PHILIPPINE INSTITUTE OF TRADITIONAL AND ALTERNATIVE HEALTH CARE
ANNUAL AUDIT REPORT FOR CY 2011
In 1977, the National Science and Development Authority (NSDA), now the Department of Science and Technology (DOST), formed a coordinated and mission program called the
National Integrated Research Program on Medicinal Plants (NIRPROMP). The program participated by U.P. Manila, Los Baños, Department of Chemistry and the Philippine Institute of
Applied Chemistry of the Ateneo de Manila University in coordination with the Philippine Council for Health Research and Development (PCHRD) of the DOST provided the ground work for the development of Herbal medicine in the Philippines leading to research into commercially feasible technology to make herbal drugs.
The Department of Health adopted the technology and started building up four commercial scale plants in Cotabato City, Davao City, Tacloban City and Tuguegarao,
Cagayan, as follows:
1. The Cotabato Herbal Pharmaceuticals Processing Manufacturing and Research
Plant (CHPPMRP) is the first, commercial scale government facility established to operate for the production of medicinal plants in dosage forms located L.R.
Sebastian Road, 9600 Cotabato CRMC Compound, Cotabato City. The Plant was inaugurated on November 15, 1988 by President Corazon C. Aquino. The
CHPPMRP facility consists of buildings, machineries and equipment for drying and processing raw materials, dosage manufacturing, quality control and animal pharmacological studies. At present, the Plant has the capacity to produce Herbal
Soap of 15,000 pcs. per month such as Bayabas Soap, Carrot Soap, Akapulko
Soap, Labanos Soap, and Papaya Soap.
2. The Davao Herbal Research and Processing Plant (DHRPP) is located inside the
Department of Health (DOH) compound in Bajada, Davao City. The Plant became operational in March 1983 and has a plant capacity to produce one million Sambong
Tablet (250gms.) and Tsaang Gubat per month.
3. The Tacloban Herbal Pharmaceutical Processing and Manufacturing Plant
(THPPMP) opened on July 1989 in Barangay Bagacay, Tacloban City. The Plant has a twenty-two (22) hectare land area, eleven (11) hectares of which is planted to first batch of the five (5) priority plants to supply the plant with raw materials specifically sambong and lagundi plants. The land was donated to PITACH by DOH in August 7, 2003. Its present Plant capacity is 2.7M Sambong Tablet (250mg.) and
Lagundi Tablet (300mg.) per month.
4. On July 1991, Cagayan Valley Herbal Processing Plant (CVHPP) was opened, located in a 1.6 hectare lot owned by the Plant at Carig, Tugeugarao City. CVHPP at present is capable of manufacturing about 2.4M Lagundi tablet (300mg.) per month.

From Traditional Medicine Program, the Philippine Institute of Traditional and
Alternative Health Care (PITAHC) was created under RA 8423 otherwise known as the
Traditional and Alternative Medicine Act (TAMA) of 1997 authored by Senator Juan Flavier. It became a turning point in the history of Philippine Traditional Medicine that the herbal plants became a priority. Henceforth, the ten priority plants are now being promoted, namely:
Lagundi, Ulasimang Bato, Bayabas, Bawang, Yerba Buena, Sambong, Ampalaya, Niyugniyogan, Tsaang-gubat and Akapulko.
The PITAHC is now a government owned and controlled corporation attached to the
Department of Health. Its mission is to uphold the right of every Filipino for better health through the provision of safe, effective and affordable traditional and alternative health care products, services and technologies.
The Principal Officers of the Institute are as follows:
Head Office
Director General
Head, Research and Development Division
Head, Finance Division
Head, Social Advocacy and Training Division
:
:
Head, Marketing, Distribution and Sales Division :
:
:
Dr. Juvencio F. Ordona
Dr. Francis Vicente S. Ras
Eva A. Beltran
Ma. Theresa Mendoza
Ofelia G. Empaynado
Head, Administrative Division
Herbal Processing Plants
Cagayan Valley Herbal Processing Plant
: Erlinda T. Hernandez
Plant Manager
Regional Operations Manager
Cotabato Herbal Processing Plant
Plant Manager
Davao Herbal Processing Plant
:
:
:
Anita C. Capiral
Dr. Marilyn B. Martinez
Mila U. Magno
Plant Manager
Regional Operation Manager
Tacloban Herbal Processing Plants
:
:
Annette L. Atanacio
Dr. Othello V. Enoveso
Plant Manager : Evelina M. Juaban
As of December 31, 2011, the Institute has a total manpower of 83 filled regular positions distributed as follows:

