EXECUTIVE SUMMARY A. Introduction of the Philippine

The Office was, however, renamed as the Bureau of Corrections (BuCor) under the Department of Justice by virtue of the Revised Administrative Code of ...

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EXECUTIVE SUMMARY A. Introduction The Bureau of Prisons was created by virtue of Reorganization Act No. 1407 of the Philippine Commission on October 26, 1905 to take charge of the safekeeping of all prisoners confined at insular and provisional prisons and of all penal settlements, or committed to the custody of the Bureau. Under this Act, the Old Bilibid Prison, the San Ramon Prison and Penal Farm and the Iwahig Penal Colony were integrated into one office. The Office was, however, renamed as the Bureau of Corrections (BuCor) under the Department of Justice by virtue of the Revised Administrative Code of 1987 issued on November 23, 1989 and Proclamation No. 4595 of the President of the Philippines. The renaming was considered critical in changing public’s perception on the BuCor’s functions and in emphasizing the BuCor’s expanded duties. In addition to the custodial function of national offenders who were sentenced to serve a term of imprisonment of more than three years, BuCor is now in charge of rehabilitating these offenders into productive and useful members of our society. On 08 April 2013, the BuCor Rationalization Plan (RAT Plan) was approved and on 24 May 2013 the BuCor Modernization Act (Republic Act 10575) was likewise approved. Since the Implementing Rules and Regulations (IRR) of the R.A. 10575 is still on process, the BuCor opted to implement the Rat Plan since the funding source has already been established for the said purpose. The Rat Plan was implemented in January 2014. The BuCor’s correctional jurisdiction was also expanded. From the original three offices integrated as one, it is now operating seven units located nationwide, namely:       

The New Bilibid Prison (NBP) in Muntinlupa City; The Correctional Institution for Women (CIW) in Mandaluyong City; Iwahig Prison and Penal Farm (IPPF) in Puerto Princesa City, Palawan; Sablayan Prison and Penal Farm (SPPF) in Occidental Mindoro; San Ramon Prison and Penal Farm (SRPPF) in Zamboanga City; Leyte Regional Prison (LRP) in Abuyog, Leyte; and Davao Prison and Penal Farm (DPPF) in Panabo City, Davao Del Norte.

A superintendent heads each colony. The staff officers head the following divisions:       

Office of the Director for Corrections Planning and Management Administration Finance Assessment, rehabilitation Program Development and Monitoring Rehabilitation Operations NBP Hospital

The Bucor is headed by a Director General of Corrections, who has control and supervision over the prison and penal farm, and assisted by three Deputy Director Generals, namely, one for Administration, one for security and operations, and one for reformation, all of whom shall be appointed by the President upon recommendation of the Secretary of DOJ. It has 1,141 custodial personnel, 326 civilian employees and 72 medical personnel. B. Financial Highlights The financial condition and the sources and application of funds of the Bureau of Corrections for calendar year 2014 are presented as follows: Financial Position Assets

974,974,281.25

Liabilities

87,702,209.99

Equity

887,272,071.26

Sources and Application of Funds Appropriations

1,948,696,000.00

Allotments Regular Appropriations

1,892,720,000.00

Automatic Appropriations

55,976,000.00

Total Allotments

1,948,696,000.00

Obligations Incurred

1,905,199,000.00

Unexpended Balance

43,497,000.00

The Statement of Appropriations, Allotments, Obligations, disbursements and Balances for CY 2014 is shown in Annex A.

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C. Operational Highlights At present, the Bureau of Corrections is operating seven prisons and penal farms with a total of 40,808 inmates. The BuCor shall maintain the custodial personnel-toinmate ration of 1:7 for three shifts, and reformation personnel-to-inmate ratio of 1:24 for one shift. D. Scope of Audit A financial and compliance audit was conducted on the accounts and operations of BuCor for CY 2014. Review and analysis were made on the balances of the assets, liabilities and equity accounts, while test of transactions were applied on income and expenditures as reflected in the financial statements as of December 31, 2014. The audit of the infrastructure projects was limited to legal and auditorial review and the technical aspect of the project will be referred to the Technical Services Office. E. Auditor’s Report The auditor rendered an adverse opinion on the fairness of the presentation of the financial statements of the BuCor considering the deficiencies/errors summarized below together with the recommendations as shown in the Matrix of Analysis on the Effects of the Misstatements in the Financial Statements marked as Annex B. 1. The accuracy, reliability and existence of the Inventory accounts with a general ledger balances totaling P32,260,324.93 in the books of BuCorMain, IPPF, LRP and SRPPF, as of December 31, 2014 were doubtful due to the (a) difference of P24,746,915.27 between the Accounting and Supply records; (b) erroneous recording of deliveries and issuances of Inventory items amounting to P14,003,390.16 and P11,567,815.86, respectively; (c) inventory items amounting to P9,846,541.35 directly charged to expense accounts; (d) absence of subsidiary records and schedules to support the General Ledger; and (e) failure to conduct physical count of inventory (Observation No. 11) We recommended that Management direct the (a) Accountant, Supply Officer and Inventory Committee to reconcile their records in order to eliminate the discrepancies; (b) Accounting Section to (i) adjust the over/understated and misclassified accounts and (ii) record purchases of supplies and materials under the Inventory account and recognized expenses upon issuances, pursuant to Section 4 (j) of the Manual on the New Government Accounting System Vol. I; and (c) Supply Officer to prepare the Report of Supplies and Materials Issued summarizing the Requisition and Issue Slip evidencing issuance of inventories; and (d) Accountant and the Acting Supply Officer to maintain an updated

