EXECUTIVE SUMMARY

A. Introduction

The National Economic and Development Authority (NEDA) is the

independent economic development and planning agency of the government. It was
created in 1972 and reorganized on 22 July 1987 in accordance with Executive
Order (EO) No. 230. It consists of the NEDA Board and the NEDA Secretariat.

The Authority’s powers and functions reside in the NEDA Board as the
country’s premier social and economic development planning and policy
coordinating body. It is headed by the President as chairman, with the Secretary of
Socio-Economic Planning, concurrently NEDA Director-General, as vice-chairman.
Several cabinet members, the Central Bank Governor, ARMM and ULAP are
likewise members of the NEDA Board.

The NEDA Secretariat serves as the research and technical support arm of
the NEDA Board. It provides technical staff support and assistance, including the
conduct of studies and formulation of policy measures and other recommendation
on the various aspects of development planning and policy formulation and
coordination, evaluation and monitoring of plan implementation. It is headed by
the NEDA Director-General who exercises general supervision and control over the
technical and administrative personnel of the Secretariat. He is assisted by three
Deputy Directors-General, each of whom is responsible for the three major offices
of NEDA, the National Development Office (NDO), the Regional Development
Office (RDO) and Central Support Office (CSO).

The Regional Development Council (RDC) was established by virtue of

Letter of Implementation No. 22 issued on 31 December 1972 and pursuant to the
Integrated Reorganization Plan of 1972. Its constitutional foundation rests on
Article X, Section 14 of the 1987 Philippine Constitution.

Executive Order No. 325 was issued on 12 April 1996 which strengthened
the RDCs to make it more responsive to new developments in socio-political fields
and ensure sustainable and broad-based development process. This EO repealed
previous EOs including EO No. 308 (s. 1987), 318 (s.1988), 347 and 366 (s. 1989),
455 (s.1991) and 505 (s. 1992).

The RDC is the highest policy-making body in the region and serves as the
counterpart of the NEDA Board at the sub-national level. It is the primary
institution that coordinates and sets the direction of all economic and social
development efforts in the region. It also serves as a forum where local efforts can
be related and integrated with national development activities.
B. Financial Highlights

The General Appropriations Act of 2013 (RA No. 10352) appropriated

P904,361,000.00 for the NEDA-CO and Regional Offices. Presented below is the
comparative summary analysis of the financial condition and sources and
application of funds:

Increase/
Particulars 2013 2012
(Decrease)
Financial Condition
Assets 1,253,270,059.29 1,021,712,694.23 231,557,365.06
Liabilities 147,461,385.46 83,057,862.28 64,403,523.18
Government Equity 1,105,808,673.83 938,654,831.95 167,153,841.88
Sources and Application of Funds
Appropriations P904,361,000.00 P787,506,000.00 P116,855,000.00
Allotments 1,114,168,417.00 921,161,195.00 193,007,222.00
Continuing Appropriations 462,683,488.70 134,154,270.96 328,529,217.74
Total Allotments 1,576,851,905.70 1,055,315,465.96 521,536,439.74
Obligations Incurred 1,394,505,247.00 930,669,153.24 463,836,093.76
Unexpended Balance P182,346,658.70 P124,646,312.72 P57,700,345.98

The Statement of Appropriations, Allotments, Obligations, Disbursements

and Balances for CY 2013 is presented in Annex A.

C. Operational Highlights

As the country’s premier socioeconomic planning body, the NEDA

continue to provide objective, timely and relevant high-level advice to policymakers
in Congress and the Executive Branch. As indicated in its recent NEDA
Rationalization Plan (NRP), it has focus on areas such as: Coordination of such
activities as the formulation of policies, plans and programs to efficiently set the
broad parameters for national and sub-national (area-wide, regional and local)
development; Review, evaluation, and monitoring of infrastructure projects
identified under the Comprehensive and Integrated Infrastructure Program (CIIP)
consistent with the government’s thrust of increasing investment spending for the
growing demand on quality infrastructure facilities; and Undertaking of short-term
policy reviews to provide critical analyses of development issues and policy
alternatives to decision-makers. The highlights of NEDA’s reported
accomplishments are identified in the area of: (i) development and coordination of
national and regional plans; (ii) public investment programming; (iii) monitoring of
development plans, programs and projects; and (iv) provision of Technical
Assistance (TA).
D. Scope of Audit

The audit covered the review of accounts and operations of NEDA Central
Office (CO), NEDA Regional Offices (NROs) and Regional Development Councils
(RDCs) for Calendar Year 2013 except for RO No. VIII, which was hardly hit by
Typhoon Yolanda.

