DPWH ES2017

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EXECUTIVE SUMMARY
A. INTRODUCTION
Under Executive Order (EO) No. 710 dated July 27, 1981, the
Ministries of Public Works and Public Highways were merged for a
more effective and sustained implementation of infrastructure
projects. Under the restructured set-up, the agency was known as
the Ministry of Public Works and Highways (MPWH) with 14
regional offices, 94 districts and 60 city engineering offices, five
bureaus and six service offices, in addition to corporations and
councils attached to the Ministry for administrative supervision. By
virtue of EO No. 124 dated January 30, 1987, the agency was
renamed as the Department of Public Works and Highways (DPWH).
The DPWH functions as the engineering and construction arm of the Government tasked
to continuously develop its technology for the purpose of ensuring the safety of all
infrastructure facilities and securing for all public works and highways the highest
efficiency and quality in construction. It is currently responsible for the planning, design,
construction and maintenance of infrastructure, especially the national highways, flood
control and water resources development system, and other public works in accordance
with national development objectives.
The agency is composed of 9 service offices, 6 bureaus, 6 Unified Project Management
Office (UPMOs). It has also 17 Regional Offices and 181 District Offices. The DPWH is
headed by a Secretary and assisted by seven (7) Undersecretaries.
Name of Official
Position/Designation
Mark A. Villar
Department Secretary
Rafael C. Yabut
Senior Undersecretary for Regional Operations in Mindanao
Ma. Cristina Catalina E. Cabral
Undersecretary for Planning Service and Public-Private Partnership
Karen Olivia V. Jimeno
Undersecretary for Legal Affairs and Priority Projects
Ardeliza R. Medenilla
Undersecretary for Support Services
Emil K. Sadain
Undersecretary for Unified Project Management Office Operations and
Undersecretary for Technical Services
Dimas S. Soguilon
Undersecretary for Regional Operations in Luzon
Roberto R. Bernardo
Undersecretary for Regional Operations in Visayas, NCR and Region IV-B
Gilberto S. Reyes
Assistant Secretary for Technical Services
Elizabeth E. Yap
Assistant Secretary for Support Services
Eugenio R. Pipo, Jr.
Assistant Secretary for Regional Operations in Luzon
Maximo L. Carbajal
Assistant Secretary for UPMO Operations
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As of December 31, 2017, the agency has a total personnel complement of 63,077 inclusive of the
regional and district engineering offices, composed of the following:
Presidential Appointees
Regular/Permanent
Employees
60
69
Legend:
Co-terminus with
the Incumbent
Job Order
TOTAL
15,319
9
Authorized
63,077
16, 568
1,249
Filled-up
Vacant
2,361
45,337
16,330
1,258
B. FINANCIAL HIGHLIGHTS
 Budget Utilization
For CY 2017, the Departments’ total current appropriations amounted
to P669,262,099,554.83. During the year, total allotments of
P662,690,828,096.83 was received, of which P610,933,247,083.19 was
obligated, leaving an unobligated balance of P51,757,581,013.64.
Current Appropriation
Agency Specific
Budget
 566,763,622,014.00
Continuing/
Extended
Total
Appropriation
Automatic
Appropriation Special Purpose Fund
 721,556,394.04
Allotment
 662,690,828,096.83
 8,103,084,375.00
Obligations Incurred
 610,933,247,083.19
 93,673,836,771.79
Unobligated Allotment
(Reverted)
 51,757,581,013.64
 669,262,099,554.83
Included in the current year regular appropriations of P566,763,622,014.00 are the appropriations
from the Special Provisions in the GAA for FY 2017 of the Department of Public Works and Highways
(DPWH) in the amount of P24,840,854,944.00 and Special Provisions in the GAA of other government
agencies amounting to P115,777,514,788.00 intended for the implementation of various
infrastructure projects. The status of fund utilization is shown in the next page.
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Particulars
Appropriations
Allotments
Unobligated
Balances
Obligations Incurred
Special Provisions for the Department of Public Works and Highways
1.
2.
Tourism Road
Infrastructure
Projects
12,365,137,944.00
12,365,137,944.00
12,142,284,613.38
222,853,330.62
Projects
12,475,717,000.00
7,762,927,613.00
4,995,384,265.16
2,767,543,347.84
24,840,854,944.00
20,128,065,557.00
17,137,668,878.54
2,990,396,678.46
Sub-total
Special Provisions from Other Government Agencies
1.
DA
6,463,959,788.00
6,463,959,788.00
5,985,938,739.15
478,021,048.85
 FMR – Road
Networks
5,916,914,788.00
5,916,914,788.00
5,494,026,777.37
422,888,010.63
 Farm-to-Mill
547,045,000.00
547,045,000.00
491,911,961.78
55,133,038.22
109,313,555,000.00
109,313,553,970.00
104,890,178,395.87
4,423,375,574.13
Sub-total
115,777,514,788.00
115,777,513,758.00
110,876,117,135.02
4,901,396,622.98
Total
140,618,369,732.00
135,905,579,315.00
128,013,786,013.56
7,891,793,301.44
2.
