EXECUTIVE SUMMARY

A. Introduction

The Department of Budget and Management (DBM), created under Executive Order
(EO) No. 25 dated 25 April 1936, is mandated under this Order and by subsequent
issuances to promote the sound, efficient and effective management and utilization of
government resources (i.e., technological, manpower, physical and financial) as
instrument in the achievement of national socioeconomic and political development
goals.

By 2022, the DBM envisions to be: a champion of results-oriented budget and

management policies and practices that enable the government to steer the country
towards meaningful development that empowers the poor and the marginalized; an
implementer of world-class budget and management systems that enhance transparency,
accountability and public participation in governance; and an institution composed of
highly competent and motivated public servants who observe the highest standards of
professionalism and integrity.

It shall lead public expenditure management to ensure the equitable, prudent, transparent
and accountable allocation and use of public funds to improve the quality of life of each
and every Filipino.

Among others, the following are the general functions of the Department:

 Formulates the overall resource application strategy to match the government’s macro-
economic policy;

 Prepares the medium-term expenditure plan, indicating the programming,

prioritization, and financing of capital investment and current operating expenditure
requirements of medium-term sectoral development plans;

 Undertakes the formulation of the annual national budget in a way that ensures the
appropriate prioritization and allocation of funds to support the annual program of
government;

 Develops and administers a national accounting system essential to fiscal management

and control;

 Conducts a continuing study of the bureaucracy and assesses as well as makes policy
recommendation on its role, size, composition, structure and functions to establish a
government bureaucracy imbued with a spirit of public service;

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 The DBM is headed by a Secretary and assisted by six Undersecretaries and four
Assistant Secretaries. It has 680 personnel complement in the Central Office (CO) and
392 in the Regional Offices (ROs) as follows:

Status of Employment CO ROs Total

Permanent 468 318 786
Co-Terminous 31 - 31
Temporary 18 - 18
Substitute 2 - 2
CT-Contractual 34 - 34
Contractual 94 73 167
Job Order/Contract of Service 33 1 34
Total 680 392 1,072

B. Financial Highlights

The financial position, financial performance and the sources and utilization of funds for
Funds Cluster 01-Regular Agency Fund, 04-Special Account-Foreign Assisted/Grants
and 07-Trust Fund for Calendar Year (CY) 2017 with corresponding figures for CY 2016,
are summarized as follows:

Particulars 2017 2016 Increase/ Decrease

Financial Position
Total Assets P2,297,284,879.18 P2,322,412,445.02 (P25,127,565.84)
Total Liabilities 124,283,491.43 817,345,949.68 (693,062,458.28)
Net Assets/ Equity 2,173,001,387.75 1,505,066,495.34 667,934,892.41
Financial Performance
Total Revenue 2,924,994,593.49 3,504,702,365.58 (579,707,772.09)
Total Expenses 2,695,022,768.67 2,404,743,968.98 290,278,799.69
Surplus/(Deficit) 229,971,824.82 1,099,958,396.60 (869,986,571.78)

For CY 2017, the Agency has a total appropriation of P1.397 billion under Republic Act
(RA) No. 10924. The agency received total allotments of P3.338 billion, of which total
obligations incurred amounted to P3.033 billion, thereby leaving a balance of P304.410
million, details as follows:

Obligations Unobligated
Sources of Funds Allotments
Incurred Balance
Regular Appropriation P2,922,153,552.00 P2,657,851,059.20 P264,302,492.80
Continuing Appropriation 415,376,449.59 375,268,973.65 40,107,475.94
Total P3,337,530,001.59 P3,033,120,032.85 P304,409,968.74

The DBM’s Statement of Appropriations, Allotments, Obligations, Disbursements and

Balances for CY 2017 is shown in Annex A.

