Audited Entity Financial Statements

Project Number: 43407-014 Loan Number: 3369 Period covered: 01 January – 31 December 2016

PHI: Social Protection Support Project (Additional Financing)

Prepared by: Department of Social Welfare and Development

For the Asian Development Bank

The audited entity financial statements are documents owned by the borrower. The views expressed herein do not necessarily represent those of ADB’s Board of Directors, Management, or staff. These documents are made publicly available in accordance with ADB’s Public Communications Policy 2011 and as agreed between ADB and the Department of Social Welfare and Development .

Republic of the COMMISSION ON AUDIT Commonwealth Ave., Quezon City

ANNUAL AUDIT REPORT

on the

DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT

For the Year Ended December 31, 2016

EXECUTIVE SUMMARY

A. Introduction

The DSWD is mandated to provide assistance to local government units (LGUs), non-government organizations (NGOs), other national government agencies (NGAs), people's organizations (POs) and other members of Civil Society in effectively implementing programs, projects, and services that will alleviate poverty and empower disadvantaged individuals, families, and communities for an improved quality of life. It implements statutory and specialized programs which are directly lodged with the Department.

It is composed of the Central Office (CO) and 16 Field Offices (FOs) in Regions I-XII, CAR, NCR, and CARAGA. It is headed by Secretary Judy M. Taguiwalo, who is assisted by three Undersecretaries and six Assistant Secretaries. Each of the 16 FO is headed by a Regional Director.

For CY 2016, the DSWD personnel complement is 28,026, consisting of 2,794 permanent, 9,592 contractuals, 61 casuals, 14,216 Contracts of Service, and 1,363 Job Orders, distributed in the CO and 16 FOs.

B. Financial Highlights

The DSWD had a total appropriation of P131,545.679 million as follows:

Amounts (in million PhP) Particulars CY 2016 CY 2015 Inc./(Dec.) Current Year’s Appropriation Regular GAA 109,641.546 107,480.723 2,160.823 Automatic Appropriation 423.973 456.988 (33.015) Special Purpose Fund 5,503.818 14,911.235 (9,407.417) Total Current Appropriation 115,569.337 122,848.946 (7,279.609) Continuing Appropriation 15,976.342 19,708.794 (3,732.452) Grand Total 131,545.679 142,557.740 (11,012.061) Obligations incurred 108,535.392 124,091.503 (15,556.111) Total unobligated balances 23,010.287 18,466.237 4,544.050

Details of the sources and application of funds are presented below.

Amounts (in million PhP) Particulars CY 2016 CY 2015 Inc./(Dec.) Financial Condition Assets 97,089.299 112,920.582 (15,831.283) Liabilities 8,014.521 6,471.330 1,543.191 Government Equity 89,074.778 106,449.252 (17,374.474)

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Amounts (in million PhP) Particulars CY 2016 CY 2015 Inc./(Dec.) Financial Performance Sources of Fund Subsidy from NG - net 31,500.038 70,508.936 (39,008.898) Other Income 765.780 1,845.651 (1,079.871) Total Income 32,265.818 72,354.587 (40,088.769) Application of Fund PS 5,674.685 5,115.047 559.638 MOOE 9,723.882 10,311.049 (587.167) FE 414.683 306.297 108.386 Non-Cash Expenses 302.354 300.460 1.894 Total Expenses 16,115.604 16,032.853 82.751 Surplus (Deficit) for the Period 16,150.214 56,321.734 (40,171.520)

C. Scope and Objectives of Audit

The audit covered the accounts and operations of the DSWD CO and 16 FOs for CY 2016. The audit was conducted to: a) verify the level of assurance that maybe placed on management’s assertions on the financial statements; (b) recommend agency’s improvement opportunities, (c) determine the propriety of transactions as well as the extent of compliance with pertinent laws, rules and regulations, and (d) determine the extent of implementation of prior year’s audit recommendations.

To a limited extent, program review was also conducted on some programs/projects of the DSWD aimed at ascertaining the economy, efficiency, and effectiveness in their implementation.

D. Independent Auditor’s Report

The Auditor rendered a qualified opinion on the fairness of the presentation of the financial statements due to material accounting errors and deficiencies noted in the audit, as shown in the Matrix of the Analysis of Effects of Accounting Errors and Deficiencies in Annex A, and which are stated in the Independent Auditor’s Report and discussed in detail in Part II of this report.

E. Significant Observations and Recommendations

Among the audit observations and corresponding recommendations discussed in Part II of this report, the significant observations are summarized as follows:

1) The CIB-LCCA with a balance of P14.021 billion as of December 31, 2016, included dormant accounts, trust receipts, donations, excess BAC honoraria, performance bond, and training fund of P737.811 million that were not remitted to the National Treasury, depriving the NG of the proper disposition of these funds.

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We recommended and the DSWD Secretary agreed to require the concerned CO’ and FOs’: (a) Cash Division to remit all trust receipts, donations, including excess funds from training, and BAC honoraria pursuant to existing laws; and (b) Accountant to exert efforts to trace back and analyze the “suspense account” in the CIB - LCCA, identify to which bank account the same was deposited, and remit the balance to the National Treasury; and record the validated reconciling items in the books of accounts in order to reflect the correct balances of the account.

2) Foreign donations of P751.913 million received from the Government of Australia were without prior clearance and approval by the President of the Philippines and not deposited with the BTr, thus, the necessary protocol review to ensure that all donations for projects and programs are in sync with the government funding and thrusts was bypassed. In the absence of said approval/clearance, disbursements of P581.158 million is without authority.

We recommended and the DSWD Secretary agreed to henceforth: (a) seek the clearance and approval of the President upon the recommendation of the DFA on all donation agreements with foreign governments as well as disbursements thereof; and (b) remit to the BTr the amounts received in accordance with Section 35, Chapter 5, Book VI of EO No. 292.

3) Refunds from the LBP conduits of P3.108 billion in CYs 2013 to 2016, representing unclaimed cash grants of 4Ps beneficiaries for Over-the-Counter (OTC) mode of payment, were not returned to the BTr.

We reiterated our prior years’ (PY) recommendations and the DSWD Secretary agreed to: (a) determine the unpaid grants for the previous years that still needs to be paid and, thereafter, remit to the BTr the excess of the refunded amount by the conduits; and (b) establish a guideline on the period for which the cash grants are to be claimed after which, these should be forfeited in favor of the government to ensure that idle funds are remitted to the BTr for proper disposition.

4) Account balances of CCT/MCCT beneficiaries of P1.285 billion under the cash card mode of payment, consisting of 2,646,577 accounts with balances ranging from P501 to more than P50,000 were not withdrawn from 30 to 2,190 days upon payout. Moreover, 28,268 accounts with total balance of P140.848 million have no date of last monetary activity, but still included in the list of beneficiaries. These tend to show that there is no immediate need for the financial assistance and casting doubt on the eligibility of the chosen beneficiaries.

We recommended and the DSWD Secretary agreed to require the NPMO to: (a) fast track the validation and investigation or re-assessment on the eligibility of concerned beneficiaries and implement delisting of ineligible beneficiaries immediately; (b) coordinate with the LBP on the results of validation and

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require them to make necessary actions to recover the amount to be remitted to the Btr; and (c) for cash cards with “No Date of Last Monetary Activity (DLMA)” status, advise the LBP of the non-renewal of cash cards of said beneficiaries to ensure that additional expenditures are avoided and limited government funds are utilized effectively.

5) Cash Advances (CAs) of P2,933.810 million remained unliquidated due to non- compliance with the provisions of COA Circular No. 97-002 dated February 10, 1997 and DSWD Administrative Order No. 07, series of 2016.

We reiterate our PY recommendations and the DSWD Secretary agreed to direct the concerned Directors/Accountants to, among others: (a) refrain from granting CAs to SDOs in excess of their maximum cash accountabilities and unless the previous CAs granted are fully liquidated; (b) intensify the monitoring controls on CAs to ensure timely submission of liquidation documents; and (c) ensure that all fund transfers to CSOs/TVIs are covered with MOA, which shall be prepared in accordance with the provisions of COA Circular No. 2007-001.

6) The non-submission of liquidation reports and the release of additional funds to IAs with outstanding accounts resulted in the accumulation of Due from NGAs/GOCCs/LGUs amounting to P25,282.064 million.

We reiterated our PY recommendations with modifications and the DSWD Secretary agreed to direct CO and FO Directors concerned to, among others: (a) monitor the status and liquidation of fund transfers to IAs and require them to immediately submit the LRs within the prescribed period per COA Circular No. 94-013 and refund the unutilized balances of fund transfers for completed projects, if any; and (b) comply strictly with the guidelines on the grant, use, and liquidation of fund transfers as well as the provisions of the MOA with concerned IAs and make a strong representation with IAs’ officials to submit LRs.

7) The non-liquidation of fund transfers to various NGOs/POs resulted in the minimal settlements, long outstanding accounts, and accumulation of the account balance of approximately P7,178.836 million as of year-end, of which 64 per cent or P4,582.577 million remained unliquidated for more than one year.

We reiterate our PY recommendations and the DSWD Secretary agreed to, among others, direct:

a) FO Directors and Accountants concerned to: (i) demand regularly from the NGOs/POs the submission of LRs and refund of unutilized balance, if any, especially those with long outstanding balances; (ii) strengthen the monitoring controls on fund transfers to NGOs/POs; and (iii) for NGOs/POs that are non-existent/non-operational and whose whereabouts

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are unknown, the legal office to institute necessary actions to require the incorporators to liquidate/refund their accounts;

b) IAS to expedite the evaluation of projects and review of liquidation documents for the immediate recording of LRs as well as submission thereof to the COA for post audit; and

c) compel the IOM to submit the original supporting documents to the liquidations and transmit to the COA to avoid the issuance of a Notice of Suspension.

8) Payments to the LBP of approximately P97.734 million representing financial expenses (bank service fees) for CYs 2014 and 2015 lacked the necessary documents to support the validity of the related transactions.

We recommended and the DSWD Secretary agreed to: (a) direct the Office concerned to submit the original copies of the MOA, including the Supplemental MOA, bank debit memos showing the bank account credited, and official receipts evidencing receipt of payment by the LBP of the bank services fees charged for 4Ps withdrawals; and (b) submit legal basis on the charging of P14.00 for every cash card withdrawals made by 4Ps beneficiaries.

9) Some thirteen SPs costing P35.097 million was found to have deficiencies/issues, due to failure of RPMO/SRPMO as well as project proponents to monitor and resolve project issues, thus may compromise the efficient and effective use of the facility and not in keeping with KC-NCDDP Community Empowerment Activity Cycle and Monitoring and Evaluation Sub-Manual for Program Implementer.

We recommended and the DSWD Secretary agreed to require the concerned FO ACT/RPMO personnel to, among others, closely monitor, supervise and provide technical assistance to the BSPMC during project implementation and immediately correct the defects/deficiencies noted for the full continuity and functionality of the SPs for the benefits of the intended beneficiaries.

10) Validation of the community grants to BSPMC of P172.341 million showed a difference of P4.136 million as against the KC-NCDDP report due to deficient reporting and monitoring mechanism of projects.

We reiterated our PY recommendation that the DSWD Secretary require the concerned FO to: (a) instruct the ACTs to monitor the status of SPs implementation within their area of responsibilities and ensure that all information/reports are accurate, complete, and consistent with Program standards; and (b) conduct reconciliation of unrecorded community grants in the KC-NCDDP Report vis-à-vis in the books of BSPMC and ensure that project reports are validated before this are issued to various stakeholders.

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The foregoing findings and recommendations were discussed with management officials in an exit conference on May 23, 2017, and their views and comments were incorporated in the report, where appropriate.

F. Enforcement of Settlement of Suspensions, Disallowances and Charges

The non-compliance with laws, rules and regulations resulted in the total suspensions and disallowances in the audit of various transactions amounting to P1,711.660 million and P485.260 million, respectively. Settlements on suspensions and disallowances were made amounting to P1,502.772 and P3.271, bringing the balances as of the year amounting to P208.889 million and P481.989 million.

G. Status of Implementation of Prior Years’ Audit Recommendations

Of the 133 prior years’ audit recommendations, 84 were fully implemented, 47 were partially implemented and two were not implemented. The details of these audit recommendations are shown in Part III of the report.

Management is enjoined to ensure full implementation of all audit recommendations to improve the financial and operational efficiency of the Agency.

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TABLE OF CONTENTS

PART PARTICULARS PAGE

I Audited Financial Statements

 Independent Auditor’s Report 1  Statement of Management Responsibility for Financial Statements 3  Statement of Financial Position 4  Statement of Financial Performance 5  Statement of Changes in Net Asset/Equity 6  Statement of Cash Flows 7  Statement of Comparison of Budget and Actual Amount 9  Notes to Financial Statements 10

II Observations and Recommendations 57

III Status of Implementation of Prior Year’s Audit Recommendations 139

IV Annex

DEPARTMENT OF SOCIAL WELFARE AND DEVELO CONSOLIDATED STATEMENT OF FINANCIAL POS AS AT DECEMBER 31, 2016 Note 2016 ASSETS Current Assets Cash and Cash Equivalents 6 P 15,603,773,091.25 Receivables 7 33,461,128,548.60 Inventories 8 2,726,371,194.85 Other Current Assets 12.1 2,937,467,233.03 Total Current Assets 54,728,740,067.73

Non-Current Assets Property, Plant and Equipment 9 42,239,362,036.81 Biological Assets 10 159,500.00 Intangible Assets 11 71,813,295.24 12.2, Other Non-Current Assets 12.3, 49,224,378.16 12.4 Total Non-Current Assets 42,360,559,210.21

Total Assets 97,089,299,277.94

LIABILITIES Current Liabilities Financial Liabilities 13 5,877,908,975.06 Inter-Agency Payables 14 747,180,394.55 Intra-Agency Payables 15 344,338,012.47 Trust Liabilities 16 325,186,430.42 Total Current Liabilities 7,294,613,812.50

Non-Current Liabilities Trust Liabilities 16 33,557,559.02 Deferred Credits 17 534,300.10 Other Payables 18 685,815,595.39 Total Non-Current Liabilities 719,907,454.51

Total Liabilities 8,014,521,267.01

Total Assets less Total Liabilities 89,074,778,010.93

NET ASSETS/EQUITY Accumulated Surplus/(Deficit) 89,074,778,010.93 Total Net Assets/Equity P 89,074,778,010.93

This statement should be read in conjunction with the accompanying notes.

4 ELOPMENT POSITION

2015

20,337,892,740.71 45,351,705,006.77 1,905,551,590.06 3,209,672,083.56 70,804,821,421.10

42,044,955,224.98 159,500.00 29,212,631.39

41,432,946.22

42,115,760,302.59

112,920,581,723.69

4,957,910,860.40 461,065,690.10 113,327,452.67 363,817,590.50 5,896,121,593.67

26,840,744.49 - 548,367,630.23 575,208,374.72

6,471,329,968.39

106,449,251,755.30

106,449,251,755.30 106,449,251,755.30

5 DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED DECEMBER 31, 2016

Note 2016 2015 Revenue Service and Business Income 19 P 54,814,548.69 52,770,024.62 Shares, Grants and Donations 20 706,932,713.63 1,792,880,798.94 Miscellaneous Income 21 4,033,099.88 - Total Revenue 765,780,362.20 1,845,650,823.56

Less: Current Operating Expenses Personnel Services 22 5,674,685,150.20 5,115,046,802.56 Maintenance and Other Operating 23 Expenses 9,723,882,452.88 10,311,049,082.22 Financial Expenses 24 414,683,550.00 306,296,608.06 Non-Cash Expenses 25 302,354,375.71 300,460,516.24 Current Operating Expenses 16,115,605,528.79 16,032,853,009.08

Surplus/(Deficit) from Current Operations (15,349,825,166.59) (14,187,202,185.52)

Net Financial Assistance/Subsidy 26 31,397,274,617.78 70,235,856,417.79 Sale of Assets 27.1 - 3,532,404.73 Gains 27.1 302,373,421.28 1,506,481,080.45 Losses 27.2 (199,609,774.95) (1,236,933,723.31) 31,500,038,264.11 70,508,936,179.66 Surplus/(Deficit) for the period P 16,150,213,097.52 56,321,733,994.14

This statement should be read in conjunction with the accompanying notes.

5 DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS/EQUITY FOR THE YEAR ENDED DECEMBER 31, 2016

Accumulated Surplus/(Deficit) 2016 2015

Balance at January 1 P 106,449,251,755.30 74,822,948,734.12 Add/(Deduct): Prior Period Adjustment/Unrecorded Income and Expenses (32,489,184,249.02) (24,557,780,791.27) Restated Balance 73,960,067,506.28 50,265,167,942.85

Add/(Deduct): Changes in Net Assets/ Equity for the Calendar Year Surplus for the period 16,150,213,097.52 56,321,733,994.14 Others (1,035,502,592.87) (137,650,181.69)

Balance at December 31 P 89,074,778,010.93 106,449,251,755.30

This statement should be read in conjunction with the accompanying notes.

6 DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended December 31, 2016

2016 2015 Cash Flows From Operating Activities

Cash Inflows Receipt of Notice of Cash Allocation P 138,441,886,436.10 171,798,168,688.69 Collection of Income/Revenues 988,039,911.21 1,843,390,135.20 Collection of Receivables 204,339,235.15 699,752,394.07 Receipt of Inter-Agency Fund Transfers 153,945,717.81 34,254,441.70 Receipt of Intra-Agency Fund Transfers 7,487,858,255.15 14,004,032,270.63 Trust Receipts 205,886,668.91 34,492,520.45 Other Receipts 1,643,425,812.90 3,293,176,152.42 Adjustments 3,663,999,361.11 11,158,247,503.50 Total Cash Inflows 152,789,381,398.34 202,865,514,106.66

Cash Outflows Replenishment of Negotiated MDS Checks (for BTr) - Remittance to National Treasury 1,053,622,130.22 370,038,680.91 Payment of Expenses 13,247,809,983.52 29,032,719,559.34 Purchase of Inventories 1,944,475,606.24 425,403,465.81 Purchase of Consumable Biological Assets - - Grant of Cash Advances 8,634,046,554.70 13,105,585,029.49 Prepayments 4,336,124.62 1,497,623.48 Refund of Deposits 12,797,157.34 2,257,948.96 Payment of Accounts Payables 2,039,366,687.17 4,056,321,092.81 Remittance of Personnel Benefit Contributions and Mandatory Deductions 1,248,536,712.09 948,608,490.60 Grant of Financial Assistance/Subsidy 40,098,582,089.42 36,486,978,054.16 Release of Inter-Agency Fund Transfers 16,395,239,746.37 11,887,092,822.69 Release of Intra-Agency Fund Transfers 32,123,988,362.00 52,288,410,971.29 Other Disbursements 3,185,955,189.95 4,342,408,313.94 Reversal of Unutilized NCA - - Adjustments 37,622,779,786.07 40,957,737,579.09 Total Cash Outflows 157,611,536,129.71 193,905,059,632.57

Net Cash Provided by/(Used in) Operating Activities (4,822,154,731.37) 8,960,454,474.09

Cash Flows from Investing Activities Cash Inflows Proceed from Sale/Disposal of Property, Plant and Equipment Equipment 40,612.50 81,654.65 Total Cash Inflows 40,612.50 81,654.65

Cash Outflows Purchase/Construction of Property, Plant and Equipment 206,387,051.61 107,552,881.84 Purchase of Intangible Assets 82,590.17 - Total Cash Outflows 206,469,641.78 107,552,881.84

Net Cash Provided By/(Used In) Investing Activities (206,429,029.28) (107,471,227.19)

7 2016 2015

Increase/(Decrease) in Cash and Cash Equivalents (5,028,583,760.65) 8,852,983,246.90

Effects of Exchange Rate Changes on Cash and Cash Equivalents 294,464,111.19 97,167,465.20

Cash and Cash Equivalents, January 1 20,337,892,740.71 11,387,742,028.61

Cash and Cash Equivalents, December 31 P 15,603,773,091.25 20,337,892,740.71

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DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT Notes to Consolidated Financial Statements (Central Office and Regional Offices) All Fund Clusters For the year ended December 31, 2016

1. General Information/Agency Profile

The financial statements of Department of Social Welfare and Development were authorized PPSAS for issue on February 14, 2017 as shown in the Statement of Management Responsibility for 1.63(b) Financial Statements signed by Director Deseree D. Fajardo, Director for Financial PPSAS 14.26 Management Service and Assistant Secretary Rodolfo M. Santos, Officer-in-Charge, Office of the Undersecretary for General Administrative and Support Services Group.

On 15 February 1915, upon creation of the Public Welfare Board during the American Regime, PPSAS 1.150 the government started to get involved in social welfare. The board was established to coordinate, regulate and supervise social services activities and other charitable works rendered by religious orders and organizations. Finally in 1917, the first government orphanage was established. As a result of several changes by the government in its bureaus and departments, the original Public Welfare Board of the year 1915 became The Department of Social Welfare and Development (DSWD). After which, The Social Welfare Administrator was formally created by virtue of Executive Order No. 396 dated 13 January 1951. Republic Act No. 5416 known as the Social Welfare Act was approved in 1968. It was made into a Department, whose responsibility was to provide comprehensive program of social welfare services designed to ameliorate the living conditions of distressed Filipinos, particularly those who are handicapped by reason of poverty, youth, physical and mental disability, illness and old age, or who are victims of natural calamities including assistance to members of the cultural minorities.

With the provision of DSWD Mandate under Executive Order No. 15, DSWD was transformed from the rowing to steering role that usher in the new vision, mission and goals for the Department.

The Department’s vision is directed towards the attainment of a “society where the poor, vulnerable and disadvantaged individuals, families and communities are empowered for an improved quality of life”. Towards this end, DSWD will be the world’s standard for the delivery of coordinated social services and social protection for poverty reduction by 2030.

In the pursuit of its vision, the DSWD mission is to “develop, implement and coordinate social protection and poverty reduction solutions for and with the poor, vulnerable and disadvantaged”.

1.1 Programs/Projects/Activities

 General Administration and Support Services  Development of Policies, Plans, and Programs

 Formulation and Enhancement for Policies and Plans  Programs Development and Promotion  Standard-Setting, Licensing, Accreditation and Compliance Monitoring

 Capability Building of and Technical Assistance to Intermediaries

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 Trainings and Capability Building Program of Intermediaries  Provision of Technical Assistance and Related Services to Intermediaries

 Protection and Promotion of Rights and Welfare of the Poor , Vulnerable and the Disadvantaged

 Augmentation and Support Services to Intermediaries in their implementation of Social Welfare and Development Programs and Activities for Distressed and Displaced Individuals, Families and Communities in Especially Difficulty Circumstances including Victims of Disaster and Calamities.  Protection and Rehabilitation Services to Center-Based Constituents

 Foreign Assisted Program

 KALAHI Additional Financing (Loan No. 7959-PH) - The objective of the project is to empower Local Communities in targeted poor municipalities and selected Urban areas, to achieve improved access to sustainable basic public services and to participate in more inclusive Local Government Unit planning and budgeting. The opening of the loan agreement was on December 3, 2010 and expected to close on May 31, 2014.

 KALAHI-CIDSS Millennium Challenge Corporation (MCC) – a project of $120 Million grant by the Millennium Challenge Corporation, an independent Foreign Aid Agency created by the United States Congress to expand the coverage of KALAHI-CIDSS in and 187 municipalities with approximately 4,301 barangays from CY 2011-2015. MCC funding will likewise support KALAHI-CIDSS expansion into an additional six poorest provinces in Luzon (Apayao and Palawan) and the Visayas (Aklan, Antique, Guimaras and Negros Oriental).

 KALAHI-CIDSS National Community Driven Development Project (NCDDP) - a poverty alleviation program of the National Government implemented by the DSWD. It is supported by the Philippine Development Plan (2011-2016). Approved on 18 January 2013, it is the expansion into a national scale of the operations of community-driven development (CDD), a strategy that has been tried and proven effective in Kalahi-CIDSS (Kapit-Bisig Laban sa Kahirapan- Comprehensive and Integrated Delivery of Social Services), the parent project of KC-NCDDP. The development objective of KC-NCDDP is to have barangays/communities of targeted municipalities become empowered to achieve improved access to services and to participate in more inclusive local planning, budgeting, and implementation. KC-NCDDP will also be aligned into a program to support community-driven post-disaster response and development in Typhoon Yolanda-affected municipalities within provinces covered by KC-NCDDP.

 Social Welfare and Development Reform Project (SWDRP) - World Bank funded project (Loan 7805-PH) to strengthen the effectiveness of DSWD as a social protection agency to efficiently implement the Pantawid Pamilyang Pilipino Program (the CCT Program) and to expand an efficient and functional National Household Targeting System of social protection programs.

 Social Protection Support Project (SPSP) - Asian Development Bank funded project to increase consumption and utilization of the education and health services among poor households and women by providing resources to expand the coverage and enhance the implementation of the government’s

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development strategy and social protection reform program. The SPSP is expected to reduce income poverty and non-income poverty in the Project area through the expansion and enhanced implementation of the NHTS-PR and 4Ps Program, and by strengthening gender and indigenous people’s aspects of the 4Ps Program. The SPSP scope will extend to participating provinces, municipalities and cities for sets 2 and 3.

 Capacity Development for Social Protection (TA 7586-PHI) – grant funded by Asian Development Bank for the conduct of Policy Review with media, academe, development partners and non-beneficiaries of the Conditional Cash Transfer (CCT) Program.

 Technical Assistance for Strengthened Gender Impacts of Social Protection (TA 7587-PHI) – This grant is provided by the ADB, from the Gender and development Cooperation Fund, is provided to the Government of the Philippines, thru the DSWD, to increase understanding and knowledge of the gender impact of Pantawid Pamilya; support actions to enhance gender equality and women’s empowerment; and create knowledge products to institutionalize key gender elements and strategies within the CCT Program. The outputs of this TA includes gender audits of the implementation processes and impact of the CCT program; community-driven ad municipal level gender action plans and grants provided to municipalities to operationalize such plans; and knowledge products related to management of gender in the CCT program.

 Technical Assistance for Support for Social Protection Reform (TA 7733-PHI) – This grant is provided by Japan Fund for Poverty Reduction, thru the ADB. The TA will have four outputs: (i) Development of national policy reforms for social protection; (ii) Formulation and implementation of an action plan for rationalization and coordination of social protection programs; (iii) Capacity development of national and local institutions to support the social protection reform agenda; and (iv) Establishment of a referral system and graduation policy for the poor population.

 United Nations Children’s Fund (UNICEF) – funded by the UNICEF for activities relating to the Day Care Workers Consultation Conference, National Capacity Building on Program and Policy Development for ECCD Practitioners, Roll Out Capability Building on Standards for Home Based ECCD, Institutionalization of ECCD Information System and for the Construction of thirty (30) additional Day Care Centers.

 UNICEF Emergency Unconditional Cash Transfer (EUCT) to Typhoon Yolanda Affected Population in Eastern Samar.

 UNFPA 7th Country Programme (PHL7U505) – This is a cash assistance / support from UNFPA for increasing capacity of NGAs and LGUs to undertake Gender-Responsive Programming to implement Magna Carta of Women Provisions especially on Reproductive Rights and Gender-Based Violence. The expected output of the 7th Country Programme is the capacity of the government to protect, fulfill, and promote the rights of women and girls, especially the marginalized and mechanisms and/or legal remedies for the protection of women’s and girl’s rights in place and functional.

 United Nations World Food Programme (UN WFP) - Development of the Framework and Early Warning System on Hunger and Food Insecurity

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Mitigation and Strengthening the Social Protection and Social Welfare and Development Programs of DSWD, Harnessing Social Media for Hunger and Food Insecurity Mitigation, and Strengthening the Social Protection and Social Welfare and Development Programs.

 UN WFP – emergency cash distribution for the assistance of Typhoon Yolanda victims through the emergency cash transfer (ECT) Top-up Project for additional emergency cash grants to qualified beneficiaries of the Pantawid Pamilyang Pilipino Program of the DSWD’s regular cash grants.

 ASEAN ROK (Republic of Korea) Funded Activities:

o Working towards a Cyber Pornography and Cyber Prostitution – Free Southeast Asia – project funded by ASEAN through the Republic of Korea (ROK) - Special Cooperation Fund (ASEAN ROK). The project aims to educate the public on how computer technology and the internet contribute to the proliferation of cyber pornography and cyber prostitution. At the same time, it also supports the capability of frontline workers to effectively and efficiently deal with the victim- survivors of the phenomena.

o Training Workshop on Strengthening Capacities of Communities, Practitioners and Policy makers to Address Violence Against Women

o Training Workshop on ASEAN Active Ageing (ACT)

 ASEAN Government of Japan (Japan ASEAN Integration Fund) Funded Activities:

o ASEAN Conference for Program Evaluation for Persons with Disabilities (PWD) – This is to provide a venue for ASEAN member States and private organizations to have technical cooperation on best practices and experiences related to provision of auxiliary social services, to evaluate existing PWD programs in the region, to develop new strategies, documents and programs for the improvement of auxiliary social services serving PWDs, and knowledge sharing and development of capacities of development workers to provide training and technical assistance on developing and managing auxiliary services for PWDs.

o Forum on the Promotion of Peace and Development for Internally Displaces Persons (IDPs) brought by Natural Disaster and Internal Conflict within a Country of the ASEAN Member States – This activity shall provide a venue for the participants from ten (10) ASEAN member states to learn from experiences, capacities, and approaches and policies undertaken to address IDPs and to facilitate exchange of information and knowledge in developing and implementing common framework among the ASEAN member states in the rehabilitation and resettlement of IDPs and/or enhancement of existing agreements within ASEAN in Disaster Management and Emergency Response on IDPs.

 ASEAN Socio Cultural Community (ASCC) – This is for the conduct of the Philippines Country-Level Assessment for the Midterm Review of the ASCC Blueprint Implementation in order to assess its progress and achievements of

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the ASSC goals, and to provide recommendations towards further enhancing the activities and mechanisms to ensure the effective contribution of the ASCC on the realization of an ASEAN Community by 2015..

 Japan Social Development Fund Grant for Community Enterprise Development as Pathway out of Poverty Project (JSDF Grant No. TF012886) – This is a financial assistance provided by Japan under the JSDF, administered by the Worldbank with the objective of improvement of livelihood and quality of life of poor households in the six (6) target municipalities through increased income and access to financial services, development of community-driven enterprises linked to markets, and local economic development support. The project is composed of four (4) parts namely: (A) Community Enterprise and Value Chain Development (Sub-grants); (B) Access to Financial Services; (C) Market Integration and Local Economic Development; and (D) Project Management, Monitoring and Evaluation, and Knowledge Dissemination.

 Japan Fund for Poverty Reduction – Assistance for Emergency Assistance and Early Recovery for Poor Municipalities Affected by Typhoon Yolanda (JFPR Project No. 9175-PHI) – This is a financial assistance provided by Japan under the JFPR administered by Asian Development Bank in the amount not exceeding $20M for the Republic of the Philippines. This will benefit about 1.2 million individuals from 74 municipalities in the region that was hit hardest by Typhoon Yolanda. A certain amount will be used for the rehabilitation projects to be implemented through Kapit-Bisig Laban sa Kahirapan – CIDSS. Kalahi CIDDS targets the speedy rehabilitation of 220 small-scale municipal and community infrastructures in 13 municipalities using the community-driven development a (CDD) strategy, a development approach that focuses on empowering and building up the capacities of citizens and local government units so they will be able to lift own communities out of poverty.

 KC NCDDP ADB AF Typhoon Yolanda Multi-Donor Trust Fund (TYMDTF) Grant No. 0472-PHI - This is a financial assistance from the Typhoon Yolanda Multi-Donor Trust Fund (TYMDTF) administered by ADB. The objective of the Project is that Project Provinces and Municipalities achieve improved access to services and infrastructure and participate in more inclusive local disaster risk reduction and management planning, budgeting and implementation.

 JSDF Grant on Improving Livelihood Opportunities for Vulnerable Urban Communities (LVUC) Project - This is a financial assistance provided by Japan under the JSDF, administered by the Worldbank with the objective of improving employment and livelihood opportunities for approximately 3,750 households in targeted urban communities affected by the financial crisis.

 ADB Grant are for Integrated People Driven Model Community Project and various construction of Transitional Shelter Units for families affected by Typhoon Yolanda.

 AusAID / World Bank Grant for Preparation of the National Community Driven Development (CDD) Program – The Government of Australia provided this grant, with the World Bank as the administrator of funds, represented by the Australian Agency for International Development under the Australia-World Bank Philippines Development Trust Fund (TF071200). The objective of the

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grant is to prepare the National CDD Program, with its own objective to empower Local Communities in targeted poor municipalities and selected urban areas, to achieve improved access to sustainable basic public services and to participate in more inclusive local government planning and budgeting. The activities for which the grant is given consist of: (a) preparation analysis; (b) knowledge exchange; and (c) program preparation facilitation and administration.

 AusAID / World Bank Co-financing for Kapitbisig Laban sa Kahirapan – Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDSS) Project – This grant is provided by the Government of Australia, with the World Bank as the administrator of funds, represented by the Australian Agency for International Development under the Australia-World Bank Philippines Development Trust Fund. The objective of the grant is to empower local communities in targeted poor municipalities and selected urban areas, to achieve improved access to sustainable basic public services and to participate in more inclusive local government unit planning and budgeting. The specific activities to be financed by the grant are: (a) carrying out of investment sub-projects specifically related to the construction of day care centers and school buildings / classrooms to meet the needs through provision of sub-grants to barangays; (b) mobilization of community volunteers for the preparation and updating of the program of work and technical plans, as well as the mobilization of local counterpart contributions for the construction and rehabilitation of day care centers and school buildings and classrooms.

 Government of Australia (GoA) Department of Foreign Affairs and Trade (DFAT) (formerly AusAID) Technical Assistance Unit of Social Welfare and Development for the Social Protection Reform TA Facility (Agreement Number 58809) - grant funded by Australian Government for DSWD TA Facility as a mechanism for planning, assessing, prioritizing, coordinating and monitoring all donor-supported TA activities relating to DSWD’s social protection reform agenda.

 GoA DFAT Assistance on the Provision of Training Program on Bridging Leadership for Convergence (Agreement Number 61692) – This is an accountable cash grant funded by the Government of Australia for the assistance regarding the provision of a training program on bridging leadership for convergence for the Department. Said training program shall assist field implementers strengthen their knowledge, skills, and aptitudes for creating and implementing collaborative action among the three core social protection programs of the Department; the Pantawid Pamilya, KALAHI- CIDSS, and the SEA-K to maximize their impact on poverty reduction.

 GoA DFAT Technical Assistance for the Analysis and Preparatory Work Supporting the National Community Driven Development in the Autonomous Region in Muslim (Agreement Number 65842) – This is an accountable cash grant funded by the Government of Australia to assist the Government of the Philippines with the cost of supporting the NCDD in the ARMM. The purpose of the grant is to adapt the proposed NCDD Project design to the social and political realities and technical experiences of ARMM to develop a project proposal for submission to the Government’s Investment Coordination Committee to support a CDD operation in ARMM.

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 GoA DFAT Assistance for Enhancing Conditional Cash Transfer Program Graduation Strategy for Exiting Beneficiaries (Agreement Number 65843) – This is an accountable cash grant funded by the Government of Australia to assist the Government of the Philippines. The assistance has the overarching goal to strengthen the graduation strategy for CCT beneficiaries through the Sustainable Livelihood Program which aims to reduce income poverty in areas with a high concentration of CCT program beneficiaries.

 GoA DFAT Agreement No 69734 - This is an accountable cash grant funded by the Government of Australia to assist the Government of the Philippines in the Enhancement of Pantawid Pamilya Social Accountability.

 GoA DFAT Agreement No 70184 - This is an accountable cash grant funded by the Government of Australia to assist the Government of the Philippines in Improving access to Early Learning thru Community-led Approach

 AECID-KCNCDDP for Capacity Building for 1000 in community development and disaster risk reduction (DRR) aims to strengthen the capacity of communities and local governments to coordinate, plan, implement and manage programs, projects and activities for local management of disaster reduction.

 Other foreign assisted projects which have been transferred to the general fund books includes the following: (1) Early Childhood Development Projects, a six year project that started its operation in year 1998 and ended last February 28, 2006; (2) Japan Social Development Fund – Social Inclusion Project (JSDF-SIP) is a three year complementary grant from the World Bank that was completed on December 31, 2008; (3) Comprehensive Pilot Intervention Plan Against Gender Violence in CARAGA (COPIPAGV13), funded by the Agencia Española de Cooperacion Internacional para el Desarollo (AECID) or Spanish Agency for International Corporation was completed last September 15, 2011; (4) Early Recovery Program for the Typhoon-Affected Bicol Region, funded by the United Nations Development Programme (UNDP), the project has been completed on October 30, 2010; (5) Mitigating the Economic and Psychosocial Impacts of HIV and AIDS, funded by the United Nations Development Programme (UNDP); (6) Care and Support Service for Persons with HIV or AIDS, funded by the United Nations Development Programme (UNDP), is a one year; (7) Access to Justice for the Poor Project, a project funded by the European Commission; (8) National Sector Support for Social Welfare and Development Reform Project (NSSWDRP), a grant from World bank; (9) Philippine Canadian Development Fund (PCDF), a Canadian grant; (10) KALAHI CIDSS Policy Human Resource Development (PHRD), a grant from World Bank; (11) Vulnerable Group Fund; (12) Poder 7 - PODER Y PROSPERIDAD DE COMUNIDAD (Makamasang Tugon-PODER 7) project; (13) AusAID Support for Assessment of Pilot Bottom-up Processes (Agreement Number 63449); and (14) ASEAN ROK Seminar-Workshop on Early Childhood Care and Development (ECCD) Systems Development.

DSWD Central Office registered office address is Constitution Hills, Batasan Pambansa Complex, Main Road, Quezon City, Philippines.

2. Statement of Compliance and Basis of Preparation of Financial Statements

2.1 The financial statements have been prepared in accordance with and comply with the PPSAS 1.129

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Philippine Public Sector Accounting Standards (PPSAS) issued by the Commission on PPSAS 2 Audit per COA Resolution No. 2014-003 dated January 24, 2014. The financial statements PPSAS 6 are presented in , which is the functional and reporting currency of the DSWD.

2.2 The financial statements have been prepared on the basis of historical cost, unless stated otherwise. The Statement of Cash Flows is prepared using the direct method.

3. Summary of Significant Accounting Policies

3.1 Basis of accounting

The financial statements are prepared on an accrual basis in accordance with the PPSAS 1, 6 Philippine Public Sector Accounting Standards (PPSAS).

3.2 Financial instruments

a. Financial assets

Initial recognition and measurement

Financial assets within the scope of PPSAS 29 Financial Instruments: Recognition PPSAS 9.10 and Measurement are classified as financial assets at fair value through surplus or PPSAS 30.31 deficit, loans and receivables as appropriate. The Department of Social Welfare and Development determines the classification of its financial assets at initial recognition.

The DSWD's financial assets include cash and other receivables.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or PPSAS 29.10 determinable payments that are not quoted in an active market. After initial PPSAS measurement, such financial assets are subsequently measured at amortized cost 29.48(a) using the effective interest method, less impairment. Amortized cost is calculated PPSAS 29.65 by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Losses arising from impairment are recognized in the surplus or deficit.

Derecognition

The DSWD derecognizes a financial asset or, where applicable, a part of a PPSAS 29.19 financial asset or part of DSWD of similar financial assets when: PPSAS 29.20- 22  The rights to receive cash flows from the asset have expired or is waived The DSWD 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 DSWD has transferred substantially all the risks and rewards of the asset; or (b) the DSWD has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

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Impairment of financial assets

The DSWD assesses at each reporting date whether there is objective evidence PPSAS 29. that a financial asset or a group of financial assets is impaired. A financial asset or 67-68 a group of financial assets is deemed to be impaired if, and only if, there is PPSAS 30. objective evidence of impairment as a result of one or more events that has PAG5(f) 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;  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).

b. Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of PPSAS 29 are classified as financial PPSAS 29.10 liabilities at fair value through surplus or deficit. The entity determines the classification of its financial liabilities at initial recognition.

The DSWD’s financial liabilities include other payables.

Subsequent measurement

The measurement of financial liabilities depends on their classification.

Derecognition

A financial liability is derecognized when the obligation under the liability is PPSAS 29.41 discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on PPSAS 29.43 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.

3.3 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in bank for local and PPSAS 2.8 foreign currencies, and treasury/agency accounts. PPSAS 2.9 PPSAS 2.56 3.4 Inventories

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Inventory is measured at cost upon initial recognition. To the extent that inventory was PPSAS 12.15 received through non-exchange transactions (for no cost or for a nominal cost), the PPSAS 12.17 cost of the inventory is its fair value at the date of acquisition. (a)

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, PPSAS 12.35 less the estimated costs of completion and the estimated costs necessary to make the PPSAS 12.20 sale, exchange, or distribution. PPSAS 12.21

Inventories are recognized as an expense when deployed for utilization or PPSAS 12.9 consumption in the ordinary course of operations of the DSWD.

3.5 Property, Plant and Equipment

Recognition

An item is recognized as property, plant, and equipment (PPE) if it meets the PPSAS 17.13 characteristics and recognition criteria as a PPE.

The characteristics of PPE are as follows:

 tangible items; PPSAS 17.14  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. PPSAS 17.26

A PPE acquired through non-exchange transaction is measured at its fair value as at PPSAS 17.27 the date of acquisition.

The cost of the PPE is the cash price equivalent or, for PPE acquired through non- PPSAS 17.37 exchange transaction its cost is its fair value as at recognition date.

Cost includes the following: PPSAS 17.30

 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.

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Measurement After Recognition

After recognition, all property, plant and equipment are stated at cost less PPSAS 17.43 accumulated depreciation and impairment losses. PAG2 of PPSAS 17 When significant parts of property, plant and equipment are required to be replaced at PPSAS 17.24 intervals, the DSWD recognizes such parts as individual assets with specific useful PPSAS 17.25 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 PPSAS 17.23 as incurred.

Depreciation

Each part of an item of property, plant, and equipment with a cost that is significant in PPSAS 17.59 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 PPSAS 17.64 in the cost of another asset.

Initial Recognition of Depreciation

Depreciation of an asset begins when it is available for use such as when it is in the PAG3 of location and condition necessary for it to be capable of operating in the manner PPSAS 17 intended by management.

For simplicity and to avoid proportionate computation, the depreciation is for one month if the PPE is available for use on or before the 15th of the month. However, if the PPE is available for use after the 15th of the month, depreciation is for the succeeding month.

Depreciation Method

Each part of an item of property, plant, and equipment with a cost that is significant in PAG4 of relation to the total cost of the item is depreciated separately. PPSAS 17

The depreciation charge for each period is recognized as expense unless it is included in the cost of another asset.

The straight line method of depreciation shall be adopted unless another method is more appropriate for agency operation.

Estimated Useful Life

The DSWD uses the Schedule on the Estimated Useful Life of PPE by classification PAG5 of prepared by COA. PPSAS 17

The DSWD uses a residual value equivalent to at least five percent (5%) of the cost of PAG6 of the PPE. PPSAS 17

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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.

Derecognition

The DSWD derecognizes items of property, plant and equipment and/or any PPSAS 17.82 significant part of an asset upon disposal or when no future economic benefits or PPSAS 17.83 service potential is expected from its continuing use. Any gain or loss arising on PPSAS 17.86 derecognition 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.

3.6 Leases

Operating lease PPSAS 13.42 Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased item to the DSWD. Operating lease payments are recognized as an operating expense in surplus or deficit on a straight-line basis over the lease term.

DSWD as a lessor

Operating Lease PPSAS 13.13 Leases in which the DSWD does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. PPSAS 13.63 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. PPSAS 13.66 The depreciation policy for PPE are applied to similar assets leased by the entity.

3.7 Intangible Assets

Recognition and Measurement

Intangible assets are recognized when the items are identifiable non-monetary assets PPSAS 31.26 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. PPSAS 31.31

Intangible Assets Acquired through Non-Exchange Transactions

The cost of intangible assets acquired in a non-exchange transaction is their fair value PPSAS 31. at the date these were acquired. 42-43

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Internally Generated Intangible Assets

Internally generated intangible assets, excluding capitalized development costs, are PPSAS 31.49 not capitalized and expenditure is reflected in surplus or deficit in the period in which PPSAS 31.55 the expenditure is incurred.

Recognition of an Expense

Expenditure on an intangible item shall be 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. PPSAS 31.87 Intangible assets with a finite life is amortized over its useful life: PPSAS 31.96 PPSAS 26.22

The straight line method is adopted in the amortization of the expected pattern of PAG3 of consumption of the expected future economic benefits or service potential. PPSAS 31 PPSAS 31.117 An intangible asset with indefinite useful lives shall not be amortized. PPSAS 31.106

Intangible assets with an indefinite useful life or an intangible asset not yet available PPSAS 31.107 for use are 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 PPSAS 31.103 finite useful life, are reviewed at the end of each reporting period. Changes in the PPSAS 31.108 expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are 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 are measured as the PPSAS 31.112 difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the surplus or deficit when the asset is derecognized.

3.8 Changes in accounting policies and estimates

The DSWD recognizes the effects of changes in accounting policy retrospectively. The PPSAS 3.27 effects of changes in accounting policy are applied prospectively if retrospective PPSAS 3.30 application is impractical.

The DSWD recognizes the effects of changes in accounting estimates prospectively PPSAS 3.41 by including in surplus or deficit.

The DSWD correct material prior period errors retrospectively in the first set of PPSAS 3.47 financial statements authorized for issue after their discovery by:

 Restating the comparative amounts for prior period(s) presented in which the error occurred; or  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.

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3.9 Foreign currency transactions

Transactions in foreign currencies are initially recognized by applying the spot PPSAS 4.24 exchange rate between the function currency and the foreign currency at the transaction.

At each reporting date:

 Foreign currency monetary items are translated using the closing rate; PPSAS 4.27  Nonmonetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and  Nonmonetary items that are measured at fair value in a foreign currency shall PPSAS 4.32 be 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, are 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.

3.10 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, PPSAS 23.31 that meets the definition of an asset are recognized as an asset if the following criteria are 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 PPSAS 23.42 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 PPSAS 23.44 recognized as revenue, except to the extent that a liability is also recognized in respect of the same inflow.

As DSWD satisfies a present obligation recognized as a liability in respect of an PPSAS 23.45 inflow of resources from a non-exchange transaction recognized as an asset, it reduces the carrying amount of the liability recognized and recognize an amount of revenue equal to that reduction.

Measurement of Revenue from Non-Exchange Transactions

Revenue from non-exchange transactions is measured at the amount of the PPSAS 23. increase in net assets recognized by the entity, unless a corresponding liability is 48-49 recognized.

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Measurement of Liabilities on Initial Recognition from Non-Exchange Transactions

The amount recognized as a liability in a non-exchange transaction is the best PPSAS 23.57 estimate of the amount required to settle the present obligation at the reporting date.

Fees and fines not related to taxes

The DSWD recognizes revenues from fees and fines, except those related to taxes, PPSAS 23.89 when earned and the asset recognition criteria are met.

Other non-exchange revenues were recognized when 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.

Gifts and Donations

The DSWD recognizes assets and revenue from gifts and donations when it is PPSAS 23.95 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 are recognized as assets when the goods are received, or there is a PPSAS 23.96 binding arrangement to receive the goods. If goods in-kind are received without conditions attached, revenue is recognized immediately. If conditions are attached, a liability is recognized, which is reduced and revenue recognized as the conditions are satisfied.

On initial recognition, gifts and donations including goods in-kind are measured at their PPSAS 23.97 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 are ascertained by reference to quoted prices in an active and liquid market.

Transfers

The DSWD 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, PPSAS 23.96 except those arising from services in-kind.

