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Republic of the Philippines COMMISSION ON AUDIT

Commonwealth Avenue, Quezon City, Philippines

CONSOLIDATED ANNUAL AUDIT REPORT

on the

NATIONAL CONCILIATION AND MEDIATION BOARD

For the Year Ended December 31, 2009

i

Executive Summary A. Introduction

The National Conciliation and Mediation Board (NCMB) is an attached agency and under the administrative supervision of the Secretary of the Department of Labor and Employment (DOLE). It serves as a machinery that shall ensure prompt response to all labor-management disputes that may arise and shall work towards their early and amicable settlement.

NCMB was created within the ambit of the DOLE on January 30, 1987, as enunciated in Section 22 of EO 126, as amended, to give more meaning to the constitutional and presidential orders of the Department and was tasked of ensuring the maintenance of industrial peace by promoting harmonious, equitable and stable employment relations that assure equal protection for the rights of all concerned parties.

The Board absorbs the conciliation, mediation, labor- management cooperation and voluntary arbitration functions of the Bureau of Labor Relations (BLR) and its counterparts in the regional offices of the Department in accordance with Section 29 (c) of Executive Order No. 126, with the following major functions:

Formulate policies, programs, standards, procedures, manuals of operations, and guidelines pertaining to effective mediation and conciliation of all labor disputes;

Perform preventive mediation and conciliation functions; Coordinate and maintain linkages with other sectors or institutions and other

government authorities concerned with matters relative to the prevention and settlement of labor disputes; and

Administer the voluntary arbitration program, maintain/update list of

voluntary arbitrators, compile arbitration awards and decisions.

The Board is headed by an Executive Director, assisted by two Deputy Executive Directors who are appointed by the President upon recommendation of the Secretary of Labor and Employment. It also maintains fifteen regional branches all over the country, each headed by an Executive Director II assisted by some technical and support staff. The personnel complement as of December 31, 2009 consisted of 51 permanent employees in NCMB-Main and 152 in the fifteen regional offices.

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B. Accomplishments vs Plans/Targets

For CY 2009, the NCMB reported number of accomplishments vis-á-vis its plans and targets.

Major Program/Activity/Project Target Accomplish-ment

Percentage of

Accomplish-ment

Remarks

I. PARTNERSHIP AND LABOR-MANAGEMENT EMPOWERMENT

A. WORKPLACE COOPERATION AND PARTNERSHIP (LMCS)

LMC Facilitation No. of LMCs facilitated

- Organized Establishment 96 86 90 - Unorganized Establishment 103 103 100

LMC Enhancement

No. of LMCs enhanced 593 619 104 - Organized Establishment 228 232 102 - Unorganized Establishment

Documentation of LMC Best Practices

No. of LMCs Best Practices documented


B. WORKPLACE DISPUTE PREVENTION AND SETTLEMENT (GMs)

Institutionalization of GMs in unorganized companies

No. of Companies covered 167 171 102 Operationalization of GMs

- Organized Establishment 209 204 98 Strengthening/Enhancement

No. of GMs strengthened - Organized Establishment 530 487 92 - Unorganized Establishment 244 239 98

Documentation of GMs No. of GMs documented


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Percentage of

Accomplish-ment

Remarks

C. ADVOCACY AND NETWORKING

Meetings/briefings/consultations conducted

No. of meetings/briefings/consultations conducted

284

387

136

Dissemination of IEC materials No. of IEC materials

disseminated 5,700 8,710 153

Meeting with social partners and various sectors

No. of MOAs forged 26 18 69 No. of training conducted 155 200 129

II. CONCILIATION AND MEDIATION PROGRAM

No. of new AS/L cases declared

20 4 20 Of the 327 total NS/L cases handled, only 4 0r 1% materialized into A/S, 5 percentage points lower than the target of 6%, which reflects the effectiveness of the conciliation-mediation services of the Board

No. of new NS/L cases filed 274 286 104 No. of new PM cases filed 460 482 105 Disposition Rate

Actual Strike/Lockouts 95% 100% 105 Notices of Strike/Lockout 93% 85% 91 Preventive Mediation 94% 89% 95

Settlement Rate Actual Strike/Lockouts 75% 75% 100 Notices of Strike/Lockout 78% 74% 95 Preventive Mediation 89% 81% 91

Duration to Dispose/Settle

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Percentage of

Accomplish-ment

Remarks

Actual Strike/Lockouts 23 20 3 days faster

Notices of Strike/Lockout 29 44 15 days longer

Preventive Mediation 22 34 12 days longer

SAGAP/FLAVAS CASE No. of new cases filed 740 995 134

III. ARBITRATION AND ADJUDICATION PROGRAM

Voluntary Arbitration Cases facilitated and monitored

No. of new voluntary arbitration cases

137 134 98

Disposition Rate Previous Cases 100% 80% 80 Current Cases 50% 50% 100 Combined Cases 60% 63% 105

Average Days to decide From Submission to Decision 20 74 54 days

longer -The delay could be explained by the difficulty of reconciling the schedule of the opposing parties and the Arbitrator.

- In some cases, the Arbitrator exerts efforts to convince the parties to settle, which necessary prolongs the proceedings.

- Holidays, cessation of work due to natural calamities

- Motions for postponements/extensions of time filed by either or both parties and approved by the VA.

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Percentage of

Accomplish-ment

Remarks

From acceptance or Arbitrator 90 208 118 days longer

-Conflicting schedules/ commitments of the Arbitrator or Panel of Voluntary Arbitrators.

-Depends on the complexity of case which requires the Arbitrator to study the case and conduct research in order to come up with a very good decision.

SVAF Subsidy Utilization No. of Cases Subsidized 138 84 61 Amount of Subsidy (in pesos) P1,198,500.00

In 2009, the Board managed to reduce the incidence of work stoppages from five

in the previous year to only four, the lower strike incidence in Philippine labor relations history. The new strike cases comprise 1.22 of the 327 total notices of strike/lockouts handled during the period. Decisions of Accredited Voluntary Arbitrators continue to enjoy wide acceptance, hence a decline in the voluntary arbitration cases. Affirmation rate for the year is computed at 100 percent while reversal rate is placed at 0 percent. C. Financial Highlights

The NCMB sources and application of funds and its consolidated financial condition for the audit year 2009, with comparative figures for 2008, are summarized in the tables below.

Table 1 Sources and Application of Funds

Particulars 2009

(in millions) 2008

(in million) Annual Appropriations (RA No. 9498 and 9401)

P115.48

P122.91

Allotments Received Extended

MOOE 8.87 3.76 CO 1.82 1.92 Total P10.70 P5.68

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Particulars

2009 (in millions)

2008 (in million)

Current PS 61.40 67.51 MOOE 50.74 52.91 CO 1.50 2.49 Total P113.64 P122.91

Obligations PS 61.40 66.81 MOOE 45.86 45.84 CO .25 2.58 Total P107.51 P115.23

Major Sources of Funds Subsidy from Nat’l Government P115.73 P123.37

Notice of Cash Allocation 112.93 117.68 Remittance Advice 2.07 5.69

Application of Funds Expenses P124.51 P113.01

Personal Services 71.99 66.81 MOOE 52.52 46.20

Table 2

Financial Condition

Particulars 2009

(in millions) 2008

(in millions) Total Assets P 15.14 P 14.60 Cash .51 .62 Receivables .48 .27 Inventories 1.43 1.46 Prepayments 1.33 1.27 PPE 11.20 10.98 Other Assets .19 .00 Total Liabilities P 11.05 P.93 Current Liabilities 11.05 .93 Equity P 4.08 P 13.67

D. Scope of Audit

This consolidated audit report covers the results of audit of the Main Office and its 15 Regional Branches (RBs) including the National Capital Region for the year ended December 31, 2009.

E. Auditor’s Report

The Auditor rendered a qualified opinion on the fairness and reliability of the presentation of the financial statements as of December 31, 2009 for reasons cited in the attached State Auditor’s Report.

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F. Observations and Recommendations

The following audit observations and recommendations were discussed with management concerned during the exit conference conducted on May 19, 2010, the details of which are discussed in Part II of this report. Management comments were incorporated in this report, where appropriate.

1. Cash advances for salaries and other benefits under account “Payroll Fund”

were fully liquidated by the concerned accountable officers of NCMB Main and the regional branches as of December 31, 2009. (Par. 1)

We recommended that management continue its compliance by the concerned accountable officers with the requirements/regulations of COA Circular No. 97-002 dated February 10, 1997 and Accounting Circular No. 2006-001 dated November 9, 2006, as to the liquidation of paid payrolls.

2. Unliquidated cash advances for travel/project expenses increased the balance

of the account Advances to Officers and Employees by P106,994.38 or 152 percent while Petty Cash Fund totaling P113,600.00 remained unliquidated at year-end contrary to the rules and regulations of COA Circular No. 97-002 dated February 10, 1997, thus the pertinent accounts’ balances are overstated while the corresponding expenses accounts are understated. Likewise, the Subsidiary Ledger for said account not maintained in RCMB-VII. (Paras. 2-8) We recommended that management direct the concerned officers and employees to submit immediately the proper accounting of expenditures to settle the unliquidated cash advances for travel and project expenses as well as the Petty Cash Fund granted during the year. We also recommended the immediate refund of the unexpended balance particularly those pertaining to CY 2008 as required under COA Circular No. 97-002 dated February 10, 1997.

3. Loss of funds amounting to P10,000.00 due to the alleged estafa committed

by a former disbursing officer of RCMB-NCR was reclassified to Accounts Receivable instead of Other Receivables (149) as required in COA Circular No. 2003-002 dated August 1, 2003, causing the year-end balance of the former account of doubtful validity while the latter is understated of the same amount. (Paras. 13-17)

We recommended that management require the Accounting Analyst to re-evaluate the entries made and effect the necessary adjustments to reflect the correct balances of the affected accounts in the ensuing year.

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4. Miscellaneous trust receipts maintained/deposited to the agency’s depository bank totaling P88,981.44 were not yet remitted to the Bureau of the Treasury contrary to the regulations of Executive Order No. 338, thereby overstating the balance of account Cash-In-Bank, Local Currency Current Account of the same amount. (Paras. 20-24)

We recommended and management agreed to direct the Accountant and the Cashier to remit/deposit immediately the remaining balances of funds still maintained with the agency’s depository bank (LBP) in accordance with the requirements of Executive Order No. 338. Failure to do so shall subject the responsible official/s and employee/s to appropriate criminal and/or administrative action pursuant to Section 6 of the said EO.

5. Disallowances/charges totaling P239,915.19 remained unsettled as of

December 31, 2009, thus depriving the government the use of the funds for other priority projects and programs. (Paras. 27-28)

We recommended that management require all persons liable to fully settle their obligations to the government as of the end of year 2010. We also recommended that RCMB-VI management devise a reasonable scheme for the immediate settlement of the disallowances/charges pursuant to existing COA rules and regulations.

6. Unfunded obligations amounting to P7,104,408.00 earmarked as Accounts

Payable as of December 31, 2009 increased the negative balance of the Statement of Income and Expenses to P8,836,926.25. (Paras. 31-34)

We recommended that management advise the Budget Officer to coordinate with the Department of Budget and Management for the immediate release in the ensuing year of the National Cash Allocation (NCAs) to finance the unfunded obligations taken up as Accounts Payable as of December 31, 2009. We further recommended to require the Chief Accountant to closely coordinate with the Budget Officer and both will assess/compare the succeeding fund releases with the obligations incurred to avoid the recurrence of negative balances in the financial reports unless if the causes are non-cash transactions.

7. Funds amounting to P977,702.96 reportedly transferred to the NCMB-Main

Office from the Department of Labor and Employment-OSEC were not recorded/recognized in the agency books and not yet liquidated as at year-end thus, the accuracy of the reported account balance is unreliable. (Paras. 39-42)

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We recommended that management require the Accountant to take up in the books the remaining balance of the fund transfer and cause the immediate liquidation of the same in the ensuing year.

8. The reliability and accuracy of the year-end balance of account Cash, National Treasury-MDS amounting to P14,829.51 in RCMB-VIII books cannot be ascertained due to the failure of the Accountant-Designate to submit the bank reconciliation statements and its supporting documents as of December 31, 2009 in violation of Section 74 of P.D. 1445 and COA Circular No. 92-125A. (Paras. 45-49)

We recommended strict compliance to Section 74 of PD 1445 and COA Circular No. 92-125A to avoid the sanctions of automatic suspension of payment of salaries due to failure of the Accountant-Designate to comply with the submission of the Bank Reconciliation Statement pursuant to Section 122(2) and (3) of PD 1445.

Specifically, we suggested the following remedial steps:

a. Make arrangement with the depository bank to allow the Accountant to pick up the bank statements to ensure timely receipt of bank statements.

b. Require the Accountant to prepare and submit BRS for December 2009 and the previous months/years and to update the related accounting records.

9. Office supplies valued at P24,088.02 which were not found during the physical inventory count remained unaccounted for by the concerned supply official due to the issuance of supplies carried on stock without the required Requisition and Issue Slip pursuant to Section 53 of the Manual on the New Government Accounting System, Volume II, causing the overstatement of the year-end balance of Office Supplies Inventory account by P476,206.06. (Paras. 54-56)

We recommended that management instruct the new Storekeeper to adhere strictly to the COA rules and regulations and avoid the issuance of requested supplies in the absence of RIS; review the discrepancies noted and coordinate with the accounting personnel for the preparation of necessary adjustments to arrive at the correct cost of unused supplies carried on stock.

10. The balances of Property, Plant and Equipment accounts per accounting

records totaling P41.86 million and per property unit’s physical count of P37.66 million differed by P4.20 million, thus casting doubts on their reliability (Paras. 59-64).

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The COA Audit Team of NCMB-Main recommended that management require the Inventory Committee to complete the reconciliation of the result of the inventory with the accounting records investigate the discrepancies noted, coordinate with the accounting personnel for the preparation of necessary adjustments to arrive at the correct value of existing properties and submit the reconciled report to the COA Audit Team in accordance with Section 490 of the GAAM, Volume I.

11. Unserviceable/obsolete properties in RCMB-II valued at P484,209.60 were

not yet disposed of during the year and not reclassified to Other Assets account in violation of Section 143 of the Manual on National Government Accounting System (NGAS), thus resulting in the overstatement of PPE accounts and the understatement of Other Assets account (Paras. 72).

The COA Audit Team in RCMB- II recommended and management agreed to instruct the Accountant-Designate to draw a journal entry voucher reclassifying the unserviceable properties to Other Assets account pursuant to Section 143 of the Manual on NGAS. The team further recommended that management require the property officer to prepare and submit to COA the prescribed Inventory & Inspection Report (I&I Report) of unserviceable properties indicating the management’s appraisal therein, for the conduct of necessary inspection and evaluation needed for their disposal pursuant to Section 64 of the Manual on NGAS.

12. Unserviceable furniture and IT equipment costing P39,542.00 in RCMB-

NCR were automatically dropped-off from the books at book value of P5,878.17 instead of the actual cost without the proper disposal required by existing laws, rules and regulations. (Paras. 74-79)

We recommended that management direct the Accounting Analyst to prepare immediately adjusting entries in the succeeding year to reflect the correct balances of the affected accounts and to follow strictly the accounting principles and standards in the recording of transactions to avoid misleading information found in the year-end financial reports.

13. Small tangible items with estimated useful life of more than a year in

RCMB-CAR totaling to P41,259.77 were not reclassified from Office Furniture and Fixtures to Inventory account contrary to COA Circular No. 2005-002 dated April 14, 2005, thus overstating the PPE account while understating the Inventory account. (Paras. 83-86)

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We recommended and management agreed that:

a) the Accountant-Designate prepare the adjusting entries and record the procured small tangible assets in accordance with COA Circular No. 2005-002; and

b) the Supply Officer issue Inventory and Custodian Slips for the

monobloc chairs and white boards for monitoring, control and accountability purposes

14. Several expenditure transactions of NCMB-Main and RCMB-NCR were not

yet properly classified to the pertinent appropriate accounts in accordance with COA Circular No. 2004-008 dated September 20, 2004 despite repeated reminders in last year’s audit report, thus affecting the accuracy of the reported operating expenses in the financial statements. (Paras. 84-90)

We recommended that management instruct the Accountant in NCMB-Main and the Accounting Analyst in the RCMB-NCR to be careful in the recording of entries in the journal reports and ledger books. Likewise, require the same officials to prepare adjusting entries in the succeeding year to reflect the correct balances of the affected accounts and to follow strictly the accounting principles and standards in the recording of transactions to avoid misleading information in the year-end financial reports.

15. A copy of the contract involving the outsourced Psychometric Assessment Services in NCMB-Main was not forwarded to the COA Office for review and evaluation of cost as required in COA Circular No. 87-278 and COA Memorandum No. 2005-027 while the procurement process/procedures were not conducted by NCMB but made use of the activity done by the Department of Labor and Employment (DOLE). (Paras. 96-99)

We recommended that management create a Bids and Awards Committee (BAC), separate and distinct from that of the DOLE as required by existing laws and regulations and to adhere strictly to the requirements of RA 9184 to address the procurement needs of NCMB-Main Office and its regional offices. We further recommend that the Accountant instructed to submit to the COA Auditor all contracts including Purchase Orders five days after perfection thereof.

16. The designated Accountant of RCMB-CAR also acts as the Supply Officer

contrary to the principle of sound internal control on the segregation of duties and functions. (Paras. 131-132) We recommended that management designate an employee other than the Accountant-Designate to perform the functions of a supply officer to separate the accounting from the custodial function and for a stronger internal control over agency assets.

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We further recommended that instead of the Budget Officer, assign an official as Supply Officer who has no access with the financial and procurement process to have a sound internal control. The Budget Officer is responsible for the obligations portion of the financial procedures of every transactions.

17. Traveling expenses incurred by an employee during the availment of family

visit privilege totaling P5,025.00 was reimbursed by RCMB-VII without legal basis and available funds for the purpose contrary to Section 4.1 of Presidential Decree No. 1445 resulting to irregular expenditures by the same amount. (Paras.147-153)

The COA Audit Team of RCMB-VII recommended that management require Mr. Hacelfeo T. Cuares to refund immediately the traveling expenses incurred amounting to P5,025.00 charged to the branch funds while the nine (9) working days used should be deducted from the earned vacation leave credits. Henceforth, the team further recommended to management to stop the practice of paying family visit expenses charged against government funds.

