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Case Study 1.

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Fraud Audit Manual Form FoAM 02 – FRA Template

Agency name: BUREAU OF MINES AND ENERGY


Performed By: Date: WP ref:
Reviewed By: Date:

COA auditor should obtain the Understanding the Agency (UTA) template of the IRRBAM portion and we identify the Agency’s Mandate, Operations,
Objectives and Strategies, Critical Success Factor, Key Performance Indicators.

A. Mandate

The Bureau of Mines and Energy (BME) is the primary government agency under the Department of Environment and Natural Resources that is responsible for the
conservation, management, development and proper use of the country’s mineral resources including those in reservations and lands of public domains.

The BME was created in 1987 by virtue of Executive Order No. 192 as a staff bureau of the Department of Environment and Natural Resources (DENR). With the
enactment of the Philippine Mining Act in 1995 (Republic Act No. 7942), it was transformed into a line bureau, charged with the administration and disposition of
mineral resources and the conduct of geological, mining, metallurgical, chemical and other researches as well as geological and mineral exploration surveys.

On August, 29, 1995, DENR Administrative Order (DAO) No. 95-23 was published to promulgate the implementing Rules and Regulations (IRR) of R.A. No. 7942.
To further strengthen the social and environmental provisions, the IRR was revised thru the issuance f DAO No. 96-40 on December 19, 1996. DAO No. 97-11 was
also issued providing for the line organization of the Bureau.

B. Functions/Operations

Functions:

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 Directly in charge in the administration and disposition of the country’s mineral lands and mineral resources;
 Recommends to the secretary of the DENR, the granting of mineral agreements and endorses to the secretary, for approval by the president, the granting
of financial or technical assistance agreements (FTAA);
 Undertakes geoscienctific surveys and researches in the fields of land and marine geology, mining, mine environment, metallurgy, and mineral
economics;
 Provides laboratory and other technical services to the public and other government entities;
 Provides technical assistance to local government units in their performance of devolved functions on small-scale mining and quarry/sand and gravel
mining operations;
 Provides staff support and technical advisory to the office of the president on mining and geology matters; and
 Acts as secretariat to the Mines Adjudication Board (MAB).

Operations:

Operations
Mineral Land Administration
- Mining Industry Development Program
- Mineral Investment Promotion Program
- Assessment and Clean-Up of Abandoned/Inactive Mines Program
- Communication Plan for Minerals Development Program
Geosciences Development and Services
- Geohazard Survey and Assessment Program
- Geologic Mapping Program
- Groundwater Resources and Solid Waste Disposal Sites Management Program

General Administration and Support Services


• General Management and Supervision
• Human Resource and Development

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C. Objectives

Mission

The BME, as steward of the country’s mineral resources is committed to the promotion of sustainable mineral resources development, aware of its contribution to
national economic growth and countryside community development. It fully recognizes that the development of a responsive policy framework in partnership with
stakeholders to govern mineral exploration, mining and investment decisions and an effective institutional structure, are fundamental requisites for the
sustainable utilization of the country’s mineral resources. It is adherent to the promotion of geological studies as an integral element of socio-economic
development, environmental protection and human safety. Yet, it is sensitive to the known environmental impacts of mining and the need for restoration and
rehabilitation of mining affected areas and the development and adoption of environmental and geoscientific technologies.

Vision

BME envisions a minerals industry that is not only prosperous but also socially, economically and environmentally sustainable, with broad community and political
support while positively and progressively assisting in government’s program on poverty alleviation and contributing to the general economic well being of the
nation.

BME also aims to be the leading geoscience and georesources Bureau serving the public and nation with scientific reliability.

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D. Strategies

Thrust

To realize its vision for the industry, BME subscribes to the core requirements of Sustainable Development as applied to mining and geoscience:
• Protection and rehabilitation of the environment;
• Promotion of social and community stability;
• Preservation of options for future generations; and
• Competitive and prosperous mining industry.

