Malindang Range Natural
Park (MMRNP), both in Misamis Occidental, was not realized due to:
a) absence of an Ecotourism Management Plan for the MGGNP and b) lack of
cohesive partnership of PENRO Misamis Occidental with the LGU and
national government agencies concerned for the rehabilitation, maintenance
and promotion of the protected areas.

a) No Ecotourism Management Plan for MGGNP

Section 6.2 of DENR Administrative Order (DAO) No. 2013-19 dated July 1, 2013
provides that:

Ecotourism Planning. This involves the formulation of the Ecotourism

Management Plan (EMP).

The process involves preparing the vision, goals, objectives, strategies,

programs and projects including identification of possible ecotourism
enterprises/businesses that may be developed in the area. These will serve
as the bases in the actual physical and program development of ecotourism
in the area.
xxx xxx xxx.

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 Based on the approved Ecotourism Management Plan, business plans shall
be formulated in partnership with the LGU or private sector. The business
plan is a more detailed review of the specific activity, attraction or service
that will be developed. It deals with marketing, operations and management
of ecotourism enterprises/businesses.

Mt. Guiting-Guiting Natural Park which embraced the Municipalities of Cajidiocan,

Magdiwang and San Fernando, in the island of Sibuyan, Province of Romblon, was
established on February 20, 1996 by virtue of Proclamation No. 746 signed by then
President Fidel V. Ramos. The primary purpose for said establishment is to protect
and conserve, on a sustainable basis, the unique and diverse terrestrial habitats and
species found therein from destructive human activities. This is under the Natural
Park category of the NIPAS Act, or R.A. No. 7586.

The DENR/Protected Area Management Board (PAMB) has already

prepared/updated the Management Plans for the Protected Area. However, the
MGGNP has still no EMP approved by the PAMB, contrary to Section 6.2 of DAO
No. 2013-19, thus, the LGU or private sector partner was not able to prepare a
Business Plan for the said Natural Park.

Absence of an approved EMP shows that the management of PENRO Romblon has
yet to improve a tourism industry that is ecologically sustainable, responsive,
participative, culturally sensitive, economically viable, and ethically and socially
equitable for the surrounding local communities of the PA that has been proclaimed
21 years ago.

Delay in the preparation of the EMP was due to the lack of initiative of the
management to monitor its project, among others, resulting in the non-preparation
of the Business Plan that would have channeled the generation of income for the
Protected Area (PA).

Management admitted that the EMP has not been prioritized in the previous years.
One of the BAC Members informed that the Joint-Process Planning and Business
Systems, Inc. has already furnished the Office of the PENR Officer and the
Protected Area Superintendent (PASu) with the initial accomplishment, which is the
Rapid Site Assessment Report as of March 28, 2018. This is due for presentation to
the PAMB of MGGNP. However, the Ecotourism Management Plan and Business
Plan are yet to be prepared as the final output.

b) Lack of cohesive partnership for the rehabilitation, maintenance and promotion

of the BPLS and MMRNP

Pursuant to Proclamation No. 418 dated November 22, 2000, the wetland areas of
Baliangao situated in the Province of Misamis Occidental was declared as Protected
Area to be known as Baliangao Protected Landscape and Seascape (BPLS). The
BPLS shall be under the management jurisdiction of the DENR and shall be

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administered in accordance with the provisions of the National Integrated Protected
Areas System (NIPAS) Act of 1992, and its implementing rules and regulations.

On the other hand, Republic Act No. 6266 promulgated in 1971, established Mt.
Malindang National Park. However, it was reclassified and renamed as the Mt.
Malindang Range Natural Park (MMRNP) under Proclamation No. 228 issued in
2002, pursuant to the NIPAS Act.

The MMRNP spans the provinces of Misamis Occidental, Zamboanga del Norte
and Zamboanga del Sur. On August 4, 2012, it was designated as the country’s 4 th
ASEAN Heritage Park (AHP) by the ASEAN Centre for Biodiversity (ACB). AHPs
are considered “protected areas of high conservation importance, preserving in total
a complete spectrum of representative ecosystems of the ASEAN region.” The
ACB establishes AHPs to generate greater awareness, pride, appreciation,
enjoyment and conservation of the ASEAN region’s rich natural heritage through a
regional network of protected areas. 

For CY 2017, however, the BPLS and MMRNP facilities as eco-tourism sites in
PENRO Misamis Occidental operated at a net loss of P7,648,763.52, due to the
following factors:

a) access roads to the facilities were not convenient;

b) lack of marketing and promotion of the facilities; and
c) Insufficient funds for the maintenance of the facilities.

Although, subsidy in the amount of P10,290,511.85 was provided to augment the

operation of these facilities, the amount was just enough to compensate for the loss
incurred.

Consequently, the goal of transforming these eco-tourism facilities into self-

sustaining and income generating ventures to augment the resources of the
government was not realized.

We recommended and Management agreed to direct the:

a. OIC PENR Officer of PENRO Romblon to continue with the process of the
preparation of an Ecotourism Management Plan for MGGNP as basis for
the development of a Business Plan that would generate more income for
the Protected Area; and

b. In-charge of PENRO Misamis Occidental to make representation and

coordinate with partner government agencies such as the Department of
Public Works and Highways, Department of Tourism and LGU-
counterpart to finance the rehabilitation of the access roads and to promote
eco-tourism in the identified areas.

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Unsustainability of completed ODA funded projects

7. Of the 112 completed ODA funded projects validated, only 56 or 50 percent

are sustainable and assured of continued operations due to inadequate project
sustainability plan, lack of commitment and full support from participating
LGUs/POs/other agencies and non-monitoring by the DENR.

Validation of selected completed Official Development Assistance (ODA) funded

projects was conducted in order to determine whether the desired results have been
sustained after project completion and ascertain the capability of the agency to
continuously maintain these projects.

Out of the 112 projects validated, only 56 or 50 percent are sustainable and assured
of continued operations, as summarized in Table XII.
Table XII – Summary Status of Completed ODA Funded Projects
ODA Funded Closed Project Location Validated Sustainable
Integrated Coastal Resources Region III 4 1
Management Project (ICRMP) Region V 31 29
Region XI 10 3
Water Resource Development Project Region IV-A 23 13
(WRDP) Region IX 10 6
Cordillera Highland Agricultural Cordillera 34 4
Resource Management Project Administrative
(CHARMP) Region (CAR)
TOTAL 112 56

The details on the result of validation are presented in Table XIII.

Table XIII – Status of Completed ODA Funded Projects
Location Status
Integrated Coastal Resources Management Project (ICRMP) - closed June 2014
Region III The Regional ICRM Center (RIC) of Region III under Component B, was
effectively carried out by the Ramon Magsaysay-Technological University
(RMTU) as manifested by the efficient and effective utilization of the facilities,
thus, benefited the beneficiaries and desired results were fully attained.
Sta. Cruz, The ecotourism enterprise contracted under Component C-Ecotourism Enterprise
Zambales provided employment opportunities to its members. But being an ecotourism
enterprise which is seasonal, it only generates low income for its members,
aggravated by the lack of support of the concerned LGU. They plan to request
financial assistance from the DENR for the maintenance of their project for its
continuous existence.
Palauig, The Sanitary Landfill with Materials Recovery and Composting Facility (MRCF)
Zambales under Component D - Social and Environmental Services and Facilities costing
P19,843,945.88 was never utilized due to political issues and concerns.

The Regional Director of DENR in Region III and other officials concerned
conducted a dialogue with the Mayor of Palauig, Zambales to inquire on the
possibility of its operation. They also went to COA Central Office to ask for
directives and clearance to operate the Sanitary Landfill. However, since there is
still an ongoing investigation by the Ombudsman, they were advised not to

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 Location Status
operate yet. The Mayor expressed willingness to operate the said facility once
everything is settled and there are no more legal impediments.
Candelaria, The MRCF located at the Municipality of Candelaria was temporarily closed and
Zambales non-operational due to high energy cost, thereby defeated the very objectives of
the projects to provide basic social services to coastal communities, and support
local governments’ efforts to mitigate coastal pollution and degradation of
resources.
Masbate, Of the 12 Marine Protected Areas (MPAs) established under Component B of the
Region V project, only the Buntod Reef Marine Sanctuary has an updated management
plan while the rest have outdated plans dating way back in 2012. Nevertheless,
these MPAs are still active. Positive results on the coral transplantation have
been observed especially in the MPAs of Cataingan and Dimasalang with
approximately 48mm growth in height. Twelve biodiversity conservation
projects were also found to be operational and active.

Under Component C, there were four ecotourism enterprises introduced and

established, but only two carry on their business activities. Internal disputes
among members of the PO in the Matalang-talang Marine Sanctuary has led to
its being dysfunctional. Lack of funds for the repair/rehabilitation of damaged
facilities (bunkhouse, board walk, guard house) of the Pawa Mangrove Eco-Park
has greatly affected and eventually led to cessation of activities.

For Component D, three social and environmental services and facilities were
implemented and these are all operational although the Municipal Wharf in LGU
Mobo has been damaged and not yet repaired and only minimal income is being
earned from its operations. Details are shown in Annex B.
Region XI Component B- Biodiversity Conservation

Stock Enhancement of Giant Clams

 Strong Waves coupled with heavy rains causes the survival rate of giant
clams to decrease and some were seen washed ashore. However newly
found Giant Clams wildlings were observed, indicative or natural habitat
replenishment.

Stock Enhancement of Sea Cucumber

 Sea Cucumber were assumed to be displaced as the enhancement structures
or fenced collapsed and destroyed from big waves and strong surges.

Stock Enhancement of Abalone

 Most of the stocked Abalones were washed out due to Tropical Depression
Agaton. POs continued the stock enhancement of abalone while at the same
time setting up other cages. Despite trying various mechanisms for the
survival of the species, the same were wiped out due to adverse natural
calamity.

Stock Enhancement of Sea Cucumber and Sea Hare

 The two projects were severely affected by the storm surges brought about
by Typhoon Agaton in 2014 wiping out the establishment structures.
Region XI Component C - Enterprise Development and Income Diversification

Forest Adventure, Nature Village & Culinary

 Building, kitchen utensils including documentary records were damaged by
Typhoon Pablo.

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 Location Status
River-Mangrove Expedition, Nature Village and Culinary
 Some equipment procured were still available but the project was not
sustained by the organization due to difficulty in accessing the area caused
by on-going road rehabilitation and unpredictable road condition like
landslide.