Services in-Kind

Services in-kind are not recognized as asset and revenue considering the complexity of the determination of and recognition of asset and revenue and the eventual PPSAS 23.98 recognition of expenses. PAG3 of PPSAS 23 Transfers from other government entities

Revenues from non-exchange transactions with other government entities and the related assets are measured at fair value and recognized on obtaining control of the PPSAS 23.42 asset (cash, goods, services and property) if the transfer is free from conditions and it PPSAS 23.44 is probable that the economic benefits or service potential related to the asset will flow to the DSWD and can be measured reliably.

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3.11 Budget information

The annual budget is prepared on a cash basis and is published in the government PPSAS 24 website.

A separate Statement of Comparison of Budget and Actual Amounts (SCBAA) was prepared since the budget and financial statements were not prepared on comparable basis. The SCBAA was presented showing the original and final budget and the actual amounts on comparable basis to the budget. Explanatory comments are provided in the notes to the annual financial statements.

3.12 Impairment of Non-Financial Assets

Impairment of non-cash-generating assets

The DSWD assesses at each reporting date whether there is an indication that a non- PPSAS 21.26 cash-generating asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the DSWD estimates the asset’s recoverable service amount. An asset’s recoverable service amount is the higher of PPSAS 26.14 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 DSWD classifies assets as cash-generating assets when those assets are held PPSAS 26.14 with the primary objective of generating a commercial return. Therefore, non-cash generating assets would be those assets from which the DSWD does not intend (as its primary objective) to realize a commercial return.

3.13 Employee benefits

The employees of DSWD are member of the Government Service Insurance System (GSIS) which provides life and retirement insurance coverage.

The DSWD recognizes the undiscounted amount of short term employee benefits, like salaries, wages, bonuses, allowance, etc., as expense and as a liability after deducting the amount paid.

The DSWD recognizes expenses for accumulating compensated absences when these were paid (commuted or paid as terminal leave benefits). Unused entitlements that has accumulated at the reporting date were not recognized as expense. Non- accumulating compensated absences, like special leave privileges, were not recognized.

3.14 Measurement uncertainty

The preparation of financial statements in conformity with PPSAS, requires management to make estimates and assumptions that affect the reporting amounts of 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 the useful life of capital assets.

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.

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4. Changes in Accounting Policies

DSWD has not adopted any change in Accounting Policies for CY 2015. The 25 PPSAS had been adopted beginning January 1, 2014 as per COA Resolution No. 2014-003 dated January 24, 2014.

5. Prior Period Adjustments

The DSWD has determined transactions relating to the previous year which have cumulative effect on surplus/deficit of the prior year.

The description of the prior period adjustments, including peso amount, its effect for each financial statement line item affected in current and prior year, and cumulative effect on opening accumulated surplus/(deficit) in current and prior year, and cumulative effect on surplus/deficit in prior year are shown on this notes to financial statements.

6. Cash and Cash Equivalents

Account Title 2016 2015 Cash - Collecting Officer 28,793,450.03 9,722,546.02 Petty Cash 27,353,211.88 13,677,145.48 Cash in Bank - Local Currency, Current Account 14,021,352,125.86 15,854,481,843.17 Cash in Bank - Local Currency, Savings Account 5,423,268.10 6,674,132.31 Cash in Bank - Foreign Currency, Savings Account 1,458,755,161.19 3,782,058,568.70 Cash - Treasury/Agency Deposit, Trust 62,095,874.19 53,592,590.87 Cash - Modified Disbursement System (MDS), Regular - 617,685,914.16 Total 15,603,773,091.25 20,337,892,740.71

Total collections of the Collecting Officers were all remitted to the National Treasury or with Authorized Government Depository Bank (AGDB) except for the amount of P28,793,158.54 which was deposited/remitted on the first banking day of the ensuing year and the amount of P291.49 in Central Office which is a forwarded balance from prior years.

Petty Cash Fund represents the cash advances granted to bonded officers of the various Centers and Institutions for its petty expenditures.

Cash in Bank- Local Currency Account includes the funds that were deposited with Authorized Government Depository Bank (AGDB) in accordance with GAFMIS Circular Letter No. 2003-005 dated November 21, 2003 as follows:

a. Livelihood Revolving Fund - SEA-K Revolving Fund authorized under Republic Act No. 5146 and Administrative Order No. 75 series of 1988

b. Donation Account for Specific Purpose a. Donation Account - Grants and Donations from various donors intended for disasters, calamities and other purposes/programs/activities as specified by the donors.

c. Foreign Assisted Projects

a. Kalahi-CIDSS National Community Driven Development Project b. Millennium Challenge Corporation Grants c. JSDF: Community Enterprise Development as Pathway Out of Poverty d. Japan Fund for Poverty Reduction

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e. KC NCDDP ADB AF Typhoon Yolanda Multi-Donor Trust Fund (TYMDTF) Grant No. 0472-PHI f. DSWD ADB Technical Assistance Grants g. DSWD AUSAID Technical Assistance Unit of SWDRA facility h. DSWD UNWFP Emergency Cash Transfer for Typhoon Yolanda- Affected Population i. DSWD Building Capacity of Local Government for Poverty Reduction, Local Governance and Community Driven j. Social Protection Support Project k. Social Welfare and Development Project l. UNFPA 7th Country Programme m. UNICEF Funds

d. Pantawid Pamilyang Pilipino Program (4Ps) grants thru LBP OTC/Conduits

e. Trust Accounts/Funds from National Government Agencies (NGAs)

a. DSWD Miscellaneous Trust Account b. DSWD Socialized Housing Project c. PGMA- Educational Assistance Program d. BAC Honoraria, Payroll Account, Training Fund and Bidders Bonds

Cash in Bank, Local Currency, Savings Account of P5,423,268.10 pertains to Region II received donations from various donors for various Centers and Institutions of the region.

Cash in Bank Foreign Currency Savings Account includes the deposits from Grants and Donations and loan proceeds received by DSWD from the following:

 National Community Driven Development Project (NCDDP)–WB and ADB  Social Protection Support Project (SPSP)  Social Welfare and Development Reform Project  DSWD Foreign Donations  ASEAN - Republic of Korea (ROK)  Japan ASEAN Integration Fund (JAIF)/Japan Fund

Cash-Treasury/Agency Deposit, Trust includes proceeds from collections of affiliation fees on Civic Welfare Training Service (CWTS) of the National Service Training Program (NSTP), field work/practicum placement fees for social work and other degree courses, care giver trainees and are deposited with the Bureau of the Treasury including collections from LGUs as 1/3 share for cost of care and maintenance of residents confined at Regional Rehabilitation Center for Youth as provided under PD 603 or The Child and Youth Welfare Code.

7. Receivables

7.1 Loans and Accounts Receivables

Accounts 2016 2015 Accounts Receivable 492,872.52 481,523.35 Loans Receivable – Others 39,808,654.57 39,808,654.57 Net Value - Accounts Receivable 40,301,527.09 40,290,177.92

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Accounts Receivable includes P73,103.06 which was a Dormant Account in Central Office reflected in the Books of Accounts since 1987. The Department will retrieve documents to support its request for write-off of this account to the Commission on Audit (COA).

Loans Receivables – Others represents assistance to identified beneficiaries under the PGMA Microfinancing and Enterprise Development Program and National Livelihood Support Fund Program.

7.2 Aging/Analysis of Receivables

Not past Past due Accounts Total due < 30 days 30 - 60 days > 60 days Accounts Receivable 492,872.52 492,872.52 Loans Receivable – 39,808,654.57 39,808,654.57 Others TOTAL 40,301,527.09 40,301,527.09

7.3 Inter-Agency Receivables

2016 Account Name Current Non-Current Total Due from National Government Agencies 1,258,756,452.78 - 1,258,756,452.78 Due from Government-Owned and/or Controlled Corporations 8,436,919,810.17 - 8,436,919,810.17 Due from Local Government Units 15,586,388,300.46 - 15,586,388,300.46 Total 25,282,064,563.41 - 25,282,064,563.41

In Central Office, Due from National Government Agencies is broken down as follows:

Name Amount Issued in CY 2016: ARMM-4Ps 30,775,684.75 ARMM-SLP 2,120,969.94 ARMM-BUB 34,637,174.25 Bureau of Internal Revenue 2,020.75 Department of Education 500,000.00 Department of Public Works and Highways-QCFED 47,730,309.74 Department of Public Works and Highways-MMFED 6,000,000.00 Department of Public Works and Highways-SMED 17,374,499.73 Philippine Carabao Center 13,324,080.00 DBM Procurement Service 203,188,329.55 Sub-total 355,653,068.71 Issued in CY 2015 and Prior Years: ARMM 9,491,778.50 Armed Forces of the Philippines – National Dev’t. Support Command (AFP-NADESCOM) 12,137.78 Bureau of Internal Revenue 46,576.24 Pag-Ibig 200.00 Bureau of Treasury 1,280.00 Commission on Higher Education (CHED) 179,746,578.68 Department of Public Works & Highways – CO 132,159,093.90 Department of Public Works & Highways – NCR 50,414,279.60 Department of Public Works & Highways – QCFED 97.68

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Name Amount Department of Public Works & Highways – SMED 3,463,749.98 National Nutrition Council (NNC) 944,172.65 Philippine Health Insurance Corp. (Philhealth) 975.00 Philippine Information Agency 4,171,252.08 Rizal Experimental Station & Pilot School of Cottage Industries (RESPSCI) 213.90 DBM Procurement Service 32,647,211.58 UP College of Education 409,124.30 DSWD City of Manila 200,000.00 Sub-total 413,708,721.87 GRAND TOTAL 769,361,790.58

The Due from ARMM represents the balance of funds transferred to ARMM for the various regular programs of the Department and funds for the implementation of 4Ps, Social Pension, Sustainable Livelihood System, Supplemental Feeding, Bottom-up Budgeting, Calamity Fund, PAMANA and other support services. A total of 99% or P140,116,149.80 was liquidated from the outstanding balance in CY 2015 while 82% or P315,064,984.08 was liquidated from the funds transferred in the current year.

The balance of funds transferred to the Procurement Service (DBM) includes the undelivered goods/items such as computer desktops, laptops and software and other office supplies.

The balance of funds transferred to the Procurement Service (DBM) pertains to the procurement of ordinary or regular office supplies and equipment which are required by Republic act No. 9184, otherwise known as Government Procurement Reform Act, to be procured from Procurement Service (PS). The Department advances amount required for the items based on the Agency Procurement Request. It also includes undelivered goods/items such as computer desktops, laptops and software and other office supplies.

The Due from National Government also includes current transfer of funds to Department of Education for the conduct of Oratorical Contest on Adoption Consciousness Celebration last April 11, 2016 amounting to P500,000.00. During the last quarter of this year, the department had transferred funds to Philippine Carabao Center for the pilot testing of Milk Supplementation for Supplementary Feeding Program in the amount of P13,324,080.00.

The balance of funds transferred to Philippine Information Authority (PIA) in the amount of P4,171,252.08 pertains to the production and airing of broadcast materials for media campaign for the Pantawid Pamilyang Pilipino Program. The PIA-Accountant had agreed to submit a duly received fund utilization report or a verified copy of the said report after personal visit conducted to them last July 28, 2016. Last November 21, 2016, the management sent another follow up letter dated to PIA requesting the submission of final liquidation requirements.

The remaining outstanding balance of P12,137.78 for the funds transferred to the Armed Forces of the Philippines – National Development Support Command (AFP-NADESCOM) that is intended for the construction of 108 Day Care Centers (DCC), construction of 100 modified shelters, cash-for-work (CFW) component in the DCC and shelter construction, represents unutilized balance subject for refund The management best effort is to personally require (AFP- NADESCOM) to return the said amount.

The P500 Million funds transferred to the Commission on Higher Education (CHED) represents the Grant-in-aid for Program for Poverty Alleviation for State Universities & Colleges (ISUCs) per Special Release Order No. B11-02264 dated December 22, 2011 with NCA No. BMB-B-11- 0023870 released by Department of Budget and Management. The unliquidated balance of P370,310,433.46 from previous year was 51% or P190,563,854.78 liquidated from the

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outstanding balance in CY 2015. Accordingly, the remaining balance of P179,746,578.68 is for submission to CHED-Resident for the verification of expenses subsequently for transmittal to DSWD once completed.

The remaining balance of P944,172.65 for the funds transferred to the National Nutrition Council (NNC) consists of P4 Million for the promotional campaign of good nutrition for the Tindahan Natin Operators and their clients in the priority 2 and 3 provinces in prior years. Last November 23, 2016, a letter was sent to NNC to demand the submission of liquidation report and/or refund of the same. No response was received from said agency as of reporting date.

The balance of funds transferred to Department of Public Works and Highways (DPWH) pertains to the various on-going projects/construction of the Department. 2015 releases of funds include receipt of funds by DPWH-CO for construction of 4-storey building & multipurpose building at DSWD CO and construction of activity centers and Home for the Girls located at DSWD Field Offices in VI, VII and VIII in the amount of P30,000,000.00 and P132,159,093.90, respectively; While, 2016 release of funds to DPWH-QCFED for the construction projects at the Reception and Study Center for Children Compound, Bago Bantay, Quezon City and at DSWD Central Office and DPWH-MMED for the various construction, repair, rehabilitation and improvement of infrastructure at DSWD-SWADCAP has current unliquidated balance of P47,730,407.42 and P6,000,000.00, respectively.

The balance of P17,374,499.73 refers to current fund transfer to Department of Public Works & Highways - South Manila Engineering District for the construction of warehouse H, replacement of existing gates and extension of perimeter fence, improvement of water line system at warehouse G, improvement of drainage and concreting of pavement, concreting of pavement at the back of warehouses A, B, & G with elevated guard house, installation of canopy for loading bays of warehouses A, B, & G located at NROC, which represents the 50% of the total contract agreement of P34,748,999.46.

The unliquidated balance of the Department of Public Works and Highways (DPWH) - South Manila Engineering District amounting to P3,463,749.96 refers to funds transferred in CY 2015 for the major repair/upgrading/improvement/construction of various infrastructure projects in DSWD- NROC, Pasay City.

The liquidation documents pertaining to the remaining balance of UP College of Educations in the amount of P409,124.30 which was already transmitted to the office of the Resident Auditor of UP College of Education was not yet released to the responsible person of the said agency, still, no liquidation report will be submitted to DSWD. We already coordinated with the details of the fund transfer and had provided pertinent documents as well to assist the person facilitating the liquidation report.

In FO-V, Due from National Government Agencies account represents the balance of funds transferred to the Department of Public Works and Highways for the construction of Day Care Centers under the Protective Services Program, and funds transferred to various State Universities and Colleges for the implementation of the Sustainable Livelihood Program and other projects.

In FO-IX, the account includes the following:

 Due from 52nd Engineer Brigade-Philippine Army represents balances of fund transferred for the construction of single detached recovery shelters, and septic vaults for the victims of Zamboanga siege in September 2013 and for the construction of perimeter fence at AVRC III, Mampang, Zamboanga City.

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 Due from DSWD-ARMM Sulu represents the balance of funds transferred for the various regular programs of the Department for the processing and rehabilitation of regular deportees and training/orientation cost of NHTS-PR ARMM Sulu workers.  Due from DSWD-ARMM Tawi-Tawi represents the balance of fund transferred for Sabah Stand-off displacement, processing and rehabilitation program of regular deportees, implementation for the needs of trafficked victims, expanded-AICS program of ARMM Tawi-Tawi, SFP implementation and construction of Day Care Center at Tubig Basag, Bongao under Sajahatra and administrative cost of different municipalities. Liquidation rate for current year is 25% while previous year is 72%.

Letters have already been sent to concern NGA’s in following-up the submission of liquidation reports in accordance with COA Circular No. 94-013 dated 13 December 1994.

In Central Office, Due from GOCCs is broken down as follows:

Name of GOCC Amount CY 2016 Land Bank of the Philippines 7,658,958,295.33 Social Housing and Finance Corp. 10,360,000.00 Subtotal 7,669,318,295.33 CY 2015 and Prior Years People’s Television Network, Inc. (PTNI) 59,678.25 Philippine International Trading Corp. (PITC) 171,462,106.95 Technology & Livelihood Resource Center (TLRC) 23,500,000.00 Subtotal 195,021,785.20

Grand Total 7,864,340,080.53

The balance of P7,658,958,295.33 due from the Land Bank of the Philippines pertains to fund transfers for the over-the-counter payment of cash grants of Pantawid Pamilya beneficiaries as of December 31, 2016 with breakdown as follows:

Year Amount 2015 and prior years 2,025,441,179.65 2016 5,633,517,115.68 TOTAL 7,658,958,295.33

The balance of P10,360,000.00 represents fund transfer to Social Housing and Finance Corporation for the shelter assistance of 148 informal settler families victims of typhoon Sendong in Cagayan de Oro City released in the second quarter of this year 2016.

The funds transferred to People’s Television Network, Inc. (PTNI) and Technology and Livelihood Resource Center (TLRC) in the amounts of P59,678.25 and P23.5 Million pertain to augmentation supports, training of livelihood programs and assistance funded by the PDAF of various legislators. After the various demand letters sent to them, personal follow up was performed to facilitate the submission of liquidation report. Accordingly, the PTNI advise us that they will refund the remaining balance, while the TLRC failed to provide us a response.

The Due from Philippine International Trading Corp. (PITC) in the amount of P171,462,106.95 pertains to unliquidated funds transferred to as procurement agent of the Department to facilitate the emergency purchase of various goods, services and infrastructure projects under the Yolanda Recovery and Rehabilitation Program.

In FO-V, Due from Government-Owned and/or Controlled Corporations represents the balance of funds transferred to the National Food Authority for the implementation of the Supplemental

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Feeding Program. According to the National Food Authority Regional Office, they had already returned the unutilized balance to the NFA Central Office, but since such amounts were not yet returned to the DSWD Field Office, the amounts still remain in the books of the latter.

In Central Office, the balance of P238,744,741.63 due from Local Government Unit represents current fund releases to PAMANA-BLGU-KALAHI CIDSS as community grants to various barangays which started last September of the current year.

Name of LGU Amount Granted CY 2014 and Prior Years Guihulngan, Negros Oriental 2,564,877.00 La Libertad, Negros Oriental 1,001,925.00 Provincial Government of North Cotabato 7,569.00 Provincial Treasurer of Aklan 200.00 Provincial Treasurer of Antique 742.65 Provincial Treasurer of Camarines Sur 1,000.00 Provincial Treasurer of Oriental Mindoro 2,500.00 Provincial Treasurer of Sorsogon 2,000.00

TOTAL 3,580,813.65

The account Due from LGUs includes the balance of funds transferred to Provincial Government of North Cotabato amounting to P7,569.00 for the implementation of Emergency Operations Philippines- Assistance to Conflict Affected Mindanao (EMOP-ACAM) project, and funds transferred to the Municipality of Guihulgan, Negros Oriental in the amount of P2,564,877.00 and La Libertad, Negros Oriental in the amount of P1,001,925.00 as augmentation for the Cash for Work Program for the 1,422 families affected by earthquake in Region VII.

In Regional Offices, the Due from LGUs pertains to the balance of funds transferred for the implementation of various programs and projects i.e. Social Pension for Indigent Senior Citizens, Supplemental Feeding Program, Sustainable Livelihood Program, various programs under the Bottom-Up Budgeting process, Crisis Intervention Program, shelter assistance and construction of Day Care Center and Senior Citizens Center.

7.4 Intra-Agency Receivables

2016 Account Name Current Non-Current Total Due from Central Office 485,000.00 485,000.00 Due from Regional Offices 356,748,517.67 356,748,517.67 Due from Other Funds 42,533,313.06 42,533,313.06 Total 399,766,830.73 399,766,830.73

Due from Central Office of Php 485,000.00 represents FO-III inter-office fund transfer for travelling expenses of reinforced staff during the Mt. Pinatubo operations. This is a dormant account which was followed up thru formal communication to Central office at the beginning of the year, however no response received.

Due from Regional Office issued on prior years represents the funds for the Microfinancing and Enterprise Development Program and National Livelihood Support Fund. This also includes amount transferred to Field Offices for payment of cost of service, financial assistance to DSWD employees affected by Typhoon Yolanda and Magnitude 7.2 Earthquake, funding for the Asia- Pacific Economic Cooperation, for temporary housing assistance for 5,587 family victims of the CY 2013 Zamboanga City siege under the Zamboanga City Roadmap to recovery and

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reconstruction plan, and for the Pilot Implementation of Community Managed Road Maintenance Project and these are subject for liquidation by the FOs.

In FO-VI, Due from Regional Offices represents the amount transferred to DSWD Field Offices for the Salaries and other benefits of the Regional Directors. For Director Minda B. Brigoli, this covers the period of 2nd quarter of 2015 and for Director Riduan Hadjimuddin, 1st semester of 2016. Liquidation will be followed up to FOs.

Due from Other Funds includes the amount of P38,676,736.90 in FO-IVB which represents transfer of funds/receivable from Cluster 1 to Cluster 6 subject for liquidation in Cluster 1 books. While, the balance pertains to FO-NCR of P3,784,576.16 and FO-X of P72,000.00

7.5 Other Receivables

This account consists of the following:

Account Name 2016 2015 Receivables - Disallowances/Charges 19,910,936.73 17,639,531.88 Due from Officers and Employees 3,331,394.73 2,218,010.59 Due from Non-Government Organizations/ People's Organizations 7,178,833,713.84 11,304,242,437.47 Other Receivables 536,919,582.07 70,704,210.78 TOTAL 7,738,995,627.37 11,394,804,190.72

The Account Receivables-Disallowances/Charges represents the disallowance for various types of expenses including Staple Food Incentive (SFI) and Agency Productivity Bonus (APB) given to DSWD Officials and Employees for CY 2000. The disallowances is under appeal by the DSWD employees. Though the disallowance/charge is under appeal, this is being collected from the officials and employees upon retirement, resignation, termination or transfer of office.

In FO-II, the account pertains to receivables from devolved workers since 1990 and the cost of typewriters (overpricing) which was subject to litigation.

In FO-VI, the account corresponds to disallowance of Additional Performance Bonus and the management is settling the charges by requiring the employees and staff by paying monthly thru salary deduction of P100.00. In 2013, in response to the disallowance of Collective Negotiation Agreement Sign-in Bonus of MOA Workers, the office started deducting monthly from Payroll of staff who availed the said bonus. All disallowances are under appeal to COA Commission proper.

In FO-IX, the account represents beginning balance as of Jan 1, 2016 in the amount of P798,215.32 and unsettled CNA disallowance of retired/deceased personnel in the amount of P260,403.00. Full settlement of NFA disallowance was made in CY2016.

The account Due from Officers and Employees in Central Office of P108,952.07 pertains to receivables from officials and employees resulting from overpayment of salaries due to leave without pay and suspension which are being deducted from the monthly payroll.

The Due from NGOs/POs includes funds released to various Non-Government Organizations from CY 2012 and prior years funded from Congressional Initiative, Congressional Development Funds (CDF) and PDAF of various solons. The account also includes transfers to barangay communities for the implementation of KALAHI CIDSS-NCDDP, PAMANA Project and JSDF- CEDED.

Further, Due from NGOs/POs includes fund transfer to International Organization for Migration (IOM) amounting to P244,983,144.21 which was transferred during 2015. These fund transfers

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are for construction of 700 single-detached Transitional Shelters and WASH Facilities for the Zamboanga Crisis-affected populations and for developing capacity of the Philippines Department of Social Welfare and Development to train families and communities in evacuation preparedness. It also includes construction of transitional shelters for victims of typhoon Yolanda and for Leyte Resettlement sites sustainable water supply. Based on the Department’s query to the Commission on Audit, when COA could not specify any specific rules, laws and regulations to govern the TOF to IOM and in reference to one of its recommendations in AOM No. 2015-025, it had required the submission of IOM liquidation reports in accordance with COA Circular 2007- 001. Consequently, the Department have been complying through the on-going validation conducted by the Internal Audit Service on the liquidation reports submitted by IOM.

In CARAGA, the accounts includes financial assistance from the Office of the President for the livelihood projects of the two beneficiaries of killed DENR anti-illegal logging enforcers amounting to 420,000.00 and funds released for the regional Implementation as per MOA between DSWD and DepEd for the construction of 605 classrooms for Lumads under KC CCL amounting to 27,087,288.40, both deposited and charged under Trust Fund Account.

In FO-I, the account includes the mount of P 500,000.00 fund transfer to Cooperative Bank of Pangasinan that ceased operation sometime in 2004. No liability was recorded in the books of the bank in favour of DSWD.

In FO-II, the accounts includes funds released to non-formal organizations/groups like the Day Care Workers Groups and Parents Federation for Supplementary Feeding Program, MCCT projects, livelihood and KALAHI-CIDSS projects under the BUB.

In Central Office, the account Other Receivables amounting to P4,513,998.91 pertains to advances granted to DSWD employees and officials for official travel or as disbursing officers of the Department. The balances were formerly recorded in account 103- Cash Disbursing Officers; account 123- Due from Officers and Employees; and account 148 - Advances to Officers and Employees. Re-classification of these balances is undertaken due to impossibility of collection from separated employees and collectibles from resigned employees who have not secured clearance for their accountabilities and who cannot be located anymore.

In FO-IX, the account represents receipts from other funds due to checks inadvertently issued under other bank accounts. Reclassification from Account #20101010 was made in the amount of P1,900,000.00 which was then under COA Investigation. Also recorded in this Account is the reconciling items reflected in the Bank Reconciliation Statement checks not taken up by the Agency in the total amount of P8,239,628.96 which is the accountability of the previous cashier, Ms. Aurora Agustin, who absconded last February1997. This is the subject of COA investigation. Undeposited collections of the missing cashier in the amount of P2,647.71 while the amount of P21,000 represents undeposited collections of PSCB sales covering Ms. Malou Dolar's accountability.

In CARAGA, Other Receivables represents receivable from LGUs with RRCY and HFG CICL wards for their one-third share in the said facility’s operations.

In FO-II, the balance of the account Other Receivables pertains to cash advances from devolved workers, AWOL employees of the Agency who were not cleared and those who are already dead.

In FO-III, the Account Receivables-Disallowances/Charges amounting to P4, 911,823.11 represents the following:

 Staple Food Allowance and Productivity Incentive Bonus given to DSWD officials and employees for CY 2000. This is still under appeal by the DSWD employees.  Hazard Pay given to DSWD-Region III employees for CY 2013.

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 Purchase of rice from NFA PDAF-funded under the sponsorships of Senators Peter and Pia Cayetano  Skills Training Vouchers under the Municipality of Dona Remedios Trinidad, Bulacan for Dressmaking NC II. This account is under appeal but recommended by the previous auditor to be recorded in the books.

In FO-V, the account Other Receivables includes advances granted to former DSWD employees and officials for official travel or as disbursing officers of the Department. Re-classification of these balances were undertaken due to impossibility of collection from separated employees and collectibles from resigned employees who have not secured clearance for their accountabilities and who cannot be located anymore

8. Inventories

Inventory items of the Department include the following:

2016 Inventory Inventories Reversal of Inventories carried at write-down Accounts carried at fair Inventory write- the lower of cost and recognized value less cost to down recognized net realizable value during the sell during the year year Inventory Held for Distribution Carrying Amount, January 1, 2016 1,303,022,641.28 - - - Additions/Acquisitions during the year 2,648,880,433.13 - - - Expensed during the year except write-down (1,168,350,351.23) - - - Adjustments during the year (663,984,777.15) - - - Write-down during the year (35,551,731.78) - - - Reversal of Write-down during the year - - - - Carrying Amount, December 31, 2016 2,084,016,214.25 - - - Inventory Held for Consumption Carrying Amount, January 1, 2016 602,528,948.78 - - - Additions/Acquisitions during the year 420,040,731.94 - - - Expensed during the year except write-down (389,807,014.68) - - - Adjustments during the year (1,587,267.10) - - - Write-down during the year (17,192,734.62) - - - Reversal of Write-down during the year - - - - Carrying Amount, December 31, 2016 613,982,664.32 - - - Semi-Expendable Inventory Additions/Acquisitions during the year 142,924,095.33 - - - Adjustments during the year - - - - Write-down during the year - - - - Expensed during the year except write-down (114,551,779.05) - - - Carrying Amount, December 31, 2016 28,372,316.28 - - - TOTAL CARRYING AMOUNT, DECEMBER - - - 31, 2016 2,726,371,194.85

Account Name 2016 2015 Inventory Held for Distribution Food Supplies for Distribution 52,025,556.89 41,039,306.89 Welfare Goods for Distribution 1,969,334,970.20 1,199,404,247.95 Drugs and Medicines for Distribution - -

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Account Name 2016 2015 Medical, Dental and Laboratory Supplies for Distribution 31,904,688.47 31,957,924.87 Construction Materials for Distribution 6,577,094.20 6,729,627.08 Property and Equipment for Distribution 36,060.00 12,400.00 Other Supplies and Materials for Distribution 24,137,844.49 23,879,134.49 Sub-total 2,084,016,214.25 1,303,022,641.28 Inventory Held for Consumption Office Supplies Inventory 194,324,495.58 165,085,422.83 Accountable Forms, Plates and Stickers Inventory 749,782.44 900,804.94 Food Supplies Inventory 170,537,920.68 202,828,054.59 Drugs and Medicines Inventory 2,318,159.06 4,763,197.73 Medical, Dental and Laboratory Supplies Inventory 1,279,966.08 1,189,994.33 Fuel, Oil and Lubricants Inventory 74,012.55 524,385.00 Agricultural and Marine Supplies Inventory 3,400.00 65,200.00 Textbooks and Instructional Materials Inventory 236,495.00 242,586.00 Construction Materials Inventory 5,166,003.10 6,366,698.11 Other Supplies and Materials Inventory 239,292,429.83 220,562,605.25 Sub-total 613,982,664.32 602,528,948.78 Semi Expendable Inventories Semi-Expendable Machinery 1,680,258.16 - Semi-Expendable Office Equipment 2,189,417.47 - Semi-Expendable Information and Communications Technology Equipment 13,511,981.74 - Semi-Expendable Communications Equipment 516,215.76 - Semi-Expendable Disaster Response and Rescue Equipment 459,046.00 - Semi-Expendable Medical Equipment 753,190.00 - Semi-Expendable Printing Equipment 309,987.50 - Semi-Expendable Sports Equipment 19,396.38 - Semi-Expendable Technical and Scientific Equipment 12,208.00 - Semi-Expendable Other Machinery and Equipment 776,042.04 - Semi-Expendable Furniture and Fixtures 8,144,573.23 - Sub-total 28,372,316.28 - Total-Inventories 2,726,371,194.85 1,905,551,590.06

Food Supplies Inventory consists of the food supplies for the consumption of the residents in various centers and institutions of the regions.

In Central Office, the Account Welfare Goods for Distribution was the cost of food supplies used for production of family food packs and non-food supplies for distribution to individuals affected by various calamities, disasters and ground conflicts. This includes the monetized value of donations received prior to the issuance of COA Circular 2014-002 dated April 15, 2014 and from locally purchased inventories out of General Appropriations Act (GAA) amounting to P14,924,718.33 and P906,863,696.27, respectively. There was a submitted Report of Supplies and Materials Issued (RSMI) by National Resources Operations Center (NROC) warehouse for the months of January to June 2016 amounting to P207,182,310.72 already booked-up during the same year. RSMI for the months of July to December 2016 are not yet received and booked-up due to non-submission of the said report to the Accounting Division. Increase in the amount of Welfare Goods for Distribution was due to purchases of relief items for victims of Typhoons Lando, Nona, Ferdie, Karen, Lawin and other calamities that has stricken the Philippines during 2015 and 2016.

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In FO-V, the Account Welfare Goods for Distribution in the amount of P54,386,154.68 and P40,923,104.00 represents the cost of Food and Non-Food Supplies for distribution to individuals affected by various calamities, disasters and ground conflicts for CY 2015 and CY 2016 respectively. These were procured by the DSWD Central Office and were subsequently transferred to the DSWD Field Office V. Although all were already distributed by the Field Office V for its intended beneficiaries, the entire amount is still reflected in the books of account since no report has been submitted to the Accounting Section pertaining to its distribution.

Medical, Dental and Laboratory Supplies for Distribution in the amount of P31,904,688.47 consist of monetized value of donated medicines and other medical, dental and laboratory supplies.

Construction Materials for Distribution in the amount of P6,577,094.20 was the monetized value of donated construction supplies stored at National Resources Operation Center.

The Account Office Supplies Inventory consists of office supplies, printed special forms, IT supplies and janitorial supplies in stockpile.

Drugs and Medicines Inventory consists of purchases for consumption and issuance to end- users.

Medical, Dental and Laboratory Supplies Inventory are purchases for consumption and issuance to end-users.

Construction Materials Inventory consists of cost of painting, carpentry, plumbing and electrical supplies for office repairs and maintenance and other minor constructions of DSWD Central Office.

Other Supplies and Materials Inventory was composed of spare parts purchased for the repair and maintenance of vehicles. The account also includes semi-expendable items and other home-life supplies and needs of the centers and residential care facilities. Increase in the Inventory is due to the reclassification of semi-expendable supplies with cost value below P15,000.00 will be dropped from the inventory account immediately upon receipt of the issuance slip/inventory custodian slip from the Supply Unit.

Semi-Expendable Machinery and Equipment and Furniture, Fixtures and Books are items purchased costing less than P15,000.00 and items reclassified from Property, Plant and Equipment (PPE).

9. Property, Plant and Equipment

Property, Plant and Equipment for CY 2016 are summarized as follows:

Buildings and Furniture, Other Land Infrastructure Machinery and Transportation Leased Construction Particulars Land Other Fixtures and Property, Plant TOTAL Improvements Assets Equipment Equipment Assets in Progress Structures Books and Equipment

Carrying Amount, January 1, 2016 40,281,096,121.96 13,917,141.99 200,371.22 579,189,028.45 738,555,911.09 146,448,044.63 95,522,197.46 - 29,822,270.71 160,204,137.47 42,044,955,224.98 Additions/Acquisitions 55,145,874.00 37,050,670.86 322,456.89 106,545,214.90 385,339,562.79 43,143,229.76 4,596,827.17 66,520.00 8,419,788.04 75,861,288.39 716,491,432.80 Adjustments - 117,316.55 - (13,149,653.34) (34,367,350.07) 337,884.46 (45,091,419.27) - (584,585.91) - (92,737,807.58)

Total 40,336,241,995.96 51,085,129.40 522,828.11 672,584,590.01 1,089,528,123.81 189,929,158.85 55,027,605.36 66,520.00 37,657,472.84 236,065,425.86 42,668,708,850.20 Disposals - - - (3,357,848.76) (135,246,101.68) (9,569,237.55) (5,963,085.44) - (114,811.70) - (154,251,085.13) Depreciation (As per Statement of Financial Performance) - (4,554,363.41) (355,536.57) (49,935,804.13) (171,062,133.96) (26,686,451.39) (12,510,671.34) - (9,990,767.46) - (275,095,728.26) Impairment Loss (As per Statement of Financial Performance) ------

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Carrying Amount, December 31, 2016 (As per Statement of Financial Position) 40,336,241,995.96 46,530,765.99 167,291.54 619,290,937.12 783,219,888.17 153,673,469.91 36,553,848.58 66,520.00 27,551,893.68 236,065,425.86 42,239,362,036.81 Gross Cost (Asset Account Balance per Statement of Financial Position) 40,336,241,995.96 60,628,954.60 400,425.89 1,035,207,395.46 1,695,782,274.58 307,329,264.20 88,369,021.84 66,520.00 57,896,202.88 236,065,425.86 43,817,987,481.27 Less : Acc. Depreciation - (14,098,188.61) (233,134.35) (415,916,458.34) (911,538,932.12) (153,655,794.29) (51,815,173.26) - (30,324,686.95) - (1,577,582,367.92) Allowance for Impairment - - - - (1,023,454.29) - - - (19,622.25) - (1,043,076.54) Carrying Amount, December 31, 2016 (As per Statement of Financial Position) 40,336,241,995.96 46,530,765.99 167,291.54 619,290,937.12 783,219,888.17 153,673,469.91 36,553,848.58 66,520.00 27,551,893.68 236,065,425.86 42,239,362,036.81

Property, Plant and Equipment is carried at cost less accumulated depreciation. Regular maintenance, repair and minor replacements are charged against Maintenance and Other Operating Expense (MOOE).

Increase in Land account for CY 2016 pertains to FO-VII.

Additions to Land Improvements include site development at DSWD-National Resource Operations Center including access to road network donated by MECO.

Additions to Buildings and Other Structures account include warehouse buildings at DSWD- National Resource Operations Center donated by MECO and completed 3-storey Micro Medium Rise Building and Director's Dormitory transferred from Construction in Progress account.

Machinery and Equipment account includes transactions of Office Equipment, Information and Communication Technology Equipment, Communication Equipment, Construction and Heavy Equipment, Disaster Response and Rescue Equipment, Medical Equipment, Sports Equipment, Technical and Scientific Equipment and Other Machinery and Equipment. Machinery and Equipment that are below the capitalization threshold of P15,000.00 were reclassified into semi- expendable expense or to its appropriate account.

Transactions of Information and Communication Technology Equipment includes purchases amounting to P98,707,660.91, donations from UNICEF amounting to P958,947.56, and transfers to various Field Offices amounting to P105,478,711.11. These transactions include servers, laptops, tablets and digital cameras.

The transactions for Communication Equipment includes purchases amounting to P5,723,260.00 and transfers to Field Offices amounting to P2,726,140.00.

In Central Office, the transactions for Motor Vehicle account in CY 2016 includes Pick up- Toyota Hilux, Wagons-Landrover Defenders and Truck-Toyota Dyna, Flatbed Van that are donations from World Vision Development Foundation, Oxfam and Save the Children Philippines. This account also includes transfer of Isuzu Hi-lander and 1995 Toyota Corolla to Field Office NCR.

In FO-VI, Motor Vehicles includes the donation from the Republic of Botswana of two (2) units of Light Truck Vehicle (Isuzu) worth P1,040,632.90 each. Donation of two other vehicles remains unrecorded due to incomplete documentation; one unit Kawasaki Motorcycle CT 100 worth 44,000.00 and one Ford Everest 4x4 vehicle with list Price of 29,775.00 US dollar. Recently purchased are 1 unit Nissan Navarra 4x4 pick-up of P1,638,173.00 and 1 unit Isuzu D-Max 4x4 Pick-up of P1,516,725.00 from Central Office.

Transactions during CY 2016 for Furniture and Fixtures and Books include purchases of Furniture and Fixtures and dropping in the books due to refund for lost book. Those items that did not met the P15,000.00 threshold were also reclassified as semi-expendable expense or to its appropriate account.

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Other Property, Plant and Equipment includes items not falling under any of the specific classification/PPE accounts.

In Central Office, adjustments amounting to P11,873,582.94 are adjustments to Semi- Expendable Machinery and Equipment that are below the capitalization threshold of P15,000.00 and are reclassified into semi-expendable expense or to its appropriate account.

In compliance with the provision of the Commission on Audit Circular No.2014-002 dated April 15, 2014, the following are the required to be disclosed is the amount of donated equipment during the year amounting to P5,303,411.40. While, in Field Offices VI and CARAGA, donated equipment amounts to P1,040,632.90 and P6,894,802.48, respectively.

Construction in Progress account refers to different unfinished and on-going construction projects of the Department as of December 31, 2016.

10. Biological Assets

Account Name 2016 2015 Breeding Stocks 90,000.00 90,000.00 Livestock Held for Consumption/Sale/Distribution 69,500.00 69,500.00 Total 159,500.00 159,500.00

Breeding Stocks includes FO-II P49,000.00 purchased of carabao as a result of productivity /livelihood activities (agro-farming) which was a part of rehabilitation of RRCY residents, and FO- XI Breeding stocks of P41,000.00 for cow raising program in the centers.

Livestock Held for Consumption/Sale/Distribution is for FO-XI productivity/livelihood activities in the center and livelihood assets.

11. Intangible Assets

Intangible asset of the Department is composed of Computer Software only to wit:

Particulars Computer Software Carrying Amount, January 1, 2016 29,212,631.39 Additions-Purchased/Acquired thru exchange or non-exchange transaction 69,985,977.96 Adjustments (126,666.66) Total 99,071,942.69 Less amortization recognized (As per Statement of Financial Performance) 27,258,647.45 Carrying Amount, December 31, 2016 (As per Statement of Financial Position) 71,813,295.24

Gross Cost (Balance per Statement of Financial Position) 151,989,942.02 Less: Accumulated Amortization (including accumulated impairment loss) 80,176,646.78 Carrying Amount, December 31, 2016 (As per Statement of Financial Position) 71,813,295.24

12. Other Assets

A. Other Current Assets

12.1 Advances

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Account Name 2016 2015 Advances for Operating Expenses 79,930,682.70 11,628,177.24 Advances for Payroll 74,289.00 7,497,363.97 Advances to Special Disbursing Officer 2,853,887,079.58 3,141,492,498.11 Advances to Officers and Employees 3,575,181.75 49,054,044.24 Total 2,937,467,233.03 3,209,672,083.56

Advances for Operating Expenses represents the amount granted to DSWD Attaches assigned in foreign posts, which include countries like Kingdom of Saudi Arabia, Qatar, Malaysia, Hong Kong, Kuwait, UAE, Jeddah, Abu Dhabi and South Korea. It also includes advances for Negros Island Region from FOs VI and VII.

Advances for Payroll in the amount of P 74,289.00 pertains to FO-II salaries of encoders, enumerators, area supervisors and area coordinators of which , because of its volume and limited supply of checks it was decided to be in the form of cash advance. It is ready for release to different provinces in the region and it will be liquidated in January 2017.

Advances to Special Disbursing Officers are amount granted to DSWD bonded Disbursing Officers both Regular Disbursing Officers and Special Disbursing Officers to be used for special purpose/time-bound activities of the Department.

In Field Offices, the account pertains to advances granted for the provision of grants and assistance for the implementation of various DSWD programs and projects and services.

In Central Office, Advances in the amount of P20,941,999.07 consists of unliquidated balance from cash advances from local and foreign travels in the total amount of P77,381.97; Advances to Special Disbursing Officers (SDOs) and Advances for Operating Expenses in the amount of P1,142,167.08 and P19,722,450.02, respectively. Unexpended/unutilized balance of CA from local and foreign travels was already refunded in January and February 2017. The advances to Social Welfare Attaches posted/detailed in foreign countries as designated SDOs for their operating expenses had already submitted additional liquidation reports after reporting date but were not yet recorded. Said liquidation reports is subject to review and evaluation prior to booking up in the books of accounts. These liquidation reports will be posted in CY 2016.

B. Other Non-Current Assets

12.2 Prepayments

Account Name 2016 2015 Advances to Contractors 17,210,421.35 4,351,768.67 Prepaid Rent 1,282,168.40 1,307,228.40 Prepaid Registration 17,399.73 74,768.70 Prepaid Insurance 3,735,253.08 2,551,035.86 Other Prepayments 3,835,601.11 5,282,328.44 Total 26,080,843.67 13,567,130.07

Advances to Contractors pertains the amount given in advance to contractors for various projects of the Department based on the contract agreement as an advance payment upon submission of required documents and are repaid by deducting from their respective progress billings.

Prepaid Rent represents advance payment for rental of office space in various Field Offices.

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Prepaid Registration includes payment for LTO Registration of various motor vehicles of the Department. These are adjusted at year-end for the expired portion and are expensed.

Prepaid Insurance is payment for insurance of various properties of the Department. These are also adjusted at year-end for the expired portion and are expensed.

Other Prepayments include cash bonds paid to PAL Express (Philippine Airlines) and Cebu Air, Inc. (Cebu Pacific Air) to maintain the credit limit with the said service providers. In FO-IX, the account represents unutilized prepaid electronic load for Pantawid Staff and unliquidated Gasoline for SF monitoring and Greening Projects. It will be liquidated on the first quarter of 2017.

12.3 Deposits

Account Name 2016 2015 Guaranty Deposits 8,986,435.84 8,677,433.42 Other Deposits 75,080.00 75,080.00 Total 9,061,515.84 8,752,513.42

Guaranty Deposits include payment to various service providers which serves as Custom Facility Deposits, Container Deposits for the release of shipments consigned with the Department, and as guarantee deposits for the procurement of Water, Electricity and Fuel, Oil, and Lubricants with fleet card facility.

12.4 Other Non-Current Assets

Account Name 2016 2015 Other Assets 14,082,018.65 19,113,302.73

In Central Office, Other Assets are composed of the cost of unserviceable property and equipment subject for disposal and donated equipment awaiting issuance to clients in the amount of P4,675,562.20 and P1,958,016.78, respectively.

13. Financial Liabilities

2016 2015 Account Name Non- Non- Current Current Current Current Accounts Payable 5,620,698,264.27 - 4,379,327,850.85 - Due to Officers and Employees 253,893,541.69 - 578,583,009.55 - Tax Refunds Payable 3,317,169.10 - - - Total 5,877,908,975.06 - 4,957,910,860.40 -

The Accounts Payable of P5,620,698,264.27 includes unreleased checks subject for reversion on the ensuing year and the balance represents the various claims of creditors as of December 31, 2016.

Due to Officers and Employees consist of unpaid salaries, reimbursement of transportation and per diem and other unpaid claims as of December 31, 2016.

In CARAGA, Due from Officers and Employees composed of P865,094.70, Cash shortage and P18,001.94 unremitted collections of Socorro L. Baricua, Cashier II; and P55,000.00 receivable from employees on excess CNA benefit granted in December 2011.

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14. Inter-Agency Payables

2016 2015 Account Name Non- Current Current Non-Current Current Due to BIR 100,974,676.10 - 84,438,189.21 - Due to GSIS 4,151,285.32 - 6,415,780.68 - Due to Pag-IBIG 2,470,455.32 - 631,687.46 - Due to PhilHealth 2,091,993.75 - 1,060,924.38 - Due to NGAs 586,719,784.54 - 328,559,938.80 - Due to GOCCs 9,701,867.01 - 8,351,281.04 - Due to LGUs 41,070,332.51 - 31,607,888.53 - Total 747,180,394.55 - 461,065,690.10 -

In Central Office, Due to BIR consists of income tax deducted from employees amounting to P1,515,114.03 and EFPS P2,112,607.07 and are remitted on the ensuing year.

Due to GSIS include Life and Retirement Premium, salary loan, policy loan and ECC and are also for remittance on the ensuing year.

Due to Pag-IBIG comprise of Pag-IBIG Premiums, Multi-Purpose Loan and Housing Loans are also remitted during the first month of the ensuing year.

Due to PhilHealth is the unremitted balance from PhilHealth premiums that are included in the January 2017 remittance.

In Central Office, Due to NGAs consist of the following:

 PhP705.00 for remittance to the Commission on Audit (COA) for payment of photocopied documents;  PhP909,861.93 funds received from Department of Interior and Local Government (DILG) for implementation of Interim Shelter Fund (ISF) Project;  PhP434,483,981.68 fund received from Department of Education (DepEd) for the construction of school buildings in Mindanao;  PhP508,903.10 fund received from the Department of Public Works and Highway (DPWH);  PhP58,663,500.00 fund received from National Housing Authority (NHA) for the Recovery and Reconstruction Plan for the 5,587 families in Zamboanga City;  PhP29,825,344.18 fund received from OP-President's Social Fund – PVB;  PhP31,114,310.43 fund received from Office of the Presidential Adviser on the Peace Process (OPAPP);and  PhP5,916,059.50 fund received from OP-President Social Fund-LBP.

In Central Office, Due to GOCCs in the amount of P5,622,563.00 are funds received from National Livelihood Support Fund (NLSF), National Home Mortgage Finance Corporation and Landbank of the Philippines.