This will be achieved thru the following:


 To revitalize responsible mining through the development of mineral development projects/priority exploration projects;
 To foster a sustainable and responsible minerals industry guided by best and state of the art safety, health, environmental and social management
practices.
 To address the negative impacts of past mining activities through a rehabilitation plan of priority abandoned mines as well as to conduct risk
assessments of identified inactive mines/areas;
 To take pro-active efforts in preventing or minimizing loss of lives and properties during natural disasters under the geohazards assessment program.
 To support local and national government agencies in the assessments of groundwater resources, solid waste disposal sites and other services
through geosciences applications

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E. Critical Success Factors

I. GENERAL ADMINISTRATION AND SUPPORT SERVICES

a. General Management and Supervision

 Implement and administer a sound recruitment, selection, placement and promotion system; employee welfare and other benefit programs; and
continuing employee suggestion, incentives and awards system for the improvement of employees’ performance and productivity. Matters relevant to
personnel relations and grievances are addressed through the grievance committee that helps create an atmosphere conducive to good supervisor-
employee relations and improvement of employee morale. Administrative procedures on matters pertaining to personnel discipline are covered by the
Uniform Rules on Administrative Cases in the Civil Service.
 Takes the lead in the implementation of Anti-Red Tape Act of 2007 through a series of focus group discussion to come up with a Citizens’ Charter Guide
for BME’s Delivery or Services.
 Takes charge on the overall maintenance of BME’s buildings, surroundings and equipments through the conduct of periodic monitoring.
 Implements the Bureau’s Annual Procurement Plan through the Bids and Awards Committee (BAC) and conduct inventory of the Bureau’s acquisitions.
 Manage Records through the conduct of storage, retrieval, transmission, maintenance, preservation and disposition of the Bureau’s documents.
 Manage, control, execute and monitor financial requirements for the Bureau. Takes the lead in the analyses and preparation of financial requirements for
BME’s Budget proposals.
 Executive Management is also lodged in this program wherein the conduct of final recommendations of mining rights applications are endorsed to the
DENR Secretary for approval; BME key officials coordinate and participate in meetings, conferences and consultations to provide guidance and maintain
its good working relationships with international and local networks; and oversees the implementation of the Minerals Action Plan (MAP).

b. Human Resource and Development

 Prepare a comprehensive annual training and development plan based on the proposal of each division and on periodic assessment of organizational
needs and skills/knowledge inventory of the work force taking into consideration the various levels and categories of jobs in the agency and the urgency
of such skills, knowledge and work attitudes required to deliver effective services to the public.
 Design, implement and evaluate in-service training and development programs such as induction, orientation/ reorientation,
professional/technical/scientific, employee development, middle management and value development programs.
 Monitor and extend assistance to the undergraduate scholarship grantees of DENR in the field of Mining, Geology and Metallurgy.
 The Bureau supports the National Youth Commission and Department of Education programs through the implementation of youth-related programs and
projects that are attuned with the framework of the Philippine Medium Term Youth Development Plan through the conduct of information, education and
communication (IEC) activities on DENR’s Programs highlighting the major programs of the BME.
 The Bureau also promotes the realization of the rights of older persons and differently-abled employees through the implementation of programs and
activities that will enable them to participate fully in the development of the societies in which they live and enjoy the opportunities available to other
citizens. For the year, BME shall provide facilities that shall enhance the mobility, safety and welfare of older and differently-abled persons.

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II. SUPPORT TO OPERATIONS

a. Planning and Policy

 Formulation of development strategies by re-evaluation of existing plans/programs (such as systems in the approval of mining applications, monitoring
and validation of commitments by the mining companies, etc.);
 Series of consultations with concerned LGUs, host communities and other concerned agencies; and
 Planning workshops/fora/management conferences
 Planning, programming, evaluation and monitoring of the Bureau’s (Central Office and 15 Regions) operations are dependent on the BME’s Annual Work
and Financial Plan (WFP) consistent with accompanying Plans: Annual Procurement, Trainings/Workshops and Travel data documents. WFP serve as the
blueprint in the implementation of the Bureau’s plans/programs/activities both for local and foreign assisted funding for the current year. This also
becomes the basis of budget estimates including additional funding requirements for inclusion in BME’s proposals for the succeeding years. The
Bureau’s mandate in the administration and disposition of the country’s mineral lands resources are in sync with the commitments in the Medium Term
Philippine Development Plan (MTPDP).
 Monthly monitoring of BME’s performance is made to determine efficiency and effectivity in the delivery of services relative to budget utilization. Conduct
of field validation of selected Regional Offices’ accomplishments by the Central Office are undertaken to check authenticity of the formers’ submitted
reports.
 Results of evaluation of Regional Offices (ROs’ Annual Performance Ratings) accomplishments by the Central Office’s lead operations divisions are
consolidated and posted to encourage healthy performance competition among them.

