Republic of the Philippines

COMMISSION ON AUDIT
Bulacan Audit Group C, Team R3-10
City of Malolos, Province of Bulacan

AOM No.: 2019-015

Date : February 18, 2019

AUDIT OBSERVATION MEMORANDUM (AOM)

Hon. Christian D. Natividad

City Mayor
City of Malolos, Province of Bulacan

Thru: Rizaldy Mendoza

City Administrator

Attention: Gng. Merlina Cruz

Tagapamanihala ng mga Paaralang Panlungsod

Members of the Local School Board

We have audited the disbursement charged against the Special Education Fund (SEF) of
City of Malolos for the year 2017 and noted the following deficiencies:

Inconsistencies/deficiencies in the utilization of Special Education Fund (SEF)

1. The Special Education Fund (SEF) was utilized on the same and/or repetitive programs,
projects and activities beyond the priority projects of the SEF contrary to Department of
Education (DepEd), Department of Budget and Management (DBM), Department of Interior
and Local Government (DILG) Joint Circular (JC) No. 1 series of 2017.

1.1. On the basis of the budget utilization records, the appropriation, obligation and utilization
of the SEF for CY 2018 are shown on the following table:

Programs, Projects and Allocation Percentage Utilization Balance

Activities
1. Operation and ₱11,317,410.85 18.94% 10,021,868.95 1,295,541.90
Maintenance of Schools
Salaries, bonuses and
allowances
1.1 Salaries and wages- 1,111,263.99 939,493.46 171,770.53
Casual/Contractual/Janitorial
1.2. Security Services 1,016,289.20 1,016,289.20 0.00
1.3. Year-end bonus 174,000.00 169,500.00 4,500.00
1.4. Cash Gift 115,000.00 110,000.00 5,000.00
1.5. Other Bonuses and 357,000.00 204,000.00 153,000.00
allowances for ECCD Brgy
Literacy Workers
 Utility Expenses
1.6. Electricity 626,340.23 512,560.27 113,779.96
(Division Office)
1.7. Electricity (Schools) 7,607,517.43 6,850,823.95 756,693.48
1.8. Fuel, oil and 210,000.00 201,822.58 8,177.42
lubricants
1.9 Repair and maintenance 100,000.00 17,379.49 82,620.51
– Transportation Equipment
2. Construction and 5,220,553.00 8.74% 4,690,130.51 530,422.49
Repair of School Buildings
2.1. Construction of School 2,140.000.00 2,140,000.00 0.00
Buildings
2.2. Repair & 3,080,553.00 2,550,130.51 530,422.49
Maintenance/Rehabilitation
of School Buildings
3. Facilities and 933,747.00 1.56% 799.000.00 134,747.00
Equipment
3.1. Information Technology 799,000.00 799,000.00 0.00
3.2. Facilities and 134,747.00 134,747.00
Equipment
4. Educational Research 27,720,589.15 46.39% 25,624,601.18 2,095,987.97
4.1.Curriculum 9,475,515.00 8,734,545.00 740,970.00
Implementation Division-
Research, Exploration &
Development Traveling
Expenses-Local
4.2. School Governance & 1,000,000.00 528,240.00 471,760.00
Opearation Division-
Research ,Exploration &
Deveopment
Expenese/Travelling
Expenses-Local
4.3. Office of the Schools 17,245,074.15 16,361,816.18 883,257.97
Division Superintendent-
Research, Exploration &
Development
Expenses/Travelling
Expenses-Local
5. Purchase of 2,421,000.00 4.05% 2,419,460.00 1,540.00
Textbooks and
Periodicals/Reproduction
of IMS
5.1. Textbooks and 2,421,000.00 2,419,460.00 1540.00
Instructional Materials
Expenses for Senior High
School
6. Sports 10,048,700.00 16.82% 7,877,172.58 2,171,527.42
Development
6.1. Regional Sportsfest 70,000.00 70,000.00
6.2. City Meet 2,200,000.00 1,687,845.08 512,154.92
6.3. CLRAA 6,177,700.00 4,830,847.50 1,346,852.50
6.4. Palarong Pambansa 1,501,000.00 1,358,480.00 142,520.00
6.5. Provision for 100,000.00 100,000.00
District Meet
 7. Funding of Early 0.00 0% 0.00
Childhood Care and
Development
8. Others 2,095,000.00 3.51% 2,199,861.97 (104,861.97)
Special Program Projects
8.1. Cultural Groups- 100,000.00 100,000.00 0.00
Trainor and Equipment
Materials
8.2. National Festival of 500,000.00 500,000.00
Talents
8.3. Division School 740,000.00 1,344,861.97 (604,861.97)
Press Conference
8.4. Metrobank MTAP 145,000.00 145,000.00 0.00
General Services
8.5. Musical Instuctor 230,000.00 230,000.00 0.00
8.6. Motor Boat 380,000.00 380,000.00 0.00
Services
Total ₱59,757,000.00 100% 53,632,095.19 6,124,904.81