DepEd
 Financial Position and Performance
The comparative financial condition and financial performance of the
Department for Calendar Years (CY) 2017 and 2016 are shown below:
2017
Assets
Liabilities
Accumulated Surplus
2016
2017
2016
1,653,479,216,363
1,416,787,022,611
Revenue
2,982,693,073
1,929,642,237
80,889,914,687
76,726,245,016
Expenses
74,115,495,247
62,993,156,151
1,572,589,301,676
1,340,060,777,595
334,708,607,663
263,956,733,621
Surplus
The increases in assets and liabilities were due to the increase in infrastructure projects implemented during
the year, while the increase in revenue and other non-operating income was due to the recognition of
penalties imposed on delayed delivery of goods and services from various suppliers and contractors.
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C. OPERATIONAL HIGHLIGHTS
Accomplishment per MFO
The Department’s reported targets and actual
accomplishments measured in terms of its major final outputs
(MFOs) are as follows:
MFO 1
MFO 1
163.30%
MFO 2
113.90%
MFO 3
Targets
123.30%
Accomplishments
Roads Constructed
Roads Maintained
820.800 km
1,796.690 km
994.466 km
1,717.311 km
MFO 2
Flood Controls
Constructed/Maintained
Bridges Constructed
Roads Paved
317.090 km
414.213 km
1,755.000 proj.
5,626.750 lm
1,999.000 proj.
17,209.098 lm
MFO 3
Airport Roads
Constructed/Maintained
Seaport Roads
Constructed/Maintained
36.210 km
29.573 km
Septage/Sewerage/ Rainwater
Collector Constructed
2,625 units
2,782 units
Legend:
Target
Actual
Tourist Destination Roads
Constructed/Maintained
107.200 km
235.820 km
90.335 km
233.243 km
Note: The reported accomplishments include
completed and ongoing prior year projects,
thus, exceeding the current year targets. The
negative variances under MFO 1 and MFO 3
were attributed to the additional projects
sourced from the fund transfers and
appropriations of other agencies which were
prioritized during the year.
D. SCOPE OF AUDIT
The audit covered the financial transactions and operations of DPWH for the year ended December
31, 2017. The objectives of the audit were to (a) verify the level of reliance that may be placed on
Management’s assertions on the financial statements; (b) determine the extent of compliance with
applicable laws, rules and regulations; (c) recommend agency improvement opportunities; and (d)
determine the extent of implementation of prior year’s audit recommendations.
The Financial Statements (FS) as of December 31, 2017 consisted of the FS of the Office of the Secretary and all
Regional Offices for Regional Agency Fund, Foreign-Assisted Projects Fund, Business Related Fund and Trust
Receipts Fund. The results of audit on the accounts and operations of DPWH Region XII was not included in this
report because the audit reports thereon was not transmitted yet as of this writing. The MVUC fund is not
included in the financial statements presented in this Report.
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E. INDEPENDENT AUDITORS REPORT
The Auditor rendered an adverse opinion on the fairness of presentation of the consolidated
financial statements of the DPWH due to accounting errors and deficiencies enumerated below:
Cash and Cash Equivalents
1.
The year-end balance of the Cash and Cash Equivalents accounts amounting to P11,826,504,815.00 was
incorrect due to the (a) inclusion of unsubstantiated cash account balances aggregating P761,431,637.29;
(b) unrecorded payments, lapsed cash allocations and fund transfers, and other book reconciling items
which overstated the cash accounts by a net amount of P5,959,954.96; and (c) non-submission of Bank
Reconciliation Statements (BRS). (Observation No. 6)
We recommended that Management:
a)
Require the Composite Team to periodically submit its report within the set deadline to monitor the
progress of work being done and the extent of reconciliation being made on the unreconciled
balances; otherwise, initiate administrative action against the members of the Composite Team if
found to be remiss in their duties;
b) Prepare the necessary adjusting entries to correct the recoding errors noted; and
c)
Coordinate with the concerned top officials of the LBP for the release of the bank statements and
immediately prepare the BRS and submit the same to COA for verification.
Receivables
2.
