DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT
NATIONAL CAPITAL REGION (FO- NCR)
TEMPLATE 2 - Overall Audit Strategy (FY2015 audit)
Purpose: To identify preliminary decisions on the focus of the audit including the objective, scope,nature, timing, direction and materiality of the audit.
Issues to Consider
Describe the factors and events that were
observed and noted
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Financial Reporting Risk –
Risk that the financial
statements of the agency
might not be presented fairly
due to incorrect
interpretation of the new
framework involving complex
matters.
None
Yes/No
1 Characteristics of
Engagement
1.1 Reporting Framework
(a) What is the financial reporting framework
used to prepare the financial statements, (e.g.
general purpose such as IFRS or IPSAS or
specific purpose)? If a specific purpose
framework is used, consider the evaluation of
its suitability carried out in prior years
The Financial Statements of the DSWD-NCR are
prepared in accordance with the Philippine Public
Sectors Accounting Standards (PPSAS) as required
by COA through issuance of COA Resolution No.
2014-003 – Adoption of the Philippine Public Sector
Accounting Standards. ; COA Circular No. 2014-003
and COA Circular No. 2015-002.
Yes
(b) Are there any regulations or laws which have
an impact on the reporting framework?
None
No
There is a need to determine whether the
accounting staff of the agency is
knowledgeable in PPSAS. This can be
confirmed through analysis of prior year
findings related to accounting errors (Section
3.2 below) and observations for the current
year. This will form part of the considerations
during the risk assessment.
None
1.2 Reporting requirements
(a) Are there any entity or industry specific
reporting requirements set by law,
regulation or other authority?
1.3 Expected Audit Coverage
(a) Does the entity have more than one division
to be audited at separate locations? Consider
significance, risk and extent of control
None
No
None
None
The agency has nine residential care facilities three
training and rehabilitation centers located in
separate locations within Metro Manila. They
Yes
The audit team will consider the materiality
of transactions involved in each centers and
will be considered in the design of audit
procedures.
None
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
exercised at those locations.
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
operate thru cash advance from the DSWD-NCR.
(b) What is the control relationship between a
parent and any components that might affect
consolidation procedures?
The agency has nine residential care facilities three
training and rehabilitation centers located in
separate locations within Metro Manila. They
operate thru cash advance from the DSWD-NCR.
No
None
None
(c) Are components audited by other auditors?
No
No
None
None
(d) Is there a need for specialized knowledge due
to the nature of business or activities carried
out?
None
No
None
None
1.4 Reporting Currency
(a) What was the reporting currency used?
Philippine Peso
No
None
None
(b) Is there a need for currency translation?
No
No
None
None
1.5Entity’s use of service organisations
(a) Does the entity use any service organizations
to process transactions (e.g. consider the
impact of centralized government processing
on the financial statements of the audited
entity)?
No service organization was hired to process the
entity’s transactions. The agency, however, hired
contract of service individuals thru MOA doing
functions of property custodianship, accounting,
budgeting services.
No
None
None
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
(b) How can the auditor obtain evidence NA
concerning the design or operations of
controls performed by these service (or
external) organizations?
1.6 Reliance on work of the Internal Auditor
(a) Is there an internal audit function?
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
No
None
None
Internal Audit unit does not exist in the DSWD-NCR.
Yes
Documentation of the testing of controls
(TOC) will solely be based on the audit team’s
work
None
Yes
Yes
Audit team will assess the continuing
relevance of the audit evidence obtained
from the previous audit. Relevant evidence
will form part of current year documentation.
None
(b) Are reports and working paper files prepared
by the Internal Auditor?
(c) Is there segregation of duties in relation to
the Internal Audit function?
(d) Is there an Audit Committee or other similar
organisation that contributes to the
independence of Internal Audit?
(e) Is there the potential to place reliance on the
work of Internal Audit?
1.7 Reliance on audit evidence from prior years’
audits:
(a) Have previous audits been conducted on this
entity?
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Also, PY working paper will be considered in
performing risk assessments.
(b) Is there evidence from prior years’ audits that
can contribute to risk assessment
procedures?
