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DEPARTMENT OF TRADE AND INDUSTRY

The Department of Trade and Industry (DTI) is the primary coordinative,
promotive, facilitative and regulatory arm of the government. Its overall
performance is consistent with the goals and objectives set under the Philippine
Development Plan, the strategies of the DTI, and the operational work plans of its
agencies, bureaus and offices.
1
To accomplish this, DTI seeks to:

1. Provide an attractive business environment for global competitiveness

The Philippines improved its ranking in world competitiveness as it reached 30
notches up to 108
th
place this year from previous years 138
th
ranking as the
most improved economy in the world in terms of ease of doing business.
2


2. Improve productivity and efficiency to expand exports, increase
investments and develop micro, small and medium enterprises to generate
jobs

As of June 2014, electronic products remained as the countrys top export with
total receipts of $2.221 billion, accounting for 40.8 percent of the total exports
revenue in June 2014. It increased by 10.7 percent from $2.006 billion
registered in June 2013.

By major groups of electronic products, Components/Devices (Semiconductors),
comprised 27.6 percent of the total exports and shared the biggest with export
earnings worth $1.503 billion and rose by 14.5 percent from $1.312 billion
recorded in June 2013.

Outbound shipments of manufactured goods were valued at $4.301 billion,
accounting for 79.0 percent of the total export receipts in June 2014. It
increased by 15.7 percent from $3.716 billion recorded in June 2013.

In terms of top export market, Japan including Okinawa remained as the
countrys top destination of exports with revenue amounting to $955.98 million,
comprising 17.6 percent share to total exports for June 2014. It decreased by
3.0 percent from $985.15 million recorded value in same month a year ago.
3


For the period of January to June 2014, a total of P149.45 billion investments
were approved by the Board of Investments. These investment approvals were
generated from 100 projects with projected new jobs of 25,805 at full
operations. Electricity, gas, steam and air conditioning supply sector recorded
the largest share of investment commitments with P90.74 billion.

Topping the list of foreign country sources of investment is the British Virgin
Islands with P5.46 billion worth of investments from January to June 2014.

1
FY 2015 Budget Message
2
DTI submission
3
http://www.census.gov.ph/content/merchandise-exports-performance-june-2014
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Among the regions of the country, Southern Luzon topped the recipients of
investments from January to June 2014. Top 5 includes NCR, Western Visayas,
CARAGA and Ilocos Region.
4


3. Empower consumers

In protecting the interest of consumers, DTI continues to monitor establishments
in compliance with the fair trade laws.


I. FY 2015 Expenditure Program

As the agency mandated to plan, implement and coordinate activities related to
trade, industry and investment, DTI and its attached agencies and corporations will
have a proposed budget of P4.188 billion for FY 2015. This is P682.77 million lower
than the 2014 budget and 54.69% or P5.054 billion smaller than the Departments
requested 2015 budget of P9.243 billion to the DBM. The amount represents .16%
of the P2.606 trillion total obligation program of the national government.

The reduction of the FY 2015 budget is due to the withdrawal of funding for the
shared services facility in the amount of P770 million, a locally-funded project
which will provide revitalizing support to enterprising small and medium industries
needing vital equipment to expand production and reach.

Included in the automatic appropriations is a special account for the operating
requirements of the Micro, Small and Medium Enterprise Development (MSMED)
Council Fund in the amount of P20.829 million. The operating requirements of the
MSMED Council will be sourced from 90% of the total penalties collected by the
Bangko Sentral ng Pilipinas (BSP) from lending institutions for non-compliance with
the mandatory allocations of credit resources to Micro, Small and Medium
Enterprises (MSME).

4
Board of Investments
Table 1
(In Thousand Pesos)
NEP % share
Amount % Amount %
New Appropriations 4,754,281 9,120,365 4,079,361 97.40 (674,920) (14.20) (5,041,004) (55.27)
Regular Agencies 4,406,338 6,306,881 3,641,629 86.95 (764,709) (17.35) (2,665,252) (42.26)
Corporations 347,943 2,813,484 437,732 10.45 89,789 25.81 (2,375,752) (84.44)
Add: Automatic
Appropriations
RLIP 99,553 101,626 87,802 2.10 (11,751) (11.80) (13,824) (13.60)
Special Account 16,931 20,829 20,829 0.50 3,898 23.02 - 0.00
Sub-total 116,484 122,455 108,631 2.60 (7,853) (6.74) (13,824) (11.29)
TOTAL OBLIGATIONS, DTI 4,870,765 9,242,820 4,187,992 100.00 (682,773) (14.02) (5,054,828) (54.69)
Source: 2015 BESF
NEP vs Agency Proposal 2015 NEP vs GAA
Comparative Obligations, FY 2014-2015
2015 Agency
Proposal
2014
Adjusted
Particulars
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The Department is divided into functional groups composed of attached agencies,
corporations, offices and bureaus that provide support to DTIs line agencies and
are involved in line operations:
















The budget for the Regional Operations Group (ROG) is composed of the Bureau of
Small and Medium Enterprise Development (P30.447 million) and the operating
requirements for the fifteen regional and provincial offices of the department
(P1.640 billion).

The ROG budget includes funding for the program beneficiaries development of the
Comprehensive Agrarian Reform Program (CARP) in the amount of P76.283 million.
The DTI-CARPs main role is to promote and develop micro, small and medium
enterprises in the countryside. The implementation of this program is subject to
the condition of a special provision under the Office of the Secretary (OSEC).

Under the budget of the Industry Promotion Group (IPG) is the provision for the
requirements of the Foreign Trade Service Corps (P395.665 million) which has 28
posts in 20 countries. The FTSC promotes the initiatives of DTI, specifically on
trade and investment promotions, as well as trade policy in key overseas markets.

Part of the budget of the Industry Development Group is the budget of the Board
of Investments (P257.075 million), an attached agency of DTI mandated to develop
an effective industrial development and investment promotion strategy and the
Aurora Pacific Economic Zone and Freeport Authority (P251.289 million), an
attached corporation.








Budget by Functi onal Group, FY 2015
(In thousand Pesos)
2015
NEP
Management Servi ces Group 448,253 10.70
Industry Devel opment Group 657,294 15.69
Industry Promoti on Group 879,606 21.00
Consumer Protecti on Group 245,599 5.86
Regi onal Operati ons Group 1,759,109 42.00
Sub-total 3,989,861
Add: PROJECT 89,500 2.14
Speci al Account 20,829 0.50
RLIP 87,802 2.10
Sub-total 198,131
GRAND TOTAL 4,187,992 100.00
Source: DTI
FUNCTIONAL GROUP/BUREAU
Percent
Share
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FY 2015 Proposed Budget by Agency

The proposed new appropriations of P4.079 billion will be spread out to five
attached agencies and two attached corporations as shown in the table below. This
is P5.041 billion lower than the budget submitted to DBM.



































The Construction Manpower Development Foundation will cease to receive funding
for FY 2015 due to its integration with the Construction Industry Authority of the
Philippines under the latters approved rationalization plan. Likewise, the Cottage
Industry Technology Center will not receive any subsidy due to its abolition.