The accuracy and existence of the Receivables account amounting to P17,177,419,231.00 was doubtful
due to the (a) dormant Accounts Receivables and Other Receivables amounting to P6,798,059.01 and
P19,724,913.86, respectively, which are doubtful of collection but for which no allowance for
impairment was provided; (b) unrecorded Receivable-Disallowance/Charges of P8,316,118.62; (c)
unliquidated Inter-Agency Receivables aged over one year amounting to P3,998,686,225.51,
P80,366,243.00 of which pertain to unimplemented projects; and (d) unreconciled difference of
P615,818,003.65 between the DPWH and IA records. (Observation No. 7)
We recommended that Management direct the Accountants concerned to:
a)
Continue sending demand letters to the concerned debtors and consider other legal actions to
enforce collection of the receivables;
b) Assess the collectibility of the receivables in order to provide an appropriate amount allowance for
impairment, and if no available records are found despite efforts to locate the same, request for the
authority to write-off the dormant receivables;
c)
Record the final and executory disallowance and enforce settlement thereof;
d) Strictly monitor the status of liquidation of fund transfers and the implementation of intended
projects, regularly follow-up with the concerned Agency Heads for the prompt liquidation of pastdue accounts and refund of unused/excess fund transfers, and for future projects, refrain from
entering into contracts/Memorandum of Agreement with the identified delinquent government
agencies until substantial liquidations have been made on their unsettled obligations; and
e)
Coordinate with the IAs to reconcile balances periodically.
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Inventories
3.
The Inventory account of P1,383,184,204.00 as of December 31, 2017 was understated by a net amount of
P44,240,903.19 due to the (a) unrecorded issuances of inventories amounting to P13,811,706.82; (b)
erroneous recording of inventory transactions with net amount of P15,658,626.37; and (c) direct recording
of inventory purchases as expense amounting to P37,414,727.72. Moreover, the difference of
P100,806,932.48 between the balances in the General Ledger and Report of Physical Count of Inventories
casts doubt on the existence of the reported inventories. (Observation No. 8)
We recommended and Management agreed to:
a)
Direct the Accountants concerned to prepare the necessary adjusting entries to correct the errors
noted; and
b) Instruct the Supply Officers concerned to promptly submit the RSMIs and update the Stock Cards to
facilitate the recording of issuances and the reconciliation of records between the Supply and
Accounting Divisions.
Prepayments
4.
The Advances to Contractors account of P42,852,844,872.00 as at December 31, 2017 was inaccurate due
to the erroneous/non-recording of recoupments which overstated the account by P2,716,281.30 and
inclusion of unsubstantiated balances aggregating P269,075,940.20 (Observation No. 9)
We recommended that Management:
a)
Require the project engineers thru the Project Monitoring Division/Group and Project Management
Office to submit the Certificates of Completion on completed projects so that the payables to the
contractors can be recorded, net of advances to be fully recouped;
b) Make the necessary adjusting entries to correct the recording errors noted; and
c)
Require the Composite Team to periodically submit its report within the set deadline; otherwise,
initiate administrative action against the members of the Composite Team if found to be remiss in
their duties.
Property, Plant and Equipment
5.
The Property, Plant and Equipment (PPE) balance of P1,577,800,804,463.00 was overstated by
P6,622,798,794.28 due to (a) unrecorded transfers and disposals of PPE of P434,329,562.74; (b) unrecorded
delivered PPE and unbilled completed infrastructure projects costing P549,094,782.32; (c) erroneous
classification of intangible assets, repairs and maintenance expense, and semi-expendable inventories
amounting to P373,144,405.01 as PPE; (d) failure to derecognize completed projects costing
P7,458,027,639.18 that are already in the possession of the recipient agencies and missing PPE amounting to
P40,754,665.55; (e) erroneous/non-recognition of depreciation in the amount of P245,182,601.79; and (f)
completed projects of the MVUC Fund not yet recorded in the books of DPWH-OSEC Regular Agency Fund
amounting to P1,338,790,632.12. Moreover, the non-reclassification of completed infrastructure assets
costing P77,466,393,518.51 from Construction in Progress to the appropriate infrastructure Assets accounts;
failure to recognize impairment loss for unserviceable properties with carrying amount of P29,293,776.19;
difference of P54,788,106,760.60 between accounting and property records; and inclusion of undocumented
balances in the total amount of P49,485,097,876.19 also rendered the reported PPE balance unreliable.
(Observation No. 10)
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We recommended that Management direct the Accountants concerned to:
a)
Prepare the necessary adjusting entries to correct the errors noted;
b) Coordinate with the Monitoring Section to identify completed projects and secure Certificate of
Completion as evidence for the reclassification of CIP accounts to the appropriate assets accounts
and recording of the unbilled portion of contract costs;
c)
Require the concerned offices to prepare the turn-over documents as basis for the derecognition of
assets which were already transferred to the recipient agencies;
d) Maintain updated PPELCs and coordinate with the Property Custodian for updating of PCs and
submission of the IIRUP in order to facilitate the reconciliation of accounting and property records
and assessment of the unserviceable/damaged PPE as basis for the recognition of impairment loss;
e)
Cause the immediate verification of the nature of the unreconciled balances to provide details that
would lead to its proper disposition;
f)
Require the personnel accountable for the missing PPEs to submit their Request for Relief from
Accountability; otherwise, immediately demand the refund of the amount equivalent to the
carrying value of the lost items;
g)
Impose proper control measures to ensure that all property accountabilities are settled prior to
retirement/separation from government service or transfer of the officials/employees; and
h) Investigate why the Accountable Officers were cleared from their accountability upon their
retirement/separation from service, hold civilly and administratively liable officials/personnel
responsible therefor, and enforce collection recovery of receivables from said officials/personnel.
