EXECUTIVE SUMMARY A. Introduction The National Printing Office (NPO) was created by virtue of Section 6 of Executive Order (EO) No. 285 on July 25, 1987 out of the merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency (PIA) and is mandated to provide printing services to government agencies and instrumentalities. Under EO No. 285, NPO has exclusive printing jurisdiction over all standard and accountable forms of national, provincial, city and municipal government, including government corporations; official ballots; and public documents such as the Official Gazette, General Appropriations Act, Philippine reports and development information materials for the PIA. However, on October 25, 2004, EO No. 285 was amended by EO No. 378, where, NPO is to continue to provide printing services to government agencies and instrumentalities but shall no longer enjoy exclusive jurisdiction over the printing services requirements of the government over standard forms; provided that the printing of accountable forms and sensitive high quality/volume printing requirements shall only be undertaken by recognized government printers which include the National Printing Office. It shall also continue to provide printing of Official Ballots and Election Paraphernalia, which could be shared with Banko Sentral ng Pilipinas, upon the discretion of the Commission on Election consistent with the provision of the Election Code of 1987. The Office may also accept other government printing jobs, including government Publications, but not in an exclusive basis. Pursuant to Government Procurement Policy Board (GPPB) Resolution No. 05-2010 issued on October 29, 2010, prescribing the Implementing Guidelines on the Procurement of Printing Services, procuring entities have the option to engage the services of private printers for their printing and publication expenditures, subject to public bidding in accordance with Republic Act (RA) No. 9184 and pertinent accounting and auditing rules and regulations. The printing of accountable forms and sensitive high quality/volume printing requirements shall only be undertaken by recognized government printers, namely: Bangko Sentral ng Pilipinas, National Printing Office and APO Production Unit, Inc. Management of the agency is vested in the Director, Mr. Francisco V. Vales in an acting capacity, and assisted by Assistant Director Attorney Sherwin Prose C. Castaneda and nine Divisions.
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The total personnel complement of the NPO was 387, consists of 378 permanent employees, seven are temporary and two co-terminus/presidential appointees, as follows: Offices/Divisions
Permanent
Temporary
Office of the Director Administrative Division Financial Management Division Sales and Marketing Division Production, Planning and Control Division Composing Division Photolithographic Division Press Division Finishing Division Engineering Division Total
21 19 20
-
Coterminus 2 -
18 48 31 77 120 24 378
2 5 7
2
Total 2 21 19 20 18 50 31 82 120 24 387
B. Operational Highlights The reported accomplishments of the agency for the Calendar Year (CY) 2016 were the following: Major Final Output/Program/ Performance Indicators Project/Activities MFO 1: National Printing Services 1. In-House Number of Printing Services (work orders) completed 2. Leasing Total
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Physical Targets 300 1170 1,470
Accomplishments % Actual (Actual/Target) 483 973 1,456
161 83.16
C. Financial Highlights The financial position, financial performance and sources and utilization of funds of the Agency for CY 2016 with corresponding figures for CY 2015 are presented below: Amount (P)
Particulars
2016
Financial Position Assets Liabilities Net Assets/Equity Financial Performance Revenue Current Operating Expenses Net Financial Assistance / Subsidy Gains Surplus/(Deficit) Sources and Utilization of Funds Appropriations Allotments Obligations Incurred Disbursements Unobligated Allotments
2015
874,016,178.61 343,373,665.92 530,642,512.69
690,386,766.64 266,439,078.21 423,947,688.43
1,480,306,561.20 1,361,971,344.29 457,294.66 0.00 118,792,511.57
1,223,574,671.02 1,254,022,483.39 31,955,082.74 1.69 1,507,272.06
9,500,296.00 9,500,296.00 457,295.00 457,295.00 9,043,001.00
32,014,237.00 32,014,237.00 32,014,231.00 30,942,062.00 6.00
The Statement of Appropriations, Allotments, Obligations, Disbursements and Balances for CY 2016 is shown in Annex A.