It was aimed to ascertain the propriety of the financial transactions;

determine the fairness of the presentation of the financial statements; ascertain
compliance with laws, rules, and regulations; and validate the implementation of
prior years’ audit recommendations.

E. Auditor’s Report on the Financial Statements

The auditor rendered a qualified opinion on the fairness of presentation of

the NEDA and RDC financial statements as of December 31, 2013 due to the
accounting errors and deficiencies as presented below and discussed in detail in Part
II of the Report:

1. In the NEDA Central Office (NEDA-CO), the total balances of five Asset
accounts of P43,163,851.76 and three Liability accounts of P12,356,921.78 are
unreliable due to the absence of Subsidiary Ledgers and supporting schedules
and existence of negative balance contrary to Sections 73 and 12 of the Manual
on the New Government Accounting System (MNGAS), Volumes I and II.

We recommended that Management: (a) require the Accounting Division to: (i)
conduct an extensive analysis of the accounts involved by working back on
prior years’ transactions; (ii) prepare the subsidiary ledgers or schedules
showing the transaction details; and (iii) establish the subsidiary ledger balances
and reconcile with the respective controlling/general ledger accounts; (b)
request authority for write-off from COA of those accounts that could no longer
be documented adequately or accountability thereof could no longer be
established or if the analysis/review of the accounts is not possible due to
absence of records and documents in accordance with Section III.A.10 of COA
Circular No. 97-001; and (c) require the Accountant to review and analyze the
recorded transactions in the subsidiary ledgers to identify and correct the
negative balance.

2. Unreleased checks amounting to P1,742,121.57 in NRO V were not reverted to

the Cash account at year-end contrary to GAFMIS Circular Letter No. 2002-001
and Section 31 of MNGAS, Volume I.

We recommended and Management of NRO V agreed to direct the Accountant

to revert back to the cash balances the unclaimed checks at the end of the year
and make a reversing entry at the start of the ensuing year in accordance with
GAFMIS Circular Letter No. 2002-001 and Section 31 of the MNGAS, Volume
 I; and require the Disbursing Officer to prepare a schedule of unreleased checks
at the end of each month for submission to the Accounting Division.

3. The balances of the Payroll Fund and Advances to Officers and Employees
accounts of P974,842.39 and P4,212,671.28, respectively, were unreliable due
to over-applied/un-applied liquidation of P184,310.63; unresolved items for
adjustment of P30,330.00; and overstatement of P18,216.00 due to double
recording. Further, cash advances granted to employees in the NEDA-CO
amounting to P2,083,309.43 remained unliquidated as of December 31, 2013
contrary to Section 89 of PD 1445 and COA Circular No. 97-002. Moreover,
NRO XI failed to enforce strictly the controls over the grant, utilization and
liquidation of cash advances as shown by the unliquidated cash advances of
P597,449.49; granting of P799,823.58 additional cash advance to employees
with unliquidated cash advances; and use of P55,500.00 cash advance for
purposes other than the purpose for which it was drawn.

We recommended that NEDA-CO sustain its effort to reduce, if not eliminate,

unliquidated cash advances and reiterated our prior year recommendations that
Management instruct the CO Accountants to (a) analyze and resolve over-
applied/un-applied liquidations as well as cash advance balances requiring
adjustment; (b) draw a journal entry to correct the aforementioned double
recording of adjustment of Payroll Fund account; and (c) in the case of long
outstanding cash advances, documentation of which could no longer be found
and accountability for which could no longer be established, initiate action to
drop them from the books of accounts in accordance with COA Circular Nos.
97-001 and 93-404.

