EXECUTIVE SUMMARY

A. Introduction

The Social Welfare Administration was formally created by virtue of EO No. 396
dated 13 January 1951. It was renamed DSWD in 1968 by virtue of RA No. 5416,
otherwise known as the Social Welfare Act.

The DSWD’s vision is to have a society where the poor, vulnerable and
disadvantaged individuals, families and communities are empowered for an improved
quality of life. Its mission is to provide social protection and promote the rights and
welfare of the poor, vulnerable and disadvantaged individuals, families and communities.

The DSWD is headed by Secretary Corazon J. Soliman who is assisted by three

Undersecretaries and six Assistant Secretaries. It has 2,569 plantilla positions with 17
FOs and seven Service Offices, namely: Social Marketing; Internal Audit Service;
Financial Management; Administrative; Procurement; Legal and Office of the Strategy
Management.

B. Financial Highlights

The DSWD had a total appropriation of P56.151 billion per RA No. 10155. Total
allotments received amounted to P74.945 billion, broken down as follows:

Source/Nature Amount
( in million P)
Regular Appropriation 55,438.628
Continuing Appropriation 4,632.209
Special Purpose Fund (PDAF, MPBF, Pension Gratuity) 14,009.437
Other Releases (Quick Response, Calamity, RLIP, etc) 864.612
Total 74,944.886

Of the total allotment received of P74.945 billion, P69.411 billion was incurred,
leaving an unexpended balance of P5.533 billion. Details of the sources and application
of funds are presented below.

Particulars CY 2013 CY 2012 Increase (Decrease)

Financial Condition
Assets ₱63,942,902,913 P55,219,992,036.63 P8,722,910,876.37
Liabilities 8,675,982,866.18 5,533,204,296.13 3,142,778,570.05
Government Equity 55,266,920,046.82 49,686,787,740.50 5,580,132,306.32
Sources of Fund
Subsidy from NG - net 68,114,430,534.61 52,023,782,616.81 16,090,647,917.80
Other Income 2,209,868,509.31 1,064,354,513.17 1,145,513,996.14
Total Income 70,324,299,043.92 53,088,137,129.98 17,236,161,913.94

i
 Particulars
Application of Fund
Personal Services
MOOE
Financial Expenses
Total Expenses
Excess of Income over Expenses
CY 2013 CY 2012 Increase (Decrease)
1,178,181,979.77 1,046,381,008.72 131,800,971.05
58,799,740,606.36 41,432,116,847.71 17,367,623,758.65
242,978,413.04 253,840,886.41 (10,862,473.37)
60,220,900,999.17 42,732,338,742.84 17,488,562,256.33
₱10,103,398,044.75 P10,355,798,387.13 (P252,400,342.38)

C. Scope of Audit

The audit covered the review of accounts and operations of the DSWD OSEC and
16 FOs for the period 01 January to 31 December 2013. It was aimed at determining
whether the financial statements (FS) present fairly the Department’s financial position
and results of operations for the year then ended, and at determining the extent of
compliance with existing laws, rules and regulations. To a limited extent, value-for-
money audit was also conducted on some programs/projects of the DSWD aimed at
ascertaining the economy and efficiency in their implementation.

D. Auditor’s Report on the Financial Statements

We rendered a qualified opinion on the fairness of presentation of the FS for

reasons stated in Part I and discussed in detail in Part II of the Report.

E. Significant Observations and Recommendations

Among the significant observations and recommendations, which are also

discussed in detail in Part II of the Report, are summarized below.

1. Cash in Bank, Local and Foreign Currency accounts still included seventeen bank
accounts with total balances of P15.331 million which are considered dormant and
not remitted to the National Treasury. (Finding #1)

We recommended and Management agreed to require the DSWD-OSEC

and FO IX to remit the dormant cash in bank account balances immediately to
the National Treasury or return to the source/donor agency the unutilized cash
from completed projects to prevent accumulation of idle funds in the AGDB.