D. Scope of Audit The audit covered the review of accounts and operations of the NPO for the CY 2016 in accordance with Philippine Public Sector Standards on Auditing (PPSSA). The audit was aimed to (a) ascertain the propriety of the financial transactions; (b) determine the fairness of presentation of the financial statements; (c) determine the extent of compliance of the agency with laws, rules and regulations; (d) recommend agency improvement opportunities; and (e) determine the extent of implementation of prior year’s audit recommendations.
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E. Opinion of the auditor on the fairness of presentation of the Financial Statements The Auditor rendered an adverse opinion on the fairness of presentation of the financial statements of NPO as of December 31, 2016, in view of the material accounting errors and deficiencies as enumerated below:
The basis of the agency in providing an allowance for impairment on Accounts Receivable totaling P65,646,298.46 was insufficient marked by the lack of an extensive and a thorough study of the status of its Accounts Receivable, contrary to Section 10, Chapter 7, Volume I of the Government Accounting Manual (GAM) and Paragraph 68 of Philippine Public Sector Accounting Standards (PPSAS) 29, Volume III, rendering the Financial Statement not fairly stated (Paragraph No. 1); The status of Accounts Receivable with a balance of P168,688,074.73 was poorly monitored resulting in (a) the reported dormancy of receivables totaling P42,041,006.38 or 24.92 percent with age ranging from 10 to 47 years, casting doubt on the validity and the existence of dormant balances, (b) the presence of receivables totaling P114,955.30 with no billing date, and negative balances totaling P9,973.25. Moreover, Management’s failure to investigate the discrepancy between the Subsidiary Ledger (SL) balances and the result of confirmation impaired the reliability on the account, contrary to Section 6, Chapter 19, Volume I of the GAM (Paragraph No. 2); The reported balance of Customers’ Deposits Payable account with an aggregate total of P212,698,701.63 could not be relied upon due to (a) inclusion of dormant customers’ deposits aged more than five years amounting to P28,277,371.54 or 13.29 percent, (b) presence of negative balances totaling P2,039,746.10, and (c) unreconciled balance of P1,886,755.66 between the General Ledger (GL) and the SL, as opposed to Section 6, Chapter 19, Volume I of the GAM (Paragraph No. 3); The balance of the account Cash in Bank-Local Currency, Current Account (LCCA) amounting to P454,738,377.73 was understated by P27,646,215.68 due to non-recognition of reconciling items requiring adjustments and corrections in the books of accounts, required under Section 2.1.2 of COA Circular No. 92-125A dated March 4, 1992 and Section 6, Chapter 21 of the GAM, Volume I (Paragraph No. 4); The reported balance of the Property, Plant and Equipment (PPE) accounts amounting to P720,413,277.73 is not fairly presented because of a net understatement of P11,256,767.36 caused by double recording, erroneous treatment, and non-recording of various PPE. Moreover, the reliability and completeness of the amounts appearing in the financial statement was doubtful due to the (a) discrepancies between the GL and the Report on the Physical Count of PPE (RPCPPE) balances totaling P562,779,490.99, (b) understatement by P823,339.75 of Depreciation and Accumulated iv
Depreciation, and (c) inclusion of unserviceable properties costing P13,399,935.00 and semi-expendable items costing P123,946.30 in the RPCPPE, contrary to the relevant provisions of the GAM (Paragraph No. 5); The reported balance of the Inventory accounts with an aggregate cost of P104,792,286.16 could not be relied upon due to the (a) discrepancy of balances between the records of the Accounting Section, the Supply and Property Section, and the Stock Section amounting to P8,482,266.82 (b) negative balances totaling P2,321,905.40, and (c) non-moving inventory items of P1,396,439.50, due to the non-maintenance of Supplies Ledger Card (SLC) and not strictly implementing the accounting policies, guidelines and procedures embodied in the GAM (Paragraph No. 6); and Various transactions totaling P1,896,084.12 were recorded in accounts other than the prescribed accounts under Chapter 3, Volume III of GAM; thus, their balances were not fairly presented in the financial statements, contrary to the provisions of PPSAS 1-Presentation of Financial Statements (Paragraph No. 7).