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perpetual inventory records for check and balance and conduct periodic reconciliation of these records. We also recommended that Management conduct physical inventory of Inventories on a semi-annual basis and ensure that the required reports are prepared on time and submitted to the accounting section and the audit team. 2. The Due from GOCC account was overstated by P43,358,597.29 due to the non-recording in the books of the completed deliveries/projects made by the PITC. (Observation No. 9) We recommended that Management require the Accounting Division to record in the books the deliveries of goods/completed projects totaling P43,358,597.29 based on the Project Completion Report submitted by the PITC to clear the overstatement of the account. 3. The reported account balance of the Due from NGAs - PS-DBM amounting to P853,983.35 was unreliable due to (a) discrepancy of P2,079,444.40 compared with the confirmed balance of P2,933,427.75 by the PS-DBM; (b) non-recording of deliveries amounting to P599,327.90 and failure to conduct regular reconciliation with the PS-DBM; (c) erroneous recording of advances to PS-DBM amounting to P2,001,580.00; (d) erroneous recording of remittances to the BTR amounting to P271,775.08 to account Due from NGAs (PS-DBM). Further, deliveries were not properly monitored which resulted in the huge accumulation to P3,987,775.90 the undelivered items by the PS-DBM. (Observation No. 10) We recommended that Management direct the (a) Chief Accountant and the Supply Section to reconcile with their records with the PS-DBM; (b) Chief Accountant to make necessary adjustments in order to reflect the correct balances of the affected accounts; and (c) Supply Section to account for all the deliveries made by the PS-DBM in order to determine the exact value of undelivered items or excess payments and to provide the Accounting Section proof of deliveries for the prompt recording of delivered goods in the book. 4. The Property, Plant and Equipment accounts balance aggregating P637,443,922.22 was unreliable due to (a) the unreconciled balance of P70,684,606.50 between the balance per books and the Report on Physical Count of the Property Plant and Equipment (RPCPPE); (b) non-disposal of unserviceable property amounting to P145,130.00; (c) non-maintenance of PPE ledger cards for each item and (d) absence of the physical inventorytaking of PPEs at the SPPF. (Observation No. 16)

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We recommended that Management (a) require the Accountants and the Property Officers of the LRP and IPPF to reconcile and update their records with the view of eliminating the discrepancy and for the Accountant to make the adjustments in the books, if warranted; (b) create a Disposal Committee to undertake and facilitate the disposal of unserviceable properties in accordance with Section 79 of PD No. 1445; (c) direct the Accounting Section of the BuCor-Main to prepare PPELC which contain adequate information allowing reconciliation of records with the Property Section and the Inventory Team and require the Accountant and the Acting Supply Officer of the SPPF and SRPPF to maintain updated records for check and balance and conduct periodic reconciliation of these records; and (d) direct the conduct of the required physical inventory of all PPEs and submit a report (RPCPPE) thereon to the Auditor for verification. 5. The procurement of gasoline and construction materials totaling P12,537,563.48 were recorded as outright expense, instead of Inventory account, contrary to Section 43 of the Manual on New Government Accounting System (MNGAS), Volume I. (Observation No. 23) We recommended that the Management require the Chief, Accounting Division to record all purchases of gasoline and construction materials intended for stock to the appropriate inventory account pursuant to Section 43 of MNGAS. F. Other Observations and Recommendations 1.

Collections from performance bond and specific activities amounting to P16,469,194.25 were not deposited to the Bureau of the Treasury, contrary to Sections 3 and 7 of Republic Act (RA) No. 10633, the General Appropriations Act of FY 2014. (Observation No. 1) We recommended that management deposit the collections to the Bureau of the Treasury, in compliance with Sections 3 and 7 of RA No. 10633.

2.

