EXECUTIVE SUMMARY

A. Introduction

The Philippine Coast Guard (PCG) was then a major unit of the Philippine Navy
by virtue of Republic Act (RA) No. 5173, as amended by Presidential Decree
No. 601. It is tasked to preserve the maritime sovereignty over the island.

With the issuance of Executive Order No. 477 on April 15, 1998, the PCG
obtained autonomy in its operations and became a civilian line function agency
attached to the Department of Transportation and Communications (DOTC).

On February 12, 2010, RA No. 9993 also known as the PCG Law of 2009 was
approved repealing RA No. 5173, as amended. It established the PCG as an
armed and uniformed service attached to the DOTC with five important functions
namely: (1) Maritime Search and Rescue; (2) Maritime Security; (3) Marine
Environmental Protection; (4) Maritime Safety Administration and (5) Maritime
Law Enforcement.

The organizational structure of PCG is headed by a Commandant with a rank of

Vice Admiral and assisted by a Vice Commandant for Operations and a Vice
Commandant for Administration. The Commandant is also assisted by different
staff offices whereby the Chief of Staff takes charge in the formulation of general
guidelines and the execution of the different duties and responsibilities. Its
organization is composed of the following:

a. Coast Guard District Offices;

b. Coast Guard Training Center;
c. Marine Environmental Protection;
d. Coast Guard Fleet;
e. Maritime Safety Service Command; and
f. Coast Guard Weapons, Communications,
Electronics, Information System Service.

B. Financial Highlights

Hereunder is a comparative data of the financial condition, results of operations

and sources and applications of funds of the PCG for the years 2013 and 2012:

2013 2012
Financial Condition
Assets P 6,593,907,736 P 6,902,016,973
Liabilities 200,206,343 191,379,875

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 2013 2012
Government Equity 6,393,701,393 6,710,637,098

Results of Operations
Income 5,074,585,713 4,222,973,253
Expenses 5,202,880,894 4,414,518,724
Excess of Expenses
Over Income 128,295,181 191,545,471
Loss on Sale of
Disposed Assets 2,091,240 -
Excess of Expenses
Over Income 130,386,421 191,545,471

Sources and Applications of Funds

Allotments 6,194,583,858 4,534,045,087
Obligations Incurred 5,743,111,651 4,300,714,793
Balances P 451,472,207 P 233,330,294

C. Operational Highlights

For the PCG’s targets and accomplishments for CY 2013 under its three core
functions namely; Maritime Security, Maritime Safety and Marine
Environmental Protection; the accomplishments are shown below:

AREAS/ACTIVITIES ACCOMPLISHMENT
I. MARITIME SECURITY
1. MARITIME OPERATIONS
a. Public Info Drive 1,271
b. Public Relation 900
c. Sealift Operation 1
1. Number of Mission 1,141
2. Number of Military Passengers 6,900
3. Number of Civilian Passengers 11,176
4. Total Steaming Time (Hrs) 3,154 hrs. & 30 min.
5. Total Miles Covered (Nautical Miles) 5,626
d. Philippine Coast Guard Auxiliary Activities 133
e. Training 74
f. Sea Scout Activities 235
g. Port/Harbor Security Conducted 15,711
h. Public Economic Welfare 34
i. Civilian Evacuation 86
j. Number of Sea Marshals Provided 44,530