1.1. As shown on the table, the SEF was largely appropriated on educational research at
46.39%, almost half of the SEF, followed by operation and maintenance of schools at 18.94%, and
sports development at 16.82%. The construction and repair of school buildings, facilities and
equipment registered a very low allocation of 8.74% . This disproportioned allocation was made
notwithstanding the fact that these types of projects are the priority items of the SEF according to
Department of Education (DepEd), Department of Budget and Management (DBM), Department
of Interior and Local Government (DILG) Joint Circular (JC) No. 1 series of 2017 which reads as:

The annual school board budget shall give priority for the construction, repair, and
maintenance of school buildings and other facilities of public elementary and secondary
schools; establishment and maintenance of extension classes where necessary; and
sports activities at the division, district, municipal, and barangay levels.

1.2. Moreover, verification disclosed that of the previous year’s allocation on education
research of ₱1,352,707.00, the current year’s allocation soared high to ₱27,720,589.15. The
sudden increase was made without noted significant underlying reasons for increase in allocation
for education research and benchmarking. Also, there was no approved project proposal
submitted to the Audit Team containing the approved budgetary limitation of each activity, thus
providing no control on the use of the funds.

1.3. Examination disclosed that most of the expenditures were obtained through cash advances
of LGU and DepEd personnel for various undertakings. The expenses were largely composed of
payments of allowances, travelling expenses/per diem, car and venue rental, resource speakers, air
fare, supplies used for the activities, and meals for the DepEd’s personnel out-of-town
benchmarking and education research. Expenses on research writeshop and performance
management system of the Division were also part of the expenses for education research. Despite
the huge amount expended, the accomplishment reports on the researches and benchmarkings on
the funds spent by the DepEd Division Office for their study and consideration in their continuing
efforts to improve the current set-up in the Department were not furnished the Audit Team.
According to the DepEd officials cthey have prepared reports for the activities undertaken but
were not furnished their Regional Office. This is without regard to DepEd Order No. 39, s2016,
Adoption of Basic Education Research Agenda. This provides guidelines toDepEd and its
stakeholders in the conduct of education research and utilization of research results. This aimed
to inform the Department’s planning, policy, and program development on all researches and
studies undertaken, aligned with its vision, mission, and core values. The Agenda also included
the priority education research areas to guide DepEd and its stakeholders in the conduct of
research.

1.4. Hence, a wastage of resources if these undertakings could not provide inputs to the DepEd
organization as a whole to improve the standards for learning and achievements through best
practices.

1.5. The Audit Team also find it worthy reiterating the following DepEd Orders:

DepEd Order No. 25, Series of 2014

1. The Department of Education (DepEd) strongly supports capacity building

activities that are meant to enhance the knowledge and skills of the teaching
and non-teaching personnel of the Department to ensure a more effective
and efficient delivery of basic education services.

2. Acknowledging the need to build manpower capability, the DepEd has been
allocating funds for training and professional development activities of the
Central Office (CO) units, Regional Office (RO), Schools Division Offices
(SDO), and schools/ learning centers under the Human Resource Training
and Development (HRTD) funds since 2006.