These are the contracts entered by the DSWD-NCR
with the suppliers/contractors in case of
infrastructure projects/service providers, audit
working papers, procedures manuals and other
permanent files.
Yes
(c) Does the audit team intend to rely on audit
evidence from previous audits to reach
conclusions on the effectiveness of internal
control in the current audit?
Yes
Yes
Accounts, reports and other data are prepared
manually.
No
No need for special procedures/software for
the audit and validation of electronic
evidence
None
NA
No
None
None
1.8 The effects of Information Technology:
(a) Are the accounts prepared electronically or
manually?
(b) If records are electronic, how will the audit
team access data or use computer assisted
audit techniques?
Audit team will assess the continuing
None
relevance of the audit evidence obtained
from the previous audit. Relevant evidence
will form part of current year documentation.
Also, PY working paper will be considered in
performing risk assessments.
There were no tests of controls performed in None
prior years, thus, initial assessment will only
be limited to prior year’s findings involving
weakness of internal controls. These will be
analyzed in conjunction with the result of
assessment of entity level controls and
walkthrough of controls.
Issues to Consider
Describe the factors and events that were
observed and noted
Implications for
Detailed Audit
Planning
Yes/No
1.9 Availability of data and key personnel:
(a) Has the audit team ensured that key
personnel and data of the entity will be
available at the planned audit dates?
The State Audit Code of the Philippines (P.D.1445)
required the agency to submit to COA trial balances
and all other supporting documents. However,
based on previous audit, there were documents
requested that were not presented for audit or late
submission/presentation of required documents.
(E.g. PY 2014 Report of Physical Count of Property,
Plant and Equipment)
2. Reporting Objectives
2.1 Entity’s timetable for reporting
(a) Is there a statutory deadline for reporting the Per Section 43 of PD1445,“A report of audit for each
financial status of the audited entity?
calendar year shall be submitted on the last
working day of February following the close of the
year.”
Per General Appropriations Act FY2015, the deadline
for submission of Annual Audit Report is June 30.
(b) If so, what is that date and when will the
audit have to be completed to meet that
date?
Based on the previous year (2014), date of
transmittal of ML to the head of the agency was June
30, 2015.
For CY2015 ML, it will be completed on June 30,
2016.
Explain Implications for Detailed Audit
Planning
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Yes
During the entrance conference, the audit None
team shall present the lists of documents (i.e.
FS, SLs, contracts, financial and physical
plans, process manuals etc.) necessary for the
audit and the corresponding deadlines for
submission.
Set appointment with key personnel for
inquiries/interviews and to discuss
issues/findings with them.
Yes
To be able to meet the set deadline, the audit None
team will start on November 2015 up to
March 1, 2016.
Yes
The Supervising Auditor and Audit Team
Leader shall closely monitor the progress of
audit work to ensure the timely completion
of the audit engagement.
To be able to meet the set deadline, the audit None
team will start early on November 1, 2015
and the second half on January 1 to March
31, 2016.
The Supervising Auditor and the Audit Team
Leader shall closely monitor the progress of
audit work to ensure the timely completion
Issues to Consider
Describe the factors and events that were
observed and noted
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
of the audit engagement.
(c) What is the timetable for completing the
audit?
The audit will be performed on a continuous basis
from November 2015 to March 31, 2016
2.2 Communication
(a) Meet with management and those charged The SAI Philippines does not have the practice of
with governance to discuss nature, timing and conducting initial conference with the management
extent of audit work;
regarding the discussion of (1) nature, timing and
extent of audit work (2) form, timing and expected
(b) Type and timing of reports and other general content of communications and (3) status of
communications. (Document expectations for audit work were not discussed and documented
before the audit engagement.
communications to the entity).
Yes
Timetable will be structured as follows:
1. Planning phase – November 2015
2. Execution phase – December 2015 to
February 2016
3. Conclusion/Reporting – March 31,
2016
None
Yes
Audit Team may conduct Initial Conference None
and/or any other meetings to discuss matters
relevant to the audit and document the
discussions through minutes of the meeting,
if so warrants, during the planning phase in
November 2015.
