PART II- OBSERVATIONS AND RECOMMENDATIONS

I. FINANCIAL AUDIT

1. There was noted misstatement of P484,000.00 due to non-recognition of financial

liability on the goods already delivered in CY 2019, contrary to paragraph 19 (a)
of IPSAS 19.

Accounting Errors/Omissions

1.1 Section 15, Chapter 2, Volume I of the Government Accounting Manual (GAM) for
National Government Agencies (NGAs), requires that the Financial Statements
(FSs) 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
International Public Sector Accounting Standards (IPSASs).

1.2 The audit of the various accounts in the FSs as at December 31, 2019 of the CAB
disclosed uncorrected misstatement/error of P484,000.00 summarized below and
discussed in the succeeding paragraphs:

Misstatement in the Financial Statements

Effect
Nature of Deficiency/ Amount
Misstatement (In Php) Under (Over)
Accounts Affected
Statement
Failure of the Accountant to 484,000.00 Accounts Payable 484,000.00
recognize financial liability Intangible Assets 459,000.00
on the goods that were Account – Computer
already delivered during CY Software
2019. Expense Accounts 25,000.00
Total Misstatements 484,000.00

Accounts Payable account

a. Understatement of Accounts Payable account in the amount of P484,000.00 due

to non-recognition of the obligations arising from the purchase of goods that
were delivered in CY 2019 but paid in CY 2020

1.3 Section 2, Chapter 6 of the GAM for NGAs, Volume 1 defines that – “Accounts
Payable refers to valid and legal obligation of NGAs/Operating Units (OUs), for
which the goods/services/projects have been delivered/rendered/completed and
accepted, regardless of the year when these obligations were incurred.”

31
1.4 Paragraph 19 (a), IPSAS 19 requires the recognition of liabilities to pay for goods
or services that have been received or supplied and have been invoiced or formally
agreed with the supplier or those obligations that are due and demandable.

1.5 Examination of disbursements vouchers (DVs) and accounting records revealed that
the Accounting Section failed to recognize liabilities on the following contractual
obligations incurred during CY 2019 and paid in January 2020:

Check Amount
Date Supplier Particulars Delivery Date
No. (In Php)
January 10, 1550668 Konek-It 3 years 459,000.00 December 26, 2019
2020 Technologies, subscription of per Delivery
Inc. Unified – UTM Receipt No. 1348
protection
firewall
January 22, 1550675 Toyota Accessories 25,000.00 March 20, 2019
2020 Commonwealth, (CAB Logo) for together with the
Inc. Toyota Hi-Ace delivery of the
GL Grandia 3.0L Toyota Grandia
A/T Extreme with sales Invoice
Black No./Delivery
Receipt No.
B6OA003991
dated March 20,
2019.
Total 484,000.00

1.6 The Accounting Section recognized the above-mentioned transactions when

payment has already been made in CY 2020 instead of recognizing first the
obligation to pay in CY 2019 which consequently understated the Accounts Payable
account by P484,000.00 as of December 31, 2019. There was unrecorded liability
from the purchase of goods that were delivered in CY 2019 but subsequently paid
in the following year.

1.7 According to the Accounting Section, to which the Audit Team disagreed, there
was no liability recorded because purchases of goods were only recognized when
payment is made since the delivery receipt, inspection and acceptance report, sales
invoice and purchase order were only received during the preparation of the
Obligation Request Status and Disbursement Vouchers as supporting documents.

1.8 We recommended that Management make the necessary adjustment for the
obligations amounting to P484,000.00 to reflect the correct balance of Accounts
Payable as of December 31, 2019. Henceforth, comply strictly with Paragraph
19 (a), IPSAS 19.

1.9 Management commented that they did not recognize this as an obligation in CY
2019, it was only in CY 2020 that Finance and Management Division (FMD)
decided to authorize the payment of P25,000 for the accessory when CAB found
out that Toyota Commonwealth refused to release the official receipt and car

32
 registration for the Toyota Grandia unless the account was settled. The other alleged
unrecorded payable was to Konek-It Technologies, Inc. for 3 years’ subscription of
Unified-UTM protection firewall. We acknowledge that the same was received on
December 26, 2019 however we did not record this as a liability in CY 2019
because it can be considered as such only after compatibility testing with our
system and a determination that it meets our specifications.

Notwithstanding of the foregoing, they will strictly adhere to Paragraph 19(a) of

IPSAS 19 which requires the recognition of liabilities to pay for goods and services
that have been invoiced or formally agreed with the supplier or those obligations
that are due and demandable.

1.10 Total misstatements amounting to P484,000.00 did not exceed the set misstatement
materiality threshold of P1,479,379.80; hence, an unqualified opinion was rendered
on the FSs of OTS.

Deficiencies in Accounting and Property Controls

2. The following are the deficiencies noted in accounting and property controls based
on prescribed accounting standards and other related government rules and
regulations:

Recommendations and
Deficiencies Standard/s Observations Management
Comments
a. Property, Section 42, Chapter 10, The balances of the PPE accounts We recommended that
Plant and Volume I of the GAM for aggregating P35,915,370.55 gross Management:
Equipment NGAs requires the Chief of accumulated depreciation have
(PPE) Accountant to maintain the unreconciled differences between a) require the
Property, Plant and Property Officer to
the Accounting and Property
Equipment Ledger Card conduct inventory
(PPELC) for each category records amounting to
of all the
of PPE which will be used to P1,522,635.05. records/documents
record promptly the kept in their office
acquisition, description, Non-derecognition by the and stockroom to
custody, estimated useful Accounting Section of the disposed locate the missing
life, depreciation, unserviceable PPEs made by IIRUP or list of
impairment loss, disposal Property Section in CY 2015 and disposed PPEs in
and other information about the conversion of some PPEs to CY 2015 and the
the asset. For check and semi-expendable items. However, detailed list of
balance, the Property and the Property Section failed to PPEs reclassified to
Supply Office/Unit shall submit to the Accounting Section semi-expendable
likewise maintain Property the Inventory and Inspection assets and submit
Card (PC) for PPE in their Report of Unserviceable Property these documents to
custody to account for the (IIRUP) for the disposed PPEs and the Accountant as
receipt and disposition of the the detailed list of the converted basis for recording
same. The balance per PPE items. Likewise, the in the books; and
PC shall be reconciled with Accounting Section has no detailed
PPELC and any discrepancy records of PPEs due to non- b) direct the
shall be immediately maintenance of PPELC prior to Accountant and the
CY 2018, thus, making it difficult

33
 Recommendations and
Deficiencies Standard/s Observations Management
Comments
verified and adjusted in the to reconcile the PPE balances as Property Officer to
books, where appropriate. required under Section 42, Chapter complete the
The PC shall also be 10 of the GAM, Volume 1. reconciliation of
reconciled with other their respective
property records like Moreover, it was informed that the PPE records
Property Acknowledgment Property Section and Accounting thereby identifying
Report (PAR). Section had already commenced the the nature and
reconciliation of the differences details of the
of the PPE balances of P1,522,635.05
P1,522,635.05. Nevertheless, unreconciled
according to the Property Officer, difference and
efforts have been exerted to locate accordingly, make
the missing copy of the CYs 2015 the necessary
IIRUP and the list of converted adjustments for the
PPEs but none could be found as reconciling items
of to date. noted.

Management commented
that the list of disposed
and semi-expendable
PPEs including IIRUP
were submitted to the
Chief Accountant on
March 2 and 3, 2020
respectively. In addition,
Management also
commented that the
reconciliation of PPE
records for the purpose of
removing the alleged
discrepancy between the
RPCPPE and the balance
of PPE per Accounting
Records is currently in
progress. The personnel
in-charge are making the
necessary adjustments to
reconcile the
items/discrepancies
noted.

The IIRUP or list of

disposed PPEs in CY
2015 was received by the
Accountant on March 2,
2020. Likewise, the
detailed list of PPEs
reclassified to semi-
expendable assets was
submitted to the latter on
the same day. The
reconciliation of PPE
records for the purpose

34
 Recommendations and
Deficiencies Standard/s Observations Management
Comments
of removing the alleged
discrepancy between the
RPCPPE and the
Property Records is
currently in progress.
The personnel in-charge
are making the necessary
adjustments in efforts to
reconcile the items
noted.

b. Unreconciled Section 9, Chapter 8 of the
difference GAM for NGAs, Volume 1
between states that - “The system
Supply and requires accounting records
Accounting to show the amount of
records inventory on hand at all
times through the
maintenance of the SLC
(Appendix 57, GAM Volume
II) by the Accounting
Division/Unit and Stock
Card (SC) (Appendix 58,
GAM Volume II) by the
Supply and/or Property
Division/Unit for each item
in stock. Regular purchases
shall be coursed through the
inventory account and issues
thereof shall be recorded as
they take place except for
supplies and materials
purchased out of PCF for
immediate use or on
emergency cases which shall
be charged directly to the
appropriate expense
accounts.”
Section 17(b), Chapter 8 of
the same Manual states that
- “Stock Card shall be used
to record all receipts and
issues of supplies and the
balance in quantity at any
time. It shall be maintained
by the Property and/or
Supply Division/Unit for
each item in stock. The IAR,
RIS, PO and DR serve as the
original sources of
information for making
entries on the card.”
The Inventory Account balance of We recommended that
P339,577.81 as of December 31, the Management direct
2019 is composed of Office the Supply and
Supplies and Accountable Forms Accounting Sections to:
Inventory amounting to
P322,213.81 and P17,364.00, a) record the
respectively. Examination complete details,
disclosed that there was an information, and
unreconciled difference of transactions of
P187,403.46 between the balance inventory receipts
of Office Supplies Inventory per and issuances in
property and accounting records, as SLC and SC and
follows: reconcile the
unreconciled
Particulars Amount difference of
Balance per
P322,213.81 P187,403.46; and
Accounting Section henceforth conduct
Balance per Supply
Section
134,810.35 regularly/monthly
Difference P187,403.46 reconciliation of
their records to
The causes of the discrepancy in the ensure accurate
amount of P187,403.46 could not balances presented
be reliably established since in the Financial
the SCs and SLCs are (a) Statements; and
incomplete as to details and
information of inventory receipts b) ensure that all
and issuances, and reconciliation inventory items
between their records was not yet are actually
completed, and (b) there were counted and
unrecorded Delivery Receipts reported in the
(DRs) and Requisition and Issue RPCI and
Slips (RISs). Only 16 SCs of reconcile balances
inventory items were provided to per RPCI and SCs
the Audit Team of which balances as of the period
in the two SCs were reconciled and covered by the
14 were not reconciled with the RPCI during the
SLCs. The examination disclosed physical count.
discrepancies in the quantity
recorded in SLCs and SCs as of Management commented
December 31, 2019. that the reconciliation of
SLC and SC items is
currently in progress.

35
 Recommendations and
Deficiencies Standard/s Observations Management
Comments
Further, Section 17(c) Moreover, examination of the SCs Moreover, the personnel
Chapter 8 of the same disclosed that the posted receipts in-charge are making the
Manual states that - and issuances of inventory items necessary adjustments in
“Supplies Ledger Card shall were only for the period July 1, effort to reconcile the
be used to record materials 2019 to December 31, 2019. All difference noted. They
received, issued and the DRs and RISs prior to July 1, 2019 commit to finish the
balance both in quantity and including prior years were not reconciliation within one
amount at any time. It shall recorded/reflected in the SCs month.
be maintained by the provided by the Supply Section thus
Accounting Division/Unit depriving the full verification of
for each kind of supplies and transactions that transpired in CY
materials. The IAR, RIS, 2019.
RSMI, PO and DR serve as
the original sources of
information for making
entries on the card.”
Section 17 of Chapter 8 of
the same Manual states that -
“The Report on Physical
Count of Inventory (RPCI)
shall be used to report the
physical count of the
supplies by type of inventory
at a given date. It shows the
balance of inventory items
per card and per count and
shortage/overage, if any.
These include the semi-
expendable property
wherein the issue is covered
by Inventory Custodian Slip
(ICS).”

c. Non- The Supply Section conducted According to the Supply

inclusion of semestral physical count of Officer, these inventory
some items of inventory and submitted the items were mistakenly
inventory corresponding RPCI as of June 30, deleted in the RPCI.
during the 2019 and December 31, 2019. They commit to
physical Comparison of the inventory items reconcile this item
count per SC and RPCI disclosed that within one month.
some items of inventory, such as
ink cartridges and USBs were not
included in both RPCIs thereby
showing that these inventories
were not counted during the actual
count.

36
1.1 As a general rule, the Head of the Agency shall be responsible for the protection of
government funds and properties, but shared responsibility shall be exercised by the
employees who are assigned or entrusted with government funds and properties to
ensure that controls are in place to prove the existence, completeness and accuracy
of recording of the agency’s assets.