Comparative New Appropriations, FY 2014 - FY 2015
(In Thousand Pesos)
2015
Agency
Proposal
Amount Percent
Attached Agencies
Office of the Secretary 3,928,050 5,557,980 3,177,849 (750,201) (19.10)
Board of Investments 276,572 379,449 257,075 (19,497) (7.05)
65,372 139,538 84,283 18,911 28.93
25,495 (25,495) (100.00)
36,345 54,731 47,237 10,892 29.97
74,504 175,183 75,185 681 0.91
4,406,338 6,306,881 3,641,629 (764,709) (17.35)
Attached Corporations
48,500 513,484 251,289 202,789 418.12
190,443 300,000 186,443 (4,000) (2.10)
9,000 (9,000) (100.00)
100,000 2,000,000 (100,000) (100.00)
347,943 2,813,484 437,732 89,789 25.81
Total New Appropriations, DTI 4,754,281 9,120,365 4,079,361 (674,920) (14.20)
Sources: FY 2014 GAA/ FY 2015 NEP
Construction Industry Authority of the
Philippines
Total New Appropriations, Attached
Agencies
NEP vs GAA
Total New Appropriations, Attached
Corporations
Construction Manpower Development
Foundation
Philippine Trade Training Center
Design Center of the Philippines
Aurora Pacific Economic Zone and
Freeport Authority
Center for International Trade
Expositions and Missions
Cottage Industry Technology Center
2014
GAA
2015
NEP
DEPARTMENT/AGENCY
Small Business Corporation
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FY 2015 Budget by Cost Structure

Operations budget will cover 72% of the DTI budget for FY 2015 which supports the
major final outputs (MFOs) of the attached agencies and corporations. General
Administration and Support (GAS) will be allotted 26% for the provision of overall
administrative management and operational support.

The Center for International Trade Exposition and Missions (CITEM) is the lone
attached corporation that will receive budget for Support to Operations for its
public information, creative arts, audio visual and exhibition and design services.

Locally- Funded Project will get a substantial reduction due to the withdrawal of
funding for the Shared Service Facility.


Regular Programs, Activities and Projects (PAPs)
DTIs agencies, bureaus, corporations, regional and provincial offices, and the
Foreign Trade Service Corps are expected to deliver the following five Major Final
Outputs (MFOs):

MFO 1: Trade and Industry Policy Services
Trade policy
- Formulation of Philippine international trade strategy and policy
- Trade engagements/agreements implementation
- E-commerce
- Trade remedy measures implementation
Monitoring of NCC competitiveness and Governance Projects
Administration of Philippine Quality Award Program
Development of new approaches to quality and productivity
Development/adoption/alignment of Philippine National Standards (PNS)
Development of policies and programs for small and medium industries
Comparative New Appropriations, By Cost Structure
2015
2014 GAA 2015 NEP % Share Amount %
TOTAL NEW APPROPRIATIONS, DTI 4,754,281 4,079,631 100.00 (674,650) (14.19)
PROGRAMS 3,901,910 3,990,131 97.81 88,221 2.26
General Management & Supervi si on (GAS) 1,012,664 1,056,294 25.89 43,630 4.31
Support to Operati ons 7,000 (7,000) (100.00)
Operati ons 2,882,246 2,933,837 71.91 51,591 1.79
MFO 1: Trade and Industry Pol i cy Servi ces 585,476 501,451 12.29 (84,025) (14.35)
MFO 2: Techni cal Advi sory Servi ces 965,300 977,739 23.97 12,439 1.29
MFO 3: Trade and Investment Promoti on Servi ces 917,830 1,026,330 25.16 108,500 11.82
MFO 4: Consumer Protecti on Servi ces 251,406 222,524 5.45 (28,882) (11.49)
MFO 5: Busi ness and Trade Regul ati on Servi ces 162,234 205,793 5.04 43,559 26.85
PROJECTS 852,371 89,500 2.19 (762,871) (89.50)
Local l y-Funded Project 852,371 89,500 2.19 (762,871) (89.50)
Source: DTI/2014 GAA
PARTICULARS
(P'000) Variance
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Formulation and development of policies and programs on consumer
education and protection
Formulation and implementation of plans and programs and policies for
industry development
Development of national comprehensive competition policy or anti-trust
law

MFO 2: Technical Advisory Services
Big Push for MSME Development
- Shared Services Facility
- Product Development & Market Promotion (includes capacity building)
- Equitable Financing/Credit Guarantee
- Community-based Enterprise Development
- Business Enabling Environment
Monitoring of MSMED Plan
Business Development Services
- Training/Seminars
- Product Development
- Organization/Facilitation/Participation in local (regional/provincial) fairs
Business Permit Licensing System (BPLS)
Operation of NERBAC
Local and Regional Economic Development Program
Export Pathways Programs (EPP)/Regional Platform for Philippine Exports
(RIPPLES)
Promoting Agribusiness Enterprises in Agrarian Communities (DTI-CARP)
SME Roving Academy

MFO 3: Trade and Investment Promotion Services
Promotion of exports
- Outbound (overseas fairs, missions)
- Inbound (local fairs, IBM)
Trade facilitation
- Capacity building for exporters (RIPPLES, info sessions)
- Doing Business in Free Trade Areas
- Auto-response Trade Opportunity Report Servicing
Promotion of product standards
Publication of PNS
Promotion and accreditation
Business & consumer info education & communication advocacy

MFO 4: Consumer Protection Services
Complaints handling and resolution
Promotion of consumer education and advocacy
Product testing
Survey on the level of consumer awareness
Diskwento Caravans
Strengthening of the DTI Call Center
Supply Chain
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MFO 5: Business and Trade Regulation Services
Business Name Registration
Monitoring and Enforcement (including price monitoring)
Accreditation of testing & calibration laboratories
Regulation of importation of used motor vehicle and steel products
Regulation of importation of motor vehicles and spare parts and government
importation
Standards Conformity Assessment (certification)


Budget by Agency

1. Office of the Secretary

The FY 2015 budget of OSEC (P3.178 billion) represents 78% of the total
new appropriations of the DTI.















Personnel Services budget will incur a decrease by P110.999 million due to
the withdrawal of funds for salaries and allowances after the approval of
the Rationalization Plan. As of June 30, 2014, the total personnel
complement is 2,341, a decrease of 481 plantilla positions.

The net increase in maintenance and other operating expenses will be
utilized for the following programs:

a. The Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN
Growth Area (BIMP-EAGA) cooperation (P10 million) - an initiative by
the four countries to harness the potentials and boost the
competitiveness of the sub-region and to close the development gap
across and within the EAGA member countries as well as across the
ASEAN-6 member states. The BIMP-EAGA cooperation aims to increase
trade, tourism and investments within and outside the sub region by:

Facilitating the free movement of people, goods and services
Comparative New Appropriations
(In Thousand Pesos)
Amount %
TOTAL New Appropriations 3,928,050 3,177,849 100.00 (750,201) (19.10)
1,051,202 940,203 29.59 (110,999) (10.56)
2,161,548 2,206,586 69.44 45,038 2.08
Financial Expenses 1,200 0.04 1,200
715,300 29,860 0.94 (685,440) (95.83)
Sources: 2014 GAA/2015 NEP
Percent
Share
Capital Outlays
Personnel Services
Maintenance and Other Operating
Expenses
Particulars
2014
GAA
2015
NEP
2015 vs. 2014
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Making the best use of common infrastructure and natural
resources
Taking the fullest advantage of economic complementation

b. Human capability training program for employees competencies and
support to investment promotion (P15.093 million)

c. Increased provision for Grassroots Participatory Budgeting from
P548.534 million in 2014 to P632.550 million in 2015.

The government expanded the GPB approach in 2014 to empower
poor communities to identify and prioritize their local poverty
reduction plans. For 2015, the DTI shall assist 435 municipalities with
634 projects amounting to P632.550 million will be allotted From this
amount, P614.126 million will be earmarked for the implementation
of specific enterprise development, industry development, training
and livelihood activities. The remaining P18.424 million will be
accounted for the monitoring and evaluation activities of the
program.























