SBMA2021 Audit Report PDF

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
ANNUAL AUDIT REPORT
on the
SUBIC BAY METROPOLITAN

AUTHORITY
For the Year Ended December 31, 2021

REGIONAL OFFICE NO. III
City of San Fernando, Pampanga
May 24, 2022
THE BOARD OF DIRECTORS

Subic Bay Metropolitan Authority
Subic Bay Freeport Zone, Olongapo City
Gentlemen and Ladies:
We are pleased to transmit the Annual Audit Report on the audit of the Subic Bay
Metropolitan Authority (SBMA), Subic Bay Freeport Zone, Olongapo City for the
Calendar Year 2021 in compliance with Section 43 of the Government Auditing Code of
the Philippines (P.D. No. 1445).
The audit was conducted to (a) ascertain the level of assurance that may be placed
on management assertions on the financial statements; (b) recommend agency
improvement opportunities; and (c) determine the extent of implementation of prior year’s
audit recommendations.
We conducted our audit in accordance with International Standards of Supreme

Audit Institutions (ISSAIs). We rendered a qualified opinion on the fairness of presentation
of the financial statements of the Subic Bay Metropolitan Authority as of December 31,
2021 owing to material accounting errors and omissions as cited in the Independent
Auditor’s Report in Part I of the report.
The significant audit observations and recommendations requiring immediate

action are as follows:
1. The timely recognition of receivables was compromised due to ineffective process

flow of financial information and vital documents relating to the renewal and pre-
termination of lease and/or sublease agreements, understating Receivables by ₱13.2
million, Service and Business Income by ₱11 million and Retained Earnings by ₱2.2
million, inconsistent with the pertinent provisions of the Philippine Financial Reporting
Standards (PFRS) towards a more reliable and fair financial reporting. (Observation No.
2)
We recommended that Management undertake the following courses of action:
a. Establish measures and strategies to ensure well-timed compliance of locators with

the requirements set upon them so as not to impede SBMA’s business processing
activities on pre-termination, new contracts and/or renewals;
b. consider providing off-book adjustment(s) as of cut-off date of FS preparation when
circumstances require, to reflect the late additions on the Receivables and Income
account, minimizing the materiality of the misstatements that might occur; and
c. institute the necessary coordination between Accounting and BID to assess or

measure the accounts or contracts subject to off-book adjustment(s) to be made.
2. Certain disclosures applicable to the SBMA as provided for under International

Financial Reporting Standards (IFRS) 7 – Financial Instruments: Disclosures and IFRS 16
– Leases were not included in the Notes to Financial Statements (FSs) impairing the
understandability of the information about the affected accounts, which is one of the
qualitative characteristics of a reliable FS. (Observation No. 3)
We recommended that Management include the applicable disclosures mentioned

under IFRS 7, Financial Instruments – Disclosures (Loans and Receivables) and IFRS 16,
Leases (for Operating Lease-Lessor) for fair presentation of the financial statements.
3. The non-recognition of Allowance for Impairment on obsolete inventories with

carrying amount of ₱7,654,808.07 was not consistent with the Philippine Accounting
Standards (PAS) 2 and SBMA internal guidelines on property disposal, thus, resulting to
the misstatement of the Inventories and Maintenance and Other Operating Expenses
(MOOE) accounts in the Financial Statements (FS) and the related disclosures in the FS.
(Observation No. 4)
We recommended that Management instruct the:
a. PPMD with the assistance of the Engineering Department to prepare the annual
inventory and appraisal of impaired inventories for submission to the Accounting
Department; and
b. Accounting Department to prepare the necessary adjusting entries and required

disclosures based on the submitted report.
4. The Investment Property (IP) accounts with carrying amount of ₱5,746,454,227.06

as of year-end were misstated due to a) unverified beginning balance of Investment
Property, Buildings and Investment Property, Port Development Project totaling
₱5,186,126,672.90; b) misclassification of IP-Land under PPE at ₱13,933,376,379.10; and
c) unrecorded lessee’s development commitment by up to ₱337,249,836.29. Likewise, full
disclosure of the accounts in the Notes to the Financial Statements (FS) was not provided
as required under Philippine Accounting Standards (PAS) 40. (Observation No. 5)
a. Provide additional strategies and involve related Departments in the “one-time”

cleansing activity to capture all development commitments for recording in the
books of accounts;
b. constitute/create a policy that will define accountability/responsibility for the
monitoring of investment/development commitment of locators and the reporting
thereof to the departments concerned, including LADD and the Accounting Office
for record keeping purposes;
c. instruct the LADD and Accounting Office to (i) come up with the necessary
database and reasonable allocation method for costing separately the land as owner-
occupied and as investment property, and prepare the necessary adjusting entry to
reclassify the same to the appropriate accounts; and (ii) provide information on the
fair values of an investment property for disclosure purposes; and
d. instruct the Accounting Department to draw journal entries recognizing unrecorded

Investment Properties.
5. Due to inadequate planning, one-time cleansing of Property, Plant and Equipment

(PPE) accounts was incomplete, inconsistent with the guidelines set forth under COA
Circular No. 2020-006, resulting in (a) unverified amounts in the Land Improvements,
Infrastructure Assets, Buildings and Building Structures and Construction in Process
accounts aggregating ₱2,581,177,708.01; (b) unreconciled amount of ₱15,538,956.89
under Other Equipment, Work Animals and Fully Depreciated Equipment (moveable
PPEs); and (c) inclusion of issued semi-expendable property below capitalization threshold
presented in the Financial Statements in the total amount of ₱2,692,631.99 which
overstated both PPE and Retained Earnings accounts by the same amount. (Observation
No. 6)
We recommended Management undertake the following courses of action:
a. Prepare a consolidated Physical Inventory Plan, taking into account among others,
the following:
- Setting of specific objectives and deliverables;

- identification of resources needed;
- risk assessment and formulation of risk mitigation strategies;
- time bound activities to be executed to attain desired objectives with assigned
accountabilities as specified in COA Circular 2020-006; and
- monitoring and assessment; and
b. direct the Accounting Department to (i) ensure that the Inventory Committee
present an accurate and complete inventory of PPEs and reconciliation results by
adopting the guidelines on the one-time cleansing prescribed in the aforementioned
COA Circular; and (ii) draw journal entry voucher (JEV) taking up the necessary
adjusting entries in the books of accounts, if warranted.
6. Lapses and gaps in project monitoring and reporting of the progress of work were
noted due to non-observance of the regulations embodied under Circular No. 03-2019 dated
March 8, 2019 of the Government Procurement Policy Board (GPPB), resulting to a high
percentage of negative slippages and eventual delays in project completion. (Observation
No. 7)
a. Establish project monitoring policies stating the specific responsibilities, reporting

requirements and standardized project monitoring tools to properly address gaps
noted in project implementation; and
b. enforce promptly the GPPB guidelines in addressing the delays in the

implementation of infrastructure projects by the contractor.
7. The SBMA may not be able to recover from losses of property and financial
resources due to absence of Management policy on the posting of performance security to
ensure the faithful performance of housing renovations. (Observation No. 8)
We recommended that Management develop policies or include in existing policies

the requirement for the posting of performance bond and monitoring of the construction
work done on housing units to protect the interest of the SBMA.
The other audit observations, together with the recommended courses of action, are
discussed in detail in Part II of the report. These, along with the prior year’s
recommendations not yet or partially acted upon and included in Part III of the report, were
discussed with the officials and staff of that Agency.
We appreciate the invaluable support and cooperation extended to our Audit Team
by the officials and staff of that Agency.
Very truly yours,
OMAR S. ROQUE
Regional Director
cc: President of the Republic of the Philippines

Vice-President
President of the Senate
Speaker of the House of Representatives
Chairperson-Senate Finance Committee
Chairperson-Appropriations Committee
Secretary of the Department of the Budget and Management
Governance commission for Government-Owned or Controlled Corporations
Presidential Management Staff, Office of the President
The Assistant Commissioner, CGS, COA, Quezon City
The Commission Proper, COA, Quezon City
National Library (soft copy)
University of the Philippines Law Center (soft copy)
COA Commission Central Library (soft copy)
May 24, 2022
Mr. ROLEN C. PAULINO, Sr.

Chairperson and Administrator
Dear Chairperson and Administrator Paulino:
We are pleased to transmit the Annual Audit Report on the audit of the Subic Bay
Metropolitan Authority (SBMA), Subic Bay Freeport Zone, Olongapo City for the
Calendar Year 2021 in compliance with Section 43 of the Government Auditing Code of
the Philippines (P.D. No. 1445).
The audit was conducted to (a) ascertain the level of assurance that may be placed
on management assertions on the financial statements; (b) recommend agency
audit recommendations.
We conducted our audit in accordance with International Standards of Supreme

Audit Institutions (ISSAIs). We rendered a qualified opinion on the fairness of presentation
of the financial statements of the Subic Bay Metropolitan Authority as of December 31,
2021 owing to material accounting errors and omissions as cited in the Independent
Auditor’s Report in Part I of the report.
The significant audit observations and recommendations requiring immediate

action are as follows:

Standards (PFRS) towards a more reliable and fair financial reporting. (Observation No.
2)


2. Certain disclosures applicable to the SBMA as provided for under International

Financial Reporting Standards (IFRS) 7 – Financial Instruments: Disclosures and IFRS 16
– Leases were not included in the Notes to Financial Statements (FSs) impairing the
understandability of the information about the affected accounts, which is one of the
qualitative characteristics of a reliable FS. (Observation No. 3)
We recommended that Management include the applicable disclosures mentioned

under IFRS 7, Financial Instruments – Disclosures (Loans and Receivables) and IFRS 16,
Leases (for Operating Lease-Lessor) for fair presentation of the financial statements.

Standards (PAS) 2 and SBMA internal guidelines on property disposal, thus, resulting to
the misstatement of the Inventories and Maintenance and Other Operating Expenses
(MOOE) accounts in the Financial Statements (FS) and the related disclosures in the FS.
(Observation No. 4)
We recommended that Management instruct the:
a. PPMD with the assistance of the Engineering Department to prepare the annual
inventory and appraisal of impaired inventories for submission to the Accounting
Department; and
b. Accounting Department to prepare the necessary adjusting entries and required

disclosures based on the submitted report.
4. The Investment Property (IP) accounts with carrying amount of ₱5,746,454,227.06

as of year-end were misstated due to a) unverified beginning balance of Investment
Property, Buildings and Investment Property, Port Development Project totaling
₱5,186,126,672.90; b) misclassification of IP-Land under PPE at ₱13,933,376,379.10; and
c) unrecorded lessee’s development commitment by up to ₱337,249,836.29. Likewise, full
disclosure of the accounts in the Notes to the Financial Statements (FS) was not provided
as required under Philippine Accounting Standards (PAS) 40. (Observation No. 5)

books of accounts;

5. Due to inadequate planning, one-time cleansing of Property, Plant and Equipment

(PPE) accounts was incomplete, inconsistent with the guidelines set forth under COA
Circular No. 2020-006, resulting in (a) unverified amounts in the Land Improvements,
Infrastructure Assets, Buildings and Building Structures and Construction in Process
accounts aggregating ₱2,581,177,708.01; (b) unreconciled amount of ₱15,538,956.89
under Other Equipment, Work Animals and Fully Depreciated Equipment (moveable
PPEs); and (c) inclusion of issued semi-expendable property below capitalization threshold
presented in the Financial Statements in the total amount of ₱2,692,631.99 which
overstated both PPE and Retained Earnings accounts by the same amount. (Observation
No. 6)
We recommended Management undertake the following courses of action:
a. Prepare a consolidated Physical Inventory Plan, taking into account among others,
the following:

- identification of resources needed;
- risk assessment and formulation of risk mitigation strategies;
- time bound activities to be executed to attain desired objectives with assigned
accountabilities as specified in COA Circular 2020-006; and
- monitoring and assessment; and
present an accurate and complete inventory of PPEs and reconciliation results by
adopting the guidelines on the one-time cleansing prescribed in the aforementioned
COA Circular; and (ii) draw journal entry voucher (JEV) taking up the necessary
adjusting entries in the books of accounts, if warranted.
noted due to non-observance of the regulations embodied under Circular No. 03-2019 dated
March 8, 2019 of the Government Procurement Policy Board (GPPB), resulting to a high
percentage of negative slippages and eventual delays in project completion. (Observation
No. 7)
a. Establish project monitoring policies stating the specific responsibilities, reporting

requirements and standardized project monitoring tools to properly address gaps
noted in project implementation; and

7. The SBMA may not be able to recover from losses of property and financial
resources due to absence of Management policy on the posting of performance security to
ensure the faithful performance of housing renovations. (Observation No. 8)
We recommend that Management develop policies or include in existing policies

the requirement for the posting of performance bond and monitoring of the construction
work done on housing units to protect the interest of the SBMA.
The other audit observations, together with the recommended courses of action, are
discussed in detail in Part II of the report. These, along with the prior year’s
recommendations not yet or partially acted upon and included in Part III of the report, were
discussed with the officials and staff of that Agency.
We request that the recommended measures be implemented and we would

appreciate receiving an action plan and status report, thru accomplishing the attached
Agency Action Plan and Status of Implementation (AAPSI) form, to be submitted to
the Audit Team within 60 days from receipt of this report, pursuant to Section 91 of the
General Provisions of the General Appropriations Act for Fiscal Year 2021.
We appreciate the invaluable support and cooperation extended to our Audit Team
by the officials and staff of that Agency.
Very truly yours,
OMAR S. ROQUE
Regional Director
cc: President of the Republic of the Philippines
Vice-President
President of the Senate
Speaker of the House of Representatives
Chairperson-Senate Finance Committee
Chairperson-Appropriations Committee
Secretary of the Department of the Budget and Management
Governance commission for Government-Owned or Controlled Corporations
Presidential Management Staff, Office of the President
The Assistant Commissioner, CGS, COA, Quezon City
The Commission Proper, COA, Quezon City
National Library (soft copy)
University of the Philippines Law Center (soft copy)
COA Commission Central Library (soft copy)
Annex A
[Name of the Agency)

AGENCY ACTION PLAN and
STATUS of IMPLEMENTATION
Audit Observations and Recommendations
For the Calendar Year 20XX
As of ____________
Agency Action Plan Reason for Action

Target Partial/Delay/ Taken/
Ref. Person/ Status of
Audit Audit Action Implementation Non- Action
Dept. Date Implementation
Observations Recommendations Plan Implementation, to be
Responsible if applicable Taken
From To
Agency sign-off:
______________________________ _____________________
Name and Position of Agency Officer Date
Note: Status of implementation may either be (a) Fully Implemented; (b) Ongoing; (c) Not implemented; (d)
Partially Implemented; or (e) Delayed
EXECUTIVE SUMMARY
A. Introduction
Section 13 of Republic Act (R.A.) No. 7227 created the corporate body known as the Subic
Bay Metropolitan Authority (SBMA). The SBMA is the operating and implementing arm
of the Government of the Philippines in developing the 67,000-hectare area of Subic Bay
Freeport (SBF) into a self-sustaining industrial, commercial, financial, and investment and
academe center to generate, among others, employment opportunities in and around the
Zone.
The SBMA plays a key role in the national government's efforts to achieve international
competitiveness and provide for its integration with the global economy.
To accomplish this, it shall embark to manage and develop the ship repair and shipbuilding
facilities, container port, as well as the oil storage and refueling stations; attract and
maintain local and foreign investments to promote the economic and social development
of the country primarily in Central Luzon; establish and regulate the operation and
maintenance of utilities, services and infrastructures; operate directly and indirectly
tourism-related activities; and protect the Freeport's forests.
B. Financial Highlights
The financial position and results of operations for CYs 2021 and 2020 are shown below:
(In Thousands of Pesos)

Financial Position Increase/ (Decrease)
2021 2020
Amount %
Total Assets ₱35,665,038 ₱35,541,345 ₱123,693 0.35%
Total Liabilities ₱13,856,957 ₱12,398,606 ₱1,458,351 11.76%
Stockholders’ Equity ₱21,808,081 ₱23,142,739 (₱1,334,658) (5.77%)
Increase/ (Decrease)
Results of Operations 2021 2020
Amount %
Total Revenues ₱ 4,752,974 ₱ 3,788,761 ₱964,213 25.45%
Total Expenses ₱ 2,991,738 ₱ 2,695,180 ₱296,558 11%
Net Assistance / Subsidy ₱ 189,045 ₱ 938,376 (₱749,331) (79.85%)
Net Income after Tax ₱ 1,844,476 ₱ 1,938,227 (₱93,751) (4.84%)
C. Scope of Audit
The audit covered the financial transactions and operations of SBMA for the year ended
December 31, 2021. We conducted our audit in accordance with International Standards of
i
Supreme Audit Institutions (ISSAIs) and we believe that it provided reasonable basis for
the audit results.
The objectives of the audit were to (a) ascertain the level of assurance that may be placed
on management’s assertions on the financial statements; (b) recommend agency
audit recommendations. The thrust areas identified in the audit instructions were audited
on a sampling basis and the significant findings are incorporated in Part II of the report,
itemized as follows:
1. Financial Audit
a. Cash
b. Cash Advances
c. Receivables
d. Inventories
e. Investment Property
f. Property, Plant and Equipment
g. Trust Liabilities
h. Financial Liabilities
2. Other Audit Areas
a. Gender and Development (GAD);

b. Compliance with Tax Laws;
c. Compliance with R.A. No. 8291 or the Government Service Insurance System
(GSIS) Law;
d. Compliance with R.A. No. 9679, Home Development Mutual Fund (HDMF)
Law of 2009; and
e. Compliance with R.A. No. 7875 or the Revised Implementing Rules and
Regulations of the National Health Insurance Act of 2013
f. Policy review on Project Monitoring and Performance Bond
D. Independent Auditor’s Report
We rendered a modified (qualified) opinion on the fairness of presentation of the financial

statements of the Subic Bay Metropolitan Authority as of December 31, 2021 in view of
accounting errors and omissions affecting the different accounts as follows:
1. Non-recognition of receivables due to ineffective process flow of financial

information and vital documents relating to the renewal and pre-termination of lease
and/or sublease agreements, understated Receivables by ₱13.2 million, Service and
Business Income by ₱11 million and Retained Earnings by ₱2.2 million, inconsistent
with the pertinent provisions of the Philippine Financial Reporting Standards (PFRS)
towards a more reliable and fair financial reporting. In addition, disclosures pertaining
to reconciliation of changes in the Allowance for impairment under PFRS 7.16,
ii
income relating to variable lease payments under PFRS 16.90, nature of lessor’s
leasing activities and risks management associated with any rights retained in the
underlying assets under PFRS 16.92 was not made.
2. The Allowance for Impairment on obsolete inventories with carrying amount of

₱7,654,808.07 was not recognized inconsistent with the Philippine Accounting
Standards (PAS) 2 thus, resulting to the misstatement of the Inventories and
Maintenance and Other Operating Expenses (MOOE) accounts in the Financial
Statements (FS) and the related disclosures in the FS; and
3. The Investment Property (IP) accounts with carrying amount of ₱5,746,454,227.06 as

of year-end were misstated due to a) unverified beginning balance of Investment
Property, Buildings and Investment Property, Port Development Project totalling
₱5,186,126,672.90; b) misclassification of IP-Land under PPE at ₱13,933,376,379.10;
and c) unrecorded lessee’s development commitment by up to ₱337,249,836.29.
Likewise, disclosures relating to amounts recognized on profit or loss for rental
income from IP and fair values of IP as required under PAS 40 were not made.
In view of the foregoing deficiencies, we recommended that Management undertake the

following courses of action:
 On Receivables



d. Include the applicable disclosures mentioned under IFRS 7, Financial Instruments

– Disclosures (Loans and Receivables) and IFRS 16, Leases (for Operating Lease-
Lessor) for fair presentation of the financial statements.
 On Inventory
a. direct the PPMD with the assistance of the Engineering Department to prepare the
annual inventory and appraisal of impaired inventories for submission to the
Accounting Department; and
b. direct the Accounting Department to prepare the necessary adjusting entries and
required disclosures based on the submitted report.
iii
 On Investment Property

books of accounts;


E. Summary of Total Suspensions, Disallowances and Charges at year-end
Audit disallowances amounting to ₱12,507,789.56 which are not yet final and executory
remained outstanding as of year-end pursuant to COA Circular No. 2009-006 dated
September 15, 2009. Likewise, audit disallowances prior to the effectivity of the
aforementioned Circular amounting to ₱139,228,850.66 which have become final and
executory through COA Notice of Finality of Decision (NFD) No. 2021-233 dated October
13, 2021 and COA Order of Execution No. 2021-023 dated November 2, 2021 remained
outstanding.
F. Status of Implementation of Prior Years’ Unimplemented Audit

Recommendations
Out of 72 audit recommendations embodied in the Annual Audit Report for CYs 2010 to
2020, 61 were fully implemented, 10 were partially implemented and one was not
implemented.
iv
TABLE OF CONTENTS
Page Nos.
PART I - AUDITED FINANCIAL STATEMENTS 1
 Independent Auditor’s Report
 Statement of Management’s Responsibility

for Financial Statements
 Condensed Statement of Financial Position
 Condensed Statement of Comprehensive Income
 Condensed Statement of Cash Flows
 Statement of Changes in Equity
 Notes to Financial Statements
PART II - AUDIT OBSERVATIONS AND 54

RECOMMENDATIONS
PART III - STATUS OF IMPLEMENTATION OF 110

PRIOR YEARS’ UNIMPLEMENTED AUDIT
RECOMMENDATIONS
PART I – AUDITED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
The Board of Directors

Qualified Opinion
We have audited the financial statements of the Subic Bay Metropolitan Authority
(SBMA), which comprise the statement of financial position as at December 31, 2021, and
the statement of comprehensive income, statement of changes in equity and statement of
cash flows for the year then ended, and notes to financial statements, including a summary
of significant accounting policies.
In our opinion, except for the effects and possible effects of the matters described in the
Bases for Qualified Opinion section of our report, the accompanying financial statements
present fairly, in all material respects, the financial position of the Subic Bay Metropolitan
Authority as at December 31, 2021, and its financial performance and its cash flows for
the year then ended in accordance with the Philippine Financial Reporting Standards
(PFRSs).
Bases for Qualified Opinion
As discussed in Part II of this report, there were material accounting errors and omissions
that affected the fairness of presentation of the accounts in the financial statements as
follows:
1. Non-recognition of receivables due to ineffective process flow of financial

information and vital documents relating to the renewal and pre-termination of lease
and/or sublease agreements, understated Receivables by ₱13.2 million, Service and
Business Income by ₱11 million and Retained Earnings by ₱2.2 million, inconsistent
with the pertinent provisions of the Philippine Financial Reporting Standards (PFRS)
towards a more reliable and fair financial reporting. In addition, disclosures pertaining
to reconciliation of changes in the Allowance for impairment under PFRS 7.16,
income relating to variable lease payments under PFRS 16.90, nature of lessor’s
leasing activities and risks management associated with any rights retained in the
underlying assets under PFRS 16.92 was not made.
2. Non-recognition of Allowance for Impairment on obsolete inventories with carrying

amount of ₱7,654,808.07, inconsistent with the Philippine Accounting Standards
(PAS) 2, resulting in the misstatement of the Inventories and Maintenance and Other
Operating Expenses (MOOE) accounts in the Financial Statements (FS) and the
related disclosures in the FS;
3. Misstatement of the Investment Property (IP) accounts with carrying amount of

₱5,746,454,227.06 as of year-end due to a) unverified beginning balance of
Investment Property, Buildings and Investment Property, Port Development Project
totaling ₱5,186,126,672.90; b) misclassification of IP-Land under PPE at
₱13,933,376,379.10; and c) unrecorded lessee’s development commitment by up to
₱337,249,836.29. Likewise, disclosures relating to amounts recognized on profit or
loss for rental income from IP and fair values of IP as required under PAS 40 were not
made.
We conducted our audits in accordance with International Standards of Supreme Audit

Institutions (ISSAIs). Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are independent of the agency in accordance with the ethical requirements that
are relevant to our audit of the financial statements, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained in sufficient and appropriate to provide a basis for our qualified opinion.
Key Audit Matters
Except for the matters described in the Bases for Qualified Opinion section, we have
determined that there are no other key audit matters to communicate in our report.
Responsibilities of Management and Those Charged with Governance for the

Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with PFRSs, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Those charged with governance are responsible for overseeing the Authority’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not guarantee that an audit conducted in accordance with ISSAIs will
always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
COMMISSION ON AUDIT
By:
MIRASOL B. LIWANAG
Supervising Auditor
May 16, 2022

Condensed Statement of Financial Position
Corporate Operating Budget
As at December 31, 2021
(With Comparative Figures for CY 2020)
Notes 2021 2020

ASSETS
Current Assets
Cash and Cash Equivalents 4 ₱ 531,731 ₱ 619,400
Investments 5 2,453,916 1,121,962
Receivables, Net 6 781,643 1,302,029
Inventories 7 33,956 94,058
Other Current Assets 11 1,385,682 1,169,984
Total Current Assets 5,186,928 4,307,433
Non-Current Assets
Receivables, Net 6 242,828 184,263
Investments 5 1,011,147 1,442,082
Investment Property, Net 8 5,746,454 5,449,402
Property, Plant and Equipment, Net 9 18,637,524 18,760,864
Deferred Tax Asset 10 8,411 0
Other Non-Current Assets 11 4,831,746 5,397,301
Total Non-Current Assets 30,478,110 31,233,912
Total Assets 35,665,038 35,541,345
LIABILITIES
Current Liabilities
Financial Liabilities 12 621,322 1,275,722
Inter-Agency Payables 13 690,712 250,996
Intra-Agency Payables 14 212,069 208,861
Trust Liabilities 15 378,362 257,437
Deferred Credits/Unearned Income 16 383,062 357,615
Provisions 17 248,776 268,316
Other Payables 18 1,136,078 1,001,899
Total Current Liabilities 3,670,381 3,620,846
Non-Current Liabilities
Financial Liabilities 12 4,158,441 4,617,825
Trust Liabilities 15 486,774 449,372
Deferred Credits/Unearned Income 16 4,027,534 3,710,563
Other Payables 18 1,513,827 0
Total Non-Current Liabilities 10,186,576 8,777,760
Total Liabilities 13,856,957 12,398,606
EQUITY
Government Equity 19 20,043,566 20,043,566
Revaluation Surplus 20 31,767 31,767
Retained Earnings/(Deficit) 1,732,748 3,067,406
Total Equity 21,808,081 23,142,739
TOTAL LIABILITIES AND EQUITY ₱ 35,665,038 ₱ 35,541,345
This statement should be read in conjunction with the accompanying notes.

Condensed Statement of Comprehensive Income
Notes 2021 2020
Income
Service and Business Income 21 ₱ 3,682,303 ₱ 3,432,271
Shares, Grants and Donations 22 120 0
Gains 23 1,070,551 356,490
Total Income 4,752,974 3,788,761
Expenses
Personnel Services 24 1,000,145 979,717
Maintenance and Other Operating Expenses 25 531,437 463,972
Financial Expenses 26 89,313 108,318
Non-Cash Expenses 27 1,370,843 1,143,173
Total Expenses 2,991,738 2,695,180
Profit/(Loss) Before Tax 1,761,236 1,093,581
Income Tax Expense/(Benefit) 28 105,805 93,730
Profit/(Loss) After Tax 1,655,431 999,851
Net Assistance/Subsidy/(Financial
Assistance/Subsidy/Contribution) 189,045 938,376
Net Income/(Loss) 1,844,476 1,938,227
Other Comprehensive Income/(Loss) for the Period 0 0
Comprehensive Income/(Loss) ₱ 1,844,476 ₱ 1,938,227
This statement should be read in conjunction with the accompanying notes.

Condensed Statement of Cash Flows
Notes 2021 2020

Cash Flows from Operating Activities
Cash Inflows
Collection of Income/Revenue ₱ 1,250,718 ₱ 1,083,257
Receipt of Assistance/Subsidy 193,456 947,946
Collection of Receivables 1,890,798 1,462,140
Receipt of Inter-Agency Fund Transfers 239,806 232,610
Receipt of Intra-Agency Fund Transfers 510,909 369,110
Trust Receipts 1,638,682 2,768,356
Other Receipts 592,705 484,967
Adjustments 99,418 242,502
Total Cash Inflows 6,416,492 7,590,888
Cash Outflows
Payment of Expenses 1,215,286 1,259,352
Purchase of Inventories 14,605 19,631
Grant of Cash Advances 2,471 6,151
Prepayments 16,135 16,132
Remittance of Personnel Benefit Contributions and Mandatory Deductions 363,613 330,663
Grant of Financial Assistance/Subsidy/Contribution 13,924 10,649
Release of Inter-Agency Fund Transfers 6,191 14,349
Release of Intra-Agency Fund Transfers 1,309,144 4,033,408
Other Disbursements 672 6,716
Adjustments 188,450 115,330
Total Cash Outflows 3,130,491 5,812,381
Net Cash Provided by/(Used in) Operating Activities 3,286,001 1,778,507
Cash Flows from Investing Activities
Cash Inflows
Proceeeds from Sale/Disposal of Property, Plant, and Equipment 4,575 2

Receipt of Interest Earned 37,668 33,077
Proceeds from Matured Investments/Redemption of Long-term
Investments/Return on Investments 3,677,873 4,897,473
Total Cash Inflows 3,720,116 4,930,552
Cash Outflows
Purchase/Construction of Investment Property 0 0
Purchase/Construction of Property, Plant and Equipment 801,715 736,749
Purchase/Acquisition of Investments 5,092,994 4,327,451
Net Cash Provided By/(Used In) Investing Activities (2,174,593 ) (133,648 )
Cash Flows from Financing Activities
Cash Inflows
Proceeds from Incurrence of Financial Liabilities 0 0
Contribution from National Government 0 0
Total Cash Inflows 0 0
Cash Outflows
Payment of Long-Term Liabilities 252,216 592,558
Payment of Interest on Loans and Other Financial Charges 0 0
Restricted Cash and Other Financial Charges 0 0
Payment of Cash Dividends 1,214,886 544,652
Net Cash Provided By/(Used In) Financing Activities (1,467,102 ) (1,137,210 )
Increase/(Decrease) in Cash and Cash Equivalents (355,694 ) 507,649
Effects of Exchange Rate Changes on Cash and Cash Equivalents 29 268,025 (255,641 )
Cash and Cash Equivalents, January 1 619,400 367,392
Cash and Cash Equivalents, December 31 ₱ 531,731 ₱ 619,400
This statement should be read in conjunction with the accompanying notes

Statement of Changes in Equity
Revaluation Surplus Retained Earnings Contributed Capital TOTAL

(Deficit)
Restated Balance at January 1, 2020 ₱ 31,767 ₱ 1,804,271 ₱ 20,043,566 ₱ 21,879,604
Changes in Equity for 2020
Add/(deduct):
Comprehensive Income for the year 0 1,938,227 0 1,938,227
Dividends 0 (1,033,038 ) 0 (1,033,038 )
Other Adjustments 0 357,946 0 357,946
Balance at December 31, 2020 31,767 3,067,406 20,043,566 23,142,739
Changes in Equity for 2021
Add/(deduct):
Comprehensive Income for the year 0 1,844,476 0 1,844,476
Dividends 0 (2,876,879 ) 0 (2,876,879 )
Other Adjustments 0 (302,255 ) 0 (302,255 )
Balance at December 31, 2021 ₱ 31,767 ₱ 1,732,748 ₱ 20,043,566 ₱ 21,808,081
This statement should be read in conjunction with the accompanying notes

Notes to Financial Statements
(With Comparative Figures for December 31, 2020)
In Thousands of Pesos
1. GENERAL INFORMATION/ AGENCY PROFILE
The Financial Statements of the SUBIC BAY METROPOLITAN AUTHORITY were

authorized for issue on January 27, 2022 as shown in the Statement of Management
Responsibility for Financial Statements signed by Atty. Wilma T. Eisma, Chairperson
and Administrator of SBMA.
1.1 General Information
On March 13, 1992, the Philippine Congress passed Republic Act (R.A.) No. 7227,
known as the Bases Conversion and Development Act of 1992, An Act
Accelerating the Conversion of Military Reservations into Other Productive Uses,
Creating the Bases Conversion and Development Authority for this Purpose,
Providing Funds Therefor and for Other Purposes.
Section 13 of R.A. No. 7227 created the corporate body known as the Subic Bay
Metropolitan Authority (SBMA). The SBMA is the operating and implementing
arm of the Government of the Philippines in developing the 67,000 hectares area of
Subic Bay Freeport (SBF) into a self-sustaining industrial, commercial, financial,
and investment and academe center to generate, among others, employment
opportunities in and around the Zone.
The area for development comprises of 13,600 hectares of leasable land (based on
the actual survey made by the DENR) and 53,852 hectares of protected area
covering the Subic Bay Freeport (SBF) or what was the former US Naval facility
in Subic Bay into a self-sustaining tourism, industrial, commercial, financial, and
investment center to generate employment opportunities.
The Subic Bay Metropolitan Authority (SBMA) provides free port incentives, tax
and duty-free privileges and other incentives to duly registered Freeport
Enterprises.
1.2 Status of Operation
The SBMA operates within the secured area of the Subic Bay Freeport Zone
(SBFZ) as the Government Agency mandated to manage the SBFZ. The SBMA
was granted by the Department of Finance (DOF) through its letter dated November
13, 2001 signed by then Secretary Jose Isidro N. Camacho to adopt tax privileges
as follows:
9
Income tax equivalent to five percent (5%) based on its “adjusted gross receipts”
from sources within the zone. For the purpose of evaluation, “adjusted gross
income” refers to gross receipts or revenues, reduced by direct costs and/or
expenses attributable to the conduct of business in which SBMA is engaged into.
The accompanying financial statements have been prepared on a going concern

basis, which contemplate the realization of assets and settlement of liabilities in the
normal course of business.
1.3 Agency Roles
The SBMA plays a key role in the national government's efforts to achieve
international competitiveness and provide for its integration with the global
economy.
To accomplish this, it shall embark to manage and develop the ship repair and
shipbuilding facilities, container port, as well as the oil storage and refueling
stations; attract and maintain local and foreign investments to promote the
economic and social development of the country primarily in Central Luzon;
establish and regulate the operation and maintenance of utilities, services and
infrastructure; operate directly and indirectly tourism-related activities; and protect
the Freeport's forests.
1.4 SBMA Vision
To be the leading ECO-urban Freeport in Southeast Asia
1.5 SBMA Mission
To grow the Freeport to be environmentally sustainable community where locators

are ahead of their competitors and our stakeholders enjoy the highest quality of life.
1.6 Core Values
Malasakit
Excellence
Integrity
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2. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION OF THE
FINANCIAL STATEMENTS
2.1 Basis of Measurement
The financial statements of the SBMA have been prepared on historical cost basis
and they are presented in Philippines Peso (₱), which is the SBMA’s functional and
presentation currency. All amounts are rounded to the nearest Philippine Peso,
except when otherwise indicated. The accompanying financial statements have
been prepared on a going concern basis, which contemplate the realization of assets
and settlement of liabilities in the normal course of business.
2.2 Statement of Compliance
The financial statements have been prepared in compliance with accounting

principles generally accepted in the Philippines as set forth in the Philippine
Financial Reporting Standards (PFRS). PFRS includes statements named PFRS and
Philippine Accounting Standards (PAS) and Philippine Interpretations based on
Interpretations of the International Financial Reporting Interpretations Committee
(IFRIC) issued by the Financial Reporting Standards Council (FRSC).
The accompanying financial statements were prepared in accordance with the

Revised Chart of Accounts (RCA) for Corporate Sector Classified as Commercial
Public Sector Entities (CPSEs) as prescribed under COA Resolution No. 2020-013
dated January 31, 2020, First time adoption of the Revised Chart of Accounts
(RCA) for Government Corporations (GCs) which consist of Government-Owned
or Controlled Corporation (GOCCs), Government Financial Institution (GFIs),
Government Instrumentalities with Corporate Powers (GICPs)/ Government
Corporate Entities (GCEs) and their Subsidiaries, and Water Districts.
The Commission on Audit (COA) required the implementation of the Revised

