10 Part II - Observations and Recommendations.docx

7/30/2019 10 Part II - Observations and Recommendations.docx

http://slidepdf.com/reader/full/10-part-ii-observations-and-recommendationsdocx 1/70

50

OBSERVATIONS AND RECOMMENDATIONS

A. Value for Money Audit

Uncollected F ishpond Lease Rentals in 11 regions – P225.778 mil li on

1. The National Government (NG) could have generated an estimated

additional income of P225.778 million had the bureau intensified the

collection of Fishpond Lease Agreement (FLA) rentals in 11 regions

pursuant to the provisions of Fisheries Administrative Order (FAO)

No. 197, Series of 2000; thus, depriving the government additional

income.

1.1 FLA is an agreement entered into by and between the Secretary of Agriculture

and a qualified fishpond applicant for the use of public land for fishponddevelopment purposes. Areas leased for fishpond purposes shall be no more

than 50 hectares for individuals, and 250 hectares for corporation or fisher folk organizations. Any branch of the government, person or association whowill engage in fishpond development for scientific research or educational

purposes may be granted an area not exceeding ten hectares through a

gratuitous permit. The lease shall be for a period of 25 years and renewable

for another 25 years.

1.2 Fisheries Administrative Order No. 197, Series of 2000 provides the rules and

regulations governing the lease of public lands for fishpond development.Further, Section 14 of FAO No. 197 prescribes the rates of annual FLA rentals per hectare for years 2000 and thereafter. The rate for CYs 2005 to 2011 is

P1,000.00 per hectare or a fraction thereof.

1.3 Verification of reports submitted by the Regional Field Offices (RFOs)

revealed low collection of rentals, as shown in the table below:

RFO Actual Collections Uncoll ected Rentals

I P 2,732,574.00 P 6,444,426.00

II 98,400.00 173,620.00

III 335,950.00 2,984,670.00

IV - A 3,352,564.00 41,631,608.00

IV - B 2,790,769.00 Undetermined

V 2,528,340.00 79,535,294.00*

VI 11,106,514.72 37,780,045.65

VII 842,440.80 38,286,646.70

X undetermined

XII 178,000.00 5,929,944.30

XIII 856,460.00 13,012,024.00

Total P 24,822,012.52 P 225,778,278.65*April to December 2011 not yet included



51

1.4 Moreover, other observations were noted in the audit of FLA rentals (details

in Annex A):

Some awardees/lessees who are not from the province, pay their rentals inthe Central Office without the regional office being informed; thereby,

resulting in the unreliability of the records of outstanding collectibles;

provisions of FAO No. 197, series of 2000 regarding the penalties andcancellation of contract for failure to pay rentals were not strictly

enforced;

no physical inventory of fishponds was conducted to determine its actualcondition and existence;

collections were not made from some FLA holders due to the fishponds

already being titled, foreclosed by banks, occupied by squatters or withcourt cases. Also, losses were incurred in the operation of fishponds

because of natural calamities; and

low collection of FLA rentals due to inaccessible payment centers.

1.5 We recommended that management:

a. intensify collection of FLA rentals and cancel/terminate lease

agreements of lessees who failed to pay the rentals and surcharges

for two consecutive years or have committed any of the grounds

stated in FAO No. 197 in RFOs I, II, III, IV-A and B, V, VI, VII, X,

XII and XIII; and

b. require RFO I to coordinate with BFAR Central Office to update the

account ledgers of the lessees who paid directly to the latter and to

reflect accurately the collection in the two offices.

F ingerl ings Dispersal not ful ly attained in two regions

2. Dispersal of Fish Fingerlings in two regions were not fully attained due to

the (a) non-compliance with the Guidelines on the Dispersal/Distribution

of Fish Fingerlings and Broodstocks; and (b) lack of regular monitoring

to determine the effectiveness of the implemented projects; thus, deprivedthe intended beneficiaries of the income/benefits derived from the

projects.

2.1 The Fingerlings Dispersal is a continuing project of the BFAR, designed to

ensure social-economic upliftment of subsistence of fisherfolk and the privatesector through improved aquaculture productivity and substitute income



52

opportunity. It is being implemented through grants to LGU cooperators and

sale to private business-owners. Livelihood and technical assistance is also

provided and/or extended in the form of training on proper handling and careof fingerlings and broodstocks. LGUs undertaking fish distribution to

backyard fishponds coordinate with BFAR Regional Offices by requesting

assistance through filing of Fingerlings Request Forms and provision of the

Masterlist of intended beneficiaries, to be liquidated upon the submission of duly signed acknowledgement receipts evidencing acceptance of intended

beneficiaries. The municipal/provincial technicians of the BFAR shall validate

all requests as to its project viability in the proposed site. Input and technicalassistance shall also be rendered by the BFAR fishery stations/Regional

Offices with proper monitoring on the culture management of the project.

2.2 For CY 2011, the BFAR RFO VI received an allotment amounting toP545,000.00 and utilized the same for the production and distribution of

quality tilapia fingerlings in Regional Outreach Stations (ROS) at Nanga,

Pototan, Iloilo and Technology Outreach Stations (TOS) at Malandog,

Hamtic, Antique.

2.3 RFO XIII, likewise, allocated a total budget of P7 million for the InputAssistance or Pipeline Projects and the Livelihood Support for Calamity

Affected Fisherfolk in Caraga Region. The amount allocated was used to

support calamity affected fisherfolk in Caraga by providing various fishing

gears and disperse seaweed propagules, prawn fry and tilapia and fingerlings;rehabilitation of fish sanctuaries and provision of technical assistance to

various fisherfolk individuals and organizations.

2.4 Validation of fingerlings dispersal project accomplishment in RFOs VI and

XIII disclosed several deficiencies in the project implementation, discussed asfollows:

a) non-compliance with the Guidelines on the Dispersal/Distribution of

Fish Fingerlings and Broodstocks

2.5 In RFO VI, distribution of free fingerlings to private sector for backyard and

home consumption projects went beyond the required ceiling of 500 pieces

per beneficiary contrary to Section B of Fisheries Office Order No. 71 datedFebruary 18, 2009.

2.6 It was noted that some request for free fingerlings were not duly approved bythe Regional Director and several forms were not duly acknowledged by therecipients.

2.7 Moreover, recipients of free fingerlings did not provide the BFAR Station

with the production data after each cropping for monitoring purposes asrequired by the above mentioned fisheries office order.



53

2.8 In RFO XIII, the Agency’s Input Assistance projects and dispersal of tilapia

and bangus fingerlings under the Livelihood Support for Calamity Affected

Fisherfolk in Caraga Region disclosed that a total of 61 individuals received bangus fingerlings in excess of the limit of 3,000 pieces. The excess ranges

from 200 to 12,000 pieces per beneficiary or a total of 240,600 pieces and

costing approximately P721,800.00.

2.9 A total of 34 individuals, also received tilapia fingerlings in excess of the

maximum quantity of 5,000 pieces allowed per beneficiary. The excess ranges

from 500 to 20,000 pieces or a total of 169,500 pieces and costingapproximately P84,750.00.

2.10 Excess of fingerlings dispersal totalled 410,100 pieces with an equivalent

amount of P806,550.00.

2.11 We recommended that management validate/assess the sites of fish

nurseries identified by LGUs to determine/ascertain its suitability and

ensure that the fingerlings/broodstocks are given only to qualifiedfisherfolk/beneficiaries.

2.12 Management of RFO XIII commented that distribution was delayed due to thelate release of funds; hence, at the time of delivery, some of the listed

beneficiaries have already stocked their fishpond or fish cages with fish

fingerlings prior to BFAR’s dispersal.

2.13 They also explained that the beneficiaries who received more than 5,000

pieces of tilapia fingerlings in the province of RFO XIII were representatives

of organizations or cooperatives with at least three fish cages which can

accommodate 12,000 pieces of fingerlings.

b) lack of regular monitoring to determine the effectiveness of theimplemented projects

2.14 The Memorandum of Agreement entered into by and between BFAR VI,LGUs and cooperators explicitly states that progress reports should be

submitted for proper monitoring and evaluation of the projects.

2.15 Verification disclosed that monthly status/progress reports were not submitted by project cooperators to RFO VI; hence, monitoring and evaluation on the

effectiveness of the various Fish Culture Projects were not conducted.

2.16 We recommended that management monitor regularly the

recipient/beneficiaries to check whether they need assistance for

sustainability of the project and to address immediately problems that

maybe encountered in the implementation of the project.



54

Maricultur e Park Project not attained in two regions

3. The objectives of the Mariculture Park Project were not attained due to

delayed turnover of fish cages in RFO III.

3.1 Fisheries Office Order No. 317, series of 2006 provided the Implementing

Guidelines and Procedures in the establishment and maintenance of Mariculture Park/Zone.

3.2 The primary objective of the Park is to increase fish production in order tomeet the increasing needs of the Filipino people for fish protein. In Region III,

the Mariculture Park project, implemented in the province of Aurora,

specifically aims to increase production of valuable fish marine species

through a sustainable environment on aquaculture technology.

3.3 As of December 31, 2011, 32 wooden fish cages costing P6,000,000.00 were

procured to be used in the Mariculture Park and subsequently donated to

LGUs or other government agencies, which were willing to shoulder the feedsto be used in bangus and other fish production. The wooden fish cages were

procured starting June 2010 up to September 2011. However, as of December 31, 2011, the wooden fish cages were not yet awarded or issued to the

identified beneficiaries and were still stationed and located in Casiguran,

Aurora.

3.4 It was noted that out of the 32 cages containing bangus fingerlings, ten were

damaged by the typhoons that occurred in 2011, particularly typhoons Pedring

and Quiel. The agency was able to recover and repair six cages. Four fishcages costing P954,684.00, however, were totally destroyed. The remaining

28 cages are still in good condition.

3.5 Interview with concerned agency officials disclosed that indeed, there wasdelay in the awarding of the fish cages due to the problem that arose in the

selection of beneficiaries because of the financial capabilities of the identified

LGUs and barangay beneficiaries with regard to the feed requirements of thefish cages. This problem, however, is being remedied by the concerned

elected officials of the province of Aurora in coordination with the BFAR

RFO III officials.

3.6 The delay in the awarding/distribution of the fish cages intended for

livelihood opportunities of the people of Casiguran was a clear manifestationthat the purchase of the fish cages did not contribute to the attainment of theobjectives of this project. Furthermore, if the fish cages are allowed to remain

unproductive and be idle it will eventually result to waste of government

funds. These might be destroyed again by typhoons and strong winds as the

place where these are located are prone to such kind of natural calamities.



55

3.7 We recommended that management in RFO III award/issue the fish

cages immediately to the intended beneficiaries. These should not be left

idle to deteriorate due to exposure to natural elements and other factors.

Use of funds without approval f rom the proper agency – P3.119 mill ion

4. Utilization of funds totalling P3.119 million for the operationalization of

Multi-Species Finfish Hatchery in RFO IV-A was not within the purpose

for which these were appropriated contrary to Section 87 of Presidential

Decree (PD) No. 1177.

4.1 Utilization of fund for purposes other than that for which it was appropriated

is tantamount to misuse of funds pursuant to Section 87 of PD 1177.

4.2 The sub-allotment of P10,600,000 was released to BFAR RFO IV-A for the

operationalization of Multi-Purpose Hatchery in Unisan, Quezon which was

covered by ASA No. 2011-03 dated January 31, 2011. It was noted thatdisbursements totalling P3,119,077.13 was not within the purpose of the said

ASA.

4.3 Management justified that per MOA signed among BFAR-Central Office

(CO), BFAR IV-A and Unlad Foundation at Unisan, the total amount of fund

for the Unisan Hatchery project was P6,589,900. BFAR – CO released theASA in the amount of P10,600,000 with an excess of P4,010,100; hence, all

other expenses were charged to the excess of allotment.

4.4 We believe however, that the Unisan Hatchery project is not yet in full

operation. Management should seek first the approval from the source agency(BFAR – CO) on the use of excess allotments for expenses other than for

which it was intended. Without the approved authority, said disbursements areimproper charges and that Agency officials shall be made liable for the misuse

of the fund.

4.5 We recommended and management agree to seek for authority from the

DBM to utilize the excess allotment for the operationalization of the

Unisan Hatchery Project for purpose other than for which it was

appropriated. We also recommended that management administer the

disbursements of funds arising from ASAs to the intended purposes

indicated therein.

Unimplemented projects – P12.757 mil li on

5. Various projects in RFO VI under the National Fisheries Program

totalling P12.757 million were not implemented/completed as of



56

December 31, 2011; hence, the benefits to be derived from the projects

were not fully enjoyed by intended beneficiaries.

5.1 The National Fisheries Program being implemented by BFAR is designed to

provide for an environment which can support the fisheries industry’s

sustainable development aimed to:

a. Contribute to national food security at all times;

b. Ensure the national and sustainable development, management and

conservation of fishery and aquatic resources in the region;c. Reduce poverty incidence in the coastal areas; and

d. Enhance people empowerment in the fisheries sector

5.2 Total funds amounting to P12,757,304.00 were downloaded to RFO VI in thelast quarter of CY 2011 for the implementation of various projects, details are

as follows:

ASA No. Date Name of Project Amount

010 August 22, 2011

Stock Assessment of Marine Fisheries

Status of Portunus Pelagicus in

Selected Visayan Sea

P 1,335,500

012 September 13, 2011 Mangrove Plantation Projects 2,300,000

014 October 11, 2011

Purchases of 3,000 units of concreted

jackstone structure for deployment

of Diwal Growing Areas

3,147,000

015 November 10, 2011Technology verification of Organic

Tilapia and Milkfish Farming1,557,000

018 November 25, 2011Information and Education Campaign

Project 1,459,254

019 December 2, 2011Procurement of Patrol Boats in the

Province of Iloilo1,250,000

020 December 12, 2011Implementation of various fisheries

programs and projects525,000

022 December 15, 2011

Resource Conservation and Livelihood

Support Project to Fisherfolk of

Barotac Viejo, Iloilo

560,000

024 December 29, 2011Conduct of Training and Hiring of

COS for Aquasilviculture Projects623,280

Total P 12,757,034

5.3 Based on inquiry with management, the Audit Team found that these projects

were not included in the Regional Operational Plan for CY 2011 of RFO VI.

These should have been implemented in the national level; however, due tolack of time and delays in the schedule, these were instead downloaded to the

region.



57

5.4 Further, the dates when these funds were transferred to the region were

already near year-end. Hence, the agency did not have much time to fully

utilize the funds and implement the projects.

5.5 The late transfer of funds caused the delays in the execution of the projects

and these were unprogrammed in the regional level; hence, cannot be properly

put into operation based on the agency’s work plan.

5.6 We recommended that BFAR-CO download the funds for project

implementation promptly so that the project can be accomplished based

on plans and targets and that the intended beneficiaries can fully enjoy its

benefits.

Loss due to Indirect Procurement of Gasoline/Diesel - P2.095 mil li on

6. BFAR-CO could have saved a total amount of P2.095 million

representing five percent discount for CYs 2007 to 2011 on theprocurement of gasoline/diesel had it directly contracted with Shell

Philippines, Inc., instead of to Carldril, Incorporated.

6.1 Section 3.1.A of COA Circular 85-55A dated September 8, 1985 provides that

purchase of items from jobbers or middlemen is in violation of government

policy.

6.2 Republic Act No. 9184 or the Government Procurement Reform Act also

provides that purchases should be done directly from the suppliers.

6.3 Analysis of the billing statements attached to the disbursement vouchersshowed that the Pilipinas Shell Petroleum Corporation grant a five percent

(5%) discount to Carldril, Inc. on petroleum products after deducting valueadded tax (VAT).

6.4 Had BFAR directly contracted Pilipinas Shell Petroleum Corporation (Shell)instead of Carldril, Inc., for the provision of its fuel requirements, the five

percent discount for CYs 2007 to 2011 or a total of P2,095,379.32 granted to

the latter could have been availed of by BFAR, computed as follows.

Period Amount of

Gasoli ne/Diesel Paid

5% Discount

January – November

2011P 7,260,387.87 P 363,019.39

CY 2010 5,945,052.87 297,252.64

CY 2009 5,065,398.58 253,269.93

CY 2008 13,737,696.76 686,844.84

CY 2007 9,899,050.32 494,952.52

Total P 41,907,586.40 P 2,095,379.32



58

6.5 Scrutiny of the MOA entered into by and between the BFAR and Carldril,

Inc., disclosed the following deficiencies:

a. no indication that the contract was awarded in accordance with the

prescribed mode of procurement which is public bidding;

b. Carldril, Inc. is just a middleman or an agent of Pilipinas Shell,considering that the products was served by the latter;

c. duration of the contract and the penalty clause/s were notspecified/provided therein; and

d. no date of perfection of the contract, only the date notarized was

indicated in the MOA which was on March 12, 2007.

6.6 We recommended that management consider contracting directly with

Pilipinas Shell Petroleum Corporation or other providers for the

petroleum product requirements to avail of the prices most advantageousto the agency, in compliance with the provisions of RA 9184.

B. Financial and Compliance Audit

Unreliable cash balances due to various deficiencies and accounting errors

– P230.099 mil li on

7. The reported cash account balance totaling P230.099 million were

unreliable due to the (a) net overstatement by P6.294 million due tovarious accounting errors; (b) unliquidated payroll fund of

P4.212 million; (c) delayed/non-submission of Bank Reconciliation

Statements (BRSs) in BFAR – CO, RFOs VI and IX and RFTC IX with

cash balance totaling P42.239 million.