Reef and Ridge Adventure, Mangrove Expedition

 Not sustained by the organization; no longer operational

Reef discovery, nature village and culinary

 The project is still operational

Reef discovery, nature village

 The project is still operational

Cordillera Highland Agricultural Resource Management Project (CHARMP) - closed June 2005
CAR Attainment of sustainability of plantation sites established during the
implementation of the CHARMP is unlikely due to the dissolution of most of
POs who were expected to care, maintain and support the established plantation
upon its turn over to the beneficiaries.

Of the 59 project sites, 34 were validated and it showed that only four (4) are still
being maintained by POs. (Annex C)

CAR management informed the team of the actions undertaken, as follows:

a) Not all POs who participated in the CHARMP have been dissolved or
failed to survive, some POs have reorganized into new POs and are
currently a recipient of the ongoing National Greening Program (NGP),
while six POs were currently participating in the Community Based
Forest Management Project (CBFMP);

b) To ascertain the existence of established plantations and to determine the

possibility of re-organization, management has informed and required
PENROs Abra, Benguet and Mt. Province, the direct implementers of the
project, to submit a report on the status of CHARMP plantations and to
determine the possibility of PO reorganization; and

c) Management intend to enter into contracts with the POs through CBFM
Agreements as this will help sustain the eventual existence of the POs.
Water Resources Development Project - closed June 2005
Region IV-A Of the 23 projects validated, 13 are operational and 10 are not operational on the
completed infrastructures of Kaliwa Watershed Management Project (KWMP)
located in Tanay, Rizal and Gen. Nakar, Quezon. (Table A, Annex D)
Region IX Ten (10) closed Water Resources Development Project in Tigbao, Zamboanga
del Sur implemented by the DENR-PENRO, Zamboanga del Sur, had no
adequate Project Sustainability Plan. Of the ten projects validated, six are
operational and four are not operational. (Table B, Annex D)

The aforecited condition might have been addressed or mitigated had the DENR
Offices concerned continued to monitor the projects. Remedial alternatives could
have been installed or implemented not only because of the amount of investments
poured in that might go to waste but also to assure that best practices in the

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protection and management of coastal ecosystems in threatened areas of high
biodiversity is sustained and to provide alternative and supplementary livelihoods to
recipients of the program.

The sustainability of the ecotourism and livelihood enterprises beyond the project
closure is one of the challenges that remain to be overcome. Central to the
successful and sustainable operation of these enterprises is the establishment of
linkages and partnership with other government agencies and support of different
stakeholders. Close coordination between DENR and other agencies and the
continued monitoring of POs’ activities even beyond project completion is a must
to be able to pursue the primary goal to enhance coastal resources, reduce poverty
and improve the living conditions of marginalized communities.

We recommended and Management agreed to direct the Heads of –

a. DENR Region III to: (i) continue the regular monitoring of the projects in
order to give immediate solution to any problem encountered by the
beneficiaries; (ii) allot funds and/or obtain financial support from other
national government agencies for the maintenance, upkeep and
sustainability of the projects; (iii) emphasize to the beneficiaries their
responsibilities in the proper utilization of the infrastructure projects to
make them sustainable and (iv) make representation with the Municipality
of Palauig for assistance in instituting measures for the full utilization of
the Sanitary Landfill together with the other established facilities in order
to protect the environment, promote public health and sanitation.

b. PENRO Masbate to: (i) tap the participation of the Regional ICRMP
Center as lead agency in the biodiversity conservation monitoring activities
considering their technical and scientific understanding in coastal
assessment and evaluation; (ii) coordinate with the Department of Trade
and Industry, Department of Tourism, and participating LGUs for the
need to further promote ecotourism sites to ensure increase in the influx of
tourists and continuous operation and (iii) request from DENR CO the
release of funds for the monitoring and evaluation of ICRM projects and
activities in the Province of Masbate.

c. Region XI to: (i) make representation with DENR Central Office to provide
funds for the monitoring of the ICRMP Projects to comply with the MOA
and (ii) find ways to mitigate the current status/conditions of the projects to
enable the recipients/beneficiaries to benefit from the alternative and
supplementary livelihoods as envisioned by the proponent and to sustain
the protection and management of coastal ecosystems.

d. CAR to: (i) ascertain the existence of the established plantations; (ii)
determine whether the POs can still be re-organized and (iii) provide

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 assistance to the POs, if feasible, to reorganize for the realization of
maximum benefits from the projects.

e. Region IV-A to: (i) utilize the National Watershed Information System
(NWIS) designed by DENR for the timely assessment/monitoring of the
state of watershed resources/facilities; (ii) provide a budget, through its
PENROs Rizal and Quezon, to ensure proper monitoring of the KWMP
facilities; and

f. PENRO Zamboanga Del Sur to execute MOA with the barangay

government concerned for the proper keeping and use of the properties
ensure that the water system properties are protected from losses, damage
or deterioration occasioned by negligence in the keeping or use of the
property.

B. COMPLIANCE AUDIT

Dormant, unauthorized and unnecessary bank accounts

8. Dormant, unauthorized and unnecessary bank account balances of P 55.900

million were not remitted to the Bureau of the Treasury, contrary to EO No.
431 and COA Circular No. 2015-001.

EO No. 431 dated 30 May 2005 provides for the reversion of all dormant accounts,
unnecessary special and trust funds to the General Fund and for other purposes.

COA Circular No. 2015-001 dated 29 January 2015 prescribes the guidelines and
procedures in the reversion to the General Fund of all dormant cash balances,
unauthorized accounts and unnecessary special and trust funds maintained by
national government agencies with depository banks.

As of 31 December 2017, the cash balance of DENR includes dormant,

unauthorized and unnecessary account balances of P 55,899,853.95 which were not
remitted to the Bureau of the Treasury (BTr), details shown in Table XII.
Table XII – Dormant, Unauthorized and Unnecessary Account Balances
DENR Office Amount Remarks
Region 4A P 4,019,831.00 Trust Receipts not deposited with the National
Treasury
Region 4B 8,519,488.10 No authority from the Permanent Committee to
maintain the accounts
PENRO-Aklan 3,980,675.36 Transfer of Cash from MDS Account to Trust
Fund
PENRO-Kalinga 235,956.78 No authority to open the account
Sub-total 16,755,951.24
Central Office 1,577,159.52 Payment of disallowed transportation
allowance and excess amount for the HR

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 Summit 2017
PENRO-Ifugao 11,911.62 Balance of RLIP
Region 5 295,643.91 Completed projects
PENRO-Capiz 24,730,258.89 Completed projects
Sub-total 26,614,973.94
Region 12 12,528,928.77 Dormant accounts from Fund 102
Sub-total 12,528,928.77
TOTAL P 55,899,853.95

We recommended and Management agreed to direct the Heads of the

concerned ROs and PENROs to require their respective Accountants to cause
the closing of dormant, unauthorized and unnecessary bank accounts and
remit the balances to the Bureau of the Treasury.

Unliquidated cash advances – P9.917 million

9. Cash advances for Payroll, Special Disbursing Officers, and Officers and
Employees in the total amount of P9.917 million remained unliquidated as at
year end. Also, additional cash advances were granted to the Special
Disbursing Officers despite the existence of unliquidated cash advances.

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

 No additional cash advances shall be allowed to any official or employee unless

the previous cash advance given to him is first settled or a proper accounting
thereof is made.

 A cash advance shall be reported on as soon as the purpose for which it has
been given has been served.

 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.

As at year end, the unliquidated cash advances for Payroll, Special Disbursing
Officers, and Officers and Employees of different offices accumulated to
P9,917,187.65, details presented in Table XIII.
Table XIII – Unliquidated Cash Advances
Particulars Office 1-30 Days 31-365 Days Over 1 Year TOTAL
Advances
RO XII P 1,324,387.74 P 1,324,387.74
for Payroll
Sub-total 1,324,387.74 1,324,387.74

Advances to BMB P1,102,655.97 1,102,655.97

SDO RO XII P 4,220,774.77 1,096,900.00 515,669.95 5,833,344.72
Sub-total 4,220,774.77 2,199,555.97 515,669.95 6,936,000.69

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 Particulars Office 1-30 Days 31-365 Days Over 1 Year TOTAL

BMB 7,478.68 7,478.68

Advances to
PENRO
Officers and 108,828.00 108,828.00
Iloilo
Employees
RO XII 762,015.00 109,219.00 669,258.54 1,540,492.54
Sub-total 878,321.68 109,219.00 669,258.54 1,656,799.22
TOTAL 5,099,096.45 2,308,774.97 2,509,316.23 9,917,187.65

In Region XII, the accumulation of unliquidated balance was attributed to the

granting of cash advances to Disbursing Officers/Employees with outstanding cash
advances.

A substantial amount of unliquidated balances was due to the failure of the

Management to monitor the cash advances.

We recommended and Management agreed to direct the Heads of the Offices

concerned to require the:

a. Accountable Officers to settle their cash advances within the prescribed

period; and

b. Accounting Division to refrain from processing additional cash advance of

accountable officers with outstanding cash advance/s.

Unliquidated fund transfers to implementing agencies – P2,439 million

10. Various fund transfers to implementing agencies amounting to P2,439.316

million remained unliquidated, of which P72.904 million or 2.99 percent were
aged over ten years.

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 at the end of the agreed period for the
project, the Implementing Agency (IA) shall submit to Source Agency (SA) the
Report of Checks Issued (RCI) and the Report of Disbursement (RD) to report the
utilization of the funds.

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

The various inter-agency receivable accounts which remained unliquidated were

aged less than one year to 10 years and over are presented in the Table XIV.
Table XIV – Unliquidated Inter-Agency Receivables

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 Amount
Office 10 years and
Total < than 1 year > 1 to < 10 years
over
Inter-Agency Receivables
Due from National Government Agencies
CO - Fund 101 2,041,862,329.65 1,803,100,881.63 178,273,476.38 60,487,971.64
CO - Fund 102 & 171 1,493,161.05 1,493,161.05
BMB 147,992,213.04 86,509,631.02 61,482,582.02
FMB 11,672,612.37 11,672,612.37
Region I 5,901,093.92 880,869.23 5,020,224.69
PENRO Batanes 6,998,965.38 6,998,965.38
Region III 1,501,753.85 632,277.40 869,476.45
Region IV-A 97,000,000.00 97,000,000.00
Due from Government Owned and Controlled Corporations
CO - Fund 101 25,467,202.78 25,299,862.78 167,340.00
Due from Local Government Units
CO - Fund 101 10,862,061.74 10,862,061.74
CO - Fund 102 & 171
111,000.00 111,000.00
(ICRMP –Romblon)
PENRO Cagayan 7,981,877.00 7,981,877.00
PENRO Isabela 575,031.68 575,031.68
PENRO Nueva
15,235,323.19 15,235,323.19
Vizcaya
PENRO Batanes 2,559,149.56 2,559,149.56
PENRO Rizal 1,777,000.00 1,777,000.00
PENRO Batangas 58,523,000.00 58,523,000.00
PENRO Aklan 167,950.00 167,950.00
PENRO Negros
1,634,066.31 821,527.31 812,539.00
Occidental
Total 2,439,315,791.52 1,892,900,659.28 473,510,188.18 72,904,944.06
100% 77.60% 19.41% 2.99%

The table showed that out of the total unliquidated fund transfers, the amount of
P473,510,188.18 were more than 1 year to less than 10 years of which
P414,987,188.18 are already due for liquidation. The remaining balance amounting
to P58,523,000.00 represent the funds transferred to three local government units of
Batangas for the implementation of Sustainable Coral Reef Ecosystem Management
Program (SCREMP), one of the priority programs administered by the DENR under
Administrative Order 2013-12 with a period of implementation from CY 2012 to
CY 2020.