Liabilities
6.
The total reported liabilities as at December 31, 2017 of DPWH amounting to P80,889,914,687.00 was
overstated by P7,957,128,330.89 due to (a) non-reversion of long outstanding/dormant payables
amounting to P8,415,398,206.85 aged more than two years against which no claim has been filed; (b)
unrecorded liabilities for completed infrastructure projects and delivered PPE amounting to
P549,094,782.32; (c) unrecorded direct payments of P90,824,906.36 to contractors/consultants by the
Foreign Lending Institution (FLI); and (d) erroneous recording of inter-agency payables of P2,642,077.60.
The unsubstantiated balances in the Accounts Payable and Inter-Agency Payables accounts totaling
P164,360,370.86 also cast doubt on the accuracy of the reported liabilities as at year-end. Moreover, fund
transfers received from various NGAs and GOCCs remained unliquidated.. (Observation No. 11)
We recommended that Management:
a)
Revert the liabilities that have been outstanding for more than two years against which no claim have
been filed;
b) Direct the Accountants concerned to prepare the necessary adjusting entries to recognize the
unrecorded payables and to correct the other errors noted;
c)
Make representation with the DBM Secretary for the issuance of the NCAAs as basis for recording the
direct payments made by the FLIs;
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d)
Submit to the concerned Source Agencies the liquidation reports for its outstanding fund
transfers and return/remit to the SAs or the BTr as the case may be, any unused funds; and
e)
Continue the analysis of the remaining unreconciled balances and adjust the liability accounts
accordingly.
Financial Statements
7.
The financial statements (FS) were not restated to reflect the effect of prior period errors, change in
accounting policy and other adjustments totaling P33,464,107,873.00, contrary to Paragraph 47 of the
Philippine Public Sector Accounting Standards (PPSAS) No. 3, thus affecting the relevance, reliability and
comparability of the financial statements. (Observation No. 12)
We recommended that henceforth Management direct the Chief Accountant to restate the Financial
Statements in compliance with PPSAS 3 to reflect the effects of the changes in accounting policy, prior
period errors and other prior years’ adjustments in compliance with PPSAS 3.
F. Other Significant Observations
Hereunder are the other significant audit observations noted during the year and the corresponding
recommendations, which are discussed in detail in Part II of this Report:
Undisbursed Allotments
1.
Of the total allotments received of P662,690,828,097.00 for CY 2017, P610,933,247,083.00 or 92.19% was
obligated, however, only P222,661,912,628.91 or 34.14% thereof was disbursed due to the delayed/nonimplementation of infrastructure projects. (Observation No. 1)
We recommended that Management:
a)
Facilitate the completion of the obligated projects in order to fully utilize/disburse the allotments
received; and
b) Henceforth, promptly initiate the procurement process and conduct adequate planning and
monitoring to further improve the agency’s absorptive capacity in terms of obligation and
disbursement of allotments received and avoid any adverse effect on future budget levels of the
agency.
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Delayed completion and non-implementation of projects
2.
The DPWH was not able to efficiently implement its infrastructure projects as indicated by (a) 2,334
projects costing P62,588,012,032.57 which were not completed within the specific contract time; (b) 135
suspended projects with total cost of P6,073,489,357.61; (c) 15 terminated projects amounting to
P2,104,853,058.88; and (d) 815 unimplemented projects with aggregate cost of P2,584,688,513.93, thus,
depriving the public of the benefits that could have been derived from the immediate and maximum use
of the said projects. Moreover, of the total delayed projects, 120 projects with total cost of
P6,665,297,187.37 have already incurred negative slippage of 15% but no liquidated damages were
imposed on the contractors nor were the contracts rescinded/terminated. (Observation No. 2)
We recommended and Management agreed to:
a)
Facilitate the completion of on-going and unimplemented projects through constant coordination
with concerned government and private entities and adequate monitoring and supervision of the
work of the contractors;
b) Institute the necessary remedies provided under the RIRR of RA 9184, such as, but not limited to,
imposition of liquidated damages for delayed projects, rescission/termination of projects with
negative slippage of 15% or more, and disqualification and/or the blacklisting of contractors;
c)
Initiate the immediate take-over process for terminated projects in order to facilitate the completion
of the project; and
d) Henceforth, minimize the delays in project implementation by:
i.