7.1 Audit of the cash accounts revealed accounting errors and deficiencies.

a) net overstatement of cash accounts – P6.294 million

7.2 Section 111 (2) of PD 1445 requires that the highest standard of objectivity

and consistency shall be observed in the keeping of accounts to safeguardagainst inaccurate or misleading information while Section 112 provides thateach government agency shall record its financial transactions and operations

in conformity with generally accepted accounting principles and in

accordance with pertinent laws and regulations.



59

7.3 Audit revealed that the following accounting errors resulted in the net

overstatement of the cash account:

Nature of Er ror Over/(Under)

statement

Unrecorded interest income P (175,334.89)

Stale checks recorded as outstanding checks (13,800.00)Unrecorded Credit Memo (32,849.38)

Unrecorded disbursement for payroll fund 6,515,570.80

Net Overstatement P 6,293,586.53

7.4 We recommended that management instruct the OIC, Chief Accountant

of BFAR-CO to make the necessary adjusting entries to reflect the

correct balances of the affected accounts.

b) unliquidated payroll fund already past due – P4.212 million

7.5 Section 4.2 of COA Circular 97-002 states that cash advance for salaries,

wages, allowances, honoraria and other similar payments shall be equal to thenet amount of the payroll for a pay period. Section 5.1 of the same circular

states that the same shall be liquidated within five (5) days after each fifteen(15) day/end of the month pay period.

7.6 Scrutiny of records revealed that the total amount of P4,212,064.76 wasalready aged more than a month from the day from which it was granted andwere already due for liquidation/refund at year-end, as follows:

Off ice Due for Li quidation/

Refund

BFAR-CO P 3,394,483.07RFO IV-B 817,581.69

Total P 4,212,064.76

7.7 RFO IV-B management assured that the cause of the non-liquidation would be

determined and they would require the concerned accountable officers to

submit to the Accounting Unit the necessary documents for the liquidation of cash advances for payrolls.

7.8 BFAR – CO management was amenable to the observation and will require

strict compliance with COA Circular 97-002 henceforth.

7.9 We recommended that management instruct the concerned OIC, Chief

Accountant to require the accountable officers to liquidate the cash

advances for payroll already past due.



60

c) delayed/non-submission of BRSs

7.10 Section 3.2 of COA Circular No. 96-011 dated October 2, 1996 provides thatthe Accountant shall within ten days from receipt of the Bank Statements,

reconcile the same with the General Ledger (GL) and prepare the BRS.

Section 3.3 of the same circular requires the Accountant to draw journal

vouchers to record all valid reconciling items that require adjustment andcorrection in the GL, while Section 3.4 requires that the duplicate and

quadruplicate copies of the BRS, including paid checks, original copies of

debit/credit memos, shall be submitted to the Auditor concerned on or beforethe 15

thof the succeeding month.

7.11 The reliability of the balance of the Cash in Bank accounts of the Bureau as of

year-end with a total of P206.649 million was doubtful due to thedelayed/non-submission of BRSs.

7.12 The following observations were noted regarding the submission of BRS:

Off ice Bank Account Book Balance Observation

BFAR-CO Local Currency, Current Account

Local Currency, Savings Account

P 27,893,896.04

6,663,369.74

BRS submitted six months

or more after the close of the monthRFO VI Local Currency, Current Account 6,992,349.94

RFO IX Local Currency, Current Account 643,622.65 No BRS prepared by the

Chief AccountantRFTC IX Local Currency, Current Account 45,554.43

Total P 42,238,792.8

7.13 This resulted to unrecorded reconciling items found in the BRSs, whichrequire adjustment. Moreover, errors found were not adjusted before closing

the books of accounts at year-end.

7.14 We recommended that management instruct the concerned OIC, Chief

Accountant to regularly and promptly prepare the BRS at the end of each

month to identify errors and reconciling items and effect the necessary

adjustments, if any.

Unreli able Due fr om Off icers and Employees account – P2.531 mill ion

8. The reported balance of account Due from Officers and Employees as of

year-end totaling P2.531 million was inaccurate and unreliable due to the

inclusion (a) in the subsidiary ledger (SLs) of BFAR-CO of unreconciled

items amounting to P1.493 million; and (b) receivables of P972,872.21

aged more than two years.

8.1 Section 47 of the Government Accounting and Auditing Manual (GAAM),Volume III provides that documentation of transactions and other significant

events should be timely, complete and accurate and should facilitate tracing of



61

a transaction or event from its occurrence in processing until completion of

recording in summary records.

8.2 Records showed that out of the total P2,531,046.79 balance of the Due from

Officers and Employees account, P2,450,053.20 or 97% of this amount comes

from the books of BFAR – CO. However, P1,493,152.99 or 60.94% are

classified as “E, Unreconciled” in the subsidiary ledger.

8.3 The account also includes receivables of P969,459.01 from a permanent

employee of BFAR currently assigned at BFAR Fisheries Regulatory andQuarantine Division (BFAR-FRQD). The amount was charged to him for his

non-compliance with the Scholarship Service Contract; hence, salaries and

other emoluments paid to him during the school year 2003 – 2004 were

required to be refunded in the letter, by the then BFAR Director datedFebruary 10, 2009.

8.4 The balance also includes receivables from various BFAR officials and

employees totaling P3,413.20 representing personal telephone call charges for the period since June 2006.

8.5 The total amount of P972,872.21 is the personal liability of the BFAR

officials and employees which were already aged more than two years but

were not yet fully recovered.

8.6 We recommended that BFAR-CO management demand the immediate

payment of receivables due from BFAR officials and employees,

otherwise, consider withholding the salaries and/or other benefits of those

who failed to settle such collectibles.

8.7 Collections were already made on some receivable accounts and demand

letters were already sent to officers and employees with personal liabilities.For CY 2012, the total amount of P75,800 was collected from the BFAR-

FRQD employee and the amount of P3,000 is being deducted monthly from

his salary to settle the whole amount. Adjusting entries were also made onaccounting errors. However, management is finding difficulty in reconciling

the beginning balance recorded as “E, Unreconciled”. Accounting personnel

are still in the process of retrieving files to reconcile all data.

Misstated Due fr om NGAs –

P293.589 mil li on

9. The balance of the Due from NGAs account of P293.589 million was

misstated due to the (a) unsupported balances of CY 2005 and prior years

purchases of various equipment and supplies from the Procurement

Service (PS) totaling P1.254 million; (b) unliquidated/undelivered

supplies, materials and equipment by the PS aged one to more than five



62

years in the amount of P31.495 million; and (c) unliquidated NFRDI fund

transfers to various NGAs, aged one to three years for projects/programs

that were already completed at year-end totaling P1.323 million.

9.1 Audit of the Due from NGAs account disclosed several deficiencies and

accounting errors.

a) unsupported balances of CY 2005 and prior years purchases of various

equipment and supplies from the PS – P1.254 million

9.2 Section 47 of the GAAM, Volume III provides that documentation of

transactions and other significant events should be timely, complete and

accurate and should facilitate tracing of a transaction or event from its

occurrence in processing until completion of recording in summary records.

9.3 The balance of the Due from NGAs account is broken down as follows:

Office Amount Central Office P 283,144,762.70

RFO III 3,433,589.23

RFO IV-A 84,549.43

RFO V 1,025,041.40

RFO X 77,940.00

RFO XII 33,425.96

NFRDI 5,789,323.53

Total P 293,588,632.25

9.4 Out of the P283,144,762.70 recorded in the books of the BFAR – CO,P37,211,621.24 or 13% represents payment of purchases of various equipment

and supplies from the PS.

9.5 Accounting records showed that as of year-end, total deposits of

P59,425,512.49 was made by the BFAR to the PS for the payment of office

and IT equipment, various office supplies and materials, etc., for the official

use of the Bureau.

9.6 The balance in CY 2005 and prior years of P1,253,877.17 is not supported

with a breakdown or list of items; hence, the validity of the same is doubtful.

9.7 We recommended that BFAR-CO management (a) require the

OIC, Property/Supply Officer to reconcile with the PS the balances of deposits from CY 2005 to CY 2011; (b) instruct both the Property Officer

and the OIC-Chief Accountant to update their records and to effect

adjustments of unrecorded deliveries, if any.

9.8 Make representation with the PS to refund the amount of the

corresponding undelivered items, if there are any.



63

b) unliquidated/undelivered balance supplies, materials and equipment by

the PS aged one year to more than five years - P31.5 million

9.9 Section 112 of PD 1445 provides that each government agency shall record its

financial transactions and operations in conformity with generally accepted

accounting principles and in accordance with pertinent laws and regulations.

9.10 Moreover, sound internal control requires that financial transactions should be

well documented in order to, among others, establish their validity/reliability

and adherence to prescribed policies and procedures.

9.11 Of the total audited balance of P37,232,291.24, 84.59% or P31,495,456.46

was aged one to more than five years. Aging of the account is presented as

follows:

CY Deposits Bal ance as of

12.31.2011 < 1 year

1 year to 2

years

> 2 years to 3

years

> 3 years to 5

years > 5 years

2011 P5,896,469.36 P5,736,834.78 P5,736,834.78

2010 18,238,622.55 15,902,419.44 P15,902,419.442009 18,274,258.60 7,663,947.41 P7,663,947.41

2008 3,246,578.07 1,042,978.32 P1,042,978.32

2007 2,842,577.71 773,029.86 773,029.86

2006 6,883,603.71 4,859,204.26 4,859,204.26

2005 &

PYs4,043,402.49 1,253,877.17 P1,253,877.17

Total P59,425,512.49 P37,232,291.24 P5,736,834.78P15,902,419.44 P7,663,947.41 P6,675,212.44 P1,253,877.17

P31,495,456.46

Percentage 100% 15.41%42.71% 20.58% 17.93% 3.37%

84.59%

9.12 The significant amount of balances of deposits to PS is due to the delayed

recording of the deliveries and/or non-deliveries of items procured by the

Bureau from PS. Due to limited data/information of these procurements,validation as to the accuracy and completeness of recording of acquiredPPEs/supplies was difficult.

9.13 Liquidations/deliveries made by PS were not immediately credited to theaccount of PS. There were delays in recording of more than six months to

almost a year after the deliveries have been made.

9.14 Control over the deposits made to PS was weak due to lack of coordination

between the accounting section and property section as well as the FIMC who

is in-charge of the information technology system of the BFAR. There was

also no monitoring of the status of the undelivered supplies, materials andequipment to update the account with PS.

9.15 Further verification disclosed that information as to the check number, official

receipts and agency procurement request were not indicated in the particular section of the JEV when recording the liquidation to properly identify what

particular deposit it pertains to.



64

9.16 We recommended that BFAR-CO management instruct the Property

Officer to prepare regularly and on time all liquidation reports

pertaining to the deliveries made by PS to avoid accumulation of balances

and to coordinate with the Accounting Unit to properly establish the

correctness of the balances appearing in the books of account and check

all records if all deliveries have been taken up in the books.

9.17 In BFAR – CO, management commented that the Accounting Section will

make proper coordination with the Property Unit to reconcile the Due from

NGAs – PS account. Liquidation reports are now being prepared for thosedelivery receipts which were in the possession of the Property Unit and will

forward the same to the Accounting Section for proper recording.

c) unliquidated NFRDI fund transfers to various NGAs – P1.323 million

9.18 COA Circular No. 94-013 provides the Rules and Regulations in the Grant,

Utilization and Liquidation of Funds Transferred to Implementing Agencies

(IA).Paragraph 4.6 states that “Within ten (10) days after the end of eachmonth/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. Only actual project expenses shall be reported. Thereports shall be approved by the Head of the IA.”

9.19 Fund transfers made by NFRDI to various national government agencies(NGAs) were for the implementation of various fishery programs/projects of

the Bureau which was debited to Due from NGAs account in the books of

BFAR. The unliquidated fund transfer made by the NFRDI as of year-end

amounted to P5,789,323.53, as shown below:

Agency Amount

Procurement Services P 31,053.41

Philippine Council for Aquatic and Marine

Research and Development (PCAMRD)32,857.50

Three Summit Proceedings 152,535.00

Aklan State University 178,490.00

Various BFAR Regional Field Training Centers 2,360,924.65

Various BFAR Regional Field Offices 3,033,462.97

Total P5,789,323.53

9.20 Aging of the total balance of NFRDI of P5,789,323.53 is shown below:

Balance as of

12.31.2011

Less than

1 year

1 year to 2

years

Over 2 years

to 3 years

P5,789,323.53 P4,994,868.34 P572,287.69 P222,167.50

100% 86.3% 9.9% 3.8%

9.21 Further verification disclosed that although 86.3% or P4,994,868.34 of the

unliquidated balances were aged less than a year, a total of P528,825 were



65

already due for liquidation considering that the projects/programs were

already completed as of year-end, details shown below:

Agency/Office

Check Duration of

Projects

Bal ance as of

12.31.2011 Date No.Amount of

Fund transfer

RFTC VII 08.23.2011 2223714 P199,825.00 August 22-26, 2011 P199,825.00RFO 2 09.30.2011 2224104 329,000.00 October 4-7, 2011 329,000.00

Total P528,825.00

9.22 Considering the lapse of time and the fact that the fund transfers are aged

more than a year to more than five years, the total amount of P1,323,280.19

(P572,287.69+P222,167.50 + P528,825.00) should have been liquidated bythe IAs.

9.23 The accuracy of the account balance is therefore affected and proper

accounting could not be made due to the IAs’ non -compliance with therequired submission of Report of Disbursements and/or Fund Utilization

Report with supporting documents to account for the utilization of saidtransferred fund.

9.24 We recommended that NFRDI management instruct the OIC-Chief

Accountant to request the concerned IAs to submit their audited

liquidation reports and/or return the unused fund to the NFRDI

particularly those programs/projects that were already completed and

make the necessary adjustments to reflect the correct balances of the

affected accounts.

I ncorrect Due from NGOs/POs –

P35.258 mil li on

10. The balance of the Due from NGOs/POs account of P35.258 million was

incorrect due to the (a) net overstatement of P2.937 million due to

accounting errors affecting the Southeast Asian Fisheries Development

Center (SEAFDEC) account; (b) expended fund transfers to SEAFDEC

aged one year to more than five years but remained unliquidated as of

year-end totaling P10.658 million; and (c) unliquidated fund transfers

made by NFRDI totaling P283,122.50 aged one year to three years.

10.1 Section 112 of PD 1445 provides that each government agency shall record its

financial transactions and operations in conformity with generally acceptedaccounting principles and in accordance with pertinent laws and regulations.

10.2 Section 5.4 of COA Circular 2007-001 dated October 25, 2007 provides that

the NGO/PO shall submit the final Fund Utilization Report certified by itsAccountant and approved by its President/Chairman within 60 days after the

completion of the project. This shall be verified by the Government



66

Organizations (GO) internal auditor and shall be the basis of the GO in

recording the fund utilization in its books of accounts.

10.3 The Due from NGOs/POs account is broken down as follows:

Office Amount

Central Office P34,739,119.20 NFRDI 519,372.50

Total P35,258,491.70

10.4 Review of the Due from NGOs/POs account disclosed accounting errors anddeficiencies, as follows:

a) net overstatement due to accounting errors affecting the SEAFDEC

account – P2.937 million

10.5 Analysis of SEAFDEC’s account revealed an overstatement of P2,937,075.51,

as shown below:

Period

Covered Nature

Over/(Under)

statement

CY 2009 Unrecorded liquidation P3,000,000.00

CY 2009 Overstatement of recorded liquidation of fund

transfer granted per check no. 720201 dated April 7,

2009

As recorded 250,000.00

Should be 187,075.51 (62,924.49)

Net Overstatement P2,937,075.51

10.6 We recommended that BFAR-CO management instruct the OIC-Chief Accountant to make the necessary adjusting entries to correct the

overstatement of P2.937 million.

10.7 The overstated recorded liquidation for SEAFDEC of P62,924.49 was alreadyadjusted per JEV No. 2012-01-001936 dated January 30, 2012, while the

unrecorded liquidation report amounting to P3 million was already credited to

the account of SEAFDEC per JEV No. 2012-04-005100 dated April 1, 2012.

b) expended fund transfers to SEAFDEC aged one year to more than five

years – P10.658 million

10.8 Out of the total fund transfers of P26.858 million granted by BFAR to the

SEAFDEC, only 31.28% or P8,400,115.51 were liquidated leaving an

unliquidated balance of P18,457,846.75 as of December 31, 2011.



67

10.9 Aging of the remaining unliquidated balance of P18,457,846.75 as of

December 31, 2011 is shown below:

Age Unliquidated

Fund Transfer % to Total

More than five years P 435,000.00 2.36%

More than two year but less than three years 62,924.49 0.34%One year to two years 5,159,922.26 27.95%

One year 5,000,000.00 27.09%

One year to more than f ive years 10,657,846.75 57.74%

Eight months 2,800,000.00 15.17%

Five months 5,000,000.00 27.09%

Cur rent 7,800,000.00 42.26%

Total P 18,457,846.75 100.00%

10.10 The accumulation of unliquidated fund transfers was due to the continuous

release of additional funds by BFAR to the SEAFDEC even if the previousreleases were not yet liquidated by the latter. Moreover, BFAR failed to exert

efforts to compel and require SEAFDEC to settle and account for the fundreleases as required, nor identify the reasons of the failure of the SEAFDEC to

liquidate the fund transfers.

10.11 Due to the failure of SEAFDEC to liquidate the fund transfer on time, the

Due from NGOs/POs account was not credited for the disbursements of fundtransfers; thereby, overstating the total reported receivables of BFAR as at

year-end. Moreover, expenses were not recognized during the period it was

incurred which is in violation of Section 4, Chapter 2, Volume I of the NGAS

Manual.