Chart of Accounts (RCA) and New and Amended Accounting Standards as per
COA Circular No. 2020-002 dated January 28, 2020.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1. Basis of Accountings
The Financial Statements are prepared on an accrual basis in accordance with the
Philippine Financial Reporting Standards (PFRS) and Revised Chart of Accounts
(RCA) for Commercial Public Sector Entities (CPSEs).
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3.2. Consolidation
A. Consolidated Entities/Controlled Entities
The SBMA has a separate financial statement from other entities in which the
SBMA has interest, control and joint management.
B. Interests in Joint Ventures
The Subic Bay Metropolitan Authority has an interest in joint ventures which are
jointly controlled entity, whereby the ventures have a binding arrangement that
establishes joint control over the economic activities of the entity. Subic Bay
Metropolitan Authority recognizes its interest in the joint venture using the equity
method. Under the equity method, investments in joint ventures are carried in the
consolidated statement of financial position at cost plus post acquisition changes in
share of net assets of the joint venture. The statement of financial performance
reflects the share of the results of operations of the joint venture. Where there has
been a change recognized directly in the equity of the joint ventures, the entity
recognizes its share of any changes and discloses this.
The equity method is used in accounting for investments in common stock of

subsidiaries which are controlled, directly or indirectly, by the investor; and
investees where the investment in voting common stock gives the investor the
ability to exercise significant influence over the operating and financial policies of
an investee even though the investor holds 50% or less of the voting stock.
C. Subsidiaries
Subsidiaries are all entities over which SBMA has the power to govern the financial
and operating policies generally accompanying a shareholding of an interest of
more than one half of the voting rights or otherwise has power to govern the
financial and operating policies, and are consolidated.
D. Associates
An associate is an entity, including an unincorporated entity such as a partnership,

over which SBMA has significant influence and that is neither a subsidiary nor an
interest in a joint venture.
Percentages of ownership in investments in shares of common stock of the

following subsidiary and associates are as follows:
Percentage of Ownership
Freeport Service Corporation 100.00
Subic Techno-park 49.99
SBDMC 48.60
Subic Water 20.00
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Percentage of Ownership
BCDA and CDC-SCA DC 33.30
Subic Bay Yacht Club 0.37
Investments in shares of common stocks of Freeport Service Corporation (FSC) are

accounted for under the cost method. Adoption of the equity method of accounting
was deferred since their records were destroyed by fire last January 2004. Also, the
deferral of the use of equity method of accounting was concurred by the
Commission on Audit pending completion of audit of the 2003 financial
transactions and the resolution of the qualification in the audit opinion of FSC`s
2002 financial statements because of the wide disparities between the gross profit
rates of FSC`s business units with the actual gross profit rates of the services being
rendered. The Commission gave an adverse opinion on the financial statements of
FSC for the years that followed rendering the financial statements unreliable.
Although SBMA is able to exercise significant influence over its investments in

SBDMC and SCADC, the cost method is being adopted in accounting for the said
investments. Joint Venture with SBDMC is accounted under the cost method since
agreements between the parties are unique and cannot be treated as an Investment
to be accounted under the equity method. SBDMC actually pays SBMA its Rent
through Leasing Revenue which is computed based on the Property Management
Agreement (PMA) and Master Lease Agreement (MLA).
The investments in shares of common stocks of STEP and Subic Water are
accounted under the equity method.
3.3. Financial instruments
A. Financial Assets
Initial recognition and measurement
Financial assets within the scope of PAS 32-Financial Instruments Recognition and
Measurement are classified as financial assets at fair value through surplus or
deficit, held-to-maturity investments, loans and receivables or available-for-sale
financial assets, as appropriate. The SBMA determines the classification of its
financial assets at initial recognition.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the marketplace (regular way
trades) are recognized on the trade date, i.e., the date that the SBMA commits to
purchase or sell the asset.
The SBMA's financial assets include: cash and short-term deposits; trade and other
receivables; loans and other receivables; quoted and unquoted financial
instruments; and derivative financial instruments.
13
Subsequent measurement
The subsequent measurement of financial assets depends on their classification.
Financial assets at fair value through surplus or deficit
Financial assets at fair value through surplus or deficit include financial assets held
for trading and financial assets designated upon initial recognition at fair value
through surplus and deficit. Financial assets are classified as held for trading if they
are acquired for the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives are also classified as held

for trading unless they are designated as effective hedging instruments. Financial
assets at fair value through surplus or deficit are carried in the statement of financial
position at fair value with changes in fair value recognized in surplus or deficit.
Loans and Receivables
Receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. After initial measurement,
receivables are reported net of allowance for bad debts. A provision for impairment
(allowance for doubtful accounts) is established when there is objective evidence
that SBMA will not be able to collect all amounts to be received. Significant
financial difficulties of the counterparty, probability that the counterparty will enter
bankruptcy or financial reorganization, and default in payments are considered
indicators that the amount to be received is impaired.
The Allowance for Doubtful Accounts is established based at certain percentage

that considers the age of Accounts Receivable. As approved per Board Resolution
No. 14-04-5063 issued on the 22nd day of May 2014, “Revised Policy on Allowance
for Doubtful Accounts”, the following table is used as a basis in determining the
Allowance for Doubtful Accounts.
Revised Policy on Allowance for Doubtful Accounts is as follows:
Age of Accounts Receivable Percentage of Allowance

1-30 days 0%
31-60 days 5%
61-90 days 10%
91-120 days 15%
121-150 days 20%
151-180 days 30%
181 days to 1 year 40%
Over 1 year to 2 years 50%
Over 2 years to 3 years 65%
Over 3 years to 4 years 80%
Over 4 years 100%
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Held-to-maturity
Non-derivative financial assets with fixed or determinable payments and fixed

maturities are classified as held to maturity when the SBMA has the positive
intention and ability to hold it to maturity.
After initial measurement, held-to-maturity investments are measured at amortized

cost using the effective interest method, less impairment. Amortized cost is
calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the effective interest rate. The losses arising
from impairment are recognized in surplus or deficit.
Investment in Peso and Dollar Time Deposits
Investments in Peso and Dollar Time Deposit include time deposits with maturities
of one year or more.
Derecognition
The SBMA derecognizes a financial asset or, where applicable, a part of a financial
asset or part of similar financial assets when:
 The rights to receive cash flows from the asset have expired or is waived
 The SBMA has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without
material delay to a third party; and either: (a) the SBMA has transferred
substantially all the risks and rewards of the asset; or (b) the SBMA has
neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
Impairment of Financial Assets
The SBMA assesses at each reporting date whether there is objective evidence that
a financial asset or a group of financial assets is impaired. A financial asset or a
group of financial assets is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that has occurred after the
initial recognition of the asset (an incurred “loss event”) and that loss event has an
impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated.
Evidence of impairment may include the following indicators:
 The debtors or a group of debtors are experiencing significant financial

difficulty.
 Default or delinquency in interest or principal payments
15
 The probability that debtors will enter bankruptcy or other financial
reorganization
 Observable data indicates a measurable decrease in estimated future cash
flows (e.g. changes in arrears or economic conditions that correlate with
defaults)
Financial Assets carried at amortized cost
For financial assets carried at amortized cost, the SBMA first assesses whether
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not individually
significant. If the SBMA determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether significant or not, it
includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is, or
continues to be, recognized are not included in a collective assessment of
impairment.
If there is objective evidence that an impairment loss has been incurred, the amount
of the loss is measured as the difference between the assets carrying amount and
the present value of estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of the estimated future
cash flows is discounted at the financial asset’s original effective interest rate. If a
loan has a variable interest rate, the discount rate for measuring any impairment
loss is the current effective interest rate. The carrying amount of the asset is reduced
through the use of an allowance account and the amount of the loss is recognized
in surplus or deficit. Loans together with the associated allowance are written off
when there is no realistic prospect of future recovery and all collateral has been
realized or transferred to the SBMA. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an event occurring
after the impairment was recognized, the previously recognized impairment loss is
increased or reduced by adjusting the allowance account. If a future write-off is
later recovered, the recovery is credited to finance costs in surplus or deficit.
B. Financial Liabilities
Initial recognition and measurement
Financial Liabilities are classified as financial liabilities at fair value through

surplus or deficit or loans and borrowings, as appropriate. The entity determines
the classification of its financial liabilities at initial recognition. All financial
liabilities are recognized initially at fair value and, in the case of loans and
borrowings, plus directly attributable transaction costs.
The SBMA’s financial liabilities include trade and other payables, loans and
borrowings etc.
16
Subsequent measurement
The measurement of financial liabilities depends on their classification.
Financial liabilities at fair value through surplus or deficit
Financial liabilities at fair value through surplus or deficit include financial

liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through surplus or deficit.
Financial liabilities are classified as held for trading if they are acquired for the
purpose of selling in the near term. This category includes derivative financial
instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships. Gains or losses on liabilities held for trading are
recognized in surplus or deficit.
Loans and borrowing
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest method. Gains and losses
are recognized in surplus or deficit when the liabilities are derecognized as well as
through the effective interest method amortization process.
Amortized cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the effective interest rate.
Derecognition
A financial liability is derecognized when the obligation under the liability is

discharged or cancelled or expires. When an existing financial liability is replaced
by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in
surplus or deficit.
C. Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each
reporting date is determined by reference to quoted market prices or dealer price
quotations (bid price for long positions and ask price for short positions), without
any deduction for transaction costs.
17
3.4. Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and cash at bank, deposits on call
and highly liquid investments with an original maturity of three months or less,
which are readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value. For the purpose of the consolidated statement
of cash flows, cash and cash equivalents consist of cash and short-term deposits as
defined above, net of outstanding bank overdrafts
3.5. Inventories
Inventory is measured at cost upon initial recognition. To the extent that inventory
was received through non-exchange transactions (for no cost or for a nominal cost),
the cost of the inventory is its fair value at the date of acquisition. Costs incurred
in bringing each product to its present location and conditions are accounted for, as
follows:
 Raw materials: purchase cost using the weighted average cost method
 Finished goods and work in progress: cost of direct materials and labor
and a proportion of manufacturing overheads based on the normal
operating capacity, but excluding borrowing costs.
After initial recognition, inventory is measured at the lower of cost and net
realizable value. However, to the extent that a class of inventory is distributed or
deployed at no charge or for a nominal charge, that class of inventory is measured
at the lower of cost and current replacement cost. Net realizable value is the
estimated selling price in the ordinary course of operations, less the estimated costs
of completion and the estimated costs necessary to make the sale, exchange, or
distribution.
Inventories are recognized as an expense when deployed for utilization or

consumption in the ordinary course of operations of the SBMA. The weighted
average method is being used in accounting for Inventories used in the ordinary
course of business.
The inventories stated in the financial statements are items held for use in the
operation of the agency.
3.6. Miscellaneous Assets and Deferred Charges
Miscellaneous Assets and Deferred Charges includes prepaid insurance expenses

that are paid in advance but not yet incurred, Advance Payments made to
Contractors and Guaranty Deposit. These assets are reported at cost.
18
3.7. Investment Property
Investment properties are measured initially at cost, including transaction costs.

The carrying amount includes the replacement cost of components of an existing
investment property at the time that cost is incurred if the recognition criteria are
met and excludes the costs of day-to-day maintenance of an investment property.
Investment property acquired through a non-exchange transaction is measured at
its fair value at the date of acquisition. Subsequent to initial recognition, investment
properties are measured using the cost model and are depreciated over its estimated
useful life of [number] years. Investment properties are derecognized either when
they have been disposed of or when the investment property is permanently
withdrawn from use and no future economic benefit or service potential is expected
from its disposal. The difference between the net disposal proceeds and the
carrying amount of the asset is recognized in the surplus or deficit in the period of
derecognition. Transfers are made to or from investment property only when there
is a change in use.
The SBMA has implemented the PAS 40 by partial reclassification Investment

Properties that are accounted under Property Plant and Equipment (PPE) account.
Full reclassification will be made after evaluation and identification of the
remaining properties that are currently accounted under Buildings and Structures.
3.8. Property, Plant and Equipment
Recognition
An item is recognized as property, plant, and equipment (PPE) if it meets the

characteristics and recognition criteria as a PPE.
The characteristics of PPE are as follows:
 tangible items;
 are held for use in the production or supply of goods or services, for
rental to others, or for administrative purposes; and
 are expected to be used during more than one reporting period.
An item of PPE is recognized as an asset if:
 It is probable that future economic benefits or service potential

associated with the item will flow to the entity; and
 The cost or fair value of the item can be measured reliably.
Measurement at Recognition
An item recognized as property, plant, and equipment is measured at cost. A PPE

acquired through non-exchange transaction is measured at its fair value as at the
19
date of acquisition. The cost of the PPE is the cash price equivalent or, for PPE
acquired through non-exchange transaction its cost is its fair value as at recognition
date.
Cost includes the following:
 Its purchase price, including import duties and non-refundable purchase

taxes, after deducting trade discounts and rebates;
 expenditure that is directly attributable to the acquisition of the items;
and
 Initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located, the obligation for which an
entity incurs either when the item is acquired, or as a consequence of
having used the item during a particular period for purposes other than
to produce inventories during that period.
Measurement after Recognition
After recognition, all property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses.
When significant parts of property, plant and equipment are required to be replaced
at intervals, the SBMA recognizes such parts as individual assets with specific
useful lives and depreciates them accordingly. Likewise, when a major
repair/replacement is done, its cost is recognized in the carrying amount of the plant
and equipment as a replacement if the recognition criteria are satisfied.
All other repair and maintenance costs are recognized as expense in surplus or
deficit as incurred.
Depreciation
Each part of an item of property, plant, and equipment with a cost that is significant
in relation to the total cost of the item is depreciated separately. The depreciation
charge for each period is recognized as expense unless it is included in the cost of
another asset.
The depreciation charge for each period is recognized as expense unless it is

included in the cost of another asset.
Depreciation Method
The straight-line method of depreciation is adopted unless another method is more

appropriate for agency operation.
20
Estimated Useful Life
The SBMA uses the Schedule on the Estimated Useful Life of PPE by classification
under COA Circular No. 2003-007.
The SBMA uses a residual value equivalent to at ten percent (10%) of the cost of
the PPE.
Impairment
An asset’s carrying amount is written down to its recoverable amount, or

recoverable service amount, if the asset’s carrying amount is greater than its
estimated recoverable service amount.
Recognition of impairment is deferred pending upon identification of the fair

market value (FMV) of SBMA’s PPE. The SBMA, in its 2018 Annual Budget has
already included the engagement of an independent appraiser to identify the FMV
of SBMA properties to be able to identify any impairment, if any.
De-recognition
The SBMA derecognizes items of property, plant and equipment and/or any
significant part of an asset upon disposal or when no future economic benefits or
service potential is expected from its continuing use. Any gain or loss arising on
de-recognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the surplus or deficit
when the asset is derecognized.
3.9. Impairment of Non-Financial Assets
At each reporting date, the SBMA assesses whether there is an indication that an
asset may be impaired. If any indication exists, or when annual impairment testing
for an asset is required, the SBMA estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs to sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that were largely independent of
those from other assets or groups of assets.
Where the carrying amount of an asset or the cash-generating unit (CGU) exceeds
its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows were discounted to their
present value using a discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining fair value
less costs to sell, recent market transactions were taken into account, if available. If
no such transactions can be identified, an appropriate valuation model is used.
21
For assets, an assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or may
have decreased. If such indication exists, the SBMA estimates the asset’s or cash-
generating unit’s recoverable amount.
A previously recognized impairment loss is reversed only if there has been a change
in the assumptions used to determine the asset’s recoverable amount since the last
impairment loss was recognized. The reversal is limited so that the carrying amount
of the asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in surplus or
deficit.
Impairment of non-cash-generating assets
The SBMA assesses at each reporting date whether there is an indication that a non-
cash-generating asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the SBMA estimates the asset’s
recoverable service amount. An asset’s recoverable service amount is the higher of
the non-cash generating asset’s fair value less costs to sell and its value in use.
Where the carrying amount of an asset exceeds its recoverable service amount, the
asset is considered impaired and is written down to its recoverable service amount.
The SBMA classifies assets as cash-generating assets when those assets were held
with the primary objective generating a commercial return. Therefore, non-cash
generating assets would be those assets from which the SBMA does not intend (as
its primary objective) to realize a commercial return.
3.10. Intangible Assets
Recognition and Measurement
Intangible assets are recognized when the items are identifiable non-monetary
assets without physical substance; it is probable that the expected future economic
benefits or service potential that are attributable to the assets will flow to the entity;
and the cost or fair value of the assets can be measured reliably.
Intangible assets acquired separately are initially recognized at cost.
If payment for an intangible asset is deferred beyond normal credit terms, its cost
is the cash price equivalent. The difference between this amount and the total
payments is recognized as interest expense over the period of credit unless it is
capitalized in accordance with the capitalization treatment permitted in PPSAS 5,
Borrowing Costs
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Recognition of an Expense
Expenditure on an intangible item is recognized as an expense when it is incurred

unless it forms part of the cost of an intangible asset that meets the recognition
criteria of an intangible asset.
Subsequent Measurement
The useful life of the intangible assets is assessed as either finite or indefinite. An
intangible asset with a finite life is amortized over its useful life.
The straight-line method is adopted in the amortization of the expected pattern of
consumption of the expected future economic benefits or service potential.
An intangible asset with indefinite useful lives was not be amortized.
Intangible assets with an indefinite useful life or an intangible asset not yet available
for use were assessed for impairment whenever there is an indication that the asset
may be impaired.
The amortization period and the amortization method, for an intangible asset with
a finite useful life, were reviewed at the end of each reporting period. Changes in
the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset were considered to modify the amortization period
or method, as appropriate, and were treated as changes in accounting estimates. The
amortization expense on an intangible asset with a finite life is recognized in surplus
or deficit as the expense category that is consistent with the nature of the intangible
asset.
Gains or losses arising from derecognition of an intangible asset were measured as

the difference between the net disposal proceeds and the carrying amount of the
asset and were recognized in the surplus or deficit when the asset is derecognized.
3.11. Provisions
Provisions were recognized when the SBMA has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits or service potential will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
Where the SBMA expects some or all of a provision to be reimbursed, for example,
under an insurance contract, the reimbursement is recognized as a separate asset
only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the statement of financial

performance net of any reimbursement. Provisions were reviewed at each reporting
date, and adjusted to reflect the current best estimate. If it is no longer probable that
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an outflow of resources embodying economic benefits or service potential will be
required to settle the obligation, the provisions were reversed.
Contingent Liabilities
The SBMA does not recognize a contingent liability, but discloses details of any
contingencies in the notes to the financial statements, unless the possibility of an
outflow of resources embodying economic benefits or service potential is remote.
Contingent Assets
The SBMA does not recognize a contingent asset, but discloses details of a possible
asset whose existence is contingent on the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of the [Name of the
Entity] in the notes to the financial statements. Contingent assets were assessed
continually to ensure that developments were appropriately reflected in the
financial statements. If it has become virtually certain that an inflow of economic
benefits or service potential will arise and the asset’s value can be measured
reliably, the asset and the related revenue are recognized in the financial statements
of the period in which the change occurs.
3.12. Revenue from non-exchange transactions
Recognition and Measurement of Assets from Non-Exchange Transactions
An inflow of resources from a non-exchange transaction, other than services in

kind, that meets the definition of an asset were recognized as an asset if the
following criteria were met:
 It is probable that the future economic benefits or service potential

associated with the asset will flow to the entity; and
 The fair value of the asset can be measured reliably.
An asset acquired through a non-exchange transaction is initially measured at its

fair value as at the date of acquisition.
Recognition Revenue from Non-Exchange Transactions
An inflow of resources from a non-exchange transaction recognized as an asset is

recognized as revenue, except to the extent that a liability is also recognized in
respect of the same inflow.
As SBMA satisfies a present obligation recognized as a liability in respect of an

inflow of resources from a non-exchange transaction recognized as an asset, it
reduces the carrying amount of the liability recognized and recognizes an amount
of revenue equal to that reduction.
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Measurement of Revenue from Non-Exchange Transactions
Revenue from non-exchange transactions is measured at the amount of the increase

in net assets recognized by the entity, unless a corresponding liability is recognized.
Measurement of Liabilities on Initial Recognition from Non-Exchange

Transactions
The amount recognized as a liability in a non-exchange transaction is the best

estimate of the amount required to settle the present obligation at the reporting date.
Gifts and Donations
The SBMA recognizes assets and revenue from gifts and donation when it is
probable that the future economic benefits or service potential will flow to the entity
and the fair value of the assets can be measured reliably.
Goods in-kind were recognized as assets when the goods were received, or there is
a binding arrangement to receive the goods. If goods in-kind were received without
conditions attached, revenue is recognized immediately. If conditions were
attached, a liability is recognized, which is reduced and revenue recognized as the
conditions were satisfied.
On initial recognition, gifts and donations including goods in-kind were measured
at their fair value as at the date of acquisition, which were ascertained by reference
to an active market, or by appraisal. An appraisal of the value of an asset is normally
undertaken by a member of the valuation profession who holds a recognized and
relevant professional qualification. For many assets, the fair value was ascertained
by reference to quoted prices in an active and liquid market.
Transfers
The SBMA recognizes an asset in respect of transfers when the transferred

resources meet the definition of an asset and satisfy the criteria for recognition as
an asset, except those arising from services in-kind.
Services in-Kind
Services in-kind were not recognized as asset and revenue considering the
complexity of the determination of and recognition of asset and revenue and the
eventual recognition of expenses.
Transfers from other government entities
Revenues from non-exchange transactions with other government entities and the
related assets were measured at fair value and recognized on obtaining control of
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the asset (cash, goods, services and property) if the transfer is free from conditions
and it is probable that the economic benefits or service potential related to the asset
will flow to the SBMA and can be measured reliably.
3.13. Revenue from Exchange transactions
Measurement of Revenue
Revenue was measured at the fair value of the consideration received or receivable.
Rendering of Services/ Various Revenue
The SBMA recognizes revenue from rendering of services derived mainly from
leasing of land and buildings, seaport and airport operation, tourism, and from other
various services being rendered by the agency to attend to the needs of the locators,
residents and other parties in their conduct of business inside the Freeport like
medical services, equipment, furniture and fixtures rentals, PPMD services,
regulatory services etc.
Interest Income
Interest income is accrued using the effective yield method. The effective yield
discounts estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount. The method applies this yield to the
principal outstanding to determine interest income each period.
3.14. Leases
Operating Lease
Leases in which the SBMA does not transfer substantially all the risks and benefits
of ownership of an asset are classified as operating leases. Initial direct costs
incurred in negotiating an operating lease are added to the carrying amount of the
leased asset and recognized over the lease term.
Rent received from an operating lease is recognized as income on a straight-line

basis over the lease term. Contingent rents are recognized as revenue in the period
in which they are earned.
3.15. Revenue and Expense Recognition
The modified accrual basis of accounting for income and expenses is being adopted.
Interest Income on past due Accounts Receivable and Bank Time Deposits are
taken up as income upon collection.
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Revenues are derived mainly from leasing of land and buildings, seaport and airport
operation, tourism, and from various services being rendered by the agency to
attend to the needs of the locators, residents and other parties in their conduct of
business inside the Freeport like medical services, equipment, furniture and fixtures
rentals, PPMD services, regulatory services etc.
3.16. Borrowing Costs
The benchmark treatment is used by the SBMA in the recognition of borrowing

costs pertaining to loans borrowed. Under the benchmark treatment, borrowings
costs are recognized as expense in the period in which they were incurred,
regardless of how the borrowings were applied.
3.17. Employee Benefits
The employees of the SBMA are member of the Government Service Insurance
System (GSIS), which provides life and retirement insurance coverage. The
SBMA recognizes the undiscounted amount of short-term employee benefits, like
salaries, wages, bonuses, allowance, etc., as expense unless capitalized, and as a
liability after deducting the amount paid.
The SBMA recognizes expenses for accumulating compensated absences

(Vacation Leave and Sick Leave) Non-accumulating compensated absences, like
Special Leave Privileges (SLP), are not recognized.
3.18. Dividends
In compliance with the Republic Act (R.A.) No. 7656 which was approved on
November 3, 1993, SBMA declares and remits dividends under certain conditions
to the National Government and for other purposes. The computation and
declaration thereof in the Financial Report was based on the Revised Implementing
Rules and Regulation (IRR) of R.A. No. 7656.
3.19. Changes in accounting policies and estimates
The SBMA recognizes the effects of changes in accounting policy retrospectively.

The effects of changes in accounting policy were applied prospectively if
retrospective application is impractical.
The SBMA recognizes the effects of changes in accounting estimates prospectively

by including in surplus or deficit. The SBMA correct material prior period errors
retrospectively in the first set of financial statements authorized for issue after their
discovery by:
 Restating the comparative amounts for prior period(s) presented in which

the error occurred; or
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 If the error occurred before the earliest prior period presented, restating the
opening balances of assets, liabilities and net assets/equity for the earliest
prior period presented.
3.20. Foreign currency transactions
Transactions in foreign currencies were initially recognized by applying the spot

exchange rate between the function currency and the foreign currency at the
transaction.
At each reporting date:
 Foreign currency monetary items were translated using the closing rate;
 Nonmonetary items that were measured in terms of historical cost in a
foreign currency were translated using the exchange rate at the date of the
transaction; and
 Nonmonetary items that were measured at fair value in a foreign currency
were translated using the exchange rates at the date when the fair value was
determined.
Exchange differences arising (a) on the settlement of monetary items, or (b) on

translating monetary items at rates different from those at which they were
translated on initial recognition during the period or in previous financial
statements, were recognized in surplus or deficit in the period in which they arise,
except as those arising on a monetary item that forms part of a reporting entity’s
net investment in a foreign operation.
The peso equivalent of dollar denominated transactions is booked at the Philippine

Dealing System (PDS) reference rate at transaction date. Any difference in
exchange rate between two related transactions for operations is charged to profit
or loss on foreign exchange while differences in exchange rate on transactions
pertaining to capital outlays is included in the cost of the asset up to the amount of
lower of replacement cost and the amount recoverable from the use or sale of the
asset. All foreign currency monetary items (Cash, Account Receivable, Loan
Payables, Security Deposit) are revalued at the closing rate at the end of the month.
3.21. Related parties
The SBMA regards a related party as a person or an entity with the ability to exert
control individually or jointly, or to exercise significant influence over the person
or an entity, or vice versa. Members of key management are regarded as related
parties.
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3.22. Measurement uncertainty
The preparation of financial statements in conformity with the RCA for GBEs
requires management to make estimates and assumptions that affect the reporting
amounts of assets and liabilities, and disclosure of contingent assets and liabilities,
at the date of the financial statements and the reported amounts of the revenues and
expenses during the period. Items requiring the use of significant estimates include
significant estimates like the useful life of capital assets, rates for amortization,
impairment of assets, etc.
Estimates were based on the best information available at the time of preparation
of the financial statements and were reviewed annually to reflect new information
as it becomes available. Measurement uncertainty exists in these financial
statements. Actual results could differ from these estimates.
4. CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents 2021 2020

Cash on Hand
Cash Collecting Officer ₱536 ₱9,720
Petty Cash 378 378
Total Cash on Hand 914 10,098
Cash in Bank-Local Currency

Cash in Bank-Local Currency 152,382 147,322
Cash in Bank-Local Currency, Savings Account 101,945 224,359
Total Cash in Bank-Local Currency 254,327 371,681
Cash in Bank-Foreign Currency

Cash in Bank-Foreign Currency, Savings Account 276,490 237,621
Total Cash in Bank-Foreign Currency 276,490 237,621
Total Cash and Cash Equivalents ₱531,731 ₱619,400
The depository banks of the SBMA are Land Bank of the Philippines (LBP),
Development Bank of the Philippines (DBP) and United Coconut Planters Bank
(UCPB).
Cash in Bank accounts are Peso and Dollar Current and Savings deposits accounts,
Time deposits with maturities of less than one year and Telegraphic transfer accounts.
Cash on Hand are Petty Cash Funds maintained by Petty Cash custodians of SBMA
and other Departments that have petty cash assignments. Likewise, Cash on Hand that
29
pertains to collections that remains undeposited at the end of the reporting period and
change funds of cashiers are included as part of Cash on Hand.
5. INVESTMENTS
This account consists of equity Investment of SBMA on the following Subic Bay
Freeport registered companies:
Investments 2021 2020

Current
Investments in Time Deposits
Investments in Time Deposits-Foreign Currency ₱1,559,604 ₱676,122
Investments in Time Deposits-Local Currency 894,312 445,840
Total Investments in Time Deposits 2,453,916 1,121,962
Total Current 2,453,916 1,121,962
Non-Current
Investments in Time Deposits
Investments in Time Deposits-Foreign Currency 652,453 1,106,709
Total Investments in Time Deposits 652,453 1,106,709
Investments in Joint Ventures

Investments in Joint Ventures 375,833 352,512
Allowance for Impairment - Investments in Joint
Ventures (17,139) (17,139)
Total Investments in Joint Ventures 358,694 335,373
Investment in Subsidiaries
Investments in Subsidiaries 5,999 5,999
Allowance for Impairment-Investments in Subsidiaries (5,999) (5,999)
Total Investment in Subsidiaries 0 0
Total Non-Current 1,011,147 1,442,082
Total Investments ₱3,465,063 ₱2,564,044
The winding up of the Freeport Service Corporation (FSC) corporate affairs started in
August 2010 and its entire operation was dormant since September 26, 2010. All FSC
employees were retrenched and paid corresponding separation pays. All FSC managed
properties and facilities were turned over and operated to/by SBMA. SBMA likewise
30
took over FSC’s current sub leases and directly collects the sublease rentals as payment
of FSC’s unpaid obligations to SBMA until September 30, 2012. Beginning October
1, 2012, all of FSC’s sub leases were transferred to SBMA as direct leases. FSC’s
movable properties were also turned over to SBMA for safekeeping and proper
disposition.
The SBMA recorded a 100% Allowance for Impairment Loss for its investment in FSC
due to its non-operational status since 2010. No future return on investment is expected
from SBMA’s investment in FSC. Likewise, an Allowance for Impairment Loss was
recorded for SBMA’s investment in SBYC based on the decline in value of SBYC
shares as reflected in SBYC’s Financial Statement for CY 2017.
Investments in time deposit are placements with the Land Bank of the Philippines
(LBP) with maturities of more than one year.
6. RECEIVABLES
Receivables 2021 2020

Current
Loans and Receivable Accounts
Accounts Receivable ₱101,591 ₱114,784
Allowance for Impairment-Accounts
Receivable (16,194) (18,949)
Interests Receivable 118,675 194,668
Receivable-Collecting Banks/Agents 2,045 955
Total Loans and Receivable Accounts 206,117 291,458
Lease Receivables
Operating Lease Receivable 377,134 434,578
Allowance for Impairment-Operating Lease
Receivable (92,689) (101,113)
Total Lease Receivables 284,445 333,465
Inter-Agency Receivables
Due from National Government Agencies 141,664 526,905
Total Inter-Agency Receivables 141,664 526,905
Other Receivables
Due from Non-Government
Organizations/People's Organizations 478 478
Due from Officers and Employees 6,486 6,498
Other Receivables 2,213 2,413
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Receivables-Disallowances/Charges 140,240 140,812
Total Other Receivables 149,417 150,201
Total Current 781,643 1,302,029
Non-Current
Loans and Receivable Accounts
Accounts Receivable 1,041,986 1,000,803
Allowance for Impairment-Accounts
Receivable (1,013,396) (973,222)
Total Loans and Receivable Accounts 28,590 27,581
Lease Receivables
Operating Lease Receivable 3,785,818 3,438,059
Allowance for Impairment-Operating Lease
Receivable (3,581,837) (3,288,070)
Total Lease Receivables 203,981 149,989
Other Receivables
Other Receivables 10,257 6,693
Total Other Receivables 10,257 6,693
Total Non-Current 242,828 184,263
Total Receivables ₱1,024,71 ₱1,486,292
Trade Receivables with age 360 days and below are classified as Current Trade
Receivables while those with age over one year are reported under Non-Current Trade
Receivables.
Trade Receivables- Non-Current includes the Receivable from the former SBMA
Treasurer for the cash (₱322, 296.18 and $25,315.67) which were stolen in a robbery
that occurred in the Treasury Department in November 2005.
Non-Trade Current Receivables includes Due from BIR, DBM for procurement, Due
from GOCC-GSIS/SSS/Pag-IBIG/PHIC, Advances Officers and Employees and
Receivables Treasurer while Non-Trade Non-Current Receivables includes Interest
Receivables from Time Deposits, Bonds, Receivables from NGO/PO’s and
Receivables from Officers, Employees and former Board of Directors.
The Airport Navigational Equipment shall be procured through the Procurement

Services (PS) of the Department of Budget and Management (DBM) in the amount of
32
₱502,211,110.00, this amount is included as a non-trade receivable from DBM and an
obligation to the DBM in the SBMA books of accounts
The penalty on past due accounts are being recorded as income upon collection.
7. INVENTORIES
Inventories 2021 2020

Inventory Held for Sale
Merchandise Inventory ₱0 ₱0
Total Inventory Held for Sale 0 0
Inventory Held for Distribution

Medical, Dental and Laboratory Supplies for
Distribution 10,413 7,168
Total Inventory Held for Distribution 10,413 7,168
Inventory Held for Consumption

Office Supplies Inventory 6,370 17,027
Accountable Forms, Plates and Stickers Inventory 1,902 1,531
Fuel, Oil and Lubricants Inventory 1,202 15,089
Other Supplies and Materials Inventory 14,069 53,243
Total Inventory Held for Consumption 23,543 86,890
Total Inventories ₱33,956 ₱94,058
8. INVESTMENT PROPERTY
Investment Property 2021 2020

Land and Building
Investment Property, Buildings ₱13,903,176 ₱8,289,104
Accumulated Depreciation-Investment Property,
Buildings (8,156,722) (2,839,702)
Total Land and Building 5,746,454 5,449,402
Total Investment Property ₱5,746,454 ₱5,449,402
An ongoing reconciliation is currently being made by the Accounting Department and

the Land and Asset Development Department (LADD) to reconcile the recorded land,
buildings, building improvements against the physical inventory being made by the
LADD.
33
On the other hand, reconciliation of accounting records against the actual physical
inventory of the Procurement and Property Management Department (PPMD) is also
on going. These include furniture, fixtures and other equipment.
The SBMA has made initial action to reinstate the assets’ value to its realizable amount/
fair market value, recognize impairment if any and assure the reliability of the amounts
presented in the Statement of Financial Position. The SBMA, in its 2021 Annual
Budget has already included the engagement of an independent appraiser to identify
the fair value of SBMA fixed assets.
9. PROPERTY PLANT AND EQUIPMENT, NET
Property, Plant and Equipment 2021 2020

Land
Land ₱14,982,125 ₱14,982,125
Total Land 14,982,125 14,982,125
Land Improvements
Other Land Improvements 1,072,509 897,829
Accumulated Depreciation-Other Land
Improvements (819,716) (791,212)
Total Land Improvements 252,793 106,617
Infrastructure Assets
Road Networks 1,561,971 1,551,805
Accumulated Depreciation-Road Networks (1,172,674) (1,096,733)
Airport Systems 1,487,894 1,487,894
Accumulated Depreciation-Airport Systems (1,323,700) (1,289,894)
Parks, Plazas and Monuments 4,297 4,297
Accumulated Depreciation-Parks, Plazas and
Monuments (3,731) (3,411)
Total Infrastructure Assets 554,057 653,958
Buildings and Other Structures

Buildings 40,477 37,977
Accumulated Depreciation-Buildings (27,702) (24,276)
Other Structures 5,290,726 10,902,903
Accumulated Depreciation-Other Structures (4,714,707) (9,761,826)
Total Buildings and Other Structures 588,794 1,154,778
Machinery and Equipment
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Office Equipment 801 801
Accumulated Depreciation-Office Equipment (359) (250)
Information and Communication Technology
Equipment 208,232 204,544
Accumulated Depreciation-Information and
Communication Technology Equipment (124,835) (98,056)
Airport Equipment 64,069 37,996
Accumulated Depreciation-Airport Equipment (38,307) (34,197)
Communication Equipment 212,486 207,902
Accumulated Depreciation-Communication
Equipment (63,802) (44,952)
Disaster Response and Rescue Equipment 1,468 1,468
Accumulated Depreciation-Disaster Response and
Rescue Equipment (1,395) (1,322)
Military, Police and Security Equipment 20,067 20,067
Accumulated Depreciation-Military, Police and
Security Equipment (2,419) (521)
Medical Equipment 21,027 20,882
Accumulated Depreciation-Medical Equipment (4,135) (2,660)
Electrical Equipment 2,460 2,460
Accumulated Depreciation-Electrical Equipment (2,347) (2,214)
Other Machinery and Equipment 169,052 145,259
Accumulated Depreciation-Other Machinery and
Equipment (47,647) (34,248)
Total Machinery and Equipment 414,416 422,959
Transportation Equipment
Motor Vehicles 224,394 116,598
Accumulated Depreciation-Motor Vehicles (63,656) (33,224)
Watercrafts 524,986 524,986
Accumulated Depreciation-Watercrafts (493,308) (466,651)
Total Transportation Equipment 192,416 141,709
Furniture, Fixtures and Books

Furniture and Fixtures 5,004 4,676
Accumulated Depreciation-Furniture and Fixtures (1,079) (644)
Total Furniture, Fixtures and Books 3,925 4,032
Heritage Assets
Works of Arts and Archeological Specimens 3,517 3,517
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Total Heritage Assets 3,517 3,517
Other Property, Plant and Equipment