2. Deficiencies in preparing the monthly BRS and incurrence of unadjusted reconciling

items in the total amount of P15.347 million in five DSWD Offices, have affected the
correctness of cash in bank accounts in the FS. (Finding #2)

We recommended that Management instruct the Accountants concerned

to, among others, review the bank reconciliation statements and identify the
reconciling items so that proper adjustments can be made in the books.

ii
3. Out of the P10.626 billion fund transferred by the DSWD CO to the LBP for the
payment of 4Ps benefits for CY 2013 thru the OTC scheme, only P10.295 billion was
utilized/disbursed as of December 31, 2013, leaving a balance of P330.247 million,
representing unpaid amount intended for beneficiaries in eight regions, P91.929
million of which were unclaimed grants of active beneficiaries in regions IVA, VI,
IX, and CARAGA. (Finding #3)

We recommended that the DSWD Secretary direct the National and

Regional Project Management Office (NPMO/RPMO) Pantawid Directors to
intensify the validation of all unpaid beneficiaries and require prompt reporting
on the status of the beneficiaries in order that the corresponding changes are
made to arrive at a more reliable and accurate database. This will minimize the
occurrence of unpaid grants.

4. Outstanding payrolls for 4Ps beneficiaries in nine DSWD FOs under the various LBP
conduits for CY 2013 had accumulated to P1.619 billion, of which liquidation
documents for the P411.551 million were in the FOs for verification, P844.194
million are still with the merchants, and P364.170 million were unpaid and still with
the conduits. (Finding #4)

We recommended that the DSWD Secretary direct the RPMO, thru the
FO Directors, to conduct regular monitoring of LRs by various LBP conduits to
facilitate timely recording and to intensify the validation of unpaid grantees.

5. Duplicate names for 4,320 beneficiaries in the 4Ps payroll in the amount of P46.502
million for CY 2013 not only resulted in incurrence of additional costs for the double
payment of grants, but also misstated the Cash and Donation accounts. (Finding #5)

We recommended that the DSWD Secretary direct the FO Directors to,

among others, require the 4Ps Focal Person to prepare and transmit promptly to
the CO, thru the Regional Director, the complete and final result of validation of
the double entry or duplicate 4Ps HH beneficiaries so that appropriate action be
made.

6. Refunds of grants in the total amount of P2.459 billion from the LBP for ineligible
beneficiaries and unclaimed grants, representing 6.32 percent of the CCT payroll of
P38.915 billion, were not completely documented to establish the correctness of
recorded returned grants. (Finding #6)

We recommended that Management comply with Section 4(f) of PD No.

1445 by requiring that refunds of ineligible beneficiaries and unclaimed OTC
grants be duly supported with the list of beneficiaries.

7. Outstanding CAs for travel and operating expenses in DSWD Offices were not
liquidated as of year-end, resulting in the accumulation of unsettled balances
amounting to P450.159 million and P83.288 million, respectively. (Finding #7)

iii
 We recommended that the DSWD Secretary direct the concerned
Directors/Accountants to, among others:

a. Stop the practice of granting new/additional CAs to AOs/employees

unless their previous CAs have been accounted for/liquidated (FO IV-B),
and strictly enforce the submission of liquidation documents as soon as
the purpose for which the CA was granted has been served and refund
any excess amount thereof (FO II, IV-B, V, VI, X, XI, CAR, and OSEC);

b. Closely monitor the settlement/ liquidation of CAs by continuously

sending demand letters (FOs II and XI).

8. None and/or delayed submission of LRs and release of additional fund transfers to
IAs with unliquidated balances resulted in the accumulation of outstanding balances
of Due from NGAs/LGUs/GOCCs of ₱2.765 billion, ₱5.388 billion, and ₱2.058
billion, respectively. Approximately 77 per cent, 19 per cent and 11 per cent of the
respective balances are aged over one to ten years. (Finding #8)

We recommended that the DSWD Secretary direct the FO Directors

concerned to, among others:

a. Closely monitor and extend technical assistance to the LGUs having

difficulties in carrying out their DC feeding programs and to follow-up
the customized rules/regulations/guidelines with the GPPB that would
facilitate SFP procurement processes;

b. Demand proper accounting of unliquidated balances of fund transfers to

concerned agencies by requiring submission of LRs to substantiate fund
disbursements in accordance with COA Circular No. 94-013; SFP Focal
Person to coordinate with the LGUs and social worker counterparts to
monitor monthly physical accomplishment to determine whether
programs were implemented and its objectives fully achieved;