Implementation of this Program is subject to the conditions set forth
under a new special provision in the Office of the Secretary.

d. The President mentioned in his SONA that the growth momentum will
have to be sustained to reduce poverty and enhance its ability to
translate investments and jobs. Priority shall be placed on reviving
the manufacturing sector and enhancing the assistance to SMEs to be
Region Amount
CAR 14,832,200
NCR 12,872,300
Region I 52,188,488
Region II 55,906,500
Region III 61,437,411
Region IV-A 89,224,519
Region IV-B 22,975,313
Region V 43,156,066
Region VI 47,395,187
Region VII 14,863,750
Region VIII 31,568,840
Region IX 21,482,017
Region X 24,563,251
Region XI 15,125,000
Region XII 40,106,130
CARAGA 66,428,863
TOTAL 614,125,835
Source: FY 2015 BESF
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able to move up the value chain and enable them to multiply. There
is an imperative need to rebuild the existing capacity of industries,
strengthen new ones and maintain the competitiveness of industries
with comparative advantage.

In pursuit of this agenda, additional funding will be given for the
Industry Development Program, a Locally-Funded Project.







The OSECs capital outlay budget of P29.860 million will be used for the
following:











Provision for bank charges in the amount of P1.2 million is due to bank
charges from remittances to the Foreign Trade Service Corps (FTSC).

The Micro Small and Medium Enterprise Development (MSMED) Council shall
be the primary agency responsible for the promotion, growth and
development of small and medium enterprises (SMEs) in the country by way
of facilitating and closely coordinating national efforts to promote the
viability and growth of SMEs, including assisting relevant agencies in the
tapping of local and foreign funds for small and medium enterprise
development, as well as promoting the use of existing programs, as well as
seeking ways to maximize the use of labor resources.

2. Board of Investments

The BOI which is under DTIs Industry Development Group, is the agency in
charge for the governments investment development efforts and promotion
of the country as an attractive investment area. For FY 2015, BOI will
receive P257.075 million in new appropriations accounting for 6.30% of the
DTI budget. The decrease of the FY 2015 budget is due to vacancies in
plantilla positions and the deletion of the non-recurring CO budget. The
increase in MOOE will augment travelling expenses for outbound investment
Amount
(000) %
Industry Development Program 60,000 89,500 29,500 49.17
Particulars
FY 2014
(000)
FY 2015
(000)
Variance
DTI-Office Building for the Regional
Development Council in Region III 28,000
Acquisition of Motor Vehicle for
Batangas and Dinagat Provincial Office 1,860
Total Capital Outlay 29,860
Particulars
FY 2015
(000)
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missions, trade negotiations and conferences and rentals for office
buildings.

3. Construction Industry Authority of the Philippines

To effectively promote, accelerate and regulate the growth and
development of the construction industry in conformity with national goals,
the President approved a budget of P84.283 million for CIAP for FY 2015.
CIAP exercises its powers and functions through its implementing arms:

Philippine Contractors Accreditation Board (PCAB)
Philippine Domestic Construction Board (PDCB)
Philippine Overseas Construction Board (POCB)
Construction Industry Arbitration Commission (CIAC)
Construction Manpower Development Foundation (CMDF)

4. Construction Manpower Development Foundation (CMDF) is a former
attached agency of the DTI which formulates an overall construction
manpower development plan and implements manpower training programs
for the construction industry. It was given P25.495 million for the capacity
building of the construction industry. However, due to the approved
rationalization plan of CIAP, one of the organizational shifts under the rat
plan was the integration of CMDF with CIAP.

For FY 2015, the implementing boards will undertake the following:
























Implementing
Board
Activity
Amount
(000)
PCAB Investigation and litigation of violations on
Contractors License Law
3,086
POCB Market development and overseas
construction industry promotion 1,889
Monitoring and evaluation of performance
of construction contractors 10,825
CIAC Resolution of construction contract claims
and disputes under construction contract
which are bound by arbitration agreement 3,459
CMDF Licensing, accreditation and registration of
contractors for construction projects
9,514
Promotion and Development of Training
and other Manpower development
activities 469
Development of training and other
construction manpower development
programs 3,208
Implementation of training and other
construction manpower development
programs, and impact assessment of
training, including the provision of testing
and certification facilities/systems 14,234
TOTAL 46,684
Source: CIAP
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5. Philippine Trade Training Center

As one of the leading agencies in the Industry Promotions Group of the
DTI, PTTC endeavors to advance the export sectors competitive position in
the world market by providing valuable problem-solving approaches
through integrated continuing education services. For FY 2015, PTTC has a
proposed budget of P47.237 million. The Center has an P11 million
allocation for the purchase of a generator set to replace its 27 year old one.
It will act as an emergency power source for the office, training, and lease
operations of its seminar rooms and exhibit areas in case of a commercial
power failure.

6. Design Center of the Philippines

By virtue of R.A. 10557 or the Philippine Design Competitiveness Act of
2013, the Design Center aims to promote design as:

A creative tool for improving the quality and competitiveness and
branding of Filipino products in the global market;
A strategic tool of value creation for sustainable economic growth
and development;
An innovative tool for enhancing the quality of human life.

DCPs proposed new appropriations for FY 2015 is P75.185 million. To
pursue its mandate, P64.012 million will be allotted for its product design
and development services.

7. Aurora Pacific Economic Zone and Freeport Authority

Created under R.A. 9490 as amended by R.A. 10083, APECO aims to boost
the social, economic and industrial development in Aurora and nearby
provinces by generating jobs for the people. To accelerate the development
of the economic zone, the national government will provide subsidy of
P72.895 million and equity of P178.394 million for the APECO. (APECO is
under Sub-Committee B)

8. Center for International Trade Expositions and Missions

To market and promote the Philippines as a reliable source of quality export
products and services in the global market, CITEM will be provided a
P186.443 million subsidy for FY 2015. Seventy-seven percent of the total
government subsidy will be allocated to the implementation of various
promotional projects, assisting local SMEs exporters, designers and
manufacturers in the global market, thus contributing to the attainment of
inclusive economic growth. The remaining twenty three percent will be
utilized for institutional promotions. With the aim of creating a distinct
Philippines brand, CITEM shall implement 13 promotional activities in
2015, through the organization of five signature events and 8 overseas trade
fairs.
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9. The Cottage Industry Technology Center, an attached corporation of DTI will
cease to receive subsidy from the national government due its abolition
upon recommendation by the DBM based on the evaluation that:

The functions of CITC are also being undertaken by existing
government entities and the private sector.
The financial statements showed that the CITC will never be
financially viable even with the implementation of new service
pricing policy and upgraded workshop facilities.


Off Budget Accounts

Off-Budget Accounts are funds which are authorized to be deposited with
government financial institutions for expenditure items which are not part of the
National Expenditure Program (NEP). For FY 2015, DTI will realize P603.826 million
income from off budget accounts which is also authorized to fund its off-budget
expenditures of P603.708 million.


Penalties collected by BSP from lending institutions for non-compliance with the
provisions of the amended Magna Carta for SMEs shall beearmarked for the
operating requirements of MSMED Council in the amount of P20.829 million.



