PART II - OBSERVATIONS AND RECOMMENDATIONS

The audit covered the financial accounts and operation of the Philippine Army
1
(PA) for CY 2018. It was conducted on a test basis to: (a) verify the level of assurance
that may be placed on Management’s assertions on the financial statements; (b)
determine the propriety of transactions and their compliance with pertinent laws, rules
and regulations; (c) identify opportunities for improvement; and (d) ascertain the extent
of implementation of prior years’ audit recommendations.

The audit of the 2018 accounts and operations of the 15 field units of the PA was
performed by the Audit Teams and Audit Groups assigned thereat. The results of such
audit2 formed part of the audit observations herein and, in turn, the basis of the Audit
Certificate accompanying this report. These 15 field units accounted for
P22,897,763,436.54 or 21 percent of the P110,675,218,167.32 total assets as of 31
December 2018 of the PA and 18 percent of its P79,879,455,084.45 total current
operating expenses for the year then.

In the case of Confidential and Intelligence Funds, the audit was limited to the
cash advances drawn under these funds in accordance with Section 6.3.5 of Joint Circular
2015-01 dated 08 January 2015 of the Commission on Audit, Department of Budget and
Management (DBM), Department Interior and Local Government (DILG), Governance
Commission for GOCCs and Department of National Defense (DND).

The audit of the assets transferred by the HPA to its PA field units, National
Government Agencies (NGAs) or Government-owned and Controlled Corporations
(GOCCs) was limited basically to: (i) ensuring that the assets transferred is for a project
of the PA with appropriate allotment and covered by a Memorandum of Agreement
(MOA) or similar document and that it is properly recorded; (ii) seeing that reports of
disbursements and disallowances are recognized in the PA books of accounts; and (iii)
reconciling the records of transferred funds of the PA, on one hand, and recipient or
implementing PA field units, NGAs and GOCCs, upon the other hand (pursuant to
Section 7 of COA Circular No. 94-013 dated 13 December 1994). The audit of the
disbursement/utilization of the transferred assets was conducted by the auditors of the
recipient or implementing PA field units, NGAs and GOCCs.

1
Acronyms used in this report are listed in Annex C.
2
Also communicated in a Management Letter (ML) issued to each of this 15 field units by the respective Audit Teams and Audit
Groups thereat.

51
FINANCIAL AUDIT

Non-submission of financial records that limited the extent of audit

1. Headquarters PA (HPA) and four of its field units failed to submit the financial
documents for transactions involving P2,587,345,689.09, thereby limiting the
extent of audit and forfeiting the benefit of, among others, timely detecting
errors and deficiencies; identifying areas for improvement; and having input to
assessments of accountability and decisions that need to be made.

1.1. The mandatory submission of financial records of receipts, disbursements,

expenditures, operations and other transactions to the Commission on Audit
within the period set by laws, rules and regulations 3 enables the auditor to
perform the standard audit procedures. It facilitates, among others, timely
detection of errors and deficiencies and identification of areas for improvement.4
The usefulness of financial statements is impaired if they are not made available
to users within a reasonable period after the reporting date.

1.2. We have noted, however, that the HPA and four field units failed to submit
financial documents for transactions involving P2,587,345,689.09 (Table 1),
within the prescribed period and even thereafter, timely enough that would have
enabled the performance of standard audit procedures. This effectively limited
the extent of audit and bypassed the benefit of such audit.

Table 1 – List of financial transactions not submitted for audit

Office/Unit Not submitted for audit Amount (Php)
HPA Journal Entry Vouchers (JEVs) supporting the 817,604,137.79
restatement of 2017 accounts forwarded to 2018/
Disclosure in the Notes to FS of the
nature/substance of the restatement of asset,
liability and equity accounts. Net of the
P250,153,577.75 HPA had accounted for so far
(Observation No. 4, pp. 59-62):

3
Among others, in Sections 6.03; 6.04 and 6.05 of COA Circular No. 95-006 dated 18 May 1995; COA Circular 2015-002 dated 09
March 2015;
COA Circular No. 2012-001 dated 14 June 2012; COA Circular No. 2009-006 dated 15 September 2009; Section 39 (1) (3) of PD No.
1445; Sections 5 and 7, Chapter 21, GAM Volume 1; and Article 218, Revised Penal Code
4
If there is an undue delay in the reporting of information, it may lose its relevance. To provide information on a timely basis, it may
often be necessary to report before all aspects of a transaction are known, thus impairing reliability. Conversely, if reporting is
delayed until all aspects are known, the information may be highly reliable but of little use to users who have had to make decisions in
the interim. In achieving a balance between relevance and reliability, the overriding consideration is how best to satisfy the decision-
making needs of users (Appendix A, PPSAS 1).

52
 Table 1 – List of financial transactions not submitted for audit
Office/Unit Not submitted for audit Amount (Php)

Change after
Particulars
restatement (Php)
Assets 298,674,775.05
Liabilities 48,767,060.07
Accumulated
470,162,302.67
Surplus/(Deficit)
Total 817,604,137.79
1st ID Disbursement vouchers and their supporting 723,914,120.57
documents not submitted for audit
7th ID Financial transactions 692,823,176.10
9th ID Disbursement vouchers and their supporting 91,875,807.07
documents - Check Disbursements and
Disbursements thru LDDAP-ADA5
54th EBde Report of Checks Issued (RCI), Report of ADA 261,128,447.56
Issued (RADAI) and disbursement vouchers with
supporting documents
Total 2,587,345,689.09

1.3. The Accounting Service, PA (ASPA) informed that there’s lack of accounting
personnel to handle the voluminous transactions in the Headquarters Philippine
Army (HPA). Existing personnel were obliged to perform multi-tasks to cope
with the demands of the unit. Certain accounting positions in ASPA were left
unfilled due to low salary rate not commensurate with the required competency
of each position; hence, recruitment and hiring of personnel to fill up the vacant
positions proved difficult.

1.4. We recommended and Management agreed to direct the responsible officers

and staff of the HPA and four field units to submit without further delay the
financial records and information specified herein and effectively resolve the
issue on the lack of personnel in ASPA.

Management Comment

1.5. The Accounting Service, PA (ASPA) informed that there’s lack of accounting
personnel to handle the voluminous transactions in the Headquarters Philippine
Army (HPA). Existing personnel were obliged to perform multi-tasks to cope
with the demands of the unit. Certain accounting positions in ASPA were left
unfilled due to low salary rate not commensurate with the required competency
5
List of Due and Demandable Accounts Payable with Advice to Debit Account (LDDAP-ADA) refers to an accountable form
integrating the ADA with the LDDAP which is a list reflecting the names of creditors/payees to be paid by the National Government
Agency/Operating Unit and the corresponding amounts of their unpaid claims, duly certified and approved by the head of the
Accounting Unit and Head of the agency or authorized officials (Sec. 5.5 , DBM Circular Letter No. 2013-16 dated 23 December
2013).

53
 of each position; hence, recruitment and hiring of personnel to fill up the vacant
positions proved difficult.

1.6. PA informed that the ASPA currently has 16 vacant positions to be filled-up. In
the Staffing Modification (Rationalization Plan II) which will be submitted to
CSAFP, SND, and DBM, there are 42 positions created for ASPA in addition to
the current plantilla positions. Any move to create or activate additional FAU
originating from ASPA thru position paper and submitted to OG5, PA will be
deliberated upon by Force Restructuring and Organizational Development
Committee (FRODC) and PA Table of Organization and Equipment (TOE)
Board.

Accounting Errors 6

2. Accounting errors in recording transactions amounting to P3,516,134,737.75

resulted in the misstatement 7 of affected accounts and weighed on the fair
presentation of the PA’s Consolidated Financial Statements (FS).

2.1. The Philippine Public Sector Accounting Standards (PPSAS) requires that
financial statements (FS) shall present fairly the financial position, financial
performance and cash flows of an entity. Fair presentation requires the faithful
presentation of the effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the PPSASs.8

2.2. Each government agency shall record its financial transactions and operations
conformably with the generally accepted accounting principles and in accordance
with pertinent laws, rules and regulations.9

2.3. On a test basis and based on the financial records submitted, we performed the
standard procedures (review, examination, verification and analysis, among
others), for the audit of the accounts presented in the FS of the PA. The audit
showed accounting errors totaling P3,516,134,737.75, broken down by
Office/Unit in Table 2.