Yes
Agency Audit Workstep details the timelines None
set for the planning, execution, reporting/
reviews of Annual Audit Reports duly
supported with audit working papers and the
submission/transmittal of reviewed audit
reports to the auditee.
(c) Document expectations agreed to with
management to communicate the status of audit
work throughout the engagement.
(d) Document expectations for communications
among members of the audit team to discuss the
expected types and timing of reports, nature and
timing of team meetings and review of work
performed.
There
are
written
instructions
and
memorandaissued by the Cluster Director and the
concerned Supervising Auditors/Audit Team Leaders
for the status of audit per engagement. Informal
discussions among members of the audit team and
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Supervising Auditor/Audit Team Leaders are also
being done.
(e) Are there any expected communications with
third parties including statutory or contractual
reporting responsibilities arising from the audit?
3. Significant Factors
3.1 Determine materiality
(a) Determine overall planning materiality for the
audit using the SAI’s guidance (supplement
with guidance notes at paras. 2.11-2.25).
Document the process used and the
materiality established for the audit.
(b) Determine performance materiality for the
audit using the SAI’s guidance (supplement
with guidance notes at paras. 2.11-2.25).
(c) Document the process used and the
performance materiality established for the
audit
(d) Identify significant components and material
classes of transactions, account balances and
disclosure that may require establishment of
materiality below the overall planning
materiality. Document those items and the
related materiality and performance
Not applicable
No
None
None
Overall Materiality is set at P68,187,055.47 based
on ½ of 1% of total assets. Please refer to Annex 1
for details in choosing the appropriate basis and
percentage used in the calculation.
Yes
Since not all the accounts identified in
Template 7 (Linking Risk and controls at the
assertion level) will be included in the design
of audit procedures, those identified should
be filtered to only those items that are
considered significant using quantitative and
qualitative aspects. In terms of quantitative
aspect, we will based on the threshold set at
60% of the overall materiality or
P40,912,233.28 (Performance
Materiality/Tolerable Error).
None
No
None
None
We set our performance materiality at 60% of
overall materiality – P40,912,233.28. Please refer to
file Annex 1 for details of performance
materiality/tolerable error computation.
NA
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
materiality.
(e) Determine materiality for any components
and where applicable communicate to
auditors of those components.
3.2 Material misstatement
(a) Based on knowledge of the entity and
information gathered to date, make a
preliminary identification of areas that may
be subject to risk of material misstatement
(b) Assess and document the impact of the
assessed risk of material misstatement at the
overall financial level on direction,
supervision and review of the audit.
NA
No
None
None
Prior year findings that are expected to still exist in
the current year are considered in the initial
assessment of areas with risk of material
misstatements: These are as follows:
- Cash and record management
- Granting and Liquidation of cash advances
- Preparation and Maintenance of Cash
Disbursement Records
- Fund transfers
- Unreliable balances of PPE accounts
- Unreliable balances of inventory accounts
These items are considered to be high risk items
that will be given focus in the planning of the audit.
Please refer to Annex 2 for summary of prior year
findings.
Yes
More experienced audit staff will be assigned
to those areas that are considered high risk
based on the initial assessment of the
accounts. These accounts will be given
priorities during the review.
Reconciliation - Risk that the
Agency’s financial statements
might not be fairly presented
due to the delay in the
preparation of reconciliation
of accounts.
Prior year findings that are expected to still exist in
the current year are considered in the initial
assessment of areas with risk of material
misstatements: These are as follows:
Yes
Employee
Fraud
(Financial/Control Risk) Possible
loss
or
misappropriation
of
unutilized cash advance,
caused by non appearance of
the beneficiaries during the
scheduled pay out, still in the
hands of the SDO due to late
liquidation/refund of unused
fund.
More experienced audit staff will be assigned Refer to above.
to those areas that are considered high risk
based on the initial assessment of the
accounts. These accounts will be given
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
-
Cash and record management
Granting and Liquidation of cash advances
Preparation and Maintenance of Cash
Disbursement Records
- Fund transfers
- Unreliable balances of PPE accounts
- Unreliable balances of inventory accounts
These items are considered to be high risk items
that will be given focus in the planning of the audit.