II. COMPLIANCE AUDIT

Budget Utilization

3. CAB obligated P142,634,000.00 or 100 percent of its total allotments of

P142,634,000.00 and disbursed P139,932,352.48 or 98.11 percent thereof, while
P139,870,588.54 or 99.99 percent of the total received cash allocation of
P139,874,427.00 was utilized, indicating substantial compliance with Section 65
of RA No. 11260 or the General Appropriation Act (GAA) of FY 2019 and
efficient utilization of its fund releases in CY 2019.

3.1 Section 65 of RA No. 11260, or the GAA for FY 2019 and Section 3.2 of the
National Budget Circular No. 577 dated May 2, 2019 state that all appropriation
authorized under FY 2019 GAA, including programmed Automatic Appropriations,
shall be valid for release and obligation for the purpose specified until December
31, 2019.

3.2 Review of CAB’s appropriations, allotments and obligations as of December 31,

2019 showed that out of the total funds received and available for spending in the
aggregate amount of P142,634,000.00, of which all was obligated. The summary of
the budgetary allocations and balances including the percentage of utilization is
presented below:

Obligations Unobligated Percentage

Source of Fund Appropriation Allotment
Incurred Allotment of Utilization
A. Current Year
1. Regular
a. PS 65,382,000.00 58,513,000.00 58,513,000.00 0.00 100
b. MOOE 81,544,000.00 70,139,000.00 70,139,000.00 0.00 100
c. Capital Outlay 5,300,000.00 3,277,000.00 3,277,000.00 0.00 100
2. Automatic
Appropriations
a. RLIP 4,389,000.00 4,389,000.00 4,389,000.00 0.00 100
3. Special Purpose
Fund
a. Miscellaneous
Personnel
Benefit Fund 6,316,000.00 6,316,000.00 6,316,000.00 0.00 100
Total 162,931,000.00 142,634,000.00 142,634,000.00 0.00 100

37
3.3 Analysis of CAB’s absorptive capacity disclosed a consistent high obligation rates
for CYs 2016 to 2019 as shown in the table below:

% of % of
Obligation Obligation Disbursement
Calendar Allotment Disbursement
Incurred Incurred over over
Year
Allotment Obligation
(In Php) Incurred
2019 142,634,000.00 142,634,000.00 140,533,759.00 100.00 98.53
2018 134,189,948.00 134,164,954.22 128,514,112.22 99.98 95.79
2017 124,419,622.16 124,419,622.16 116,936,288.36 100.00 93.99
2016 110,513,000.00 99,270,838.78 82,371,068.43 89.83 82.98

3.4 As can be observed from the above table, during CY 2019, CAB was able to cope
with its increasing allotments, maintaining a relatively high obligation and
utilization rates of 98.11 percent and 99.99 percent, respectively. Similarly, the
disbursement rate had increased to a relatively high percentage where
P139,932,352.48 or 98.11 percent of the obligations incurred were
utilized/disbursed, and the remaining P2,701,647.52 or 1.89 percent were unpaid but
are due and demandable.

3.5 Presented below is the summary of Notice of Cash Allocations (NCAs) received,
disbursed and unutilized in CY 2019:

Amount Unutilized
Disbursements
CY 2019 NCA No. Received Amount
(In PhP)
January 6,234,686.63 12,779,313.37
February NCA-BMB-A-19- 0000266 19,014,000.00 6,233,488.17 6,545,825.20
March 6,544,914.24 910.96
April NCA-BMB-A-19- 0005204 7,650,805.48 17,177,668.52
May and 24,828,474.00 10,603,173.82 6,574,494.70
June NCA-BMB-A-19-0007164 6,573,620.55 874.15
July NCA-BMB-A-19- 0011690 28,672,692.58 20,234,075.42
August NCA-BMB-A-19- 0011376 48,906,768.00 9,208,463.81 11,025,611.61
September NCA-BMB-A-19- 0006390 11,023,866.33 1,745.28
October NCA-BMB-A-19- 0011376 16,310,034.76 28,076,502.24
NCA-BMB-A-19- 0011690 44,386,537.00
November 14,341,353.14 13,735,149.10
NCA-BMB-A-19- 0011690
NCA-BMB-A-19- 0024632 2,038,648.00 0.00 15,773,797.10
December
NCA-BMB-A-19- 0026932 700,000.00 16,473,489.03 308.07
Total 139,874,427.00 139,870,588.54 3,838.46
Percentage of Utilization (b / a) 99.99%
*The above amounts exclude NCA for TRAs

3.6 Of the total NCAs received by CAB, P139,870,588.54 or 99.99 percent was
utilized, an indication of the agency’s efficient utilization of its fund release in CY
2019.

3.7 We commended Management for efficiently utilizing its fund releases for the
operation and attainment of the agency’s mandate.

38
Non-renewal of fidelity bond on time and excess amount of bond

4. Internal control over cash accountabilities of CAB AOs was not strictly observed
as required under Section 7.2 of Treasury Circular No. 02-2009, thereby exposing
the government to risk of not being fully indemnified in case of defalcation,
shortage, or unrelieved loss perpetrated by the AO, or other losses due to fortuitous
events and calamities.

a) The fidelity bonds of the Accountable Officers were not renewed on time

4.1 Section 7.2 of Treasury Circular No. 02-2009 dated August 6, 2009 provides that
the fidelity bond of an accountable officer shall be renewed before the expiration of
the bond. The application for renewal of bond shall be accomplished by using
General Form 57A”.

4.2 Verification of the bond effectivity disclosed that the fidelity bonds of three
Accountable Officers were not renewed on time or ranging from 15 to 30 days’
delay in the renewal. Details are shown in the next page:

Effective Date No. of Days

Accountable Officer Risk No. Expiration without
From To
Fidelity Bond
1. Petty Cash Fund DIVA-19-0424N 03/08/2019 03/08/2020 03/08/2020 30 days
Custodian (PCFC) DIVA-18-0218R 02/08/2018 02/08/2019 02/08/2019 -
2. Special Disbursing DIVA-19-0422N 03/08/2019 03/08/2020 03/08/2020 15 days
Officer (SDO) DIVA-18-0216R 02/21/2018 02/21/2019 02/21/2019 -
DIVA-19-0423N 03/08/2019 03/08/2020 03/08/2020 15 days
3. Cashier
DIVA-18-0217R 02/21/2018 02/21/2019 02/21/2019 -

4.3 The cause of the delay in the renewal of fidelity bond was because the person-in-
charge overlooked the date of expiration. The delayed renewal of bond exposes the
government to the risk that it may not be fully indemnified in case of defalcation,
shortage, or unrelieved loss perpetrated by the Accountable Officer, or other losses
due to fortuitous events and calamities.

b. The Accountable Officers bonded maximum cash accountability significantly

exceeded their actual cash custody.

4.4 Section 5.1 of Treasury Circular No. 002-2009 provides that – “The amount of bond
shall be based on the total accountability (cash. property and accountable forms) of
the accountable public officer as determined by the Head of Agency. Provided, the
individual maximum accountability of each accountable public officer shall not
exceed One Hundred Million Pesos (P100M). However, the Head of Agency may
assign to other public officers the excess accountability for which a separate
Fidelity Bond shall be secured.”

39
4.5 As shown in the AOs’ latest bond risk number issued by the Bureau of the Treasury
(BTr), the maximum cash accountability was P1,000,000.00 for the Petty Cash
Fund Custodian (PCFC) and P250,000.00 for Special Disbursing Officer (SDO),
whereas, their actual cash accountability as PCFC and SDO since the time of their
designation remained at P15,000.00 and P70,000.00, respectively. These excess
bond on accountability had caused government’s incurrence of unnecessary
expenses in paying higher bond premium than what is necessary to cover their
actual cash accountability, as shown in the table below:
Actual Cash Accountability Excess
Accountable Maximum Amount of
Premium Per Special Corresponding Bonded Cash Premium
Officer Risk No. Cash Cash
Paid Order Premium Accountability Paid
Accountability Advance
PCFC DIVA-19-0424N 1,000,000.00 7,500.00 53, s.2018 15,000.00 168.75 985,000.00 7,331.25
SDO DIVA-19-0422N 250,000.00 1,500.00 24, s.2015 70,000.00 900.00 180,000.00 600.00

4.6 Interview with the Management disclosed that the DBM system enhancements in
the disbursement of funds to facilitate settlement of valid government payables
through MDS has led the way for the immediate payment to government
creditors/payees through MDS check or ADA. Thus, the AOs no longer holds an
amount that exceed the maximum cash accountability of P1,000,000.00.

4.7 It is to be noted that the excess bonded accountability cannot be recovered in case
of loss or defalcation, thus the payment of additional premium in excess of what is
required by law is devoid of any corresponding indemnity value.

c. Inconsistency between the amount of cash accountabilities authorized in the

Special Order/Designation and actual amount granted

4.8 Examination revealed that the amount of Petty Cash Fund (PCF) authorized to be
handled by the PCFC and duly approved by the Executive Director per Special Order
No. 53, s.2018 dated December 12, 2018 is P20,000.00, however, only
P15,000.00 was actually granted to her.

4.9 It was noted that the PCF of P15,000.00 of the PCFC is already sufficient for the one
month recurring petty expenses of CAB.

4.10 We recommended that Management:

a) strictly apply for renewal of fidelity bond in compliance with Section 7.2 of
Treasury Circular No. 02-2009 dated June 6, 2009;

b) reduce the bonded accountability of the Accountable Officers to an amount

commensurate to their actual maximum cash accountability to avoid
incurrence of unnecessary expenses on excess premiums for bonds beyond
the indemnity limit; and

c) amend the Special Order of the PCFC to reduce the amount of her PCF
from P20,000.00 to P15,000.00 which is sufficient to cover the one month
recurring petty expenses of CAB.

40
4.11 Management admitted in their comments that there was a challenge in the
processing of renewal of fidelity bonds given the difference dates of renewal of all
accountable officers. Nevertheless, as stated, the delayed renewal exposed the
Office to risks; hence, our commitment to promptly renew in the future. We would
carry out the recommendation to strictly apply for renewal, in compliance with the
subject BTr Circular.

Management also commented that the recommendation to reduce the bond

accountability reasonably commensurate to the actual maximum cash accountability
shall be followed. Further, the adjustment on petty cash accountability was made in
consideration of the increasing frequency/demand for urgent request submitted to
the supply section. While the AOM found that the amount of P15,000.00 is
sufficient to cover the recurring petty cash expenses, we respectfully request that in
the interim, the amount of P20,000 be retained, considering that emergency/urgent
request for purchases, by their nature, are unpredictable, or may be critical or
exigent; hence, may require immediate action and payment.

Non-compliance with pertinent COA and RA No. 9184 rules and regulations

5. CAB entered into a month-to-month extension of contract for security services

for CY 2019 on September 3, 2019, with monthly contract cost of P130,386.95
and paid the total amount of P647,104.08, net of tax, for services rendered from
January to May 2019 prior to the execution of a valid contract contrary to
Section 9.1 of COA Circular No. 2012-001 dated June 14, 2012.

Moreover, contract review on the procurement of security services for CY 2019

reveals non-compliance of the following: a) provisions of relevant COA
regulations on the submission of the contract and lacking of signature of the
Chief Accountant as a witness on the contract; b) Sections 5.1 and 5.2
(Procedural Requirements) of GPPB Revised Guidelines on the Extension of
Contract for General Support Services rendering the validity of the contract for
security services for CY 2019 questionable and c) provisions of the General
Appropriations Act and Government Accounting Manual (GAM) for National
Government Agencies (NGAs) on Certification of Availability of Funds.

5.1 Section 9.1 of COA Circular No. 2012-001 which provides that “the approved
contract is one of the specific requirements for each type of disbursements before a
payment can be made.”

5.2 Section 4.2 of the Revised Guidelines on the Extension of Contracts for General
Support Services provides – “the original contract subject of the extension was
awarded in accordance with the provisions of Republic Act 9184 and its 2016
Revised Implementing Rules and Regulations.”

41
5.3 Section 4.7 of the same Guidelines also provides – “the terms and conditions of the
original contract shall not be changed or modified, except when changes or
modifications will redound to the advantage of the government at no additional cost
to the Procuring Entity.”

5.4 On September 3, 2019 the CAB has awarded an extension for contract of security
services with St. Moritz Security Agency, Inc. in the amount of P130,386.95, which
shall be for the period of six months, beginning January 1, 2019, or until such time
that the bidding process has been completed. The CAB resorted to extending the
CY2018 contract for security services entered into with St. Moritz Security Agency,
Inc. upon failed bidding conducted before the expiration of the original contract.
Moreover, the CAB did not submit the original contract, despite several verbal
demands, which should be the basis of the contract extension of the security
services, thus evaluation on its compliance with RA 9184 and its IRR cannot be
undertaken.