Work/Zoo Animals 2,624 6,086
Accumulated Depreciation-Work/Zoo Animals (589) 0
Other Property, Plant and Equipment 1,685,882 1,690,457
Accumulated Depreciation-Other Property, Plant
and Equipment (1,525,616) (1,525,615)
Total Other Property, Plant and Equipment 162,301 170,928
Construction in Progress
Construction in Progress-Land Improvements 1,113,490 768,629
Construction in Progress-Buildings and Other
Structures 369,690 351,613
Total Construction in Progress 1,483,180 1,120,242
Total Property, Plant and Equipment ₱18,637,524 ₱18,760,864
10. DEFERRED TAX ASSETS
Deferred Tax Assets 2021 2020

Deferred Tax Assets
Deferred Tax Assets ₱9,718 ₱0
Application of Advances for the AY 2017 (1,307) 0
Total Deferred Tax Assets ₱8,411 ₱0
Deferred tax asset refers to advances from customer received during the year that are
reported as part of taxable income in the current year.
11. OTHER ASSETS
Other Assets 2021 2020

Current
Advances
Advances to Special Disbursing Officer ₱826 ₱0
Total Advances 826 0
Deposits
Guaranty Deposits 3,527 3,527
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Total Deposits 3,527 3,527
Prepayments
Advances to Contractors/Sub-Contractors 129,007 197,655
Prepaid Insurance 5,442 4,349
Prepaid Registration 92 94
Total Prepayments 134,541 202,098
Restricted Fund
Restricted Fund 1,246,788 964,359
Total Restricted Fund 1,246,788 964,359
Total Current 1,385,682 1,169,984
Non-Current
Restricted Fund
Restricted Fund 4,831,746 5,397,301
Total Restricted Fund 4,831,746 5,397,301
Total Other Assets ₱6,217,428 ₱6,567,285
Other Assets includes funds held in trust by the SBMA such as Security Deposits and
Advance Rental paid by Locators and Residents, SBMA collection of the 2% LGU
share from the 5% tax paid by SBF Registered enterprises that are for distribution to
the LGUs around SBMA, fund transfer from the DOST (ICTO-ASTI) for the National
Government Data Center (NGDC) project of the DOST and E-Konek t`rust fund for
the BOC and SBMA Seaport Fees paid through the LBP.
Prepayments include prepaid expenses for insurance, licenses, subscriptions and

registrations that are subject to regular monthly amortization as expense when incurred.
The Advances to Contractors are for project mobilization or as required in the contract.
These amounts are for recoupment against their claims to SBMA for the succeeding
periods.
Deposits covers guarantee deposits made to Subic Enerzone to guaranty installation of

transformers, power lines and power accounts of SBMA.
37
12. FINANCIAL LIABILITIES
Financial Liabilities 2021 2020

Current
Payables
Accounts Payable ₱350,506 ₱986,015
Due to Officers and Employees 10,946 12,920
Interest Payable 15,463 20,944
Indemnities Payable 502 0
Total Payables 377,417 1,019,879
Bills/Bonds/Loans Payable
Loans Payable-Foreign 243,905 255,843
Total Bills/Bonds/Loans Payable 243,905 255,843
Total Current 621,322 1,275,722
Non-Current
Bills/Bonds/Loans Payable
Loans Payable-Foreign 4,158,441 4,617,825
Total Bills/Bonds/Loans Payable 4,158,441 4,617,825
Total Financial Liabilities ₱4,779,763 ₱5,893,547
The Payables account includes various obligations to suppliers, contractors and

personnel. The obligations incurred are payables for such items of MOOE, Capital
Expenditures, (Capex) and Personnel Services (PS). Unpaid Guarantee Fees for the
current year are also reported in this section of the statement of financial position.
Following Legal Cases before the Courts which are probable:
 The SBMA had a contingent asset amounting to ₱10,000.00, Case title SBMA
VS Philippine Negrito Handcraft Store & Food Center with Civil Case No.
7624-MTCC, Branch 2 Olongapo City, Civil Case No. 122-0-15 RTC Branch
72, Olongapo City.
 Contingent liability amounting to ₱29,402,500.00, Murami Subic Trading Corp.
VS SBMA with Civil Case No. 146-0-2012 RTC Branch 72, Olongapo City.
CA-G.R. CV No. 101795 Court of Appeals.
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 Liability amounting to ₱501,561.15 (451,561.15 actual damages 50,000.00
attorney’s fee). Raymund C. Ramos VS SBMA, with Civil Case No. 1420-15
RTC 72, Olongapo City.
As part of 2017 GAA, the SBMA received a total of ₱553,000,000.00 from the National
Government under SARO-BMB-C-17-0007292 dated May 22, 2017, SARO-BMB-C-
17-0013276 and SARO-BMB-C-17-0013277 dated August 25, 2017. Said SARO was
released to the SBMA through NCA-BMB-C-17-0022062 and NCA-BMB-C-17-
0022063 amounting to ₱57,185,000.00 (Equity) and ₱495,815,000.00 (Infrastructure
Projects of SBIA), respectively.
The 2018 GAA included SBMA subsidy under SARO No. BMB-C-18-0006478 in the
amount of ₱530,000,000.00 for SBMA’s various Infrastructure Projects. On the other
hand, the SBMA was granted National Government Subsidy for the years 2019 and
2020 amounting to ₱459,700,000.00 and ₱770,818,000.00, respectively under SARO
Nos. SARO No. BMB-C-19-0005016, SARO No. BMB-C-20-0000869 and SARO No.
BMB-C-20-0015110. Finally, the SBMA was granted National Government Subsidy
for the year 2021 amounting to ₱601,668,000.00 under SARO NO.s SARO BMB-C-
21-0000163 and SARO BMB-C-21-0008178.
List of On-going Projects under GAA 2018 and 2019

Other Executive Offices
GOCC: SUBIC BAY METROPOLITAN AUTHORITY
Fund: For Subsidy
As of December 31, 2021
Contract
Source of Funds Project Title Balance
Amount
Corporate Funded Rehabilitation of Subic Covered
Court ₱5,558 ₱556
Corporate Funded Additional Works Rehabilitation of
Subic Covered Court
41,835 4,183
Corporate Funded Additional Works Rehabilitation of
SBECC
44,113 4,411
Corporate Funded Construction of CHAD and BOD
Offices 11,130 1,143
Corporate Funded Renovation of Bldg. 657
14,111 14,111
Corporate Funded Rehabilitation of Slope at Aparri
Road 73,728 15,208
Corporate Funded Construction of Housing Sentries
6,152 0.00
Corporate Funded Fitness Center 4,291 0.00
39
Contract
Source of Funds Project Title Balance
Amount
Corporate Funded Construction of Building 71
23,899 12,991
Corporate Funded Rehabilitation of Mt. Sta. Rita
Communication Facility
5,985 3,736
Corporate Funded Perimeted Fence (Kalaklan to
Kalayaan) 69,703 4,217
Corporate Funded Rehabilitation of Perimeter Road
52,901 16,270
Sub-Total 353,406 76,826
National Construction of Magsaysay Bridge
Government
Funded 337,095 252,762
National Goldridge Construction and
Government Development Corporation
Funded 96,369 5,456
National NSD Road Rehabilitation Network
Government Phase 2
Funded 82,659 2,881
National NSD Road Rehabilitation Network
Government Phase 3
Funded 289,007 132,788
National Road Rehabilitation Project 2016
Government
Funded 79,316 1,414
Government
Funded 236,602 75,268
Government
Funded 282,127 43,454
Government
Funded 192,670 113,206
Government
Funded 169,010 124,434
Sub-Total 1,764,855 751,663
Total ₱2,118,261 ₱828,489
Multiyear projects for GAA 2019 and 2020 (NSD Road Rehabilitation phase 3 and
Construction of Magsaysay Bridge) are reflected in total Contract Cost.
40
12.1. Loans Payables
This account represents drawdowns from the following bilateral lending

institutions net of repayments:
Loan Payables 2021 2020

Current
Loan Payable - JBIC/OECF I
2.50% p.a. (Category A - Consulting) and 2.10% p.a.
(Category B - Civil Works) ₱17,174 ₱18,014
Loan Payable - JBIC/OECF II
(Category B - Civil Works) 226,731 237,829
Total Current 243,905 255,843
Non-Current
Loan Payable - JBIC/OECF I
(Category B - Civil Works) 77,281 99,078
Loan Payable - JBIC/OECF II
(Category B - Civil Works) 4,081,160 4,518,747
Grand Total ₱4,402,346 ₱4,873,668
Foreign loans are recorded at restated value. Revaluation rate as of December 31,
2021 and December 31, 2020 are $1: 51, JPY1: ₱0.4412 and $1: 48.02, JPY1:
₱0.4629, respectively.
13. INTER-AGENCY PAYABLES
2021 2020
Inter-Agency Payables
Due to BIR ₱36,041 ₱46,992
Due to GSIS 18,411 11,699
Due to Pag-IBIG 1,921 2,374
Due to PhilHealth 1,294 1,320
Due to Government Corporations 87 25
Due to LGUs 215,196 188,526
Due to Treasurer of the Philippines 417,656 0
Due to SSS 106 60
Total Inter-Agency Payables 690,712 250,996
41
14. INTRA-AGENCY PAYABLES
2021 2020
Intra-Agency Payables
Due to Other Fund ₱212,069 ₱208,861
Total Intra-Agency Payables 212,069 208,861
Due to Other Funds account includes amounts paid by Financial Building Corporation
(FBC) and EMS Corporation’s Subleases that have court cases.
15. TRUST LIABILITIES
Trust Liabilities 2021 2020

Current
Trust Liabilities
Trust Liabilities ₱11,425 ₱11,084
Guaranty/Security Deposit Payable 303,064 199,197
Customers' Deposits Payable 63,873 47,156
Total Trust Liabilities 378,362 257,437
Non-Current
Trust Liabilities
Customers' Deposits Payable 486,774 449,372
Total Trust Liabilities 486,774 449,372
Total Non-Current 486,774 449,372
Total Trust Liabilities ₱865,136 ₱706,809
The Customers’ Deposit consists of Security Deposits and Advance Rentals. The
Security Deposits represent cash payments made by tenants as a guarantee for unpaid
utility bills at the end of the lease term. The Advance Rentals represent payments from
Locators and Residents to be applied against the last month/s of the customer’s
occupancy of the leased facility. In no case shall this amount, during the term of the
lease agreement, be applied to the customer’s unpaid obligation unless the customer
has given its intention not to renew its lease and to vacate the leased property. In the
event that there is no outstanding account at the end of the lease term, the security
deposit shall be refunded accordingly.
42
16. DEFERRED CREDIT/UNEARNED REVENUE/INCOME
Deferred Credit/ Unearned Revenue/Income 2021 2020

Current
Unearned Revenue/Income
Unearned Revenue/Income-Investment Property ₱383,062 ₱357,615
Total Unearned Revenue/Income 383,062 357,615
Non-Current
Unearned Revenue/Income
Unearned Revenue/Income-Investment Property 3,969,846 3,710,563
Total Unearned Revenue/Income 3,969,846 3,710,563
Deferred Credits
Deferred Revenue from Grants and Donations 57,688 0
Total Deferred Credits 57,688 0
Total Deferred Credit/ Unearned Revenue/Income ₱4,410,596 ₱4,068,178
Deferred credits include rentals received in advance from various

investors/locators/residents related to long-term lease.
17. PROVISIONS
Provisions 2021 2020

Current
Provisions
Leave Benefits Payable ₱248,776 ₱268,316
Total Provisions ₱248,776 ₱268,316
18. OTHER PAYABLES
Other Payables 2021 2020

Current
Other Payables
43
Dividends Payable ₱1,128,493 ₱980,326
Undistributed Collections 7,585 21,573
Total Other Payables 1,136,078 1,001,899
Total Current 1,136,078 1,001,899
Non-Current
Other Payables
Dividends Payable 1,513,827 0
Total Other Payables 1,513,827 0
Total Non-Current 1,513,827 0
Total Other Payables ₱2,649,905 ₱1,001,899
19. GOVERNMENT EQUITY
2021 2020
Paid-in Capital
Cost of Fixed assets ₱19,100,000 ₱19,100,000
Cash Contribution from the National Government 900,000 900,000
Total Paid-in Capital ₱20,000,000 ₱20,000,000
Donated Capital 43,259 43,259
Invested Capital -Held in Trust 306 306
Total Government Equity 20,043,566 20,043,566
The Donated Capital is composed of the Instrument Landing System (ILS) partly
financed by the Federal Express Corp. amounting to ₱34,367,662.00, the 10 mural
paintings of Artist Rene Robles amounting to ₱3,250,000.00 and the NPR Truck
donated by RP Energy and Isuzu Forward Garbage Compactor amounting to
₱4,722,000.00 and ₱920,000.00 respectively.
The Invested Capital – Held in Trust includes eight motor-vehicle from Hanjin and
Summa Kumagai and furniture and office equipment from Conservation of Priority
Protected Areas Project (CPPAP) by the Department of Environment and Natural
Resources (DENR).
44
20. REVALUATION SURPLUS
The Revaluation Surplus represents the additional net book value of Buildings and
Structures turned over by the U.S. Naval Base in 1993 booked based on the result of
the physical inventory completed by the Fixed Asset Inventory Team in December
2003. The piecemeal realization of Revaluation Surplus was initially recorded in July
2005. This represents amortization of revaluation surplus.
The LADD is currently in the process of verifying the inventory list of all SBMA
properties particularly Land and Building. Appraisal and valuation of the properties to
its Fair Market Value is being worked out by the LADD which may affect the Appraisal
Surplus account upon recording of the properties to its realizable and fair amounts.
21. SERVICE AND BUSINESS INCOME
Service and Business Income 2021 2020

Business Income
Admission Fees ₱124,710 ₱112,083
Hospital Fees 524 930
Income from Gaming Operations 1,215 1,274
Interest Income 212,139 232,755
Landing and Parking Fees 26,750 12,292
Other Business Income 131,148 132,857
Rent/Lease Income 1,815,727 1,777,439
Road Network Fees 25,029 25,346
Royalty Fees 0 0
Seaport System Fees 1,111,748 943,284
Total Business Income 3,448,990 3,238,260
Service Income
Accreditation Fees 2,112 135
Fines and Penalties-Service Income 5,904 5,774
Other Service Income 6,834 4,294
Permit Fees 18,853 13,150
Processing Fees 92,127 81,872
Registration Fees 4,874 9,750
Sewerage/Garbage Fees 37,127 27,925
Supervision and Regulation Enforcement Fees 65,482 51,111
Total Service Income 233,313 194,011
Total Service and Business Income ₱3,682,303 ₱3,432,271
45
22. SHARES, GRANTS AND DONATIONS
Shares, Grants and Donations 2021 2020

Grants and Donations
Income from Grants and Donations in Kind ₱120 ₱0
Total Grants and Donations 120 0
Total Shares, Grants and Donations ₱120 ₱0
23. GAINS
Gains 2021 2020

Gains
Gain on Foreign Exchange (FOREX) ₱1,070,551 ₱356,490
Total Gains 1,070,551 356,490
Total Gains ₱1,070,551 ₱356,490
24. PERSONNEL SERVICES
Personnel Services 2021 2020

Other Compensation
Cash Gift ₱7,577 ₱7,693
Clothing/Uniform Allowance 9,720 9,084
Directors and Committee Members' Fees 8,423 7,179
Hazard Pay 5,166 21,392
Longevity Pay 1,118 1,016
Mid-Year Bonus 48,666 47,215
Other Bonuses and Allowances 35,828 31,448
Overtime and Night Pay 15,390 13,540
Personnel Economic Relief Allowance (PERA) 36,266 36,857
Productivity Incentive Allowance 31,862 7,638
Representation Allowance (RA) 7,569 7,845
Transportation Allowance (TA) 7,251 7,549
Year End Bonus 48,782 47,660
Total Other Compensation 263,618 246,116
Other Personnel Benefits

Other Personnel Benefits 17,268 17,393
46
Terminal Leave Benefits 55,018 66,421
Total Other Personnel Benefits 72,286 83,814
Personnel Benefit Contributions

Employees Compensation Insurance Premiums 1,818 1,846
Pag-IBIG Contributions 1,817 1,845
PhilHealth Contributions 7,907 7,742
Retirement and Life Insurance Premiums 70,007 68,401
Total Personnel Benefit Contributions 81,549 79,834
Salaries and Wages

Salaries and Wages-Casual/Contractual 20,391 23,770
Salaries and Wages-Regular 562,301 546,183
Total Salaries and Wages 582,692 569,953
Total Personnel Services ₱1,000,145 ₱979,717
25. MAINTENANCE AND OTHER OPERATING EXPENSES
Maintenance and Other Operating Expenses 2021 2020

Awards/Rewards, Prizes and Indemnities
Awards/Rewards Expenses ₱4,005 ₱2,396
Total Awards/Rewards, Prizes and Indemnities 4,005 2,396
Communication Expenses
Internet Subscription Expenses 3,566 2,862
Postage and Courier Services 332 194
Telephone Expenses 7,797 8,192
Total Communication Expenses 11,695 11,248
Confidential, Intelligence and Extraordinary Expenses

Extraordinary and Miscellaneous Expenses 1,016 769
Total Confidential, Intelligence and Extraordinary
Expenses 1,016 769
General Services
Janitorial Services 16,253 8,894
Security Services 29,945 45,190
Total General Services 46,198 54,084
47
Labor and Wages
Labor and Wages 158,805 163,658
Total Labor and Wages 158,805 163,658
Professional Services
Auditing Services 4,419 392
Consultancy Services 14,854 18,041
Legal Services 38,848 1,558
Other Professional Services 5,005 5,798
Total Professional Services 63,126 25,789
Repairs and Maintenance

Repairs and Maintenance-Buildings and Other Structures 14,271 17,380
Repairs and Maintenance-Infrastructure Assets 452 960
Repairs and Maintenance-Machinery and Equipment 8,889 3,928
Repairs and Maintenance-Transportation Equipment 9,486 1,671
Total Repairs and Maintenance 33,098 23,939
Supplies and Materials Expenses

Accountable Forms Expenses 1,451 2,092
Fuel, Oil and Lubricants Expenses 9,790 6,260
Medical, Dental and Laboratory Supplies Expenses 4,133 2,741
Military, Police and Traffic Supplies Expenses 196 0
Office Supplies Expenses 7,840 4,144
Other Supplies and Materials Expenses 20,725 9,606
Semi-Expendable Furniture, Fixtures and Books Expenses 98 0
Semi-Expendable Machinery and Equipment Expenses 1,841 567
Total Supplies and Materials Expenses 46,074 25,410
Taxes, Insurance Premiums and Other Fees

Fidelity Bond Premiums 603 715
Insurance Expenses 15,654 15,648
Taxes, Duties and Licenses 218 240
Total Taxes, Insurance Premiums and Other Fees 16,475 16,603
Training and Scholarship Expenses

Training Expenses 61 407
Total Training and Scholarship Expenses 61 407
Traveling Expenses
48
Traveling Expenses-Foreign 0 167
Traveling Expenses-Local 692 1,811
Total Traveling Expenses 692 1,978
Utility Expenses
Electricity Expenses 65,994 57,722
Water Expenses 6,173 5,182
Total Utility Expenses 72,167 62,904
Other Maintenance and Operating Expenses

Advertising, Promotional and Marketing Expenses 1,615 4,083
Printing and Publication Expenses 471 105
Rent/Lease Expenses 6,801 7,238
Donations 5,417 7,483
Other Maintenance and Operating Expenses 63,721 55,878
Total Other Maintenance and Operating Expenses 78,025 74,787
Total Maintenance and Other Operating Expenses ₱531,437 ₱463,972
26. FINANCIAL EXPENSES
Financial Expenses 2021 2020

Financial Expenses
Interest Expenses ₱44,132 ₱57,927
Guarantee Fees 44,555 49,862
Bank Charges 626 529
Total Financial Expenses 89,313 108,318
Total Financial Expenses ₱89,313 ₱108,318
Guarantee Fees are paid to the Bureau of Treasury for the National Government’s
sovereign guaranty to the foreign loans. Interest on Loans covers interest on
Outstanding loans. Others consist of Contractual Services-SBMA, Other Professional
Services, Fuel, Meals, Accommodation & Other Reimbursement, Travel, and
Communication which are included under other Maintenance and Other Operating
Expenses.
49
27. NON-CASH EXPENSES
Non-Cash Expenses 2021 2020

Depreciation
Depreciation-Investment Property ₱263,186 ₱246,227
Depreciation-Land Improvements 17,501 1,614
Depreciation-Infrastructure Assets 109,368 70,536
Depreciation-Buildings and Other
Structures 10,141 9,433
Depreciation-Machinery and
Equipment 66,925 40,673
Depreciation-Transportation
Equipment 57,089 14,723
Depreciation-Furniture, Fixtures and
Books 436 359
Depreciation-Other Property, Plant
and Equipment 290 0
Total Depreciation 524,936 383,565
Impairment Loss
Impairment Loss-Loans and
Receivables 37,418 (8,965)
Impairment Loss-Lease Receivables 285,343 65,225
Total Impairment Loss 322,761 56,260
Losses
Loss on Foreign Exchange (FOREX) 523,146 702,114
Loss on Sale/Redemption/Transfer of
Investments 0 1,154
Loss of Assets 0 80
Total Losses 523,146 703,348
Total Non-Cash Expenses ₱1,370,843 ₱1,143,173
28. TAXATION
INCOME TAX EXPENSE 2021 2020

Gross Income Subject to Tax 3,763,783 3,392,077
Less: Allowable Deduction (Direct Cost) 1,647,683 1,517,477
Gross Taxable Income 2,116,100 1,874,600
Special tax rate 5% 5%
Income Tax Expense 105,805 93,730
50
As a territorial tax privilege in accordance with Section 43 of R.A. No. 7227,
enterprises located within the Subic Bay Freeport Zone (SBFZ) shall be exempt from
all national and local taxes. In lieu of paying taxes, the SBF enterprises, including
SBMA, shall pay a final tax of 5% of their gross income earned from sources within
the SBFZ. As defined in the same section of R.A. No. 7227, “gross income earned”
shall mean gross net sales/revenues derived from any business activity less cost of
sales/direct cost during a given taxable period.
29. EFFECTS OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
2021 2020
Effects of Exchange Rate on Cash and Cash Equivalents
Gain on Foreign Exchange - Actual ₱429,274 ₱28,931
Gain on Reval of Dollar Adv's & Dep's - Res (4,419) (4,485)
Gain on Reval of Dollar Adv's & Dep's- Locs 0 (9,361)
Loss on Foreign Exchange - Actual (156,830) (270,726)
Effects of Exchange Rate Changes on Cash and Cash
Equivalents Total ₱268,025 ₱ (255,641)
30. RELATED PARTY TRANSACTIONS
The Authority has entered into a service and management contracts with Freeport
Service Corporation (FSC), its wholly-owned subsidiary, since FSC’s start of
operations in 1996. Contracts include FSC’s provision of manpower services to SBMA
on a reimbursable basis plus 10% overhead mark up. However, the overhead markup
has been increased from 10% to 13% effective December 17, 2004. Facilities
management contract FSC’s management of tourism-related facilities of SBMA.
Under this arrangement, the term of which lasted until 2009, SBMA paid FSC a
management fee of ₱6 million per month while SBMA received 5% of FSC’s gross
income on these facilities.
However, in SBMA’s effort to wind up the operation of FSC, the management fee of
₱6 million per month were no longer extended beginning January 2010. With FSC’s
dormancy of operation beginning September 26, 2010, the provision for gross revenue
sharing had also been stopped since FSC’s facilities were taken over by SBMA, based
on the Omnibus Agreement between SBMA and FSC, for management by the Tourism
Department and the LAMD.
31. ASIAN ECONOMIC EVENTS
The Authority had obtained several loans with bilateral lending institutions to finance
the infrastructure development of Subic Bay Freeport Zone. Most of these loans were
51
negotiated and became effective before the Asian economic crisis hit the country in late
1997.
The peso depreciation vis-à-vis the US dollar, Japanese yen and Euro have had a great
impact on SBMA’s debt service requirements. Loans’ peso value depreciates when
pegged against their original peso value using the negotiated foreign exchange rate at
loan dates.
To address the issue on the uncontrolled depreciation and appreciation of peso against
foreign currencies from time to time, most new lease contracts being entered by SBMA
are now peso denominated.
32. IMPLEMENTATION OF THE INTEGRATED FINANCIAL MANAGEMENT

SYSTEM (IFMS)
On June 1, 2004, the Authority had implemented the IFMS concurrent with the manual
accounting. Three modules were developed to facilitate the recording of all transaction
and information presented in duly certified and approved Journal Entry Vouchers. The
function of each module is briefly discussed as follows:
i. GENERAL LEDGER MODULE (GL). Facility to record all adjustments,

corrections & reversing entries that cannot be recorded in the other modules
replacing the manual recording/ reporting in the General Journal.
ii. ACCOUNTS RECEIVABLE MODULE (AR). Facility to record all billing

and collection transactions replacing the manual recording/ reporting in the
Journal of Bills Rendered and the Journal of Collections and Deposits. The
Journal of Accounts Receivable generated in this module replaces the aforesaid
manual books.
Currently, Statement of Account (SOA) and Billing Statements issued to the

Locators and residents are IFMS generated reports. The manual preparation of
these reports has been stopped since the parallel run on the manual system and
the IFMS AR module produced the same outputs.
iii. ACCOUNTS PAYABLE MODULE (AP). Facility to record all obligation

and disbursement transactions replacing the manual recording/ reporting on
Voucher Payable Register and Journal of Checks Issued. The Journal of
Accounts Payable generated in this module replaces the aforesaid manual
books.
The Financial Statements are prepared manually based on the IFMS generated reports
from the GL module, AR module and AP module. Although the three modules produce
reliable reports and outputs, the capability to integrate the outputs of the modules to
produce the Financial Statements cannot be relied upon since development in the IFMS
System has been stopped because of the Management’s plan to require the Enterprise
52
Resource Planning System (ERPS). The parallel run in the IFMS and manual
preparation of Financial Statements will continue.
SBMA is planning to adopt the Enterprise Resource Planning System (ERPS) to

replace the existing IFMS with integrated, commercially off-the-shelf package
software that will reuse existing tools, data and processes. The ERPS is expected to
remedy non-integration of data, which became a major dilemma in the implementation
of the IFMS.
53
PART II – AUDIT OBSERVATIONS AND RECOMMENDATIONS
PART II - AUDIT OBSERVATIONS AND RECOMMENDATIONS
The audit of financial transactions and operations of the Subic Bay Metropolitan
Authority (SBMA) for calendar year (CY) 2021 disclosed some observations that needed
improvements and/or corrections. Our observations with the corresponding
recommendations are discussed in detail in the succeeding paragraphs.
Financial and Compliance Audit
Cash
1. Evaluation of the system of cash management of the Authority, specifically the

policies on the Change Fund, reporting of accountability for accountable forms, and the
bonding of accountable officers (AOs) yielded control deficiencies, which may expose
funds to risk of loss or misuse.
1.1 The cash examination conducted for CY 2021, and the verification and review of
the Report of Accountability for Accountable Forms (RAAF), disclosed several
deficiencies/lapses in cash management of the Agency, as manifested by the following:
A. Inadequacy of internal control in the management of Change Fund
1.2 Section 123 of the Presidential Decree (P.D.) No. 1445 provides the definition of
internal control; to wit: Internal control is the plan of organization and all the coordinate
methods and measures adopted within an organization or agency to safeguard its assets,
check the accuracy and reliability of its accounting data, and encourage adherence to
prescribed managerial policies.
1.3 Based on best practices of other institutions, a policy on Change Fund (CF) is
necessary to provide guidelines for the appropriate establishment, use, and accountability
over such funds. Procedures are established to encourage effective administration and
internal control on cash handling operations throughout an organization. For that purpose,
the Policy Statement shall provide, at a minimum, the following clauses:
a. Purpose of the policy

b. Procedures with respect to:
b.1 Establishment
b.2 Increase or Decrease of CF Amount
b.3 Custody and Accountability
b.4 Restriction or Limitations
b.5 Transferring or Closing the Fund
b.6 Shortages and/or Overages
1.4 The current revolving amount of the CF of the Authority is ₱150,000.00 for the
peso fund and $4,000.00 for the dollar fund. Currently, these funds are handled by 42
54
Cashiers as of June 30, 2021 as per Summary of Change Fund from the Treasury
Department.
1.5 We requested from Management the current Change Fund Policies and Procedures.
The Audit Team was provided with the Cash Management Division’s (CMD’s) Standard
Operating Procedures (SOP) which states the following responsibilities with respect to the
management of CF: (a) Ensure CF (both in peso and dollar) is available in smaller
denominations for daily use of the office/field cashiers in the operation; (b) Monitor CF
distribution by recording the issuance in the logbook and have them sign the logbook to
acknowledge receipt thereof; (c) Prepare monthly report of CF Distribution and On Hand;
and (d) Receive the returned CF and record in the logbook. All these tasks form part of the
responsibilities of the Head Cashiers.
1.6 As can be observed from the limited responsibilities stated in the SOP, specific
procedures with respect to the fund establishment, increase/decrease, custody and
accountability, restrictions, transfers/closing of funds, and procedures on
shortages/overages were glaringly absent. We were provided by a Treasury staff with a
listing of procedures as well as documentary requirements with respect to CF management.
The listing was prepared based on the actual practice being done by the Treasury
Department. The listing, however, neither forms part of the SOP nor incorporated as an
update in the current documented procedures.
1.7 We noted that one Head Cashier is maintaining CFs totaling ₱24,000.00 and
$700.00, who is not directly involved in collections. It was confirmed by the CF Custodian
that these are used in giving small denominations to Field Cashiers when circumstances
necessitate. We also noted a lack of justification with respect to increases and/or decreases
of the funds in the hands of various collectors, i.e., when changing their station. These
practices are not clearly defined in the SOP.
1.8 The possible risks of misapplication and mishandling of CF by unauthorized

personnel are increased, in addition to the presumption that cash is naturally susceptible or
vulnerable to misappropriation. Such risks may be avoided or mitigated if the policy of the
Authority is designed to appropriately identify the purpose, authorized persons to handle,
and the amount of change fund. Controls over cash need not only have a sound basis and
consistent application but also be explicitly written in detail due to the asset’s inherent risk,
and to avoid subjectivity or misinterpretation.
1.9 We recommended that Management update its SOP to include clear and
concrete policies on the purpose, authority to receive and maintain, and the
measurement of change fund released to accountable officers, with equal emphasis on
the procedures on (i) establishment; (ii) increase or decrease in the amount of change
fund; (iii) custody and accountability; (iv) restriction or limitations; (v) transferring
or closing of the fund; and (vi) disposition of shortages and/or overages.
1.10 Management commented that the Cash Management Division’s (CMD) SOP in the
handling of change funds may not be sufficient, but nevertheless, restrictions on the use of
55
the change funds are strictly adhered to. The Head Cashier maintaining CF in peso and
dollars, who is also a bonded officer, although not directly involved in collections, is the
OOD who supervises the day-to-day operation of the collection section. Part of the OOD’s
function requires the handling of the CF in small denominations for ready issuance when
the CF on hand of the field or office AO is already in big bills.
1.11 Management has drafted a Change Fund Handling Policy incorporating clauses as
suggested in the audit recommendation. The Policy will be routed for comments by the
Support Services SDA and DA and Legal Department before presentation to the Board for
Approval.
1.12 More so, an Office Order was issued for proper management of accountabilities by
identifying custodians and alternates/assistants for the CF, PCF and Accountable Forms.
Additionally stated is that all change fund transactions will only be between the CFC or
the Alternate and the AO. To document these transactions and emphasize the accountability
of AOs handling the change fund, the CFC and the AO will be documenting each and every
transaction using the newly prescribed forms: (1) The Change Fund Request/Issuance
Form; and (2) The Change Fund Surrender/Clearance Form. The Change Fund Logbook
will still be maintained by the CFC.
B. Non-preparation of the monthly Report of Accountability for Accountable Forms

(RAAF) by accountable officers (AOs)
1.13 Section 98, Volume 1, of the Government Accounting and Auditing Manual
(GAAM) provides that, Report of the accountable officer. — Accountable Officers shall
render a report to the COA Unit Auditor on their accountability for accountable forms at
least once a month in prescribed form. Such report shall also be prepared in case of
transfer of office or accountability by the accountable officer. The report shall include,
among others, the name/type, quantity and serial number and/or value, of the accountable
forms as of last month/period, the forms received and issued during the month/period and
the balances as of end of month/period.
1.14 Presidential Decree (P.D.) No. 1445 indicated the guidelines that shall be observed
in the keeping of accounts; to wit:
Section 111. Keeping of accounts.
(1) The accounts of an agency shall be kept in such detail as is necessary to meet the
needs of the agency and at the same time be adequate to furnish the information needed by
fiscal or control agencies of the government.
(2) The highest standards of honesty, objectivity and consistency shall be observed in
the keeping of accounts to safeguard against inaccurate or misleading information.
56
1.15 Furthermore, Section 124 of the same P.D. provides that it shall be the direct
responsibility of the agency head to install, implement, and monitor a sound system of
internal control.
1.16 The Accountable Forms (AFs) Custodian is tasked to prepare the monthly RAAF
of the Agency covering the total accountable forms received and issued within a given
period. This is accomplished by using the information from the AF Custodian himself for
the newly received forms of the Agency combined with the information provided in the
logbooks being maintained, containing forms issued to and by the Cashiers. No separate
RAAF is prepared by each Cashier.
1.17 Based on the guidelines set forth in the Standard Operating Procedures (SOP) of
the Cash Management Division (CMD), each Collecting Officer (C.O.) receives
accountable forms (ORs and tickets) from the AF Custodian or the Cashier/Officer of the
Day (OOD), as the case may be, who then maintains the logbooks for record keeping. Upon
issuance, the Cashier will receive the forms through the logbook.
1.18 Two logbooks are being kept, namely: (I) the logbook for the issuance of forms to
the Cashiers; and (II) the one for the monitoring of the use of received forms.
I. Logbook for the Issuance of Forms to the Cashiers
1.19 The logbook for the receipt of the Cashiers of AFs contains the following
information:
Booklet Quantity Serial Total Name of Signature Date Date

No. No. Value Cashier Received Fully
Issued
(a) (b) (c) (d) (e) (f) (g) (h)
Figure 1 Forms Issued to Cashiers Logbook Format
a. Booklet No. – applicable only for official receipts since tickets do not have this
b. Quantity – total number of accountable forms for a particular booklet and series
c. Serial No. – series coverage of forms issued to Cashiers
d. Total Value – applicable only for AF with money value (tickets)
e. Name of Cashier – to whom the forms are issued to
f. Signature – sign of the corresponding Cashier receiving the form
g. Date Received – pertains to the date the Cashier received the form from the AF
Custodian and/or Officer of the Day
h. Date Fully Issued – pertains to the date the Cashier fully exhausted that specific
series received (letter c)
II. Logbook for the Issuance of Forms by the Cashiers
1.20 On the other hand, the logbook recording the issuance of AFs by the Cashiers
reflects the following format:
57
I. Forms Used by each Cashier during their Shift II. Unissued Forms after the Cashier’s Shift
Date Facility Series Qty. Amt. Accountable Balance Qty. Turned Date Re- Date
/ Used Officer (Series) Over Issue
Station Name Sign To d To
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m)
Figure 2 Forms Used and Turned Over by Cashiers Logbook Format
a. Date – refers to the current date of shift

b. Facility/Station – where the forms are used; station of duty of the Cashier
c. Series Used – series coverage of forms issued by the corresponding Cashier
d. Quantity – total number of accountable forms issued relative to the series used
e. Amount – total value of accountable forms issued (AF with money value)
f. Name of AO – Cashier on duty who issued the forms
g. Sign of AO – signature of the Cashier on duty
h. Balance – series coverage of forms remaining (unissued) after the shift of the
Cashier (g)
i. Quantity – total number of accountable forms left unissued relative to the series
balance (h)
j. Turned Over to – name of the AF Custodian/Officer of the Day (OOD) to whom
the series balance (h) was surrendered to
k. Date – date the series balance (h) was turned over to the AF Custodian/OOD (j)
l. Re-Issued To – name of the Cashier to whom the AF Custodian/OOD reissued
the turned over series balance (h)
m. Date – date the series was reissued to the corresponding Cashier (m)
1.21 The above information in the logbooks is encoded in the Integrated Financial
Management System (IFMS) with generally the same content, except that the signature of
the Cashier is replaced by the signature of the AF Custodian in the Certification, and the
information on the Unissued Forms after the Cashier’s shift is not reflected.
1.22 Three reports relative to the RAAF of the Agency can be generated from the IFMS:
(1) The Accountable Forms per Cashier showing all AF received by the Accountable
Officer (AO); the (2) Official Receipts and (3) Tickets Accountability Report showing AF
issuances/used/sold during desired period.
•Accountable Forms as per Cashier encoded by the AF Custodian