 Oversees legality of actions by BME through investigations, opinions, advices/replies, to BME’s concerns in the implementation of the Bureau’s mandate
in accordance with the implementation of Mining Laws, rules and regulations. Represents BME and files cases in court, quasi-judicial bodies or tribunals
against violators.
 Actual field validation of Regional Offices with cases in the Panel of Arbitrators (PA) to check if proceedings and disposition of cases is in accordance with
the rules provided in the Rules of Pleadings Practice and Procedures before the PA and the Mines Adjudication Board (MAB).
 Review and conduct formal investigations, if necessary by the MAB aimed at judiciously and speedily resolving appealed cases involving mining conflicts
elevated by the PA and other mine-related cases filed within the Bureau.

b. Mineral Economics, Information and Publication

 Compilation and analysis of date on mineral production, policy, trade, investment, taxation, tariff and other economic matters relative to the mining
industry to serve as basis for policy recommendations both for local and international mining investors.
 Evaluation of project feasibility studies by mining rights applicants to determine the technical, economic, social and environmental feasibility of mining

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projects.
 Generation, forecasting and consolidation of national statistical data based on the monthly submission of Regional Offices and monthly updating of
regional statistical reports to come out with a standard outline on national and official statistics information such as: revenues in form of taxes, mining
rights applications approved/registered, producing and non-producing mines, mineral production, sales and employment, export prices and trends in the
mining industry. Such data is vital for general consumption and estimation of the mining industry’s gross value added in the national accounts. This is
done through conduct of monitoring/validation of accomplishments of mining permittees.
 Participation in and establishment of national/regional/ international linkages on trade, policy and investment in mining.
 Operationalization and maintenance of Mining Investment Assistance Center (MIAC) to promote and provide information relative to mining rights;
investment policies, rules and procedures; fiscal regimes; business norm; and environmental and social requirements; coordination with and referrals to
other agencies concerned; and advisory services pertaining to approaches and strategies in doing mining business in the Philippines. In support to the
MIAC, the Regional One-Stop-Shop Committees facilitates the issuance of Area Status and Clearance for mining applications to consequently reduce the
processing time of said applications.
 Publication of Mineral Gazette, technical and popular articles related to mineral resources, mining activities and the environment including the conduct
of information, education and communication (IEC) activities for Mineral Resources and Geosciences (MRGS).

 Periodic maintenance and enhancement of the Bureau’s Website to facilitate transparency on information campaign by BME.
 Maintenance and enhancement of accurate database systems: Mineral Rights Management, Geographic Information for various geological applications,
Safety, Health, Environment and Social (SHES) Development Management.

c. Research and Development

 Conduct of the following research and development studies to eventually come up with
 Recovery of Nickel from Low-Grade Ores by Atmospheric Leaching
 Research on the Cenozoic Stratigraphy of the Philippines
 Case Study on the differentCommunity Relations/Development Approaches/Practices in every stage ofMine Operation (from pre-mine exploration to
mine development andrelinquishment)
 Mining Community Profiling

III. OPERATIONS

a. MINERAL LANDS ADMINISTRATION

 MINING INDUSTRY DEVELOPMENT PROGRAM


Regional Offices monitor while Central Office conducts audit of approved mining contracts/permits outside and within mineral reservations as to:
o Compliance with the terms and conditions of the mining permits/contracts work programs;

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o Compliance to the implementation of Safety, Health, Environment and Social (SHES) Management programs such as Environmental Protection
and Enhancement Program (EPEP), Final Mine Rehabilitation/Decommissioning Plan (FMR/DP), Safety and Health Programs, and Social
Development Management Program (SDMP) of large and small-scale mines;
o Validation of volumes and tonnages of mineral resources and ore reserves declared in the mining companies’ feasibility study (results gathered
by BME and Mining Companies) to assess sustainability and effectivity of the companies’ ongoing management systems/protocols/programs
through the conduct of field verification.

These serve as venue to provide recommendations/measures/ policy amendments on how to improve the companies’ performance and awareness on
their commitments.

On approved permits/contracts within mineral reservations, the Bureau handles the overall administration, management and operation so that the total
amount of royalties from mineral shipments due the government shall be duly determined and the payment monitored.
BME provides technical assistance with the Provincial/City Mining Regulatory Board (P/CMRB) and Multipartite Monitoring Team (MMT) in the
abovementioned activities.