Table 4
(in thousand pesos)
Revenues Expenditures Revenues Expenditures Revenues Expenditures
Office of the Secretary
OSEC-Proper
Trust Receipts Assessment Fees, Seminar/Training
Fees, Clearance Fees
9,118 28,586 27,236 49,560 49,452 50,164 50,046
OSEC-IPO-Phils
Retained Income/Fund
IPO Retained Income Registration fees, grants of patents,
registration of trademarks, subscription
fees and other income
1,043,034 459,331 368,832 499,704 499,704 535,373 535,373
Revolving Fund Dormitory Fees 4,694 2,821 2,821 2,821 2,821
Trust Receipts Seminar/Training Fees 3,439 6,968 12,560 6,968 6,968 6,968 6,968
Trust Receipts Seminar/Training Fees 11,180 8,500 8,500 8,500 8,500 8,500
Trust Receipts Bid Documents, Others 271
TOTAL 1,055,591 511,030 417,128 567,553 567,445 603,826 603,708
Particulars
Balance as of
Dec. 31, 2013
FY 2013 FY 2015 FY 2014
Construction Manpower
Construction Industry
Philippine Trade Training Center
Design Center of the Philippines
Authority of the Philippines
Development Foundation
Department
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Sources of Revenue

For FY 2015, the department is projected to contribute P375.054 million in non-
revenues from various sources to the National Treasury. Among the agencies, OSEC
will contribute the largest amount at P275.884 million which is 74% of the total
projected revenue for FY 2015.








Table 5
Sources of Revenue
(in thousand pesos)
Amount Percent
Office of the Secretary 302,272 235,276 275,884
73.56
40,608 17.26
Permits and Licenses 204,941 168,192 202,296 34,104 20.28
Franchising and Licensing Fees 744 1,683 1,844 161 9.57
Permit Fees 3,354 -
Registration Fees 186,040 144,596 177,853 33,257 23.00
Other Permits and Licenses 8,425 21,913 22,599 686 3.13
Fines and Penalties 6,378 -
Service Income 75,322 47,697 50,114 2,417 5.07
Clearance and Certification Fees 64,161 32,253 34,215 1,962 6.08
Inspection Fees 868 -
Processing Fees 285 566 778 212 37.46
Other Service Income 6,711 13,341 13,370 29 0.22
Fines and Penalties 3,297 1,537 1,751 214 13.92
Other Income 1,512 2,456 2,645 189 7.70
Miscellaneous Income 1,365 2,455 2,644 189 7.70
Other Fines and Penalties 147 1 1 - 0.00
Special Account in the General Fund 20,497 16,931 20,829 3,898 23.02
MSME Development Council Fund (Fund 151) 20,497 16,931 20,829 3,898 23.02
Board of Investments 30,799 33,329 36,140 9.64 2,811 8.43
51,099 40,888 44,816 11.95 3,928 9.61
5,816 18,000 18,214
4.86
214 1.19
389,986 327,493 375,054 100.00 47,561 14.52
Particulars FY 2013 FY 2014 FY 2015
2015 vs 2014
Construction Industry Authority of the Philippines
TOTAL, DEPARTMENT OF TRADE AND INDUSTRY
Philippine Trade Training Center
Source: 2015 BESF
% Share
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II. Special Provisions

1. Office of the Secretary

a. Micro, Small and Medium Enterprise Development Council Fund. In
addition to the amounts appropriated herein, Twenty Million Eight
Hundred Twenty Nine Thousand Pesos (P20,829,000) sourced from ninety
percent (90%) of the total penalties collected by the BSP from the
lending institutions for non-compliance with the mandatory allocations
of credit resources to Micro, Small, and Medium Enterprises (MSMEs),
constituted into the Micro, Small and Medium Enterprise Development
Council Fund, shall be used for the development of the MSME sector
pursuant to Section 20 of R.A. No. 9501.

Funding for the MSMED Council for FY 2015 will be 23% higher than
the current year level of P16.931 million.

b. Comprehensive Agrarian Reform Program. The amount of Seventy Six
Million Two Hundred Eighty Three Thousand Pesos (P76,283,000)
appropriated herein shall be used in support of the Program Beneficiaries
Development component of the Comprehensive Agrarian Reform
Program.

Provision for the beneficiaries under the development component
of the Comprehensive Agrarian Reform Program (CARP) will be
utilized for the promotion and development of MSMEs in the
countryside. The FY 2015 allocation will slightly decrease from the
current year budget for CARP of P76.333 million.


c. Grassroots Participatory Budgeting Projects. The amount of Eight
Hundred Seventy Four Million One Hundred Forty Seven Thousand Pesos
(P874,147,000) appropriated herein for the Promotion and Development
of Small and Medium Industries includes Six Hundred Fourteen Million
One Hundred Twenty Six Thousand Pesos (P614,126,000), which shall be
used exclusively for the implementation of Grassroots Participatory
Budgeting (GPB) Projects in the LGUs identified under Table A, Volume
No. III of this Act. In no case shall said amount be used for any other
purpose.

Releases from said amount shall be subject to compliance with the
requirements of Good Financial Housekeeping under the FY 2014 Seal of
Good Governance and LGU Public Financial Management Improvement
Program pursuant to DBM-DILG-DSWD-NAPC JMC No. 4 dated November
26, 2013 and such other requirements as may be provided in the
guidelines.

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The LGUs shall likewise ensure that the cost of implementing the GPB
projects shall not exceed the cost of similar projects being implemented
by national government agencies in the same locality.

This program will be implemented under MFO 2: Technical
Advisory Services for the promotion and development of small and
medium industries in the regions. For FY 2015, DTI shall assist 435
municipalities with 634 projects under GPB. Local Poverty
Reduction Action Teams (LPRAT) have identified specific
enterprise development, industry development, training and
livelihood activities for implementation by the DTI and LGUS.


III. Issues

Port congestion

Truck operators and business owners are saying Manila's daytime truck ban
has been bad for business, but DTI said the setback is temporary, as they
are learning to adjust their schedules. The DTI welcomed, however, the
increased interest in the Batangas port as a result. The port congestion and
the truck ban already had an adverse impact on the countrys economic
growth in the second and third quarters of this year as port congestion still
going to fully normalize by September.
(http://www.rappler.com/business/211-governance/53481-manila-truck-ban-batangas)
(http://www.mb.com.ph/port-congestion-truck-ban-to-shave-off-ph-growth/)

The shippers, importers and exporters were urged to utilize the port
capacities on Sundays for a virtually 24/7 operations and for the truckers to
slash by half trucking fees charged on shippers on those days as an
incentive. These twin moves would help decongest the ports in as fast as
three weeks and would aid in getting back to normal movement of goods in
and out of the Manila ports.
(http://anzcham.com/dti-urges-sunday-work-to-ease-port-congestion/)

Because of the truck ban and the port congestion, prices of some goods had
gone up by about 3-5 percent since the expanded truck ban policy was
implemented by the Manila government in February this year. Traders have
to bear additional costs to move their cargo out of congested ports in
Manila.
(http://business.inquirer.net/171581/dti-fears-truck-ban-fallout)
(http://www.rappler.com/business/economy-watch/66773-dti-price-hikes-port-
congestion)


Investments

DTI expects five business missions from abroad. The missions would come
from France, Japan, Malaysia and Singapore. For outbound missions, DTI is
organizing trade visits to East Asia and Europe, Manalo said. Apart from its
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organized delegations, DTI officials will participate in missions organized by
other parties, such as that by Philippine Ambassador to the US Jose Cuisia.

Trade Secretary Gregory L. Domingo also will join a road show of the
Association of Southeast Asian Nations economic ministers. The DTI is aiming
for a 10-15 percent increase in the number of inbound trade missions this
year after last years 210.

The Philippine economy grew by 7.2 percent last year, above the
governments target of 6-7 percent. Growth however didnt create enough
jobs, as unemployment increased to 7.5 percent from 7.1 percent the
previous year.

