AUDIT OBSERVATIONS AND RECOMMENDATIONS

A. Introduction

We commend the NEA Management for taking immediate action on our audit
observations, as follows:

a. Not all Electric Cooperative (EC) are submitting liquidation reports including
pertinent supporting documents for the subsidies they received from NEA.

Action taken:

In response, NEA issued a Memorandum dated October 10,2013 to all ECs

enjoining them to submit original documents to support the Liquidation of
Subsidies released to them. ECs are now submitting the required reports
including vouchers and other supporting documents.

b. Unreconciled balances of liquidations and interest income amounting to ₱75.405

million and P330,872, respectively, under the Other Payables- DOE CARE
account.

Action taken:

Management prepared adjusting entries on January 31, 2014 under JEV Nos.
2014-01-000355 and 2014-01-000334 to bring the balance of both accounts
reconciled and to come up with the correct account balances.

c. Interests earned from bank deposits originating from Department of Energy

(DOE) for NEA -Expanded Rural Electrification Program (EREP) and Calamity
Assistance and Rehabilitation Effort (CARE)account amounting to P0.724 million
and P2.318 million, respectively, were not remitted to DOE.

Action taken:

Management remitted to DOE on March 6, 2014 the interests earned amounting

to P0.724 million and P2.318 million under O.R. nos. 3069428 and 3097250,
respectively.

d. Unutilized Pantawid Kuryente - Katas ng VAT (PKKV) fund amounting to ₱8.248

million was not returned to Department of Social Welfare and Development
(DSWD).

Action taken:

Management remitted to DSWD the amount of P8.248 million on March 18, 2014
under O.R. no. 4704567.

e. Non-liquidation of the PKKV fund released to Leyte II Electric Cooperative, Inc.

(LEYECO II) amounting to ₱8.822 million.

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 Action taken:

LEYECO II already submitted liquidation report with the liquidation unrecorded in

the books of NEA at the time of the subsidy audit of COA Audit Team. An
adjusting entry for the liquidation was madeunder JEV # 2014-01-000744 dated
January 31, 2014.

f. Expenses for lodging amounting to ₱57,421 incurred during the inspection of

projects undertaken by NEA Technical Inspector were charged against the
Subsidy Fund released to Kalinga-Apayao Electric Cooperative, Inc. (KAELCO).
The amount of P11,600 was incurred by the NEA Technical Inspector.

Action taken:

Management informed that KAELCO excluded the expenses in their accounting

of subsidy, and that the NEA personnel concerned was directed to refund the
lodging expenses amounting to P11,600.

g. Overstatement of liquidations of subsidy and PKKV Fund released to Aurora

Electric Cooperative Inc. (AURELCO)

Action taken:

Management prepared adjusting entries due to error in recording under JEV No.
2014-03-001241 dated March 19, 2014 and JEV No. 2014-05-0031211 dated
May 21, 2014.

h. Furniture & Fixtures and Medical, Dental & Laboratory Equipments recognized in
the books remained unadjusted for several years which caused reported assets
in the financial statements understated by P.299 million.

Action taken:

Management prepared adjusting entries under JEV No. 2014-06-003600 dated

June 11, 2014.

i. Erroneous computation of Service Charge under the NEA Project Cost

Evaluation Memorandum resulted to overstated subsidy granted to Misamis
Occidental I Electric Cooperative, Inc. (MOELCI-I).(as embodied in the
Memorandum of Agreement (MOA).

Action taken:

Management informed that the service charge was correctly computed at 3.5%;
thus, no excess payment was made, which validation proved that indeed the
computation was correct.

j. Overstatement of additional subsidy released to MOELCI-I by P4,950.50 and

understatement of Other Service Income recognized by NEA by the same
amount.

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 Action taken:

Management received payment from MOELCI-I amounting to P4,950.50 under

OR # 7211 dated June 5, 2014.and a journal entry will be done subsequently to
reflect the correct balance.

k. Charging of overhead expenses amounting to P587,518.10 by Lanao del Sur

Electric Cooperative (LASURECO) against the subsidy (consisting of
administrative expenses such as representation, renovation of their office and
improvement of their facilities) was not proper as the same was not in
accordance with the provisions of the MOA entered into by and between NEA
and LASURECO, and COA Circular Nos. 2012-003 and 2007-001 dated October
29, 2012, and October 25, 2007, respectively.

Action taken:

Management decided to offset the amount of fund utilized which are not in
accordance with MOA against the amount due for release (3.5% net of service
charge) to LASURECO as shown below:

Disallowed Expenses P587,518.10

Less: Amount due from NEA 476,190.48
Amount paid by LASURECO P111,327.62

Payment of LASURECO was covered by NEA OR # 7119 dated May 13, 2014

B. Audit Observations and Recommendations on Subsidies Received under

Disbursement Acceleration Program (DAP)

NEA received funds from the Bureau of Treasury totaling P1.580 billion in CY 2012 and
CY 2013 under the FY 2011 DAP and FY 2012 DAP, with details below:

SARO FUNDING/ AMOUNT DATE

NCA # and
SARO NUMBER AMOUNT APPROPRIATION RECEIVED RECEIVED
Date SOURCE
(a) (b) BY NEA
SARO - BMB-F11-01866 ₱200,000,000 NCA No. RA 10147 200,000,000 Feb 9, 2012
dated BMB-F-11- FY 2011 GAA
December 5, 2011 0022222 dated
December 5, 2011
SARO - BMB-F-12-00756 ₱1,264,000,000 NCA No. BMB-F-12- RA 10155 1,264,000,000 Sept 21, 2012
dated September 14, 2012 0017159 dated Sept. FY 2012 GAA
SEP 14, 2012
SARO No. F-11-02260 600,000,000 NCA No. F-11- R.A. 10147, 115,600,050 January 21,
dated Dec. 22, 2011 0023860 dated FY 2011 GAA 2013
BLEP Dec. 22, 2011
₱1,864,000,000 ₱1,379,600,650
TOTAL SEP/BLEP
₱2,064,000,000 ₱1,579,600,650
Grand Total

Results of the audit are discussed in the succeeding paragraphs.

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1. As of year-end, of the subsidy fund received under the CY 2011
Disbursement Acceleration Program for Rural Electrification Program in
ARMM - CY 2011 ARMM Stimulus Fund, totaling P200 million, the amount
of P189.682 was allocated to seven ECs, with P10.319 million or 5%
unallocated; and of the subsidies allocated, only P138.845 million was
released to five ECs, with unreleased amount of P50.837 million; and of the
amount released, the amount liquidated totaled P79.467 million. Delays in
the liquidation of P59.378 million were noted.