c. Stop the practice of granting additional fund transfers unless previous

fund transfers are liquidated to prevent accumulation of balances. (FOs
IV-B, V, IX and XI);

d. Follow up with the NFA the submission of liquidation documents to

facilitate settlement of outstanding balances and ensure that the intended
purpose for the fund transfer has been served; and,

e. Enforce strictly the sanctions provided in the MOA on the refund of

funds transferred and cancellation of the Certificate of Registration in
case of violation of the provisions therein. (FOs IV-B and XIII);

iv
9. The non-liquidation of fund transfers to various NGOs/POs resulted in minimal
settlements and accumulation of account balances of approximately ₱1.108 billion as
of year-end, of which 73.43 percent or ₱813.614 million remained unliquidated for
more than one year. (Finding #9)

We recommended that the DSWD Secretary direct the FO Directors

concerned to, among others:

a. Demand from NGOs/POs the submission of LRs and refund of unutilized

balance, if any, to comply with the guidelines prescribed under COA
Circular No. 2007-001 and the provisions in the MOA;

b. Refrain from granting additional fund transfers, unless previous ones

have been liquidated, to avoid accumulation of unliquidated balances;

c. For the non-operational NGOs whose whereabouts are unknown, retrieve

the names of the incorporators and seek the assistance of the COMELEC
in determining their present addresses and, thereafter, enforce
liquidation/refund of the accounts.

10. Advances of P35.714 million for the procurement of supplies and materials remained
unserved as of December 31, 2013 thus, the accumulation of idle funds to the PS-
DBM and non utilization of the needed supplies and materials for the regular
operations of three DSWD Offices. On the other hand, the DSWD-FO XIII Caraga
did not procure their common-use supplies and materials amounting P5.285 million
from the PS-DBM. (Finding #10)

We recommended that the DSWD Secretary direct the Management of

the DSWD Offices to work closely with the PS-DBM for the immediate delivery
of already paid and needed supplies, equipment, and other services.
Specifically:

a. Supply and Property Section to reconcile periodically with the Finance

Division and the PS-DBM regarding the undelivered office supplies;

b. FO IV-B Supply Officer to refrain from making advance payments for

supplies, materials, equipment, and services to PS-DBM at year-end;

c. Procurement officer in FO XIII - Caraga to closely coordinate with the

PS-DBM on the former’s common use supplies requirements and ensure
to procure the same with the PS-DBM.

11. Control lapses in the accounting and management of inventories have affected the
existence and completeness of recorded inventory accounts’ balances in OSEC and
six DSWD FOs. (Finding #11)

v
 We recommended that the OSEC and FO Directors concerned ensure:

a. The Supply Unit or the Inventory Team: (i) conduct physical count and
prepare the report (RPCI); and, (ii) the Accountant and Property Officer
reconcile their inventory records/reports regularly and effect necessary
adjustments to the Inventory accounts’ balances (DSWD OSEC, NCR,
and FOs VI, IX, X, and XI); and, (ii) prepare and submit report on
issuances of supplies (RSMI) regularly to the Accounting Unit for
recording of issuances of inventories in the books (DSWD OSEC and FO
VI); and,
b. NCR and FOs VI, X, and XI’s Accounting Units maintain supplies ledger
cards on inventory to establish correctness of GL controlling accounts.

12. Control lapses in the accounting and management of PPE have affected the valuation,
existence, and completeness of recorded PPE accounts’ balances in OSEC and ten
DSWD FOs. (Finding #12)

We reiterated our recommendations in prior years and Management

agreed to ensure, among others, the following:

a. Monitor the regular/periodic physical count of PPE, the preparation of

the report (RPCPPE) and submission thereof to COA for verification;

b. Property Officer: (i) prepare the IIRUP for submission to Accounting

Unit as basis for the reclassification of PPE to Other Assets accounts and
to the audit team for verification; and, (ii) cause the immediate disposal
of unserviceable PPE following the requirements of Section 79 of PD 1445
to prevent further deterioration and recover the salvage value from
probable sale of the asset; and,

c. Accounting and Property Units undertake regular reconciliation of their

records and ensure that all discrepancies are immediately investigated,
cleared and adjusted in either records;