Conscientiously carrying out the detailed engineering to ensure that issues on RROW, funding,
viability of the project sites and cooperation of the LGUs and other agencies/companies relative
to the issuance of permits and clearances, are properly addressed prior to project
implementation;
ii.
Thoroughly reviewing and evaluating the Program of Work to ensure that project designs and
estimates are properly prepared and that all phases of the projects are covered to minimize
variation orders and time extensions which often result in increased cost and delayed project
completion;
iii.
Directing the BAC to properly verify and evaluate during post-qualification the operating
conditions of equipment and other construction requirements, among others, to ensure
adequacy, availability and suitability of the contractors’ technical capability; and
iv.
Strictly monitoring and supervising the projects implemented by the Department.
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Incurrence of Commitment Fees
3.
Low disbursement rate due to significant delays in the implementation of foreign-assisted
infrastructure projects adversely affected the timely availment/utilization of the loan proceeds which
resulted in the incurrence of commitment fees amounting to P27,647,128.58. (Observation No. 3)
We recommended that Management:
a)
Accelerate the utilization of loan proceeds by adopting efficient and timely procurement
procedures in accordance with the guidelines of the Foreign Lending Institutions (FLIs);
b) Closely monitor the status/progress of the projects to ascertain that the strategies adopted
are responsive to fast track the implementation of the projects, taking into consideration the
remaining timeline of the projects;
c)
Prepare the necessary catch up plan/program for the completion of the projects, in case
substantial delay occurred, to ensure that the project will be implemented on the target
schedule; and
d) Consider including a stipulation in the contract for the imposition of sanctions against the
concerned contractors for commitment fees incurred due to their fault or negligence which
should not be borne by the government.
Unutilized School Buildings and Equipment
4.
Completed school buildings and procured equipment costing P326,311,495.60 and P25,866,444.32,
respectively, were not fully utilized thereby defeating the purpose for which government resources
were spent. (Observation No. 4)
We recommended that Management:
a)
Regularly coordinate with the Department of Education (DepEd) as necessary, particularly on
addressing the following issues:
 Viability of the project/location sites to ensure that the school buildings have adequate
power and water supply prior to project implementation;
 Possible inclusion in the program of works the cost of tapping of electrical line to the main
source of power supply for succeeding school building projects; and
 Verification of the proper beneficiaries of the project during the planning stage to determine
its necessity so that the real intent of the funds released would be attained;
b) Request for additional funding for the procurement of auxiliary equipment, or return the Road
Milling Machine to the Regional Office for transfer to other District Office which needs said
equipment and has the capability to procure the indispensable support equipment; and
c)
Revisit Joint Circular (JC) No. 2013-1 to include the following:
 The accountability and responsibilities of the LGUs, being the end-users in the
implementation of program/projects;
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•
Proper coordination mechanism between the DepEd, DPWH and LGU for the timely
procurement of building structures and its goods and facilities for immediate/ready
utilization of the school building; and
•
Joint monitoring and inspection between DPWH, DepEd and LGU during the project
implementation.
Technical Defects in various Infrastructure Projects
5.
A total of 334 infrastructure projects of DPWH were found to have defects equivalent to at least
P40,924,520.79 which, if not corrected/rectified by concerned contractors, may result in wastage of
government funds and deprive the public of the maximum use of the infrastructures. (Observation No.
5)
We recommended that Management:
a)
Require all the concerned contractors to rectify immediately the deficiencies noted to conform
with the approved program of works or forfeit the Performance Security and consider blacklisting
the concerned contractors who refuses to effect the necessary corrections; and
b) Direct the Inspectorate Team to, henceforth, conduct regular and strict monitoring and
supervision to ensure that all contractors undertake the projects in accordance with the approved
program of works.
Dormant and Unnecessary Bank Accounts
6.
Dormant and unnecessary bank accounts amounting to P3,591,431.99 and interest income and excess
proceeds of P33,419,152.10 were not remitted to the Bureau of Treasury, contrary to DOF-DBM-COA
Joint Circular No. 4-2012 dated September 11, 2012 and Section 4 of the General Provisions of the
General Appropriations Act of FY 2017. (Observation No. 6)
We recommended that Management remit to the National Treasury the interest income and other
excess/unutilized proceeds from sale of bids and collected conference fees.
Unrecouped Advances to Contractors
7.