In CARAGA, the account is the difference of amount withheld and remittance to National Home Mortgage Finance Corporation representing collection incentive. The increase for this year pertains to amount withheld from MOA staff salaries and for remittance to Social Security System in the following quarter.

15. Intra-Agency Payables

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Account Name 2016 2015 Due to Central Office 339,243,932.95 112,058,388.32 Due to Bureaus 12,661.54 - Due to Regional Offices 1,127,841.82 1,269,064.35 Due to Other Funds 3,953,576.16 - Total 344,338,012.47 113,327,452.67

Due to Central Office represents the balance funds under PGMA Microfinancing and Enterprise Development Program and National Livelihood Support Fund Program and funds received from beneficiaries of Pantawid Pamilya Program as overpayment of cash grants. This also includes amount transferred to Field Offices for payment of cost of service, financial assistance to DSWD employees affected by Typhoon Yolanda and Magnitude 7.2 Earthquake, funding for the Asia- Pacific Economic Cooperation, for temporary housing assistance for 5,587 family victims of the CY 2013 Zamboanga City siege under the Zamboanga City Roadmap to recovery and reconstruction plan, and for the Pilot Implementation of Community Managed Road Maintenance Project and are subject for liquidation by the FOs.

In CARAGA, it also includes transfer of funds for the regional implementation as per MOA between DSWD and DepEd for the construction of 605 classrooms amounting to P72,475,338.74.

Due to Bureaus pertains to FO-CARAGA of P12,661.54 pertaining to the amount withheld from salary for overpayment of expenses and for remittance to BTr.

Due to Other Funds pertains to FO-NCR of P3,874,576.16 and FO-IV-B of P169,000.00 pertaining to amount to be transferred to Fund Cluster 1 subject for adjustment.

Due to Regional Offices presents the amount transferred to DSWD Field Offices for the salaries and other benefits of the officials reassigned from one region to another.

16. Trust Liabilities

2016 2015 Account Name Current Non-Current Current Non-Current Trust Liabilities 14,670,621.52 - 16,419,314.86 - Trust Liabilities-Disaster Risk Reduction and Management Fund 310,515,808.90 - 347,398,275.64 - Guaranty/Security Deposits Payable - 33,047,724.10 - 26,285,997.32 Customers' Deposits Payable - 509,834.92 - 554,747.17 Total 325,186,430.42 33,557,559.02 363,817,590.50 26,840,744.49

Trust Liabilities pertains to FO-VI funds received from UNICEF, RJJWC, RSCWC for various activities and President Social Fund as financial assistance to AFP, PNP and affected DSWD employees by Typhoon Yolanda.

2016 2015 Account Name Current Non-Current Current Non-Current Trust Liabilities-Disaster Risk Reduction and Management Fund 310,515,808.90 - 347,398,275.64 -

Trust Liabilities-Disaster Risk Reduction and Management Fund account was recognized starting July 1, 2014 in accordance with the newly issued COA Circular 2014-002 dated April 15, 2014. This account was used to record the cash donations received, disbursed and/or transferred to DSWD Field Offices. These are summarized as follows:

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Beginning Balance –January 1, 2016 P 224,450,239.53 Receipts/Refunds-January 1-December 31, 2016 156,242,829.06 Disbursements/Fund Transfers (129,421,576.22) Add: balance of FOs as of Dec. 2016 59,244,316.53 Ending Balance-December 31, 2016 P 310,515,808.90

The Account Guaranty/Security Deposits Payable and Customers Deposits Payable pertain to cash bond to guarantee performance of the term of contract and participation in bidding.

17. Deferred Credits

Other Deferred Credits pertains to FO I donations received from Philhealth for the construction of nursery in Home for Women with condition that the same must be liquidated within one year.

18. Other Payables

2016 2015 Account Name Non- Current Non-Current Current Current Other Payables 685,815,595.39 548,367,630.23

The Other Payables includes the Revolving Fund for Self Employment Assistance Revolving Settlement Fund (SEA-RSF). This program/project is promoting self-respect and self-reliance to the disadvantage families and individuals by assisting them to engage in to income-producing project through the provisions of the intent free capital loan assistance fund. It also includes amount of bid security and performance bond from the prospective bidder for the procurement of goods and services under public bidding and monthly deductions from employees’ salary for MBA, SWEAP, PROSPER, SSS, health card, and other individual creditors/suppliers.

19. Service and Business Income

Account Name 2016 2015 Permit Fees 3,525,720.00 3,342,529.22 Registration Fees 235,200.00 72,500.00 Clearance and Certification Fees 10,334,169.00 9,177,200.00 Licensing Fees 2,037,100.00 200,500.00 Supervision and Regulation Enforcement Fees 500.00 - Verification and Authentication Fees 37,030.00 19,000.00 Processing Fees 1,000.00 10,500.00 Fines and Penalties - Service Income 6,216,755.10 2,524,361.69 Other Service Income 888,811.96 1,130,150.37 School Fees 305,200.00 - Affiliation Fees - 355,300.00 Rent/Lease Income - 5,000.00 Income from Hostels/Dormitories and Other Like Facilities 1,579,327.50 2,711,076.75 Sales Revenue 305,323.00 - Interest Income 23,995,815.96 27,226,879.09 Fines and Penalties - Business Income 1,136.85 179,312.94 Other Business Income 5,351,459.32 5,815,714.56 Total 54,814,548.69 52,770,024.62

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Permit Fees pertains to fees collected by the Department for fund raising campaign fee from various registered, licensed and accredited Social Welfare and Development Agency (SWADA) and for duty free entry or facilitation fees.

Clearance and Certification Fees are collections for travel clearance issued to minors travelling abroad alone and/or accompanied by a person other than his/her parents.

Registration Fees pertains to collections for registration and licensing of various accredited Social Welfare and Development Agency (SWDAs).

Verification and Authentication Fees are collections for accreditation fees of various accredited SWDAs.

Interest Income represents income earned from various bank accounts of the Department which were remitted to the Bureau of Treasury.

The account Fines and Penalties - Service Income is the amount charged or being collected by the Department from various contractors/ suppliers for late delivery of goods and services as specified in the Purchase Order.

Affiliation Fees pertains to fees collected for every student or on-the-job trainee under the National Service Training Program-Civic Welfare Training Service.

Income from Hostels/Dormitories and Other Like Facilities represents the amount collected by the department from trainings, seminars, conferences, meetings and other capability-building activities at SWADCAP and Central Office facilities, function rooms and dormitories. This fund as being managed by the Capability Building Bureau in coordination with the Administrative Service is intended for the capability building activities, as well as, improvement and maintenance of the SWADCAP and Central Office dormitory.

Sales revenue includes sales proceeds from items produced by clients out of the productivity activities in centers and institutions.

20. Shares, Grants and Donations

Account Name 2016 2015 Income from Grants and Donations in Cash 670,896,008.54 1,744,031,810.34 Income from Grants and Donations in Kind 36,036,705.09 48,848,988.60 Total 706,932,713.63 1,792,880,798.94

This account is used to record grants and donations received by the Department. For CY 2016 the Central Office received donated Motor Vehicles from World Vision Development Foundation (WVXDF, Oxfam) and Save the Children's Philippines (SCP) and ICT Equipment's (Lenovo Think Pad Edge E431 and Canon Power Shot A2500) from UNICEF.

This account is also used to record grants and donations received as technical assistance and for project implementation from various foreign funding institutions such as the Asian Development Bank, Millennium Challenge Corporation and United Nation agencies.

In Central Office, the Income from Grants and Donations in Cash includes the following:

 PhP4,412,702.95 grants received from UNFA;  PhP561,956,613.85 grants received from MCC;  PhP50,440,400.00 grants received from AUSAID;

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 PhP13,174,899.62 grants received from UNICEF ECCD; and  PhP20,306,442.96 grants received from KC NCDDP AECID.

In Field Offices, the account pertains to donations received from various donors for various centers and institutions of the regions.

21. Miscellaneous Income

Miscellaneous Income pertains to proceeds from sales of scrap and waste materials, bid documents for participation in the bidding for the supply and delivery of various goods and services. The account was used interchangeably with other gains account.

22. Personnel Services

22.1 Salaries and Wages

Account Name 2016 2015 Salaries and Wages - Regular 763,683,727.71 680,646,046.25 Salaries and Wages - Casual/Contractual 3,221,222,291.91 2,838,121,876.52 Total 3,984,906,019.62 3,518,767,922.77

22.2 Other Compensation

Account Name 2016 2015 Personal Economic Relief Allowance (PERA) 220,846,256.51 211,427,879.49 Representation Allowance (RA) 14,292,367.97 13,498,061.13 Transportation Allowance (TA) 9,178,812.18 10,331,929.51 Clothing/Uniform Allowance 43,632,711.20 45,299,314.15 Subsistence Allowance 31,896,575.27 14,435,715.53 Laundry Allowance 444,654.49 152,566.86 Quarters Allowance 34,000.00 88,825.00 Productivity Incentive Allowance 11,154,864.91 93,558,794.00 Overseas Allowance 23,060,052.95 22,194,202.36 Honoraria 6,920,709.19 7,787,252.62 Hazard Pay 18,154,641.27 1,667,396.33 Longevity Pay 924,220.47 537,519.06 Overtime and Night Pay 21,975,837.12 29,267,802.14 Year End Bonus 395,043,530.33 182,923,870.98 Cash Gift 41,641,075.60 44,277,547.70 Other Bonuses and Allowances 365,671,993.99 559,363,844.18 Total 1,204,872,303.45 1,236,812,521.04

Subsistence Allowance represents the amount paid for the Magna Carta of DSWD Public Social Workers and DSWD Health Workers.

Productivity Incentive Allowance pertains to the Productivity Enhancement Incentive (PEI) given to all DSWD Regular, Casual and Contractual Employees for CY 2016.

Overseas Allowance pertains to the Post Allowances of Social Service Attaches in Malaysia, Kuwait, Qatar, Jeddah, Riyadh, KSA; Abu Dhabi, South Korea & Hong Kong.

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The account Honoraria refers to the cash incentive granted to DSWD Officials & Employees for services rendered in Special Projects in addition to their regular duties.

The account Hazard Pay pertains to other benefits granted to Officials & Employees per Republic Act 9433, an act providing for Magna Carta for Public Social Workers. The RA 9433 states that public social workers and public social welfare and development workers assigned in remote and depressed areas, strife-torn or embattled areas, distressed or isolated stations, mental hospitals, leprosaria, areas declared under a state of calamity or emergency which expose them to great danger, volcanic activity/ eruption, occupational risks or threats to life shall be compensated with hazard allowance equivalent to at least 20% of the monthly basic salary.

Longevity Pay represents the amount paid for DSWD Loyalty Awardees for CY 2016.

Other Bonuses and Allowances pertains to the Collective Negotiation Agreement (CNA), a cash incentive given to all DSWD Regular, Casual and Contractual Employees for CY 2016.

The increase in Account Year-End Bonus is equivalent to one month basic salary as an additional benefits to Regular and Casual/Contractual officials and employees in accordance with DBM Circular #2016-4 dated April 28, 2016.

The Account Other Bonuses and Allowances pertains to payment of Performance Enhanced Incentive (PEI), Performance Based Bonus (PBB) and CNA to DSWD officials and employees holding regular, casual/contractual positions.

22.3 Employee Future Benefits

The DSWD and its employees contribute to the GSIS in accordance with the Republic Act 8291 dated April 30, 1997. The GSIS administers the plan, including payment of pension benefits to employees to whom the act applies.

22.4 Personnel Benefit Contributions

Account Name 2016 2015 Retirement and Life Insurance Premiums 309,930,883.74 277,150,795.71 Pag-IBIG Contributions 10,978,972.51 10,744,780.73 PhilHealth Contributions 30,641,203.69 27,768,581.59 Employees Compensation Insurance Premiums 10,799,940.34 10,685,208.00 Total 362,351,000.28 326,349,366.03

Retirement and Life Insurance Premium pertains to the remittances made to the Government Service Insurance System (GSIS) for Life & Retirement Premium Government's share and other payables.

Pag-IBIG Contributions represents remittances to the Home Development Mutual Fund (HDMF) for PAG-IBIG premiums pertaining to government share.

PhilHealth Contributions represents payment of PhilHealth premium for government share.

Employees Compensation Insurance Premiums account refers to the remittances made to recognize the government’s share in premium contributions to the Employees’ Compensation Commission (ECC).

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22.5 Other Personnel Benefits

Account Name 2016 2015 Retirement Gratuity - 3,721,043.89 Terminal Leave Benefits 31,174,979.58 15,271,888.70 Other Personnel Benefits 91,380,847.27 14,124,060.13 Total 122,555,826.85 33,116,992.72

Other Personnel Benefits pertains to DSWD Anniversary Bonus given to DSWD Regular, Casual and Contractual Employees for CY 2016 and monetization of leave credits availed by DSWD employees for CY 2016.

23. Maintenance and Other Operating Expenses

23.1 Traveling Expenses

Account Name 2016 2015 Traveling Expenses - Local 784,829,604.63 926,519,472.58 Traveling Expenses - Foreign 12,959,603.45 8,590,248.08 Total 797,789,208.08 935,109,720.66

Traveling Expenses - Local includes airfare, travel per diems and other related travelling expenses of DSWD Officials and Employees on official business to attend various activities within the country for the period January to December 2016.

Traveling Expenses - Foreign includes airfare, pre-travel allowance, accommodation and daily subsistence allowance of DSWD Officials and Employees during travels on official business to attend various trainings/seminars, consultation meetings for the period January to December 2016. It also includes liquidation of operating expenses by the Disbursing Officer in Foreign Posts.

23.2 Training and Scholarship Expenses

Account Name 2016 2015 Training Expenses 1,436,643,541.53 1,538,749,955.33 Scholarship Grants/Expenses 403,010.44 183,585.45 Total 1,437,046,551.97 1,538,933,540.78

Training Expenses pertains to payment of honorarium of resource persons, board and lodging and/or hotel accommodation and airfare tickets of participants to various seminar, training - workshops. It also includes course fee and/or registration fees of DSWD Officials and Employees to enhancement training and seminars.

23.3 Supplies and Materials Expenses

Account Name 2016 2015 Office Supplies Expenses 191,438,107.19 223,957,604.47 Accountable Forms Expenses 3,171,708.08 2,827,786.38 Animal/Zoological Supplies Expenses 15,580.82 Food Supplies Expenses 258,757,362.87 392,886,896.75 Welfare Goods Expenses 908,200,534.43 388,413,189.64 Drugs and Medicines Expenses 18,376,634.09 10,752,025.97 Medical, Dental and Laboratory Supplies Expenses 1,392,453.93 1,492,825.36

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Account Name 2016 2015 Fuel, Oil and Lubricants Expenses 33,161,812.53 35,481,205.78 Agricultural and Marine Supplies Expenses 231,459.00 118,384.00 Textbooks and Instructional Materials Expenses - 273,140.00 Semi-Expendable Machinery and Equipment Expenses 89,613,926.40 - Semi-Expendable Furniture, Fixtures and Books Expenses 24,937,852.65 - Other Supplies and Materials Expenses 143,427,293.79 174,198,357.61 Total 1,672,709,144.96 1,230,416,996.78

23.4 Utility Expenses

Account Name 2016 2015 Water Expenses 33,418,011.94 33,779,892.70 Electricity Expenses 92,254,313.04 92,373,022.32 Gas/Heating Expenses 63,384.00 Other Utility Expenses 400.00 Total 125,736,108.98 126,152,915.02

Water Expenses are payments made to Maynilad Water Services, Inc. for the water consumption at DSWD Central Office, NHTO (Mahusay Building), Director's Dormitory and DSWD AHON Center, MIA Road, Pasay City. It also includes payment to Manila Water Company for water consumption of DSWD SWADCAP, Taguig City and DSWD 4Ps Training Center, Bago Bantay, Quezon City. It also includes payment of various Field Offices for water services.

Electricity Expenses are payments made to MERALCO for the electricity consumption at DSWD Central Office, NHTO (Mahusay Building), Director's Dormitory and DSWD AHON Center, MIA Road, Pasay City. It also includes payment to Manila Water Company for water consumption of DSWD SWADCAP, Taguig City and DSWD 4Ps Training Center, Bago Bantay, Quezon City. It also includes payment of various Field Offices for power services.

23.5 Communication Expenses

Account Name 2016 2015 Postage and Courier Services 29,600,746.87 6,422,631.87 Telephone Expenses 135,616,864.50 151,986,608.51 Internet Subscription Expenses 17,082,541.82 20,006,084.79 Cable, Satellite, Telegraph and Radio Expenses 332,762.14 1,286,421.87 Total 182,632,915.33 179,701,747.04

Postage and Courier Services represents payment made to the Philippine Postal Corporation and LBC Express, Inc, for mailing services of various communications, door-to-door delivery of the Department. It also includes liquidation of Operating Expenses of the different Social Welfare Attache at foreign post.

Telephone Expenses are payments made to the Philippine Long Distance Telephone Company (PLDT) for current charges of DSWD Telephone (Landlines) lines. It also includes mobile expenses made to Globe Telecom, Inc. and Smart Communications, Inc. for Globe Amax and Smart BIZ load services corporate e-loading systems for use of DSWD Officials and Employees who are Globe/Touch Mobile and Smart/Talk and Text subscribers. Also included are reimbursements of individual postpaid lines payments in lieu of prepaid card allocation.

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Internet Subscription Expenses are payments made to Globe Telecommunications, Inc. and Smart Communications for the Wireless Internet Service with Wifi Technology for use of DSWD Executive and Management Committee and for wireless internet subscription of DSWD Central Office. It also includes payment made to iOne Resources, Inc. as secondary internet service provider of DSWD DRRROO and NROC.

23.6 Awards/Rewards and Prizes

Account Name 2016 2015 Awards/Rewards Expenses 2,081,772.19 1,396,143.21 Prizes 997,694.85 923,336.09 Total 3,079,467.04 2,319,479.30

Awards/Rewards Expenses pertains to cash/monetary award given to best Provincial, LGU or NGO category implementing various DSWD programs and services during the PANATA KO SA BAYAN Awards held at Asian Institute of Management last January 28, 2016. It also includes cash awards and plaques given to awardees during DSWD PRAISE Awards Ceremony last January 29, 2016.

Prizes represents payment made to the winners of the Convergence Rebranding contest, the search for Huwarang Pamilya and Exemplary Child activity of Pantawid Pamilya.

23.7 Extraordinary Expenses

Account Name 2016 2015 Extraordinary and Miscellaneous Expenses 5,435,096.61 5,620,691.42

Extraordinary and Miscellaneous Expenses - payment of extraordinary and miscellaneous expenses of DSWD Officials for the period January to December 2016.

23.8 Professional Services

Account Name 2016 2015 Legal Services 3,547,752.74 2,727,362.37 Auditing Services 701,358.09 687,003.79 Consultancy Services 111,013,581.98 128,576,152.75 Other Professional Services 4,248,605,137.94 5,122,977,571.46 Total 4,363,867,830.75 5,254,968,090.37

Legal Services represents payment of counsel's fee of DSWD Legal Service Staff during attendance to various court hearings. It also includes payment to PLDT for current telephone charges of the Office of the Ombudsman and Child Justice League; honorarium for legal services rendered by the Child Justice League and monthly allowance of the Office of the Solicitor General Officials and Personnel for legal services rendered for the period January to December 2016. It also includes retainer’s fee of FOs Attorney for the year during attendance to various court hearings in FOs Centers and Institutions clients

Auditing Services are payments made to PLDT for current charges of DSWD - COA telephone lines. It also includes the procurement of Brother consumables and the delivery of materials for the fabrication of filing cabinets and installation of vinyl tiles at DSWD-COA office.

Consultancy Expenses includes payment to service providers engaged in the development of systems and the program/project consultants.

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Other Professional Services are payments to DSWD hired workers under a Cost of Service Contracts.

23.9 General Services

Account Name 2016 2015 Janitorial Services 59,310,028.21 43,582,736.20 Security Services 134,501,507.66 121,526,755.21 Other General Services 660,233.41 34,373.50 Total 194,471,769.28 165,143,864.91

Janitorial Services are payment made to Philcare Manpower Services for janitorial services rendered at DSWD Central Office and satellite offices including special, additional and overtime services rendered at DSWD NROC and SWADCAP. It also includes payment of various Field Offices for janitorial services.

Security Services are payments made to Prime Security Agency, Inc. for security services rendered at DSWD Central Office, NROC and RSCC for the period January to December 2016. It also includes payment of various Field Offices for security services.

Other General Services represents payment made for the siphoning of septic tanks and reclogging of sewer lines at the Procurement Service. It also includes payment for the collection, hauling, processing and disposal of residual wastes at the DSWD NROC. It also includes payment for the pest control services rendered at the DSWD-CO and other Satellite Offices for the months of July to September 2016.

23.10 Repairs and Maintenance

Account Name 2016 2015 Repairs and Maintenance - Land Improvements 63,893.00 174,360.84 Repairs and Maintenance - Infrastructure Assets 37,333.00 - Repairs and Maintenance - Buildings and Other Structures 67,221,139.68 58,463,247.09 Repairs and Maintenance - Machinery and Equipment 13,948,916.89 11,331,495.78 Repairs and Maintenance - Transportation Equipment 24,500,882.19 20,877,946.60 Repairs and Maintenance - Furniture and Fixtures 1,663,865.31 1,941,845.96 Repairs and Maintenance - Leased Assets Improvements 29,241.04 371,180.00 Repairs and Maintenance - Semi –Expendable Machinery and Equipment 52,900.00 - Repairs and Maintenance - Other Property, Plant and Equipment 1,034,269.02 1,062,100.18 Total 108,552,440.13 94,222,176.45

23.11 Taxes, Insurance Premiums and Other Fees

Account Name 2016 2015 Taxes, Duties and Licenses 107,040,005.77 27,153,001.76 Fidelity Bond Premiums 17,716,585.82 15,096,502.24 Insurance Expenses 14,117,678.07 10,989,955.81 Total 138,874,269.66 53,239,459.81

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Taxes, Duties and Licenses represents the release of allotment to cover payment for Customs Duties and Internal Revenues Taxes for the shipment of donated goods received by DSWD. It also includes expenses incurred for registration, renewal of license and smoke emission of vehicles.

Fidelity Bond Premium represent payment of 1.5% fidelity bond premium of Regular Disbursing Officers, Special Disbursing Officers and Approving/Signatory of each Bureau/Service of the Department.

Insurance Expenses pertains to payment to Government Service Insurance System for insurance from fire and other perils for various DSWD buildings and motor vehicles.

23.12 Labor and Wages

Account Name 2016 2015 Labor and Wages 49,764,150.07 71,063,104.86

Labor and Wages pertains to payment of job orders (JOs) contracts in various Field Offices.

23.13 Other Maintenance and Operating Expenses

Account Name 2016 2015 Advertising Expenses 17,371,600.76 15,230,545.73 Printing and Publication Expenses 25,343,934.42 146,523,892.07 Representation Expenses 118,969,310.37 121,364,397.61 Transportation and Delivery Expenses 31,810,863.34 12,041,493.14 Rent/Lease Expenses 96,574,698.99 89,080,944.00 Membership Dues and Contributions to Organizations 49,500.00 18,183.92 Subscription Expenses 83,827,838.94 80,043,347.25 Donations 74,557,506.27 136,030.00 Other Maintenance and Operating Expenses 195,418,246.93 189,698,061.10 Total 643,923,500.02 654,136,894.82

Advertising Expenses includes newspaper publication or advertorial for Invitation to Bid for the procurement of goods and services.

Printing and Publication Expenses represents payment made to National Printing Office for the supply, printing and delivery of Household Assessment Forms (HAFs) with stickers for the National Household Assessment of DSWD and Center for Community Journalism and Development Inc for the KC Gender Workshop and Publication of the Gender Coffee table book and Japi Printzone Corporation for the procurement of 9,000 pcs of KC CEAV/Volunteers kits/booklets

Rent Expense pertains to payment of additional offices and equipments in various Field Offices.

Subscription Expenses are payment made to Accent Micro Technologies, Inc. (AMTI) for the Acquisition of Managed Services for DSWD Primary Information and Communication Technology (ICT) Perimeter Security Devices for the period January to December 2016. It also includes payment made to IOne Resources, Inc. for the monthly subscription of IPVPN for the DSWD Field Offices (FO's) for the period January to December 2016, AG Datacom, Inc. For Service Level Agreement for the Virtualized Agreement and anti-virus and Anti-Malware solutions and other service providers for storage solutions and information management. Also included are payments made to JJJ Newspapers & Magazines for newspaper subscription for the DSWD Central Office, DRRROO, NROC and SWADCAP (January to December 2016).

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Donations account pertains to Central Office transfer of PPE items to DSWD-ARMM in the amount of P1,842,246.00, while the balance of P71,746,020.27 pertains to expenses recognized by some FOs upon liquidation of fund transfer for the implementation of DSWD programs/projects.

24. Financial Expenses

Account Name 2016 2015 Interest Expenses - - Bank Charges 414,683,550.00 306,295,801.99 Other Financial Charges - 806.07 Total 414,683,550.00 306,296,608.06

The account Bank Charges generally refers to payment and accruals of interbank fees for the funds received by the DSWD from the grantor/donor and for cash card grants advanced by Land Bank of the Philippines (LBP) to other banks for ATM transactions and the bank service fees for over-the-counter payments of cash grants by the LBP conduits for the implementation of the Pantawid Pamilya Program.

25. Non-Cash Expenses

25.1 Depreciation

Account Name 2016 2015 Depreciation - Land Improvements 4,554,363.41 1,361,029.63 Depreciation - Infrastructure Assets 355,536.57 12,327.84 Depreciation - Buildings and Other Structures 49,935,804.13 34,124,035.70 Depreciation - Machinery and Equipment 171,062,133.96 173,254,600.98 Depreciation - Transportation Equipment 26,686,451.39 21,020,041.26 Depreciation - Furniture, Fixtures and Books 12,510,671.34 16,277,743.05 Depreciation - Other Property, Plant and Equipment 9,990,767.46 4,220,199.57 Total 275,095,728.26 250,269,978.03

The Depreciation for Buildings and Other Structures, Machinery and Equipment, Transportation Equipment, Furniture and Fixtures and Books, Other Property, Plant and Equipment are periodic cost allocation for the wear and tear the Department's PPE.

25.2 Amortization

Particulars 2016 2015 Amortization – Intangible Assets 27,258,647.45 50,017,687.62

Amortization of Intangible Assets are also periodic cost allocation of the Computer Software.

26. Net Financial Assistance/Subsidy

Financial Assistance/Subsidy from NGAs, LGUs, GOCCs Particulars 2016 2015 Subsidy from National Government 105,615,250,959.68 126,814,053,481.98 Assistance from Local Government Units 902,968.00 1,412,433.70

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Particulars 2016 2015 Subsidy from Other Funds 40,100.00 112,899,102.91 Total Financial Assistance/Subsidy 105,616,194,027.68 126,928,365,018.59

Less: Financial Assistance/Subsidy to NGAs, LGUs, GOCCs, NGOs/POs

Particulars 2016 2015 Subsidy to NGAs Financial Assistance to NGAs Financial Assistance to Local Government Units Financial Assistance to NGOs/POs Subsidy to Operating Units 1,795,140.07 Subsidy to Other Funds 30,000.00 Subsidies - Others 74,217,094,269.83 56,692,508,600.80 Total Financial Assistance/Subsidy to NGAs, LGUs 74,218,919,409.90 56,692,508,600.80 Net Financial Assistance/Subsidy 31,397,274,617.78 70,235,856,417.79

Subsidy to Operating Unit pertains to the cost of equipment transferred to Negros Island Region (NIR).

The account Subsidy from National Government is further broken down as follows:

Particulars 2016 2015 Receipt of Notice of Cash Allocation (NCA) 106,493,478,189.89 132,801,302,920.06 Tax Remittance Advice (TRA) 1,142,823,047.91 1,040,240,885.52 Non-Cash Availment Authority 106,571,740.00 26,793,579.00 Total 107,742,872,977.80 133,868,337,384.58 Less: Reversion of Lapsed NCA 2,127,622,018.12 6,859,377,466.19 Refunds 194,906,436.41 Total 2,127,622,018.12 7,054,283,902.60 Total as of December 31, 2016 105,615,250,959.68 126,814,053,481.98

The account Subsidies – Others includes payment of cash grants to the Pantawid Pamilya beneficiaries amounting to P46,923,977,200.00. Out of the total amount, P21,970,681,000.00 were paid to the beneficiaries thru their Cash Card accounts maintained with Land Bank of the Philippines while Php24,953,296,200.00 were paid thru over-the-counter thru LBP Conduits Liquidation.

The account also includes payment of community grants to various barangays for the Kalahi CIDDS project implementation and other grants and financial assistance from various DSWD programs and projects.

The receipt of NCA for CY 2016 does not include receipts of NTA of P31,941,606,059.21 and NCA for Trust and other receipts of P6,802,187.00, as presented in the SCF, while in CY 2015, the receipt of NCA per SCF of P171,798,168.688.69 included NTA of P38,992,009,655.63 and receipt of NCA for trust and other receipts of P4,856,113.

Reversion of lapsed NCA amounting to P2,127,622,018.12 and P6,859,377,466.19 in CY 2016 and CY 2015 respectively was included/part of the adjustments in the cash outflows which can be found in the Detailed Statement of Cash Flows.

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27. Non-operating Income, Gain, or Losses

27.1 Non-Operating Income/Gain

Account Name 2016 2015 A. Sale of Assets Sale of Garnished/ Confiscated/ 3,532,404.73 Abandoned/Seized Goods and Properties

B. Gains Gain on Foreign Exchange (FOREX) 297,437,395.83 1,502,942,769.81 Gain on Sale of Property, Plant and Equipment 10,360.00 Gain on Sale of Biological Assets - Other Gains 4,936,025.45 3,527,950.64 Total Gains 302,373,421.28 1,506,481,080.45

27.2 Non-Operating Losses

Particulars 2016 2015 Loss on Foreign Exchange (FOREX) 198,398,984.53 1,236,447,055.37 Loss on Sale of Property, Plant and Equipment 1,210,790.42 3,340.90 Loss on Sale of Assets - 203,746.03 Loss of Assets - 275,222.66 Other Losses - 4,358.35 Total 199,609,774.95 1,236,933,723.31

Gains on Foreign Exchange results from the translation of foreign currency into the presentation currency which the Philippine peso was using the prevailing exchange rate at every end of the period. This is the excess of current exchange rate (closing rate) at the reporting date over the rate initially or previously recognized multiplied by the balance of the foreign currency account.

Loss on Foreign Exchange (FOREX) are results from the translation of foreign currency into the presentation currency which was the Philippine peso using the prevailing exchange rate at every end of the period. This is the excess of the rate initially or previously recognized over current exchange rate (closing rate) at the reporting date multiplied by the balance of the foreign currency account.

Other Gains pertains to proceeds from disposal thru public sale of unserviceable equipment's, motor vehicles, valueless records, scrap/waste materials, rice bags, nylon sacks, cardboard boxes & stretch films core. It also includes fees charged to various registered, licensed and accredited SWDAs for photocopying of documents in accordance with Circular No. 12 Series of 2015. The account also includes payments received from contractors/suppliers for non- refundable fee for bidding documents for participation in the bidding for the supply and delivery of various goods and services.

28. Budget Information

The original budget per General Appropriations Act of 2016 is P110,560,165,000.00, including RLIP, while the total budget allocated to the Department, inclusive of Special Allotment Release Order (SARO), Continuing Appropriations and other fund augmentation is P131,545,680,074.49

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The following are the reasons of the variances of P20,985,515,074.49 between the original and the final budget:

Particulars Cluster 1 Cluster 2 Cluster 3 Cluster 4 TOTAL Difference of Original and Final Budget 18,385,348,152.80 2,375,246,458.69 20,516,413.00 204,404,050.00 20,985,515,074.49 Realignments/ Augmentation 5,623,397,814.00 - 20,516,413.00 204,404,050.00 5,848,318,277.00 Continuing Appropriations 13,601,096,130.80 2,375,246,458.69 - - 15,976,342,589.49 Transfer (839,145,792.00) - - - (839,145,792.00) TOTAL 18,385,348,152.80 2,375,246,458.69 20,516,413.00 204,404,050.00 20,985,515,074.49

The difference of Final Budget of P131,545,680,074.49 and Actual Amounts of P92,472,529,465.39 resulting to P39,073,150,609.09 is reconciled with the total unobligated allotment and unpaid obligations with breakdown as follows:

Unobligated Allotment P23,023,412,600.79 Unpaid Obligations 16,049,738,008.30 Total P39,073,150,609.09

The Actual Amounts of P92,472,529,465.39 represents disbursements under Current and Continuing Appropriations, while payment of accounts payable covering prior year’s obligations was not considered in the presentation of the Statement of Comparison of Budget and Actual Amounts (SCBAA).

29. Related Party Transactions

26.1 Key Management Personnel

The key management personnel of the DSWD are the Head of the Agency, the members of the Executive Committee which consists of the Undersecretaries and the Assistant Secretaries.

26.2 Key Management Personnel Compensation

The aggregate remuneration of members of the governing body and the number of members determined on a fulltime equivalent basis receiving remuneration within this category, are as follows:

Particulars Aggregate Remuneration Salaries and Wages 10,668,694.63 Other Compensation 3,230,659.09 Personnel Benefit Contributions 1,067,558.27 Other Personnel Benefits 2,339,395.10 Total 17,306,307.09

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PART II - OBSERVATIONS AND RECOMMENDATIONS

A. Financial Audit

Dormant Accounts/Unremitted Funds to the Bureau of Treasury

1. The CIB-LCCA with a balance of P14.021 billion as of December 31, 2016, included dormant accounts, trust receipts, donations, excess BAC honoraria, performance bond, and training fund of P737.811 million that were not remitted to the National Treasury, depriving the NG of the proper disposition of these funds.

The following laws and regulations govern the deposit of funds to the National Treasury as well as the reversion and closure of balances of special and trust receipts accounts:

a. Sections 6,7, 8, and 13 of FY 2016 General Appropriations Act or the GAA (RA No. 10717) for deposit of cash donations, trust receipts, and any excess proceeds of training funds with the National Treasury;

b. Sections 6.2 and 8 of DBM Budget Circular (BC) No. 2004-5A dated October 7, 2005 for any excess of the amount collected for BAC honoraria and performance bonds and deposits filed or posted by private persons or entities with the department, among others; and

c. Section 11 for closure and reversion of all balances of special accounts, fiduciary or trust funds, and revolving funds to the General Fund in any of the following instances: (i) when there is no legal basis for its creation; (ii) when their terms have expired; or (iii) when they are no longer necessary for the attainment of the purposes for which said funds were established.

Likewise, COA Circular No. 2015-001, dated January 29, 2015, on the reversion to the General Fund of all dormant cash, unauthorized accounts, unnecessary special and trust funds, and related accounts.

Section 3 of the Circular states, among others, that the Head of the Accounting Unit shall: (i) conduct thorough analysis of the cash accounts maintained with an authorized government depository bank (AGDB) that have remained inactive or those accounts with no transactions other than periodic bank charges; and (ii) deposit the cash balances to the National Treasury or return the unutilized balances to Source Agency (SA)/donors/financing entities in the case of grants or foreign-funded programs/projects.

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The total balances of the Cash in Bank- Local Currency Current Account (CIB-LCCA) of P14,021.352 million as of December 31, 2016 included P737.811 million that were supposed to be remitted/deposited with the National Treasury, instead of with AGDB, contrary to the foregoing rules and regulations. Details is presented in Table 1.

Table 1. Summary of bank account balances for remittance to BTr

Per Books FO Particulars (in Million Php) CO Bidders/ Performance Bond 14.071 DSWD Donations 116.412 e-Donation 0.031 BAC Honoraria (Excess) 5.800 Training Fund (Excess) 10.957 Foreign Donation ($1,000,35 @49.813) 0.050 Self Employment Assistance-Kaunlaran (SEA-K) 14.862 Miscellaneous Trust Account 1.585 VI PGMA Microfinancing Development Program Fund 0.143 All FOs SEA-K Revolving and Settlement Fund 573.660 (except VII & XII) XIII President’s Social Fund 0.240 TOTAL 737.811

The SEA-K Associations’ (SKAs) account is a revolving fund used for the collection of loan repayments from members as well as for the grant of new loans to other organized SKAs. With the issuance of Memorandum Circular (MC) No. 13, series of 2015, on the Guidelines on the Provision of Seed Capital Fund (SCF), the SCF released by the DSWD to members of the SKAs is no longer treated as loan but financial assistance, such that members will pay their loans to the SKAs who will manage the account for the association and repayment to the DSWD is no longer required effective June 18, 2015. For loans prior to this date, the beneficiaries are still required to repay their loans directly to the account opened for the purpose. With the implementation of MC No. 13, the funds needed to pay the SCF are sourced from the General Fund, thus, the purpose for which the trust fund was established is no longer necessary, and the CIB balance of the SEA-K Revolving and Settlement Fund has to be remitted to the National Treasury so that the amount could be used for other projects of the government.

In FO XIII, the amount of P240,000.00 corresponds to the amount deposited by the DSWD-Central Office (CO) for opening of the account intended for assistance to the nine employees of the DSWD-FO Caraga whose houses were partially and totally/heavily damaged by Typhoon Pablo, way back in year 2012. However, said fund was not utilized as intended because the fund was downloaded late by DSWD CO and assistance to the DSWD employees had already been given prior to the release of fund.

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The non and/or delayed remittance to the National Treasury of the trust receipts, cash donations, and the balances for BAC Honoraria and Training Fund, resulted in large cash deposited in the AGDB of the agency, the amounts of which could have been used for other projects of the government.

It bears emphasizing that Sections 4 and 5 of the GAA or RA No. 10651 provides that disbursements or expenditures by agencies in violation of the above requirements shall be void and shall subject the erring officials and employees to disciplinary actions in accordance with Section 43, Chapter 5 and Section 80, Chapter 7, Book VI of EO No. 292 and to appropriate criminal action under existing penal laws.

This has been an observation in the CY 2015 audit report, but Management had not substantially complied with the recommendation, with only eight bank accounts closed, of which the amount of P436,242.85 was remitted to the BTr.

Moreover, in CY 2015, we also recommended for Management to direct the Accountant to exert efforts to trace back and analyze the “suspense account” of P4.944 million in the CIB-LCCA; determine to which bank account the same was deposited; and remit the balance to the National Treasury, however, as of to date, the Accountant was unable to account the same, which has been a result of the agency’s migration to the e-NGAS in CY 2003, thus rendering the CIB account balance overstated, due to its non-existence.

Management informed that the suspense account is a beginning balance from CY 2003 when the e-NGAS was first adopted. The personnel handling said account already retired and there are no documents available to examine and reconstruct the same. They shall write letters to the AGDBs to inquire about or confirm any existing bank accounts under the name of the DSWD and reconcile with their records/ inventory of bank accounts.

Likewise, in FO VI, the amount of P41,980.46, representing the difference between the book and bank balances labeled as “for adjustment”, has existed in the books of accounts since 1993 and had been a recurring audit observation in the Management Letter (ML) since CY 2012 but not adjusted due to lack of records.

We recommended and the DSWD Secretary agreed to require the concerned CO’ and FOs’:

a) Cash Division to remit all trust receipts, donations, including excess funds from training, and BAC honoraria pursuant to existing laws; and

b) Accountant to exert efforts to trace back and analyze the “suspense account” in the CIB - LCCA, identify to which bank account the same was deposited, and remit the balance to the National Treasury; and

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record the validated reconciling items in the books of accounts in order to reflect the correct balances of the account.

Management comment:

The Department shall adhere to COA’s recommendations and henceforth, the bank accounts for BAC Honoraria and Bidders Performance Bond will be deposited to the BTr. On the other hand, the training fund, DSWD Donations, e-donations, and foreign donations shall be maintained, pursuant to Section 10.a of the CY 2016 GAA and COA Circular No. 2014-002.

Auditor’s Rejoinder:

The CY 2016 GAA explicitly states that cash donations and trust receipts shall be deposited with the National Treasury. It, likewise, provides that any excess proceeds of training funds shall be deposited with the National Treasury as income of the General Fund, thus we maintain our recommendation.

Issues affecting income from Grants and Donations

2. Foreign donations of P751.913 million received from the Government of Australia were without prior clearance and approval by the President of the Philippines and not deposited with the BTr, thus, the necessary protocol review to ensure that all donations for projects and programs are in sync with the government funding and thrusts was bypassed. In the absence of said approval/clearance disbursements amounting to P581.158 million is without authority.

a) No prior clearance/approval of receipt and non-deposit to BTr.

Section 6 of the CY 2016 GAA provides that xxx In case of donation from foreign governments, acceptance thereof shall be subject to the prior clearance and approval by the President of the Philippines upon recommendation of the Secretary of Foreign Affairs.

It further states that the receipts from cash donations and proceeds from sale of donated commodities shall be deposited with the National Treasury and recorded as a Special Account in the General Fund and shall be available to the implementing agency concerned through a Special Budget pursuant to Section 35, Chapter 5, Book VI of E.O. No. 292.

Article 4 of General Agreement on Development Cooperation (GADC) between the Government of Australia (GOA) and the Government of the Republic of the Philippines (GRP) signed on October 28, 1994 provides that the Australian International Development Assistance Bureau of the Department of Foreign Affairs and Trade shall be the coordinating authority for the Government of Australia while

60 the National Economic and Development Authority (NEDA) shall be the coordinating authority for the GRP.

In CYs 2014 to 2016, the DSWD, as represented by the Secretary, entered into an agreement with the GOA, represented by the Department of Foreign Affairs and Trade (DFAT), for the implementation of the following programs:

Table 2. DFAT program funds not remitted to the BTr

Amount Received Project Name Year (In Million Php) Improving Access to Early Learning through Community-led Approach 487.954 2014 Social Protection Reforms 52.500 Social Support for Disaster Response 104.247 2015 56.772 Social Protection Reforms 2016 50.440 TOTAL 751.913

The above amounts were recorded as CIB–LCCA and Income from Grant and Donations-Cash for the respective years of receipt and were directly deposited to the Land Bank of the Philippines (LBP) for the account of the DSWD as provided for in the provision for Deposit and Disbursement of GOA funds of the MOA.

While the agreement states that the funding of the said programs was born out of the terms of the GADC, the insertion of “prior clearance and approval by the President of the Philippines upon recommendation of the Secretary of Foreign Affairs” in the GAA suggests certain amendment for compliance of the Philippine Government that may not necessarily affect previously approved agreements.

Moreover, the Agreement specifies the NEDA to be the coordinating authority for the GRP but records show that it is the DSWD Secretary who signed the Direct Funding Agreement, thus not in keeping the Article 4 of the GADC.

The failure of the DSWD to secure prior clearance and approval by the President of the Philippines upon recommendation of the Secretary of Foreign Affairs and non-compliant signatory to the Agreement is contrary to established rules and regulation on donations, thus the process have bypassed necessary protocol reviews to ensure that all donations for projects and programs are in sync with the government funding and thrusts.

In addition, the failure of DSWD to remit the donated funds to the BTr may affect the judicious formulation and implementation of special budgets reflective of national objectives and to ensure that funds are utilized and operations are conducted effectively, economically, and efficiently.

61 b) Unauthorized Disbursements

Section 6, Paragraph 3, General Provisions of RA No. 10717 or the GAA of FY 2016 states that: “Disbursements or expenditures by agencies in violation of the above requirements shall be void and shall subject the erring officials and employees to disciplinary actions in accordance with Section 43, Chapter 5 and Section 80, Chapter 7, Book VI of E.O. No. 292, and to appropriate criminal action under existing penal laws.”

Table 3 summarizes the receipts and disbursements of various DFAT grants with its corresponding accomplishments pertaining to programs/projects of the DSWD.

Table 3. Receipts and Disbursements of DFAT Grants

Amounts (in Million PhP) DFAT Grant No. % Utilized Accomplishment Received Disbursed 70184 Improving 487.954 466.935 95.69 Of the total funded 374 Sub-Projects Access to Early (SPs) - Learning through  338 SPs (90%) already completed Community-led and directly benefitted 113,754 Approach households;  27 SPs (7%) ongoing implementation;  9 SPs (3%) are yet to start 70013 104.247 57.598 55.25  Construction of one unit Warehouse Support Program and various improvements at DSWD for Disaster National Resource Operations Center Response (NROC) of P34,748,999.46;  Trainings - Workshop on Inventory and Warehouse Management;  Psychosocial Support Trainings;  Manual of operations on Donations, Logistics,  Production and warehouse management (on-going);  Disaster Response Manuals for FOs (on-going) 70507 Social 159.712 56.625 35.45  Various Protection Seminars/Trainings/Workshops/ Reforms Study/Reports on DSWD’s Social Protection Reforms Total 751.913 581.158

Verification showed that the purposes of the program/s were given due accomplishments within the timeframe as evidenced by the above disbursements. The duration period for DFAT No. 70184 ended in December 2016 while the end- date for the other two programs will be on December 2017. All grant agreements were signed by the DSWD Secretary on behalf of the GRP pursuant to the documents entitled “Subsidiary Arrangement Between the GRP and the GOA –

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Support for the National Disaster Coordinating Council Collective Strengthening of Community Awareness to Natural Disaster”.

Since there was no presentation of any evidence of the approval of the President of the Philippines, upon recommendation of DFA Secretary, the programs/projects enclosed in the agreements entered into by the Agency were likewise not approved by the Philippine Government, thus making the disbursements/expenses void ab initio or to be treated as invalid from the outset pursuant to Section 6 Paragraph 3, General Provisions of RA No. 10717 GAA of CY 2016.

Management commented that with the Australian Aid, significant gains have been chalked up in developing the capacities of the DSWD and other implementers in carrying out the 4Ps and other core social protection programs. Existing DSWD-DFAT agreements with the direct cash transfer mechanism have supported, or are supporting about 60 completed, ongoing and pipeline technical assistance projects intended to enhance service delivery across practically all programs of the DSWD.

We recommended and the DSWD Secretary agreed to henceforth:

a) Seek the clearance and approval of the President upon the recommendation of the DFA on all donation agreements with foreign governments as well as disbursements thereof; and

b) Remit to the BTr the amounts received in accordance with Section 35, Chapter 5, Book VI of EO No. 292.

Management Comment:

The DSWD has continuing authority to enter into subsidiary agreements with agencies of the GOA based on the General Agreement on Development Cooperation (GADC) entered into by the GRP and GOA dated 28 October 1994.

The GADC authorized “agencies, statutory authorities or organizations” of the GOA and the GRP to “conclude subsidiary arrangements in respect of specific activities.” Because the DSWD is not aware of any subsequent agreement or issuance by either the GRP or the GOA revoking this provision, the authority given by this provision is deemed to be continuing and because the DSWD, as an agency of the GRP, has an implicit continuing authority to enter into subsidiary agreements with other agencies of the GOA, it is sufficient compliance with the requirement under various GAA for “prior clearance and approval of the President of the Philippines upon recommendation by the Secretary of the Foreign Affairs.”

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Nevertheless, to avoid any misunderstanding or ambiguity, in the future, the DSWD shall seek explicit approval from the President before accepting donations from foreign governments.

NEDA is not the only GRP agency that may enter into subsidiary agreements with the GOA. As previously stated, Article 5.1 for the GADC authorized “agencies , statutory authorities or organizations” of the GRP to enter into such subsidiary arrangements. The DSWD is an agency of the GRP and the Secretary is the head, thus the DSWD Secretary has sufficient authority to sign DFAT Agreement.

The donor/grantor, the GOA through the DFAT, authorized deposit of the donated funds into the DSWD accounts, thus DSWD was exempted from remitting these funds to the BTr.