The table also showed that P72,904,944.06 or 2.99 percent were outstanding for ten
years and more and discussed separately in observation no. 11.

Moreover, funds transferred by FMB to various DENR Regional Offices in the total
amount of P 5,425,091.00 were not received by the concerned regional offices, as
borne out by results of confirmation, details shown in Table XV.
Table XV – FMB Fund Transfers Not Received by DENR Regional Offices
DENR Regional Office Funds Not Received by DENR ROs

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 Date Check/ADA No. Amount
Region XVIII 3/02/2017 826540 P 924,660.00
Region XI 11/10/2016 371619 1,134,653.00
Region IV-A 4/24/2017 826649 1,210,660.00
Region II 06/20/2017 101-424 407,000.00
Region I 07/24/2017 377909 1,748,118.00
TOTAL P 5,425,091.00
We recommended and Management agreed to direct the:

a. Heads of the Offices concerned to require their Accountants to demand

immediate liquidation of fund transfers from the concerned implementing
agencies and return of unutilized balances for projects that have been
concluded, if any; and

b. FMB Director to investigate the cause of the non-receipt of funds by the

Implementing Agencies and file appropriate charges for the responsible
officials/personnel, if warranted.

Dormant accounts – P85.580 million

11. Dormant accounts amounting to P85,580,400.50 as of December 31, 2017

remained outstanding and uncollected for ten years and more due to failure of
management to demand immediate settlement thereof.

Section 5.4 of COA Circular No. 2016-005 dated December 19, 2016 provides that:

“Dormant Receivable Accounts – accounts which balance remained

inactive or non-moving in the books of accounts for ten (10) years or
more and where settlement/collectability could no longer be
ascertained.”

Section 5.6 of the same Circular also provides that:

“Dormant Unliquidated Fund Transfers – advances granted by the

source entity to implementing entity for the implementation of
programs/projects which remained non-moving for ten (10) years or
more and where settlement could no longer be ascertained.”

As of December 31, 2017, dormant accounts in the total amount of P85,580,400.50

remained outstanding and uncollected for ten years and over, with details shown in
Table XVI.
Table XVI – Dormant Accounts

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 Office Amount Remarks

Due from National Government Agencies

CO Fund 101 60,487,971.64

Due from Government Owned and Controlled Corporations

CO Fund 101 167,340.00

Due from Local Government Units

CO Fund 101 10,862,061.74
PENRO Isabela 575,031.68
PENRO Negros Occidental 812,539.00

Due from Officers and Employees

Cash advances granted in 1991 on the implementation
of bamboo project for bamboo seedlings for areas
affected by the Mount Pinatubo eruption. The
Region III 177,900.00 concerned employee went on AWOL sometime in
1995 and likewise, the whereabouts could no longer be
traced, hence, the collectability from the persons liable
was doubtful, thus rendering the account unreliable.
Unliquidated cash advance of a former Special
Disbursing Officer who was already separated from the
service due to Absence Without Leave way back in
PENRO Bataan 99,990.00 2005. Demand letter was sent on April 4, 2017 to said
former SDO for his unsettled accounts but there was no
response received from him.
Other Receivables
Forwarded beginning balances upon the installation of
CO Fund 101 277890 eNGAs with no available schedules to support the
account balance.
Total P85,580,400.50

The existence of dormant accounts for ten years and over showed the lack of efforts
by management to monitor the collectability/settlement of the accounts.

We recommended and Management agreed to require the Accountants of

DENR CO, Region III and PENROs Isabela, Negros Occidental and Bataan to
validate the existence of receivables aged 10 years or more and request for
write-off of dormant accounts in accordance with the procedures under COA
Circular No. 2016-005.

Insurance of government property with GSIS

12. The Central Office, one Staff Bureau, two Regional Offices and 14 PENROs
had fully complied with the Inventory of Physical Assets, Insurance and
Bonding of Risks with the General Insurance Fund of the GSIS with total
insurance premiums paid to P16.915 million. However, one Staff bureaus and
three PENROs had partial compliance.

The Central Office, FMB, Regions III and X and 14 PENROs had fully complied
with the Inventory of Physical Assets, Insurance and Bonding of Risks with the

151
 General Insurance Fund of the GSIS, with total insurance premiums paid amounting
to P16,914,836.01.

On the other hand, the LMB, PENROs La Union, Siquijor and Negros Oriental did
not fully comply with RA No. 656, otherwise known as the “Property Insurance
Law”, as not all insurable assets were insured with the General Insurance Fund
(GIF) of the GSIS.

Non insurance of the physical assets exposed the agencies concerned to the risk of
not being indemnified or compensated for any damage to or loss of the properties in
case of theft, fire or natural calamities.

We recommended and Management agreed to ensure that all insurable assets

and property of its Offices are adequately covered/insured with the GIF of the
GSIS in compliance with RA No. 656.

Gender and Development issues not fully addressed

13. Gender issues were not fully addressed due to: a) non-allocation of at least
five percent of appropriation for the implementation of GAD programs/
projects/activities in the Central Office, two staff bureaus, three ROs, 16
PENROs and two Foreign-assisted projects; b) non-formulation of GAD Plan
and Budget (GPB) in two ROS and two PENROs; c) lack of PCW endorsement
on GPBs of one RO, one Staff bureau and two PENROs and d) absence of
GAD database containing sex disaggregated data in one RO and three
PENROs.

a) non-allocation of at least five percent of agency’s appropriation for gender and

development

The Central Office, LMB, BMB, NCR, Regions VI and XII and 16 PENROs did
not allocate at least five percent of their agency budget for gender and development,
contrary to Section 30 of General Appropriation Act of FY 2017.

Likewise, the FMP and INREMP, both foreign-assisted projects, allotted less than
five percent for gender and development, which is not in consonance with Section
37 A.2 of the Magna Carta on Women and its IRR which provides that:

National government agencies and other government instrumentalities shall ensure that
five to thirty percent (5-30%) of funds received from Official Development Assistance
governments and multi-lateral agencies are in support of gender responsive programs and
projects.

Further, low utilization of GAD budget due to lack of proper planning in the
implementation of GAD programs/projects/related activities was noted in NCR,
BMB and PENROs Bulacan, Bataan, Occidental Mindoro and Davao Oriental.

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b) non-formulation of GAD Plan and Budget (GPB)

PCW Memorandum Circular No. 2015-04 prescribes the guidelines in the

preparation and submission of the FY 2017 GAD Plan and Budget (GPB). It
provides in Item 8 thereof, that all government instrumentalities shall formulate
their annual GPBs within the context of their mandates.

The Regional Offices of Regions IV-A and IV-B, as well as PENROs North
Cotabato and Saranggani did not formulate their own GPB, contrary to the above
regulation. The GPBs prepared for Regions IV-A and IV-B covered their Regional
Offices and PENROs.

The GAD Focal Person explained that the GPB submitted to PCW is on a region-
wide basis, to which we agreed. We are of the opinion, however, that for
monitoring and audit purposes, each Regional Office should also prepare their own
GPB, simultaneous with their PENROs.

c) lack of PCW endorsement on GPBs

The GPBs of NCR, LMB and PENROs Tarlac and Siquijor may not serve as a
sound guide in project implementation and control of GAD projects and activities
as the same did not bear review and endorsement from PCW.

On the other hand, the CO and PENROs Batanes and Negros Oriental were not able
to submit their PCW endosed GPBs to their respective audit teams thus,
determination on the judicious use of GAD budget and responsiveness of the offices
concerned to GAD issues were not undertaken.

Further, the total expenditures reflected in the Accomplishment Report do not

contain details, hence the cost of implementing the GAD Plan could not be verified
by the audit teams of PENROs Mt. Province, Ifugao, Isabela, Quirino, Nueva
Vizcaya; Siquijor and South Cotabato.

Such lapses were contrary to Item V of COA Circular No. 2014-001 dated March
28, 2014 which provides that the agency shall submit a copy of the Annual GPB to
the Audit Team assigned to the agency within five (5) days from the receipt of the
approved plan from the PCW or their mother or central offices, as the case maybe.

Item No. 1.3.6 of PCW Memorandum Circular No. 2017-03 also provides that
concerned agencies shall print the final GAD AR for signature of their agency head
and submit signed copies to PCW and their respective COA Audit Team according
to the schedule set under PCW-DBM-NEDA JC 2012-01 and COA Circular 2014-
001, respectively”.

d) Absence of GAD database containing sex disaggregated data

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 Region IX and three PENROs (Zamboanga del Norte, Zamboanga Del Sur and
Negros Occidental) had not established GAD database containing sex disaggregated
data contrary to Section 4.4 of the PCW-NEDA-DBM Joint Circular No. 2012-01
which provides that “the agency shall develop or integrate in its existing database
GAD information to include gender statistics and sex-disaggregated data that have
been systematically produced or gathered as inputs or bases for planning,
budgeting, programming, and policy formulation.”
We recommended and Management agreed to direct the GAD Focal Point
System (GFPS) and/or DENR officials concerned to:

a. allocate at least five percent of the agency budget for the formulation and
implementation of GAD Plan and maximize utilization of GAD allocated
budget to be more responsive in addressing gender issues;

b. formulate GPB for CY 2018 and onwards and ensure its review, approval
and endorsement by the PCW, copy furnished the Auditor, together with
the Accomplishment Report containing the detailed cost of implementing
the GAD Plan; and

c. develop or integrate in existing database gender statistics and sex-

disaggregated data as inputs or bases for planning, budgeting,
programming, and policy formulation.