(c) Document the mannerin which the The briefing forms part of the supervision and
engagement team is briefed on the need to direction of the team leader to the members of the
maintain a questioning mind and to exercise team.
professional and evaluating audit evidence.
(d) Document discussion of matters that may
affect the audit with other SAI personnel
responsible
for
performing
other
engagements to the entity.
3.3 Internal Controls
(a) Consider the results of previous audits that
involved evaluating the operating
effectiveness of internal controls including
the nature of identified deficiencies and
action taken to address them.
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
priorities during the review.
No
None
None
Not applicable. Same team is assigned to perform
the other audit streams.
No
None
None
There were no tests of controls performed in prior
years. However, there were deficiencies noted in
2014 related to internal controls as follows (lifted
from 2014 ML):
- Inadequate safeguard for cash and other
accountabilities
- Non/inappropriate
Preparation/Maintenance of Cash
Disbursement Records and Subsidiary
Ledgers for SDOs
- Unauthorized duties/functions of
accountable officer (collecting officer)
- Lack of control in the grant of multiple and
excessive cash advances for program
Yes
In conjunction with the result of assessment
of entity level controls and walkthrough for
the possible reliance on internal controls,
appropriateness of full substantive testing
will be assessed, depending on its nature, for
the areas affected by the enumerated
deficiencies such as those related to cash,
inventories and PPE.
Employee Fraud - Possible
loss or misappropriation of
unutilized cash advance,
caused by non appearance of
the senior citizens during the
scheduled pay out, still in the
hands of the SDO due to late
liquidation/refund of unused
fund.
Reconciliation - Risk that the
Agency’s financial statements
might not be fairly presented
due to the delay in the
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
implementation
Delayed liquidation of cash advances
Delayed preparation and submission of
BRS/non adjustment of BRS reconciling
items
- Failure of the agency officials to strictly
monitor the liquidation of inter agency
receivables
- Failure of management to compel erring
recipients thru possible legal means to
settle long overdue fund transfers to
NGOs/POs
- Un-updated stockcards/ delayed recording
of issuances due to late
preparation/submission of Monthly Report
of Supplies and Materials Issued
- Non-submission of RCPPE/nonreconciliation of PPE/incomplete and unupdated PPELCS and PCs
As presented in 2014 ML for 2013 recommendation
related to control deficiencies (Ref: Items
2,3,8,11,13,14), there were 20 recommendations
issued. Status of implementation is presented
below:
 Fully Implemented – 9
 On-going Implementation – 2
 Partially Implemented – 4
 Not Implemented – 5
preparation of reconciliation
of accounts.
-
(b) Is there evidence that management seriously
considers control deficiencies?
As presented in 2013 ML for 2012 recommendation
related to control deficiencies (Ref: Items
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Yes
In conjunction with the result of assessment
of entity level controls and walkthrough for
the possible reliance on internal controls,
appropriateness of full substantive testing
will be assessed, depending on its nature, for
the areas affected by the enumerated
deficiencies such as those related to cash,
inventories and PPE.
No risks identified so far but
will depend on the result of
assessment of entity level
controls.
Issues to Consider
Describe the factors and events that were
observed and noted
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
(c) Consider evidence of management’s
commitment to the design, implementation
and maintenance of sound internal controls,
including evidence of appropriate
documentation of such internal control.
(d) Consider the impact of the volume of
transactions which may determine whether it
is more efficient for the auditor to rely on
internal control.
(e) Consider the importance attached to internal
control throughout the entity to the
successful achievement of its objectives.
3.4 Significant issues
(a) Consider the impact of significant
organizational developments affecting the
entity such as changes in information
4,5,6,8,9,10,11,13,14,16,17,18,21,22,24,26), there
were 49 recommendations issued. Status of
implementation is presented below:
 Fully Implemented – 36
 On-going Implementation – 3
 Partially Implemented – 6
 Not Implemented – 4
Based on the summary above, the team concluded
that the management considers control
deficiencies.