1.1 The account Due from NGOs/POs – OPAPP covered subsidies received
from the National Government to fund projects intended for the Rural
Electrification Program in the Autonomous Region in Muslim Mindanao
(ARMM) totaling ₱200,000,000. The fund was sourced from the FY 2011
DAP which was described as ARMM Stimulus Fund / Transition
Investment Support Plan (TISP)

1.2 Below are the audit observations relative to the above fund.

1.2.1 Unallocated subsidy fund amounting to ₱10.319 million.

Of the total amount of P200 million received under DAP on February

9, 2012, only P189.682 million was allocated for 246
sitios/barangays projects, leaving a balance of P10.318 million.

Total amount received P200,000,000.00

Less: Allocation 189,681,735.82
Unallocated subsidy fund P10,318,264.18

1.2.2 Delayed Releases to ECs amounting to ₱50.837 million.

a. Delayed releases of appropriated subsidy to ECs amounting to

P50.837 million was contrary to the Memorandum of Agreement
(MOA) entered into by and between NEA and the EC which
states that “the amount appropriated by NEA for this purpose
shall be available for release to the RECIPIENT within one (1)
year from the date of receipt of appropriations from the National
Government.”

b. NEA started the release of fund on May 22, 2012, however, as of

December 31, 2013, ₱50.837 million was still not released to the
ECs, and thus project implementation was also delayed.

No. of
Allocation to Balance of
ARMM sitios/ Releases
ECs Fund
brgy.
BASELCO 50 P 44,459,988.31 P 38,871,989.48 P 5,587,998.83
CASELCO 26 24,293,196.15 0.00 24,293,196.15
LASURECO 62 47,191,832.95 47,191,832.95 0.00
MAGELCO 47 35,860,859.09 32,274,773.18 3,586,085.91
SIASELCO
11 10,893,149.45 0.00 10,893,149.45
No. of
Allocation to Balance of
ARMM sitios/ Releases
ECs Fund
brgy. 31
SULECO 38 17,537,822.33 15,784,040.09 1,753,782.24
TAWELCO 12 9,444,887.54 4,722,443.77 4,722,443.77
TOTAL 246 P189,681,735.82 P138,845,079.47 P50,836,656.35
 Note: Releases to SIASELCO amounting to ₱9,803,834.51 was effected on 1/31/14

1.2.3 Non-liquidation of OPAPP fund released to ECs amounting to

P59.378 million as at year-end.

1.2.3.1 Review of the account revealed that a total of ₱138.845

million was released in CY 2012 to five ECs for rural
electrification program in the ARMM. Of the said amount,
only P79.467 million was liquidated as of December 31,
2013, leaving a balance of P59.378 million. Summary of
fund releases and liquidations is presented below:

RECIPIENTS/ RELEASES WITH LIQUIDATIONS BALANCE AS REMARKS

DATE REPORTS (LR) OF DEC. 31,
RECEIVED Date Amount 2013
Received
BASELCO/ 38,871,989.48 0.00 38,871,989.48 LR
5/22/12 received
on 1/31/14
SULECO 15,784,040.09 0,00 15,784,040.09 LR
5/23/12 received
on 6/9/14
MAGELCO 32,274,773.18 11/27/13 32,274,773.18 0.00
6/18/12

LASURECO 47,191,832.95 5/14/13 47,191,832.95 0.00

5/23/12
TAWELCO 4,722,443.77 4,722,443.77 LR
5/25/12 received
on 6/9/14
Grand total 138,845,079.47 79,466,706.13 59,378,473.34

1.2.3.2 We gathered that the releases to three ECs (BASELCO,

SULECO and TAWELCO) were liquidated in January and
June of 2014.

1.2.4 Erroneous recording of subsidy releasesby NEA to the ECs

amounting to P18.353 million in the subsidiary ledger.

1.2.4.1 Subsidy releases under OPAPP to various ECs amounting

to P18.353 million from CY 2012 to CY 2013 was
erroneously recorded under the subsidiary ledger for Sitio
Electrification Program (SEP) for CY 2009 and 2011.This
resulted in the understatement of the account Due to
NGOs/POs – OPAPP (Account Code 139-006) and
overstating the subsidiary ledger balances of SEP Account
139-004, 139-005 and 139-007.

ECs Project Per Books Should be Amount

Account Code Account
Code
BASELCO SEP – 2009 139-004 139-006 P 1,427,500.00
(Regular
Subsidy)

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 LASURECO SEP – 2011 139-005 139-006 5,779,074.14
(DAP)
SIASELCO SEP – 2011 139-005 139-006 9,803,834.51
(DAP)
MAGELCO SEP – 2011 139-007 139-006 1,342,395.00
(DAP)
P 18,352,803.65

1.3 Management submitted the following comments:

a. As of January 2014, the ECs liquidated a total of P138.845 million

or 93% of the total subsidies of P148.699 million, leaving a
balance of only P9.804 million which pertained to subsidy
released to Siasi Electric Cooperative Inc. (SIASELCO), an EC
located in a far-flung island. SIASELCO, however, promised to
send its liquidation report before the end of June 2014.

b. In their letter to the Secretary Mar Roxas (being the head of

OPAPP), they explained that the unallocated/unreleased amount
of P10.318 million to ECs is still needed to finance the cost of
house wiring for additional connections within the Transition
Investment Support Plan (TISP)-funded sitios.

c. Their project implementation was greatly affected by the peace

and order situation in the ECs’ area coverage. Like the case of
Cagayan de Sulu Electric Cooperative, Inc. (CASELCO), they
needed the help of the military to implement the program because
of difficulty in transporting construction materials thereat. Just to
come-up with a signed Memorandum of Agreement (MOA) is a
great challenge to them because of the fast turn-over of military
officials assigned thereat. In the case of Tawi-Tawi Electric
Cooperative, Inc. (TAWELCO), they had to enter into another
MOA and this time, with the National Power Corporation (NPC),
for the electrification program of Languyan Island. Again, the mere
preparation and signing of the MOA took much time thus resulted
in the delay in the implementation of the project. For these
reasons, it was prudent for NEA to momentarily suspend the
release of subsidies.

1.4 We recommended that NEA Management:

a. Require the ECs concerned to fully liquidate their subsidies

which purposes have already been completed/implemented;

b. Effect immediately the necessary accounting adjustments to

reflect the correct balance of the account Due to NGOs/PO-
OPAPP;

c. Return to the Bureau of the Treasury the unallocated subsidy

fund amounting to P10.318 million if there are no projects
identified to be funded; and

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 d. Take necessary remedial measures to prevent delay in the
release of subsidy to ECs.