(http://www.interaksyon.com/business/82863/dti-to-host-5-foreign-business-missions-
this-summer)


Price Monitoring

The Department of Trade and Industry (DTI) has ordered the issuance of
show cause orders (SCOs) against cement manufacturers and resellers amid
unwarranted price hikes of cement. In a statement, DTI-Consumer
Protection Group has directed the DTI monitoring teams in all provinces and
regions to conduct daily monitoring activities over the next two weeks on
prices of cement.
Cement manufacturers already implemented prices effective February 1 this
year by an average of P8 per 40 kilogram bag of cement or P220 per bag
from P212 per bag amid strong demand for cement on huge government
infrastructure projects on top of strong construction activities from the
private sector.
Cement sales in 2013 grew 5.9 percent to 19.445 million tons from 18.356
million tons in 2012. The last quarter of 2013 added 4.503 million MT in
sales or 2.1 percent higher than the 4.409 MT in the same quarter of 2012.
The Cement Manufacturers Association of the Philippines said that strong
growth is expected in 2014 because of continued confidence in government
and large increase in budget of the Department of Public Works and
Highways for infrastructure and housing programs.
In 2012, the local industry posted a 17.5 percent growth, its highest in 15
years, having sold 18.4 million tons of cement from 15.6 million tons in
2011. Cement firms have expanded their capacities also in anticipation of
the huge demand for cement amid a growing economy.
(http://www.mb.com.ph/dti-orders-cement-manufacturers-dealers-to-justify-price-
increases/)

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Ease of doing Business
DTI launched its electronic payment (e-payment) facility for business name
registration. Through the Business Name Registration System (BNRS)
website, registration and payment can be done online in less than 15
minutes.
Alternatively, entrepreneurs can register by visiting the Philippine Business
Registry System's website. For payment, entrepreneurs can use Globe GCash
or Bancnet.

Last year, 335,266 business names registered with the DTI, with 41,658 new
and existing business names lodged with the Philippine Business Registry.

(http://www.interaksyon.com/business/79104/dti-launches-online-registration-e-
payment-of-business-name)


Exports

The Department of Trade and Industry expects Philippine electronics
exports to grow by as much as 8-10 percent this year, as the sector
continues to recover.

DTI said the projection was an improvement from the 5-7 percent forecast
announced by the Semiconductor and Electronics Industries in the
Philippines Inc. (Seipi). the DTIs higher projection may be attributed to the
recovery of global demand for electronic goods and the new facilities being
put up, which will shore up production in the country.

(http://business.inquirer.net/173387/dti-ph-electronics-to-grow-by-8-10-in-2014)


















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III. COA Audit Reports

The Auditor rendered an unqualified opinion on the fairness of presentation of the
financial statements in accordance with Philippine Standards on Auditing. The
audit also involved performing procedures to ascertain the propriety of financial
transactions and compliance of the Corporation to prescribed laws, rules and
regulations.


OSEC (FY 2012 COA Audit Report)

1. Loans totalling P100,920,000.00 were granted by Small Business Corporation
(SBC), an attached agency of DTI, to 3,721 micro-enterprise borrowers who
were not residents of the 19 targeted of the Rural Micro-Enterprise
Promotion Programme (RuMEPP) since no guidelines were formulated on the
selection of borrowers under the microfinance component of the
Programme. Moreover, the monitoring activities undertaken by the DTI-
Project Management Unit (PMU) were inadequate in ensuring that all
components and activities of RuMEPP were performed in line with the
program design and that it is achieving its objectives in promoting profitable
and sustainable micro enterprises.

Recommendations:

a. The Project Management should formulate guidelines on the grant of
loans to the MEs to ensure that only the intended beneficiaries will
benefit from the Programme and make sure that such guidelines be
strictly implemented/observed;

b. The Project Monitoring Unit conduct monitoring and evaluation on the
SBCs implementation of the micro-finance component of the RuMEPP
to ensure that all components and activities were performed in line
with the program design and that it is achieving its objectives in
promoting profitable and sustainable micro enterprises.

2. The erroneous recording of the receipt of the P300,500,000.00 for the
endowment fund for the Barangay Micro Business Enterprise (BMBE) from the
PAGCOR and Peoples Credit and Finance Corporation (PCFC) and its
subsequent transfer to SBC and the non-recording of total interest earned of
P64,433,990.38 and expenses incurred in CY 2012 of P452,158.00 resulted in
the understatement of assets and government equity accounts both by
P365,433,990.38.

Recommendation:

a. The Chief Accountant should draw a Journal Entry Voucher (JEV) to
record the noted over/understatement of the affected accounts and
exercise due diligence in recording and capturing of transactions.

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19

3. As of year-end, the amount of P60,746,220.88 recorded under accounts Cash
in Bank, Local Currency, Current Account (LCCA) and Local Currency,
Savings Account (LCSA) of DTI-OSEC consisting of bidders bonds, proceeds
from the sale of bid documents and ICC stickers, and other funds were not
yet remitted to the Bureau of Treasury contrary to Sections 3 and 4 of the
General Provisions of RA 10155 and Section 2 of E.O. No. 338 dated
December 30, 1989. Further, the Cash in Bank LCCA account balance of
P68,134,232.57 includes negative balances of P2,176,099.78 which
correspondingly reduced the account balance by that amount.

Recommendation:

a. The management should secure authority from the Permanent
Committee for the establishment of ICC and BPS Revolving Funds,
otherwise, the same together with all bank balances of Funds 101 and
103 be remitted to the BTr. The Accountant should review the
unreconciled/negative balances of the three bank accounts to
determine the causes thereof and effect the necessary adjustments.

4. The reported balance of the Loans Receivable-Others account of
P316,514,349.52 as of December 31, 2012 was doubtful due to inclusion of
(a) P294,524,938.77 or 93.05% of the total loans receivables in DTI-OSEC and
12 Regions which were already dormant for over ten years and were not
supported with adequate records to substantiate the balance; and (b)
discrepancy of P1,508,795.10 of the account balance between the General
Ledger and the Status Reports on Loans in DTI-CAR.

Recommendations:

a. The Accountants of DTI-OSEC and the concerned regions should (a)
exert extra effort for the retrieval and gathering of pertinent loan
documents and subsidiary records; (b) send demand letters to the
debtors for the collection of the outstanding balances; and (c)
reconcile the balances between the GL and the Status Reports on
loans to determine causes thereof for proper disposition.

5. The balances of Advances to Officers and Employees account of
P184,949,808.90 of DTI-OSEC and 11 Regions was unreliable due to (a)
inclusion of unliquidated cash advances of P97,989,872.56 or 52.96%, which
are aged 90 days to over three years the purposes of which were supposedly
completed/attained; (b) unrecorded liquidation reports totalling
P26,076,413.86; and (c) reclassification of P2,245,136.20 from Advances to
Officers and Employees account to various Receivable accounts.

Recommendations:

a. The management agreed to (a) direct all officers and employees with
long overdue accounts to immediately liquidate the balances of their
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20
cash advances or cause the withholding of the AOs salaries until their
accounts are fully settled and/or file appropriate legal action; and
(b) require the Chief Accountant to facilitate the review and approval
of the Liquidation Reports; and (c) effect the necessary adjusting
entries to correct the misclassification of accounts.


6. The validity and existence of six receivable accounts with total reported
balances of P276,730,765.72 as of December 31, 2012 of DTI-OSEC and 13
Regional Offices were doubtful due to (a) an existence of P129,729,154.10
unreconciled, dormant and undocumented balances; and (b) a discrepancy
of P44,972,874.29 in the balances of the receivables between books and the
results of confirmation.