F. Summary of Significant Observations and Recommendations The following are the other audit observations and the corresponding recommendations: 1. The handling of special cash advances was characterized by irregularities, such as (a) grant of additional cash advances with aggregate total of P4,574,000.00 despite non-liquidation of prior cash advances, (b) excessive cash advances, (c) insufficient bond to secure the huge agency fund, in the hands of the accountable officer, against possible misuse or misappropriation, and (d) incomplete documentation in the grant of the cash advances totaling P5,624,000.00, in violation of the provisions of Presidential Decree (PD) No. 1445 and of COA Circular Nos. 97-002 and 2012-001 (Paragraph No. 8). We recommended and Management agreed to: a. Require the Accountable Officer to first liquidate her cash advances before the grant of additional cash advances in accordance with PD No. 1445, and the above-cited COA Circulars; b. Require the Accountable Officer to refund/return immediately to the Collecting Officer any cash advance no longer needed or unused for a period of two months; c. Ensure that the fidelity bond of the Accountable Officer is sufficient to secure the amount of her money accountability to avoid loss of government funds in case of unexpected defalcations, shortages, and unrelieved losses; v
d. Comply with the submission of all documentary requirements in the grant and liquidation of cash advances as prescribed under COA Circular Nos. 97-002 and 2012-001; and e. Henceforth, strictly comply with the rules and regulations on cash advances and the PD No. 1445. 2. The Petty Cash Fund (PCF) operation of NPO was inconsistent with the procedures in handling petty cash fund as prescribed by GAM as the agency a) set up its PCF without considering its monthly recurring petty expenses; thus, becoming idle in the hands of the Petty Cash Custodian (PCC), and (b) liquidated/closed its PCF at every year-end, instead of replenishment, making the operation irregular, in violation of COA Circular 2012-003 (Paragraph No. 9). We recommended and Management agreed to observe the proper procedure in the establishment, replenishment, and closure of PCF to avoid unnecessary and circuitous procedures. 3. Management failed to submit to the Office of the Auditor, 13 copies of contracts and their supporting documents within the prescribed period contrary to Section 3.1.1 of COA Circular No. 2009-001 dated February 12, 2009, thus, affecting the purpose of the auditorial review, early detection of deficiencies and immediate communication to Management of the results of audit for appropriate remedial action. (Paragraph No. 10) We recommended and Management agreed to direct the concerned officials/employees to submit copies of Contracts and their supporting documents to the Office of the Auditor within the prescribed period. 4. The NPO’s maintenance of several bank accounts caused performance inefficiencies in the preparation of Bank Reconciliation Statements (BRS), the issuance of checks, and the matching of deposits against depositors, contrary to an efficient internal control system. Moreover, one bank account has a negative balance amounting to P93,104.44, and another bank account’s unutilized trust fund totaling P255,685.15 was not remitted to the BTr in violation of DBM Circular No. 2004-5 (Paragraph No. 11). We recommended and Management agreed to: a. Consolidate the bank accounts with similar purpose to minimize the workload of concerned personnel and their concentration focused on a limited number of bank accounts; hence, all procedures are performed and reports prepared for a timely submission to the Auditor; b. Henceforth, adopt and maintain an efficient internal control system to ensure that resources are safeguarded against wastage, information are reliable, and operations are economical, efficient and effective; vi
c. Direct the Accounting Section to record the reconciling items of LBP Account No. 1872-1008-45; thus, closing its negative balance; and d. Remit to the BTr or may utilize it in accordance with GPPB Resolution No. 18-2012 the remaining balance of the trust fund totaling P255,685.15, and henceforth use succeeding proceeds from the sale of biddings documents in accordance with the prescribed GPPB regulations. The above findings and recommendations were discussed with Management officials concerned in the exit conference held on March 28, 2017. Management views and reactions were considered in the report, where appropriate. The details of the above observations were discussed in Part II of this report. G. Implementation of Prior Year’s Audit Recommendations Of the seven audit recommendations embodied in the CY 2015 Annual Audit Report, three were implemented while four were partially implemented.
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