EXECUTIVE SUMMARY

A. Introduction

The Department of Trade and Industry (DTI) had its beginning as early as 1898.
Several changes in name, functions, and organization occurred until it was reorganized by
virtue of Executive Order No. 133 dated February 27, 1987 where it is mandated to be the
primary, coordinative, promotive, facilitative and regulatory arm of the government for
trade, industry and investment activities.

In the Philippine Development Plan (PDP) CYs 2011-2016, the DTI shall
endeavor to improve the business environment, increase productivity and efficiency, and
enhance consumer welfare. By CY 2016, the following goals would have been achieved:

 Improve country's competitiveness. Land in the top one-third ranking (for

country's competitive environment for the firms) in major international
surveys;
 Generate 4.6 million employment from industry and services sector, two
million of which shall come from Micro Small Medium Enterprises
(MSMEs) sector; and
 Increase the level of awareness of consumers on their rights and
responsibilities from 50 percent to 80 percent.

To attain the above-mentioned goals, DTI has to expand exports, increase

investments, develop and promote MSMEs and enhance consumer welfare and
protection. These should be accomplished by the following major final outputs (MFOs):

MFO 1 - Trade and Industry Policy Services

MFO 2 - Technical Advisory Services
MFO 3 - Trade and Investment Promotion Services
MFO 4 - Consumer Protection Services
MFO 5 - Business and Trade Regulatory Services

The DTI is headed by Secretary Ramon M. Lopez, assisted by Undersecretaries

Ruth B. Castelo, Teodoro C. Pascua, Ceferino S. Rodolfo, Rowel S. Barba, Zenaida C.
Maglaya, and Nora K. Terrado.

The DTI structure, pursuant to Department Order No. 11-47 dated September 29,
2011, was streamlined into six major functional groups composed of the different bureaus
and offices that deliver business and consumer services to its stakeholders and the public,
namely, (1) Office of the Secretary, (2) Management Services Group (MSG),
(3) Consumer Protection Group (CPG), (4) Industry Promotion Group, (5) Industry
Development Group (IDG), and (6) Regional Operations Group (ROG).
 With the approval of the Rationalization of the Department, the former Regional
Office-National Capital Region was integrated in DTI Central Office as one of its offices
called National Capital Region Office (NCRO).

Effective December 31, 2014, the Governance Commission for GOCCs (GCG)
approved the abolition of the Cottage Industry Technology Center (CITC). Its corporate
personality was absorbed by DTI including its functions, assets, liabilities and existing
obligations pursuant to Memorandum Order No. 2014-23 dated August 22, 2014. CITC
now becomes part of the NCRO.

Of the approved plantilla positions of 2,353 under the DTI Rationalization Plan
and the Staffing Pattern for DTI-Central Office (CO) and 15 Regional Offices (ROs),
1,982 were filled up, leaving unfilled positions of 371. In addition, DTI had 134
incumbent/co-terminus officials and 83 contractual personnel, thus a total of 2,199 warm
bodies.

The DTI also maintains 27 Foreign Trade Service Corps in Europe, Middle East,
North America, and Asia and the Pacific, headed by a Commercial Attachè, whose goal
is to promote Philippine trade and investment worldwide.

B. Financial Highlights

The agency’s financial position, performance and sources and application of funds
for the year ended December 31, 2016, compared with that of the previous year are, as
follows:

Amount
Particulars
2016 2015
Financial Position
Assets P 3,725,569,632.28 P 3,465,684,897.77
Liabilities 588,188,396.73 616,706,605.44
Net Assets/Equity 3,137,381,235.55 2,848,978,292.33
Financial Performance
Revenue P 374,538,672.66 P 370,722,778.35
Current Operating Expenses 3,291,094,664.63 2,521,838,325.05
Net Financial Assistance/Subsidy 4,061,774,991.76 3,501,104,442.28
Surplus for the period P 1,147,658,009.17 P 1,349,943,903.55
Sources and Application of Funds
Appropriation P 3,676,880,000.00 P 4,133,239,000.00
Allotments 5,355,045,090.71 4,816,743,751.50
Obligations Incurred 4,694,024,185.66 4,313,701,369.54
Unobligated Balances P 661,020,905.05 P 503,042,381.96

C. Scope and Objectives of Audit

The audit covered the CY 2016 transactions, accounts and operations of the DTI.
The audit was conducted to (a) ascertain the level of assurance that may be placed on

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management’s assertions on the financial statements; (b) determine the propriety of
transactions as well as the extent of compliance with applicable laws, rules and
regulations; (c) recommend agency improvement opportunities; and (d) determine the
extent of implementation of prior years’ audit recommendations.

The Financial Statements (FS) are the combined FS of the DTI-CO and 15 DTI-
ROs. Part II of this report, however, does not include the observations and
recommendations pertaining to DTI-RO Nos. IV-A and VII due to non-submission of
Management Letters (MLs) by concerned Audit Team Leaders (ATLs).

D. Independent Auditor’s Report

A qualified opinion was rendered on the presentation of the financial statements

due to accounting errors/deficiencies contained in the Basis for the Qualified Opinion,
which are discussed in detail in Part II of the report.