Recommendations:

a. The management of DTI-OSEC and the concerned regions have agreed
that the accountants should: (a) determine the causes of the
discrepancies of the unreconciled forwarded balances of the accounts
and the outstanding balances between books and the results of
confirmation and prepare the necessary adjusting entries; (b) exert
extra effort to locate the pertinent documents and if the same
proved to be futile, request for the write-off of the dormant accounts
following the procedures prescribed in COA Ciruclar No. 97-001 dated
February 5, 1997; (c) strictly monitor the settlement of fund transfers
to avoid accumulation of long outstanding balances;
b. For the remaining fund transfers, management should demand the
immediate liquidation/settlement thereof and if warranted, file
appropriate legal action against the concerned proponents; and
c. The accountant of DTI RO No. XI should formalize the demand for the
liquidation/refund of the seed fund from the recipients of the Bridge
Financing Projects.

7. The year-end Inventory accounts balances of DTI-OSEC and Region V
amounting to P904,971.05 cannot be relied upon due to (a) recording as
outright expenses the procured supplies and materials totalling
P48,121,107.29; (b) adjustments to P30,989,618.87 on dormant inventory
accounts without the corresponding Report of Supplies and Materials Issued
(RSMI); (c) non-observance of proper management and control on
inventories; and (d) non-preparation of Report of Physical Count of
Inventories (RCPI) for supplies inventory of P903,910.55, which were not all
in consonance with the provisions of Manual on the NGAS, Volumes I and II.

Recommendations:

a. The DTI-OSEC the Chief Accountant should (i) comply with the
provisions of Sections 43 of the Manual of the NGAS, Volume I on the
proper recording of purchases and issuances of supplies and
materials; (ii) restore to inventory accounts the undocumented
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21
P30,989,618.87 adjustments; and (iii) maintain the SLC for
inventories;
The Property Officer should (i) conduct the physical count of
inventories; (ii) prepare RSMI for issued inventories; and (iii) maintain
the SC for inventories;

b. DTI-Region V The Property Officer/Inventory Team prepare the
RCPI.

8. The reported year-end book value of PPE accounts totalling P795,957,877.99
were unreliable in view of (a) unreconciled difference of P350,468,725.82
between the accounting and property records of DTI-OSEC and three
regions; (b) net overstatement of PPE accounts by P319, 243, 426.54 due to
accounting errors at DTI-OSEC and three regions; (c) completed projects
totalling P10,225,049.73 of DTI-OSEC still recorded under Construction in
Progress-Agency Assets account instead of reclassifying them to the proper
PPE accounts; (d) undocumented negative and unreconciled PPE balances
amounting to P21,735,865.51 of DTI-OSEC; (e) variance of P836,316.84
between the general and subsidiary ledgers of DTI-OSEC; and (f) non-
conduct of physical inventory and non-rendition of physical report of PPE
accounts of P52,471,949.62 in five regions. Further, unserviceable property
of DTI-CAR and Region IV-A valued at P794,578.14 remained undisposed as
of year-end which is not in accord with Section 79 of P.D. No. 1445.

Recommendations:

a. The management of DTI-OSEC and the Regional Offices agreed to
require the concerned accountants to:

i. Record the costs of the motor vehicles under the RUMEPP;
ii. Reclassify the acquisition of PPE in DTI-CAR to the appropriate
PPE account;
iii. Reclassify all completed projects from CIP-Agency Assets
accounts to the appropriate PPE accounts duly supported with
proper documentation;
iv. Review the causes of the negative and unreconciled balances
for proper subsequent actions;
v. Ascertain the causes of the negative and unreconciled
balances
for proper subsequent actions;
vi. Adjust the accounting errors in recording disposals and
Acquisition of PPEs and provide the correct allowance for
depreciation.

b. Property officers:

i. Include in the physical count and report the PPE totalling
P350,468,725.82;
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ii. Determine the value of DTI-NCR property included in the
physical report;
iii. Include in the RPCPPE the cost of motor vehicle of DTI-Mt.
Province and building of CAR Regional Office;
iv. Conduct the physical inventory of PPE and prepare and submit
the RPCPPE thereon; and
v. Facilitate the disposal of unserviceable property to prevent
them from further deterioration.

9. The validity of the reported balances of four liability accounts totalling
P479,066,268.61 were doubtful due to (a) undocumented payables of
P104,445,876.14 of DTI-OSEC and three regions in violation of Section 46 of
PD No. 1177; (b) erroneous recording of transactions to account Other
Payables totalling P69,424,942.30 of DTI-OSEC; and (c) non-reversion of
payables aged more than two years totalling P29,418,819.17 to Government
Equity by DTI-OSEC and two regions contrary to Section 98 of PD No. 1445
and DBM-COA Joint Circular No. 99-6 dated November 13, 1999.

Recommendation:

a. The accountants of DTI-OSEC should correct the accounting errors in
the recording of the procurement and sale transactions, as well as
payment of honoraria. The accountants of DTI-OSEC and the three
regional offices should also revert to the government equity the
undocumented payables and those which remained outstanding for
more than two years.

10. Payment of ENERCON Incentive to DTI-OSEC employees at a rate of
P10,088.86 per employee or a total of P5,180,218.18 charged against savings
from electricity and fuel consumption was in excess of the authorized CNA
allowance of P25,000.00 per employee provided under DBM Budget Circular
No. 2011-5 dated December 26, 2011.

Recommendation:

a. The management should require the refund from its employees the
ENERCON Incentive of P10,088.06 which is in excess of the CNA
Incentives of P25,000.00 authorized under DBM Budget Circular No.
2011-5.

11. Payment to service providers and procurement of ICC stickers totalling
P32,578,493.00 for CY 2012 of DTI-OSEC were not adequately supported
with pertinent documents which is not in accordance with Section 4 of PD
No. 1445 which cast doubt on their validity and propriety.

Recommendations:

a. The management agreed to require the Chief Accountant to (a)
submit the required documents to the above transactions; and (b)
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henceforth, ensure that only transactions/claims with complete
documentation are processed and paid.

12. In addition to the beginning balance of Receivables Disallowances/Charges
of P27,847,530.41, disallowances totalling P195,618.45 were issued in 2012,
of which P5,994,488.11 were also settled and P10,660,879.01 were
adjusted, leaving a year-end balance of P11,412,477.64 in DTI-OSEC and
nine regions. In DTI-OSEC, the Receivables Disallowances/Charges were
understated by P4,749,610.66 since disallowances which are still under
appeal were already recorded as settled.

Recommendations:

a. The DTI-OSEC and concerned regional offices accountants should
send demad letters to all concerned officials and employees to settle
in full their audit disallowances. The Director of Legal Services of
DTI-OSEC should initiate, as the circumstance warrant, the filing of
an administrative and/or criminal case to those who refuse to settled
their accountabilities.

13. As of January 1, 2012, the unremitted taxes of DTI OSEC and 16 regions
amounted to P17,920,081.19. During the year, in addition to the unremitted
taxes for CY 2011, taxes withheld totalled P133,705,568.46 of which the
amount of P146,834,966.43 was remitted leaving a balance of P9,488,847.28
as of year-end.

Recommendation:

a. The concerned accountants should ensure timely remittance of taxes
withheld and determine the causes of the unremitted balances of
prior years and the negative balance in DTI-CAR for adjustments.