13. The practice of utilizing KALAHI-AF GOP counterpart for administrative costs of
other FAPs is not in accordance with DBM-COA-DOF Joint Circular No. 2-97.
Moreover, GOP counterpart was used to pay loan expenditures pending the release of
the loan proceeds. (Finding #14)

We recommended that Management:

a. stop the use of GOP financial counterpart to FAPs with no GAA

appropriation and disburse the same according to its intended use; and,
b. adjust/reclassify the charging of expenses from KC-AF GOP to respective
or appropriate funds, as may be necessary.

vi
14. Valid obligations amounting to P562.397 million were not recorded in the books of
accounts at year end, thus resulted in the understatement of the affected liability and
related expense and asset accounts of DSWD-OSEC. (Finding #15)

We recommended that the DSWD OSEC Accountant record the P1.087

million acquisitions of two servers and, henceforth, issue a memorandum
requiring the submission of all due and demandable obligations for purposes of
recording valid obligations before closing of the books of accounts at year end.

15. Grants amounting to P1.081 billion were paid to 364,636 HH beneficiaries, which
could not be found in the National Household Targeting System-Poverty Reduction
(NHTS-PR) database, thus, resulted in additional cost to the government in the
distribution of CCT. (Finding #16)

We recommended that the DSWD Secretary direct the Pantawid NPMO

Director to; (i) prioritize the poor beneficiaries before inclusion of non-poor
beneficiaries in the 4Ps payroll; (ii) revisit the criteria of poor and non-poor to
consider the very thin boundary such as the income difference of the HH
beneficiaries in setting the threshold; and, (iii) the NHTO Director to provide
viewing access of the NHTS-PR database to the COA Auditors.

16. Validation of Set 1A 4Ps beneficiaries revealed: a) cases of drop-outs; b)

beneficiaries identified as ineligible; c) absence of health centers and lack of health
personnel and other health facilities; and, d) complaints on non-receipt of grants.
(Finding #17)

We recommended that the Management ensure, among others, to:

a. strengthen the monitoring of the program implementation and address

identified gaps/issues that would hinder the success of the program;

b. direct the RPMO to conduct continuous validation of the beneficiaries to

ensure that only qualified ones benefitted from the Program and delist
those who are not considered extremely poor;

c. coordinate with the LGUs without barangay health centers for the
possibility for being covered under the KALAHI-CIDSS program and,
thereafter, coordinate with the DOH to make health services available to
the beneficiaries at all times; and,

d. direct the UFMU Director to act immediately on complaints received on

the non-payments of grants, and to update the beneficiaries’ profile thru
the Beneficiary Update System regularly.

vii
17. Implementation of Sub-Projects (SPs) for CY 2013 revealed unutilized KC-MCC and
KC-AF Funds of P888.385 million and P45.393 million, respectively, as well as
delayed completion of 388 SPs, thus the objectives of the program were not fully
attained. (Finding #19)

We recommended that Management direct, among others, the following:

a. NPMO to adopt measures to strengthen implementation of all planned

SPs to targeted clients’ location in accordance with the workplan and
institute feedback mechanism to address the issues and concerns which
hinder the execution of the projects; and,

b. RPMO and ACT to require the BSPMC to: (i) fast track submission of
requirements as provided in the CBPM to ensure timely release of
community grants; and, (ii) perform resurvey of or update the project
design/specifications/scope of work before the procurement/bidding in
order to avoid additional works or several variation orders during project
implementation.

18. Deficiencies noted during the Validation of SPs include, among others: a) 30 KC SPs
costing P38 million with deficiencies; b) SPs constructed near the danger zone
exposed the project at risk including its beneficiary-users; and, c) Excess purchases of
construction materials that may result to waste of funds. (Finding #20)

We recommended that Management, among others, require:

a. the ACT and BSPMC to immediately correct the defects/deficiencies

noted for the continuity and complete functionality of the SPs for the
benefits of the intended beneficiaries;

b. require stricter conduct of site inspection to determine not only the

accessibility but also the appropriateness of the site before approval of
the SPs and for accountability purposes in case of untoward incidence;

c. the Regional Community Infrastructure Specialist to control and monitor

the purchases and issuances of materials for the sub-projects.