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 AREAS/ACTIVITIES ACCOMPLISHMENT
2. MARITIME LAW ENFORCEMENT
a. Seaborne Patrol
1. Number of Patrol Mission 2,950
2. Steaming Time (Hrs) 6,867 hrs. & 23 min.
3. Total Miles Covered (Nautical Miles) 18,622
b. Coastal Patrol
1. Number of Mission 14,372
2. Area Covered (Kms) 55,665
c. Apprehension
1. Smuggling 4
2. Illegal Transport of Forest Product 13
3. Illegal Fishing 18 tons & 200 kilos
4. Traffic of Narcotics 0
5. Illegal Entry 1
6. Illegal Possession of Firearms/Explosives 1
7. Piracy/Robbery Against Ship 21
8. Illegal Transport of Endangered Animals 8
9. Human Smuggling 1
II. MARITIME SAFETY
1. ISSUANCES OF DOCUMENTS
a. Special Permit to Load Inflammable/Dangerous
26,211
Cargoes
b. Roll Book Registration 728
c. Registration of Oil Record Book 351
d. Garbage Management 26
e. Shipboard Oil Pollution Emergency Plan 3,636
f. International Oil Pollution Prevention Certificate 27
2. INSPECTIONS
a. Mandatory Pre-Departure Inspection 8,292
b. Emergency Readiness Evaluation 89
c. Port State Control 1,570
d. Flag State Control 6,768
e. Safety of Life at Sea Inspection 26,785
1. Maritime Violation Report (MVR) Issued 266
2. MVR Adjudication 51
f. Visitation in Respective Area of Responsibility
1. Coast Guard District Commanders 13
2. Coast Guard Station Commanders 82
3. RECEIVED
a. Master’s Oath of Safe Departure 518,193

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 AREAS/ACTIVITIES ACCOMPLISHMENT
b. Number of Marine Protest 11,600
c. Amount of Fines/Penalties Imposed 0
d. Amount of Revenue Collection
1. PCG Revenue/Collection 3,345,594.00
2. Deputized by MARINA 5,411,886.00
4. SEARCH AND RESCUE (SAR)
a. SAR Incident Reported 606
b. SAR Operation Conducted 647
c. Number of Survivor Rescued 9,738
d. Number of Person Missing 237
e. Number of Dead Body Recovered 329
f. Training Seminar 98
5. NAVIGATIONAL SAFETY
1. LIGHTHOUSE STATONS/BEACONS
a. Total Number of Light Stations 561
b. Total Number of Light Stations Operating 372
c. Total Number of Light Stations Not Operating 189
d. Operating Efficiency (%) 66%
2. BUOYS
a. Total Number of BUOYs Maintained 6
b. Total Number of BUOYs Operating 6
c. Total Number of BUOYS Not Operating 0
d. Total Number of BUOYS Drifted 0
e. Total Number of BUOYS Missing 0
III. MARINE ENVIRONMENTAL PROTECTION
1. SHIP BASED
a. Bunkering 9,372
b. Deck Washing 1,012
c. Tank Cleaning 522
d. Dumping 765
e. Vessel Inspection of Maritime Pollution
8,100
Equipment
2. LAND BASED INSPECTION
a. Oil Companies Visited/Inspected 201
b. Inspection of Maritime Pollution Equipments 1,313
3. COASTAL INSPECTION
a. Coastal inspection 3,017
b. Length of Coastline (Kms) 16,908 kms. & 600 m.
c. Dirty Polluted Coastline 43
d. Number of Coastline Clean-Up 511

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 AREAS/ACTIVITIES ACCOMPLISHMENT
e. Number of Coastal Barangay 668
f. Area Covered (Kms) 2,788 kms. & 400 m.
g. Weight Garbage Collected (In Tons) 15,408
4. OTHER OPERATIONS
a. Number of Oil Spill Incident 30
b. Training/Seminar 106
c. Info Drive/Dialogue Conducted 106

D. Scope of Audit

A financial and compliance audit was conducted on the accounts of the PCG for
the year ended December 31, 2013 to: (a) verify the level of assurance that may
be placed on management’s assertions on the financial statements; (b) determine
the extent of compliance with applicable laws, rules and regulations;
(c) recommend agency improvement opportunities; and (d) determine the extent
of implementation of prior year’s audit recommendations.

E. Independent Auditor’s Report

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

financial statements due to the following:

1. The year-end balance of the account Due from NGAs of

P10,781,572.01 representing the advances made to the Procurement
Service- Department of Budget and Management (PS-DBM) did not
reconcile with the balance of P5,799,704.11 per records of said agency or a
difference of P4,981,867.90. This rendered the account balance inaccurate.
(Observation No. 1)

We recommended that Management direct the Logistics Office and other

concerned offices to submit to the Chief Accountant all invoices relative to
deliveries made by the PS-DBM for proper take-up in the books of
accounts. The Chief Accountant should review the postings in the General
Ledger and Subsidiary Ledger and coordinate with the PS-DBM to identify
cause/s for the still unaccounted discrepancies for the necessary
corrections/adjustments in the books. Henceforth, conduct regular
reconciliation with the PS-DBM for the early detection and immediate
adjustment of errors.