FY 2013 COA Audit Reports

BOI

1. The completion of the Network Infrastructure Upgrade Project to address
the network security threats of BOI was delayed since the delivery of various
IT equipment costing P12,300,707.56 which were planned to be procured as
early as CY 2011 was only completed on May 17, 2013 or after 679 days from
date of full release of the NCA for the purpose due to (a) outsourcing of
procurement needs to PITC instead of BOI undertaking the same; (b)
absence of timelines for the procurement activities; (c) outdated BOI
Information System Strategic Plan (ISSP) for IT equipment; and (d) lack of
provision in the MOA on contract duration and timelines for the delivery of
deliverables by PITC.

Recommendations:
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a. The BAC Chairman should ensure that BOI undertake its own
procurement activities to facilitate the completion of requirements in
accordance with set schedule;
b. Director, Finance and Administrative Services Department (i) require
the PITC to refund the P1,030,869.82 unutilized fund transfer; (ii)
improve the Procurement System thru proper and complete
preparation of all necessary documents such as PPMP and APP, among
others; (iii) religiously monitor all programmed procurement
activities to ensure timely achievement of desired results; and (iv) in
entering into future similar contracts, ensure that the timelines on
the fulfilment of obligations of the supplier/contractor and provision
for penalty clause, among others, are included therin to protect the
interest of BOI; and
c. The Director, Strategic Management Services Department update the
existing ISSP and have it approved by NCC.

2. The accuracy of the Cash in Bank Local Currency, Current Account balance
amounting to P154,871.27 as of year-end was unreliable due to the
difference of P2,830,810.21 between the balance per books and per Bank
confirmation attributed to (a) overstatement/understatement of the
account due to either unrecorded or erroneously recorded financial
transactions; (b) unrecorded cash balances of two bank accounts of
P2,023,854.53; and (c) inclusion of cash balances of P154,871.27 which
should have been reverted to the Bureau of Treasury (BTr) pursuant to
Section 4 of the General Provisions of the FY 2013 GAA.

Recommendations:

The Chief Accountant should:

a. prepare the necessary adjusting entries for the discrepancies noted
between the balances per books and per bank confirmation;
b. Exercise diligence in recording and capturing of transactions to
ensure accuracy and reliability of account balances;
c. Initiate the remittance to the BTr all bank balances pertaining to
interest income earned, bidding fees and trust receipts/other
collections required to be remitted to the National Treasury; and
d. Take the necessary steps for the closure of BOI-Fund 102, a dormant
bank account.

The Director of FASD should secure authority from the Permanent
Committee to maintain the LBP BOI Trust Fund 184 for the Industry
Development Program of the DTI.

3. The cash equivalent of the unreleased checks as of December 31, 2013
amounting to P2,383,636.50 was not restored to the Cash-National Treasury,
MDS account as required under Government Accounting and Financial
Management Information System (GAFMIS) Circular Letter No. 2002-001
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dated December 16, 2002 due to the non-submission of the Schedule of
Unreleased Checks by the Cashier to the Accounting Division for recording.
This resulted in the understatement of the Cash-National Treasury, MDS and
the related Payable/Liability accounts both by the same amount as of year-
end.

Recommendations:

a. The cashier should prepare the monthly schedule of unreleased
checks for submission to the Accounting Division; and
b. The accountant should record the necessary adjustments based on
the Schedule of Unreleased Checks submitted by the Cashier to
ensure the correctness of the accounts Cash-National Treasury, MDS
and related payable/liability accounts as of year-end.

4. The balances of the Receivable accounts amounting to P19,633,843.78 as of
December 31, 2013 were unreliable due to the (a) inclusion in the account
Due from GOCCs the unliquidated fund transfers totalling P13,331,577.38 of
the Philippine International Trading Corporation (PITC) the purposes of
which were already completed and attained; (b) discrepancy of
P1,565,917.35 between the BOIs General Ledger balance and that per
Procurement Service for account Due from NGAs; and (c) absence of
subsidiary ledgers covering majority of the receivable accounts to support
the General Ledger balances which was not in accord with Section 12 of the
Manual on the New Government Accounting System (NGAS), Volume II.

Recommendations:

a. The Managing Head should strictly enforce full settlement of accounts
due from the fund recipients and from concerned BOI officials and
employees with outstanding cash advances and audit disallowances,
thru demand letters and/or salary deduction pursuant to existing
rules and regulations;
b. The Accountant should: (a) send a demand letter to PITC for the
immediate submission of the liquidation report duly verified by the
COA Audit Team Leader assigned thereat and the refund of the
unspent balance, if any; (b) reclassify the P50,000.00 receivables
from DTI-Regional Offices to Due from NGAs and henceforth, classify
receivables in accord with the Standard Chart of Accounts; and (c)
prepare SL for the five remaining receivable accounts and thereafter
reconcile SL balances with the GL regularly or at the end of each
month to ensure the correctness of the reported balance of each
account.
c. The Accountant and Property Officer should coordinate with their
counterparts in the PS for the immediate reconciliation of the noted
discrepancy between the balance of the receivable per BOIs books
and that of the PS.


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CIAP

1. The year-end balance of account Cash-National Treasury, MDS of P0.00 was
understated by P613,920.47 due to (a) non-restoration of the P276,893.77,
the cash equivalent of unreleased checks as of year-end, which was required
by GAFMIS Circular Letter No. 2002-001 dated December 16, 2002; and (b)
cancelled checks totalling P337,026.70 which were still included in the
outstanding checks as of December 31, 2013 and were not reverted to the
BTr. Moreover, 88 checks amounting to P3,030,829.27 were cancelled during
the year, a sign of poor management and control over check issuances.

Recommendations:

a. The management agreed that (a) the cashier on a monthly basis and
at year-end, prepare the Schedule of Unreleased Checks for
submission to the Accounting Section for reading;
b. The accountant should record promptly the necessary adjustments
based on (i) the schedule of unreleased checks; and (ii) on the
cancelled checks reported in the RCIC submitted by the Cashier to
ensure accuracy and reliability of account balances; and
c. The cashier should ensure that checks are prepared based on
approved disbursement vouchers only.


2. The year-end balance of the Accounts Payable account of P10,685,769.05
was unreliable due to the inclusion of (a) unreverted and insufficiently
documented payables of P508,604.00 which remained outstanding in the
books for more than two to seven years; (b) undocumented payables of
P303,148.76; (c) recorded payables of P8,505,780.47 for which
goods/services were not yet delivered/rendered as of year-end; and (d) paid
obligations/transactions of P52,626.54 which resulted in the overstatement
of the balance of Accounts Payable account by P9,370,159.77 and the total
of related asset/s and expense/s by P8,505,780.47 and P864,379.30,
respectively, as of year-end. These deficiencies were contrary to Sections 4
and 98 of PD No. 1445 and Section 4 of the Manual on the NGAS, Volume I.

Recommendations:

The Chief Accountant should:

a. Revert to the unappropriated surplus of the General Fund the amount
of long outstanding surplus of the General Fund the amount of long
outstanding and all undocumented payables totalling P811,752.76;
b. Prepare adjustments for the (i) amount recorded as payables for
which no goods/services were yet delivered/rendered; and (ii)
payables which were already paid in CY 2013; and
c. Ensure that the recognition of payables complies with Section 4(s) of
the Manual on the NGAS, Vol. I

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PTTC

1. The collection of fees from in-house trainings/seminars and use/rental of
facilities of P2,048,494.00 and P581,876.35, respectively, was delayed from
one to 217 days due to the absence of written/formal policies and
procedures in the conduct of in-house trainings/seminars which include,
among others, the collection of fees, imposition of penal sanction on
non/late payment of amount due on time and partial-adherence to policy on
rental facilities.