Table 2 – Amount of Errors by Office/Unit

Office/Unit Amount (Php)
HPA 2,026,345,501.92
1st ID 138,028,436.03
2nd ID 6,746,371.83

6
Errors documented in audit based on available records/information during the conduct of such audit. Errors that could not be
expressed in monetary terms or the nature of which could not be fully established because documents were not yet available during the
audit, are included in the issue on accounting deficiencies (Observation No. 2, pp. 56-58).
7
Misstatement of amount means either overstatement or understatement. Overstatement of amount means that the amount is incorrect
and more than the true amount. Understatement of amount means that it is incorrect and less than the true amount.
8
PPSAS 1 Section 15, Chapter 2 of GAM, Volume I
9
Section 112, ibid

54
 Table 2 – Amount of Errors by Office/Unit
Office/Unit Amount (Php)
3rd ID 26,907,758.60
4th ID 119,142,527.43
6th ID 78,606,543.01
7th ID 245,235,767.66
9th ID 52,214,298.36
10th ID 8,539,664.48
MID-TRADOC 164,189,086.65
51st EBde 85,255,802.73
52nd EBde 29,700,523.61
53rd EBde 52,244.76
54th EBde 535,170,210.68
Total 3,516,134,737.75

2.4. Out of the P3,516,134,737.75 total amount of errors, 88.9 percent or

P3,126,050,144.41 were due to timing difference in the recording of transactions
among financial records and failure to complete the reconciliation of such
records by the end of 2018 (Table 3).

Table 3 - Breakdown of 88.9 percent of accounting errors

Percentage of
Particulars Amount (Php)
total errors
Between Headquarters PA and its field 1,259,255,062.37 35.8
units
Between PA’s Accounting and Property 390,446,260.32 11.1
records
Between PA and Other NGAs or 1,476,348,821.72 42.0
GOCCs10
Total 3,126,050,144.41 88.9

2.5. The timing difference in the recording of transactions among financial records
could not be avoided considering the nature of the PA operations which require
immediate movement of mission-essential assets. In 2018, for example, the PA
had 293,022 combat operations against the CPP-NPA and 260,701 combat
operations were against the Abu Sayyaf Group (ASG), Lawless Terrorist Groups
(LTGs), and Lawless Elements (LLEs).11 This, however, does not justify lengthy
delay in resolving such timing difference.

2.6. The accounting errors resulted in the misstatement of account balances and
carrying amounts as presented in detail in Annex B with the net effect
summarized in Table 4. As such, these errors weighed on the fairness of the PA’s
financial position and performance presented in its Consolidated FS.

10
NGAs - National Government Agencies; GOCCs - Government-Owned and Controlled Corporations
11
Philippine Army Annual Accomplishment Report CY 2018

55
 Table 4 – Effect of accounting errors
Net effect on Understatement
Assets P 290,890,769.21
Liabilities 286,298,791.96
Surplus/(Deficit) 418,663,258.73 4,591,977.25
Income 24,151,342.17
Less: Expenses 438,222,623.65

2.7. In terms of nature of errors, these errors are mostly reiterations of those in the
prior years’ CAARs wherein the causes were discussed. The recommendations
addressing such causes as well as the status of implementation of such
recommendations as at year end are discussed in Part III of this report. Among
the main causes are the following: 12

a. Non-submission or delay in the submission of documents supporting the

movements of assets (e.g. deliveries of procured items directly from
contractors, Government Arsenal, PS-DBM or through the Philippine
International Trading Corporation (PITC); issuance/consumption;
transfer; completion of contracted infrastructure projects; disposal;
utilization of cash advances; etc.) by the concerned HPA offices and field
units; thus, the accounting offices/units had no basis in recognizing or
reclassifying the appertaining such movements of assets;

b. Documents supporting movements of assets/asset transactions that could

not be located in view of fast turnover of responsible/accountable
personnel without effective turnover of such documents; thus, the
corresponding carrying amounts of the corresponding asset accounts
could not be fully accounted for;

c. Non-maintenance or improper maintenance of ledger cards and stock

cards by the accounting and property offices, respectively; thus, the
difficulty in establishing the accuracy, completeness and existence of the
carrying amounts of the assets accounts;

d. Lack of common reference and information in the records of the

Accounting and Property offices/units (e.g., unit cost, storage location,
etc.) making it difficult to establish the accuracy, completeness and
existence of carrying amounts of assets and expense balances;

e. Recognition of deliveries upon payment instead of upon inspection and

acceptance; thus, the delay in the recognition of deliveries; and

12
Same ones identified in the 2015-2017 CAARs on PA

56
 f. Derecognition of unserviceable properties only after their disposal
instead of upon approval of the Inventory and Inspection Report of
Unserviceable Property or IIRUP; thus, the delay in derecognition.

2.8. We noted the action taken and measures set in place by the PA as presented in
Part III of this report. The level of errors, however, indicate that these actions and
measures need to be calibrated to bring about more effective results.

2.9. We reinforce our prior years’ recommendation by urging Management to

direct the concerned accountants of ASPA and Field Accounting Units to
correct immediately all the accounting errors discussed herein.

Accounting Deficiencies

3. Various accounting deficiencies in recording and reporting financial

transactions amounting to P4,952,590,419.72 undermined the quality of
information presented in the PA’s Consolidated Financial Statements (FS).

3.1. Verification and analysis of the PA’s accounts and their underyling transactions
showed accounting deficiencies as presented in Table 5 by Office/Unit and
identified in detail in Annex B.

Table 5 - Accounting deficiencies by Office/Unit

Office/Unit Amount (Php)
HPA 4,250,727,829.12
1st ID 401,817.40
2nd ID 483,960.47
3rd ID 5,990,169.64
7th ID 9,589,017.53
MID-TRADOC 156,746,833.92
51st EBde 17,788,215.12
52nd EBde 207,572,398.96
54th EBde 303,290,177.56
Total 4,952,590,419.72

3.2. Out of the P4,952,590,419.72 total amount of deficiencies, 86.2 percent or

P4,270,184,393.61 relate to incomplete asset reconciliation due to timing
difference in the recording of transactions as shown in Table 6. As mentioned in
Observation No. 2, this timing difference is expected due to the nature of the
PA’s operation, however, such nature does not justify leaving it unresolved for a
considerable time.

57
 Table 6 - Breakdown of 86.2 percent of accounting deficiencies
Percentage of
Particulars Amount (Php) total errors
(4,952,590,419.72)
Between the Headquarters PA and 5,990,169.64 0.1
its field units
Between PA’s Accounting and 3,552,338,009.16 71.7
Property records
Between PA and Other NGAs or 711,856,214.81 14.4
GOCCs
Total 4,270,184,393.61 86.2

3.3. These accounting deficiencies undermined the quality of information presented

in the PA’s Consolidated FS, consequently falling short of meeting the
prescribed quality standards.13

3.4. These deficiencies are reiterations of those in the prior years’ CAARs. The
causes identified in audit that gave rise to these deficiencies, the corresponding
recommendations to address them as well as the status of implementation of such
recommendations are discussed in Part III of this report. The main causes
discussed in the prior years’ CAARs are practically the same as those of
accounting errors, specifically those listed in letters ‘a’ to “d”. As discussed in
Observation No. 2, the action taken and measures set in place by the PA to
address these causes (as presented in Part III of this report) need to be calibrated
to bring about more effective resolution of these accounting deficiencies.

3.5. We reinforce our prior years’ recommendation by recommending that

Management instruct the concerned officers and staff of the HPA, Infantry
Divisions and Engineer Brigades to resolve the accounting deficiencies listed
in detail in Annex B. Specifically:

a. for the long outstanding cash advances, settle them without further
delay and ensure that the recognition of the attendant assets and
expenses are made in the proper period;

b. in the case of the unreconciled difference between the property and

accounting records, and between the records of accounts of PA and
PS-DBM or PITC, account for and settle them fully;

c. for the undocumented bank credit and debit memo, account for
them fully and recognize them in the books of accounts by the end of
2019;

13
Appendix A, PPSAS 1 – Among these qualitative characteristics are”: Understandability, Relevance, Timeliness, Reliability,
Faithful representation, Substance over form, Completeness and Comparability.