5.5 Furthermore, prior to the award of the contract extension for security services, the
CAB has already paid the security services rendered for the period of January 1 to
May 31, 2019 amounting to P647,104.08. Details are presented in the next page:

Services Paid without an Existing Contract

Amount of
Payment, Net
Period of Payment DV No.: DV Date Check No.
of Tax
(In PhP)
January 2019 19-01-30 1/18/2019 1550301 129,420.96
February and March 2019 19-05-335 5/16/2019 1550444 258,841.92
April 2019 19-06-421 6/21/2019 1550445 129,420.96
May 2019 19-06-422 6/21/2010 1550446 129,420.96
Total 647,104.80

5.6 The basic requirement for the payment of services rendered is the
perfected/approved contract, absence thereof may render the payment baseless since
there can be no legal basis for the payment during the period. Thus, the
disbursements from January 1 to May 31, 2019 in the amount of P647,104.80 is
considered irregular for being not supported by extension of contract at the time the
payment was made in violation of Section 9.1 of COA Circular No. 2012-001 dated
June 14, 2012.

5.7 Moreover, the procurement of the security service violates various provisions of
relevant COA Circulars, GPPB resolutions and GAA. Summarized as follows:

Relevant Rules and

Description Condition
Regulations
a.) Section 1 of COA Section 1 of COA Circular No. 79-122 The contract for the
Circular No. 79-122 dated December 18, 1979 provides that extension of security
dated December 18, “All contracts for capital projects and services was executed
1979 and Section 4.4 for the supply of commodities and without the signature of

42
 Relevant Rules and
Description Condition
Regulations
of COA Circular No. services, including equipment, the Accountant as
82-122-B dated maintenance contracts, and other witness.
January 8, 1982 agreements requiring payment which
are chargeable to agency current
operating or capital expenditure funds,
shall be signed by agency heads or
other duly authorized official only
when there are available funds. The
Chief Accountant of the contracting
agency shall sign such contracts as
witness and contracts without such
witness shall be considered as null and
void.”

Section 4.4 of COA Circular No. 82-

122-B dated January 18, 1982 states
that “in addition to accomplishing the
Certificate of Availability of Fund
(CAF), the accounting official shall
also sign the contract as witness.
Contract not so witnessed or supported
by CAF shall be considered null and
void.”

b.) Section 3.1.1 of COA
Circular No. 2009-001
Section 3.1.1 provides that “within five Late submission by 110
(5) working days from the execution of days of the copy of
a contract by the government or any of perfected contract for the
its subdivisions, agencies or extension of security
instrumentalities, including services and its
government-owned and controlled supporting documents to
corporations and their subsidiaries, a the Office of the Auditor
copy of said contract and each of all the
documents forming part thereof by
reference or incorporation shall be
furnished to the Auditor of the agency
concerned. In case of agencies audited
on an engagement basis, submission of
a copy of the contract and its
supporting documents shall be to the
Auditor of the mother agency or parent
company, as the case may be.”

c.) GPPB Resolution No. Section 5.1 All contract extensions shall The Management of
03-2006 and Sections be subject to the prior approval of the CAB failed to submit the
5.1 and 5.2 (Procedural Head of the Procuring Entity or his/her written approval of the
Requirements) of duly authorized representative upon Head of the Procuring
GPPB Revised recommendation of the Bids and Entity or his duly
Guidelines on the Awards Committee. authorized representative
Extension of Contract to enter into an extension
for General Support Section 5.2 In addition to the of contract, and the
Services foregoing, if the proposed contract written notification/
extension exceeds six (6) months, the report submitted to
Head of the Procuring Entity or his/her GPPB for its intention to
duly authorized representative shall

43
 Relevant Rules and
Description Condition
Regulations
immediately report to the Government extend the contract
Procurement Policy Board in writing of beyond six months
its intent to extend beyond six months.

d.) Section 29 of the FY Section 29 of the FY 2019 GAA’s The contract for
2019 GAA’s General General Provisions provides that - “no extension of security
Provisions, and obligations chargeable against any service was not supported
Sections 36(c) and 37, authorized allotment shall be incurred with Certificate of
Chapter 1 of the GAM, by departments, bureaus, and offices of Availability of Funds
Volume I. the National Government, including (CAF).
Constitutional Offices enjoying fiscal
autonomy, SUCs, GOCCs and LGUs
without first securing a certification of
availability of funds (CAF) for the
purpose from the agency chief
accountant, subject to Section 40,
Chapter 5, and Section 58, Chapter 7,
Book VI of E.O. No. 292. The
certification of availability of funds
sufficient to cover the cost of contracted
activities shall be contained in, and
made part of, the contract duly signed
by the chief accountant of the
contracting agency.”

Section 36(c) Chapter 1 of GAM,

Volume I provides that “the Head of the
Accounting Unit shall certify the
availability of funds before an Agency
Head or his duly authorized
representative enter into any contract
that involves the expenditure of public
funds based on the copy of budget
release documents.”

Section 37. Certification of Availability

of Funds. No funds shall be disbursed,
and no expenditures or obligations
chargeable against any authorized
allotment shall be incurred or
authorized in any department, office or
agency without first securing the
certification of its Chief Accountant or
head of accounting unit as to the
availability of funds and the allotment to
which the expenditure or obligation
may be properly charged. xxx”

e.) Section 59.2 of the Section 59.2 provides that “any and all The provision of
2016 Revised IRR of disputes arising from the settlement of disputes
RA 9184 implementation of a contract covered was not included/
by the Act and this IRR shall be incorporated in the
submitted to arbitration in the contract of extension of
Philippines according to the security services and

44
 Relevant Rules and
Description Condition
Regulations
provisions of R.A. 876, otherwise cannot be validated on the
known as the "Arbitration Law" and original contract due to
R.A. 9285, otherwise known as the non-submission
“Alternative Dispute Resolution Act of
2004”: Provided, however, That
disputes that are within the competence
of the Construction Industry Arbitration
Commission to resolve shall be
referred thereto. The process of
arbitration shall be incorporated as a
provision in the contract that will be
executed pursuant to the provisions of
the Act and this IRR: Provided, further,
that by mutual agreement, the parties
may agree in writing to resort to other
alternative modes of dispute
resolution.”

5.8 We recommended that Management:

a) direct the Accounting Section to process payment for services rendered only
be made upon submission of perfected contract and its supporting
documents in compliance with Section 9.1 of COA Circular No. 2012-001
dated June 14, 2012 specifically on the general and specific requirements
for each type of disbursement;

b) submit the CY 2018 security services contract and its supporting

documents to the Office of the Auditor to avoid audit
suspension/disallowance for the payments made for security services for
CYs 2018 and 2019;

c) require the BAC to ensure that procurement process for service contracts
due for expiration shall be started and completed in time before their
expiration to avoid continued services without valid contracts;

d) instruct the Accountant to sign as witness in all contracts entered into by

CAB in adherence to the provision of Section 1 of COA Circular Nos. 79-
122 dated December 18, 1979 and Section 4.4 of COA Circular No. 82-122-
B dated January 8, 1982;

e) require the submission of copy of perfected contract and its supporting

documents to the Office of the Auditor within five working days from its
execution pursuant to the provisions of Section 3.1.1 of COA Circular No.
2009-001, dated February 12, 2009;

45
 f) comply with the provision of Sections 5.1 and 5.2 of GPPB Revised
Guidelines on the Extension of Contract for General Support Services –
procedural requirements;

g) require the Chief Accountant to see to it that contracts and claims against
government funds are supported with CAF in compliance with Section 29
of the FY 2019 GAA’s General Provisions and Sections 36(c) and 37 of
Chapter 1, GAM, Volume I; and

h) include/incorporate in all contracts the provision on settlement of disputes

as provided under Section 59.2 of the 2016 Revised IRR.

5.9 The Management commented that the disbursements made without the execution of
the extension contract was cured by the execution of the extension contract despite
the delay and since the services were actually rendered, the payment is justifiable
under the principle of quantum meruit. The services may be paid at the amount
fixed in the previous contract. Non-payment of services actually rendered would
constitute unjust enrichment. As regard with the CY 2018 contract, the
Management commented that they are encountering difficulties in locating the copy
of the contract for security services for CY 2018 and they are improving their
record-keeping system. Consequently, they have requested from St. Moritz Security
Agency, Inc. a copy of the contract which was submitted on March 12, 2020.
Moreover, they also commented that the late execution of the extension of contract
for security services for CY2019 was due to circumstances which were outside of the
Agency’s control, i.e. delay in the approval of the 2019 General Appropriations
Act (GAA), delay in the release of implementing Rules and Regulation of CY2019
re-enacted budget, difficulties in the release of funds from DBM. The duration
clause of the extension of contract was phrased with indefinitely because of the
uncertainties as to when the bidding process will be completed. Also, the
Management commented that they exerted their best effort to complete the bidding
process. Furthermore, the management commented that the provision for settlement
of disputes need not be explicitly expressed in the contact itself because it is
already contained in the General Conditions of Contract (GCC) which forms an
integral part of the contract.

Auditor’s Rejoinder

5.10 Management was advised to give appropriate and preferential action for the
submission of the CY 2018 security service contract to avoid audit
suspension/disallowance of the payments made for security services for CYs 2018
and 2019.

5.11 Likewise, Management was also advised to stop processing of payment to all
suppliers without a valid contract and its supporting documents to avoid
suspension/disallowance.

46
Late submission and incorrect format of Bank Reconciliation Statement (BRS)

6. Monthly Bank Reconciliation Statements were not submitted within the

prescribed period and in the proper format contrary to Section 7, Chapter 21,
Volume 1, and Appendix 80, Volume 3 of the GAM for NGAs, respectively.

a) Late submission of Bank Reconciliation Statement (BRS)

6.1 Section 7, Chapter 21 of the same Manual prescribe the timeline of reporting to wit:

“The Chief Accountant shall submit the BRS within twenty days after the receipt of
the monthly Bank Statements to the following:

Original – COA Auditor (with all the supporting documents and JEVs)
Copy 2 – Head of Agency/Entity
Copy 3 – Accounting Division/Unit File
Copy 4 – Bank, if necessary”

6.2 Compliance by the Chief Accountant in the submission of the Monthly BRS as of
December 31, 2019 are as follows:

Date Received by the Audit Team No. of Days of Delay

Regular MDS Regular MDS Payroll
Date of Payroll Account
Due Date of Account Account Account
Month Receipt of (LBP Account
Submission (LBP Account (LBP Account (LBP Account
Bank No. 2511-03-07-
No. 2251-9000- No. 2251-9000- No. 2511-03-
Statement 41)
11) 11) 07-41)

January May 20, 2019 June 27, 2019 22 Days

No date of
February Cannot be July 19, 2019 Cannot be
receipt of BS
determined since determined since
March no available August 13, 2019 no available
information on information on
April date of receipt of date of receipt of
May the BS. September 19, the BS.
October 16, 2019
June Cannot be
2019
October 16, November 5, determined
July 10 Days since CAB only
2019 2019
August maintains
Cannot be Cannot be passbook and
determined since November 15, determined since no regular
no available 2019 no available update on the
September information on information on account
No date of date of receipt of date of receipt of balance.
receipt of BS the BS. the BS.
February 20,
2020
October January 26, 2020 25 Days
Cannot be
Cannot be
determined due to
November January 6, 2020 determined since February 20, no available
no available 2020 information of
information on
date received on
No date of date of receipt of
December the advance copy
receipt of BS the BS.
of bank

47
6.3 As shown in the table above, delays ranged from 10 to 25 days in the submission of
the BRS for Regular MDS Account for the months of January and July to October
2019 to the Office of the Auditor was incurred by the Accounting Section.

6.4 On the other hand, Section 74 of PD No. 1445 states that – “At the close of each
month, depositories shall report to the agency head, in such from as he may direct,
the condition of the agency account standing on their books. The head of the agency
shall see to it that reconciliation is made between the balance shown in the reports
and the balance found in the books of the agency.”

6.5 The Chief Accountant failed to monitor the submission of the BS which was
required to be submitted at the close of each month; hence, the delayed submission
of the BRS.

6.6 Interview with the Accountant disclosed that the delayed submission of the BRS
was due to the excess responsibilities and exacerbated by the additional work that
were distributed to the remaining FMD employees in the wake of the retirement of
two key FMD personnel that overwhelmed the division, invariably causing it to
commit lapses in the follow-up of BS with the LBP and preparation of BRS.