Financial Profile
Central Office
Cagayan Valley HPP
Cotabato HPP
Davao HPP
Tacloban HPP
:
:
:
:
:
26
18
10
15
14
83
PITAHCs financial condition and results of operations are presented below:
Comparative Financial Condition
Assets
Liabilities
Surplus
2011
314,855,289
30,156,019
284,699,270
2010
278,313,838
24,961,966
253,351,872
Results of Operation
2011
Income
Expenses
Net (Loss)
Subsidy from NG
Income after subsidy from NG
55,210,189
65,574,961
(10,364,772)
37,000,000
26,635,228
2010
52,148,111
66,759,721
(14,611,610)
40,000,000
25,388,390
Scope of Audit
The audit covered the operations of the PITAHC for CY 2011. The audit involved performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depended on the auditor’s judgment, including the assessment of the risks or material misstatement of the financial statements, whether due to fraud or error.
State Auditor’s Report on the Financial Statements
The Auditor rendered a clean opinion on the fairness of the presentation of the financial statement of the PITACH for the year 2011.
Summary of Significant Audit Observations and Recommendations
Below is the summary of the audit findings and recommendations for CY 2011 as detailed in Part II-A of the Report.
1. The surety bond submitted by the contractor on May 27, 2011, in substitution for the release of the retention money totalling P3,885,830.52, was due to expire on May 12, 2012. However, still no proper turn-over of the project was made by the contractor, contrary to the Implementing Rules and Regulations of Republic Act No. 9184. In addition, despite of the delay of the construction, liquidated damages were not computed and deducted from such payment.

We recommended that Management require the contractor to finish the construction works, to make necessary corrections of the defects as indicated in the punch-list submitted by the PITAHC-DOH consultant engineer, and to submit a renewed surety bond should the construction works and correction of the defects be still unfinished by May 19, 2012.
Management commented that the retention money was released in accordance with R.A. 9184, as it was substituted by a surety bond and at the time of its release, the construction was on schedule and was satisfactorily undertaken. Said release was made in coordination with the PITAHC Consultant Engineer.
However, despite repeated requests for the renewal of the surety bond long before its expiry during series of meetings with the contractor, no action has been made by the latter. Relative thereto, a letter to the contractor formalizing the Agency request for the renewal of the surety bond is being made.
2. Property, Plant and Equipment of Tacloban Herbal Processing Plant was not insured, contrary to Sec. 489 Volume I of the Government Accounting and
Auditing Manual (GAAM), exposing government property to uninsured risk.
We recommended that Management of Tacloban Herbal Processing Plant take immediate steps to insure the property, plant and equipment with the Government
Service Insurance System, the authorized insurer of the government property.
Management commented that the observation was well noted. The THPP’s application for insurance of its Property, Plant and Equipment with the Government
Service Insurance System (GSIS) is already in process. The Plant is currently complying with the required documentation and is scheduled for inspection by the
GSIS representative.
3. The Cost of Goods Manufactured did not include the proportionate cost of insurance and depreciation expenses of Building, Machineries and
Equipment used in the production of herbal products contrary to the provisions of Philippine Accounting Standards I and Cost Accounting
System Manual of the Agency resulting in the understatement of Cost of
Goods Manufactured by P2,360,941 and incorrect basis for determining selling price of the products.
We recommended that Management effect the necessary accounting adjustment to correct the Cost of Goods Manufactured; and henceforth, require the
Accountants of the four Herbal Processing Plants to allocate the cost of insurance and depreciation expenses of building, machineries and equipment used in the production, in the computation of Factory Overhead in order to arrive at a correct basis of computation of the selling price of the herbal products.
Management commented that the observation was well-noted and they shall comply with the recommendation in Calendar Year 2012. We were also informed that Management, in coordination with the HPPs accountants, is in the process of devising a scheme applicable to all HPPs, on the allocation of the cost of insurance and depreciation expenses of the building, machineries and equipment for

inclusion in the computation Factory Overhead to arrive at correct Cost of Goods
Manufactured.
Status of Implementation of Prior Year’s Recommendations
Of the fifteen prior year’s audit recommendations embodied in the CY 2010 Annual Audit
Report, thirteen were implemented, two were partially implemented.
COA-PITACH Audit Team
The PITAHC was audited by Team 4, Audit Group G – OWWA Development Group headed by Ms. Fe G. Engo, Supervising Auditor. Team 4 is composed of the following:
Name/Position Designation
Yolanda B. Ulep Audit Team Leader
State Auditor IV
Evelyn D. De Guzman Audit Team Member
State Auditor II
Florencio S. Crimen Audit Team Member
State Auditor II