Implementation of Senior Citizens and Person with Disability Program

14. The Central Office, two Staff Bureaus, eight Regions and 30 PENROs spent a
total amount of P5.273 million in the implementation of programs, projects
intended for the Senior Citizens and Person with Disability (SCPDs). However,
one Staff Bureau, three Regions and 23 PENROs did not allocate budget nor
formulate any plans, projects and programs intended for the benefit of SCPD
for CY 2017.

The Central Office, BMB, ERDB, eight Regions and 30 PENROs spent a total
amount of P5,273,447.19 in the implementation of programs, projects intended for
the SCPDs.

For CY 2017, however, the FMB, ROs IV-A, IX and XI and 23 PENROs did not
allocate budget and formulate plans, projects and programs intended for the benefit
of SCPD, contrary to Section 31 of the General Provisions of the GAA for FY
2017.

We recommended and Management agreed to ensure that all its Offices:

a) formulate plans intended for the benefit of the SCPDs;

b) allocate funds from the budget and fully utilize it for the planned activities;
and

154
 c) ensure that expenses incurred are accounted for the planned activities and
wholly for the purpose and for the benefit of the SCPDs.

Withholding and remittance of GSIS employees’ contributions and loan payments

15. In compliance with RA No. 8291, the GSIS Act of 1997, the DENR Central Office,
three Staff Bureaus, nine Regions and 38 PENROs withheld GSIS monthly
contributions and loan payments amounting to P476,147,144.93 and remitted the
amount of P445,594,234.62 during the year. The amount of P1,335,820.91 was
remitted in the first quarter of 2018.

Withholding and remittance of Philhealth contributions

16. In compliance with the National Health Insurance Act of 1995, the DENR Central
Office, two Staff Bureaus, four Regions and 21 PENROs deducted PhilHealth
contributions amounting to P14,814,945.08 and remitted the amount of
P14,442,255.02 during the year. The amount of P294,205.35 was remitted in the
first quarter of 2018

Withholding and remittance of Pag-IBIG contributions

17. In compliance with RA 9679, the HDMF Law of 2009, the DENR Central Office,
two Staff Bureaus, six Regions and 26 PENROs deducted PAG-IBIG contributions
amounting to P69,967,286.90 and remitted the amount of P71,602,248.57,
including prior year’s balances. The amount of P1,165,539.57 was remitted in the
first quarter of 2018

Withholding and Remittance of Taxes

18. The DENR CO, two Staff Bureaus, 11 Regions and 47 PENROs withheld taxes
amounting to P661,238,215.90 from gross compensation income of officials and
employees and private entities on government purchases and contract of services
and remitted to the Bureau of Internal Revenue the amount of P602,685,980.82 in
compliance with Revenue Regulation No. 10-2008 dated July 8, 2008. The amount
of P51,643,813.37 was remitted in the ensuing quarter.

Delayed/Non-submission of Mandatory Reports

19. Financial reports and documents for CY 2017 were not submitted within the
prescribed period or were not submitted at all to the audit teams, thus
precluding the timely audit of the financial accounts and transactions and
early communication of audit results to Management as input to assessment of
accountability and decision making purposes.

The submission of financial reports is required by the laws, rules and regulations
listed in Table XVII.

155
 Table XVII – Laws, Rules and Regulations on the Submission of Financial Reports
Required Period of
Document/Report Regulation
Submission
Report of Checks Issued (RCI) Report Daily or as often as necessary
of Advice to Debit Account Issued Appendix 35,
(RADAI) with all paid vouchers and Government
documents evidencing the transaction Accounting Manual
(GAM), Volume II
Report of Collections and Deposit Daily or as often as necessary Appendix 26, GAM,
(RCD) with all official receipts (ORs), Volume II
deposit slips (DSs) and documents
evidencing the transactions
Bank Reconciliation Statements (BRS) Within 20 days after receipt of Section 7, Chapter
the monthly Bank Statement 21, GAM, Volume I
Monthly/Quarterly Trial Balance (TB), Within 10 days after the end of Section 60, Chapter
Financial Statements (FSs), Supporting the month/ quarter 19, GAM, Volume I
Schedules
Report on the Physical Count of Not later than July 31 and Appendix 66, GAM,
Inventories (RPCI) January 31 of each year for the Volume II
first and second semesters,
respectively
Report on the Physical Count of Not later than January 31 of Appendix 73, GAM,
Property, Plant and Equipment each year Volume II
(RPCPPE)

The Accounting Section of the Central Office, BMB, three Regional Offices and 15
PENROs did not submit their financial reports and documents within the time frame
established by existing rules and regulations, as shown in Table XVIII, with delays
ranging from one to 590 days.
Table XVIII –List of Offices with Delayed Submission of Financial Reports
Document/Report Office No. of days delayed
Central Office 7-150
BMB 1-111
PENRO Abra 3-68
PENRO Cagayan 21-82
PENRO Bataan 3-590
RCI/RADAI/with DVs PENRO Zambales 15-119
PENRO Quezon 11-85
PENRO Catanduanes 38-98
PENRO Sorsogon 17-76
PENRO Davao del Norte 14-106
PENRO Davao del Sur 1-27
PENRO Davao Occidental 1-163
PENRO Sarangani 5-369
PENRO Negros Occidental 100
Central Office 4-140
BMB 1-111
BRS PENRO Nueva Ecija 71-221
PENRO Camarines Sur 13-174
PENRO Aklan 9-59
PENRO Quezon 11-85

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 Document/Report Office No. of days delayed
Monthly/Quarterly TB and PENRO Davao del Sur 1-27
FSs PENRO Davao Occidental 1-163
PENRO Negros Occidental 2
Central Office 9-107
RCD with ORs and DSs BMB 1-111
PENRO Davao del Sur 1-27
Also, there were documents and reports not yet submitted to the audit teams as of
December 31, 2017, with details shown in Table XIX.

Table XIX –List of Documents and Reports Not Submitted to Audit Teams as of 12.31.17
Document/ Report
BRS
RCI/RADAIs with DVs
RCD with ORs and DSs
Period Covered of
Office Documents/Reports Not
Submitted
CAR November-December 2017
ERDB June-December 2017
PENRO Isabela September-December 2017
PENRO Quirino August-December 2017
PENRO Batanes June-December 2017
PENRO Palawan January-December 2017
PENRO Zamboanga del Sur October-December 2017
PENRO Lanao del Norte February-December 2017
PENRO Negros Occidental June-December 2017
Region VIII November-December 2017
PENRO Isabela August-December 2017
PENRO Quirino October-December 2017
PENRO Batangas November-December 2017
PENRO Antique July-December 2017
PENRO Guimaras July-December 2017
PENRO Aklan May-December 2017
PENRO Isabela November-December
PENRO Quirino September-December

Likewise, no RPCIs were submitted by FMB, Region VI and three PENROs (Leyte,
Benguet and Negros Occidental).

Further, the RPCPPEs for CY 2017 were not submitted by FMB, Regions VI and
IX and PENROs Batanes, Leyte, Negros Occidental and Benguet.

Conduct of timely audit and verification could not be undertaken due to submission
way beyond their prescribed period and the non-submission of documents and
reports.

We recommended and Management agreed to direct the Heads of the Offices

concerned to require their Accountants to submit the financial reports and
documents within the time frame established under existing regulations for
audit purposes.

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Submission of copy of government contracts

20. Copies of perfected contracts and purchase orders, together with all the
documents forming part thereof, were not furnished the Auditor, thus
precludes the timely review and evaluation of the documents.

Section 3.1.1 of COA Circular No. 2009-001 provides 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 incorporation shall be furnished to
Auditor of the agency concerned.

Section 3.2.1 of COA Circular No. 2009-001 provides that a copy of any purchase
order irrespective of amount, and each and every supporting document, shall,
within five (5) days from issuance thereof, be submitted to the Auditor concerned.

There was a delay of one to 289 days in the submission of 227 perfected contracts
in Central Office, Regions I, VIII and PENRO Antique as shown in Table XX:
Table XX – No. of Days Delayed in the Submission of Contract
Number of
Office/Region Amount No. of Days delayed
Contracts
Central Office 67 P 369,415,640.00 8-289
Region I 9 19,564,922.76 2-212
Region VIII 1 1,025,000.00 6 months
PENRO Antique 150 46,255,850.80 1-30
Total 227 P 436,261,413.56

Likewise, the PENROs of Romblon, Leyte and Compostela Valley were notable to
submit perfected contracts within the time frame provided in COA Circular No. 2009-
001.

Similarly, delay of one to 212 days was noted in the submission of 664 Purchase
Orders (POs) in Central Office, Regions I and VI and PENROs Antique and Aklan, as
presented in Table XXI.
Table XXI – No. of Days Delayed in the Submission of Purchase Order
Number of
Office/Region Purchase Orders Amount No. of Days delayed
Central Office 24 P 1,734,677.00 1-22
Region I 84 5,179,214.78 2-212
Region VI 250 24,275,359.68 1-142
PENRO Antique 49 16,136,348.75 1-30
PENRO Aklan 257 3,872,244.79 1-198
Total 664 P 51,197,845.00

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 The PENROs of Romblon and Southern Leyte were not able to submit perfected
contracts within five (5) days from issuance thereof, as provided in Section 3.2.1 of
COA Circular No. 2009-001.

The delayed submission of contracts and purchase orders and the supporting
documents caused the delay in the review and evaluation of the same as to
completeness of the legal and technical requirements, its propriety, compliance with
existing laws, rules and regulations, hence any defects could not be immediately
rectified.

We recommended and Management agreed to direct the Heads of Offices

concerned to submit copies of perfected contracts and POs with all documents
forming part hereof to the audit teams within the prescribed period to enable the
timely review and evaluation of these documents.

Hiring of Contract of Service Personnel

21. The DENR hired Contract of Service (COS) individuals of 8,232 representing
50.50 percent of 16,300 regular plantilla positions to provide administrative
and technical assistance, including that of various foreign-assisted projects and
such other related functions. The combined number of COS and regular
personnel of the agency exceeded the number of regular positions under the
Indicative Staffing Pattern approved by the DBM by 6,146.

CSC-COA-DBM Joint Circular No. 1, s. 2017 dated June 15, 2017 was issued to
provide rules and regulations governing Contract of Service and Job Order Workers
with the end view of providing social protection for the workers and equality of
benefits and clarify accountability of JO/COs workers who have no employer-
employee relationship with the agency

DBM Circular Letter No. 2013-5 dated July 22, 2013 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.

Paragraph 2.3.2 of the Circular provides, among others, that agencies whose
Rationalization Plan has 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.