58
 d. in the case of disbursements, account balances and financial
transactions lacking the prescribed documentation, prove their
validity/regularity by submitting such documentation;

e. for the abnormal FOL consumption recognized in the accounts,

account for and recognize the actual level of consumption;

f. in the case of PPE without allowance for depreciation, provide such

depreciation in accordance with the prescribed method; and

g. for the 895 pieces of firearms turned-in to FSSU, ASCOM and PAO,
GS, account for them correctly in both the books of accounts of
ASPA and 3rd ID.

Non-disclosure of information that will enable users to evaluate the significance of the
accounts presented in the FS

4. The PA had not disclosed in the Notes to FS the required information that will
enable users of its FS to evaluate the significance of the assets, liabilities and
equities to its financial position and performance and the nature and extent of
risks arising from them.

4.1. We looked into the financial reporting of the Philippine Army (PA) to see if it
conforms to the Philippine Public Sector Accounting Standards (PPSAS). 14
While we appreciate PA’s effort to adhere to the financial reporting standards as
articulated in PPSAS, we have identified, certain areas in which PA can improve
compliance to such standards and present fairly its FS.15

Non-disclosure of the nature of restatement in the Notes to FS

4.2. We compared the restated carrying amounts and balances of 2017 accounts
presented in the PA’s 2018 Comparative Consolidated FS and those in the
certified FS in the 2017 CAAR on PA. The comparison showed material changes
as summarized in Table 7. These changes were carried forward to the 2018
carrying amounts and balances of the PA’s accounts. The PA; however, had not
disclosed the nature and substance of these changes in the Notes to Consolidated

14
COA Resolution No. 2014-003 dated 24 January 2014 prescribes the adoption of the International Public Sector Accounting
Standards (IPSAS), to be referred to as the Philippine Public Sector Accounting Standards (PPSAS)
15
Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation
requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, revenue, and expenses set out in PPSASs. The application of PPSASs, with additional
disclosures when necessary, is presumed to result in financial statements that achieve a fair presentation (Par. 27, PPSAS 1).

59
 FS; thus, falling short of the standards16 and bearing on the understandability of
such FS.17

Table 7 – Analysis of restated 2017 accounts (in thousand)

2017 As
Per certified FS Change
Particulars Restated
in 2017 CAAR
Total Assets P105,539,123 P 106,004,542 (P 465,419)
Total Liabilities 3,668,452 3,599,991 (68,461)
Total Assets less Total
Liabilities P101,870,671 P 102,404,551 (P 533,880)
Accumulated
Surplus/(Deficit) P100,693,483 P 101,227,362 (P 533,879)
Revaluation Surplus 1,177,188 1,177,189 (1)
Total Net Assets/Equity P101,870,671 P 102,404,551 (P 533,880)

Non-disclosure of information vital to understanding the significance of receivables,

inventories and PPE

4.3. Review of the Notes to FS showed that PA had not disclosed certain information
as required in prescribed accounting standards. 18 These information (Table 8)
will enable users of the FS to evaluate the significance of the receivables,
inventories and PPE to the PA’s financial position and performance and the
nature and extent of risks arising from such assets.19

Table 8 - Information vital to understanding the significance of receivables,

inventories and PPE not disclosed in the Notes to FS
ACCOUNTS DISCLOSURES
Other Policies and procedures on the accounting for and utilization of
Receivables the RMC Fund;20

16
Para. 54, PPSAS 3
17
The Notes to FS shall present information about the basis of preparation of the financial statement and the specific accounting
policies used. It shall provide additional information that is not presented on the face of the Statement of Financial Position, Statement
of Financial Performance, Statement of Changes in Net Assets/Equity, or Cash Flow Statement, but that is relevant to the
understanding of any of them (Para, 127, PPSAS 1).
An entity shall present information including accounting policies in a manner that meets the qualitative characteristic of, among
others, understandability. An information is understandable when users might reasonably be expected to comprehend its meaning. For
this purpose, users are assumed to have a reasonable knowledge of the entity’s activities and the environment in which it operates, and
to be willing to study the information. Information about complex matters should not be excluded from the financial statements
merely on the grounds that it may be too difficult for certain users to understand Appendix A, ibid).

18
The Notes to FS shall present information about the basis of preparation of the financial statement and the specific accounting
policies used. It shall provide additional information that is not presented on the face of the Statement of Financial Position, Statement
of Financial Performance, Statement of Changes in Net Assets/Equity, or Cash Flow Statement, but that is relevant to the
understanding of any of them (Paragraph 127, Philippine Public Sector Accounting 1).
19
The principles for disclosure in the entity’s financial statements enable users to evaluate the significance of financial instruments for
the entity’s financial position and performance and the nature and extent of risks arising from financial instruments to which the entity
is exposed during the period and at the end of the reporting period, and how the entity manages those risk (Sec. 1, Chapter 7, GAM
Vol. I).
20
The PA accounts for the Repair, Maintenance and Construction Fund (RMC Fund) in the Other Receivables account. RMC Fund
consists of the rebates on Fuel, Oil and Lubricants (FOL) procured from Petron Corporation.

60
 Table 8 - Information vital to understanding the significance of receivables,
inventories and PPE not disclosed in the Notes to FS
ACCOUNTS DISCLOSURES
The movement in the RMC Fund over the year; and
Inventories The carrying amount of inventories carried at fair value;
The amount of inventories recognized as an expense during the
period;
The amount of any write-down of inventories recognized as an
expense in the period;
A reconciliation of the carrying amount at the beginning and end
of the period showing:
• Additions;
• Expensed during the year except write-down;
• Write-down during the year; and
• Reversal of Write-down during the year
Property, Plant A reconciliation of the carrying amount at the beginning and end
and Equipment of the period showing:
(PPE)
• Additions;
• Disposals;
• Acquisitions through entity combinations;
• Increases or decreases and impairment losses;
• Impairment losses recognized in surplus or deficit;
• Depreciation;
• Other changes
The existence and amounts of restrictions on title21;
The amount of expenditures recognized in the carrying amount
of an item of PPE in the course of its construction;
The amount of contractual commitments for the acquisition of
PPE; and
The carrying amount of temporarily idle PPE;
The gross carrying amount of any fully depreciated PPE that is
still in use; and
The carrying amount of PPE retired from active use and held for
disposal.

4.4. In order to meet the standard of understandability and enable users of the
FS to evaluate the significance of the assets, liabilities and equities to the
financial position and performance and the nature and extent of risks
arising from them, we recommended that Management direct ASPA to
disclose in the Notes to FS the following:

21
In 5th ID, 4 lots in the amount of P270,597,823.00 were acquired thru Presidential Proclamation, Executive Order and Donation with
condition.

61
 a. nature and substance of the changes arising from the restatement of
accounts presented in the 2017 FS; and

b. information on receivables, inventories and PPE listed in Table 8.

PERFORMANCE AUDIT
Delay in procurement actions for mission-essential goods and base development projects
5. Considerable delay from 25 to 61 calendar days in procurement actions for
mission-essential goods and base development projects poses risk to the PA
operations in achieving its core purpose. 22

5.1. In line with the government’s objective of streamlined procurement process that
is efficient and effective23, we performed a comparative analysis of the actual and
maximum period of procurement action as recommended in the IRR of RA 9184
from pre-procurement conference to issuance of the Notice to Proceed (NTP);
PAPC, Armed Forces of the Philippines, Procurement Service (AFPPS) Service
Charter for small-value items; or contracted/agreed upon in the case of the
delivery of goods24 and infrastructure projects.

5.2. The selected procurement samples showed considerable delay from Pre-
procurement Conference to issuance of Notice to Proceed (NTP) and in the
delivery of goods/projects procured as summarized in Tables 9 and 10,
respectively. The extent of delay is alarming because, as specified in these
Tables, the samples pertain mostly to procurement of mission-essential
goods/projects. As such, this delay poses risk to PA operations in achieving its
core purpose.