18. The CY 2009 Gender and Development Plan and Budget for the NCMB

Main and its regional offices was not reviewed and endorsed by the National Commission on the Role of Filipino Women (NCRFW), thus the allocation and utilization thereof are not in pursuance of the Joint Circular No. 2004-1 of the Department of Budget and Management (DBM), National Economic and Development Authority (NEDA) and the NCRFW. (Paras. 176-187

We recommended that management require the GAD Focal Point to prepare a Plan and Budget allocation that conforms with the guidelines/policies set forth in Joint Circular No. 2004-1 of the DBM, NEDA and NCRFW so that the activities/projects to be undertaken gear towards the objectives of equality and opportunity of gender treatment for men and most especially for women.

We further recommended that management require the NCMB GAD Focal person to resubmit the CY 2010 budget and have it stamped “received” and indicate the date of receipt. We also recommended that management require same official or his representative to follow up the action taken to the submitted GAD Plan and Budget until it is reviewed and endorsed by the NCRFW. We further recommended to re-evaluate the Office Order for the creation of Focal Person and include the regional branches for the proper and updated monitoring of the implementation and utilization of the distributed GAD funds in the succeeding years.

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G. Implementation of Prior Years’ Audit Recommendations

The status of implementation of prior year’s recommendation is shown below:

Status Number Percentage

Fully Implemented 10 50% Partially Implemented 5 20 Net Implement 5 20

Total 20 100%

Table of Contents

Page No. Part I Financial Statements

• State Auditor’s Report 1 • Statement of Management’s

Responsibility for financial statements 3

• Detailed Balance Sheet 4 • Detailed Statement of Income and

Expenses 6

• Statement of Cash Flows 9 • Notes to Financial statements 10 Part II Observations and Recommendations 18 Part III Status of Implementation of Prior Year’s Audit

Recommendations 56

Part IV Annexes

State Auditor’s Report The Executive Director National Concilitaiton and Mediation Board Arcadia Bldg., Quezon Avenue Quezon City

Pursuant to Section 2, Article IX-D of the Philippine Constitution and Section 43 of the government Auditing Code of the Philippines (PD 1445), we have audited the accompanying Consolidated Balance sheet of the National Conciliation and Mediation Board (NCMB) as of December 31, 2009, and the related Consolidated Statement of Income and Expenses and Consolidated Cash Flows for the year ended. These financial statements are the responsibility of the Auditee. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted state auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement/s. Our audit also included examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. It also included assessing, as well as, evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Part II – Audit Observations and Recommendations, we observed that:

1. Unliquidated cash advances for travel/project expenses increased the balance of the account Advances to Officers and Employees by P106,994.38 or 152 percent while Petty Cash Fund totaling P113,600.00 remained unliquidated at year-end contrary to the rules/regulations of COA Circular No. 97-002 dated February 10, 1997, thus the pertinent accounts’ balances are overstated while the corresponding expenses accounts are understated. Likewise, the Subsidiary Ledger for said account not maintained in RCMB-VII.

2. Loss of funds amounting to P10,000.00 due to the alleged estafa committed by the

former disbursing officer of RCMB-NCR was reclassified to Accounts Receivable instead of Other Receivables (149) as required in COA Circular No. 2003-002 dated August 1, 2003, causing the year-end balance of the former account of doubtful validity while the latter is understated by the same amount.

3. Miscellaneous trust receipts totaling P88,981.44 maintained/deposited to the agency’s

depository bank were not yet remitted to the National Treasury contrary to Executive Order No. 338, thereby overstating the balance of account Cash-In-Bank, Local Currency Current Account of the same amount.

Republic of the Philippines COMMISSION ON AUDIT

Commonwealth Avenue, Quezon City

2

4. Disallowances/ charges totaling P239,915.19 have remained unsettled as of December 31, 2009, thus depriving the government the use of the funds for other priority projects and programs.

5. Unfunded obligations totaling P7,104,408.00 earmarked as Accounts Payable as of

December 31, 2009 of NCMB-Main increased the negative balance of the Statement of Income and Expenses to P8,836,926.25.

6. Funds amounting to P977,702.96 reportedly transferred to the NCMB-Main Office

from the Department of Labor and Employment-OSEC were not recorded/recognized in the agency books and not yet liquidated as at year-end thus, the accuracy of the reported account balance is unreliable.

7. The balances of Property, Plant and Equipment accounts per accounting records

totaling P41.86 million and per property unit’s physical count of P37.66 million differed by P4.20 million, thus casting doubts as to their reliability.

8. Unserviceable/obsolete properties in RCMB-II valued at P484,209.60 were not yet

disposed of during the year and not reclassified to Other Assets account pursuant to Section 143 of the Manual on National Government Accounting System (NGAS), thus resulting in the overstatement of PPE accounts and the understatement of Other Assets account. On the other hand, unserviceable furniture and IT equipment costing P39,542.00 in RCMB-NCR were automatically dropped-off from the books at book value of P5,878.17 instead of the actual cost without the proper disposal required by existing laws, rules and regulations.

In our opinion, except for the effects of the deficiencies presented in the preceding paragraph, the financial statements referred to above, present fairly, in all material respects, the financial position of the National Conciliation and Mediation Board as of December 31, 2009 and the results of its operations and its cash flows for the year then ended in accordance with applicable laws, rules and regulations and in conformity with applicable generally accepted state accounting principles.

COMMISSION ON AUDIT

By:

31 May 2010

3

4

2009 2008

Current Assets

Cash (Note 5)Cash-Collecting Officer P P 9,621.25Payroll Fund 160,632.97Petty Cash Fund 113,600.00 125,900.00Cash-Local Currency, Current account 400,098.16 319,362.25 Total Cash 513,698.16 615,516.47

Receivable (Note 6)Accounts Receivable 10,000.00 16,680.00Advances From Officers and Employees 177,313.56 70,319.18Due from NGAs 38,531.42 129,448.37Due from GOCCs 7,500.00Receivable-Disallowances and Charges 239,915.19 29,989.75Other Receivable 15,000.00 15,568.13 Total Receivables 480,760.17 269,505.43

Inventories (Note 7)Office Supplies Inventory 1,308,034.42 1,348,644.98Other Supplies Inventory 114,525.30 114,525.30 Total Inventories 1,422,559.72 1,463,170.28

Prepaid Expenses (Note 8)Prepaid Insurance 41,101.43 10,955.51Prepaid Rent 1,223,172.48 1,195,632.48Guaranty Deposits 50,000.00 50,000.00Other Prepaid Expenses 17,696.67 14,480.00 Total Prepayments P 1,331,970.58 P 1,271,067.99

ASSETS

NATIONAL CONCILIATION AND MEDIATION BOARDConsolidated Detailed Balance Sheet

As of December 31, 2009(With Comparative Figures for CY 2008)

5

2009 2008

Property, Plant & Equipment (Note 9)Office Equipment 8,573,841.58 7,736,604.07Furniture and Fixtures 5,796,427.81 5,334,310.40IT Equipment and Software 15,074,566.56 15,352,913.62Communication Equipments 125,248.00 141,528.00Library Books 944,831.24 944,831.24Motor Vehicles 11,286,388.00 11,839,238.00Other Property, Plant and Equipment 55,210.69 0.00 Total Property, Plant & Equipment 41,856,513.88 41,349,425.33Less: Accumulated Depreciation 30,656,120.94 30,796,414.49 Property, Plant & Equipment, Net 11,200,392.94 10,553,010.84

Other Assets (Note 10) 193,499.05 430,317.93

Total Assets P 15,142,880.62 P 14,602,588.94

Current Liabilities (Note 11)Accounts Payable 10,267,370.40 745,459.64Due to Officers and Employees 3,303.00 Due to National Treasury 231,590.18 Other Payables 207,459.80 126,120.52Due to BIR 182,583.88 60,979.94Due to GSIS 31,023.45 974.58Due to PAG-IBIG 38,931.43 Due to PHILHEALTH 81,462.50 25.00Performance/Bidders/Bail Bonds Payable 15,849.41 Total Current Liabilities 11,059,574.05 933,559.68

EquityGovernment Equity, beginning 13,669,029.26 9,879,727.31Retained Operating Surplus Adjustments 2,040.58 205,174.79 Prior Year's Adjustments (750,837.02) (304,084.39) Current Operations (8,836,926.25) 3,888,211.55

(9,585,722.69) 3,789,301.95Government Equity, ending 4,083,306.57 13,669,029.26

Total Liabilities and Equity P 15,142,880.62 P 14,602,588.94

See Accompanying Notes to Financial Statements

LIABILITIES AND EQUITY

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2009 2008

INCOMESubsidy Income from National Government (Note 13) P 119,333,137.77 P 123,373,169.22Less: Reversion of Unused NCA 3,599,412.45 6,415,642.50

Subsidy Income from NG, Net 115,733,725.32 116,957,526.72Seminar Fees 2,000.00Loss/Gain on Sale of Assets (60,288.39) (54,652.95)Other Fines and Penalties (Note 14) 1,554.57 39.50Miscellaneous Operating and Service Income(Note 14) 892.50 450.00

Total Income 115,675,884.00 116,905,363.27

EXPENSESPersonal Services

Salaries & Wages - Regular Pay 47,228,754.72 40,755,316.42Personnel Economic Relief Allowance (PERA) 2,322,690.68 1,138,568.71Additional Compensation (ADCOM) 2,316,075.23 3,413,705.91Representative Allowance 1,625,090.90 1,393,800.00Transportation Allowance 1,508,105.11 1,309,227.35Clothing Allowance 772,000.00 768,000.00Productivity Incentive Allowance 405,000.00 361,000.00Other Bonuses and Allowances 272,000.00 260,000.00Longevity Pay 180,000.00 269,083.00Cash Gift 975,250.00 947,250.00Year-end Bonus 4,220,169.80 3,540,362.33Life & Retirement Insurance Benefits 5,647,860.55 4,835,199.09PAG-IBIG Contributions 233,700.00 227,829.10PHILHEALTH Contributions 382,248.50 158,175.50ECC Contributions 231,668.86 229,308.63Terminal Leave Benefits 1,782,125.98 3,822,721.82Other Personnel Benefits 1,882,485.22 3,377,993.18Total Personal Services P 71,985,225.55 P 66,807,541.04

Maintenance and Other Operating ExpensesTraveling Expenses - Local 4,233,727.01 3,842,064.97Traveling Expenses - Foreign 1,500.00 10,515.36Training and Seminar Expenses 1,532,945.63 683,996.96

NATIONAL CONCILIATION AND MEDIATION BOARDConsolidated Detailed Statement of Income and Expenses

For the Year Ended December 31, 2009(With Comparative Figures for CY 2008)

7

2009 2008

Scholarship Expenses 23,478.00 18,000.00Office Supplies Expenses 2,992,355.57 3,269,740.15Accountable Forms Expenses 35,104.00 24,250.00Drugs and Medicine Expenses 479.75Gasoline, Oil and Lubricants 1,240,530.02 1,620,091.71Other Supplies Expenses 111,390.14Water Expenses 319,027.98 627,549.53Electricity Expenses 3,185,399.61 2,660,695.58Postage and Deliveries 391,720.28 345,192.20Telephone - Landline 1,569,166.84 1,748,820.40Telephone - Mobile 528,785.67 528,808.41Internet Expenses 418,806.84 349,589.61Advertising Expenses 1,410.00 18,032.00Printing and Binding Expenses 103,563.00 31,654.84Rent Expenses 9,134,658.07 5,140,605.77Representation Expenses 1,349,450.02 1,116,460.19Transportation and Delivery Expenses 25,075.00 26,000.00Auditing Services 173,672.82 17,222.00Subscription Expenses 146,411.34 63,094.60Legal Services 50,000.00General Services 122,124.72Janitorial Services 2,435,918.67 2,008,738.05Security Services 3,162,754.09 2,520,736.10Other Professional Services 2,582,267.21 2,222,181.57Repairs and Maintenance: Office Building 40,355.10 89,077.80 Other Leasehold Improvement 38,766.00 Office Equipment 259,876.73 381,171.50 Furnitures and Fixtures 141,371.65 211,973.50 IT Equipment and Software 332,215.03 215,559.14 Communications Equipment 200.00 Other Property, Plant and Equipment 500.00 Motor Vehicles 791,698.60 676,710.82Extraordinary Expenses 122,000.00 110,620.54Taxes, Duties and Licenses 2,229.06 4,398.12Fidelity Bond Premium 176,712.55 168,457.25Insurance Expenses 220,270.34 307,818.51Donation 30,000.00Depreciation Expenses: Office Equipment 315,851.90 159,555.49 Furniture and Fixtures 238,740.88 216,414.95

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2009 2008

IT Equipment & Software 1,038,789.62 1,049,760.59 Books 12,208.88 3,328.84 Communication Equipment 3,987.00 11,351.91 Motor Vehicle 122,400.05 122,399.95 Other Property, Plant and Equipment 539.92Other Maintenance & Operating Expenses(Note 12) 12,965,024.83 13,379,947.05Total MOOE (Note 14) 52,523,335.70 46,204,710.68Financial Expenses

Bank Charges 4,249.00 4,900.00Total Financial Expenses 4,249.00 4,900.00Total Expenses (Note 12) 124,512,810.25 113,017,151.72

Net Income Over Expenses (Note 15) P (8,836,926.25) P 3,888,211.55

See Accompanying Notes to Financial Statements

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2009 2008Cash Flow from Operating Activities:

Cash Inflows:Receipt of Notice of Cash Allocation (NCA) P 112,925,047.00 P 117,679,077.00Receipt of Notice of Transfer Allocation (NTA) 77,644,859.06 73,481,272.38

227,447.21Collection of Receivables (disallowances) 11,722.20 45,767.70

1,801,921.0921,130.14

Collection of Income/Revenues/fines and penalties 892.50 403,450.00Receipt of refund of cash advances 60,855.63 129,827.78Receipt of refund of overpayment of expenses 104,443.06

Total Cash Inflows 192,798,317.89 191,739,394.86

Cash Outflows:Cash payment of operating expenses 80,665,850.04 79,250,148.29Transfer of funds thru NTA 77,644,859.06 73,481,272.38Cash payment terminal leave 1,581,274.48 3,822,721.82Remittance of collections to BTR 351,784.86 229,905.54Reversion of unused NCA 3,599,412.45 6,415,642.50

1,801,921.09Grant of cash advances and petty cash funds 9,420,266.94 10,056,298.90Cash purchase of inventories 2,212,409.80 2,574,116.30

12,005.52Remittance of GSIS/PAGIBIG/PHILHEALTH payables 12,975,640.34 13,969,820.19Cash payment of accounts payables 870,539.89 2,137,543.37

Total Cash Outflows 191,135,964.47 191,937,469.29

Cash Provided by Operating Activities P 1,662,353.42 P (198,074.43)

Cash Flow from Investing Activities:Cash Inflows:

Receipt of Proceeds from sale of assets 2,500.00 5,627.05Cash Outflows:

Cash Purchase of Property, Plant and Equipment (1,766,671.73) (1,259,583.18)Cash Provided by Investing Activities (1,764,171.73) (1,253,956.13)

Total Cash provided by Operating and Investing Activities (101,818.31) (1,452,030.56)Add: Cash Balance, Beginning January 1 615,516.47 2,067,547.03Cash Balance, Ending December 31 P 513,698.16 P 615,516.47

NATIONAL CONCILIATION AND MEDIATION BOARDConsolidated Statement of Cash FlowsFor the Year Ended December 31, 2009

(With Comparative Figures for CY 2008)

Redemption/Return of Bidder's/Performance Bond

Cancellation of Checks Issued during the year

Collection of VA Award Held-In-TrustReceipt of Bidder's/Performance Bond

Payment/Deposit of VA Awards

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NATIONAL CONCILIATION AND MEDIATION BOARD NOTES TO FINANCIAL STATEMENTS

As of December 31, 2009 1. General/Agency Profile

1.1 The National Conciliation and Mediation Board (NCMB) was created by virtue of Executive Order No. 126, reorganizing the Department of Labor and Employment.

1.2 The NCMB is mandated by the EO to serve as the lead government

agency for:

Formulation of policies, develop plans and programs and set standards and procedures relative to the promotion of conciliation and voluntary arbitration. Facilitation of labor-management cooperation through joint mechanisms for information sharing, effective communication and consultation and group problem solving.

2. Basis of Financial Statements Presentation

2.1 The financial statements herein show the financial condition, result of operations and cash activities of NCMB for the calendar year ended December 31, 2009. These financial statements have been prepared in accordance with generally accepted state accounting principles and standards.

3. Summary of Significant Accounting Policies

3.1 The Board uses the accrual basis of accounting. All expenses are

recognized when incurred and reported in the final statements in the period to which they relate. Revenues are recorded when realized, except for transactions where accrual basis is impractical or when, other methods are required by law.

3.2 The board adopts the system of One Fund Concept. It maintains General

Fund (101) and Special Account in the General Fund (151) for Collective Bargaining Agreement Registration fees.

3.3 The Decentralized Accounting System is adopted.

Notice of Cash Allocation (NCA) is recorded in the Regular Agency (RA) books upon receipt of the Advice of NCA Issued.

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Notice of Transfer Allocation (NTA) is issued to the Regional Branches, and is recorded by the Branches upon receipt.

The Modified Obligation System is used to record allotments received and obligations incurred.

Income/receipts which the agency is not authorized to use and are required to be remitted to the National Treasury are recorded in the National Government (NG) Books.

3.4 Supplies and materials purchased for inventory purposes are recorded using perpetual inventory system.

3.5 Petty Cash Fund (PCF) account is maintained under the Imprest System.

All replenishments are directly charged to the expense account. Supplies and materials purchased out of the Petty Cash Fund for immediate use or emergency are taken up as outright expenses.

3.6 Property Plant and Equipment (PPE) are carried at cost less accumulated

depreciation and obsolescence. The Straight Line Method of depreciation is used to depreciate the PPE. A residual value computed at 10 percent of the cost of asset is set and depreciation starts on the second month after purchase. Regular maintenance, repair and minor replacements are charged against Maintenance and Other Operating Expenses (MOOE) as these were incurred.

3.7 Tangible assets with serviceable life of more than one year but small

enough to be considered as PPE are recorded as inventories upon acquisition and expense upon issuance.

3.8 Payable accounts are recognized and recorded in the books of accounts

only upon acceptance of the goods/inventory/other assets and rendition of services to the agency

3.9 Taxes withheld are remitted to the Bureau of Internal Revenue (BIR) thru

Tax Remittance Advice. 3.10 Accounts were reclassified to conform with the new Chart of Accounts

prescribed under the New Government System (NGAS) which was implemented effective January 1, 2002.