Auditor’s Rejoinder:

The GAA is the highest law that establishes the national budget of the Philippines. It, likewise, provides a system of receipt and utilization of funds to ensure that this will achieve the purpose and impact the lives of the Filipinos and the nation as a whole. The latest provisions of the GAA in CY 2014 to 2016 set the guidelines that should be followed by all officials in the Government to ensure that the budget/funds are utilized and operations are conducted effectively, economically, and efficiently, thus we maintain our recommendation.

Understated Cash in Bank

3. CIB-LCCA as well as the related expense/equity and payable accounts is understated by approximately P26.020 million at year-end due to: (a) non-reversion of unreleased checks; (b) unadjusted stale checks; and (c) unrecorded book and bank reconciling items.

a) Non-reversion of unreleased checks – P1.819 million

Section 56, Chapter 19, Volume I of the GAM for NGAs provides the procedures on handling and accounting for unreleased checks at the end of the year. Specifically, a JEV shall be prepared to recognize the restoration of the cash equivalent to the unreleased checks and the recognition of the appropriate liability/payable account but there shall be no physical cancellation of the checks. The JEV supporting such restoration shall form part of the supporting document to the financial statements to be submitted to COA at year end. At the start of the ensuing year, another JEV shall be drawn to reverse the previous entry made and recognize the availability of the checks for release. This procedure shall not apply to account “Cash-Modified Disbursement System (MDS)” since there is no actual cash with GSBs.

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Unreleased checks of P1.819 million at FO IV-B were not restored to Cash in Bank as at year end, details as shown in Table 4.

Table 4. Summary of Unreleased Checks (FO IV-B) Check No. Date Payee Amount For Payment of Capital Seed fund under SLP Program 385046 - 049 12/14/2016 various payees 970,000.00 For Fund Transfer for Social Pension 382231 - 234 9/7/2016 various municipalities 670,000.00 For Payment of various Expenses 133989; 134345; 9/1/2016; 11/25/2016; various payees 179,186.16 134504; 134552 12/28/2016; 12/29/2016 Total 1,819,186.16

b) Unadjusted stale checks – P11.345 Million

Section 44, Chapter 6 of GAM Volume I provides that, “Checks may be cancelled when they become stale, voided, or spoiled. The depository bank considers a check stale, if it has been outstanding for over six months from date of issue or as prescribed”.

Included in the CIB are stale checks totaling P11.345 million as of December 31, 2016, reported by three FOs, to wit:

Table 5. Schedule of Stale Checks FO Check No./ Date Payee Amount Remarks 133485 IV B Padre Ali 10,718.00 - 5/26/2016 issued and outstanding for a period of 6 to 36 months but not restored to cash III Various Various 905,114.31 account due to late receipt of the bank statements from the servicing banks and erroneous BRS submitted. represents financial assistance to beneficiaries and livelihood associations for livelihood programs ranging from P10,000, to more than P100,000 but not released and became stale due to lack of DSWD Accreditation on concerned XI Various Various 10,429,193.34 associations. The issuance of various checks which became stale could have been avoided had there been proper coordination with the DSWD CO on the accreditation of SLP Associations before check preparation. Total 11,345,025.65

The Accounting Unit in FO III reasoned that she was not able to determine the stale checks because of the late receipt of the bank statements from the servicing

65 banks and admitted that the BRSs submitted were erroneous and revised BRS for the account will be prepared and submitted.

The non-restoration of unreleased checks to the CIB – LCCA, as well as, non-cancellation/adjustment of stale checks resulted in the understatement of both the Cash and related payable accounts by P13.164 million considering that the corresponding cash balance is still intact with the AGDB.

c) Unrecorded book reconciling items – P12.856 million

The book reconciling items of P12.856 million from CYs 2014 to 2016 pertaining to FO III and CAR bank transactions were not recognized in the books of accounts as of December 31, 2016, details as shown in Table 6.

Table 6. Breakdown of Unrecorded Reconciling items (in PhP) FO Book Reconciling Items Amount Remarks III Dollar deposits converted to 216,415.11 The Accountant also stated that the peso unrecorded reconciling items of P363,014.33 were among the many donations to the agency’s centers and Credit memos 136,599.22 institutions directly deposited by various Check deposit 10,000.00 donors to the bank and remained unrecorded because they could not be traced, matched, or reconciled with the reports submitted by centers and institutions or lack of proper documents and information. Over remittance of withholding 12,441.60 The reconciling item of P10,178.57 tax (book error) should have been a bank reconciling item because it was the bank which incurred the error but deducted from the book balance. The reconciling item of P2,263.03 for over-remittance of taxes in July 2014 had not been explained. Sub Total 375,455.93 CAR SEA K - rollback –Feb to Dec 2016 12,109,611.03 Unrecorded as of December 31, 2016 Interest 50,183.17 Error in posting beginning balance (20,724.27) Uncorrected error SWDRP-LP 1,220.00 Cancelled check GTA 340,157.46 Donations for the centers converted to peso RSCWC ECCD 200.00 Double charging of bank charges. Sub total 12,480,647.39 Grand Total 12,856,103.32

The non-adjustment of the accounts affected by these reconciling items had understated, the CIB and Accumulated Surplus/(Deficit) accounts as of December 31, 2016. Further, non-recording of donations resulted in the non-utilization

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thereof which could have redounded to the benefits of the residents of the centers and institutions.

Likewise, in NCR , FOI, and III, BRS were either submitted late or not submitted at all due to lack of training/understanding on BRS procedures, and which is also not in keeping with Section 5, Chapter 21 of the GAM, Volume I.

We recommended and the DSWD Secretary agreed to instruct the concerned FO Accountants to:

a) make necessary adjustments in the books of accounts for the value of unreleased and stale checks and unrecorded reconciling items at year end;

b) conduct regular/monthly reconciliation of recorded book and bank balances, by preparing the BRS and, thereafter, prepare the necessary adjusting entries in the books of accounts; and

c) conduct coaching or send the concerned staff to appropriate training on the procedures and preparation of the BRS.

Unclaimed cash grants not remitted to the BTr

4. Refunds from the LBP conduits of P3.108 billion in CYs 2013 to 2016, representing unclaimed cash grants of 4Ps beneficiaries for Over-the-Counter (OTC) mode of payment, were not returned to the BTr.

Section 88, General Provisions of the GAA requires the reversion to the General Fund of unexpended balances of appropriations authorized in this Act, at the end of the validity of appropriations provided under Section 65 hereof, and shall not thereafter be available for expenditure except by subsequent legislative enactment.

Records showed that as of December 2016, total fund transfers to the LBP 4P’s account amounted to P142,955.201 million, of which processed liquidations from October 2008 to December 2016 totaled P135,296.242 million, leaving a balance of P7,658.958 million (Table 20). Included in the said liquidations are refunds of P4,099.822 million from CYs 2013 to 2016 made by various conduits for OTC cash grants, however, only the amount of P992.257 million was remitted as of December 31, 2016. The details of the refund per year is shown in Table 7.

Table 7. Status of Refunds from LBP Conduits

Amounts (in Million PhP) Year Refund from Conduits Remitted to BTr Balance (Not Remitted) 2011 593.005 (593.005) 2012 248.643 (248.643)

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Amounts (in Million PhP) Year Refund from Conduits Remitted to BTr Balance (Not Remitted) 2013 491.984 14.702 477.282 2014 1,049.328 33.787 1,015.541 2015 2,532.135 57.112 2,475.023 2016 26.375 45.008 (18.633) Total 4,099.822 992.257 3,107.565

While the DSWD-CO had already remitted the amount of P992.257 million, the non-remittance to the BTr of the remaining balance of P3,107.565 million, despite that these funds remained unutilized for more than three years, has deprived the National Government (NG) of the proper disposition of these funds. Management, however, informed that there are still unpaid claims from the above refunds, thus they cannot remit the whole amount refunded.

It may be worthy to note that the Guidelines for the Implementation of the 4Ps has no provision on the period for which the beneficiaries could claim their cash grants, thus the amount is left idle in the banks for several years now.

We reiterated our prior years’ recommendations and the DSWD Secretary agreed to:

a) determine the unpaid grants for the previous years that still needs to be paid and, thereafter, remit to the BTr the excess of the refunded amount by the conduits; and

b) establish a guideline on the period for which the cash grants are to be claimed afterwhich, these should be forfeited in favor of the government to ensure that idle funds are remitted to the BTr for proper disposition.

Management commented that it considered the COA recommendation to set a period of deadline for which cash grants are to be claimed. Initially, DSWD is proposing that unclaimed cash grants shall remain only for two years from date of funding. Upon approval of the proposed policy, the amount of P1,699,127,555.84 shall be remitted to BTr and the amount of P491,923,100 shall be retained in the account of DSWD pending rescheduling, change of conduit, and validation of current payables.

Unwithdrawn CCT/MCCT cash card grants

5. Account balances of CCT/MCCT beneficiaries of P1.239 billion under the cash card mode of payment, consisting of 2,433,518 accounts with balances ranging from P501 to more than P50,000 that were not withdrawn from 30 to 2,190 days upon payout, tend to show that there is no immediate need for the financial assistance and casting doubt on the eligibility of the chosen beneficiaries. Moreover, 28,268 accounts with total balance of P140.848 million

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have no date of last monetary activity, but still included in the list of beneficiaries.

The 4Ps has two types of cash grants given out to household (HH) - beneficiaries:

 health grant: P500 per HH every month, or a total of P6,000 every year;

 education grant: P300 per child every month for ten months, or a total of P3,000 every year (a HH may register a maximum of three children for the program)

These cash grants are distributed to the HH-beneficiaries through the LBP or, if not feasible, through alternate payment schemes, such as Globe G-Cash remittance and rural bank transactions.

The modes of payment for the CCT cash grants shall be as follows:

a) Cash Card Automated Teller Machine (ATM); b) Over-the-Counter (OTC); and c) Other mode of payment which can be done when the areas defined are not accessible to the Land Bank ATM, for Cash Card mode, and the Land Bank cannot do offsite payments, for OTC mode.

Further, Section 4.4 of the IRR for the Cash Disbursement for the 4Ps states that “Cash Card reactivation at the end of the third year shall be subject to a reactivation fee of One Hundred Pesos (P100.00) for the account of the DSWD”.

Examination of the cash card balances of CCT/MCCT beneficiaries’ accounts with the LBP, Prepaid card, and First Consolidated Bank - Palawan, , and Siquijor branches, provided by the LBP, revealed that as of December 31, 2016, there are 2,674,845 accounts with unwithdrawn balances totaling P1,425,732,419.12, from 2008 to 2016, as shown in Table 8.

Table 8. Summary of unwithdrawn balances as of CY 2016 (In million PhP)

Accounts 312, 501, 502 LBP Prepaid Card Total FCB Grand Total 503 YEAR No. of Outstanding No. of Outstanding No. of Outstanding No. of Outstanding Accounts Balance Accounts Balance Accounts Balance Accounts Balance 2008 - - 0 0 101 0.016 101 0.016 2009 - - 0 0 5,041 4.678 5,041 4.678 2010 - - 0 0 15,405 5.935 15,405 5.935 2011 - - 8 0.029 220,473 88.279 220,481 88.308 2012 - - 67 0.315 222,516 177.775 222,583 178.089 2013 - - 77 0.428 159,120 421.527 159,197 421.956 2014 - - 105 0.464 68,619 113.268 68,724 113.732 2015 20 0.058 139 0.393 83,950 102.280 84,109 102.731 2016 2,525 2.521 0 0.00 1,868,411 366.918 1,870,936 369.438

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Accounts 312, 501, 502 LBP Prepaid Card Total FCB Grand Total 503 YEAR No. of Outstanding No. of Outstanding No. of Outstanding No. of Outstanding Accounts Balance Accounts Balance Accounts Balance Accounts Balance Sub Total 2,545 2.579 396 1.629 2,643,636 1,280.677 2,646,577 1,284.884 no withdrawal since account 9 0.008 311 1.982 27,948 138,858 28,268 140.848 was opened

Grand Total 2,554 2.587 707 3.611 2,671,584 1,419.535 2,674,845 1,425.732

Aging showed that 2,433,518 accounts with total balances of P1.239 billion or 87 percent of the unwithdrawn balances were outstanding from 30 to more than 2,190 days upon payout as shown in Table 9.

Table 9. Aging Schedule of Account Balances from CCT/MCCT Beneficiaries 30-2190 days or more Mode of Payment Outstanding Balance No. of Accounts (in million PhP) FCB – Bohol 307 1.306 Palawan 73 . 285 Siquijor 16 .038 LBP Prepaid Card 173 .261 Accounts 312,501,502,503 2,432,949 1,236.612 Total 2,433,518 1,238.502

It bears emphasizing that the cash grants are benefits given to the poorest municipalities and homeless and indigenous people whose economic condition is equal to or below the provincial poverty threshold to augment their day-to-day expenses. It is very remarkable, however, that the accounts have significant unwithdrawn amounts, which gives an impression that the holders of the accounts are not in dire need of assistance for the education for their children, health needs of the family, and other basic expenses of a family.

The continuous non-withdrawal of the cash grants only showed that the holders do not need the financial assistance/cash grant and do not really belong to the poorest of the poor as well as may not be eligible to be a CCT beneficiary, thus defeating the purpose of the 4Ps/CCT program to alleviate poverty by improving the health, nutrition, and the education of the poorest families, homeless, and assistance to indigenous people.

Moreover, records showed that 28,268 accounts with total outstanding balance of P140.847 million have no date of last monetary activity or no withdrawals from date of opening of the accounts, as shown in Table 10.

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Table 10. Summary of accounts with no withdrawal activity

Mode of Payment No. of Accounts Outstanding Balance FCB -Bohol 219 1.333 Palawan 78 0.553 Siquijor 14 0.095 LBP Prepaid Card 9 0.008 Accounts 312,501,502,503 27,948 138.858 Total 28,268 140.847

Despite the non-movement of these accounts, and the constant report of the LBP to the DSWD for such occurrence, delisting of the accounts or non-renewal of the Cash card after the period of three years were still not made, as provided in Section 4.4 of the IRR for the Cash Disbursement for the 4Ps, to avoid incurrence of additional reactivation fee every after three years.

This has been a finding in the previous year and to address the matter, Management conducted field inquiry to affected provinces in FOs I, NCR, VII, VIII, and ARMM to determine the existence of HHs with non-moving accounts, the reasons for non-use/non-withdrawal by the HHs, and to recommend remedial actions to prevent the problem.

A report dated January 31, 2017 was submitted to the National Program Management Office (NPMO) containing the causes of the problem and the recommendation of the Group who conducted the validation, but as of December 31, 2016, review of the cash card accounts showed that while there were actions taken to address this observation, there are still considerable idle funds that could have been utilized for other government projects had these been remitted to the BTr. Details as shown in Table 11.

Table 11. Comparison of unwithdrawn balances as of CY 2015 and CY 2016 (Amounts in Million PhP)

CY 2015 Accounts CY 2016 Accounts Increase/(Decrease) Year Qty Amounts Qty Amounts Qty Amounts 2008 101 0.016 101 0.016 2009 5,151 5.139 5,041 4.678 (110) (0.461) 2010 15,606 6.396 15,405 5.935 (201) (0.461) 2011 223,852 94.34 220,481 88.308 (3,371) (6.032) 2012 227,934 186.601 222,583 178.089 (5,351) (8.512) 2013 167,336 462.737 159,197 421.956 (8,139) (40.781) 2014 76,837 122.693 68,724 113.732 (8,113) (8.961) 2015 1,886,977 235.556 84,109 102.731 (1,802,868) (132.825) No DLMA 386,435 139.008 28,040 139.515 (358,395) 0.507 Sub Total 2,990,229 1,252.486 803,681 1,054.96 (2,186,548) (197.526) 2016 - - 1,871,155 370.772 1,871,155 370.772 Total 2,990,229 1,252.486 2,674,836 1,425.732 (315,393) 173.246

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We recommended and the DSWD Secretary agreed to require the NPMO to:

a) fast track the validation and investigation or re-assessment on the eligibility of concerned beneficiaries and implement delisting of ineligible beneficiaries immediately;

b) coordinate with the LBP on the results of validation and require them to make necessary actions to recover the amount to be remitted to the Btr; and

c) for cash cards with “No Date of Last Monetary Activity (DLMA)” status, advise the LBP of the non-renewal of cash cards of said beneficiaries to ensure that additional expenditures are avoided and limited government funds are utilized effectively.

Management Comments and updates:

The actual number of accounts with balances ranging from P501 to more than P50,000 that were not withdrawn from 30 to 2,190 days is 194,198 only with aggregate unwithdrawn cash grants amounting to P1,121,721,207.87. Based on the initial validation by the Department, 16 percent or 7,129 accounts belong to HHs who are ineligible from the Program but 75 percent or 33,898 accounts with balances of P360,641,471.56 are still needed by the concerned HHs. Further, it was observed that there were operational issues/gaps which resulted in the dormancy/ non- movement of the accounts.

Initial validation showed the following:

 7,072 accounts with outstanding balance of P43,378,639.88 already withdrawn by beneficiaries;  8,961 accounts with grants amounting to P53,262,772.52 still for withdrawal. These accounts were reported as claimed, however, beneficiaries were either unaware that they have unclaimed grants or doesn’t know how to withdraw;  9,210 cashcards with total balance of P116,638,632.12 lost/stolen/damaged, hence, due for replacement;  7,129 accounts with balance of P20,573,603.89 due for closure due to ineligibility or waiver from the program;  4,207 accounts with unwithdrawn grants of P37,280,014.13 inactive but appealable HH status. Closure of account or release of cash grants shall be identified once final HH status is updated in the Pantawid Pamilya Information System; and  88 accounts with total cash grants of P517,088.65 kept by beneficiaries as savings.

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As for the remaining 148,876 accounts with grants of P702,709,029.64, the Department shall fast track the validation, investigation/re-assessment on the eligibility of concerned beneficiaries.

The DSWD shall coordinate with the LBP on the results of validation and shall require them to make necessary actions to recover the amount to be remitted to the BTr corresponding to the accounts for closure. Further, accounts due for replacement and those requiring transfer of cash grants from old to new accounts shall be endorsed to the LBP as soon as documents required by the bank are complete.

Although it is stated in the LBP and DSWD IRR that reactivation fee amounting to P100 shall be charged to the DSWD by the LBP upon expiration of the cashcards, it is informed that since the start of the program, no billing for reactivation fee has been received by the DSWD, thus this provision from the MOA IRR has never been implemented and no additional expenditure was incurred.

Moreover, the Department shall prioritize the validation of the HHs having accounts with “no DLMA” status.

Unliquidated Cash Advances (CAs) - P2,933.810 million

6. CAs of P2,933.810 million remained unliquidated due to non-compliance with the provisions of COA Circular No. 97-002 dated February 10, 1997 and DSWD Administrative Order No. 07, series of 2016.

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

 No additional CAs shall be allowed to any official or employee unless the previous CA given to him is first settled or a proper accounting thereof is made;  A CA shall be reported on as soon as the purpose for which it has been given has been served;  All CAs shall be fully liquidated at the end of each year. Except for Petty Cash Fund, the Accountable Officer (AO) refund any unexpended balance to the Cashier/Collecting Officer who will issue the necessary official receipt.

In addition, Section 89 of PD No. 1445 provides, among others, that no CA shall be given unless for a legally authorized specific purpose.

a) Unliquidated Advances to Special Disbursing Officers (SDOs) – P2,853.88 million

CAs amounting to P2,853.88 million were granted to SDOs for the payment of various programs and projects, such as Social Pension, Emergency Shelter Assistance, Cash for Work, Assistance to Individual in Crisis Situation (AICS), and

73 other operating expenses, of which P174.14 million or 6 percent pertains to prior years that are already past due. Details are presented in Table 12.

Table 12. Breakdown of Unliquidated Advances to SDOs

Account Balance (in Million PhP) FO Past Due Total Current CY 2015 CY 2014 & PYs CAR 224.644 224.664 - - I 346.981 341.746 5.235 - II 676.254 676.139 0.115 - III 20.629 20.629 - - IV - A 224.429 222.945 1.484 - IV - B 104.129 47.928 44.898 11.303 V 391.749 349.337 42.381 .031 VI - - - - VII 2.726 1.565 1.129 .032 VIII 132.962 75.501 7.011 50.45 IX 325.986 325.978 .00768 - X 32.668 31.569 1.099 - XI .032 .032 - - XII 130.357 129.099 1.258 - NCR 239.173 231.467 7.666 .04 CO 1.144 1.144 - - TOTAL 2,853.863 2,679.743 112.284 61.856 174.139 (6%)

As gleaned in Table 12, six percent of outstanding CAs represents past due accounts that were already expended but not yet liquidated, thus tend to overstate the recorded receivables account.

The non-liquidation of CAs resulted in non-recording of the appropriate transactions as they occur as well as the accumulation of unliquidated CAs, thus exposing government funds to risk of possible losses thru theft or misuse.

Other related observations noted by the audit teams are as follows:

Observations FOs Affected Common Issues 1. Additional CAs provided despite non-liquidation of II, IV-A, VI, VIII, IX, X, NCR previous CAs 2. Delays in submission of LRs / Non or Partial liquidation CAR, I, IV-B, VIII, IX, X, NCR of CAs 3. Unauthorized transfer of CAs to other AOs CAR, I, II, NCR 4. CA’s deposited to personal account of AOs II, X,

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In FO III, audit of the CAs granted as well as the liquidation of P1.195 million by the AO disclosed that: (a) 214 actual payees were not among those authorized in the RAO to receive assistance; (b) Cash Assistance Payroll of P28,050, acknowledged by fifteen authorized payees, not included in the liquidation of P1.195 million; and (c) erasures/alterations in names of beneficiaries in the paid Cash Assistance Payroll.

Management informed that that there were errors in the submission of documents and sufficiently explained the deficiencies noted with the submission of additional documents to support their justifications.

For FO V, CAs for the Sustainable Livelihood Program (SLP) were granted to SDOs on an average of two months before the start of the activities, thus exposing government resources to risks of loss or misuse due to accumulation of accountabilities handled.

We, likewise, noted that in FO IX, CAs of P29,112,258.50 were transferred to ten CSOs and Technical Vocational Institutes (TVIs) from the CA of the SDOs without any covering MOA contrary to COA Circular No. 2007-001 dated October 25, 2007 provides the revised guidelines in the granting, utilization, accounting, and auditing of the funds released to Non-Governmental Organizations/People’s Organizations (NGOs/POs) and Section 4.5.3 of RA No. 9184 and its revised IRR.

We reiterate our previous year’s recommendations and the DSWD Secretary agreed to direct the concerned Directors/Accountants to:

a) refrain from granting CAs to SDOs in excess of their maximum cash accountabilities and unless the previous ones granted to them are fully liquidated;

b) intensify the monitoring controls on CAs to ensure timely submission of liquidation documents (FO I);

c) direct the SLP office to submit requests for funding of CA for activities within a reasonable time prior to the start of the activity/project to enable timely cash payouts (FO V);

d) ensure that all fund transfers to CSOs/TVIs are covered with MOA, which shall be prepared in accordance with the provisions of COA Circular No. 2007-001 (FO IX);

e) instruct the SDOs to immediately close all accounts maintained purposely for the unused accumulated CAs and return the same to the coffers of the government to avoid legal impediments (FO X);

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f) review the existing agency disbursements systems and control processes to include adequate and proper identification of documents supporting financial claims and stamping “PAID” by the paymasters on all DVs, payrolls, and supporting documents after payment to avoid any attempt to use the same in payment of future claims; and instruct all paymasters and AOs to avoid erasures and alterations on approved payrolls/DVs to preserve their validity and reliability (FO III);

g) require the SDOs to submit the necessary documents to support the liquidations made, and require the Accounting Unit to record liquidations only when supported with complete documents; and

h) impose sanctions to erring officials and employees who fail to liquidate their CA as soon as the purpose of thereof has been served. Suspension of salaries of erring AOs shall be ordered, in accordance with the rules set forth under Section 9.2 of COA Circular No. 2012-04.

As of March 31, 2017, a total of ₱94.893 million has been liquidated, leaving a balance of P2,758.987 million. Below are updates on the status of unliquidated CAs after December 31, 2016:

FO Management Comments and Updates I Management will adopt/devise a recording/monitoring scheme for every SDO/AO to strengthen/ improve/install effective internal control system on CAs. Also, they pledged to coordinate and synchronize their monitoring/recording to ensure the correctness and validity of all settlements/ liquidations. CAR During consultations with the program focals, the following concerns were raised as reasons of the delayed liquidation: a) Difficulty in the coordination and scheduling of payouts with the LGUs; b) Some paymasters have other important activities during the scheduled payout; and c) Incomplete documents from beneficiaries, especially those from far-flung areas. Moreover, in addition to reminders and demand letters to SDOs, additional controls were put in place so as to compel the SDOs to liquidate on time. II The Project Development Officers’ (PDOs) depositing of unutilized CAs to their personal bank accounts was corrected and has ordered these to be turned over to the SDOs. Accordingly, those deposited to the personal bank accounts of the PDOs were withdrawn and turned over to the proper SDOs. Thru the initiative of the DSWD FO2 Director, there is a proposed reorganization of the DSWD wherein additional SDOs will be hired as all FOs have the same concern on the lack of permanent employees to be designated as SDOs. III They had not realized the significance of adequately and appropriately identifying their documents by putting payroll number, indicating the nature of assistance in any payroll and stamping the payroll and its SDs with “PAID”. Thus, it will adhere to the recommendations of the COA Audit Team regarding proper identification of documents. V They are monitoring the CA of each SDO if they are qualified for subsequent CA according to their bond limit. Each CA has its particular purpose to serve and a lot of programs and activities cannot be catered by the limited number of SDOs. Management will implement measures to minimize the CAs granted to SDOs, such as thru direct procurement from

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FO Management Comments and Updates suppliers/training providers instead of payment through cash assistance payroll. In addition, they will try to facilitate the immediate revalidation of beneficiaries and to request funds only for prioritized projects. VI, X They will adhere to the Audit Team’s recommendations. VII Management to send memorandum to Negros Island FO thru the FO Director and require the AO assigned in Negros Island FO to submit her reply on the abovementioned audit observations and recommendations on or before the end of March 2017. IX Management to send a memo for the SLP Focal Person to prepare schedule of payment or cash programming of projects. Only request for CA pertaining to payment of accounts which will due within two months shall be submitted and processed with the schedule of payment as one of the supporting documents. MOA will be accomplished to support funds transferred to the TVIs out of the CAs of the SDOs. b) Unliquidated Advances for Operating Expenses - P79.930 million

Pursuant to Section XIII, paragraph B, of DSWD AO No. 07, Series of 2016, the allocation of monthly MOOE shall be transferred on a quarterly basis and succeeding releases of MOOE shall be subject to a 75 percent rate of fund utilization of previous fund transfers and balances as supported with prescribed LRs.

The total outstanding balance of Advances for Operating Expenses as of December 31, 2016, amounted to P79.930 million, representing advances granted to AOs to defray operating expenses at operating/field units and in foreign posts. Aging of the account included the amount of P3.754 million granted in prior years, as shown in Table 13.

Table 13. Status of Unliquidated CAs for Operating Expenses

Amounts by Age (in Million PhP) Total Account FO CY 2014 and Balance Current Year CY 2015 PYs VI 14.978 14.978 - - VII 45.230 45.230 - - CO 19.722 15.968 2.844 0.910 Total 79.930 76.176 2.844 0.910 Past due 3.754

At the CO, the accumulated outstanding advances for operating expenses amounted to P19.722 million. This represents advances to Social Welfare Attaches (SWAtts) in various foreign/overseas post, the ages of which are shown in Table 14.

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Table 14. Summary of Advances for Operating Expenses (Amounts in Million PhP)

Unliquidated Cash Advances CY 2016 Total Balances Accountable Officers Amount < 30 31 - 90 91 - 365 CY CY Total days days days 2015 2014 Arang, Josephine (SWA- Jeddah) 1.263 0.000 0.404 0 0.404 0.853 0.006 Bacwaden, Judith Y. (SWA - Qatar) 1.366 0.430 0.000 0 0.430 0.933 0.003 Bonina, Bernard (SWA - Malaysia) 2.187 0.000 2.187 0 2.187 0.000 0.000 Deloria, Maricel (SWA -Riyadh) 4.912 3.080 1.832 0 4.912 0.000 0.000 Dy, Elizabeth L. (SWA - Hongkong) 1.621 1.350 0.000 0 1.350 0.271 0.000 Mendoza, Annie (SWA, Kuwait) 0.629 0.000 0.000 0 0.000 0.000 0.629 Nillas, Isabel S. (SWA - Abu Dhabi) 2.041 1.053 0.000 0.764 1.817 0.000 0.225 Oliva, Nilda (SWA -Kuwait) 1.167 0.000 0.740 0.178 0.918 0.249 0.000 Panganiban, Perlita V. (SWA - Riyadh) 0.747 0.000 0.000 0.162 0.162 0.538 0.047 Razon, Priscilla (Rome, Italy) 2.892 2.892 0.000 0.000 2.892 0.000 0.000 Villanueva, Lucita J. (SWA- South, Korea) 0.897 0.000 0.000 0.897 0.897 0.000 0.000 Total - Advances for Operating Expenses 19.722 8.805 5.163 2.001 15.969 2.844 0.910 Total 91 days and Prior Years 5.754

Out of the total balance of P19,722,450.02, there are still balances from CYs 2014 and 2015, and aged 91 to 365 days, totaling P5,754,705.28, which were not yet liquidated. Considering the time elapsed, it is presumed that these are already expended, thus should have been liquidated and recorded to the appropriate accounts.

The remaining fund balances for CY 2015 of the SWAtts – Malaysia, Kuwait, and Hongkong were granted authority to be utilized for CY 2016. However, the balance of SWAtt-Kuwait was not deducted from the 1st quarter of the CY 2016 release due to the delayed submission of liquidation documents, while the SDO at SWAtt-Jeddah passed away, hence the unliquidated balance. Noteworthy was the CY 2014 account balance of Annie Mendoza, now assigned as Assistant Director of FO IV-A of P628,703.67 which, until now, has not been liquidated despite final demand letter issued by the Accounting Office on November 2, 2016. Section 8 of CSC Resolution No. 04-0676 dated June 17, 2004 as amended by CSC Resolution No. 1200103 dated January 12, 2012 provides the administrative liability of AOs who fail to liquidate their CAs within the period prescribed.

Moreover, review of the individual SLs of the following AOs/SWAs showed that despite huge amount of outstanding balances, additional transfers were made in 2017, as shown in Table 15.

Table 15. Additional Cash Advances (In million PhP) Balance Grants as of Accountable Officers December 31, 2016 February 2017 SWA - Qatar 1.366 1.421 SWA - Malaysia 2.187 1.595 SWA-Riyadh 4.9120 0.698 SWA - Hongkong 1.621 0.420 SWA - Abu Dhabi 2.041 1.455

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Balance Grants as of Accountable Officers December 31, 2016 February 2017 SWA-Kuwait 1.167 1.536 Total 13.294 7.125

In FO VI, the accumulation of unliquidated Advances for Operating Expenses of P14,947,995.57 was due to the grant of additional CA despite the non-liquidation of the previous CA contrary to the provisions of COA Circular No. 97-002.

The above practice resulted in the accumulation of unliquidated fund transfers and non-recording of expenses already incurred but not yet reported as of year-end.

We recommended and the DSWD Secretary agreed to require all concerned FOs to:

a) strictly observe the provisions of COA Circular No. 97-002 on the grant, utilization, and liquidation of CAs and ensure monitoring thereof; and

b) liquidate their CAs on time, otherwise, impose administrative sanctions against them in accordance with the Section 89 of PD No. 1445, COA Circular No. 97-002, and CSC Resolution No. 04-0676, dated June 17, 2004 as amended by CSC Resolution No. 1200103 dated January 12, 2012.

Management Comments:

At the CO, LRs were submitted in CY 2017, which reduced the balance to P14,002,357.50. There are also liquidation documents submitted amounting to P7,180,524.78 which are not yet taken up in the books of accounts pending submission of some required supporting documents.

For the unliquidated balance of the late SWAtt to Jeddah, Kingdom of Saudi Arabia, the Management is coordinating with the new SWatt in Jeddah to locate the documents pertaining to unliquidated CA of the former.

With regards to the unliquidated balance of SWAtts posted in South Korea and Kuwait, LRs are not yet submitted to FMS-AD, memo dated November 2, 2016 were sent demanding submission of their respective LRs and a final notice to settle their unliquidated balances was sent to two (2) Attaches' last April 19, 2017, however, the FMS-Accounting Division have not received their compliance to this requirement.

On the observation that despite huge amount of outstanding balances, additional transfers were made in 2017, this is being done so that the operations overseas are not disrupted. However, the release of funds for the succeeding year is

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based on the liquidation report and the remaining cash in bank statement balance of the SWAtt as of December 31, 2016. The remaining cash in bank balance by each SWAtt are being deducted from the respective first quarter MOOE of the ensuing year. Therefore, the released of fund for the 1st quarter of 2017 is net of remaining funds of CY 2016, approved by the Head of office on the utilization of remaining fund balance.

In addition, the review and compliance process of SWAtt’s liquidation reports are strenuous considering the distance and the communication process for the compliance of their lacking documents, hence, hinders the timely submission and recording of the same.

The Secretary already issued a memorandum to all officials and staff of the Department, dated May 22, 2017, to immediately settle all accounts and to strictly enforce the rules on liquidation of CAs starting July 1, 2017, in accordance with rules and regulations.

Unliquidated Fund Transfers – Due from NGAs/LGUs/GOCCs - P25,282.064 million

7. The non-submission of LRs and the release of additional funds to IAs with outstanding accounts resulted in the accumulation of Due from NGAs/GOCCs/LGUs amounting to P25,282.064 million.

COA Circular No. 94-013 dated December 13, 1994 provides the rules and regulations in the grant, utilization, and liquidation of funds transferred to implementing agencies (IAs). This is to ensure that the transfer is properly taken up in the books of the Source Agency (SA) and IA and used only for the intended purpose and for proper accounting and reporting on the utilization of the funds.

Paragraph 4.6 of said Circular provides that within ten days after the end of each month/end of the agreed period for the Project, the IA shall submit the Report of Checks Issued (RCI) and the Report of Disbursement (RD) to report the utilization of the funds. Paragraph 4.9 further states that the IA shall return to the SA any unused balance upon completion of the project while Paragraph 5.4 provides that the SA shall require the IA to submit the reports and furnish the IA with a copy of the journal entry voucher taking up the expenditures.

a) Due from NGAs P1,258.757 million

Unliquidated fund transfers to various NGAs amounted to P1,258.757 million as of December 31, 2016 of which, P752.798 million or 58 percent have been outstanding for two years and above, contrary to COA Circular No. 94-013.

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The balance of the account represents the unutilized portion of the fund transfers for the implementation of various projects. Aging of the account is shown in Table 16.

Table 16. Aging Schedule of Due from NGAs Amounts (in million PhP) CY 2016 CY 2015 CY 2014 and PYs FO Total (1 year and (3 years and (2 years) below) above) CO 768.69 355.673 168.675 244.346 NCR 129.52 1.042 7.087 121.389 CAR 11.53 0 4.62 6.907 I 0.99 0 0.992 - II 11.19 9.922 0.1 1.17 III 5.58 2.22 0.732 2.629 IV-A 25.13 3.371 0.429 21.331 IV-B 18.65 2.329 1.2 15.122 V 62.62 54.467 8.152 - VI 25.48 25.365 0 0.111 VII 55.03 0 40 15.027 VIII 41.27 23.385 0 17.884 IX 50.65 17.841 27.93 4.876 X 22.55 22.187 0.289 0.076 XI 17.56 12.5 5 0.062 XII 12.32 2.658 8.532 1.129 CARAGA 0.00 0 0 - TOTAL 1,258.757 532.960 273.738 452.059 Aged 2 years and above 725.797

As shown in Table 16, for CY 2016, bulk of the unliquidated balances came from current year fund transfers of P532.960 million, which is 42 percent of the total CY 2016 year-end balance as shown in Figure 1:

Figure 1. Aging of Due from NGAs

CY 2016 (1 year and

36% 42% below)

CY 2015 (2 years)

22% CY 2014 and PYs (3 years and above)

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On the other hand, the amount of P725.797 or 58 percent represents fund transfers which had been outstanding for two years and above.

The details of the reported observations in the audit of fund transfers are as shown in Table 17.

Table 17. Observations per FOs

Unliquidated DSWD Balance Observations/Remarks Offices (in million PhP) CO 768.694 The accounts of AFP – NADESCOM, NNC, PIA, RESPSCI, UP College of Education and DSWD – City of Manila have no movement in CY 2016 and upon verification, the balances have been outstanding for more than six years already.

Amounts due from PHILHEALTH and DSWD – City of Manila of P975.00 and P200,000.00 were recorded under this account, instead of Due from GOCC and LGU, respectively.

Comparison of balances per books for the Due from NGAs of P750,195,489.25 and results of confirmation from recipients/beneficiaries showed a discrepancy of P101,007,550.37 that resulted in the overstatement of P65,902,198.66 of the account representing liquidations made by the DPWH. NCR 129.518 CAR 11.527 I 0.992 II 11.192 Consists of fund transfers for the implementation of sustainable livelihood programs (SLPs) granted to Cagayan State University (CSU) – Sanchez Mira Campus, CSU - Gonzaga Campus, and Department of Trade and Industry (DTI) – FO 02 in CY 2014 as well as to Southern Isabela College of Arts and Trade (SICAT) in CY 2015, and Isabela School of Arts and Trade (ISAT) in CY 2016.

No liquidations were submitted for fund transfers granted to CSU – Sanchez Mira Campus in the amount of P322,971.00 and to CSU – Gonzaga Campus in the amount of P298,901.61, despite that these have been outstanding for more than two years. On the other hand, only the amount of P852,884.97 liquidation for the balance of fund transfer to DTI – FO2 was received in CY 2016. III 5.581 IV-A 25.131 IV-B 18.651 V 62.618 VI 25.476 Includes funds transferred to Corazon Locsin Montelibano Memorial Hospital on December 28, 2012 of P200,000.00, which was partially liquidated, leaving a balance of

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Unliquidated DSWD Balance Observations/Remarks Offices (in million PhP) P110,906.50.

The Accomplishment Report submitted by the SLP, DSWD- FO VI showed that the Skills Training on Food Processing and Food Cart Vending in Ajuy, Iloilo amounting to P889,793.00 which was included in the funds transferred to NIPSC-Estancia, Iloilo, was already completed on November 23, 2016 but not yet liquidated as at year-end. VII 55.027 VIII 41.269 IX 50.648 Transferred funds to the 52nd Engineer Brigade, Philippine Army, for the construction of concrete perimeter fence at the Area Vocational Rehabilitation Center, Barangay Mampang costing P7,145,514.00, is 50.03 percent completed as of October 2016.

Construction of single detached recovery shelters, boardwalks, and septic tanks totaling P11,122,630.00 intended for the internally-displaced persons in the Zamboanga siege were already completed and accepted but liquidation documents for the P1,612,848.00 were not yet submitted as of December 31, 2016 X 22.552 XI 17.562 Long due fund transfers of P5,062,160.37 remain unliquidated for a number of years already.

No liquidation of fund transfers of P5,000,000.00 to the University of Southeastern Philippines since CY 2015. XII 12.319 CARAGA - TOTAL 1,258.756

Considering the length of time that has elapsed, these receivable accounts still remain as assets of the SA, where in reality most of the accounts over two years have already been spent by the IAs concerned, thus affecting the validity of the receivables account.

We reiterated our prior years’ recommendations with modifications and the DSWD Secretary agreed to direct the CO and FO Directors concerned to:

a) monitor the status and liquidation of fund transfers to IAs and require them to immediately submit the LRs within the prescribed period per COA Circular No. 94-013 and refund the unutilized balances of fund transfers for completed projects, if any;

b) reclassify the accounts of PHILHEALTH and DSWD – City of Manila according to its proper account (CO);

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c) coordinate with concerned NGAs and reconcile their balances and make necessary adjustments, especially with the DPWH (CO); and

d) assess the present situation regarding the presence of informal settlers on the DSWD IX property and employ new strategies to hasten their relocation so that the perimeter fence project will be completed (FO IX).

Management comments and updates are summarized as follows:

Offices Management Comments CO A total of P36,086,124.90 from the CY 2016 balance was liquidated as of April 2017.

Several demand letters were sent to IAs with long-outstanding balance, reiterating the submission of their LRs in compliance with COA Circular No. 94-013.

a. On May 2, 2017, Management followed up the remaining balances for refund of AFP – NADESCOM (P12,137.78); NNC (P944,172.65); and UP College of Education (P409,124.30) b. Sent letters on April 7, 2014, Nov. 21, 2016, & May 2, 2017 to the PIA for the liquidation of its balance of P4,171,252.08

II Management has required the SLP staff to do regular monitoring of all SLP fund transfers so that all unused funds will be immediately refunded after the implementation of the SLP project/activity.

Also, the DSWD FO2 Director has ordered the FO Program Coordinator of the SLP and the Accountant to do a validation of the program implementation for funds transferred to CSU-Gonzaga, CSU-Sanchez Mira, DTI-RO2, and ISAT which have not fully liquidated. We agreed to their commitment to submit the necessary reports to the Office of the COA Auditor until March 31, 2017.

VI Management commented that they will adhere to the Audit Team’s recommendations. IX The main cause of delay in project completion is the presence of informal settlers in the DSWD IX property. Series of meetings were conducted by Management with the City Social Welfare Development Officer (CSWDO) regarding the transfer of the informal settlers to a resettlement area, which have shown positive results. To date, there remain only 118 families who have not yet been relocated.

They also averred that meeting with CSWDO personnel and concerned informal settlers would be arranged so doable solutions could be agreed upon and the completion of long delayed projects could be realized. During the exit conference, Management mentioned that cash assistance will be given to families once they are relocated to a new site. Informal settlers are given up to March 15, 2017 to leave the area so that construction of the perimeter fence can resume.

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b) Due from GOCCs - P8,436.920 million

The balance of Due from GOCCs of P8,436.920 million included the amount of P3,550.207 million which were outstanding for two to ten years, with a difference of P105.406 million per result of confirmation.

The balance represents unliquidated balances of funds transferred to the different GOCCS for the implementation of various projects. The aging of the account is shown in Table 18.

Table 18. Aging of Due from GOCCs (in million PhP) Current CY 2014 FO Total (1 Year and CY 2015 Remarks and Prior Below) CO 7,864.340 4,404.408 959.839 2,500.093 outstanding for two to ten years CARAGA 0.008 - - 0.008 NCR 271.397 216.231 55.165 - undelivered items from PITC I 57.103 24.695 32.409 - defeating the purpose to hasten the implementation of project II 1.246 1.246 - - V 12.730 10.115 - 2.615 overstated by P31.693 million due to non-recording of payment of stipend of senior citizens which can be VI 89.538 89.538 - - attributed to inadequate monitoring of LRs from the Philippine Postal Corporation, resulting also in the understatement of Subsidies-Others Funds transferred to the NFA with book balance of P25.209 million as of December 31, 2016 did not agree with the NFA-confirmed balance of VII 60.505 60.505 - - P39.025 million or a variance of P13.816 million due to lack of monitoring and reconciliation of funds transferred to IAs. VIII 0.078 - 0.078 - X 10.889 10.889 - - XI 20.441 20.441 - - XII 48.645 48.645 - - TOTAL 8,436.920 4,886.713 1,047.491 2,502.716 Past Due 3,550.207

As gleaned from the above table, the amount of P3,550.207 or 42.07 percent were outstanding for two to ten years, the bulk of which represents fund transfers to LBP for cash grants to 4Ps beneficiaries.

Moreover, confirmation of the balances from the IAs showed a discrepancy of P105.406 million, details shown in Table 19.

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Table 19. Results of Confirmation Amounts (in Million PhP) Per GOCC Causes of Discrepancies /Remarks Per Books Confirmation/ Difference validation CO LBP 7,658.958 No reply PTNI 0.060 SHFC 10.360 10.360 0.000 TL//RC 23.500 23.500 Per confirmation, this was re- transferred by the TLRC to various NGOs, but no LRs were submitted despite numerous demand letters from the DSWD Accounting Office PITC 171.462 121.250 50.212 Some deliveries were not recognized/recorded in the books of account Total CO 7,864.340 131.610 73.712 FO 6 Discrepancy represents unrecorded PPC 89.538 57.845 31.694 payment of stipend to senior citizens Total 7,953.878 189.455 105.406

For the fund transfers to TLRC, confirmation revealed that the P23.500 million was given to the following Foundations but no LRs were submitted to date:

Amount DV# Payee Transferred 0120070100001 Kalinga sa Kapwa at Kalikasan Foundation 4.500 012007010079 Kalinga sa Kapwa at Kalikasan Foundation 0.500 0120061201962 Gov. Eunice Guerrero-Cucueco Foundation 3.150 012007010131 Gov. Eunice Guerrero-Cucueco Foundation 0.350 0120061201963 Kaagapay Magpakailanman Foundation 9.000 012007010130 Kaagapay Magpakailanman Foundation 1.000 0120070100198 Kaagapay Magpakailanman Foundation 5.000 Total 23.500

As regard the outstanding balance of P7,864.340 million at the CO, the amount of P7,658.958 million or 97 percent pertains to CY 2011 to 2016 fund transfers to the LBP for OTC payments of cash grants for the 4Ps beneficiaries. Details are shown in Table 20.

Table 20. Balances of Fund Transfers for 4Ps Account (Amounts in million PhP) Liquidation Balance Year Fund transfer CY2015 CY 2016 Total Unliquidated 2008 204.873 204.873 - 204.873 - 2009 2,473.797 2,472.552 1.244 2,473.797 - 2010 5,432.093 5,432.078 0.014 5,432.093 -

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Liquidation Balance Year Fund transfer CY2015 CY 2016 Total Unliquidated 2011 11,468.591 11,290.717 177.871 11,468.589 0.002 2012 17,772.870 17,419.442 164.867 17,584.309 188.561 2013 20,837.783 18,451.264 318.149 18,769.413 2,068.370 2014 24,600.529 24,197.453 354.938 24,552.391 48.138 2015 30,473.502 25,954.246 3,559.418 29,513.663 959.839 Sub-Totals: 113,264.037 105,422.625 4,576.502 109,999.127 3,264.910 2015 2016 29,691.163 - 25,297.115 25,297.115 4,394.048 Grand Totals 142,955.201 105,422.625 29,873.617 135,296.242 7,658.958

It must be noted that the MOA expressly provided that “LBP shall submit liquidation documents within five working days from the last date of the scheduled payout.

The non-liquidation of fund transfers by the IAs resulted in the accumulation of funds transferred to various GOCCs in the total amount of ₱8,436.920 million. Considering the length of time that elapsed, it is presumed that the projects for which the funds were transferred had already been completed.

We reiterated our prior years’ recommendations with modifications and the DSWD Secretary agreed to direct the Accounting Division to:

a) comply strictly with the guidelines on the grant, use, and liquidation of fund transfers as well as the provisions of the MOA with concerned IAs and make a strong representation with IAs’ officials to submit LRs;

b) monitor liquidations made by GOCCs for timely recording of the assets procured and expenses incurred and require the refund of any unexpended balance;

c) make necessary adjustments in the books of accounts for the unrecorded deliveries from the PITC; and

d) explore possible legal action against the Foundations which were recipients of fund transfers through TLRC receivership.

Management Comments:

FO Management Comments and Updates CO Liquidations of P3,165,587,705.01 was recorded from January to April 2017.

The Department has not been remiss in asking IAs to liquidate the amounts transferred to them. The Department sent letters to the IAs again last May 2, 2017 requesting immediate submission of LRs and to refund any unutilized balance of the funds transferred to them.