Table 9 -Average delay in procurement action

Recommended maximum period of No. of calendar
Office/ Goods/Infra- action days
Procurement
Unit structure No. of
action Reference Actual Variance
calendar days
HPA Individual Pre-procurement Annex C, 2016 Revised 197 61
Clothing and Conference to 136 IRR, RA No. 9184
Individual issuance of Notice

22 The Philippine Army shall: (1) Organize, train and equip forces for the conduct of prompt and sustained operations on land; (2)
Prepare such units as may be necessary for the effective prosecution of the national defense plans and programs and armed forces
missions, including the expansion of the peacetime army component to meet any emergency; (3) Develop, in coordination with the
other Major Services, tactics, techniques and equipment of interest to the army for field operations; (4) Organize, train and equip all
army reserve units; and (5) Perform such other functions as may be provided by law or assigned by higher authorities (Section 49,
Executive Order Nr 292 s.1987).
23
Annex C, 2016 Revised Implementing Rules and Regulations (IRR) of Republic Act (RA) No. 9184.
24
Goods. Refer to all items, supplies, materials and general support services, except Consulting Services and infrastructure projects,
which may be needed in the transaction of public businesses or in the pursuit of any government undertaking, project or activity,
whether in the nature of equipment, furniture, stationery, materials for construction, or personal property of any kind, including non-
personal or contractual services, such as, the repair and maintenance of equipment and furniture, as well as trucking, hauling,
janitorial, security, and related or analogous services, as well as procurement of materials and supplies provided by the Procuring
Entity for such services. The term “related” or “analogous services” shall include, but is not limited to, lease of office space, media
advertisements, health maintenance services, and other services essential to the operation of the Procuring Entity (Section 5(r), 2016
Revised IRR of RA 9184)

62
Table 9 -Average delay in procurement action
Recommended maximum period of No. of calendar
Office/ Goods/Infra- action days
Procurement
Unit structure No. of
action Reference Actual Variance
calendar days
Equipment (ICIE) to Proceed (NTP)

51st EBde Base development Pre-procurement 113 or 141 Annex C, 2009 Revised 172 50
projects Conference to IRR, RA No. 9184 for
issuance of NTP projects prior to 2016;
and Annex C, 2016
Revised IRR, RA No.
9184 for projects
thereafter
51st EBde Small-value items Preparation of 7 PAPC, AFPPS Service 32 25
Purchase Order Charter
(PO) to preparation
and approval of
NTP

Table 10 -Average delay in delivery of procured goods/projects

No. of
Office/
Goods/Infrastructure contracts/ Amount (Php) Delay Reference
Unit
AORs
HPA 1 unit Fuel Lorry, 8 units 6 332,868,638.00 207 average Compared to contracted
Grader, 19 units Dump Truck calendar period including period
(heavy), 11 units Truck trooper days extension granted (Contract
Carrier, Medium, 3 units Nos. ENG-005-10-17; ENG-
Passenger Bus and 2 units Mini 011-10-17; ENG-010-10-17;
Bus, 3 units Well Drilling ORD-026-12-17; ORD-036-
Truck/Rig 12-17; ENG-021-12-17)
HPA ordinance (firepower) items; 36 646,404,349.63 AORs Per status of AORs received
armor spares items; unserved by Philippine International
quartermaster items; over 2 years Trading Corporation (PITC)25
infrastructure/engineer for 2010-2016 PA projects
items/projects; and
medical/dental items
HPA munition 1 212,720,261.36 unserved Compared to delivery period
over 317 specified in the Memorandum
calendar of Agreement (MOA) with
days the Government Arsenal
(GA)26
51st Base development projects from 33 622,768,935.36 706 Compared to contracted
EBde 2012 to 2018 calendar period including period
days extension granted

5.3. Analysis of procurement by HPA through the PITC tended to show capacity
issue on the part of the latter considering that there are AORs for 2010 and 2013
projects which had not been completed yet as at year-end. In the meantime, funds

25
Authorized under the Section 53.6 of the Revised Implementing Rules and Regulations (IRR) of Republic Act (RA) 9184 in order
to hasten project implementation. Procuring Entities which may not have the proficiency or capability to undertake a particular
procurement, as determined by the Head of the Procuring Entity concerned, may request other Government of the Philippines (GoP)
agencies to undertake such procurement for them, or at their option, recruit and hire consultants or procurement agents to assist them
directly and/or train their staff in the management of the procurement function.
26
Sec. 53.5, IRR of RA 9184 authorizes negotiated procurement of goods from another government agency while Executive Order
No. 303 dated 29 March 2004 directs the AFP, PNP, and other government agencies to source their small arms ammunition and such
other munition requirements as may be available from the Government Arsenal.

63
 amounting to P6,494,519,543.90, remained at PITC for the procurement of goods
requisitioned from 2007 to 2018.

5.4. In the case of the delay in procurement of munitions from the GA, the PA had to
give ample time to GA for the processing of the required ammunitions27.

5.5. At the 51st EBde, there was considerable delay from the preparation of the Post
Qualification Requirements (PQR) up to the signing of the contract/issuance of
NTP. Moreover, the delay extends to the project completion. In three cases,
several base development projects awarded to a contractor were all terminated.
This is a main contributory factor in the inordinate delay in the full delivery of
such projects.

5.6. We recommended and Management agreed to direct the Commanding

Officer of the PAPC to:

a. address the delay in procurement actions and in the process come up

with a catch-up plan reflecting the prevailing condition in 2018;

b. in the case of procurement through PITC and from GA:

i. work closely with them to implement measures to hasten

considerably the delivery of outstanding requisitioned goods,
equipment, etc.; and

ii. evaluate and determine the extent by which PA can effectively

source operational requirements from them and ensure that
such extent is factored in future procurement actions.

Management Comment

5.7. The activity of the contracts of the PAPC, AFPPS starts once the approved
Notice of Award (NOA) is received from the PABAC which is responsible for
pre-procurement activity to approval of the NOA. The total number of days
consumed until the contract is approved by the Head of the Procuring Entity
indeed exceeded the maximum allowable period in the procurement process of
Goods and Services. This observation is attributed on the availability of
concerned individuals in the signing and approval of the contract which is
beyond control. The Center facilitated a one-time signing of the contract in
response to the issue noted. Concerned signatories are requested to attend to
purposely check the completeness and evaluate the documents. At present, the
Center is working to invite the MFO of the concerned units and the Acting Army
Chief Accountant in order to facilitate and fast-track the issuance of Obligation
Request and Status (ORS), funding of the contract and subsequent issuance of
Certificate of Availability of Fund from the ASPA.

27
Funds were transferred to GA in September 2016.

64
 5.8. The 51st EBde informed that the 112th Contracting Office, Armed Forces of the
Philippines is currently instituting reforms to streamline the Contract
Management and Implementation of Base Development Projects implemented
“By Contract”. Actions taken to address the delay include management meetings
with the contractors, issuance of demand letters to the contractors in case of
reported occurrence of Project Slippage, and constant request for Legal
Comments in situation that disparity in the implementations of Policies and
Directives occurs.

5.9. PA received an advice from GA on March 29, 2019 that the remaining ammo is
ready for hauling. The Pre-delivery Inspection (PDI) of 8,483,313 rds Ctg 5.56
mm Ball, SS109/M855 at the Government Arsenal, Limay, Bataan is tentatively
scheduled between 27 May to 14 June 2019 to complete the delivery of training
ammo requirements charged to the P628M fund transferred to GA.

a. The PA already recorded the unrecognized interest income noted in the

amount of P1,980,531.17 thru JEV No. 2019-05-003375 dated May
22, 2019.

b. The PA already recorded the unrecognized liquidated damages in the

amount of P23,374,221.39 thru JEV No. 2019-05-003299 dated May
17, 2019.

5.10. OG4, PA in coordination with ASCOM, PA created the Procurement Management

Office (PMO) to cater the requirements such as monitoring, delivery and other
factors that are attributed on the delay of the bidding activities.

COMPLIANCE AUDIT
Non-compliance with certain provisions of laws, rules and regulations on financial
operations
6. The PA had not observed certain provisions of laws, rules and regulations on
financial operations; thus, bypassing the intended control benefits to its financial
and accounting operation.

6.1. Laws, rules and regulations on government financial operations provide the
controls that ensure, among others, the validity of transactions and promote
adherence to policies and procedures. The PA, however, had not observed certain
provisions of laws, rules and regulations (Table 11), thus, bypassing the intended
control benefits to its financial and accounting operation.