3.11 Financial expenses such as bank charges are separately classified from

MOOE.

3.12 Transactions in foreign currencies are recorded in Philippine Peso based on the BSP rate of exchange prevailing at the date of transactions.

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4. Correction of Fundamental Errors

4.1 Fundamental errors of prior years are corrected by using the Prior Year’s Adjustments account. Errors affecting current year’s operation are charged to the current year’s accounts.

5. Cash and Other Cash Accounts

Petty Cash Fund P 113,600.00 Cash-In-Bank, Local Currency Current Account 400,098.16

TOTAL P 513,698.16 Petty Cash Fund balance of P 113,600.00, consists of cash advance

granted to Regular and Special Disbursing Officers in the Central Office and Regional Branches, maintained under the Imprest System, for payment of petty or miscellaneous authorized expenditures which cannot be immediately paid by check.

The account Cash in Bank – Local Currency, Current Account consists of: Central Office:

Bidder’s Bond P 67,307.71 GATT Fund 20,000.01 Sports & Cultural Activities 43,668.00 Seminar /Conference Fees 24,755.48 ATM Payroll Account ___26,987.92 TOTAL P 182,719.12

Regional Branch No. VI:

Voluntary Arbitration Award P 216,821.08 Regional Branch No. XIII:

Regular Current Account P 557.96 TOTAL P 400,098.16

========== 6. Receivables

This account consists of:

Accounts Receivable P 10,000.00 Due from NGAs 38,531.42 Receivable-Disallowances and Charges 239,915.19 Advances to Officers and Employees 177,313.56 Other Receivables 15,000.00

TOTAL P 432,228.75

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The Accounts Receivable amounting to P10,000.00 was originally recorded in the Petty Cash Fund account but due to loss of funds through estafa by Ms. Adelfa Lacerna, former Cash Disbursing Officer of NCMB-NCR, the unliquidated cash advance was later reclassified to the said account at the start of the year.

The amount of P38,531.42 Due from NGAs consists of undelivered

supplies procured from the Procurement Service of the Department of Budget and Management during the last quarter of CY 2009.

The account Advances to Officers and Employees pertains to the

unliquidated cash advances granted for travel and for special purposes which have been liquidated early part of CY 2010.

The Receivable-Disallowances and Charges of P239,915.19 pertains to

the disallowances for the year 2004 and 2006 of NCMB-Main amounting to P2,661.54 and the Regional Branches VI and VIII in the amount of P233,179.44 and P4,074.21, respectively.

7. Inventories


Office Supplies Inventory P 1,308,034.42 Other Supplies Inventory 114,525.30

TOTAL P 1,463,170.28

All purchases are coursed thru the inventory account and issuances are recorded as they take place except for purchases out of the petty cash fund which are charged directly to the appropriate expense account.

8. Prepayments and Other Current Assets


Prepaid Rent P 1,223,172.48 Prepaid Insurance 41,101.43 Guaranty Deposits 50,000.00 Other Prepaid Expenses 17,696.67

TOTAL P 1,331,970.58

The account Prepaid Rent consists of P 1,195,632.48 for two months advance and security deposit for office space of the Central Office, and P 540.00 for advance rental for one unit lock box (P.O. Box 1604) in the Philippine Postal Office, while the P 27,000.00 represents payment for one month advance deposit for new office space of Regional Branch No. XII.

The Prepaid Insurance pertains to the unexpired portion of payment to

GSIS to cover insurance of supplies and motor vehicles.

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The account Guaranty Deposits represents the security deposit for rental of office building of Regional Branch No. VII.

The account Other Prepaid Expenses pertains to the deposit of telephone

services of Central Office.

9. Property Plant and Equipment


Particulars Acquisition Cost Accumulated Net Book Accounts Depreciation Value

Office Equipment P8,573,841.58 P6,077,658.99 P2,496,182.59 Furniture and Fixtures 5,796,427.81 3,964,066.26 1,832,361.55 IT Equipment and Software 15,074,566.56 10,606,394.94 4,468,171.62 Communication Equipment 125,248.00 101,974.25 23,273.75 Library Books 944,831.24 335,030.63 609,800.61 Motor Vehicle 11,286,388.00 9,569,106.25 1,717,281.75 Other Property, Plant & Equipment 55,210.69 1,889.62 53,321.07

TOTAL P41,856,513.88 P30,656,120.94 P11,200,392.94 =========== =========== ===========

The account Office Equipment included equipment worth P169,450.00, purchased from the Special Account in the General Fund (Fund 151).

10. Other Assets P 193,499.05

This account pertains to the cost of assets not used in the operation and those waiting for disposal.

11. Current Liabilities

This account includes the following:

Accounts Payable P 10,267,370.40 Due to Officers and Employees 3,303.00 Due to National Treasury 231,590.18 Due to GSIS 31,023.45 Due to PAG-IBIG 38,931.43 Due to BIR 182,583.88 Due to PHILHEALTH 81,462.50 Performance/Bidders/Bail Bonds Payable 15,849.41 Other Payables 207,459.80

TOTAL P 11,059,574.05

The Accounts Payable pertains to the unpaid obligations as of December 31, 2009 of the Central Office and the Regional Branches.

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The account Other Payables represents the remaining balance of the Voluntary Arbitration Award/Decision of Regional Branch No. VI.

12. Other Maintenance and Operating Expenses

The total Other Maintenance and Operating Expenses for the year amounted to P 12,965,024.83. The account includes expenses incurred in the conduct of plant-level orientation seminars on grievance machinery, voluntary arbitration, area-wide seminars and skills training. Payment for Subsidy of Voluntary Arbitrators is charged to the account.

It also includes expenses incurred during the Mid-Year and Year-End

Performance Assessment and Corplanning Exercises, Labor Day Celebration, Independence Day, DOLE Sports fest, Search for Outstanding LMC Awards for Industrial Peace, GAD Programs, payment of Collective Negotiation Agreement (CNA) and other regular and special activities/programs of the Board which cannot be classified under the specific financial expense accounts.

13. Subsidy Income from National Government

This account includes the following:

NCA received from DBM for payment of expenses for agency operational expenses P112,925,047.00

Tax Remittance Advice (TRA) issued to BIR 6,468,946.40 Less: Refund of Unused Cash Advances, etc. (60,855.63) Total P119,333,137.77

============ The account consists of Notice of Cash Allocation (NCA) received from

the Department of Budget and Management and Tax Remittance Advice and cash refund remitted to the Bureau of Treasury.

For this year, Notice of Cash Allocation (NCA) amounting to

P 112,925,047.00 was received from the Department of Budget and Management for the current operating expenses, payment of prior year liabilities and terminal leave benefits of former employees.

The total amount of P 77,644,859.06 was released to the Regional

Branches to cover their budgetary requirements for Operating Expenses (Personal Services, Maintenance and Other Operating Expenses and Capital Outlay).

14. Receipt of Other Income

In addition to the Subsidy Income from the National Government, the

agency’s financial resources were augmented by Other Fines and Penalties of P1,554.57 and Miscellaneous Operating and Service Income of P892.50.

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15. Expenses Expenses recorded in the books amounted to P124,512,810.25 which

include (a) non-cash expenses (depreciation) amounting to P1,732,518.25 and (bank charges) of P4,249.00 (b) Prior year adjustments amounting to P750,837.02 (c) Supplies expenses (prior year supplies inventories and issued during the year) amounting to P2,992,355.57 and (d) unpaid obligations for which goods and services have been delivered/rendered, and recognized during the year amounted to P10,267,370.40. Following the Matching Principle of Accounting, all expenses are recorded and reported in the period which they are incurred to reflect the actual expenses/utilization of the Board at year end. The unreleased cash allocation for the year amounted to P13,834,752.95, details shown in the table below:

Table 1

Summary of Allotment, Corresponding Released/Unreleased Cash Allocations

Allotment *Cash Allocation which should be

released by DBM

Actual Cash Released by

DBM

Unreleased Cash Allocation

RLIP P 5,924,977.00 P5,924,977.00 P5,924,977.00 - PS 66,352,365.00 61,044,175.80 59,690,307.90 1,353,867.90

MOOE 59,615,420.29 56,634,649.28 44,718,941.10 11,915,708.18 CO 3,322,103.03 3,155,997.88 2,590,821.00 565,176.88

TOTAL P135,214,865.32 P126,759,799.95 P112,925,047.00 P13,834,752.95

* Computed net of withholding of eight percent and five percent for PS and MOOE, respectively.

The reported expenses of P52,523,335.70 as of December 31, 2009

exceeded the reported income of P115,675,884.00 by P 8,836,926.25 due to unreleased cash allocation of P13,834,752.95. Of the latter amount, P10,267,370.40 was obligated and taken up as Accounts Payable as of December 31, 2009 causing an unfunded obligations of P7,104,408.00 ( negative balance of P8,836,926.25 less depreciation expenses of P1,732,518.25). The request for cash allocation to cover payment for the payable accounts of P10,267,370.40 has been submitted to the DBM early part of CY 2010.

16. Allotments, Obligations and Balances

Total allotment available during the year amounted to P135,214,865.32,

including the continuing appropriations/allotment carried over from FY 2008 of P10,700,523.32. Of the amount, P3,401,321.77 was reverted to the General Fund pursuant to the Budget Circular No. 2006-1 dated February 1, 2006. The Summary of Notice of Cash Allocation, Allotment, Obligations and Balances as of December 31, 2009 per expenditure program was as follows:

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Table 2

Summary of Notice of Cash Allocation, Allotment, Obligations and Balances Per Expenditure Program

Category

Notice of Cash Allocation (Subsidy)

Allotment

Obligations

Unexpended

Expenses/ Disbursements (Depreciation

Included)

Extended Current Total Total Reverted Extended

PS

P65,615,284.90 -

P72,277,342.00

P72,277,342.00

P72,000,225.55

P277,116.45

P277,116.45

P71,985,225.55

MOOE

44,718,941.10

P8,878,420.29

50,737,000.00

59,615,420.29

51,332,253.92

8,283,166.37

3,401,321.77

P4,881,844.60

52,527,584.70

CO

2,590,821.00

1,822,103.03

1,500,000.00

3,322,103.03

2,074,151.20

1,247,951.83

1,247,951.83

2,070,137.60

TOTAL

P112,925,047.00 P10,700,523.32 P124,514,342.00 P135,214,865.32 P125,406,630.67 P9,808,234.65 P3,678,438.22 P6,129,796.43 P26,582,947.85

The total obligations liquidated/disbursements for Maintenance and Other

Operating Expenses (MOOE) includes (a) depreciation amounting to P1,732,518.25 (b) unliquidated cash advances totaling to P146,731.12 (c) issuance of prior year supplies inventories totaling to P359,241.85 (d) closing of petty cash fund granted in prior years amounting to P2,000.00 (e) advance deposit of P27,270.00 for rental of office space and (f) prepaid insurance amounting to P5,944.50. While the P15,000.00 unliquidated obligations in Personal Services (PS) pertains to the longevity pay for prior year but paid only in 2009. The expense was taken up in the book as adjustment in the prior years’ account.

Of the total amount obligated in the Capital Outlay (CO), only

P2,070,137.60 was liquidated. The P4,013.60 unliquidated obligations pertains to the undelivered equipment procured from the Procurement Service of the Department of Budget and Management. The amount is included in the Due from NGAs.

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PART II - OBSERVATIONS AND RECOMMENDATIONS Cash Advance Cash advances for salaries and other benefits under account “Payroll Fund” were fully liquidated by the concerned accountable officers of NCMB Main and the regional branches as of December 31, 2009.

1. We recommended that management continue its compliance by the concerned accountable officers with the requirements/regulations of COA Circular No. 97-002 dated February 10, 1997 and Accounting Circular No. 2006-001 dated November 9, 2006, as to the liquidation of paid payrolls. Unliquidated Cash Advances of Officers and Employees in NCMB-Main and RCMB- CAR to RCMB- XII Unliquidated cash advances for travel/project expenses increased the balance of the account Advances to Officers and Employees by P106,994.38 or 152% while Petty Cash Fund totaling P113,600.00 remained unliquidated at year-end contrary to the rules and regulations of COA Circular No. 97-002 dated February 10, 1997, thus the pertinent accounts’ balances are overstated while the corresponding expenses accounts are understated. Likewise, the Subsidiary Ledger for said account not maintained in RCMB-VII.

2. The granting, utilization and liquidation of cash advance is governed by COA Circular No. 97-002 dated February 10, 1997, pertinent provisions of which are quoted as follows:

2.a “No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made

2.b A cash advance shall be reported on as soon as the purpose for which it was

given has been served.

2.c When a cash advance is no longer needed or has not been used for a period of two (2) months, it must be returned to or refunded immediately to the collecting officer.

2.d All cash advances shall be fully liquidated at the end of each year. Xxxx.”

3. The year-end unliquidated cash advances were composed of the following:

Table 1 Schedule of Unliquidated Cash Advances Per Account and Per Office

Offices

Petty Cash

Fund

Advances to Officers and Employees

Amount

NCMB-Main P64,600.00 P64,600.00 Regional Branches - ( RB CAR, I, II, III,

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- IV-A & B, V, VI,) 49,000.00 49,000.00 - (RB VII, VIII, X,

XI, XII)

177,313.56

177,313.56 Total for CY 2009 113,600.00 177,313.56 290,913.56 Total for CY 2008 P125,900.00 P70,319.18 P196,219.18 Increase (Decrease) P(12,300.00) P106,994.38 P94,694.38 Percentage of Inc./Dec. 9.77% 152.16% 48.26%

4. Very apparent in the above table is the significant increase of the year-end balance of account Advances to Officers and Employees by P106,994.38 or 152.16% as compared to last year, showing management’s failure to initiate control on the grants of cash advances for travels and project expenses. Verification of agency records also revealed that the purposes for which the cash advances were given have long been served but the unspent balances are yet to be refunded, as presented in the Aging of Unliquidated Cash Advances (Annex A).

5. The audit team also noted that the respective accountable officers in the Main Office and eight regional branches failed to liquidate the Petty Cash Fund (PCF) granted during the year totaling to P113,600.00 and allowed the PCF to remain in their safekeeping even in the ensuing year contrary to Paragraph 5.1.2 of COA Circular No. 97-002 dated February 10, 1997 which requires that “ The AO shall liquidate his cash advance for petty operating expenses and field operating expenses within twenty (20) days after the end of the year; subject to replenishment as frequently as necessary during the year.”

6. Moreover, the COA Audit Team of RCMB-VII noted that the Accountant-Designate failed to maintain a Subsidiary Ledger (SL) for the account Advances to Officers and Employees (148), thus immediate verification and review of the amount of cash advances granted and liquidated for each employee for a given time could not be facilitated, contrary to Section 12 of the New Government Accounting System (NGAS) Manual, Volume II.

Section 12 of the New Government Accounting System (NGAS) Manual, Volume II states that “ The Subsidiary Ledger (SL) is a book of final entry containing the details or breakdown of the balance of the controlling account appearing in the General ledger (GL). Postings to the SL generally come from the source documents. Examples of GL accounts which have SL are Cash Collecting Officers, Cash-Disbursing Officers, Cash in Bank-Local Currency, Current Account, Accounts Receivable, Notes Receivable, etc. The totals of the SL balances shall be reconciled with their respective control account regularly or at the end of each month. Schedules shall be prepared periodically to support the corresponding controlling GL accounts.”

7. Verification and review of the Trial Balance for calendar year 2009 revealed that the account Advances to officers and Employees (148) pertaining to the 12 agency personnel granted cash advances has no corresponding Subsidiary Ledger (SL), thus verification of their accountabilities for a given period could not be ascertained.

8. The continuous failure of the concerned accountable officers to liquidate the cash advances as soon as the purpose for which these were given has been served resulted to the

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overstatement of the balances of accounts Advances to Officers and Employees and Petty Cash Fund while the pertinent expense accounts were understated.

9. We recommended that management:

direct all concerned officers and employees of NCMB-Main and its regional offices to submit immediately the proper accounting of expenditures to settle the unliquidated cash advances for travel and project expenses as well as the Petty Cash Fund granted during the year.

comply strictly with the regulations/requirements of COA Circular No. 97-

002 dated February 10, 1997. request the immediate refund of the unexpended balance particularly those

pertaining to CY 2008 as required under Require the Accountant –Designate of RCMB-VII to maintain a Subsidiary

Ledger (SL) for account Advances to Officers and Employees (148) for the year 2010.

10. The Chief Accountant assured the COA Audit Team that she will inform all concerned accountable officers in the NCMB-Main office and its regional branches to liquidate all Petty Cash Funds still in their safekeeping. The malpractice of holding the Petty Cash Fund beyond the period required by COA regulations will automatically be stopped in year 2010. She also informed the Auditors that the unliquidated balance of the account Advances to Officers and Employees as of December 31, 2009 was reduced to P31,388.56 because RCMB-VII management already liquidated the amount of P145,925.00 on February 9, 2010 and instructed the Accountant-Designate to maintain a Subsidiary Ledger for the account Advances to Officers and Employees (148) starting January 2010.

Misclassification of account/transaction Loss of funds amounting to P10,000.00 due to the alleged estafa committed by a former disbursing officer of NCMB-NCR was reclassified to Accounts Receivable instead of Other Receivables (149) as required in COA Circular No. 2003-002 dated August 1, 2003, causing the year-end balance of the former account of doubtful validity while the latter is understated by the same amount.

11. The account Other Receivables is defined as an “amount due from agency’s officers and employees for overpayment, cash shortages, loss of assets and other bills issued by the agency. It also includes advances for official travel.” (Emphasis applied) 12. On the other hand, the account Accounts Receivable is used to record the amount due from customers/clients resulting from services rendered, trading/business transactions, and sale of merchandise or property which are expected to be collected in the regular course of business or over a definite period of time.

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13. Analysis of the Petty Cash Fund account disclosed that the prior year’s balance of P10,000.00 was reclassified to Accounts Receivable account as per Journal Entry Voucher Number 625 dated December 31, 2009 for the alleged loss of funds through estafa by Ms. Adelfa Lacerna, former Disbursing Officer of NCMB-NCR. Ms. Lacerna is no longer connected with POEA after a prolonged absence from work. This loss of funds was not reported to the Office of the COA Auditor.

14. The said loss of funds should have been recorded under the account Other Receivables instead of Accounts Receivable as required in COA Circular No. 2003-002 dated August 1, 2003.