E. Other Significant Observations and Recommendations

1. The DTI exceeded the targets for Licensing and Registration under MFO 5 - Business
and Trade Regulation Services in terms of quantity, quality and timeliness of
approved business names, despite some negative comments/feedbacks from some of
its clients. Moreover, there were deficiencies and inadequacies in the eBNRS which
rendered the physical report of accomplishment unreliable. (Observation No. 1)

We recommended and Management agreed to instruct the officials concerned to:

(a) consider all the recommendations posted by clients in the Client Satisfaction
Feedback Form, for immediate implementation, if warranted and address the negative
comments/feedback from clients in order to meet their expectations and likewise
promote ease of doing business at DTI; and (b) address the noted
deficiencies/inadequacies of the eBNRS such as (i) set a more realistic performance
indicator for each type of business name application; (ii) exert effort to encourage the
clients to answer the survey questionnaire to determine whether or not there was an
improvement of service or the need for it; (iii) devise a scheme whereby actual
processing time from start to finish will be captured by the eBNRS to prevent human
intervention/manipulation, if warranted; and (iv) consider the queuing time of clients
waiting to be served in setting the PI for Timeliness.

2. The National Consumer Affairs Council (NCAC) posted low utilization of allocated
funds at 48 percent or P2.40 million out of P5 million funds in CY 2016. The
physical accomplishment was likewise low since most PPAs were unimplemented
and could not be evaluated against the set targets in the absence of Performance
Indicators (PI) not stated in measurable terms as to quantity and quality.
(Observation No. 2)

We recommended and Management agreed to direct the OIC of CPAB to instruct the
focal person of NCAC, through the CPAB to – (a) maximize fund utilization in
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 accordance with the WFP to provide services to more beneficiaries; (b) prepare Work
Plan and Target or its equivalent for any given year using Performance Indicators
expressed in quantifiable terms as to quantity, quality and timeliness for each
programmed P/A/P as a basis in the preparation of the Accomplishment Report to
facilitate evaluation of performance against targets; (c) henceforth, ensure close
monitoring of all approved programs/projects/activities of NCAC for any given year
in order to guarantee their substantial accomplishment within the approved budget
and timelines set for the benefit of the intended users and the general public; and
(d) make representation with Congress and DBM to integrate future funds intended
for the programs and projects pertaining to NCAC in the appropriation of CPAB, to
ensure that the intended benefits envisioned by the government for its consuming
public, through the NCAC, will be maximized.

3. The Cash in Bank-LCCA balances of DTI-CO and its twelve Regional Offices
amounting to P131.921 million were unauthorized and unnecessary but were not
reverted to the National Treasury. (Observation No. 3)

We recommended and Management agreed to instruct the Accountants of DTI-CO

and ROs to revert/remit to the BTr the balances of all unauthorized and unnecessary
bank accounts pursuant to laws, rules and regulations.

4. Fund transfers to implementing agencies for various programs and projects

amounting to P422.572 million were not liquidated as of year-end, of which P208.965
million were aged more than one year. (Observation No. 4)

We recommended and Management agreed to require the Accountants of the DTI-

CO, FMS OIC-Director and concerned Regional Directors to: (a) strictly comply with
the provisions of COA Circular 94-013 dated December 13, 1994 on the
implementation, utilization and liquidation of fund transfers; (b) require the
immediate settlement of unliquidated fund transfers through the submission of the
required reports and/or refund of the unused balance, if any; (c) coordinate with the
counterpart Accountant of the concerned LGUs for the immediate submission of
liquidation reports pertaining to the utilized funds; and (d) strengthen the monitoring
controls on fund transfers to prevent accumulation of long outstanding fund transfers.

5. The balances of the receivable accounts of DTI ROs amounting to P4.652 million as
of December 31, 2016 have been dormant for ten years and more but not yet
requested for write-off. (Observation No. 5)

We recommended and Management agreed to require the various Regional

Accountants to initiate request for write-off of accounts in accordance with the
guidelines and procedures per COA Circular No. 2016-005 dated December 19, 2016.

6. The DTI management could not strictly enforce the timely submission of financial
reports on the use of GCash ePayment facility for DTI business name registration for

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 CY 2016 due to the absence of an approved MOA/contract covering the said
agreement. (Observation No. 6)

We recommended and Management agreed to require the (a) Director, PMT-BR to

(i) submit the approved Quadpartite MOA covering the agreement on business name
registration using GCash ePayment facility, otherwise, this Office will be constrained
to recommend the suspension on the use of the facility in DTI’s operations for want
of legal basis/authorization and documentation to protect the interest of the
government; and (ii) observe submission of timely and adequately substantiated
report of collections of income and remittances to the BTr to the Accounting
Division; and (b) Accountant, to monitor the submission of monthly reports
pertaining to GCash ePayment in close coordination with the PMT-BR in order to
ensure timely recording of said transactions in the books of accounts.

The observations and recommendations were discussed with DTI officials in an

exit conference conducted on June 6, 2017. Management views and comments were
incorporated in this report, where appropriate.

F. Enforcement of Settlement of Accounts

Of the total audit suspensions of P185.578 million, disallowances of

P42.630 million and charges of P1,100.00 both for current and prior years, P162.347
million, P3.450 million and zero respectively, were settled during the year, leaving a
balance of P23.230 million; P39.859 million; and P1,100.00 ,respectively, for a total of
P63.090 million.

G. Implementation of Prior Years’ Audit Recommendations

Of the 101 prior years’ audit recommendations contained in prior years

Consolidated Annual Audit Reports (CAARs), 67 or 66 percent were fully implemented,
27 or 27 percent were partially implemented, and 17 or 7 percent were not implemented.