Part I
Executive Summary
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EXECUTIVE SUMMARY
BACKGROUND
Governments around the world consider effective performance management and
reporting system as a vehicle for enhancing public accountability and driving the
achievement of government outcome. In line with this principle, the Philippine
Government, through the Department of Budget and Management (DBM) and
the National Economic Development Authority (NEDA), embarked on projects
to further strengthen accountability mechanisms and improve public expenditure
management. One of the projects that was initiated by the DBM for this purpose
was the Public Expenditure Management Improvement Project (PEMIP). The
objectives of the PEMIP are as follows:
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To enhance aggregate fiscal discipline;
To improve resource allocation; and
To promote operating efficiency at the agency level.
The major components of the PEMIP are as follows:
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Medium-Term Expenditure Framework (MTEF);
Agency Performance Measurement System;
Agency Managerial Flexibility; and
Performance Incentives.
The Philippine Government started to introduce the MTEF and the
Organizational Performance Indicator Framework (OPIF) through the FY 2000
National Budget Call. This was refined in the FYs 2001- 2002 budget calls, with
the introduction of periodic assessment of on-going Programs, Activities and
Projects (PAPs). These projects are subjected to the Sector Effectiveness and
Efficiency Review (SEER). The MTEF, OPIF, and SEER constitute the three
pillars of the Government’s public expenditure management reform program.
Under the MTEF, the budget will be restructured to cover a number of years to
better support the Government’s development strategy and improve technical
efficiency in the sectors by “providing a more predictable resource environment
for program planning and implementation.”
Hand in hand, the concept of performance indicators was introduced through
OPIF. The indicators were intended to be linked to the organization’s
performance in order to encourage government agencies to allocate and/or
reallocate resources towards high priority PAPs. Under OPIF, the appropriate
final output directly linked with the actual organization performance of the
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EXECUTIVE SUMMARY
agencies will be identified and developed. A final output is a good or service
produced or provided by an organization which is consumed or used by an
external client.
Another project of the government which is related to performance reporting is
the Formulation of Performance Indicators and Standards for Development
Administration (FPISDA) Project. This project was undertaken by NEDA in
relation to the paradigm shift in governance which is called “development
administration” covering six areas of concern including, among others, reengineering or streamlining the bureaucracy, privatization and decentralization.
Under the project, NEDA commissioned the Development Academy of the
Philippines (DAP) to formulate performance indicators and standards on the
areas of concern of development administration. These indicators are intended to
monitor and evaluate government’s performance under the new concept of
“development administration”. The ultimate objective of FPISDA is a shift to
performance-based planning, programming and budgeting system.
In line with the government’s efforts to improve public expenditure management
and strengthen accountability, a study on the existing performance reporting
system of selected government agencies was undertaken. Performance reporting
is considered as an integral part of the government’s accountability framework.
Reporting is the final phase of any activity and the resultant reports are
considered to be the windows of accomplishments. For this reason, performance
reports to be useful must be credible. Performance reports of government
agencies are used by different sectors. Internal users or the management use the
report to assess and monitor the progress of a particular activity in relation to its
intended outcome. External users are using the reports for different purposes.
The DBM and legislative bodies need performance reports for budget allocation
purposes. The Office of the President uses the reports for monitoring the
performance of the agency officials and as an input in the President’s State of the
Nation Address (SONA).
The NEDA uses the agency’s reports as basis for assessing the extent of
implementation of socio-economic and development programs of the
government. Other external users of reports are the general public and the
media.
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EXECUTIVE SUMMARY
AUDIT OBJECTIVE
The audit was conducted to assess the efficiency and effectiveness of
performance reporting system of the Product Standards Development and
Promotion program of the DTI giving consideration to the sufficiency of
performance indicators and the reliability, relevance, and completeness of
performance information.
AUDIT SCOPE AND METHODOLOGY
The audit covered the evaluation of performance reports rendered by six (6)
selected medium-sized government agencies for CYs 2001 and 2002 which
include the DTI. The team focused the evaluation on one of its programs, the
Product Standards Development and Promotion, implemented by the Bureau of
Product Standards (BPS). This program was formulated to establish standards for
all local products, test, and/or analyze standardized and non-standardized
products for purposes of certification, and extend technical assistance to
producers to improve the quality of their products. Specifically, the audit
evaluated product testing and certification. For CY 2002, the BPS received an
allotment of P 28.894 million which was fully obligated.
The team considered the following key criteria in assessing the effectiveness of
the performance reporting system:
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Complete and informative reporting
Accurate and reliable reports
Timely submission of reports
Sufficient and appropriate performance indicators
To achieve the audit objectives, the team performed the following:
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Reviewed the existing performance reporting of the DTI and the
BPS insofar as it relates to the Product Standards Development and
Promotion program with emphasis on product testing and
certification.
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EXECUTIVE SUMMARY
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Evaluated the following reports:
 monthly, quarterly, semi-annual and annual reports for CY
2001 and selected months of 2002 of the BPS Testing
Center;
 2001quarterly reports of the Certification Division;
 2001 BPS quarterly and year-end report; and
 DTI published annual report for 2001.
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Conducted interviews with the staff involved in the preparation of
the reports.
Visited the BPS Testing Center to understand the flow of reports and
to verify the validity of the data source.
The audit was conducted from November 18, 2002 to March 31, 2003 in
compliance with COA Office Orders Nos. 2002-518 and 518A dated November
15 and 25, 2002, respectively, and pursuant to Memorandum dated February 13,
2003.
AUDIT CONCLUSION
The existing performance reporting system of the DTI insofar as the Product
Standards Development and Promotion program is concerned as implemented by
the Bureau of Product Standards (BPS) needs improvement. This situation is
partly due to insufficient performance indicators to measure the achievement of
the objectives. The BPS’ primary objectives are to upgrade the quality of
product standards and to protect and safeguard the welfare of the consumers.
The team noted that the reports merely enumerate selected activities and outputs
accomplished during the period without relating such outputs to the program’s
intended results or outcome. This hinders the conduct of an effective evaluation
of the BPS’ performance. The report though, could be considered reliable and
timely as the information contained therein are based on reconciled and
verifiable accomplishment and submitted to the DTI on time.
Considering that reports are the windows of accomplishments and the agency’s
performance is assessed based on what was reported, the BPS should consider
improving the report contents to be reflective of the activities undertaken to
attain its objectives. For this purpose, the team included in the report
recommendations to address these concerns for consideration by the BPS and the
DTI.
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EXECUTIVE SUMMARY
MANAGEMENT’S REACTION TO AUDIT OBSERVATIONS
The audit highlights were forwarded to the DTI Secretary, copy furnished the
Director, BPS on October 16, 2003 for comments. Generally, the management
recognized the existence of the issues raised in the report and resolved to initiate
appropriate steps to improve their performance on reporting system. They
submitted explanations surrounding the existing performance reporting system
which were incorporated in the report, together with the team’s evaluation.
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