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FO Management Comments and Updates The balance of Due from Philhealth was reclassified to Due from GOCCs per JEV No. 2017-04-010663 dated April 1, 2017, as well as that of DSWD-City of Manila to Due from LGU per JEV No. 2017-04-011773 dated April 27, 2017 as recommended by the Commission.

The balance of P195,021,785.20 refers to the outstanding balance of the three IAs (TLRC, PITC, and Peoples Television Network).

The Department sent the People’s Television Network Inc. a letter dated 1 December 2016 following up the liquidation of the balance of P59,678.25.

As for the TLRC, the Department has also sent several demand letters but to date, the TLRC has yet to respond. The Department entered into several tripartite MOA with former Congressmen and the TLRC. These MOA did not authorize the TLRC to further transfer funds to NGOs. Thus, if the TLRC did transfer funds to NGOs, the Department did not know of, and did not consent to, such transfers.

Although the outstanding balance of the PITC appears large, this represents only 8.89 percent of the total P1,928,055,660.31 that the Department transferred to the PITC. More importantly, the PITC has regularly submitted LRs for the amount transferred to it, the latest of which was received by FMS-Accounting Division on 6 June 2016. The Department, through the Procurement Service, shall coordinate with the PITC to reconcile the balances in the respective books of accounts of the Department and of the PITC. I Management has already written a letter dated February 2, 2017 addressed to Ma. Lourdes T. Baua, President and CEO of PITC, requesting PITC to expedite the procurement of the required supplies/commodities/equipment. The agency was informed that there was a failure of bidding on November 29, 2016 and a recommendation for re-bid pursuant to Section 35 of Revised IRR of RA No. 9184 was made. Management assured the team that they will consider all recommendation on the succeeding procurement transactions of the Department. VI As of March 6, 2017 the Social Pension Program Unit has already reconciled the LRs of Philpost amounting to P31,693,500.00 and adjustments will be reflected in the books in March 2017. VII There was overstatement in the posting of LRs for NFA accounts which resulted to variance in the books of NFA. This started since year 2011 and the variance has accumulated to P13,815,515.55. The reconciliation of this account is ongoing and adjustments will be made as soon as these are completed to eliminate the variance. Management assured that there will be regular monitoring not only for NFA accounts but all accounts of fund transfers especially on updated posting of LRs.

c) Due from LGUs - P15,586.388 million Funds transferred to various LGUs remained unliquidated due to non- compliance with the provisions of COA Circular No. 94-013, specifically on the prompt submission of financial and accomplishments reports to inform on the status

88 of funded programs and projects, thus resulting in accumulation of unliquidated Due from LGUs of P15,586.388 million with approximately 41 percent past due.

During the year, DSWD FOs transferred funds to implement various poverty reduction programs through MOA with LGUs in the various cities/municipalities contrary to the provisions of COA Circular No. 94-013.

Aging of the account balance showed that of the outstanding balance of fund transfers to LGUs, approximately 41 per cent or P6,390.42 million of the respective unliquidated balance were aged over one to ten years as shown in Figure 2 below:

Figure 2. Aging of Fund Transfers by LGUs (in million pesos)

CY 2016 (current)

CY 2015 (over 1 yr)

CY 2014 and prior

0 2000 4000 6000 8000 10000

The figure above clearly indicates the increasing trend in terms of funds transferred to LGUs over the years. The details per Office as well as the relevant reported observations in the audit of fund transfers are as follows:

Balances DSWD (in million Observations and Remarks Offices PhP) CO 242.326 Represents fund transfers to the different LGUs and barangays for the implementation of various projects.

Approximately 98.5 percent or P238,744,741.63 represents releases to 764 barangays in CY 2016 in varied amounts ranging from P270,000 to P1,350,000 for the implementation of KC PAMANA community grants which can be completed within two to three months from the date of fund release. As of December 31, 2016, only 78 barangays have liquidated either partially or fully their accounts totaling P20,116,751.15.

Total unliquidated balance and long-outstanding accounts of P6,442.65, is non-moving since CY 2005 and tagged as a reclassification entry made in CY 2003. NCR 209.817 - CAR 353.538 - I 626.304 Covers CYs 2008 to 2016 balances. For 2016, out of

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Balances DSWD (in million Observations and Remarks Offices PhP) P662,134,169.00 transferred to LGUs, approximately 82 percent or P548,043,475.51 remained unliquidated as of December 31, 2016. The reasons of Management are:

a) complexity of the program/project b) political intervention, conflict among the administrators, intra-agency conflict c) difficulty in the implementation of the project d) delayed implementation of the project, e) delayed liquidation f) failure to adequately monitor the utilization as well as the liquidation of funds

A review on the account revealed errors or inconsistencies in the recording of the fund transfers appearing in the trial balance schedule - LGU account and comparison of some accounts between the Due from LGU schedule and the respective reports of each focal person showed discrepancies. II 495.215 - III 583.491 - IV-A 804.015 - IV-B 572.243 Continous granting of funds despite the failure of the recipient agencies to immediately liquidate within the prescribed period. V 780.123 VI 2,649.851 Approximately 52 percent or P1,377.92 million pertains to CY 2015 and prior years. VII 1,522.735 VIII 4,280.904 The bulk of the unliquidated fund transfers as of December 31, 2016 aggregating P3,189,865,769.77 or 68.28 percent was for Emergency Shelter Assistance (ESA); Social Pension (SocPen) of P446,246,500.00 or 9.55 percent; Cash for Building Livelihood Assistance (CBLA) of P310,527,015.00 or 6.65 percent; Cash for Work (CFW) of P272,032,825.00 or 5.82 percent and Supplemental Feeding Program of P228,933,030.69 and all other programs and projects of the DSWD FO VIII.

There were series of fund transfers made for SocPen to the same LGUs even though the previous fund transfer for the same purpose were not yet liquidated, hence, the unliquidated fund transfers for this purpose accumulated to an amount aggregating P445,963,000.00 as of November 30, 2016.

Of the 140 recipients of unliquidated fund transfers, 36 confirmation letters were sent to the IA Auditor for confirmation/ reconciliation of the account balance. Results of the confirmation letters sent to the LGUs noted that there were balances already liquidated by the LGUs of P53,503,721.00

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Balances DSWD (in million Observations and Remarks Offices PhP) that are still unrecorded in the books of the IA, thus overstating the account.

The GL of the account showed that the recorded fund transfers amounted to P2,410,762,508.13 but only P20,414,400.00 of DVs were submitted to COA, leaving P2,390,348,108.13 still unsubmitted to the auditor, thus preventing the conduct of post-audit of the transactions.

A total of P1,524,731.00 remained dormant for ten years, the amount represents balances of unidentified recipients and appears to be irregular such that it is not in line with the programs/activities of the LGUs.

The account balance includes unexplained/unreconciled adjusting entries of P5.0 million recorded as debit to the account. IX 353.067 X 655.503 XI 776.683 Prior year’s fund transfers to 16 municipalities of P37,582,168.60 for various programs/projects, are 100 per cent unimplemented, resulting in the non-attainment of the programs’ objectives and accumulation of unliquidated fund transfers account balances. These fund transfers were granted mostly for the implementation of BUB projects involving P12,280,000.00 and the rest are related to the agency’s regular programs.

The fund transfer to the Municipality of Pantukan, Compostela Valley dated November 23, 2015 for e-AICs was still 100 percent unliquidated for more than a year already, despite the very minimal amount of only P25,000.00

Fund Transfers to 43 municipalities were granted with additional funds amounting to P981,489,430.90 for the implementation of various programs, despite the absence of liquidation of prior grants.

The highest amount of additional releases and unliquidated fund transfers were under the Modified Shelter grants of P328,628,734.26.

The most numbered instances of transferring additional funds were noted mostly in KALAHI-BUB projects where 37 instances of additional transfers were made amounting to P53,477,122.50 for 23 municipalities, both from BUB and regular funds.

There are overlapping fund releases for the Supplementary Feeding Program amounting to P34,505,382.40 were also noted, leaving P32,722,396 or 95.17 percent of the

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Balances DSWD (in million Observations and Remarks Offices PhP) unliquidated total grants. Fourteen (14) additional fund releases were given despite the absence of full liquidation of funds. XII 481.604 CARAGA 198.968 P177,315,274.39 or 89.12 percent represents transferred funds for the implementation for CY 2016 and P21,652,360.97 represents transferred funds from CY 1997 to 2015 which are already past due TOTAL 15,586.387

The above observations and lapses concerning Due from LGUs account also showed laxity in monitoring of the liquidation of various fund transfers which casted doubts as to the proper utilization of funds in realization of program objectives.

We reiterated our prior years’ recommendations and the DSWD Secretary agreed to direct FO Directors concerned to:

a) require LGUs to comply strictly with the provisions of COA Circular No. 94-013 dated December 13, 1994 on the submission of LRs and refund the remaining unutilized funds for completed projects, if any;

b) require Accounting and project personnel to monitor status of implementation and compliance of concerned LGUs with the above Circular;

c) include timelines on project implementation in the MOA to be able to impose sanctions against the IAs in case of its failure to implement the projects as specified in the MOA; (FO XI)

d) ensure that the fund transfer is properly taken up in the books, regular reconciliation and monitoring on the settlement of fund transfers should be intensified; (FO I)

e) monitor project implementation to hasten liquidation of various funds among the different municipalities with multiple program fund transfers; (FO XI)

f) direct the Accountant to submit the accounts and vouchers and its lacking supporting documents intact to the Auditor within the period prescribed by COA rules and regulations (FO VIII); and

g) require the Accountant to review and analyze the account and request write-off of the balances which are already dormant following the

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requirements under COA Circular No. 2016-005 dated December 19, 2016. (FO VIII)

Management comments, which included updates on the status of unliquidated fund transfers after December 31, 2016, are summarized as follows:

Offices Management Comments and Updates CO The amount of P26,193,450.51 was liquidated from January to April 2017.

Demand letters dated November 23, 2016 were already sent to the following LGUs: Municipal Government of Taal, Batangas; Municipal Government of La Libertad, Negros Oriental; City Government of Guihulngan, Negros Oriental; and Provincial Government of North Cotabato.

With regards to the dormant outstanding balance of due to LGUs amounting to P6,442.65, the Department will officially request for the write-off to the Commission. I Out of the 2015 unliquidated cash advances in the amount of P694,595,746.45, the amount P539,490,925.99 was liquidated as of December 31, 2016. The errors/lapses made on the multiple entry of the checks/disparity of the posted amount granted, liquidated and its balances/non posting/non recording of some of the fund transfers and that they are in the process of improving the recording/entry of data so that there will be no room for unintentional errors or omissions. IV-B Sending of quarterly demand letters is being done regularly and that close monitoring of all unliquidated fund transfer is being adopted. Project Officers conducted consultation with project implementers and accountants during official filed visit to LGUs. They noted also, that LGU project staff and finance officers were always reminded about the outstanding fund transfer during program review of the different projects/units (PIR). VI Created a Team to gather the liquidation reports from LGUs. As of March 14, 2017, the Team was able to collect the liquidation reports amounting to P1,008,416,525.51 which will be reflected in the books before the end of March 2017. It is also proposed that the collection and monitoring of the liquidation reports be included in the function of the Municipal Action Team (MAT) and the updated reports will be submitted to COA every quarter. VIII Already adopted several control measures and monitored fund transfers to LGUs. Several telephone calls were made by the program staff to remind LGUs of their outstanding balances. The agency also went down to the LGUs to provide technical assistance in reconciling and retrieving liquidation reports. Moreover, demand letters were sent to LGUs with unliquidated balances. XI The immediate release of funds from its CO caused its non-implementation coupled with some impediments, such as logistics, procurement and the like were also experienced by these municipalities which also affected its non- liquidation.

Already issued directives to the different municipalities for the full liquidation

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Offices Management Comments and Updates of various fund transfers within specific deadlines, on or before 30 June 2017, otherwise all unexpended funds shall be required for full refund. In the case of granting additional fund transfers for the BUB projects despite previous transfer’s outstanding balances. The FO averred that it was allowed by the then DSWD Secretary in her memorandum dated 14 August 2015. The non- release of BUB funds to LGUs that have not fully liquidated the funds for the BUB projects resulted in significant delays in its implementation for CY 2015 projects.

As a rejoinder, the aforementioned contention was however unacceptable considering that most of these additional grants are pertaining to releases during the year 2016 and the one stated in the memorandum pertains only for CY 2015 project implementation. More so that the said memorandum will not prevail in the succeeding years as it only applies to specific budget year of 2015.

With regards to the overlapping fund releases for the SFP, as per SFP Omnibus Guidelines, additional funds could be granted if at least 70 per cent liquidation was made on the previous releases. However, we still observed less than 70 percent liquidations of previous releases but were still granted with additional fund transfer. The Municipalities of Maco in Compostela Valley Province and Sarangani in Davao Occidental were granted with additional funds amounting to P3,268,746.00 and P880,580.00, despite that these fund releases were only 57.25 percent and zero percent liquidated, respectively. XIII The FO is doing its best to conform to the legal requirements and guidelines on the liquidation of the account Due from LGUs. However, they are also committed to serve the poor, vulnerable disadvantaged and the needy with the end view of ensuring that the benefits due to them will be delivered the soonest possible time. Thus, they prefer granting advances per program. They are taking serious efforts to secure liquidation from LGUs for the advances released. It has been their practice of sending demand letters to LGU with unliquidated balances. Moreover, the liquidation of advances to LGU is one of their agenda of discussion in every Account Management Team Meeting and during Program Review and Evaluation workshops which is attended by concerned LGU officials. Furthermore, the management has assigned staffs to conduct monitoring visits and follow-up the LGUs on their submission of the LRs.

Undelivered Items from PS-DBM

8. Advances to PS-DBM for the procurement of common-use supplies and materials and equipment included undelivered items of P235.836 million and P0.769 million for CO and FO V, respectively. Moreover, a discrepancy of P3.463 million was noted in DSWD-CO and FO XI due to absence of reconciliation of records between DSWD and PS-DBM.

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Accounts reconciliation is a control process to ensure that recorded account balances are correct at the end of an accounting period and for the fair presentation of accounts in the FS.

The DSWD procures common-use supplies and materials, software and Property, Plant and Equipment (PPE) from the PS-DBM. Funds for said requirements are remitted in advance to this agency.

At DSWD-CO, accounting records showed that as of December 31, 2016, the outstanding balance of the PS-DBM recorded under the Due from NGAs amounted to P235.83 million. Out of the 2015 and prior years’ advances, a minimal amount of only P8.648 million or 21 percent have been delivered in 2016, while P72.948 million or 26 percent of the 2016 advances have been delivered on the same year. As compared with the confirmed PS-DBM balances, there was a discrepancy of P3.266 million with the DSWD accounting records. It was observed that there was no reconciliation of records between the PS-DBM and DSWD-CO.

It is worthy to note that despite the existence of undelivered items in prior years’ (CY 2015 and below) with a substantial amount of P32.647 million, the DSWD-CO still transferred funds of P276.137 million to the PS-DBM in CY 2016 for the procurement of desktops, laptops for CO and FOs, Microsoft Premier Support Services, CoreCAL ALNG LicSAPK MVL UsrCAL, Office Productivity Tools, and Office Standard Development Software Licenses, among others, with only a liquidation of P72.948 million, thus delaying implementation of programs activities of the DSWD CO to the disadvantage of users and stakeholders.

In FO V, undelivered items purchased from the PS-DBM were not accounted for, which resulted in the misstatement of Due from NGAs and related expenses of P769,247.54.

For FO XI, confirmation from the PS-DBM disclosed a creditable balance per record of P240,465.22 as of December 31, 2016 for various procurement transactions. However, verification of the agency’s accounting records disclosed a balance of only P43,062.50 which was significantly understated compared to the PS-DBM records of P240,465.22. Comparative analysis between the records of the DSWD and DBM- PS disclosed a discrepancy of P197,402.72 mostly from unaccounted deliveries of procured items from PS-DBM.

We reiterated our previous years’ recommendations and the DSWD Secretary agreed to direct CO and FO Directors concerned to:

a) instruct the Accountant and the Property Officer to: (i) work closely with the PS-DBM for the immediate delivery of supplies, materials, equipment, and other services amounting to P32.647 million; and (ii) stop the transfer of funds to PS-DBM, instead, offset the balance against current and future requisitions, if warranted (CO); and

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b) require the Supply and Property Division to reconcile periodically with the Finance Division and the PS-DBM regarding the undelivered office supplies and the discrepancy noted (CO, FO XI).

Management Comment:

At the CO, Advances to PS-DBM has been reduced to P235.495 million. The FMS-AD and PS is regularly reconciling the records for the outstanding balance. The DSWD stopped transferring funds to PS-DBM (for CSE procurement) since 2015. The amount transferred for 2016 are for laptop and desktop computers, and software licenses which have become off-the-shelf at PS-DBM.

In FO IV-B, a total of P3.152 million has been refunded by the PS-DBM on February 27, 2017 for undelivered supplies and has already been deposited to the BTr.

Unliquidated Fund transfers to NGOs/POs - P7,178.836 million

9. The non-liquidation of fund transfers to various NGOs/POs resulted in the minimal settlements, long outstanding accounts, and accumulation of the account balance of approximately P7,178.836 million as of year-end, of which 64 per cent or P4,582.577 million remained unliquidated for more than one year.

The Revised Guidelines and Documentary for Common Government Transactions on Fund Transfers to Non-Government Organizations/Peoples Organizations (NGOs/POs) prescribed under COA Circular No. 2012-001 dated June 14, 2012 provides guidelines on fund transfers to NGOs/POs, as well as COA Circular No. 2007-001 dated October 25, 2007, which states, among others:

Section 5.3 – The signing officials of Government Organizations (GOs) to the MOA shall cause close monitoring and inspection of project implementation and verification of financial records and reports of the NGOs/POs, and shall insure compliance with the provisions of the MOA and of the COA Circular. Fund releases are subject to liquidation through submission of Fund Utilization Reports (FURs).

Section 5.4 – Within sixty (60) days after the completion of the project, the NGO/PO shall submit the final FUR certified by its Accountant and approved by its President/Chairman to the GO, together with the inspection report and certificate of project completion rendered/issued by the GO authorized representative, list of beneficiaries with their acceptance/acknowledgment of the project/ funds/goods/services received. The validity of these

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documents shall be verified by the internal auditor or equivalent officials of the GO and shall be the basis of the GO in recording the fund utilization in its books of accounts. These documents shall support the liquidation of funds granted to the NGO/PO.

The SL balances of the Receivables-Due from NGOs/POs disclosed accumulated balance of P7,178.836 million as of December 31, 2016, of which P4,582.577 million or 64 percent is aged over one year. The details are summarized in the Table 21.

Table 21. Aging Schedule of Fund Transfers to NGOs/POs Amounts (in Million PhP) DSWD CY 2016 CY 2015 CY 2014 and Offices TOTAL Current (over one year) Prior CO 299.187 200.983 434.871 935.041 NCR - .668 178.774 179.442 CAR 46.203 9.689 2.598 58.490 I 23.494 19.026 .692 43.212 II - .610 .700 1.310 III 168.386 15.255 32.885 216.526 IV-A 36.910 1.868 5.297 44.075 IV-B 102.630 20.420 21.069 144.119 V 230.291 411.724 28.565 670.580 VI 19.500 1,168.284 14.467 1,202.251 VII 6.311 1,680.024 14.270 1,700.605 VIII 449.928 58.430 16.782 525.140 IX 201.854 18.143 .235 220.232 X 641.856 53.040 1.726 696.622 XI 232.136 - .342 232.478 XII 4.667 166.334 .800 171.801 CARAGA 132.907 4.006 - 136.913 Total 2,596.260 3,828.504 754.073 7,178.837 Total Over 1 Yr & Prior 64% % to Grand Total of ₱7,178.837 ₱4,582.577

Below are the observations of DSWD FOs on fund transfers to NGOs/POs:

DSWD Balance Observations Offices 12/31/2016 CO 935.041 Approximately P299.187 million pertains to balances of current year fund transfers for community grants for the implementation of KC-PAMANA projects, construction of JSDF-CDED community service facility like warehouse with solar dryer, nursery farm, and shelters for typhoon Yolanda affected families.

The prior years’ balance of P635.854 million pertains to 74 NGOs/POs with balances aged two to more than six years, with only four (ABS-CBN, ERDAF, IOM, PNRC) that have

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DSWD Balance Observations Offices 12/31/2016 reported movements for the year.

A total of 28 NGOS’s with balances of P85.365 million were long outstanding and dormant for ten years and beyond.

Out of the 90 NGOs with unliquidated balances of P935.040 million, approximately 27 percent or 24 LRs with total amount of P462.005 million are with the Internal Audit Service (IAS). The IAS cited that some liquidations received are for review/ validation and for submission of lacking documents from the NGOs/POs. CAR 58.490 Approximately P1.408 million aged more than three years were granted to Day Care Parents Associations mostly in the province of Abra in 2009. As time passed, liquidation of said funds has become almost impossible due to the following:

a) the project already finished and there are no more staff in charge of monitoring liquidation of said funds; and b) the whereabouts of members of the associations whose children have long graduated from the day care centers, are unknown and could not be located despite diligent efforts.

Approximately P9.689 million and P4.755 million, aged more than one year to two years and six months to one year, were granted to KKBs under the Bottom-Up- Budgeting/Grassroots Participatory Budgeting Process (GPBP). Implementation of the projects were mostly supervised and monitored by the municipal government. All projects have been completed as of August 31, 2016 however, liquidation of the funds was very slow due to the absence of teams in the provinces to follow up required documents from the associations. I 43.212 Majority of the unliquidated funds came from Kalahi BUB program. The BUB Focal Person claimed that the Barangay Sub-Project Management Committees (BSPMC) concerned were authorized/given two years to implement and liquidate the projects which is not in keeping with Section 5.4 of COA Circular no. 2007-001 which requires the submission of FUR, within 60 days after the completion of the project for the liquidation of funds granted to them.

MOA between the agency and the NGO/POs have no specific period to liquidate the funds. IV-B 144.118 Fund transfers of P144.118 million remained unliquidated as of December 31, 2016 due to non-submission of LR. XI 232.478 Fund transfers to various NGOs from prior years of P0.342 million were long due/outstanding for more than three years. Management informed that the concerned NGOs failed to

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DSWD Balance Observations Offices 12/31/2016 fully liquidate the fund balances due to problems encountered in gathering all the documents pertaining to the said liquidation.

Considering the length of time that has elapsed, the said fund transfers could have been expended and the appropriate transactions not recognized in the books, thus may mislead the readers of the FS on the true condition of the account.

We reiterate our previous years’ recommendations and the DSWD Secretary agreed to direct:

a) FO Directors and Accountants concerned to: (i) demand on a regular basis from the NGOs/POs the submission of LRs and refund of unutilized balance, if any, especially those with long-outstanding balances to comply with the guidelines prescribed under COA Circular No. 2007-001 and the provisions in the MOA/Agreement; and (ii) strengthen the monitoring controls on fund transfers to NGOs/POs; (iii) for NGOs/POs that are non-existent/non-operational and whose whereabouts are unknown, the legal office to institute necessary actions to require the incorporators to liquidate/refund their accounts; (CO)

b) IAS to expedite the evaluation of projects and review of liquidation documents for the immediate recording of LRs as well as submission to the COA for post audit; (CO)

c) compel the IOM to submit the original supporting documents to the liquidations and transmit to the COA pursuant to Section 43 paragraph (4) of PD No. 1445 to avoid the issuance of a Notice of Suspension; (CO)

d) ensure that necessary provisions such as timelines, responsibility as well as penalty are included in the MOA with NGOs/POs for accountability purposes; and

e) assign specific personnel to monitor and follow up FURs from NGOs/POs.

Management comments, which include updates on the status of unliquidated fund transfers after December 31, 2016, are summarized as follows:

Fos Management Comments and Updates CO This has been reduced by a total of P39,488,987.68, which consists of liquidation and refunds from community grants for the implementation of KC-PAMANA projects

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Fos Management Comments and Updates Further, the following NGOs – (a) La Paz JSDF – CDED Farmers Association (Agusan del Sur); (b) San Remigio Producers Cooperative; (c) CDED Farmers Association; (d) Paracelis Abat Farmers Development; and (e) Silayan Kalinga Community Development Foundation, were organized by the Department itself as part of its various programs, specifically the SLP. The addresses of these NGOs were verified by the SLP National Project Management Office (NPMO). The SLP-NPMO established the addresses of these NGOs during the social preparation and community organization stage.

The Department has already sent the letter requiring the IOM to submit original supporting documents to support its liquidation report. CAR Project personnel commented that teams previously assigned in the provinces to monitor the projects were pulled out in 2016 when the projects were completed. After the pull-out, very minimal follow up has been done on the liquidation of the funds, hence the past due balances.

Management commented that efforts are being intensified in following up liquidation of the fund transfers. I The issue of those unliquidated amounts which were reported as bank charges, the Accountant will require the BSPMC head a certification that the unliquidated balances were bank charges for these to be considered as liquidation of the same, in adherence with the recommendation made by the audit team. Accordingly, all the Kalahi BUB projects that were enumerated thereto were already liquidated on December 2016. IV-B Sending of quarterly demand letters is being done regularly and that close monitoring of all unliquidated fund transfer is being adopted. Project Officers conducted consultation with project implementers and accountants during official filed visit to NGOs/POs. VI The issue has been raised in the Management Committee meeting and reiterate on the participation of programs/projects concerned on the monitoring and collection of liquidation reports of NGOs/POs and the inclusion of necessary provision in the MOA for accountability purposes.

The CY 2016 fund transfers are with on-going project implementation.

A DSWD Team was created for the monitoring and collection of reports from the LGUs and will conduct the same activities from NGOs/POs.

Misstated and Unreconciled Inventory Balances - P1,060.326 million

10. The recorded balance of Inventory was overstated by a net amount of P964.568 million due to non-preparation and submission by the Property Office of RSMIs for the inventory issuances to the Accounting Office for recording. Moreover, the accuracy and existence of the balance of inventory in five FOs of P1,647.590 million could not be ascertained due to non-conduct of physical count, non-maintenance of SL and SLC, prior years balance remained unchanged, and non-conformity with the perpetual inventory system.

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Section 9, Chapter 8 of GAM Volume I, states that, “supplies and materials purchased for inventory purpose shall be recorded using the Perpetual Inventory System, resulting in a more accurate inventory records and a running total for the cost of goods sold in each period. Regular purchases shall be coursed through the inventory account and issues thereof shall be recorded as they take place except for supplies and materials purchased out of PCF for immediate use or on emergency cases which shall be charged directly to the appropriate expense accounts.”

Section 17 requires, among others, the following Records, Forms and Reports to be prepared and/or maintained.

a) Supplies Ledger Card (SLC) – shall be used to record materials received, issued and the balance both in quantity and amount at any time. It shall be maintained by the Accounting Division/Unit for each kind of supplies and materials. The IAR, RIS, RSMI, PO and DR serve as the original sources of information for making entries on the card. b) Stock Card (SC) – shall be used to record all receipts and issues of supplies and the balance in quantity at any time. It shall be maintained by the Property and/or Supply Division/Unit for each item in stock. c) Report of Supplies and Materials Issued (RSMI) – shall be prepared by the Property and/or Supply Custodian based on the RIS and shall be used by the Accounting Division/Unit as basis in preparing the JEV to record the supplies and materials issued. d) Report on the Physical Count of Inventories (RPCI) – shall be used to report the physical count of supplies by type of inventory as at a given date. It shows the balance of inventory items per card and per count and shortage/overage, if any.

Section 53 of the GAAM, Volume III, further provides that “accountability for the custody and use of an asset is to be assigned, maintained and periodic comparisons shall be made of the existing asset with the recorded accountability and appropriate action taken on any differences.”

The recorded Inventory as of December 31, 2016 amounted to P2,726.371 million, however, review of the balances per inventory account showed that the balances of inventories in CO, NCR, FO 4A, and FO X1 differed with those in the report of physical count, with a total variance of P964.568 million, as shown in Table 22.

Table 22. Unreconciled Book Balance and Report of Physical Count (in million PhP) Total Remarks/ Inventories Some Cause/s of the RPCI Books Difference Differences Welfare Goods for Distribution 122.913 965.856 842.943 No RSMI prepared Medical Dental & laboratory supplies for and submitted to distribution 0.000 31.905 31.905 Accounting Office Construction Materials for Distribution 0.000 6.577 6.577

Office Supplies Inventory 16.312 25.443 9.131

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Total Remarks/ Inventories Some Cause/s of the RPCI Books Difference Differences Other Supplies and Materials 0.608 49.707 49.099 Drugs and Medicines Inventory 0.088 0.140 0.052 Unrecorded supplies Medical, Dental & Laboratory Supplies 0.063 0.003 (0.060)

Construction Materials Inventory 1.840 1.563 (0.277) Textbooks and Instructional Materials No inventory Inventory* 0.000 0.137 0.137 Food Supplies for Distribution 0.000 13.842 13.842 Food Supplies Inventory 0.542 11.589 11.047 Accountable and no-Accountable forms invty 0.009 0.184 0.175 semi expendable items 0.883 0.88 (0.003) Grand Total 143.258 1,107.826 964.568

Moreover, the following observations were noted in the FOs:

Inventory FO Observation Balance IV-A 1,033,599 Available records showed that balances from Drugs and Medicines Inventory, Medical, Dental and Laboratory Supplies Inventory, and Textbooks and Instructional Materials Inventory remained unchanged from the Entity’s 2010 balances of ₱.071 million, while the Food Supplies for Distribution and Other Supplies and Materials Inventory balances of P61.644 million remained unchanged from the previous year’s balances. The related purchases and issuances during the year were not reflected at year-end.

Goods amounting to P13.842 million for distribution to people affected by calamities/disasters/ground conflicts were erroneously classified and recorded as food supplies, misstating the Food Supplies for Distribution and Welfare Goods for Distribution by the same amount. V 161.298 The balances of inventory accounts as at year-end included balances of P64.8 million which remained unchanged for more than three years as well as unrecorded issuances for welfare goods and non- conformity with the perpetual inventory system.

Other Supplies and Materials Inventory with a balance for current year of P0.972 million should have been charged to expense since these were already issued to end-users.

Welfare Goods for Distribution showed a balance of P95.5M as at year-end. The Notes to the Financial Statements stated, “Although all (welfare goods) were already distributed by the Field Office V for its intended beneficiaries, the entire amount still reflected in the books of account since no report has been submitted to the Accounting Section pertaining to its distribution.” VI 119.159 The Supply Officers assigned at various programs failed to prepare the RSMI based on RIS, hence, the Accounting Unit has not prepared Journal Entry Vouchers to record all supplies and materials issued.

Further, RPCI was not submitted at the end of the year as no physical count of inventories was conducted. The Accounting Unit also failed to maintain the SLC to support the GL balances and the Supply Unit do not properly maintain/update their SC, for each type of supplies.

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Inventory FO Observation Balance VIII 274.463 The failure of the Accountant to record the issuance of inventory items and the non-keeping of records of the accounts likewise with the Supply Officer where there was no RPCI prepared/submitted and SC not maintained/updated raised doubts on the correctness and reliability on the account balances.

The BAC awarded the contract amounting to P13.1 million to Fortune Group Corporation on the procurement of assorted goods for stockpiling of commodities and food for work activities on Risk Reduction Management Program despite that the Net Financial Contracting Capacity of the winning bidder was below the Agency Budget of the Contract (ABC) for the Project to be bid thus ineligible and disqualified to participate in the bidding. Moreover, other supporting documents to the contract was lacking and deficient. XI 59.071 Actual physical count of unpacked relief goods and Family Food Packs showed a shortage of P1,168,987.98 and overage of P490,012.65 respectively, adversely affecting the validity and reliability of the welfare goods inventory account

Internal control deficiencies in the management of Inventories:

a) Lapses in the documentation and recording of inventories. SCs not timely accomplished and the warehouse in-charge does not keep its own files of delivery receipts and/or charge invoices which should be the basis in recording the debits to the SCs. b) Damaged goods and dented canned goods of P19,962.08 were set aside and excluded from repacking without preparing a separate report to account for its disposal. c) The agency’s inefficient warehouse management and inadequate facilities in storing procured welfare goods resulted in the difficulty in conducting inventory count. d) Warehouse was accessible to any person. The repackers just come and go inside the warehouse without anyone checking them and their belongings before going in and out. These hired individuals to do the repacking of Family Food Packs were not given IDs or name tags for easy identification of repackers from management personnel. Warehouse is not equipped with CCTV cameras to capture irregular operation from the inside. e) Receiving and recording of goods from supplier is done by the same warehouse personnel contrary to the principle of sound internal control on the segregation of incompatible duties and functions.

We recommended and the DSWD Secretary agreed to require the concerned FO:

a) Property Division to conduct physical count of inventories and prepare a Report thereon; prepare RSMI and submit to Accounting unit for recording of issued inventories; (FO VI)

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b) implement internal control measures to ensure that inventories are safeguarded from possible wastage and misappropriation; (FO XI)

c) Property and Accounting Divisions to diligently prepare, maintain and update their Inventory Records, Forms and Reports; (FO IVA, V , VI, VIII) and

d) Accountants to make the necessary adjustments in the books of accounts for the understatement/overstatement of inventory accounts.

Accounting Errors and Other Deficiencies Affecting Balances of PPE Accounts

11. The recorded balance of PPE totaling P42.239 billion was understated by P568.884 million due to: a) unrecorded PPE found at station; b) unrecorded donated PPE; and c) Construction in Progress not reclassified to the appropriate PPE account. Likewise physical count for PPE and reconciliation of property and accounting records was not conducted to support the balance and existence of PPE.

a) Unreconciled Balances – P114.653 million

Section 42, Volume I of the GAM, provides that “The Chief Accountant shall maintain the PPELC for each category of PPE including work and other animals, livestock etc. The PPELC shall be kept to record promptly the acquisition, description, custody, estimated useful life, depreciation, impairment loss, disposal and other information about the asset. For check and balance, the Property and Supply Office/Unit shall likewise maintain PC for PPE in their custody to account for the receipt and disposition of the same. The balance per PC shall be reconciled with PPELC maintained by the Accounting Division/Unit. They shall be reconciled with other property records like PAR.

Further, Section 38 of Chapter 10 of the Volume I of GAM provides that: “The entity shall have a periodic physical count of PPE, which shall be done annually and presented on the Report on the Physical Count of Property, Plant and Equipment (RPCPPE) as at December 31 of each year. This shall be submitted to the Auditor concerned not later than January 31 of the following year. Equipment found at station and losses discovered during the physical count shall be reported to the Accounting Division/Unit for proper accounting/recording.”

The recorded PPE as of December 31, 2016 amounted to P42.239 billion. Review of the property records and RPCPPE however, disclosed a net difference of P114.653 million, details as shown in Table 23.

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Table 23. Comparison of PPE Balances per Accounting and Property Records

Amounts (in Million PhP) DSWD Per Property Observations Offices Per Books Record/ Difference RPCPPE CO 28,459.836 28,822.041 (362.205) The net difference of P362,205,486.73 can be attributed to the failure of the Accounting Division to record various PPE found at station amounting to P372,022,365.50, misclassification of some PPE, and variance in unit costs. NCR 357.702 234.457 123.245 Non-maintenance of PC, and un-updated PPELC IV-B 84.515 73.246 11.269 the Agency did not undertake complete physical count of inventory and did not maintain PPELC V 165.168 108.486 56.682 The balances of PPE accounts were not adequately supported with reports or records, except for Machineries which had a supporting schedule. The PPELC do not show the beginning balances of PPE.

Management’s failure to reconcile the concerned sections’ records raised doubts on the accuracy and existence of the PPE accounts as recorded in the books. VI 64.739 68.931 (4.192) PPEs found at station were not recorded in the books. Further, the Accounting Division did not maintain the PPELC while the PCs of Property/Supply Unit were not updated thus, the difference could not be immediately identified and adjustments could not be immediately effected. VIII 111.662 47.233 64.429 Office Equipment overstated and ICT Equipment understated by P7,160,041.00 and P7,006,545.00 XIII 128.946 132.827 (3.881) No periodic reconciliation made between the PPELCs maintained by the Accounting Division with balances per PC of the Supply Unit.

PPELC used by the Accounting Staff is not the prescribed form per Appendix 70 of GAM Volume II. Likewise, PCs of the Supply unit were not properly and completely accomplished. Total 29,372.568 29,437.221 (114.653)

The net difference of P114.653 million could have been adjusted has there been proper reconciliation of records between Accounting and Property Divisions on a regular basis.

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The unreconciled differences were likewise attributed to non-conduct or incomplete of physical count of PPE by above FOs and other accounting errors.

We reiterated our recommendations in prior years for the DSWD Secretary to require the Accounting and Property Management Divisions to conduct complete physical count of PPE and undertake the regular reconciliation of their records and ensure that all discrepancies are immediately investigated, cleared, and adjusted in either records. b) Unrecorded PPE Donations – P127.062 million

Section 3, Chapter 10 of the GAM, Volume 1, states “Criteria for Recognition.

The cost of an item of PPE shall be recognized as assets if, and only if:

a) it is probable that the future economic benefits or service potential associated with the item will flow to the entity; b) the cost or fair value of the item can be measured reliably; c) beneficial ownership and control clearly rest with the government; d) the asset is used to achieve government objectives; and e) it meets the capitalization threshold of P15,000.

Under this recognition principle, an entity shall evaluate all its PPE costs at the time they are incurred. These costs include cost incurred initially to acquire or construct an item of PPE and costs incurred subsequently to add to, replace part of, or service the PPE.”

Section 12 further states that, “Cost of PPE acquired through donation without condition shall be taken up at its fair value at the date it is acquired. All expenses incurred in connection with the donated asset, such as delivery and installation costs, shall be included in the amount recognized as asset”.

Moreover, Section 27 states, “PPE gradually loses its ability to provide service over the course of time. Because of this, its cost needs to be distributed on a systematic basis over its useful life. The allocated cost is referred to as depreciation. The depreciation charge for each period shall be recognized as expense unless it is included in the carrying amount of another asset. For example, the depreciation of manufacturing plant and equipment is included in the costs of conversion of inventories. Similarly, depreciation of PPE used for development activities may be included in the cost of an intangible asset recognized.”

At DSWD-NCR, titles/deed of donations/presidential proclamation pertaining to three parcels of Land with total values amounting to P96.019 million, were not yet transferred in the name of the DSWD-NCR, thereby

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exposing government’s assets to possible adverse claims of interested third parties.

Likewise, donated buildings amounting to P31.043 million was neither recorded/ recognized in the FS nor disclosed in the Notes to FS.

The failure of the Accounting Division to record the donated PPE which have been beneficially owned and used by the NCR rendered the related PPE accounts and Accumulated Surplus understated. Consequently, the corresponding depreciation expense were not recognized.

We recommended and the DSWD Secretary agreed to require the concerned NCR FO to:

a) facilitate the issuance of titles/deeds of donation/presidential proclamation to the three parcels of land; and

b) record in the books of accounts of DSWD the cost of the donated buildings to recognize ownership of the donated assets; compute and recognize the corresponding depreciation; and include in the RPCPPE the said donated buildings.

Management Comments:

FO Management Comments and Updates CO The Accounting and Property division are currently reconciling the PPE accounts. Necessary adjustments will be made once reconciliation is completed II PCs were already established for PPE acquired for the period January to December 2016.

Committed to establish not later than April 15, 2017 the PCs for PPE acquired prior to CY 2016 which are included in the RPCPPE.

The properties for disposal which are in the DSWD FO2 have already been disposed while a proper inventory has been conducted of those properties in the CV-RRCY and the PDAC has convened for the appropriate mode of disposal. The opening of sealed canvass was conducted on November 21, 2016. On the other hand, updated inventory report on the properties in the RSCC and the RHWC were already submitted. The disposal for the unserviceable properties in the CVRRCY were already disposed while those in the RSCC and the Regional Haven have yet to be disposed

VI The reconciliation by the Accounting and Property Unit is on-going. XIII The non-reconciliation between the books of accounts and RPCPPE was due to different classification per account code and that, they have just made some adjustments on February 28, 2017, thru reclassification and by adding some items that were found out during their finance conference. They further stated that the audit findings are well taken.

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c) Completed projects not reclassified to PPE account-P69.800 million

Completed projects with a balance of P69.800 million were not reclassified to the appropriate PPE account pursuant to Section 8 paragraph (g) the Government Accounting Manual (GAM) due to non-submission of liquidation documents by the Contractors.

Section 8 paragraph (g), Chapter 10 of GAM Volume I, states that:

During the construction period, all expenses incurred in relation to the construction of the PPE shall be taken up in the books as Construction in Progress (CIP) with the appropriate asset classification. As soon as the construction is completed, the “Construction in Progress” account shall be reclassified to the proper asset account. Likewise, all expenses such as interests, license fees, etc., during the construction period shall be capitalized.

The balance of Construction in Progress as of December 31, 2016 amounted to P236.065 million. Audit disclosed that in DSWD-CO five projects with a balance costing P69.800 million were already completed but not recorded in their proper PPE accounts, thus overstating the CIP and understating the related PPE accounts by the aggregate amount. The subject CIP are summarized in Table 24.

Table 24. DSWD-CO list of completed projects under CIP (In million PhP)

Balance Contract Contract Fund Status of Name of Project Contractor as of Remarks Period Price Transferred Completion 12.31.2016

Repair and Dadoy Freight Jan 7, 1.960 1.690 Completed Renovation of Elsies Service & 2013 to Gaches Construction May 7, Supply 2013 Supply and delivery of Technologies Payment 1.287 1.287 1.287 100% Completed structured cabling for Specialist INC for the the new KC building. 100% billing was on April 8, 2013 Construction of 3- Aylan Dec 21, 55.868 41.930 Completed storey building (4P's Construction 2012 to and being Bldg). and Trading Dec 18, used by 2013 the 4Ps Unit Proposed 3-storey, GCI 1/30/2014- 13.296 13.875 13.296 100% Completed Micro-MRB (Phase II) Construction 12/3/2015 and Development Corporation Construction of 3- Dover Completed 18.272 14.000 11.598 100% Completed storey Bldg FOal Construction, July 12, Office Ph-1 INC./Pablo S. 2013 Labasbas Const. (J/V) Total Cost of Completed Projects 90.683 69.800

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Balance Contract Contract Fund Status of Name of Project Contractor as of Remarks Period Price Transferred Completion 12.31.2016

Repair/Rehab/Improv Ale-J May 31, 13.034 7.000 4.921 30.34% Should ement of Roofing at Construction 2016- have been DSWD CO and Trading December completed 26, 2016 as of this date. no liquidation yet. Upgrading of 2nd floor Ale-J May 31, 9.506 5.000 1.426 NO data on employees dormitory Construction 2016- completion and Trading October 31, 2016 Pantawid Pamilya Aylan August 11, 25.666 27.000 3.850 NO data on Will be Training Center - Construction 2016- completion completed Phase II and Trading 5/8/2017 Construction of Day New Rich May 31, 7.128 3.750 1.069 No data on Care and Child General 2016- completion Minding Center Contractor September Services and 30, 2016 Trading Co., INC. Repair/rehab/improve N.C. Aguilar May 5.616 3.000 2.453 38.24% Should ment of existing Construction 31,2016- have been powerhouse at and Supply INC August 31, completed Matapat & Magiliw 2016 as of this Bldg. date, no liquidation yet. Total of CIP 151.633 83.520

The total costs of the completed projects were not yet reclassified to the appropriate PPE account due to non-submission of liquidation documents from the contractor. Considering that the projects were already completed, accepted, and already in use, the same should be transferred to the appropriate PPE account and the corresponding depreciation provided.

Moreover, in FO VI, the balance of CIP per books of P9.566 million and the Schedule of Construction in Progress submitted by the Property Officer of P7.793 million has a difference of P1.773 million, thus, casting doubt as to the accuracy of Construction in Progress balance at year-end.

We recommended and the DSWD Secretary agreed to require the:

a) Engineering Unit to follow up submission of liquidation documents from the DPWH/Contractors and submit the same to the Accounting Office for proper recording; (CO)

b) Accounting Division to coordinate with the Engineering Unit to submit status of all civil works and necessary documentation to determine the completed projects and effect reclassification from CIP to appropriate PPE account and thereafter, compute the corresponding depreciation; (CO) and

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c) Accounting Division to coordinate with the Property Division to reconcile the balance of CIP in FOVI. Management Comments:

At the CO, the completed supply and delivery of structured cabling for KC building, 3-storey 4Ps building, and 3-storey MRB (Phase II) in the total amount of P56,512,496.45 were transferred to its proper account per JEV Nos. 2017-04- 011810, 04-011838, and 04-01855 all dated April 28, 2017. The repair and renovation of Elsies Gaches is for transfer of ownership to FO upon completion of Property Transfer Report. The construction of 3-storey building Regional Office costing P11.597 million, although completed, documents were not yet submitted to facilitate the transfer of the last tranche, while all the rest were not yet completed.

Non-Insurance of PPE-P9.049 million

12. PPE with a book value of P9.049 million were not insured with the GSIS against damage or loss through theft, fire and other fortuitous events, thus exposing the agency to possible risk of financial loss due to non-indemnification of property loss.

Section 5 of RA No. 656, provides that, “the Government, except a municipal government below first class, is required to insure its properties with the General Insurance Fund against any insurable risk.”

Further, Administrative Order No. 33, Section 1, requires all heads of departments, among others, to secure from the General Insurance Fund directly, all insurances or bonds covering properties, contracts, rights of action and other insurable risks of their respective offices, including all those in which their respective offices have an insurable risk and all those in which they have an insurable interest only. For this purpose, no insurance agent or general agent shall hereafter be appointed or maintained to represent the General Insurance Fund and/or the Government Service Insurance System.

Review of insurable PPE of the DSWD disclosed that Buildings and Motor Vehicles amounting to P9.049 million were not among the PPE insured with the GSIS, the details of which are shown in Table 25.

Table 25. List of Uninsured PPE

Cost Property Remarks (in million PhP) Buildings DSWD-National Resource Operation Center (NROC) Office 3.863 DormitoryBuilding and and Dormitory, Garage concrete semi-concrete, 2 storey two GI- storey,roofing 530 sq.m 1.042 336.25sq.m. (1991 completion) DSWD-Productivity and Skills Capability Building (PSCB) 0.300 Center, semi-concrete, 1-storey.

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Cost Property Remarks (in million PhP) DSWD-Day Care Center, semi-concrete, 1-storey. 0.100 3-Storey Micro-MRB 1.652 Sub-Total 6.957 Motor Vehicles Sedan - Toyota - Corolla Gli 1995 - Chassis # AE101- 0.515 Operational 9540796 Motor # 4A-LO28736 Plate # SEF-549 Van - Nissan - Urvan 2.5 Shuttle - Eng # TD25-266229 Plate 0.584 Operational # SFD 812 Pick-up - Ford Ranger - Dual Aircon and CD ready stereo 0.877 Operational system; power steering, SFK-625. Motorcycle, Kawasaki KLX150, engine type, 4 stroke, SOHC 0.115 Operational 2 valve, single cylinder, air cooled carburetor Sub-Total 2.091

Grand Total 9.048

The non-inclusion of these assets costing P9.049 million in the insurance coverage with the GSIS Insurance Fund exposes them to the risk of not being indemnified or compensated for any damage to, or loss of its property thru theft, in cases of destruction of property through fire, flood or other force majeure.

In FO II, two units donated motorcycle was insured with a private insurance company and the GSIS, respectively, and registered in the name of the donor.

In FO VIII, PPE purchased from January to June 2016 were not insured until the renewal of insurance on June 2017 and insured assets does not include transportation equipment, buildings and other PPE.

We recommended and the DSWD Secretary agreed to instruct the Property Asset Management Division to facilitate the preparation of the list of all insurable PPEs and get the necessary insurance coverage with the GSIS under the General Insurance Fund.