During the year, the DENR offices hired 8,232 COS representing 50.50 percent of
16,300 regular plantilla positions to provide administrative and technical assistance,
including that of the various foreign-assisted projects and such other related
functions as may be assigned.

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The payments of their services were charged against the MOOE of the General
Fund. The rate of the individual job order/contract of service personnel is compliant
with the minimum wage rate under Wage Order No. NCR-17 dated May 17, 2012.

The hiring of COS were covered by contracts on a semi-annual term, January to

June and July to December.

Table XXII – Summary of Hired Personnel

Total No. of
No. of No. of
No. of COS Contractual
Approved Filled
Workers Personnel and
Regular Positions Difference
Office Filled Positions
Positions (a-d)
(b) (d)
(a) (c)
(b+c)
Central Office 812 305 572 877 (65)
ERDB 298 320 256 576 (278)
FMB 155 208 127 335 (180)
LMB 160 141 144 285 (125)
BMB 157 96 149 245 (88)
NCR 304 133 243 376 (72)
CAR 1,054 975 999 1,974 (920)
RO I 730 356 688 1,044 (314)
RO II 1,094 894 1,021 1,915 (821)
RO III 1,141 698 949 1,674 (506)
RO IVA 919 0 782 782 137
RO IVB 1,160 553 984 1,537 (377)
RO V 739 691 672 1,363 (624)
RO VI 1,010 0 956 956 54
RO VII 757 657 693 1,350 (593)
RO VIII 896 198 791 989 (93)
RO IX 1,049 0 968 968 81
RO X 938 88 801 889 49
RO XI 920 480 852 1,332 (412)
RO XII 904 547 557 1,104 (200)
RO XIII 1,103 892 1010 1,902 (799)
TOTAL 16,300 8,232 14,214 22,446 (6,146)

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 DBM.

As can be gleaned from Table XXII, the hired COS and the actual number of
personnel assigned in ERDB, FMB, LMB, BMB, NCR, ROs CAR, I, II III, IV-B,
V, VII, VIII, XI, XII, and XIII exceeded the number of regular positions under the
ISP approved by DBM in their respective offices ranging from 65-920, or a total of
6,146, agency wide.

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 We recommended and Management agreed to direct the Human Resource
Development Service (HRDS) to:

a) revisit the set of guidelines in the hiring/rehiring of COS to rationalize their

employment in the different offices of the agency

b) review the organizational structure and staffing to determine the

appropriate manpower complement for the programs/activities/projects of
each Office; and
c) ensure compliance to the DENR's internal policy of limiting the combined
number of filled positions with the actual number of COS within the total
number of approved positions under the ISP approved by the DBM.

Receipt and Disbursement of PDAF and DAP Fund

22. No Priority Development Assistance Fund (PDAF) were received and disbursed for
CY 2017 and prior years, in compliance with Supreme Court Decision G.R. Nos.
208566.

On the other hand, the BMB received Disbursement Acceleration Program (DAP)
Fund from the DBM in CY 2011 in the amount of P5,000,000.00 for the
maintenance and other operating expenses of five Protected Areas (PAs). The total
amount of P4,600,000.00 were transferred in CY 2012 to said PAs through the
issuance of sub-allotment advice and were already utilized.

The amount of P400,000.00 was retained by BMB for monitoring and evaluation of
these PAs and expended in same year.

Disclosure and Publication of all PPAs

23. The management of FMB, PENROs Occidental Mindoro and North Cotabato
did not post their on–going government projects/programs/activities (PPA)
and/or provide a list thereof to their auditors, thus depriving the people of
their right to information of public concern and the audit team to validate the
same.

Pertinent provisions on the information and publicity of projects / programs/

activities (“PPA”) of government agencies are as follows:

Section 2.1 of COA Circular No. 2013-004 dated January 30, 2013 provides that-

At the beginning of the year, all government agencies shall provide their
respective assigned Supervising Auditors (SAs) and Audit Team Leaders

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 (ATLs) with a list of on-going government projects/programs/activities
(“PPA”) and those that are to be implemented during the year. xxx

Section 2.2.1 of the same Circular states that-

All government agencies, or the implementing unit, office or division as the

case may be, shall notify the public of their PPA through the posting of
relevant information detailed on signboards, blackboards, whiteboards,
posters, tarpaulins, streamers, electronic boards or similar materials
(collectively, “Signboards”) not exceeding 3 feet by 2 feet, in conspicuous
places within the agency premises, and in the venue where the PPA is
located or carried out. This requirement applies to all government PPAs,
regardless of amount or source of funds.

While, Section 3.1 states that-

The Head of the Agency shall inform its SA and ATL within ten (10) days
after the award of the infrastructure project or before the start of the
program/activity that the appropriated project signboards and/or public
notices are already posted, and SA and ATL shall validate the same.

The management of FMB, PENRO Mamburao and its CENRO Sablayan and
CENRO San Jose, all in Occidental Mindoro and PENRO North Cotabato did not
furnish their respective auditors the list of on-going government
projects/programs/activities and those that are to be implemented during the year
for audit, contrary to Section 2.1 of the above circular.

Likewise, the PPAs implemented by PENRO Mamburao, CENRO-Sablayan and

CENRO- San Jose were not posted in conspicuous places within their Office
premises contrary to Section 2.2.1 of the same circular.

In the case of FMB, however, tarpaulins were displayed to publicize some of its
activities such as the repair/renovation of FMB building and
trainings/seminars/workshops conducted during the year.

Further, existence or implementation of government programs and projects

undertaken by the PENRO North Cotabato in the total amount of P90,563,759.86
were not validated as pertinent reports were not furnished/submitted to the Audit
Team.

We recommended and Management agreed to direct the Heads of the Offices

concerned to-

a) furnish the Office of the Auditor a list of all on-going government

projects / programs / activities and that those are to be implemented
during the year for audit purposes; and

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 b) post the detailed information on signboards, blackboards, whiteboards,
posters, tarpaulin, streamers or similar materials not exceeding 3 feet
by 2 feet in conspicuous places within the agency premises or venue
where the PPA is located / built.

Disbursements with Incomplete Documentary Requirements

24. The DENR paid P130.921 million for various expenses not supported by
complete documents, thus, casting doubt on the propriety, regularity and
validity of the transactions.

As among the fundamental principles, claims against government funds shall be

supported with complete documentation pursuant to Section 4(6), Presidential
Decree (PD) No. 1445 and COA Circular No. 2012-001 dated 14 June 2012 which
prescribes the documentary requirements for common government transactions.

Payments for the salaries and wages, RATA, other personnel benefits, repairs and
maintenance of motor vehicles, procurement of goods and services and other
expenses for CY 2017 in the total amount of P130,920,807.65 were not supported
with the required documents under COA Circular No. 2012-001, thus, casting doubt
on their propriety, regularity and validity. Issuance of Audit Observation
Memoranda and/or Notices of Suspensions were made as a result thereof. The
details are shown in Annex E.

We recommended and Management agreed to direct the Heads of concerned

DENR Offices to require their respective Accountants to ensure that all
payments of claims are properly supported with the required documents.

Enforcement of COA Audit Suspensions, Disallowances and Charges

25. Suspensions, disallowances and charges in audit of various transactions

amounting to P159.210 million, P99.407 million and P92.976 million,
respectively, remained unsettled.

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 Charge (NC)/Notice of Settlement of Suspensions and
Disallowances/Charges (NSSDC) issued by COA, are summarized in Table XXIII.

Table XXIII – Summary of Suspension, Disallowances and Charges as of December 31, 2017

163
 Balance as of During the Year Balance as of
Particulars
Jan. 1, 2017 Issuance Settlement Dec. 31, 2017
Suspensions P 96,068,500.85 P 120,042,652.81 P 56,901,106.92 P 159,210,046.74
Disallowances 79,621,411.93 24,809,874.13 5,023,426.34 99,407,859.72
Charges 92,976,257.93 5,000.00 5,000.00 92,976,257.93
TOTAL P 268,666,170.71 P 144,857,526.94 P 61,929,533.26 P 351,594,164.39

ND/NC/NS issued prior to effectivity of the 2009 Rules and Regulations on the
settlement of Accounts (RRSA) are not included in the reflected balance but are
deemed disallowances/charges which shall continue to be enforced in accordance
with these Rules under Sec. 28 thereof.

The unsettled disallowances and charges include, among others, the following:

a. Disallowances

Office Particulars Amount Status

CO Fund 101 Transportation Subsidy P 232,343.48 For reconciliation
Notice of Finality of Decision (NFD) was
UNIDO Honorarium 94,500.00
issued
Collective Negotiation
Agreement (CNA) for CY 9,893,570.49
2011 COA Order of Execution (COE) was issued to
the agency officials and persons liable
CNA (Fund 158) for CY
848,250.00
2011
NGS Cluster 8 Decision No. 2015-059 dated
Dec. 11, 2015 was issued whereby the appeal
Legal Consultancy 5,939,562.24 was denied. However, the Decision was not
final and the appeal has been elevated to the
Commission Proper for automatic review.
Requested refund from the concerned DFA
UNIDO Honorarium 42,400.00
officials/ employees
Construction of the COE was issued to the agency officials and
1,600,000.00
FASPO building persons liable
Liquidation of Cash Answer to appeal dated October 9, 2017 is still
78,738.00
Advance under review by the NGS-Cluster 8 Director
Payment to Green Data Appeal was filed on June 29, 2017 with NGS-
10,179,731.00
Center Cluster 8
Appeal was filed on Nov. 9, 2017 with NGS-
Fidelity bond 43,750.00
Cluster 8
The disallowed transportation allowance of a
former Regional Director will be deducted from
Transportation Allowance his claim of Terminal Leave Benefits while the
186,500.00
of DENR Officials request of FMB Director for installment
payment was approved by COA on 10 January
2018
Unauthorized use of motor
37,245.77 Not yet final and executory
vehicles
NCR SONA Incentive Bonus 499,750.00
Civil action was filed by the agency against the
Excess Leave Credits 144,558.68 liable person pending before Branch 43 MTC,
Quezon City
Honoraria 40,000.00 Demand letters have been sent
Financial Subsidy
627,835.42
Allowance
On-going deduction is being implemented
Subsistence Laundry
4,331,691.75
Allowance (Magna Carta)