10.12

The expenses incurred by SEAFDEC out of the unliquidated fund could not be fully evaluated and accounted for as to its validity, necessity or usefulnessto the project for lack of liquidating documents as basis for evaluation.

10.13 Inquiry from the accounting personnel revealed that the liquidation report for fund transfer granted in CY 2005 in the amount of P435,000 had already been

submitted but not yet credited to the account of SEAFDEC due to lack of

supporting requirements.

10.14 We recommended that BFAR-CO management monitor the project

implementation and request SEAFDEC to submit the liquidation

documents and/or refund unused balances of fund transfers for

completed projects particularly those aged more than one year; and stop

the release of additional funds until previous releases are fully liquidated.



68

c) unliquidated fund transfers made by NFRDI aged one year to three years

– P283,122.50

10.15 The outstanding balance of Due from NGOs/POs on NFRDI as of December

31, 2011 totaling P519,372.50 is broken down as follows:

Agency Amount Percentage Age Kaibigan Dagat Calamina, Inc. P283,122.50 54.51% Less than a year

The Worldfish Center 236,250.00 45.49%Over 2 years to

3 years

Total P519,372.50

10.16 Considering the lapse of time and the fact that the fund transfers are aged

more than a year to more than five years, the total amount of P10,940,969.25

(P10,657,846.75 + P283,122.50) should have been liquidated by the IAs.

10.17 We recommended that BFAR-CO management thru NFRDI

management to instruct the OIC-Chief Accountant to require the

concerned NGO/PO to submit audited liquidation reports and/or return

the unused fund to the NFRDI particularly those programs/projects that

were already completed and make the necessary adjustments to reflect

the correct balances of the accounts.

Overstatement of Due from National Treasury and Due to National Treasury

Accounts – P6.218 mi ll ion

11. The reported balances of the accounts Due from National Treasury of

P52.053 million and Due to National Treasury of P83.707 million were

both overstated by P6.199 million and P6.218 million, respectively, due to

the erroneous recording of remittances of BFAR-CO to the Bureau of

Treasury under Fund 151.

11.1 Fund 151 was set-up as a Special Account in the General Fund in November

4, 2009 for the Wildlife Management Fund pursuant to Fisheries

Administrative Order No. 233, series 2010. This fund shall be used to record

collections of fees, charges, fines, penalties and other revenues generated fromwildlife related activities and the same to be remitted to the Bureau of

Treasury (BTr). A Special Budget Request to the Department of Budget and

Management (DBM) shall be made to withdraw the amount to be used

exclusively for expenditures related to the rehabilitation or restoration of habitats affected by acts committed in violation of RA 9147 otherwise known

as the Wildlife Resources Conservation and Protection Act.



69

11.2 As of December 31, 2011, the only transactions that were recorded under

Fund 151 are collections and remittances with the following journal entries:

As Recorded Should be

Particul ars Debit Credit Particulars Debit Credit

Cash - Collecting Officer

Due to National TreasuryTo record collection of

fees, charges, fines, penalties and other revenues

xxx

xxx


Due to National TreasuryTo record collection of

fees, charges, fines, penalties and other revenues

xxx

xxx

Due from National Treasury


To record remittance of collections

xxxxxx

Due to National Treasury


To record remittanceof collections

xxxxxx

11.3 It can be observed in the preceding entries that the account Due to National

Treasury was credited for collections; however, it was not debited upon

remittance. This caused the account to accumulate to P6,218,088.37. Thisamount represents liabilities/payables, which were already remitted to the

BTr.

11.4 The Due from National Treasury account was erroneously debited instead of

the Due to National Treasury account which caused its overstatement by

P6,199,506.37. This should not have been debited to represent receivables

from the BTr since the submission of a Special Budget request as supported by a list of collections does not guaranty that the total amount collected and

remitted will be granted upon said request.

11.5

The difference of P18,582.00 (P6,218,088.37 less P6,199,506.37) whichrepresents unremitted collections was also understated due to understatement

of collections in 2010 by P2,150 and understatement of deposits by P118.

11.6 We recommended that BFAR-CO management instruct the OIC, Chief

Accountant to make the necessary adjusting entries to properly reflect

the remittance of collections to the BTr and record the net

understatement of Due to National Treasury account.

11.7 Adjustments had already been made in March 2012 per JEV Nos. 2012-03-

002252; 2012-03-0022254; 2012-03-00290 and 2012-03-000291.

Understated Receivables – Disallowances/Charges account – P69.458 million

12. The reported balance of the account Receivables - Disallowances/Charges

of P69.458 million was understated due to an unrecorded disallowance of

P7.842 million in BFAR-CO.



70

12.1 Section 22.6, Chapter V of COA Circular No. 2009-006 dated

September 15, 2009 “Prescribing the use of the Rules and Regulations on

Settlement of Accounts” provides that the Chief Accountant shall, on the basis of the Notice of Finality of Decision (NFD), record in the books of

accounts, the disallowance and/or charge as a receivable.

12.2 In BFAR – CO, Notice of Disallowance (ND) No. 2005-018 datedApril 22, 2005 was issued on the payment to Subic International Air Charter,

Inc. and V.G. Productions for airplane usage and aviation fuel, and radio

airings for BFAR’s information campaign, respectively, amounting toP7,842,125.54.

12.3 An appeal was made by the Bureau, however, this was subsequently denied

under LSS Decision No. 2009-258 dated June 23, 2009 and the denial wassustained under LSS No. 2010-007 dated January 19, 2010, confirming the

finality of the disallowance.

12.4 Review of the pertinent documents revealed that said disallowance was notrecorded in the books despite, the disallowance became final and executory

since CY 2010. This understated the account Receivables -Disallowances/Charges and understated the Government Equity account by

the said amount.


to record the disallowance of P7,842,125.54.

Unrel iable Advances to Off icers and Employees account – P30.183 mil li on

13. The reported balance of the account Advances to Officers and Employees

of P30.183 million was unreliable due to the (a) overdue unliquidated

cash advances for more than 90 days amounting to P15.954 million; and

(b) various accounting errors resulting to a net overstatement of

P160,315.37 in BFAR-CO. These are in violation of Section 89 of

PD 1445, COA Circular 97-002 and Section 4.a of the NGAS Manual.

13.1 Audit of the account Advances to Officers and Employees revealed the

following:

a) overdue unliquidated cash advances – P15.954 million

13.2 Executive Order No. 248 provides that cash advances for travel should beliquidated within 60 days after the official’s return to the Philippines in case

of official travel abroad, or within 30 days of his return to his permanent

official station. Further, COA Circular No. 97-002 states that cash advances



71

for operating requirements shall be liquidated as soon as the purpose for

which it was granted is achieved.

13.3 With the lapse of time, the cash advances should have been liquidated by the

accountable officers. The expenses charged to these cash advances were not

recorded/recognized during the period when they were incurred due to lack of

liquidation documents contrary to Section 4.a Chapter 2 of the Manual on NGAS.

13.4 Audit of account Advances to Officers and Employees showed unliquidated balance of P30,183,055.46 as of December 31,2011, summarized as follows:

Agency Amount Less than 90 days 91-365 days Over 1 year

Central Office P 15,649,109.60 P 5,783,910.17 P 4,217,621.26 P 5,647,578.17

RFO I * 350,755.00

RFO CAR 4,000.00 4,000.00 - -

RFO IV-A * 1,267,298.73

RFO IV-B 721,521.00 414,045.00 40,098.00 267,378.00

RFO V 2,620,182.11 539,825.88 248,189.06 1,832,167.17

RFO VI 422,977.60 136,588.60 69,165.00 217,224.00

RFO VII 86,691.26 2,989.32 83,701.94 -

RFO VIII 476,921.35 279,071.66 191,324.69 6,525.00

RFO IX 3,000.00 3,000.00

RFO X 2,258,484.51 841,843.24 579,057.00 837,584.27

RFO XI 900,539.46 621,109.00 372,419.00 248,690.00

RFO XII 315,985.00 269,525.00 46,460.00 -

RFO XIII * 2,118,782.90

RFTC II * 391,316.60

RFTC IV 83,922.00 83,922.00 - -

RFTC V 99,812.20 99,812.20 - -

RFTC VII 11,623.02 - - 11,623.02

RFTC VIII 19,960.00 19,960.00 - -

RFTC IX 338,490.00 338,490.00 - -

RFTC XI 96.00 96.00 - -

NFRDI 2,041,587.12 1,004,832.00 925,329.16 111,425.96

TotalP 30,183,055.46 P 10,443,020.07

P 6,773,365.11 P 9,180,195.59

P 15,953,560.70

Percentage100.00% 23.86%

22.44% 30.42%

52.86%

*No data submitted

13.5 Out of the reported Advances to Officers and Employees, P15,953,560.70 or

52.86% is already more than 90 days. The balance in BFAR-CO also includesunliquidated cash advances of the former BFAR Director amounting to

P77,732.84 representing cash advance for foreign travel which was notliquidated prior to his retirement despite the issuance of AOM No. 11-025

dated August 22, 2011.



72

13.6 The former BFAR Director was able to secure a clearance from the

Accounting Section despite having unliquidated cash advance. The

Accounting Section should not have cleared the said Officer or this could havealso been deducted on his claim of terminal leave.

13.7 We recommended that management instruct the Accounting Section to

demand immediately the liquidation of the long outstanding cashadvances and the immediate refund of the unused cash advances from the

concerned accountable officers.

b) net overstatement due to various accounting errors – P160,315.37

13.8 Pursuant to Accounting Circular No. 2006-001 dated November 9, 2006,

“Cash advances granted for travel and other special time-bound undertaking shall be accounted for as „Advances to Officers and Employees‟ to establishthe accountability of the recipient. This shall be liquidated or settled

immediately after the travel or completion of the undertaking for which it was

granted.” Hence, the account is credited when the accountable officer submitsa complete set of liquidating documents.

13.9 BFAR-CO’s balance of the account was overstated by a total of P160,315.37due to the following accounting errors:

Natur e of Er ror As Recorded Should Be Over/(Under)

statement

Overstatement of recorded liquidationreports for traveling expenses

Amount recorded P408,643.35Should be 407,510.45

Understatement P (1,132.90)

Advances to Officersand Employees


P (1,132.90)

Set-up of Petty Cash Fund erroneouslyrecorded as Advances to Officers and

Employees


Petty Cash Fund 200,000.00

Erroneous recording of refund of pettycash


Petty Cash Fund (5,722.84)

Erroneous recording of refund of cashadvance

Payroll Fund Advances to Officersand Employees

3,346.46

Erroneous recording of refund of

payroll fund

Advances to Officers

and Employees

Payroll Fund (8,225.00)

Double recording of refund of unusedcash advance

Amount recorded P(55,900.70)Should be (27,950.35)Understatement P(27,950.35)



(27,950.35)

Net Overstatement P 160,315.37



73

13.10 We recommended that management direct the OIC-Chief Accountant to

prepare adjusting entries of the affected accounts.

Unreli able I nventory account – P94.452 mil li on

14. The balance of the Inventory accounts totaling P94.452 million was

unreliable due to the unreconciled difference between the accountingrecords and the inventory reports totaling P2.249 million.

14.1 Section 43 of the NGAS Manual Volume I prescribes the perpetual inventoryof supplies and materials wherein regular purchases shall be recorded under

the inventory account and issuances thereof shall be recorded based on Report

of Supplies and Materials Issued (RSMI). The Accounting Unit and the

Property Office shall maintain Supplies Ledger Cards (SLC) and Stock Cards(SC), respectively. The balance in quantity per SC should always reconcile

with the SLC of the Accounting Unit.

14.2 Section 65 of the Manual on NGAS Volume II requires the preparation andsubmission of the Report on Physical Count of Inventories (RPCI) which shall

be used to report the physical count of supplies by type of inventory as of agiven date. It shows the balance of inventory items per cards and per count

and shortage/overage, if any.

14.3 Comparison of the inventory account balances in RFOs IV-A and B as of December 31, 2011 between the inventory reports and accounting records

showed a difference of P2,249,283.07 due to failure to reconcile both records,

as follows:

Off ice I nventory Account Per Books Per I nventory Report

Difference

RFO IV-A

Office Supplies P2,019,615.99 P997,810.00 P1,021,805.99

Accountable Forms 25,785.00 23,130.00 2,655.00

Agricultural Supplies 1,528,789.42 927,304.78 601,484.64

RFO IV-B

Office Supplies 159,559.10 163,065.54 3,506.44

Accountable Forms 30,600.00 9,900.00 20,700.00

Agricultural Supplies 599,131.00 - 599,131.00

Difference P2,249,283.07

14.4 We recommended that management instruct the Property and

Accounting Officers to exert efforts to reconcile the accounting and

property records to reflect the correct inventory account balances in thefinancial statements.

Deficiencies in the release of the F ishery Loan and Guarantee Fund - P100 mil li on

15. Various deficiencies were noted in the release of funds by BFAR - CO to

the Land Bank of the Philippines (LBP) amounting to P100 million



74

representing trust deposit as authorized by Section 110 of Republic Act

No. 8550. Moreover, the Audit Team was not furnished with the copy of

the Implementing Rules and Regulations for the said project/program.

This was also erroneously recorded as Due from GOCCs instead of

Guaranty Deposit, resulting to overstatement and understatement of the

said accounts, respectively.

15.1 A Trust Agreement was entered into by and between the BFAR – CO

represented by the BFAR National Director and LBP represented by

Atty. Felix L. Manlangit, Vice President/Officer-in-Charge pursuant toSection 110 of Republic Act No. 8550 otherwise known as “The Philippine

Fishery Code of 1998 - An Act Providing for the Development, Management

and Conservation of the Fisheries and Aquatic Resources, Integrating All

Laws Pertinent Thereto and for Other Purposes” quoted as follows:

“Section 110. Fishery Loan and Guarantee Fund

Pursuant to Section 7, Article XIII of the Constitution, there ishereby created a Fishery Loan and Guaranty Fund with an

initial of One hundred million pesos (P100,000,000.00), which

shall be administered by the Land Bank of the Philippines. The fund shall be made available for lending to qualified borrowers

to finance the development of the fishery industry under a

program to be prescribed by the Department.

For the same purpose, the Department may seek financial

assistance from any source and may receive any donation

therefrom.”

15.2 A transfer of fund was made by the Bureau to Land Bank of the Philippines-

Trust Banking Group (LBP-TBG) covered by Check No. 939096 datedDecember 22, 2011 in the amount of P100 million, however, the account Due

from GOCCs was debited instead of Guaranty Deposit. The amount is a

guarantee fund up to 100% to cover principal loan exposures of LBP againstthe risk of default of borrowers in accordance with the IRR

15.3 We noted that the following information and/or documents were not provided/submitted:

a. Implementing Rules and Regulations (IRR) jointly approved by the LBP-TBG and BFAR and mechanics of the project;

b. Mechanics on the implementation of the project by the LBP;



75

c. Provision for the accounting entry relative to the transfer/remittance of

fund by BFAR to LBP-TBG and creditor if ever and the corresponding

accounting entry to be made by LBP-TBG in its books of accounts;

d. Approving authority of the loan to be granted;

e. Composition of the Governing Board and copy of Resolutions, if any.

f. Signatory and/or authorized approving officials on all transaction made by

LBP-TBG; and

g. Under Section 1 of Article II of subject Trust Agreement, the LBP is given

the discretionary power to invest and reinvest a portion of the Fund in

government securities and/or open and maintain a saving account. Section110 of RA 8550, does not give the LBP said power except to administer

the said fund for lending purposes to qualified borrowers to finance the

development of fishery industry.

15.4 We recommended that the OIC – Chief Accountant adjust the accounts

by debiting Guaranty Deposit account and crediting Due from GOCCs.

Moreover, furnish the Audit Team with a copy of the IRR to properly

evaluate the transactions.

15.5 Reclassification of account had already been made in March 2012 per JEV No. 2012-03-002255. Preparation of the IRR is now on it final stage.

Overstatement of Other Prepaid Expenses – P24.908 mil li on

16. The Other Prepaid Expense (OPE) account with a balance of

P39.371 million was unreliable due to the (a) unrecorded delivery of

Gasoline, Oil and Lubricants (GOL) amounting to P24.775 million; and

(b) overstatement of P132,470.18 due to various accounting errors.

16.1 Debits to the Other Prepaid Expenses account represent prepayment made to

suppliers of items prior to delivery.

16.2 Section 61 of the NGAS Manual, Volume III states that account Other PrepaidExpenses (165) is used to record other prepaid expenses not included in any

specific prepaid accounts. This account is credited for the expired portion of the other prepaid expenses at the end of the accounting period.

16.3 Verification of the abovementioned account disclosed that the Other Prepaid

Expense account is overstated by P24,907,555.04 due to the following:



76

a) overstatement due to unrecorded delivery of GOL aged more than a year

– P24.775 million

16.4 In BFAR-CO and RFO X, P38,227,408.94 or 97% of the total balance of the

OPE account represents procured GOL; P24,775,084.86 or 65% of which

represents unrecorded delivery of items for more than a year, presented as

follows:

Off ice Year Total Payments Total Recorded

Deliveries

Other Pr epaid Expenses for

Gasolin e, Oil and

Lubricants

BFAR-CO 2011 P 13,836,120.43 P 561,451.15 P 13,274,669.28

RFO X

Prior years

2011Prior years

159,737,808.68173,573,929.11

177,654.80310,288.83

487,943.63

135,273,012.65135,834,463.80

--

24,464,796.0337,739,465.31

177,654.80310,288.83

487,943.63

Total2011Prior years

Total

14,013,775.23160,048,097.51

P174,061,872.74

P 561,451.15135,273,012.65

P135,834,463.80

13,452,324.0824,775,084.86

P38,227,408.94

16.5 We recommended that management require the concerned

division/section chief to submit the required documents to the Accounting

Unit and the OIC – Chief Accountant to record the delivery upon

reconciliation with the records of the concerned division.