Table 11 – List of compliance issues on financial operations

Laws, Rules and/or Regulations Not
Office/Unit Audit Observations
Observed
HPA Delayed submission of TBs, financial Sections 6.03; 6.04 and 6.05 of COA

65
Table 11 – List of compliance issues on financial operations
Laws, Rules and/or Regulations Not
Office/Unit Audit Observations
Observed
2nd ID statements/reports, Journal Entry Vouchers, Circular No. 95-006 dated 18 May
disbursement vouchers, liquidation reports of 1995; COA Circular 2015-002 dated
cash advances and supporting documents to the 09 March 2015; COA Circular No.
DVs/LRs 2012-001 dated 14 June 2012; COA
Circular No. 2009-006 dated 15
September 2009; Section 39 (1) (3) of
PD No. 1445; Sections 5 and 7,
Chapter 21, GAM Volume 1; and
Article 218, Revised Penal Code
HPA Nine out of the 31 Contracts exceeded the Annex C, 2016 Revised Implementing
maximum allowed period of 136-calendar days Rules and Regulations (IRR) of
from Pre-Procurement Conference to the date of Republic Act (RA) No. 9184
issuance of Notice to Proceed (Observation 5,
pp. 63-66)
HPA Delayed submission of bank reconciliation Sections 5 and 7, Chapter 21, GAM
statements covering 27 bank accounts Volume 1
HPA Late/Non-submission of Purchase Orders / Sections 3.1.1 and 3.2.1 of COA
2nd ID Contracts Circular No. 2009-001 dated 12
52nd EBde February 2009
HPA Non-submission of Notices of Delivery to COA Item A.2 of COA Circular No. 96-010
within 24 hours from acceptance of such
delivery
4th ID Non-submission of List of all on-going Section 2.1 of COA Circular No.
52nd government projects, programs and activities at 2013-004 dated 30 January 2013
the beginning of the year and those to be
implemented during the year
7th ID Hiring legal retainer without securing the Section 3, Rule VIII of the 2009
written conformity and acquiescence of the Revised Rules of Procedures
Solicitor General and concurrence of the
Commission on Audit
7th ID Disbursement vouchers not properly COA Circular 2012-001 dated 14 June
51st EBde documented 2012; and Section 4 (6) of PD No.
1445
10th ID Checks remained outstanding for more than six Section 44, Chapter 6, Volume I of the
(6) months GAM
HPA Grant of additional cash advances (CAs) to Section 4.1.2 of COA Circular No. 97-
51st EBde AOs with unsettled CAs 002 dated 10 February 1997
52nd EBde Additional CAs granted without Certification Section 36, Chapter 6, GAM Volume
from the Accountant that the previous CA had I; and COA Circular No. 2012-001
already been liquidated. dated 14 June 2012
52nd EBde Contracts not dated and not supported with COA Circular 2009-001 dated 12
complete documentation February 2009 and IRR of RA 9184
51st EBde Non-maintenance/improper maintenance of Section 17, Chapter 8, GAM Volume I
HPA supplies ledger card and stock card for Fuel, Oil
and Lubricants
HPA Delayed submission of approved Request and Section 17, Chapter 8, GAM, Volume
54th EBde Issue Slips (RISs) / Report of Supplies and I
Materials Issued (RSMI)
51st EBde Failure to conduct physical count of inventories Section 13, Chapter 8, GAM Volume I
4th ID Non-submission of Monthly Report of Fuel COA Circular No. 77-61 dated 26
52nd EBde Consumption and other documents supporting September 1977
fuel issuances/consumption

66
Table 11 – List of compliance issues on financial operations
Office/Unit Audit Observations
7th ID Non- maintenance of PPE Ledger Card by the
Accounting Unit
MID-TRADOC Property Acknowledgement Receipts (PAR) for
motor vehicles in the name of the Responsible
Supply Officers (RSOs) instead of the actual
end-users
10th ID Non-preparation and submission of the Monthly
RAAF
53rd EBde Supporting documents not stamped “PAID” by
the disbursing officer after payments were made
3rd ID Non-provision of depreciation
HPA Non-preparation/submission of RAAF for
Delivery Advice (DA) of FOL products
7th ID, 9th ID, Non-derecognition of unserviceable PPE
10th ID
51st EBde Non-reclassification of completed projects to its
54th EBde proper PPE accounts
51st EBde Purchase contracts between the suppliers and
Chief, 112th Contracting Office, AFPPS of the
Brigade prior to the Certification of the
Availability of Funds (CAF)
52nd EBde Non-submission of copy of Advice of
Allotment/Sub-advice of Allotment
54th EBde Accountable Officer not adequately bonded
5th ID Government property not insured with the
8th ID Property Insurance Fund of the Government
Service Insurance System (GSIS)
4th ID Non-submission of Calendar Year 2018 Roster
of Civilian Active Auxiliary; and documents to
support validity of full payment of subsistence
allowance
10th ID AOs not provided with safety vault or
equivalent
Laws, Rules and/or Regulations Not
Observed
Sec. 42, Chapter 10, GAM, Volume I
Section 21, GAM Volume 1
Section 17(k), Chapter 8, GAM
Volume I
Sec. 2(q), COA Circular No. 92-389
dated 03 November 1992
Section 27, Chapter 10, GAM Volume
I
Appendix 67, GAM, Volume II
Section 40, Chapter 10, GAM Volume
I
Item e, Section 8, Chapter 10, GAM,
Volume I
Section 36(c), GAM Volume I
Sections 4 and 39, PD 1445
Section 101.1 and 101.2, PD 1445
Republic Act 656
COA Circular No. 2009-006 dated 15
September 2009; Section 39 (1) (3),
PD No. 1445; Paragraph C, Chapter
IV, CAFGU Cadre Handbook; Section
39, PD1445
Sections 123 and 124, PD 1445

6.2. These non-compliance issues are mostly reiteration of those reported in prior
years’ audit reports which means that the existing compliance monitoring system
of the PA has not improved.

6.3. In order to strengthen control over the PA’s financial and accounting
operation, we recommended that Management intensify the monitoring of
compliance to the accounting and auditing laws, rules and regulation
specified in Table 11 and ensure faithful observance thereof.

Management Comment

6.4. On the delayed submission of financial documents, the Accounting Service, PA

(ASPA) informed that there’s lack of personnel to handle the voluminous

67
 transactions in the Headquarters Philippine Army (HPA). Existing personnel
were obliged to perform multi-tasks to cope with the demands of the unit.
Certain accounting positions in ASPA were left unfilled due to low salary rate
not commensurate with the required competency of each position; hence,
recruitment and hiring of personnel to fill up the vacant positions proved
difficult. HPA further informed that the ASPA currently has 16 vacant positions
to be filled-up. In the Staffing Modification (Rationalization Plan II) which will
be submitted to CSAFP, SND, and DBM, there are 42 positions created for
ASPA in addition to the current plantilla positions. Any move to create or
activate additional FAU originating from ASPA thru position paper and
submitted to OG5, PA will be deliberated upon by FRODC and PA TOE Board.

6.5. In the case of non-preparation/submission of Report of Accountability for

Accountable Forms (RAAF) for Delivery Advice (DA) of FOL products, HPA
pointed out that the inclusion of the DAs in the RAAF is inapplicable because
they are pre-numbered documents provided by Petron Corporation which is a
private company. Used DAs are filled-up with the corresponding approved FOL
allocations and money value which serves as the reference documents of Petron
Corporation to deliver the FOL products to PA end-user units.

6.6. Based on the use of the DA described in the foregoing comment, it is clear that
the DA is an accountable form that should be tracked and reported in the RAAF.
The source of an accountable form has no bearing in tracking accountable forms.
The DA is not much different from the blank checks provided by the banks.

Compliance with Other Mandatory Accounts/Areas

Gender and Development (GAD)

7. PA has not implemented three vital GAD activities programmed for FY 2018
with a total budget of P2,069,011.39.

7.1. Analysis of the PA’s GAD Plan and Budget delivery showed that it spent
P6,168,219,811.53 for 55 projects/activities which accounted for 9.6 percent of
its total appropriation of P63,998,132,000.00. We are pleased to note that this is
way above the minimum amount set by law for GAD implementation.28

7.2. We are also pleased to observe in the following activities that the PA had taken
measures to implement GAD activities in such a way that redundant activities
and certain costs are avoided. These redundant activities are in Table 12.