We recommended further, that NRO XI Management enforce firmly the

controls on the granting, utilization and liquidation of cash advances set forth
under COA Circular No. 97-002 and Section 89 of PD 1445; discontinue the
granting of additional cash advance to any employee with outstanding cash
advance; stop the practice of using cash advances for any purpose other than
that for which they were drawn; and direct the Accountant to issue regularly a
demand letter to the concerned Accountable Officer as soon as his/her cash
advance has become due for liquidation.

4. The balance of the Due from NGAs account of P55,555,598.34 at NEDA-CO is

unreliable due to deficiencies such as fund transfer balances totaling
P992,753.13 which remained unliquidated for 11 to 15 years; balance of
P3,419,480.48 not supported with appropriate documentation; abnormal
negative balance of P7,069.33; and overstatement of P9,294,763.15 due to
unrecorded deliveries.

We recommended that Management: (a) ascertain validity of the overdue

accounts and strictly enforce the liquidation and/or refund of unexpended
amount of fund transferred to other government agencies in adherence to COA
Circular No. 94-013; (b) direct the Accountant to analyze the balances not
supported with appropriate documents and establish their validity, otherwise
 request authority from COA to write-off accounts that could no longer be
adequately documented or accountability thereof could no longer be established
in accordance with Section III.A.10 of COA Circular No. 97-001; (c) direct the
Accountant to review and analyze the recorded transactions in the subsidiary
ledger to identify those that will resolve the negative balance and adjust the
account accordingly; and (d) direct the Asset Management Division (AMD) to
submit without fail, promptly and on a regular basis, receipts and other
documents supporting any delivery of goods and services procured by the
Agency.

We recommended further, that Management initiate measures that would

readily detect unrecorded deliveries, such as: (a) regular reconciliation of the
supplies and PPE records of AMD and Accounting Division; (b) maintenance of
PPELC and updating of Property Cards; (c) preparation of Procurement
Monitoring Report; and (d) preparation of RIS and RSMI for items requested
and issued.

5. The total inventory balance of P9,562,366.20 is unreliable due to net

unreconciled difference of P98,559.36 between the Report on the Physical
Count of Inventories (RPCI) and the General Ledger (GL) of NROs CAR, III
and IX; and (b) adjustment/dropping from the books of Region IX the amount
of P46,430.15 even without the Report of Supplies and Materials Issued
(RSMI). Further, the purchase of office supplies of P367,822.35 in NRO IX
was recorded as direct expense instead of inventories, thereby, over-riding
internal control over inventory tracking.

We recommended in Part II of this report specific courses of action that would

address the foregoing observations in the NROs.

6. The consolidated Property Plant and Equipment (PPE) balance of

P1,016,348,787.77 (net of depreciation) is unreliable due to net unreconciled
difference of P72,134,685.49 between the General Ledger and the Report of
Physical Count of Property, Plant and Equipment (RPCPPE) of NEDA-CO and
NRO CAR; overstatement of P1,059,724.02 representing unserviceable
properties in NROs CAR, VII and XIII that were not reclassified to the Other
Assets account; absence of reports and records to support PPE balances totaling
P71,084,111.74 at NROs II, III and IX; and write-off of properties costing
P710,928.34 and Items in Transit account without sufficient documentation at
NRO IX.

We recommended in Part II of this report specific courses of action to remediate

errors and omissions and strengthen controls over PPE tracking and
management.

7. The NEDA-CO and NROs I, II, IVA, IX and XI failed to enforce strictly the
rules on leave prescribed in Executive Order No. 292 and CSC Resolution No.
00-0034 dated January 5, 2000 as shown in the leave monetization without
sufficient vacation leave credits and, in certain instances, even below the 10
 days minimum monetization required; monetization of sick leave credits
without first exhausting vacation leave credits; monetization in excess of 30
days allowed without the approval of the Agency Head; and, non-deduction of
the five-day forced leave, which resulted in, among others, overpayment of
P66,913.16 and P54,555.18 for leave monetization in NEDA-CO and NRO XI,
respectively, and non-deduction of Vacation/Sick Leave availed by the
employees in NRO XI.