16.6 Management already instructed the unit/personnel who is in-charge in the

procurement of gasoline to reconcile their records with the balance appearingin the accounting record and make necessary adjustment. To date, delivery of

gasoline, oil and lubricants amounting to P4,855,183.29 was already recorded

in the books in January 2012 per JEV No. 2012-01-002132.

b) overstatement due to various accounting errors – P132,470.18

16.7 Review of the Other Prepaid Expense account disclosed an overstatement of

P132,470.18, as follows:

Off ice/Region Natur e Amount

CO Erroneous computation of expired portion of

prepayments

P 56,470.18

IV-B Unrecorded expired portion of prepayments 76,000.00Total Overstatement P132,470.18

16.8 Prepayments for various procurements of GOL and maintenance and serviceagreements were not adjusted at the end of the year to reflect expiration and

consumption contrary to Section 61 of the NGAS Manual Volume III.



77

16.9 We recommended that management instruct the Accounting Unit to

adjust accordingly the expired portion of the Other Prepaid Expenses

account.

Unreli able balance of Property, Plant and Equipment accounts – P3.008 bil li on

17. The balance of the Property, Plant and Equipment accounts with a book

balance of P3.008 billion could not be relied upon due to the (a) net

overstatement due to various accounting errors totaling P665.907 million;

(b) unreconciled difference between the accounting records and the

Report on the Physical Count of PPE (RPCPPE) of P24.175 million; and

(c) non-submission of the RPCPPE with a book balance of P2.043 billion.

In addition, PPE ledger cards were not maintained by the accounting unit

and Acknowledgement Receipts for Equipment (ARE) were not renewed

every three years or when there was a change in accountability.

a) overstatement due to various accounting errors – P665.907 million

17.1 Section 112 of PD 1445 provides that each government agency shall record itsfinancial transactions and operations in conformity with generally accepted

accounting principles and in accordance with pertinent laws and regulations.

17.2 Audit of the PPE accounts of the bureau revealed the following errors:

Observation Offices

Affected Overstatement

Net understatement in the recorded

accumulated depreciation

Central Office P 658,958,206.61

Non-recording of accumulated depreciation NFRDI 1,278,066.53

Non-dropping of disposed PPE from the

books of accounts

Central Office 355,230.71

Small expendable items recorded as PPE

instead of Inventory

RFO III 5,315,771.95

Unrecorded donated PPE from Japan

International Cooperation Agency (JICA)

NFRDI Understated by

undetermined amount

Unrecorded land, land improvements, office

buildings and other structures

RFO VI

RFO XII

Understated by

undetermined amount

Total Overstatement P 665,907,275.80


to re-compute the recorded Accumulated Depreciation in the books and

make the necessary adjustments and to drop from the books of account

the recorded PPE which were already disposed, donated, transferred or

sold; make the necessary representation to the proper authorities

regarding the titling of untitled lands and to make the proper

adjustments in the books of accounts.



78

b) unreconciled difference between the balances per book and the RPCPPE

in three regions – P24.175 million

17.4 Section 43 of the NGAS Manual Volume I requires that the Accounting Unit

shall maintain Property, Plant and Equipment Ledger Cards (PPELCs) for

each category of PPE. For check and balance, the Property and Supply Office

shall maintain Property Cards (PCs) for PPE. The balance in quantity per PCshould always reconcile with the PPELCs of the Accounting Unit.

17.5 Comparison of the balances appearing in the RPCPPE submitted by theProperty Unit and the balance of PPE accounts recorded in the books

disclosed a discrepancy of P24,174,993.96 in three regions, as follows:

Region Per Books Per RPCPPE Di ff erence

RFO IV-A P 59,897,316.72 P 55,712,613.15 P4,184,703.57

RFO IV-B 68,230,522.04 49,633,736.91 18,596,785.13

RFTC XI 16,133,188.28 17,526,693.54 1,393,505.26

Total P24,174,993.96

17.6 We recommended that management require the Property and the

Accounting Units to reconcile periodically the RPCPPE with the

accounting records for a reliable and accurate balance of the assets of the

agency.

c) non-submission of RPCPPE in BFAR-CO and four Regional Offices

17.7 Section 66 of the Manual on NGAS requires the submission of the RPCPPE.

This shall be used to report on the physical count of PPE items by type as of agiven date. It shows the balance of property and equipment per cards and per

account and shortage/overage, if any. This report shall be submitted yearly to

the Office of the Auditor not later than January 31 of each year.

17.8 It was noted that in BFAR Central Office and four regions did not submit theRPCPPE contrary to the foregoing provision.

Region PPE Balance per

Book Remarks

BFAR-CO P1,698,265,613.58Actual physical count of PPE is already on-going in some

National Centers.

RFO VI 80,363,660.37 Management reconstituted the Property and InventoryCommittee per Special Order No. 16 dated 6 October 2011,

however, as of date, no physical inventory was undertaken.

RFO X 91,616,903.06

The Inventory Committee conducted the inventory of

government property of RFO X sometime in September 2010

to December 2010, but encoding and reconciling the reports

is still on-going.

RFO XI 104,460,849.48 Physical count is still on-going.



79

Region PPE Balance per

Book Remarks

RFO XIII 68,607,435.89

Inquiry from the management revealed that they have not

conducted physical inventory for a number of years and they

could not even recall the last inventory conducted.

Total P2,043,314,462.38

17.9 Non-submission of this report makes the recorded assets in theabovementioned offices doubtful since there is no report of physical count to

validate the existence of the reported PPEs as of year-end.

17.10 We recommended that management instruct the concerned Property

Officer to conduct physical inventory of all PPEs, and to submit the

RPCPPE as basis for the reconciliation with the accounting records.

17.11 There were also other observations in RFO IV-A and B, as follows:

Region Observation

RFO IV-A

and IV-B

PPELCs were not maintained in the accounting unit, which is inconsistent with

Section 43 of the Manual on the NGAS contributing to the non-systematic recording

and monitoring of the inventories and items of PPE. Absence of the updated ledger

cards affected the determination of the completeness of the agency’s costs of PPE

items.

RFO IV-B AREs were not renewed every three years or whenever there was a change of

accountability, which is not in accordance with the procedures in the requisition and

issuance of equipments resulting in the poor monitoring of their existence and

custodianship contrary to the Manual of NGAS, Vol. II Appendix 53.

17.12 We recommended that management require the Accountant to maintain

and update the PPELCs in compliance with Section 43 Volume I of the

Manual on the NGAS; and direct the Property and Supply Unit to cause

the renewal of the AREs every January of the third year after issue or

whenever there was a change of accountability, determine the end-users

of the equipment covered by AREs issued to former employees already

deceased as well as those separated from the service; and issue the

corresponding AREs to end-users.

17.13 Management commented that the ledger cards were not updated due to

manpower constraints.

Overstated Due to Of ficers and Employees account – P21.031 mil li on

18. The account Due to Officers and Employees of P21.031 million was

overstated by P9.553 million because of various accounting errors.

18.1 Analysis of the account in BFAR – CO revealed that liabilities were set-up for obligations to agency’s personnel; however, the corresponding payment was



80

not debited to the Due to Officers and Employees account resulting to the

overstatement of the said account amounting to P9,553,274.99.

Particulars Accounting Er rors As

Recorded Should Be Amount

CNA Incentives of BFAR

Employees CY 2010 per ObR no.

MOOE-11-02-0860

Double recording of

MOOE for payment of

CNA

MOOE Due to

Officers and

Employees

P4,602,000.00

Wages of BFAR Regular

Employees for the month of

August 2011

Unrecorded

disbursements out of

Fund 101-ATM

Due to

Officers and

Employees

4,819,859.61

Salaries of Casual Employees for

the period Oct. 16-31, 201032,263.83


the period April 1-15, 2010 Unrecorded

disbursements out of

Fund 101-ATM

Due to

Officers and

Employees

36,819.51


the period April 16-30, 201032,127.34

Salaries of Casual Employees,

December 16-31, 201130,204.70

Total Overstatement P9,553,274.99

18.2 The foregoing accounting errors resulted in misstatement of the followingaccounts:

AccountOver/(Under)

statement

Government Equity P(4,602,000.00)

Due to Officers and Employees 9,553,274.99

Cash in Bank - Local Currency, Savings Account 4,951,274.99


to make the necessary adjusting entries and to be more cautious inrecording transactions.

18.4 Adjustment had already been made in March 2012 per JEV Nos. 2012-03-

002206, 2012-03-002209 to 002212 and 2012-03-002229.

Overpayment of CNA I ncenti ves and payment of other benefi ts without l egal basis

– P72.827 mil li on

19. The payment of Collective Negotiation Agreement (CNA) Incentives

totalling P102.980 million for CY 2011 includes (a) overpayment totalingP72.827 million; (b) grant of CNA incentives to Job Order employees

amounting to P2.845 million; and (c) monetary incentives and retirement

benefits of retirees of P2.45 million. These are not in accordance with

Budget Circular Nos. 2006-1 and 2011-5 dated February 1, 2006 and

December 26, 2011.



81

a) overpayment of CNA Incentives – P72.827 million

19.1 Payment of CNA was in excess of P25,000 limit for each employee despitethe provision in Item 3.5 of Budget Circular No. 2011-5 dated December 26,

2011, which provides that “The CNA Incentive for FY 2011 shall be

determined based on the amount of savings generated by an agency following

the guidelines herein, but not to exceed P25,000 per qualified employee.”

19.2 Out of the Collective Negotiation Agreement (CNA) Incentive for CY 2011

totaling P102,979,716.48, P72,826,952.44 was in excess of the P25,000.00 per qualified employee, contrary to Budget Circular No. 2011-5, as shown below.

Off ice/Region Amount Paid Al lowed I n Excess of P25,000

Central Office P 21,060,000.00 P 8,775,000.00 P12,285,000.00

RFO II 1,890,000.00 650,000.00 1,240,000.00

RFO III 5,742,604.00 1,225,000.00 4,517,604.00

RFO IV-A 11,270,000.00 2,347,916.67 8,922,083.33

RFO IV-B 6,002,499.93 1,765,441.16 4,237,058.77

RFO VII 8,907,107.51 3,425,810.58 5,481,296.93

RFO VIII 8,292,100.00 1,794,826.84 6,497,273.16

RFO X 8,988,620.00 2,523,500.00 6,465,120.00

RFO XI 8,196,001.04 2,773,505.31 5,422,495.73

RFO XII 4,721,000.00 1,573,666.67 3,147,333.33

RFO XIII 7,679,252.00 925,000.00 6,754,252.00

RFTC V 2,790,000.00 300,000.00 2,490,000.00

RFTC VII 1,786,340.00 398,096.81 1,388,243.19

RFTC XI 2,160,000.00 375,000.00 1,785,000.00

NFRDI 3,494,192.00 1,300,000.00 2,194,192.00

Total P 102,979,716.48 P30,152,764.04 P72,826,952.44

19.3 Moreover, the claims were not supported with the followingdocuments/information/ justification embodied under Budget Circular

No. 2006-1 dated February 1, 2006:

i. Guidelines/criteria to be followed in the grant of CNA Incentive

prepared by the employee’s union/organization;

ii. Written resolution signed by the employee’s union/organization and

noted by the head of agency showing the computation/breakdown of

the total amount of savings which were realized out of the cost-cutting

measures and systems improvement identified in the CNAs and

supplements thereto, which were the results of the joint effort of labor and management;

iii. Copy of the Report on the Utilization of Savings for the Payment of CNA Incentives and Report of Accomplishment for the year submitted

to the Department of Budget and Management (DBM); and



82

iv. Justification why the CNA was granted before year-end when savings

were not yet fully determined.

19.4 Management explained that CNA incentives were paid not as one time grant

because the savings can only be determined after the accomplishment of each

project/activity being planned. Cash allocation is released by the DBM in

monthly basis thru MDS and considering that December is the last month of the year.

19.5 Management explained that the amount of CNA given to each regular employee exceeded the P25,000.00 because the Budget Circular dated

December 26, 2011 which stipulates the ceiling was only downloaded on

January 17, 2012.

19.6 While it is true that cash allocation is released by the DBM on a monthly

basis, savings on the allotments during the year can only be determined at the

end of the year upon evaluation of the accomplishments of the agency.

b) CNA Incentives of Job Order employees without legal basis –

P2.854 million

19.7 Civil Service Commission (CSC) Resolution No. 02-0790 dated June 5, 2002

provides that Contract of Service Workers are not entitled to benefits enjoyed

by government employees such as ACA, PERA and RATA and other benefitsgiven by the agency such as mid-year bonus, productivity incentive,

Christmas bonus and cash gifts.

19.8 In three regions, CNA incentives totalling P2,853,501.04 were extended to job

orders employees, which are not among those enumerated under Item 3.0 of DBM Budget Circular No. 2006.1.

Region Amount

RFO X P 1,248,500.00

RFO XI 1,300,001.04

RFTC V 305,000.00

Total P 2, 853,501.04

c) monetary incentives and benefits of retirees without legal basis

– P2.450 million

19.9 The Implementing Rules and Regulations (IRR) of Executive Order (EO) 180

dated June 1, 1987 prescribes the rules governing the exercise of the right of

government employees to self-organization.

19.10 Rule XII Collective Negotiations of the said IRR clarifies the subjects which

can be negotiated under the CNA. Section 3 thereof specifically provides that

allowances, travel expenses, and other benefits which are specifically



83

provided by law are not negotiable. Since CSC rules and regulations and the

GSIS law already cover retirement benefits, the grant of such retirement

benefits under the CNA has no legal basis.

19.11 BFAR-CO and five regions paid the various retired employees monetary

incentives and retirement benefits totaling P2,450,000 for CY 2011 as

provided under the Collective Negotiations Agreement (CNA) between BFAR and the BFAR- Employees Union even without legal basis. Details as follows:

Office/Region Amount

Central Office P 1,920,000

RFO II not stated

RFO IV-A 160,000

RFO X 80,000

RFO XI 230,000

RFTC V 60,000

Total P 2,450,000

19.12 We recommended that management strictly follow the provisions of DBMBudget Circulars on the grant of CNA Incentives and require the refund

of the amount of P72.827 million for excess CNA Incentives, P2.45 million

representing payment of retirement and monetary incentives of retired

BFAR officials and employees and the P2.854 million granted to Job

Order employees due to lack of legal basis.

19.13 Management commented that the payment made to retired BFAR officials and

employee is in accordance with DBM Circular No. 2006-01 and they believed

that they made their action in good faith while the incentive given to BFAR

officials and employees/retirees was in recognition of the loyalty and valuable

contribution.

19.14 After a careful review and evaluation of the circumstances and documentssubmitted, the fact remains that the granting of said retirement benefits to the

concern retired BFAR officials and employees under the CNA, has no legal

basis and therefore unauthorized under the following grounds:

a. The rules in retirement laws and or benefits are governed by RA 8291

otherwise known as the GSIS Act of 1997. However, those in the service

before June 1, 1977 shall have the option to choose among the modes of

retirement under RA 660, RA 1616 or Presidential Decree (PD) 1146.

Such being the case, any payments of retirement benefits made to BFAR retirees by virtue of the CNA cannot be countenance for lack of legal

basis. To grant double gratuity is unwarranted. In the absence of anexpressed provision of law, a retiree from the government service is

prohibited from receiving double or additional benefits for exactly the

same service.



84

b. The CNA entered into by the DA-BFAR and the BFAR-EU is a different

and distinct instrument guaranteed under the 1987 Constitution granting

government workers the right to self-organization. By virtue of which,DBM Budget Circular No. 2006-1 dated February 1, 2006 was issued.

Under DBM Circular 2006-1, “al l existing cash incentives in the CNAs in

the form of allowances and benefits, such as staple food allowance, rice

subsidy, grocery allowance, inflation allowance, relocation allowance,SONA bonus, bonuses other than the year-end benefit authorized under

RA 6686, as amended by RA 8441, etc., shall be consolidated into a single

cash incentive, and shall be referred to and collectively paid as CNA Incentive.” The same shall be sourced solely from savings from released

MOOE. It does not in a manner, gives the impression to include retirement

benefits or incentives.

19.15 A Notice of Disallowance on the payment made to retired employees of

BFAR had already been issued in the Central Office per ND No. 12-002-101

(11) dated February 15, 2012 in the amount of P1,920,000.00.

19.16 Notice of Disallowance No. 12-01-003-101 (2011) dated January 31, 2012

was issued to BFAR RFO VII for the payment of CNA Incentives. The excessCNA incentives amounting to P72,826,952.44 will be disallowed in 2013.

I rr egular Payment of Other Al lowances and Incenti ves – P7.551 mill ion

20. Payment of allowances/benefits/incentives to the officers and employees in

five regions totaling P7.551 million were irregular due to non-compliance

with laws, such as (a) Fish Production and Financial Assistance of

P400,000; (b) GAD incentives of P87,000; (c) commutable representationand travelling allowance of P2.143 million; (d) medical and dental,

calamity and anniversary bonus of P3.6 million; (e) 13th

month pay and

cash gift of P1.233 million extended to job orders; and (f) cultural

allowance of P87,600.

20.1 Section 3.1.A of COA Circular 85-55A dated September 8, 1985 provides that

payment of allowances and other forms of additional compensation without

proper authority is in violation of government policy.