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 Office Particulars Amount Status
Court Allowance 54,700.00
FMB With pending appeal filed by the DENR
Excessive CNA paid to
Employees Union (DENREU) dated November
Regular and Casual 2,522,125.67
5, 2012 with the Commission on Audit and
Employees in CY 2011
pending case filed with the Supreme Court
Appeal dated November 21, 2012 was denied
Honoraria paid to Chairs
by COA-NGS, Cluster 8 under Decision No.
and Members of BAC and
705,600.00 2015-035 dated September 8, 2015. Appellants
Technical Working Group
filed Motion for Reconsideration on Dec. 04,
of the FMB for CY 2011
2015.
Unauthorized payment of
honoraria to BAC Chairs,
645,183.90 With pending appeal dated July 11, 2014
members, observers, and
TWG of FMB in CY 2012
Repair of roofing of the
BMB Ninoy Aquino Hall in 1,016,265.62
2012
TEV 253,700.00 Partially settled during the year leaving a
PENRO Ifugao
PIB 150,000.00 balance of P303,551.00
Management was able to collect from
Survey expenses claimed
Manangan Surveying Office the amount of
Region III by Manangan Surveying 1,201,399.49
P524,065.00 as partial settlement on the
Office
disallowance.
Excess claim of travelling
4,000.00
expenses
Region V
Excess claim of BAC
361,786.62
Honorarium
Travelling expense in
PENRO relation to unauthorized
18,557.00
Guimaras attendance to the UPLB
Alumni Homecoming
Salary paid to an
PENRO Leyte employee who was 85,420.13
dismissed from the service
Total P 41,839,165.26

b. Charges

Office Particulars Amount Status

Construction of FASPO
P 20,426,733.05 Pending decision on the appeal filed by DPWH
building
CO Fund 101
Answer to appeals under review by the NGS-
Confiscated lumber 566,218.80
Cluster 8 Director
Under appraisal of the
selling price of the public With COA Decision, NFD received by
NCR 31,222,875.00
land at Eastwood, Quezon Management on October 17, 2016
City
P 52,215,826.85

In Region XI, disallowances as of CY 2017 consist of disallowed payments due to

the following:

 overpayment for rental of two units of helicopter for aerial survey;

 payment of RATA to officers with relief order from post issued by the DENR
Secretary;
 payment of CNA to casual employees without legal basis;
 suspended payments that have matured into disallowance due to non-
submission of the required documents;

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  Erroneous computation of salaries and PERA and the granting of leave credits
to personnel who are not entitled resulting to overpayment of salaries and
PERA;
 overpayment of salaries/ services rendered;
 payment of porterage fee in excess of the allowable incidental expenses;
 supplemental disallowance to ND No. 12-101-006-(12) for the overpayment
of rental of two units of helicopter for aerial survey; and
 overpayment of catering and accommodation services.

The accumulation of the unsettled balances was due to the non-enforcement of

sanctions of the Agency.

In order to increase the settlement of the disallowances and charges, the agency may
opt for partial settlements thru installment basis in accordance with COA Resolution
No. 2015-031 dated August 20, 2015, whereby the monthly payment shall be
deducted from salary of the person liable, subject to the maximum take home pay
requirement under the GAA.

We recommended and Management agreed to:

a) comply with existing laws, rules and regulations to avoid NSs, NDs and
NCs;

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 NSs, NDs and NCs.;
and

c) intensify the settlement of disallowances, charges and suspensions by

seeking the approval of COA to pay in installment the liability under the
NDs/NCs issued pursuant to COA Resolution No. 2015-031 dated August
20, 2015.

C. FINANCIAL AUDIT

Accounting Errors/Omissions and Deficiencies

1. The reported balances of the accounts in the Financial Statements were not
fairly presented due to various accounting errors/omissions and deficiencies
amounting to P947.684 million and P3,930.639 million, respectively.

Section 27 of the Philippine Public Sector Accounting Standards (PPSAS) 1

provides that “Financial statements shall present fairly the financial position;
financial performance, and cash flow of an entity. Fair presentation requires the
faithful representation of the effects of transactions, other events, and conditions in

166
 accordance with definitions and recognition criteria for assets, liabilities, revenue,
and expenses set out in IPSASs.”

The accounts showed various accounting errors/omissions and deficiencies

amounting to P947,683,880.46 and P3,930,639,175.71, respectively, which
affected the fair presentation of the reported total Assets, Liabilities and
Accumulated Surplus/(Deficit) amounting to P42,140,548,460.86,
P2,772,621,631.39 and P39,367,926,829.47, respectively, as discussed in the
succeeding paragraphs. The effects of these errors/omissions and deficiencies are
shown in Annex F.

Accounting Errors/Omissions

a) Unrecorded collections and book reconciling items of cash accounts – P9.822

million

There were unrecorded collections and book reconciling items amounting to

P9,822,564.69 that affected the fair presentation of various cash in bank accounts.

Amount
Office Accounts Affected Particulars
Overstatement Understatement
Cash–Collecting Unrecorded collection of
BMB P 464,315.97
Officers fees
Cash-Local Unrecorded deposits, 1,001,374.11
Central Office Currency Current interest income and
Account remittance of taxes
BMB Unrecorded collections 1,607,425.00
Unrecorded interest income 27,830.86
CAR
and unadjusted stale checks
Unrecorded interest income 198,153.47
and unadjusted stale
PENRO-
checks; non-restoration of
Benguet
cash due to unreleased
checks
Region I Unrecorded bank account 741,787.58
PENRO- Unadjusted stale checks 2,800.00
Pangasinan
PENRO – Unadjusted stale checks 206,702.50
Isabela
Unadjusted book 513,528.90
Region VI
reconciling items
Region XII Unrecorded deposits 68,730.00
Sub-total 4,368,332.42
PENRO–South Cash-Treasury/ Collections deposited to the 538,681.86
Cotabato Agency Deposit, Bureau of the Treasury but
Regular not closed to Accumulated
Surplus/ (Deficit) account at
the end of the year
BMB Cash-Treasury/ Unrecorded deposits 196,532.50
PENRO- Agency Deposit, Erroneous closing entry 2,762,203.75
Occidental Special Account
Mindoro
Sub-total 2,958,736.25

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 Amount
Office Accounts Affected Particulars
Overstatement Understatement
PENRO- Cash-Modified Unadjusted stale checks 155,222.05
Pangasinan Disbursement
PENRO-Negros System 86,875.00
Occidental
PENRO- 1,250,401.14
Sarangani
Sub-total 1,492,498.19
Total Overstatement/Understatement P 538,681.86 P 9,283,882.83
Total Errors P 9,822,564.69

b) Unrecorded/erroneous recording and misclassification of receivable accounts –

P309.693 million

There were unrecorded transactions, errors in recording, reclassification and non-

recognition of impairment amounting to P309,693,328.09 that misstated the
receivable accounts.

Accounts Amount
Office Particulars
Affected Overstatement Understatement
Central Due from NGAs Unrecorded deliveries of P 209,796,073.00
Office various PPE items
FMB Erroneous adjustment 18,408.26
The account was debited for the 622,492.78
refund of trust liabilities (Due
to NGAs account)
Misclassification of account 26,335,579.98
NCR should be classified as Due 2,704,670.00
from ROs account
CAR Unrecorded supplies and 190,026.75
PENRO- materials delivered by PS 102,811.88
Benguet (Accumulated Surplus/Deficit)
BMB Unrecorded fund transfer 500,000.00
PENRO – Misclassification of account 7,300,000.00
South recorded as CIP-Buildings and
Cotabato Other Structures account
Sub-total 231,970,062.65
Central Due from GOCCs Liquidation of PITC 43,486,307.45
Office
Region IX Due from Erroneous use of accounts 6,251,283.44
Operating Units
Central Receivables – Unrecorded 44,312.15
Office Disallowances/ disallowance/settlement; double
Charges recording of disallowance
PENRO- Other Misclassification of account 3,180,462.69
Tarlac Receivables
PENRO- Due from Erroneous liquidation 2,041,486.68
Abra NGOs/POs
Central Other Misclassification of account 10,321,846.58
Office Receivables
Central Non-recognition of impairment 12,397,566.44
Office on dormant accounts

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 Accounts Amount
Office Particulars
Affected Overstatement Understatement
Total Overstatement/Understatement P304,471,378.71 P 5,221,949.38
Total Errors P 309,693,328.09

c) Unrecorded acquisitions and issuances/ non-derecognition of defective and expired

items/ erroneous recording of inventory accounts – P175.080 million

There were errors and omissions in the recording of delivery, transfer and issuances
of supplies amounting to P175,080,445.99.

Amount
Office Accounts Affected Particulars
Overstatement Understatement
PENRO-Capiz Agricultural Seedlings produced
produce for were used in NGP
distribution Projects but not
P144,033,255.50
reclassified to CIP-
Land Improvement
account
Failure to record the
24,985 pieces of 282,636.00
seedlings produced
Sub-total 143,750,619.50
Central Office Office Supplies Non-derecognition of 420,092.64
Inventory defective, expired
obsolete office
supplies
PENRO-Guimaras Unrecorded issuance 1,180,973.90
ERDB 6,651,262.05
PENRO-Abra 2,951,206.94
PENRO-Pangasinan Purchase of office 2,463,061.35
PENRO-Laguna supplies recorded as 3,248,400.50
PENRO-Misamis outright expense 885,590.01
Occidental
PENRO-Ifugao 166,649.19
Sub-total 14,765,103.50
Central Office Accountable Forms, Non-derecognition of 66,000.00
Plates and Stickers defective, expired
Inventory obsolete accountable
forms
LMB Unrecorded issuances 7,489,040.00
(net)
PENRO-Pangasinan Purchases recorded as 46,517.00
outright expense
Sub-total 7,508,523.00
PENRO-Guimaras Other Supplies and Unrecorded issuances 1,608,542.02
PENRO-Abra Materials Inventory Purchases of supplies 47,800.00
PENRO-Pangasinan recorded as outright 245,478.32
expense
Sub-total 1,315,263.70
PENRO-Albay Semi-Expendable Unrecorded issuances 801,000.00
PENRO-Quirino Machinery and 430,895.29
Equipment and
PENRO-Ifugao Recorded as outright 51,288.00
other semi-
expense
expendable
PENRO-Albay Misclassification of 377,039.75

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 Amount
Office Accounts Affected Particulars
Overstatement Understatement
accounts accounts - recorded as
Office Supplies
Expenses and Other
Supplies and
Materials Expenses
PENRO-Pangasinan Misclassification of 83,885.85
accounts - recorded as
Office Supplies
Expenses
Sub-total 719,681.69
Central Office Fuel, Oil and Non-derecognition of 1,254.60
Lubricants the cost of expired oil
Inventory
Region IV-A Agricultural and Unrecorded issuances 7,020,000.00
Marine Supplies of agricultural
supplies
Total Overstatement/Understatement P160,315,342.49 P14,765,103.50
Total Errors P175,080,445.99

d) Misclassification, unrecorded transactions/non-recognition and non-derecognition

of PPE accounts - P422.243 million

There were unrecorded transactions, errors in recording and/or reclassification and

non-recognition of impairment amounting to P422,243,470.70 that affected the PPE
accounts.