15. Due to the erroneous classification of accounts/transactions by the Accounting Analyst, the year-end balance of Accounts Receivable was overstated while the account Other Receivables (149) is understated by P10,000.00.

16. We recommended that management require the Accounting Analyst to re-evaluate the entries made and effect the necessary adjustments to reflect the correct balances of the affected accounts in the ensuing year.

17. The Accounting Analyst clarified that the classification made is in accordance with the instruction/advice from the NCMB-Central Office (NCMB-CO). Nonetheless, they will strictly adhere to the audit findings and will make the necessary adjusting entry to reflect the correct balances of the affected accounts on the April 2010 financial report.

Unremitted trust receipts maintained in the depository bank

Miscellaneous trust receipts maintained/deposited to the agency’s depository bank totaling P88,981.44 were not yet remitted to the National Treasury contrary Executive Order No. 338, thereby overstating the balance of account Cash-In-Bank, Local Currency Current Account of the same amount.

18. Section 2 of Executive Order No. 338, as implemented by Joint Circular No. 1- 97, dated January 2, 1997 of the COA, DOF, and DBM, specifically requires “ All government offices to immediately transfer all public moneys deposited with depository banks and other institutions to the Bureau of the Treasury, regardless of income source.”

19. Section 6 of RA No. 9524, otherwise known as the General Appropriations Act for CY 2009 further provides that “Receipts from non-tax sources authorized by law for specific purpose which are collected/received by a government office or agency acting as a trustee, agent or administrator, or which have been received as guaranty for the fulfillment of an obligation, and all other collections classified by law or regulations as trust receipt shall be treated as trust liability of the agency concerned and deposited with the National Treasury in accordance with EO No. 338, s. 1996 xxxxxxxxxxxxxx.” 20. The balance of the account Cash-In-Bank-Local Currency Current Account (111) shown in the consolidated detailed Balance Sheet totaled P400,098.16. Analysis of the account revealed that the balance was composed of bidder’s bond receipts, excess/unutilized project funds and trust receipts (garnishment for award to aggrieved claimants)

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21. Further analysis of the account also revealed that of the P400,098.16 cash in bank, P88,981.44 or 22.24 percent are due for remittance/transfer to the National Treasury in accordance with the requirements of Executive Order No. 338, particularly the unutilized balances of programs/projects, as presented in the Table below:

Table 2

Trust Receipts Due For Remittance to the National Treasury

Nature of Collections/Receipts Cash-In-Bank, LCCA Balance

Funds Due for Transfer to

the BTR NCMB-Main Office

Bidder’s Bond P67,307.71 GATT Fund 20,000.00 P20,000.00 Sports and Cultural Activities 43,668.00 43,668.00 Seminar/Conference fees 24,755.48 24,755.48 ATM Payroll Account 26,987.92 Sub- Total 182,719.12 88,423.48

RCMB-VI Garnishment/Award to Aggreived Claimants 216,821.08

RCMB-XIII Unspent Project Funds 557.96 557.96 Grand Total P 400,098.16 P 88,981.44 ========= ========

22. The continuous failure of the accounting official to remit/deposit to the account of the National Treasury the remaining balance of collections, the excess/unutilized project funds and, the balance of account Cash-In-Bank, Local Currency Current Account reported in the financial statements resulted in the overstatement of the said account.

23. We recommended and management agreed to direct the Accountant and the Cashier to remit/deposit immediately the remaining balances of funds still maintained with the agency’s depository bank (LBP) in accordance with the requirements of Executive Order No. 338. Failure to do so shall subject the responsible official/s and employee/s to appropriate criminal and/or administrative action pursuant to Section 6 of the said EO.

24. The Chief Accountant informed the COA Audit Team that all dormant trust receipts long maintained in the depository bank will be closed as of June 30, 2010 as per coordination made with the Land Bank of the Philippines.

Unfunded obligations/expenses Unfunded obligations amounting to P7,104,408.00 earmarked as Accounts Payable as of December 31, 2009 increased the negative balance of the Statement of Income and Expenses to P8,836,926.25. 25. The net income over expenses reported in the Statement of Income and Expenses as of December 31, 2009 showed a negative balance of P8,836,926.25 making it appear that the expenses incurred by NCMB exceeded the subsidy/other income received during the year.

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26. The excess of expenses over income consists of depreciation expenses amounting to P1,732,518.25 and unfunded obligations amounting to P7,104,408.00 earmarked as Accounts Payable as of December 31, 2009.

27. The negative balance was disclosed by the agency Accountant in the Notes to the Financial Statements, under Note 15, indicating therein that the cause of the negative balance was the unreleased cash allocation amounting to P13,834,752.95.

28. Verification of agency reports and records showed that the total appropriations approved for NCMB as per General Appropriations Act for CY 2009 amounted to P115,483,000.00 while the actual special allotment released and received amounted to P19,731,865.32 as per Schedule of Special Release of Allotment(SARO) or a total allotment of P135,214,865.32. Of the latter amount, P125,406,630.67 was obligated during the year including those earmarked as Accounts Payable at year-end. However, the total cash allocation received as per Notice of Cash Allocation only amounted to P112,925,047.00, yielding an unfunded obligations of P12,481,583.67, of which P10,267,370.40 was taken up as Accounts Payable- Due and Demandable as of December 31, 2009. Total Accounts Payable for NCMB-Main amounted to P3,317,776.15 while the remaining balance of P6,949,594.25 was distributed to the regional branches nationwide.


advise the Budget Officer to coordinate with the Department of Budget and Management for the immediate release in the ensuing year of the National Cash Allocation (NCAs) to finance the unfunded obligations taken up as Accounts Payable as of December 31, 2009.

require the Chief Accountant to closely coordinate with the Budget Officer

and both will assess/compare the succeeding fund releases with the obligations incurred to avoid the recurrence of negative balances in the financial reports unless if the causes are non-cash transactions.

30. Management commented that the Accountant and Budget Officer were already instructed and have immediately conducted further review and analysis of the fund releases as well as the obligations incurred for the year. The total obligations of P125,406,630.67 included expenses incurred during the Mid-Year and Year-End Performance Assessment, Labor Day Independence Day Celebrations, DOLE Sports fest, Search for Outstanding LMC Awards for Industrial Peace, Voluntary Arbitrators fee, payment of Collective Negotiation Agreement (CNA) and other regular and special activities/programs of the Board which cannot be classified under any of the budgetary accounts. The above activities, programs and expenditures were charged against the available allotment/savings from the released MOOE of the Board. Revised Notes to Financial Statements, Statement of Allotment, Obligations and Balances, Cash Releases, and detailed computation of C.N.A. incentive were submitted for reference.

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31. The negative balance reported in the Statement of Income and Expenses was incurred, as follows:

a. On Personal Services – Terminal Leave Benefits and Other Personnel Benefits

(Productivity Enhancement Bonus and Monetization of Leave Credits). These expenses were obligated even without available appropriation/allotment using the savings from the released PS allotment as authorized in Section 60 of the GAA of 2009 (RA 9524) and item no. 5.1.2.1 of Budget Circular No. 2009-5.

b. Maintenance and Other Operating Expenses – these are expenses incurred for

the activities enumerated in paragraph no.36.

32. The Statement of Income and Expenses showed a negative balance due to unfunded obligations. The total cash allocation that should be released by the DBM should be P126,759,799.95. According to the DBM, all obligations which cannot be backed up by cash shall be reported as Accounts Payable as of December 31, 2009. The agency concerned shall request the release of the same in the ensuing year.

Unrecorded and unliquidated interfund transfer Funds amounting to P977,702.96 reportedly transferred to the NCMB-Main Office from the Department of Labor and Employment-OSEC were not recorded/recognized in the agency books and not yet liquidated as at year-end thus, the accuracy of the reported account balance is unreliable.

33. Section 48 of the Government Accounting and Auditing Manual, Volume I, specifically requires that:

“ Transactions must be promptly recorded to maintain the relevance and value of the information to agency management in controlling operations and making decisions.”

34. Further, Section 158 of the Manual on the New Government Accounting System, defines Due to NGAs as “ an account used to record the amount of liabilities due to national government agencies including those inter-agency transferred funds received for the implementation of specific programs/projects.”

35. Review of the Trial Balances and general ledger entries showed that the account Due to NGAs was not maintained in the NCMB- Main books of accounts as of December 31, 2009. Verification of agency records to validate the confirmation letter dated February 15, 2010 sent by the Audit Team Leader of the Department of Labor and Employment (DOLE) showed that the interfund transfer from DOLE to NCMB-Main for GATT activities amounting to P1,088,064.46 was previously taken up as Trust Liabilities in the Board’s books of accounts under the Old Government Accounting System (OGAS). Liquidations submitted for the interfund transfer were credited by the Accountant to the latter account. Pursuant to the Manual on the New Government Accounting System, all old accounts should be closed to the new chart of accounts, thus the balances of trust liabilities accounts pertaining to funds transferred by other government agencies should have been closed to the

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Due to NGAs account. On the other hand, the funds transferred were still existing in the DOLE books under the account Due from NGA’s showing an unliquidated balance of P977,702.96 as of December 31, 2009.

36. Interview made with the Chief, Financial Management Division, revealed that the liquidation papers are still in their custody since they are still awaiting for several supporting documents from the NCMB-Region IV.

37. We recommended that management require the Accountant to take up in the books the remaining balance of the fund transfer and cause the immediate liquidation of the same in the ensuing year.

38. Management commented that the Accountant averred that she recorded the amount transferred by DOLE for the GATT activities of NCMB-Main as Trust Liabilities (OGAS account). After the conduct of the approved training programs, the agency recorded the liquidation reports and submitted the same to DOLE thru the Office of then Undersecretary Felicisimo O. Joson, for their appropriate action. She later learned that the said reports were not taken in the books of DOLE when she received a confirmation from the COA-NCMB Audit Team. Concerned officials of the agency requested the Regional Branches to resubmit liquidation papers to the Central Office. As of date, all RBs’ have submitted their reports, except RV IV-A. The Accountant informed the Audit Team that she’s in the process of retrieving the liquidation papers with the assurance to submit the same report on or before April 30, 2010. She will also prepare Journal Entry Voucher (JEV) to restore the account Due to NGAs and will submit to DOLE the disbursement reports once completed. Non Submission of Bank Reconciliation Statements and its supporting documents The reliability and accuracy of the year-end balance of account Cash, National Treasury-MDS amounting to P14,829.51 in RCMB-VIII books cannot be ascertained due to the failure of the Accountant-Designate to submit the bank reconciliation statements and its supporting documents as of December 31, 2009 in violation of Section 74 of P.D. 1445 and COA Circular No. 92-125A. 39. Section 74 of P.D. 1445 states that:

“At the close of each month, depositories shall report to the agency head, in such form as he may direct, the condition of the agency account standing on the books. The head of the agency shall see to it that reconciliation is made between the balances shown in the reports and the balance found in the books of the agency.”

40. While COA Circular No. 92-125A dated March 04, 1992, Sec. 2.1, states: “The Chief Accountant/Head of Government Accounting Units of National Government Agencies shall: a. Prepare Monthly Treasury Reconciliation Statements (TRS) of Treasury

accounts and Bank Reconciliation of the general account based on the Treasury Statement (TS) and Bank Statement (BS) submitted by the BTr and the bank, respectively.

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b. Prepare correcting/adjusting entries for discrepancies/errors or other reconciling items requiring corrections by the agency immediately after the Treasury/Bank Reconciliation Statements were made and after these items were properly analyzed and verified.

c. Submit the originals of the TRS within 15 days after receipt of TS together with

copies of the Journal Entry Vouchers taking the correcting/adjusting entries, to TARD, BTr and Accounting Office (AO) COA

d. Submit the original of the BRS for the general account within 15 days after the

end of the month to the COA Auditor, copy furnished the concerned Government Servicing Bank (GSB) and the Department of Budget and Management (DBM) and Accounting Finance Bureau (AFB).”

41. Section 5 of the same Circular states that, “failure on the part of the officials concerned to comply with the requirements of this Circular shall subject them to the sanctions imposed under Section 122(2) and (3) of PD 1445”. 42. The COA Audit Team in RCMB-VIII noted that the Accountant failed to submit Bank Reconciliation Statements from May 2008 to December 31, 2009 hence, the accuracy of the monthly bank transactions as shown in the bank statements remained unverified, thus, affecting the reliability of the reported year-end balance of the account Cash-In-National Treasury-MDS. 43. When asked, the Accountant-Designate reasoned out that the delay was due to the late submission of bank statements by the depository bank. The COA Audit team averred that she should take the initiative to obtain personally or follow up from the bank in writing the copies of bank statements as well as informing them of the delay or non-receipt of the bank statements. 44. We recommended strict compliance with Section 74 of PD 1445 and COA Circular No. 92-125A to avoid the sanctions of automatic suspension of payment of salaries due to failure of the Accountant-Designate to comply with the submission of the Bank Reconciliation Statement pursuant to Section 122(2) and (3) of PD 1445. 45. Specifically, we suggested the following remedial steps:

a. Make arrangement with the depository bank to allow the Accountant to pick up the bank statements to ensure timely receipt of bank statements.

b. Require the Accountant to prepare and submit BRS for December 2009 and

the previous months/years and to update the related accounting records. 46. In the exit conference, management acknowledged the audit recommendation and assured the audit team to submit the required reports. 47. The COA Audit Team also emphasized that the sanctions embodied in Section 122(2) and (3) of PD 1445 will be imposed should the designated Accountant still fail to submit the BRS at least, in the next calendar year.

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Overstatement of Office Supplies Inventory account of NCMB-Main Office supplies valued at P24,088.02 which were not found during the physical inventory count remained unaccounted for by the concerned supply official due to the issuance of supplies carried on stock without the required Requisition and Issue Slip pursuant to Section 53 of the Manual on the New Government Accounting System, Volume II, causing the overstatement of the year-end balance of Office Supplies Inventory account by P476,206.06. 48. Section 53 of the Manual on the New Government Accounting System, Volume II provides that:

“Requisition and Issue Slip (RIS). The Requisition and Issue Slip (Appendix 50) shall be used to request supplies and materials that are carried on stock.”

49. We noted during interviews with concerned officials that a newly-hired employee was designated Storekeeper on November 9, 2009. The transfer of accountability from the outgoing to the incoming officer, was done hence, an inventory listing of supplies was turned over to the new Storekeeper. Thereafter, they conducted the physical count of the unused supplies carried on stock at the stockroom. The immediate conduct of physical inventory disclosed discrepancies between the inventory list of items with the actual count of P24,088.02.

50. According to the outgoing Storekeeper, the difference can be attributed to the immediate issuance of requested supplies even without the required Requisition and Issue Slip (RIS) every time there is an immediate request for needed supplies.


instruct the new Storekeeper to adhere strictly to the COA rules and regulations and avoid the issuance of requested supplies in the absence of RIS

reconcile the discrepancies noted between the balances per books and per

count. coordinate with the accounting personnel for the preparation of necessary

Journal Entry Vouchers to record the issuances of office supplies without requisition slips after reconciliation of the above stated items to arrive at the correct cost of unused supplies carried on stock.

52. Management commented that they had conducted several meetings with the concerned officers to discuss the matter even before the receipt of this AOM. Actually, they were required to conduct a recount of office supplies in the stockroom to verify the balance per stock cards. However, after the recount, it showed that the balances of most of the listed supplies do not tally with the actual stocks on hand. The Storekeeper is now going over the stock cards to account the discrepancies noted. He was also instructed to strictly comply with the COA rules and regulations on the issuance of supplies to prevent recurrence of the problem.

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Unreconciled Property,Plant and Equipment Accounts’ Balances

The balances of Property, Plant and Equipment accounts per accounting records totaling P41.86 million and per property unit’s physical count of P37.66 million differed by P4.20 million, thus casting doubts on their reliability. 53. The Manual on Property Custodianship specifically requires the reconciliation of Property and Accounting Records, the rules hereby quoted, to wit:

“After the physical inventory-taking, the Inventory Committee shall reconcile

the results of the count with the property and accounting records. The inventory listing of the equipment shall be checked on the property card maintained by the property as against the equipment ledger cards maintained by the accounting and the total thereof shall be compared with those in the general ledger.”

54. Moreover, Section 491(b) of the Government Accounting and Auditing Manual (GAAM) Volume I, provides that:

“All discrepancies between physical and book balance must be investigated and cleared immediately. If necessary, written explanations shall be required from person responsible.”

55. We noted that the Inventory Committee of the NCMB conducted the physical inventory of all properties only during the early part of CY 2010 in the absence of a COA representative as witness pursuant to Section 490 of GAAM, Volume I. The Report on the Physical Count of Property, Plant and Equipment (RPCPPE) was submitted to the COA Audit Team on March 2, 2010 but not reconciled with the accounting records. The balances of Property, Plant and Equipment (PPE) accounts reported in the year-end financial reports totaling to P41,856,513.88 differed with the report of physical count of P37,245,804.11 by P4,610,709.77, as shown below:

Table 4

Difference of PPE Accounts’ Balances Per Record with Per Count Particulars Per Accounting

Records Per Count Difference

Office Equipment P8,573,841.58 P6,890,796.43 P1,683,045.15 Office Furniture & Fixtures 5,796,427.81 5,967,105.01 (170,677.20) IT Equipment & Software 15,074,566.56 11,953,103.28 3,121,463.28 Library Books 944.831.24 1,291,715.79 (346,884.55) Communication Equipment 125,248.00 166,696.60 (41,448.60) Motor Vehicles 11,286,388.00 10,970,388.00 316,000.00 Other Property, Plant and Equipment

55,210.69

5,999.00

49,211.69

Total P 41,856,513.88 P 37,245,804.11 P 4,610,709.77 56. It can be gleaned from the above table that the total value of Office Furniture and Fixtures, Library Books and Communication Equipment per physical inventory are higher

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when compared with the accounting records while IT Equipment and Software showed a remarkable difference of P3,121,463.28 between the two reports.