6.7 Late submission of BRS defeated the purposes of its preparation of checking the
accuracy of the balance of cash in bank accounts, deter fraud, and timely
determination and recording of book and bank reconciling items. Hence, the
reliability of the balance of accounts Cash in Bank - MDS and Cash in Bank –
Payroll in the amounts of P0.00 and P30,044.58 as of December 31, 2019 could not
be ascertained.

b) Incorrect format of BRS

6.8 Appendix 80 of GAM for NGAs, Volume 3 prescribed the format to be used in the
preparation of BRS. It requires the following information:

a) name of the Agency;

b) period of BRS;
c) unadjusted balances of Agency and Bank;
d) Bank reconciling items; e) Agency’s Book reconciling items;
f) adjusted balances of Agency and Bank;
g) name and signature of the preparer and date the BRS prepared;
h) name and signature of the reviewer and date the BRS reviewed; and
i) column for explanatory comment for each Agency’s Book and Bank
Reconciling items.

6.9 Moreover, Sequence 13 of Section 8, Chapter 21 of GAM for NGAs, Volume 1

explicitly direct that the BRS should be prepared in accordance with the format
shown in Appendix 80 of GAM for NGAs, Volume 3.

48
6.10 Examination of the submitted BRSs disclosed that the Accounting Section did not
prepare the BRS in accordance with the format, such that it lacked the information
in the column for explanatory comment for each Agency’s Book and Bank
Reconciling Items and there was no indication that the BRS has been reviewed due
to lacking of name and signature of a reviewer and date of review.

6.11 We recommended that Management:

a) strictly monitor the submission by LBP of the BS and consequently,

prepare and submit the BRS within twenty days after the receipt of the
monthly BS pursuant to Section 7 of Chapter 21, GAM for NGAs, Volume
1; and

b) prepare the monthly BRS with complete information and signatures in

accordance with the format prescribed under Chapter 13 of GAM for
NGAs, Volume I.

6.12 Management commented that there are two factors contributed to the late
submission of BRS, first was the retirement of two key personnel in the Financial
and Management Division (FMD). From January to November 15, 2019, the BRS
was being prepared by the previous acting Accountant and then Supervising
Administrative Officer and reviewed by the current Accountant. There was a deluge
of additional work that flooded the FMD in the wake of the retirement of the
Supervising Administrative Officer and Fiscal Examiner II. The responsibility of
preparing the BRS was overlooked as it fell through the cracks of the transition. The
FMD had to improvise to adopt to the rapidly changing condition.

The other factor is the difficulty in securing a bank statement from LBP within a
reasonable period of time. New appointments to the vacated position are likely to
ease the workload burden of the current employees, consequently ensuring that
BRS will be submitted to COA on time. and lastly, we will adhere to the prescribed
format of BRS found in the GAM.

Insufficient actual Field Audit/Onsite Verification of Sales and Cargo Production Reports
and Weak Internal Control in the Assessment and Collection of Other Service Income

7. Out of 517 registered Airfreight Forwarders (AFFs) and 20 registered General

Sales Agents (GSAs), the CAB conducted only four actual field audit/on-site
verification of sale and cargo production reports submitted by AFFs and GSAs
during CY2019 due to lack of audit personnel thus reliability of the reports
submitted cannot be ascertained in which verification and supervision fees
collected are based. Moreover, CAB Assessment Forms used as basis in issuing
Order of Payment for supervision and verification fees did not show names and
signatures of the authorized signatories.

49
 a) Insufficient actual field audit/on-site verification of sales and cargo
production reports
7.1 Pursuant to its mandate, the CAB, represented by its Board, was granted under
Section 10 of the Civil Aeronautics Act of the Philippines (Republic Act No. 776)
the power to regulate the economic aspect of air transportation, general supervision
and regulation of, the jurisdiction and control over air carriers, general sales
agents, cargo sales agents, and airfreight forwarders as well as their property,
property rights, equipment, facilities, and franchise, in so far as may be necessary
for the purpose of carrying out the provisions of the said Act. The same provision
empowered CAB to adopt any original, amended, or new individual, joint or special
rates, charges or fares proposed by an air carrier if the proposed individual, joint, or
special rates, charges or fares are not unduly preferential or unduly discriminatory
or unreasonable for any service in connection with air commerce.

7.2 On this basis and following the approval and adoption by CAB Board on July 2013
as per Resolution No, 50 (BM-5-07-26-2013), CAB charges verification fees to
Airfreight Forwarders (AFs) at a rate of P50.00 per House Airway Bills (HAWBs)
issued by International Airfreight Forwarders and P40.00 per HAWB issued by
Domestic Airfreight Forwarders. HAWBs were reported in the Airfreight
Forwarder Cargo Production Report (AFCPR).

7.3 Verification and supervision fees collected were recorded as Other Service Income
in the books of CAB where a total collection of P65,409,841.12 for the period January
1 to December 31, 2019 was reported. Details are shown below:

Verification Fees
Supervision Fees
Domestic International
From General Collection
CY 2019 Airfreight Airfreight
Sales Agents
Forwarders Forwarders
(in PhP)
January 278,040.00 1,140,440.00 2,068,490.56 3,486,970.56
February 239,520.00 1,123,750.00 11,333,880.56 12,697,150.56
March 205,800.00 1,292,400.00 4,607,920.00 6,106,120.00
April 327,920.00 1,159,120.00 6,204,210.00 7,691,250.00
May 300,370.00 1,472,410.00 1,420,480.00 3,193,260.00
June 291,760.00 1,180,200.00 1,936,290.00 3,408,250.00
July 314,280.00 1,455,030.00 1,112,440.00 2,881,750.00
August 266,300.00 1,109,320.00 8,716,900.00 10,092,520.00
September 192,520.00 1,233,600.00 6,042,750.00 7,468,870.00
October 266,480.00 1,175,720.00 1,422,940.00 2,865,140.00
November 342,250.00 1,252,600.00 1,662,320.00 3,257,170.00
December 230,840.00 1,162,840.00 867,710.00 2,261,390.00
Total 3,256,080.00 14,757,430.00 47,396,331.12 65,409,841.12

7.4 Assessment and collection of the above revenues were based on MTSR and AFCPR
submitted monthly by the GSAs and AFs to Air Carrier Accounts and Field Audit
Division (ACASFAD). The ACASFAD is mandated pursuant to Paragraph G of
Section 1.0 of Quality Manual on International Organization for Standardization
(ISO) 9001 of CAB to conduct field audit to verify the correctness and

50
 completeness of the sales/revenues reported in the MTSR and AFCPR with those of
sales agent’s actual records maintained in their respective offices.

7.5 In CY 2019, data showed that a total of 29 GSAs and 521 AFs were subjected to
assessment and collection of supervision and verification fees. Details are as
presented in the next page:
New
No. of AC Voluntary Total No. %
Type of Air Commerce Permits
as of Ceased as of Increase/
(AC) Granted in
12/31/2018 Operations 12/31/19 (Decrease)
CY 2019
A. General Sales Agents for
Passengers 26 3 0 29 11.54

B. Airfreight Forwarders
1. International 300 12 4 308 2.67
2. Domestic 52 9 6 55 5.77
3. International/
155 8 5 158 1.94
Domestic
Total 533 32 15 550 3.19

7.6 As observed, the number of stakeholders issued with permits to engage in the
issuance of PTs and HAWBs has increased by 3.19 percent in CY 2019.
Comparative analysis of the total supervision and verification fees collected and
recorded under the Other Services Income account of CAB for CYs 2018 and 2019,
showed a 25.88 percent increase in collections. Details are shown below:

Other Service Income

CY 2019 CY 2018 Increase/ (Decrease) Percentage
65,409,841.12 51,961,846.72 13,447,994.40 25.58

7.7 As contained in CYs 2017 and 2018 AARs, CAB failed to conduct regular
audit/onsite verification of the MTSRs of the GSAs and AFCPRs of AFs. In CY
2019, in response to this audit observation, the ACASFAD was able to conduct four
field audit, three for airfreight forwarders (Makati Express Cargo, AAI Worldwide
Logistics, Inc., and Nissin Transport Philippines, Inc.), and one (1) for general sales
agents (New Dynasty International, Inc.) which represents only 0.57% and 3.45%
of the total CY 2019 AFs and GSAs, respectively.

7.8 The audit of three airfreight forwarders and one general sales agent disclosed
discrepancies between the actual sales and production report of AAI Worldwide
Logistics, Inc. against the submitted MTSR and AFCPR to the CAB amounting to
P381,230.00. The insufficient actual field audit/on-site verification of sales and
cargo production reports renders doubt as to the accuracy of number of HAWBs
and PTs reported in the MTSRs and AFCPRs. Consequently, also the income
collected by the CAB which can be used to advance public interest and
developments.

51
7.9 Moreover, the Management commented that the mandate of the CAB on AFs and
GSAs were primarily regulatory and not income generating; hence, they are more
focused on the rule-making functions, i.e. issuance and amendment of orders,
general rules and procedures, authorization of any domestic and international
charter air services, investigation of complains against domestic or foreign air
carrier, etc., over regulations of its stakeholders rather than to target revenue-
generating directives.

7.10 Contrary to Management’s justification, the authority of CAB to examine and

inspect the records of the GSAs and AFs at any time during office hours is provided
for in Section 13 and Section 11 of the Economic Regulation No. 8 (ER No.8) as
amended by Board Resolution No. 189-84 and Economic Regulation No. 4 (ER No.
4), both issued by the agency.

7.11 Hence, pursuant to its mandate and in accordance with the preceding issuances and
considering the importance of the onsite verification or field audit of reports in
investigating unusual changes in collection trends, detecting irregularities and
ensuring accuracy, completeness and correctness of reports used as basis in the
assessment and collection of revenue by the CAB, there is an utmost necessity of
conducting the required audit/on site verification of the records maintained by
GSAs and AFs.

b) CAB Assessment Forms used as basis in issuing Order of Payment for

supervision and verification fees did not show names and signatures of the
authorized signatories
7.12 Section 123 of Presidential Decree (PD) 1445 defines internal control as “the plan of
organization and all the coordinate methods and measures adopted within an
organization or agency to safeguard its assets, check the accuracy and reliability of
its accounting data, and encourage adherence to prescribed managerial policies.

7.13 Section 124 of the same decree specifically states that it shall be the direct
responsibility of the agency head to install, implement, and monitor a sound system
of internal control.

7.14 Inspection and verification of the CY 2019 assessment forms revealed that most of
these forms did not reflect the name and signatures of the personnel who conducted
the assessment and the authorized reviewer and approving authority despite our
recommendation in CY 2018 audit to install necessary control in the issuance of
assessment form. Hence, responsibilities inherent in the issuance of the said forms
could not be readily pinpointed.

7.15 Interview with ACASFAD personnel disclosed that CAB has no written policies
regarding the personnel who will assess, sign, review and approve the assessment
form, thus, anyone of them in the ACASFAD may issue the assessment form which
are filled-out manually.

52
7.16 The absence of the name and signature of CAB personnel preparing and
reviewing/approving the assessment forms shows weakness in internal control and
exposes the agency to the risk of unauthorized use of assessment forms that may
compromise the integrity of the assessment process.

7.17 The Management commented that in order to came up with measures to monitor the
correctness of verification and supervision fees, they published Memorandum
Circulars 1 and 2 series of 2018 which strengthens previous memorandums
requiring the GSAs and AFFs to submit an inventory of their used and unused
house airway bills/tickets containing the inclusive serial numbers of each set of
house airway bills and/ tickets including the new and subsequent printing by
principals. Furthermore, the hiring of additional employees shall be taken into
consideration, however the conduct of a field audit commences when there is
reasonable ground to believe that an error, discrepancies or mis-declarations are
actually committed. On the other hand, with regards to CAB Assessment Forms did
not show names and signatures of the authorized signatories, the Management
commented that the accountable officers have inadvertently missed out in filling in
their name and as such they shall draft an internal policy in the manner of filling up
Assessment Forms.

7.18 We reiterated our prior year’s recommendation that Management:

a) fill up vacant position in the ACASFAD to augment its existing manpower,

or in the alternative, adopt strategies to fully utilize and enhance the
capability of the current personnel complement to enable the Division to
conduct its mandated regular field audit function; and

b) issue a written Guidelines/Policies on the use of the Assessment Forms

installing controls necessary to identify and show the names and signatures
of personnel responsible in the preparation and review of the entries
reflected therein and encourage personnel’s adherence to management
policies in assessment and collection of fees to maintain/safeguard the
integrity of the assessment process.

Payment of Flying Pay without corresponding withholding tax

8. CAB did not withhold income tax on the payment of flying pay contrary to Revenue
Regulations (RR) No. 11-2018 dated January 31, 2018 and Revenue
Memorandum Order (RMO) No. 23-2014 dated June 20, 2014.

Moreover, they also did not comply with the mandatory minimum four flying hours
per month and the six-months service requirement before CAB personnel
be eligible for flying pay/additional compensation as required under Section 30 of
RA No. 776 – The Civil Aeronautics Act of 1952, and CAB Memorandum No. 17
dated March 5, 2019, respectively.