1.23 The components of this report are the same as what the Logbook for the Issuance
of Forms to Cashiers shows except that there is no corresponding portion for the receiving
Cashier’s signature, and that the Total Value of the forms received (AF with money value)
is not included. The table below reflects the format as can be seen in the IFMS Report.
58
Cashier Name *Issued **Returned Booklet Series Qty.
Date Date No. From To
xx xx xx xx xx xx xx
CERTIFICATION
by AF Custodian
Figure 3 IFMS Report - Forms Issued to Cashiers Format
*Issued Date or Date Received (g) in the Logbook for the Issuance of Forms to Cashier.
**Returned Date or Date Fully Issued (h) in the same logbook.
 Official Receipts Accountability Report encoded by the income/collection

encoder
1.24 The contents of this report present only the series coverage of official receipts
actually issued and/or cancelled by the respective Cashiers for a given period, including
the corresponding booklet number of the OR. The information below can also be seen on
the Logbook for the Issuance of Forms by Cashiers (specifically c, d, and f):
OR ISSUED
Qty. From To Cashier Name Booklet No.
xx xx xx xx xx
CANCELLED OR NO.
Date Issued OR No. Cashier Name
xx xx xx
CERTIFICATION
by AF Custodian
Figure 4 IFMS Report - Official Receipts Used by Cashiers Format
 Tickets Accountability Report encoded by the income/collection encoder
1.25 For tickets, this report also contains the series coverage issued and/or cancelled by
the respective Cashiers for a given period. The information below can also be seen on the
Logbook for the Issuance of Forms by Cashiers (specifically b, c, d, and f):
TICKET ISSUED
Qty. From To Cashier Name Color Revenue Source
xx xx xx xx xx xx
CANCELLED TICKET
Date Issued Ticket No. Ticket No. Total Ticket Color Cashier Name
From To
xx xx xx xx xx xx
59
CERTIFICATION
by AF Custodian
Figure 5 IFMS Report - Tickets Used by Cashiers Format
1.26 During the conduct of the Cash Examination, we observed that the turnover of
O.R.s and/or tickets initially received (first release of series from AF Custodian or OOD)
by one Field Cashier to another was a usual practice when remaining forms are on hand.
We were informed that because they are subject to rotations or changes of station, and in
the case of the Cashiers’ rest days, some forms must be transferred, depending on where
the forms are applicable (in the case of tickets), based on the Cashier’s station of duty.
1.27 The audit also showed that there were accountable forms transferred from one
Cashier to another which were not recorded in the IFMS. It was only upon our
communication about the noted deficiencies with the AF Custodian that the correction of
the record was made. To take up the transfer, the AF Custodian removes the specific series
of tickets transferred from the account of the Cashier who initially received the forms and
reflects the same in the account of the recipient Cashier who last used/exhausted the forms.
The transaction trail could not be traced, such as the date and series endorsed, from whom
the AF was received and to whom it was transferred, except for the information shown and
recorded in the logbook.
1.28 The tables below show the Official Receipts and Tickets originally issued to the
following Cashiers but were transferred to and issued by other Cashiers. These ORs/Tickets
were reflected as balances of the Cashiers who initially received the forms (per
accountability) since no turnover was documented.
OFFICIAL RECEIPTS
No. Initial Recipients from AF Qty. Series Other
Custodian/OOD From To Issuing
Cashiers
1 Riza T. Centeno 10 3827191 3827200 J. Abalos
2 Kathlyn E. Marcellano 50 3872501 3872550 D. Miral
3 Jesus S. Mangohig Jr. 50 3893451 3893500 G. Torres
4 Marietta P. Mendez 21 3800780 3800800 G. Lagatao
5 Victobert G. Bactad 9 3762142 3762150 W. Estrella
Table 1 List of ORs Turned Over to the Issuing Cashier but Not Reflected in the IFMS
TICKETS
No. Initial Recipients from Qty. Color Amount Other Issuing
AF Custodian/OOD Cashiers
1 Rosanie N. Artates 61 White ₱1,220.00 M. Gonzales
2 Julio Lennon S. Castro 28 Yellow 3,024.00 J. Del Rosario
25 Red 2,250.00 R. Artates
49 Pink 4,802.00 J. Del Rosario
46 Blue 2,760.00 R. Artates
184 Green 14,720.00 R. Artates;
60
TICKETS
No. Initial Recipients from Qty. Color Amount Other Issuing
AF Custodian/OOD Cashiers
E. Bautista
3 Jason L. Pial 10 Yellow 1,080.00 W. Estrella;
A. Montalla
4 Vincent Ray T. Villafania 60 Blue 3,600.00 M. Apostol
5 Rochelle G. Morillo 59 Red 5,310.00 W. Estrella
12 Green 960.00 W. Estrella
6 Sharon Ticmon 65 Yellow 7,020.00 J. Del Rosario
19 Red 1,710.00 V. Villafania
5 Pink 490.00 J. Pial
89 Blue 5,340.00 R. Morillo
11 Green 880.00 V. Villafania
7 Angelica Mae R. Cruz 23 Yellow 2,484.00 J. Sumala
53 Red 4,770.00 S. Ticmon
85 Pink 8,330.00 S. Ticmon; S.
Mari;
C. De Guzman
7 Blue 420.00 S. Ticmon
8 Arnel D. De Vera 20 Yellow 2,160.00 R. Movilla
15 Red 1,350.00 R. Movilla
70 Pink 6,860.00 R. Artates
Grand Total ₱ 80,900.00
Table 2 List of Tickets Turned Over to the Issuing Cashier but Not Reflected in the IFMS
1.29 The AF Custodian informed us that there were instances wherein some Cashiers
who initially received the AFs were unable to update the record in the logbook for the
transfer made. This is one reason for the discrepancy in the IFMS on unrecorded AF
transfers.
1.30 In addition, there were also noted cases when AFs counted during the cash
examination date were not reflected in the IFMS as received by the corresponding Cashier
within the period of examination as shown below:
Accountable Officer Qty. Color Total Cash Exam Date Issued to

Date Cashier per IFMS
Angelica Mae R. Cruz 18 Blue ₱ 1,080.00 6-Jul-21 8-Jul-21
14 Green 1,120.00 6-Jul-21 8-Jul-21
Total ₱2,200.00
Table 3 Accountable Forms Counted on Hand but not Received by the Cashier per IFMS within the CE date
1.31 Lastly, there were two isolated cases not traced to the IFMS, as follows:
Accountable Officer Qty. Color Total Remarks
Mariell S. Apostol 50 Yellow ₱ 5,400.00 Not seen in IFMS as received by any AO

within the period covered June 1, 2020 to
August 1, 2021 (sample coverage used), but
issued by this AO on Jan. 12-15, 2021.
61
Accountable Officer Qty. Color Total Remarks
10 Blue 600.00 Not reflected in the IFMS as issued by the

AO within the CE Period, but issued by said
AO on Jan. 30, 2021
Total ₱6,000.00
Table 4 Other Cases Noted
1.32 No individual RAAF is being prepared by the Collecting Officers aside from what
can only be generated from the system, which is the overall RAAF of the Agency.
Moreover, the prescribed form of the monthly RAAF was not used in the IFMS (See
Figures 3 to 5). As can be observed, although the system shows a combined report, for a
given period, stating the name of the Cashier, type of forms, serial number, date received
and date fully issued, it does not include information on the beginning and ending balances
and the value of the respective forms, if any. Likewise, the required certification of each
AO as to the correctness of the rendered report was not obtained. In addition, the
responsibility for the preparation of the monthly RAAF is lodged with the AF Custodian
as per SOP and not with the individual collectors.
1.33 Since an AO is not required to prepare his/her respective RAAF, the Cashier is
precluded from conducting an independent check of the reported forms. Such practice also
hindered the AF Custodian to establish and determine the Cashiers’ accountability on
received and issued forms, resulting in the non-detection of errors encoded in the IFMS.
Furthermore, the non-use of the prescribed format for the monthly RAAF in the IFMS
affected the completeness of the report generated therefrom.
1.34 The foregoing lapses in the controls of the Agency cast doubt on the reliability of
the system generated reports. Had each AO rendered a monthly individual RAAF and the
Agency adopted the prescribed format in the system, the AF Custodian could have
periodically checked the accuracy of their records and avoided any misleading information.
1.35 We recommended that Management instruct the Treasury Department to:
a. require and ensure the preparation and submission of monthly RAAF as

prescribed under Section 98 of GAAM, Volume I by updating the SOP and
including the preparation of RAAF as part of the collectors’ responsibility;
and
b. institute effective controls in monitoring the recording of receipts and

issuances of accountable forms in the system by the Cashiers for the purpose
of enhancing accuracy and reliability of the recorded transactions and reports
prepared.
1.36 Management stated that the monthly RAAF currently prepared by the AFC is based
not only on the logbooks, but also on the reports generated by the Integrated Financial
Management System (IFMS) and certified by the Department Manager. Moreover, it was
62
clarified that the existing guidelines in the transfer/turnover of accountable forms was a
product of the discussion during exit conference on May 18, 2016, officially disseminated
through a CMD Memo.
1.37 Management agreed with the recommendation and issued CMD Memorandum
dated October 30, 2021 instructing all AOs to immediately comply with the use of the
prescribed AO’s monthly RAAF (to be individually accomplished by the AO) effective
November 01, 2021. Furthermore, all AOs were given IFMS access to the individual
monthly RAAF and the Official Receipts, and Tickets Accountability Report to enable
them to compare the individually prepared RAAF against the data encoded in the IFMS, to
enhance accuracy and reliability of the recorded transactions and preparation of reports.
Any discrepancies between the RAAF and IFMS generated reports are immediately relayed
to the AFC for further verification.
1.38 They also mentioned that all transactions relative to the accountable forms shall be
coursed through mainly to the AFC including re-issuances of unused accountable forms
that were surrendered by an AO; and direct transfer among AOs shall no longer be allowed.
A Memorandum dated January 25, 2022 and effective February 1, 2022, pertaining to the
Issuances and Surrender of Accountable Form was issued by Management directing AOs
to accomplish the prescribed Accountable Forms Issuance Slip and the Accountable Forms
Surrender Slip.
C. Cashier’s fidelity bonds either insufficient or excessive
1.39 Section 7.1 of COA Circular No. 97-002 dated February 10, 1997 states that Each
Accountable Officer with a total cash accountability of ₱2,000.00 or more shall be bonded.
The amount of bond shall depend on the total accountability of the officer as fixed by the
Head of the Agency. An official or employee who has both money and property
accountability shall be bonded only once to cover both accountabilities, but the amount of
the bond shall be in accordance with the Schedule. Provided, the individual maximum
amount of bond of each accountable officer shall not exceed Eleven Million Pesos (₱11M),
as additionally mentioned in Section 5.1 of Treasury Circular No. 02-2019 dated April 25,
2019.
1.40 Analysis of the fidelity bonds applied to 50 Cashiers revealed that 21 of them were
excessively bonded while the remaining 29 were inadequate. The table below presents the
range of variances identified, from smallest to largest, based on the daily average collection
as computed by the Audit Team, using the amount of collections from each Cashier’s
preceding bond coverage.
Type of Variance Number of Amount of Bond Variance

Cashiers From (Smallest) To (Largest)
Excessive 21 ₱ 15,000.00 ₱ 75,000.00
Inadequate 29 25,000.00 1,425,000.00
Table 5 Range of Variances Identified Based on Daily Average Collection
63
1.41 For the purpose of assessing the appropriate amount of bond, we determined the
most relevant period where a collection trend may be considered consistent on the average.
While a large portion of the variables used in the computations can be perceived as a lesser
representation of the usual number and amount of collections of the Agency (especially
during the pandemic in which collections were relatively lower), it was still observed that
several Cashiers had inadequate bonds.
1.42 Verification of the Agency’s basis for determining the fidelity bond of the AOs
disclosed that the amount applied for was based on the Salary Grade (SG) level of the
applicant. However, it was not clearly shown how the computation was done based on their
respective SGs.
1.43 A walkthrough of the Agency’s policy and practice showed that collections for the
day were either partially or fully deposited within the day or early the next banking day.
Therefore, the accountability of a Cashier is generally limited to the extent of his or her
daily collections, and so the risk of undue loss can be restricted up to the amount of their
respective daily collections. Furthermore, since day-to-day collections vary, the use of
averaging in the determination of the collector’s accountability can be a more appropriate
representation of his or her accountability.
1.44 For purposes of control and to safeguard government funds from unnecessary
losses, it is necessary that the AO be adequately bonded. In cases where the latter failed to
render account for his or her collections, or had absconded, the Authority may not be able
to recover and claim against the fidelity bond of the officer beyond his or her maximum
accountability, as the bond can be made answerable only up to the extent of the approved
coverage. On the other hand, the excess amount over the computed fidelity bond could
have been used to augment those identified as insufficient or saved for other public
purposes.
1.45 We recommended that Management require the Treasury Department to

review regularly the accountability of the AOs, and accordingly adjust/increase the
fidelity bonds based on the average daily collections to ensure that their cash
accountabilities are adequately insured against the risk of possible loss or misuse.
1.46 Management acknowledged the necessity of adequately bonding the AOs, thus,
adopted and applied the daily average cash collections in the request for renewal of the
initial cashiers whose bonds matured in January 2022. The data used in determining the
previous average daily cash collection of each cashier is extracted from the IFMS.
1.47 Management ensures that the above determination shall now be the basis of the
renewal once the cashiers’ bond expires. Moreover, it was mentioned that the Treasury
Cashiers’ bond premium will be the only ones determined using the previous year’s daily
cash collection upon expiration, while the bonds of other bonded officers and employees
will remain the same since their accountabilities are fixed in the Office Orders issued to
them.
64
Ineffective process flow affecting the timely recognition of receivables

Standards (PFRS) towards a more reliable and fair financial reporting.
2.1. Paragraph 31 of the Philippine Financial Reporting Standard (PFRS) mentioned the
qualitative characteristic of financial statements pertaining to its reliability. It states that,
to be useful, information must be reliable; and information has the quality of reliability
when it is free from material error and bias and can be depended upon by users to represent
faithfully that which it purports to represent or could reasonably be expected to represent.
Furthermore, Paragraph 38 thereof also cited that, for an information to be reliable, the
financial statements must be complete within the bounds of materiality and cost. An
omission can cause information to be false or misleading, thus, unreliable and deficient in
terms of its relevance.
2.2 Late recognition of receivables and income was already an issue in prior year’s
Annual Audit Report (AAR). The Audit Team relayed our observations to Management
about the matter via an Audit Observation Memorandum (AOM) and an attestation
requirement was cited in the Memorandum requesting completeness of information from
the Business and Investment Department (BID). In CY 2021, the Accounting Department
conformed to our recommendation on the early submission of contracts/lease agreements
to ensure completeness of the recording of all financial transactions as at year-end, and the
inclusion of an attestation requirement in the memorandum to be accomplished when the
necessary documents are tendered to the department concerned. Upon inquiry with
Accounting, the Audit Team was provided with a copy of two attestation letters for BID-
Manufacturing and Maritime, and BID-Information and Communications Technology; the
other two were obtained directly from BID, and the remaining one disclosed that no
memorandum was received by their Department requiring the same, thus, no attestation
was submitted by them. While majority had complied with the submission, the content of
the letters generally included the list of companies with the corresponding date of
submission to Accounting and/or status of the contract with the locator mostly covering
until October or November 2021. Attestation on the completeness of contracts as of
December 31, 2021 was not explicitly written or obtained.
2.3 Analysis of the Subsidiary Ledger (SL) maintained for Retained Earnings (RE)
account as of March 15, 2022 revealed various adjustments recorded in the same year
which pertained to additions to or deductions from income of prior years as summarized
below:
No. Nature/Particulars of Journal Entries Made Debits to RE Credits to RE

1 Cancellation /Adjustments of Billing ₱ 5,049,187.68 ₱ 1,899.63
2 Amortization of Advances/Unearned Income - 4,566,153.63
relating to PYs
65
No. Nature/Particulars of Journal Entries Made Debits to RE Credits to RE
3 Recorded as Rent Income in PYs but should 2,181,682.89 18,536.54
have been charged to Unearned Rent Income
4 Correcting of various PY entries 395,195.57 142,154.61
5 Bills rendered for CY 2022 inclusive of bills - 16,929,478.47
from PY
Total ₱ 7,626,066.14 ₱ 21,658,222.88
Net Effect – Understatement of Income in PY - ₱ 14,032,156.74
Attributed to CY 2021 Per Breakdown of Accounting ₱ 10,025,344.71

Attributed to Years Prior to CY 2021 Per Breakdown of Accounting ₱ 4,006,812.03
Table 6 Adjustments to Retained Earnings Affecting Income of Prior Years
2.4 For No. 1, billings were generally cancelled due to pre-termination/termination of

sublease agreements while adjustments were made due to amendments in the sublease
agreement or the basis of the billings served. Additionally, bills exclusively for prior years
were rendered only in CY 2022 (No. 5). These, according to the Accountant, were
attributed to the late endorsement of contracts.
2.5 For No. 3, the Accounting Office’s analysis of the account of Hagafea Corporation
resulted in the reversal of Rent Income previously recognized but should have been
appropriately treated as Unearned Income for subsequent amortization. On the other hand,
the amortization of the advances was also part of the result of analysis of records
undertaken by the AR-Housing Division on the account of Hagafea Corporation and Subic
Homes, Inc. The amount reflected in the above summary of adjustments refers to the
reversal of rent income and amortization, which included the gain and/or loss due to forex
rate differences upon recognition.
2.6 In addition, the Audit Team requested for the list of locators per record of
Accounting and the BID. Comparison of the Customers’ Master List (Direct Lessees) and
List of Sublease (Sub-lessees) as of December 31, 2021 generated from the IFMS by the
Accounting Department as against the List of Active SBF Locators from the BID resulted
in the initial discrepancies categorized as follows:
a. Accounts expired per Accounting but active per BID

b. Accounts not listed per Accounting but active per BID
 Accounts Expired per Accounting but Active per Business and Investment
Department (BID)
2.7 Initial comparison of the data given by the two Departments disclosed a total of 189
accounts which are listed as expired per Accounting, but still on active status in the list
provided by the BID, comprising of both direct and sub-leases.
2.8 As mentioned by the Accounting Department, there were direct leases with
continued possession of the leased property but whose term has already ended, yet the
lessee has been continuously billed regardless of the expiry of the lease term unless
otherwise, a notice or an endorsement from the BID is given to them regarding any non-
66
renewal, pre-termination, and the like, of the respective client. The stipulation on
continuous billing is likewise indicated in the lease agreement with locators as cited under
paragraph 3, Term of Lease, quoted as follows:
In case the Lessee continues to be in possession of the Leased Property upon

termination of this Lease Agreement, the Lessee shall pay rentals over the same
based on escalated rental payment under this Lease Agreement or the property’s
appraised value, whichever is higher, in addition to the penalties to be imposed by
the Lessor.
2.9 We also obtained ten samples of locators which are classified as sub-lessees, in
which the rental rates are considered at the highest dollar and/or peso rent, and arrived at
the following data:
NO. COMPANY NAME UNBILLED MONTH(S) MONTHLY RECEIVED BY

RATE ACCOUNTING
Coverage No. of Mos.
1 SCHENKER Aug. – Dec. 2021 5 Bldg. - March 2022
PHILIPPINES ₱59,986.29
(SUBIC) INC. – Under Lot -$28.40
Xantheng (Subic)
International
Corporation
2 GOLDEN ABC, N/A - Under Subic Bay Town Center, Inc. (SBTCI) – Quarterly GRS
INCORPORATED Billing
(REGATTA) – Under
SBTCI
3 SUBIC AUTO Updated Billing
TRUCKS AND
MACHINERY LTD.,
CORP. – Under MSK
Group Work
Incorporated
4 DELTA Continuously billed but in the process of pre-termination, presented at
PRODUCTION the AEC meeting on March 25, 2022
PHILIPPINES CORP.
– Under Global
Terminals and
Development, Inc.
5 LBC EXPRESS, INC. – May – Dec. 2021 8 ₱3,750.00 Copy of
Under 01 Property accounting – for
Ventures Corporation submission
6 DAVID BROWN Updated Billing
GEAR SYSTEMS
(PHILIPPINES), INC.
– Under Global
Terminals and
Development, Inc.
7 YCH PHILIPPINES June 15 – Dec. 6.5 $165.19 March 2022
(SUBIC BAY), INC. – 2021
Under Sapphire
Instruments Subic Bay,
Inc.
67
NO. COMPANY NAME UNBILLED MONTH(S) MONTHLY RECEIVED BY
RATE ACCOUNTING
Coverage No. of Mos.
8 KANSAI Nov. 1 – Dec. 2 $1,750.00 Copy of
MULTIWAYS 2021 accounting – for
TRADING CORP. – submission
Under Xantheng
(Subic) International
Corporation
9 SECURITY BANK Aug. 16, 2020 – 16.5 ₱36,960.00 March 2022
CORPORATION – Dec. 2021
Under Subic Park ‘N
Shop, Inc.
SECURITY BANK No existing SLA (Last SLA ended in June 2021)
CORPORATION –
Under Shengkai Corp.
10 FOO CHI TRADING Jan. 1 – Dec. 2021 12 ₱9,419.44 March 2022
AND RESOURCES
INC. – Secure Build
Construction Corp.
Table 7 Samples from the List of Expired Leases per Accounting Record but Active per BID
2.10 The necessary documents of six out of ten sample sub-lessees were verified to have
been submitted after year-end or pending submission to the Department concerned for
billing purposes. Per inquiry made, the requirement of Accounting Unit for an account to
be billed is the approved Term Sheet and the notarized Sub-Lease Agreement (SLA). It
should be noted that under a sublease, locators (sub-lessees) are discontinued from being
billed once their contract term ends, unlike the continuous billing for direct leases.
 Accounts Not Listed per Accounting but Active per BID
2.11 Verification showed that a total of 55 accounts no longer exist in the Accounting
list, although the same are still included in the Active Locator’s list of the BID. The
following are samples of accounts with effectivity dates of lease falling under CY 2021 as
indicated in the BID report:
NO. COMPANY NAME NO. COMPANY NAME
1 Autokid Trucks Trading Corporation 9 Petsmart.ph Inc.

2 Beawmont Distributions, Inc. (Formerly Time 10 SBGP Food Services, Inc.
Depot Inc.)
3 Eight Woodlans Realty Corp. 11 Snapcrowd International Inc.
4 GSquare Business Consultancy 12 The Shoreline Subic Inc.
5 Ishinikon International, Inc. 13 TNBTS House Rental
6 Meeting Room Restaurant 14 Tundayag Intellectual Property Agents
Intellectual Property Research and
Documentation Services
7 Originails Corporation 15 Vue Circle Corp.
8 Osaka Subic International, Inc.
Table 8 Samples of Active Sub-Lessees per BID's Record but Not Included in the Accounting List
68
2.12 The statuses of billing of the above accounts, however, are still for submission to
the Audit Team as of this writing.
 Active per Accounting Records but Not Listed per BID
2.13 Further scrutiny of the Accounting List, comprised of direct lessees and sub-lessees,
showed no counterpart record per BID for a considerable number of 1,935 accounts
(including duplicate accounts per Accounting). While it is part of the lease agreement to
continuously bill direct leases as long as they retain occupancy of the leased property, sub-
lessees billed but possibly pre-terminated or did not renew their contracts may affect the
recorded amount of income in the books of the Agency, and consequently that appearing
in the financial statements.
2.14 In view of the foregoing circumstances, the Account Officer(s) concerned

mentioned the following causes of delay for six contracts that were found to have unbilled
amounts as of December 31, 2021:
a. During the interview, one cause identified was the overly delayed submission of
the notarized SLA by the locator. Since the contract is in the stage of renewal, such
requirement is not needed prior to the issuance of the permit (Certificate of
Registration or Certificate of Registration and Tax Exemption). As such, the locator
may not see an urgency for the submission of a notarized SLA which then resulted
to the delayed action on their part. Other reason mentioned was the non-availability
of the signatories in the SLA;
b. Pending submission of the original SEC Certificate;
c. The furnishing of a copy of the amended approved Term Sheet and SLA to the
Accounting Department was overlooked (only the original Term Sheet was e-
mailed in April 2021); and
d. Pending issue on the imposition of a penalty against Foo Chi Trading and Resource,
Inc. The unauthorized use of the facility by the said lessee hindered the renewal of
the Sublease Agreement (resolved thru Board Resolution No. 21-08-2177 dated
September 7, 2021 recommending a separate treatment on the imposition of penalty
from the renewal of the sublease and CRTE).
2.15 Aside from the above lapses, another culprit was the tedious process of review,
marking and sealing of Sublease Agreements, Amendment to the Sublease Agreements,
which involved an incorporation of the review to the said SLA, and the frequent exchange
of documentary requirements between the Legal Department, Business and Investment
Group, and the locators. Only when the draft and corrected SLA has been finalized, that it
can be subjected to notarization by the locator, which will be resubmitted to the Authority
in five sets for marking and sealing by the Legal Office, and after which, copies will be
distributed to the concerned Departments, including Accounting.
69
2.16 Management addressed the above procedural weaknesses through the issuance of
Board Resolution No. 21-09-2215, approving a simplified process of review without the
usual marking and sealing of the Sublease Agreements and Amendment to the Sublease
Agreements. In lieu thereof, a Consent to the said Agreements shall be issued by the
Authority. In this process, and considering SLA’s format has been standardized, the Legal
Office will simply require the submission of the approved Term Sheet inclusive of the
already notarized SLA, together with other necessary documents. This procedure is
expected to reduce the turnaround time and facilitate prompt actions at the locators’ end
starting December 2021.
2.17 Nonetheless, the aforementioned observations affected not only the balances
appearing in the financial statements (FSs) of the Authority but also the qualitative
characteristics that the FS should possess for it to be valuable in the analysis and decision
making of users and stakeholders.
2.18 The delayed endorsement of contracts and erroneous charges to Retained Earnings
of the current year’s income affected the accuracy of the balances of Receivables and
Income as of year-end, as illustrated below:
Effects Debit Credit

[1] Cancellation /Adjustments of Billing ₱ 5,049,187.68 ₱ 1,899.63
[5] Bills rendered for CY 2022 inclusive of bills - 16,929,478.47
from PY
Net Understatement of:

Receivables ₱ 11,882,190.42
Service and Business Income ₱ 9,828,959.81
Retained Earnings ₱ 2,053,229.61
Table 9 Effect of the Delayed Endorsement of Contracts and Erroneous Charges to Retained Earnings
2.19 Shown hereunder is the net effect of the unbilled accounts for the six out of ten
samples determined to have been belatedly submitted or pending submission to
Accounting; viz:
NO. COMPANY NAME UNBILLED MONTH(S) MONTHLY TOTAL

RATE
Coverage No. of
Mos.
1 SCHENKER Aug. – Dec. 2021 5 Bldg. ₱ 307,173.45
PHILIPPINES ₱59,986.29
(SUBIC) INC. Lot = $28.40
2 LBC EXPRESS, INC. May – Dec. 2021 8 ₱3,750.00 30,000.00
3 YCH PHILIPPINES June 15 – Dec. 2021 6.5 $165.19 54,760.49
(SUBIC BAY), INC.
4 KANSAI Nov. 1 – Dec. 2021 2 $1,750.00 178,500.00
MULTIWAYS
TRADING CORP.
5 SECURITY BANK Aug. 16, 2020 – Dec. 16.5 ₱36,960.00 609,840.00
CORPORATION 2021
70
NO. COMPANY NAME UNBILLED MONTH(S) MONTHLY TOTAL
RATE
Coverage No. of
Mos.
6 FOO CHI TRADING Jan. 1 – Dec. 2021 12 ₱9,419.44 113,033.28
AND RESOURCES
INC.
₱1,293,307.22
Net Understatement of: Debit Credit

Receivables ₱ 1,293,307.22
Service and Business Income ₱ 1,126,987.22
Retained Earnings ₱ 166,320.00
Table 10 Net Effect of Unbilled Accounts
*Dollar to Peso conversion based on ₱51.00 exchange rate as at balance sheet date
2.20 Since the above figures pertained only to the amount found in a sample of ten, the
remaining differences between the Accounting and BID records and the previous erroneous
entries have the possibility of affecting further the account balances appearing in the
Financial Statements of the Authority.
2.21 Overall, understatements of Receivables and related accounts are computed as

follows:
Accounts Affected Current Year’s Unbilled Total as at

Income Recorded accounts March 15, 2022
under Retained
Earnings
Receivables ₱11,882,190.42 ₱1,293,307.22 ₱13,175,497.64
Service and Business Income 9,828,959.81 1,126,987.22 10,955,947.03
Retained Earnings 2,053,229.61 166,320.00 2,219,549.61
Total ₱23,764,379.84 ₱2,586,614.44 ₱26,350,994.28
Table 11 Overall Amount of Understatements on Receivables and Related Accounts
2.22 We recommended that Management undertake the following courses of

action:
a. establish measures and strategies to ensure well-timed compliance of locators

with the requirements set upon them so as not to impede the Authority’s
business processing activities on pre-termination, new contracts and/or
renewals;
b. consider providing off-book adjustment(s) as of cut-off date of FS preparation

when circumstances require, to reflect the late additions on the Receivables
and Income account, minimizing the materiality of the misstatements that
might occur; and
71
measure the accounts or contracts subject to off-book adjustment(s) to be
made.
2.23 Management commented that the Business and Investment Group (BIG) has
spearheaded the reengineering of the Business Processes of the Authority to ensure
compliance of locators is made in a timely manner. The Authority, through the approval of
Board Resolution No. 22-02-2431, will be adopting the Policy and Guidelines on the New
Business Process relative to the issuance of business permits, approval of requests and
processing of other business-related operations requests in the SBFZ. Included in the policy
is the delegation of the monitoring of compliance to the concerned departments where the
violations/comments have been noted.
2.24 Further, the agency concurred with considering the provision of off-book
adjustment(s) as necessary and committed to adhere with the Audit Team’s
recommendation on the institution of coordination between Accounting and BID for
purposes of assessing or measuring the accounts or contracts for off-book adjustment(s).
Inadequate disclosures on leases
3. Certain disclosures applicable to the Authority as provided for under

International Financial Reporting Standards (IFRS) 7 – Financial Instruments:
Disclosures and IFRS 16 – Leases were not included in the Notes to Financial
Statements (FSs) impairing the understandability of the information about the affected
accounts, which is one of the qualitative characteristics of a reliable FS.
3.1. Paragraph 25 of the Philippine Financial Reporting Standard (PFRS) states that an
essential quality of the information provided in the financial statements (FSs) is that it is
readily understandable by users. Further, the same standard cited in Paragraph 21 the
inclusion of notes and supplementary schedules and other information in the FSs whose
purpose is to add informative value relevant to the needs of the users about the items in the
balance sheet and income statement. They may include disclosures about the risks and
uncertainties affecting the entity and any resources and obligations not recognized in the
balance sheet.
3.2 During the review of the Notes to Financial Statements (FSs) of the Authority for
the year 2021, it was observed that the applicable minimum disclosure required per IFRS
7, Financial Instruments – Disclosures (Loans and Receivables) and IFRS 16, Leases (for
Operating Lease-Lessor) were incomplete. Such disclosures are necessary, thus, to be
considered an integral part of the Notes for the better understanding of the users and readers
thereof.
3.3 The following disclosures were not visible or evident in the Notes to FS of the
Authority:
72
 Loans and Receivables (Receivables)
 Disclosure on the reconciliation of changes in the Allowance for Impairment

account during the period for each class of financial assets – IFRS 7.16
 Leases
 Disclosure on a tabular format, unless another format is more appropriate, of the

lease income, separately disclosing income relating to variable lease payments
that do not depend on an index or a rate – IFRS 16.90
 Disclosure on the additional qualitative and quantitative information about

leasing activities – IFRS 16.92, such as, but not limited to:
a. the nature of the lessor’s leasing activities; and
b. how the lessor manages the risk associated with any rights it retains in
underlying assets. In particular, a lessor shall disclose its risk management
strategy for the rights it retains in underlying assets, including any means
by which the lessor reduces that risk. Such means may include, for
example, buy-back agreements, residual value guarantees or variable
lease payments for use in excess of specified limits.
3.4 The objective of disclosures is for lessors to convey by way of a Note that, together
with the quantitative information provided in the statement of financial position, statement
of profit or loss, and statement of cash flows, users of the FS are given bases to assess the
effect that leases have on the FS. While the abovementioned disclosures add up to the
understandability of the financial statements, information that should have been contained
within but were not, can possibly affect the users’ appreciation of the report.
3.5 We recommended that Management include the applicable disclosures

mentioned under IFRS 7, Financial Instruments – Disclosures (Loans and
Receivables) and IFRS 16, Leases (for Operating Lease-Lessor) for fair presentation
of the financial statements (FSs).
3.6 Management acknowledged the observation and commented their adherence to the
recommendation on the inclusion of the said disclosures in the Authority’s Financial
Statements ending December 31, 2022.
Misstatement of Inventories and related Expense accounts

Standards (PAS) 2 and the Authority’s internal guidelines on property disposal, thus,
resulting to the misstatement of the Inventories and Maintenance and Other Operating
73
Expenses (MOOE) accounts in the Financial Statements (FSs) and the related
disclosures in the FS.
4.1. The Philippine Accounting Standards (PAS) 2 defines inventories as assets that are
held for sale in the ordinary course of business, in the process of production for such sale
or in the form of materials or supplies to be consumed in the production process or in the
rendering of services. It also requires the disclosures of amount of any write-down of
inventories recognized as an expense in the period.
4.2 Note 3.5 of the Notes to the Financial Statements of the Authority states that
inventory is measured at cost upon initial recognition. After initial recognition, inventory
is measured at the lower of cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of operations, less the estimated costs of
completion and the estimated costs necessary to make the sale, exchange, or distribution.
4.3 SBMA Board Resolution No. 09-491, or the Guidelines for the Disposal of
Unnecessary Properties in SBMA, dated September 18, 2009, defines unnecessary
property as property that is not essential to the needs or operations of the particular office
that has possession of it. It further states that the term shall include properties, among
others, that are obsolete due to changed procedures, functions, or usage patterns are no
longer needed and have become unserviceable for any cause. Accordingly, the
Procurement and Property Management Department (PPMD) shall, upon consultation with
the user/s of the subject properties, determine which properties may be considered
unnecessary and therefore suitable for disposal.
4.4 Previous audit reports disclosed the presence of obsolete/dormant inventories of the
Authority which consisted of FSC office supplies, hardware, tires and toiletries, and spare
parts. Records showed that these inventories had been held in stock for more than eight to
20 years and their possible use was uncertain.
4.5 For CY 2021, the PPMD and Expense Managers concerned identified non-
moving/obsolete inventory items totaling ₱7,654,808.07, which are as follows:
Account Name/Sub-Account Line Item/ Amount

Quantity
Spare Parts - Stocking
Spare Parts – Ecology 233 ₱1,912,071.00
Spare Parts-Transportation 718 3,540,235.26
Total Amount 951 ₱5,452,306.26
Office Supplies and Materials-Stocking
Office Supplies – FSC 39 ₱115,035.20
Office Supplies –Stocking 61 934,013.56
Total Amount 100 ₱1,049,048.76
Maintenance Supplies Inventory-Stocking
Hardware – FSC 45 45,824.00
Tires – FSC 2 14,920.00
Toiletries –FSC 2 1,830.00
74
Total Amount 49 ₱62,574.00
Excess Materials from 291 ₱1,090,879.05
Completed Project
Grand Total 1,391 ₱7,654,808.07
Table 12 Non-moving / Obsolete Inventory Items Identified by PPMD and Expense Managers
4.6 Inquiry with the PPMD personnel revealed that inventory items that are considered
hazardous are to be disposed through the activity of the Ecology Department on the
Recyclable Collection Event. The said event entails cost for the treatment of hazardous
materials for disposal, but such activity was not included in the Project Procurement
Management Plan (PPMP) of the PPMD. For lack of funding, the planned disposal did not
materialize. Meanwhile, the other inventories were also planned to be disposed of together
with the unserviceable PPE items in Bldg.709 but due to prolonged preparation of disposal
documents, no disposal transpired during CY 2021; thus, the said inventories have
remained undisposed.
4.7 The PPMD personnel further cited the lack of capable personnel to appraise the
subject inventories and the hiring of an appraiser would be impractical, considering that
the subject items were already obsolete. As such, the appraisal report, which will be the
basis of the Accounting Department for the recognition of inventory impairment was not
prepared, thus, resulted in an overstatement of the Inventories account and an
understatement of Maintenance and Other Operating Expenses (MOOE) by as much as
₱7,654,808.07. Additionally, inventory write-downs were not properly recognized for the
period.

action:
a. direct the PPMD with the assistance of the Engineering Department to

prepare the annual inventory and appraisal of impaired inventories for
submission to the Accounting Department; and
b. direct the Accounting Department to prepare the necessary adjusting entries

and required disclosures based on the submitted report.
4.9 Management agreed to the recommendation wherein the PPMD will seek the
assistance of the Engineering Department relative to the appraisal of the impaired
inventories as identified by the PPMD, in coordination with the concerned Expense
Account Managers (EAMs).
4.10 Moreover, it was mentioned that the Accounting Department will prepare the
necessary adjusting entries and required disclosures upon receipt of the required report
from the PPMD.
75
Misstated Investment Property
5. The Investment Property (IP) accounts with carrying amount of