2. Of the subsidy fund received in CY 2013 under CY 2011 DAP for Barangay
Line Enhancement Project (BLEP) totaling P115.600 million, the amount of
P93.185 was allocated to ECs; and of the amount allocated, only the
amount of P67.906 million was released to 18 ECs from April 2013 to
November 2013, leaving an unreleased amount of P25.279 million. No
liquidation report was submitted by ECs as at year-end.

Of the subsidy fund received in CY 2012 under CY 2012 DAP for Sitio
Electrification Program totaling P1.264 billion, the amount of P1.262 billion
was allocated; and of the allocated amount, P1.036 billion was released to
75 ECs, leaving unreleased amount of P225.730 million. And of the
released amount, only the amount of P233.404 million was liquidated as at
year-end, or 21%.

2.1. As regards the funds received for SEP and BLEP, the following are the
results of our audit:

2.1.1. Unallocated subsidy fund balance amounting to P24.271

million.

a. Of the total amount of P1.380 billion received in CY 2012 and

CY 2013 under FY 2011 and FY 2012 DAP, the amount of
P24.271 million was not allocated, with details below.

Project Received Allocated Unallocated

BLEP 115,600,050.00 93,185,542.40 22,404,507.60
SEP 1,264,000,000.00 1262,133,050.09 1,866,949.91
Total 1,379,600,050.00 1,355,318,592.49 24,271,457.51

2.1.2. Unreleased funds amounting to P251.009 million as of year-

end.

Of the total allocated amount of P1.355 billion, only the amount of

P1.104 billion was released to various ECs, leaving a balance of
P251.009 million unreleased.

AMOUNT
DAP-SEP
RELEASED TO BALANCE OF % of
Funds ALLOCATION TO ECs
ECs FUND Releases
Received
CY 2012 1,262,133,050.09 1,036,403,251.54 225,729,798.55 82%

(Released from
Oct 2012 to Dec
2013)

CY 2013 93,185,542.40 67,906,258.08 25,279,284.32 73%

(Released from

34
 AMOUNT
DAP-SEP
RELEASED TO BALANCE OF % of
Funds ALLOCATION TO ECs
ECs FUND Releases
Received
April 2013 to
November 2013)
TOTAL 1,355,318,592.49 1,104,309,509.62 251,009,082.87 81%

2.1.3. Unliquidated amount of P870.905 million or 79% of the total

amount released to ECs.

Of the total amount of P1.104 billion subsidies released to 93 ECs,

only P233.404 million or 21% was liquidated, leaving a balance of
P870.905 million.

DAP-
TOTAL AMOUNT
SEP/BLEP TOTAL AMOUNT UNLIQUIDATED % of
LIQUIDATED BY
Funds RELEASED AMOUNT Liquidation
ECS
Received
CY 2012 1,036,403,251.54 233,404,478.52 802,998,773.02 23%
(75 ECs)
(Received
liquidation
reports from
March 2013 to
Oct 2013)
CY 2013 67,906,258. - 67,906,258.08 0%
(18 ECs) 08
TOTAL 1,104,309,509.62 233,404,478.52 870,905,031.10 21%

2.2. Management submitted the following information/comments:

a. The non-release of the remaining balance to ECs was due to

non-submission to NEA of Budget Request by the concerned
ECs for the release of remaining balance as follows:

40% Budget Request

Accomplishment Report

10% Budget Request

Accounting of Funds
Accomplishment Report
Certificate of Final Inspection and
Acceptance(CFIA)

b. The conduct of final inspection and acceptance by NEA

Engineers was not immediately undertaken due to the creation
of Task Forces and assignment of 17 NEA Engineers to the
areas affected by Typhoons Yolanda and Santi. The Accelerated
Total Electrification Office (ATEO) shall fast track the inspection
and acceptance of the completed projects. Also, the ECs were
already required to submit original documents to support
liquidation of subsidy funds.

35
 2.3. Our audit also disclosed that NEA did not include any timelines in the
implementation of subsidized projects to be strictly observed by both NEA
and EC. ECs should not be left with impunity for any unjustified deviations.

2.4. For SEP and BLEP projects funded under DAP, we recommended that
NEA Management:

a. For completed projects of ECs, ensure that the Accelerated

Total Electrification Office fast track the inspection and
acceptance thereof to facilitate the submission of liquidation
reports by the ECs concerned;

b. For ongoing projects, and for projects not yet started but
already covered by subsidy releases to ECs, strictly monitor
completion thereof within reasonable period; and

c. Require the concerned ECs to promptly submit liquidation

reports of completed projects.

d. For the unallocated amount of P24.271 million, return to the

Bureau of the Treasury, if there are no projects identified to be
funded; and

e. Take appropriate action for the immediate release to ECs of the

remaining unreleased funds.

2.5. Also, we recommended and NEA Management agreed to develop

timelines and benchmarks to be strictly observed by both NEA and
EC in the implementation of subsidized projects.

Management readily agreed as one of its Major Final Outputs (MFOs) is the
implementation and monitoring of subsidized projects.

C. Audit Observations and Recommendations – Cash Accounts

3. Cash-in-Bank - High Yield Savings and Cash-in-Bank Current Accounts

amounting to P25.990 million and P35.088 million, respectively, maintained
with the Development Bank of the Philippines (DBP) remained dormant for
five to eight years.

3.1. Executive Order (EO) No. 431 dated May 30, 2005 was issued re:
“Reverting all Dormant Accounts, Unnecessary Special and Trust Funds to
the General Fund and For Other Purposes. A Joint Circular No. 4-2012
dated September 11, 2012 was issued by the Department of Finance,
Department of Budget and Management and Commission on Audit on
prescribing the Rules and Regulations for the implementation of the said
EO.

3.2. Dormant High Yield Savings Account with the DBP

36
3.2.1. Savings account amounting to P25.990 million maintained with
DBP remained inactive for more than six to seven years. No cash
movement was recorded except for the interest earned. The status
of the cash balances including its interest income earned as of the
end of 2013 are presented below:

Interest
Account # Date Opened Amount Opened Cash in Bank
Earned
Special Civil
Action Account Sept. 5, 2006 P 16,581,429.00 P 2,568,895.00 P19,150,324.00
1,133,741.1 137,71 1,27
KFW Account Jan. 16, 2008 5 1.69 1,452.84
4,623,499.3 561,60 5,18
RFE Account Jan. 16, 2008 6 0.61 5,099.97
0455-011175- 346,109.6 36,76 382
160 Jan. 16, 2008 7 3.44 ,873.11
Cash Account Balances P22,684,779.18 P 3,304,970,74 P25,989,749.92

3.2.2. Management stated that their main reason why they deposited
these funds into a “Restricted Fund” is to generate a higher
interest.