19. Non-payment from inactive beneficiaries prevented the rollback of P498.297 million
funds for re-lending purposes, thus may affect the attainment of project objectives to
reinforce the goal of the project to sustain SKA operations and institutionalize its
presence in the community to improve the socio-economic skills of poor families.
(Finding #21)

We recommended that the DSWD Secretary direct, among others:

viii
 a. the SLP Focal Person to conduct regular/periodic monitoring and
assessment of all SKAs so that problems could be attended to and
addressed at the earliest time, including instances of non-payment and
disbandment of SKAs;

b. the FOs’ Directors to ensure that the PDOs: (i) submit the required
financial reports showing the details of remittances/deposits made by SLP
beneficiaries for proper accounting of funds; (ii) monitor closely the
project implementation to render timely evaluation and assessment of the
operations of the SKAs in order to determine program status and
repayment capability of the beneficiaries; and (iii) adopt stricter
measures in the review of project proposals submitted by applicants for
loan assistance; assess their capability to repay the loans; and come up
with measures to fast track approval of project proposals and subsequent
releases of funds to SKAs/member-beneficiaries, to maximize the
program implementation and fund utilization.

20. A total of 30,438 core shelter units amounting P2.131 billion, out of 36,399 units with
total cost of P2.571 billion, in eight regions were not yet started and/or funds
unutilized due to varying constraints and problems, thus denying the disaster victims/
beneficiaries of the immediate access to decent shelters and exposing construction
materials/resources to possible misuse, losses and wastage. (Finding #23)

We recommended that Management direct the FO Directors concerned

to ensure, among others, that the PMB/Regional Engineer/Shelter Focal persons:

a. supervise and monitor proper implementation of CSAP/MSA programs

to enable the completion and proper utilization of core shelter units;

b. in the case of unfinished/unconstructed units reported in current/prior

years, demand from LGUs concerned to comply with their obligations as
agreed upon in the MOA with the DSWD;

c. require concerned contractors and NASA members to immediately

undertake the completion/construction so that the same could be utilized
by the beneficiaries; and,

d. conduct regular ocular inspection to determine whether project funds are

utilized according to the objectives of the program; and render reports
duly supported with actual accomplishments as well as the status of
unoccupied shelters.

21. Part of Sendong Funds intended for financial assistance and rehabilitation of
victims/survivors was obligated for other purposes not directly related thereto and
only 77 percent out of P449.402 million was actually disbursed as of December 31,

ix
 2013, hence the purpose of the fund as an emergency aid and assistance to individuals
and families affected by Typhoon Sendong was not fully achieved. (Finding #24)

We recommended that Management fast-track the proper utilization of

the fund for a more effective and efficient way of providing aid and assistance to
the Sendong victims. Henceforth, utilization of calamity funds should be pure,
direct, and solely for the intended purpose for which it was created and to cater
the intended beneficiaries.

22. Delays in the payment of social pensions by the LGUs in FO II; lack of coordination
with OSCA and C/MSWDO in the pay-out of social pension; grant of multiple cash
advances, and refunds of unclaimed stipends of P17.024 million in NCR, and
unreleased checks of P3.363 million in FO VI to LGUs deprived the senior citizens of
the timely receipt of benefits due them. (Finding #25)

We recommended that Management:

a. adopt the most cost-effective and efficient mode of social pension

provision, i.e. through Landbank ATM/Cash Card and through cash
advance by a designated SDO as provided in the operational procedure in
the implementation of the SPISC;

b. ensure funds transferred to each LGU are based on the updated and
approved list of verified beneficiaries; and,

c. intensify coordination with C/MSWDO, OSCA, and LGUs with regard

implementation of SPISC, particularly on the schedule of pay outs and
requirements needed, as well as monitoring of the conditions of indigent
senior citizens, which shall serve as basis for subsequent payments.

The audit observations and recommendations were discussed with Management

officials in an exit conference on September 4, 2014. Management comments were
incorporated in the report, where appropriate.

F. Status of Implementation of Prior Years’ Audit Recommendations

The status of implementation of prior years’ recommendations as summarized

below, is also presented in Part III of the report, some of which are also reiterated and
discussed in Part II.

Status Number Percentage

Fully Implemented 16 31%
Partially Implemented 27 53%
Not Implemented 8 16%
Total 51 100%