Amount
Office Accounts Particulars
Overstatement Understatement
Agricultural
PENRO Unrecorded delivered Plastic
and Forestry P 8,837,715.60
Cagayan Seeding Tray
Equipment
Improvements charged as
Region III 6,958,794.64
expense
Buildings and Non-recognition of Impairment
PENRO
Other Losses for unserviceable/ P200,000.00
Pampanga
Structures obsolete properties
 PENRO
Undetermined ownership and
Agusan del 930,000.00
control of PPE
Sur
Sub-total 5,828,794.64
Mobilization fund for the repair
and rehabilitation of PENR
PENRO CIP –
Office Building was not 127,036.50
Pampanga Buildings and
capitalized but directly charged
Other
to expense
Structures
PENRO
Davao del Erroneous recording of PPE 1,073,704.78
Sur
Sub-total 946,668.28
 PENRO CIP-Land Erroneous recording of
8,530,743.18
Abra Improvements transactions
PENRO Unsupported derecognition/ 7,752,031.17
Laguna adjustment made on the account

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 Amount
Office Accounts Particulars
Overstatement Understatement
PENRO
Non-reclassification of accounts 144,033,255.50
Capiz
Completed perimeter fencing
 CAR should be reclassified to Other 10,672,919.61
Land Improvement account
Erroneous recording of Fund
transfer to the City Government
 PENRO
of San Jose del Monte, Bulacan 24,027,960.00
Bulacan
- should be reclassified to Due
from LGUs account
PENRO
Erroneous recording of PPE 103,571.85
Siquijor
Sub-total 125,511,578.39
Central
112,586,792.90
Office Unrecorded PPE
Region IX 12,316,400.01
Information and
 PENRO Communications Non-recognition of Impairment
Technology Losses for unserviceable/ 41,928.92
Zambales
Equipment obsolete properties
Region VIII Erroneous recording of PPE 38,164.00
PENRO
Computer peripherals below
Surigao del 485,127.29
P15,000
Sur
Sub-total 124,337,972.70
PENRO
208,000.00
Bataan Non-recording of donated lots
PENRO
Land 1,956,000.00
Zambales
PENRO
Under-valuation and unrecorded
Camarines 484,690.55
lots
Norte
Sub-total 2,648,690.55
CO 21,525,378.60
PENRO Unrecorded PPE
600,000.00
Catanduanes
PENRO
Motor Vehicles Erroneous derecognition of PPE 316,000.00
Sorsogon
PENRO
Davao  Unrecorded PPE 2,617,572.43
Occidental
Central Non-derecognition of carnapped
956,800.00
Office vehicle
Sub-total 24,102,151.03
Davao
 Unrecorded PPE 80,000.00
Oriental
PENRO - Office Misclassification should be
18,183.02
Ifugao Equipment semi-expendable items
PENRO
Various semi-expendable assets
Surigao del 41,250.00
recognized as PPE
Sur
Sub-total 20,566.98

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 Amount
Office Accounts Particulars
Overstatement Understatement
CO 79,934,816.00
NCR Unrecorded PPE 458,200.00
PENRO Other
505,440.00
Marinduque Machinery and
Equipment Erroneous recording of
PENRO equipment even though the items
33,164,061.00
Antique meet the criteria for recognition
as PPE
Sub-total 114,062,517.00
Technical and Equipment still in the books
CAR Scientific despite transfer to the different 655,680.00
Equipment PENROs/ CENROs
Error in recording payments of
constructed assets and non-
Region I 14,971,276.40
reclassification of completed
projects
Misclassification of accounts
PENRO-
recorded as Office Supplies 309,530.00
Abra
Expenses
PENRO- Various errors and non-
2,800,218.34
Pangasinan recording of PPE transaction
Non-capitalization of
PENRO
improvements and directly 8,816,830.17
Bulacan
charged to expense
Misclassification of account
PENRO - recorded as Office Supplies
559,255.00
Albay Various PPE Expenses and Other Supplies
and Materials Expenses
Region XII  Unrecorded PPE 114,000.00
Various semi-expendable assets
815,512.24
recognized as PPE
CO-FAPs
Unserviceable/obsolete/
disposed/ unlocated properties 7,117,091.55
still included in the PPE
PENRO - Items to be classified as semi-
197,249.71
Isabela expendable
PENRO
Nueva Non-recognition of Impairment 2,746,253.10
Vizcaya Losses for fully depreciated and
unserviceable PPE
PENRO
321,913.62
Bulacan
Various PPE Non-recognition of Impairment
PENRO accounts Losses for
730,000.00
Pampanga unserviceable/obsolete
properties
PENRO Equipment still in the books
232,400.00
Zambales despite transfers to LGUs
PENRO Non-recognition of Impairment 645,730.00
Quezon Losses for
unserviceable/obsolete
properties

172
 Amount
Office Accounts Particulars
Overstatement Understatement

Region IV- Various semi-expendable assets

3,752,013.43
B recognized as PPE

PENRO Non-recognition of Impairment

Occidental Losses for Unserviceable/ 2,969,621.00
Mindoro obsolete properties

Unserviceable/obsolete/
Region V disposed/unlocated properties 9,566,288.17
still included in the PPE
PENRO
Various semi-expendable assets
Negros 907,332.78
recognized as PPE
Oriental
Non-recognition of Impairment
PENRO
Losses for Unserviceable
Misamis 2,117,571.82
properties
Occidental

Region XII Recorded but undelivered 2,218,102.75

Region XIII 1,032,516.00
PENRO Non-recognition of Impairment
Agusan del Losses for Unserviceable 7,243,084.27
Sur properties
PENRO
Surigao del 249,565.00
Norte
Sub-total 15,291,135.53
Total Overstatement/Understatement P 16,893,483.81 P 405,349,986.89
Total Errors P 422,243,470.70

e) Unrecorded/erroneous recording and misclassification of Other Assets– P20.150

million

There were errors in the recording of Other Assets account amounting to

P20,150,057.64.
Amount
Office Accounts Affected Particulars
Overstatement Understatement
PENRO Kalinga Advances to Cash advances for
Officers and travel and registration
Employees fee erroneously P 215,885.00
recorded as outright
expense
Region IV-A Misclassification of 3,035,546.95
account recorded as
Other Receivables
account
Sub-total 3,251,431.95
PENRO- Quirino Advances to Unrecorded transaction 1,567,934.15
Contractors
PENRO - Pampanga Erroneous recording 5,969,701.61
and non-recoupment of
advances from the

173
 Amount
Office Accounts Affected Particulars
Overstatement Understatement
periodic progress
billing of contractors
Net overstatement 4,401,767.46
PENRO –Albay Other Prepayments Erroneously recorded 155,000.00
as Fuel, Oil and
Lubricants Expenses

Central Office Confiscated Assets Non-recording of 1,240,309.53

confiscated lumbers
and non-derecognition
of the remaining
confiscated lumber
(net amount)
NCR Non-recording of 1,256,130.10
confiscated assets and
its dispositions in the
books (net amount)
PENRO –Isabela 13,085,485.09
PENRO –Nueva
703,313.89
Viscaya
PENRO –Quirino 203,907.96
PENRO –Aurora 1,683,321.53
PENRO –Bataan 153,433.34
PENRO –Bulacan Non-recording of 158,255.30
PENRO -Nueva Ecija confiscated assets 3,431,359.29
PENRO -Zambales 136,061.90
PENRO Aklan 179,080.10
PENRO Antique 140,293.60
PENRO Zamboanga
1,115,631.38
del Sur
PENRO Misamis
922,233.50
Oriental
PENRO –Albay Unrecorded acquisition 492,817.16
and issuance (net
amount)
Net understatement 23,915,999.35
PENRO - Albay Advances for Misclassification of 28,000.00
Operating Expenses account should be
Advances to Special
Disbursing Officers

Central Office Other Assets Inclusion of items of 184,759.11

undetermined amount
that should be
classified as PPE and
non-derecognition of
motor vehicles already
sold
Region II Inclusion of items that 2,546,728.84
should be classified as
PPE
PENRO Zambales Overstatement due to 11,118.25
non-dropping of
disposed property in
the books of account
Sub-total 2,742,606.20
Total Overstatement/Understatement P 7,172,373.66 P 27,322,431.30
Total Errors P 20,150,057.64

174
f) Erroneous recording/ misclassification of liability accounts – P10.694 million

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

amounting to P10,694,013.35. Details are as follows:

Accounts Amount
Office Particulars
Affected Overstatement Understatement
PENRO-Albay Accounts Erroneous adjustment of P 2,393.40
Payable stale check to Due to BIR
account instead of Accounts
Payable
Due and demandable 2,786,314.14
PENRO Surigao Del obligations were not
Norte booked up
Region I Obligated but not yet 187,260.75
delivered
PENRO-La Union Erroneous computation and 1,253,987.05
double recording of liability
overstated A/P and CIP-
Land Improvements
accounts
Sub-total 1,347,459.74
CAR Due to NGAs Erroneous adjustment 18,243.20
CO Due to Other Erroneous classification 8,538,008.78
Funds
Other Negative balance 790,301.63
Payables
Total Overstatement/Understatement P 8,556,251.98 P 2,137,761.37
Total Errors P10,694,013.35

We recommended and Management agreed to direct the concerned Accountants

to effect the necessary adjustments on the omissions/errors and improper
recording of transactions, as well as the misclassification of accounts, to correct
the reported balances of the affected accounts in the Financial Statements.