₱5,746,454,227.06 as of year-end were misstated due to a) unverified beginning balance
of Investment Property, Buildings and Investment Property, Port Development Project
totaling ₱5,186,126,672.90; b) misclassification of IP-Land under PPE at
₱13,933,376,379.10; and c) unrecorded lessee’s development commitment by up to
₱337,249,836.29. Likewise, full disclosure of the accounts in the Notes to the Financial
Statements (FSs) was not provided as required under Philippine Accounting Standards
(PAS) 40.
5.1 Paragraph 7 of Philippine Accounting Standards 40 (PAS 40) states that Investment
Property (IP) is held to earn rentals or for capital appreciation or both. An investment
property generates cash flows largely and independently of the assets held by an entity.
5.2 As of December 31, 2021, the balance of the IP accounts of the Authority, as
reflected in the Comparative Statement of Financial Position, showed a carrying value of
₱5,746,454,227.06, broken down as follows:
Account Name December 31, 2021 December 31, 2020 Increase/(Decrease)

Investment Property,
Buildings ₱6,125,670,652.21 ₱511,598,281.84 ₱5,614,072,370.37
Accumulated Depreciation 5,305,986,556.01 234,174,275.30 5,071,812,280.71
Carrying Value ₱819,684,096.20 ₱277,424,006.54 ₱542,290,089.66
Investment Property, Port
Development Project ₱7,777,505,480.19 ₱7,777,505,480.19 ₱0.00
Accumulated Depreciation 2,850,735,349.33 2,605,527,884.91 245,207,464.42
Carrying Value ₱4,926,770,130.86 ₱5,171,977,595.28 (₱245,207,464.42)
Total Carrying Value ₱5,746,454,227.06 ₱5,449,401,601.82 ₱297,052,625.24
Table 13 Non-moving / Obsolete Inventory Items Identified by PPMD and Expense Managers
a. Unverified beginning balance of IP based on LADD Report- ₱5.2 bilion
5.3 The Land and Assets Development Department (LADD), was tasked to administer
all lands, building and structures of the Authority, responsible, among others, for the
maintenance of a database for all land holdings, including all housing structures and
facilities.
5.4 The Authority has implemented PAS 40 thru partial reclassification of Investment
Properties (IP) previously categorized under the Property Plant and Equipment (PPE)
account. For calendar year (CY) 2021, the Accounting Office made adjustments totaling
₱5,614,072,370.37 (see table above) for the 1,566 identified leased properties of the
Authority that were reclassified from the Fully Depreciated Buildings and Structures
account under PPE. These items generally pertain to the housing units for lease.
76
5.5 Nonetheless, the beginning balances of the IP accounts with an aggregate carrying
amount of ₱5,186,126,672.90 as of year-end, as tabulated below, was not physically
verified by LADD as to existence. Consider the following:
Particulars Account Code Amount

Investment Properties- Buildings 1-05-01-020-001-000- ₱511,598,281.84
000
Acc. Dep.- Investment Property- Buildings 1-05-01-021-001-000- (252,241,739.80)
000
Carrying amount 259,356,542.04
Investment Properties- Port Development 1-05-01-020-002-000- 7,777,505,480.19
Project 000
Acc. Dep.- Investment Property- Port 1-05-01-021-002-000- (2,850,735,349.33
Development 000 )
Carrying amount 4,926,770,130.86
Total Carrying Amount as of Dec. 31, 2021 ₱5,186,126,672.90
Table 14 Investment Property Breakdown as of Year-end
5.6 According to Management, full reclassification to the appropriate accounts will be

made after the evaluation and identification of the individual property by the Inventory
Committee in-charge with the one-time cleansing of PPE. As such, the existence and
accuracy of the aforementioned amount of ₱5,186,126,672.90 was not ascertained as at
year-end.
b. IP-Land classified under PPE - ₱13.9 billion
5.7 Section 5 of PAS 40 defines Investment Property as property held to earn rentals
or for capital appreciation or both. An owner-occupied property held for use in the
production or supply of goods or services or for administrative purposes is excluded.
5.8 Based on records, the cost of land is valued at ₱14,982,125,138.93 consisting an

area of approximately 146,140,314 square meters (sq.m.) or 14,614.03 hectares out of the
entire 67,452-hectare coverage of the Subic Bay Freeport Zone (SBFZ). Item 1.1 of the
Notes to the Financial Statements (FSs) cited that the Authority’s area for development is
comprised of 13,600 hectares of leasable land (based on the actual survey conducted by the
DENR) and 53,852 hectares of protected areas under the jurisdiction of the Freeport. Based
on estimates, 93% of the recorded value of the land is considered leasable, with an allocated
amount of about ₱13,933,376,379.10.
5.9 As at year-end, the portion of Land, recorded as PPE, that can be considered as IP
was not reclassified. Prior year recommendation on adopting an allocation methodology
was not made. During the year, the Land and Asset Development Department (LADD) had
an initial meeting with the Land Management Bureau of DENR Region III for the conduct
of land boundary survey of the whole SBFZ and the secured area to properly allocate the
corresponding cost of land to be treated as property investment.
77
5.10 The non-classification of Land for lease as Investment Property overstated the
account PPE and understated Investment Property by as much as ₱13,933,376,379.10.
c. Unrecorded lessee’s development commitment - ₱337 million
5.11 Development Commitment refers to the contractual obligation of a Subic Bay

Freeport Enterprise (SBF) to construct and/or develop physical improvements on a
particular property of the Authority. These commitments, upon termination/expiration of
the lease contract, will become the property of the Authority as stipulated in the agreement.
5.12 In the previous year’s audit, we noted one building facility built by a certain locator.
This was taken over by the Authority in July 2015 with a depreciated replacement
cost/appraised value of ₱197,625,000.00 as determined by LADD. Review of records
showed that there were no additions or adjustments made to the Investment Property
account pertaining to development commitments that have become the property of the
Authority. Likewise, the LADD has yet to account for all the existing buildings and
structures of the Authority especially those built since its establishment as a government
corporation.
5.13 For the current year’s audit, we requested information on the actual amount of
development commitment infused by the locators on the leased property from the Building
Permit and Safety Department (BPSD) using 42 samples from the list of expired contracts
generated from the Integrated Financial Management System (IFMS). The BPSD provided
information for ten locators (one out of ten is found to be active and currently in the long-
term lease) while the remaining 32 were marked as “no record of dev. commitment”. BPSD
clarified that they were not provided with the request for validation by the Business and
Investment Department (BID), citing their function, per Omnibus Policy of the Authority,
as merely rendering assistance upon the request of the Managers and Account Officers of
the BID. Further verification from the BID pertaining to the 32 accounts revealed that 17
have no development commitments, while no information was obtained as regards the
remaining 15 accounts. The results of our verification confirmed nine development
commitments and the corresponding amounts; to wit:
Expired Contract from IFMS Actual Date Development Commitment

of
Customer Name Effectivity Expiry Termination BPSD Validated BID
Date Date (BID) Amount
AUTOKID SUBIC 1-Dec-17 30-Nov-21 30-Nov-21 ₱63,753,062.65 25 Million
TRADING (more or less)
CORPORATION or
US$531,914.89
AVIVA IMPORT 3-Nov-14 2-Nov-20 Renewed 2,529,317.00 Files for the
AND EXPORT valid until year 2015 were
CORP. April 30, 2022 forwarded to
the Internal
Audit - not yet
returned
78
Expired Contract from IFMS Actual Date Development Commitment
of
Customer Name Effectivity Expiry Termination BPSD Validated BID
Date Date (BID) Amount
BROADWATER 5-Jul-11 4-Jan-12 7/4/2021 6,048,491.24 6,000,000.00
MARINE, INC. (renewed until
(FORMERLY July 4, 2024)
BROADWATER M
SAMBONG SUBIC 1-Feb-18 31-Jan-22 31-Jan-22 1,571,521.87 1,571,521.87

CORP.
SUBIC METRO 3-Dec-14 2-Dec-19 2-Dec-19 5,360,758.75 5,360,758.75
LANKA
INTERNATIONAL
CORPORATION
SUBIC TRUCKBOY 15-Sep-16 14-Aug-21 31-Jan-22 5,465,645.86 3,000,000.00
INTERNATIONAL,
INC.
TAIJIMA 5-Aug-18 4-Aug-20 4-Aug-20 2,326,863.75 2,500,000.00
INTERNATIONAL
VENTURE CORP
WARTSILA SUBIC, 1-Apr-05 30-Nov-09 40,268,208.95 no available
INC. data
YOBGOO 18-Jul-13 31-Jan-22 31-Jan-22 2,650,305.60 2,650,305.60
INTERNATIONAL
CORPORATION
Total ₱129,974,175.67
Table 15 Results of Verification for Nine Development Commitments
5.14 In addition to the samples presented to the BID and BPSD, we also forwarded 30
accounts with the highest receivable balance to the Legal Department for information on
those which have been pre-terminated or have already expired. Considering the amounts
of outstanding receivables due from these locators, such accounts may contain substantial
development commitments. Out of the 30 accounts, 11 accounts were already “taken over”
by the Authority as follows:
Locator Handling Department

1. Legend International Resorts Ltd. Locators Registration and Licensing
Department (LRLD now under the BID
Leisure)
2. KT Global Subic Inc. LRLD / General Business and Investment
Department (GBID)
3. The Universal International Group Locators Registration and Licensing
Development Department (LRLD now under the BID
Leisure)
4. Subic Bay Marine Exploratorium BID Leisure
5. Pal Horizon Gateway Subic Inc. BID Leisure
79
Locator Handling Department
6. Subic Leisureworld Inc. Locators Registration and Licensing
Department (LRLD now under the BID
Leisure)
7. The Manila Times of Journalism BID Leisure
Inc.
8. The Manila Times College of Subic BID Leisure
Inc.
9. Subic Bay Waterfront Development Locators Registration and Licensing
Corp. Department (LRLD now under the BID
Leisure)
10. Subic Language Learning Center General Business and Investment
Inc. Department
11. Subic Bay Satellite Systems, Inc. BID Information and Communications
Technology (ICT)
Table 16 Eleven (11) Accounts Taken-Over by the Authority
5.15 Regarding our inquiry, BID Leisure and BID ICT both stated in their responses that
they do not have an account or record of development commitments. As such, the amounts
involved are not reflected in the above table.
5.16 To further verify other development commitments that were not captured in our
samples, we requested a list of accounts, either pre-terminated or expired, with
development commitments from five Departments of the Business and Investment Group
(BIG), and gathered the following information:
Company Name Lease Term Development BPSD Date Pre-

Commitment Validation terminated/Expired
From GBID
Casa Kalayaan 25 years To improve school None Pre-terminated on
International School from facilities worth 3/31/2021
Inc. 9/9/2018 to ₱27,284,000.00 for
9/8/2043 a period of ten years
from 3/25/2016 to
3/26/2026
SUBICPRO 10 years To construct an ₱2,176,046.00 Pre-terminated on
COMMODITIES from emission testing 8/31/2019
CORPORATION 7/1/2013 to center worth 1.5M
6/30/2023 on the leased
property within six
months starting
from 7/8/2013 to
1/7/2014
From Logistics
SUBIC METRO 5 years Construction of 5,000,000.00 Expiration Date is
LANKA from fence shed and December 3, 2019
INTERNATIONAL 12/3/2014 to office six months
CORPORATION 12/2/2019 from
80
commencement
date
From Manufacturing and Maritime

POLARMARINE, From Repair and 2,474,614.62 Expiration date -
INC. 10/12/2015 renovation of 11/30/2019
to showroom, office,
10/12/2019 warehouse,
production and
restroom
Total ₱9,650,660.62
Table 17 Pre-terminated or Expired Accounts not included in the Samples
5.17 As can be observed from the foregoing, gaps relating to the monitoring of acquired
development commitments and reporting of the acquisitions thereof to the Accounting
Department for recording were not addressed. According to the BID, the Omnibus Policy
on the Imposition of Performance Bond and its Applicable Rates provides guidance for the
monitoring of the locator’s compliance with their development commitments. The policy
was only put in place in 2016; hence, development commitments were not monitored
efficiently prior to the implementation of the policy. There were also instances where the
locators failed or have had delays in the submissions, which resulted to the late validation
by the BPSD. We also noted that the policy did not define the reportorial mechanism
which ensures provision of information on acquired development commitments to other
Departments concerned, such as LADD and the Accounting Unit.
5.18 Considering the repossessed building facility of ₱197,625,000.00,

expired/terminated contracts totaling ₱139,624,836.29, the IP and Retained Earnings
accounts were both understated by ₱337,249,836.29 as at December 31, 2021.
Additionally, the absence of information on acquired development commitments without
the necessary monetary information understated the same accounts for undetermined
amounts. The aforementioned misstatements, which affected Retained Earnings have an
impact on tax payables and dividends due to the National Government as well.
d. Inadequate disclosure
5.19 Paragraphs 75 and 78 of PAS 40 requires the following information, among others,
as a minimum disclosure requirement related to IP, which shall be embodied in the Notes
to FSs. Also presented are the corresponding Management comments for each; viz:
i. Amounts recognized in profit or loss for rental income from IP.
The Accounting Department committed to sort all revenues to determine income

from IP for inclusion in the Notes to FS in the succeeding year; and
ii. The fair value of IP.
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If the fair value of an IP item cannot be measured reliably, additional disclosures
are required, including an explanation of why fair value cannot be determined
reliably and, if possible, the range of estimates within which the fair value of an IP
falls when recorded using the Cost Model. The Accounting Department
commented that it will coordinate with LADD for such additional disclosures.
5.20 By and large, the inadequacy of disclosure obscured the relevant information and
reduced the understandability of the account in the FSs.

action:
a. provide additional strategies and involve related Departments in the “one-

time” cleansing activity to capture all development commitments for
recording in the books of accounts;

monitoring of investment/development commitment of locators and the
reporting thereof to the departments concerned, including LADD and the
Accounting Office for record keeping purposes;
database and reasonable allocation method for costing separately the land as
owner-occupied and as investment property, and prepare the necessary
adjusting entry to reclassify the same to the appropriate accounts; and (ii)
provide information on the fair values of an investment property for disclosure
purposes; and
d. instruct the Accounting Department to draw journal entries recognizing

unrecorded Investment Properties.
5.22 Management commented that the drafting of the Physical Inventory Plan (PIP) for
the One-Time Cleansing of PPE accounts is being undertaken by LADD, in coordination
with other concerned departments, who will also be included in the Inventory Committee
(IC) being constituted. Part of this PIP are the additional strategies determined appropriate
to capture the development commitments for recording in the books of accounts.
5.23 Management also committed that the Business and Investment Group (BIG) will
review and initiate the necessary amendments in the existing Omnibus Policy on the
Imposition of Performance Bond and its Applicable Rates to include responsible
department for the monitoring of investment/development commitment of locators and for
proper assets recognition/recording and proper valuation.
5.24 They also agreed with the establishment of a database and a reasonable allocation
method for the separate costing of land wherein they mentioned that LADD will need the
expertise of an Appraiser for the fair values of the investment properties. Upon receipt of
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the endorsement of report from LADD on properties, the Accounting Department will
prepare the necessary journal entries.
Incomplete cleansing of Property, Plant and Equipment
6. Due to inadequate planning, one-time cleansing of Property, Plant and

Equipment (PPE) accounts was incomplete, inconsistent with the guidelines set forth
under COA Circular No. 2020-006, resulting in (a) unverified amounts in the Land
Improvements, Infrastructure Assets, Buildings and Building Structures and
Construction in Process accounts aggregating ₱2,581,177,708.01; (b) unreconciled
amount of ₱15,538,956.89 under Other Equipment, Work Animals and Fully
Depreciated Equipment (moveable PPEs); and (c) inclusion of issued semi-expendable
property below capitalization threshold presented in the Financial Statements in the total
amount of ₱2,692,631.99 which overstated both PPE and Retained Earnings accounts
by the same amount.
6.1 COA Circular No. 2020-006 provides the general and procedural guidelines in the
conduct of physical count of Property, Plant and Equipment (PPE), recognition of PPE
items found at stations and disposition for non-existing/missing PPE items for the one-time
cleansing of PPE account balances of government agencies. The Circular was issued to
address the enormous discrepancies in PPE account balances of government agencies
which have become a perennial issue and caused the non-establishment of the accuracy of
the PPE balances presented in the financial statements. These gaps caused exceptions in
the fairness of presentation of the financial position of government agencies and deprived
the government with reliable and useful information in decision-making and asset
accountability.
6.2 Responsibility with regard to the accomplishment of the one-time cleansing activity
rests with the Inventory Committee (IC) as stated in Section 5.2 of the same COA Circular.
the Authority’s IC was constituted through Office Order No. 2019-12-0604, headed by the
Land Asset Development Department (LADD) with members from the Accounting
Department and Procurement and Property Management Department (PPMD). The
Committee’s composition is in line with their core duties and responsibilities of providing
reliable asset information as well as assignment and tracking of asset accountability.
6.3 As of December 31, 2021, the Property, Plant and Equipment (PPE) accounts of
the Authority, as reflected in the Statement of Financial Position, showed a total carrying
value of ₱18,637,523,660.85, composed of the following:
Account Name Cost Accumulated Carrying Value

Depreciation
Land ₱14,982,125,138.93 ₱0.00 ₱14,982,125,138.93
Land Improvements 1,072,509,163.60 819,716,104.76 252,793,058.84
Infrastructure Assets 3,054,161,421.85 2,500,104,717.82 554,056,704.03
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Account Name Cost Accumulated Carrying Value
Depreciation
Buildings and Building 5,331,203,243.93 4,742,409,797.60 588,793,446.33
Structures
Construction in 1,483,180,623.33 1,483,180,623.33
Progress
Machinery and 699,663,057.60 285,246,126.93 414,416,930.67
Equipment
Transportation 749,379,225.36 556,964,357.52 192,414,867.84
Equipment
Furniture and fixtures, 5,003,654.80 1,079,268.24 3,924,386.56
books
Heritage assets 3,517,000.00 0.00 3,517,000.00
Other PPE 1,688,506,482.69 1,526,204,978.37 162,301,504.32
Total PPE ₱29,069,249,012.09 ₱10,431,725,351.24 ₱18,637,523,660.85
Total Assets ₱35,665,037,406.74
Percentage 52.26%
Table 18 Composition of the Property, Plant and Equipment accounts of the Authority
a. Unverified Buildings and Structures based on LADD Report - ₱2,878,823,832.53
6.4 For the calendar year (CY) 2021, the Authority attempted to implement the one-
time cleansing of PPE. For its part, the LADD focused verification on fully depreciated
Buildings and Building Structures with carrying value of ₱511,234,134.75, leaving an
aggregate amount of ₱2,878,823,832.53 still unverified, comprised of Land Improvements,
Infrastructure Assets, Buildings and Building Structures and Construction in Progress
(refer to the above table for the breakdown). The initial results of the substantiation
performed by the LADD are tabulated below:
Particulars No. of Amount Carrying Value

Facility/ Line
Items
Demolished buildings still carried in 488 ₱1,044,524,629.86 104,452,463.99
the books but no longer existing
Utilities and Structures recorded in the 31 365,787,488.55 36,578,748.86
books but physical existence could not
be established
Various accounting entries of which 152 729,670,995.91 72,967,099.60
related facility/property numbers were
not identified (untagged)
Existing Facilities but not recorded in 108 No assigned value
the books of accounts
Total 779 ₱2,139,983,114.32 ₱213,998,312.45
Table 19 Initial Results of the Substantiation by LADD
b. Unreconciled PPEs based on PPMD Report - ₱2,596,716,664.90
6.5 On the other hand, the PPMD provided the following results on the verification of
moveable PPEs such as Other Equipment, Work Animals and Fully Depreciated
Equipment, showing unreconciled amount of ₱15,538,956.89; viz:
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Account Subsidiary Physical Count Unreconciled Unreconciled
Ledger (b) (Gross) (Carrying Value)
(a) (a-b)
Other Equipment ₱5,003,654.80 ₱4,675,575.00 ₱328,079.80 ₱18,200.00
Work Animals 2,624,477.32 1,472,086.71 1,152,390.60 719,270.47
Fully Depreciated - 1,685,882,005.37 1,537,867,141.21 148,014,864.16 14,801,486.42
Equipment
Total ₱1,693,510,137.49 ₱1,544,014,802.92 ₱149,495,334.57 ₱15,538,956.89
Table 20 Unreconciled Amount on the Comparison of Subsidiary Ledger and Physical Count
6.6 In addition, fixed assets with a carrying value of approximately ₱2,581,177,708.01

(see table below for the details) were not duly reconciled and adjusted in the accounting
books because the one-time cleansing activity was not completed. Overall, the existence
and accuracy of the recorded PPEs totaling ₱2,596,716,664.90 were not ascertained.
Property, Plant and Equipment Carrying Value

Land Improvements ₱252,793,058.84
Infrastructure Assets 554,056,704.03
Construction in Progress 1,483,180,623.33
Buildings and Building Structures (not fully 77,559,311.58
depreciated)
Discrepancies per LADD report 213,588,010.23
Sub-total (Fixed Assets) ₱2,581,177,708.01
Discrepancies per PPMD report 15,538,956.89
Total ₱2,596,716,664.90
Table 21 Unreconciled Fixed Assets
6.7 Sections 5.9 and 5.10 of COA Circular 2020-006 states that the IC shall prepare a
Physical Inventory Plan (PIP) containing, at the least, the specific assignments/duties of
the Committee members, the cut-off date and a schedule specifying the dates and locations
of the inventory taking activities from start up to the targeted completion date of the
physical inventory. The PIP shall be approved by the Head of the Agency.
6.8 Plan preparation involves the following:

- Identification of resources needed;
- Risk assessment and formulation of risk mitigation strategies;
- Time bound activities to be executed to attain desired objectives with assigned
accountabilities; and
- Monitoring and assessment.
6.9 We requested information on the Physical Inventory Plan of the IC for CY 2021.
We were provided with separate plans for the LADD and the PPMD. We have observed
that the separate plans did not completely take into consideration all the required guidelines
and procedures as stated in the COA Circular. An interview with the IC revealed that
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setbacks encountered during the conduct of activity hindered its completion, which is
indicative that the individual plans may be inadequate.
6.10 Moreover, review of records showed that various semi-expendable properties

below the capitalization threshold of ₱15,000.00 were still carried under the different PPE
accounts with carrying values totaling ₱2,692,631.99, detailed as follows:
Account Acquisition Cost Accumulated Carrying Value

Depreciation
IT Equipment and
Software ₱1,559,200.76 ₱714,393.33 ₱844,807.43
Communication
Equipment 1,699,280.84 315,355.64 1,383,925.20
Medical, Dental and
Laboratory Equipment 24,000.00 7,892.09 16,107.91
Hand tools 24,700.00 23,465.00 1,235.00
Other Equipment 2,129,260.23 1,689,168.07 440,092.16
Furniture and Fixture 10,600.00 4,135.71 6,464.29
Total ₱5,447,041.83 ₱2,754,409.84 ₱2,692,631.99
Table 22 Various PPE Accounts Containing Semi-Expendable Properties
6.11 Section 5.4 of COA Circular No. 2016-006 states that tangible items below the
capitalization threshold of ₱15,000 shall be accounted for as semi-expendable property.
6.12 The classification/inclusion of semi-expendable properties under PPE overstated

both the PPE and Retained Earnings accounts by ₱2,692,631.99.

action:
a. prepare a consolidated Physical Inventory Plan, taking into account, among

others, the following:

- Identification of resources needed;
- Risk assessment and formulation of risk mitigation strategies;
- Time bound activities to be executed to attain desired objectives with
assigned accountabilities as specified in COA Circular 2020-006; and
- Monitoring and assessment; and
presents an accurate and complete inventory of PPEs and reconciliation
results by adopting the guidelines on the one-time cleansing prescribed in the
aforementioned COA Circular; and (ii) draw journal entry voucher (JEV) to
take up the necessary adjusting entries in the books of accounts, if warranted.
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6.14 Management commented that the Authority is currently in the process of taking the
necessary steps to implement COA Circular 2020-006, for the One-Time Cleansing of PPE
account balances, wherein an initial coordination meeting on March 9, 2022 presided by
LADD was conducted to present the proposed implementation of the said Circular.
6.15 Among the topics discussed in the initial meeting were as follows:
- the need for the creation of an Inventory Committee (IC);

- the determination of the primary members of the IC – LADD, PPMD,
Accounting – and the inclusion of Support members from other concerned
departments; and
- the overview of the guidelines and procedures for the One-Time Cleansing of
PPE Accounts including the requirement for the formulation of the Physical
Inventory Plan (PIP).
6.16 As mentioned, further coordination meetings will be held in order to prepare a

consolidated PIP for all PPE accounts, and the Accounting Department will draw the
necessary adjusting entries upon submission of accurate and complete inventories of PPE
by the IC.
Lapses in Project Monitoring
noted due to non-observance of the regulations embodied under Circular No. 03-2019
dated March 8, 2019 of the Government Procurement Policy Board (GPPB), resulting
to a high percentage of negative slippages and eventual delays in project completion.
7.1 Project monitoring is an important aspect of the project’s life cycle. It aims to keep
track of project progress metrics, identify potential project implementation risks, and
institute corrective measures to address those risks. Project monitoring ensures that the
project is within the specified budget and deadlines. Careful project monitoring provides
project managers with valuable and reliable data regarding the progress of work, which is
essential in decision- making.
7.2 The Chairman of the Authority issued Office Order No. 2019-09-0560 on
September 19, 2019 assigning the Building Permit and Safety Department (BPSD), in
addition to its existing functions, as the Project Management Office (PMO) under the
Public Works and Technical Services Group (PWTSG). One of the tasks of the PMO is the
management of the implementation of infrastructure projects funded by the National
Government (NG) and projects funded through the Authority’s Corporate Operating
Budget (COB) totaling ₱50 Million and above. The PMO performs functions such as
project supervision; review of contractor’s/consultant’s billings, variation orders, and time
extensions; coordination of work progress and other related activities; and preparation of
recommendation for approval of payment of claims.
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7.3 Based on the records of the PMO, the following are the information regarding the
seven projects executed by the Authority as of December 31, 2021, viz:
ORIGINAL TIME EXTENSION Percentage

of
PROJECT CONTRACT
NO. NTP No. of Total Revised Completion
NAME AMOUNT Completion
CD extensions addt’l Date of As of
Date 3/29/2022
granted CD Completion
Rehabilitation
1 of Slope @ ₱73,728,254.73 10/17/19 270 7/13/20 9 615 03/20/22 91.44%
Aparri Road
NSD Road
Rehabilitation
2 289,007,445.57 10/1/19 365 9/30/2020 6 591 05/14/22 65.69%
Project Phase
III
Rehabilitation
3 of Perimeter 52,900,976.45 1/2/20 240 8/29/2020 6 555 04/26/22 73.15%
Road
Perimeter
Fence
4 69,702,936.90 1/2/20 300 10/28/2020 9 481 02/21/22 96.98%
(Kalaklan -
Kalayaan)
Construction
5 of Magsaysay 396,582,528.08 9/26/19 540 3/19/2021 5 450 06/12/22 30%
Bridge
Road
6 Rehabilitation 198,950,573.34 8/11/20 300 6/7/2021 3 306 04/09/22 43.49%
Project 2020
Road
7 Rehabilitation 169,009,622.19 5/3/21 300 2/27/22 1 96 06/03/22 45%
Project 2021
Total ₱1,249,882,337.26
Table 23 Information on the Seven (7) Projects per PMO Record
7.4 Delays were encountered during the implementation of the said projects, as
manifested in the numerous requests for time extensions. The usual reasons given to justify
the requests for extension of the project duration which were approved by Management are
as follows:
- Community Quarantine during the pandemic;

- Unfavorable weather conditions; and
- Obstructions and other unfavorable working conditions hindered the progress
of work.
7.5 On a regular basis, the PMO has been submitting a Project Delivery/Completion
Status Report to the PWTSG beginning January 2020. The report contains project
milestones as of the reporting date. Review of the Status Reports showed that various
projects incurred negative slippage, as summarized in the table below:
Reporting Report Submitted Deficiencies Noted/Remarks

Month/s to PWTSG
January 2020 Monthly Report The Construction of Magsaysay Bridge reported a negative
slippage of 15.135%; while the other projects contained no
information on slippage.
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Reporting Report Submitted Deficiencies Noted/Remarks
Month/s to PWTSG
February 2020 Monthly Report The Construction of Magsaysay Bridge reported a negative
January to June Semi-annual The Construction of Magsaysay Bridge reported a negative
2020 Report slippage of 24.71%; while the other projects contained no
July 2020 Monthly Report The following projects reported slippage:
Rehabilitation of Slope at Aparri Road - Negative 44.94%
NSD Road Rehabilitation Project Phase III- Negative
48.61%
Perimeter Fence (Kalaklan to Kalayaan) Project – Negative
22.5%
Rehabilitation of Perimeter Road- Negative 53%
Construction of Magsaysay Bridge – Negative 43.59%
July to September Quarterly Report The following projects reported slippage:
2020 Rehabilitation of Slope at Aparri Road - Negative 51.14%
NSD Road Rehabilitation Project Phase III- Negative
57.26%
Road Rehabilitation Project 2020 – Negative 2.195%
October 2020 Monthly Report No information on slippage reflected in the report.
November 2020 Monthly Report The Construction of Magsaysay Bridge reported a negative
October to Quarterly Report The Construction of Magsaysay Bridge reported a negative
December 2020 slippage of 14.55%; while the other projects contained no
January 2021 Monthly Report The Construction of Magsaysay Bridge reported a negative
January to March Quarterly Report The Construction of Magsaysay Bridge reported a negative
2021 slippage of 24.779%; while the other projects contained no
April to June, Quarterly Report The Construction of Magsaysay Bridge reported a negative
2021 slippage of 45%; while the other projects contained no
May 2021 Monthly Report The Construction of Magsaysay Bridge reported a negative
slippage of 28%; while the other projects contained no
August 2021 Monthly Report The Construction of Magsaysay Bridge reported a negative
October 2021 Monthly Report The Construction of Magsaysay Bridge reported a negative
October to Quarterly Report No information on slippage reflected in the report. The
December 2021 progress of work in Magsaysay Bridge was not included in
the report.
February 2022 Monthly Report The Construction of Magsaysay Bridge reported a negative
Table 24 Summary of the Status Reports Reviewed Showing Various Projects with Negative Slippage
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7.6 We requested for documentations from the PMO with respect to the monitoring
activities done on infrastructure projects. Out of the seven projects, only the documents
pertinent to the Construction of Magsaysay Bridge and Road Rehabilitation Project 2020
were made available to the Audit Team. Indicated below are the audit observations
encountered during the evaluation of such documents; viz:
 Construction of Magsaysay Bridge: Project started on September 26, 2019
 The monthly progress reports are part of the deliverables of a separate

Consultancy Contract involving the supervision of the said construction
project. While the infrastructure project started on September 29, 2019, 13
reports were provided covering the period October 2020 to October 2021.
The first report covered accomplishments from September 2019 up to
October 2020; thus, the reporting of accomplishments was not timely,
inconsistent with the specified timelines cited in the General Conditions of
the Contract 41.1.
 The report included, among others, progress status, construction activity and
work accomplished, projected activities, contractor’s resources, material and
quality testing, billing, variation order, request for time extension, weather
reports, project correspondence, minutes of the meetings, safety and health,
and progress photographs.
 The Minutes of the Regular Meetings included discussions of problems

encountered during project implementation.
 The contractor did not provide catch-up plans needed to make up for the lost
time on problems encountered and for monitoring the implementation
thereof by the PMO.
 Documentation pertaining to the validation by the PMO of the reported

accomplishment is done only upon submission of the contractor’s billing
statement. As such, verification of the actual progress of the project was not
timely and did not coincide with the monthly reporting of accomplishments.
 Road Rehabilitation Project 2020: Project start date August 11, 2020
 There were five accomplishment reports for the month of July 2021, one for
the month of August and another one for December 2021. The weekly
reporting was in response to the Memorandum of the PMO Manager to the
contractors requiring the weekly submission of project accomplishments.
The reporting requirements per GCC 41.1 were not followed. The December
2021 report stated a negative slippage of 18.94% which was not stated in the
submitted Project Delivery/Completion Status Report submitted to the
PWTSG.
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 Follow-up letters were made by the PMO requiring the contractor to submit
the accomplishment reports.
 Catch-up plans prepared by the contractor to make up for lost time and
monitoring of the implementation of these plans by the PMO were not
provided.
 Documentations pertaining to the validation by the PMO of the reported

accomplishment were contingent upon the submission of the contractor’s
billing statement. As such, the validation of the actual progress of the project
did not coincide with the regular reporting of monthly accomplishments.
7.7 The Government Procurement Policy Board (GPPB) issued Circular No. 03-2019
dated March 8, 2019, or the Guidance on Contract Termination Due to Fifteen (15%)
Negative Slippage by the Contractor in Infrastructure Projects which pronounces the
following regulations:
Subject Matter Specific Provisions of the Circular

Item 4.2 -Timing of reports xxx to ensure the timely implementation of
infrastructure projects and effective management
of the performance of contractors, the following
calibrated actions in response to delays in the
implementation of infrastructure projects are
hereby adopted:
4.2.1 Negative slippage of 5% The contractor shall be given a warning and

required to submit a detailed "catch-up" program
on a fortnightly (two weeks) basis to eliminate the
slippage. The contractor shall commit to
accelerate his work and shall identify specific
physical targets to be accomplished over a defined
time period. Furthermore, the contractor shall be
instructed to specify the additional input resources
- money, manpower, materials, equipment, and
management - which he should mobilize for this
action program. The Implementing Office shall
exercise closer supervision and meet the contractor
every other week to evaluate the progress of work
and resolve any problems and bottlenecks.
4.2.2 Negative slippage of 10%: The contractor shall be issued a final warning and
required to come-up with a more detailed program
of activities with weekly physical targets, together
with the required additional input resources.
Onsite supervision shall be intensified and
evaluation of project performance shall be done at
least once a week. At the same time, the
Implementing Office shall prepare contingency
plans for the termination of the contract and/or
take-over of the work by administration or
contract.
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Subject Matter Specific Provisions of the Circular
4.2.3 Negative slippage of 15% or more In accordance with the IRR of R.A. 9184, the
Implementing Offices shall initiate termination of
the contract and/or take-over of the remaining
work by administration or assignment to another
contractor/appropriate agency. Proper transitory
measures shall be taken to minimize work
disruptions, e.g., take-over by administration while
negotiation or rebidding is on-going.
Table 25 Section 4.2 of the Guidance on Contract Termination Due to Fifteen (15%) Negative Slippage
7.8 The PMO commented that the responsibility for the monitoring of infrastructure
projects was assigned to the project engineers. The same performed regular inspections but
documentation of the inspections was only done when requests for payments were made
by the contractor. We also noted the lack of a clear monitoring policy stating the specific
responsibilities of the project engineers as well as the frequency and form of reporting
requirements. This led to inconsistencies and inaccuracies in the reports generated as well
as undefined accountabilities and deliverables which adversely affected the decision-
making of management officials concerned in terms of providing interventions on noted
gaps during project implementation.
7.9 We recommended and Management agreed to undertake the following courses

of action:
a. establish project monitoring policies stating the specific responsibilities,

reporting requirements and standardized project monitoring tools to properly
address gaps noted in project implementation; and

Inadequacy of Housing Renovation Policy
8. The Authority may not be able to recover from losses of property and financial
resources due to absence of Management policy on the posting of performance security
to ensure the faithful performance of housing renovations.
8.1 Section 2 of Presidential Decree (P.D.) No. 1445 states that it is the declared policy
of the State that all resources of the government shall be managed, expended or utilized in
accordance with law and regulations, and safeguarded against loss or wastage through
illegal or improper disposition, with a view to ensuring efficiency, economy and
effectiveness in the operations of the government. The responsibility to take care that such
policy is faithfully adhered to rests directly with the chief or head of the government agency
concerned.
8.2 Meanwhile, a sound principle of internal control requires the following goals and
functions of Management, as provided for in Sections 123 and 124 of the said Decree:
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Section 123. Internal control is the plan of organization and all the coordinate
methods and measures adopted within an organization or agency to safeguard its
assets, check the accuracy and reliability of its accounting data, and encourage
adherence to prescribed managerial policies.
Section 124. It shall be the direct responsibility of the agency head to install,
implement and monitor a sound system of internal control.
8.3 Performance bond is issued to one party of a contract as a guarantee against the
failure of the other party to meet obligations specified in the contract. Performance bonds
are common in construction and real estate development where the owner requires the
developer to assure contractors or project managers through this instrument in order to
guarantee that the value of the work will not be lost in case of an unforeseen negative event.
8.4 The Authority owns housing units of which it provides both long-term and short-
term lease arrangement with investors and other individual entities. Policies and guidelines
associated with the use of these housing facilities are defined in the Resident’s Handbook
furnished to the lessees.
8.5 The Resident’s Handbook contains the rules and regulations with regard to repairs,
renovations and/or extensions of individual housing units. One of the key requirements as
stated in the handbook is that all renovations, extensions and repair works shall be in
accordance with the National Building Code of the Philippines (P.D. 1096) and its referral
codes. The resident shall secure from the Authority all necessary construction
permits/clearances prior to renovation, extension and repair works. The Building Permit
and Safety Department (BPSD) handles the issuance of the construction permit and also
issues the occupancy permits once the construction work is completed in accordance with
existing construction and safety standards.
8.6 For the year ended December 31, 2021, there were 35 housing units that had
undergone construction but were still subject to occupancy permit application. Of the 35
units, only one was issued with a building permit in 2018, nine in 2020, and 25 units in
2021.
8.7 Relatively, the Omnibus Policy of the Subic Bay Metropolitan Authority on the
Imposition of Performance Bonds, and its applicable rates was issued to establish the
framework and mechanisms for the posting of performance bonds, including the applicable
rates of the same. It protects the interest of the Authority over the properties by imposing
necessary penalties in case of violations or non-compliance with the policy. However, the
policy was limited to ensuring that development commitments of Subic Bay Freeport
Enterprises on the properties within the Subic Bay Freeport Zone and the expansion areas
are fulfilled. The policy excludes the imposition of a performance bond for work involving
renovations, extensions, and repairs of existing housing units.
93
8.8 Non-imposition of performance bond for construction works on leased housing
units exposes the Authority to risk of non-completion of repair/renovation works as well
as loss of income and property should the lessee default on its obligation.
8.9 We recommended and Management agreed to develop policies or include in

existing policies the requirement for the posting of a performance bond and
monitoring of the construction work done on housing units to protect the interest of
the Authority.
Gender and Development
9. Limited use of existing tools provided in the Harmonized Gender and