Replenishment of Petty Cash Fund (PCF) made by two accountable officers of the BuCor-Main covered disbursements for periods of two to three months or exceeded the recurring expenses of the NBP Hospital and Office of the NBP Superintendent for one month, contrary to Paragraph 4.3.1 of COA Circular No. 97-002, thus, exposing the cash to possible risks of loss or misuse and unnecessarily tying up the agency’s funds/cash which could have been used for other purpose. (Observation No. 3) We recommended that management reduce the AOs’ PCF to an amount sufficient only for one month’s requirement of the respective Offices based on

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the average monthly disbursements; and instruct the AO to refund/deposit the excess of his current PCF to the Collecting Officer. 3.

The two accountable officers made several purchases that exceeded the P15,000.00 limit per transaction set forth under Paragraph 4.3.2 of the COA Circular No. 97-002 dated February 10, 1997. (Observation No. 4) We recommended and management agreed to strictly adhere with the P15,000 limit of transaction provided under COA Circular No. 97-002 dated February 10, 1997.

4.

The electric and water bills of officers and employees of the BuCor-Main and private concessionaires have accumulated to P13,441,331.11 as of December 31, 2014 because management failed to exercise its option to disconnect electrical and water connections until such time that their accounts are fully paid. (Observation No. 8) We reiterated our previous recommendations that management effect the immediate disconnection of the electrical and water connections based on the “NO PAY NO CONNECTION” policy in order to avoid the further accumulation of uncollected electric bills so that the BuCor will not be burdened on the electric consumptions of the tenants; and revisit the Lease Agreement to include policy on billing, collection of utility bills from officers and employees/tenants and for the renewal of the lease agreements, with the end view of updating payments of electric and water bills. We further recommended that the Director monitor the strict implementation of the Memorandum dated May 6, 2013.

5.

The unused fund for the completed deliveries/projects totaling P4,834,919.44 were not returned by the PITC to the BuCor, contrary to paragraph B-11 of Article 5 of the Memorandum of Agreement (MOA) between BuCor and Philippine International Trading Corporation (PITC). (Observation No. 9) We recommended that management demand PITC for the immediate refund of the unexpended balance of P4,834,919.44 and the excess service fee of P252,643.98 or a total of P5,087,563.42.

6.

The procurement of rice from the National Food Authority amounting to P60,952,275.00 was directly delivered to the end-user instead to the Supply Section; hence, no record of deliveries and acceptance were available, contrary to Section 45 of the MNGAS, Volume I. Moreover, copies of purchase orders (PO) for the supply of rice including all supporting documents and the delivery documents were not submitted to the audit team for review, inconsistent with COA Circular No. 2009-002 dated May 18, 2009. (Observation No. 13)

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We recommended that management strictly adhere to the provisions of Section 45 of the Manual on New Government Accounting System, Volume I, and require the Supply Officer to acknowledge receipt of all deliveries and accordingly prepare and sign the Inspection and Acceptance Report; and require the concerned agency officials/personnel to comply with the said regulation by ensuring that copies of POs including all supporting documents and delivery documents are submitted to COA within the prescribed period. 7.

The DPPF Budget Unit/Acting Budget Officer did not prepare/maintain the Registry of Allotments and Obligations for Maintenance and Other Operating Expenses (RAOMO) and Registry of Allotments and Obligations for Personal Services (RAOPS), prescribed under Sections 17, 19 and 20, Chapter I, MNGAS, Volume II, for National Government Agencies resulting in the incurrence of Overdraft/Obligations in Excess of Allotment totaling ₱40,219,420.30 (Observation No. 14) We recommended that the DPPF Management require the Acting Budget Officer to prepare/maintain RAOMO and RAOPS in order to monitor allotments received, obligations incurred, and balances of allotments; thus, Overdraft in allotment/Obligations Incurred in Excess of Allotments, if any, for a given year, can readily be determined.

8.

The funds intended for the payment of Personal Services (PS) under Fund 101 (DBP) – Financial Assistance of the DPPF totaling ₱4,648,743.59, were improperly utilized for the payment of expenses classified under the Maintenance and Other Operating Expenses (MOOE), which is not within the specific purpose for which the fund was intended, in violation of Section 37 of P.D. 1177. (Observation No. 15) We recommended that management adhere strictly to the provision of laws, rules and regulations on the utilization of funds in order to avoid disallowances in audit and penalties/sanctions imposed by law for any violations thereof.

9.