57. The difference of P4,610,709.77 can be attributed to the following deficiencies noted in audit mostly from RCMB-NCR which concerned officials failed to correct during the year due to the non-reconciliation of the accounting records with those maintained in the property units.

a) Comparison of CY 2009 with last year’s Report on the Physical Count of

Property, Plant and Equipment (RPCPPE) and the inventory report with the accounting records of RCMB-NCR showed a difference of P163,498.83 due to the failure of the Inventory Committee to include several units with total value of P325,055.00 (Annex B) under the accounts Office Equipment, Furniture and Fixtures and IT Equipments and Software when same units were recorded in the ledger books. Details shown below:

Table 5

Difference of Per Record with Per Count Particulars Per Accounting

Records Per Count Difference

Office Equipment P540,227.00 P503,327.00 P36,900.00 Furniture&Fixtures 628,716.51 616,800.51 11,916.00 IT Equipment & Software 1,211,624.33 1,096,941.50 114,682.83 Motor Vehicles 741,000.00 741,000.00 - 0 - Total P3,121,567.84 P2,958,069.01 P163,498.83

b) Two items totaling P9,300.00 were included in the CY 2009 inventory report

of RCMB-NCR under the account Office Furniture and Fixtures but taken up in the books upon purchase in the account Office Equipment. Realizing the erroneous entries made, the Accountant-Designate reclassified the previous entries done from the accounts Office Equipment to the Other Supplies Expenses instead of Furniture and Fixtures, thereby causing the year-end balance of the latter account understated and overstated the pertinent expense account of the same amount.

Furniture and Fixture Quantity Amount

a. Open Shielves 72x36x18 1 P4,800.00 b. Bookshelves 1 4,500.00

Total P9,300.00 =======

c) Six units of unserviceable computer chairs of NCMB-NCR valued at P2,400.00/unit or a total of P14,400.00 and undetermined value of IT Equipment were dropped off from the books at book value of P2,484.00 and P3,394.17, respectively instead of actual cost upon purchase. We also noted that no report of disposal of property was submitted to the COA Audit Team during the year. Details are shown below:

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Book Value Actual Cost Difference

IT Equipment and Software P 3,394.17 P25,142.00 P21,747.83 Furniture and Fixtures 2,484.00 14,400.00 11,916.00

d) The year-end balance of Office Equipment account amounting to P540,227.00

under the RCMB-NCR office is understated by P2,500.00 due to the erroneous recording of furniture and fixtures amounting to P9,300.00.

e) Unserviceable office furniture and IT equipment in RCMB-NCR were

automatically dropped-off from the books at book value of P5,878.17 instead of its accumulated actual cost of P39,542.00.

f) Noted during the conduct of physical inventory count in RCMB-CAR were

several properties found in station but were not included in the RPCPPE. Except for the SCRA books worth P42,800.00, these items were covered with duly accomplished Acknowledgement Receipts of Equipment (ARE).

58. The failure of management to reconcile the result of inventory report with the accounting records rendered the year-end balances of the affected fixed asset accounts unreliable. 59. We recommended that management require:

the Inventory Committee of NCMB Main to:

Complete the reconciliation of the result of the inventory with the accounting records and investigate the discrepancies noted.

Coordinate with the accounting personnel for the preparation of

necessary adjustments to arrive at the correct value of existing properties.

Submit the reconciled report to the COA Audit Team in accordance

with Section 490 of the GAAM, Volume I. the Supply Officer of RCMB-NCR and CAR to:

Instruct the respective Accounting Analyst to prepare adjusting

entries next calendar year to reflect the corrected balances of the affected accounts.

Follow strictly the accounting principles and standards in the

recording of transactions to avoid misleading information in the year-end financial reports.

60. Management of NCMB –Main and RCMB-NCR and CAR agreed to the audit recommendations and assured the Audit Team that the inventory report will be revised and reconciled with the accounting records. Necessary adjusting entries will also be made to

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correct the discrepancies noted in the audit relative to the recording of unserviceable properties to drop its cost from the books. The corrected amount will be reflected in the March and April 2010 financial report. The cost of unserviceable properties still subject for disposal will also be reclassified to Other Asset account. The Accountant-Designate of RCMB-CAR also commented that the procurement of the items were charged to the Maintenance and Other Operating Expenses (MOOE) funds, thus, were not included in the report.

61. The COA Audit Team, however emphasized that the non-recording of the procured items in the books is contrary to Section 63 of Presidential Decree (P.D.) No. 1445, which states that:

“Except as may otherwise be specifically provided by law or competent authority, all money and property officially received by a public officer in any capacity or upon any occasion must be accounted for as government funds and government property. Government property shall be taken up in the books of the agency concerned at acquisition cost or an appraised value.”

62. We further recommended and management agreed that the Supply Officer shall determine the acquisition costs of the subject property and shall be included in the Report on the Physical Count of Property, Plant and Equipment and likewise, be recorded in the agency books. All assets procured to be used in agency operations, regardless of funding source, are to be recorded and accounted for as government property. Unserviceable/obsolete Property, Plant and Equipment not yet disposed Unserviceable/obsolete properties in RCMB-II valued at P484,209.60 were not yet disposed of during the year and not reclassified to Other Assets account in violation of Section 143 of the Manual on National Government Accounting System (NGAS), thus resulting in the overstatement of PPE accounts and the understatement of Other Assets account. 63. Analysis of Other Assets account revealed that the reported year-end balance of P193,499.05 did not include the unserviceable properties in RCMB-II with total cost of P484,209.60. The items were still included in the report of physical inventory-taking for CY 2009 of serviceable properties due to the branch’s failure to conduct its disposition during the year. 64. We recommended and management of RCMB II agreed to:

instruct the Accountant-Designate to draw a journal entry voucher reclassifying the unserviceable properties to Other Assets account pursuant to Section 143 of the Manual on NGAS.

require the property officer to prepare and submit to COA the prescribed

Inventory & Inspection Report (I&I Report) of unserviceable properties indicating the management’s appraisal therein, for the conduct of necessary inspection and evaluation needed for their disposal pursuant to Section 64 of the Manual on NGAS.

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Unserviceable furniture and IT equipment costing P39,542.00 in RCMB-NCR were automatically dropped-off from the books at book value of P5,878.17 instead of the actual cost without the proper disposal required by existing laws, rules and regulations.

65. Section 79 of PD 1445 dated June 11, 1978, particularly requires that:

“Destruction or Sale of Unserviceable Property – when government property has become unserviceable for any cause or is no longer needed, it shall, upon application of the officer accountable therefore, be inspected by the head of the agency or his duly authorized representative x x x x and if found to be valueless or unsalable, it may be destroyed. If found valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body x x x. In the event that public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned x x x.”

66. Likewise, Part II-H of DBM National Budget Circular No. 425 dated January 28, 1992, specifically provides that:

“H. Dropping from the books of Accounts. Upon disposal of property, the pertinent portions of the Inventory and Inspection Report of Unserviceable Property (IIRUP), Waste Materials Report or Invoice-Receipt of Property, whichever applicable, shall be accomplished. These reports shall be the basis for dropping the property from the books of accounts and for taking up the proceeds from the sale of property.”

67. Noted during the analysis of accounts Furniture and Fixtures and IT Software and Equipment were unserviceable properties with total cost of P39,542.00 automatically dropped off from the books at book value of P5,878.17 even without the proper disposal required under the aforecited existing laws, rules and regulations. Details are shown below:

Table 6

List of Property Automatically Dropped-Off from the Books Kind of Property

Specifications

Quantity

Unit Cost

Total Cost Per Ledger

Book

Book Value/ Replacement

Cost Furniture & Fixtures

Computer Chairs, Sigma, Dark Green D-3198

6

P2,400.00

P14,400.00

P2,484.00

IT Software and Equipment

Intel, Pentium IV, 512MB,HD: 80 GB 7200 RPM Fax Modem, D-Link, DFM, Monitor: Giant 15” White, DVD Rom, 16X white internal with AVR-500 watts and Monitor Filter

1

25,142.00

25,142.00

3,394.17 Total 7 P 39,542.00 P 5,878.17

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68. Further verification of the entries made under Journal Entry Voucher No. 627-B revealed that the recorded transaction was actually intended to take up the unserviceable properties as of December 31, 2009 but the accounts debited were Accumulated Depreciation-IT Software and Equipment and Accumulated Depreciation-Furniture and Fixtures amounting to P3,394.17 and P2,484.00, respectively, instead of Other Asset account at total value of P39,542.00, the recorded cost of the items subject for disposal.

69. COA Circular No. 2008-001 dated January 29, 2008 defined Other Asset Account (729) as a debit account composed of cost or fair value of other assets which are not classified under any of the specific asset accounts including serviceable assets not used in operation as well as unserviceable property, plant and equipment awaiting disposal. (Emphasis ours) 70. The erroneous classification of unserviceable properties and the dropping-off from the books at book value instead of at cost overstated the year-end balance of the accounts Furniture and Fixtures by P11,916.00 (P14,400.00 less P2,484.00) and IT Software and Equipment by P21,747.83 (P25,142.00 less P3,394.17) and understated the balance of Accumulated Depreciation-Furniture and Fixtures by P2,484.00 and Accumulated Depreciation-IT Software and Equipment by P3,394.17.00. Likewise, the account Other Asset was not included in the financial statements.

71. We recommended that management direct the Accounting Analyst to prepare immediately adjusting entries in the succeeding year to reflect the correct balances of the affected accounts and to follow strictly the accounting principles and standards in the recording of transactions to avoid misleading information found in the year-end financial reports.

72. Concerned management officials averred that the Inventory Committee already revised the inventory report prepared earlier by the Supply Officer–Designate to conform with the accounting records. The Accounting Analyst admitted that the following unserviceable properties were indeed recorded in the books at its Book Value (BV) and not the Actual Cost (AC) as shown below:

Book Value Actual Cost Difference IT Equipment & Software P 3,394.17 P 25,142.00 P 21,747.83 Furniture & Fixtures 2,484.00 14,400.00 11,916.00 73. With regards to the discrepancy between the book value and the actual cost in the above items, the Accounting Analyst already effected the necessary adjusting entries and reflected the correct balances in the March 2010 Quarterly Financial Report. Small tangible items not reclassified under Inventory account Small tangible items with estimated useful life of more than a year in RCMB-CAR totaling to P41,259.77 were not reclassified from Office Furniture and Fixtures to Inventory account contrary to COA Circular No. 2005-002 dated April 14, 2005, thus overstating the PPE account while understating the Inventory account.

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74. A review of the Report on the Physical Count of Property, Plant and Equipment showed that several articles listed in the report with total value of P41,259.77 were improperly classified as Furniture and Fixtures. This was not in accordance with the description of accounts in the Chart of Accounts under the NGAS. 75. Among these items are Monobloc chairs and white boards totaling P10,274.77, which are considered as small tangible items that should have been recorded as inventories upon acquisition and expense upon issuance in accordance with Section 2.2.1 of Commission on Audit (COA) Circular No. 2005-002 dated April 14, 2005. 76. Due to the misclassification of accounts, depreciation was also provided for these items contrary to Section 2.2.2 of COA Circular No. 2005-002, which states that:

“Other tangible assets not included in the list per Annex A (List of Tangible Assets that may be considered as Inventories) shall be classified as PPE, subject to depreciation.”

77. As a result, the Office Furniture and Fixtures and corresponding accumulated depreciation accounts were overstated while the Inventory account was understated. 78. We recommended and management agreed that: the Accountant-Designate shall prepare the adjusting entries and record the

procured small tangible assets in accordance with COA Circular No. 2005-002. the Supply Officer shall issue Inventory and Custodian Slips for the monobloc

chairs and white boards for monitoring, control and accountability purposes. Improper classification of expenditure transactions Several expenditure transactions of NCMB-Main and RCMB-NCR were not yet properly classified to pertinent appropriate accounts in accordance with COA Circular No. 2004-008 dated September 20, 2004 despite repeated reminders in last year’s audit report, thus affecting the accuracy of the reported operating expenses in the financial statements.

79. Section 111(2) of Presidential Decree 1445 provides that:

“(2) The highest standards of honesty, objectivity and consistency shall be observed in the keeping of accounts to safeguard against inaccurate or misleading information.”

80. COA Circular No. 2004-008 provides the updated description of accounts under the New Government Accounting System applicable to National, Local and Corporate.

81. Verification of agency records and analysis of various expenditure accounts of NCMB-Main disclosed that the following transactions were improperly recorded/entered in inappropriate accounts which resulted in misleading information detrimental to the best interest of the agency in conducting performance analysis and budget forecasting:

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a. Overtime pay of regular employees amounting to P120,087.98 and P12,889.41

were recorded to the Salaries and Wages-Regular (701) and Other Professional Services (799) accounts, respectively when the former is used in recording the pay proper of regular government employees for services rendered while the latter is used to record the cost of other professional services contracted by the agency not classified under specific professional services accounts, instead of to the appropriate Overtime and Night Pay (723), account used in the recording of compensation to authorized government employees for working in excess of the minimum hours.

b. Representation Allowance (713), an allowance granted to authorized officials

and employees while in the actual performance of their respective functions, totaling to P126,200.00, was erroneously entered to the account Representation Expenses (783), an account used to record the expenses for official meetings/conferences/entertainment.

c. Transportation Allowance (714), allowance granted to authorized

officials/employees for transportation, in the amount of P126,200.00 was erroneously charged to Traveling Expenses-Local (751) which is defined as the account used to record expenses in the movement of persons within the country and whether employed in the government or not, such as transportation and travel per diem, hire of guides, ferriage, and all other similar expenses.

82. Likewise, verification of RCMB-NCR records and analysis of the account Other Maintenance and Operating Expenses (969) disclosed that the transactions shown below were improperly recorded/entered in the corresponding accounts which provide misleading information detrimental to the best interest of the agency in conducting performance analysis and budget forecasting:

Overtime Pay - P14,972.10 Monetization of Leave Credits 12,517.27 Repairs and Maintenance Expenses 9,000.00 Other Supplies Expenses 32,930.00 Total P 69,419.37

======== 83. The improper classification of the expenditure transactions were already mentioned in last year’s Annual Audit Report but the same errors were still noted/ observed in the agency records both in the NCMB-Main and RCMB-NCR during the current year.

84. Due to the misclassification of expenditure transactions by the Accountant in NCMB-Main, the year-end balances of the accounts Salaries and Wages-Regular, Other Professional Services, Representation Expenses and Traveling Expenses-Local were overstated while those for the accounts Overtime and Night Pay, Representation and Transportation Allowances were equally understated.

85. On the other hand, due to the failure of the Accounting Analyst of RCMB-NCR to reclassify the subject expenditures to its appropriate accounts, the balance of Other MOOE

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account was overstated by P69,419.37 while the affected pertinent accounts were understated by the same amounts. 86. We recommended that management:

instruct the Accountant in NCMB-Main and the Accounting Analyst in the RCMB-NCR to be careful in the recording of entries in the journal reports and ledger books.

require the same officials to prepare adjusting entries in the succeeding

year to reflect the correct balances of the affected accounts and to follow strictly the accounting principles and standards in the recording of transactions to avoid misleading information in the year-end financial reports.

87. Management commented that: Item 8.2 of Budget Circular No. 10 dated March 29, 1996 provides that “Agencies are hereby authorized to use savings from released allotments for current operating expenditures for the payment of overtime services without need for prior authority from DBM”. Pursuant to this circular, claims for overtime services are being charged from the available savings of the Board, whether it be from PS or MOOE. This resulted to the confusion of the concerned officer in recording the transactions. 88. For the payment of reimbursable Representation and Transportation Allowance (RATA), the Board is always guided by National Compensation Circular No. 67-B dated August 8, 2002, specifically 4.1.2 and 4.1.3. Since the Board has no available savings from the appropriations for RATA, Section 4.1.3 is applied which provides that “For reimbursable RATA, the amount shall be solely charged against savings from Maintenance and Other Operating Expenses”. Inasmuch as the said provision does not specify the account expense to be used, the same is charged against the savings from MOOE particularly from Representation and Traveling Expense accounts. 89. Nonetheles, both Accountants were instructed to coordinate with the COA Audit Team for the appropriate accounts to be used in recording these transactions. They are advised to strictly adhere to the audit findings and to be more careful in the recording of future transactions. Management assured the COA Audit Team that necessary adjustments will be made in the next calendar year to reflect the proper classification and charging of accounts/expenses in accordance with the updated description of Chart of Accounts under the New Government Accounting System.

90. These audit findings are prior year’s audit observations of the previous COA Auditors of NCMB- Main and RCMB- NCR and were reiterated in the CY 2009 AAR since no actions were taken by management to implement last year’s audit observations.

Non-compliance with existing laws, rules and regulations on procurement

A copy of the contract involving the outsourced Psychometric Assessment Services in NCMB-Main was not forwarded to the COA Office for review and evaluation of cost as required in COA Circular No. 87-278 and COA Memorandum No. 2005-027 while the procurement process/procedures were not conducted by NCMB but made use of the activity done by the Department of Labor and Employment (DOLE).

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91. COA Circular No. 87-278 requires “all audited agencies to furnish the COA Auditor with copies of perfected contracts and purchase orders within five (5) working days upon approval.” 92. A perusal of the documents furnished the COA Office and verification of agency records revealed that no contract was submitted to the COA Office for review by the COA Auditor as required by the aforementioned regulations. Only submitted to the COA Audit Team upon verbal request are the Letter of Intent duly signed by an official of Quaerito Qualitas, the service provider, and Amendment to Contract with other pertinent supporting documents. 93. The Audit Team further noted during the interview with the OIC of the Internal Services that the pertinent necessary papers for the procurement of the outsourced psychometric assessment service were kept by the concerned BAC officials of the Department of Labor and Employment (DOLE) since the modes of acquisition were selected and the processes/procedures were conducted by them. Concerned NCMB officials believed that being an umbrella agency, they can make use of the department’s procurement activity and just hire directly the services of the provider.

94. Section 11.1 of the Implementing Rules and Regulations Part A of Republic Act 9184, as amended, specifically states that:

“Each procuring entity shall establish in its head office a single BAC to undertake the functions specified in Section 12 of this IRR-A. However, to expedite the procurement process for practical intent and purposes, the head of the procuring entity may create separate BACs where the number and complexity of the items to be procured, so warrants.”

95. We recommended that management: create a Bids and Awards Committee (BAC), separate and distinct from that of

the DOLE as required by existing laws and regulations and to adhere strictly to the requirements of RA 9184 to address the procurement needs of NCMB-Main Office and its regional offices.

instruct the Accountant to submit to the COA Auditor all contracts including

Purchase Orders five days after perfection thereof.

96. Management officials present during the exit conference assured the COA Audit Team to comply with the audit recommendations in the succeeding year. The Accountant was instructed to submit all copies of contracts not yet forwarded to the COA office. The compositions of the Bids and Awards Committee (BAC) of RCMB-IX was not in accordance with the pertinent provisions of the Implementing Rules and Regulations (IRR-A) of Republic Act (RA) 9184, thus, casting doubts on the regularity of the procurement undertaken by management. 97. Section 11.2 of IRR-A of RA 9184 provides for the composition of BAC members that shall be composed of at least (5) members, three (3) regular and two (2) provisional members.