3.2.3. Management also submitted comments that except for the

Watershed account which will be remitted to the DENR, all
accounts will be transferred to the Cash-in-Bank – Savings Account
– General/Administrative Fund after their maturity dates, as
discussed below.

a. Special Civil Action Account amounting to P19.150 million

This account was opened on September 5, 2005 in compliance

with the order of the Regional Trial Court to set aside an amount
for the payment of rice allowances to some NEA employees. NEA
had long paid the claims. Since this is part of NEA’s General Fund,
this will be transferred to its Current Account, General/
Administrative Fund after May 12, 2014 (maturity date) of the
investment). A copy of the memorandum of the Deputy for Legal
Services dated March 4, 2014 endorsing the matter to the Office of
the Solicitor General for being the handling lawyer of NEA.

b. KFW Account amounting to P1.271 million

This account is maintained to cover the balance of NEA’s Foreign

loan with Kreditanstalt Fur Wiederaufbau (KFW) for Island
Electrification. NEA is still paying the amortization of this loan with
an outstanding balance of P50,324,674.19 as of December 31,
2013. The amount of P1,274,345.39 will be transferred to NEA’s
Current Account -Administrative/ Fund after its maturity date (May
12, 2014).

c. RPE Fund Account amounting to P5.185 million

This account is intended to cover the balance of NEA’s Foreign

grant from Deutsche Gesellchaft for Techische Zusammenarbeit

37
 (GTZ) in support to the Energy Resources for the Alleviation of
Poverty program of the Estrada Administration. NEA had totally
released the grant to the electric cooperatives. The amount of
P5.197 million will be transferred to NEA’s Current Account –
General/Administrative Fund after the maturity date of the account
(May 12, 2014).

d. Watershed Account amounting to ₱382,873.11

This amount represents the balance of the Watershed Program

entered into by NEA with the Department of Environment and
Natural Resources (DENR). They intend to remit to DENR the
bank balance amounting to P383,357.02.

3.2.4. We recommended that NEA Management immediately:

a. Effect transfer of the balances of Special Civil Action

Account, KFW Account and RPE Fund Account to Cash-
in-Bank, Current Account - General/Administrative Fund;
and

b. Remit the balance of Watershed Account to the DENR.

3.3. Dormant Current Account with the DBP

3.3.1. Analysis of the account disclosed the following:

SUBSIDIARY ACCOUNT ACCOUNT CODE DORMANT REMARKS

NAME
DBP - NPC O-Ilaw Project Dormant since CY
Fund 111-0-05150-455-6 P 674,720.84 2007
Dormant since CY
LBP - Bid Bond 111-0232-1118-87 30,472,687.50 2005
LBP - NEA CARE Project Dormant since CY
Fund 111-1872-1028-48 2,828,720.85 2007
Dormant since
LBP - NEA EREPP Fund 111-1872-1029-10 1,111,797.10 CY2008
P35,087,926.29

3.3.2. Management informed the following:

a. DBP-NPC O-Ilaw Account amounting to P0.675 million

In a memorandum dated May 21, 2002 of Ms. Rosita O. Rivera,

then Director for Finance, informed the NEA Administrator that
NEA can use the interest earned for the NPC-O-Ilaw Fund
based on COA Circular 94-013. Total interest earned from CYs
2002-2013 amounted to P0.922 million, much higher than the
bank balance of P0.675 million. With this information, they
believe that the bank balance included the accumulated interest
from March 2002 to December 2013. They intend to transfer the
amount to the Current Account - General Fund/Administrative
Fund.

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 b. LBP-BID BOND Account amounting to ₱30.473 million

The Chairman of the NEA Board of Governance, Nomination &

Remuneration Committee recommended to the NEA Board of
Administrators the release of P26.8M to Nerwin Industries
Corporation representing the principal amount of bid bond paid
by the company. Said payment is in exchange for the dismissal
of all cases filed by Nerwin against NEA. The interest earned for
this account shall be transferred to its Current Account –
General/Administrative Fund.

c. LBP-CARE FUND Account amounting to P2.829 million

NEA already remitted to DOE the amount of P2.318 million,

acknowledged under OR No. 3097250 dated March 6, 2014.

d. LBP-NEA EREPP FUND Account amounting to P1.112 million

In compliance to the audit recommendation, NEA has already

returned to DOE the amount of P0.724 million representing
interest earned for the account, acknowledged under OR No.
3069428dated March 6, 2014.

3.3.3. We recommended that NEA Management revert back the

dormant accounts, DBP-NPC O-Ilaw Account and LBP-BID
BOND Account to the Current Account –
General/Administrative Fund.

D. Audit Observations and Recommendations – Other Subsidies

4. Unexpended subsidy fund balances of completed projects amounting to

P82.441 million and interest earned amounting P3.369 million were not
returned/remitted by ECs to NEA despite the completion of the projects.

4.1 Section 7 of the MOA between NEA and ECs provides that “It is agreed that
all amount in excess of total disbursement and cost of unimplemented project
including interest earned thereon shall be returned/remitted to NEA and or
the RECIPIENT may request written authority from NEA to use the
savings/balance as well as interests accruing to the fund for activities allied to
the projects, within thirty (30) days after Final Inspection of NEA.

4.2 Of the total NEA’s releases to selected ECs amounting to ₱893.485 million,
an aggregate amount of P796.032 million was utilized and allowed in audit,
thereby leaving a balance of unexpended subsidy still outstanding with the
ECs of P82P.441 million as of December 31, 2013 notwithstanding that this
amount is considered as savings from completed projects. Details are shown
below:

39
 Amount Reported
Net Funds Received Unexpended
Name of EC as Utilized by the
by the ECs Subsidy
ECs
1 ALECO P332,872,839.18 P281,016,138.90 P51,856,700.28
2 AURELCO 9,989,761.88 9,508,579.40 481,182.48

3 CASURECO I 93,025,548.82 91,755,892.18 1,269,656.64

4 CASURECO II 8,502,387.27 7,337,923.37 1,164,463.90

5 CASURECO V 123,328,537.34 118,741,062.52 4,587,474.82

6 KAELCO 79,128,549.47 68,351,516.40 10,777,033.07

7 TARELCO I 47,819,939.69 38,360,132.24 9,459,807.45

8 MOELCI I 52,849,587.34 52,838,194.09 11,393.25

9 QUEZELCO I 145,968,125.89 143,134,260.98 2,833,864.90

4.3 P893,485,276.89 P796,032,330.37 P82,441,576.79

Likewise, interest earned on bank deposits accruing from the receipt of subsidies
amounting to P3.370 million were not remitted to NEA, as shown below.