53
 a) Non-withholding of income tax on payments of flying pay to CAB officials and
employees as required under RR No. 11-2018 and RMO No. 23-2014

8.1 Section 7(A) of RR No. 11-201 provides – “every employer must withhold from
compensation paid an amount computed in accordance with these Regulations,
whether the employee is a citizen or an alien, except non-resident alien not engaged
in trade or business. Provided, that no withholding of tax shall be required on the
Statutory Minimum Wage Earner (SMW), including holiday pay, overtime pay,
night shift differential and hazard pay of MWEs in the private/public sectors as
defined in these Regulations. Provided, further, that an employee who receives
additional compensation such as commissions, honoraria, fringe benefits, benefits
in excess of the allowable statutory amount of ₱90,000.00, taxable allowances and
other taxable income other than the SMW, holiday pay, overtime pay, hazard pay,
and night shift differential pay, shall be taxable only on such additional
compensation received.”

8.2 Section 3(D) of RMO No. 23-2014 also provides – “As an employer, government
offices including government-owned or controlled corporations (such as but not
limited to the Bangko Sentral ng Pilipinas, Metropolitan Waterworks and Sewerage
System, Philippine Deposit Insurance Corporation, Government Service Insurance
System, Social Security System), as well as provincial, city and municipal
governments are constituted as withholding agents for purposes of the creditable tax
required to be withheld from compensation paid for services of its employees.”

8.3 Review of the disbursement vouchers for the payments of flying pay made by CAB
to its seventy three (73) officers and employees in the amount of P9,328,436.00
representing the increase in compensation equivalent to fifty percent (50%) of their
respective base pay as provided under Section 30, Paragraph 2 of RA No. 776
disclosed that the Management failed to withhold an income tax from those who are
earning more than the exempt threshold of P250,000, in violation of the
abovementioned rules and regulations which deprived the government of additional
income in the amount of P2,322,055.21 excluding 25 percent surcharge, 12 percent
interest per annum, and compromise penalty.

b) Non-compliance with the mandatory minimum four flying hours per month to
be eligible for additional compensation as required under Section 30 of RA
No. 776 or the Civil Aeronautics Acts of the Philippines dated June 20, 1952

8.4 Section 30 paragraph 2 of RA No. 776 provides that “All rated and/or licensed airmen
and such other authorized personnel of the Civil Aeronautics Board and/or Civil
Aeronautics Administration who may be required to undertake or perform
regular and frequent aerial flights in connection with their duties, shall at the
discretion of the head of the office receive an increase in compensation equivalent
to fifty per centum of their respective base pay. Provided, however, that the total
flying hours per month shall not be less than four hours. (Emphasis ours)

54
8.5 Review of the Flight Monitoring Reports submitted by Finance and Management
Division for CY 2019 disclosed that the Management computed the required flying
hours from the moment the officer/employee enters the airport of origin up to the
time they left the airport of their destination and vice-versa.

8.6 The Audit Team conducted an examination and used the itinerary of flight attached
to the flight monitoring report in computing the total actual number of flying hours
an official/employee has rendered. Out of the 432 flights, 396 or 91.67 percent were
less than the required minimum four flying hours in violation of the
abovementioned rules. Considering that their flying hours is below the required
minimum number of hours, these officers and employees are not eligible for the
additional increase in compensation. However, the CAB already paid the additional
compensation for CY 2019 based on the computation of the four flying hours
starting from the moment they enter the airport of origin.

8.7 As defined in Wikipedia, flight hours mean the hours spent in the sky on an aircraft
or each hour or part thereof elapsing from the moment at which the wheels of the
Aircraft leave the ground on the take-off of the Aircraft until the wheels of the
Aircraft touch the ground on the landing of the Aircraft following such take-off
https://www.lawinsider.com/dictionary/flight-hour.

8.8 Applying the meaning of flight hours, we computed that the minimum four flying
hours should be based on the itinerary of flight which disclosed that the number of
flying hours rendered by CAB officers and employees were less than the required
minimum four flying hours. Therefore, they should not be entitled to the additional
compensation equivalent to fifty per centum of their respective base pay.

8.9 Review of the accomplishment reports and disbursement vouchers disclosed that
there were 432 flights conducted by its officers and employees that are considered
less than the minimum four flying hours and a total of P8,259,309.50 flying pay
was attributable to these flights, thus, considered as an overpayment due to non-
compliance with Section 30 of RA No. 776 on the minimum four flying hours.

c) Non-compliance with the six-months service requirement before CAB

personnel be eligible for flying pay as a form of incentive as required under
CAB Memorandum No. 17, dated March 5, 2019

8.10 Section V Paragraph A of the CAB Memorandum No. 17 – Flight Monitoring

Guidelines provides – “to be eligible for incentives, CAB personnel must be in
regular plantilla position who have rendered at least six (6) months of service, upon
submission of a flight report, including the pertinent travel documents and
attachments. The six-month period may be waived with the express approval from
the Executive Director.”

8.11 Review of the accomplishment reports and disbursement vouchers disclosed Deputy
Executive Director has been appointed only on April 1, 2019 but has already
conducted flights for the months of April, May, June and July 2019 (fourth, fifth,

55
 six and seventh flight, respectively). However, he had received an additional
compensation or flying pay amounting to P233,571.50 when he has not yet
rendered the six months service.

8.12 Moreover, there was no express approval from the Executive Director waiving the
required six months of service or exemption for DED to be entitled to flying pay in
violation of the above-mentioned CAB guidelines.

8.13 We recommended that Management:

a) require all the officials and employees to pay the withholding tax which
were not deducted from their flying pays received for CY 2019;

b) direct the Chief Accountant to deduct withholding tax from payments of

flying pay to CAB officials and employees in compliance with Section 7(A)
of RR No. 11-2018 dated January 31, 2018 and Section 3(D) of RMC No.
23-2014 dated June 20, 2014 on the withholding tax on compensation/
income;

c) instruct the responsible officer to be strictly cautious in computing the

required minimum four flying hours per month reckoned from the actual
start as per itinerary of flight coming from the airline companies in
compliance with Section 30 paragraph 2 of RA No. 776, or the Civil
Aeronautics Act of the Philippines dated June 20, 1952 as amended; and

d) strictly observe the requirement under Section V of CAB Memorandum

No. 17 dated March 5, 2019 that for CAB personnel to be entitled to flying
pay, he must be in regular plantilla position who had rendered at least six
(6) months of service, upon submission of a flight report, including the
pertinent travel documents and attachments. Otherwise, secure an express
approval from the Executive Director to waive the six-months service
requirement.

8.14 Management commented that flying pay by its separate designation alone, is an
special allowance. It is not absolutely and universally available. The people entitled
to it are unique and limited to specific industries and jobs. And even in those jobs,
as in the CAB, the pay is subject to the discretion of the head of the Agency. In
these regards, the taxability or non-taxability of flying pay has been clarified in at
least one field in accordance with RA No. 9040. Admittedly, this law refers
specifically to members of the AFP. On the basis of the above discussion, however,
that the flying pay is discretionary and not absolute in character and availability, we
argued that the flying pay mentioned in Sec. 30 of RA No. 776 is akin to the
excluded income mentioned in Sec. 3 of RA No. 9040. Just as military personnel
are only able to claim the same when they receive orders to fly, so do CAB
personnel when they are issued travel order. In both cases, it is very possible that
military or CAB personnel may not be given orders to undertake aerial flights for
the duration of their service.

56
8.15 Management also commented that the definition being used in the observation
refers only to the description of an aircraft’s physical movements from the ground to
being airborne and touching down again. In this context, the definition is used
to measure the performance of the aircraft for particular purposes such as acquisition,
lease, and/or maintenance contracts, where the physical rigors and effects of flight on
an aircraft must be exactly timed and measured in connection with the terms,
conditions, warranties, lifetime, and like provisions of such documents. For the
International Civil Aviation Organization, it may also refer to the “block time” used
by airline schedulers and airport coordinators, measured from the time the chocks
are taken off the wheels for pushback to the time they are put on at the port of
destination. For the passenger, the “flight” is the entire time allotted to air travel,
including trips to and from the airport and all processes undertaken therein. This is
the reason why government regulations on air transport invariably include the
passenger experience at landside.

8.16 To use a specific definition of “flight hours” without understanding the source and
the context of its application is thus dangerous and will unduly misconstrue the
intention of RA No. 776. Clearly, instead of referring solely to the aircraft’s
airborne time, or indeed, airlines’ declared itineraries, Sec. 30 refers to the
experience of the personnel undertaking the flight. To further construe this, we need
to recall that the duty to undertake aerial flights is in connection to personnel’s
duties. On this note, it behooves us to ask what duties CAB employees have for
them to take aerial flights. In fine, while the law uses the word “flying” in Sec. 30,
we should bear in mind the spirit that giveth life rather than the letter that killeth the
law’s intent. A contrary view, and the AOM’s specific choice of definition, would,
in this age of fast jets, render nugatory the provisions of a law that is of DC-3 and
Conair 340 vintage.

8.17 Lastly, they likewise submitted that there is no irregularity in the Deputy Executive
Director receiving flying pay for aerial flights conducted even before the lapse of
six (6) months starting from his appointment. Despite the provisions of CAB
Memorandum No. 17 dated March 5, 2019, it bears stressing that the Deputy
Executive Director received the proper Travel Order(s) to undertake aerial flights.
Such orders are ipso facto the exercise of discretion referred to in Sec. 30 of RA
No. 776. In other words, the fact that personnel receive an order to travel and claim
flying pay from no other than the head of agency is already clear approval from the
latter, and we submit that a separate declaration only stating that the director
“approves” of the flight and the claim of flying pay is already redundant,
superfluous, and a waste of resources.

8.18 However, they committed that they we will look into, including specific wording in
travel orders with respect to personnel required to undertake aerial flights sooner
than six (6) months after appointment and clarifying what constitutes as flying
hours for purposes of accomplishing our duties. They are likewise open to further
studying the taxability or non-taxability of the flying pay and making the
appropriate adjustments in the grant thereof, if necessary.

57
Auditor’s Rejoinder:

8.19 Management was advised that RA No. 9040 (charter of AFP) is not applicable to
CAB, first, unlike CAB, AFP maintains and uses their own aircraft, second taxes
are the lifeblood government and only those who are exempted can escape from
taxation, and third, tax exemptions are strictly construed against the taxpayer and
liberally in favor of the government because taxation is the rule and exemption is the
exception. Moreover, we advised them to revisit the CAB Memorandum No. 17
dated March 15, 2019 to include specific definition of flying hours and the
exemption of some personnel from the required six-months requirements to be
eligible for flying pay.

8.20 It is worth mentioning that for CY 2020, the Management already withhold and
remitted taxes on flying pay.

Non-compliance with the rules and prescribed period for Liquidation of Cash Advances

9. Out of the P3,207,905.02 cash advances granted for CY 2019, 49.20 percent or
P1,578,130.16 were liquidated beyond the required period and 24.46 percent or
P386,028.56 remained unliquidated as of December 31, 2019 contrary to Sections
5.1.1 to 5.1.3 of COA Circular No. 97-002 dated February 10, 1997. Moreover,
Accountable Officers (AOs) with unliquidated cash advances were granted
additional cash advance contrary to Section 1.1 Paragraphs 2 and 8 of COA
Circular No. 2012-001 dated June 14, 2012.

9.1 The balance of accounts Advances to Special Disbursing Officer (SDO) and
Advances to Officers and Employees (OE) amounted to P386,028.46 as of
December 31, 2019, as shown in the table below.

Advances to
Advances to OE Total
Particulars SDO
(In PhP)
Beginning Balance, 01/01/2019 84,800.00 0.00 84,800.00
Add: Cash Advances Granted 869,606.00 2,338,299.02 3,207,905.02
Less: Cash Advances
769,095.00 2,178,316.56 2,947,411.56
Liquidated
Ending Balance, 12/31/2019 185,311.00 159,982.46 345,293.46

9.2 Audit disclosed that Management granted 62 cash advances (CA) composed of 45
cash advances for local and foreign travels recorded under Advances to OE account
and 17 cash advances used for current operating expenses and special activities of the
Agency recorded under Advances to SDO account.

9.3 Examination of schedules, DVs and supporting documents, and attachments on the
grant, utilization and liquidation of cash advances disclosed the following:

58
 a) Unliquidated/Non-compliance with the timeliness in liquidation of Cash
Advance contrary to Sections 5.1.1 to 5.1.3 of COA Circular No. 97-002 dated
February 10, 1997

9.4 COA Circular No. 97-002 dated February 10, 1997 and COA Circular No. 2012-
001 dated June 14, 2012 provides the guidelines and timelines on liquidation of
cash advances. Details are shown in the table below:

Specific Purpose of Cash

Prescribed Liquidation Period
Provision Advance
COA Circular No. 97-002
Within five (5) days after each fifteen (15) day/end
Section 5.1.1 Salaries, Wages, etc.
of the month pay period
Petty Operating Within twenty (20) days after the end of the year;
Section 5.1.2 Expenses and Field subject to replenishment as frequently as necessary
Operating Expenses during the year
Within sixty (60) days after return to the Philippines
in the case of foreign travel or within thirty (30) days
Section 5.1.3 Official Travel after return to his permanent official station in
the case of local travel, as provided for in EO 248
and COA Circular No. 96-004
COA Circular No. 2012-001
As soon as the purpose of the cash advance has been
Section 1.2 Special Purpose
served.