DepEd Order No. 32, Series of 2011

10. The budget for the capability building programs shall come from DepEd
Central Office’s MOOE and/or Human Resource Development and Training
(HRDT) Funds.

a. The budget allocation for T&D programs and activities shall be determined
by the DepEd Management depending on the availability of funds.

b. The budget allocations for each level (central, region, division, district, and
schools) shall also be determined by the Management and guided by the
T&D activities and budget estimate in the SPPD/MPPD at various levels.

Trainings and scholarships may either be fully-funded or co-shared by DepEd with

its personnel: (1) fully-funded T&D activities mean DepEd pays for tuition fee,
miscellaneous expenses, allowances or stipend; and (2) co-shared trainings are
those trainings in which DepEd pays for tuition fee only. xxx
1.6. In the conduct of verification of disbursements on a random sampling, other observations
were noted, to wit:

a) No substantial ECCD related project was implemented under the SEF to promote the
physical and mental health of the children except for the payment of allowances to ECCD
Barangay Literacy Workers aggregating to ₱204,000.00. JC No. 01 provides that the LGU
shall include allocation from their SEF for the Early Childhood Care Development
(ECCD) Program.

b) Unnumbered Resolution of the LSB dated May 17, 2018 was passed authorizing the
payment of prior year’s arrears on electricity of DepEd amounting to ₱4,493,229.74. Thus,
audit disclosed that seven installment payments to MERALCO for the electricity
consumption of various schools in the previous years were paid out of the SEF amounting
to ₱600,969.48 per installment or a total ₱4,206,786.36. This is contrary to JC No. 01
which provides that the payment of utilities i.e. electricity and communication expenses
shall be net of budgetary provisions for DepEd and there was no provision in the Circular
to charge from SEF any unpaid utilities of the DepEd.

c) The payment of salaries and wages to DepEd personnel were again paid from the SEF
notwithstanding the regulation of JC 01 that only payment of compensation/allowances of
teachers locally hired in elementary and secondary schools identified to have shortages
per the teacher deployment analysis of DepEd and salaries/wages of utility workers and
security guards hired in public elementary and secondary schools which have not been
provided such position in the DepEd budget should be charged thereto. Per inquiry from
the City Human Resources Office, there was no locally appointed teacher in the DepEd.

d) The expenditures on sports activities such as CLRRA, City Meet and Palarong Pambansa
which amounted to ₱4,830,847.50, ₱1,687,845.08, and ₱1,358,480.00, respectively, were
not supported with approved project proposal enclosing the budgetary limitations of each
activity. Hence, there was no assurance that the incurred expenditures for these sports
activities were relevant to the activities, regulated and in order.

e) The purchase of information technology equipment (26 LCD Projectors) aggregating to

₱799,000.00 covered under check no. 737474 dated January 18, 2018 was paid through
cash advances. This is contrary to the general principles of the imprest system in the
handling of cash that all payments must be made in cash except for regular and special
cash advance for salaries, wages and allowances, travelling expenses and time-bound
undertakings. Nonetheless, during the auditorial visitation at DepEd Division to determine
the existence, condition and usage of the projectors, none of them was found by the Audit
Team. Inspection and Acceptance Report (IAR) and Acknowledgement Receipt for
Equipment (ARE) were nowhere to find in the payment documents to find out the persons
who inspected and accepted the projectors, and to whom the projectors were delegated.

f) Albeit liquidated in the books, the liquidation documents of the following cash advances
were not yet submitted to the Audit Team:
CHECK CASH IN
PAYEE EXPLANATION
DATE NO. BANK
 18/01/2018 737472 ARNELIA TRAJANO C/A FOR THE EXPENSES TO BE INCURRED THE ₱ 500,000.00
PARTICIPANTS TO THE NATIONAL SCHOOL PRESS
CONFERENCE ON FEB. 16-23, 2018 AT DUMAGUETE