Advances to contractors amounting to P1,295,058,503.76 and P523,549,657.53, were not recouped
despite completion and termination of projects while additional advance payments of
P41,538,634.96, in excess of the 15% advances, were granted for materials stored at the contractor’s
warehouse, contrary to Sections 4.3 and 4.1 of Annex E of the Revised IRR of RA 9184. (Observation
No. 9)
We recommended that Management:
a)
Require the project engineers thru the Project Monitoring Division/Group and Project
Management Office to submit the Certificates of Completion on completed projects so that the
payables to the contractors can be recorded, net of advances to be fully recouped;
b) Recover advance payments to contractors whose contracts were terminated by forfeiting the
corresponding surety bond posted by the concerned contractors or by deducting the amount
from the final payment of the project or from any other money claims due them, otherwise, the
unrecouped amount from payment made shall be disallowed in audit;
c)
Strictly comply with Section 4.3 of Annex E of the Revised IRR of RA 9184 and impose
administrative sanctions against erring personnel who fail to recoup the advances from the
progress billings and/or surety bond of the contractors concerned, as warranted;
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d) Require the immediate refund of the partial payments made on materials delivered on site to
preclude disallowance threof;
Excessive Rentals of Motor Vehicle
8.
In Regions I and XI, rental of 184 motor vehicles for project supervision with a total cost of
P158,675,629.30 was found excessive, contrary to COA Circular No. 2012-003 dated October 29,
2012 and DPWH Department Order No. 03 series of 2010. Likewise, the rented motor vehicles in
Region XI remained undelivered as of December 31, 2017, casting doubt on the necessity of said
transportation equipment in the supervision of projects. (Observation No. 13)
We recommended that Management stop the practice of providing vehicle rentals per project and
instead make it on a per project engineer basis especially if the projects are being implemented
simultaneously.
Excessive Contract Cost
9.
The contract costs of various infrastructure projects implemented by the DPWH-NCR, CAR, IX, XI and
XIII were found excessive due to cost estimates exceeding the COA allowable cost and inclusion of
unnecessary work item. (Observation No. 14)
We recommended that Management:
a)
Require the concerned contractors to refund the excess amount or deduct the same from any
money due them, whichever is practicable;, otherwise, the same shall be disallowed in audit; and
b) Direct the concerned personnel responsible in the preparation of the program of work to
conform to DPWH rules, regulations and procedures in the preparation of cost estimates for all
infrastructure projects to avoid excessive approved budget for the contract; and
Non-compliance with the existing laws, rules and regulations
10. Certain provisions of RA 9184 and its Implementing Rules and Regulations (IRR) were not
observed/complied with in the procurement of infrastructure and goods such as (a) projects were not
awarded through public bidding, (b) absence of Project Procurement Management Plan and Annual
Procurement Plan, (c) insufficient posting of warranty security, (d) splitting of purchases orders, (e)
non-imposition of liquidated damages, and others, hence, defeating the purpose of transparency,
completeness and economy in the procurement process. (Observation No. 15)
We recommended that Management:
a)
Strictly adhere to the provisions of RA No. 9184 and its IRR in all stages of the procurement of
infrastructure projects, goods, and services to ensure transparency, competitiveness and
economy in the procurement process;
b) Submit justification/explanation with corresponding supporting evidence for the use of
alternative method of procurement; and
c)
Require the District Inspectorate Team to strictly monitor the condition of the completed projects
of the agency during the defects liability period to determine any defective projects that would
require repairs/rectification by the concerned contractors.
12
Payment of Right-of-Way Claimants
11. Payments made by DPWH-OSEC, Regions I, V, X, XI and XIII to Road Right of Way (RROW) claimants
affected by the implementation of various infrastructure projects were not in accordance with the
provisions of RA 10752 and COA Circular No. 2012-001 and other relevant laws, rules and regulations.
Furthermore, implementation of several projects was delayed mainly due to several factors relative to
the acquisition of RROW. (Observation No. 18)
We recommended that Management:
a)
Require the submission of the documentary requirements under RA 10752 and assign a
responsible officer to check, ascertain and ensure the completeness of the supporting
documents in the payment of ROW claims;
b) Direct the Accountant to comply strictly with the documentary requirements supporting the
payment of ROW acquisition under Section 13 of COA Circular No. 2012-001 and Section
2.23, Item D of DPWH ROW Acquisition Manual. Likewise, ensure that only the modes of
payment expressly authorized by law are followed by the Accountant in the payment of ROW
acquisition claims;
c)
Strictly follow the provisions of the DPWH ROW Acquisition Manual and the DPWH DO No. 70
series of 2017 which require a 50% retention in case of acquisition of land and release the
retention only upon proper transfer of title to the Republic of the Philippines or the
annotation thereof of the Deed of Absolute Sale in the Register of Deeds, as the case may be;
d) Include as a requirement for ROW claims the employment of the services of GFIs or IPAs in
the determination of replacement costs of structure or improvement as provided in Sections
6.2 and 6.6 of RA No. 10752 to ensure transparency and promote the principle of check and
balances; and
e)
Adopt a collaborative team approach where there is interactive and continuous
communication, coordination and cooperation among different units, divisions and district
offices of the DPWH and other government agencies concerned to immediately identify and
address ROW issues.