28
Sec. 30, General Provisions, GAA for FY 2018 (RA No. 10964)

68
Table 12 – Redundant GAD Activities

Responsible Approved
Activity Remarks
Unit/Office Budget

PA Major Units (PAMU) GFP
Committee Reviews of GAD
Accomplishment Reports 2017
and GAD Plans 2018
PA Major 1,556,646.12 Not implemented because the
Units activity did not fit the timeline
and redundant to GAD Activity
18 for FY 2018 (Review of
GAD AR 2017 and GPB 2019)

Conduct of GAD conference with OAGAD 27,088,487.31 Implemented by incorporating

GFPS of all PA units to and PA the agenda in GAD Activity 11
disseminate GAD-related policies Major Units for FY 2018 (GFPS Execom,
consultation on the GAD TWG Committee Meetings)
initiatives and programs

Conduct of Women’s symposium PA Major 2,190,996.10 Implemented by incorporating

Units this in GAD Activity 23 for FY
2018 (Men and Women Forum)

Capacity building of GAD officers OAGAD 18,408,210.52 Implemented by incorporating

to monitor and evaluate the and PA this in the Gender
implementation of GAD PAPs Major Units Mainstreaming Activities,
Philippine Army-wide which GAD particularly during the GAD
include the sex disaggregated Offices Family Conference. (GAD
reporting of gender mainstreaming Activity 34 for FY 2018)
programs

Development of gender-fair OG8 and 100,000.00 Implemented by incorporating

training materials for PA Training TRADOC this activity in GAD Activity
Schools 43 for FY 2018 (Crafting and
Publication of IEC materials)

7.3. We are concerned however, that while the PA has implemented 55 of the 63
GAD activities programmed in FY 2018, it has not implemented as at year end
the following GAD activities for FY 2018 which we consider vital to PA
operation (Table 13):

Table 13 – Unimplemented GAD activities

Responsible Approved
Activity
Unit/Office Budget
Review and revision of guidelines, policies and other doctrines AGSMO P 750,000.00
in the creation of external contents and messaging of the
ATRSEP
Development of a system for Reservist Training (RRU OG9, PA 342,473.90
Evaluation)
Development and revision of reservist training materials, POI OG9, PA 976,537.49
and curricula to integrate gender sensitivity
Total P2,069,011.39

69
Management Comment

7.4. The Army Governance Strategy Management Office (AGSMO) claimed that
upon thorough study, the activity is not fit for the daily operational requirements
of the Office. Instead, those activities were re-programmed as direct GAD
Activities that were acceptable and convenient to our office and personnel.

7.5. HPA G9 informed that it conducted a direction-setting activity to identify the

type of trainings, requirements, program of instructions (POI), and curricula in
order to integrate gender sensitivity. Training evaluation parameters are crafted
to determine the effectiveness of the program. The outcome of the program will
be submitted at the end of CY 2019. The Harmonized Gender and Development
Guideline (HGDG) is a PCW-prescribed gender analysis tool to integrate gender
perspective in the major programs of an agency and to attribute a portion or the
whole budget of the program to the GAD budget. It has been resolved that the
RRU Evaluation and Revision of Reservist training materials will be subjected to
HGDG to be part of the GAD Plan and Budget (GPB) Attributable Activities for
CY 2020. Necessary training was given to concerned offices during the GPB
Development Training and Workshop for HPA Offices last 24-26 April 2019.

7.6. We encourage Management to implement effectively the GAD activities in

Table 13.

8. Implementation of Program for Senior Citizens and Person with Disability

8.1. In 2018, the Philippine Army spent P1,067,569.00 for projects intended to
address the concerns of senior citizens and persons with disability. 29 Table 14
lists these projects.

Table 14 - Projects intended to address the concerns of senior citizens and

persons with disability
Project Cost
Unit Project
(Php)
Repainting of parking space/bays for priority use
of Persons with Disability and Senior Citizens 15,825.00
3rd ID Procurement of three (3) crutches
Procurement of one Nebulizer
Hallways and Ramps
Repair and enhancement (canopy extension,
8th ID
railings) of PWD ramp at 8ID grandstand 171,990.00

29
All agencies of the government shall formulate plans, programs and projects intended to address the concerns of senior citizens and
persons with disability, insofar as it relates to their mandated functions, and integrate the same in their regular activities. Moreover, all
government infrastructure and facilities shall provide architectural features, designs of facilities that will reasonably enhance the
mobility, safety and welfare of persons with disability (Sec. 31, General Provisions, General Appropriations Act (GAA) for FY 2018
or RA No. 10964).

70
 Table 14 - Projects intended to address the concerns of senior citizens and
persons with disability
Project Cost
Unit Project
(Php)
MID- Construction of Ramp in front of Medical
TRADOC Dispensary, Mech Division (MID) 59,650.00
MID- Repair of parking area for Senior Citizen/PWDs at
TRADOC Command Administration building (TRADOC) 120,600.00
PWD/SC Ramp and Plant Box, Headquarters,
Camp Atienza, Libis, Quezon City – P40,820.00 87,820.00
PWD/SC Ramp, Camp M. dela Cruz, Annex,
51st EBde
Soyung, Isabela – P17,000.00
PWD/SC Ramp, Camp Servillano Aquino, Tarlac
City – P30,000.00
Repair and Maintenance of Admin, Multipurpose
53rd EBde buildings and installation/construction of Ramp
100,000.00
and Handrails
Repair and Maintenance/enhancement of PWED
HPA
CR and pathways (ASCOM) 85,905.00
Gift giving/enhancement of Admin building stairs
HPA
with ramp (ARESCOM) 86,130.00
Repair for a decent and SC and PWD friendly
HPA
comfort rooms (FCPA) 249,649.00
Repair and Maintenance of pathway with railing
HPA
(APAO) 90,000.00
Total
1,067,569.00

9. Tax Laws and Regulations, GSIS Premiums and Other Loan Amortizations, and
PhilHealth and Pag-IBIG Contributions

9.1. The PA substantially complied with the timely remittance to BIR, Government
Service Insurance System (GSIS), PhilHealth, and Pag-IBIG of mandatory salary
deductions,30 including loan amortizations, pursuant to the applicable laws, rules
and regulations. 31 The withholding and remittances of mandatory salary
deductions in 2018 are summarized in Table 15.

30
The salaries of all PA personnel are centrally managed in the HPA.
31
Sections, 47 and 48, General Provisions, GAA for FY 2018 (RA No. 10964); Specifically: For taxes withheld - Executive Order
No. 651 dated 16 February 1981, Revenue Regulations 1-87 dated 02 April 1987 and Revenue Memorandum 8-2003 dated 03 March
2003, RA No. 7649; For GSIS remittances – Section 14.1, Rule III of the IRR, RA 8291, PD No. 626, RA No. 6111; For Philhealth
remittances – RA No. 7875 and Section 20(b) of RA 9241; and For HDMF/Pag-IBIG remittances – RA No. 9679 or the Pag-IBIG
Fund Law

71
 Table 15 – Withholding and remittances of mandatory salary deductions in 2018
Carrying amount, Remittance
Account Remarks
31 Dec. 2018 Date Amount
The non-
January remittance of
Due to BIR 305,417,140.83 32 300,266,940.65 the balance was
2019
due to delayed
submission of
the abstract
January from FCPA and
Due to GSIS 4,323,778.95 33 581.75
2019 some were
pertaining to
prior years
balances
Due to
679,874.47 April 2019 6,432.53 without
PhilHealth supporting
documents.
Due to Pag-IBIG 72,103.45 April 2019 72,103.45
Total 310,492,897.70 300,346,058.38
Unremitted
balance 10,146,839.32

10. GSIS Property Insurance Law

10.1. All government agencies are required to insure its property with the GSIS
against any insurable risk therein provided and pay the premiums thereon. 34
Properties, assets, agreements, rights or causes of action or other insurable
interest of the Armed Forces of the Philippines are bound by this to the extent
acceptable to the General Insurance Fund (GIF) being administered by the
GSIS.35

10.2. Based on available records during the audit, the PA paid P7,128,082.54 in 2018
for the insurance premium and documentary stamp tax (DST) for its insurable
assets.

11. PDAF and DAP 36

11.1. For CY 2018, the PA did not receive funds from the Priority Development
Assistance Fund (PDAF) and Disbursement Acceleration Program (DAP).