18/01/2018 737473 ARNELIA TRAJANO C/A FOR THE EXPENSES TO BE INCURRED THE 740,000.00
PARTICIPANTS TO THE NATIONAL SCHOOL PRESS
CONFERENCE ON FEB. 16-23, 2018 AT DUMAGUETE

18/01/2018 737475 SALVADOR B. C/A FOR THE TEST BOOKLETS TO BE USED FOR 799,000.00
LOZANO ACADEMIC EVALUATION

19/01/2018 737476 SALVADOR B. C/A FOR DIVISION ORIENTATION ON THE 790,000.00

LOZANO ADOPTATION AND IMPLEMENTATION OF PHIL.
PROFESSIONAL STANDARDS FOR TEACHERS

09/02/2018 737489 ARNELIA TRAJANO C/A FOR THE PARTICIPANTS TO THE 537,600.00
BENCHNARKING ACTIVITY ON BEST PRACTICE OF
PERFORMING SCHOOLS TO BE HELD ON
FEBRUARY 16-23, 2018 AT DUMAGUETE CITY
14/02/2018 737491 ARNELIA TRAJANO C/A FOR ALLOW OF PARTICIPATION ON THE 1,018,500.00
CONDUCT OF BENCHMARKING ACTIVITY OF BEST
PRACTICES OF SCHOOL TO BE HELD ON FEB. 19-25,
2018
14/02/2018 737492 CECILIA F. CHANG C/A FOR ALLOW OF PARTICIPATION ON THE 976,500.00
CONDUCT OF BENCHMARKING ACTIVITY OF BEST
PRACTICES OF SCHOOL TO BE HELD ON FEB. 18-24,
2018 AT DAVAO DEL SUR REGION XI
21/03/2018 737533 MA. VICTORIA C. C/A FOR THE ALLOW OF PARTICIPANTS TO 127,500.00
VIVO OUTPUT ON EDUCATIONAL RESEARCH ON APRIL 6,
2018 AT MALOLOS SPORTS CONVENTION CENTER

13/04/2018 737563 CONRADO C/A FOR TRAINORS (CHESS, WRESTLING AND 30,000.00
SANTIAGO BADMINTON) FOR PALARONG PAMBANSA

Total ₱ 5,519,100.00

1.2. A strong LSB could be attained through regular quarterly meetings or as often as necessary
as this is an important requirement, under Section 100 of Republic Act No. 7160. This is to be
attended by the key members of the Board to study and assess the viability and effects of the
implemented SEF projects. This aimed to address the challenges in the public education system
which include lack of school rooms and facilities conducive to learning, and quality education,
among others. However, based on records, the LSB only had two sessions for the year 2018 which
were not attended by a representative from a youth sector, and which were attended mostly by
mere representatives of the key members. The Audit Team, somehow, viewed the deficiency as
one of the contributory factors for the noted infractions. This, in turn, resulted in the use of the
Fund on unmonitored expenditures and beyond the priority projects of the SEF depriving the
school children of quality education.

1.3. We recommend that the LSB chairman (a) call for a frequent meeting with the
members of the LSB to tackle the true issues in the education system in the public sector,
and in coordinated efforts plan the allocation of the SEF largely on the priority projects
enumerated under JC No. 01; (b) set a budget limit for every activity and project of the
DepED as should be contained in the project proposal approved by the authorized personnel
of the LSB; (c) refrain from allowing the grant of cash advance without the supporting
approved project proposal as a medium in determining how the cash advances are to be
expended; (d) submit to the DepEd Regional Office the research output undertaken by the
DepEd Division personnel as an input to the Department’s sharing and use of research
results; (e) submit an explanation on the unlocated LCD projectors aggregating to
₱799,000.00; and (f) submit the liquidation documents of the cash advances aggregating to
₱5,519,100.00

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof.

ELSA S.B. PUNO

State Auditor IV
Audit Team Leader

REMEDIOS P. SOTO
Supervising Auditor, OIC
Proof of receipt of AOM
___________________

Date: ________________