9.5 The details of balances of Advances to SDO and Advances to OE as of December

31, 2019 are shown in the table below:

Check/ADA Amount
Account Used Date Granted Purpose Remarks
Reference (In PhP)
Dec 10, 2019 9900000498 Purchase of gifts for
Not yet
government agencies 65,000.00
Liquidated
partner
Advances to
Dec 10, 2019 9900000499 Liquidated
Special Disbursing Expenses for
161,046.00 on January
Officer Christmas Party
17, 2020
with LR No.
20-01-03
Sub-total Advances to SDO 226,046.00
Nov 18, 2019 9900000472 Travel to New Delhi
India for Airport
Collaborative
Liquidated
Decision Making
on January
Integration with Air
124,632.46 7, 2020 with
Traffic Flow
LR No. 20-
Management
01-02
Advances to Workshop on
Officers and December 2 to 4,
Employees 2019
Nov 20, 2019 9900000484 Travel for Inter- Liquidated
island inspection to on January
Legaspi and Cebu on 2,550.00 2, 2020 with
December 9 to 10, LR No. 20-
2019 01-01
Dec 17, 2019 1550639 Travel to Clark Not Yet
24,000.00
International Airport Liquidated

59
 Check/ADA Amount
Account Used Date Granted Purpose Remarks
Reference (In PhP)
Dec 17, 2019 1550640 for Annual GAD
Assessment and
Not Yet
Planning on 8,800.00
Liquidated
December 18 to 20,
2019
Sub-total Advances to OE 159,982.46
Total Advances 386,028.46

9.6 Examination disclosed that out of the outstanding balance of P386,028.46 as of

December 31, 2019, P97,800.00 remained unliquidated as of January 20, 2020. The
AOs failed to intensify efforts to demand the lacking supporting documents such as
attendance sheets, certificate of appearance, official receipt and list of recipients,
etc. needed in the liquidation resulting to unliquidated CAs.

9.7 Examination of the Schedule of Cash Advances and Liquidation showed that out of
the 62 cash advances in the aggregate amount of P3,207,905.02, 19 cash advances
amounting to P1,192,101.70 were liquidated beyond the reglementary period and
six cash advances in the total amount of P386,028.46 remained outstanding as of
December 31, 2019

9.8 Majority of the CAs were granted for special activity of the agency with prescribed
liquidation timeline of as soon as the purpose of the cash advance has been served.
However, these CAs were liquidated five (5) to ninety-nine (99) days beyond the
completion of the activity.

b) Granting of additional cash advance with existing unliquidated cash advances

Section 1.1 Paragraphs 2 and 8 of COA Circular No. 2012-001 dated June 14,
2012

9.9 Section 89 of Presidential Decree (PD) No. 1445, as reiterated in Section 1.1
paragraphs 2 and 8 of COA Circular No. 2012-001 dated June 14, 2012 provides -
“No additional cash advances shall be allowed to any official or employee unless
previous cash advance given to him is first liquidated and accounted for in the
books.” and “Certification from the Accountant that previous cash advances have
been liquidated and accounted for in the books.” respectively.

9.10 Out of the 29 AOs that were granted CAs during CY 2019, five were given
additional CAs without liquidating prior accountabilities.

9.11 Moreover, post-audit of the disbursement vouchers for the grant of cash advances
revealed that the required Certification was not attached thereto; hence, the
Accountant failed to comply strictly with this control document as basis to
determine whether the AO still has an outstanding CA. As a result, additional CA
was granted even though previous cash advance given to him was not yet liquidated
and accounted for in the books in violation of Section 1.1 Paragraphs 2 and 8 of
COA Circular No. 2012-001 dated June 14, 2012.

60
9.12 Under Paragraph 8 of the same Circular, a Certification from the Accountant that
previous cash advances have been liquidated and accounted for in the books is a
documentary requirement for granting of additional CA.

9.13 We recommended and Management agreed to:

a) require the Accounting Section to strictly monitor the liquidation of CAs

within the prescribed timelines and issue demand letters to SDO with
unliquidated CAs; and

b) stop the granting of additional cash advances to AOs with outstanding

unliquidated cash advances and require the Certification from the
Accountant that previous cash advances granted to particular AOs were
already liquidated and accounted for before granting new cash advances
and that the same be attached to the related disbursement voucher.

9.14 Management commented and acknowledged that the CAs were not liquidated as of
January 20, 2020; however, they claim that some advances has been liquidated as of
May 2020. Management’s efforts may not have been successful in obtaining the
required supporting documents to liquidate this CA on time, but this should be
attributed to forces outside or beyond their control. In the future, they will strive
harder to secure the supporting documents necessary to liquidate cash advances
within the period prescribed and adhere to the provisions of COA Circular No. 97-
002.

Non-submission/Late Submission of Perfected Contract of Job Order (JO) Personnel for

CY 2019

10. Non- and delayed submission ranging from four to 20 days of perfected contracts
and other documentary requirements on the hiring of JO personnel to the Office
of the Auditor was incurred by CAB which causes the delay in the timely review
of contract contrary to the provisions of COA Circular No. 2009-001 dated
February 12, 2009.

10.1 COA Circular No. 2009-001 dated February 12, 2009 provides for the restatement
with amendment of COA Circular No. 87-278 and COA Memorandum No. 2005-
027 re: submission of copy of government contracts, purchase orders and their
supporting documents to the Commission on Audit. Section 3.1.1 of the said
Circular provides:

3.1.1 Within five (5) working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities, including
government-owned and controlled corporations and their subsidiaries, a copy
of said contract and each of all the documents forming part thereof by reference
or incorporation shall be furnished to the Auditor of the agency concerned. In
case of agencies audited on an engagement basis, submission of a copy of the

61
 contract and its supporting documents shall be to the Auditor of the mother
agency or parent company, as the case may be.

Section 7 of the same Circular provides that hiring under contract of service shall
be limited to consultants, learning service providers, and/or other
technical experts to undertake special project or job within a specified period,
the project or job is not part of the regular functions of the agency, or the
expertise is not available in the agency, or it is impractical or more expensive
for the government agency to directly undertake the service provided by the
individual or institutional contractor.

10.2 As of December 31, 2019, CAB hired a total of 115 Job Order personnel to
undertake office support services, general services like drivers, messengers and
mechanics, among others, and field-based services such as Passenger Rights Action
Officers (PRAOs) assigned at the airports nationwide. For the period January 1 to
December 31, 2019, total compensation paid for the 115 hired JO personnel
amounted to P34,886,869.57, net of tax.

10.3 Review of records disclosed that for the period January 1 to December 31, 2019, of
the 115 perfected contracts and other documents in relation to the hiring of Job
Order (JO) personnel, 101 were not submitted to the Audit Team while 11 were
submitted late, ranging from four to 20 days, contrary to the above-cited rules. This
precluded the implementation of a systematic and effective review process and the
generation of timely and relevant audit results.

10.4 We emphasize the need for Management’s strict compliance with the above
requirement as failure to submit government contracts within the prescribed
timeframe is meted with the sanctions provided under Section 4 of the said Circular,
to wit:

4.1 Any unjustified failure of the officials and employees concerned to comply with
the requirements herein imposed shall be subject to the administrative
disciplinary action provided in (a) Section 127 of Presidential Decree No. 1445;
(b) Section 55, Title I-B, Book V of the Revised Administrative Code of 1987; and
(c) Section 11 of Republic Act No. 6713.

4.2 Upon receipt of information or discovery by the auditor of such failure by

management to comply with the required submission, an Audit Observation
Memorandum shall be issued by him calling the attention of the latter, and
requesting compliance, else the transactions covered by the unsubmitted
documents be suspended in audit and the penalty prescribed by law under 4.1 be
enforced.

10.5 We recommended that Management submit the perfected contracts of the 101
hired JO personnel to the Office of the Auditor and henceforth, ensure strict
compliance with the provisions of COA Circular No. 2009-001, particularly on
the submission of government contracts and other required documents to the

62
 Office of the Auditor within five working days from execution, to facilitate
review thereof.

10.6 Management commented that the subject contracts were executed for the hiring and
deployment of Passenger Rights Action Officers (PRAOs) in major commercial
airports in the Philippines. After the execution, these contracts were collated by the
Legal Division, and simultaneously forwarded to the Financial and Management
Division upon completion. Please note that these contracts came from different
provinces in the country because of the geo-airport location of our Passenger Rights
Action Desks (PRADs).

Nevertheless, they are transmitting copies of the contracts of service covering CY

2019 of PRAOs to the Office of the Resident Auditor.

Compliance with Other Rules and Regulations

11. In monitoring CAB’s compliance with the herein laws, rules and regulations, the
Audit Team noted the following:

Laws, Rules
and Provision/s Violated Audit Observations and Recommendations
Regulations
R.A No. 656 RA No. 656 otherwise known as CAB substantially complied with the provisions of Republic
otherwise the “Property Insurance Act (R.A.) No. 656 otherwise known as the “Property
known as the Law”, as amended, established Insurance Law”, by insuring all insurable properties
Property the Property Insurance Fund against all risks with the General Insurance Fund of GSIS
Insurance Law and required every government, except for one motor vehicle insured only against third
except municipal government party liability (TPL) instead of comprehensive insurance.
below first class to insure its
properties with the Fund
Management substantially complied with the above
against any insurable risk.
guidelines by securing an insurance for all its motor vehicles
and insurable PPEs. CAB paid insurance premiums of
Executive EO No. 33 was issued directing
P78,223.56 in CY 2019 as shown in the next page:
Order (EO) No. all heads of government
33 agencies and their subsidiaries Amount Premium
Insurance
to secure from the General PPE
Policy No.
Coverage Covered Paid
Insurance Fund directly, all (In PhP)
Building, Office
insurances or bonds covering Equipment, and
0033972 All Risk 37,010,026.44 53,620.40
properties, contracts, rights of Furniture and
Fixture
action and other insurable risks Motor Vehicles/Plate No.
and all those in which they A92238 0151911 All Risk 1,904,500.00 13,711.71
have an insurable interest only. SKP 687 0155078 All Risk 594,135.00 5,698.32
AQA 6337 0155080 All Risk 518,436.45 5,193.13
SHU 951 - TPL 0.00 0.00
COA Circular COA Circular No. 92-390 was SGY 170 -
No. 92-390 issued directing all heads of the Donated to
- - 0.00 0.00
JRED (Oct.
agencies to be responsible for 2019
the preparation and submission Total 40,027,097.89 78,223.56
of the inventory of all insurable
physical assets using the format Nevertheless, Management failed to secure a comprehensive
prescribed therein. Under the insurance policy for CY 2019 for motor vehicle with plate
said circular, the latest no. SHU 951 in the Table above thus, leaving the
inventory report, preferably government unprotected against any damage to, or loss of,
properties due to casualties or force majeure.