2. The existence and accuracy of the balance of Inventory accounts totaling

P485,305,283 were doubtful due to the continued failure to conduct an

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 inventory count, maintain Supplies Ledger Cards (SLCs) and update the
Stock Cards (SCs). (Observation No. 2)

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

a. direct the Supply Accountable Officer (SAO) to conduct at year-end a

physical inventory of supplies and materials and submit the
corresponding Report on the Physical Count of Inventories;

b. require the concerned Districts, Stations, Detachments and Units to

prepare and submit for consolidation an inventory report to the SAO to
facilitate monitoring and arrive at the correct amount of issuances and
balances for each inventory item; and

c. instruct both the Chief Accountant and the SAO to maintain SLCs and
update SCs, respectively, and reconcile their records regularly to
immediately check on errors/discrepancies.

3. The payment of P18,502,678.71 for the purchase of one unit Aluminum

Workboat made out of a Letter of Credit (LC) with the Land Bank of the
Philippines (LBP) remained unrecorded in the books of accounts as at year-
end due to the failure to secure original of the related transaction documents
from the bank. This resulted in the overstatement of the Deposit on LC and
understatement of the Watercrafts accounts both by the same amount.
(Observation No. 3)

We recommended and Management agreed to instruct the Chief Accountant

to immediately make representation with the LBP to obtain the original of
the transaction documents of the aluminum workboat and to record the
payment thereof in the books of accounts.

4. The accuracy of the year-end balances of the Property, Plant and Equipment
(PPE) accounts totaling P7,356,365,867 was still not established due to the:
(a) failure again to conduct physical inventory; and (b) incomplete Property,
Plant and Equipment Ledger Cards, (PPELCs) and non-maintenance of
Property Cards (PCs). (Observation No. 4)

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

a. direct the SAO at the Headquarters, in coordination with the Responsible

Supply Officers (RSOs) in the field offices/units, to facilitate the
completion of the physical inventory of all the agency’s assets and to
prepare the corresponding report thereon for reconciliation with the
accounting records in order to establish the accurate balance of the PPE
accounts. Henceforth, include as part of the responsibilities of the RSOs

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 the conduct of the yearly count of PPE and the preparation of the
inventory report; and

b. instruct the Chief Accountant and the RSOs/SAO to maintain complete

and updated PPELCs and PCs for all types of PPE and to reconcile the
same regularly.

5. The balance of the Work/Other Animals account amounting to

P2,494,516.95 as of December 31, 2013 was understated for an
undetermined amount due to the failure to appraise and record in the books
the costs of the K9 dogs acquired through breeding and donation.
(Observation No. 5)

We recommended and Management agreed to:

a. direct the Headquarters Coast Guard (HCG) K9 Unit to provide the
Accounting Service Office a complete inventory of the K9 dogs
including information on the whereabouts, status, and category;

b. require the Chief Accountant to reconcile its records against the

inventory report submitted by the HCGK9 Unit and conduct an
appraisal of the cost of the unrecorded K9 dogs thru benchmarking
with the current market prices taking into consideration their growth,
quality and usage. From thereon, prepare the necessary JEV to record
the same in the books in order to reflect the correct balance of the
account Work/Other Animals in the financial statements; and

c. instruct the Chief Accountant to make the needed adjustment in the

books to drop the costs of the K9 dogs that died in CY 2013.

F. Other Significant Observations and Recommendations

The following are the other observations and the corresponding

recommendations, which are discussed in detail in Part II of the report.