Out of the P79,058,545.54 expended for the constructions/major repairs of the BuCor facilities, the amount of P63,838,999.62 worth of projects were not included in the 2014 APP. Likewise, 14 projects totaling P42,005,472.32 funded from 101 were taken from the Maintenance and Other Operating Expenses (MOOE) instead of Capital Outlay, contrary to Section 59 of the 2014 General Appropriations Act (GAA). (Observation No. 18) We recommended that management prepare, maintain and update the APP for all procurement activities to include, for each individual project, a Project Procurement Management Plan (PPMP) and refrain from utilizing the MOOE fund for the constructions/major repairs of BuCor facilities.

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10.

The procurement of the BuCor-Main infrastructure projects totaling P7,643,549.51 was not in accordance with the provisions of RA No. 9184 and its IRR, thereby defeating the purpose of the law on the transparency, competitiveness and accountability in the procurement process. (Observation No. 19) We recommended that Management (a) comply with the provisions of the RA 9184 and its IRR in the payment of mobilization fee; (b) adhere strictly to the provisions of RA 9184 and its IRR on the extension of time in the completion of projects; (c) render an explanation why the contractor failed to commence their work as stated with the NTP; (d) hasten the procurement process by awarding contracts/POs strictly not exceeding three months from date of opening of bids, in line with Section 38.1 of the Revised IRR of RA 9184; (e) submit all resolutions to the Director for approval, in compliance with Section 37.1.1 of the Revised IRR of RA 9184; and (f) direct the BAC to be cautious in the preparation of the Abstract of Bids in order to achieve the purpose of public bidding.

11. The procurement of petroleum (gasoline and diesel) was undertaken by the BuCor-Main without due regard to the provisions of Section 5, RA 9184 and Sections 2 and 4 of GPPB Board Guidelines, which resulted in the overpricing of P656,060.00. Moreover, purchase orders (POs) relative thereto were not submitted to the Auditor, contrary to COA Circular No. 2009-002 dated May 18, 2009; thus, the timely review thereof was not undertaken resulting in the non-detection of the deficiency. (Observation No. 20) We recommended that Management prepare the ABC taking into consideration the requirements of Section 4 of the GPPB Guidelines to come up with fair, reasonable and realistic price of the items and accordingly update the ABC prior to actual bidding/canvass of prices or request for price quotations; and consider procuring petroleum products from other suppliers offering better prices in order to save government resources. We also recommended that management comply with COA Circular No. 2009-002 by ensuring that copies of POs including all supporting documents and delivery documents are submitted to COA within the prescribed period. 12.

The propriety of the consumption of gasoline, oil and lubricant in the amount of P6,037,458.93 at the BuCor-Main cannot be determined due to the nonsubmission of the Monthly Report of Official Travel and the Monthly Report of Fuel Consumption. Further, fuel worth P1,137,372.51 were issued to private vehicles as back up cars of the Director. (Observation No. 21) We recommended that Management require the prompt and regular submission of Monthly Report of Official Travel, summarized in a Monthly Report of Fuel Consumption to facilitate timely audit of gasoline, oil and

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lubricants expenses; and refund the cost of gasoline and diesel issued to the private cars. 13.

The accounting records and other required financial reports of the IPPF were not submitted within the prescribed period contrary to Section 7.2.1.a of COA Circular No. 2009-006 dated September 15, 2009, thus, preventing the Audit Team from conducting a timely verification and audit of its accounts and operations. (Observation No. 24) We recommended that Management require the IPPF Cashier and Accountant to submit the accounting and financial reports to the Audit Team within the prescribed period pursuant to Section 7.2.1.a of COA Circular No. 2009-006.

14.

The disbursements for foodstuff consumption of SPPF inmates totaling P41,294,880.73 were not properly documented, contrary to Section 4 of Presidential Decree (P.D.) No. 1445 and Section 28, MNGAS, Volume I, while at LRP, disbursement vouchers and its supporting documents for the payment of various claims amounting to P4,933,518.29 were not submitted to the Auditor, contrary to Section 7.2.1 of the RRSA and Section 6 of COA Circular No. 95-006 dated May 18, 1995, casting doubt on the validity and propriety of the expenditures. (Observation No. 25) We recommended that Management direct the SPPF personnel concerned to properly document disbursements of government funds, in strict compliance with the fundamental/basic principles and in conformity with applicable laws, rules and regulations and require the LRP Supply Officer to immediately prepare the Inspection and Acceptance Reports upon receipt of deliveries to enable the Cashier to submit the DVs together with the supporting documents within the period prescribed in COA Circular No. 95-006.

G. Status of Implementation of Prior Year’s Audit Recommendations Out of the 32 prior years’ audit recommendations contained in the CYs 2011 and 2013 Annual Audit Reports, five were fully implemented, while 24 were partially implemented and three were not implemented at all. Partially implemented audit recommendations with impact on the financial statements and operations of the agency are reiterated in Part II of the report.

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