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98. Evaluation of the agency procurement showed that the composition of the BAC in RCMB-IX was only limited to two (2) personnel, the Chairman and one member only, which is not in accordance with the requirements of RA 9184. 99. The continuous failure of management to comply with the provisions of the procurement law regarding the composition and creation of the BAC casts doubts on the regularity of all the procurement already undertaken by the agency. 100. The COA Audit Team in RCMB-IX recommended that management require all concerned officials/employees to comply strictly with the provisions under RA 9184 in the creation/establishment of BAC in the regional branch. 101. Management further explained that the Branch has only seven (7) employees including the Branch Head with their respective designations, in addition to their regular functions, and has no contractual/casual employees. 102. The COA Audit Team maintained their stand on compliance the requirements of the law. While it is true that the branch have only seven (7) plantilla employees, management can make use of the other remaining personnel to complete the BAC members/composition as required by RA 9184.

Lack of necessary supporting documents

Expenditures of RCMB-XI were paid even without the complete supporting documents contrary to Par. 6 Sec. 4 of PD 1445 dated June 11, 1978 and Sec. 3.3.1 of COA Circular No. 2004-006 dated September 9, 2004 which resulted in the audit suspension amounting to P31,950.00. 103. Par. 6, Sec. 4 of PD 1445 dated June 11, 1978 provides that claims against government funds shall be supported with complete documentation. 104. Section 3.3.1 of Circular No. 2004-006 further states that the Official Receipt (OR) shall be required for disbursements where the payee/recipient is a business establishment required by the Bureau of Internal Revenue to issue Official Receipts for its collections. The OR may also be in the form of cash receipt tape generated by cash register with the Bureau of Internal Revenue seal. 105. We observed that the following expenditures were paid without complete supporting documents in violation of the above-cited auditing regulations, thus resulting in audit suspensions amounting to P31,950.00.

Table 7 Expenditures Paid Without Complete Supporting Documents

Account Amount Telephone Expenses-Mobile P9,950.00 Traveling Expenses 22,000.00 Total P31,950.00

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106. Audit of the account Telephone Expenses-Mobile covering the period January 1 to December 31, 2009 showed that payment of cellular prepaid cards amounting to P9,950.00 were not supported with the required official receipts contrary to Par. 6 Sec. 4 of PD 1445 dated June 11, 1978 and Section 3.3.1 of COA Circular No. 2004-006 dated September 9, 2004. 107. Details of the suspended transactions on the purchase of prepaid cards are shown below:

Table 8 Suspended transactions on the Procurement of Prepaid Cards

Check No. DV No.

Date

Particular

Amount

Amount Receipted

Amount Not

Receipted

Payee

1316770 RB XI-2009-12-391 12/9/09 Cellcard-Dec.09

P1,500.00 P1,500.00 Isidro L. Cepeda

1316738 RB XI-2009-11-360 11/5/09 Cellcard-Nov.09

1,000.00 1,000.00 Isidro L. Cepeda

1316719 RB XI-2009-10-341 10/8/09 Cellcard-Oct.09

1,000.00 1,000.00 Isidro L. Cepeda

Sub-Total 3,500.00 0.00 3,500.00 1316692 RB XI-2009-09-314 9/22/09 Cellcard-

Sept.09 1,000.00 200.00 800.00 Adorico D.

Dadivas Jr. 1316655 RB XI-2009-08-277 8/12/09 Cellcard-

Aug.09 1,000.00 1,150.00 (150.00) Adorico D.


Jul.09 1,000.00 600.00 400.00 Adorico D.

Dadivas Jr 1316576 RB XI-2009-06-195 6/5/09 Cellcard-

Jun.09 1,000.00 400.00 600.00 Adorico D.

Dadivas Jr. 1316534 RB XI-2009-05-156 5/5/09 Cellcard-May

09 1,000.00 1,000.00 Adorico D.


Apr.09 1,000.00 200.00 800.00 Adorico D.


Mar.09 1,000.00 1,000.00 Adorico D.


Feb.09 1,000.00 1,000.00 Adorico D.


Jan.09 1,000.00 1,000.00 Adorico D.

Dadivas Jr. Sub-Total 9,000.00 2,550.00 6,450.00 Total Grand Total P12,500.00 P2,550.00 P9,950.00

108. Management explained that they thought that the submission of cell cards was sufficient and a valid substitute of the required official receipt. The audit team emphasized that an official receipt is required as proof of payment. 109. Further, the payment of relocation and other incidental expenses amounting to P22,000.00 arising from the reshuffling of Director Isidro L. Cepeda from NCMB Regional Branch VI, Iloilo City to NCMB Regional Branch IX, Davao City, was suspended in audit due to the lack of supporting documents such as original copies of bill of lading and official receipt/s. 110. We recommended and management agreed that Official Receipts and other necessary supporting documents shall be submitted to COA pursuant to the provisions of PD 1445 and COA Circular No. 2004-006.

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111. During the exit conference, the Regional Director committed the submission of the necessary supporting documents to support the payment of relocation expenses incurred. Henceforth, management ensured that all payments made will have complete supporting documents to avoid the suspensions of the transactions in post-audit. Fuel, oil and lubricant expenses amounting to P50,979.74 were incurred in RCMB-XI without the required Monthly Reports of Official Travel and Fuel Consumption to be submitted to the Commission On Audit office in accordance with the provisions of the Manual on Audit for Fuel Consumption of Government Motor Vehicles. 112. Paragraph 2 of Specific Rules and Regulations of the Manual on Audit for Fuel Consumption particularly states that “the use of government vehicles shall be properly controlled and regulated. The use of government motor vehicles should be controlled through properly accomplished and duly approved Driver’s Trip Tickets which should be serially numbered, a summary of which shall be made at the end of the month in a Monthly Report of Official Travels.” 113. Post-audit of transactions revealed that concerned officials were allowed to charge fuel, oil and lubricant expenses totaling P50,979.74 against government funds even without the Monthly Report of Official Travel and Fuel Consumption as required in the Manual on Audit for Fuel Consumption. 114. Interview with the Administrative Officer revealed that she always reminded the Driver to comply with the said requirements since the same finding was repeatedly included in every audit year but to no avail. 115. The COA Audit Teams reiterated last year’s audit recommendations that management:

require all officials with service vehicles the immediate submission of the Monthly Report of Official Travels and Monthly Report of Fuel Consumption of Government Motor Transportation for CY 2009.

instruct the Regional Accountant not to accept payment of fuel

consumption if the signatures of passenger/s and the specific purpose of every official travel are not indicated in the duly prescribed Driver’s Trip Ticket. Henceforth, the reports must be submitted to the Office of the COA Auditor on a monthly basis to avoid another suspension/disallowance in audit.

116. During the exit conference, the Regional Director stressed that the Administrative Officer will be the responsible person to monitor the early submission of the required reports. Repair works on Office Equipment in RCMB-VII amounting to P28,000.76 were not supported with Pre-Repair Inspection Report and Waste Materials Report contrary to COA Circular No. 93-299 C and Section 63 of the New Government Accounting System Manual (NGAS), Volume II, thus validity of expenses on Repairs and Maintenance - Office Equipment could not be ascertained.

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117. Section 6.6 of COA Circular No. 93-299C provides that “ Pre-repair evaluation reports shall be rendered by management, copies of which shall be attached to the disbursement vouchers”.

118. Section 63 of the New Government Accounting System (NGAS), Volume II states that “ The Waste Material Report shall be used to report all waste materials such as destroyed spare parts and other materials considered scrap due to replacement.”

119. Post-audit of transactions showed that repair works on Office Equipment were not supported with Pre-Inspection Report and Waste Materials Report contrary to Section 6.6 of COA Circular No. 93-299C and Section 63 of the New Government Accounting System (NGAS), Volume II, thus the validity of expenses for repair works on Office Equipment totaling P28,000.76 could not be ascertained. 120. The COA Audit Teams recommended that management: require concerned officials/employees to prepare/submit Pre- Repair Inspection

Report and the Waste Materials Report for every repair works done to avoid suspension of said transaction in audit in the succeeding year.

adhere strictly on the requirements of Section 6.6 of COA Circular No. 93-299 C

and Section 63 of New Government Accounting System (NGAS), Volume II in similar future transactions.

121. Management agreed to the audit observation and informed the Audit Team that the requirement was already complied with by concerned employees since the corresponding Pre- Repair Inspection Report and the Waste Materials Report for the repair works on Office Equipment totaling P28,000.76 were submitted to the Office of the Auditor on February 25, 2010. No segregation of duties and functions The designated Accountant of RCMB-CAR also acts as the Supply Officer contrary to the principle of sound internal control on the segregation of duties and functions. 122. Section 50 of the Government Accounting and Auditing Manual (GAAM) states that “key duties and functions such as authorization, custody and accounting shall be assigned to separate offices and individuals to eliminate opportunities to conceal errors and irregularities”. It further states that the following functions be separated or performed by different employees/departments to avoid giving any one office or individual inordinate control over transactions and resources:

a) Transaction authorization ( a management function) b) Transaction execution ( a custodial function) c) Transaction recording (an accounting function) d) Periodic accountability (an internal audit function)

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123. The COA Audit Team in RCMB – CAR observed that the custodial and accounting functions are performed by one employee, the designated Accountant. Aside from accounting functions, she also acts as the Supply Officer. This set–up precludes checks and balances, contrary to the principle of sound internal control on the segregation of duties and functions. 124. We recommended that management designate an employee other than the Accountant-Designate to perform the functions of a supply officer to separate the accounting from the custodial function and for a stronger internal control over agency assets. 125. Management explained during the exit conference that the limited number of personnel, particularly in the Administrative and Financial Unit (AFU), made them deviate from the cardinal rule by giving multiple designations to staff. In adherence to sound internal control on the segregation of duties and functions, management will be designating the Budget Officer – Designate to take custodial functions as Supply Officer–Designate vice the Accountant effective April 1, 2010. This is to give ample time for the Accountant to rectify the Branch’s inventory records 126. We further recommended that instead of the Budget Officer, assign an official as Supply Officer who has no access with the financial and procurement process to have a sound internal control. The Budget Officer is responsible for the obligations portion of the financial procedures of every transactions.

Non-compliance with existing COA rules and regulations

Disbursement vouchers including its supporting documents amounting to P3,196,694.84 were not stamped “PAID” after payment thereof contrary to Paragraph 2 (Q) of COA Circular No. 92-389, thus the possibility of using the same documents to pay similar transactions in the future is not remote.

127. Paragraph 2 (Q) of COA Circular No. 92-389 dated November 3, 1992 provides that paid vouchers, including its supporting documents, shall be perforated and conspicuously stamped “PAID” by the Disbursing Officer. The stamp shall provide space for the number of check issued and the date of actual payment”. 128. An effective and sound internal control requires that all disbursement vouchers and its supporting documents shall be stamped “PAID” after payment to avoid subsequent reuse. The date of payment should likewise be indicated in the vouchers and its supporting documents. This is one of the control techniques in the disbursement of funds. 129. Audit of disbursements for calendar year 2009 of the RCMB- XII showed that all disbursement vouchers totaling P3,196,694.84 were not stamped “PAID” and the date was not indicated on the face of the documents thus, the same supporting documents may be reused for future transactions to the disadvantage of the government. The total amount of disbursements for CY 2009 is broken down, shown as follows:

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Table 9 Monthly Disbursements Not “Stamped” Paid

Months Amount January P 181,734.90 February 243,382.94 March 264,795.42 April 266,570.43 May 327,718.65 June 263,624.44 July 305,036.95 August 385,120.15 September 185,461.92 October 238,298.94 November 213,641.50 December 321,308.64 Total P 3,196,694.84

130. We recommended that the Cashier/Disbursing Officer implement basic internal control by stamping “PAID” all disbursement vouchers and its supporting documents after payment to prevent its possible re-use, to distinguish it from other transactions which are not yet paid and to protect the interest of the government. 131. Management informed us that effective January 2010 they have already started complying with the recommendation given. Majority of the Reports of Supplies and Materials Issued and Requisition Issue Slips in RCMB-VII were not acknowledged by corresponding recipients, thus the validity of at least 80 percent of the recorded issuances costing P 89,044.33 of the account Office Supplies Inventory could not be ascertained. 132. Section 32, Volume III of the Government Accounting and Auditing Manual (GAAM) states that “Internal Control comprises the plan of organization and all the methods and measures adopted within an agency to ensure that resources are used consistent with laws, regulations and policies; resources and safeguarded against loss, wastage and misuse; financial and non-financial information are reliable, accurate and timely; and operations are economical, efficient and effective”.

133. Per verification, the total cost of Supplies and Materials Issued (RSMI) for calendar year 2009 amounting to P111,709.01 were not covered/supported with 122 Requisition and Issue Slips (RIS).

134. However, further verification of RSMI and the corresponding supporting RIS revealed that 80 percent of the total RIS prepared costing P 89,044.33 were not signed by the person/s who received the items or office supplies. The space provided for “ Received by” in the said RIS were left blank and unsigned contrary to what is required by a sound principle of internal control system so as to prevent wastage or misuse of government properties or resources.

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135. This practice not only manifests the inadequacy of internal control procedures over Office Supplies Inventory but also renders the validity of 80 percent of the total Supplies and Material Issued during the year 2009 costing P89,044.33 doubtful.

136. We recommended that management : require each and every concerned employee to acknowledge the receipt of items

or office supplies costing P89,044.33 by affixing their signatures on the space provided for “Received by” in the 87 unsigned Requisition and Issue Slip (RIS) to show proof or evidence that they had really or actually received the said items or office supplies.

Management shall strengthen its internal control methods or procedures over

Office Supplies Inventory to prevent wastage or misuse of government properties or resources

137. Management agreed with the audit recommendation and informed the Audit Team that the requirements in audit will be complied with immediately.

Family Visit expenses charged to agency funds Traveling expenses incurred by an employee during the availment of family visit privilege totaling P5,025.00 was reimbursed by RCMB-VII without legal basis and available funds for the purpose contrary to Section 4.1 of Presidential Decree No. 1445 resulting to irregular expenditures by the same amount. 138. Section 4.1 of Presidential Decree No. 1445 states 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.”

139. Post-audit of transactions showed that Mr. Hacelfeo T. Cuares, Conciliator-Mediator, visited his family in Tacloban City on official time during the first, second and third quarter of calendar year 2009 or a total of nine working days with traveling expenses of P5,025.00. The expenses incurred was paid/reimbursed from the branch fund even without legal basis and available funds for the purpose contrary to Section 4.1 of Presidential Decree 1445.

140. Verification of the branch records also revealed that the family visit privilege was based on Unnumbered Memorandum dated December 18, 2008 of Secretary Marianito D. Roque of the Department of Labor and Employment (DOLE) and an Office Order No. 10 series of 2009 signed by Director Reynaldo R. Ubaldo, Executive Director IV, National Conciliation and Mediation Board.

141. The unnumbered memorandum of Secretary Roque dated December 18, 2008 stated, among others,

19.1 The officials/personnel concerned who are assigned to a post at least 50 kilometers away from their place of residence shall be entitled to family visit privilege on official time.

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19.2 The family visit privilege may be availed of once every quarter at a maximum of three working days per visit, inclusive of travel time.

19.3 Actual transportation expenses shall be reimbursed by the office

concerned.

142. Likewise, Office Order No. 10, series of 2009 also stated the same guidelines as that of the said memorandum.

143. Notwithstanding the issuances of the two labor officials, the COA Audit Team of RCMB-VII considered the traveling expenses incurred by Mr. Hacelfeo T. Cuares being paid out of government funds an irregular expenditures due to the absence of an authority from DBM to grant the same as well as contrary to Section 4.1 of Presidential Decree No. 1445.

144. The irregularity of same expenses has been decided upon by the higher officials of the Commission On Audit as per COA Decision No. 2007-033 dated July 31, 2007. Likewise, an appeal of one Mr. Ismael J. Herradura, Director, Parole and Probation Administration (PPA), Regional Office No. VI, Iloilo City, on the disallowance of expenses incurred relative to the availment of the Family Visit Privilege, was also denied.

145. The COA Audit Teams recommended that management: require Mr. Hacelfeo T. Cuares to refund immediately the traveling expenses

incurred amounting to P5,025.00 charged to the branch funds while the nine working days used should be deducted from the earned vacation leave credits.

stop the practice of paying family visit expenses charged against government

funds.

146. In reply to Audit Observation Memorandum (AOM) No. 2009-001dated January 7, 2010, Mr. Hacelfeo Cuares commented that the reimbursement made for his traveling expenses incurred in the availment of Family Visit Privilege amounting to P5,025.00 had the authority from Marianito D. Roque, Secretary of Department of Labor and Employment (DOLE) and it was covered with an Office Order signed by Reynaldo R. Ubaldo, Executive Director IV of the National Conciliation and Mediation Board who has the inherent power to grant official time to its employees and approve travel, as and the said grant does not need authority from Department of Budget and Management (DBM). He commented further that his reimbursements totaling P5,025.00 were supported with all the necessary documentary requirements. However, he appealed that his traveling expenses in the amount of P5,025.00 shall be allowed in audit. 147. The COA Audit Team however invoked the content of COA Decision No. 2007-033 dated July 31, 2007, affirming, among others, the disallowance of the same expenses. The COA decision stated that; “ the power to approve the grant of allowances and other fringe benefits is vested in the President of the Philippines under Section 5 of Presidential Decree (PD) No. 1597. In relation to this power, the Department of Budget and Management (DBM) is mandated to “provide the required criteria and guidelines, xxx for the grant of all types of allowances and additional forms of compensation to employees in all agencies of the government (Section 17 (g) of PD 985)”.