As part of its development, the management
created a position for Management and Audit
Analyst. However, its functions differ from that of
the internal audit.
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
Yes
This will be considered in the assessment of
entity level controls as part of control
environment.
No risks identified so far but
will depend on the result of
assessment of entity level
controls.
Although the agency only covers the NCR, and
considering the size of the audit team, the major
programs and projects of the agency made it
difficult to review the details of all the transactions
of the agency
Yes
No risks identified so far but
will depend on the result of
assessment of entity level
controls.
As noted in the previous findings related to control
deficiencies, a sound internal control is critical for
efficient and effective use of government funds for
the implementation of programs and projects of
DSWD.
Yes
If based on the result of assessment of entity
level controls and walkthrough, the team
concluded that the team may rely on
controls, testing will be designed for all the
relevant controls that may minimize the
extent of substantive procedures to be
performed.
This will be considered in the assessment of
entity level controls considering the five
elements of internal control.
None
No
None
None
No risks identified so far but
will depend on the result of
assessment of entity level
controls.
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
technology and operation’s processes.
(b) Consider significant developments such as
changes in industry regulations and new
reporting requirements.
(c) Consider significant changes in the applicable
financial reporting framework, such as
changes in accounting standards.
None
No
None
None
The PPSAS was adopted/implemented only for CY
2014 financial reporting.
No
None
(d) Consider other significant relevant
developments, such as changes in the legal
environment affecting the entity.
4. Resourcing
None
No
The accounting staff may not have attended
the training on PPSAS, hence, may not be
knowledgeable in applying PPSAS infinancial
reporting.
None
The team has no need to use specialized
software for the conduct of the audit since
DSWD is using manual system in processing
its transactions.
None
None
4.1 Assigning Resources
(a) Are there particular qualifications or levels of
experience staff need to possess?
(b) Are personnel with special skills/ expertise
needed (e.g. IT, Finance, Engineering)?
No
No
No
As stated in Section 3.2 above, more
experienced audit staff will be assigned to
those areas that are considered high risk
based on the initial assessment of the
accounts. These accounts will be given
priorities during the review.
(c) What hardware and software resources are
needed for the audit?
None
(d) Are experienced team members assigned to
the areas with the highest risk of material
misstatement?
Yes
4.2 Amount of resources
(a) How many staff members will be needed?
Two members. One State Auditor II and one State
Auditor I
Yes
Same team will be engaged in the audit. Since
the number of team members in previous
None
Describe the factors and events that were
observed and noted
Issues to Consider
Implications for
Detailed Audit
Planning
Explain Implications for Detailed Audit
Planning
Yes/No
(b) Was the previous year’s allocation of staff
sufficient?
No
(c) How long did it take to complete the audit in
the previous year?
(d) Are the necessary IT resources available?
Six months including Performance and Compliance
Audit
(e) What additional costs might be incurred?
Yes
Implications for risk of
material misstatements (to
be carried forward to
Template 6 – Risk Register)
year was insufficient that caused work during
weekends/holidays, the audit for the current
year will start early – the team will start
interim procedures in November 2015.
None
4.3 Timing
(a) Are there sufficient and available resources to
meet the timing requirements?
Yes, considering the early start of the current year
audit
Yes
The team will design interim procedures and
will also consider whether it is appropriate to
test controls to minimize some of the year
end substantive procedures
None
Yes
Reviews, especially for items considered as
high risk, will be included in the activities in
the time allocation. Weekly meetings will be
held to facilitate the monitoring of the
progress of the audit whether additional time
should be allocated for specific procedures or
there is a need to reduce the time allotted for
areas with low risks.
None
(b) When will resources be deployed? Such as
whether at an interim audit stage or at key
cut-off-dates.
4.4 Management of resources
(a) Have you considered the allotment of time for
the periodic review of audit work?
November 2015
Yes
No
have to be completed?
Based on the level of risk of accounts handled by
(c) How will resources be managed, directed and
the audit member
supervised?
In practice, weekly meeting
(d) When will team briefing and debriefing
meetings be held?
