EXECUTIVE SUMMARY A. Introduction

Chancellor of UP Manila, the Executive Directors of the National Nutrition Council ... IAs/project leaders, stating definite deadlines and the possibl...

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EXECUTIVE SUMMARY A. Introduction The Philippine Council for Health Research and Development (PCHRD) was created on March 17, 1982 through Executive Order No. 128 and is mandated to formulate policies, plans, programs, projects, and strategies for health science and technology (S&T) development program; allocate government and external funds for research and development (R&D); monitor R&D projects; and generate external funds. The policy-making body of the Council is vested upon the Governing Council (GC) with the DOST Secretary as Chairman and the Secretary of the Department of Health (DOH) as Co-Chairman. Members of the GC are the Chancellor of UP Manila, the Executive Directors of the National Nutrition Council (NNC), and PCHRD and four from the private sector. The Council Executive Staff is headed by an Executive Director, Dr. Jaime C. Montoya, and four Division Chiefs, who undertake the agency’s policy thrusts and programs, namely: 1. Research Management and Development Division (RMDD), with nine members; 2. Institution Development Division (IDD), with eight members; 3. Research Information, Communication, and Utilization Division (RICUD), with 18 members; and, 4. Finance and Administrative Division (FAD), with 14 members. Thus, the total manpower of PCHRD consists of 55 regular employees, including one staff under the Office of the Executive Director (OED), and 56 under employees contract of service, as of December 31, 2016.

B.

Financial Highlights The Agency’s financial condition, results of operations and sources and application of funds for CY 2016 compared with that of the preceding year are as follows: Financial Condition Group of Accounts Assets Liabilities Net Assets/Equity

CY 2016 598,493,328.46 101,046,184.79 497,447,143.67

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CY 2015 648,594,255.86 163,933,359.54 484,660,896.32

Increase/ (Decrease) (50,100,927.40) (62,887,174.75) 12,786,247.35

Results of Operation Group of Accounts Income Expenses Surplus/Deficit for the period

2016

2015

500,668,489.27 179,256,583.92 321,411,905.35

491,232,646.23 153,841,589.61 337,391,056.62

Increase (Decrease) 9,435,843.04 25,414,994.31 (15,979,151.27)

Sources and application of funds Group of Accounts Allotments Obligations Balances

CY 2016 500,652,174.00 499,265,793.99 1,386,380.01

CY 2015 493,276,606.00 491,924,377.71 1,352,228.29

Increase/ (Decrease) 7,375,568.00 7,341,416.28 34,151.72

C. Scope of Audit The audit covered the financial and compliance audits of the accounts and operations of the PCHRD for the year ended December 31, 2016. The audit was conducted to (a) ascertain the level of assurance that may be placed on management’s assertions on the financial statements, (b) recommend agency’s improvement opportunities, (c) determine the propriety of transactions as well as the extent of compliance with pertinent laws, rules and regulations, and (d) determine the extent of implementation of prior year’s audit recommendations.

D. Independent Auditor’s Report A qualified opinion was rendered on the fairness of presentation of the financial statements due to the following: 1. Understatement of Cash in Bank-LCCA account by ₱0.508 million due to non-recognition of transactions affecting the bank account “PCHRD Payroll Account” maintained with the LBP. 2. Understatement of PPE accounts by ₱5.951 million due to: (a) nonrecording of PPEs costing ₱1.828 million acquired out of funds received from SAs; (b) inclusion of semi-expendable equipment with total cost of ₱0.781 million; and (c) derecognition of unserviceable PPEs totaling ₱4.905 million prior to disposal. 3. Understatement of Due to NGAs account by ₱7.287 million due to: (a) inclusion of funds received from GOCCs in the amount of ₱25.099 million; (b) recording transfer of IATFs from the SA to IAs by debiting the account instead of recognizing receivables with an unliquidated balance of ₱17.812 million as at year-end; and (c) improper recording of ii

PPEs totaling ₱2.412 million acquired out of IATFs and eventually donated to the Agency.

E.

Summary of Significant Audit Observations and Recommendations The other significant observations and recommendations, discussed in detail in Part II of the report are as follows: Financial and Compliance 1. Fund transfers totaling ₱70.020 million recorded under the accounts Due from NGAs, Due from NGOs/POs, and Other Receivables pertained to completed research projects which still remained unliquidated due to inadequate project monitoring, particularly on the submission of FRs and refund of unexpended balances. (Observation No. 4) We recommended and Management agreed to: (a) Direct the concerned Project Officers/Division Chiefs to monitor regularly and closely the programs/projects which were subject of FTs/grants and strictly enforce the provisions of DOST AO No. 005 on the reporting requirements for the grants; (b) Revisit the MOA to include sanctions if the terminal technical and audited financial reports are not submitted as agreed upon; and, (c) Direct the concerned Technical Divisions to send demand letters to IAs/project leaders, stating definite deadlines and the possible legal actions that may be instigated against them in case of non-compliance, and to exhaust all possible remedies to compel the IAs to liquidate their longoutstanding balances. 2. Airline tickets for official travels with total costs of ₱7.323 million were procured from one and the same travel agency due to the non-conduct of canvass which is not in compliance with the provisions of RA No. 9184 and its IRR. We recommended and Management agreed to purchase airline tickets for official travels through competitive selection process, pursuant to RA No. 9184 to afford the most advantageous price and terms for the government. The above findings and recommendations were discussed with Management officials in an exit conference held on March 22, 2017 and their comments were incorporated in this Report, where appropriate.

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F.

Status of Suspensions, Disallowances and Charges Shown below is the status of the audit suspensions, disallowances and charges issued:

Particulars NS ND NC Total

Beginning Balance (As of 12/31/2015) 3,217,445.07

This period January 1 to December 31, 2016 NS/ND/NC NSSDC

Ending Balance (As of 12/31/2016) -

2,103,500.00 1,449,371.95

2,103,500.00 136,445.07

4,530,371.95

3,552,871.95

2,239,945.07

4,530,371.95

3,217,445.07

G. Status of Implementation of Prior Year’s Audit Recommendations Of the 22 audit recommendations, 11 were fully implemented, nine were partially implemented and two were not implemented. Details on the actions taken by PCHRD on the audit recommendations are presented in Part III of this report. We enjoin Management to ensure full implementation of all audit recommendations to improve the financial and operational efficiency of the Agency.

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