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Untimely submission of financial and accounting reports

The Accounting Personnel of RCMB-NCR and RCMB-XII failed to submit timely the various financial and accounting reports and other supporting documents for the fiscal year 2009 as required in Sec. 5.1 of COA Circular No. 92-89E dated March 8, 1992 and Sec. 450 of Government Accounting and Auditing Manual (GAAM). 148. Sec. 5.1 of COA Circular No. 92-89E states that, “the required Trial Balances and supporting statements shall be submitted as follows:

Quarterly Trial Balance –

o Operating Units – on or before the 10th day of the month following the quarter

o Regional Offices – on or before the 10th day of the month following the quarter

o Central Offices – on or before the 10th day of the month following the quarter”

149. Sec. 450 of GAAM Volume II also states that:

“xxx… Government Agencies shall submit the monthly Trial Balance to the COA Unit Auditor and Department of Budget and Management (DBM) within ten days after the end of each month; the quarterly Trial Balance to the COA Unit Auditor, Accountancy Office and DBM within ten days after the end of each quarter; and the year-end Trial Balance not later than February 14 of the following year.xxx”

150. We noted during the verification on the submission of reports by the Financial and Management Division that the Accounting Personnel failed to submit on a timely basis the financial and accounting reports ranging from two months to eight months for RCMB-NCR while ten days to two months for RCMB-XII for the year 2009. 151. Interviews conducted with the designated Accountant of RCMB-XII disclosed that the Disbursing Officer is often delayed in the submission of the financial reports because of she has to prepare other reports being as the Administrative Officer and the designated Budget Officer as well as, in a concurrent capacity. 152. We recommended that management:

require the concerned officials of these regional branches to adhere strictly to the requirements of Sec. 5.1 of COA Circular No. 92-89E dated March 8, 1992 and Sec. 450 of GAAM Volume II.

if warranted, another personnel should be designated as Budget Officer in

the regional branch.

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153. The Officer-in-Charge of RCMB-XII informed the Audit Team that he had called a meeting with the concerned employees to identify the root cause of the delay of submission of reports. They assured the COA Auditors that the delay will be corrected as recommended. 154. The Management of RCMB-NCR mentioned that they have consistently forwarded their monthly financial and accounting reports to Auditor Melodita Iway, Audit Member, NCMB-Central Office, Quezon City as evidenced by the acknowledgement receipt of the Office of the Auditor, NCMB-DOLE. With regards to the disbursement vouchers (DVs), they have consulted then Auditor Iway who said that it is no longer necessary since she will report to the Manila Office twice a week. They found out that in August 2009 that Auditor Merle Yang, Audit Member, DOLE, will handle the branch accounts. 155. The office of the Supervising Auditor of DOLE is just several floors away from the NCMB-NCR office and therefore can be easily approached for assistance regarding the submission of monthly financial/quarterly financial reports and its supporting schedules and documents. The audit teams under the DOLE audit group are under her supervision, thus she can easily call the attention of the Auditors regarding the reports, submitted to their office, to avoid the delay in the submission of the required reports.

Lower rate of accomplishment for voluntary arbitration case

RCMB-III failed to attain its projected target for voluntary arbitration due to the low disposition rate of 25 percent by voluntary arbitrators to the detriment of the branch’s performance on the disposition of pending cases.

156. Section I Rule II of the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings defines voluntary arbitration as the mode of settling labor-management disputes by which the parties select a competent, trained and impartial third person who shall decide on the merits of the case and whose decision is final and executory. Voluntary Arbitrator refers to any person who has been accredited by the Board as such, or any person named or designated in the collective bargaining agreement by the parties as their voluntary arbitrator, or one chosen by the parties with or without the assistance of the Board, pursuant to a selection procedure agreed upon in the CBA or one appointed by the Board in case either of the parties to the CBA refuses to submit to voluntary arbitration. 157. Verification of accomplishments as of December 31, 2009 showed that the disposition rate for current voluntary arbitration cases was only 25 percent compared to last year’s 100 percent. It was noted that out of the four (4) arbitration cases received for the current year, the voluntary arbitrator was able to render decision or award on one of the cases at hand. This registered a 25 percent accomplishment out of the 50 percent target. 158. Management mentioned that arbitrators incurred delays due to their busy schedules and heavy workload. The arbitrators are, however, reminded about the pending cases. 159. In order to hasten the disposition cases, NCMB main office conducts yearly seminar/retooling for arbitrators to emphasize the importance of rendering decision on time. It also conducts regular convention for voluntary arbitrators yearly or once every two years to expedite disposition cases.

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160. Despite the above initiatives, however, the Board was unable to attain its target accomplishment. In fact, one case which was then pending in the previous year still remained unresolved as at year end.

161. We recommended and management agreed to encourage the voluntary arbitrators to hasten the disposition of cases and make representation with the NCMB officials to continue its accreditation program so as to increase the number of accredited arbitrators. As such, the Board will be able to meet the targeted disposition rate of 50 percent for current cases and 100 percent for prior year cases.

Discrepancies in the Deduction of Annual Five days Forced/Mandatory Leave Credits

The failure of the administrative staff of RCMB-VII to deduct the required annual five days forced/mandatory leave credits from the accumulated vacation leave of two branch personnel resulted in the overstatement of their respective balances on vacation leave credits by 13 days or a total money value of P21,905.22 as of December 31, 2009 contrary to Section 25 of the Omnibus Rules on Leave, Rule XVI of the Omnibus Rules Implementing Book V of EO 292 of the Civil Service Commission dated January 2007.

162. Section 25 of the Omnibus Rules on Leave, Rule XVI of the Omnibus Rules Implementing Book V of EO 292 of the Civil Service Commission dated January 2007 provides that “All officials and employees with 10 days or more vacation leave credits shall be required to go on vacation leave whether continuous or intermittent for a minimum of five working days annually under the following conditions:

a. The head of the agency shall, upon prior consultation with the employees, prepare a staggered schedule of the mandatory five-day vacation leave of officials and employees provided that he may, in the exigency of the service, cancel any previously scheduled leave.

b. The mandatory annual five-day vacation leave shall be forfeited if not taken during the year. However, in cases where the scheduled leave has been cancelled in the exigency of the service by the head of the agency, the scheduled leave not enjoyed shall no longer be deducted from the total accumulated vacation leave.

c. Retirement and resignation from the service in a particular year with out completing the calendar year do not warrant forfeiture of the corresponding leave credits if concerned employees opted not to avail of the required five–day mandatory vacation leave.

d. Those with accumulated vacation leave of less than ten days shall have the option to go on forced leave or not. However, officials and employees with accumulated vacation leave of 15 days who availed of monetization for 10 days under Section 22 hereof, shall still be required to go on forced leave (Amended by CSC MC No. 41 s, 1998).”

163. Verification and review of leave credits earned by the 14 employees of NCMB-VII for the years 2007 to 2009 disclosed that the five days annual mandatory forced leave not

49

availed by Mr. Arturo Kierulf and the eight days for Director Edmundo Mirasol with money value of P8,539.82 and P13,365.40, respectively, or a total of 13 days and money value of P21,905.22, were not deducted from their respective leave credits, thus overstating the balances of their accumulated privilege leave earned as of December 31, 2009. 164. We recommended that management:

require the assigned Administrative Officer to deduct immediately in the respective Records of Leaves, Absences and Undertimes of the concerned personnel the overstatement of vacation leave balances of Director Mirasol and Mr. Kierulf.

adhere strictly to the regulations of Section 25 of the Omnibus Rules on

Leave, Rule XVI of the Omnibus Rules Implementing Book V of EO 292 of the Civil Service Commission dated January 2007.

165. Management assured the COA Audit Team that the overstatement of vacation leave balances of Director Mirasol and Mr. Kierulf for eight and five days respectively were already deducted from the respective total accumulated vacation leaves as of February 2010. Gender and Development (GAD) Programs Non-compliance to guidelines/policies formulated for Gender and Development (GAD) funds of NCMB-Main The CY 2009 Gender and Development Plan and Budget for the NCMB Main and its regional offices was not reviewed and endorsed by the National Commission on the Role of Filipino Women (NCRFW), thus the allocation and utilization thereof are not in pursuance of the Joint Circular No. 2004-1 of the Department of Budget and Management (DBM), National Economic and Development Authority (NEDA) and the NCRFW. 166. Paragraph 4.3 of the Joint Circular specifically emphasized that “ the conduct of massive information, education and communication campaigns on the gender issue/s being addressed by the agency and on corresponding agency programs, activities and projects shall be given priority in terms of budget allocation.” 167. Paragraph 4.2 further states that “the development of GAD activities shall proceed from a review of sex-disaggregated data, the conduct of a gender analysis of major programs and the conduct of consultation/s with women’s group or groups concerning GAD.” 168. In paragraph 3.2 of the Joint Circular, GAD Plan and Budget was defined as: “the systematically designed set of programs, projects carried out to address gender issues and concerns in their respective sectors. Gender issues was also defined as problems and concerns that arise from the unequal status of men and women that could impede women’s full development and their participation in an equal enjoyment of the fruits of development.” 169. The GAD Plans and Budget prepared by an official of NCMB showed an allocation of P355,000.00 for the NCMB-Main Office and P1,220,000.00 for the Regional Offices or a total of P1,575,000.00 which is lesser by P4,199,150.00 on the required allocation of

50

P5,774,150.00 (5 percent of total budget appropriations of P115,483,000.00 as per GAA of CY 2009). The former amount was allocated as follows:

Table 10 Allocations of GAD Budget in NCMB-Main and its Regional Branches

Program/Activity/Project Amount(PhP) Amount(PhP) Amount (Php) NCMB-Main RCMB Total 1.Gender Advocacy Program a. Celebration on Gender Roles on special holidays(Women’s month, Mother’s Day/Father’s Day)

110,000.00

355,000.00

465,000.00 b. Institutionalization of NCMB-GS Club (Gender Support Club)-Meetings

10,000.00

215,000.00

225,000.00 c. Establishment of GAD corner in the NCMB Library

10,000.00

120,000.00

130,000.00 d. Research on Career Pathing of Women and Men employees

50,000.00

130,000.00

180,000.00 e. Orientation program/seminar on sexual harassment, equal employment opportunities, enhancement of women

in trade unions/participation of worker’s

org., girl/child and harmonizing work

and family among NCMB personnel

50,000.00

80,000.00

130,000.00

f. Create NCMB GAD Website - - g. Establish CODI Directory

40,000.00 -

40,000.00

h. Establish Data Bank Program 30,000.00

80,000.00

110,000.00

i. Conduct Planning Workshop (discuss/prepare GAD action plan) or conduct information/ dissemination thru plant visit and provide IEC materials on GAD program to clientele

55,000.00

240,000.00

295,000.00 Total 355,000.00 1,220,000.00 1,575,000.00

170. We noted in the review of NCMB GAD Plan and Budget that the project/activities to be undertaken do not conform with the requirements of paragraph 4.2 of the Joint Circular, do not also bear the review and endorsement of the NCRFW officials and no proof/evidence

51

found on the face of the documents that a copy was indeed received by NCRFW, since there was no stamped “received” as well as the date of receipt. 171. Verification of agency records showed that the GAD Focal Point and Technical Working Group was created only for the NCMB-Main as per Office Order Number 8 dated February 3, 2009 but no information stating therein that the order also includes the regional offices. 172. The GAD activities programmed for CY 2009 included activities on: (a) Celebration on Gender Roles on Special Holidays which aims to recognize gender roles and responsibilities; (b) Wellness Program to provide comprehensive knowledge that will respond to the health concerns of the employees; and (c) Livelihood Training to promote women’s economic empowerment. The purpose for the purchase of 59 Business Guides (Gabays) from Technology Resource Center is to provide information on the different business opportunities of employees and additional reading materials on GAD Corner in the Library. The Board’s GAD activities for CY 2009 aim to address gender issues and women concerns with the end goal of promoting women empowerment, gender equity and equality. With regard to the creation of GAD Focal Point and TWG, Office Order No. 5 dated 18 January 2006 was issued requiring all heads of regional branches to designate GAD Focal Persons who shall serve as the regional counterpart of the Central Office FP and TWG. 173. Of the P1,220,000.00 GAD budget for the regional branches, P80,000 was allocated for the RCMB-NCR, which was equally budgeted for the activities as summarized below:

Table 11

Budget Allocation of RCMB_NCR for GAD Acitivities Program/Acitivities Amount (Php)

1. Conduct selected plant level seminars incorporating therein the topic on sexual harassment or equal employment opportunity

10,000.00

2. Participation in women’s month celebration, conduct symposium/Forum on women’s empowerment and film showing.

48,000.00

3. Organize a physical fitness program as part of institution building such as; dance lessons, aerobics sessions.

22,000.00

Total 80,000.00 174. Post-audit of transactions on the utilization of the funds in the NCMB-Main and RCMB-NCR offices showed that expenses incurred totaling to P86,347.61 and P46,935.00, respectively were all recorded in the Other Maintenance and Operating Expenses account (969) and did not conform with the requirements of Joint Circular No. 2004-1. Mostly of these pertain to expenses on the celebration of women’s month, mother’s and father’s day, conduct of calesthenics/aerobics/dancing/herbal medicine symposium, conduct of TGIF 3rd year anniversary, honoring papa employees, health and wellness program (ballroom dancing) and launching of NCMB speaker’s club. Most of the expenses were paid out from cash

52

advances granted or reimbursement of additional charges. A procurement of 59 titles of Gabays, intended as reading materials in the library was also charged to the fund but it was not included in the GAD Plan and Budget. 175. The concerned officials of RCMB-II did not prepare and submit the branch’s GAD Plan , thus there was no utilization for the said fund in CY 2009. On the other hand, RCMB VI only allocated .29 percent of the branch’s GAD budget and spent P16,000.00 for women’s activities. The management of RCMB-IX spent P180,881.57 or 4.433 percent of the total GAD allocation for the branch. Likewise, RCMB-X budgeted P35,000.00 for the following GAD activities of the office:

Gender Sensitivity Orientation - P 1,500.00 Forum on Women’s Rights - 1,500.00 Forum on Proposed Divorce Bill - 1,500.00 Women’s Month Celebration - 12,000.00 Outreach to Charitable Institutions - 12,000.00 Computer Literacy - 1,500.00 Sports - 5,000.00 Total P 35,000.00

=========

176. Post-audit of disbursements for the year showed that of the P35,000.00 budget only P10,260.00 was utilized during the women’s month celebration and outreach program. 177. Moreover, the Gender and Development (GAD) activities undertaken by RCMB-VII were concentrated on gender issue/concern classified as Organization-focused and Client -focused with a total expenses of P23,003.39, 178. We recommended that management:

require the GAD Focal Point to prepare a Plan and Budget allocation that conforms with the guidelines/policies set forth in Joint Circular No. 2004-1 of the DBM, NEDA and NCRFW so that the activities/projects to be undertaken gear towards the objectives of equality and opportunity of gender treatment for men and most especially for women.

require the NCMB GAD Focal person to resubmit the CY 2010 budget and have it stamped “received” and indicate the date of receipt.

require same official or his representative to follow up the action taken to the submitted GAD Plan and Budget until it is reviewed and endorsed by the NCRFW.

re-evaluate the Office Order for the creation of Focal Person and include the regional branches for the proper and updated monitoring of the implementation and utilization of the distributed GAD funds in the succeeding years.

53

179. The officials of NCMB-NCR averred during the exit conference that the following GAD activities instituted for CY 2009 aim to recognize gender roles and responsibilities, provide comprehensive knowledge that will respond to the concerns of the employees, address gender issues and women concerns with the end goal of promoting women empowerment, and equal opportunity of gender treatment for men and most especially for women. includes the following:

(a) Celebration of Gender Roles on Special Holidays (e.g. Women’s

Month; Mother’s and Father’s Day) (b) Health and Wellness Program (e.g. ballroom dancing) and (c) Staff development

180. The NCMB-GAD Focal person insisted that the GAD Plan and Budget was indeed forwarded to the NCRFW for their appropriate action every year but unfortunately it was not favourably acted upon. He even requested the COA Audit Team for an information if they can continue to implement the activities included in the 2010 GAD Plan even without the endorsement of the Commission. 181. Management commented further that through the years, the Board has been consistently submitting to the DBM a copy of its annual GAD plan and budget without the endorsement of NCRFW along with its yearly budget proposals and GAD accomplishments. However, neither agency informed the Focal Point or the Executive Director of the said requirement. Since 2004, only the accomplishments were submitted to the NCRFW for its inclusion in the yearly national GAD accomplishment report. Hence, concerned officials assumed that the said procedure is no longer required. 182. NCMB officials also mentioned that on April 13, 2009, NCMB received a letter from NCRFW extending their appreciation to the Board for joining the nationwide observance of Women’s Month. In the same letter, NCRFW requested NCMB to submit the accomplishments for the said activity to be included in the former’s website. After the same was submitted to NCRFW, no feedback was received for any observation/s or comment/s on the activities undertaken by the Board. 183. The purchase of Gabay books, however noble the purpose for its procurement, cannot be included in the report of GAD expenses due to lack of available funds for its payment since the said transaction not included in the CY 2009 GAD Plans and Budget. Compliance with Tax Laws The BIR exemption claims by each personnel of RCMB-II indicated in the Annual Information Return of Income Taxes Withheld on Compensation (BIR Form 1604CF) for Calendar Year 2009 is not supported with the Certificate of Update of Exemption and Employer’s and Employees Information (BIR Form No. 2305) as required under Section 5 of BIR Revenue Regulation 10-2008, hence rendering the claim of each personnel doubtful. 184. Post-audit of disbursement vouchers particularly for BIR remittances disclosed that the exemptions claimed by each personnel of RCMB-II indicated in the Annual Information Return of Income Taxes Withheld on Compensation (BIR Form 1604CF) for Calendar Year

54

2009 is not supported with the Certificate of Update of Exemption and Employer’s and Employees Information (BIR Form No. 2305) as required under Section 5 of BIR Revenue Regulation 10-2008, hence rendering the claim of each personnel doubtful. 185. The BIR regulations particularly emphasized that where an employee, in violation of these Regulations either fails or refuses to file an Application for Registration (BIR Form No. 1902) together with the required attachments, the employer shall withhold the taxes prescribed under the Schedule for Zero Exemption of the Revised Withholding Tax Table. In case of failure to file the Certificate of Update of Exemption and Employer’s and Employee’s Information (BIR Form No. 2305) together with the attachments, the employer shall withhold the taxes based on the reported personal exemptions existing prior to the change of status and without reflecting any change. Any refund or underwithholding that shall arise due to the violations shall be covered by the penalties prescribed under Section 80 of the NIRC, as amended. 186. The COA Audit Team recommended and management agreed to require the agency personnel to update their BIR records by submitting to BIR the Certificate of Update of Exemption and Employer’s and Employee’s Information (BIR Form No. 2305) supported by NSO Birth Certificate of registrant/qualified dependent child/children, NSO Marriage Contract and Sworn declaration and Waiver of Exemption by husband duly signed by the employer, if any. Settlement of Accounts Disallowances/charges totaling P239,915.19 remained unsettled as of December 31, 2009, thus depriving the government the use of the funds for other priority projects and programs. 187. The balance of account Receivable-Disallowances/Charges of P239,915.19 remained unsettled as of December 31, 2009. The account is composed of the following disallowances:

Table 3 Composition of Disallowances/Charges Offices Particulars Amount

NCMB-Main Personnel Motivation Allowance -2001 P 2,661.54 RCMB-VI Grocery Allowance - 2001 233,179.44 RCMB-VIII Staple Food Allowance -2001 4,074.21 Total P 239,915.19

188. Noted in the table above is the receivable from RCMB-VI which still showed a bigger balance as compared to the two other offices. As regards the NCMB-Main Office, Chief Accountant reported to the Audit Team that the disallowances were settled by each of the concerned employees through monthly salary deduction of P2,658.89 payable to the Treasurer of the Philippines. 189. We recommended that management:

require all persons liable to fully settle their obligations to the government as of the end of year 2010.