Management Comments:

FO Management Comments and Updates CO Four buildings to be included in the application for insurance coverage for the period May 2017 to May 2018. The MRB insurance shall be shouldered by the NMLI the beneficiaries. The motor vehicles were already transferred to FOs II Management, thru the Chief Administrative Officer committed to secure the Deed of Conveyance from the Department of Public Works and Highways which is a requirement to facilitate the transfer of Certificate of Registration from the donors to the DSWD FO2.

Accounting Errors and Deficiencies affecting Accounts Payable-P5.621 billion

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13. The recorded balance of Accounts Payable of P5.621 billion was overstated by a net amount of P2.138 billion due to erroneous classifications of payables transactions and failure to set up accruals of expenses. Moreover, the amount P194.148 million could not be validated due to incomplete documentation, while payables aged two years and above were not reverted.

a) Errors and Omissions in the recording of payables

GAM Volume III prescribes the use of Accounts Payable to recognize receipt of goods or services on account in the normal course of trade and business operation.

Section 6, Volume I, of the GAM requires that the agency recognize and present its financial transactions and operations in conformity with the accrual basis of accounting. Accrual basis as defined in Section 2 of the GAM a basis of accounting under which transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transaction and events are recognized in the accounting records and recognized in the financial statements of the periods to which they relate.

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

Verification of Accounts Payable for CY 2016 disclosed errors and omissions overstating the account by a net amount of P2,138.482 million as at year end. Details are shown in Table 26.

Table 26. Various errors affecting Accounts Payable (in million PhP) Amount FOs Observation Over/(Under) Erroneous Classification CO (2,219.295) Approximately 86 percent of the total payables which pertains to accounts with other national government agencies and government corporations that were recorded under this account instead of Due to NGAs or Due to GOCCs.

Double recording of accounts payable overstated the Accounts Payable and Janitorial Services by P9,555,959.83 and P8,859,103.31, respectively, while accumulated surplus/deficit was understated by P696,856.52, as of December 31, 2016.

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Amount FOs Observation Over/(Under) V (1.379) Erroneously recorded payable to Due to Philhealth and Due to officers and employees amounting to P273,912.50 and P1,105,432.38 respectively. VIII (11.462) erroneous entries/ use of Account code (.038) Unrecorded payment CARAGA (1.038) erroneous classification of payables to officers and employees Sub-total (2,233.212) Unadjusted Staled Checks IV-B 1.830 Unreleased checks and stale checks were not reverted to AP Non-Accrual of Expenses at year-end V 3.362 Unrecorded accruals of various expenses VI 89.538 non-recognition of unpaid CY 2016 4th Quarter stipend of indigent senior citizens Total Overstatement (2,138.482) Overstatement of Accounts Payable

In FO V, although there were amounts accrued/recognized as liabilities as at year-end in the books of accounts, disbursements in January 2017 in the total amount of P3,362,308.13 were not recognized as Accounts Payable as at year-end. This amount comprised mainly of cost of training, services of contractual personnel, travelling, security services, rent, and other expenses.

In FO VI, the unpaid CY 2016 4th quarter stipend of indigent senior citizens amounting to P89,538,000.00 that was due for distribution in October 2016 was not recognized as Accounts Payable at year-end, thereby resulting in the understatement of both the Accounts Payable and Subsidies-Others accounts as of December 31, 2016.

We recommended that the DSWD Secretary agreed to require the concerned CO and FO Accountants to:

a) reclassify payables to their appropriate accounts in accordance with the Revised Charts of Accounts for National Government Agencies, Volume III of the GAM; and

b) identify and include all items for accrual as liabilities at the end of each accounting period supported with complete documentation. b) Unsupported and Unreverted Outstanding Payables

Section 37, paragraph (2), Chapter 2, of the GAM Vol. I states, among others, that no obligation shall be certified to accounts payable unless the obligation

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is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence.

Likewise, Section 4 paragraph (f) of PD No. 1445, provides that “Claims against government funds shall be supported with complete documentation”

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

Verification of the recorded accounts payable totaling P194.148 million for the five FOs were not supported with complete documentation to establish validity of the liability and were aged two years and above.

We recommended and the DSWD Secretary agreed to instruct the concerned Accountants to: a) comply strictly with the provisions of Section 4 of PD No. 1445 and Section 37 paragraph (b) of the GAM to ensure that recorded accounts payable are valid and Section 4 paragraph (f) of PD No. 1445; b) make necessary adjustments in the books of accounts to revert the unsupported/double set up of payable to accumulated surplus/deficit; and c) examine the aging of accounts payables and prepare JEV to revert back to the Accumulated Surplus the accounts that have been outstanding for over two years.

Inadequate Documentation of Bank Service Fees

14. Payments to the LBP of approximately P97.734 million representing financial expenses (bank service fees) for CYs 2014 and 2015 lacked the necessary documents to support the validity of the related transactions.

Section 4, item 6, of PD No. 1445 requires all claims against government funds to be supported with complete documentation.

COA Circular No. 2012-001 on Documentary Requirements for Common Government Transactions, item no. 12.0, enumerates the documentary requirements for Financial Expenses: Loan Agreements/MOA together with supporting documents; statement of account; bank debit memos; and other supporting documents deemed necessary depending on the nature of the transaction.

The LBP billed the DSWD the amount of P90.000 million and P66.675, representing the following expenses incurred by said bank for CY 2014 and 2015, respectively.

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Table 27. Summary of Billing and Payment

No. of transactions Amounts (in million PhP) Particulars Remarks 2014 2015 2014 2015 Cash card 5,602,076 2,353,301 78.429 32.946  No Debit memos withdrawals @ a attached service fee of  Billing Statement P14.00 per for the first payable transaction in the amount Manpower and 14.817 19.400 P90,000,000 was Other Expenses not original Procurement of 14.329  Official Receipt not conduits (3% of machine validated ABC)  MOA not original Total 5,602,076 2,353,301 93.246 66.675 Less Income 3.246 - from investible 4Ps fund Total billing 90.000 66.675 Amount Paid 66.489 31.245 Taxes 3.499 1.644

The CY 2014 fees was settled through ADA No. 31131201, dated March 3, 2016, of which the amount of P66.489 million (net of due to BIR) was withdrawn from the MDS account on March 07, 2016 as evidenced by a bank debit memo, while the CY 2015 fees was paid through DV No. 16-04-1779 amounting to P31.244 million (net of tax) dated April 21, 2016 by ADA No. 4-1530-2016 dated and debited on April 25, 2016.

It is worth to mention that the LBP requires no charges or fees for withdrawals and balance inquiries from regular LBP ATM clients. However, for the first six cash card withdrawals successfully made by 4Ps beneficiaries at LBP ATMs, the DSWD will pay P14.00/transaction. While we noted that the charges were covered in the MOA between the DSWD and the LBP, it is highly disadvantageous to the government since regular card holders were not charged fees for withdrawals from LBP ATMs (regardless of the number of transactions).

We recommended and the DSWD Secretary agreed to:

a) direct the Office concerned to submit the original copies of the MOA, including the Supplemental MOA, bank debit memos showing the bank account credited, and official receipts evidencing receipt of payment by the LBP of the bank services fees charged for 4Ps withdrawals; and

b) submit legal basis on the charging of P14.00 for every cash card withdrawals made by 4Ps beneficiaries.

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On March 21, 2017, Management transmitted OR Nos. 0014354 and 0014355, both dated March 10, 2017, amounting to P66,488,708.30 and P31,244,559.50, respectively. The original MOA was not submitted neither was there any explanation/justification on the charging of service fees on cash card withdrawals made by 4Ps beneficiaries.

Other Accounting Errors

15. The procured DSWD Enterprise Data Warehousing and Data Sharing Project amounting to P8.997 million was recorded as Consultancy Services instead of Development in Progress – Computer Software understating the balance of the accounts.

The GAM Revised Chart of accounts prescribes the use of Development in Progress- Computer Software to recognize the cost of coding, testing and other costs incurred during the development of computer software. This is credited upon completion and transfer to “Computer Software” account, and when the asset is impaired.

On the other hand, Consultancy Services is used to recognize the cost of services rendered by consultants contracted to perform particular outputs or services primarily advisory in nature and requiring highly specialized or technical expertise which cannot be provided by the regular staff of the agency.

Analysis of the Consultancy Services as of December 31, 2016 showed two disbursements in June and October 2016 as payment for the contract of "Hiring of Consultancy Services for the DSWD Enterprises Data Warehousing and Data Sharing Project" in the amounts of P7,997,600.00 and P999,700.00 respectively.

Verification revealed that the purpose of the contract is to deliver a functional Enterprise Data Architecture specifically designed for DSWD. Additionally an amendment to the Contract included the following deliverables/outputs:

a. Consult, design and implement Enterprise Data Architecture Services for the DSWD Enterprise; b. Consult design and implement a Pre-Data warehousing and Data sharing Services for DSWD Enterprise; c. Installation of a functional conceptual design and approved implementation plan for a web base data sharing portal that contains business intelligence and data analytics

The above deliverables define the improvement or development of database management system that will cater the reporting and analysis of the data from the different existing systems of DSWD, thus, pursuant to GAM, these are

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development costs that produce a product master, which should not be recognized as Consultancy Services, but Computer Software as it is expected to yield economic benefits or service potential to one or more users for number of years, thus should be capitalized and recorded as Development in Progress- Computer Software in the meantime that these are not yet completed.

Management commented that the Sybase Solutions Corp was contracted to perform particular outputs and services which were primarily advisory in nature and or requiring highly specialized and technical expertise which cannot be provided by the department’s regular staff. The engagement is more about providing a highly specialized and technical expertise and did not require the creation of a new software-by-product since most of the tools used were either existing and/or open source.

The erroneous classification and recording of the transaction resulted in the understatement of asset account Computer Software and overstatement of Consultancy Services, an expense account, by P8,997,300.00.

We recommended that the DSWD Secretary require the Accounting Unit to make the necessary adjustments in the books of account to correct the error in the recording of the transactions in compliance with the RCA, Volume III of the GAM.

Internal Control Deficiencies on Cash Management

A. Weak internal control over check processing and releases

16. The weak internal control in the processing and release of checks, resulted in the loss of government funds amounting to P867,965.25.

Sound internal control dictates that procedures over disbursements should be in place and followed to ensure that government funds are safeguarded against loss or wastage through illegal or improper disposition.

Section 4 paragraph (6) of PD No. 1445 likewise states that, ”Claims against government funds shall be supported with complete documentation.”

Examination of the BRs, DVs and the corresponding SLs of the transactions of KC-NCDDP-IBRD for CYs 2015-2016 showed that:

1) A total of fourteen checks was issued to a payee who is not the payee stated in the approved DVs and SLs and deposited to the Planters Bank, Tungkong Mangga Bank Account No. 0077900349, as shown in Table 28.

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Table 28. List of Checks with deficiencies

Payee Date deposited/ Check No. Date Amount Remarks Per DV Per Check negotiated E-Copy Corp. P10,674.76 Dec. 16, 2015 No receiving 1) 262085 12/01/2015 signature 2) 262134 12/16/2015 Melanie L. Sison 103,891.92 Dec. 17, 2015 3) 262046 11/06/2015 Meralco 60,000.00 Nov. 11, 2015 MCSA Marketing 10,106.91 Nov. 17, 2015 No receiving 4) 262063 11/16/2015 signature La Breza Hotel 69,174.37 Nov. 17, 2015 No receiving 5) 262064 11/16/2015 signature - 91,875.00 Sept. 16, 2015 No receiving 6) 262301 09/11/2015 signature 7) 261950 09/16/2015 La Breza Hotel 91,875.00 Sept. 28, 2015 8) 261826 07/15/2015 Fog Horn Inc. 111,375.00 Aug. 4, 2015 Raquel Ramos 9) 262345 01/24/2015 - 111,375.00 July 23, 2015 Maria Ligaya 58,305.28 Mar. 10, 2016 10) 276194 03/08/2016 Laura O. Morales - 60,000.00 Mar. 2, 2016 Blank per Cash 11) 262123 12/10/2015 book and Not issued per RCI 12) 276202 03/10/2016 - 60,000.00 Mar. 10, 2016 DSWD Payroll 19,494.77 Nov. 16, 2015 13) 269208 11/12/2015 Account DSWD Payroll 9,817.24 Dec 16, 2015 14) 269230 12/15/2015 Account Total P867,965.25 *With ND issued

2) Seven checks were not supported with the general requirements for disbursements as prescribed under COA Circular No. 2012-001 (e.g. CAF, DV), as shown in Table 29.

Table 29. List of Checks without supporting documents Check Date deposited Payee Amount Remarks Date No. /negotiated Dec. 3, 2015 262099 Melanie L. Sison P103,891.92 Jan. 18, 2016 Appearing to be double payment of Consultancy fees for the period Oct to Nov. 2015 due to the issued Check No. 262134 to Raquel Ramos. Mar. 14, 2016 276222 Maria Ligaya Laura O. 58,305.28 Mar. 21, 2016 Appearing to be double Morales payment of Consultancy fee for the period Jan. 1-31, 2016, due to the issued Check No. 276194 to Raquel Ramos. Jan. 24, 2015 262345 Raquel Ramos 111,375.00 July 23, 2015 Without supporting papers/ Not in the series of RAAF/logbook Sept. 11, 2015 262301 Raquel Ramos 91,875.00 Sept. 16, 2015 Without supporting papers/ Not in the series of RAAF/logbook Jan. 13, 2016 262221 Meralco 60,000.00 Jan. 15, 2016 Without supporting papers Dec. 10, 2015 262123 Raquel Ramos 60,000.00 Mar. 2, 2016 Without supporting papers Mar. 8, 2016 276202 Raquel Ramos 60,000.00 Mar. 10, 2016 Without supporting papers Total P545,447.20

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3) Check Releasing logbook were not properly accomplished. There were 89 checks issued in the logbook without payee names, amounts and receiving signatures, thus, not in keeping with sound internal control policies and also resulted to unaccounted releases of checks vis-à-vis RAAF.

4) There were sampled checks issued amounting to P2,090,398,121.76 without specific Field Office numbers which resulted to deposit of Check No. 251201 to LBP Account No. 3122-1024-31 instead of Account No. 1452-1052-80 of DSWD Field Office 07, thus needed to return back to the Head Office account for change of payee name. The subject control weakness resulted to delays in the implementation of project to the disadvantage of targeted beneficiaries.

In view of the above observations, we issued ND nos. 2016-02-102 (2015) (NCDDP) dated July 21, 2016 amounting to P660,347.96, 2016-03-102(2015-2016) (NCDDP) dated August 25, 2016 amounting to P178,305.28 and 2017-01-FAPS (2015) dated April 27, 2017 amounting to P29,312.01. An appeal was filed with the Commission on December 19, 2016.

We recommended that the DSWD Secretary require the persons liable to:

a) refund/recover the amount representing irregular disbursements amounting to P867,653.25;

b) conduct necessary investigation and initiate legal action against the erring employees if warranted;

c) revisit/review the current internal control procedures within the FCD and make the necessary improvements in order to fill-up the loopholes which has been taken advantage by the perpetrators to accomplish their illegal acts.

Management commented that the department is seeking reimbursement form LBP for the total amount of questionable checks. As of this date LBP is still processing the Department’s claim and the investigation by the NBI is still on- going. The Department has already taken steps to strengthen its internal control systems such as preparation of Advice of Checks Issued and Cancelled for all trust/current accounts, assigning of verified checks and issuance/signing/releasing of checks.

B. Accountable Forms without money value not accounted in the RAAF

17. Approximately 102 pieces of Accountable Forms (AFs) without money value representing commercial checks issued by the LBP were not presented upon

119 request and were not accounted in the RAAF for CY 2016, thus resulting in the unauthorized use and loss of government funds amounting to P367,141.92.

Section 17 (k) of the GAM provides that the Report of Accountability for Accountable Forms (RAAF) to be prepared by the Accountable Officer (AO) to report on the movement and status of AFs in his/her possession. The AFs include those with or without face value.

Inventory of checks at the Cash Division on July 12, 2016 showed that the following checks of the KC-NCDDP-IBRD under LBP Account No. 3122-1024-40, as summarized in Table 30, were not accounted in the RAAF.

Table 30. Summary of Unaccounted Checks

Check Series Quantity 262099 1 262123 1 262301-262400 100 TOTAL 102

Examination of the Report of Checks Issued for CYs 2014 to 2016 revealed that the above checks were not among the series of checks issued to pay DSWD expenditures, but four of the above series were processed without supporting documents and negotiated with the Planters Bank. These are included in the Notice of Disallowance issued as shown in Table 28.

We recommended and the DSWD Secretary agreed to require the Accountable Officer (Cashier) to submit justification/explanation of the unaccounted checks and why it was not reported immediately to proper authorities.

Management Comments:

Justification was submitted dated April 12, 2017 by the Cashier and informed that in view of the volume of work in the Division, she did not have the luxury of time to go over every piece of documentation of financial reports submitted by her staff. Because of this, lapses have been noted in the internal control on the custodianship of the used and unused checks. Lessons were learned that all documents/ reports submitted to her office are now being thoroughly reviewed by Unit Heads and verified by Administrative Officer III and Supervising Administrative Officer.

With regards to reporting the matter to proper authorities, she informed that the FMS Director gathered the concerned staff of the Cash Division last April 25, 2016 to discuss the issue and instructed them on the actions to be undertaken. Upon review of the submitted report of the cash Division by the FMS Director, the issue was immediately reported to the Office of Undersecretary requesting a

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thorough investigation on the case. Further, DSWD requested the assistance of the NBI to look into the said negotiated checks that are unaccounted.

C. Undisposed checks of closed accounts

18. Checks of closed accounts are still in the custody of the AO which contributed to excessive filing of unnecessary documents, thus may be disposed of in accordance with COA Memorandum No. 87-243-B.

Inventory of checks as of July 12, 2016 disclosed a total of 6,067 checks from 41 closed accounts that are still in the custody of the AO. Verification with the bank showed these were accounts with zero balances and closed accounts.

The filing of numerous unusable checks only contribute to unnecessary accounting and/or inventory of AFs, thus resulting to waste of time and space at the Cash Division Office. The said records may be disposed per COA Memorandum No. 87-243-B which provides the authority to Records Management and Archives Office to dispose of all government records.

We recommended and the DSWD Secretary agreed to direct the AO to prepare Inventory Report of all checks with closed bank account as of December 31, 2016 and dispose in accordance with the procedure prescribed under COA Memorandum No. 87-243-B.

Management Comment:

The Division already conducted the inventory of the unused checks for all closed accounts in the custody and will conduct disposal procedures in compliance with the auditor’s recommendation.

Non-elimination of Intra-office Transactions

19. Intra-Office accounts totaling - P744.092 million affected the reliability and accuracy of the reported account balances in the FS.

PPSAS and GAM Section 8 Paragraph (d) Procedures in the Consolidation of FS provides, among others, that in order that the consolidated FS may present financial information about the economic entity as that of a single entity, xxx (d) Balances, transactions, revenues, and expenses between entities within the economic entity shall be eliminated in full. Consolidated financial statements shall be prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Review of the consolidated FS of the DSWD disclosed that the following reciprocal accounts were used to record intra-office transactions, which remained not reconciled and not eliminated during the consolidation of the FSs, thus, defeated

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the purpose of consolidation which is to show the financial condition and results of operation of the DSWD as a single entity, contrary to the afore-cited regulations. A summary is shown is Table 31.

Table 31. Summary of Intra-Office Accounts Account Balance Difference Due to FO Offices P 1,127,841.82 Due from Central Office 485,000.00 642,841.82 Due from FO Offices 356,748,517.67 Due to Central Office 339,243,932.95 17,504,584.72 Due from Other Funds 42,533,313.06 Due to Other Funds 3,953,576.16 38,579,736.90 Total Difference 56,727,163.44 Aggregate Total of Accounts Affected P 744,092,181.66

We recommended the DSWD Secretary direct the concerned officials and Accountants to: (i) prepare schedules of the reciprocal accounts and undertake an analysis, reconciliation and elimination thereof; (ii) correct the balances of accounts affected after reconciliation; and (iii) thereafter, conduct regular quarterly reconciliation to immediately rectify any discrepancy and to show the financial condition and results of operation of the Department as a single entity.

Management Comment:

The FMS Director commented that the reciprocal accounts being eliminated are the Subsidy to RO and Subsidy form Central Office (expense and revenue accounts). The intra-office transactions mentioned in the AOM should not be eliminated considering that these are real/balance sheet accounts and these are used (debited/credited) for payment/liquidation of fund transferred. Likewise, the eNGAS does not automatically eliminate these accounts in the consolidation, unlike with the reciprocal accounts.

Auditor’s Rejoinder:

The non-elimination or reconciliation of the reciprocal accounts overstates the subject accounts in the consolidated FS. In the transfer of funds to regional and central offices, the accounts that will be retained in the consolidated Financial Statements (FS) will only be cash and the balances of the reciprocal accounts are individually accounted in the FS of concerned office/region but eliminated in the consolidated FS. This should be reconciled first before elimination.

Non-Submission/Delayed Submission of Financial Documents/reports

20. Financial documents particularly DVs, Contracts, and other Financial Reports in eleven FOs were either not submitted or delayed, precluding verification of

122 the agency’s financial transactions and timely audit as aid in Management decisions and input in enhancing financial accountability.

Financial reports together with supporting documents and schedules as DVs including its supporting documents, Contracts, POs etc. of 11 Field Offices were not submitted within the reglamentary period by the Accounting Unit to the Office of the Auditor, as shown in Table 32.

Table 32. Summary of documents not submitted

Reports Criteria Timelines Remarks FR Section 60 paragraph b & 10 days after end of CAR, III, IVA, VIII, X, NCR c, Chapter 19, Volume I of month/ quarter the GAM DV Section 6.05 of COA within ten (10) days from II, III, V, VIII Circular No. 95-006 dated date of receipt of said May 18, 1995 documents PO/ Section 3.1.1 of COA Within five (5) workings I, IVA, X, XI, XIII, NCR Contracts Circular No. 2009-001 days from the execution of the contract

The common reason for the delayed or non-submission of the financial reports and documents were attributed to the lack of personnel and voluminous transactions of the DSWD due to several programs, projects and activities. While we noted the predicament of the agency, it is stressed that the submission of required reports is equally important to ensure that information useful are available on time for accountability and decision making purposes are available.

The non-submission of the financial reports likewise has hindered the audit of financial transactions for the year. It has also limited the time for Management to act on relevant audit observations, if any.

We recommended and the DSWD Secretary agreed to instruct the concerned FO Accounting Units to:

a) create a separate team that would cater exclusively to the recording/checking/monitoring of liquidation documents and supporting documents submitted by the SDOs since the main/root cause of the delays are the bulk submissions of said liquidation documents; (NCR)

b) review the manpower complement of the Financial Management Division and request for augmentation, if necessary; and

c) comply strictly with the prescribed deadlines on submission of reports, otherwise impose the withholding of salaries and allowances of concerned personnel for continuous failure to comply pursuant to Section 22 of PD No. 1445.

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B. Program Review

Kapit-Bisig Laban sa Kahirapan-National Community-Driven Development Project

For CY 2016, the Audit Team conducted a program review of the Kapit-Bisig Laban sa Kahirapan-Comprehensive Integrated Delivery of Social Services to assess the efficiency, economy and effectiveness of project implementation. In compliance with the KC loan agreement the audit covered physical inspection, evaluation of sustainability, adequacy of maintenance and monitoring with respect to at least 10 percent of the total sub-projects.

21. As of December 31, 2016, the KC-NCDDP physical accomplishment registered at 78.99 percent exceeded the 70.00 percent KC-NCDDP Results Framework per loan agreement, thus the objective of the project to provide target beneficiaries of improved access to services and infrastructure and to participate in more inclusive management planning, budgeting and implementation in their community had been generally achieved.

The Intermediate Outcome Indicators for the CY 2015 per Results Framework of KC-NCDDP states that, 70 percent of NCDDP community projects should be completed in accordance with technical plans, schedule and budget.

As of CY 2016 the KALAHI-CIDSS – National Community-Driven Development Program (NCDDP) has approved Community Grants for the implementation of Sub-projects with total cost of approximately P20,524.178 million for 19,000 SPs to be implemented nationwide. Per report of accomplishment submitted by the Project Management Office (PMO), the DSWD has accomplished 15,009 or 78.99 of its targeted SPs. Details per Region is shown in Table 33.

Table 33. Financial and Physical Accomplishment Target % of Accomplishment Approved Budget per Completed Region No. of Balance * 2015 & 2016 WFP No. SPs Physical Financial SPs CAR P 396,302,219.73 232 86 146 37.07 P 107,573,430.48 I 108,167,192.93 96 58 38 60.42 48,439,038.83 III 78,071,025.20 22 20 2 90.91 26,093,100.00 IV-A 658,172,691.42 865 766 99 88.55 485,518,433.22 IV-B 1,412,137,644.81 1,247 884 363 70.89 766,367,354.99 V 4,007,697,960.72 1,735 948 787 54.64 1,383,653,697.33 VI 3,020,896,648.16 3,370 3,064 306 90.92 2,064,158,686.16 VII 2,401,948,722.62 1,893 1,450 443 76.60 1,355,646,218.40 NIR 361,249,300.00 903 725 178 80.29 803,585,249.65 VIII 3,289,080,758.00 4,934 4,097 837 83.04 2,257,878,715.13 IX 1,119,159,129.90 1,077 1,038 39 96.38 972,478,595.71 X 1,051,423,133.80 648 341 307 52.62 394,394,529.58

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Target % of Accomplishment Approved Budget per Completed Region No. of Balance * 2015 & 2016 WFP No. SPs Physical Financial SPs XI 757,736,093.95 537 356 181 66.29 437,541,005.00 XII 648,905,919.64 385 241 144 62.60 357,544,417.78 CARAGA 1,213,229,825.35 1,056 935 121 88.54 1,047,592,538.03 TOTAL P 20,524,178,266.23 19,000 15,009 3,991 78.99 P12,508,465,010.29 * Includes ongoing and not yet started projects 60.94%

As gleaned from the above table, the program only registered a 60.94 percent financial accomplishment due to the non-downloading of ten percent project cost, representing contingency fund of some projects.

To validate the above accomplishment, the audit team selected six regions with materiality as criteria and employed the following audit procedures:

a. Inspection of physical accomplishment of selected SPs; b. Interviews with the Barangay Sub-Project Management Committee cum members, Operations and Maintenance group and community- beneficiaries; c. Compared balances and information on Technical, financial, and physical accomplishment reports, and other related documents from the BSPMC/ACT versus checklist prepared.

The results of validation disclosed that of the total 158 SPs selected, 149 SPs or 84.99 percent was completed, 8 or 5.06 percent on-going and one not yet started, as shown in Table 34.

Table 34. Validated Status of Projects Validation Completed On-Going Not Yet Started Field No. of No. of Financial Physical No. of No. of Office Project Cost Project Cost Project Cost % Project Cost SPs SPs % % SPs SPs IV- MiMaRoPa 17 14,912,880.35 17 14,912,880.35 100.00 100.00 - - - V 21 41,491,262.98 15 27,475,968.16 66.22 71.42 5 11,640,676.52 28.06 1 2,374,618.30 VI 29 22,586,108.80 27 20,503,170.60 90.77 93.10 2 2,082,938.20 9.22 - - VII 32 26,371,387.16 32 26,371,387.16 100.00 100.00 - - - VIII 27 20,418,190.24 27 20,418,190.24 100.00 100.00 - - - Caraga 32 57,545,877.50 31 46,134,095.50 80.17 96.87 1 11,411,782.00 19.83 - - Total 158 183,325,707.03 149 155,815,692.01 84.99 94.30 8 25,135,396.72 13.71 1 2,374,618.30

As deduced from the table above, the physical accomplishment of the FOs was 94.30 with a financial accomplishment of 84.99 meeting the 70 percent target set in the Results Framework of KC-NCDDP, except for FO V which has only 66.22 percent financial accomplishment. As for the on-going and not yet started projects vis-à-vis the project cost of 13.71 percent and 1.29 percent, respectively, are well within the marginal letdown. Interview revealed the following perennial causes of delays in the implementation of the program:

a) Bad weather condition, especially to communities in the shoreline or islands; b) Procurement documents not immediately prepared by the SPMC;

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c) Limited contractors and suppliers within the area and/or their reluctance to engage in community SP implementation due to costly hauling of materials especially to far-flung areas, thus the frequent failure of bidding/canvass; and d) Reshuffling of project personnel

The period of implementation is from six to nine months from the date of the release of funds pursuant to Item 3.2 of the Community Empowerment Activity Cycle.

In Region XI, 29 sub-projects costing P30.837 million have failed to meet specific targeted completion dates stipulated in the contracts with delayed implementation ranging from 26 to a maximum of 64 calendar days.

Moreover, funds for approved projects amounting P14.240 million were not released on time by the FOs, thus contributing to the unaccomplished 3,991 SPs (Table 35) in CY 2016 and delaying the benefits that the concerned community could derive therefrom.

While we noted some challenges in the implementation of the SPs, the completion of the prioritized projects provided the community-beneficiaries access to basic social services, infrastructures, and other benefits due them, in accordance with the objective of the project.

We commended the DSWD PMO for exerting efforts to facilitate competition of targeted projects, however, for the uncompleted SPs, we recommended that the Management require the concerned RPMO and ACTs personnel to:

a) monitor regularly the on-going and unimplemented SPs and determine the causes of delays and address the issues and concerns to fast track the completion of the SPs;

b) furnish the BSPMCs with the list of good standing contractors and suppliers and blacklist erring contractors and suppliers;

c) require the BSPMCs to strictly adhere to the KALAHI policy on the prescribed period for project implementation;

d) fast track the downloading of community grants to BSPMC; and

e) avoid reshuffling of project personnel within the period of project implementation, if feasible.

22. A total of thirteen SPs costing P35.097 million was found to have deficiencies/issues, due to failure of RPMO/SRPMO as well as project

126 proponents to monitor and resolve project issues, thus may compromise the efficient and effective use of the facility and not in keeping with KC-NCDDP Community Empowerment Activity Cycle and Monitoring and Evaluation Sub-Manual for Program Implementer.

The Manual requires the Sub-Regional Project Monitoring Officer to conduct field visits for monitoring of SPs implementation activities. Also, in the M & E Sub-Manual for Program Implementer, the implementers shall conduct operations or implementation monitoring to address compliance that focus on monitoring and assessing if a project, program, or policy is being executed.

During the validation, we noted that thirteen SPs were with deficiencies that may compromise the efficient and effective use of the facility, details shown in Table 35.

Table 35. Summary Status of SPs with Deficiencies

No. SP Location Project Cost Deficiencies/ Issues-Management Comment Photos 1)

Non-operational; Completion of the SPs is already Construction of taking more than 17 months San Lucas, one (1) unit Day ______Calabanga, 799,984.00 Care Center Camarines Sur building SP completed last 12/26/2016

2) Non-downloading of P220,000.00 balance; Completion of the SPs is already taking more than Construction of 17 months. SP 65% Complete Brgy I (POB), Evacuation ______Gartchitorena, 2,200,000.00 Center cum 90 of grants have been downloaded, 99.95% of Camarines Sur Training Center which have been utilized. SP physical progress is at 91.80%. 3rd tranche request for release (RFR) submitted last April 2017

3) Non-downloading of P237,461.83 balance;

Delayed implementation

______Construction of Maqueda, 90% of the grants downloaded, 93.52% of which Evacuation Caramoan, 2,374,618.30 have been utilized. Preparation of the RFR for 2nd Center Camarines Sur tranche is on-going. Physical accomplishment is

75%.

4)

Non-downloading of 237,461.83 balance; Delayed completion. SP 85% Complete Construction of Ilawod, ______Evacuation Caramoan, 2,374,618.30 99.86% of grants downloaded have been utilized. Center Camarines Sur Final tranche is in process. Physical accomplishment is 75%

5)

Non-downloading of 237,461.83 balance; Santo Domingo, Implementation of SP is already taking 17 months Construction of Calabanga, 3,189,666.00 to complete. SP 67.84% Grouted Riprap Camarines Sur ______SP completed last 3/10/2017

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No. SP Location Project Cost Deficiencies/ Issues-Management Comment Photos 6)

Non-downloading of 307,640.82 balance; Delayed completion Improvement of Tabog, ______Brgy. Road with Caramoan, 3,076,408.22 99.54% of the 90% of the grants downloaded Drainage Canal Camarines Sur were utilized. Final tranche in process. 82% physical accomplishment.

7)

Community- Non-downloading of P74,406.80 balance; Managed Brgy. 8, Implementation of SP is already taking 17 months construction of San Jose, 749,368.00 ______a Day Care Antique 2nd tranche downloaded last March 29, 2017; Center Physical status 100% completed to date.

8) Non-downloading of P140,797.70 balance; Community- Delayed completion 70% complete Managed Brgy. 4, ______Construction of San Jose, 1,413,277.00 Community has not requested for release of the Evacuation Antique fund balance. Current funds able to complete the Center SP as planned. Physical status 100% completed to date

9)

Case was filed against the Contractor for Breach of Contract; Inability of BSPMC to handle large amount of fund; Implementation of SP is already taking 17 months to complete ______The Contractor filed Breach of Contract against DSWD Regional Office, LGU of Hinatuan, SDS Construction of Pagtiqui-an and BSPMC of Barangay Bitoon, Hinatuan. The 1 Unit Hinatuan (Bitoon), 14,919,407.00 hearing last April 25-26 at the Commission Evacuation Hinatuan, Industry Arbitration Commission (CIAC) at Makati Center Surigao del Sur City resulted to the submission of Technical resolutions and Legal Memorandum to CIAC on 05/25/2015 as basis to give decision on the case.

Accomplishment is 68% with 80.95% financial progress

10) Constructed a Civic Center not in accordance to Program of Works; No Final Inspection Report, Certificate of Completion and Acceptance, no Sub- Community- Project Completion Report Managed Brgy. 3, ______Construction Of San Jose, 1,085,283.00 Final Inspection Report and SP completion report Evacuation Antique submitted on 03/03/2017, but not yet updated in Center the KC website. Certificate of SP completion with turn-over and acceptance are included in the SPCR

11)

First Aid Missing emergency equipment/basic rescue Management materials; no proper storage; no inventory record Training with ______Emergency Cubay South, Inventory recording was initiated by the project Equipment Bugasong, 730,100.00 staff and already in place. The barangay replaced (Portable Antique the items missing using their disaster funds. The Oxygen Tank equipment were labeled with control numbers for and basic proper inventory. However the storage is still in rescue the barangay hall. materials)

12) - Not yet turned over to the Barangay for more than a year. - Not functional and not yet complete in terms of facilities. Brgy. - Not maintained that may lead to the sub-project Health Center/ Pundagitan, impairment. Birthing Center Governor 1,080,493.00 - the Barangay Captain did not accept the sub- Generoso, project due to failure of the contractor to repair Davao Oriental various defects ------The noted deficiencies were already addressed by the concerned LGUs through the Area Coordinating Teams and the Volunteers

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No. SP Location Project Cost Deficiencies/ Issues-Management Comment Photos - Completion date: 02/25/2016 -the location where the completed SP (concreted 0.18 km road) was constructed in an agricultural area surrounded by corn fields and far from the barangay road with no clear entrance and exit points -SP did not served its purpose because said area could not be reached by vehicles because of its rocky and hilly terrain before reaching to the concreted road ______Concreting of Barangay -The SP in barangay Danglag was implemented 0.18 km. Danglag, 13) 1,104,000.00 based on the approved program of work that Danglag Consolacion, went through a process of consultation through Barangay Road Cebu barangay assembly. Location accessibility was thoroughly considered before its implementation -The regional management will seek audience with the barangay council of Barangay Danglag on March 11, 2017 to negotiate for the completion of the roads connecting the SP. -The barangay council submitted a resolution of road ownership and to submit other supporting documents. The RPMO also claimed to have the 8 deeds of donation signed by 4 people who have ownership on parts of the SP.

The failure of RPMO as well as project proponents to monitor and resolve project issues resulted to the uncorrected and unreported deficiencies in the project implementation and completion, thus affecting the satisfactory project completion and maximum utilization of SPs.

We recommended and the DSWD Secretary agreed to require the concerned FO ACT/RPMO personnel to:

a) closely monitor, supervise and provide technical assistance to the BSPMC during project implementation and immediately correct the defects/deficiencies noted for the full continuity and functionality of the SPs for the benefits of the intended beneficiaries;

b) strictly implement the provision of storage facilities before the delivery of the construction materials at the site to secure these materials; and

c) hold accountable the RPMO/ACT/BSPMC who will be found remiss in the monitoring and evaluation of the SPs.

23. Validation of the community grants to BSPMC of P172.341 million showed a difference of P4.136 million as against the KC-NCDDP report due to deficient reporting and monitoring mechanism of projects.

Per Operations Manual of the KC-NCDDP, the ACT will prepare and submit reports thru the Sub-Regional Program Management Team (SRPMT) to the RPMO, the Municipal Consolidated Status of Grant Fund Utilization and other reports. In turn, RPMO will submit to the National Project Monitoring Office every 15th of the following month for the monthly reports and every 25th of the following quarter for the quarterly reports.

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Out of the data from the submitted reports, the NPMO prepares national progress reports and other monitoring reports for submission to the National Program Director, Human Development and Poverty Reduction Cluster, National Steering Committee, national oversight agencies, and donor agencies of the Program.

Comparison of the submitted KC-NCDDP report and the validation result by the Audit Team revealed unreconciled data, thus cast doubt on the validity and integrity of the information relayed to various stakeholders.

Validation of the documents in the custody of the BSPMC revealed the variance of P4.136 million versus the KC-NCDDP report of the NPMO, thus affecting the accuracy of the balances downloaded to the BSPMC as shown in Table 36.

Table 36. Comparative Balances of Recorded Community Grants Region Per BSPMC Per KC Difference IV- MiMaRoPa P14,856,379.29 13,807,604.75 1,048,774.54 V 40,450,180.38 40,372,671.80 77,508.58 VI 22,046,348.25 21,582,136.79 464,211.46 VII 23,342,222.33 22,393,231.20 948,991.13 VIII 20,266,143.46 20,297,205.51 (31,062.05) Caraga 51,380,231.81 49,752,646.78 1,627,585.03 Total P172,341,505.52 168,205,496.83 4,136,008.69

The inconsistencies noted in the financial accomplishments per validation made may affect decision-making process that would ensure efficient and effective implementation of KC projects.

We reiterated our prior year’s recommendation that the DSWD Secretary require the concerned FO to:

a) instruct the ACTs to monitor the status of SPs implementation within their area of responsibilities and ensure that all information/reports are accurate, complete, and consistent with Program standards; and

b) conduct reconciliation of unrecorded community grants in the KC- NCDDP Report vis-à-vis in the books of BSPMC and ensure that project reports are validated before this are issued to various stakeholders.

Management Comments:

Management commented that the difference represents the balance yet to be released to the concerned BSPMCs, however, DSWD could not make any release pending the following:

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a) the SP’s existing physical and financial progress should have reached the percentage required; and

b) the BSPMCs or the excess amount to be refunded to DSWD.

Auditor’s Rejoinder:

Our validation showed that the fund utilized per BSPMC documents/reports vis a vis the KC Fund Releases Report were not reconciled with the amount downloaded as of December 31, 2016, thus we maintain our recommendation.

24. The lack of capacity building initiatives for Operations & Maintenance (O & M) group and non-compliance with KC post implementation regulations diminished the efficiency and effectivity of project monitoring and reporting to ensure sustainability of completed projects.

Pursuant to the program development objective of KC-NCDDP the Communities in the target municipalities should be empowered to achieve improved access to basic services and to participate in more inclusive local planning, budgeting, implementation and disaster risk reduction and management”, the team validated the sustainability and maintenance of the SPs under the management of O&M groups.

Among the activities enumerated in the CEAC to capacitate the communities after project completion are as follows:

a) Accreditation of Organization By-Laws and O&M Policies; b) Conducts general orientation on operation and maintenance and forming O&M groups and facilitate planning workshop; c) Inter-organization learning forums to encourage exchange of experiences and learnings, and collective problem solving support.

The results of interview for validated 149 SPs is provided in the chart below:

200 150 100 50 0 Accredited O&M Policies Financial Maintains O&M Group and Support to the Financial Guidelines SPs Records

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As can be seen in the above chart, all 149 have an established Financial Support coming from BLGUs but only 34 O&M Groups were duly accredited, 45 groups with established written policies and guidelines, and none of the validated O&M maintains Financial records. Interview with the community revealed that O&M groups were formed after the project completion as part of CEAC activity, but out of 149 completed SPs, 115 O&M groups are only recognized by the BLGU and MLGU through the Mutual Partnership Agreement.

The presence or compliance with such data are gauges that these groups are capable of sustaining or maintaining the SPs to ensure efficient and effective utilization of the SPs as well as implementation of future projects.

We recommended and the DSWD Secretary agreed to require the concerned FO:

a) O&M groups thru RPMO/Area Coordinating Team submit necessary documents (such as Policies and Guidelines) to concerned LGUs for group accreditation and assistance in the proper utilization and maintenance of the SPs; and

b) RPMO/ Monitoring and Evaluation Team, ACT to conduct capacity building initiatives and trainings to ensure that O&M groups are equipped to manage SPs.

C. Other Compliance Issues

Gender and Development (GAD)

25. The DSWD had substantially implemented GPB with a consolidated budget of P73,108.363 million, which constitutes 66.17 percent of the total budget of the agency, with expenditures of P58,315.362 million or 79.76 percent of the total allocated budget for GAD.

The 2016 GAA or RA No. 10717 requires all government agencies to allocate at least five percent of their budgets to undertake activities that will address gender issues within their concerned mandates. The GAD Plan shall be integrated in the regular activities of the agencies and should relate to poverty alleviation, economic empowerment especially of marginalized women, protection, promotion and fulfillment of women’s rights and practice of gender-responsive governance.

For CY 2016, the PCW approved and endorsed the DSWD GAD Plans and Budget of P73,108.363 million. Table 37 shows the consolidated accomplishment reports for GAD in CY 2016 submitted to the PCW for review.

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Table 37. Consolidated Accomplishment Reports for GAD in CY 2016 (Amounts in millions PhP) Plans and Programs Accomplishments PAPs Objectives Remarks No. Activity Budget No. Activity Expenditure A. Client-focused 58 178,072,383.00 58 1,054,636,764.06 B. Organization Focused 17 35,503,130.00 16 32,344,282.46 1 GAD activity unimplemented C. Attributed Programs 2 72,894,788,000.00 2 57,228,381,000.00 GAA Appropriation 77 73,108,363,513.00 76 58,315,362,046.52 Percentage 98.7% 79.76%

We commended the DSWD for its compliance with GAD laws and regulations and recommended that it continue to provide adequate allocation of funds for programs and activities that will uplift the gender issues of employees as well as implementation of the planned programs and activities.

Senior Citizens and Differently-Abled Programs

26. Plans, programs and projects for senior citizens and persons with disability were integrated in the programmed activities of the Agency with a total budget of P8,277.447 million, for which P7,564.000 million was obligated, leaving a balance of P0.713 million.

Section 36 of the General Provisions of RA No. 10717, states, among others, “All agencies of the government shall formulate plans, programs and projects intended to address the concerns of senior citizens and persons with disability, insofar as it relates to their mandated functions , and integrate the same in their regular activities.

Moreover, “all government infrastructure and facilities, shall provide architectural or structural features, designs, or facilities that will reasonably enhance the mobility, safety and welfare of persons with disability pursuant to Batas Pambansa Blg. 344 or R.A. No. 7277.”

RA No. 7277 of the Magna Carta for PWDs mandates for the rehabilitation, self-development and self-reliance of disabled persons and their integration into the mainstream of society and for other purposes. It further defines the rights and privileges of disabled persons such as equal opportunity for employment, access to quality education, national Health Program, Auxiliary Social Services, telecommunications, accessibility (barrier-free environment), political and civil rights.

As provided under RA No. 9994 or the Expanded Senior Citizens Act of 2010, the Social Pension Program for Indigent Senior Citizens (SPISC) is the major program of the DSWD, which provide senior citizens entitlement to a monthly stipend of ₱500.00 effective January 2011.

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For CY 2016, a total of 1,314,816 senior citizen beneficiaries or 95.56 percent of the target of 1,375,970 was served at the DSWD FOs. The total amount of P7,564.000 million was obligated for the year from the total allocation of P8,277.447 million.

On the other hand, community-based programs for persons with disability were implemented with a total allotment of P11.801 million and obligated a total of P5.797 million, serving a total of 1,933 PWDs throughout the country.

We commended the DSWD for implementing the expanded coverage of senior citizens and programs and services for PWDs that greatly helped address the concerns of the senior citizens and persons with disability.

Compliance with GSIS Remittance

27. For CY 2016, DSWD collected/withheld the amount of P456.400 million for premiums and loans from employees, with a corresponding remittance of P463.382 million to the GSIS within the prescribed period in compliance with RA No. 8291, otherwise known as the “GSIS Act of 1977”.

Section 14, of the Implementing Rules and Regulations (IRR) of RA No. 8291, otherwise known as the Government Service Insurance Systems (GSIS) Act of 1997 provides, among others, Each government agency shall remit strictly to the GSIS the employees’ and government agency’s contributions including 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 within the first ten (10) days of the calendar month following the month to which the contributions apply.

Except for the unremitted balance of P3.968 million, the DSWD faithfully adhered to the GSIS Act. The balance of P2.182 million represents net unremitted balance and negative balances for reconciliation, which are carry forward balance in prior years and cannot be remitted due to unavailability of documents/records. Table 38 shows the details per FO.

Table 38. Status of GSIS Collections, Remittances and Balances

Beginning Balance FO Collections Remittances Balance Remarks (12/31/15) CO 166,265.42 46,406,517.01 46,277,084.68 295,697.75 No remittance yet CAR (4,790.80) 13,255,714.24 13,250,828.46 94.98 Remitted on February 9, 2017 NCR 0.00 40,542,320.89 40,455,115.00 87,205.89 Erroneous entry, Adjusted on April 2017 I 0.00 40,244,000.35 40,244,000.35 0.00 II Negative balance of 1,918.24 is an 0.00 17,292,379.69 17,294,297.93 (1,918.24) accounting error III 23,691,949.63 23,691,949.63 0.00 GSIS personal share and loans of employees and Social Insurance Fund premiums as govt shares for CY 2016 amounting P23,691,949.63 and P822,418.46, respectively, were deducted and remitted to the GSIS

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Beginning Balance FO Collections Remittances Balance Remarks (12/31/15) IV A 3,320,829.94 41,836,406.01 41,574,204.28 3,583,031.67 Remitted on January 10,2017 IV B Remitted on January 8, 2017 1,834,069.08 17,855,823.81 17,666,624.85 2,023,268.04 P3,430,379.60 V 166,468.86 49,971,122.37 50,100,634.35 36,956.88 Remitted on Jan 3, 2017 VI 3,499,474.73 65,727,895.43 68,983,596.45 243,773.71 No remittance. For reconciliation VII 0.00 32,610,870.59 32,124,635.04 486,235.55 Remitted January 13, 2017 VIII 0.00 36,707,427.41 37,047,080.25 (339,652.84) For reconciliation IX 598,029.12 39,963,807.76 42,006,325.97 (1,444,489.09) For investigation of negative balance X 23,756.79 51,117,867.84 51,117,867.84 23,756.79 For reconciliation updating and maintenance of subsidiary ledger XI 2,026,335.82 27,531,681.64 29,125,121.75 432,895.71 Remitted on January 30, 2017 XII 50,017.82 16,561,100.12 16,521,958.00 89,159.94 XIII 484,810.99 26,335,493.53 26,365,287.72 455,016.80 Remitted on January 10,2017 Total 12,165,267.77 587,652,378.32 593,846,612.55 5,971,033.54

We commended the department for its compliance with GSIS laws. For the unremitted balance, we recommended and the DSWD Secretary agreed to require the concerned FO Accountant to exert efforts to locate the documents/records and review, analyze and reconcile the account and remit the balances, if warranted.