 MINERAL INVESTMENT PROMOTION PROGRAM


Issuance of mining contracts/permits: Financial Technical Assistance Agreement (FTAA); Mineral Production Sharing Agreement (MPSA); Exploration
Permit (EP); Mineral Processing Permit (MPP); Industrial Sand and Gravel Permit (ISAGP); Special Mines (SMP) and Small-Scale Mining Permit (SSMP)
including areas within mineral reservations through processing and evaluation of mining applications upon the applicants’ submission of mandatory
requirements (DAO 96-40 as amended). Conduct of field verification is done to validate information on land use and classification areas covered by
mining applications. This will also ensure that the mining projects are to be undertaken without compromising the environmental and social
responsibilities that each applicant has to commit.

Other mining related permits are also issued by the Bureau such as: Ore Transport Permit (OTP), Certifications/Accreditations of Traders, Dealers,
Minerall Processors, Service Contractors, etc.

In addition, within the mineral reservation areas, there is a continuing conduct of assessment and identification of other possible high potential mineral
areas. Included is the conduct of capability building in preparation to the packaging of investment profile of the existing mineral reservation areas to
accelerate exploration and development of high potential mining projects nationwide.

 ASSESSMENT AND CLEAN-UP OF ABANDONED/ INACTIVE MINES PROGRAM


Implementation of rehabilitation activities in Bagacay, Hinabangan, Western Samar (Philippine Pyrite Corp.) by adopting the Detailed Engineering
Planning and Design. Plan of Action are as follows:
o Phase I – Construction of vital structures (interceptor ditches/canals, boulder belts, silt ponds/dam, new access roads, reinforced concrete spillway
and perimeter fence) and re-vegetation works (to be applied to disturbed and critical areas like mine pits, tailings ponds, waste dumps, riverbanks
and other selected areas.
o Phase II – Care and maintenance of re-vegetated areas to sustain growth and protect the area from further deterioration.

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Simultaneously, Phase II of the work is coordinated with Ecosystems Research and Development Bureau (ERDB) for soil amelioration and reforestation
covering seventy three (73) hectares. General administration of the said ground works shall be supervised by the BME-Central Office and periodic
monitoring to be handled by BME-Regional Office VIII.

Funding source is coordinated with the assistance of the World Bank under the National Program Support for Environment and Natural Resources
Management Program (NPS-ENRMP) to strengthen DENR’s limited budget resources and catalyze the implementation of Bagacay abandoned mines.

Conduct of risk assessment of fifteen (15) inactive/abandoned mine sites nationwide adopting the following parameters for purpose of gathering
baseline data for the development of rehabilitation program for such mining areas: acid mine drainage hazards; safety hazards; erosional hazards;
impact to vegetation; visual intrusion and heritage value.

Rapid assessment on coastal/near shore areas downstream of one priority abandoned mine site, Western Minolco Corporation in Atok, Benguet through
the conduct of geo-scientific survey and laboratory analysis of sediments and water samples to establish impact attributions and environmental effects
on water brought about by past mining operations. Results of study are vital in decision making on future rehabilitation programs.

 COMMUNICATION PLAN FOR MINERALS DEVELOPMENT PROGRAM


Preparation, packaging, reproduction and dissemination of suitable information materials that shall cater to the requirements of the mining industry’s
stakeholders in line with the Bureau’s thrust to inform, communicate and educate the public on mining investment promotion and issues/concerns
regarding mining and geosciences.

Coordinates with the media for press releases/conferences in order to keep the public abreast on issues and concerns that need earnest action and
response.

BME regularly maintains its good working relationships with international and local networks. This serves as venue for BME key officials’ coordination
through participation in meetings, conferences, and consultations to provide guidance (or seek guidance), clarification or inputs to address particular
issues, policies and programs.

Establish and create IEC brigade through trainings of the Bureau Staff to promote Mining and Geosciences to target beneficiaries. For the year, BME’s
priority audiences are local government units, religious and civil society groups.

Establish and maintain national and regional electronic websites as sources of vital information on the minerals industry,

b. GEOSCIENCE DEVELOPMENT AND SERVICES

 GEOHAZARD SURVEY AND ASSESSMENT PROGRAM


Completion of geohazard mapping in 1:50,000 scale of two hundred fifty (250) priority municipalities in the country. The generated map is presented

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through conduct of seminars/workshops on geohazards both for concerned technical personnel, local officials of the government as well as teachers to
ensure that dissemination of information has been properly channeled. Digital copies of the geohazard maps are also provided to NEDA and other
government agencies involved in development planning and land use classification.