55

devise a reasonable scheme for the immediate settlement of the disallowances/charges pursuant to existing COA rules and regulations.

190. The Chief Accountant of NCMB-Main assured the COA Audit Team Leader that the disallowances/charges amounting to P2,661.54 will be fully settled in the ensuing year. Concerned officials of NCMB also agreed to the Audit Team’s recommendation for the immediate settlement of their obligations to the government.

56

Part III - Status of Implementation of Prior Year’s Audit Recommendation Out of 20 audit recommendations contained in the 2008 Annual Audit Report, 11 were fully implemented, five were partially implemented while the remaining four were not implemented. Partially and not implemented recommendations were reiterated in Part II of this Report.

Reference Observation/Recommendation Action taken by

Management

Auditor’s Validation

2008 CAAR Page 15

1) Cash Advances to Officers and Employees totaling P25,275.84 remained unliquidated as of year-end as required under COA Circular No. 97-002 dated February 10, 1997, resulting to overstatement of account Advances to Officers and Employees and understatement of cash account.

We recommended to management to direct the accountable officer immediately liquidate their cash advances and/or refund any unexpended balance pursuant to COA Circular No. 97-002 dated February 10, 1997.

Implemented Full liquidation on April 2009 as per JEV Nos. 09-02-584 – P 4,000 -02-058 2,000 -02-615 .04 -02-300 9,049.80 -04-575 10,226.00 Total P25,275.84 ========

2008 CAAR Page 17

2) Procurement from Department of Budget and Management (DBM)- Procurement Service (PS) under account “Due From NGAs” in the Accounting and Property records are understated in the Amount of P934.65 and P85,689.10, respectively.

We recommended that Management direct the Accountant and the Supply Officer to effect the adjustments to reconcile the accounting and property records.

Partially Implemented.

The Chief Accountant had reported that the discrepancy noted and the unrecorded purchases were already effected in the accounting and property records. However, verification of agency records showed that several of the discrepancies are not yet reconciled.

2008 CAAR Page 18

3) The agency has undelivered common used Office Supplies

Partially Implemented

The balance of Due From NGAs

57


Management


amounting to P116,141.37 procured thru advance payment from the DBM-PS, in accordance with Letter of Instruction No. 755, Executive Order Nos. 289 series of 1987 and 359 series 1989, due to non monitoring of deliveries, thereby understating the Inventory account and overstating the Due from NGAs Account.

We recommended that management make a periodic review and reconciliation of undelivered supplies and make representation with the Procurement Service to facilitate the delivery of supplies balance subject of the advances.

showed a decrease from P116,141.37 to P25,224.42 showing that almost all of the undelivered items were already received by the Property and Supply Officer. We noted however in post-audit that there are procurement of common supplies from private suppliers through cash advances and there are supplies not yet fully delivered by PS at the end of the year.

2008 CAAR Page 18, Par. 4

4) The RSMI were not prepared and submitted monthly and the Supplies Ledger and Property Stock Cards were not maintained as required under Section 62, Volume II, of the Manual on the New Government Accounting System (NGAS) and Section 43, Volume I of the same manual, resulting in overstatement of Office Supplies Inventory account due to unrecorded issuances amounting to P61,919.91 in NCMB-CAR, and doubtful validity of Office Supplies balance of P165,523.02 in RB-XI

Implemented Assumed implemented in RCMB-CAR and RCMB-XI since there were no potential audit findings reported by the COA Auditors assigned in the said branches.

We recommended that the Supply/Property Officer observe the prompt preparation and timely submission of the RSMI in accordance with Section 62, Volume

58


Management


II, Manual on NGAS. We also recommended that the designated Accountant and the Property Officer maintain complete, updated and properly accomplished Subsidiary Ledger and Stock/Property Ledger Card, respectively.


5) The correctness and existence of PPE accounts in RB-V and RB-VII amounting to P3,814,490.47 and Supplies Inventory of P81,868.21 in NCMB-NCR and RB-V could not readily ascertained due to management failure to conduct physical inventory taking contrary to Section 490, Government Accounting and Auditing Manual (GAAM), Volume I.


Reiterated in No. 10 of CAAR 2009

We recommended that management conduct immediately the physical inventory of the PPE and Supplies Inventory in RB-V, RB VII and NCMB-NCR, respectively to determine the existence of the property of the government and accountability of the Accountable Officer. Further, we recommended the creation of the Inventory Committee pursuant to Section 490, GAAM, Volume I.

2008 CAAR Page 20, Par. 6 6) The PPE with total book value of

P13,464,557.95 could not be ascertained as to its correctness due to discrepancies between the accounting records and physical count totaling P2,774,978.42 (P2,730,778.42) in NCMB-Main and P44,200.00 in RB-IX). The total

Not Implemented

Reiterated in No. 10 of CY 2009 CAAR

59


Management


amount of discrepancies also overstate the accounting records.

We recommended the immediate reconciliation of the discrepancies noted between the accounting record and physical count. The Accountant and Property Officer should sit down together to facilitate reconciliation thereof.

2008 CAAR Page 22, Par. 7 7) The PPE account for three regions

with a net book value of P1,218,674.65 in the Financial Statements includes unserviceable properties with a book value of P323,580.46, resulting in the overstatement of the PPE account. This should be classified as Other Assets account as required under COA Circular No. 2004-008 dated September 20, 2004. Likewise, these unserviceable properties were not disposed pursuant to Section 79 of PD 1445.

Not implemented

Reiterated in No. 10 of CAAR CY 2009

We recommended that the Accountant should make the necessary adjustments in the books to properly classify/record the unserviceable properties to Other Assets account in accordance with COA Circular No. 2004-008. Instruct the Property Officer to prepare all the requirements for the disposal of all unserviceable properties and those beyond economical repair in accordance with Section 79 of PD 1445.


8) The expenditure accounts were not properly classified in accordance with COA Circular No. 2004-008

Not Implemented

Reiterated in No.13 page 37 of CY 2009 CAAR

60


Management


dated September 20, 2004, thus affecting the reliability and accuracy of the reported operating expenses in the financial statements in NCMB Main, NCR and RB-V.

We recommended for the strict compliance to COA Circular No. 2004-008 which prescribed the use of the updated Standard Chart of Accounts.


9) Regional Directors in RB-II and RB-VIII who were assigned government service vehicle, collected Transportation Allowance (TA) amounting to P129,600.00 contrary to COA Circular No. 99-002, dated June 15, 1999 and Section 45, paragraph 5 of the General Appropriations Act (GAA), FY 2008, thus rendering their claims irregular, which resulted to the overstatement of expense and understatement of asset account.

Implemented Assumed implemented no negative findings reported by the Auditor.

We recommended that management stop the practice of granting TA to officials who were issued government service vehicle to avoid audit disallowance.


10) Failure to record payment expenses to Labor Organization of VRESCO Employees (LOVE) amounting to P152,677.00 in the agency’s books of accounts, contrary to Section 119 of P.D. 1445, resulted in an overstatement of the year-end balances of Other Payable and Cash in Bank accounts in RB-VI.

We recommended that the Accountant-designate should

Implemented Assumed implemented no negative findings reported by the Auditor.

61


Management


prepare a Journal Entry Voucher to take up expenses paid to Labor Organization of VRESCO Employees in the amount of P152,677.00.


11) Payments for claims with incomplete documentation totaling P327,458.77 were made by the agency contrary to the provisions of Section 4 of P.D. 1445, thus the regularity of the transactions could not be validated in RB-VI, RB-VIII and RB-XII.

Implemented Assumed implemented since the subject finding not mentioned in the CY 2009 ML.

We recommended that the designated Accountant/Bookkeeper/Disbursing Officer attach/submit the lacking documents in accordance with Section 4 of P.D. 1445, for verification to avoid suspensions and/or disallowance.


12) The Accountant-designate in RB-XII failed to prepare Journal Entry Vouchers for transactions covering July-December 2008 due to oversight and multi-tasking functions contrary to the provisions of Section 43 of NGAS Manual Volume II, hence delayed the verification of the accounts in the financial statements and the occurrence of possible errors in the recording of financial transactions.


We recommended that the Accountant designate prepare the Journal Entry Voucher in all transactions in accordance with Section 43 of NGAS Manual Volume II to facilitate the prompt

62


Management


review and verification of accounts and transactions of the auditee and to prevent the occurrence of possible errors in the recording of financial transactions.


13) Supply Officer designate failed to issue Acknowledgement Receipt for Equipment (ARE) for properties totaling P77,750.00, contrary to Section 56 of the NGAS Manual, Volume II, thus the control and accountability of said assets are not properly monitored and safeguarded.

Implemented

Verification of RCMB-NCR property records showed that corresponding ARE were already prepared for the subject properties.

We recommended that the Supply Officer designate prepare Acknowledgement Receipt for Equipment for monitoring, control and accountability as requires under Section 56 of the New Government Accounting System Manual, Volume II.

2008 CAAR Page 29 and 30 Par. 14 and 16

14) Balance of Accounts Receivable, Due fro GOCCs and Receivable Disallowances and Charges in NCMB Main remained outstanding and dormant for more than five (5) years, thus of doubtful validity due to absence of supporting documents


Verification of agency records showed that the P16,680.00 balance of Accounts Receivable was due to an erroneous entry and immediately adjusted in the books. The Due from GOCCs is a receivable from GSIS for claim of insurance, but the same was no longer possible due to absence of records

63


Management


and documents. Officials of NCMB is now preparing request for write-off to drop the dormant accounts from the agency books. Of the total receivable/disallowance of P7,870.54, P5,209.00 was already settled leaving a balance of P2,661.54 for the NCMB-Main. Reiterated in the CY 2009 CAAR in No. 5 page 25.

We recommended that the Accountant to verify/confirm of the nature of the account. We further recommend that if the verification of the accounts is not possible due to the absence of records and documents, the agency head should request for write-off of accounts from the Commission on Audit in accordance with COA Circular No. 97-001 dated February 5, 1997, supported by List of available records and extent of validation made on the accounts and Certification and reasons why the supporting documents cannot be located.


15) Posting to the General Ledger (GL) were not updated hence the accounts appearing in the Trial Balance/Financial Statements cannot be ascertained in NCMB-NCR.

We recommended that the

Implemented Verification of RCMB-NCR records showed that posting of entries to the General Ledger were already updated.

64


Management


Accounting Analyst should post the transactions from October to December 2008 in the General Ledger to reflect the correct account balance as of year end in order to reconcile with the balances in the trial balance and financial statements.


16) The NCMB-NCR uses the Revised Philippine Government Chart of Accounts prescribed under COA Circular No. 2008-001 dated January 29, 2008, although its implementation was suspended by COA Circular No. 2008-003 dated December 24, 2008.

We recommended to convert all accounts in accordance with the Chart of Accounts used before the implementation of COA Circular No. 2008-001 dated January 29, 2008, as required under COA Circular No. 2008-003 dated December 24, 2008.

Implemented Review of RCMB-NCR monthly Trial Balances showed that the Accounting Analyst already used the Chart of Accounts required in COA Circular No. 2003-002 dated August 16, 2003.


17) Due to poor planning and inadequate strategies, the submission of Monthly Fiscal Reports and its supporting documents for audit were delayed ranging from 12 to 48 days contrary to Sections 64, 100 and 122 of P.D. 1445, thus verification of said reports could not be done promptly in RB-VI, RB-VII and RB-VIII.

We recommended that management should strictly comply with the submission of the monthly fiscal reports not later than 5th day of the ensuing month to the Office of the Auditor.


Reiterated in Part II of CY 2009 CAAR.

65


Management


We also recommended that management should submit written justification citing reasons/causes for delayed submission of the reports.


18) RB-X did not established Bids and Awards Committee (BAC) for its procurement in accordance with Article V of Republic Act No. 9184, an act providing for the modernization, standardization and regulations of the procurements activities of the government and for other purposes.

We recommended the establishment of the Bids and Awards Committee in compliance with Section 11 of Republic Act No. 9184.

Implemented BAC was created on March 2009


19) RB-II, Furniture and Fixtures, Equipment and Library Books were not insured with the GSIS, hence, the interest of the government is not adequately protected/safeguarded in violation of Section 5 of RA 656, COA Circular No. 94-012 and Memorandum Circular No. 364.

We recommended to insured agency’s properties with the GSIS in order to indemnify or compensate the government in case of any damage to, or loss due to the theft, fire, earthquake, storm or other calamities pursuant to R.A. 656, Memorandum Circular No. 364 and COA Circular No. 94-012.


2008 CAAR Par. 22 – 22.7 in page 34

20) In compliance with Executive Order No. 273 approving and adopting the Philippine Plan for Gender – Responsive Development

Not Implemented

Reiterated in CY 2009 CAAR in No. 22 page 53.

66


Management


(PPGD) for the period 1995-2025, NCMB had develop and implemented gender advocacy program which improved understanding on gender related issues, policies and procedure of NCMB personnel.

We recommended to management for the continued implementation of GAD programs that were already started and to implement other programs included in the annual GAD Plan and budget.

2007 CAAR page 15

The previous year’s audit disallowances totaling P102,041.99 pertaining to the payment of staple food allowance CY 2001 registered a 52% rate of settlement in CY 2007.


The balance of disallowance as of December 31, 2009 only totaled to P4,074.21.

We reiterate our recommendation and the Management agreed to require the immediate and full settlement by the personnel concerned of their respective audit disallowances.

2007 CAAR page 16

The required documentation of the grant of CNA incentives for CY 2006 amounting to P68,000.00 to rank and file employees of RB-VI remained unsubmitted.

We hereby reiterate our recommendation to the Management that the required documentation of their compliance of the grant of CNA incentives with Budget Circular No. 2006-1 be immediately submitted.

Implemented Assumed implemented since there was no report from the COA Audit Team in RCMB-VI except the balance as of December 31, 2009 of the disallowance still showed bigger balance amounting to P233,179.04.

2007 CAAR Discrepancy of P187,944.96 existed between the physical count and the

Implemented Verification of agency records

67


Management


page 17 reported balance per books amounting to P474,750.05 and P662,694.98 respectively, which may be attributed to the non-preparation and submission of the Monthly Report of Supplies and Materials Issued (RSMI) to the Accounting Unit as basis for recording issuance of supplies.

showed that the discrepancy was already adjusted in the books in CY 2008.

We recommended and Management agreed that the accounting and supply records be immediately reconciled to ascertain the cause of the discrepancy and take the necessary action thereon.

2007 CAAR page 18

The net discrepancy of P281,374.75 noted between the accounting records and physical inventory for the PPE accounts of NCMB-Main and RB-IV, with the balance per books showing higher figures than the count remained unreconciled at year-end.

Not Implemented

Reiterated in Part II in CY 2009 CAAR in No. 10 page 31.

We recommended immediate reconciliation of the discrepancies noted on PPE accounts of NCMB-Main and RB-IV between the accounting records and physical count, and effect the necessary adjustments or take appropriate action for unaccounted property.

2007 CAAR page 19

Delays of two to four months in the delivery of offices supplies covered by advances to the procurement Service (PS) had compelled the NCMB-Main and RB-NCR to resort to shopping mode of procurement using Petty Cash Fund totaling P174,300.38 purchases. Of the advances to PS of P238,325.01, no


Noted in post-audit of liquidation reports in CY 2009 that there are common and other supplies and materials procured/paid out from Petty Cash

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Management


further deliveries of supplies had been made for the amount of P4,993.66 as at year-end.

Fund.

We recommended that Management (a) make representation with the Procurement Service for the refund of the balance of advance payment for supplies which could no longer be delivered; (b) request authority to resorting to alternative modes of procurement for commonly-supplies which cannot be immediately provided by the PS in order not to hamper the regular operations of the NCMB and its regional offices.

2007 CAAR page 22

Unserviceable property with book value of P1.29 million for four regional offices were not disposed of pursuant to Section 79 of P.D. 1445, which resulted in further deterioration of the property, lower sale proceeds and occupied space which could be used for productive activities. These property also remained classified as Property, Plant and Equipment accounts and not reclassified to Other Assets account pursuant to Section 143 of NGAs Manual, Volume III.


Reiterated in CY 2009 CAAR in No. 11.1 and 11.2 in pages 34-36

We recommended and Management agreed that:

a) The prescribed inventory and inspection report of unserviceable property be accordingly accomplished as basis for the disposal proceedings; and

b) The unserviceable properties be reclassified to Other

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Management


Assets while awaiting final disposition and adjust the balance of PPE accounts accordingly.

2007 CAAR page 24

Perpetual Inventory Method was not adopted in accounting for office supplies and materials in violation of Section 43 of the NFAS Manual, Volume I, as a result of which purchases, issuances and accountability of the same could not be properly controlled and monitored.

Implemented Assumed implemented since there was no report of non implementation by the COA Audit Team in RCMB-IX.

We recommended that the RB-IX Management adopt the perpetual inventory method in accounting for office supplies, and maintain perpetual inventory records for proper control, monitoring and recording of acquisition and issuances of office supplies and materials.

2007 CAAR page 26

The required documentation of the grant of CNA incentives for CY 2006 amounting to P68,000.00 to rank and file employees of RB-VI remained unsubmitted.

Not Implemented

We that RB-VI submit the prescribed documents to substantiate the validity of the grant of CNA incentive in 2006.

Annex A Page 1 of 1

Annex B Page 1of 2

REVISED STATEMENT OF ALLOTMENTS, OBLIGATIONS AND BALANCES As of December 31, 2009

Annex B Page 2of 2

REVISED STATEMENT OF ALLOTMENTS, OBLIGATIONS AND BALANCES As of December 31, 2009