Conclusion:
In my opinion, the overall audit strategy provides appropriate direction to focus the risk assessment procedures and design of further audit.
(b) Will an engagement quality control review
ANNEX 1
Materiality Template
MATERIALITY TEMPLATE
Part II – MATERIALITY AND TOLERABLE ERROR COMPUTATION
Auditee
Department Of Social Welfare And Development – National Capital Region
Audit Date
December 31, 2015
Prepared By
Reviewed By
Approved By
A.
COMPUTATION OF MATERIALITY
1. Understand the Auditee’s Views on Materiality
Decribe the Auditee’s view on materiality and the underlying rationale/computation.
Based on the nature of the projects/programs of DSWD – NCR which constitutes
significant portion of the Philippine Budget, execution is done though assistance of its
implementing partners (Local Government units, GOCCs, etc.). This causes significant fund
transfers to those agencies which form part of the “Due from...” accounts in the balance
sheet. There were also significant findings related to other balance sheet accounts such as
Cash, Inventories and PPEs. Thus, the balance sheet accounts are believed to be the
financial statement measure most important to users of the financial statements.
2. Determine the sensitivity of the accounts.
Generally, the more sensitive the account, the lower the materiality level.
Very Sensitive, Sensitive and Not Sensitive accounts should be selected for
Moderate and Low Risk, respectively.
accounts identified as High,
ANNEX 1
Materiality Template
3. Identify the Most Appropriate Materiality Benchmark
a. Select the most relevant materiality benchmark (check one):
Measurement Percentage
Degree of Sensitivity
Very
Base Figure

Sensitive
Sensitive
Sensitive
Total expenditures
½%
½-2%
2%
Total revenues
½%
½-2%
2%
Turnover (Sales)
½%
½-2%
2%
Normalized operations surplus
¼%
¼%-½%
½%
Total assets
½%
½-1%
1%
Net Assets or Equity
1%
1-2%
2%
b. Indicate the benchmark amount (monetary value).
Php 13,637,411,093.94
c. Indicate the source of the benchmark (check one):
Prior year financial statements

Not
Current year projection (indicate date below)
Computation (show below)
Other (describe below)
As at June 30, 2015
ANNEX 1
Materiality Template
d. Indicate the reason for the benchmark selection (check one):
Agency is operating under normal circumstances
Agency with volatile operating surplus
Agency is operating at breakeven levels

Agency is a non-profit entity
Agency has significant one-time (unusual) revenue or expenditure during the
audit year
Agency operating losses
Agency does not report earnings ( non-profit organizations and government entities
)
Employee benefit plans
Others (please indicate)
4. Determine the Measurement Percentage
a. Materiality measurement percentage:
½ of 1%
b. Indicate the reason for the percentage.
The team has used the conservative approach in choosing the appropriate percentage for
overall materiality computation with the following considerations:
-
High Risk. DSWD is included in the top agencies with the highest budget
ANNEX 1
Materiality Template
-
allotment, thus, susceptible to public scrutiny
Qualified Opinion was issued in the consolidated financial statements of DSWD –
Main and all regional offices including NCR
There were significant accounting errors and deficiencies noted in the previous
audit
5. Calculate Materiality
Measurement
Percentage
Benchmark Amount
(from Step 3.b.)
13,637,411,093.94
B.
Materiality
(from Step 3.a.)