32
Remitted on various dates in January and April 2019
33
P3,374,534.06 was remitted on 10 January 2019 under Check No. 756064 and GSIS OR No. 003000092112; P420,976.94 of
Housing Project/Real Estate Loan (HP/REL) part of amounts withheld and remitted
34
All government agencies are required to insure its property with the GSIS against any insurable risk therein provided and pay the
premiums thereon (Sec. 5, RA 656 or the Property Insurance Law, as amended by PD No. 245). Also required in Memorandum
Circular 634 of the Office of the President dated 10 May 1973 and COA Circular No. 79-112 dated 30 August 1979.
35
COA Circular No. 2018-002 dated 31 May 2018; The Circular prescribes the Property Inventory Form for the assessment of
insurance coverage.
36
Supreme Court Decision G.R. Nos. 208566 and 209287, respectively

72
12. Hiring of Casual, Job Orders, Contractuals, and Consultants

12.1. Based on available records during the audit, PA hired 527 Job Order (JO)
personnel in 2018 to provide administrative and technical assistance in the
implementation of its programs and projects. Wages paid totaled
P59,876,731.52. 37

13. Disaster Risk Reduction and Management (DRRM) 38

13.1. The status of the PA’s Disaster Risk Reduction and Management Fund
(DRRMF) for the year ended 31 December 2018 is presented in Table 16.

Table 16 – Status of DRRMF for the year ended 31 December 2018 (Php)
Total
Particulars From GAA
Cash donation Amount Percentage
Release/Available during the year 51,388,481.71 267,323,641.82 318,712,123.53 100
Utilization during the year 50,740,734.27 170,244,086.50 220,984,820.77 69
Balance, 31 December 2018 647,747.44 97,079,555.32 97,727,302.76 31
Disbursement during the year 48,453,623.34 170,244,086.50 218,697,709.84 69
Unpaid obligation 2,287,110.93 - 2,287,110.93 1

14. Yolanda Fund

14.1. The Headquarters Philippine Army (HPA) received Yolanda Fund in the
amount of P35,327,030.71 from the Office of the Civil Defense (OCD), the
implementing arm of the National Disaster Risk Reduction and Management
Council (NDRRMC). Details are shown in Table 17.

Table 17 – Receipt of Yolanda Funds

Particulars Amount
For the replenishment of Fuel, Oil and Lubricants (FOL) used in the P 5,723,642.77
Humanitarian and Disaster Response Operation during typhoon
Yolanda
For the repair of damaged facilities of 3rd Infantry Division (ID), 8th 29,603,387.94
th rd
ID, 9 ID and 53 Engineer Brigade (EBde)
TOTAL P35,327,030.71

37
No JO hired in 2018 at 2nd and 10th IDs and 52nd EBde as underlying documents/data were not available during the audit.
JO workers are hired subject to the limitations in paras. 7.2 to 7.4 of Joint Circular No. 1, s. 2017 dated 15 June 2017 of the Civil
Service Commission (CSC), COA and DBM.
Departments/Agencies/GOCCs/GFIS whose Plan has already been approved by the DBM are allowed to outsource certain services,
thru the hiring of consultants/job order/contract of service personnel, where no employer-employee relationship exists, provided it is
consistent with the following: a. Overall policy under the approved RP on services/areas which could be outsourced (e.g., utility,
building and grounds maintenance, messengerial, security, transportation/mobility, and information technology); b. Agency policy on
which other services to outsource; and c. Pertinent budgetary, civil service, accounting and auditing rules and regulations. The
Agencies should likewise ensure that the hiring of consultants/job order/contract of service personnel would contribute to the
attainment of their objectives and would not adversely affect the implementation of their regular programs/projects and the
achievement of their work targets (Par. 2.3.2 of the DBM Circular Letter No. 2013-5 dated 22 July 2013).
38
Specific accounting guidelines for the DRRM Fund are prescribed in COA Circular 2014-002 dated 15 April 2014 while its audit is
pursuant to COA Resolution No. 2013-024 dated 20 November 2013 and COA Circular No. 2014-009 dated 28 August 2014.

73
 14.2. The HPA subsequently transferred the funds to recipient units as shown in
Table 18:

Table 18 – Fund Allocation

Reference
Unit Notice of Fund
Date Amount
Allocation/Check No.
ASCOM IATF-48-2016 November 7, 2016 P 5,723,642.77
547035 March 30, 2017 13,218,350.60
3rd ID
547040 April 4, 2017 57,180.00
547034 March 30, 2017 13,483,421.57
547039 April 04, 2017 1,483,500.00
8th ID
547040 April 4, 2017 717,109.17
547040 April 4, 2017 379,880.80
9th ID 547036 March 30, 2017 134,060.00
53rd EBde 547040 April 4, 2017 129,885.80
Total P35,327,030.71

14.3. The Status of Funds as of 31 December 2018 is shown below (Table 19).

Table 19 – Status of Funds, 31 December 2018 (amounts in Php)

Particulars HPA 3rd ID 8th ID 9th ID 53rd EBde Total
Allocation/Fund
5,723,642.77 13,275,530.60 16,063,911.54 134,060.00 129,885.80 35,327,030.71
Transfer
Obligation 5.723,642.77 12,775,498.50 16,046,216.50 134,060.00 0.00 34,679,417.77
Disbursement 5,723,635.75 12,775,498.50 16,046,216.09 134,060.00 0.00 34,679,410.34
Unobligated/unutilized 0.00 500,032.10 17,695.04 0.00 129,885.80 647,612.94
Undisbursed 7.02 0.00 0.41 0.00 0.00 7.43

14.4. The total unobligated balance of P647,612.94 intended for the repair of
damaged facilities of PA units in 3rd ID, 8th ID and 53rd EBde was refunded
fully on various dates to the source agency in compliance with regulations. 39

14.5. There are no significant findings in the audit of utilization of Yolanda Funds.

15. Marawi Fund

15.1. On 23 May 2017, government forces clashed with armed fighters/terrorists

when the military tried to arrest a top ISIS leader. The battle resulted in the
deaths and wounding of government soldiers, among others. The Office of the
Army Adjutant reported 1,465 Wounded-in-Action (WIA) PA personnel.40

39
Section 6.7 of COA Circular No. 94-013 dated December 13, 1994 which states that “The Implementing Agency shall return to the
SA any unused balance and refund of disallowance upon completion of the project.”
40
Unsigned report

74
 15.2. The public showed their gratitude and support for the soldiers thru donations in
cash and in-kind. These donations are being accounted for as Marawi Fund.

15.3. Cash donations of P47,643,153.00 intended as financial assistance to

Wounded-in-Action (WIA) PA personnel remained unutilized as of 31
December 2018. Moreover, the PA exceeded by P9,980,000.00 the financial
assistance granted to 118 certified KIA beneficiaries contrary to GHQ
Letter Directive No. 30 dated 31 July 2017.

Unutilized/unobligated donations for Wounded-in-Action (WIA) PA personnel

15.3.1. Review of accounting records and other pertinent documents showed that
the cash donations received by the Headquarters Philippine Army from
GHQ and various private donors totaled P235,027,155.32. The status of
these donations as of 31 December 2018 (Table 20) disclosed unutilized
amount for WIA PA personnel of P47,643,153.00 or 20 percent of the
total.

Table 20 – Status of Cash Donations as of 31 December 2018

Transferred
Returned to Unutilized/
Purpose Total Utilized to PAF and
Donor Unobligated
PN
Financial assistance P147,262,002.32 P128,490,000.00 P18,772,002.32
to the legal
beneficiaries of
Killed-in-Action
(KIA) PA personnel
received from
AFPGHQ
Donations from 47,643,153.00 47,643,153.00
various donors for
Financial assistance
to the WIA PA
personnel
Donations received 40,122,000.00 36,961,600.00 166,400.00 1,798,000.00 1,196,000.00
from various donors
for the support of
travel of PA/PAF/PN
Female personnel to
Hong Kong for the
Observation Tour on
Safety and Security41
Total P 235,027,155.32 P 165,451,600.00 P 166,400.00 P 68,213,155.32 P1,196,000.00
100 % 70.40% 0.07 % 29.02 % 0.51 %

15.3.2. Verification of the P165,451,600.00 out of the cash donations used so far
showed that the PA had not crafted specific guidelines for the receipt and

41
Funds received from various sources as financial support to fund the budgetary requirements of the AFP female combatants and
officers who will be travelling to Hongkong for the Observation Tour on Safety and Security in support of the Philippine
government’s endeavor to uplift and boost the morale of these modern day heroes.

75
 utilization and liquidation of donations, especially for those intended for
the WIA PA personnel. This is a contributing factor in the slow
utilization of the donations and works against its intended purpose.