Identification of relocation sites for the affected communities is also provided to LGUs for possible or immediate transfer of communities residing on
critical areas.

Also, coastal and offshore geohazard assessment/survey in different offshore areas of the Philippines utilizing the research vessel RPS Explorer as survey
platform are also conducted to recommend mitigation and risk management to concerned entitities. Immediately thereafter, results on findings are
disseminated through the conduct of IEC activities for LGU officials at the barangay level.

Dissemination of information is the most important highlight of accomplishment with the objective of preparing, warning and capacitating the
communities on both land (landslides, floods, flashfloods, subsidence, etc.) and coastal geohazards to mitigate/minimize damages to properties and
prevent loss of lives.

Conduct of Engineering Geological and Geohazard Assessments (EGGA) to private land developers and government institutions/individuals to provide
information and regulatory requirements of the ECC System for housing and land development projects.

 GEOLOGIC MAPPING PROGRAM


Generation of geologic maps at 1:50,000 scale (land and coastal) that are essential for mineral resources exploration for land use planning on:
groundwater resource management; geohazard zoning; energy and mineral sourcing and; solid waste disposal sites though the conduct of field surveys
and various laboratory analyses.

Provision of laboratory services for different types of samples (water, solids and stream sediments, clay, ores, micro-fossils, rocks, etc.) both for
government and private clients to provide baseline data information.

 GROUNDWATER RESOURCES AND SOLID WASTE DISPOSAL SITES MANAGEMENT PROGRAM


Conduct of groundwater resource and vulnerability assessment of various areas in the country to come out with groundwater availability map to be used
as a tool by the decision makers in the management of available water resources for future development. Integrated in this study is the conduct of
geological studies of possible solid waste disposal sites and assessment of the existing landfill sites or areas through the application of hydro-geologic
and geochemical studies for development into engineered dumps or landfills. This program will assist the LGUs and private organizations on how to
localize groundwater resources and manage their respective communities’ solid wastes without contaminating the source of water.

 ASSESSMENT/STUDY ON THE RELATIVE SEA LEVEL CHANGE ASSOCIATED HAZARDS AS INDUCED OR ENHANCED BY CLIMATE CHANGE AND
GEOLOGICAL FACTORS
Identification of priority areas in NW Luzon, Albay Gulf and Eastern Leyte for coastal hazard assessment, and dissemination of information based on the

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result of relative sea level rise study brought about by climate change. Said result shall contribute to the formulation of a national land-use management
policy, appropriate mitigation/adaptation measures that address coastal erosion, coastal flooding, saltwater intrusion, storm surges, loss of productive
lands and decrease in soil and water quality.

F. Key Performance indicators

N/A

G. Others (COA Alert)

None

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From the information COA auditor gathered (lists above), COA auditor assesses those information and identifies the fraud risk that might affect the
agency’s Mandate, Operations, Objectives and Strategies, Critical Success Factor, Key Performance Indicators. Using COA auditor’s professional
judgment and FoAM’s fraud categories, we identify all possible fraud risks and schemes of the agency and document them in the table below:

Overall
Fraud category1 Risk Statement2 Process3 Sub-processes4 Impact5 Likelihood6 Assessment7 Audit response8

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Overall
Fraud category1 Risk Statement2 Process3 Sub-processes4 Impact5 Likelihood6 Assessment7 Audit response8

1. Fraud Category – COA auditor list down if the key fraud risk is under the fraud risk category of; Corruption, Asset Misappropriation, and Financial statement Fraud.
2. Risk Statement – COA auditor would indicate the risk description of the agency.
3. Process(es) – COA auditor identifies which process in the agency is affected by the fraud risk identified.
4. Sub-Process(es) - COA auditor identifies which specific area in the process is affected by the fraud risk identified.
5. Impact – COA auditor should assess the extent of the identified fraud risks to the agency. Factors that may help define the impact rating may include financial effect,
reputation impacts, ability to achieve key objectives, etc.
6. Likelihood – COA auditor should assess the susceptibility of the agency to identified fraud risks.
7. Overall Assessment – COA auditor assess the combined assessment on the impact and likelihood of the fraud risks within the agency and rank this as either low, moderate,
and high.
8. Fraud Response – Base on the overall assessment, COA auditors provides a proper audit response to all identified fraud risk, e.g. test of controls, substantive test, or
detection control.

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