20.2 Audit of disbursements in five regions disclosed that the grant of

allowances/benefits/incentives in five regions totaling P6.947 million waswithout legal basis, as follows:

RFO Nature Amount

II a. Fish Production Incentive and Financial

Assistance P 400,000.00

II b. Unauthorized GAD Incentives 87,000.00

VII c. Unauthorized Commutable 2,143,200.00



85

RFO Nature Amount

and X Representation and Transportation

Allowance

VIII d. Medical, Dental, Calamity and

Anniversary Bonus without legal basis 3,600,000.00

X e. Unauthorized Cash Gift Benefits and

13th Month Pay extended to Job Order

Employees 1,233,252.27XIII f. Cultural Allowance without relevant

activity 87,600.00

Total P7,551,052.27

a) grant of Fish Production Incentive and Financial Assistance without legal basis – P400,000

20.3 Fish Production Incentive and Financial Assistance amounting to P390,000

and P10,000, respectively, were paid to BFAR RFO II employees contrary to paragraph 5.0 of Budget Circular No. 2006-1 dated February 1, 2006.

“Paragraph 5.0 of Budget Circular No. 2006 -1 on the grant of

CNA Incentive provides, among others, to wit:

The form of the CNA Incentive shall be simplified and

rationalized as follows:

5.4.1 All existing cash incentives in the CNAs in the form of

allowances and benefits, such as staple food allowance,

rice subsidy, grocery allowance, inflation allowance,relocation allowance, SONA bonus, bonuses other than

the year-end benefit authorized under RA No. 6686, as

amended by RA 8441, etc., shall be consolidated into a single cash incentive, and shall be referred to and collectively paid as the CNA Incentive.

5.4.2 Henceforth, all CNAs and supplements thereto shall only provide for the CNA Incentive as the cash incentive.”

20.4 Audit of disbursements covering December 2010 to February 2011 disclosedthat the agency paid Fish Production Incentive of P15,000 per employee for a

total of P390,000. Likewise Financial Assistance amounting to P10,000 was

also paid.

20.5 It was noted that payment made was supported by a request from thePresident, BFAR-Employees Union, which request was approved by the

BFAR National Director. The request made by the President of BFAR-EU

was anchored on the provision of Section 10, Article VIII of the BFAR Employees’ Union Collective Negotiations Agreement which took effect on

June 15, 2009.



86

20.6 The incentives paid were deemed consolidated with the CNA Incentive;

hence, is no longer allowed.

20.7 We recommended that RFO II management require the refund of fish

production incentive and financial assistance received under the CNA as

it has no legal basis.

b) unauthorized GAD Incentives - P87,000

20.8 Gender and Development (GAD) Incentive amounting to P87,000 was paid by

BFAR RFO II without express authority, contrary to Administrative Order No

103.

Section 3 of Administrative Order No. 103 in so far pertinent states that” All NGAs, SUCs, GOCCs, GFIs and

OGCEs, whether exempt from Salary Standardization Law

or not, are hereby directed to:

(a) xxx

(b) Suspend the grant of new or additional benefits to full-

time employees and officials, except for (i) Collective

Negotiation Agreement (CNA) Incentives which areagreed to be given in strict compliance with the

provisions of Public Sector Labor-Management

Council Resolutions, and (ii) those expressly provided

by presidential issuance.” (emphasis ours)

20.9 Audit revealed that Gender and Development Incentive amounting to P87,000

was paid to GAD Focal Point Members in 2010. The special order creating theGAD Focal Point for BFAR Region II stated, among others, that the members

shall perform the GAD activities in addition to their regular functions.

20.10 GAD incentive is a form of additional benefits articulated in Administrative

Order 103. There having no authority expressly provided by Presidential

issuance, the same is construed as an irregular expenditure; hence, is not

allowed to be paid out of government funds.

20.11 GAD is a program in all government agencies, and activities related theretoare considered regular activities, therefore additional benefits should not be

paid to GAD Focal Point members.

20.12 We recommended that management require the refund of benefits paid in

the form of GAD Incentive totaling P87,000, contrary to Administrative

Order 103.



87

c) unauthorized Commutable Representation and Transportation Allowance

– P2.143 million

20.13 Section 47 of the General Provisions of the General Appropriations Act(GAA) for FY 2010 authorized monthly commutable representation allowance

at rates indicated below:

P5,500 for Assistant Bureau Regional Directors; and

P4,000 for Chief of Divisions, identified as such in thePersonal Services Itemization and Plantilla of Personnel.

(Underscoring supplied)

20.14 Further, Commission on Audit Circular No. 81-90C dated November 12, 1981

which corrected the COA Circular No. 80-90-A dated July 31, 1980 with

respect to sub-paragraph 1.0 of Compensation Policy Guidelines No. 80-2 of the Ministry of Budget reads as follows:

"1.0 Officers-in-charge who are fully designated by the

appointing authority to perform duties and responsibilities of positions without regular incumbent shall be entitled to the

allowances of each position on reimbursable basis."(Emphasis

provided)

20.15 COA Circular No. 80-90A dated July 31, 1980 with respect to sub-paragraph

2.0 of Compensation Policy Guidelines 80-2 of the Ministry of Budget

provides that Officers-in-Charge who are duly designated by an appointingauthority to perform duties and responsibilities of positions while the regular

incumbents thereof are on an authorized attendance, on official time, in a

training, scholarship grant, seminar or similar activity, or on official leaveshall be entitled to the regular allowances of the position on reimbursable

basis provided that the regular incumbent is no longer collecting the same

allowances. (Underscoring provided)

20.16 BFAR RFO VII and X paid the Officers-in-Charge commutable

representation and transportation allowance amounting to P516,000 and

P1,627,200, respectively, even when such offices/divisions are not in the

Personal Services Itemization and Plantilla of Personnel contrary to Section47 of the General Provisions of the GAA resulting in the unauthorized

payment of subject allowance by P2,143,200.

20.17 Perusal of the Personnel Services Itemization and Plantilla of Personnel

(PSIPOP) of BFAR-RFU X disclosed that there are no Divisions identified in

the PSIPOP, and that there is only one personnel with division chief position,



88

the Chief Aquaculturist who is designated as OIC – Fisheries Resources

Management Division. It is also disclosed that there is only one director

position, Director I, which is occupied by the Regional Director.

20.18 Without Divisions in the Plantilla and with only one Director’s position, the

requirements in the grant of representation allowance to Officers-In-Charge

(OICs) are not met. As such, the OICs mentioned above, except for the Officeof the ARD, are not authorized to receive representation allowance. The Chief

Aquaculturist designated as the OIC of the Office of the ARD is entitled to

representation allowance only at the rate authorized for division chief, byvirtue of her item being under the compensation classification of Salary Grade

24.

20.19 Examination of disbursement vouchers further showed that aside from their representation allowance, the ARD and the Division Chiefs claimed

reimbursements for the cost of meals, groceries, fruits, vegetables, delicacies,

tokens, etc. that were served and given to visitors, and for the cost of meals

and snacks of staff during monitoring, general cleaning and venue preparation.Further, employees who are not authorized under the GAA to claim for

representation made reimbursements for similar purposes. Suchreimbursements amounted to P147,173.53 and recorded in the books of

accounts as representation expenses. It becomes unnecessary for them to

receive fixed representation allowance anymore.

20.20 It was also observed that when the Regional Director of BFAR RFO X

reported back to office on February 22, 2011 from an official leave of absence

on January 2011, she was paid her RATA for February 2011. However, theARD, who was designated OIC during the RD’s absence, was also paid of

RATA for the same period at the RD’s rate of P12,600.00. The excess amountof P1,600.00 received by the ARD from the usual rate she receives as such is,

therefore, disallowable in audit as provided in the earlier cited COA Circular No. 80-90A. The same principle is applied to the OIC-FMRD who was

designated as Assistant ARD during the period, which excess is P3,000.00.

The ARD and the OIC-FRMD may, however, collect subject RATA onreimbursable basis subject to the approval of DBM for funding purposes.

20.21 Premises considered, out of the P2,124,400.00 representation andtransportation allowance paid by BFAR-X management to its officials for the

two-year period January 2010 to December 31, 2011, P1,627,200.00 were

unauthorized and without appropriate funding.

20.22 The payment of the unauthorized RATA was sourced from the allotment for

other maintenance and other operating expenses of the agency, since the

approved PS budget for the two year periods was only P501,800.00.



89

20.23 BFAR RFO X informed that they granted the Officers-In-Charge

representation allowance to augment the low salaries of these personnel and

considering further that they are designated not only as OICs of divisions butalso as OICs of sections or units due to inadequate staff.

20.24 When this observation was initially communicated to management in August

2011, they have, henceforth, stopped the payment of unauthorized RATA tothe OICs of the agency.

20.25 We recommended that management stop the charging of expenses for

RATA without approved appropriation or funding pursuant to Section 4

of DBM National Compensation Circular No. 67 dated January 1, 1992.

d) Medical, Dental, Calamity and Anniversary Bonus without legal basis – P3.6 million

20.26 Section 16 of the General Provisions of the General Appropriation Act of

2011 provides:

“Restrictions on the Use of Government Funds. No

government funds shall be utilized for the following purposes:

x x x

(e) Grant of honoraria and other allowances except those

specifically authorized by law. x xx”

20.27 On the other hand, one fundamental principle governing financial transactionsand operations of any government agency provided in Section 4 of PD 1445

states that “No money shall be paid out of any public treasury of depositoryexcept in pursuance of an appropriation law or other specific statutory

authority.”

20.28 Administrative Order No. 263 issued on March 28, 1996 authorized the grant

of anniversary bonus to officials and employees of government entities.

Relevant section are as follows:

“Section 2.3 - The anniversary bonus authorized under this

Order shall be granted during milestone years.

Section 2.4 - A milestone year refers to the 15th

anniversary and to every fifth (5

thyear) thereafter).

Section 2.5 - Payment of the anniversary bonus shall be in anamount not exceeding P3,000 each employees provided that the



90

employee has rendered at least one (1) year service in the same

agency as of the date of the milestone year.”

20.29 BFAR RFO VIII granted various benefits to its employees aggregating

P3,600,000 or P60,000 per employee without legal basis contrary to Section

16(e) of the General Provision of the GAA, Section 4(a) of PD 1445 and

Administrative Order No. 263.

20.30 Review of the disbursements showed that RFO VIII paid the following

benefits:

Name of Al lowance Date Granted Amount Amount per

Employee

Medical & Dental March 15, 2011 P 600,000 P 10,000

Calamity Assistance May 23, 2011 1,200,000 20,000

64t year Anniversary Allowance July 15, 2011 1,800,000 30,000

Total P 3,600,000 P 60,000

20.31 Verification disclosed that one of the supporting documents attached to thedisbursement voucher was Corporate Health Care Program Contract between

MEDOCare Health Systems, Inc. and BFAR Employee’s Union (EU)

represented by its National President.

20.32 Based on the above, it was apparent that BFAR has granted its employees

additional health care benefits on top of the Philhealth governmentcontribution which has no legal basis.

20.33 In May 2011, calamity assistance of P20,000 each was granted to BFAR RFO

VIII employees. The payment was based on a Memorandum from the BFAR

Regional Director addressed to the BFAR Director thru the President of BFAR EU dated April 28, 2011, requesting for financial assistance. Said

request was recommended for approval by the President of BFAR EU andapproved by the Officer-in-Charge of BFAR. Attached also to the claim were

Sangguniang Panlalawigan Resolutions of Leyte, Easter and Northern Samar

declaring the areas as calamity areas. The grant still has no legal basis.

20.34 Anniversary bonus of P30,000 was granted to each BFAR employees in July

2011. Based on AO 263, 64th

year is not a milestone year; hence, payment

made has no legal basis.

20.35 We recommended that RFO VIII management stop the granting of Medical, Dental, Calamity, and Anniversary Bonus without legal basis

and to refund the amount of P3.6 million.



91

e) unauthorized grant of Cash Gift Benefits and 13th Month Pay to

Contract of Service Workers – P1.233 million

20.36 DBM Budget Circular No. 2010-1 provides, among others, the coverage of

subject Year-End Bonus and Cash Gift which exclude the laborers hired

through job orders (pakyaw) and those paid on piecework bases.

20.37 Civil Service Commission (CSC) Resolution No. 02-0790 dated June 5, 2002

also provides that Contract of Service Workers are not entitled to benefits

enjoyed by government employees such as ACA, PERA and RATA and other benefits given by the agency such as mid-year bonus, productivity incentive,

Christmas bonus and cash gifts.

20.38 Examination of CY 2011 financial records showed that RFO X paid 13th

Month Pay and Cash Gift Benefits to its Contract of Service Workers (CSWs)

in the aggregate amount of P1,233,252.27, contrary to Section 55 of the

General Provisions of RA 10147, otherwise known as the General

Appropriations Act of 2011 and DBM Budget Circular No. 2010-1, thusconstitutes an irregular expenditure as defined in COA Circular No. 85-55A.

20.39 The payment of said benefits to CSWs contravened Section 55 of General

Provisions of CY 2011 GAA (R.A. 10147) and Paragraph 4.4 of DBM

Budget Circular No. 2010-1; hence, constitutes an irregular expenditure as

defined in COA Circular No. 85-55A and are, therefore, disallowable in audit.

20.40 We recommended that RFO X management (a) cause the refund of

benefits amounting to P1.233 million paid to CSWs and henceforth desist

from paying similar benefits; (b) refund the unauthorized representation

and transportation allowance paid to the Officers-In-Charge of divisionsand request appropriate funding from the DBM, who shall identify the

divisions or the chief of division positions in the Personal Itemization and

Plantilla of BFAR RFO X Personnel; and (c) limit its representation

expenses to the amounts authorized for representation allowance in the

General Appropriations Act.

f) Cultural Allowance – P87,600

20.41 Section 27 and 28 of the General Provisions of Republic Act Nos. 9970 and10147, the General Appropriation Act of 2010 and 2011 respectively,

provides as follows:

“Culture and Athletic Activities. Out of the appropriationsauthorized in this Act for MOOE of each department, bureau,

office or agency, an annual amount not exceeding One Thousand

Two Hundred Pesos (P1,200.00) per employee-participant may



92

be used for the purchase of costume or uniform, and other related

expenses in the conduct of cultural and athletic activities.”

20.42 The RFO XIII released a total amount of P87,600.00 to its personnel as

Cultural Allowance even without relevant activity conducted in violation of

Section 27 and 28 of the General Provisions of Republic Act Nos. 9970 and

10147, the General Appropriation Act of 2010 and 2011, respectively, thus,incurring irregular disbursements of the same amount.

20.43 Verification of the transaction for CY 2010 showed that the RFO XIII issuedLBP Check Nos. 671330 - 671365 dated October 19, 2010 in the amount of

P1,200.00 each or a total of P43,200.00 as culture allowance of the 36

permanent employees. Likewise, transaction as of October, 2011 also showed

issuance of LBP Check No. 704719 dated October 18, 2011 in the amount of P44,400.00 as cultural allowance for the 37 permanent employees at

P1,200.00 each employee or a grand total of P87,600.00. Apparently, there

was no cultural or athletic activity that took place and no supporting official

receipts of the related expenses.

20.44 The grant of this allowance was not within the context of the aforementioned provisions. It was clearly stated that the amount allowed shall be used by the

employee-participant for the purchase of costume or uniform and other related

expenses in the conduct of cultural and athletic activities. This resulted to

irregular disbursements of the agency as these did not comply with theexisting guidelines.

20.45 We recommended that RFO XIII management require the concerned

personnel to refund the cultural allowance received in the amount of

P2,400 each and for future claim of allowances, verify first the legality of the claim before its release to avoid disallowances in audit.

Overpayment/I rr egular/Unconscionable Traveli ng Expenses - P1.488 mil li on

21. Travelling expenses totalling P1.488 million paid by BFAR-CO and

RFO XI were not in accordance with Executive Order (EO) No. 298,

Section 331 of the Government Accounting and Auditing Manual

(GAAM), Volume I, and Section 2 of PD 1445, thereby resulting to

overpayment/irregular expenses. Moreover, approval of travel and

pertinent documents for BFAR CAR personnel was signed by the sameofficer, thereby showing weak internal control, contrary to Section 50 (a)

of the GAAM, Volume III.

21.1 EO No. 298 provides the guidelines on the rates of allowable travel expenses.

It also provides that the allowable per diem of P800.00 includes hotel andlodging (50%), meals (30%), and incidental expenses (20%).



93

21.2 Section 331 of the GAAM, Volume I, states that “Travel expenses of private

individuals are allowed only if authorized by law, rules and regulations.”

21.3 Moreover, Section 2 of Presidential Decree No. 1445, provides that “it is the

declared policy of the State that all resources of the government shall be

managed, expended, or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition,

with a view to ensuring efficiency, economy and effectiveness in the

operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government

agency concerned.”

21.4 Audit of travelling expenses in BFAR-CO and RFO XI disclosed anoverpayment of P1,488,081.64 as follows:

Region Cri teria Observation/Defi ciency Amount

BFAR-CO EO 298 Overpayment by P731,637.28 representing payment of per diem considering that hotels

and meals for activities being attended were

inclusive or shouldered by the BFAR and/or

other implementing agencies conducting the

conferences/workshop/training/seminars.

P 731,637.28

Section 331

GAAM Volume

I

Traveling expenses from July to November

2011 totaling P498,699 paid to members of the

Law Enforcement - Quick Response Team

(LE-QRT) who were hired without employer-

employee relationship.

The duties and responsibilities as specified in

their contracts such as combating illegalfishing, assisting in the implementation of the

national fishery management plans and

projects related to conservation and protection

of fisheries, and providing assistance during

disasters affecting the fishing communities,

among others, were not reflected in their

accomplishment reports and their travels were

mostly for messengerial functions and other

office work related activities.