Development Guidelines (HGDG) resulted to inadequacy of GAD planning and minimal
implementation of Programs, Activities, and Projects (PAPs), thus, attaining a low
0.43% expenditure to budget ratio, which is inconsistent with the intention of Section 5.3
of the Philippine Commission on Women-National Economic Development Authority-
Department of Budget and Management (PCW-NEDA -DBM) Joint Circular (JC) No.
2012-01.
9.1. For the year 2021, the Authority has completed its analysis of the Agency’s sex-
disaggregated data in compliance with the audit recommendation for the prior year. Based
on the results of that analysis, the following recommendations were made by the GAD
Focal Point System (GFPS):
 That the GFPS focus its gender awareness activities to locators, communities and
other stakeholders, with ages of target participants ranging from 21 to 45 years old;
 That the GFPS create a separate program in raising awareness on the Lesbian, Gay,
Bisexual, Transgender, and Queer (LGBTQ) community by focusing on peer group
seminars and fora and other activities;
 That the GFPS recalibrate its module on Gender Sensitivity Training and Seminar
in breaking stereotypes of men and women and most especially the members of the
LGBTQ while also focusing on advocating the elimination of discrimination and
gender inequality;
 That the GFPS recalibrate its seminar and training modules focusing on various
gender equality laws such as Anti-VAWC, Magna Carta on Women and others and
ensure that all trainers are well-equipped and knowledgeable in presenting such
laws; and
 That GFPS must conduct a three-year Sex Disaggregated Data (SDD) Survey to
track the progress of its programs and other activities and the achievement of its
objectives.
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9.2 Section 36 of Republic Act (R.A.) No. 9710 states that the cost of implementing
Gender and Development (GAD) programs shall be based on the Agency’s GAD budget
which shall be at least five percent (5%) of its total budget appropriations for the year.
9.3 Comparison of the 2021 Corporate Operating Budget (COB) with the Annual GAD
Plan and Budget (GPB) showed the following information:
Particulars Amount
Approved Corporate Operating Budget ₱ 6,377,646,000.00
Threshold 5%
Required budget for GAD purposes 318,882,300.00
Reserved budget for GAD purposes 432,510,000.00
Difference ₱ 113,627,700.00
Table 26 Comparison of COB with Annual GPB
9.4 It can be gleaned above that the budgetary support for GAD was sufficient
representing about 7% of the total COB or ₱432,510,00.00.
9.5 However, the Authority reported a very minimal spending of ₱1,865,071.19 or only
0.43% of the total reserved budget for GAD for the following PPAs:
GAD Objective/Activity GAD Budget Actual Accomplishments/

Expenditures Remarks
Conduct of events and programs ₱850,000.00 ₱637,661.73 Four activities
that will highlight Gender Rights conducted
and Welfare and promote gender
equality and equity within the
Freeport and its contiguous areas.
Conduct of forum, community 500,000.00 432,000.00 Ten seminars
dialogue and meeting with conducted
stakeholders, schools, locators,
communities and IP Tribes.
Conduct of trainings, 150,000.00 64,700.00 Partially done due to
coordination meeting for spike of Covid-19
members of the GAD Focal Point
System and the GAD Department
Partners.
Hiring of GAD Consultants with 710,000.00 670,709.46 Hired two GAD
the skills and experience and consultants
specialization on the use of the
Multi-Media.
Conduct of training and seminars 300,000.00 60,000.00 Due to Covid-19,
focusing on employees’ Gender proposed seminars
awareness, health issues and were conducted
others. online.
Attributed Program:
Upgrading of Vessel 135,000,000.00 0.00 Projects were re-
Management Traffic System budgeted in 2022
awaiting the release
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GAD Objective/Activity GAD Budget Actual Accomplishments/
Expenditures Remarks
of SARO from the
DBM.
Implementation of the Drainage 295,000,000.00 0.00
Master Plan
Total ₱432,510,000.00 ₱1,865,071.19
Table 27 Summary of Actual GAD Expenditures and Accomplishments
9.6 Based on the submitted GAD Accomplishment Report (AR), three were
implemented, two had minimal financial activity as at year-end, while the two attributed
programs were not implemented.
9.7 PCW-NEDA -DBM Joint Circular No. 2012-01 sets forth the guidelines for GAD
Planning and Budgeting. Under Section 5.3 of the Circular, it encourages agencies to assess
the gender-responsiveness of their major programs and projects using the HGDG tool. The
result of the assessment will guide the Agency in identifying areas for improvement.
Section 6.4 states that attribution of the GAD budget of a portion or the whole of the of
Agency’s major programs is a means toward gradually increasing the gender
responsiveness of government programs and budgets.
9.8 The main preparer of the GAD Plan and Budget (GPB) is the GAD Focal Point
System Technical Working Group (GFPS TWG). GAD-focused Programs, Activities and
Projects (PAPs) to be implemented for the year were included in the plan. Initially, five
infrastructure projects were considered by the GFPS TWG and subjected to the project
identification tool as prescribed in the HGDG and included in the submitted GPB. Of the
five projects included, only two were approved for inclusion in the approved/endorsed GPB
by the Philippine Commission for Women (PCW). As the application or use of the tool
was limited to only five projects, attributable funding from other PAPs in the Corporate
Budget was therefore not considered and included in the GPB. It also hindered the
assessment capabilities of the GFPS TWG in the identification of areas where
improvements and needed interventions can be made.
9.9 We recommended that Management advise the GFPS to consider extending

the application of the HGDG tool to all programs, activities, and projects (PAPs), with
consideration of their impact on the mandate of the Authority, and consider in the
submitted GPB to the PCW those PAPs that passed the tool as GAD responsive and
sensitive, subject to the availability of the GAD fund.
9.10 Management commented that the GAD Focal Point System Executive Committee
and the Technical Working Group have coordinated with the Financial Planning and
Budget Department (FPBD) and the Performance Management Group in considering the
use of the HGDG Tool to be mandatory in the submission of the 2023 Project Procurement
Management Plan (PPMP).
9.11 The PMG Secretariat presented the inclusion of the GAD Attribution Checklist
(HGDG Tool) and Project/Program profile to the Performance Management Group on
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February 15, 2022 which was subsequently approved by both the PMG and the FPBD. It
was stated that the GAD FPS TWG will ensure all PAPs that passed the tool will be
included in the 2023 GAD Plans and Budget (GPB) for review and endorsement by the
Philippine Commission on Women.
Compliance with Tax Laws
10. Withholding taxes totaling ₱78,156,123.58 were remitted to the Bureau of

Internal Revenue (BIR) within the required period in accordance with Revenue
Regulations Nos. 2-98 and 17-2003 dated April 17, 1998 and March 31, 2003,
respectively. However, adjustments made after year-end resulted in various
misstatements in the Due to BIR and other related accounts as of December 31, 2021:
(a) overstatement in the Inter-Agency Receivables account by ₱686,092.69; (b)
understatement in the Other Receivables account by ₱352,816.11; (c) overstatement in
the Inter-Agency Payables account by ₱1,500,000.00; and (d) net understatement in the
Accounts Payable account by ₱1,166,723.42.
10.1. Revenue Regulations Nos. 2-98 and 17-2003 dated April 17, 1998 and March 31,
2003, respectively, provide the guidelines on the remittance of taxes withheld by
withholding agents.
10.2 Audit and verification of the accounts revealed that the Agency remitted its taxes
withheld during the year totaling ₱78,156,123.58, details are illustrated in the table below:
Expanded Withholding Compensation Withholding Total

Taxes Tax
₱20,502,227.39 ₱57,653,896.19 ₱78,156,123.58
Table 28 Breakdown of Remittances Made During the Year - Taxes
10.3 The Authority had unremitted expanded and compensation withholding taxes as at
year-end of CY 2020 totaling ₱4,155,512.16 and ₱7,290,574.83, respectively, which were
verified to be adjusted and/or fully remitted in January of 2021.
10.4 In CY 2021, the Agency withheld and remitted the amounts of ₱19,040,935.98 and
₱20,502,227.39, respectively, on expanded withholding taxes. On the other hand, total
taxes withheld on compensation during the year totaled ₱61,510,396.30 while total
remittances totaled ₱57,653,896.19. A summary of the entity’s compliance with the
aforementioned tax laws is presented below:
a. Expanded Withholding Taxes
Total
Due to BIR
Month Taxes Withheld (Balances + Taxes Remitted
(Ending Balance)
Current)
Beg. Balance ₱ - ₱ 4,155,512.16 ₱ - ₱ 4,155,512.16
January 1,467,675.98 5,623,188.14 4,155,512.16 1,467,675.98
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Total
Due to BIR
Month Taxes Withheld (Balances + Taxes Remitted
(Ending Balance)
Current)
February 2,941,820.50 4,409,496.48 932,372.10 3,477,124.38
March 2,575,114.69 6,052,239.07 2,676,762.68 3,375,476.39
April 815,645.96 4,191,122.35 2,957,168.31 1,233,954.04
May 736,855.99 1,970,810.03 961,316.48 1,009,493.55
June 1,790,377.72 2,799,871.27 910,049.74 1,889,821.53
July 353,882.58 2,243,704.11 1,526,166.06 717,538.05
August 1,474,594.26 2,192,132.31 538,948.93 1,653,183.38
September 682,590.28 2,335,773.66 1,525,144.17 810,629.49
October 3,066,916.78 3,877,546.27 503,801.64 3,373,744.63
November 606,435.49 3,980,180.12 1,789,266.37 2,190,913.75
December 2,529,025.75 4,719,939.50 2,025,718.75 2,694,220.75
Total ₱ ₱
19,040,935.98 20,502,227.39
Table 29 Details on Withholdings and Remittances for Expanded Withholding Taxes
b. Withholding Taxes on Compensation
Total Due to BIR

Taxes Taxes Tax
Month (Balances + (Ending
Withheld Remitted Adjustment
Current) Balance)
Beg. Balance ₱ - ₱ 7,290,574.83 ₱ - ₱ - ₱ 7,290,574.83
January 3,900,038.40 11,190,613.23 3,636,322.05 3,654,252.78 3,900,038.40
February 4,438,487.39 8,338,525.79 3,900,038.40 - 4,438,487.39
March 4,171,030.56 8,609,517.95 4,438,487.39 - 4,171,030.56
April 4,170,020.60 8,341,051.16 4,171,030.56 - 4,170,020.60
May 8,394,062.87 12,564,083.47 4,170,020.60 - 8,394,062.87
June 4,072,955.91 12,467,018.78 8,394,062.87 - 4,072,955.91
July 4,037,528.37 8,110,484.28 4,072,955.91 - 4,037,528.37
August 4,043,821.62 8,081,349.99 4,037,528.37 - 4,043,821.62
September 4,056,536.10 8,100,357.72 4,043,821.62 - 4,056,536.10
October 4,107,747.01 8,164,283.11 4,056,536.10 - 4,107,747.01
November 8,625,345.31 12,733,092.32 4,107,747.01 - 8,625,345.31
December 7,492,822.16 16,118,167.47 8,625,345.31 7,900.35 7,484,921.81
Total ₱ 61,510,396.30 ₱57,653,896.19 ₱3,662,153.13
Table 30 Details on Withholdings and Remittances for Withholding Taxes on Compensation
10.5 Additionally, the amount of ₱2,694,220.75 and ₱5,984,921.81 pertaining to

expanded withholding tax and taxes withheld on compensation, respectively, which formed
part of the year-end balance of Due to BIR, were found remitted in January 2022 upon
further analysis and review of the Agency’s records.
10.6 It was also observed that an adjustment was made on January 25, 2022 per JGL-
22-01-000163 for the remaining balance of the withholding tax on compensation totaling
₱1,500,000.00 to reflect the corrections from the prepared Annual Alphalist for
compensation taxes of the employees in CY 2021.
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10.7 However, it should be noted that such adjustment was made the following year and
not within the year these taxes pertained to, giving rise to the misstatement in the financial
position of the Agency as of year-end with an effect on the following accounts:
(a) Net overstatement of Inter-Agency Receivables - ₱686,092.69
Due from BIR, Tax on Compensation ₱575,252.92

(PS)
Due from BIR, Tax on Contractual 110,839.77
Employees
Total ₱686,092.69
(b) Understatement of Other Receivables (Due from Officers and Employees and
Salaries and Wages and All Monetary) - ₱352,816.11
(c) Overstatement of Inter-Agency Payables (W/Tax on Compensation – PS) -

₱1,500,000.00
(d) Net understatement of Accounts Payable - ₱1,166,723.42
Accounts Payable-Personnel Services ₱989,855.98

Accounts Payable MOOE (CS 176,867.44
Employees)
Total ₱1,166,723.42
10.8 The concerned personnel mentioned during the inquiry that since all Journal Entry
Vouchers (JEV) need to be finalized by January 14 of the following year, and the above
adjustment may only be known after the preparation of the Alphalist for taxes on
compensation, the deadline for which falls until the end of January, time differences and
the cut-off for the preparation of reports were revealed as the reasons for the after-year
adjustment. This is especially so when accuracy and thorough review should be ensured
when preparing the Alphalist.
10.9 The Audit Team commends the Management for the prompt remittance of taxes,
and for strictly implementing the imposition of taxes on money payments due or payable
to all suppliers of goods and/or services as a withholding agent of the government, as well
as the effort to effect adjustments as soon as possible. Nevertheless, while compliance with
prescribed regulations on the withholding and remittance of taxes are important matters,
the same weight and attention should have been given to the proper classification and
presentation of accounts appearing in the financial statement (FSs) of the Agency when it
comes to the assessment of its fair presentation, especially in cases where material amounts
are involved, which can possibly mislead users of the FSs.
10.10 We recommended and Management agreed to direct the Accountant to make

the necessary off-book adjustment(s), when circumstances require, reflecting the
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correct balances of Due to BIR and affected accounts in the financial statements to
establish fair presentation thereof.
Compliance with R.A. No. 8291 or Government Service Insurance System (GSIS) Law
11. Premium contributions including employer’s share, loan amortizations and other
amounts totaling ₱203,922,991.70 were remitted to the GSIS within the required period
in compliance with the Implementing Rules and Regulations (IRR) of Republic Act
(R.A.) No. 8291 or the Government Service Insurance System (GSIS) Act of 1997.
However, an aggregate amount of ₱671,533.54 remained unaccounted for as of year-
end.
11.1. Section 14 of the Revised Implementing Rules and Regulations (IRR) of R.A. No.
8291, otherwise known as The Government Service Insurance System (GSIS) Act of 1997,
in consonance with Section 6(b) of the same Act, states the following provisions on
remittance of contributions to GSIS:
a. Section 14.1 - Each government agency shall remit directly to the GSIS the
employees’ and government agency’s contributions within the first Ten (10) days
of the calendar month following the month to which the contributions apply. The
remittance by the government agency of the contributions to the GSIS shall take
priority over and above the payment of any and all obligations, except salaries
and wages of its employees.
b. Section 14.2 - The government agency shall also deduct from the fixed monthly
compensation of the employee the loan amortizations (consolidated loans, policy
loan, emergency loan, housing loan, and other loans), premium payments
(optional, pre-need and other non-life insurance) and other amounts due the
GSIS.
c. Section 14.3 - The said amounts shall be remitted to the GSIS within the first Ten
(10) days of the calendar month following the month when the deductions were
effected, accompanied by supporting lists in the form prescribed by the GSIS.
11.2 Audit of the premium contributions including employer’s shares, loan

amortizations and other amounts due to GSIS for CY 2021 showed that the Authority has
been compliant with the provisions set forth by the aforementioned law. The breakdown of
the remittances made, premium contributions including employer’s share, loan
amortizations and other amounts due to GSIS totaling ₱203,922,991.70 is presented
hereunder:
Account Name Total Amount Remitted

Life and Retirement Ins. Prem- Employee Share ₱ 52,676,675.83
Life and Retirement Ins. Prem- Employer Share 71,946,915.58
100
Multi-Purpose Loan 12,832,686.76
Emergency Loans 8,052,545.31
Consolidated Loan 30,666,265.76
Financial Assistance Loan (GFAL) 22,665,154.58
Salary Loan 84,873.43
Policy Loan 1,806,845.05
Housing Loan 484,920.31
Optional Employees Contribution 9,892.44
Unlimited Optional Life Insurance Loan 14,821.00
Cash Advance Loan 22,007.38
ECARD Plus Loan 26,025.42
GPA 843,040.00
Educ. Assistance Loan 216,994.85
Computer Loan 1,573,328.00
Total ₱ 203,922,991.70
Table 31 Breakdown of Various GSIS Accounts Remittance
11.3 Further analysis and verification of the accounts showed that of the outstanding
balance of ₱18,410,928.25 as of December 31, 2021, the amount of ₱17,739,394.71 was
remitted/refunded in January of the following year, as summarized below:
Description Amount
Beginning Balance, Jan. 1, 2021 ₱ 11,699,436.26
Total Amount Withheld – CY 2021 212,259,850.54
Total Amount Remitted – CY 2021 (203,922,991.70)
*Net Adjustment – CY 2021 (1,625,366.85)
Ending Balance, Dec. 31, 2021 18,410,928.25
Amount Remitted/Refunded (January 2022) (17,739,394.71)
Remaining Amount Unremitted as of Jan. 31, 2022 ₱ 671,533.54
Table 32 Analysis of GSIS Accounts’ Total Balance as of Year-End
*Net Adjustments – net amount of additional withheld contributions, reversal, reclassification, refund, etc.
11.4 Verification with the Accounting Office showed that the unremitted amount as of
January 31, 2022 totaling ₱671,533.54 was partly identified, pending action due to varying
circumstances.
11.5 The table below includes the following accounts in the previous year’s audit
observation which showed a decrease due to partial adjustments effected/deducted from
the balance of unremitted amounts as of January 25, 2021; to wit:
Account Name Amount of Amount of Increase/ Remarks

Unremitted Unremitted Ending (Decrease)
Ending Balance as Balance as of
of January 25, January 31, 2022
2021
GSIS Prem - EE ₱ 267,996.37 ₱ 83,109.71 (₱184,886.66)
101
Unremitted Unremitted Ending (Decrease)
Ending Balance as Balance as of
of January 25, January 31, 2022
2021
GSIS Prem - ER 196,897.35 34,955.53 (161,941.82)
Salary Loan 211,810.85 173,270.27 (38,540.58)
Emergency Loans 421,248.98 358,393.80 (62,855.18)
Consolidated Loan 269,232.68 2,422.32 (266,810.36)
Identified;
for
remittance
Educ. Assistance Loan 9,380.02 216.67 (9,163.35) Refunded in
2/01/2022
Table 33 GSIS Accounts in Prior Year’s Observation Showing a Decrease due to Adjustments
11.6 On the other hand, the following accounts when compared to the previous findings
reflected an increase in the unremitted ending balance:

Unremitted Unremitted (Decrease)
Ending Balance as Ending Balance as
of January 25, of January 31,
2021 2022
Policy Loan ₱ 12,836.54 ₱ 13,295.29 ₱ 458.75
Financial Assistance - 4,886.62 4,886.62* Identified; for
Loan (GFAL) remittance
Computer Loan - 983.33 983.33* Refunded in
2/01/2022
₱ 671,533.54
Table 34 GSIS Accounts in Prior Year’s Observation Showing an Increase
*From current year - December 2021 withheld amount not accounted in the remittance of the following
month.
11.7 It was revealed during the audit that while the breakdown of adjustments for GSIS
Premiums of both the Employee and Employer were identified, the concerned personnel
was having difficulty in the determination of the composition for Salary Loan, Policy Loan,
and Emergency Loan accounts. It was mentioned that adjustments pertaining to the years
2003-2020 were already effected as a result of their review and analysis in compliance with
the prior year’s recommendation of the Audit Team. However, we were informed that those
relating to the years preceding the effectivity of the use of the Integrated Financial
Management System (IFMS), cannot be readily identified since only the manual system of
recording was used back then and in the verification of files, hard copies of documents will
be needed for tracing. The GSIS Electronic Billing and Collection System (eBCS) is a web-
based application that enables remitting agencies to download their respective Electronic
Billing Files (EBFs) as well as upload their Electronic Remittance Files (ERFs). The EBFs
contain details of the mandatory contributions as well as deductions for outstanding loans
of the individual members. These files are readily accessible by the ERF Officer of the
Authority and, as a matter of fact, should have been used to reconcile the unaccounted
discrepancies.
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11.8 Meanwhile, most of the accounts enumerated in the prior year’s findings relative to
the unremitted ending balance as of January 25, 2021 were fully settled as listed below:
Account Name Amount of Amount of

Unremitted Ending Unremitted
Balance as of Ending Balance
January 25, 2021 as of January 31,
2022
Housing Loan ₱ (216.67) ₱ -
Educational Plan 399.00 -
Memorial Plan (SBMA Employees) 7,031.00 -
Optional Employees Contribution 2,869.43 -
Unlimited Optional Life Insurance Loan 2,670.20 -
Cash Advance Loan 19,124.43 -
Enhance Salary Loan 37,858.79 -
ECARD Plus Loan 29,474.94 -
GPA 21,110.78 -
Table 35 GSIS Accounts in Prior Year’s Observation Fully Settled
11.9 The Audit Team acknowledges the effort of the Accounting Division in eliminating
the unaccounted balances of their GSIS dues for the above accounts. While determination
of prior years’ errors and deficiencies consumes time and effort, it is also of great
importance to give as much priority to the movements of the current year’s accounts to
avoid accumulation of adjustments in the current and succeeding years.
11.10 Although records showed improvements in the settlement of account balances, the
outstanding amounts that remained unaccounted for and unremitted for a long time may
already be depriving employees/members of the benefits due them in view of death,
disability, and old age (retirement).
11.11 We recommended and Management agreed to instruct the Accounting

Department personnel concerned to:
a. reconcile the accounting records with the EBF downloadable from the eBCS;
and
b. effect the needed adjustments, and remit/refund any pending

contributions/loan payments of employees, if any.
Compliance with R.A. No. 9679, Home Development Mutual Fund (HDMF) Law of 2009
12. Fund contributions including employer’s share, loan amortizations and other
amounts totaling ₱24,116,269.55 were remitted to the HDMF within the required period,
in compliance with Republic Act (R.A.) No. 9679 and its Implementing Rules and
Regulations (IRR); hence, no penalty was imposed on delayed or non-remittance
thereof.
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12.1. Republic Act (R.A.) No. 9679, An Act Further Strengthening the Home
Development Mutual Fund (HDMF), and for Other Purposes, dated July 21, 2009, and its
Implementing Rules and Regulations (IRR) was established to ensure that fund
contributions and repayments of loans granted are deducted from salaries of employees
and remitted to HDMF in a timely manner.
12.2 Audit of the fund contributions including employer’s share, loan amortizations and
other amounts due to HDMF for CY 2021 showed that the Authority complied with the
provisions set forth by the aforementioned law. Total remittances to the HDMF totaling
₱24,116,269.55 are composed of the following:

Premium Contribution - Employee's Share ₱ 2,119,600.00
Premium Contribution - Employer's Share 1,821,900.00
Housing Loan 106,394.04
Multi - Purpose Loan 8,382,904.86
Loan Payment, Voluntary 6,148,753.82
Contribution, Voluntary 1,614,500.00
Calamity/Emergency Loan 260,254.62
Modified Contribution - Plantilla 3,505,100.00
Modified Contributions - CS 32,000.00
Calamity Loan - CS 124,862.21
Total ₱ 24,116,269.55
Table 36 Breakdown of Various HDMF Accounts Remittance
12.3 Examination of the accounts disclosed that the ending balance as of December 31,
2021 of ₱1,920,624.71 was remitted/refunded in January 2022, as summarized below:
Description Amount
Beginning Balance, Jan. 1, 2021 ₱ 2,374,400.07
Total Amount Withheld – CY 2021 24,389,927.90
Total Amount Remitted – CY 2021 (24,116,269.55)
*Net Adjustment – CY 2021 (727,433.71)
Ending Balance, Dec. 31, 2021 1,920,624.71
Amount Remitted/Refunded (January 2022) (1,920,624.710
Remaining Amount Unremitted as of Jan. 31, 2022 ₱ 0.00
Table 37 Analysis of HDMF Accounts’ Total Balance as of Year-End
12.4 Analysis of the General Ledger (GL) controlling account revealed that the portion
of the remaining unremitted amount as of January 25, 2021 totaling ₱771,730.66, which
was mentioned in the prior year’s findings, was already accounted for and fully settled
within the audit year as shown in the table below:
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Account Name Amount of Amount of
Unremitted Unremitted
Ending Balance Ending Balance
as of January 25, as of January 31,
2021 2022
Multi - Purpose Loan ₱ 118,240.94 ₱ -
Loan Payment, Voluntary 639,149.7 -
Contribution, Voluntary 11,461.92 -
Calamity/Emergency Loan 2,047.22 -
Calamity Loan-CS 830.88 -
Total ₱ 771,730.66 ₱ -
Table 38 GSIS Accounts in Prior Year’s Observation Fully Settled
12.5 We commended Management for abiding with the stipulations of R.A. 9679 on
prompt remittance of amounts due to Pag-IBIG, and the diligence displayed in
reconciling the items unaccounted for in the prior year’s observation.
Compliance with R.A. No. 7875 as amended by R.A. Nos. 9241 and 10606, The Revised
Implementing Rules and Regulations of the National Health Insurance Act of 2013
13. The Authority has dutifully complied with Republic Act (R.A.) No. 7875 as
amended by R.A. Nos. 9241 and 10606 on the withholding of premium contributions
shared by the employees and employer, remitting a total amount of ₱18,131,833.74 to
the Philippine Health Insurance Corporation (PHIC) in CY 2021, giving the agency
personnel entitlement to the program benefits offered by PhilHealth.
13.1 Audit and verification of the accounts revealed that the Agency withheld and
remitted its premium contributions during the year, including the employer’s share, totaling
₱18,131,833.74, as required in Republic Act (R.A.) No. 7875 as amended by R.A. Nos.
9241 and 10606, The Revised Implementing Rules and Regulations of the National Health
Insurance Act of 2013, which requires that the member’s monthly contribution shall be
deducted and withheld automatically by the employer from the former’s salary, wage or
earnings and to be remitted by the employer on or before the date prescribed by the
Corporation.
13.2 The said remittances were composed of premiums withheld from their employees as
well as the employer’s share and the voluntary contributions of those under the Contract of
Services. Details are shown below:
Premium Employees' Premium Contributions - Total

Share Employers' Share Voluntary
₱ 7,906,442.70 ₱ 7,906,562.07 ₱ 2,318,828.97 ₱ 18,131,833.74
Table 39 Breakdown of Remittances Made During the Year - PHIC
13.3 Further analysis of the General Ledger (GL) of the three accounts revealed that the
amount totaling ₱27,650.00 from previous year’s observation, specifically under the
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account of PHIC Contributions – Voluntary, classified as unaccounted, has already been
settled and adjusted in the current audit year, complying with the Audit Team’s
recommendation.
13.4 Moreover, the year-end balance totaling ₱1,294,362.60 was remitted in January
2022, which was within the prescribed period.
13.5 We commended Management in adhering faithfully to the requirements of

Republic Act (R.A.) No. 7875, as amended by R.A. Nos. 9241 and 10606, on the
prompt remittance of amounts due to PhilHealth, and reconciling the records of the
Agency as necessary to reflect consistency and reliability of the financial statements
(FSs).
Enforcement of Audit Suspensions, Disallowances and Charges
14. Out of the Notices of Finality of Decision (NFDs) totaling ₱146,817,449.10 that
became enforceable through COA Order of Execution No. 2021-023 dated November 2,
2021, a total of ₱7,588,598.44 had already been settled in full, leaving a balance of
₱139,228,850.66 outstanding which requires immediate settlement under COA Circular
No. 2009-006 dated September 15, 2009 or the Rules and Regulations on the Settlement
of Accounts (RRSA).
14.1 The Commission on Audit (COA) issued Notice of Finality of Decision (NFD) No.
2021-233 dated October 13, 2021 followed by COA Order of Execution (COE) No. 2021-
023 dated November 2, 2021 for a total amount ₱146,817,449.10, with the instruction to
the Authority to recognize and enforce the settlement of the Notices of Disallowances
(NDs) and Notices of Charge (NCs). The notices enumerated in the said COE pertained to
transactions that transpired prior to the effectivity of the 2009 Revised Rules and
Regulations on the Settlement of Accounts (RRSA).
14.2 Even before the receipt by the Authority of the NFD and COE, Management had
already sent demand letters (DLs) for the settlement of the aforementioned notices. Records
showed that as of November 15, 2021, the Authority had issued a total of 43 DLs to persons
liable out of 61 individuals who were subject to the COA disallowances and charges,
including seven personnel currently employed in the Authority. The following summarizes
the result of actions taken by Management:
Particulars Number of Persons Demand letter sent

Persons with Full Settlement 12 12
Persons with Partial Settlement 4 4
Person without Settlement 20 20
Unlocated Persons 15 3
Persons Tagged as Deceased 10 4
Total 61 43
Table 40 Summary Result of Actions Taken by Management
106
 As can be seen from the above table, 12 individuals have already settled their
disallowances, including 7 personnel who are currently employed in the Authority.
 The four persons with partial settlement were former employees of the Authority.
 Of the 20 persons without settlement, 12 did not reply to the demand letters sent,
while 8 provided letters disputing the enforcement of the COE through their legal
counsels.
 Of the 15 unlocated persons, three demand letters were sent but two were returned
to sender and one has no update. The other 12 have uncertain /incomplete names
and/or addresses.
 Four demand letters were already sent to those persons tagged as deceased. The
Authority sought the assistance of the Philippine Statistics Authority (PSA) for the
confirmation of the ten deceased persons mentioned in the said COA
Disallowances. The PSA verified and provided the dates of death of nine people,
while the other one was not confirmed as it was tagged as “common name”. The
Authority sent another letter dated December 29, 2021 to PSA stating a more
complete details of the said person for confirmation.
14.3 Settlements totaling ₱7,588,598.44 were covered by 24 Notices of Settlement of

Suspensions/Disallowances/Charges (NSSDCs) which were issued to Management on
various dates. These included settlements through payment and those previously settled as
indicated in the COA Legal Service Sector Decision No. 2010-015 dated March 23, 2010;
to wit:
Amount
ND/NS/NC Suspended/ Reference/ Amount
No. Date
Reference No. Disallowed/ Settlements Made Settled
Charged
Settled per NSSDC No. 2021-
1 NS 94-0191(94) 11/21/1994 ₱42,658.00 ₱42,658.00
001 dated Dec. 16, 2021
2 NS 97-021(97) 7/31/1997 1,800.00 1,800.00
002 dated Dec. 16, 2021
3 NS 01-043(01) 7/20/2001 5,777.81 5,777.81
003 dated Dec. 16, 2021
Partially settled amounting to
NS No.97-
4 4/1/1997 6,995,422.66 6,749,744.92 per NSSDC No. 6,749,744.92
149(96)
2021-004 dated Dec. 16, 2021
AOM No.02- Settled per NSSDC No. 2021-
5 64,966.67 64,966.67
022 005 dated Dec. 16, 2021
6 NS 93-0275-101 10/29/1993 2,252.60 2,252.60
006 dated Dec. 16, 2021
7 NS 93-0276-101 10/29/1993 3,218.00 3,218.00
007 dated Dec. 16, 2021
8 NS 93-0277-101 10/29/1993 1,609.00 1,609.00
008 dated Dec. 16, 2021
107
Amount
ND/NS/NC Suspended/ Reference/ Amount
No. Date
Reference No. Disallowed/ Settlements Made Settled
Charged
9 NS 93-0278-101 10/29/1993 1,988.85 1,988.85
009 dated Dec. 16, 2021
Partially settled amounting to
NS No. 96-
10 7/26/1996 314,500.00 296,050.00 per NSSDC No. 296,050.00
099(96)
2021-010 dated Dec. 16, 2021
11 ND 94-011(94) 11/5/1994 1,950.30 1,950.30
011 dated Dec. 22, 2021
12 NS 94-0193(94) 11/21/1994 18,962.41 46,157.41
012 dated Dec. 22, 2021
ND RLAO- Settled per NSSDC No. 2021-
13 8/19/2004 23,735.08 23,735.08
2004-018 013 dated Dec. 22, 2021____
14 ND 94-020(94) 12/2/1994 9,285.00 9,285.00
014 dated Dec. 22, 2021
15 NS 94-0828(94) 12/1/1994 11,048.40 11,048.40
015 dated Dec. 22, 2021
ND RLAO- Settled per NSSDC No. 2021-
16 6/14/2005 38,349.00 38,349.00
2005-056 016 dated Dec. 22, 2021
17 NS 02-016(01) 4/18/2002 11,400.00 11,400.00
017 dated Dec. 22, 2021
18 NS 98-021(98) 8/6/1998 3,722.40 3,722.40
018 dated Dec. 22, 2021
19 NS 00-073(00) 7/7/2000 68,333.04 68,333.04
019 dated Dec. 22, 2021
NS No.96- Settled per NSSDC No. 2021-
20 9/25/1996 132,050.00 132,050.00
107(96) 020
21 NS 93-112 6/30/1993 2,000.00 2,000.00
021 dated Dec. 22, 2021
22 NS 96-123(96) 10/18/1996 46,845.22 46,845.22
022 dated Dec. 22, 2021
23 NS 93-444 12/31/1993 13,625.00 13,625.00
023 dated Dec. 22, 2021
24 ND 94-007(94) 11/22/1994 10,031.74 10,031.74
024 dated Dec. 22, 2021
Total ₱7,588,598.44
Table 41 Details of Settlements Covered by 24 NSSDCs Issued to Management on Various Dates
14.4 Based on the foregoing, a sum of ₱139,228,850.66 (combined disallowances and

charges) have yet to be settled as summarized below:
Particulars Amount
Amount due and demandable per COE ₱146,817,449.10
Less: NSSDCs issued 7,588,598.44
Balance not yet settled as of December 31, 2021 ₱139,228,850.66
Table 42 Amount Due and Demandable per COE Not Yet Settled
108
14.5 Meanwhile, the Statement of Audit Suspensions, Disallowances and Charges
(SASDC) covering the transaction years 2009-2011 reflected a balance of ₱12,507,789.56
as of December 31, 2021, the breakdown of which is presented below:
ND No. Date Particulars Amount

ND-SBMA 2010-11-001 9-Nov-10 Payment of Board of Directors ₱5,280,000.00
(2009) per diem/ allowances covering the
period from January to December
2009
ND-SBMA 2010-11-002 12-Nov-10 Payment of BODs per
(2010) diem/allowances covering the 640,000.00
period from January to December
2010
ND# 11-001-(10) 12-Oct-11 Calbayar Trading/JMG Horse
Equipment Trading - payments of 2,600,000.00
ten patrol horses
ND# 2012-001 (2011) 23-Feb-12 Raffle items during the 2011
SBMA Christmas Party 10,718.21
ND# 2012-001 (2011) 23-Feb-12 Sponsorship for the costumes
used by the Public Service Group. 9,243.00
ND No. 2013-001 (2011) 14-Feb-13 Payment for the consultancy fees
of 12 office consultants for CY 3,940,492.01
2011
ND No. 2013-002 (2012) 18-Feb-13 Payments of various expenses
charged against the account "All 27,336.34
Other Services"
Total ₱12,507,789.56
Table 43 Breakdown of SASDC Covering Years 2009-2011 as of Year-End
14.6 We recommended that the Authority through the Chairman and