Accounting Deficiencies

Accounting deficiencies in recording and reporting financial transactions amounting to

P3,930,639,175.71 also affected the reliability of the reported account balances of the
financial statements.

a) Non-maintenance of subsidiary ledgers and schedules and off-setting of negative

balances – P26.939 million

Office Particulars Amount

a. Accounts Receivable
Non-maintenance of subsidiary ledgers to
Region XI P 8,205,336.50
support the account balance
f. Due from Officers and Employees
CAR Negative balance 11,884.18

175
 Office Particulars Amount
d. Other Receivables
Absence of schedules to support the
Central Office account 10,160,721.02
Other Receivables
Non-maintenance of SL and detailed
LMB 8,561,248.74
schedules of Other Receivables
Total P26,939,190.44

We recommended and Management agreed to direct the concerned Accountants

to maintain subsidiary ledgers and provide schedules to support the account
balance.

b) Discrepancy between the GL and RPCI, undocumented forwarded beginning

balance, and non-maintenance of ledgers for Inventory accounts= P 125.516
million

Doubtful existence and completeness of the carrying amount of the Inventory

accounts due to discrepancy of P 56,660,412.53 between the GL and RPCI

The pertinent documents/records showed that the total carrying amount of Inventory
accounts as of 31 December 2017 is unreliable due to the failure of the Department to
establish fully the existence and completeness of the inventory carrying amount as
there is a discrepancy of P56,660,412.53 between the control accounts and the
Report on the Physical Count of Inventories (RPCI). It must be pointed out that the
discrepancy is equivalent to 8.53 percent of the total carrying amount of the Inventory
accounts of P663,868,367.30. Details are shown below:

DENR Office Unreconciled Difference

Central Office P 10,561,720.58
LMB 23,849,036.82
FMB 21,406,983.18
BMB 842,671.95
Total P 56,660,412.53

Other deficiencies noted in the verification of the account are as follows:

Office Particulars Amount

Agricultural Produce for Distribution account was
ERDB not adequately disclosed in the Notes to Financial P 49,274,776.41
Statements
No RPCI, Stock Cards and Supplies Ledger Cards
NCR 1,084,875.61
not updated
Non-existence of seedlings recorded as Other 504,230.
CAR
Supplies and Materials Inventory account 00
PENRO –Abra Absence/incomplete inventory taking 230,466.54
PENRO-La Union 2,114,450.69
Stock Cards and Stock Ledger Cards are not
PENRO- Ilocos Norte maintained and reconciled 4,043,915.80

176
 Office Particulars Amount
Issuances of Various Inventory account not 734,769.
PENRO Quirino
supported by RIS and RSMIs 29
Issuances of agricultural produce not supported by
704,456.
PENRO Catanduanes RIS and IARs, hence, issuances not recorded in the
00
books
Issuances of various Inventory account not
PENRO Aklan 773,888.37
supported by RIS and RSMIs
PENRO Negros No supporting documents or evidences attached in
240,119.58
Occidental the vouchers of Office Supplies Inventory
PENRO Zamboanga Del Issuances of Various Inventory account not 8,264,073.
Norte supported by RIS, RSMIs and ICS 61
PENRO Agusan Del Absence of subsidiary ledgers on various
1,125,383.38
Norte Inventory account
Total P68,855,285.70

We recommended and Management agreed to direct the concerned Accountants

to:

a. coordinate with the Property Officer to establish the existence and

completeness of the carrying amounts of the Inventory accounts by
reconciling fully the difference between the GL or control accounts and
RPCI; and

b. ensure completeness of the required subsidiary ledgers and supporting

documents on all issuances of inventories.

c) Doubtful existence and completeness of the carrying amount of the PPE accounts
due to discrepancy of P2,583.565 million between the GL and RPCPPE and other
deficiencies amounting to P611.761 million

Comparative analysis showed that the total amount of PPE per GL differs by
P2,583,564,956.82 with the balance per RPCPPE, rendering doubtful its existence
and completeness. The details are shown below:

177
 Office Amount
CO P 768,239,211.16
CO – FAPS 5,756,568.38
NCR 44,039,630.85
LMB 98,848,210.24
PENRO Benguet 1,289,435.04
Region II 6,855,160.57
PENRO Batanes 19,547,445.12
Region III 24,278,639.93
PENRO Pampanga 64,072,116.00
PENRO Batangas 175,005,399.58
PENRO Quezon 826,096,086.85
PENRO Oriental Mindoro 72,605,607.09
PENRO Camarines Sur 32,107,237.02
PENRO Capiz 249,745,520.86
PENRO Guimaras 816,304.70
Region XII 3,579,952.00
PENRO Dinagat Island 1,073,318.43
29,522,206.97
PENRO Agusan del Sur
103,559,495.12
PENRO Negros Occidental 20,023.32
Surigao del Sur 56,507,387.59
Total P 2,583,564,956.82
The audit teams concerned were unable to perform alternative procedure to account fully
for such discrepancy because of the unavailability of other supporting documents.

Moreover, several deficiencies were also noted in the verification of the PPE
accounts, as follows:

Office Particulars Amount

CO – FAPS Absence of RPCPPE P 31,844,320.30
Incomplete physical count and non-maintenance of
FMB
PPELC
115,815 ,138.66
Existence of negative balance in the PPE and non-
PENRO Ifugao
maintenance of PPELC
92,695,784.83
PENRO- La Union Non-conduct of physical count, incomplete 76,363,645.69
PPELCs and PCs, and
unserviceable/lost/unreturned PPE were
PENRO – Ilocos Sur 159,153,365.56
derecognized without adhering to the
prescribed procedure
PENRO – Oriental
Non-conduct of physical count, incomplete 72,605,607.99
Mindoro
PPELCs and PCs
PENRO - Romblon 82,869,363.70
Uncertainty of the CIP - Land Improvements-
PENRO Southern Leyte Reforestation Projects balance due to non- 67,755,839.76
maintenance of ledger card
Absence of particulars/details of the projects and
Region XIII non-conduct of physical count/actual inspection by 28,473,454.50
the Inventory Committee
Total P 611, 761,382.33

178
 We recommended and Management agreed to direct the:

a. Accountants concerned to update their PPELC and, in coordination

with the Property Officers, reconcile fully the difference between the
GL and RPCPPE; and

b. Chief of General Services Division to update the PC for each class of

PPE and reconcile it regularly with the RPCPPE and PPELC and
ensure that RPCPPE is prepared and submitted on time.

d) Unreconciled SL and GL balances and recording of fully depreciated PPE under

the Other Assets account – P323.129 million

Office Accounts Affected Particulars Amount

PENRO-Albay Advances to Unreconciled balance P 704,967.12
Contractors between the schedule and
the GL and not supported
by subsidiary ledger.
Central Office Other Assets Difference between the 158,645,372.65
balance per GL and the
physical count of PPE
recorded under the Other
Assets account.
Unreconciled SL and GL 163,778,242.37
balances and existence of
dormant items in-transit
Total P323,128,582.14

The audit teams concerned were unable to perform alternative procedure to account
fully for such discrepancy because of the unavailability of supporting documents.

The total deficiency of P323,128,582.14 is equivalent to 53.76 percent of the total

Other Assets of P601,108,153.34.

We recommended and Management agreed to direct the Accountants concerned

to:
a. reclassify PPE recorded under the Other Assets account to the proper
PPE account ;

b. in coordination with the Property Officer, reconcile fully the

difference between the balance per General Ledger (GL) and the
physical count; and

c. determine the composition of the unreconciled amount of the

Advances to Contractors account (PENRO-Albay) and Other Assets
account (CO) and dormant items in-transit as included in the
subsidiary ledger of the CO.

179
 We also recommended that the Director of the Administrative Service of Central
Office direct the Chief of the Property and Supply Management Division and the
OIC Chief of General Services Division to update the physical inventory of the
other assets and reconcile it with the book balance.

e) Unreliable balance of Payables account due to absence of schedules and

supporting documents- P259.729 million

Office Particulars Amount

ERDB Not reconciled to the books of source agency (Due to P 4,467,132.54
NGAs - PCAARRD
LMB Absence of schedules, subsidiary ledgers and pertinent 17,042,143.46
documents (Other Payables Account)
Negative balances of Due to GSIS (P362,179.78); Due 1,090,002.41
to PAGIBIG (P623,908.47): Due to Philhealth
(P 103,914.16)
FMB Not substantiated with supporting documents 439,679.39
BMB Negative balance and unsupported accounts 60,071.86
Central Office Not substantiated with proper documentation 92,074,870.75
CAR Various Payables not supported with SLs and 87,735.84
unavailability of records
PENRO Kalinga Absence of schedules, subsidiary ledgers and pertinent 514,110.16
documents (Inter-Agency Payable Account)
Region I 187,260.75
Set-up of Accounts Payable account even if the items
PENRO-
were not yet delivered
Pangasinan 1,192,441.66
PENRO Tarlac Absence of schedules, subsidiary ledgers and pertinent
documents (Due to Other NGAs and Trust Liabilities
Account) 435,589.66
Unclaimed Guaranty/Security Deposits Payable 15,007,296.26
Not adequately disclosed in the Notes to Financial
Region IV-A Statements: Accounts Payable - P3,882,808.35; Due to
8,465,520.25
Officers and Employees - P2,802,874.48; Due to NGAs
- P544,921.17 and Other Payables - P1,234,916.25
Absence of schedules, subsidiary ledgers and pertinent
PENRO Antique documents (Other Payables Account) 84,075.33
PENRO Iloilo Absence of schedules, subsidiary ledgers and pertinent 6,819,600.56
documents (Accounts Payable Account)
PENRO Siquijor Inclusion of unfounded and invalid claims 932,742.50
PENRO Capiz Absence of schedules, subsidiary ledgers and pertinent 7,234,463.35
documents (Guaranty/Security Deposits Payable, Due to
NGAs and Other Payables Account)
Region VIII Accounts Payables account not supported with SLs 44,434,681.37
Absence of schedules, subsidiary ledgers and pertinent
PENRO Leyte documents (Accounts Payable Account) 591,150.00
Settlements of Accounts Payable thru issuance of checks 2,327,223.31
Region XI Funds not yet transferred to NGAs/Bureaus (Due to 1,846,000.00
NGAs of P1,318,000.00 and Due to Bureaus of
P528,000.00)
PENRO Sarangani Absence of schedules, subsidiary ledgers and pertinent
30,977,717.88
documents (Account Payable Account)

180
 Office Particulars Amount
PENRO South Variance between the reported amount in the FS and the
Cotabato voucher and supporting documents 4,275,318.46
PENRO Agusan Absence of schedules, subsidiary ledgers and pertinent 11,252,368.68
Del Norte documents (Various Payable Account)
PENRO Aklan Absence of schedules, subsidiary ledgers and pertinent 7,890,169.32
documents (Guaranty/Security Deposits Payable and
Other Payables Account)
Total P259,729,365.75

It must be pointed out that the total deficiency of P259,729,365.75 is equivalent to

nine percent of the total Liabilities of P 2,772,621,631.39.

We recommended and Management agreed to require the Accountants to:

(a) review the validity of the unliquidated obligations or accounts payable

which are outstanding for more than two years and if found to have no
valid claims against the Department, cause the reversion of the same to
the unappropriated surplus; and

(b) prepare subsidiary records/schedules to support and substantiate the

account balance of the payables.

181