498,699.00

RFO XI Section 2 of PD

1445 and COA

Circular No. 85-

55A

The attendance of eight region-based

personnel to the seminar conducted at Subic in

April 2011 when the same course was

scheduled in Davao City in May 2011 incurredadditional expenses of P124,659.00 for the

Marine Mammal Stranding Response Training

funds. Interviews conducted showed that the

two seminars were basically the same, except

for the live dolphins that were used during the

training in Subic. Management could have

saved the said amount, had the RFO XI

personnel were not authorized for the same

124,569.00



94

Region Cri teria Observation/Defi ciency Amount

Training at Subic, Olongapo City on April 27

to 29, 2011, and instead attended the

scheduled training in Davao City.

Section 2 of PD

1445 and COA

Circular No. 85-

55A

Travel expenses of P133,176.36 were spent

unnecessarily as changes in schedules were

made frequently. Personnel who were not

authorized by Central Office were allowed toattend meetings thereat. Had the

seminars/trainings and meetings been properly

planned by BFAR Central and regional offices

and a closer coordination between the offices,

the government could have saved the said

amount which was unnecessarily spent.

133,176.36

Total P1,488,081.64

21.5 Other deficiencies noted in the review of transactions are enumerated below:

a. Approved Itinerary of Travel attached to the DVs does not indicate the time

of arrival to and departure from the point of destination, which information isnecessary in the determination of allowable traveling expenses;

b. officials and employees who act as resource person/speaker to a certainactivity does not indicate information whether travelling expenses will be

shouldered by the inviting agency;

c. travelling expenses of employees assigned in the regional field officeclaimed their travelling expenses in the BFAR Central Office; thereby,

defeating transparency; and

d. approved Travel Orders (TO) were unnumbered and some TOs were dated

ahead of the other.

21.6 In BFAR CAR, several claims for travel expenses of a certain officer were

approved by the same officer indicating the lack of check and balance in these

particular transactions.

21.7 Audit of expenditures showed that BFAR CAR incurred travelling expenses

amounting to P1.66 million for the period ended December 31, 2011.

Examination of the Disbursement Vouchers and supporting documents for travelling expenses paid in 2011 showed that there were five travel claims of

the Assistant Regional Director (ARD), which she also approved as detailed

below:

Check Travel Peri od Destinati on

Documents Approved by

the ARD for each claim Number Date

963336 02.10.11 Feb 2-4, 2011 ManilaTravel Order

963457 03.04.11 Feb 25-26, 2011 Manila

963742 04.13.11 Apr 3-5, 2011 Mountain Province Itinerary of Travel

963831 04.25.11 Apr 14-16, 2011 Apayao Certificate of Travel



95

Check Travel Peri od Destinati on

Documents Approved by

the ARD for each claim Number Date

Completed

964534 08.08.11 Jul 28-30, 2011 Nueva Ecija &

Apayao Disbursement Voucher

Aug 2-4, 2011 Abra

21.8 The approval by the ARD of her own Travel Orders, Itineraries of Travel,Certificates of Travel Completed and Disbursement Vouchers was contrary to

the check and balance under existing rules, the applicable portions of which

are as follows:

Basis Document Rule

EO 248 as

amended by EO

298, Section 5

Travel Order

Disbursement Voucher

Travels of officials and

employees of the National

Government Agencies for

less than thirty days and

payment of travel expenses

therefore shall be approved by the head of office/bureau

or equivalent.

GAAM Volume I,

Section 346(a)Itinerary of Travel

The Itinerary shall in all

cases be approved by the

agency head or his duly

authorized representative.

GAAM Volume I,

Section 346(i)

Certificate of Travel

Completed

(Appendix 21)

The portion "On evidence and

information of which I have

knowledge, the travel was

actually undertaken" to be

signed by Supervisor.

21.9 Section 50(a) of the Government Accounting and Auditing Manual, VolumeIII, provides that “To ensure that effective check and balance exists . . ., no

one person or department should be in complete control over a transaction.”

21.10 We recommended that management (a) strictly comply with the

provisions of EO No. 298 on payment of travel expenses; and (b) require

the officials and employees concerned to refund the travelling expenses

paid not in accordance with EO 298 totaling P731,637.28.

21.11 Management agreed with the recommendations and would ensure that

compliance with EO 298 will be observed by strictly implementing the ruleson travel.

21.12 In BFAR – CO, Notice of Disallowance No. 12-004-101(11&12) dated

October 1, 2012 was already issued.



96

I rr egular Payment for the BFAR – Local Scholarship Program – P2.879 mi ll ion

22. Out of the P3.866 million paid for the scholarship benefits to BFAR

Employees as well as to the Iloilo State College of Fisheries (ISCOF) who

availed of the Scholarship Grant under the Local Scholarship Program

(LSP), P2.879 million was irregular because of (a) overpayment of tuition

and matriculation fees (TMF) for 15 BFAR scholars amounting toP126,640.00; (b) payment of TMF of P363,300 for CY 2009 which was not

supported with official receipts; (c) double payment of TMF for eight

scholars for first Trimester 2009-2010 totalling P243,100; and

(d) acceptance of nine unqualified applicants for the Program with a total

expenditure of P2.146 million. Moreover, other specific documentary

requirements for the LSP were not complied with to complete the

evaluation of the qualifications and performance of the scholars, in

violation of Memorandum Circular No. 11 dated April 16, 2002 and

Fisheries Office Order No. 319 series of 2000 dated November 13, 2000.

22.1 A Career Development and Professionalization of BFAR Personnel was proposed in line with the continuing program for career and personnel

development of the Bureau as provided in EO 292 and RA 8435 of theAgricultural and Fisheries Modernization Act (AFMA).

22.2 The main goal is to develop a highly competent and professional workforce in

BFAR for better public service and build up human resource capabilities inthe field of fisheries technology integrated with rural development to pump

prime the country’s economic development.

22.3 The objectives of the program are as follows:

a. Help BFAR technical personnel cope with the new mandates,

functions and responsibilities of the new BFAR and keep focus on thefuture requirements of the industry;

b. Build a pool of highly motivated and advanced level of manpower infisheries and marine sciences technology and allied fields to enhance

optimum productivity;

c. Upgrade the existing expertise of BFAR in the training of state-of-the

art entrepreneurial and technology-based fisheries manpower;

d. Develop innovative managerial expertise to enhance both thetechnological and administrative leadership capabilities of executives

and community resource development workers of BFAR; and

e. Equip BFAR personnel with advance perception and methodologies toensure the delivery of exemplary quality public service.



97

22.4 The program shall provide post-graduate (Ph.D.) courses in Fisheries

Technology (DFTech) to its qualified technical personnel and in order toimplement the program, a joint program on advanced studies for its personnel

was made with the Iloilo State College of Fisheries (ISCOF) thru a

Memorandum of Agreement.

22.5 Total budget required per student amounted to P401,650, broken down as

follows:

a. Tuition fee (P300 per unit x 60 units)

b. Miscellaneous & other fees (P3,950 x 7

trimester)

c. Instructional materials (P300/subject x

20 subjects)

d. Stipend (P5,000 x 29 months)

e. Book Allowance (P5,000/sem. x 7

trimester)

f.

Thesis/Dissertation Support g. Graduation Support

Total per Student

-

-

-

-

-

--

P 18,000

27,650

6,000

145,000

35,000

150,00020,000

P401.650

22.6 BFAR personnel requested an authority to pursue graduate studies effective

the first semester of school year 2009. In turn, authorities were granted to 31

and 29 BFAR personnel to pursue MFTech and DFTec, respectively, comingfrom the Central Office, BFAR National Centers, regional offices and regional

field training centers.

22.7 The authority stated that tuition fee and other school fees shall be borne bytheir respective Offices chargeable against the Staff Development Funds.

22.8 For calendar years 2009, 2010 and 2011, the Bureau paid the amount of P807,300, P222,000 and P2,836,220, respectively or a total of P3,865,520 for

eight PhD Scholars and seven Master ’s Degree Scholars, summarized below:

Particulars Totals

Stipend

(P8,000/

month)

Book Allowance

(P5,000/semester

/summer)

Tuition &

Matriculation

Fees

CY 2009

Doctor of Fisheries TechnologyMaster of Fishery Technology

Sub-total

P405,000 402,300

807,300

P192,000 192,000

384,000

P30,000 30,000

60,000

P183,000* 180,300*

363,300*

CY 2010

Doctor of Fisheries TechnologySub-total

222,000 222,000

192,000 192,000

30,000 30,000

CY 2011

Doctor of Fisheries TechnologyMaster of Fishery Technology

Sub-total

1,415,2401.420.980

2,836,220

576,000672,000

1,248,000

90,000105,000

195,000

749,240 643,980

1,393,220

Total P3,865,520 P1,824,000 P285,000 P1,756,520

*Already disallowed in audit per ND No. 2010-001-101 (10) dated February 22, 2010



98

22.9 Review/verification of the disbursement vouchers and other pertinent

documents on the program disclosed the following observations:

a) overpayment of tuition and matriculation fees – P126,640

22.10 The total difference of P126,640 represents overpayment of tuition and

matriculation fees for 15 BFAR scholars which were paid directly by theBureau to ISCOF, shown as follows:

Check i ssued by

BFAR OR I ssued by ISCOF

Particulars

Amount

Paid to

ISCOF

Total

Amount per

Attached

Assessment

Difference Remarks

Date No. Date No.

11.26.2009 799400 none 1st Trimester

2009-2010(Sept-Dec.

2009)

P183,000 P183,000 - No Official Receipt

acknowledging theamount paid

11.26.2009 799401 none 1st Trimester 2009-2010

(Sept-Dec.

2009)

180,300 180,300 - No Official Receiptacknowledging the

amount paid

11.17.2011 937671 11.19.2011 0199025 2nd Trimester 2009-10

252,400 189,300 P63,100

11.17.2011 937672 11.19.2011 0199023 Summer 2010 252,400 189,300 63,100

11.17.2011 937673 11.19.2011 0199027 1st Semester SY 2010-11

61,110 61,110 -

11.17.2011 937674 11.19.2011 0199022 1st Trimester

2009-10

183,330 183,000 330 There was a discrepancy

on the period of payment

between the OR issued by ISCOF as against the

DV/ObR, to wit:

ISCOF

Official

Receipt

1st

Trimester

09-10

DV &ObR

1st Semester

201011.17.2011 937675 11.19.2011 0199021 Summer 2010 185,700 185,700 -

11.17.2011 937676 11.19.2011 0199026 2nd Trimester 2009-10

185,700 185,700 -

11.17.2011 937677 11.19.2011 0199024 1st Semester

2010-11

180,630 180,520 110 Payment for Scholars 1

to 4 was for 1st Semester

2010-2011 @ P30,105each and Scholars 5 & 6

was for 1st Trimester

2009-2010 @ P30,050or total of P180,520,

hence a difference of P110

Per OR issued byISCOF, payment was

intended for 1st

Semester 2010-2011

11.17.2011 937678 11.19.2011 0199030 Summer 2010 30,950 30,950 -

11.17.2011 937679 11.19.2011 0199028 1st Trimester

2010

30,050 30,050 -

11.17.2011 937680 11.19.2011 0199029 2nd Trimester

2010-11

30,950 30,950 - Per attached Assessmen

of Fees, payment wasintended for 2nd

Trimester 2009-2010

Total P1,756,520 P1,629,880 P126,640



99

b) no Official Receipts issued for the payment of tuition and matriculation

fees – P363,300.

22.11 Based on our examination of disbursements, the payment of tuition and

matriculation fees in CY 2009 to ISCOF totaling P363,300 was not supported

with Official Receipts acknowledging the receipt of payment, shown below:

Check No. Date Amount

799400 11.26.2009 P183,000.00

799401 11.26.2009 180,300.00

Total P363,300.00

c) double payments of tuition and matriculation fees – P243,100.00 22.12 Tuition and miscellaneous fees of P243,100 for 1

stTrimester 2009-2010 were

paid twice to eight scholars.

d)

age requirement for scholars were not complied

22.13 Item A.1.h of Fisheries Office Order No. 319, Series of 2000 dated November 13, 2000 entitled “Amending the Revised Rules and Guidelines on

Scholarships/Training/Study Grants of the Bureau of Fisheries and Aquatic

Resources (BFAR)” states that applicants eligible for the LSP should not bemore than 40 years old for MS and not more than 50 years for PhD.

22.14 Our audit showed that for its Doctorate Course on Fishery Technology, six of

eight scholars would have been disqualified because they were above the agelimit of 50. Total payment made for those unqualified was P1,403,060.

Likewise, for the Masteral Course on Fisheries Technology, three of seven

scholars would not have qualified again because of exceeding its age limit.Total payments amounted to P743,060.

e) scholarship granted despite documentary requirements were not

complied

22.15 Review and evaluation of the LSP revealed that scholarship was granted to

applicants despite non-submission of the necessary documents for evaluation,as follows:

i. results of evaluation undertaken by PDC per scholar showing therein

that every scholar complied with all the requirements embodied in theFOO issued by BFAR based on MC No. 11 issued by the Civil Service

Commission;



100

ii. accomplished Item A.1.d of said FOO, showing the following columns:

a. BFAR Scholar b. School attended (Undergrad/Graduate)

c. General weighted average

d. Qualified

e. Disqualified

iii. photocopy of Curriculum for each course (PhD and MS);

iv. photocopy of assessment for every semester/trimester/summer;

v. photocopy of Certificate of Registration/enrollment and upon

presentation of the original;

vi. certification of subjects taken with the corresponding grades for every

semester/trimester/summer;

vii. report on the results of the monitoring conducted by the Bureau for

every grantee to determine his/her progress or academic performance;and

viii. report on the evaluation conducted on the effectiveness of the program

or result of assessment on the benefit gained from the scholarshipinvestment.

22.16 Based on the Memoranda to the individual Scholars all dated June 09, 2009duly signed by Atty. Benjamin Felipe S. Tabios, Jr., all scholar applicants

were accepted to the BFAR-ISCOF Fisheries Scholarship Program effectiveThird Trimester (September - December 2009) except for authority of

Ms. Marites B. Chiuco whose Memo was unsigned.

22.17 Further the following documents/information and/or explanation/ justification

were likewise not submitted:

a. why above transactions will not be disallowed in audit despite non-

compliance with the MC No. 11 dated April 16, 2002 and FOO No. 319Series of 2000 dated November 13, 2000;

b. coverage of each trimester/semester and summer (months);and

c. nature of College Executive Program Schedule Fees particularly the

Administrative Cost of P5,000 and Immersion and other Learning related

expenses of P13,780 collected every enrollment.



101

22.18 We recommended that management, particularly the LSP evaluation and

monitoring team submit immediately to the audit team the specific

documents/information to complete the review and evaluation of the

implementation of the LSP.

22.19 We recommended also that management cause the refund of the:

a. difference of P126,640 on tuition and matriculation fees paid to

ISCOF between the amount disbursed by BFAR and the amount

claimed by scholars; and

b. double payment of tuition and matriculation fees of P243,100 to eight

scholars.

22.20 To date, management already partially submitted the documents required and

it is now being evaluated by the Audit Team. A Notice of Suspension will be

issued in the event that the documents submitted do not suffice.

I rr egular expenditure of f unds for the Lanao del Norte Maricultur e and Aqua-

Tour ism Project – P25.467 mil li on

23. Lanao del Norte Mariculture and Aqua-Tourism Project with a total

project cost of P25.467 million was not constructed in accordance with

the implementing guidelines contrary to COA Circular No. 85-55A.

23.1 Paragraph 3.1 of COA Circular No.85-55A dated September 8, 1985 dealing

on the rules and regulations for the prevention of irregular, unnecessary,

excessive, or extravagant (IUEE) expenditures or uses of government fundsand property defined "irregular expenditure" as those expenditure incurred

without adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained recognition in law. A

transaction conducted in a manner that deviates or departs from, or which

does not comply with standards set is deemed irregular.

23.2 In February 26, 2010, a MOA was entered into by and between the BFAR-

RFO X and the Provincial Local Government Unit of Lanao del Norte for the

Establishment of Lanao del Norte Mariculture and Aqua-Tourism Project

amounting to P25,467,200.00 of which 10% or P2,546,720.00 will be the

PLGU counterpart.



102

23.3 Details of the project per approved implementing rules and regulations of the

MOA are as follows:

Lanao del Nor te Maricultur e and Aqua Tourism Project

Project Cost Estimates

Phase Parti cular Amount Total Amount

1 Municipality of TubodCulture Fisheries P2,302,400

Capture Fisheries 1,050,000

1 unit working platform with shade 250,000

High-value Fish Stocking, 4,000 grouper 320,000

Total - Phase 1 P3,922,400

2 Municipalities :

Kolambugan 2,342,000

Culture Fisheries 1,292,000


Maigo 2,060,400



Total - Phase 2 4,402,4003 Municipalities of Baroy and Lala

Baroy 2,060,400



Lala 2,060,400



Total - Phase 3 4,120,800

4 Municipalities of Kapatagan and Bacolod

Kapatagan P 2,060,400



Bacolod 2,060,400Culture Fisheries 1,010,400


Total - Phase 4 P 4,120,800

5 Municipality of Sultan Naga Dimaporo




6 Municipalities of Kauswagan and Linamon

Kauswagan 2,060,400



Linamon 2,060,400


Capture Fisheries 1,050,000.