1. The procurement of supplies for the K9 dogs amounting to P16,916,701.00

and construction materials amounting to P786,622.50 for the repair of the
Coast Guard Base Farola (CGBF) Chapel were split into several Purchase
Orders (POs) to conform with the threshold for shopping or small value
procurement and to circumvent the conduct of public bidding, in violation of
the provisions of Sections 10 and 54(1) of the Implementing Rules and
Regulations of Republic Act (RA) No. 9184. Thus, the purpose of bidding to
obtain the best value for money in government procurement was defeated.
(Observation No. 6)

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 We recommended that Management should be cognizant in the utilization
and/or use of government funds in relation to their day to day operations.
Stop the practice of splitting POs and requisitions and adopt public bidding as
the mode of procurement and other modes if circumstances so require in
order to ensure that the best value for money is always obtained in the
procurement of goods.

2. The supplies totaling P9,734,778.00 procured by the HCGK9 Unit were

neither included in the approved Annual Procurement Plan (APP) for CY
2013 nor a Supplemental APP prepared, contrary to Section 7 of the Revised
Implementing Rules and Regulations of RA No. 9184. (Observation No. 7)

We recommended and Management agreed to strictly comply with the

provisions of RA No. 9184 on the preparation of the revised APP as an
effective guide in the procurement of goods to maximize agency resources.
Likewise, update/revise the APP within six months or as often as required by
the PCG Head to be consistent with its duly approved budget and available
resources.

3. Disbursements totaling P9,811,509.34 were not adequately supported with

the requisite documents, contrary to Section 4 of Presidential Decree (PD)
No. 1445 and Section 28 of the NGAS Manual, Volume I, thus hindering the
Office of the Auditor to conduct complete review and substantive tests to
establish the propriety and accuracy of the transactions. (Observation No. 8)

We recommended and Management agreed to strictly adhere to the rules and

regulations requiring the submission of complete supporting documents for a
complete review of the disbursements.

4. The Gender and Development (GAD) Plan and Budget for CY 2013 was not
approved by the head of the agency, the Department of Budget and
Management (DBM) and the Philippine Commission on Women (PCW) and
did not also include those activities mainstreamed with other
programs/projects, thus, the allotted funds of P32,050,000.00 was only .52
percent of the total appropriation for the year. These are contrary to the
provisions of Section 28 of the General Provisions of the General
Appropriations Act (GAA) for FY 2013. Moreover, the Accomplishment
Report was for January to October 2013 only and did not bear the actual
cost/expenditure for each activity. (Observation No. 12)

We recommended and Management agreed to have the copy of the GAD

Plan and Budget approved by the Head of the PCG, the DBM and the PCW.

We also recommended that Management include in its Plan the activities that
would address the gender concerns not only the agency’s personnel but also
of its clientele.
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 We reiterated our prior year’s recommendation that Management formulate a
more comprehensive GAD Plan and Budget detailing therein all the related
activities including those mainstreamed with other programs/projects so as to
present the required budget of five percent of the total appropriation.

5. There was no specific fund allotted for the CY 2013 formulation and
implementation of plans, programs and projects intended to address the
concerns of senior citizens and differently-abled persons contrary to Section
29 of the General Provisions of the FY 2013 GAA. (Observation No. 13)

We recommended and Management agreed to allot funds to formulate and

implement plans, programs and projects for the benefit of the senior citizens
and differently-abled persons.

6. The unsettled suspensions and disallowances totaling P18,710,892.86 and

P416,684.82 respectively, remained outstanding for four to 12 years contrary
to COA Circular No. 2009-006 dated September 15, 2009 on the Rules and
Regulations on the Settlement of Accounts. (Observation No. 16)

We recommended that Management send demand letters to all persons

responsible for the disallowances to settle immediately their accountabilities.
In case of failure, resort to legal means to enforce settlement. For those
transferred employees, coordinate with their present agency/office for the
withholding of their salaries until their disallowances have been fully settled.
Likewise, require the full settlement of the suspension to avoid the same from
maturing into a disallowance.

The above observations and recommendations were discussed with management

officials concerned in an exit conference on May 28, 2014 and their comments
were incorporated in this report, where appropriate.

G. Implementation of Prior Year’s Recommendations

Out of the eight audit recommendations in the CY 2012 Annual Audit Report,
four were partially implemented and four were not acted upon.

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