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C. Operational Highlights

Under the General Appropriations Act (GAA) for Fiscal Year (FY) 2017 (RA No. 10924),
the DBM’s total appropriations for the programs and specific activities amounted to
P1.397 billion, details are as follows:

Program/Project Amount
A. PROGRAMS
I. General Administration P 773,993,000.00
Support
II. Support to Operations 142,708,000.00
III. Operations
a. MFO 1: Budget Policy
Advisory Services 25,402,000.00
b. MFO 2: Budget
Management Services 221,228,000.00
c. MFO 3: Organizational
Productivity Enhancement
Services 27,957,000.00
d. MFO 4: Performance
Review and Evaluation
Services 88,880,000.00 363,467,000.00
Sub-total P1,280,168,000.00
B. PROJECTS
I. Locally-funded Projects 116,884,000.00
Total New Appropriations P1,397,052,000.00

The DBM accomplished more than the physical targets under Major Final Outputs
(MFOs) 2 and 4, with related costs incurred totaling P241.377 million and P85.801
million or 94.35 and 92.33 per cent, respectively, of the budget allotted for its activities.

D. Scope of Audit

The audit covered the financial audit of the accounts and operations for CY 2017 of the
DBM-CO and its ROs, except, the result of the audit of RO VII, which is not included in
this report. The audit was conducted to: (a) verify 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.

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E. Independent Auditor’s Report on the Financial Statements

A qualified opinion on the fairness of the presentation of the consolidated financial

statements of DBM-All Funds was rendered due to the material accounting errors and
deficiencies noted in the audit, as shown in the Analysis of the Effect of Misstatements
on the Financial Statements in Annex B and which are stated in the Independent
Auditor’s Report and discussed in detail under Part II of this report.

F. Summary of Significant Audit Observations and Recommendations

Among the audit observations and corresponding recommendations discussed in Part II

of this report, the significant observations are summarized as follows:

1. The inability of Management to take full advantage of the allotment/funds received

during the year resulted in unobligated balance of P272.898 million, or 20.53 per cent
of the total allotment, and the reversion of unused Notice of Cash Allocation (NCA)
totaling P344.270 million, or 13.52 per cent of the total NCAs received.

We recommended that Management revisit its budgeting procedures and cash

management program for optimum utilization of allotment and cash allocation.

2. Unserviceable PPE items and semi-expendable items totaling P77.305 million were
not disposed since CY 2015, thus had exposed the said properties to further
deterioration, unnecessarily occupied space, and lost opportunity to earn income from
sale thereof.

We recommended that Management require the concerned Property Officers to

cause the immediate appraisal and disposal of all unserviceable properties.

3. Management did not strictly comply with the five-day submission requirement for
contracts and Purchase Orders (POs) under COA Circular No. 2009-001, thus
precluded the timely auditorial review and communication of audit results.

We recommended and Management agreed to require the concerned Bids and

Awards Committee (BAC)/Procurement official to submit, within the prescribed
period, all copies of the contracts and POs, including supporting documents for
auditorial and legal review.

4. The submission to the Audit Team of financial reports and supporting documents, and
Bank Reconciliation Statement (BRS) for CY 2017 was delayed by 6 to 350 days,
thereby, prevented the prompt audit/review of the subject transactions.

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 We recommended and Management agreed to:

a) Direct the Accountant and the concerned accountable officer to submit the
Monthly Trial Balance, BRS, and other financial reports within the
prescribed deadlines; and

b) If warranted, initiate appropriate administrative action against the person/s

concerned for continuous/persistent failure to comply with the prescribed
submission schedule of the required financial reports and supporting
documents.

The foregoing observations together with the corresponding recommendations were

discussed with concerned officials of the agency during the exit conference on 18 May
2018. Management views and comments were incorporated in the report, where
appropriate.

G. Status of Settlement of Audit Suspensions, Disallowances and Charges

The balances of Notice of Suspensions (NS), Disallowances (ND) and Charges (NC) as
of year-end are summarized below:

Beginning Balance Issued Settled Ending Balance

Particulars
31 Dec 2016 01 January - 31 December 2017 31 Dec 2017
NS/ND/NC NSSDC
NS P 1,202,509.68 P 115,441.42 P 179,197.85 P 1,138,753.25
ND 4,957,144.69 391,400.00 430,110.85 4,918,433.84
Total P 6,159,654.37 P 506,841.42 P 609,308.70 P 6,057,187.09

H. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 49 prior year’s audit recommendations embodied in the CY 2016 Consolidated
Annual Audit Report, 24 were fully implemented, 18 were partially implemented, four
not implemented and three no status of implementation. The details are discussed in Part
III of this report.

We enjoined Management to ensure full implementation of all audit

recommendations to improve the financial and operational efficiency of the agency.