Total Project Cost P25,467,200

23.4 Allotment released for the project totalled P25,467,200.00 covered by ASA

No. 2010-02-001 dated February 2, 2010 and ASA No. 2010-03-005 dated



103

March 1, 2010 in the amount of P21,544,800.00 and P3,922,400.00,

respectively. Total fund released to PLGU as of December 31, 2011 amounted

to P22,348,600.00, representing 97.50% of the total amount to be released toPLGU of P22,920,480.00. Audit of the funds released disclosed the following:

DV No.Check

Amount Remarks

Date No.101-10-02-5038 02.14.2010 0314470 P12,348,600 No approved POW/DED but with

approved Project Proposal

101-10-12-5048 12.29.2010 0325580 5,000,000 No attached SWA

101-11-05-1431 06.30.2011 0327815 5,000,000 Reportedly 85.57% but not inaccordance with the original scope

of the Project as per approved MOA

Total P22,348,600

CAF - Certificate of Availability of Fund

DED - Detailed Engineering Design

POW- Program of Works

SWA - Statement of Work Accomplished

23.5 Moreover, audit of the disbursement voucher and supporting documents for

the payment of the second tranche amounting to P10,000,000.00 paid in two

equal installments, revealed that the reported project accomplishment of 80.77% was based on a “revised” program of works, which Project Cost is

now reduced to P25,000,000.00, and not on the original scope of works as

approved in the MOA. The details of the work accomplished are as follows.

I tem of Work/ Activity Qty./ Unit Uni t Cost Amount Physical

Accomp.

%

Accomp.

Fish Cage Assembly made

of Wood, 4m L x 4m W

x 4m D with accessories

195 units P75,000.00 P14,625,000 180 92.30

Imported High-value Fish

Stocking / Grouper Fingerlings

60,000

pcs. 130.00 7,800,000 60,000 100

Operation Cost for Grow-

out of Grouper for one

year

12 mos. 214,583.33 2,575,000 6 50

Total P25,000,000 80.77

23.6 It was noted in the Project Fund and Implementing Guidelines and Proceduresfor the Establishment of the Project, the required Project Counterpart Fund of

the PLGU is 10% of the total project cost which is equivalent to P2.6 million.

The payment of the first tranche (50%) to PLGU amounting to P12,348,600

was not supported with the CAF representing the 10% counterpart of thePLGU which is a prerequisite for the release of the first tranche.

23.7 The attached supporting document/instrument that accordingly changed theentire scope and specifications of the Project was a Supplemental Agreement

dated October 1, 2010, about eight months after the receipt of the first tranche



104

by the PLGU, practically modifying the major conditions contained in the

MOA, as presented below:

Per M OA

dated February 19, 2010

Per Supplemental Agr eement (SA)

dated October 1, 2010 Reason for M odifi cation

Project Cost:P25,467,200.00 P25,000,000.00

Project - Lanao del Norte Mariculture and AquaTourism Project for the followingMunicipalities-

Phase 1 - Tubod

Phase 2 – Kolambugan and MaigoPhase 3 – Baroy and LalaPhase 4 – Kapatagan and Bacolod

Phase 5 - Sultan Naga DimaporoPhase 6 – Kauswagan and Linamon

Establishment of Mariculture and Aqua

Tourism Project located at Coastal Areasalong Panguil Bay, Illana Bay and IliganBay of Lanao del Norte

After due evaluation and

sample testing of the seawaters of LDN, the winning

bidder for the implementationof the Project has

recommended for the vitalrevisions of some aspects of the project design to ensure

profitable return of investments at the same time

achieve the target of fisherfolk training.

First Variation -

Sec. 2.3 - BFAR X shall supervise theimplementation of the project in

accordance with the approvedDevelopment Plan and Work andFinancial Plan. By the nature of the

Project design, as a Techno-demoProject, the project implementation

shall be in six (6) Phases.

The Construction of the Techno-DemoProject shall be implemented in the

Municipality of Kolambugan. Thereafter the model fish cages shall be physicallytransferred to the other identified

beneficiary towns.

Other affected Provisions of MOA:Par. F Item II of Annex A of MOA

(a) Implementation of the projectshall be duly covered with MOAstating the functions and

obligations of BFAR and thePLGU

(b) The PLGU in return shall enter into contract with the MLGUstating the functions and

obligations of the latter.

Second Variation - Scope as contained

in Annex B of the MOA

Construction of Culture and CaptureFish Cages to include: Constructionon Fish Aggregating Device(PAYAO), Gill Net, Fish Pot, Hand-

line, Working Platforms complete

with mooring for ceremonial sticking,Modified Shallow Cage with FishCorral and Circular Fish Cages

Scope per SA -

Construction of Floating Cages made

of First Class Wood (HardwoodLumber) and Plastic Drums withImported Nets and other materials.Procurement of first-class fingerlings

of export (High-value Fish Stocking)

quality, purchase of necessary feedsand medicines up until the age of maturity; which shall be procured by

the winning bidder. Increase quantityof fingerlings to be procured from4,000 groupers to 60,000 groupers to

be cultured in the Floating Fish Cages.



105

23.8 The Audit Team is of the view that the scope of work as contained in the

MOA cannot anymore be a subject of a major modification via a

Supplemental Agreement, especially eight months after the 50% fund wasalready released, inasmuch as the (a) Pre-Rapid Area Assessment, and

(b) Conduct of Bathymetric Investigation is presumed to have been

accomplished. An in-depth study of the viability of the project at their

supposed sites would have been done and result thereof was considered in the preparation of POW and DED.

23.9 To entertain the recommendation of the winning bidder, therefore, istantamount to saying that there has been no pre-detailed engineering and

planning of the Project made.

23.10 Having no approved POW, DED, and CAF, the fund transfer of the firsttranche representing 50% of the TPC was, therefore, found to be irregular.

23.11 Further, there was no proof that RFO X monitored and evaluated the

implementation of the Project and validated accomplishments and providedfeedback to ensure that implementation is in accordance to plans, budget,

criteria and standards set forth for the Project as provided in Paragraph B,Item III of Annex A of the MOA.

23.12 Otherwise, they could have provided the necessary technical assistance and

consultancy services to ensure that the project is technically acceptable andthat, in case the technical expertise of the regional office is not available,

consultation with BFAR-CO may be made.

23.13 Furthermore, Paragraph F.b, Item II of Annex A of the MOA provides that the

PLGU, in return, shall enter into contract with the MLGU stating the functionsand obligations of the latter. The provision emphasized the extent of

involvement/ participation of the MLGU being the main beneficiaries of theProject.

23.14 Considering the impropriety of the circumstances surrounding the Project, thefund transfers to the PLGU in the total amount of P22,348,600, is deemed

irregular, having departed from the conditions set forth in the implementing

rules and regulations prescribed in the MOA.

23.15 In its reply to the AOM issued, management provided the Team a copy of the

letter of the Bureau Director to the PLGU Governor dated October 4, 2010interposing no objection to the revision of the POW, with certain provision.

23.16 In view of these, we recommended that RFO X management secure the

necessary legal authority from appropriate body or bodies to deviate

from or re-align the project from what it is now. Such bodies include not

only BFAR-CO which approved the project at its original program/scope



106

of works; but also from DBM which anchored the fund released for the

project to the AWFP submitted by BFAR on the basis of the

P25,467,200.00 project cost as originally programmed; and the local chief

executive officers of the various municipalities involved in the project as

stipulated in Paragraph F.b, Item II, Annex A of the MOA as required in

Sec. 63 of the General Provisions of RA 10147, otherwise known as the

General Appropriations Act of 2011.

Compliance with RA 9184

24. Various observations contravening Republic Act 9184, otherwise known

as the Government Procurement Reform Act and its Implementing Rules

and Regulations were found, such as (a) procurement of common-use

supplies from outside suppliers instead of from the Procurement Service

(PS) of P3.483 million; (b) issues regarding the Approved Budget for the

Contract (ABC); (c) improper procurement through alternative modes

instead of bidding; (d) bidding or notices of award were not posted in thePhilGEPS; and (e) other observations from different regions as discussed

below.

a) non-procurement of common-use supplies from Procurement Service

(PS-DBM) – P3.483 million

24.1 Purchases of common-use supplies totaling P3.194 million were not made

from the Procurement Service of the Department of Budget and Management

(PS-DBM) in violation of RA9184 as reiterated in Section 4 of

Administrative Order No. 17 dated July 28, 2011.

24.2 Section 53 (e) of Republic Act 9184 otherwise known as the Government

Procurement Reform Act states that:

“purchases of goods from another agency of the government

such as the PS-DBM, which is tasked with a centralized

procurement of commonly used goods for the government inaccordance with Letter of Instruction No. 755 and Executive

Order No. 359, series of 1989.”

24.3 Furthermore, Section 4 of Administrative Order No. 17 provides:

“Procurement of Common-Use Supplies. Common-use supplies

shall be procured directly from the PS or its depots without need for public bidding as provided in Section 53.5 of the

Implementing Rules and Regulations of RA 9184.”



107

24.4 Common-use supplies is defined as those which refer to goods, materials and

equipment that are used in the day-to-day operations of procuring entities in

the performance of their functions.

24.5 Review of purchases of commonly used goods and supplies revealed that

there were minimal purchases from the PS-DBM, most of the purchases were

made from outside suppliers, as shown below.

Region

Procured Common-use Supplies

Period Total

Fr om PS-

DBM

From Outside

Suppliers

RFO XI P 849,267.15 P7,754.80 P 841,512.35 January to June 2011

RFO XII 2,352,525.10 - 2,352,525.10 August to December 2011

RFTC IX 289,096.16 - 289,096.16 CY 2011

Total P3,490,888.41 P7,754.80 P3,483,133.61

24.6 This practice was contrary to the above-cited law requiring all agencies to

directly purchase commonly used goods from the PS-DBM and deprived the

agency of probable savings which may otherwise have been generated and,also, deprived the PS-DBM of possible income.

24.7 In RFO XI, the said purchases from outside suppliers were made without the

requisite certification issued by the PS-DBM that the items procured were not

available at the time of purchase or the quarterly price list issued by the PS-DBM. Inquiries made disclosed that the Supply and Property Officer was not

aware that purchases in small quantities are still covered by the regulation and

should be procured from the PS-DBM.

24.8 RFO XII management commented that since their office was still located in

General Santos City, they deemed it practical to purchase office supplies atvarious suppliers/dealers at General Santos City considering the distance of PS-DBM situated in Koronadal City. However, they promised to purchase the

said supplies from PS-DBM starting year 2012 because BFAR RFO XII is

now located at Koronadal City.

24.9 We recommended that management comply with Section 53(e) of RA

9184 requiring purchase of commonly used goods from the PS-DBM.

b) issues in the Approved Budget for the Contract (ABC) in RFO XI and

CAR

24.10 Section 31.1 of RA 9184 states:

“The ABC shall be the upper limit or ceil ing for acceptable bid

prices. If a bid price, as evaluated and calculated in

accordance with this IRR, is higher than the ABC, the bidder



108

submitting the same shall be automatically disqualified. There

shall be no lower limit or floor on the amount of the award .”

24.11 Based on the random sampling as presented in the following table, bidders

whose bid prices were more than the Approved Budget for the Contract

(ABC) as indicated in the Purchase Requests were still included and awarded

the contracts.

24.12 In RFO XI, various procurements in the total amount of P248,550.00 was

P96,850.00 more than the amount in the Approved Budget for the Contract(ABC) of P151,700.00 in violation of Section 31.1 of RA 9184.

Particulars Estimated

Amount in

Purchase

Request

Total

Amount Of

Difference

Remarks I tems Qty Total Amount

Trevally Fingerlings 5400 pcs @ P6.00 P 32,400P 2,700 or

10%P 29,700

Per PR the total amt.

for trevally is only

P29,700 or P5.50 per

piece

Labor for the fabrication of 10x10 x 4m bamboo frame

marine fishcage @

P16,000.00/ Unit-MPIGACOS

5 Units 80,00060,000 or

300%20,000

Contract of labor morethan the ABC-P4,000

Labor for the fabrication of

10x10 x 4m bamboo framemarine fishcage @

P4,200.00 per unit

3 Units 12,600600

or 5%12,000

Contract price -morethan the PR

Wooden Banca with

Gasoline Engine 6.5 HPwith accessories

1 Unit 29,9502,950

or 11%27,000

Amount more than

ABC

Labor for the fabrication of

10x10 x 4m bamboo framemarine fishcage @

P4,200.00 per unit - (full)

2 units 8,400400

or 5%8,000

Contract price -morethan the PR

Empty Sacks 5000 pcs 50,000 15,000 or 43% 35,000 Per PR only P7.00 per piece

PE Net 14 double width @

P17600 each2 rolls 35,200 15,200 or 76% 20,000

Per PR only P10,000

per roll

P 248,550 P 96,850 P 151,700

24.13 Moreover, perusal of the Purchase Requests showed that majority of theamounts were written in pencil which can readily be erased, thereby integrity

of information is not assured. It behooves officials tasked to review and

approve these transactions to pause and view pencil markings as red flags andinvestigate the surrounding circumstances.

24.14

In BFAR CAR, the ABC for the two units windmill and the four other projects did not provide for all cost components needed in the implementationof the projects contrary to the GPPB Manual of Procedures for the

Procurement of Infrastructure Projects. Thus, the ABC and the contract prices

of these projects may not be realistic.



109

24.15 Under the GPPB Manual of Procedures for the Procurement of Infrastructure

projects, preparation of the ABC is one of the works under detailed

engineering. Thus, the GPPB prescribed that:

“The approved budget for the contract to be bid must

also specify for each major work item, such as

earthwork, roadwork, and massive concreting. It must also specify the components for equipment, rentals, fuel,

labor materials and overhead, including cost of the

approved construction safety and health program and security premiums, taxes, profit, cost of money, inflation,

contingencies, etc.”

24.16 In the GPPB Sample Forms for the Procurement of Civil Works, the standardform in the preparation and computation of the Approved Budget for the

Contract provides for Estimated Direct Cost and Indirect Cost. Indirect Cost

composed of the following:

Overhead, Contingencies and Miscellaneous;

Profit;

Mobilization and demobilization;

Value added tax.

24.17 Review of the ABC prepared by BFAR CAR for the following projects

showed that indirect costs were not fully provided for.

Name of Project I ndir ect Cost provided

Procurement & Installation of 2-units Windmill No indirect cost

Drilling of Exploratory/ Production Well Value added tax of 10.5%Construction of Fish Laboratory Bldg., Phase I Value added tax of 10.5%

Construction of Pond Dike and Pond Division 6% - no breakdown

Construction of Tilapia Hatchery Value added tax of 10.5%

24.18 Under DPWH Department Order No. 29 series of 2011, which provides for

the guidelines on the preparation of Approved Budget for the Contract,

indirect costs are set as follows:

Estimated Di rect Cost

(EDC)

I ndir ect Cost Total I ndirect

Cost OCM Profit

(% of EDC) (% of EDC) (% of EDC)

Up to P5 million 12 12 24Above P5 M to P50 M 9 8 17

Above P50 M to P150 M 7 8 15

Above P150 M 6 8 14

24.19 Considering that the Department of Agriculture and BFAR do not haveguidelines on the preparation of cost estimates for infrastructure projects, and

considering further the requirements of the GPPB in the preparation and



110

computation of the ABC as mentioned in Paragraph 19 hereof, it is suggested

that BFAR adopt the DPWH guidelines in the preparation of the ABC.

24.20 The insufficient provision for indirect cost in the ABC indicates that the ABC

and the contract prices were not realistic. As such, accomplishments in these

projects may be below standard or works may not be performed completely.

24.21 BFAR CAR management informed that the “engineering section” was

instructed to adopt the DPWH guidelines in the preparation of the ABC.

24.22 It was also observed in BFAR CAR that the Approved Budget for the

Contract for the construction of fish laboratory building amounted to

P3.36 million even when the allotment received by them for the project was

only P2.6 million. Thus, P901,016.92 of the contract price was chargedagainst the allotment for the construction of shed contrary to the purpose of

the allotment.

24.23 Perusal of the project proposal for the establishment of fish health laboratoryshowed that the budget proposed for the project amounted to P2.6 million.

The allotment received by BFAR CAR for the project also amounted toP2.6 million. The Approved Budget for the Contract for this project, however,

was P763,596.59 more than the proposed budget and the allotment received as

the ABC amounted P3,363,596.59. This was contrary to Section 7.5 of the

IRR of RA 9184 which states that “The ABC as reflected in the APP or PPMPshall be at all times consistent with the appropriations for the project

authorized in the GAA, continuing, and automatic appropriations, for the

corporate budget, and the appropriation ordinance, as the case may be”.

24.24 Review of the Registry of Allotments and Obligations disclosed that theContract of BFAR CAR with MP Villegas Construction for the Construction

of the 3-Storey Fish Laboratory Building (Phase I) amounting toP3,211,481.72 was charged against the following:

Advise of Sub-all otment Account

Code

Amount

Charged Percentage

Number Date

2010-06-011 June 21, 2010 211 P2,310,464.80 71.94

2010-07-013 July 05, 2010 215 901,016.92 28.06

T o t al P3,211,481.72 100.00

24.25 Verification showed that the above-listed allotments were authorized for the

following purposes:

Allotment

Number Purpose

Account

Code Amount

2010-06-011Buildings - Establishment of Fish Health Laboratory 211 P2,600,000.00

Other Structures - Establishment of hatcheries 215 5,000,000.00

2010-07-013Other Structures - Provision of Shed 215 1,000,000.00

Agricultural, Fishery and Forestry Equipment - Drilling 227 1,000,000.00



111

24.26 As observed, the purpose of ASA No. 2010-07-013 with account code 215

was for the provision or construction of shed, and not for the construction of

fish laboratory.