63
 Laws, Rules
and Provision/s Violated
Regulations
as of December 31 shall be
submitted not later than
October 31 of the ensuing year.
Section 33 of Section 33 of the General
the General Provisions of GAA for FY
Provisions of 2019 requires all agencies of
R.A. No. 11260 the government to formulate
or the GAA for plans, programs and projects
FY 2019- intended to address the
Programs and concerns of senior citizens and
Projects persons with disability, insofar
Related to as it relates to their mandated
Senior (SC) functions, and integrate the
Citizens and same in their regular activities,
Persons with and directs that government
Disability infrastructure and facilities
(PWD) provides architectural or
structural features, designs or
facilities that will reasonably
enhance the mobility, safety
and welfare of persons with
disability pursuant to BP Blg.
344 and RA No. 7277, as
amended.
64
Audit Observations and Recommendations
its properties due to casualties or force majeure.
We commended Management for substantially
complying with the provisions of property insurance
under R.A. 656, E.O. No. 33, and COA-Circular No. 92-
390 thereby ensuring that all insurable properties were
fully covered with insurance policy for CY 2019.
However, we recommended that Management
immediately apply for the CY 2020 comprehensive
insurance with the GSIS General Insurance Fund of the
one Toyota Innova with Plate No. SHU 951 and Serial
KUN40-5016797.
Management commented that they already applied for a
comprehensive insurance for the Toyota Innova with Plate
No. SHU 951dated February 4, 2020 with Policy No. MV-
PC-GSISSHO-0160210.
CAB failed to implement three out of its seven
programs/activities/projects to address the concerns of senior
citizens and persons with disability in violation of
Section 33 of the General Provisions of the GAA for FY
2019.
CAB allotted P669,000.00 or 0.44 percent of the agency’s
total budget of P152,226,000.00 for seven major PWD and
SC related target activities. Evaluation of the agency’s
accomplishment report revealed that CAB was able to
implement and complete only four out of seven majority
planned activities for PWD and SC with utilization of
P257,065.35 or 38.43 percent of the total allocated amount.
The Audit Team was not able to evaluate/assess the
performance rating of CAB in terms of its implementation
and accomplishment of the targeted planned activities for SC
and PWD because targets were not quantified or specified in
terms of quantity such as the number of targeted participants
for the training, number of trained personnel, and other
measurable indicators.
The targeted activities were actually measurable in quantity
but no quantifiable performance indicators were provided
instead only the prospective beneficiaries were listed.
Further, it was noted that the expected
output/accomplishment for the planned activities was
dependent on the receipt of invitation of other agency like
Luzon International Premier Airport Development
Corporation (LIPAD) and Civil Aviation Authority of the
Philippines (CAAP) both under the supervision of the DOTr,
which was beyond the control of CAB; hence, it was an
 Laws, Rules
and Provision/s Violated
Regulations
RA No. 10606 Section 18, Rule III of the
amending Act Implementing Rules of R.A.
No. 7875, No. 10606 requires that the
otherwise member’s monthly contribution
known as the shall be deducted and withheld
National Health automatically by the employer
Insurance Act from the former’s salary, wage
of 1995 or earnings. The premium
contributed shall be divided
equally between the employer
and the employed. The
employer’s counterpart shall
not, in any manner be charged
to the employee. The monthly
premium contribution of
employed members shall be
65
Audit Observations and Recommendations
outright non-accomplishment once the other agency failed to
do so.
Interview with the SC and PWD focal person also revealed
that the CAB-Task Force on Accessibility (TFA) is a
member of DOTr-TFA, thus, they are required to adopt the
programs/activities of the DOTr as far as SC and PWD
activities are concerned; hence, the inclusion of these
activities in their planned/programed activities for SC and
PWD.
We recommended that Management:
a) instruct the SC and PWD focal person that in the
preparation of plan and budget for the succeeding
years, formulate programs/activities which are
quantifiable, specific, and attainable and allocate
budget based on the intended targets so that the
excess/deficit in the actual expenditure can be
minimized; and
b) instruct the CAB-TFA to regularly coordinate with
the LIPAD and CAAP to get their full cooperation
and participation towards full implementation of its
planned activities.
Management commented that the late approval of the
National Budget for CY 2019 affected the implementation of
some of their plans and program for the SCs and PWDs, in
addition the DOTr-TFA is inactive for more than a year and
under new management/leadership, and has not formally
convened to meet with the attached agencies’ respective
Task Force on Accessibility. The convergence is necessary
to formulate collective targets, plans and program, where
most of the activities of the CAB-TFAS are born. Hence, the
recommendation that the time-bound targets is not yet
feasible and cannot readily be identified at the moment.
CAB failed to comply with RA No. 10606 amending Act
No. 7875, otherwise known as the “National Health
Insurance Act of 1995” due to delayed remittance of
Philhealth premium contribution for CY 2019.
The CAB deducted a total of P437,057.58 from salaries of its
officers and employees including Job Order (JO) personnel
representing personal shares in Philhealth contributions,
P354,371.66 of which was remitted in CY 2019 leaving a
balance of P79,643.38 as of December 31, 2019, of the
ending balance, P34,235.34 was remitted on January 7,
2020, leaving an unremitted balance of P45,408.04 which, to
date, remained unpaid in violation of Philhealth Circular No.
0001 series of 2014 dated January 9, 2014
CAB incurred delays ranging from 31 days to 276 days in
 Laws, Rules
and Provision/s Violated
Regulations
remitted by the employer on or
before the date prescribed by
the Philhealth Insurance
Corporation (PHIC).
Philhealth Philhealth Circular No. 0001
Circular No. series of 2014 dated January 9,
0001 series of 2014 revised the payment
2014 dated schedule for the applicable
January 9, 2014 month starting March 2014
onwards for the Formal Sector,
specifically all Government and
Private Employers so that
employers with Philhealth
Employer Numbers (PENs)
ending in 0-4 every 11th to 15th
day of the month following the
applicable period, and employer
with PENs ending in
5-9 Every 16th to 20th day of the
month following the applicable
covered.
66
Audit Observations and Recommendations
the remittance of Philhealth premium contribution in CY 2019
in violation of the aforesaid Philhealth Circular.
Verification also disclosed that there are under- and over-
remittance of premium contribution which resulted in net
under remittance of Philhelath premium contribution in the
amount of P45,408.04.
Interview with the Accountant and the Chief of Human
Resources revealed that there was under/over remittance of
Philhealth contributions because of the non-inclusion of
amounts withheld from salaries of newly hired casual
employees and JO personnel, claimed thru separate
vouchers. Moreover, the Accountant failed to conduct
periodic verification, analysis and reconciliation of the
account Due to PhilHealth to determine whether the amounts
withheld tally with the amounts remitted.
This deficiency of delayed and the under/over-remittance
PhilHealth premium contributions is a reiteration of the CY
2018 audit finding as contained in the CY Annual Audit
Report which was not corrected by Management as of to
date.
We recommended that Management direct the Accountant
to:
a) prepare the disbursement voucher for the
remittance of the unremitted amount of Philhealth
contributions of P45,408.04 to the PHIC and
henceforth comply strictly with the
payment/remittance schedule of every 11th to 15th
day of the month following the applicable period in
compliance with Philhealth Circular No. 0001
series of 2014 dated January 9, 2014; and
b) conduct monthly verification, analysis and
reconciliation of Due to Philhealth account to
ensure that amounts withheld tally with the
amounts remitted, thereby avoiding under/over
remittance.
Management commented that they will fully commit and
promptly act on the abovementioned recommendations to
prepare the disbursement voucher for the remittance of the
unremitted amount of Philhealth contributions of P45,408.04
to the PHIC and henceforth comply strictly with the
payment/remittance schedule of every 11th to 15th day of
the month following the applicable period in compliance
with Philhealth Circular No. 0001 series of 2014 dated
January 9, 2014 and conduct monthly verification, analysis
 Laws, Rules
and Provision/s Violated
Regulations
RA No. 7742 Section 5, Rule VI of the
amending PD Implementing Rules of RA No.
No. 1752, 7742, amending PD No. 1752
otherwise or the HDMF Law of 1980
known as the requires all employers to remit
Home to the Fund their contributions
Development as well as the contributions of
Mutual Fund their covered employees
Law of 1980 including those employees
who, in proper instances,
voluntarily join the Fund within
fifteen (15) days from the date
the contributions were collected
unless another period is
previously agreed upon
between the employer and the
Fund.
Refusal or failure to collect and
remit the required contribution
or the correct amount due shall
subject the employer to penalty
of three (3%) percent per month
of the amounts payable
computed from the date the
contributions fall due and until
the same is paid in addition to
the penalty imposed under
Section 1 of Rule XIII.”
HDMF Paragraph E of HDMF Circular
Circular No. No. 275 dated January 22, 2010
275 dated requires employers to remit the
January 22, required monthly employer and
2010 employee contributions to the
nearest Pag-IBIG branch or its
authorized collecting banks,
together with the duly
accomplished Membership
Contribution Remittance Form
(MCRF), in accordance with the
following remittance schedules:
1. A to D - 10th to 14th of the
month following the period
covered;
2. E to L - 15th to 19th of the
month following the period
covered;
67
Audit Observations and Recommendations
and reconciliation of Due to Philhealth account to ensure that
amounts withheld tally with the amounts remitted, thereby
avoiding under/over remittance.
CAB failed to comply with RA No. 7742 amending PD No.
1572, otherwise known as the “Home Development Mutual
Fund Law of 1980” due to delayed and under/over
remittance of HDMF Premium Contributions for CY 2019.
The CAB deducted a total of P1,725,242.45 from salaries of
its officers and employees, including those appointed as casual,
representing shares in HDMF contribution and loan
amortizations, P1,695,666.94 and P15,698.64 of which was
remitted to HDMF and refunded to personnel, respectively, in
CY 2019, leaving a balance of P13,876.87 as of December
31, 2019. Of the ending balance, only P6,400.00 was
remitted in January 15, 2020, leaving an unremitted balance of
P7,476.87 which, to date, remained unremitted in
violation of Paragraph E of the HDMF Circular No. 275,
dated January 22, 2010 in relation Section 5, Rule VI of the
implementing Rules of RA No. 7742, amending PD No.
1752, the HDMF Law of 1980.
CAB incurred delays ranging from 12 days to 377 days in
the remittance of HDMF premium contributions in CY 2019.
The number of days of delay was computed based on the
prescribed payment schedule of every 10th to 14th day of the
month following the applicable period pursuant to Paragraph
E of HDMF Circular No. 275 dated January 22, 2010 in
relation Section 5, Rule VI of the implementing Rules of RA
No. 7742, amending PD No. 1752, the HDMF Law of 1980.
Inquiry with the Chief Accountant and Chief of Human
Resources Section disclosed that there were under and over
remittance of premium contributions because of non-
inclusion of amounts withheld from salaries of newly hired
and resigned employees, and from the maternity benefits
claimed thru separate vouchers. The delayed remittance was
due to the excess responsibilities of withholding and
processing the disbursement for the other mandatory
deductions of casual and job order personnel and
exacerbated by the additional work that were distributed to the
remaining FMD employees in the wake of the retirement
of two key FMD personnel that overwhelmed the division,
invariably causing it to commit lapses in remitting HDMF
premiums.
Moreover, the Accountant failed to conduct periodic
verification, analysis and reconciliation of the account Due to
HDMF to determine whether the amounts withheld tally
with the amounts remitted.
The delayed and under/over-remittance HDMF premium
 Laws, Rules
and Provision/s Violated Audit Observations and Recommendations
Regulations
3. M to Q - 20th to 24th of the contributions is a reiteration of the CY 2018 audit finding as
month following the period contained in the CY 2018 Annual Audit Report which was
covered, and not yet corrected by Management up to this date.
4. R to Z - 25th to the end of the
month following the period We recommended that Management direct the Accountant
covered. to:

a) prepare the disbursement voucher for the

remittance of the unremitted amount of HDMF
contributions of P300.00 and loan re-payments of
P7,176.87 to the HDMF and henceforth comply
strictly with the payment/remittance schedule of
every 10th to 14th day of the month following the
applicable period in compliance with Paragraph E
of the HDMF Circular No. 275, dated January 22,
2010 in relation Section 5, Rule VI od the
implementing Rules of RA No. 7742, amending PD
No. 1752, the HDMF Law of 1980; and

b) conduct monthly verification, analysis and

reconciliation of Due to HDMF account to ensure
that amounts withheld tally with the amounts
remitted, thereby avoiding under/over remittance.

Management commented that they will fully commit and

promptly act on the abovementioned recommendations.