Administrator continue to cause the enforcement and immediate settlement of the
outstanding COE.
14.7 Management adheres to the recommendation of the Audit Team. They also
commented that the Authority was able to collect an additional amount of ₱202,194.63 as
settlement of various individuals for various Notices of Suspensions for the period
December 2, 2021 to March 15, 2022.
109
PART III – STATUS OF IMPLEMENTATIONOF PRIOR YEARS’
UNIMPLEMENTED AUDIT RECOMMENDATIONS
STATUS OF IMPLEMENTATION OF PRIOR YEARS’ UNIMPLEMENTED
AUDIT RECOMMENDATIONS
Out of 72 audit recommendations embodied in prior years’ Annual Audit Report (AARs),
61 were fully implemented, 10 were partially implemented and one was not implemented
at all.
Status and
Reason
Observations and Recommendations Ref. Management Comments for Partial/
Non-
Implementation
1. Due to delayed endorsement of lease CY
agreements and supporting documents to 2020
the Accounting Department, the client AAR
accounts and related Statement of Finding
Accounts (SOA) were not timely created No. 1
in the computerized system or captured as
the transactions occur thus,
understatement of both Receivables and
Service/Business Income accounts by
₱16,009,006.87. Relatedly, there was also
an understatement by ₱800,450.34 in the
Income Tax and Inter-Agency accounts.
We recommended that management

direct the Accounting Department to
strengthen accounting controls by:
(a) issuing an annual memorandum for the The annual Memorandum Fully
purpose of timely recognition of on the closing of SBMA Implemented
receivables and related income in the books for the year 2021
accounting books; dated October 7, 2021, was
already issued by the
Accounting Department
and disseminated to the
SBMA departments on
October 15, 2021.
The said Memorandum

includes a reminder on the
submission of required
reports/documents,
including lease agreements
to ensure that all financial
110
Status and
Reason
Non-
Implementation
transactions are recorded in
the books of accounts.
(b) include an attestation requirement in The annual Memorandum Fully

the memorandum by the concerned head on the closing of SBMA Implemented
that the submitted information are books for the year 2021
complete; and dated October 7, 2021
issued by the Accounting
Department includes under
Item No. 11, the attestation
requirements on the
submission of all lease
agreement proposals by the
Business and Investment
Group.
The Senior Deputy

Administrator for Business
and Investment (SDABI)
already gave instructions to
the BIDs per its
Memorandum dated
September 30, 2021,
regarding the submission of
a Memorandum to the
Accounting Department on
the listing of all lease and
sublease proposals
approved by the SBMA
Board or Management on
specified cut-off dates.
Such memorandum must
indicate whether or not the
pertinent agreements
covering the approved
proposals have been
submitted to the
and also indicate the status
of the instruments if the
111
Status and
Reason
Non-
Implementation
agreements have not yet
been submitted.
The SDABI also instructed

the inclusion of an
attestation by the BID
Managers that the lease
proposal has undergone the
standard evaluation process
and has been duly approved
by Management and/or
Board of Directors.
Further, the BIG had to

explore ways in which all
the agreements could be
submitted to the
Accounting Department by
the end of a given fiscal
year. Hence, the BIG,
worked on the new BIG
Process for approval of
requests, hoping to expedite
the entire process.
Furthermore, the BIG also

had to study how CREATE
affects the requests and the
processing of said requests.
The BIG also had to wait
for the IRR of CREATE
and participate in meetings
and discussions with the
FIRB and DOF to fully
understand the impact of
CREATE on the BIG
Process.
112
Status and
Reason
Non-
Implementation
(c) draw the following adjusting entries: The Accounting Fully

Department will prepare an Implemented
Account Debit Credit entry to adjust the Income
Retained ₱8,804,953.78 Tax Payable and Dividends
Earnings Payable accounts in
Dividends ₱8,004,503.44 relation to the late billing of
Payable
revenues at the proper time
Income Tax ₱800,450.34
Payable
as explained in our reply to
corresponding AOM 2021-
006 (2021).
Accordingly, the related

Income Tax Payable will be
recorded upon
determination of the Final
Adjusted Income Subject to
Tax on an annual basis
upon the closing of the
books.
The Dividend Payables will
be recorded in the books
only when we receive
notice from the DOF of the
final amount of Dividend
due for the year.
2. Out of the recorded Advances to CY

Officers and employees of 2020
₱147,310,027.23 a total of AAR
₱141,130,026.23 or 96.6% was not Finding
supported by subsidiary ledgers (SLs), No. 2
inconsistent with Section 7.2.1e of COA
Circular No. 2009-006 dated September
15, 2009; thus, the recovery from each
employee/accountable person for his/her
unliquidated accounts was not enforced,
which may result to possible financial
losses on the part of the Agency.
113
Status and
Reason
Non-
Implementation
We recommended that management:
(a) instruct the Department Head,

Accounting Department to:
(i) implement existing manual controls The Accounting Fully

designed to countercheck the accuracy Department is still awaiting Implemented
and integrity of the Integrated Financial a reply from COA on the
Management System (IFMS); and correct amount to be used
for the said account (SC or
COA). Upon their reply, the
will immediately upload
the SL of the said account
into the IFMS.
Meanwhile, the Accounting

Department maintains/
updates the SL recorded
thru MS Excel.
The Accounting
Department reconciled the
amount with COA SBMA.
Various NDs and NSs are
fully and partially settled
with the issuance of
certificates from COA.
(ii) see to it that journal entries are duly The Accounting Fully
supported with details before the financial Department has adhered to Implemented
transactions are approved for recognition the COA recommendation.
in the system.
3. The accuracy of some recorded CY

inventories totaling to ₱70,896,374.56 2020
was uncertain due to as (a) inclusion of AAR
non-existent inventories of Finding
₱62,719,261.40 in the reported balance No. 3
114
Status and
Reason
Non-
Implementation
as at year-end; (b) non-derecognition of
issued/consumed inventories of
₱2,520,037.75 in the books of accounts;
(c) inconsistent application of inventory
costing method and (d) non-recognition
of impairment on obsolete inventories
carried at cost amounting to
₱5,657,075.46, inconsistent with the
Philippine Accounting Standards (PAS) 2
and the Subic Bay Metropolitan Authority
(SBMA) Board Resolution No. 09-491 or
the Guidelines for the Disposal of
Unnecessary Properties, thus, affecting
the reliability of the year-end Financial
Statements.
We recommended that the management

undertake the following courses of action:
a. Direct the Accounting Department The Accounting Fully

to prepare the following adjusting entries Department had Implemented
to derecognize non-existing inventories: derecognized the non-
existing inventories
Accoun Debit Credit amounting to
t ₱62,719,261.40 per JGL
Retained ₱ 62,719,261.40 21-02-0248 on February
Earnings-
Prior
18, 2021.
Year’s
Adjustmen Also made the following
t
Office ₱ 10,498,220.42
adjusting entries to close/
Supplies recognize as expense the
and direct issuance inventory
Materials accounts with a total of
Medical, 205,509.12 ₱2,520,037.75 under the
Dental and following Journal Entry
Laboratory
Supplies
Vouchers (JEVs):
• JGL 21-01-0257
Fuel, Oil, 14,101,098.04 (₱1,739,552.26);
lubricant
• JGL 21-02-0200
Maintenan (₱9,464.28);
ce Supplies 3,302,689.39
Inventory
115
Status and
Reason
Non-
Implementation
• JGL 21-02-0250
Spare Parts 34,508,103.83
(₱767,521.21); and
Other 103,640.60 • JGL 21-02-0309
Constructi (₱3,500.00).
on
Materials
Inventory
Account Debit Credit

Retained ₱ 2,520,037.75
Earnings-Prior
Year’s
Adjustment
Office ₱ 945,355.77
Supplies and
Materials-
Direct
Issuance
Medical, 152,752.19
Dental and
Laboratory
Supplies –
Direct
Issuance
Maintenance 1,402,242.30
Supplies
Inventory –
Direct
Issuance
Spare Parts- 19,687.49

Direct
Issuance
b. Emphasize the requirements of the

The Accounting Fully
memorandum on the closing of SBMA
Department has been Implemented
books, particularly item b.7, to ensure that
regularly reminding the
the direct issuances are expensed in the
PPMD on the submission of
correct period;
duly accomplished RIS
and/or WMR, as
applicable, to enable
processing of payment and
recognition of expense in
the correct period.
116
Status and
Reason
Non-
Implementation
The PPMD commits to
provide all the necessary
documents such as duly
signed IAR/RIS/WMR, as
applicable, to the
Accounting Department.
c. Direct the Accounting Department and At present, direct issuances Fully

the PPMD to coordinate and provide that are processed for Implemented
mechanisms in order to apply consistent payment with the original
inventory costing methodology for RIS and/or RWM already
inventory – direct issuance; and attached to the APV are
directly recorded as
expenses by the
d. Direct the PPMD to include in its The Internal Audit Service Fully
regular inventory count the conduct of (IAS) has sent a reminder Implemented
appraisal of unusable inventories and memorandum to PPMD on
forward the documentation to the May 26, 2021 for the
Accounting Department as basis for inclusion of an appraisal of
inventory write-downs. inventory items as they
conduct their regular
inventory count.
The PPMD agreed to

include in their regular
inventory count the conduct
of an appraisal of unusable
inventories and forward the
documentation to the
Accounting Department as
the basis for inventory
write-downs in compliance
with the recommendation.
Also, PPMD will continue
to identify the slow or non-
moving items subject to
disposal.
117
Status and
Reason
Non-
Implementation
4. The Investment Property accounts with CY

carrying value of ₱5,449,401,601.82 as of 2020
year-end were misstated by AAR
₱14,679,976,088.62 due to: a) erroneous Finding
recognition of various investment No. 4
properties under Land and Fully
Depreciated Building accounts
amounting to ₱13,933,376,379.10 and
₱557,187,824.38, respectively; b)
inclusion of an owner-occupied property
amounting ₱1,418,745.37 under
Investment Property-Buildings; and c)
unrecorded lessee development
commitment valued at ₱197,625,000.00.
Likewise, full disclosure of the accounts in
the Notes to the Financial Statements (FS)
was not provided as required under
Philippine Accounting Standard (PAS)
40.

instruct the:
a. LADD to:
(i) come up with the necessary database Substantial enhancements Fully

and reasonable allocation method to be were made by MIS to the Implemented
able to allocate cost on the land as owner- AMS addressing the (Reiterated in
occupied and land to be classified as recommendations and it is 2021 AAR,
investment property and prepare the continuously being Observation
necessary adjusting entry to reclassify the developed as requested by No. 5.b)
same; the LADD.
The AMS, through the

support of MIS, is in the
process of enhancement,
validation of data and
information, and data
clean-up of:
1. Housing Primary Details
118
Status and
Reason
Non-
Implementation
2. Housing Lessee
Information
3. Housing Sub-Lessee
Information
4. Nature of Contract
Updating
5. Enhancement of AMS
a. Error in data entry of
primary details
b. Additional values on
currency
c. Additional values on
nature of contract
d. Changes in fields
attributes of housing lessee
table
e. Updating of facility
housing details
f. Uploading of housing
lessee data
Also, access to the AMS, as

a web-based system, is
currently restricted inside
the SBMA network
(locally) for security
reasons. Outside access for
a specific duration/period
of time may be allowed by
MIS only for users
authorized and specified by
the LADD.
Further, the LADD

requested and collaborated
with the Land Management
Bureau, DENR, Region III
to work on the drafting of a
financial work plan for the
proposed land boundary
survey of the whole SBFZ
119
Status and
Reason
Non-
Implementation
secured area in order to
properly allocate costs on
lands as property
investment and determine
the exact land area as one of
the investment properties of
SBMA.
(ii) provide information on the fair values A second meeting with the Fully
of investment property for disclosure DENR, III at the DENR Implemented
purposes; and Office, San Fernando, (Reiterated in
Pampanga was held on 2021 AAR,
October 18, 2021 for the Observation
finalization of a financial No. 5.d)
work plan for the proposed
land boundary survey of the
whole SBFZ secured area.
The LADD Appraiser

Consultant has already
reported for work on
August 16, 2021. The
Appraiser is currently
conducting inspections, and
property valuations of
housing units.
The Appraiser will also

conduct property appraisal
for those SBMA facilities
that has no acquisition cost
and those facilities that
were being improved that
has no construction cost
records i.e., lots/land,
housing/buildings,
structures, roads, bridges,
etc.
120
Status and
Reason
Non-
Implementation
To date, the LADD
Appraiser has started to
categorize the different
types of housing units to
facilitate the appraisal.
(iii) give timely information to the The LADD Consultants are Fully
Accounting Department as regards the currently coordinating with Implemented
development commitments that were the concerned department (Reiterated in
taken over by management; and to build up the database 2021 AAR,
monitoring of all locators’ Observation
development commitments No. 5.c with
to be able to deliver timely modification)
information to the
The Senior Deputy

Administrator for Business
Group (SDABI) gave an
instruction to all BIDs per
its memorandum dated
September 30, 2021,
directing the BIDs to
furnish the BPSD with
copies of all approved Term
Sheets (including Board
Resolutions if the proposal
required Board approval)
with development
commitments by November
30, 2021 for proposals
approved from January 1,
2021 to October 31, 2021.
And starting November 1,
2021, all BIDs must submit
copies of approved Term
Sheets to the BPSD three
(3) days from the certified
true copy of the Term
Sheets.
121
Status and
Reason
Non-
Implementation
b. Accounting Department to prepare the The Accounting Fully

following adjusting entries: Department has reclassified Implemented
Fully Depreciated
Account Account Debit Credit Buildings and Structures to
Code
Investm 1-05-01- ₱5,571,878
Investment Properties
ent 020-001 ,244.02 amounting to
Properti ₱5,571,878,244.02 per JGL
es –
Building 1-06-04- 5,014,690,4
No. 21-03-000280 as
s 991-007 19.62 recommended.
AD-
Fully
Further, the amount of
Depreci ₱14.47 million of
ated Investment Property is
composed of SUBAC,
Account Account Debit Credit ₱11.97 million and Bldg.
Code
Fully 1-06-04- ₱5,571,87 5000, ₱2.5 million.
Depreci 990-006 8,244.02 Reclassification of Bldg.
ated – 5000 from Investment
Building
s and Property to Buildings
Structur (owner occupied) was
es made under JGL No. 21-
1-05-01- 5,014,690,
Acc. 021-001 419.62 03-000281 (Annex I). On
Dep. – the other hand, the
Investm Accounting Department did
ent
Property not reclassify SUBAC from
– Bldgs. Investment Property to
To record reclassification of fully depreciated Buildings (owner occupied)
buildings to Investment Property.
based on the latest
information from the
LADD that said property is
still open for lease to
prospective investors.
5. The reliability and accuracy of the CY

Property, Plant and Equipment accounts 2020
with carrying value of ₱3,771,136,043.04 AAR
were not established as at year-end due to
122
Status and
Reason
Non-
Implementation
accounting errors and omissions such as Finding
(a) unreconciled variance of No. 5
₱1,860,590,249.12 between the records
of Accounting versus the reports of the
Land and Assets Development
Department (LADD) and Procurement
and Property Management Department
(PPMD); (b) non-provision of
accumulated impairment losses for
unserviceable assets; (c) erroneous
recognition as Property, Plant and
Equipment (PPE) of repairs and
maintenance expenses amounting to
₱28,212,653.63; (d) completed
Construction in Progress (CIP) in the
amount of ₱38,260,038.64 not
reclassified to appropriate PPE accounts;
and (e) non-existent movable assets and
demolished buildings totaling to
₱45,674,372.56 still recorded in the
books of accounts, which were
inconsistent with Philippine Accounting
Standards (PAS) 16.

undertake the following courses of action:
(a) Instruct the Accounting Department in LADD is continuously Partially

coordination with the Technical coordinating with the Implemented
Departments concerned to come up with Accounting Department to
mechanisms that will enable the comply with the As part of the
recognition of asset impairment; recommendation approved
concerning the recognition restructuring
of asset impairment. to work on the
mechanisms to
enable the
recognition of
asset
impairment,
the LADD
123
Status and
Reason
Non-
Implementation
will hire two
(2) Appraisers
Additionally,
LADD is
gathering all
existing
records from
concerned
departments
(BPSD,
Engineering
Dept., BIDs)
to establish the
proper
mechanisms
for the
recognition of
asset
impairment.
(b) Adopt accounting policies and The Accounting Not

controls that will provide guidance on the Department complied with Implemented
recognition of repairs as capital the recommendation by
expenditure or expense as well as provide adopting applicable
attribution of expenditures to the related Accounting Standards on
asset being replaced for derecognition the recognition of Capital
purposes; and Expenditures and
Derecognition of Asset
upon retirement or
replacement.
Further, the LADD

Consultants are
continuously doing the data
gathering and assisting the
Accounting Department in
the determination of fixed
assets for recognition and
for de-recognition. Also,
LADD Consultants are
124
Status and
Reason
Non-
Implementation
doing the formulation of
policies and controls in
coordination with SBMA
technical departments.
(c) Based on the results of the inventory The LADD is continuously Fully
taking, provide adjusting entries to verifying and cleaning-up Implemented
establish PPE balances that are verifiable all record entries based on
as to existence, condition and the inventory results. (Reiterated in
accountability. 2021 AAR,
The PPMD has verified Observation
some accounts (APV) from No. 6 with
the sorted accounting modification)
records:
(i) JV2001-08-059 –
disposal of 36 vehicles
amounting to
₱1,760,858.97
(II) ₱96-05-22-0199 JV97-
02-102 PO No. 966177 –
procurement of 5 trucks
amounting to
₱16,981,063.73
Upon submission of the

Inventory Report by PPMD
and LADD, Accounting
shall book the adjusting
entries.
6. The accounting entries for the receipt CY

of Government Grants and deliveries of 2020
procured items paid out of the Grants did AAR
not conform to Philippine Accounting Finding
Standard (PAS) 20 resulting in the No. 6
understatement of related
PPE/Investment Property/Expense by
₱74,266,753.70; overstatement of
Receivables by ₱422,623,677,.75;
125
Status and
Reason
Non-
Implementation
overstatement of Financial Liabilities by
₱348,356,924.05; understatement of
Deferred Income by ₱126,748,606.70;
understatement of Trust Liabilities by
₱370,759,356.30; overstatement of
retained earnings by ₱502,586,852.00;
understatement of Subsidy Income by
₱5,078,889.00; and other various
unaccounted effects of non-recognition of
delivered assets, its related accumulated
depreciation, depreciation expense and
related amortization of deferred and
subsidy income. Likewise, the non-
recognition and absence of disclosure of
related transactions affected the fairness
of presentation of various accounts in the
financial statements of the Agency as at
year-end.
We recommended that management:
(a) adopt PAS 20 in the recognition of The Agency has adhered to Fully
Government Grants; PAS 20, including the Implemented
related disclosures to the
financial statements.
(b) emphasize to end-users and the PPMD Implementation of Partially

the need to provide prompt information DVOR/DME and Air- Implemented
and documentation to the Accounting Ground projects is still
Department for the proper recording of ongoing because of The PS-DBM
the receipt of goods/services procured out pending deliverables from delivery
of the Grants and effect the adjusting the contractor. receipt for the
entries made for such unrecorded receipts; The original PS-DBM final 30% of
and delivery receipts for the project lot is
70% of project lot not yet issued
(DVOR/DME and Air- because of
Ground) are in the pending
possession of PPMD. deliverables
Copies of delivery receipts from
from contractor were also contractor.
126
Status and
Reason
Non-
Implementation
provided to PPMD during Subject for
the inspection. joint
inspection of
The completion of required SBMA/PS-
documentation is being DBM
accomplished as documents
are received from the
Airport Department.
The Accounting
Department has partially
complied with the said
recommendation under
JGL No. 21-08-000125
amounting to
₱9,400,560.00.
(c) draw the necessary Journal Entry The Accounting Fully

Voucher (JEV) taking up the adjustments Department already Implemented
on the different accounts affected, if reversed the Financial
warranted. Liabilities and Receivables
related to Government
Grants amounting to
₱348,356,924.05 per JGL
21-03-0216.
Also made the

recommended adjusting
entries to recognize the
Financial Liability to the
National Treasury and the
proper Deferred Income per
JGL 21-03-0218.
7. The inappropriate recognition of CY

Accounts Payable to take up the year-end 2020
accrual of liabilities and subsequent AAR
payments of claims resulted in the Finding
overstatement Financial Liabilities and No. 7
Property, Plant and Equipment accounts
127
Status and
Reason
Non-
Implementation
by ₱14,449,483.24 and ₱12,922,683.24,
respectively, and understatement of
Retained Earnings by ₱1,526,800.00
We recommended that management The Accounting Fully

direct the Accountant to enhance and Department has been Implemented
strengthen monitoring and review directed to enhance and
procedures in the preparation of journal strengthen the monitoring
entries for all payment transactions and and review procedures in
accrual of payables to state the Liabilities recording financial
account at a more accurate balances as at transactions to ensure
year-end. accurate balances of assets
and liabilities accounts.
8. Out of the four litigation cases of the CY

Subic Bay Metropolitan Authority 2020
(SBMA) pending with the Court and other AAR
adjudication bodies, one involving an Finding
amount of ₱10,173,295.12 was No. 8
erroneously disclosed as a Contingent
Liability despite the remoteness of
settlement in favor of the other party.
Meanwhile, one case for ₱10,000.00 was
not disclosed as a Contingent Asset
although the collection of the claim in
question is considered probable.
Similarly, a contingent claim for
₱29,402,500.00 under a pending lawsuit
was not disclosed when there is a
possibility of subsequent outflow of
resources affecting the Agency. Lastly,
there was no provision and disclosure for
a probable obligation amounting to
₱501,561.15. Such omissions and
erroneous accounting policy stemmed
from inadequate procedures in the closing
of the books of accounts at year-end
which resulted to qualitative and
quantitative misstatements in the
Financial Statements (FS).
128
Status and
Reason
Non-
Implementation
We recommended and the management
agreed to undertake the following courses
of action:
a. Require the Legal Department to The Legal Department has Fully

forward the documentation required in the already provided the Implemented
memorandum for consideration in the Accounting Department
preparation of the year-end Financial with the case records and
Statements; and legal documents showing
the status of the cases
subject of the COA
Observation for the latter’s
appropriate action via email
on December 14, 2021 and
furnishing the hard copy
thereof through its
Memorandum dated
December 07, 2021. Also,
it was copy furnished to
Offices of the Senior
Deputy Administrator for
Support Services and of the
Deputy Administrator for
Legal Affairs.
b. Direct the Accounting Department to:
(i) include the required documentation for The annual memorandum Fully
information on provisions and on the closing of SBMA Implemented
contingencies in the yearly memorandum books for the year 2021
on the closing of SBMA books; dated October 7, 2021, was
already issued by the
and disseminated to SBMA
departments on October 15,
2021.
The said memorandum

includes under Item no. 10,
the submission of the status
of legal issues with court
129
Status and
Reason
Non-
Implementation
cases, etc. where contingent
receivables or payables
may arise from the Office
of the Deputy
Administrator for Legal
Affairs and Legal
Department.
(ii) provide disclosures thru the Notes to The Accounting Fully

Financial Statements as required by PAS Department will comply Implemented
37; and with the recommendation
and will include the
disclosures in the Notes to
FS.
(iii) prepare the following adjusting The Legal Department Fully

journal entries for the unrecorded issued a memorandum to Implemented
provision for a liability that is probable: the Accounting Department
via email on July 23, 2021
Acco and also furnishing the hard
Accoun
unt Debit Credit copy thereof on July 24,
t
Code 2021 submitting the
5020 Indemnit ₱501,5 documents (court orders)
6030/ ies/Prior 61.15 requested by the latter for
3070 Period the booking of the case
1010 Adjustm Raymund C. Ramos vs.
ent SBMA docketed as Civil
2060 Other ₱501,5 Case No. 142-0-15
1990 Provisio 61.15 (Regional Trial Court of
ns Olongapo City, Branch 72).
On August 26, 2021, a

meeting was conducted
attended by Managers
and/or representatives of
the Accounting
Department, FPBD and
Seaport Department
130
Status and
Reason
Non-
Implementation
pertinent to the BUR that
will be prepared.
In the said meeting, it was

resolved that the BUR will
be issued by the Seaport
Department where the
subject vehicle was
assigned and where Mr.
Marcelino (who was the
operator of the vehicle
during the incident) then
performed services as a
Dockman and Rigger.
9. Withholding taxes amounting to CY

₱69,520,145.96 were remitted to the 2020
Bureau of Internal Revenue (BIR) within AAR
the required period in accordance with Finding
Revenue Regulations Nos. 2-98 and 17- No. 9
2003 dated April 17, 1998 and March 31,
2003, respectively.
We recommended that management The Accounting Fully

continue with the good practice of Department will continue Implemented
adhering to the BIR Revenue Regulations with the good practice of
Nos. 2-98 and 17-2003 on the proper adhering to the BIR
withholding of taxes and prompt Revenue Regulations Nos.
remittance thereof. 2-98 and 17-2003 on the
proper withholding of taxes
and prompt remittance
thereof.
10. Premium contributions including CY

employer’s share, loan amortizations and 2020
other amounts totaling to AAR
₱182,806,516.93 were remitted to the Finding
Government Service Insurance System No. 10
(GSIS) within the required period in
compliance with Republic Act (R.A.) No.
131
Status and
Reason
Non-
Implementation
8291 or the GSIS Law of 1997, and its
Revised Implementing Rules and
Regulations (RIRR). However, a sum of
₱1,509,724.69 remained unaccounted as
of year-end.
We recommended that the management:
(a) instruct the Accounting personnel To date, adjustments on the Fully

concerned to carefully review and analyze employee share were made Implemented
all the previous years’ transactions and under JGL-21-01-0001,
records pertaining to the withholding and APV No. 21-02-0117, APV (Reiterated in
remittance of GSIS No. 21-03-0119, APV No. 2021 AAR,
premiums/contributions and loan 21-07-000009 and JGL No. Observation
deductions to the GSIS; and 21-07-000001 in the total No. 11)
amount of ₱67,531.67.
The remaining unremitted

balance for reconciliation is
₱215,895.03.
(b) if warranted, immediately remit Total adjustments made to Fully

outstanding balances in settlement of the date, loans included, is Implemented
accounts of the individual employees ₱103,419 and total
affected by the delayed or non-remittance remittance of ₱439,339.16.
of premiums/loan amortizations.
11. Fund contributions including CY

other amounts amounting to AAR
Home Development Mutual Fund No. 11
(HDMF) within the required period in
compliance with Republic Act (R.A.) No.
9679, and its Implementing Rules and
Regulations (IRR). Nonetheless, a total of
₱214,069.14 remained unaccounted as of
year-end.
132
Status and
Reason
Non-
Implementation
We recommended that the management The total amount of Fully

instruct the Accounting personnel remitted adjustments made Implemented
concerned to trace, review and reconcile to date is amounted to
all documents supporting the unaccounted ₱558,072.62 and
amount of ₱214,069.14 under the Due to ₱128,057.96. Summary of
HDMF account and effect adjustments in remittance and adjustments
the books of accounts, if warranted. made and the
corresponding Journal
Entry Vouchers are as
follows:
• JGL-21-01-000001
• JGL-21-04-000189
• JGL-21-04-00198
• JGL-21-04-000226
• JGL-21-04-000286
• JGL-21-05-000001
• JGL-21-05-000005
• JGL-21-05-000155
• JGL-21-05-000174
• JGL-21-05-000247
• JGL-21-06-000004
• JGL-21-06-000056
• JGL-21-06-000204
12. Premium contributions amounting to CY

Philippine Health Insurance Corporation AAR
(PHIC) within the required period in Finding
compliance with Republic Act (R.A.) No. No. 12
7875 as amended by R.A. Nos. 9241 and
10606. Nevertheless, a total of
₱27,650.00 remained unaccounted for as
of year-end.
(a) instruct the Accounting personnel The unaccounted variance Fully

concerned to trace those employees is fully adjusted to date. Implemented
ENCLOSURE L provides
133
Status and
Reason
Non-
Implementation
whose contributions were withheld but the summary of
not yet remitted; adjustments made and the
corresponding Journal
(b) once the employees are identified, Entry Vouchers as follows: Fully
work out with the PHIC the remittance of • JGL-21-04-000144 Implemented
the contributions to their credit; • JGL-21-04-000168
• JGL-21-04-000226
(c) retrieve or locate all pertinent • JGL-21-04-000286 Fully
documents to substantiated the amount of • JGL-21-06-000004 Implemented
₱27,650.00; and • JGL-21-06-000204
• JGL-21-06-000287
(d) effect necessary adjustments in the Fully
books of accounts, if warranted. Implemented
13. The Subic Bay Metropolitan Authority CY

(SBMA) was not compliant with the 2020
minimum budgetary requirements for AAR
Gender and Development (GAD) Finding
programs/projects/activities (PPAs) and No. 13
the required GAD mechanisms to identify
and address the gender issues as stated in
Section 36 of Republic Act (R.A.) No.
9710 and Philippines Commission on
Women (PCW) Memorandum Circular
(MC) No. 2018-04 dated May 4, 2018,
thus, hindering the attainment of the
Freeport’s GAD mandate.
We recommended and the management

agreed to direct the whole GAD Focal
Point System (GFPS) as well as all other
units concerned to undertake the
following remedial measures:
a) Analyze the existing GAD Database, The Gender Analysis is set Fully
containing sex-disaggregated data, to to be conducted by the Implemented
serve as inputs for the identification of SBMA GADFPS.
GAD issues and concerns and the (Reiterated in
appropriate Programs/Projects/Activities; Meanwhile, an initial 2021 AAR,
SBMA 2022 GPB was
134
Status and
Reason
Non-
Implementation
already submitted in Observation
November 2021 (via No. 9)
GMMS) to the PCW and
this is subject to their
review.
Necessary revisions in the

SBMA 2022 GPB will be
made once the Gender
Analysis is completed and
the PCW review is
received.
b) Consider using gender analysis tools Management approved the Fully

prescribed in the PCW Memorandum in “Guidelines on GAD Implemented
the absence of an approved policy Attribution – An Adoption
guideline on GAD attribution, and of the Harmonized Gender
properly document the outputs of gender and Development
analysis conducted to improve the GAD Guidelines” in March 2021.
Plan strictly in accordance with the GAD The said guideline is a
mandate; and simplified guideline that
will aid the SBMA
Departments and Offices in
ensuring GAD attributions
to all its Projects, Activities
and Programs (PAPs). It
also includes a GAD
Review Committee who
will review and assess
proposed projects for
attribution to the Agency’s
Gender and Development.
The orientation for the use

of the guidelines was held
on April 20, 2021.
Attribution was also
included in the 2021 PCW-
approved GAD Plan and
Budget.
135
Status and
Reason
Non-
Implementation
c) Whenever the Agency budget allows, The Agency continue to Fully
recommend an adequate strive to reach its goal of Implemented
funding/attribution to carry out the GAD becoming a gender-
Plan more efficiently and effectively. responsive GOCC. Thus,
funding, whenever budget
allows, for the
implementation of the
Agency’s GAD Programs,
Activities and Programs
shall always be given
priority.
14. Audit disallowances amounting to CY

₱12,507,789.56 remained unsettled as of 2020
year-end contrary to COA Circular No. AAR
2009-006 dated September 15, 2009. Finding
Likewise, audit disallowances prior to the No. 14
effectivity of the aforementioned Circular
amounting to ₱140,605,881.78 remained
unsettled.
We recommended that the Chairperson As to Audit disallowances Fully

and Administrator cause the immediate amounting to Implemented
settlement of the outstanding audit ₱140,605,881.78
disallowances. (Reiterated in
As indicated in the 2021 AAR,
SBMA’s letter to COA Observation
dated November 9, 2021, No. 14 with
the SBMA has already sent modification)
out demand letters to 43
individuals demanding the
payment within 30 days of
their individual liability
under the disallowances or
suspension specific to
them. There are 18 demand
letters that will be sent out
as soon as their present
whereabouts or current
addresses are ascertained.
136
Status and
Reason
Non-
Implementation
Note that out of the 18, 4
are already deceased.
In the same letter, the

SBMA also requested from
COA the acceptance of the
payment proposal of the 7
individuals who are still
employed with SBMA for
the settlement of their
disallowances by
installment as approved
thru Board Resolution No.
21-11-2291.
Some of the persons liable

who received their
respective Notices have
already paid in full the
disallowed amounts.
15. The correctness, existence and CY

validity of reported accounts payable 2019
balances amounting to ₱738,002,472.33 AAR
as of December 31, 2019 could not be Finding
ascertained due to (a) difference totaling No. 4
₱43,524,894.18; (b) low percentage of
confirmation replies; and (c) long
outstanding payables totaling
₱390,315,846.70 or 52.89 percent of the
reported balance as of December 31,
2019, contrary to the Conceptual
Framework of Philippine Financial
Reporting Standards (PFRS) thus
affecting the fair presentation of the total
liabilities in the financial statements.
We recommend that Management:
(a) assess and reconcile the Based on Management Fully

discrepancies in the confirmation response : Implemented
137
Status and
Reason
Non-
Implementation
replies of Propmech Corporation
and NPC-GENCO and effect Propmech Corporation.
adjustments, if warranted; The SBMA Accounts
Payable to Propmech as of
November 2019 was based
on the latter’s 1st billing in
the amount of
₱4,676,922.00 dated
December 19, 2018). On
the other hand, the
Company might be using
the percentage of
completion in their
Accounts Receivable as
rendered in their project
from which they replied to
COA’s confirmation letter.
Their 2nd invoice dated

December 06, 2019 in the
amount of ₱2,522,958.00
was received by SBMA and
processed for payment in
December 2019. The
contract was already paid
on January 20, 2020.
NPC-GENCO. The SBMA

Accounts Payable to NPC-
GENCO as of November
2019 amounting to
₱617,405.12 was recorded
based on the Ground Lease
Agreement (GLA) for the
Subic Power Station.
When the Power Sector

Assets & Liabilities
Management (PSALM)
Corporation was created, as
Congress enacted the
138
Status and
Reason
Non-
Implementation
EPIRA Law on June 8,
2001, the NPC-GENCO
was liquidated and became
part of PSALM. PSALM
then billed SBMA for
which we accrued payables
under its name. The billing
includes VAT, market fees
and interests, which SBMA
contested. The matter is
under arbitration before the
Office of the Government
Corporate Counsel
(OGCC).
The creditor’s response to

your confirmation letter
was based on PSALM’s
accounts receivable
balances which still include
the penalties, value added
taxes, and market fees. But
without the contested
charges, the principal
amount of liability is the
same.
In view of PSALM’s
takeover of NPC-GENCO,
they will consolidate the
amount due to the latter
with the accounts payable
to PSALM.
SBMA will pay the said

liability once they receive
the final decision or
outcome of the arbitration
case from OGCC.
139
Status and
Reason
Non-
Implementation

GSIS within the required period in No. 8
compliance with R.A. No. 8291, the GSIS
law of 1997, and its Revised IRR.
However, amount totaling ₱1,937,457.30
remained unaccounted for as of year-end.
We recommend that the Management The Management Fully

instruct the concerned Accounting concurred and would like Implemented
Department personnel to exert more effort the COA to note that a
to trace, review and reconcile all review and reconciliation
documents supporting the Due to GSIS of these accounts is being
account and effect adjustments, if undertaken. To date, the
necessary. nature and disposition of
some of these items have
*same with 2020 AAR Finding no. 10 already been identified and
adjustments have been
made as appropriate:
 The unremitted
amount of GSIS
employee share
amounting to
₱225,682.07 and
unremitted amount
of GSIS employer
share amounting to
₱128,338.55 as of
January 31, 2020
per AOM pertain to
premiums withheld
and accrued from
retroactive
adjustment on step
increments due to
length of service,
140
Status and
Reason
Non-
Implementation
promotion and
initial pay.
 Unremitted
GSIS
Employee
Share - The
breakdown of
the unremitted
amount of
GSIS
employee
share
amounting to
₱225,682.07
is shown in
Annex A. As
shown
therein, the
said amount is
partly the
remaining
balance of the
unremitted
GSIS
employee
share from the
previous
year’s COA
AOM 2019-
006
amounting to
₱770,405.04.
Of this
amount,
₱601,821.89
was already
remitted and
adjusted in
2019 leaving a
balance of
141
Status and
Reason
Non-
Implementation
₱168,583.15.
This balance
plus the
unremitted
GSIS
employee
share for 2019
amounting to
₱7,098.92
correspond to
the said
unremitted
amount of
₱225,682.07.
Annex B
provides the
details of this
amount
including the
adjustments
made in
February
2020 of
₱3,739.43,
leaving a
balance of
₱221,942.64.
 Unremitted
GSIS
Employer
Share – The
unremitted
amount of
₱128,338.55
is still subject
for review and
reconciliation.
142
Status and
Reason
Non-
Implementation
 The unremitted
amount of GSIS
loans amounting to
₱1,562,325.90
includes those from
inactive GSIS loan
accounts and those
GSIS loan
deductions from the
final pay of
separated
employees for the
year 2019. Some
were already
identified and
adjusted while
reconciliation of
some is still
ongoing.
Annex C provides
the details of the
unremitted amount
of GSIS loans and
the corresponding
adjustments made
in 2020.
 The unremitted
amount of GSIS-
Group Personal
Accident Insurance
(GPA) amounting
to ₱21,110.78 are
excess GPA amount
from previous years
deducted in the
payroll which as per
Human Resource
Management
Department
143
Status and
Reason
Non-
Implementation
(HRMD) are
subject for refund to
employees. This
pertains to Value
Added Tax (VAT)
on GPA insurance
which GSIS
previously
informed SBMA
not to include for
remittance.
Breakdown of the
said amount is still
for determination.
The status of reconciliation

and adjustments made to
date were submitted to
COA on July 10, 2020.
will continue with the
analysis and reconciliation
of the remaining
unaccounted balances of
the Due to GSIS account.