24.27 The Advice of Sub-allotment provides, among others, that it is the primary

responsibility of the Regional Director to keep expenditures within the limits

of the amounts sub-allotted as stated in the Advice. With this limitation,charges to the allotment outside of the purpose are deemed unauthorized. In

the case of the fish laboratory building, the P901,016.92 charged against ASA

No. 2010-07-013 was deemed unauthorized. Section 4.1 of PD 1445 further provides that no money shall be paid out of any public treasury or depository

except in pursuance of an appropriation law or other specific statutory

authority. Payments to MP Villegas corresponding to P901,016.92 charged

against the allotment for the construction of shed under ASA No. 2010-07-013was, therefore, prohibited.

24.28 The utilization of allotment for purposes other than those authorized resulted

in the non-implementation of the project construction or provision of shed.Thus, the objective or the purpose of this project was not attained.

24.29 In its comments, management stated thus: “The regional office, after due

consideration, decided on combining the two amounts or allotments: namely

the allotment for the building and the allotment for the shed; in order to fully

maximize the use of land and fund and to optimize the use of space available.At the same time provide a better parking area for the proposed reefer truck on

the region, rather than having a separate shed for the said vehicle. As per

initial plans of this office, the parking shed would have been constructed at theside of the proposed fish health laboratory. However, upon evaluation of the

available area for the two projects, it was deemed more pragmatic for the two projects to be combined, thus giving more emphasis on area usage and better

laboratory building facilities. The same was purely a management decisionand further, the same was undertaken with the primary reason for providing

out clientele better quality service through better facilities.”

24.30 We recommended BFAR CAR management to (a) include in the

Approved Budget for the Contract not only labor and materials but also

all indirect costs of infrastructure projects; (b) use the standard form

prescribed by the GPPB for the calculation of the ABC; and (c) to limit

the ABC of procurement projects to the amounts of allotments received

for such projects.

c) improper procurement through alternative modes instead of publicbidding

24.31 Section 10, Rule V of the Revised Implementing Rules and Regulations of Republic Act No. 9184, otherwise known as the Government Procurement



112

Reform Act, states that all procurement shall be done through competitive

bidding, except as provided in Rule XVI of the same IRR.

24.32 Rule XVI of the cited law, rules and regulations provides for the alternative

modes of procurement where Section 52 of the Rule specifically provides, in

substance, that Shopping as a method of procurement shall be employed in (b)

procurement of ordinary or regular office supplies and equipment notavailable in the Procurement Services involving an amount not exceeding

P500,000.00 (prescribed in Annex H of the Revised IRR).

24.33 In RFO X, management procured their fuel and other petroleum requirements

through Shopping despite that the annual fuel requirement of the agency

amounts to more than P500,000 contrary to the abovementioned rules.

24.34 In RFO XI, based on the documents submitted, the Purchase Requests

prepared by the different Divisions and Provincial/City Fishery Offices within

Region XI were not consolidated as the requirement of the whole office for

procurement during the year as indicated in the Annual Procurement Plan. Bynot consolidating all the requirements of the different end-users as indicated in

the PRs, BAC did not consider the total Approved Budget for the Contract(ABC) and allowed the use of the alternative mode of procurement, which

was Shopping instead of public bidding, thus Section 52 of RA 9184 and

Annex “H” of the IRR were not complied.

24.35 We recommended management in RFO XI to instruct the BAC to strictly

comply with the provisions of Section 31.1 of RA 9184; to require the

BAC that the Purchase Requests be filled up in permanent ink and that

the BAC refer to the Annual Procurement Plan; look into the possibility

of manipulation and investigate the circumstances when pencil markingsare on public documents and procedures are not complied; and to comply

with the procurement process prescribed by RA 9184 in the procurement

of goods, services and civil works. Accordingly, the members of the BAC

should evaluate conditions under which public bidding or the alternative

modes of procurement like shopping or small value procurement may be

applied.

d) bidding or notice of award were not posted in the PhilGEPS

24.36 Issues regarding the use of the Philippine Government Electronic Procurement

System (PhilGEPS) were found in RFO XI and RFTC IX, thereby, violatingSections 8.2.1.a, 12.2 and 54.3 of RA9184 and DBM Circular Letter No.

2011-6A.

Section 8.2.1.a “The PhilGEPS shall have a centralized

electronic bulletin board for posting procurement opportunities,notices, awards and reasons for award. All Procuring Entities are



113

required to post all procurement opportunities, results of bidding and

related information in the PhilGEPS bulletin board.” (emphasis ours)

Section 54.3 “In all instances of alternative methods of procurement, the BAC, through the Secretariat, shall post, for

information purposes, the notice of award in the PhilGEPS website,

the website of the procuring entity concerned, if available, and at anyconspicuous place reserved for this purpose in the premises of the

procuring entity.” (emphasis ours)

24.37 In RFO XI, the results of bidding or notices of award were not posted in the

PhilGEPS, BAC Resolution recommending the award was not prepared and

required reports were not submitted.

24.38 In RFTC IX, it was found that the agency is not registered with the PhilGEPS;consequently, all of its procurement activities during CY 2011 amounting to

P289,096.16 were not posted in the System, contrary to the abovementioned

provisions of RA 9184. Thus, the agency was unable to fully benefit from theservices offered by this Electronic Procurement System.

24.39 We recommended that management post in the PhilGEPS all the results

of all biddings conducted by them for purposes of information and

transparency and for RFTC IX to cause the immediate registration with

the PhilGEPS to be able to obtain the full benefits from the services

offered by them.

e) other observations noted contrary to RA 9184

24.40 Other observations found in the audit and review of transactions regarding procurements are as follows:

Region Observations

CAR a. The Bidding Documents for certain procurement projects issued by the

Bids and Awards Committee (BAC) did not contain the information

necessary for the prospective bidders to prepare their bids.

b. Detailed engineering activities for the procurement of the two units

windmill and four infrastructure projects were not sufficiently carried

out.

c. The BAC required the submission by prospective bidders of their

eligibility documents and evaluated such documents prior to the receipt

and opening of bids

RFO II d. There were procurements of goods which were not included in the

Annual Procurement Plan (APP).

RFO VI e. The agency failed to prepare, formulate and submit the Annual

Procurement Plan (APP) within the first quarter of the year.

RFO XI f. Purchases amounting to P4,470,898.37 for the period January to June

2011 were made despite the absence of a quorum or the Chairman or



114

Region Observations

the Vice-Chairman during the opening of bids.

g. Purchases amounting to P170,119 were delivered even prior to the

opening of bids indicating that the biddings were simulated.

h. BAC Resolutions recommending the award were not prepared by the

BAC

i. The Procurement Monitoring Reports (PMR) covering all procurement

activities specified in the APP whether on-going or completed were not

prepared and submitted fourteen (14) days after each semester by the

agency in printed and electronic copies to the GPPB

RFTC XI j. An Office Memorandum issued for the re-organization of the Center’s

Bids and Awards Committee (BAC) do not fix a period of one (1) year

from the time of its effectivity.

24.41 We recommended management require the BAC to be familiar with the

procurement process and to strictly comply with the provisions of RA

9184. Deviations from the prescribed process are grounds for theinstitution of penal sanctions provided for in the law. The Head of the

Procuring Entity and the members of the BAC are responsible for the

applied processes to be compliant with laws, rules and regulations.

Compliance with tax laws

25. NFRDI and RFO VI were unable to remit taxes totaling P77,740.84

contrary to the National Internal Revenue Code (NIRC) and its

Implementing Rules and Regulations which requires remittances of

withheld taxes within the tenth day of the following month.

25.1 BIR rules and regulations prescribe that remittance of taxes withheld shall be

on or before the tenth (10th) day of the month following the month thewithholding was made.

25.2 There were unremitted withholding taxes of the following offices,summarized as follows:

Agency

Due for

Remittance

NFRDI P56,167.74

RFO VI 21,573.10Total P77,740.84

25.3 In NFRDI, audit disclosed that as of December 31, 2011, the reported balance

of account Due to BIR amounting to P684,611.81 includes the amount of

P56,167.74 representing taxes withheld from November 2011 and prior year/months deducted from contractors/suppliers for various procurements



115

and consultancy services for the implementation of NFRDI programs/projects

and from NFRDI official and employees. Details are shown below:

Source of Tax Withheld Per Books

Tax Withheld

in December

2011

Alr eady Due for Remittance

31- 90 days 91- 365

days Over 1 Year

Private Individuals

including Suppliers andJob Order Employees

P541,906.91 P501,509.10 P13,591.49 P2,498.56 P24,307.76

NFRDI Employees 142,704.90 126,934.97 - - 15,769.93

Total P684,611.81 P628,444.07P13,591.49 P2,498.56 P40,077.69

P56,167.74

25.4 Likewise, in RFO VI, there was failure to remit taxes amounting to

P21,573.10. Taxes withheld for the period January to December 2011 had

been remitted to the BIR within the reglementary period. However,examination of Due to BIR balances for CY 2011 showed that there were

variances in the remittance of taxes withheld, as shown below:

Month (2011)

Per Books Remi ttance Var iance

January P121,797.38 P123,867.77 P (2,070.39)

February 262,986.00 254,938.85 8,047.15

March 317,534.54 306,385.44 11,149.10

April 231,106.20 229,384.90 1,721.30

May 241,172.21 243,070.51 (1,898.30)

June 288,100.75 280,851.69 7,249.06

July 276,523.01 276,743.06 (220.05)

August 312,875.34 301,576.61 11,298.73

September 246,403.22 252,750.49 (6,347.27)

October 221,849.11 225,526.38 (3,677.27)

November 255,899.84 258,898.66 (2,998.82)

December 475,197.76 475,877.99 (680.23)

Total P3,251,445.36 P3,229,872.35 P21,573.01

25.5 We commend the management of Central Office, RFOs I, II, III, IV-A and B,IX, X, XIII and RFTC V for the awareness of the governments drive towards

strong revenue generation. The agencies have been consistently withholding

tax, contractor’s tax and expanded withholding tax. These were remitted to theBureau of Internal Revenue on a regular basis.

25.6 The balance of taxes withheld as of year-end of these regions will be remitted

on January 2012 pursuant to the rule that taxes withheld shall be remitted on

or before the 10th

day of the succeeding month.

25.7 In view of the foregoing, we recommended that:

a. NFRDI, cause the remittance of taxes already due; and



116

b. RFO VI reconcile the records to determine the cause of the

variances between taxes withheld and taxes remitted and to remit

immediately to BIR all identified unremitted taxes withheld

25.8 We commend the management of RFOs I, II, III, IV-A, IV-B, IX, X, XIII and

RFTC V for their compliance with BIR tax laws.

25.9 RFO VI management commented that the variance erroneously taken up in

the books as Due to BIR should have been recorded as Due to GSIS.

Gender and Development (GAD)

26. RFOs II and VI failed to allocate 5% of the total annual appropriations

for CY 2011 for GAD activities contrary to the Section 31 of the General

Provisions of the General Appropriations Act CY 2011.

26.1 Pursuant to Executive Order No. 273, Approving and Adopting the PhilippinePlan for Gender Responsive Development, (1995-2025), agencies are

mandated to institutionalize Gender and Development (GAD) efforts ingovernment by incorporating GAD concerns in their planning, programming

and budgeting processes. It also mandates agencies to incorporate and reflect

GAD concerns in their annual budget proposals and work and financial plans.

26.2 Moreover, Sec. 31 of the General Appropriation Act for CY 2011 states that

all departments, bureaus, offices, agencies, SUCs, GOCCs, and LGUs shall

formulate a GAD Plan designed to address gender issues within their

concerned sectors or mandate and implement applicable provisions in the

Convention on the Elimination of All Forms of Discrimination AgainstWomen, the Beijing Platform for Action, the Millennium Development Goals

(2000-2015), the Philippine Plan for Gender-Responsive Development(1995-2025), and the Framework Plan for Women. The GAD Plan shall be

integrated in the regular activities of the agencies, which shall be at least five

percent (5%) of their respective budgets.

26.3 The development of the GAD Plan shall proceed from the conduct of gender

analysis, the generation and review of sex-disaggregated data, and

consultations with gender advocates and women clientele.

26.4 Its implementation shall contribute to poverty alleviation, the economicempowerment especially of marginalized women, the protection, promotion,

and fulfilment of women's human rights, and the practice of gender-responsive governance. Utilization of the GAD budget shall be evaluated

based on the GAD performance indicators identified by said agencies.



117

26.5 The preparation and submission of annual GAD Plans and annual GAD

Accomplishment Reports shall be guided by Joint Circular No.2004-01 dated

April 5, 2004 issued by the DBM, NEDA, and Philippine Commission onWomen (formerly the National Commission on the Role of Filipino Women),

as well as other guidelines on GAD Planning and Budgeting that may be

issued by the appropriate oversight agencies.

26.6 RFOs I, III, IV-A and B, IX, X, XI, RFTC V recognized the need to address

gender issues within the organization, they allocated 5% of their total budget

appropriations for Gender and Development programs for CY 2011. Theannual GAD Accomplishment Report showed that the agency has effectively

implemented the GAD-related activities and programs contained in the annual

GAD Plan.

26.7 In RFOs II and VI, however, the required allocation of at least 5% of the total

appropriation for GAD activities was not complied with contrary to the

General Provisions of the General Appropriation Act for CY 2011.

26.8 We commend RFOs I, III, IV-A and B, IX, X, XI, RFTC V for the continued

compliance with EO 273.

26.9 We recommended that RFOs II and VI management ensure compliance

with the fund allocation to GAD related activities as provided by law in

order to accomplish all GAD planned activities.

Unsettl ed Suspensions and Di sall owances

27. Audit suspensions and disallowances amounting to P10.781 million andP7.315 million, respectively, remained unsettled due to non-enforcement

of management of Section 7 Chapter I of the RSSA contrary to COA

Circular 2009-006.

27.1 COA Circular 2009-006 prescribe the use of the Rules and Regulations onSettlement of Accounts (RRSA), to wit:

“7.1.1 The head of the agency, who is primarily responsible

for all government funds and property pertaining to

his agency, shall ensure that (a) x xx (b) the

settlement of disallowances and charges is madewithin the prescribed period and (c) the requirements

of transactions suspended in audit are complied with;and (d) x xx”



118

27.2 The balance of disallowances and suspensions are summarized as follows:

Agency

Disallowance Suspension

Beginning

Balance

1/1/2011

I ssued for

CY 2011

Settl ed for

CY 2011

Ending

Balance

Beginning

Balance

1/1/2011

I ssued for

CY 2011

Ending

Balance

CO P 621,477.00 P 99,453.90 P 99,453.90 P 621,477.00 P 936,638.98 P 490,754.43 P 1,427,393.41

RFO III - 1,406,082.84 920,963.41 485,119.43 - - -

RFO IV-B - 48,000.00 - 48,000.00 285,518.22 - 285,518.22RFO VI 1,172,675.63 - 103,134.88 1,069,540.75 - - -

RFO X 869,411.00 4,082,034.15 - 4,951,445.15 3,620,340.67 - 3,620,340.67

RFO XIII - 87,600.00 - 87,600.00 - 353,844.47 353,844.47

NFRDI - 52,160.00 - 52,160.00 - 5,093,800.00 5,093,800.00

Total P2,663,563.63 P5,775,330.89 P1,123,552.19 P7,315,342.33 P4,842,497.87 P5,938,398.90 P10,780,896.77

27.3 In RFO III, the balance of disallowance of P485,119.43 is under appeal.

27.4 We recommended that management intensify the collection of

disallowances, especially those receivables from other creditors, other

government agencies, and former BFAR employees including those

already retired and detailed to other government agencies.

27.5 A memorandum was already issued to the NFRDI management to deduct the

disallowances from the salaries and wages of the concerned officers andemployees.

Delayed Submission of Reports, Purchase Orders and Contracts

28. Delayed or non-submission of required financial reports, schedules, and

program/ project status reports by RFOs X, XIII and RFTC V

management contrary to Sections 39 and 122 of PD 1445 and Section 7 of

COA Circular No. 2009-006; thereby, causing difficulty in rendering the

mandated tasks of the Audit Team.

28.1 Section 7.1.1 of COA Circular 2009-006 dated September 15, 2009 provides

that the Head of the Agency is primarily responsible for all government fundsand property pertaining to his agency and he shall insure that the required

financial and other reports and statements are submitted by the concerned

agency officials in such form and within the period prescribed by the

Commission.

28.2 In addition, Section 7.2.1 (a) of COA Circular No. 2009-006 dated September

15, 2009 provides that, the reports and supporting documents submitted by theaccountable officers are immediately recorded in the books of accounts andsubmitted to the Auditor within the first ten (10) days of the ensuing month.



28.3 In CY 2011, the Team found difficulties in rendering its mandated tasks as

mentioned in the cited laws due to management’s delayed or non-submission

of the following reports, to wit:

Office Documents/Reports not Submitted on Time

RFO VI a. Financial Reports with supporting documents

b. Letter Orders issued for catering services during conduct of trainings

RFO X a. List of NTAs/NCAs;

b. Statement of Allotments, Obligations, and Balances (SAOB) with

their corresponding schedules

c. Annual Work and Financial Plan for CY 2011;

d. Status of Infrastructure Projects; and other

e. Program/Accomplishment Reports, including the Status of Rental

Payments per FLAs.

RFO XIII Monthly reports pertaining to disbursements and liquidation of cash

advances.

RFTC V a. Purchase Orders

b. Job Orders

c.

Contracts of Services

28.4 The failure of the agency to abide with the aforesaid rules and regulation prevented the timely review/audit of the said documents.

28.5 We recommended that management submit, henceforth, all the required

reports, schedules, and other documents that are necessary in the

evaluation, examination, and audit of obligations, disbursements, and of

other activities relating to financial operations of the agency so that the

audit team can discharge its functions efficiently and effectively.

Date post:	14-Apr-2018
Category:	Documents
Upload:	andrew-garcia
View:	224 times
Download:	0 times