Republic Act Revenue Regulations No. 11- The year-end balance of Due to BIR account in the amount
(RA) No. 10963 2018 dated January 31, 2018 of P751,779.37 is unreliable due to (a) understatement of
or the Tax constituted all employer of Due from BIR account because of non-recording of taxes
Reform for government/private offices as withheld in the amount of P41,054.00 from the payment
Acceleration withholding agents for purposes made to suppliers and resource persons, and (b) delayed
and Inclusion of the creditable tax required to remittance for more than five months as of report date of
(TRAIN) Act be withheld on income
the taxes withheld of P15,784.44 contrary to Revenue
and its payments from compensation,
Implementing contractors, suppliers of goods Regulation No. 1-2013 dated January 23, 2013.
Rules and and other services. As
Regulations withholding agents, they are Analysis, verification and reconciliation of account Due to BIR
primarily liable for the payment showed that in CY 2019, CAB withheld a total of
of the taxes to the National P5,804,770.74 of taxes from its CY 2019 payments of goods,
Treasury thru the Bureau of services, and compensation of its employees, P5,052,991.37
Internal Revenue (BIR). of which was remitted in CY 2019 leaving a balance of
P751,779.37 net of unrecorded taxes withheld from
Section 4-114-2 of RR No. 13- payments made to various suppliers and resource persons in
2018 dated March 15, 2018 the amount of P41,054.00. Of the ending balance, CAB
provides that the Government remitted P777,048.93 on January 8, 2020.
or any of its political
subdivisions, instrumentalities The delayed remittance of P15,784.44) refers to the withheld
or agencies, including taxes in October 2019 but remained unremitted as of 31
government-owned-or- December 2019; hence, already more than five months
controlled corporations delayed in remittance as of report date in violation of RR No.
(GOCCs) shall, before making 1-2013 dated January 23, 2013.
payment on account of each

68
Laws, Rules
and Provision/s Violated
Regulations
purchase of goods and services
which are subject to the value-
added tax imposed in Sections
106 and 108 of this Code
(NIRC as amended by Train
Law), deduct and withhold a
final value-added tax at the rate
of five percent (5%) of the gross
payment thereof.
RR No. 1-2013 dated January
23, 2013 required the filing of
returns and payment of taxes
thru the electronic filing and
payment system (eFPS).
69
Audit Observations and Recommendations
Interview with the accounting personnel disclosed that
understatement of Due from BIR account in the amount of
P41,054.00 was caused by the non-recording of taxes
withheld from payments made to various suppliers and
resource persons charged to cash advance but the amounts of
withheld taxes were included in the remittance/payment list,
thus already paid.
Moreover, the Accountant failed to conduct periodic
verification, analysis and reconciliation of the account Due
to BIR; thus, over and under remittance of taxes withheld
was not immediately detected.
We recommended that Management direct the Accountant
to:
a) remit the unremitted taxes withheld of P15,794.44
to the BIR and henceforth comply strictly with the
payment/remittance schedule thru eFPS on or
before the 10th day following the month in which
withholding was made in compliance with Revenue
Regulation No. 1-2013 dated January 23, 2013.
b) draw a JEV to record withholding taxes from
payments made to various suppliers and resource
persons in the amount of P41,054.00 to reflect the
actual ending balance of Due to BIR account; and
c) henceforth, conduct the monthly verification,
analysis and reconciliation of Account Due to BIR
to ensure that amounts withheld tally with the
amounts remitted, thereby avoiding under/over
remittance.
Management commented that the balance of Due from BIR
account in the amount of P751,779.37 is inaccurate,
however, they maintain that it is not unreliable because they
were able to identify the errors in the entries made or
omitted. Nevertheless, we will effect the necessary
adjustments in our year-end financial statements to reflect
the true value of the due to BIR and the other affected
accounts.
The delayed remittance was due to the excess
responsibilities of withholding and processing the
disbursement for the other mandatory deductions of casual
and job order personnel and exacerbated by the additional
work that were distributed to the remaining FMD employees
in the wake of the retirement of two key FMD personnel that
overwhelmed the division, invariably causing it to commit
lapses in remitting taxes.
Management also committed to remit the unremitted taxes
withheld in the amount of P15,794.44 to the BIR and adopt
 Laws, Rules
and Provision/s Violated
Regulations
Section 32 of Section 32 of the General
RA No. 11260 Provisions of the GAA for FY
otherwise 2019 requires all agencies of the
known as the government to formulate a
“General Gender and Development
Appropriations (GAD) Plan designed to
Act of FY address gender issues within
2019” – Gender their concerned sectors or
and mandate and shall integrate the
Development same in the regular conduct of
(GAD) activities which shall be at least
five percent of their budget.
PCW Emphasized the need to
Memorandum implement the provisions of the
Circular No. Magna Carta of Women
2014-05 dated (MCW) and its Implementing
Rules and Regulations (IRR)
28 November
which mandates all government
2014 instrumentalities to adopt
gender mainstreaming as a
strategy for implementing the
law and attaining its objectives.
One of the institutional
mechanisms for gender
mainstreaming prescribed by
the law is the development and
maintenance of a GAD
database containing gender
statistics and sex-disaggregated
data. In this regard, all
government agencies were
enjoined to regularly collect
and generate sex-disaggregated
data and statistics in support of
the MCW indicators relevant to
their agency. Such data shall be
stored and maintained in the
agency's GAD database or
similar system, updated as
needed, and used in policy and
program development to
address gender issues in their
respective sectors, particularly
in the preparation of their
annual GAD plans and budgets
and accomplishment reports.
70
Audit Observations and Recommendations
withheld in the amount of P15,794.44 to the BIR and adopt
COA’s recommendation to conduct a reconciliation of the
Due to BIR account and the TRA prior to remittance.
The CAB had allocated P7,957,800.00 or 5.22 percent of
the CY 2019 agency’s total budget of P152,226,000.00 for
the implementation of its 11 GAD programs/projects;
however, only P514,826.68 or 6.47 percent of the allocated
amount was utilized since not all planned activities for the
year were undertaken, thus, the inability of the agency to
fully accomplish its planned GAD activities.
Further, CAB has not developed a GAD Sex Disaggregated
Data System to be used in policy making and program
development in addressing gender issues in the agency
contrary with PCW Memorandum Circular N0. 2014-05.
Verification of fund allocation, utilization and
implementation of GAD related activities showed that CAB
had allocated P8,250,000.00 or 5.42 percent of the agency’s
total budget of P152,226,000.00 for its 11 GAD
programs/projects for CY 2019; however, only P514,826.68
or 6.24 percent of the allocated amount was utilized since
not all planned activities for the year were undertaken, thus,
the inability of the agency to fully accomplish its planned
GAD activities.
Utilization/
Activities Budget
Disbursement
a) Completed
Two (2) Activities 400,000.00 208,470.56
b) Started but not
completed
Two (2) Activities 750,000.00 306,356.12
c) Not Started 7,100,000.00 0.00
Seven (7) Activities
Total 8,250,000.00 514,826.68
We noted that most of the targeted planned activities for
GAD were not quantified or specified in terms of quantity
such as the number of targeted participants for the training,
number of trained personnel, and other measurable
indicators, performance rating of CAB in terms of targets
versus accomplishment could not be determined and evaluated.
The targeted activities were actually measurable in quantity
but no quantifiable performance indicators were provided,
instead only the prospective beneficiaries were listed.
Moreover, the low utilization of the allotted budget for the
Agency’s GAD Plans and Activities was due to: (a) non-
attribution of the flagship program of the Agency which is
 Laws, Rules
and Provision/s Violated
Regulations
RA No. 8291 or Section 6(b) of RA No. 8291 or
the GSIS Act of the GSIS Act of 1997 provides
1997 that each employer shall remit
directly to the GSIS the
employee’s and employer’s
contributions within the first
ten (10) days of the calendar
month following the month to
which the contributions apply.
The employer remittance of the
GSIS contribution to the GSIS
71
Audit Observations and Recommendations
establishment and maintenance of complaint and assistance
desks at all terminals of Ninoy Aquino International Airport
and continuously deploy personnel who will monitor
compliance of the relevant provisions of APBR and (2) non-
implementation of five of its GAD plan and budget.
We recommended that Management:
a) instruct the GAD focal person that in the
preparation of GAD plan and budget for the
succeeding years, formulate programs/activities
which are quantifiable, specific, and attainable;
b) ensure that a GAD sex-disaggregated data system
as required under PCW Memorandum Circular
No. 2014-05 is established so that planned activities
relating thereto are fully implemented thereby the
budgeted amount are fully utilized as well; and
c) see to it that the GAD planned activities are
gender-responsive in its design, implementation
and monitoring of the program thru application of
Harmonized Gender and Development Guidelines
(HGDG) as recommended by the PCW in its
evaluation of the GAD accomplishment report
submitted by CAB.
Management commented that in CY 2020 GAD GPB,
performance indicator/target indicated specific targets. Said
GPB was accomplished based on targets for the continual
improvements towards attaining the concrete goals in six
years. They will also conduct SDD training to stakeholders
after gender sensitivity trainings and train some of their
technical personnel to develop and maintain SDD system.
Management also commented that they were not able to
prioritize the implementation of GAD GPB in CY 2019
because it faced challenges in budget approval and release.
This year, it will actively pursue its plan and projects to
increase accomplishments leading to attainment of CAB
GAD long term goals.
Delay in remittance of GSIS contributions and loan
payments ranging from 21 days to eight- and one-half
months was incurred in CY 2019 CAB contrary to Section
14.1, Rule III of the Implementing Rules of RA No. 8291,
the GSIS Act of 1997. Moreover, over and under
remittance of the monthly GSIS contributions were noted
due to the failure of the Accountant to regularly conduct
verification, reconciliation and analysis of account Due to
GSIS.
Laws, Rules
and Provision/s Violated
Regulations
shall take priority over and
above the payment of any and
all obligations, except salaries
and wages of its employees.
Section 7 of the same GSIS Act
provides that charging of
interest of not less than 2%
simple interest per month for
delayed remittances of all
monies due the GSIS.
Section 14.1, Rule III of the
Implementing Rules of RA No.
8291, the GSIS Act of 1997,
states that - “Each government
agency shall remit directly to
the GSIS the employees’ and
government agency’s
contribution within the first ten
(10) days of the calendar month
following the month in which
the contributions apply. The
remittance by the government
agency of the contribution to
the GSIS shall take priority
over and above the payment of
any and all obligations, except
salaries and wages of its
employees.”
72
Audit Observations and Recommendations
Analysis, verification and reconciliation of the account Due to
GSIS showed that in CY 2019, CAB withheld a total of
P6,455,125.40 for premium contribution and loan payments,
P5,613,921.35 and P176,953.99 of which was remitted to the
GSIS and refunded to the employees, respectively, leaving a
balance of P664,250.06 as of December 31, 2019. Of the
ending balance, P578,436.55 was remitted in January 9,
2020; hence, the unremitted amount of P85, 813.51 to date.
CAB incurred delays ranging from 21 days to 8.5 months in
the remittance of GSIS premium contributions and loan
payments in CY 2019. The number of days of delay was
computed based on the prescribed payment schedule of
every 10th day of the month following the applicable period
pursuant to Section 14.1, Rule III of the Implementing Rules
of RA No. 8291, the GSIS Act of 1997.
Interview with the Accountant and HR personnel disclosed
that the under- and over-remittance as well as the delayed
remittance was due to failure of the Accountant to review
and reconcile the amount appearing in the remittance list
against the amounts withheld per payroll. He merely
processed and approved the voucher for payment without
checking or verifying the correctness of the amount to be
paid. The delayed remittance was due to the excess
responsibilities of withholding and processing the
disbursement for the other mandatory deductions of casual
and job order personnel and exacerbated by the additional work
that were distributed to the remaining FMD employees
in the wake of the retirement of two key FMD personnel that
overwhelmed the division, invariably causing it to commit
lapses in remitting the GSIS premiums and loans.
Moreover, the Accountant failed to conduct periodic
verification, analysis and reconciliation of the account Due
to GSIS; thus, over and under remittance of taxes withheld
was not immediately detected.
This deficiency of delayed and under/over-remittance GSIS
premium contributions is a reiteration of the CY 2018 audit
finding as contained in the CY 2018 Annual Audit Report
which was not yet corrected by Management up to this date.
We recommended that Management direct the Accountant
to:
a) remit to the GSIS the CY 2019 unremitted GSIS
contributions and loan payments of P85,813.51 and
henceforth comply strictly with the remittance
schedule on or before the 10th day following the
month following the applicable period pursuant to
Section 14.1, Rule III of the Implementing Rules of
RA No. 8291, the GSIS Act of 1997; and
 Laws, Rules
and Provision/s Violated Audit Observations and Recommendations
Regulations

b) verify conscientiously the correctness of the amount

to be remitted per disbursement voucher against the
supporting remittance list and conduct the monthly
verification, analysis and reconciliation of Account
Due to GSIS to ensure that amounts withheld tally
with the amounts remitted, thereby avoiding
under/over remittance.

Management commented that they will fully commit and

promptly act on the recommendations of COA to remit to the
GSIS the CY 2019 unremitted GSIS contributions and loan
payments of P85,813.52 and henceforth comply strictly with
the remittance schedule on or before the 10th day following
month pursuant to Section 14.1, Rule III of the IRR of RA
No. 8291 or the GSIS Act of 1997, and verify
conscientiously the correctness of the amount to be remitted
per disbursement voucher against the supporting remittance
list and conduct the monthly verification, analysis and
reconciliation of Account Due to GSIS to ensure that amount
withheld is tally with the amount remitted, thereby avoiding
under/over remittance.

Settlement of Suspensions, Disallowances and Charges

12. CAB has no outstanding suspensions, disallowances, and charges as of

December 31, 2019. The CY 2017 outstanding balance for disallowance
amounting to P137,886.00 issued on August 18, 2017 has already been refunded
and settled in CY 2018 by persons liable per Official Receipt Nos. 8459508, and
8459631 to 8459636.

Disbursement Acceleration Program (DAP) and Priority Development Assistance Fund

(PDAF)

13. No funds from DAP and PDAF were received by the CAB for CY 2019 and
previous years.

National Disaster Risk Reduction and Management Fund

14. There are no funds received for disaster-related activities of the CAB for CY
2019.

73
Yolanda Funds

15. No funds were received by CAB in CY 2019 for the purpose.

Marawi Funds

16. No funds were received by CAB in CY 2019 for the purpose.

74