Financial assistance granted to beneficiaries of personnel Killed-in-Action (KIA)

in excess of allowed amount

15.3.3. The General Headquarters (GHQ) of the Armed Forces of the Philippines
(AFP) issued GHQ Letter Directive No. 23 dated 07 July 2017, 42
Paragraph 6.c of which states that each of the KIA personnel beneficiary
shall receive P35,000.00 as financial assistance. Subsequently, GHQ
Letter Directive No. 30 31 July 2017 was issued,43 Section 4.a of which
provides that each of the KIA personnel beneficiary shall receive the
amount of One Million Pesos only.44

15.3.4. As shown in Table 20, Cash donations received as financial assistance to

the legal beneficiaries of Killed-in-Action (KIA) PA personnel amounted
to P147,262,002.32, of which P128,490,000.00 was utilized for the
purpose. Audit of the disbursement vouchers and documents supporting
this utilization showed that the PA exceeded by P9,980,000.00 the
financial assistance granted to 118 certified KIA beneficiaries contrary to
GHQ Letter Directive No. 30 (Table 21).

Table 21- Overpayment of financial assistance to PA personnel KIA (Php)

No. of KIA Granted per Allowed per
Difference Overpayment
beneficiaries beneficiary beneficiary
117 1,085,000.00 1,000,000.00 85,000.00 9,945,000.00
1 1,035,000.00 1,000,000.00 35,000.00 35,000.00
118 2,120,000.00 9,980,000.00

15.3.5. We recommended that Management:

a. formulate specific guidelines for the receipt, utilization and

liquidation of the donated Marawi Fund intended for WIA PA
personnel and, in accordance with such guidelines, utilize it fully
for the timely benefit of such personnel; and

b. require the then Director, FCPA to justify the overpayment to

KIA beneficiaries.

42
Re: Distribution and Management of Financial Assistance Donated by the Private Sector. The Letter Directive prescribes the
policies, procedure and requirements to ensure that the certified beneficiaries/ family of the Armed Forces of the Philippines (AFP)
Killed-in-Action (KIA) personnel will be the recipient of the financial assistance donated by the Private Sector.
43
Re: Distribution and Management of One Million Pesos Financial Assistance to KIA Personnel of Marawi Crisis). The Letter
Directive prescribes the policies, procedures and requirements to ensure that the certified beneficiaries/ family of AFP KIA personnel
involved in the Marawi Operations will be the recipients of the financial assistance from a confidential donor worth ONE MILLION
PESOS each.
44
Copy of Letter Directive No. 30 provided to the COA-PA Audit Team by the staff of COA-GHQ, AFP upon request.

76
Enforcement of Settlement of Audit Suspensions, Disallowances and Charges

16. The PA had not enforced the settlement of audit suspensions and disallowances
in the amount of P176,364,854.68 and P122,170,913.29, respectively which is not
in keeping with the rules and regulations on the settlement of accounts. 45

16.1. Audit suspension should be settled within 90 calendar days from receipt of the
Notice of Suspension (NS), otherwise, the transaction covered by it shall be
disallowed/charged after the Auditor shall have satisfied himself that such
action is appropriate. Consequently, the Auditor shall issue the corresponding
Notice of Disallowance/Notice of Charge (ND/NC). Audit disallowance shall be
settled within six months from receipt of the ND by the persons liable.46

16.2. The suspensions and disallowances as of 31 December 2018 are presented in

Tables 22, 23 and 24.

Table 22 – Status of audit suspensions and disallowances/charges

Beginning January 1 to December 31, 2018 Ending
Particulars Balance, Balance,
NS/ND/NC NSSDC47
01/01/2018 12/31/2018
Notice of 449,773,633.06 44,664,765.02 318,073,543.40 176,364,854.68
Suspension (NS)
Notice of 89,601,710.44 46,323,988.07 4,754,785.22 122,170,913.29
Disallowance (ND)
Total 539,375,343.50 90,988,753.09 322,828,328.62 298,535,767.97

Table 23 – Suspensions by office/unit

Unit Balance, 31 Dec. 2018
HPA P129,670,220.47
1st ID 40,000.00
2nd ID 1,537,150.00
4th ID 896,925.00
6th ID 2,111,955.60
10th ID 41,630,702.35
MID TRADOC 477,901.26
Total P176,364,854.68

16.3. The documents required to settle the suspensions in HPA in the amount of
P44,295,220.47 were submitted in March 2019, for which NSSDCs were
issued; thus, leaving a balance of P85,375,000.00.

45
2009 Revised Rules and Regulations on the Settlement of Accounts (RRSA) prescribed under COA Circular No. 2009-006 dated
15 September 2009
46
Section 9.4, ibid
47
Notice of Settlement of Suspensions, Disallowances and Charges

77
 Table 24 – Disallowances by office/unit
Issued during Balance,
Unit Prior Years Settlement
the year 31 Dec. 2018
HPA P15,126,056.97 P17,668,420.00 P 0.00 P32,794,476.97
1st ID 451,601.42 451,601.42
3rd ID 1,017,067.91 24,978.05 992,089.86
6th ID 0.00 13,781.81 13,781.81
7th ID 0.00 4,701,188.50 4,701,188.50 0.00
9th ID 0.00 53,263.62 0.00 53,263.62
10th ID 41,901,163.66 0.00 41,901,163.66
MID TRADOC 6,970.00 137,516.67 16,293.67 128,193.00
51st EBde 449,127.96 285,000.00 12,325.00 721,802.96
52nd EBde 21,649,722.52 23,464,817.47 45,114,539.99
Total P80,601,710.44 P46,323,988.07 P 4,754,785.22 P122,170,913.29

16.4. The breakdown of the HPA unsettled disallowance as of 31 December 2018 is

shown in Table 25.

Table 25 – Status of disallowances in HPA as of 31 December 2018

ND No. ND Date Amount (Php) Particulars
10-001-101-(03) 12.12.10 5,103,000.00 With Notice of Finality of Decision
(NDF) dated December 8, 2017 on
COA Decision No. 2017-243 dated
18 August 2017
2012-101-01 (11) 03.28.12 5,860,240.87 With appeal. Decided by Cluster 4
per Decision No. 2014-006 dated 24
November 2014. Appeal elevated to
the Commission Proper for automatic
review. Original amount of
P7,102,314.67; with partial settlement
of P1,242,073.80 under NSSDC No.
2013-04 dated 24 May 2013.
2013-101-01 (12) 04.17.13 3,205,022.10 With appeal to Cluster Director. All
appellants were furnished copy of the
auditor’s answer for the Appeal
Memorandum dated 29 April 2015.
2014-101-03 (12) 03.12.14 825,000.00 With appeal. Decided by Cluster 4
per Notification dated 04 October
2016. Appeal elevated to the
Commission Proper for automatic
review,
2015-101-01 (2014) 09.14.15 132,794.00 With appeal to Cluster Director.
Original amount of P167,001.50; with
partial settlement of P34,207.50 under
NSSDC No. 2016-12. All appellants
were furnished copies of the auditor’s
answer for the Appeal Memorandum
dated 31 May 2016
2018-101-01 to 04 (2013) 2,431,350.00 Four Separate Appeal Memoranda
2018-101-05 to 09 (2012) 09.14.18 3,674,040.00 were filed at the Office of the Cluster
2018-101-10 (2013) 486,270.00 Director, NGS, Cluster 4 by the

78
 Table 25 – Status of disallowances in HPA as of 31 December 2018
ND No. ND Date Amount (Php) Particulars
2018-101-11 to 13 (2012) 2,881,600.00 Appellants on various dates, for
which Orders to Answer on subject
2018-101-14 to 25 (2013) 8,195,160.00 appeals were received at the Office of
the Auditor, HPA.
Total P32,794,476.97

16.5. The unsettled disallowance of P451,601.42 in 1st ID had long become final and
executory but the whereabouts of the persons liable are unknown.

16.6. In 51st EBde, disallowances amounting to P571,326.97 were settled in the first
quarter of 2019, leaving a balance of P150,475.99. NFDs were issued for the
NDs in prior years amounting to P212,800.99 while a Memorandum of Appeal
was filed at COA Cluster 4, NGS for the ND issued in CY 2017. No decision is
issued yet relative to the said appeal.

16.7. We recommended that Management strictly enforce prompt settlement of

the suspensions and disallowances.

79