X
½ of 1%
Amount
=
68,187,055.47
COMPUTATION OF TOLERABLE ERROR
1. Determine the Number of PAJEs and PRJEs Based on Prior Year Experience
None
2. Determine the Total Monetary Amount of PAJEs and PRJEs Based on Prior Year Experience
P0.00
Include support for Steps 2 and 3
Not applicable
ANNEX 1
Materiality Template
3. Calculate the Total Expected Error as a Percentage of Materiality
Expected Error
Materiality
(from Step 2)
Amount
0.00
/
68,187,055.47
Percentage
=
0.00%
4. Determine the Tolerable Error Percentage
Tolerable Error Matrix
Column 1
Column 2
Expected Number of PAJEs
Based on Prior Year
Experience (from Step 1)
Total Expected Error as % of
Materiality (from Step 3)

Column 3
Tolerable Error %
0–2
Not applicable
3–5
up to 40%
40%
over 40%
25%
up to 40%
25%
over 40%
15%
6 or more
60 – 80%
5. Calculate Tolerable Error
Tolerable Error %
Materiality
(from Step 4 Column 3)
Amount
60%
X
68,187,055.47
Tolerable Error Amount
=
40,912,233.28
ANNEX 2
Prior Year Findings
CY 2014 Audit Findings
1. The lack of proper training in the discharge of duties as accountable officers (AO), as required under Paragraph
6.1 of COA Circular No. 97-002, caused the (a) inappropriate handling of cash on hand; (b) prevalent transfer of
funds from one officer to another; (c) unused cash advances not refunded; (d) inadequate safeguard for cash
and other accountabilities; and (e) non-reconciliation daily of cash on hand with CDR balance, which posed risks
of possible loss/misuse of government funds or the unauthorized use for personal purposes as well as these may
result to inaccurate information on covering financial reports.
2. Petty Cash granted to two SDOs are 68.16 and 51.77 percent in excess of the average monthly recurring project
requirements of the Center and the Pantawid Program of the FO, contrary to Paragraph 4.3.1 of COA Circular No.
97-002, thus, it did not only tie up the regional office fund for a longer period, which could have been used for
other priority activities, but it also exposed the cash to possible risks of loss to theft or misuse for personal and
other purposes.
3. The lack of proper training in the discharge of their duties as SDOs, four AOs did not prepare/maintain their
respective Cash Disbursement Records (CDR) while six improperly/inappropriately recorded the daily
transactions/disbursements in the CDR, thus, rendered difficulty in the establishment of the cash accountability
of the SDO/AO at the time of cash examination and posing risk to possible misuse of government funds
4. Five Property Custodians were acting as Special Disbursing Officers and one SDO is also acting as Collecting
Officer but were not appropriately bonded while one Center Head was designated SDO at the facility care
centers but not bonded contrary to Section 101(2) of PD 1445 and Paragraphs 4.6 and 5.1 of Treasury Circular
No. 02-2009 dated August 6, 2009, thus, the concerned AOs are not fully insured for the faithful performance of
all duties imposed upon them by law.
5. The AO is acting as Collecting Officer in the absence of an authority, thus the objective of sound internal control
on proper execution of transactions and events is visibly defeated.
6. Lack of control in the grant of multiple and excessive cash advances to officials and employees for program
implementation towards the end of the year ballooned the unliquidated cash advances as of December 31, 2014
by P34,033,695.76 or an increase by 289.87 percent compared to last year’s balance of P11,740,904.51 which
remained idle in the hands of the accountable officers for several months, thereby exposing government cash to
risks of loss or misuse for personal purposes.
7. Liquidations totaling P78,817,802.37 or 76.66 percent of the total cash advances of P102,809,164.45 granted for
travel and special purpose/time-bound activities were made beyond the reglementary period, with delays
ranging from 15 days to more than one year, due to lack of strict monitoring in the liquidation of outstanding
cash advances and the practice of granting additional cash advance without liquidation of the prior ones.
Settlement of cash advances of P762,610.78 seemed remote since the involved accountable officers are no
longer connected with the government service.
8. Deposited rollback repayments amounting to P10,077,216.07 for the Revolving Settlement Fund under the
Sustainable Livelihood Program was credited by the depository bank to a separate clearing account instead of
taking it up to the pertinent account of the Field Office, thus, understating the year-end balance of
P30,833,320.99 of the account Cash in Bank-LCCA.
ANNEX 2
Prior Year Findings
9. The delayed preparation and submission of BRS and the failure of the Regional Accountant to take up in the
books the adjusting entries for the errors committed in the recording of transactions and the non-adjustments of
the BRS reconciling items during the closing of the books of accounts resulted in the net understatement of the
account Cash in Bank, LCCA by P451,784.15.