Name of EC Interest Earned (Net of Tax)

1 ALECO P1,211,838.32
2 AURELCO 342,219.15
3 CASURECO II 506,753.62
4 CASURECO III 34,085.80
5 CASURECO IV 728,736.68
6 KAELCO 155,216.34
7 MOELCI 18,942.93
8 QUEZELCO I 78,658.17
9 TARELCO I 293,115.39
P3,369,566.40

4.4 We recommended that NEA Management:

a. Closely monitor the unexpended subsidy fund balances and its

interest earned accruing from the fund, and either demand the
return of the same immediately after 30 days of NEA’s final
inspection of the project, or require immediate submission of
request for realignment of the fund, if warranted; and

b. Cause the suspension of any subsequent subsidy releases to ECs

until compliance of the requirement is satisfied, in case of
unjustified failure of the EC to comply with the provision/s stated in
the MOA.

40
 4.5 Management informed that they already communicated on June 6, 2014 with
the ECs concerned to submit an updated action taken on the audit
recommendation of the COA audit teams (from the time COA Auditors
conducted their audit). Also, they required the ECs to return the excess or
unexpended amounts including interests earned or submit board resolution
requesting for realignment, staking sheets and bill of materials and other
necessary reports/documents.

5. NEA allowed release of the entire 10% retained amount to the ECs upon
submission by ECs of the required reports and other documents, without the
final evaluation and determination by NEA of the actual cost expended. This
practice may result in the accumulation of excess subsidies not returned by
ECs.

5.1 Based on NEA’s Approved Revised Guidelines on the Request for Release of
Construction Funds to EC’s dated May 17, 2010, initial release of fifty percent
(50%) of the total evaluated cost (labor and materials) shall be
recommended. Succeeding releases shall be based on progress billing after
fifty (50%) accomplishment, and Ten percent (10%) shall be retained and to
be released only upon submission of all documents such as accounting of
funds, certificate of completion, as built staking sheet/s, bill of materials and
NEA’s final inspection/acceptance.

5.2 Audit disclosed that actual funds utilized for some completed projects of
various ECs for CY 2011 up to CY 2013 under the Sitio Electrification
Program were less than the NEA’s evaluationcost with an aggregate amount
of P22.851 million. As stated above, NEA retains 10% of the total project
cost to be released only upon submission of the required reports and other
documents that are cited in the MOA.

5.3 As a practice, NEA releases the entire retained amount notwithstanding that
the actual project cost is less than the NEA evaluation cost. As such, excess
subsidies will likely happen if NEA will not take into consideration the
project’s actual cost before releasing the 10% retained amount.

5.4 Verification of the pertinent documents disclosed that there were projects
already implemented and completed by the ECswith actual costs of the
projects lesser than the costs as evaluated by NEA. If the retained funds
would be released by NEA without referring to the actual project cost, an
excess fund of at least P22.85 million released to six ECs is expected, as
follows:

Excess Subsidy
(If the remaining 10%
Name of EC
retention will be
released)
ALECO P 1,131,819.41
CASURECO I 1,151,487.04
CASURECO II 241,741.53
CASURECO III 604,572.28

41
 Excess Subsidy
(If the remaining 10%
Name of EC
retention will be
released)
CASURECO IV 7,415,082.30
KAELCO 12,306,659.42
P22,851,361.98

5.5 We recommended that NEA Management release to ECs the retained

amount of subsidy only upon final evaluation and determination by
NEA of the actual cost expended and to the extent thereof to avoid
excess release of subsidy.

5.6 Management informed that they will release the retention money only up to
the extent of actual subsidies utilized by the ECs only.

6. Under Pantawid Katas ng VAT Program (PKKV) released to selected ECs,

consumers without credit memo, or those approved by NEA as qualified
under the PKKV totaling 2,465 were not issued a credit memo while 340
consumers which did not qualify as recipients in the criteria set by DSWD
and NEA were among the recipients of PKKV.

6.1 NEA Memo No. 2008-018 (Implementing Guidelines on the Release of Funds
for “PantawidKuryente: Katas ng VAT” Program) dated June 26, 2008
required the submission by electric cooperatives of complete list of residential
customers with consumption of 100 KWH and below based on May 2008
electric billing duly certified by the EC head of Billing Unit and the General
Manager. NEA, on the basis of the listing submitted by ECs, released the
PKKV subsidy to the ECs.

6.2 Audit of the PKKV fund disclosed several deviations from the NEA Memo
above-mentioned. A total of 2,800 consumers who were either disqualified or
did not avail of the Program were included in the funds released by NEA.
Details of the audit observation are presented below:

AUDIT OBSERVATION
Name of EC Non-Residential
Total Recipients/Amount
Consumers Consumers without CM
Not Allowed
(Disallowed) (To be returned to NEA)
Number Amount
Number Amount Number Amount
P20,000.
1 ALECO 40 00 965 ₱482,500.00 1,005 P502,500.00
2,500.0
2 AURELCO 5 0 - - - 2,500.00
CASURECO 10,500.0
3 I 21 0 454 227,000.00 475 237,500.00
CASURECO 20,500.0
4 II 41 0 - - 41 20,500.00
CASURECO 18,000.0
5 III 36 0 430 215,000.00 466 233,000.00
CASURECO 14,500.0
6 IV 29 0 - - 29 14,500.00
65,000.0
7 QUEZELCO 130 0 334 167,000 464 232,000.00
8 TARELCO I 38 19,000.0 282 141,000.00 320 160,000.00

42
 AUDIT OBSERVATION
Name of EC Non-Residential
Total Recipients/Amount
Consumers Consumers without CM
Not Allowed
(Disallowed) (To be returned to NEA)
0
P1,402,500.00
Total 340 P170,000 2,465 P1,232,500 2,800

6.3 We recommended and NEA Management agreed to require the ECs

concerned to properly and fully account for the funds received from
NEA under the PKKV, with actual and complete list of residential
customers who availed of the PKKV.

7. The realignment of unexpended amounts/savings for subsidies received

under the regular subsidy in CYs 2004, 2006, 2007 and 2008 totaling to
P4.409 million was effected by AURELCO without NEA’s approval.

7.1 Section 2 of the MOA states that “The RECIPIENT shall use the funds, which
may be in the form of materials and equipment requisitioned, cost of labor
and peso releases requested by the RECIPIENT from NEA, solely and
exclusively for the project(s) adverted to in Schedule A, and in no case
diverted or used for purposes unrelated to said projects x xx”

7.2 Our audit disclosed that AURELCO’s implementation of projects under

regular subsidy in CYs 2004, 2006, 2007 and 2008 resulted in
savings/unexpended amounts totaling P4.409 million. The said realignment
was covered by an AURELCO Board Resolution. However, this realignment
did not bear approval by NEA.