Compliance with Tax Laws

28. The DSWD had complied with BIR regulations No. 1-2013 dated January 23, 2013, with total amount of P918.744 million remitted to the BIR, representing taxes withheld for CY 2016, and unremitted balances as of year-end remitted in January 2017. However, in FO V, included in the balance was the long outstanding unreconciled amount of P3.400 million.

Section 80 (A) of the National Internal Revenue Code, as amended, provide that the employer shall be liable for the withholding and remittance of the correct amount of Tax required to be deducted and withheld. Further, it is also required under Section 79(H) that “on or before the calendar year but prior to the payment of the compensation for the last payroll period, the employer shall determine the tax due from each employee on taxable compensation income from the entire taxable year in accordance with Section 24 (A). The difference between the tax due from the employee for the entire year and the sum of taxes withheld from January to November shall either be withheld from his salary in the succeeding year.

DOF-DBM-COA Joint Circular No. 1-2000 dated January 3, 2000 and Joint Circular No. 1-2000A dated July 31, 2001 require the remittance of taxes withheld from employees and government suppliers.

For CY 2016 the DSWD consolidated Tax withheld, remittances and balance is presented in Table 39.

Table 39. Status of Taxes Withheld, Remitted, and Balance Beginning FO Tax Withheld Remittance Balance Remarks Balance

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Beginning FO Tax Withheld Remittance Balance Remarks Balance CO 2,858,942.13 198,488,892.74 197,720,113.77 3,627,721.10 Remitted P2,076,102.14 in January 2017 and refunded P484,869.87, leaving a balance of P1,066,749.09 for further verification NCR 11,614,423.90 67,937,943.59 79,516,084.21 36,283.28 remitted on May 2017 CAR 384,643.97 38,189,677.85 37,605,315.38 969,006.44 Remitted P4,352.23 on January 5, 2017, P961,875.56 on January 10, 2017 and P2,778.65 on February 9, 2017. I 0.00 28,285,593.66 28,285,593.66 0.00 II 3,077,597.58 24,435,121.68 25,855,775.86 1,656,943.40 Remitted a total of P888,537.22 from March to June 7, 2017. Balance of P768,406.18 as of June 16, 2017 III 3,958,158.22 55,574,170.02 54,902,792.59 4,629,535.65 Remitted P4,192,520.78 on January 5 and 6, 2017 IVA 6,849,014.36 60,754,119.63 59,002,289.01 8,600,844.98 Remitted on January 10, 2017 IVB 2,508,155.14 43,877,457.09 44,866,079.71 1,519,532.52 Remitted on January 10, 2017 P1,210,972.77 V 4,239,522.29 109,079,385.08 109,288,472.97 4,030,434.40 The balance of Due to BIR was unreliable due to various errors that resulted to under-remittance of taxes withheld by P48,350.20, error in recording liability to GSIS amounting to P21,131.46, and long outstanding unreconciled balance amounting to P3.4 million. Remitted on Jan 13, 2017 VI 10,548,747.14 100,142,826.01 95,511,925.51 15,179,647.64 Taxes withheld were not remitted intact and promptly to the BIR (par. 118-124, CY 2016 ML). Remitted P9.752 million on January 9, 2019 and the balance of P5.428 million is for reconciliation VII 0.00 72,663,374.53 73,588,530.31 (925,155.78) For reconciliation VIII 8,347,340.72 73,453,427.73 67,551,051.74 14,249,716.71 Remitted P8,171,234.60 on Jan 10, 2017, and the balance is subject for reconciliation IX 2,804,315.12 81,662,744.34 79,897,723.90 4,569,335.56 Remitted P2,046,090.50 in January 2017 and the amount of P1,688,662.54 is for refund to employees. The old balance of P834,582.52 is for investigation X 1,006,183.19 86,745,141.55 74,335,178.51 13,416,146.23 Remitted January 10, 2017 XI 1,053,718.18 56,394,132.02 55,927,890.42 1,519,959.78 Remitted on January 9, 2017 XII 0.00 38,602591.58 38,602591.58 0.00 XIII 2,961,196.79 69,575,024.89 70,101,044.79 2,435,176.89 Remitted on January 6, 2017 Total 62,211,958.73 1,205,861,623.99 1,192,558,453.92 75,515,128.80

We commended DSWD for its effort to comply with BIR rules and regulations, however, for the unremitted balance, we recommended and the DSWD Secretary agreed to require concerned FOs Accountants to analyze the account and make necessary adjustments to the books of accounts or remit the balances to the BTr, if warranted.

Enforcement of Settlement of Suspension/Disallowances/Charges

29. Notices of Suspensions and Disallowances amounting to P208.889 million and P481.989 million, respectively, remained unsettled at year end, contrary to Section 9.4 of the 2009 RRSA.

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The 2009 Rules and Regulations on the Settlement of Accounts (RRSA) requires that a suspension should be settled within 90 calendar days from receipt of the Notice of Suspension (NS); otherwise the transaction covered by it shall be disallowed/charged after the Auditor shall have satisfied himself that such action is appropriate. Consequently, the Auditor shall issue the corresponding Notices of Disallowance (ND). The disallowance shall be settled within six months from receipt of the ND by the persons liable.

The status of audit suspensions and disallowances found in the audit of various transactions as of December 31, 2016 are summarized in Tables 40 and 41.

Table 40. Status of Notices of Suspensions (in million PhP)

Issuance Settlements Field Beginning Ending for the for the CY Remarks Office Balances Balance CY 2016 2016 CO 257.266 141.703 270.908 128.062 Settlement under review for NS amounting to P127.62 million fund transfers to NGOs/POs II 31.156 289.511 247.994 72.673 IV-A 9.632 0.000 9.632 0.000 IVB 1.814 0.000 1.814 0.000 VI 0.000 19.705 18.645 1.060 Suspensions amounting to P1.060 million was settled on January 2017 VIII 1.531 0.000 0.000 1.531 Settlement of suspended accounts could not be possibly done as the related records and other documents were washed-out/destroyed during the storm surge caused by the super typhoon Yolanda X 502.492 453.022 952.287 3.227 XI 0.000 1.466 1.466 0.000 XII 0.000 0.086 0.000 0.086 XIII 2.276 0.000 0.026 2.250 Total 806.167 905.493 1,502.772 208.889

Table 41. Status of Notices of Disallowances (Amounts in Million PhP)

Field Beginning Issuance Settlements Ending Balance Remarks Office Balances 403.348 14.756 0.000 418.104 With appeal submitted for evaluation CAR 0.089 0.000 0.017 0.072 I 0.000 0.000 0.000 0.000 No issuance II 0.000 3.905 0.608 3.297 III 2.905 2.466 1.316 4.055 There were disallowances amounting to P2,522,270.00 issued prior to the effectivity of the RRSA which had become final and executory, thus recorded as Receivables-Disallowances and Charges. No settlement on these disallowances was made during the year. IV-A 0.047 0.100 0.047 0.100 The ND issued during the year reflected the payment of retainer lawyer fees amounting to P100,000.00 wherein disbursements were not supported with the contract which require written concurrence of COA in the hiring of legal retainer in this FO 129. As of December 31, 2016, the decision is still under review in the Office of the Commission Proper awaiting final decision. V 2.623 1.444 0.455 3.612 The settlement pertains to partial

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Field Beginning Issuance Settlements Ending Balance Remarks Office Balances settlement of one (1) ND. The remaining 36 disallowances are still on appeal. VI 5.262 0.120 0.042 5.340 P5,240,265.11 is under appeal with the COA and the balance of P100,000.00 is not yet final and executory. ND issued prior to the effectivity of the 2009 RRSA are not included in the above balances but are deemed disallowances which shall continue to be monitored and enforced. As of December 31, 2016, disallowances of P218,100.00 issued prior to the effectivity of the 2009 RRSA remained unsettled. VII 1.767 0.000 0.000 1.767 Under Fund 101, the unsettled disallowance of P1,463,143.71 pertains to ND issued in prior years that remained unsettled as of December 31, 2016. For KALAHI CIDSS-KKB, total disallowance amounted to P303,814.90 that also pertains to prior years. VIII 0.364 0.000 0.000 0.364 Settlement of disallowed accounts could not be possibly done as the related records and other documents were washed-out/destroyed during the storm surge caused by the super typhoon Yolanda IX 0.110 0.000 0.110 0.000 The balance of P110,075.00 was fully paid by the officers and employees concerned during the year X 0.000 1.636 0.004 1.632 XI 0.000 1.050 0.340 0.710 709,636.24, represents meal allowance of 4Ps beneficiaries attending the Community-Driven Enterprise Development (CDED) process. XII 0.065 0.000 0.000 0.065 XIII 1.045 0.055 0.332 0.768 ND issued prior to the effectivity of RRSA has a balance of P504,183.60 as of December 31, 2016. 179. The foregoing balances shall continue to be monitored and enforced, pursuant to Section 28.3 of COA Circular No. 2009-006 dated September 15, 2009. NCR 42.103 0.000 0.000 42.103 Total 459.728 25.532 3.271 481.989

ND/NC/NS issued prior to effectivity of the 2009 RRSA are not included in the reflected balances but are deemed disallowances/charges, which shall continue to be enforced in accordance with these Rules as provided under Sec. 28 thereof.

We recommended the DSWD Secretary to:

a) enforce settlement of audit suspensions and disallowances within the prescribed period in accordance with Sections 9.4 and 10.4 of the 2009 RRSA; and

b) initiate necessary administrative and/or criminal action in case of unjustified failure/refusal by subordinate officials to effect compliance

138 with the foregoing requirements, pursuant to Section 7.1.2 of 2009 RRSA.

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STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

The Auditors have followed up and validated the actions taken by the concerned DSWD officers and employees in the implementation of the audit recommendations as contained in the CAAR for the previous years and noted the following:

Status of Implementation No. of Recommendations Fully Implemented 84 Partially Implemented 47 Not Implemented 2 Total 133

The results of our validation were discussed in the exit conference and recommended Management continuing corrective/remedial actions to address the issues in order to fully implement the recommendations on those partially implemented and unimplemented. The details are as follows:

FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI CY 2015 Dormant CY Accounts/unremitted Funds 2015 to the Bureau of Treasury CAAR Page 62 1) Dormant and other unnecessary cash in banks accounts of P143.095 million were not remitted to the National Treasury or returned to the grantor thus, depriving the source agencies of the proper disposition and productive use of the funds.

Recommendation:

The DSWD Secretary to: a) Require the Cash CO - Updates as of March 31, 2017 PI Out of the 16 bank Division to close all There are eight bank accounts that accounts of CO dormant accounts and were closed by the Department and recommended for closure, remit all trust receipts, these are as follows: only eight were closed and donations, including remitted to BTr the excess funds from Account No. Account Name amount of P436,242.85. training, and BAC 3122-1015-83 PODER 3 Peso Current Account 3122-1015-24 DSWD-UNDP Care and Support Services for honoraria pursuant to Persons with HIV/AIDS Reiterated in this report existing laws; and 3122-1019-90 DSWD-Social Protection Strategy Project under Observation No. 1 3122-1019-15 DSWD Mitigating the Economic and Psychological Impacts of HIV and AIDS page 57.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI 3122-1023-50 DSWD UN-WFP Emergency Cash Transfer for Typhoon Yolanda-Affected Population in 4Ps Areas 3122-1023-26 Give2 Asia Pepsico Foundation FOIV-A Cash for Work Program 3124-7000-34 DSWD-Comprehensive Pilot Intervention Plan Against Gender Violence-Phase 3 3122-1021-48 DSWD Payment Application Secure System for the Bureau of Customs

The following bank accounts will not be closed due to following reasons: • The Bidders/Performance Bond are deposits made by private individuals and are liability of the Department which is required to be immediately returned to contractors after performance of the undertaking; • Cash donations for typhoon Yolanda are still being utilized for the rehabilitation phase of the calamity victims; • BAC Honoraria is maintained pursuant of 6.2 of DOF-DBM-COA Permanent Committee Resolution No. 2005-2; • Other bank accounts are maintained with AGDB based on the MOA; and Training Fund Account is maintained based on DSWD memorandum Circular No. 30, Series of 2004.

b) Direct the Accountant to Documents needed are not available. PI Verified corresponding exert efforts to trace back Management through FMS-AD to JEVs and noted and analyze the exert all efforts to retrieve the needed adjustments for the “suspense account” in documents to reconstruct the data and reconciling items as the Cash in Bank- LCCA reconcile balances. recommended. and to what bank account the same was deposited On the bank reconciling accounts, Reiterated in this report and remit the balance to adjustments in books of accounts are under Observation No. 1 the National Treasury; already made for the following: page 57. and record the validated

reconciling items in the Account No. Account Name Amount JEV No. and Date

books of accounts in 3122-1011-09 Training Fund P2,400.00 2016-06-002984 order to reflect the dated June 1, 2016 3122-1016-72 Miscellaneous 1,750.00 2016-03-008935 correct balances of the Trust Account dated March 31, 2016 3122-1016-72 Miscellaneous 218,749.00 2016-03-001154 account. Trust Account dated March 28, 2016 and 2016-07-003379 dated July 18, 2016

Overstated Cash-in-Bank CY FCSA and Accumulated 2015 Surplus CAAR Page 65 2) Recorded balance of Cash in Bank – FCSA of P3,782.058 million at year-

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI end is overstated by P49.677 million due to inadvertent exclusion of the balance of regular agency fund transferred to the Foreign Assisted Fund in the computation of FOREX gain as of September 30, 2015. Consequently the Gain on FOREX/Accumulated Surplus was overstated by the same amount.

Recommendation:

Management agreed to direct Adjusted per JEV#2016-04-000729. FI Validated the adjustment the Accountant to make made per JEV #2016-04- necessary adjustment to 000729 dated April 1, correct the balances of the 2016 in the amount of affected accounts. P49.676,660.08 and found in order. Unliquidated Cash Advances CY (CAs) 2015 CAAR 3) CAs amounting to Page 66 P125.493 million pertaining to prior years remained unliquidated as of December 31, 2015 due to non-monitoring of submission of LRs and non- compliance with COA Circular No. 97-002 dated February 10, 1997

3.a) Unliquidated Advances to Special Disbursing Officers - ₱3,141.494 million

Recommendation:

The DSWD Secretary to direct the concerned Directors/Accountants to: a) Require all AOs to The Management continues to PI Unliquidated cash liquidate their CAs on follow-up and require those advances for CY 2015 and time, otherwise, impose Disbursing Officer who had not yet below amounted to administrative sanctions submitted their liquidation report thru P174,142,100.12 or an against them in the issuance of notices/ memoranda. equivalent decrease of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI accordance with Section COA's recommendation is duly 94.45% decrease due to 89 of PD No. 1445, COA noted. liquidations. Circular No. 97-002, and CSC Resolution No. 04- Consolidated 0676 dated June 17, As of December 31, 2016, 2004; P3,576,590,764.34 or 95.36% was liquidated out of P3,141,492,498.11 (with adjustment of P663,916,789.66) outstanding cash advances as of Dec. 2015, leaving a balance of P174,142,100.12

Demand letters were sent to the concerned Officials and Employees to submit their liquidation report which is already due and demandable. b) Stop the practice of PI The following DSWD granting excessive CAs FO VIII. The monitoring of CAs has Field Offices still grants to SDOs; been enforced as a result of creation cash advance to SDOs of Accounting Processing and with previous unliquidated Accounting Reporting subsections. cash advances. (NCR, II, V, VI, IX and X) c) Require the concerned FI Verified the adjustments SDOs to immediately The Accounting has already made due to recording of submit the necessary submitted necessary documents to unsupported liquidations, documents to support the support the liquidations. per JEV#2016-03-002625 liquidations made, dated 3/31/2016 and found henceforth, record only in order. liquidations with complete supporting documents (FO II); and d) Request write-off of NI Reiterated in this report dormant accounts after No Action. under Observation No. 6 exhausting utmost effort page 73. in the liquidation of the long-outstanding balances. (FO V and VIII)

3.b)Unliquidated CY Advances to Officers 2015 and Employees CAAR ₱49.054 million Page 69

Recommendation: Consolidated The DSWD Secretary to As of December 31, 2016, PI CY 2015 balance of require all concerned Offices P4,698,905.29 or 72.05% was P3,141.494 million has to strictly observe COA liquidated out of P49,054,044.24 been reduced to P174.14 Circular No. 97-002 on the (with adjustment of P41,852,660.17 million in CY 2016 or a

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI grant, utilization, and and refund of P535,639.40) total liquidation of liquidation of CAs and ensure outstanding cash advances as of Dec P2,967.354 million or monitoring thereof; and 2015, leaving a balance of 94.46%. liquidate their CAs on time, P1,822,384.49 otherwise, impose administrative sanctions Demand letters were sent to the against them in accordance concerned Officials and Employees to with the Section 89 of PD No. submit their liquidation report which 1445, COA Circular No. 97- is already due and demandable. 002, and CSC Resolution No. 04-0676 dated June 17, 2004.

Unliquidated Fund Transfers CY – Due from 2015C NGAs/LGUs/GOCCs and AAR NGOs/PO Page 70

4) Inadequate monitoring Consolidated of LRs and release of As of December 31, 2016, Reiterated in this report additional fund transfers to P27,306,701,564.23 or 78.63% was under Observation No. 7 IAs with unliquidated liquidated out of P33,755,810,134.70 page 80. balances resulted in the (with adjustment of accumulation of P1,312,487,391.92 and refund of outstanding balances of Due P341,647,524.78) outstanding cash from NGAs/ GOCCs/ LGUs advances as of Dec 2015, leaving a of ₱1,536.589 million, balance of P7,419,948,437.61. P7,361.876 million and Breakdown as follows: ₱24,858.345 million, respectively. Approximately 63 percent, 10 percent and 24 percent of the respective balances are aged over one (1) to ten (10) years.

4.a) Due from NGAs ₱1,536.589 million

Recommendation:

The DSWD Secretary to: Sent follow-up and demand letters PI Balance unliquidated for a) Direct the concerned and conducted personal visits to CY 2015 and below Offices and employees to implementing agencies with long amounted to strictly comply with outstanding unliquidated balances. P725,797,556.78 or paragraphs 4.6, 4.9 and 52.77% liquidation. 5.4 of COA Circular No. 94-013, dated December 13, 1994, on the liquidation of fund transfers, otherwise it must share responsibility

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI for the accumulation of unliquidated accounts; Management has exerted efforts to FI Improved liquidation monitor liquidations. percentages with b) Create a core group to liquidations amounting to closely monitor the to P810.789 million or liquidation of fund 52.77%. transfers and require the IAs to immediately submit the LRs within the prescribed period per COA Circular No. 94- 013 and to refund the unutilized fund transfers for completed projects, if any; and Management has exerted efforts to PI Initial adjustments to the reconcile the DSWD book balances accounts were made c) Require the Accounting with those of the IAs and make amounting to P19 million. Division to verify the necessary adjustments as reflected in results of confirmation in the books. the DSWD books and exert further efforts to reconcile the DSWD book balances with those of the IAs and make necessary adjustments, if necessary.

4.b) Due from GOCCs - CY ₱7,361.876 million 2015 CAAR Recommendation: Page 73

The DSWD Secretary to direct the Accounting Division to: a) Adhere strictly to the CO PI Total liquidations and guidelines on the grant, The outstanding balance for Due from adjustments for CY 2015 use, and liquidation of GOCCs as of February 28, 2017 as and below amounted to fund transfers as well as follows: P7,133,445,715.66 or the provisions of the 96.91%.

MOA with concerned Balance as of Liquidation (January Balance as of December 31, 2015 2016 to Feb. 2017) Feb. 28, 2017 IAs and make strong P7,020,139,992.55 P6,825,118,207.35 P195,021,785.20 representation with its 100% 97.22% 2.78% officials to submit LRs to liquidate the same; and b) Monitor liquidations Sent follow-up letters and scheduled FI Copies of follow- made by the GOCCS for personal visit to implementing up/demand letters were timely recording of the agencies with long outstanding furnished to COA. assets procured and unliquidated balances. expenses incurred and

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI require refund of any unexpended balance.

4.c) Due from LGUs CY ₱24,858.345 million 2015 CAAR Recommendation: Page 77

The DSWD Secretary agreed to: a) Require the Accounting Sent follow-up letters and scheduled PI Of the total CY 2015 and Unit to refrain from personal visit to implementing earlier balance of recording liquidation of agencies with long outstanding 24,858.343 million, fund transfers to LGUs unliquidated balances. liquidation amounted to on SoRDs, which merely P18,480.909 or 74.34% reflect CAs granted to Adjustments taken up in the books of AOs or those without accounts to reflect actual fund specific details of transfers. payments incurred, and compel the LGUs concerned to submit revised SoRDs on liquidations with deficiency totaling P27.203 million and that subsequent LRs should show detailed actual project expenditures (FO IX); and b) If sending of Management has exerted efforts to FI Registered a liquidation of confirmation does not enforce liquidations. P996,280,003.73 or work, the Accounting 68.54% from prior years Unit could visit the balances of different LGUs to P1,453,677,616.07. monitor the unliquidated balances and follow up the liquidation and/or request refunds for the unutilized balances. (FO XI). Unliquidated fund transfers CY to NGOs/POs 2015 CAAR 5) The delayed or non- Page Liquidation for CY 2015 81 liquidation of fund and below amounted to transfers to IAs and the P6,721.67 Million or pending and unrecorded 59.46 percent of the total liquidations with the IAS, unliquidated balance for due to: (a) lack of CY 2015. and/or inappropriate

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI documentations submitted; Reiterated in this report and/or, (b) inadequate under Observation No. 9 monitoring of submission of page 96. LRs from the IAs, resulted in the accumulation of the balance of the Due from NGOs/POs amounting to ₱11.304 billion as of year- end, of which 13 percent or ₱749.064 million pertaining to CY 2013 and PYs are due for liquidation.

Recommendation:

The DSWD Secretary to direct all FO Directors concerned to: a) Strengthen the Demand letter was issued to NGOs FI Only accredited monitoring controls on with unliquidated cash advance. NGOs/POs are tapped for fund transfers by project implementation creating a core group to (with the exception of closely monitor the international agencies). liquidation of fund transfers and require the NGOs/POs to immediately submit the LRs within the prescribed period per COA Circular No. 2007- 001; send demand letters to those who fail to liquidate on time; and refund the unutilized fund transfers for completed projects, if any; The Management is not remiss in FI Noted the actions taken by sending demand letters to these Management. Copies of b) Study the MOA with NGOs, but after their failure to demand letters, referral to NGOs/POs and possibly respond to our demands, these NGOs Legal Office and to OSG include provisions on are endorsed to the Department’s was furnished the – control measures, Legal Service (LS) for appropriate DSWD COA Office. specifically on the legal action. The LS had forwarded implementation of such case of non-compliance of projects and liquidation NGOs to the Office of the Solicitor of funds, to ensure General (OSG) for the initiation of project completion as legal action and appropriate remedies. well as full liquidation of fund transfers; Accordingly, the OSG requested certified true copies of the Disbursement Vouchers (DVs), together with the supporting

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI documents of the 13 NGOs/POs which in return, the Department had requested from COA said copies of documents since the original documents had already been forwarded for final custody per letters dated March 9, 2015, March 24, 2015 and July 22, 2015.

Request for write-offs are coursed PI Only NCR submitted a through the auditor. request for write-off. c) Direct the Accountant to review the propriety of the dormant Due from NGOs/POs and request possible write-off in accordance with COA Circular No. 97-001; The RPMO has already directed the FI Noted considerable ACT/SRPMO on the regular and percentage of liquidation d) Direct the ACTs to prompt submission of DVs and from FOs. require BSPMCs’ strict supporting documents. Disbursement compliance on the Vouchers will be subjected to prompt submission of Municipal Fiduciary Review DVs and supporting Workshop prior to submission to documents to the DSWD COA. All NGOs and POs are active FOs to ensure the timely and being monitored by BUB Focal preparation and and BUB hired staff. recording of the LRs and the submission of the DVs and other related documents. IAS has conducted an audit of the FI Certifications on the total liquidations made by IOM Liquidations from IOM e) We also recommended was made but no that the DSWD Secretary supporting original direct the IAS to documents were attached facilitate the review of to the Certification since liquidations, especially the IOM claims to have an those submitted by the internal policy that they IOM; and the keep the original Accountant to record documents.

promptly reviewed LRs.

Misstated and unreconciled CY Inventory balances 2015 CAAR Page 6) The recorded balance 86 of Inventory was overstated by a net amount of P125.672 million due to: (a) non preparation and submission by the Property Office of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI RSMIs for the inventory issuances to the Accounting Office for recording; (b) recording the supplies and material purchased directly as expenses; and (c) non-recording of deliveries from the PS- DBM. Moreover, the balance of inventory accounts totaling P1,066.973 million in some regions could not be ascertained either due to non- conduct of physical count or non-reconciliation between books and physical count with a net difference of P9.968 billion.

6.a) Misstated Inventory Balances

Recommendation:

The DSWD Secretary require the: a) Property Unit to conduct Physical Count conducted for CY FI RPCIs were submitted to physical count of 2016. the FO auditors in inventories and prepare a compliance with the Report thereon; and As of December 31, 2016 RSMIs recommendation. prepare RSMI and until December 31, 2015 were Various JEVs per FO were submit the same to submitted by Procurement Service drawn to record the Accounting unit for and NROO was already booked up. RSMIs. recording of issued inventories; and b) Accounting Unit to make To account all inventory account to its FI Inventory purchases are the necessary appropriate account. recorded to their adjustments in the books appropriate asset accounts. of accounts and to stop the practice of recording inventories as direct expense for purchases of common used supplies.

6.b)Unreconciled CY Inventory Balances 2015 CAAR Recommendation: Page 89 FO V PI

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI The DSWD Secretary require The system is yet to be finalized. Validated partial the concerned FOs’ Property Once finalized, it will be coded by a compliance by FOs. Management and Accounting programmer and then tested by the Divisions to conduct Accounting Section Reiterated in this report reconciliation of their records under Observation No. 10 and effect adjustments/ FO IX page 100. corrections, if necessary. The Inventory team has already conducted the Physical Count of Inventory Items last June 2016 with representative from Accounting Unit and COA. Accounting recognized expense only upon issuance of the RSMI by the Supply Unit.

FO XI Inventories are already recorded in its proper account.

CARAGA Supply and Accounting records already reconcile with all the RIS completely submitted to Accounting Unit. Delayed establishment of a CY sound relief goods inventory 2015 system CAAR Page 90 7) The delayed establishment of a sound relief goods inventory system resulted in the spoilage of an estimated P11.895 million worth of sardines and the non- recording of P11.752 million to Welfare Goods for Distribution Inventory which was erroneously recorded as Financial Assistance to NGAs, resulting in the misstatement in both accounts.

Recommendation:

The DSWD Secretary direct the Property Management Division to properly comply with the following:

FI

149

FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI a) Set clear/written NROO practices a return policy Compliance with the guidelines (or quality control wherein upon discovery of recommendations were procedures) concerning the damaged/spoiled items, the noted by inspections of inspection, acceptance and Department, through its Procurement items delivered as remedies in case of discovery Service immediately coordinates with replacement of spoiled or of unwanted items like its supplier (in this case, the Fortune damage goods. spoiled, tampered and/or Group Corporation) for the 100% dented goods; replacement of the goods. FI b) Monitor strictly the Moreover, NROO has drafted a Per inspection conducted, movement of goods stored at Manual of Operations which aims to packages of relief goods the warehouse so that those consolidate best practices, were labeled expiration nearing their expiry date may standardize, and provide date for easy identification be disposed ahead than those guidelines/systems/processes on the of those nearing with late expiry dates; Department’s disaster relief expiration. operations specifically on the management of donations, logistics, production and warehouse, which includes quality control standard’s embedded in every process.

The Writeshop for the Finalization of the Manual of Operations was held in Mandaluyong City last 13th through 16th of June 2016 and was attended by NROO, DSWD FOs and CO staff.

In 2016, the NROO conducted several capacity building activities attended by participants from all Field Offices, NROO, VDRC, DReAMB, PS and AS to ensure that the best practices are being adapted. FI c) Monitor closely the The NROO has strengthened its storage conditions of the internal control procedures/ It was validated that warehouse in consonance to mechanisms on warehouse 888,066 tins with total cost the required storage management for proper monitoring of P10,434,775.50 were conditions of the relief goods; by adhering to principles of First In, replaced by the supplier. First Out (FIFO), First Expire, First Out (FEFO); and other good and It was observed that the established industry practices in warehouses at NROC were Inventory Management. provided with thermometer to monitor In its effort to continuously improve heat and humidity in the its operation and have a reliable and place. accurate inventory and monitoring of relief goods which will result to more efficient delivery of goods to disaster victims, the Department of Social Welfare and Development developed the Relief Goods Inventory Management Service.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI FI d) Look into the causes of Identified causes of spoilage and the spoilage, leakage or entered into agreement with the bulging of the subject supplier for the replacement of It was validated thru sardines and make the damaged goods. inspection that the spoiled necessary action (e.g. storage goods were already conditions, blacklisting of replaced. unscrupulous suppliers) to avoid the same incidents from happening again; and

FI e) Conduct investigation on the alleged tampering of expiry dates and file Management negotiated appropriate action against the for the return/replacement Fortune Group, if warranted. of all spoiled sardines and the supplier complied, thus no further actions were taken. Unreliable balances of PPE CY accounts 2015 CAAR 8) The existence and Page 93 accuracy of recorded PPE of ₱1,711.626 million could not be fully ascertained due to: (a) incomplete or non- conduct of physical count in two FOs; (b) unreconciled discrepancies between the Accounting and Property records with net difference of P404.18 million in seven FOs; and, (c) unrecorded donated building and structures from the MECO and acquisition of motor vehicle; and non- reclassification of completed construction to appropriate PPE, resulting in understatement of P144.142 million.

8.a) Non-conduct of Physical count and reconciliation of records

Recommendation:

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI The DSWD Secretary agreed to ensure: COA's recommendation is duly FI FO V which did not a) monitoring of the noted. AS, NIC and FMS will closely conduct physical count in regular/periodic physical coordinate and monitor items in PPE CY 2015 but have already count of PPE, and to reconcile balances in RPCPPE and complied in CY 2016. preparation and the balances per books of accounts. submission of the RPCPPE to COA for verification; and PI As per validation, regular Accounting and Property reconciliation was not Management Divisions done by seven FOs. undertake the regular reconciliation of their Reiterated in this report records and ensure that under Observation No. 11 all discrepancies are page 104. immediately investigated, cleared and adjusted in either records.

8.b) Unrecorded/ CY Misstated PPE 2015 CAAR Recommendation: Page 95

The DSWD Secretary require the: a) Property Management 100% of the noted unrecorded FI Unrecorded PPE donated Division to request donated buildings and structures by MECO already appraisal of the property amounting to P78,012,552.81 is recorded under JEV No. to ascertain the correct already recorded in the books of 2016-03-008586 value of the donations by accounts per JEV No. 2016-03- amounting to MECO and include the 008586 and corresponding P78,012,552.81 under JEV same in the list of PPE adjustment of Depreciation was also No. 2016-03-008586 dated for which the Agency is effected per JEV No. 2016-03- March 31, 2016. accountable; 008586 dated March 31, 2016 said adjustments was already reported in the Trial Balance as of March 31, 2016, since all the necessary documents prior to recognition were already completed (i.e. the Deed of Donations between the Department and MECO, dated March 25, 2010 , Bills of Materials-Warehouse C and As-Built Plans, Building and Electrical Permits). These serve as the basis on the appraisal and booking of the donated properties.

PI

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI b) Engineering Office to Documents pertaining to completed Verified and found that monitor on-going and projects subject of finding in CY 2015 only two out of the four completed projects and were submitted to Accounting Office. completed projects were complete the necessary transferred to PPE documentation upon accounts completion and furnish the Accounting Division for recording; and PI c) Accountant to record the Completed projects subject of finding Verified recording of two subject PPE and compute in CY 2015 already recorded to projects per JEV No. the corresponding appropriate PPE accounts 2016-09-024674 and depreciation 2016-05-014530. expenses/accumulated depreciation. Unreliable Balance of CY Accounts Payable 2015 CAAR 9) The recorded balance Page 97 of Accounts Payable of P4,379.327 million is understated by a net amount of P16.135 million, due to: a) failure to set-up accounts payable for delivered supplies and materials; and b) erroneous classification of payable transactions. Moreover, the amount P32.174 million could not be validated due to incomplete documentation.

Recommendation:

The DSWD Secretary to: a) Procurement Service The observation and findings of the PI Validation made showed (DSWD) to submit Commission is noted. Procurement that documentation of immediately all documents Service and Accounting Division Accounts payable are only on delivered supplies and shall be in close coordination for the done upon request for materials to the Accounting immediate submission of documents payment. Division for recording; and relating to consummated transactions and deliveries for proper recognition of payable accounts in the books. b) Accounting Division to FO IX The Supply Unit immediately FI FO IX complied with the process/record only those submits to Accounting Unit the recommendation, claims with complete invoices after receiving all the however, for CY 2016, at supporting documents and deliveries. the CO payables were set- make the necessary up without complete

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI adjustments in the books for documentation, hence the accounts misstated. audit finding is reiterated in this report under Observation No. 13, page 111. VALUE FOR MONEY CY AUDIT 2015 CAAR A. PANTAWID Page 101 PAMILYANG

PILIPINO PROGRAM (4Ps)

10) Deficiencies/gaps in the 4Ps information system, such as: a) compliant beneficiaries excluded/ suspended from payroll; b) retro payments not verifiable on Grievance system and paid only after two (2) years; and c) existence of duplicate entries in the 4Ps payroll had affected the efficient implementation of the program.

CY 10.a) Compliant 2015 beneficiaries CAAR excluded/ Page suspended from 102 payroll

Recommendation:

The DSWD Secretary to: Guidelines on the Computation of FI Affected beneficiaries a) implement a Grants in the Pantawid Pamilyang were reviewed and management review Pilipino Program was crafted and validated per report of control process which approved to better understand the validation dated January ensures that all basis on computation of grants, 29, 2016. compliant beneficiaries provide guidance to Field Offices and are included in the implementers. payroll for the periods stated in the CV; and, The guidelines will be used as the reference for computation of grants per household/client status. The following conditions were enumerated in the said guideline: the conditions for payment; NAPA generation; payroll computation;

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI release of grants; unclaimed grants; and for the retroactive payment process to ensure that the compliant household beneficiaries of the program will receive the grants that are due them.

FI The DSWD contracted a Current year payment processing is systems consultant to b) identify the causes of the already being enforced. review the CCT/4Ps exclusion from the information System. payroll list and make necessary enhancement in the system to avoid the same errors. 10.b) Retro payments not CY readily verifiable in 2015 the GRS and paid CAAR only after two years Page 104

Recommendation:

The NPMO to: a) strictly comply with the Retroactive payment module is PI The DSWD contracted a 4Ps operations manual locked after the last year’s processing systems consultant to on processing of period. review the CCT/4Ps retroactive payment for information System. eligible beneficiaries Retroactive payment processing facilitated by the GDD; schedules are already included in the and CV Timeline. RPMO are urged to abide by the given timeline

PI The DSWD contracted a b) establish a monitoring Continued coordination with Finance systems consultant to mechanism to warrant the on time processing and release of review the CCT/4Ps timely resolution of payment information System. complaints to ensure that the cash assistance reach the beneficiaries within the timelines set and the much needed cash assistance is utilized as intended.

10.c) Duplicate names/ CY entries in the 4Ps 2015 payroll CAAR Page 106 Recommendation:

The NPMO to:

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI a) conduct a As of February 2017, partial PI The DSWD is currently review/validation of the validation results on 1,253 validating CCT beneficiary data and households out of 1,872 (67%) reveal beneficiaries included in clean up the that: 842 HHs were verified as unique the audit report and delist invalid/double and were retained, 411 HHs were duplicates upon beneficiary entries and delisted, validated as duplicates. verification of duplicity. errors to ensure that the The validation has master data is free from commenced in February any invalid/duplicate/ 2017. multiple records; and b) enhance the system to NPMO is still awaiting validation PI The DSWD contracted a include an embedded result on the remaining 607 HHs from systems consultant to facility that region ARMM and 12 HHs from review the CCT/4Ps automatically checks region XII to complete the report. information System. duplicate/invalid beneficiary entries to Also in the 1st quarter of 2015, aside avoid double payments. from the duplicates detected by the Commission, the program also was able to detect possible duplicates which were provided to the regions for their validation. The program, through the Beneficiary Data Management Division (BDMD), was able to detect 7,801 possible duplicates households in which 5,101 households retained and 1,004 households were delisted as duplicates the remaining 1,696 households from region ARMM are still being validated.

The BDMD also crafted a guidelines to strengthen deduplication during registration process. There are two (2) ways of detecting duplicates, the top- down approached and the bottom-up approached both of which are integrated in the enhanced Registration Process which was employed in 2015 to eliminate duplicities in newly registered households of the program.

As part of the decentralization efforts, the BDM Officers in the field were also trained to detect duplicates using technologies such as STATA and MS Excel for a thorough review and management of the data of the program down up to the field level.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI To prevent undue withholding of grants, only those HHs with identical monitored children are recommended for suspension of grants.

11) The account balances CY of CCT/MCCT 2015 beneficiaries under the cash CAAR card mode of payment Page 108 showed a total of P1.099 billion, consisting of 79,530 accounts with balances ranging from P2,801 to P102,200 that were not withdrawn from 30 to 2,190 days upon payout, thereby showing that there is no immediate need for the financial assistance, and casting doubt on the eligibility of the chosen beneficiaries.

Moreover, 386,435 accounts with a total balance of P139.008 million have no date of last monetary activity, but still included in the list of beneficiaries.

Recommendation:

The Secretary to require the NPMO to: DSWD has coordinated with LBP on PI DSWD and LBP 4Ps a) Coordinate with LBP on the status of the partial validation of personnel are currently the status of cash cards cash cards accounts. (Letter to LBP reviewing the status of all issued to beneficiaries dated April 20, 2016). Succeeding cash cards. and make necessary communication shall be prepared actions to recover the upon completion of validation. amount to be remitted to the Btr; The DSWD also developed the Cash PI Report on validation of b) Conduct an Card Account Verification System non-moving accounts investigation/re- (CAVS) in order to fast track the submitted by the Risk assessment on the conduct of validation of all existing Management and Quality eligibility of concerned cash card accounts. Assurance Division with beneficiaries and make recommendations dated necessary actions based January 31, 2017 covering on the assessments; the Regions 1, 7, 8, ARMM, and NCR.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI

A Memorandum to the DSWD PI The DSWD is currently c) Intensify monitoring and Regional Offices dated June 8, 2016 validating CCT follow-up of was prepared to inform the Regional beneficiaries included in beneficiaries by field Offices on the approved guidelines the audit report and delist personnel and update of for the conversion of cash card to ineligible beneficiaries if the data base for the non- prepaid card together with the user warranted. compliant/delisted manual for the CAVS. The validation has beneficiaries; commenced in February 2017.

NPMO conducted a validation of PI The DSWD is currently d) The RPMO, Pantawid non-moving cash card accounts in validating CCT Director intensify Regions I, NCR, VII, VIII, and beneficiaries included in validation of all unpaid ARMM to identify the reasons for the audit report through beneficiaries and require account dormancy and craft a policy the conduct of the Municipal and to prevent the same and also to guide “Kamustahan”. Provincial Links to the coordination with concerned The validation has promptly report on the offices within and outside DSWD. commenced in February status of beneficiaries so 2017. that changes, if any, The Regional Offices were also could be effected provide with the list of HHs within Reiterated in this report immediately to prevent their area with non-moving accounts under Observation No.5 or minimize the for them to validate. The result is now page 68. occurrence of unpaid being consolidated and will be grants on OTC and off- provided to LBP for appropriate site payments of 4Ps. action.

Prepared follow up memorandum to the DSWD RO on July 4, 2016 to remind and instruct the DSWD RO to use the said verification tool and to fast track the validation of the said accounts. 12) Payment of MCCT to CY qualified beneficiaries 2015 incurred delays, ranging CAAR from 12 to 15 months, due Page 112 to: (a) absence of partner conduit to service the areas; (b) lack of capital funds of conduits; and (c) delayed processing and release of checks for MCCT beneficiaries, thus the objective to alleviate the condition of the partner families was not fully achieved.

Recommendation:

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI The Secretary to require the National/Regional Project Management Office the following: Submission of Notice of Approve FI Payouts were done in a) Submit to the Unified Payroll Action for the payment of batches, February, March Financial Management grants of MCCT beneficiaries is and April 2016 Unit the Notice of submitted in advance to UFMU to corresponding to payroll Approve Payroll Action synchronize the payout schedules of period August 2014 to for the early preparation MCCT to RCCT. January 2016. and release of MCCT Cash Grants; The timeline on updating and FI Validation showed that b) Justify the over releases compliance monitoring is already Releases covered CY of Cash Grants to FOs. adjusted and synchronized with the 2014-2015 cash grants. RCCT schedules to facilitate the utilization of the existing machinery of the regular CCT.

Releases of cash grants to FOs is based on the compliance to the program conditionalities of the beneficiaries. In the COA AOM, MCCT target is lower compared with the total registered. The increase of the registration is due to inclusion of disaster afflicted families and inclusion of additional IP families which were validated also during the registration period of IPs in 2014 & 2015

The budget of MCCT particularly for the grant of MCCT beneficiaries is sourced from line item of the grant of Pantawid and within the budget coverage of the year.

To include contingency plan in the preparation of the succeeding WFP considering the un-factored events which can be covered and included in MCCT program implementation.

To coordinate with LBP in FI Additional Conduits were Likewise, the DSWD identification of partner conduits for contracted to facilitate the Management to revisit their MCCT for timely conduct of payout pay-outs especially in MOA with LBP on to beneficiaries. ARMM. systematic contracting the services of partner conduits to address the delayed payment of cash grants.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI B. KALAHI CIDSS CY 2015 13) Low financial CAAR accomplishment rate and Page 114 delayed submission of project accomplishment as of December 31, 2015, raised doubts on the effective implementation of the KC-NCDDP M&E System, specifically on the areas of reporting, monitoring and evaluating KALAHI projects.

Recommendation:

The DSWD Secretary to The NPMO is currently in the process PI Validation showed that a require the NPMO/RPMO to of enhancing its Program Information software is being faithfully adhere with the Management System. developed to integrate provisions of the KC M & E various components and to ensure that the projects are streamlining processes in implemented in accordance encoding, data review and with the approved budget, submission. project milestones, and performance expectations. 14) Only 47.39 percent or CY 272 SPs costing P329.081 2015 million were completed, out CAAR of the 574 SPs validated Page 116 with project cost of P696.591 million, thus short of the 70 percent KC- NCDDP Intermediate Outcome Indicator for CY 2015, due to: (a) lack of assistance and monitoring by the ACTs and RPMOs personnel to the BSPMCs; and (b) delayed downloading of community grants to the BSPMC, especially the 2nd tranches, thus may affect the implementation of SPs within the agreed timeframe of five-year and four-year implementation period provided in the loan agreement with the WB and ADB, respectively.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Recommendation:

The DSWD Secretary to require the concerned ACTs and RPMOs personnel to: a) Monitor regularly all on- The RCIS will submit a Tactical plans FI All 574 SPs have been going and to complete the SPs by December completed as of December unimplemented SPs and 2016. The plan contains detailed 31, 2016 due to the determine the causes of strategies per subprojects to ensure monitoring undertaken by delays and address the that completion activities are the ACTs. issues and concerns to undertaken. fast track the completion of SPs; b) Require the BSPMCs to NPMO and RPMO will closely (e.g. FI BSPMCs adhered to the strictly adhere to the weekly) monitor the actions to be timely submission of KALAHI policy on the undertaken through field visits and requests for fund and prescribed period of provision of TA to the SRPMO and noted that there was project implementation ACTs. increase in the percentage thru timely submission of completion of SPs for of requests for fund ACTs are instructed to fill-out CY 2016. release and supporting properly the geo-tagging web app documents and instruct (including the reasons for non and the BSPMCs to start the slow moving SPs) in order to provide initial procurement necessary assistance/TA activity while waiting for immediately. the downloading of the community grants; FI Community grants for SPs c) Fast track the validated for CY 2015 downloading of were already downloaded community grants to and SPs were completed. BSPMC; and FI Noted improvement/ d) Monitor adequately the SRPMOs and RPMOs to intensify fastracking in status of SPs monitoring of sub-projects during downloading of implementation within SPI. community grants. their area of responsibility and ensure Sustainability Evaluation that all as a means to monitor the information/reports are status of SP is being accurate, complete, and undertaken. Per validation consistent with Program conducted. standards (ACTs). 15) SPs costing P9.087 CY million were with 2015 deficiencies/issues, and not CAAR in keeping with KC- Page 119 NCDDP policy guidelines.

Recommendation:

161

FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI

The DSWD Secretary to: a) Require the ACT/RPMO personnel to:

i) Monitor and supervise Defects/deficiencies have been fixed. FI SPs are operational and closely the SPs and useful per validation in CY provide technical 2017. assistance to the BSPMC during project implementation and immediately correct the defects/deficiencies noted for the full continuity and functionality of the SPs for the benefits of the intended beneficiaries; Defects/deficiencies have been fixed FI Deficient SPs have been ii) Make necessary corrected/resolved per representations with validation. the concerned Barangay Chairman to address the stop order and resolve the issue being raised; and Defects/deficiencies have been fixed FI Deficient SPs have been iii) Implement strictly the corrected/resolved per provision of storage validation. facilities before delivery of construction materials at the site to secure these materials The RPMO and SPRMO ensure that FI Necessary actions were b) Hold accountable the the Area Coordinating Teams must undertaken by conducting RPMO/ACT who will be conduct regular re orientation, regular meetings with found remiss in the coaching and mentoring to the stakeholders and monitoring and BSPMC. The ACTs also ensure that concerned barangay evaluation of the SPs. all technical documents and other officials was noted. supporting documents must be presented during the Barangay Assembly and followed by series of meetings with the volunteers for transparency and accountability.

Management also ensures that newly hired staff are well trained and oriented for them to be capable of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI transferring the knowledge, skills and attitude to the BSPMCs.

16) Community grants CY amounting to P217.240 2015 million released to BSPMC CAAR showed a difference of Page 121 P48.086 million as against the KC-NCDDP report, thus affecting the accuracy of the reported project accomplishments to various stakeholders.

Recommendation:

The DSWD Secretary to: a) Instruct the ACTs to Reconciled reports on community FI CY 2015 already monitor properly the grants from the Community to the reconciled but with similar status of SPs National levels and discrepancies finding in this report under implementation within were reconciled. Observation No. 21, page their area of 124. responsibilities and ensure that all information/ reports are accurate, complete, and consistent with Program standards; b) Conduct reconciliation FI CY 2015 already of unrecorded reconciled but with similar community grants in the finding in this report under KC-NCDDP Report vis- Observation No. 21, page à-vis in the books of 124. BSPMCs and ensure that project reports are validated before issuance to stakeholders; and c) Direct the RPMO/ACT FI SP documents were to conduct final prepared and filed. SPs inspection of the SPs and had turned-over to prepare the FIR, SPCR, appropriate BLGUs. and CCA and furnish copy to the barangay local government and other stakeholders for final turn-over of the SPs.

163

FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI 17) Validation of 39 CY association-led SPs costing 2015 ₱59.953 million disclosed CAAR non-compliance with the Page 124 registration requirements, as stated in the RWSM, thus the sustainability of the projects may not be assured.