HDMF within the required period in No. 9
compliance with R.A. No. 9679, and its
IRR. However, amount totaling to
₱258,744.27 remained unaccounted for
as of year-end.
We recommend that the Management The remaining balance of Fully

instruct the concerned Accounting ₱258,744.27 that is Due to Implemented
Department personnel to exert more effort HDMF account pertains to
144
Status and
Reason
Non-
Implementation
to trace, review and reconcile all loans from previous years
documents supporting the Due to HDMF which are still subject for
account and effect adjustments, if further analysis and
necessary. reconciliation. The
concerned Accounting
*same with 2020 AAR Finding no. 11 personnel will trace all
supporting documents in
order to record the
necessary adjustments on
or before December 31,
2020.
Reconciliation of accounts
is still ongoing.

PHIC within the required period in AAR
compliance with R.A. No. 7875 as Finding
amended by R.A. Nos. 9241 and 10606. No. 10
However, amount totaling to ₱27,550.00
remained unaccounted for as of year-end.
We recommend that the Management The remaining balance of Fully

instruct the concerned Accounting ₱27,550.00 that is Due to Implemented
Department personnel to exert more effort PHIC account pertains to
to trace, review and reconcile all voluntary contributions of
documents supporting the account and contract of service
effect adjustments, if necessary. employees from previous
years which are still subject
*same with 2020 AAR Finding no. 12 to further analysis and
reconciliation. The
concerned Accounting
personnel will trace all
supporting documents in
order to record the
necessary adjustments on
or before December 31,
2020.
145
Status and
Reason
Non-
Implementation
Reconciliation of PHIC
accounts (Contribution and
Voluntary) is still ongoing.
19. The validity, existence and CY

collectability of the total Receivables 2018
amounting to ₱5,680,914,611.16 as of AAR
December 31, 2018 could not be fully Finding
ascertained due to poor turnout of No. 2
confirmation replies which nonetheless
showed discrepancy of ₱723,055,546.19,
while leniency of the Management to
strictly impose their policies to collect
receivables resulted in very low 23.03
percent net realizable value. Likewise,
insufficient supporting documents to
support request for write-off of dormant
accounts was noted.
We recommended and the Chairperson

and Administrator agreed to direct the
Accountant to:
(a) conduct examination and Monitoring is being Partially

reconciliation on the discrepancies conducted. Discrepancies Implemented
between the accounting and lessees’ between balances against
records and to effect adjustments, if PAGCOR are still subject To date, the
warranted; to a court case and there is account of
no resolution yet on the said PAGCOR is
case. As to balances against still subject for
BOC, reference to the resolution.
SBMA Legal Department
for their appropriate action
on the issue has yielded no
result as to date.
As to balances against
BOC, the Legal
Department has issued
notices over the six (6)
146
Status and
Reason
Non-
Implementation
housing units covered by
the expired Memorandum
of Agreement. Notices
were sent to the locators
who are subject for the
write-off of dormant
accounts referred by the
Accounting Department/
Treasury Department.
20. The reliability of the reported Due CY

from Officers and Employees – Non- 2018
current account balance of ₱7,095,458.87 AAR
fully ascertained due to the (a) No. 3
remoteness of the collectability of long
outstanding balances arising from the
setting up of accountability for the loss,
through death, of work animals -
₱5,787,765.94; and (b) unsubstantiated
dormant collectibles of ₱775,552.93.
Moreover, the lack of proper
authorization for the partial settlement on
the loss of property valued at
₱532,140.00 was noted.

and Administrator agreed to:
(b) require the concerned departments, The LED and PPMD are Partially
specifically the PPMD and LED, to gather closely coordinating to Implemented
all remaining available documents such as complete the required
affidavits of accountable officers and documentation for the The autopsy
autopsy reports and submit the same to filing of relief for
report for one
COA for appropriate action; accountability on horse, “Sister
the
remaining six (6) horsesFlorence” is
subject of the finding. not yet
secured to
The PPMD has evaluated date. For the
the documents submitted five other
horses with
147
Status and
Reason
Non-
Implementation
by LED on September 6, complete
2019. documentation
, these will be
To date, LED still needs to submitted to
secure the autopsy report COA in order
for “Sister Florence” in to proceed
order to finally submit said with the
documents to COA. processing of
the relief for
accountability.
21. The correctness, existence and CY

validity of reported accounts payable 2018
balances amounting to ₱707,290,379.55 AAR
ascertained due to (a) low percentage of N. 4
confirmation replies; and (b) long
outstanding payables totaling to
₱49,747,198.22 or 7.03 percent of the
reported balance as of December 31,
2018, contrary to the Conceptual
Framework of Philippine Financial
Reporting Standards (PFRS) thus
affecting the fair presentation of the total
liabilities in the financial statements.

and Administrator agreed to instruct the
Accountant to:
(b) immediately validate and verify the The Accounting Fully

inactive accounts specifically those with Department was able to hire Implemented
significant outstanding balances; and six (6) Consultants who
reported for work in
October and November
2019, who will assist them
in the reconciliation of
various accounts, assist in
recovering/ researching
required documents
necessary to adjust various
148
Status and
Reason
Non-
Implementation
accounts, review existing
contracts of locators and
residents to check their
compliance and perform
other relevant tasks which
may be assigned by the
concerned division of

GSIS within the required period in No. 11
compliance with R.A. No. 8291, the GSIS
law of 1997, and it’s Revised IRR.
However, amount totaling to
₱2,174,023.67 remained unaccounted for
as of year-end.
We recommended and the Chairperson Please refer to CY 2019 Fully

and Administrator agreed to instruct the AAR Finding No. 8 Implemented
concerned Accounting Department remarks as discussed
personnel to exert more effort to trace, above.
review and reconcile all documents
supporting the Due to GSIS account and
effect adjustments, if necessary.
*same with 2020 AAR Finding no. 10

HDMF within the required period in No. 12
compliance with R.A. No. 9679, and it’s
IRR. However, the amount of
₱229,934.51 remained unaccounted as of
year-end.
149
Status and
Reason
Non-
Implementation
and Administrator agreed to instruct the
concerned Accounting Department
personnel to
a. exert more effort to trace, review and Please refer to CY 2019 Fully
reconcile all documents supporting the AAR Finding No. 9 Implemented
Due to HDMF account and effect remarks as discussed
adjustments, if necessary; and above.
*same with 2020 AAR Finding No. 11
b. draws the necessary adjusting entry to Please refer to CY 2019 Fully

correct the overstatement of the account AAR Finding No. 9 Implemented
“PAG-IBIG Contribution-Employer’s remarks as discussed
Share”. above.

PHIC within the required period in AAR
compliance with R.A. No. 7875 as Finding
amended by R.A. Nos. 9241 and 10606. No. 13
However, the amount of ₱28,737.50
remained unaccounted as of year-end.
We recommended and the Chairperson Please refer to CY 2019 Fully

and Administrator agreed to instruct the AAR Finding No. 10 Implemented
concerned Accounting Department remarks as discussed
personnel to exert more effort to trace, above.
review and reconcile all documents
supporting the account and effect
adjustments, if necessary.

2009-006 dated September 15, 2009.
150
Status and
Reason
Non-
Implementation
Likewise, audit disallowances prior to the Finding
effectivity of the aforementioned Circular No. 15
unsettled.
We recommended and the Chairperson The Accounting Fully

and Administrator agreed to cause the Department already Implemented
immediate settlement of the outstanding disbursed the amount paid/
audit disallowances. withheld from final pay of
concerned officers.
On January 22, 2019, a
decision was rendered by
the Supreme Court on G.R.
No. 230566 where the
petition was PARTIALLY
GRANTED. And on April
17, 2019, the said decision
became final and
executory. The persons
identified by the March 26,
2012 Notice of
Disallowance under Special
Audit ND No. 2012-
001(2011) are not required
to refund the disallowed
amounts therein. Thus, the
amount of ₱12,507,789.56
remained unsettled as of
12/31/2020 out of the
₱15.5M. The remaining
₱12.5 M has pending
appeals to the COA.
Also, the amount of

₱140,811,860.11 resulting
from disallowances prior to
the effectivity of COA
Circular 2009-006.
remains outstanding in the
books as of 12/31/2020.
151
Status and
Reason
Non-
Implementation
Further, an amount of
₱15,625.00 was deducted
from the final pay of Ms.
Almira Capistrano as
settlement for her
disallowance.
26. The accuracy, existence and CY

reliability of accounts payable balance of 2017
₱748,231,701.49 as of December 31, AAR
2017 could not be fully established due to Finding
(a) discrepancy of ₱717,206.23; (b) low No. 7
percentage of confirmation replies; and
(c) non-reversion of long outstanding
balance of payables worth
₱48,425,866.07 or 6.47 percent of the
accounts payable balance as of year-end,
contrary to the Philippine Financial
Reporting Standards (PFRS) Conceptual
Framework.
We recommended and Management

agreed to:
c. examine the long outstanding payables The Accounting Fully

to ascertain the validity of the recorded Department continuously Implemented
obligations and effect adjustments if reviews the payables
necessary. account, including analysis
of those outstanding for
*same with 2019 AAR Finding no. 4d, more than 2 years.
For the period January 1 to

December 31, 2018, the
was able to examine and
adjust a total of
₱2,323,799.08 out of the
152
Status and
Reason
Non-
Implementation
₱48,425,866.07 long
outstanding payables as of
December 31, 2017.
As mentioned above in CY
2019 AAR Finding No. 4
(d), all dormant payable
accounts that are related to
the Accounts Payable
Division are monitored
/validated regularly. We
reversed for 2020 an
amount of ₱158,000 under
JGL 20-06-0114 & JGL 20-
07-0154.
27. The entity remained not compliant CY

with the provisions of Philippine 2017
Accounting Standards (PAS) 36 on the AAR
assessment of assets and recognition of Finding
any impairment thereof, thus failing to No. 11
present a more reliable carrying value of
the assets that may be considered
obsolete, unserviceable and damaged,
therefore, affecting the fair presentation
of the assets and reported income in the
entity’s financial statements.
We reiterated our last year’s Management is taking Fully

recommendation that the Accounting appropriate steps to Implemented
Department together with other implement the COA
concerned Department be directed to recommendation.
comply with PAS 36 by assessing the
conditions of its assets subject for In fact, they have budgeted
impairment and to recognize the in 2019 for the procurement
impairment loss if warranted, to reflect of Consultancy Services for
the realizable value of the assets which is the appraisal of SBMA
also necessary for the Financial Fixed Assets.
Statements to fairly present the account
153
Status and
Reason
Non-
Implementation
balances and thus, become more useful to For movable assets, the
the stakeholders and users of the same. PPMD has been
coordinating with
prospective suppliers/
appraisers who will be
qualified as project
consultants for the
appraisal.
Results thereof shall serve

as basis for the recognition
of impairment loss, if any,
by the Accounting
Department.
28. Premium contributions, loan CY

amortizations and other amounts 2017
amounting to ₱94,328,000.51 were AAR
remitted to the GSIS within the required Finding
period in compliance with R.A. No. 8291, No. 13
the GSIS law of 1997, and it’s Revised
IRR. However, amount totaling to
₱1,272,351.83 remain unaccounted for as
of year-end.
We recommended and Management Please refer to CY 2019 Fully

agreed to instruct the concerned AAR Finding No. 8 Implemented
Accounting Department personnel to remarks as discussed
trace, review and reconcile all documents above.
supporting the Due to GSIS account and
*same with 2019 AAR Finding No. 8,

2018 No. 11
29. Fund contributions, loan CY

amortizations and other amounts 2017
amounting to ₱31,843,453.81 were AAR
remitted to the HDMF within the required Finding
period in compliance with R.A. No. 9679, No. 14
154
Status and
Reason
Non-
Implementation
and it’s IRR. However, amount totaling to
₱278,642.83 remained unaccounted for
as of year-end.

supporting the Due to HDMF account and

2018 No. 12
30. Premiums withheld amounting to CY

₱6,975,300.00 were remitted to the PHIC 2017
within the required period in compliance AAR
with R.A. No. 7875 as amended by R.A. Finding
Nos. 9241 and 10606. However, amount No. 15
totaling to ₱187,139.25 remained
unaccounted for as of year-end.

supporting the account and effect
adjustments, if necessary.

2018 No. 13
31. Total budget for GAD in the amount CY

of ₱6,070,000.00 was only 0.15 percent of 2017
the required threshold as set forth under AAR
the Philippine Council on Finding
Women/National Economic and No. 17
Development Authority/Department of
Budget and Management
(PCW/NEDA/DBM) Joint Circular No.
2012-01 and only 31 percent of the
155
Status and
Reason
Non-
Implementation
amount was utilized during the year
thereby failing to fully institutionalize
gender mainstreaming within the entity.
Likewise, lapses have been noted in the
submission of the GAD Plan and Budget
and the Accomplishment Report.
We recommended and Management

agreed to direct the whole GAD Focal
Point System as well as all other units
concerned to:
a. conduct a gender analysis of PPAs Please refer to CY 2019 Fully

through the administration of the HGDG AAR Finding No. 11 (a) Implemented
test and comply with the existing remarks as discussed
guidelines for the preparation of the GAD above.
plans and budgets;
*same with 2019 AAR Finding No. 11a,

2018 No. 14a

2009-006 dated September 15, 2009. Finding
Likewise, audit disallowances prior to the No. 18
effectivity of the aforementioned Circular
unsettled.
We recommended that Management Please refer to CY 2018 Fully

cause the immediate settlement of the AAR Finding No. 15 Implemented
audit disallowances. remarks as discussed
above.
2016 No. 13, and 2011 No. 7
33. The correctness, validity and CY

reliability of the reported balances of the 2016
Accounts Payable amounting to AAR
₱207,234,842.10 and ₱146,956,682.91
156
Status and
Reason
Non-
Implementation
as of September 30, 2016 and December Finding
31, 2016, respectively could not be No. 5
determined due to a) the results of the
confirmation showing net discrepancies
of ₱1,041,105,129.72 and ₱248,535.32;
and b) the long outstanding payables
aggregating to ₱71,496,901.05 or
48.65% of the reported balance as of
December 31, 2016 contrary to the
Conceptual Framework for Financial
Reporting and Section 73 of the Manual
on the New Government Accounting
System (MNGAS) requiring the faithful
representation of the accounts in the
Financial Statements thereby affecting
the total liabilities figure as well as that of
the corresponding expense accounts.
a. Continuously analyze the discrepancies a. Accounting Fully

noted in the confirmation and effect the Department has Implemented
adjustments where necessary; and substantially
completed the analysis
of the accounts
payable balances with
discrepancies between
SBMA records and the
creditors’ confirmed
balances as of
December 31, 2016 of
8 creditors found by
COA.
To date, the Utilities

Department is still
coordinating with
Subic Water and
Sewerage
157
Status and
Reason
Non-
Implementation
Company to validate
the SBMA accounts
payable to them.
b. Ensure that recording of accounts b. Same remarks with Fully

payable is based on valid claims that for CY 2017 AAR Implemented
evidenced by actual delivery of goods and Finding No. 7
rendition of services. A review of the long Recommendation c.
outstanding payables should be made and
effect necessary management actions Further, on September
thereon. If deemed necessary, revert the 24, 2018, the SBMA
corresponding amounts to the appropriate wrote a letter to the
equity account in accordance with Office of the
existing rules and regulations. Government Corporate
Counsel (OGCC)
requesting the
commencement of
arbitration proceedings
on the receivables of
SBMA from PSLAM
vis-à-vis the
receivables of PSALM
from SBMA.
34. The accounting department failed to CY

comply with the provisions of PAS 36 on 2016
the assessment of assets and recognition AAR
of any impairment thereof thus, failing to Finding
present a more reliable carrying value of No. 7
the assets considered obsolete,
unserviceable or damaged, therefore
affecting the fair presentation of the
assets and the income in the Statement of
Financial Position and in the Statement of
Comprehensive Income, respectively.
We recommended to:
a. Direct the Accounting Department to Please refer to CY 2017 Fully

comply with PAS 36 by assessing the AAR Finding No. 11 Implemented
conditions of its assets subject for remarks as discussed above
158
Status and
Reason
Non-
Implementation
impairment and to recognize the
impairment loss if warranted, to
reflect the realizable value of the
assets which is also needed for the
Financial Statements to fairly present
the account balances and thus, become
more useful to the stakeholders and
users of the same.
**same with 2017 AAR Finding No. 11
35. Audit suspensions and disallowances CY

amounting to ₱970,370.42 and 2016
₱15,451,322.12, respectively, remained AAR
unsettled as of year-end contrary to COA Finding
Circular No. 2009-006 dated September No. 13
15, 2009. Likewise, audit disallowances
prior to the effectivity of the
aforementioned Circular amounting to
₱140,605,881.78 remained unsettled.
We recommended that the:
a. Management causes the immediate Please refer to CY 2018 Fully

settlement of the audit disallowances. AAR Finding No. 15 Implemented
remarks as discussed
**same 2018 AAR Finding No. 15, 2017 above.
No. 18, 2011 No. 7
36. The balance of Working Animals CY

account as of year-end was unreliable due 2015
to the (a) non-inclusion of the values of AAR
nine cavalry horses with no appraised Finding
values; and (b) inclusion in the balance of No. 6
the costs of the 19 dead animals totaling
₱1,021,778.00.
We recommended that the
159
Status and
Reason
Non-
Implementation
a. concerned Accountable Officers file Management informed us Fully
their request for relief with the COA that concerned departments Implemented
will be coordinating to
process the remaining 1
dead animal (Romeo –
horse which died in 2008)
without relief of
accountability.
37. The Management failed to liquidate CY

the sum of ₱110,353.50 representing 2013
advance payments made to two (2) AAR
contractors with projects contracted in Finding
prior years. No. 6
We reiterated for the last time the ● ProConsult – already Partially

recommendation to immediately settle the settled its unrecouped Implemented
amount by demanding refund/restitution advanced payment
of the unrecovered advance payments amounting to
paid to IP Santos and Associates. We ₱6,330.65 on March
informed the Management that a notice of 11, 2014 per Official
disallowance would be issued making the Receipt no. 352429.
officials who authorized the payment of
advances but failed to recover the
advances or properly monitor the ● I.P. Santos and
recoupment of said advances from Associates- The Legal
progress billings liable for the entire Department requested
unrecovered amount. the assistance of the
Insofar as the accountability of Intelligence Office to
ProConsult, Inc. is concerned, we locate the address of
recommended that Management establish I.P. Santos and
with absolute certainty whether or not Associates on July 16,
there remains an unsettled amount still 2018. However, the IO
collectible from the firm. If an amount replied in its
remains due from ProConsult, Inc., we memorandum dated
advised the Management to demand September 4, 2018 that
immediate settlement thereof. Otherwise, the company no longer
we recommended to effect the necessary holds officers at their
adjustment in the books of account to known given address.
correct any possible error committed. But they will still
communicate the
160
Status and
Reason
Non-
Implementation
matter if they acquire
further leads.
38. The SBMA spent approximately CY

₱23.38 million for the CY 2007 RFID 2013
Project which never became operational AAR
owing to the Management’s (1) lack of Finding
preparation to implement the Project as No. 26
evidenced by the failure to (a) appoint
Project Coordinator responsible for the
coordination of activities, resources, and
information; (b) assign roles,
responsibilities and accountabilities to
concerned departments and (c) formulate
policies and procedures necessary in
managing the post-implementation phase
of the Project; (2) lack of consultation
with concerned departments in drafting
the terms of reference for the procurement
of RFID-related IT equipment; (3) non-
compliance of Contractor with its
contractual obligations particularly the
commissioning of various equipment and
application system according to the
intended design and purpose; and (4)
absence of strong willpower to make the
Project work as evidenced by the
Management’s inaction to protect the
interest of the agency despite knowledge
of the causes leading to the failure of the
Project.
No Project Coordinator was appointed to

oversee the progress and completion of
the RFID Project. Instead, the
Management instructed the MIS Head to
fill in the gap and assume the duty of a
Project Coordinator for the entire
Project. However, certain errors and
lapses of duty were noticed while the MIS
161
Status and
Reason
Non-
Implementation
Head acted as Project Coordinator.
Meanwhile, the RFID Project Team
constituted to facilitate the
implementation of the Project failed to
carry out its mandate.
The Management failed to assign the

respective roles and responsibilities of
various departments involved in the
operation of the security system. On the
other hand, accountability over most of IT
equipment for the Security Systems
Project was entrusted to a single
individual.
The Management failed to formulate

policies and procedures needed to
manage the post-implementation phase of
the Project.
Lack of consultation with concerned

departments in drafting the terms of
reference for the procurement of RFID-
related IT equipment.
Non-compliance of Contractor with its

contractual obligations particularly the
commissioning of various equipment and
application system according to its exact
design and purpose and the integration of
the Security Systems with the enhanced
SBMA Metropolitan Area Network
Absence of strong willpower to make the

Project work as evidenced by the
Management’s inaction to protect the
interest of the agency despite knowledge
of the causes leading to the fall of the
Project.
We recommend that Management:
162
Status and
Reason
Non-
Implementation
1. consider filing appropriate charges 1. The Legal Department Partially

against: sent a Memorandum dated Implemented
a. Messrs. Jeffrey C. Salazar and Rani April 12, 2013 to the Office
C. Cruz for accepting the project and of the Deputy The DAC has
certifying its completion despite Administrator for already
knowledge to the contrary, thus, Administration and resolved the
compromised the interest of the agency; concurrent Chairman of the administrative
Disciplinary Action case filed
b. members of the RFID Project Team Committee (DAC) against Mr.
for failure to fulfill their tasks which endorsing the Legal Rani C. Cruz.
inaction is equivalent to nonfeasance Department’s study and Mr. Cruz filed
amounting to neglect of duty, thus, recommendations on the a timely
contributed to the failure of the Project RFID Project. Motion for
causing serious damage to the agency; Consequently, an Reconsideratio
administrative complaint n. The DAC
c. drafter of the terms of reference for with regard to the said has also
the RFID Project for failure to consult project was filed by the resolved the
with and confirm the IT requirements of SBMA Management Motion for
OSD, thus, facilitated the incurrence of against Mr. Rani C. Cruz Reconsideratio
unutilized property resulting in wastage of which is still on-going. n and
public funds; recommended
that the same
be denied for
d. Atty. Martinez et al. for failure to lack of merit.
finalize and submit policies and
procedures necessary for the operation of
the systems and post implementation of
the Project;
e. PMTI for failure to commission the

various IT equipment according to the
intended security system design and for
failure to deliver several IT equipment on
time, which failure amounted to breach of
contract; and
f. former Administrator Armand C.
Arreza for failure to exercise the degree of
diligence required of him under the given
circumstances.
163
Status and
Reason
Non-
Implementation
2.coordinate with PS-DBM for purposes 2. The former Manager of Partially
of imposing and collecting liquidated Legal Department met with Implemented
damages from PMTI; the PS-DBM which
resulted in the agreement SBMA has not
that the latter will execute collected yet
the imposition and aby liquidated
collection of liquidated damages from
damages against PMTI. PMTI as of
However, SBMA has not status date
yet collected any liquidated
damages from PMTI as of
the status date.
4.require incumbent officials who were 4. The concerned official Partially

involved in the procurement of RFID- was already separated from Implemented
related IT equipment to immediately file SBMA and no request for
the necessary request for relief from relief of accountability has The concerned
accountability for the missing items; been filed. official was
already
separated from
the SBMA and
no request for
relief from
accountability
has been filed
6. consider disposing off unserviceable IT 6. Due to the on-going Partially

equipment for purposes of recovering investigations into RFID Implemented
portion of the investment cost spent in projects (by COA, NBI,
procuring the items. Ombudsman and SBMA), The PPMD
the PPMD deemed it could not
necessary to proceed with proceed with
the disposal after the said the disposal of
investigations. unserviceable
IT equipment
since there are
still pending
investigations
by various
government
agencies on
164
Status and
Reason
Non-
Implementation
the RFID
project.
39. Reliance on Management’s assertion CY
of accurate reported net book value as of 2012
December 31, 2012 at ₱25.90 billion and AAR
existing physical assets at the close of the Finding
year could not be certified in view of the No. 4
discrepancies of information in the
Accounting and Property records, thus,
grossly affecting the fair presentation of
total assets as at year-end.
Land
4.a) The discrepancy in the total land CY Please refer to CY 2019 Fully
area of the agency’s real estate property 2012 AAR Finding No. 1 (e) Implemented
per Accounting and Property records AAR remarks as discussed
remained unchanged at 1,013.22 Finding above.
hectares. No. 4.a
We reiterated our previous

recommendation that the Accounting
Department and LAMD should closely
and constantly coordinate with each other
all developments pertaining to asset’s
valuation, existence, and disclosures so
that only fair and reliable information are
recorded in the ledgers/folio and
subsequently presented in the financial
statements. The LAMD was advised to
pursue the agency’s request for
reconstruction pending before the DENR
as such is deemed vital in bringing the
records close to reality. The Accounting
Department, on the other hand, was
requested to constantly follow-up with the
LAMD new developments concerning the
request. Once information is available,
both departments were instructed to
devote more time in reconciling records’
165
Status and
Reason
Non-
Implementation
differences to avoid a repetition of similar
audit finding in the future.
Land Improvements and Buildings and CY

Other Structures 2012
AAR
4.b.1) The discrepancy of ₱3.295 billion Finding Please refer to CY 2019 Fully
combined cost of land improvements and No. 4.b AAR Finding No. 1 (e) and Implemented
buildings and other structures per CY 2017 AAR Finding No.
Accounting and Property records 11 remarks as discussed
remained unchanged. above.
4.b.2) The following significant audit

observations, which overstated the PPE
account to as much as ₱1.113 billion and
disclosed during the CY 2011 special
interim audit, still subsisted during the
current year audit
We reminded the Management that there

is no solution better than constant
communication and coordination among
concerned offices and personnel. We
reiterated that the Accounting Department
and LAMD should seriously exert extra
effort and allot more time in reconciling
the cost variances. The LAMD should
immediately furnish the Accounting
Department reports on incurred
improvement costs to enable the latter to
effect the proper capitalization. The
LAMD, in coordination with PPMD, was
likewise advised to provide reports on
demolished buildings, facilities and other
structures so that the Accounting
Department could drop from the book of
accounts the corresponding book value.
**with 2017 AAR Finding No. 1e
166
Status and
Reason
Non-
Implementation
40. The accuracy of the balance of Other
Assets in the amount of ₱52.3 million was
doubtful due to the inclusion of missing
time deposit and cash on hand and
loss/unaccounted assets amounting to
₱25.09 million.
Arts, Archeological Specimen and Other

Exhibits
5.b) The correctness of the reported CY 5.b The amount of Partially

balance of ₱3,517,000.00 as of December 2012 ₱3,517,000.00 under the Implemented
31, 2012 could not be established due to AAR said account is composed of
incomplete records to support the Finding the following: PPMD has not
composition of the account, thus, affecting No. 5.b yet located the
the reliability of the total assets as at year- 10 mural painting of
end. paintings Miangao Old
. by Rene Church and
We recommended that Management Robles ₱ 3,500,000.00 the copy of the
require its Appraisal Committee or valued at PAR
Inventory Committee to assess the ten P350,00
(10) paintings taking into consideration 0 each
their physical condition and, thereafter,
recommend valuation adjustment, if Painting,
warranted. It was further recommended Wild 2,000.00
that Management require the Inventory Orchid
Committee to prepare Property Painting,
Acknowledgment Receipt for the three (3) Bloomin 10,000.00
paintings and locate the unaccounted g
₱1.017 million worth of art works and
exhibits. The Inventory Committee was Painting,
also instructed to document its efforts Miangao
5,000.00
exerted in searching for the unaccounted OldChur
art works. If the search proved futile, we ch
recommended that Management request
TOTAL ₱ 3,517,000.00
from COA a possible write-off of the
unaccounted balance from the books.
The above total value of the
paintings is reflected in the
SBMA books.
Management submitted a
167
Status and
Reason
Non-
Implementation
copy of the Property
Acknowledgement
Receipts (PAR) of Mr.
Alfredo R. Suero Jr. as
proof of custody of the 10
mural paintings. The ten
(10) mural paintings by
Rene Robles have already
been located and are now at
Bldg. 255 Procurement
Division Conference
Room.
PARs for Wild Orchid and

Blooming were already
presented to COA in 2013.
Currently, the paintings are
located at the office of the
Tourism Dept. and the
corresponding PAR is
signed by its staff.
PPMD has not yet located

the painting of Miangao
Old Church and the copy of
PAR.
41. Deficiencies were noted in the

appropriateness of certain terms and
conditions of consultancy
agreements and in the implementation
thereof, contrary to CSC Memorandum
Circular No. 06 s. 2005, Section 15 of
Rule XIII of the Omnibus Rules
Implementing Book V of Executive Order
292, and the Revised IRR of R.A. 9184 on
the procurement of consultancy services.
15. b) The term of the contract agreement CY Management commented Fully

of 13 office consultants exceeded the term 2011 that Mr. Roberto V. Garcia, implemented
of the appointing head of the procuring AAR SBMA Chairman and Head
168
Status and
Reason
Non-
Implementation
entity, contrary to Section 53.7 of the Finding of the Agency, acquiesced (Overtaken by
Revised Implementing Rules and No. 2.b to the retention of the events with
Regulations (IRR) of R.A. 9184, as services of these 13 the issuance of
amended under GPPB Resolution No. 06- consultants as their services Notice of
2009, resulting in the payment of were deemed necessary and Disallowance
consultancy fees amounting to essential. The consultants No. 2013-001
₱1,095,981.48 without valid/legal basis. have rendered services and (2011) dated
have been religiously February 14,
The management should require the performing their tasks in 2013)
restitution of the amount of good faith. The Office of
₱1,095,981.48 and the monetary the Chairman has been
equivalent of fringe benefits enjoyed by accepting monthly
the consultants from September 18, 2011 accomplishment reports
to December 31, 2011. and has been endorsing the
payment for their continued
service for the questioned
period.
42. Inappropriate expenditures of

₱22,889.78 were charged to the
extraordinary and miscellaneous (EME)
account in violation of COA Circular No.
2006-001 dated January 3, 2006, while
EME reimbursements of ₱21,983.50 did
not have sufficient documentation to
establish their regularity.
17.a) EME reimbursements of CY

₱19,961.21 for the celebration of SBMA 2011
Christmas Party were unnecessary, as AAR
defined in Section 163 of the Government Finding
Accounting and Auditing Manual Volume No. 6.a
I, and therefore, may be disallowed in
audit as provided in Section 10 of COA
Circular No. 2009-006, dated September
15, 2009.
.
The management should direct the Management filed an Fully
persons liable to settle immediately the appeal to COA Regional implemented
said disallowance. Audit disallowances Office 3 on Feb. 23, 2012.
not appealed within six months from Awaiting response from
169
Status and
Reason
Non-
Implementation
receipt of the notice shall become final COA RO3 regarding the (Overtaken by
and executory as prescribed under appeal made. events with
Sections 48 and 51 of P.D. 1445. the issuance of
(Also part of the Notice of
P15,451,322.12 Disallowance
Disallowances noted in the No. 2012-001
CY 2016 AAR Finding No. (2011) dated
13.) February 23,
2012)
43. Disallowances amounting to CY

December 31, 2011, contrary to Section AAR
5.4 of COA Circular No. 2009-006 dated Finding
September 15, 2009. No. 7
The management should cause the SBMA filed a Motion for Fully
persons liable to settle the disallowances Reconsideration (re: Implemented
as provided for in Section 5.4 of COA Decision No. 2016-156) on
Circular No. 2009-006 dated September October 13, 2016 before the
15, 2009. Commission on Audit,
Commonwealth Avenue,
Quezon City. Awaiting
reply on the motion filed.
(Also part of the

P15,451,322.12
Disallowances noted in the
CY 2016 AAR Finding No.
13.)
Please also refer to CY

2018 AAR Finding No. 15
remarks as discussed above
44. Periodic monitoring/ reconciliation of CY

delivered items procured from the PS- 2010
DBM was not regularly observed by the AAR
Accounting Department and the Finding
Procurement and Property Management No.2
Department as required in COA Circular
170
Status and
Reason
Non-
Implementation
No. 80-124 dated January 18, 1980
resulting in the overstatement of the Due
from DBM-Procurement of Supplies
account by ₱41.47 million.
The management should

• The accountant to record the delivered The Accounting Fully
IT Equipment, printers and software Department recorded Implemented
amounting to ₱26.3 million delivered Information
Technology Equipment
amounting to
P11,082,365.84 per JGL-
11-02-00339 and JGL-11-
• The accounting office to reconcile its 02-000343.
record of deliveries with that of the
property at least quarterly The PPMD and Accounting
Department are closely
• The property office to transmit promptly coordinating for the
to the accounting office the pertinent reconciliation of records on
delivery and inspection documents upon items purchased from
completion of these tasks for the DBM. Attached is a copy of
recording of the delivered items the latest memorandum
from the Accounting
• The property office to conduct Department regarding
monitoring of deliveries of all items thereon.
procured from PS-DBM at least quarterly,
to ensure timely completion of deliveries
and correction of errors.
171

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Republic of the Philippines

ANNUAL AUDIT REPORT

SUBIC BAY METROPOLITAN

For the Year Ended December 31, 2021

May 24, 2022

THE BOARD OF DIRECTORS

Gentlemen and Ladies:

We conducted our audit in accordance with International Standards of Supreme

The significant audit observations and recommendations requiring immediate

1. The timely recognition of receivables was compromised due to ineffective process

We recommended that Management undertake the following courses of action:

a. Establish measures and strategies to ensure well-timed compliance of locators with

c. institute the necessary coordination between Accounting and BID to assess or

2. Certain disclosures applicable to the SBMA as provided for under International

We recommended that Management include the applicable disclosures mentioned

3. The non-recognition of Allowance for Impairment on obsolete inventories with

We recommended that Management instruct the:

b. Accounting Department to prepare the necessary adjusting entries and required

4. The Investment Property (IP) accounts with carrying amount of ₱5,746,454,227.06

We recommended that Management undertake the following courses of action:

a. Provide additional strategies and involve related Departments in the “one-time”

d. instruct the Accounting Department to draw journal entries recognizing unrecorded

5. Due to inadequate planning, one-time cleansing of Property, Plant and Equipment

We recommended Management undertake the following courses of action:

- Setting of specific objectives and deliverables;

We recommended that Management undertake the following courses of action:

a. Establish project monitoring policies stating the specific responsibilities, reporting

b. enforce promptly the GPPB guidelines in addressing the delays in the

We recommended that Management develop policies or include in existing policies

Very truly yours,

cc: President of the Republic of the Philippines

May 24, 2022

Mr. ROLEN C. PAULINO, Sr.

Dear Chairperson and Administrator Paulino:

We conducted our audit in accordance with International Standards of Supreme

The significant audit observations and recommendations requiring immediate

1. The timely recognition of receivables was compromised due to ineffective process

We recommended that Management undertake the following courses of action:

a. Establish measures and strategies to ensure well-timed compliance of locators with

c. institute the necessary coordination between Accounting and BID to assess or

2. Certain disclosures applicable to the SBMA as provided for under International

We recommended that Management include the applicable disclosures mentioned

3. The non-recognition of Allowance for Impairment on obsolete inventories with

We recommended that Management instruct the:

b. Accounting Department to prepare the necessary adjusting entries and required

4. The Investment Property (IP) accounts with carrying amount of ₱5,746,454,227.06

We recommended that Management undertake the following courses of action:

a. Provide additional strategies and involve related Departments in the “one-time”

d. instruct the Accounting Department to draw journal entries recognizing unrecorded

5. Due to inadequate planning, one-time cleansing of Property, Plant and Equipment

We recommended Management undertake the following courses of action:

- Setting of specific objectives and deliverables;

a. Establish project monitoring policies stating the specific responsibilities, reporting

b. enforce promptly the GPPB guidelines in addressing the delays in the

We recommend that Management develop policies or include in existing policies

We request that the recommended measures be implemented and we would

Very truly yours,

[Name of the Agency)

Agency Action Plan Reason for Action

(In Thousands of Pesos)

2. Other Audit Areas

a. Gender and Development (GAD);