We recommended that Management:

(a) direct the Human Resource Management Division (HRMD) to apply strictly
the rules on leave set forth in Sections 22 and 23 of the Omnibus Rules on
Leave of EO 292 and pertinent CSC Resolutions;

(b) instruct the HRMD and the concerned NEDA-CO and NRO Accountants to
work together in recovering the overpayment arising from the
misapplication of rules on leave or errors in the computation of payments
for leave benefits;

(c) require the HRMD to:

• conduct re-training on rules on leave of those personnel involved in the

administration of leave;

• complete the correction and updating of all records of leave and document
these process;

• put in place a regular review and reconciliation of leave balances reflected

on each Leave Record as against Monthly Report of Attendance and
Absences (MRAA); and

• file pertinent records such as MRAA and Daily Time Record (DTR), and
maintain back up file for leave balances to facilitate monitoring and
review of leave records;

(d) direct the Human Resource official at NRO XI to investigate the e-DTR
system errors and resolve the cause accordingly.

F. Other Significant Observations and Recommendations

1. NEDA engaged the Statistical Research and Training Center (SRTC) as

a servicing agency or procurement agent without cost-benefit analysis
and due regard to the Guidelines on Agency-to-Agency Agreements
prescribed in the Government Procurement Policy Board Resolution No.
18-2007. This delayed the procurement process, stalled the development
 of three management information systems and prevented the Agency to
benefit timely from using these systems.

We recommended that Management: ensure compliance with the

Government Procurement Reform Act particularly Section 2 of the IRR
of RA No. 9184 by evaluating fully the economy, efficiency and
effectiveness and comply with the procedural requirement set-forth
under the Guidelines of Agency-to-Agency Agreements before engaging
other government agencies as a servicing agency or procurement agent;
assess the over-all progress of the project and initiate measures that
would protect the interest of the NEDA by: (a) re-evaluating the cost
component and its reasonableness; (b) re-visiting provision on
‘knowledge-transfer’; and, (c) validating the provision of the delivery
period; and, ensure that a copy of contract hereto discussed and all each
documents forming part thereof by reference or incorporation be
furnished to the Auditor . All other contracts entered into by the NEDA
should also be submitted within five (5) days from its execution as
required under COA Circular No. 2009-001 dated February 12, 2009.

2. Regional Directors of NROs IVA, VI and IX availed of Family/Home

Visit Privileges without prior approval from the Office of the President,
contravening Presidential Decree No. 1597.

We recommended that Management direct: the concerned NROs to

enforce the refund of the expenses in connection with the Family/Home
visit; and the Human Resource officer at NROs IVA, VI and IX to
deduct from the vacation leave credits of the concerned officers the
leave availed of as Family/Home Visit Privilege.

3. Audit of utilization of DAP funds at NRO IX disclosed that a consultant

was hired for services that duplicated those performed by the
Department of Public Works and Highways (DPWH) Regional Office
No. IX as its servicing/procurement agent which is an unnecessary
expenditure as proscribed in COA Circular No. 2012-003 dated October
29, 2012. Moreover, it awarded the contract without public bidding and
not at a fixed price contrary to Sections 10 and 2 of Annex F of the
Implementing Rules and Regulations of Republic Act No. 9184.

We recommended that NRO IX Management implement measures that

will ensure that duplication of services are not contracted; conform
strictly with the required fixing of price for consultancy contracts as
required in RA 9184; and, recover the amount of P49,677.68 out-of-
pocket expenses from the persons determined to be responsible for the
lapses noted.
 The aforementioned observations together with the corresponding
recommendations were discussed with Management officials concerned during the
exit conference on June 4, 2014. Management views and comments were
incorporated in the report, where appropriate.

G. Implementation of Prior Years’ Recommendations

Of the six audit recommendations embodied in the CY 2012 Consolidated

Annual Audit Report, one was fully implemented and five were partially
implemented.