10. The failure of the agency officials to strictly monitor the liquidation of Inter-Agency Receivables and to compel
concerned implementing agency officials to submit/furnish the FO officials of their liquidation reports, caused
the significant increase of the year-end balance of Inter-Agency Receivables with aggregate amount of
P438.934M by P164.398M or 59.88 percent as compared to CY 2013 balance of P274.535M.
11. The failure of management to compel erring recipients through possible legal means to settle the long overdue
fund transfers to NGOs/POs caused the accumulation of outstanding year-end balance of P197.017M of the
account Due from Non-Government Organizations/People’s Organizations. Likewise, the reported liquidation of
P4.016M or 2.01 percent is considered minimal for last year’s remarkable unliquidatedbalanceofP199.122M.
12. Prior years’ adjustments not taken up in the books and recorded adjusting entries not appropriately supported
with necessary documents resulted in the overstatement of the year-end balance of P197,017,525.27 of the
account Due from Non-Government Organizations/Peoples Organizations by P230,281.30.
13. The year-end balances of Property, Plant and Equipment (PPE) accounts, amounting to P144.588M, representing
1.08 percent of the total assets of P13.342B, is unreliable due to the (a) non- submission of the RPCPPE for CY
2014; (b) non-reconciliation of PPE balances per accounting records with RPCPPE of CY 2013; and (c) incomplete
and un-updated PPELCs and PCs.
14. The correctness of the reported year-end balances of Inventories totaling P102.876M was unreliable due to a)
unreconciled difference of P64.748M between the accounting records and RCPI in four inventory accounts; b)
unupdated Stock Cards (SCs) and Supplies Ledger Cards (SLCs); and (c) delayed recording of issuances due to late
preparation/submission of Monthly Report of Supplies and Materials Issued (MRSMI) contrary to Sections 491.b
of the GAAM, Volume I and Section 43 of the MNGAS, Volume I.
15. Only P350.860M of the P387.553M fund transferred by the DSWD CO to the LBP was utilized/disbursed for the
payment of grants in FO-NCR for CY 2014 thru the LBP authorized conduits, due to the inadequate validation on
the household qualifications of the grantees of the 4Ps, thus, the unpaid amount of P36.692M remained idle
with the bank and denied the 28,003 or 11.61 percent targeted beneficiaries of the intended benefits.
16. Inadequate validation of identifying 4Ps household qualifications and lack of proper coordination with the DSWD
CO Project Director caused the entry of duplicate names of grantees in the Payroll and 4Ps Database which cast
doubts on the reliability of funds allocated for the payment of grants to the intended beneficiaries.
17. Untimely coordination/close monitoring and inadequate information dissemination (a) delayed the
implementation of the program causing excessive grants of cash advances totaling P90.330M and subsequent
refunds of P35.572M or 39.38percent; ad (b) denied the 3,150 targeted beneficiaries of the program, thus the
objective of providing at least the basic needs of the qualified senior citizens is not totally achieved. Likewise,
unspent cash in significant amount was held by the SDOs from one to three months which expose government
funds to risk of loss and misuse to personal purpose.
ANNEX 2
Prior Year Findings
18. The incapability of the implementing partners to carry out the program on the prescribed period due to untimely
grants/remarkable amount of funds released by the FO and the unliquidated prior years’ fund transfers of
P21.184M, delayed the implementation of the Supplemental Feeding Program in CY 2014, thus, hindered the full
attainment of the goal of the program of improving and sustaining the nutritional status of targeted beneficiaries
within 120 days.
19. Reported GAD expenses in the accomplishment report amounting to P22.453M is inconsistent with the total
disbursements of P2.348M reported by the Budget and Accounting Unit showing a discrepancy of P20.105M
while both reports exceeded the CY 2014 GAD Budget of P.703M by P21.75M and P1.645M. Likewise, the
budgeted funds of P0.703M represent only 0.325 percent of the required five percent amounting to P216.073M
of the total appropriations of P4B. Thus, the targets and the objectives to address the GAD issues were not fully
attained/achieved since majority of the GAD activities were not implemented as planned.