Undelivered Construction and Heavy Equipment
12. In DPWH-OSEC, 25 of the 90 units of various construction and heavy equipment remained undelivered
as of December 31, 2017, 24 units thereof have already reached the maximum liquidated damages of
ten percent (10%) of the total contract price, contrary to paragraph 3.2, Annex D of the IRR of RA
9184. Moreover, the validity of the performance bond posted by the same supplier for the supply and
delivery of eleven (11) various heavy equipment has already lapsed even before actual delivery.
(Observation No. 19)
We recommended that Management:
a)
Require the suppliers to immediately deliver the remaining construction and heavy equipment
including the various tools and supplies;
b) Impose and deduct the corresponding liquidated damages from the claim of the suppliers for the
delayed delivery and enforce the delivery/installation of tools and supplies and other deliverables
as specified in the contracts;
c)
Impose appropriate sanctions against the erring suppliers in addition to the liquidated damages
to be paid by them considering the importance of the items which it should have delivered within
the time frame;
13
d) Rescind the contract and consider blacklisting the supplier whose liquidated damages already
exceeded 10% of the contract cost; and
e)
Strictly monitor and comply with the performance security requirement of RA 9184 which shall
remain valid until the issuance by the Procuring Entity of the Certificate of Final Acceptance.
The above observations and recommendations were discussed with concerned
Management officials in an exit conference conducted on June 1, 2018 and their comments were
incorporated in this report, where appropriate.
G. Summary of Total Suspension, Disallowances, and Charges
As at December 31, 2017, unsettled suspensions, disallowances and charges
amounted to P3,734,590,740.61, P2,264,529,032.17 and P5,369,129.01, respectively. Details
are as follows:
Beginning Balance
(as of December 31,
2016)
Audit Action
Settlement this
period
(January 1 to
December 31, 2017
Issued this period
(January 1 to December
31, 2017)
ND/NS/NC
Ending Balance
(as of December 31,
2017)
NSSDC
(in PhP)
Notice of
Suspension
Notice of
Disallowance
Notice of Charge
4,699,908,692.53
1,620,447,394.24
2,585,765,346.16
3,734,590,740.61
2,287,991,034.50
1,810,054.85
25,272,057.18
2,264,529,032.17
4,361,500.00
1,166,716.47
159,087.46
5,369,129.01
The following are the status of balances of audit disallowances in DPWH Offices as of
December 31, 2017:
Region/
Office
OSEC
Final and Executory
Without
Appeal
13,804,054.20
NCR
CAR
16,521.34
I
-
II
III
-
IV-A
VI
65,568.49
-
Total
415,854,368.07
4,452,000.02
-
60,936,088.97
56,309.10
1,105,445.77
3,919,130.27
50,616,637.75
47,922,023.21
7,385,512.64
470,799.02
812,449.02
8,668,760.68
1,892,592.00
39,567,385.85
8,053,453.40
37,624,983.46
8,053,453.40
80,142,601.41
-
24,780,325.59
74,356,475.36
-
396,280,807.74
9,726,161.12
406,006,968.86
44,511,004.89
227,773,114.53
-
6,757,835.56
-
VII
Others
73,300.00
1,057,640.10
V
On
Appeal
With COA Order
of Execution
-
-
2,777,500.00
IV-B
With
NFD
-
434,110,422.29
61,065,698.07
103,579,758.34
108,672,136.51
2,019,359.14
129,499.99
17,915,009.45
24,447,136.31
2,654,635.71
38,521,107.65
116,481,717.04
70,050,085.64
7,011,326.80
57,287,918.57
65,493,810.29
1,194,564.92
-
VIII
-
-
-
-
167,534,834.96
167,534,834.96
IX
-
-
-
-
117,813,139.62
117,813,139.62
X
-
-
-
XI
-
-
-
XIII
-
-
-
Total
1,663,644.03
14,862,781.20
51,847,842.55
6,696,243.62
1,136,610,709.90
24,236,301.09
24,236,301.09
372,883,104.55
379,579,348.17
27,287,679.06
27,287,679.06
1,044,544,054.49
2,264,529,032.17
14
H. Status of Prior Year’s Recommendation
The result of validation of the implementation of prior year’s audit
recommendations are presented below:
Year Reported
2016
2015
2014
Total No. of
Outstanding
Recommendations as
of January 1, 2017
37
10
1
Partially
Implemented
22
7
-
Fully Implemented
9
3
1
Not
Implemented
6
-
Summarized hereunder are the audit observations with partially and unimplemented
recommendations, the details of which are presented in Part III of this Report.