7.3 Presented below are various projects with unexpended subsidy or savings
that were realigned by AURELCO without NEA’s approval.

Funds
Name of Project
Realigned
1. Line extension of San Pablo Esperanza ₱935,536.82
2. Construction of Dx lines of Brgy. Ayod&
Brgy. Dimalwadi, Dinapigue 318,926.93
3. Extension of secondary lines of Brgys. 171,825.41
4. Rehabilitation of damaged Dx line
caused by typhoon Paeng. 2,415,853.12
5. Electrification of one (1) line section 138,915.39
6. Extension of Dx lines for two (2) brgys
and one (1) sitio 427620.24
TOTAL P4,408,677.91

7.4 On May 17, 2014, AURELCO Board Resolution was submitted to NEA
requesting for the approval of the realigned subsidies sourced out from
savings in CYs 2004, 2006, 2007 and 2008 amounting to P4.409 million.

7.5 We recommend that NEA Management take appropriate action for the
realignment made by AURELCO without first securing approval.

43
8. Six projects implemented by Kalinga-Apayao Electric Cooperative, Inc.
(KAELCO) under the SEP were completed, hence may no longer require the
release of the ten percent of the subsidy retained by NEA totaling P6.561
million.

8.1 The SEP Subsidy Fund released to KAELCO amounted to P59.638 million
(net of service charge) with details shown in the table under paragraph 8.3
below.

8.2 Audit of the subsidy releases to KAELCO and its liquidation reports disclosed
that the projects implemented under SEP were already completed, however,
the actual cost of the project incurred was less than the NEA’s evaluated cost
and subsidy released by NEA. Details are shown below.

EXCESS
SUBSIDY (IF THE
AMOUNT REMAINING 10%
RETENTION WILL
FUND 10% BE RELEASED)
NAME OF PROJECT
BALANCE RETENTION
UTILIZED /
RELEASED
ALLOWED IN
BY NEA
AUDIT

Extesion of Distribution Lines for 9,703,747.1 8,987,184.3 716,562. 1,078,194.1

seven (7) Sitio's 2 1 81 2 1,794,756.93
Extension of Distribution Lines for 15,866,800.3 1,558,660. 1,870,688.2
3 Brgy 17,425,460.71 4 37 1 3,429,348.58
6,793,717.2 2,048,078. 982,421.7
Line Extention of 8 sitios 8,841,796.11 3 88 9 3,030,500.67
Construction of Lines of two (2)
Sitio's 1,194,438.97 1,028,964.23 165,474.74 132,715.44 298,190.18
16,657,498.6 513,828. 1,907,925.2
Improvement of Tapping Point 17,171,327.53 2 91 8 2,421,754.19
Extension of Distribution Lines for 5,302,038.2 4,559,044.7 742,993. 589,115.3
seven (7) Sitio's 4 3 51 6 1,332,108.87
59,638,808.6 53,893,209.4 5,745,599. 6,561,060.2
8 6 22 0 12,306,659.42

8.3 We recommended that NEA Management ensure that the release of the
10% retention fee to the KAELCO is based on the final evaluation and
determination by NEA of the actual cost expended so that the release
will be limited to the actual cost thereof.

8.4 We also recommended that NEA and KAELCO Management make an

assessment on the programming and cost estimation of projects in
order to ascertain what caused the non-use of the substantial portion of
subsidies, and ensure adequate planning so that subsidies to ECs
would not result in significant unexpended amount.

9. As regards the subsidies released to Albay Electric Cooperative (ALECO),

the awarding of projects was made on a per item/sitio basis instead of on a
per project basis, thus resulting in the difficulty of verifying the reported
disbursements reported by ALECO.

44
 9.1 Section 4a of the MOA between NEA and EC provides that “x xx the
Recipient shall submit Regular Accomplishment Reports on the progress of
the project implementation including an accounting of the subsidy fund and
disbursements made to implement the projects(s) on a per project basis, and
such other data and information, as may be required by NEA from time to
time. x x x”

9.2 Verification of the report on accounting of funds for projects implemented by

Albay Electric Cooperative (ALECO) showed that disbursements were not
accounted on a “per project basis” as provided in the MOA. An example is
the 77 sitios covered by several subsidy releases bidded together and
awarded to different contractors according to the lowest bid for each sitio.

9.3 This resulted in the difficulty in verifying the data contained in the EC’s
Accounting of Funds because one subsidy release covering various sitios
was split into two/three contractors. The Audit Team had to do matching the
documents such as check voucher against the contract of each sitio in order
to identify what group of subsidy release the documents belong, thus time-
consuming.

9.4 Also, the accuracy of the data on project implementation as required in the
MOA such as the required number of days within which it should be started,
completed and energized, cannot be ascertained since no project
implementation report was submitted by ALECO in spite of several request
made by the Audit Team.

9.5 We recommended that NEA Management require ALECO to award

projects based on a per subsidy release to avoid complications and to
facilitate accounting of funds and the audit thereof.

9.6 Management informed that they will send a letter to Bishop Baylon with a
directive to ALE€CO to produce the required documents by the COA Team
and to assign a specific person to monitor status of compliance.

10. Documents required to support the Accounting of Funds reported by ALECO

and CASURECO II in the amount of P83.719 million and P1.260 million,
respectively were not submitted for audit.

10.1 Section 4a of the MOA provides that “x x x the Recipient shall submit Regular
Accomplishment Reports on the progress of the project implementation including an
accounting of the subsidy fund and disbursements made to implement the projects(s)
on a per project basis, and such other data and information, as may be required by
NEA from time to time. x x x”.

10.2 Likewise, Section 5 of the MOA states that “NEA and the Commission on Audit
shall require the submission of voucher and other documents relevant to the grant
and the project(s) as well as conduct an audit on all transactions made with respect
thereto, x x x”.

45
10.3 Our audit of the subsides received by ALECO for the period October 2005 to
February 2013 and by CASURECO II for the period from September 2008
to August 2012 disclosed the following:

a. ALECO’s disbursement vouchers and other pertinent documents to

support the accounting of funds for Regular Subsidy, CARE and SEP
totaling P83.719 million which represents 18% of the subsidies
received during the period were not submitted for audit.

b. Supporting documents for the utilization of the Regular and

BLEP/SEP funds received by CASURECO II were not submitted for
audit amounting to P1.260 million which represents 2.5% of the
subsidies received.