Recommendation:

The DSWD Secretary to: a) Require the ACT at Coordinated with DILG and secure FI Included in the Mutual DSWD Field Offices to guidelines for inclusion in revised Partnership Agreement strictly implement the ODM Manual executed between the provisions of NEDA DSWD, Municipal and Board Resolutions No. 5 Barangay LGUs and series of 1996; community associations b) Establish a monitoring Tracking of status of community FI NPMOs is continuously mechanism to ensure that formation and capability building monitoring. association-led sub- assistance and conduct of projects are provided Sustainability Evaluation with guidance and Monitoring forms were developed support in all matters and submitted to M&E for inclusion relating to the projects; in the PIMS database. Status of and compliance of FOs will be tracked as part of program Review. c) Revisit the KC Manuals Guidance to ACTs on organizational FI The NPMO is and provide specific formation, registration and continuously provisions on ownership strengthening will be provided in the upgrading/amending the and require all the revised ODM manual. Manual as necessary. validated projects and similar projects to Provision of guidance on the establish ownership with following: the assistance of Area Coordinating Teams. a) Ownership of lot for subprojects prior to construction in the RFP requirements and Social Safeguards Manual. b) Turn-over and Acceptance of completed subprojects in the Infrastructure Manual. c) Conduct of Functionality Audit to ensure all competed SPs, especially with tariff, are operated and maintained by O&M groups.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Manual revision programmed in 2nd quarter of 2017. C. Emergency Shelter CY Assistance (ESA) Program 2015 CAAR I.Core Shelter Page 128 Assistance Project (CSAP)/Modified Shelter Assistance Project (MSAP)

18) The Agency registered a low CSAP accomplishment of 68.97 percent or 69,003 despite the full release of funds for the project due to: (a) failure to provide LGU counterpart and to comply with shelter assistance requirements; (b) delayed release of certification as safe areas by the MGB/PHILVOCS/ PAGASA; and c) validation of relocation sites still on- going, thus, depriving the victims of disasters benefits thereof and rendering the objective of the program not fully attained.

Recommendation:

The Management to: a) Enforce the policy on Monthly monitoring and validation is PI Status of CSAP as of LGU counterpart and being undertaken by the DSWD-FO December 31, 2016 require the submission Project Management Teams (PMTs) completed-63,746, of all documentary to ensure timely completion of the Ongoing-6,415, Not yet requirements from LGUs shelter projects. Started- 13,030. requesting shelter assistance, before funds The selection and replacement are downloaded to them; process of beneficiaries are strictly governed and implemented pursuant b) Establish an effective to AO 17, Series of 2010; PI Civil Engineers as PDOs monitoring/validation of III have been hired in sites to ensure that A waiver for a disinterested Regions with significant projects are implemented beneficiary is being issued subject for number of shelter projects according to plans and replacement under the process closely monitor and budget; provided by AO 17, Series of 2010; provide technical

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Sanctions on the mortgage, sale and assistance to LGUs in the rental have been incorporated on the project management. draft amendments to AO 17, Series of 2010; and c) Conduct inventory of all PI modified shelters DSWD exerted full effort that The DSWD is currently distributed to the resulted to commitments of the LCE’s conducting an inventory of victims/ beneficiaries of to complete the remaining units in all CSAP projects Typhoon Pablo to their respective area of Jurisdiction as nationwide. determine if the actual soon as possible. This was done thru occupants were the the joint monitoring conducted by lawful owners of the SWAD and other DSWD staffs in the shelter assistance funded municipalities. by the government, and prepare a contract to be These guidelines were always signed by them, duly emphasized during the pre- notarized, indicating orientation with the implementing therein that MSA shall LGU’s to ensure that CSAP features not be rented, sold out, are being followed. and/or mortgaged and include a provision on As of this time, the DSWD can only sanctions for those who augment P70,000.00 per unit as per are violators including shelter assistance guidelines and those who buy the shelter subject to availability of funds. The which was given as LGU’s who signified their interest to assistance for the implement the project are fully aware calamity victims; and of their counterpart as stipulated in the MOA signed by both parties such PI d) Conduct actual inventory as the lot, the additional materials and The DSWD is currently of the shelters which are hiring of foreman among others. The conducting an inventory of not occupied for several beneficiaries are also very much all CSAP projects years from its aware of their roles and nationwide. completion to be responsibilities as stipulated in the transferred to those who MOA. However, they cannot work are assessed to be in need full time because they need to work in of assistance. the farm during the day and some of them are not skilled in masonry and carpentry works. In response, the LGU had to hire a foreman and assign the Municipal Engineer to assist in the construction. Other factors in the delay of the completion is unavailability of lumber because of the total log ban and bad weather condition. II. Transitional Shelters CY 2015 19) The delay in the CAAR construction of transitional Page 134 shelters in Regions VIII and IX, with only 52 percent or 1,410 completed out of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI 2,700 units in Region VIII and 85 percent overall completion in Region IX, deprived the victims of disaster of immediate shelter assistance, thus defeating the very objective of the project.

a) Transitional Shelter for typhoon Yolanda

Recommendation:

The Secretary to require the The delay in the construction of PI Out of the 2700 units for IP to complete the needed transitional shelter in Region VIII and construction, only 1,410 transitional shelters and IX are due to the following: units completed in Region turnover the same to the VIII as of December 31, intended beneficiaries and a) Availability of safe location 2016. strictly observe compliance where the shelter units will be with the established laws, constructed; rules, and regulations on b) Revision of bill of materials due Fund transfers to IP and to changes in the design of the CSAP. latrines to adjust/conform to the actual topographic condition of the area; c) Re-validation of target beneficiaries to ensure no duplication of shelter assistance; and d) The location of the site in FOIX has been changed, wherein the original site is too far from the city and that haulers consume a lot of time and effort.

The increase in budgetary requirements is due to the construction of fish landing at the transitional sites in City, so the IDPs can pursue their livelihood on-site and need not to return to the hazardous coastal areas, as this was one of the issues raised during the consultation with the victims of Typhoon Yolanda on October 31, 2014 and November 1, 2014.

For future projects, we FI Negotiations/meetings recommend the DSWD to were done to implement include in the MOA with IPs the recommendation were the standard design and

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI specifications of shelter noted per reports assistance projects to ensure submitted. that the benefits of the shelter assistance are achieved.

b) Transitional Shelter CY and Wash Facilities 2015 for the Zamboanga CAAR Crisis-Affected Page 137 Population

Recommendation:

The DSWD facilitate the release of approved funds for the wash facilities and require the IP to complete the WASH facilities and thereafter turnover the same to the intended beneficiaries.

Henceforth, the DreamB to:

a) Coordinate closely with The delay in the construction of FI Reports submitted showed partner LGUs to ensure transitional shelter in Region IX are that 700 units completed that all requirements are due to the change of location site and verified by the Auditor fully complied before the wherein the original site is too far thereat. project is started; and from the city and that haulers consume a lot of time and effort.

b) Make careful review of The increase in budgetary FI Negotiations/ meetings the work and financial requirements for FO IX is needed to were done to implement plan to come up with a complete the: the recommendation with more realistic and justifications on the implementable budget. a) Pedestal bracings installation additional budget. for the 232 shelter units b) 36 latrines and bathing cubicles with laundry area or 12 modules c) 7 Units - 6 Chamber Septic tanks d) approximately 800 LM Boardwalk including entrance. III. Emergency Shelter CY Assistance (ESA) 2015 CAAR a) ESA for Typhoon Page 141 Yolanda

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI 20) The delay in or non- release of shelter assistance to 37,870 beneficiaries amounting to P684.30 million rendered the objective of the program to address the emergency and rehabilitation shelter needs of families with damaged houses not fully realized. Further, no clear and written policy guidelines were issued on the processing period of documents, from assessment to release of fund, thus affecting the efficient implementation of the program.

Recommendation: All 469,821 target family- FI Per reports received, funds The DreamB and concerned beneficiaries in Region VI under the distributed amounted to FOs to hasten the assessment Comprehensive Rehabilitation and P8,356,500,000.00 as of and validation of prospective Recovery Plan (CRRP) have been December 31, 2016. beneficiaries and include in served costing P8.4 billion the guidelines the time immediately upon release of funds element in processing the from the DBM in June 2015. documents needed in the grant of ESA to beneficiaries as well as the corresponding penalty for non-compliant LGUs. b) ESA for typhoon Lando CY 2015 21) Distribution of ESA for CAAR typhoon Lando victims was Page 142 delayed by three months due to delay in the downloading of fund to the Regions and in the assessment and validation of beneficiaries.

Recommendation:

The Secretary direct the All LGU requests for fund FI Verified thru SAA the concerned FOs and DreamB augmentation for the ESA of 58,737 Downloaded funds to closely coordinate and families have been funded amounting totaling to follow up submission of to P776,210,000.00: P776,210,000.00 as documents by LGUs and fast December 31, 2016. track the downloading of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI funds, if already available, to a) P24,860,000.00 for CAR for ensure that the objectives of 2,126 families; emergency assistance b) P396,570,000.00 for Region I for program are attained. 30,997 families; c) P315,900,000.00 for Region III for 26,982 families. D. SUPPLEMENTAL CY FEEDING PROGRAM 2015 CAAR Delayed/Non-implementation Page 145 of the Supplemental Feeding Program (SFP)

22) The delayed and/or non-implementation of the SFP in seven regions, due to lapses in program implementation deprived children beneficiaries of the opportunity to improve their nutritional status and health condition.

Recommendation:

The Management direct the concerned FOs to: a) Instruct the Regional Actions taken/ activities undertaken FI Communications/ SFP Focal Person/s to by the Central Office to avoid the Memoranda were sent to coordinate closely with problem enumerated by COA FOs for compliance. the concerned IPs and Auditors: the social worker 1) Sent Memorandum to Field counterparts to monitor Office to comply with the monthly the proper and recommended actions of the efficient implementation COA Auditors. of SFP as well as liquidation of fund 2) Continuous provision of transfers; and Technical Assistance to Field Offices to validate and assess to status of program implementation such as fund utilization, physical and financial accomplishment, and Nutritional Status Report.

3) Conducted Work and Financial Planning Workshop in General Santos City on March 2016 and participated by the Regional Supplementary Feeding Program Focal Person and

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Nutritionist/Dieticians of 17 DSWD Regional Field Offices b) Assess the readiness of FI Seminars, Orientations the IP and capacitate DSWD Field Offices Focal Persons were conducted in the them before any release conducted activities to capacitate the FOs/LGUs to capacitate of fund for the efficient Local Government Units on the the IPs. and effective implementation of the program. implementation of the These activities includes following: Program. 1) Consultation Dialogue with concerned staff of LGU composed of Municipal Auditors, COA Auditors, Local Chief Executive (LCE) and SFP Focal person.

2) Conducted Program Implementation Review with LGUs to discuss and resolve issues and concerns on the implementation of SFP.

3) Orientation of SFP implementing partners on the Amended Omnibus Guidelines to implanting partners during social preparation before the actual feeding.

4) Capacity building of implementers and other stakeholder (MSWDP. And selected Child Development Workers) on nutrition related concerns.

5) Continuous conduct of monitoring visits and provision of technical assistance to FOs/LGUs and random spot check of day care centers on the actual feeding.

DSWD Administrative Order No. 4 series of 2016 (Omnibus Guidelines in the Implementation of the SFP) was disseminated to MSWDOs during visits or SWD Forums. The

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI AO was issued to address the program implementation gaps encountered.

E. Unutilized Cash CY Donation 2015 CAAR 24. Total cash donations Page 148 received as of December 31, 2015 for typhoon Yolanda amounted to ₱1,165.797 million for which ₱217.383 million was disbursed at the DSWD CO, ₱928.450 million transferred to the different FOs, and the balance of ₱19.964 million remained in CO LBP Account.

Recommendation:

Management agreed to direct Coordination with FOs for the PI As of December 31, 2016, the FOs concerned to fast monthly submission of Liquidation the amount of P87.097 track the immediate release of Reports for Cash Donations for million is still unliquidated assistance to the intended Typhoon Yolanda. by the FOs – for beneficiaries and/or return the monitoring. unutilized amount to DSWD- CO if not anymore needed. Other Compliance Issues CY 2015 Enforcement of Settlement of CAAR Suspension/Disallowances/ Page 152 Charges

25. Notices of Suspensions and Disallowances amounting to P419.547 million and P463.195 million, respectively, remained unsettled at year end, contrary to Section 9.4 of the 2009 RRSA.

Recommendation:

The Secretary to: CO a) Enforce settlement of As of December 31, 2016 PI audit suspensions and

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI disallowances within the An appeal Memorandum was filed Review by COA of the prescribed period in with the Commission Proper. appeal filed by accordance with Sections 9.4 However, the COA has no action or Management is on-going. and 10.4 of the 2009 RRSA; response yet on the appeal. and

NCR Two (2) petition for appeal was filed to Special Audit Office (SAO) dated June 21 & 23, 2016 while One (1) petition for review was filled to Commission proper dated June 30, 2016.

b) Initiate necessary Under appeal. PI administrative and/or criminal action in case of Review by COA of the unjustified failure/refusal by appeal filed by subordinate officials to effect Management is on-going compliance with the foregoing requirements, pursuant to Section 7.1.2 of 2009 RRSA. CY 2014 1) The reported balances CY of the accounts in the FSs 2014 were not fairly presented CAAR due to various accounting Page 54 errors/ omissions and deficiencies.

1.a Accounting Errors/ Omissions

Recommendation:

The Secretary to direct the Omissions/Errors had already been FI Verified the adjustments concerned officials to require adjusted and classified to its proper made and found in order. their respective Accountants account. to effect the necessary adjustments on the omissions/errors and improper recording of transactions, as well as the misclassification of accounts, to correct the reported balances of the affected accounts in the FSs.

1.b Accounting CY Deficiencies 2014 CAAR

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI a) Non-elimination of intra- Page office transaction 59 accounts – P93.578

million

Recommendation:

The Secretary agreed to direct The intra-office transactions are not FI The necessary adjustments the concerned officials to reciprocal accounts, thus, elimination in the books of accounts require their Accountants to: in the consolidated financial were done and the use of (a) prepare schedules of the statements is not required. The appropriate accounts are reciprocal accounts and accounts mentioned in the audit being effected in the undertake an analysis, observation are receivables/payables recording of financial reconciliation and accounts (inter-office transactions) transactions. elimination thereof; (b) subject for liquidation. correct the balances of . accounts affected after reconciliation; and (c) thereafter, conduct a regular quarterly reconciliation to immediately rectify any discrepancy and to show the financial condition and results of operation of the Department as a single entity. b) Unreliable Cash in Bank, CY LCCA account balances 2014 CAAR – P1,684.799 million Page 60

Recommendation:

The Secretary agreed to BRS is immediately prepared once PI Three (3) FOs still with require the Accountants to bank statement is received, similar observation in CY regularly prepare the monthly reconciling items are immediately 2016. Not implemented in BRS for all bank accounts to adjusted in the books. Issued FO6, Partially determine and identify the reminder to the Accountant and FMU implemented in NCR, I reconciling items and Chief to comply with COA Circular FOV, prior year’s establish the accuracy of the 92-125A which requires the reconciling items were reported cash in bank “Accountant to prepare the BRS adjusted and reflected in balances. based on the bank statements from the the books, however a bank and submit the same within 15 similar observation was days after the end of the month to the issued in 2015 ML which Auditor concerned; and immediately was also partially after the items were properly implemented. analyzed and verified, prepare correcting/adjusting entries for Reiterated in this report discrepancies/errors or other under Observation No. 3, reconciling items requiring page 64. corrections by the agency.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI c) Unreliable balances of CY receivable accounts – 2014 P6,152.334 million CAAR Page 60 Recommendation:

The Secretary to require the Awaiting validated report from the PI The IAS provided updated Accounting Division to Internal Audit Service (IAS) for the list of LRs of NGOs/POs record the verified submitted liquidation reports of the being validated. reconciling items in the books concerned NGOs/POs, original and exert further efforts to audited liquidation reports from the Reiterated in this report reconcile the book balances implementing agencies (IAs) and under Observation No. 9 with those of the IAs/ NGOs/ awaiting liquidation from LBP for page 96. POs and make necessary Over-the Counter (OTC) payments of adjustments. cash grants for the Pantawid Pamilya.

Some NGOs/POs were referred to Legal Service for appropriate Legal Action and accordingly endorsed to Office of the Solicitor General for the non-compliance. d) Unreliable balance of CY Inventory accounts – 2014 CAAR P1,458.993 million Page 61

Recommendation:

The Secretary agreed to direct Recommendations were noted and PI Four (4) FOs still with the concerned DSWD complied. similar observation in CY officials to require their 2016. respective Accountant and

Property Officer to: Reiterated in this report (a) conduct physical count under Observation No. 10, and prepare the RPCI; (b) page 100. prepare and submit RSMI regularly to the Accounting

Unit for recording of issuances of inventories in the books; and (c) maintain and update the SLCs and SCs and thereafter reconcile with the results of the physical count to correct and update the various inventory accounts balances and establish management’s assertion of existence and accuracy in recording inventories.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI e) Unreliable balances of CY PPE accounts – P 2014 CAAR 1,575.081 million Page 63

Recommendation:

The Secretary agreed to direct FOs of Property and Asset PI Three (3) FOs are still with the concerned DSWD Management Section has already similar observation in CY officials to: (a) monitor the conducted the physical inventory 2016. regular/periodic physical taking for calendar year 2016 and is count of PPE; (b) prepare the now in the process of reconciling with Reiterated in this report RPCPPE and submit the same Accounting Section. under Observation No. 11 to the COA Auditor for page 104. verification and to the Accountant for reconciliation purposes; (c) maintain and/or prepare complete and updated PPELCs and PCs; and (d) undertake regular reconciliation of the property and accounting records and ensure that all discrepancies are immediately investigated, cleared and adjusted in either record. Funds kept intact in the bank CY not remitted to the National 2014 CAAR Treasury Page 65

2) Trust receipts, donations, dormant and unnecessary accounts, including excess BAC

Honoraria and Training

Fund of P796.660 million were not remitted to the

National Treasury.

Recommendation:

The Secretary agreed to The bank account for Building PI Five (5) FOs including require the concerned DSWD Capacity of Local Government for OSEC still with similar officials to deposit Poverty Reduction was already observation in CY 2016. immediately with the closed, six bank accounts were National Treasury or to the scheduled for closure, the bank Reiterated in this report source/donor agency the trust accounts intended for Bureau of under Observation No. 1 receipts, cash donations, Customs Pass was referred to the page 57. dormant and unnecessary Disaster Response Assistance and bank accounts, including the Management Bureau while six bank excess BAC Honoraria and accounts were maintained based on

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Training Fund deposited with the MOA with the Donor/Source AGDB. Agency. The Field Offices will inquire to the BTr and Landbank if such amounts can be transferred to the BTr thru ADA. Inadequate controls on cash CY accountabilities 2014 CAAR 3) Inadequate controls in Page 68 handling cash accountabilities of the AOs/SDOs and granting of huge amount of cash advance without adequate safeguards exposed government funds to risk of loss through theft/robbery and/or misuse.

Recommendation:

The Secretary agreed to direct Management commented that the the concerned officials to deficiencies were on account that the strengthen internal control by Department lacks fiduciary positions observing the rules and to handle CAs, thus, it resorted to regulations on the proper having the DOs handle the huge handling, utilization and amounts needed to implement liquidation of CAs, as programs and projects. Furthermore, follows: the Department cannot refuse to implement programs it was directed a) Consider the reduction of to implement. The DBM FI FOs including OSEC the CA of the AO in CO continuously appropriates budget for complied with the equivalent to one month programs sought to be implemented recommendations. requirement and by the Administration. Nevertheless, refund/deposit the excess the Management will continuously of his current PCF to the meet with the RDOs/SDOs to monitor Collecting Officer; their compliance with the Commission’s recommendations.

b) Require the AO to SDOs are required to submit FI Validation showed that replenish CA only once accounting of their cash advance AOs complied by the total disbursements showing their cash on hand and liquidating their CAs have reached 75 percent ensuring that all liquidation are above 75% utilization. of the CA and refund of forwarded to Accounting for the unutilized CA for recording before granting another more than two (2) cash advance. Copy of SO with months; maximum cash accountability is attached to CA to ensure that CA does c) Limit the CA to the not exceed maximum accountability. FI Observed that CAs granted actual list/payroll of the Ms. Bumanlag and Ms. Palermo who to the AOs are equivalent Informal Settlers Fund act as collecting officer were already to the actual list/payroll of (ISF) beneficiaries on a bonded as such.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI per pay-out/pay period the Informal Settlers for and consider the pay-out. possibility of paying the amount intended for the ISF beneficiaries through check instead of cash; d) Provide the SDOs with Vaults have been purchased for use of FI adequate vault/safe and Accountable officers Observed the use of require the SDO to have portable vaults by AOs full control of and to safeguard her CA from unauthorized access; e) Refrain from designating PI as paymaster those In CY 2016 there are still holding temporary Three (3) FOs with similar appointments, as much observation. as possible, and limit the granting of CAs to permanently appointed officials only; f) Require all AOs to be FI bonded and review the In CY 2016, the DSWD accountability of the secured bonds for all AOs and ensure that the designated AOs. bond applied/paid is in accordance with Annex C of Treasury Circular No. 02-2009 to minimize unnecessary bond premium incurred/paid by the Department; FI g) Refrain from using the In CY 2016, it was PCF for transactions observed that AOs no exceeding the limit of longer use their PCF for P15,000, which should purchases exceeding be paid by check; P15,000.00 PI h) Stop the practice of For CY 2016 it was transferring/turning over observed that Four (4) FOs of CA from one AO to have similar observation. another; FI i) Limit the amount of CA Observed that CAs granted to the actual list/payroll to the AOs are equivalent per pay-out/pay period or to the actual list/payroll for to an amount sufficient 4Ps beneficiaries per pay- only for one month’s out. requirement; and PI

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI j) Follow strictly the It was observed that some guidelines prescribed in FOs have similar the handling, custody observations in CY 2016. and preparation of the cashbook. Reiterated in this report under Observation No. 6 page 73. Unserviceable PPE not CY disposed of - ₱11.469 million 2014 CAAR 4) The delayed or non- Page 82 disposal of unserviceable property amounting to ₱11.469 million that were already beyond economic repair resulted in their accumulation and diminished value due to prolonged exposure to natural element.

Recommendation:

The Secretary agreed to direct Management already disposed FI The Audit staff observed the concerned officials to subject PPE and regularly conducts the conduct of public require their respective disposal of unserviceable properties. bidding and disposal of Property Officers to cause the unserviceable properties. immediate disposal of unserviceable PPE following the requirements of Section 79 of PD No. 1445 to prevent further deterioration and to recover the salvage value from probable sale of the asset. Unauthorized, unnecessary CY and unsupported payment of 2014 transactions CAAR Page 90 5) Lapses in the processing of claims and weaknesses in the fund disbursement system permitted the payments of transactions which were supported with insufficient and improper documents resulting in disallowances/suspensions in post audit. .

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Recommendation: Full payment was made to NFA in PI A total of P1,866,623.72 The Secretary require the consideration of the following: has been refunded to KC- Kalahi-CIDSS (KC) National  The office will be able to save AF-LP from NCDDP on Program Management Office when paid in cash, each bag will August 12, 2015 thru (NPMO) and Finance to: cost only P1,250.00 instead of remittance to the Bureau of (a) use the KC-AF-LP P1,350.00. Thus, P84.240 Treasury. In the case of according to its intended use; million will yield 67,392 bags MCC, reimbursement (b) reimburse KC-AF-LP the instead of 62,400 bags or savings amounting P33,900.00 is P1.967 million from the of 4,992 bags of rice which is now in process. The total appropriate FAP funds; equivalent to P6.240 million. amount has been refunded (c) adjust/reclassify the  Based on the project number of thru remittance to the BTr charging of expenses from families to be affected in Region except for the P23,706.04 KC-AF to the respective or 8, it was anticipated that the under JFPR which is appropriate funds, as may be volume of rice was not even currently processed. necessary; and (d) direct the enough to produce the required concerned officials of all FOs 600,000 FFPs for Region 8. and CO to ensure that all Thus, to ensure that there will be necessary documentation are no shortage, they opted to pay in submitted and attached before cash. processing of claims.  The procurement of 4,321 sacks of NFA rice amounting P5.833 million was charged to standby funds that would lapse on December 2014. It was in anticipation of any disaster which usually happens on year- ends as per reasonable patterns of previous disasters. It was also this time that most of the LGUs have no more funds and would need augmentation from the national government to respond to any disaster. Thus, this will also prepare the FO for any unforeseen disaster and also enable the office to preposition goods in areas to be affected. Payment of grants to non- CY compliant beneficiaries 2014 CAAR 6) In FOs IV-A, Xll, CAR, Page 103 Caraga and NCR, approximately 3,649 beneficiaries who are non- compliant with health and education conditions of the program for more than three times were paid grants in the total amount of P4.898 million in CY 2014.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Recommendation:

The Secretary direct the Management clarified that these PI The DSWD is conducting concerned officials to: (a) beneficiaries were paid grants its validation through the subject the 3,649 accordingly either because they had “Kamustahan” program. beneficiaries to GRS to registered new eligible members for determine their eligibility to CVS monitoring or they were stay or not in the program; compliant with at least one (b) withhold their grants until conditionality in the latter periods of they meet the 2014, due to reasons that are not conditionalities, if warranted; entirely their own. and (c) look into the same conditions in other regions Investigated the compliance history not included in the sampled of these HHs and determined that 124 population, for appropriate HHs were non-compliant due to action. reasons that are not entirely their own. Some have been inactive and non- complying for some periods but were subsequently reactivated because of high school expansion. When their 15 – 18 y/o children started complying, they resumed receiving grants again. Thus, the program retained these households. Incurrence of bank service CY fees due to use of over the 2014 counter (OTC) instead of CC CAAR Page 105 7) Payment of grants thru OTC to 2,249,852 beneficiaries in 7,402,015 transactions wherein other beneficiaries in the same municipality/ barangay/ province were receiving their grants thru CC, resulted in the incurrence of bank service fees of P214.022 million and administrative expenses to include the costs of services in supervising and monitoring the OTC pay- out and submission of LRs as well as the cost of documentation required before and after the pay- out, such as print-out of Payrolls, Acknowledgement Receipts and list of paid/ unpaid beneficiaries.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Recommendation:

The Secretary to direct the Pantawid Pamilya plans to convert PI The DSWD and LBP concerned officials to limit OTC payments of around 400,000 already started the use of the payment of grants thru HHs to LBP Prepaid Cards in the 4th prepaid cards in March OTC in areas where ATM year of 2015 to maximize the 2016 prioritizing OTC facilities are not yet available presence of ATM and the Point-of- beneficiaries in Metro and consider the payment of Sale (POS) facilities. However, as of Manila. grants directly to the this date, LBP and DSWD is beneficiaries where ATM revisiting its MOA and IRR, one of facilities are available to save the significant revision to the on bank service charges and document is the inclusion of cost/fees other administrative costs on to ATM/POS withdrawals. Also, the monitoring and reporting NPMO had identified the HH paid of grants distributed OTC. through OTC in areas where LBP servicing branch is present for proper consideration. SUPPLEMENTAL CY FEEDING PROGRAM 2014 CAAR Delayed implementation of Page 107 SFP

8) The delayed implementation as well as poor coordination and monitoring between FOs, DepEd and LGUs, resulted in the delayed attainment of the goal to improve and sustain the nutritional status of targeted children.

Recommendation:

The Secretary agreed to direct Recommendation noted and FI As per validation by the the FOs concerned to ensure implemented. Auditors of Region V and the proper coordination VI, the recommendations among the proponents of the were already complied SFP, particularly with the with. NFA, for the prompt delivery of NFA rice in FO VI and the LGUs/schools for the timely implementation of the SFP; and augment the manpower requirement of the program in FO V for efficient and effective performance. A. KALAHI-CIDSS CY 2014 LCC failed to reach the 80 CAAR percent performance target

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Page 9) The 80 percent 109 performance target of municipalities that will provide KALAHI-CIDSS AF and MCC of 30 percent LGU Counterpart Commitment in 2014 was not attained, which resulted in the non-funding of other SPs of the community and limiting the number of beneficiaries who could have availed of the benefits due from the program.

Recommendation:

The Secretary agreed to direct the concerned officials to:

a) verify and look into the Management will comply in the FI Fully implemented in Municipalities which do future that LCC data should be Central Office and in FOs not comply with the included in the reporting system in the VIII, IX, and XI, partially provisions of the MOA KC website. implemented in FOs VI, regarding the 30 percent X, and XII. LCC in the costs to ensure the sustainability and success of the KC projects;

b) impose sanctions in case FI Municipalities with no Municipalities assured LCCs were not continuously fail to included in the succeeding comply with the implementations. abovementioned provisions; and

c) improve the reporting PI Observed that the system in the website to reporting system in the include not only the website has added committed sub-project information on detailed costs but likewise the costs and completion of actual and detailed costs SBs to reflect the efficiency of the project in attaining Reiterated in this report its goals. under Observation No. 21 page 124. Delayed/ unimplemented/ not CY functional KALAHI-CIDSS 2014 sub-projects CAAR Page 111

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI 10) Out of 1,404 prioritized SPs in FOs CAR, V and VI amounting to P1,319.726 million, only 470 or 33.47 percent were completed, with project costs of P353.693 million. Moreover, the completed 51 SPs amounting to P58.452 million were either not functional or with various deficiencies/ defects, thus, limiting the access to basic social services, infrastructures as well as other benefits due the communities.

Recommendation:

The Secretary agreed to:

a) require the KALAHI- As of December 31, 2016 all 1,404 FI Fully implemented in FOs CIDSS Regional prioritized SPs are completed. CAR, V, and VI. Monitoring Management Unit in coordination with the field personnel to fast track the completion of SPs;

b) adopt measures and FI Fully implemented as the institute feedback 2016 completion rate of mechanism system to SPs met the 70% project address the issues and outcome indicator. concerns which hinder the timely completion of projects; and FI CAR, V and VI SPs were c) direct the ACT and completed. BSPMC to immediately correct the defects/deficiencies noted and closely coordinate during planning and pre and post construction phases. B. SOCIAL PENSION FOR INDIGENT CY SENIOR CITIZENS 2014 CAAR Page

116

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Delayed and non-payment of the pension benefits to indigent senior citizens

11) Out of total 116,637 targeted SPISC beneficiaries, approximately 55,496 or 48 per cent failed to claim their pensions amounting to P335.738 million as of December 31, 2014, thereby defeating the objective of the program to alleviate the living condition of indigent senior citizens.

Recommendation:

The Secretary agreed to direct The unpaid grants were already paid FI Fully implemented in FOs the concerned officials to: and the FOs conducted consultation NCR, VI, CARAGA & dialogue with the LGUs C/MSWDO XII a) strictly adhere to existing and OSCA to collaborate effort with rules and regulation in the Barangay officials, volunteers, the grant, utilization and senior citizens organizations and liquidation of cash CSOs to disseminate pay-out advances; schedules to ensure that the beneficiaries are informed. FI DSWD has conducted a validation of indigent senior citizens listed in the b) conduct verification, beneficiaries in identification and coordination with LGUs. monitoring of NHTS registered/ eligible senior citizens, in close coordination with the Municipal/ City Social Worker and Development Officers, prior to drawing of CAs and fund transfer to ensure that only qualified poor will receive the FI Observed that the FOVI grants; has already released the funds to concerned LGUs. c) instruct the FO VI Regional Social Pension Unit (RSPU) to facilitate the immediate release of FI Observed that DSWD has the funds to the LGUs; a mechanism to monitor the distribution of the d) strictly monitor the funds to ISCs. distribution of the senior 185

FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI citizen’s fund to intended FI Observed that DSWD and beneficiaries; LGUs close coordination to monitor and implement e) require the focal person the social pension pay-out and the Accountant to closely monitor and coordinate with the LGUs concerned for the immediate submission of the LRs/ required documents to facilitate the subsequent release of the social pension benefits to the intended FI Observed that DSWD beneficiaries; and grants CAs to AOs the exact amount per payroll. f) refund immediately any excess amount thereof so as not to hinder subsequent payments to beneficiaries. C. ASSISTANCE TO CY INDIVIDUALS IN 2014 CRISIS SITUATIONS CAAR Page 119 Assistance to individuals in crisis not in accord with DSWD guidelines

12) Assistance on burial, educational and medical purposes was made direct to the claimants instead of the service providers and instances of payments more than once in every three months, contrary to DSWD Memorandum Circular No. 2 and 15, series of 2014.

Recommendation:

The Secretary agreed to: The office had already received FI Fully implemented in FOs (a) require the concerned confirmation and willingness of the II, IV-A, IV-B, IX, X, XI, CIUs to pay assistance Service Providers (4 Hospitals and 7 CARAGA, partially beyond P5,000.00 directly to Funeral Homes) to forge partnership implemented in Central the service providers and with the Department. Ceremonial Office and FO VI. covered by guarantee letters signing of MOA was done and an to provide some level of amendments to the guidelines are Noted that double assurance that the amount currently being reviewed. checking is done by will be utilized for its CrIMS software intended purpose. In cases

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI where the issuance of COA noted the issuance of guarantee letter to a service MC No. 1 to amend some provider is not practical, a provisions of the justification should be given guidelines. by the social worker stating the reason/s for non- compliance; (b) double check the claims for possible multiple availment of assistance; and (c) revisit and amend the guidelines, if warranted, on circumstances when a client can avail of same or multiple assistance within the given period; and on allowing the release of assistance for the transport of cadaver through CAs, among others. Non-full utilization of AICS CY fund 2014 CAAR 13) Out of the ₱4,090.000 Page 121 million allocation for AICS in CO and 16 FOs, only 47 percent or ₱1,855.156 million was disbursed at year end, despite the reported beneficiaries served of 486,912 vis-à-vis the target of 281,079 beneficiaries.

Recommendation:

The Secretary agreed to direct Advocacy activities are being FI Fully implemented in FOs the concerned officials to conducted at the National Level to II, VI, VIII, X, XI, formulate other ways and include press releases and press CARAGA, CO NCR, and means to enhance the existing briefings for awareness of the IV. system in the delivery of potential beneficiaries on the program AICS to fast track the process. disbursements so that the mandated function of the agency in granting assistance be enjoyed by more than majority of the poor, marginalized and vulnerable/disadvantaged individuals/families. Procurement and acceptance CY deficiencies resulting in 2014 CAAR

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI undistributed and expired or Page about to expire relief goods 125

14) The procurement and acceptance of relief goods without considering the absorptive capacity and condition of the warehousing facilities and personnel, available stocks, shelf life or expiry dates and the actual needs of FOs resulted in undistributed and expired or about to expire relief goods amounting to at least P141.084 million.

Recommendation:

The Secretary to direct the concerned officials to: Construction of additional warehouse FI Construction of additional a) Consider, among others, at NROC and other FOs were warehouse and facilities to the following factors in inaugurated in CY 2016. safeguard relief goods its future procurement were completed in CY and acceptance of relief FO VII request for additional 2016. goods to prevent warehouse personnel was approved overstocking and/or by the HRDB and currently on Compliance with other expiration: (i) absorptive process at FMS. recommendations were capacity and condition of noted through inspection the warehousing facility Enhancement was already and observation. and personnel to finished and waiting for further accommodate procured instruction from IMB on the items; (ii) availability of effectivity of its implementation. goods prior to the procurement of For review of guidelines and additional relief items submission of recommendation to the based on the needs of the Secretary. disaster affected FOs or let the FOs do their own 1) To enhance the mechanized procurement and make system at NROC if found them responsible and necessary after the dry run accountable for the same; and (iii) shelf-life 2) To review the quantity or expiry date of goods to prepositioned goods in the FOs be procured and nearest to NROO considering distributed to recipient the enhanced capacity of its beneficiaries; repacking and storage system.

b) Formulate distribution 3) Follow through action on the FI Reports submitted by plan in order that the request for hiring additional DSWD in coordination purpose of “disaster warehouse personnel. with LGUs conducts

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI response/relief” could be meetings to facilitate fully served by 4) Follow through action on the distribution during transferring food items to implementation of RGIMS. disasters. storage area suitable for storing perishable goods Due to the short shelf life, noodles and fast track the will no longer be procured and distribution of these included in the FFPs composition. items. Also, improvements on the warehousing facilities are already c) Assign additional being undertaken. FI The DSWD has personnel during relief circularized a Crisis operations to properly Communication Manual to and collectively guide the DSWD Central store/pile the goods Office received from various and its Regional Offices sources to prevent its essential information and immediate materials that will spoilage/deterioration assist its staff and other and to facilitate efficient personnel in handling monitoring and reporting communication during of the status of relief an emergency or crisis. operation; and

d) Observe proper FI The DSWD CO procurement planning spearheads the and monitoring of relief procurement planning for goods that would aid in relief goods to augment making decision as to the FOs stocks. necessity of procuring additional relief goods during disaster relief operations so that huge balances of stocks after each relief operation could be avoided and to ensure efficient and effective delivery of the relief goods. Receipt of distributed relief CY goods not ascertained 2014 CAAR 15) There was uncertainty Page 132 as to the actual receipt of FFPs by victims of Typhoon Ruby/Hagupit in FOs IV-A, IV-B, VI and XI because the distribution of the 144,444 FFPs was not supported with the Relief Distribution Sheets (RDS). Moreover, the prescribed forms for receipt and utilization of

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI disaster relief cash and in- kind aid/ donations were not complied by the CO.

Recommendation:

The Secretary agreed to: NROO personnel to strictly comply FI The prescribed forms for (a) direct the FOs IV-A, IV- with COA Circular No. 2014-002 on DRRM inventory B, VI and XI Management to the use of prescribed forms for management is now being require the immediate DRRM inventory Management. used by the NROO submission of the RDS from personnel. the concerned LGUs as proof As of December 2015, the RDS from of actual receipt of FFPs by 32 LGUs have already been received It was noted that Report on Typhoon Ruby/ Hagupit as part of the liquidation on the relief Inventories were affected families; and goods received for Typhoon Ruby submitted by Supply Unit (b) require the WMDFD, victims. Management is also and Physical Count was DRRMOO personnel to continually requesting remaining conducted by the strictly comply with COA LGUs to submit immediately RDS for Inventory Committee in Circular No. 2014-002 on the subsequent submission to COA. CY 2016 use of prescribed forms for DRRM inventory Auditor of DSWD Region management. 8 received the distribution sheets prepared and submitted by Management. Delayed and/or non- CY completion of Core Shelter 2014 Projects CAAR Page 137 16) Out of the 12,898 core shelter units targeted from 2008 to 2014 of the CO and FOs CAR, III, VI, VIII and X, only a total of 5,821 or 45 percent were completed while 6,789 were not yet completed/started while the construction of 288 units is on-going at year-end. Moreover, some of the completed units in prior years remained unoccupied and some were destroyed by super typhoon Yolanda in CY 2013.

Recommendation:

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI The Secretary to require the concerned FO officials to institute procedures to expedite the release/distribution of CSAP to the prioritized recipients, to wit: Recommendations noted, compliance PI Per status of a) coordinate with the CO on-going. accomplishment as of for the immediate release December 31, 2016 of the of the additional CSAP to targeted C/MSAP of 5,037 pay the remaining to be completed for CY qualified beneficiaries of 2016, a total of 1,837 has the financial assistance already been due them; accomplished.

PI Coordination between the b) require the LGU officials DSWD and LGUs to comply with the observed per reports committed submitted. responsibilities on resettlement lots or any counterpart stipulated in the MOA prior to downloading of assistance so that the funds will not be tied up and remained unutilized for a long period of time; NI Funds are still with the c) require the LGUs and concerned LGUs. implementing NGOs to immediately return the unutilized amount and remit the same to the BTr; and d) conduct monitoring on FI Periodic monitoring is the actual utilization of being implemented by the the fund and project DREAMB per reports implementation by the submitted. concerned LGU by requiring the regular submission of financial and status report for the immediate completion of these CSAP shelters.

D. SELF-EMPLOYMENT CY ASSISTANCE- 2014 CAAR

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI KAUNLARAN Page PROGRAM 143

Accumulation of Unpaid Capital Seed Fund Accounts under the SEA-K Program

17) The Capital Seed Fund of the SEA-K program totaling ₱1,077.789 million, granted in CY 1994 to 2014, remained unpaid, for failure of the beneficiaries to settle their accounts within two years from receipt of the loan. As a consequence, other qualified SEA-K beneficiaries are deprived of start-up fund, thereby adversely affecting the objective to provide sustainable source of income to poor families to establish and self-manage sustainable community- based livelihood projects.

Recommendation:

The Secretary agreed to direct the concerned officials to: Memorandum Circular (MC) No. 13, FI It was noted that series of 2015, - Guidelines on the Management issued a) Conduct case Provision of Seed Capital Fund Memorandum Circular conferences on inactive (SCF), was issued so that the SCF No. 13 which provides that SKA accounts and exert released by the DSWD to members of the beneficiaries will no extra effort to collect the the SKAs is no longer treated as loan longer repay the amount same from both active but financial assistance, the members provided in the SLP to the and inactive SKAs; will pay their loans to the SKAs who DSWD but to the will manage the account for the association. association and repayment to the DSWD is no longer required effective June 18, 2015. FI DSWD will no longer b) Impose sanctions against impose sanctions in view delinquent member- of the issuance of MC 13, beneficiaries; it will be the CSOs who will formulate sanctions for their members FI

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI c) Require the SLP NPMO Noted compliance through to monitor project reports submitted by the implementation, SLP NPMO. consolidate reports and recommend measures for issues/difficulties in the FOs project FI implementation;

d) Revisit the feasibility of Interviewed SLP NPMO project proposals and personnel and noted that consider proposals amendments on the review geared towards more and processing of relevant progress, such proposals will be as food production; and FI circularized.

e) Provide SEA-K condonation policy for With the issuance of MC uncollected rollback to 13, the condonation will be those affected by moot and academic. calamities or economic crisis, which are among the reasons for their being inactive, to prevent the accumulation of the uncollected balances. The agency may benchmark with other agencies/ institutions engaged in loaning business and consider providing condonation for uncollected rollbacks/ repayments. Other Compliance Issues CY 2014 Gender and Development CAAR (GAD) Page 147

18) The DSWD GAD Plan and Budget for CY 2014 of P2.321 million or 2.79 percent of the agency’s appropriation for CY 2014 amounting to P83,114.075 million intended to undertake the client- and organization’s-focused activities was not in full compliance with Joint Circular No. 2012-01 to

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI address gender issues and concerns.

Recommendation: Recommendations noted. FI Validated that GAD activities were The Secretary agreed to direct incorporated in the the concerned FO officials to Programs of the Agency. strictly comply with the Commended with updates requirements and/or in CY 2016 CAAR – for directives of the Philippine monitoring on CY 2017. Commission on Women to fully implement the activities that accelerate gender mainstreaming effort within the agency.

Compliance with GSIS CY Remittance 2014 CAAR 19) For CY 2014, DSWD Page 149 remitted a total amount of P333.246 million for GSIS premiums in compliance with RA No. 8291, except for FOs V and XIII who failed to consistently remit within the prescribed period the required premium contributions and monthly loan repayments to the GSIS by a range of 1-153 days.

Recommendation: Recommendations noted and will FI GSIS collections remitted The Secretary to direct the comply accordingly. to GSIS. Commended with concerned officials to require updates in CY 2016 the Accounting Unit to CAAR. review properly the recorded GSIS deductions and remittances and make the necessary adjustments for the accounts Due to GSIS, RLIP and ECIP and to ensure that the monthly premiums are accurate/ exact amount of contributions withheld and remitted to the GSIS.

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI Compliance with Tax Laws CY 2014 20) The DSWD offices, CAAR Page except for FOs V and XI had 150 remitted in full the total amount of P774.065 million to the BIR the withheld taxes from compensation and from goods and services purchased CY2014 with the balance as of year-end remitted in January2015.

Recommendation:

The Secretary agreed to direct Recommendations noted. FI Accountants withheld and the concerned officials to remit taxes to BIR. require their respective Commended with updates Accountants to withhold and in CY 2016 CAAR. remit to the BIR the

appropriate taxes on

compensation, personnel

benefits and additional compensation. Status of Suspensions and CY Disallowances 2014 CAAR 21) The non-compliance Page 151 with laws, rules and regulations resulted in the total suspensions and disallowances in the audit of various transactions amounting to P401.193 million as of December 31, 2014, of which P45.965 million was settled, thereby leaving a balance of P355.228 million.

Recommendation:

The Secretary to direct the Recommendations noted and will PI The concerned DSWD officials concerned to comply comply accordingly officials and employees with laws, rules and have already submitted regulations to avoid audit appeals to COA for PDAF suspensions, disallowances related transactions. and charges and to settle the same within the prescribed Reiterated with updates in period to prevent their this report under

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FI AUDIT OBSERVATIONS/ MANAGEMENT Results of Auditor’s Ref PI RECOMMENDATIONS COMMENTS/ACTIONS TAKEN Validation NI accumulation to staggering Observation No.27 page amounts. 134.

Legend: FI – Fully Implemented; PI – Partially Implemented; NI – Not Implemented

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Annex A

Department of Social Welfare and Development Analysis of the Effect of Misstatements on the Financial Statements As of December 31, 2016 (Amounts in million PhP)

A. Accounting Errors Effect to Total Observation Nature of Errors Account/s Affected Assets/ Liabilities/ No. Equity Errors Affecting Asset Accounts: 3 Understatement of CIB – LCCA CIB-LCCA 26.020 7 Unrecorded deliveries from PITC Due from GOCCs 50.212 10 Misstatement of inventories Various accounts 914.356

Welfare goods for distribution Welfare goods for 13.842 erroneously recorded as food Distribution supplies for distribution Food supplies for (13.842) distribution 11 Unrecorded PPE found at station Various accounts 372.022 Unrecorded donated PPE Buildings 31.043 Land 96.019 Completed CIP not reclassified Buildings 69.800 to PPE account CIP (69.800) 15 Erroneous entry in the Development in 8.997 recognition of asset Progress-Computer Software 17 Non-elimination of intra-office Due from Central 0.485 accounts Office Due from FO 356.749 Due from Other Funds 42.533 Total Errors Affecting Assets Account 1,898.436 Total Assets 97,089.299 Percentage of Errors to Total Assets 1.96% Errors Affecting Liability and Equity Accounts: 3 Understatement of CIB – LCCA Accounts Payable 26.020 10 Overstatement of inventories Accumulated 964.568 Surplus/Deficit 11 Understatement of PPE Accumulated 499.084 Surplus/Deficit 13 Misstatement of Accounts Accounts Payable (2,138.482) Payable Various payable 2,138.482 accounts 15 Erroneous entry in the Accumulated 8.997 Annex A

Effect to Total Observation Nature of Errors Account/s Affected Assets/ Liabilities/ No. Equity recognition of asset Surplus/Deficit

17 Non-elimination of intra-office Due to Central Office 0.485 accounts Due to FO 356.749 Due to Other Funds 42.533 Total Errors Affecting Liabilities and Equity Accounts 1,898.436 Total Liabilities and Equity 97,089.299 Percentage of Errors to Total Liabilities and Equity 1.96%

B. Accounting and Control Deficiencies

Observation Nature of Errors Account/s Affected Amount Involved No. Unaccounted Cash –in Bank 1 Cash in Bank LCCA 4.986 10 Unreliable balance of inventories Various accounts 1,647.590 11 Unreliable balance of PPE Various PPE accounts 103.342 Unreliable balance of Accounts 13 Accounts Payable 194.148 Payable Total Deficiencies 1,950.066 Total Assets 97,089.299 Percentage to Total Assets 2.01%