Recommendations:

a. The Chief of the BMTSD should (i) formulate written policies and
procedures in the conduct of in-house trainings/seminars to include
uniform term of collection of fees and penal sanction on non/delayed
payment of fees, among others, which would serve as guide of
personnel involved therein; and (ii) furnish the AFMD with all the
contracts for the conduct of in-house trainings/seminars for the
timely preparation of the SOA; and
b. The Chief of the FEMD strictly follow the policy of full payment of the
rental fees before egress by the users of seminar rooms and
exhibition halls.

2. The total book balance of PPE accounts of P405,042,705.84 as of year-end
was overstated while the Other Assets account was understated both by
P4,048,068.21 due to the non-reclassification of
unserviceable/waste/defective PPE items costing P4,048,068.21 to Other
Assets account as prescribed by Section 143 of the NGAS Manual, Volume III.
Moreover, property costing P140,552.29 remained unaccounted as of year
end.

Recommendations:

a. The Property Officer should prepare the Inventory and Inspection
Report of Unserviceable Property (IIRUP) and submit the same to the
Accountant for reclassification of the unserviceable PPE to Other
Assets account; and
b. The Property Officer and Accountant should investigate the causes of
the unaccounted PPE items for appropriate action.

DCP

1. The total book balances of PPE accounts of P20,890,988.46 as of year-end
were overstated by P886,926.65 due to the non-reclassification of
unserviceable/defective PPE items costing P886,926.65 to Other Assets
account. Further, property worth P1,037,532.44 were not found during the
inventory count of the audit team in December 2013.

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Recommendations:

a. The Property Officer prepare the Inventory and Inspection Report of
Unserviceable Property (IIRUP) and submit the same to the
Accountant for reclassification of unserviceable PPE to Other Assets
account;
b. The Property Officer and Accountant should: (i) investigate the
causes of the unaccounted PPE items; and (ii) demand for the proper
accounting of the unaccounted items, otherwise, hold the custodians
of the PPE accountable/liable for their loss, if the circumstances so
warrant; and
c. The Accountant should set a receivable account from the concerned
personnel accountable for the unaccounted PPE, if warranted, and
effect the necessary adjustments in the books of accounts.

CITEM

1. Book reconciling items remained unadjusted/unbooked resulting in the net
understatement of Cash in Bank balance by P605,945.33 due to delay in
preparing Bank Reconciliation Statement and recording the corresponding
adjusting entries.

Recommendations:

The management should: (1) ensure timely recording of transactions
and preparation of monthly trial balance; (2) prepare bank
reconciliation statements monthly and take-up the reconciling items
in the books in the following month; (3) exert effort to clear the
2006-2011 bank errors that have not been corrected by the bank; (4)
coordinate with the bank as to the data that must be indicated by the
exhibitors when depositing collection on-line, to facilitate recording
in the books; and (4) book up the necessary reversing entries for
checks that remain outstanding for more than six months.

2. Unused funds transferred by the Department of Agriculture (DA) and
Department of Science and Technology (DOST) through the Philippine
Council for Industry and Energy Research and Development (PCIERD) in the
respective amounts of P333,629 and P128,343 were not returned despite
completion of the projects in 2002 and 2007 but were disbursed without
authority from the funding agencies contrary to COA Circular No. 94-013.

Recommendations:

The management should a) secure approval from the source agency
to utilize any unused funds for another project, before disbursing the
same, b). henceforth, comply with the provisions of COA Circular No.
94-013 particularly Sections 6.4 and 6.5 on the preparation and
submission of liquidation reports and Section 6.7 requiring the return
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of unused balance and refund of any disallowance upon completion of
the project.

3. Physical inventory report submitted by the Administrative Service Division
(ASD) was as of December 31, 2011 only. The report showed discrepancies of
P2.299 million against the accounting records due to unrecorded
acquisitions and lost items and misclassifications of accounts thus, the
accuracy and reliability of the Property, Plant and Equipment (PPE) balance
as of CY 2012 cannot be ascertained.

Recommendation:

The management should: (1) direct the AS and ASD to comply with Section
90 of PD 1445 and submit inventory report by the end of January of the
following year. The inventory may be conducted as early as September to be
able to come up with an inventory report on time duly reconciled with the
Accounting records; (2) reconcile the balances of PPE regularly and properly
record all acquisitions/disposals and effect necessary adjustments; (3)
require the AS and ASD to coordinate with each other for proper costing and
classification of accounts; (4) make the necessary adjustment in the books
and inventory report as identified.

4. Of the cost of P1.410 million worth of disposed items of property, only the
amount of P273,367 was dropped from the books of accounts resulting in the
overstatement of property and equipment by P1.137 million. Some items
were disposed below the allowable 10% price reduction margin of the
appraised value by Management thus loss was incurred which was not
recorded in the books. The appraisal and the negotiated price were not
submitted to COA for validation/review contrary to COA Circular No. 91-712.

Recommendations:

The management should: (1) prepare the necessary adjusting entries to
correct the overstatement of PPE and understatement of loss on sale of
the assets; (2) submit to COA the computation of the appraised values of
the PPE for review to find out whether the disposal was reasonable.

5. The increase in the 2012 Net Income of CITEM of P41.759 million or 111%
from a net loss of P37.601 million to a net income of P4.158 million was due
mainly from the government subsidy which amounted to P179.510 million
compared to 2011 subsidy of P79.686 million and not as a result of good
sales performance since revenues generated from project trade fair
decreased by 15% from 2011 sales or P4.7 million.

6. Funds transferred by some national government agencies amounting to
P47.054 million for trade fairs did not also increase revenues instead
reported Export Sales of USD184.590 million in 2012 were lower than 2011
sales of USD202.903 million by USD18.313 million or 9% defeating the
purpose of holding trade fairs.
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Recommendations:

The management should: (1) adopt a risk assessment and management
process to accurately gauge performance and find out actual level of
success of the projects. Regularly monitor exhibitors sales as a tool in the
measurement of accomplishments on the projects; (2) review expenditures
with significant increases and their impact on accomplishments; (3) adopt
strategies to do away with unnecessary expenditures, and increase
participation fees and other revenues, to avoid losses and protect
government funds; and (4) invest in developing further personnel skills
through trainings and utilize their full potentials and services to avoid hiring
of consultants.

7. The 50-year lease contract of the 4.9-hectare government land between DTI
and PHILEXPORT was disadvantageous to the government which resulted in
substantial loss of P11.608 million to the government and deprived CITEM of
its right over the 4.9 hectare government property and had to incur rental
expenses in the amounts of P85.938 million from 2008 to 2012 because
PHILEXPORT failed to comply with the provisions of the lease contract and
sub-lease contract.

Recommendations:

The management should: (1) initiate immediate actions to pursue the
amendment of the lease contract to protect the interest of the government
and recover CITEMs rights over the property; (2) make representation with
DTI, DBM and the Bureau of Treasury to regain the Centers rights over the
property; (3) seek legal assistance from the Office of the Government
Corporate Counsel relative to the non-compliance by PHILEXPORT, the
lessee, and MECI, the sub-lessee, on the respective lease and sub-lease
contracts; (4) suggest to DTI to amend the lease agreement to upgrade the
rental rate of P1,000 per year for 4.9-hectare government reclaimed land to
what is considered fair, just and equitable to the National Government.
Moreover, conditions in the lease contract be provided to ensure that the
objectives of RA 7844, otherwise known as the Export Development Act
(EDA) of 1994 are met.