10.4 Further, review of the CASURECO II’s Accounting of Funds for the release of
P2.123 million under Check nos. 215028 and 327292 for SitiosMatindig;
Kawaynan and Gogon of LupiTinambac projects, disclosed that the
supporting documents submitted for audit amounting to P0.767 million for
materials taken from the EC’s warehouse are photocopies, while the
Accounting of Funds and the disbursement voucher for the utilization of
P493,878.91 for the line extension of GawadKalinga, Sta. Cruz,
Calabangaunder the Regular fund has no supporting documents such as
contract, OR and staking sheets, summarized as follows:

Particulars Amount
BLEP/SEP Fund
MCT#44110 bare wire 1/0 P 277,029.50
MCT#44177 various hardware 63,066.53
MCT#44178 various hardware 74,337.58
MCT#44793 electri meters (13pcs) 12,350.00
MCT#45166 Dist transformers, accesorries 115,460.42
MCT#45207 Dist transformers 109,542.55
MCT#45398 Dist transformers, accesorries 114,759.39
Sub-Total P766,545.97
Regular Fund
CV#11-01-008 DBPCk#28430609 Kings Tower Power Supply
-payment for cost of materials, labor & other charges 493,878.91
Grand Total P1,260,424.88

10.5 On the other hand, review of the ALECO’s Accounting of Funds, together with
the supporting documents disclosed the following:

a. For Regular Subsidy – P8.327 million

Ocular inspection disclosed that materials were transferred/pulled out

from the project site and used for other projects without any
documentation. These were projects from Pioduran under Auto Debit
#5724-0-00600-525-6 dated 7/26/06 of P6,753,432.59 described as
follows:

i. Sitio Bualao and Ormoc of Barangay Binodegahan –

Materials intended for the project (poles and cable) were

46
 pulled out upon the order of the former Municipal Mayor and
were installed in core shelter project at Barangay Caratagan
as indicated in the Barangay certification issued on
September 10, 2013 by Alfredo B. Barcellano, Barangay
Secretary.

ii. Sitio Cabasan, Buenavista – Although steel poles were

erected and conductor wires were installed the lines were
energized using secondary electric distribution only instead
for primary distribution lines.

iii. Sitio Bikalon and Sagapan, Malidong – The distribution lines

were not energized.

iv. Sitio Potot Nablang Gulod – The project was not completed
and/or abandoned. Tapping point for the distribution lines
was not found although some poles were erected (some
were not erected and found on the project site) and wires
were installed. The residents on their on own initiative made
use of the wires and connected them to the energized
barangay distribution lines to supply electricity to the
residents of the sitio.

v. SitioTipon-tipon, Salvacion – The project was not

completed. Poles were erected from tapping point up to
secondary lines. Wires were stringed from tapping point to
pole number 9 all of which are primary lines. No wire was
stringed for the entire secondary line poles. The lines were
energized as secondary lines by Barangay Power
Association (BAPA). The lines projected to secondary poles
were stringed to branches of trees instead of the secondary
line poles.

vi. No supporting documents were submitted for the extension

of distribution lines to five sitios in GawadKalinga project
amounting to P1.573 million.

b. Calamity Assistance Rehabilitation Effort (CARE) – P74.175

million

No supporting documents were submitted for audit, including cash

advances granted to ALECO officials for travel expenses that were not
liquidated.

c. Sitio Electrification Program (SEP) –P1.217 million

No disbursement vouchers and supporting documents in the

extension of distribution lines in the 3rd congressional district of the
Province of Albay at Purok 2, Agol, Pioduran and Purok 3 & 4 Minto,
Guinobatan, were submitted for audit.

47
 10.6 We recommended that NEA Management:

a. Require EC to submit immediately the documents to support the

accounting of funds for the projects specified above;

b. Require ALECO to submit documentation for the realigned

projects including justification for the realignment without prior
NEA approval;and

c. Require ALECO to return excess payments against NEA’s

evaluation cost totaling ₱4.706 million which were charged to the
fund.

10.7 The Management informed that they will comply with the recommendation as
promptly as it could.

11. For subsidy releases and liquidations of Camarines Sur I Electric

Cooperative, Inc. (CASURECO I), there was erroneous posting in the
Subsidiary Ledger (SL) totaling P5.687 million, resulting in unreconciled
subsidiary ledger balances against the EC’s records.

11.1 In the examination of the actual subsidy received and liquidated by the EC for
various electrification projects, we noted that NEA’s subsidiary ledger
balances does not tally with that of the ECs, thus resulted in under/over of
fund balances as shown below:
DIFFERENCE
PER AUDIT PER NEA UNDER/
ACCT. (OVER)
PROJECT
CODE
RELEASES LIQUIDATIONS BALANCE RELEASES LIQUIDATIONS BALANCE

64,629,125.1 64,629,125.1 64,629,125. 64,629,125.

139-001
CARE 3 3 - 13 13 -
18,985,000.0 18,747,500.0 18,985,000. 18,833,500.
139-003
PKKV 0 0 237,500.00 00 00 151,500.00 86,000.00
SUBSIDY
139-004 FOR 5,406,226. 10,901,891. 5,406,226.
ELECTRIFI- 5,406,226.72 72 - 62 72 5,495,664.90 (5,495,664.9)
CATION -
2009
SUBSIDY
139-005 FOR SITIO 16,018,041.6 8,558,549. 11,294,832.. 14,166,680. 8,558,549.
– 2011 0 93 07 77 93 5,608,130.84 5,686,701.23
SUBSIDY
139-007 FOR SITIO 8,892,684.6 8,892,684. 9,083,721. 8,892,684.
– 2012 7 67 - 00 67 191,036.33 (191,036.33)
SUBSIDY
139-008 FOR SITIO 21,708,379.6 21,708,379.
– 2013 9 - 21,708,379.69 69 - 21,708,379.69
33,154,711.7 86,
139,474,798.21 106,234,086.45 33,240,711.76 139,474,798.21 106,320,086.45 6 000.00

The difference noted between NEA’s subsidiary ledger balances and the
record of CASURECO I was due to erroneous recording of the following
journal vouchers:

Taken-up Should be Amount

1,660,324.5
JEV#2012-11-009722 139-004 139-005 0
3,835,340.4
JEV#2012-11-009236 139-004 139-005 0
JEV#2013-08-005753 139-007 139-005 191,036.33
5,686,701.2 48
3
 11.2 Our audit also disclosed that of the total amount of P18.985 million released
to CASURECO I, only the amount of P18.748 million was liquidated and
allowed in audit, thereby showing a difference of P86,000.00.

11.3 We recommended that NEA Management effect immediately the

necessary adjustments in the SL account balances so as to reconcile
with that of the EC’s records and to require EC for the full liquidations
of the unexpended fund balances.

12. Of the subsidy released to CASURECO II under Regular Subsidy, eight

projects with a total amount of P2.316 million were not implemented.