Status/No. of Audit
Recommendations
Reference
CY 2016 CAAR
Obs. No. 3
pages 52-55
Obs. No. 4
pages 55-59
Observation
Partially
Implemented
Not
Implemented
Delayed/non-implementation of
project
Overlapping
implementation
period for multiple projects
awarded to same contractors
Unutilized
National
Risk
Reduction and Management Fund
1
Obs. No. 6
pages 61-65
Obs. No. 7
pages 65-69
Obs. No. 8
pages 69-71
Incorrect Cash Balance
2
Unliquidated fund transfers
1
Unliquidated fund transfers to
FFCCCII
1
Obs. No. 9
pages 71-75
Obs. No. 10
pages 75-77
Understatement of Inventory
balance
Unliquidated Advances to Officers
and Employees
1
Obs. No. 11
pages 77-81
Obs. No. 12
pages 81-86
Obs. No. 13
pages 86-89
Unrecouped
Advances
to
Contractors
Unreliable PPE account Balances
2
2
2
1
Obs. No. 5
pages 60-61
Unimposed Retention Money and
Unreverted
Guaranty/Security
Deposits Payable with valid claims
1
1
1
1
1
Remarks
Reiterated under Observation No.
2, Part II of this Report.
Review of transactions for CY
2017 disclosed that the condition
still exists in some DEOs
Several projects funded out of the
NDRRMF were not implemented.
Reiterated under Observation No.
6, Part II of this Report.
Reiterated under Observation No.
7, Part II of this Report.
Inspection Reports supporting
completed projects were
submitted. The amount of
P1,218,062.50 has been refunded
but P3,765,000.00 remained
unliquidated.
Reiterated under Observation No.
8, Part II of this Report.
Liquidation documents and
request for write-off were
submitted but other DPWH
Offices still has outstanding cash
advances
Reiterated under Observation No.
9, Part II of this Report.
Reiterated under Observation No.
10, Part II of this Report.
Reiterated under Observation No.
11, Part II of this Report.
15
Status/No. of Audit
Recommendations
Reference
Observation
Obs. No. 14
pages
89-90
Obs. No. 15
pages 90-92
Unliquidated fund transfer released
under the PDAF and DAP
1
Reiterated under Observation No.
11, Part II of this Report.
Non-compliance
with
the
Government Procurement Reform
Act (RA No. 9184)
1
Reiterated under Observation No.
15, Part II of this Report.
Obs. No. 18
pages 99-100
Non-restatement of effects of
changes in accounting policy and
prior
period
errors
and
inadequate disclosures in the
Notes
to
the
Financial
Statements
Excessive/Irregular expenditures
1
Reiterated under Observation
No. 12, Part II of this Report.
1
Compliance with Government
Insurance System Act of 1997
(RA 8291)
Compliance with Tax Laws
1
Reiterated under Observation
No. 13 and 14, Part II of this
Report.
Reiterated under Observation
No. 23, Part II of this Report.
Programs and Projects for Senior
Citizens and Differently-Abled
Gender and Development Plan
(GAD)
Enforcement
of
COA
Suspensions, Disallowances and
Charges
1
Incurrence of commitment fees
on foreign-assisted projects
Unimplemented project under
the TouWa Program
1
Excessive contract costs
1
Non/Improper utilization of
funds received from other NGAs,
GOCCs and LGUs and excess
funds not remitted to the BTr
Unreliable balance of Accounts
Payable
Double Payment of Insurance
Premium to GSIS- P2.584 Million
2
Obs. No. 19
pages 100-101
Obs. No. 20
pages 101-102
Obs. No. 21
pages 102-103
Obs. No. 22
pages 103-104
Obs. No. 23
pages 104-106
Obs. No. 24
pages 106-107
CY 2015 CAAR
Obs. No. 3
pages 54-58
Obs. No. 4
pages 58-59
Obs. No. 6
pages 62-64
Obs. No. 15
pages 90-96
Obs. No. 16
pages 96-97
Obs. No. 17
pages 98-99
Total
Partially
Implemented
Not
Implemented
Reiterated under Observation
No. 26, Part II of this Report.
Reiterated under Observation
No. 21, Part II of this Report.
Reiterated under Observation
No. 20, Part II of this Report.
Reiterated under Observation
No. 27, Part II of this Report.
2
1
1
Reiterated under Observation
No. 3, Part II of this Report.
Fund transfers to LWUA were
still not fully liquidated as of
December 31, 2017.
Reiterated under Observation
No. 14, Part II of this Report.
Reiterated under Observation
No. 11, Part II of this Report.
1
Reiterated under Observation
No. 11, Part II of this Report.
A letter was sent by DPWH
reminding GSIS about the excess
payment, however, GSIS has not
refunded the overpayment.
1
1
29
Remarks
6
16
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