12.1 Section 2 of the MOA states that “The RECIPIENT shall use the funds, which
may be in the form of materials and equipment requisitioned, cost of labor
and peso releases requested by the RECIPIENT from NEA, solely and
exclusively for the project(s) adverted to in Schedule A, and in no case
diverted or used for purposes unrelated to said projects x xx “

12.2 Verification of the NEA’s evaluation report on projects to be implemented as

compared to the Contract and Report of Project Implementation submitted to
the Team showed that eight (8) projects in the total amount of P2.316 million
under Regular Subsidy, were not implemented.

12.3 We recommended that NEA Management require CASURECO II to

return the amount of P2.316 million for the unimplemented projects.

E. Other Audit Observations and Recommendations

13. Due from Officers and Employees in the amount of P482,013 as of December
31, 2013 remained uncollected/outstanding.

13.1 The account Due from Officers and Employees showed the following details:

Code Description Amount

123-003 Death Contribution P113,333.57
123-001 GSIS Accident Insurance 173,491.56
123-005 RATA Disallowance 47,568.50
123-006 Regional Centers 33,208.46
123-002 Telephone Calls 114,411.11
TOTAL P482,013.20

13.2 Our verification and inquiries from the Financial Services/Accounting Division,
as well analysis of the account, disclosed the following:

49
 a. NEA advanced the employees’ contribution/pledge of P200 each
when a member of the employee’s family dies, which are
deductible from the employees’ monthly salary.

b. Moreover, the following check disbursements, which are in the

nature of advance payment, were made by NEA in favor of the
GSIS covering the Group Personal Accident Insurance of its
employees:

Check No. Date Amount

42410036 March 6, 2013 P 60,144
31985186 August 12, 2010 59,304
29748457 June 15, 2009 58,968
P178,416

c. Part of the account balance in the amount of P114,411.11 pertained

to employees’ personal telephone calls which remained
unsettled/uncollected from the concerned employees.

13.3 We find this as neglect on the part of the officer in-charge of this account for
failure to bill and include the amounts as a payroll deduction from the salary
of the employees concerned.

13.4 We recommended that NEA Management:

a. Stop the practice of advancing the donation/pledges of NEA

employees for their death contributions and the employees’
premiums for the GSIS Group Personal Accident Insurance; and

b. Immediately effect payroll deductions for the uncollected long

outstanding balances from employees thru payroll deductions.

13.5 Management informed that the legal basis for the payment of death
contributions to NEA employees’ family members, and subsequently
deducted from the General Payroll are (1) NEA’s Program on Awards and
Incentives for Service Excellence (PRAISE) as approved by the Civil Service
Commission on 2005 and (2) Policy on Death Contributions.

13.6 Further, they commented that they had been remitting in behalf of its
employees the deductions for GSIS – Group Personal Accident Insurance
which was deducted from the General Payroll ahead of the remittance:

Payroll Month Date of Remittance

Feb. 2013 March 6, 2013
Feb. 2010 August 12, 2010
Feb. 2009 June 15, 2009

Management commented that they are not granting personal cash advance
for the accident insurance of its employees but rather acts only as
collecting/remitting “agent”.

50
 For the death contributions, they will strictly monitor the collections.

13.7 As a rejoinder, Management may be correct in stating that at present they are
already deducting in advance the personal group insurance of its employees.
The amounts referred to in this audit observation are those that were
disbursed by NEA in 2009, 2010 and 2013 and still not collected from the
employees as of December 31, 2013.

14. Gender and Development Plan

14.1 Subsidiary ledger for GAD account showed a balance of P43,938.75

representing total expenses incurred as of December 31, 2013. However,
per GAD Accomplishment Report (GAD AR), the total actual cost/expenditure
incurred for the whole activity is P109,693.70 or a difference of P65,755.02 as
against the book balance.

14.2 Likewise, expenses not in accordance with the GAD Plan in the amount of
P29,942.25 were also noted. Verification of records showed that some of the
expenses paid/incurred were not in accordance with the Philippine
Commission on Women-endorsed Plan (PCW). Below is the breakdown:

Date Payee Particulars Amount

2-28-13 A.B. Suasi Professional fee for Zumba 3,000.00
dances instructor
5-04-13 B.Reyes Catering Meals during meeting re: 2,415.00
Services vaccination of Anti-flu
5-28-13 E.L. Morales Medicines- included in the 2,170.00
emergency purchase of various
office supplies spare parts &
other misc. items
7-04-13 Rosa Pharmacy, Cost of various medicines for the 22,357.25
Inc. use of Wellness Center for the
whole year of 2013
Total 29,942.25

14.3 Out of the P0.612 million or 5% of NEAs approved budget of P12.233 million,
P0.500 million was only appropriated for GAD Plan & Budget. Per NEA’s
GAD AR, the total actual cost/expenditure incurred was only P109,693.70,
showing a difference of P390,306.30.

14.4 We recommended that NEA Management:

a. Require the Accounting Department to reconcile their records

with the GAD Accomplishment Report to correct the
discrepancy; and

b. Refund the amount of P29,942.25 which was not in accordance

with the GAD Plan as endorsed with the Philippine Commission
on Women otherwise, a Notice of Disallowance will be issued.

51
 14.5 Management informed that the expenses were from OSEC’s accomplishment
and were not coordinated to the accounting department. OSEC identified
those expenses as GAD related, but based on the actual accounting record,
these were charged to training expenses.

F. Compliance with Tax Laws and GSIS Law:

For the CY 2013, the NEA complied with the Bureau of Internal Revenue (BIR)
Regulations and of the Government Service Insurance System (GSIS) law by regularly
withholding taxes from the employees’ salaries and wages and deducting the
mandatory deductions for employees’ GSIS life and retirement insurance premiums
and remitting the same to BIR and GSIS, together with the NEA’s counterpart thereat.
The employees’ withholding taxes and GSIS premiums deducted for the month
December 2013 was remitted as follows:

a. BIR – the taxes withheld for the month of December 2013 amounting to
P4.746 million was remitted to BIR on January 14, 2014 as evidenced by
deposit slip dated January 15, 2014 for the account of the BIR.

b. GSIS – the GSIS Social Insurance Contributions premium for both the
employees and NEA for the month of December 2013 amounting to
P2.121 million was remitted to GSIS on January 10, 2014.

G. Statement of Suspensions, Disallowances and Charges

The status of audit suspensions and disallowances as of year-end is shown below. No

Notices of Charges were issued.

Audit Action Beg. Balance, Issued Settled Ending Bal.,

Jan. 1, 2013 Dec. 31, 2013
Suspensions 7,370.00 0 7,370.00 0
Disallowances 697,200.81 0 0 697,200.81
TOTAL 704,570.81 0 7,370.00 697,200.81

52