Management Services

Report No. 2007-05A

Government-wide Performance Audit

Discretionary, Extraordinary
and
Miscellaneous Expenses

Metropolitan Waterworks and

Sewerage System
 Republic of the Philippines
Commission on Audit
MANAGEMENT SERVICES
Commonwealth Avenue, Quezon City, Philippines
Telephone Nos.: 931-9235, 931-74-55

June 10, 2008

HON. JOSE DIOSDADO M. ALLADO

Administrator
Metropolitan Waterworks and Sewerage System
Katipunan Road, Balara
Quezon City

Sir:

We are pleased to transmit the report on the government-wide

performance audit on the allocation and utilization of discretionary,
extraordinary and miscellaneous funds by the Metropolitan Waterworks and
Sewerage System (MWSS). The government-wide performance audit covering
six government-owned and controlled corporations and twelve local
government units was conducted in compliance with MS/TS Office Order No.
2007-011 dated March 22, 2007. The results of the audit were forwarded to
that Office on March 5, 2008 for comments, of which were incorporated in the
report, where appropriate.

The audit covered the review and evaluation of appropriations and

reported expenses charged against discretionary, extraordinary and
miscellaneous expenses account from CYs 2004 to 2006. It also covered
detailed analysis of selected CY 2006 expenditures charged against these funds
and similar expenses charged against other accounts.

We look forward to the proper implementation of the recommendations

and we would appreciate being informed on the actions taken thereon within
one month upon receipt thereof.

We acknowledge the cooperation and assistance extended to the team

by the officials and staff of that Office.

Very truly yours,

By Authority of the Chairman:

SUSAN P. GARCIA
Director IV
Contents Page

Part I Executive Summary 1

Introduction 2
Audit Objective 2
Evaluation Criteria 2
Audit Scope and Methodology 3
Audit Conclusion 4
Management’s Comments 5
Audit Recommendations 6

Part II The Allocation and Utilization Guidelines 7

Introduction 8
Governing Laws, Rules and Regulations 10

Part III The Metropolitan Waterworks and Sewerage System 13

Background 14
The Privatization of MWSS 15
Organizational Structure 17
Personnel Complement 18
Appropriations and Expenditures 20

Part IV Audit Observations 21

Chapter 1 Conformity with Prescribed

Limitations 22

Introduction 23
Observations 24

Chapter 2 Judicious Spending 29

Introduction 30
Observations 30
Management’s Comments and
Team’s Rejoinder 39

Part V Recommendations 40
 Part I

Executive Summary

1
EXECUTIVE SUMMARY

INTRODUCTION

The allocation and utilization of funds intended for extraordinary and

miscellaneous expenses by government agencies are generally governed by COA
Circular No. 85-55A, and Section 25 of the General Provisions of the General
Appropriations Act (GAA) for national government agencies (NGAs), COA
Circular No. 2006-001 for government-owned and controlled corporations
(GOCCs), and Section 325 (h) of R.A. 7160 for local government units (LGUs).

Extraordinary and miscellaneous expenses as prescribed under these rules and

regulations, shall include, but shall not be limited to expenses incurred for:

• Meetings, seminars and conferences

• Official entertainments
• Public relations
• Educational, athletic and cultural activities
• Subscriptions to professional technical journals and informative
magazines, library books and materials
• Contributions to civic and charitable institutions
• Membership in government associations, national professional
organizations duly accredited by the Professional Regulations
Commission, and in the Integrated Bar of the Philippines
• Other similar expenses not supported by the regular budget
allocation.

AUDIT OBJECTIVE

The audit was conducted to assess whether the existing systems on the allocation
and utilization of discretionary, extraordinary and miscellaneous funds were
effective in ensuring that the limitations prescribed under existing rules and
regulations were observed and that funds were used for the purposes intended.

EVALUATION CRITERIA

To achieve the audit objective, the team considered the following evaluation
criteria for assessing the agencies’ effectiveness in controlling the allocation and

2
 EXECUTIVE SUMMARY

utilization of discretionary, extraordinary and miscellaneous funds:

• Conformity with the following prescribed limitations:

o LGUs- 2% of Real Property Tax collection in the next

preceding year
o GOCCs- amounts prescribed in their respective
charters or, in its absence, rates provided in the GAA

• Judicious spending of funds focusing on:

o Spending funds for the purposes intended

o Proper documentation of expenses

AUDIT SCOPE AND METHODOLOGY

The audit covered the review and evaluation of appropriations and reported
discretionary, extraordinary and miscellaneous expenses incurred from CYs
2004 to 2006 by selected GOCCs including MWSS and LGUs in the National
Capital Region, Regions I, III, VII and X. The audit also covered detailed
analysis of selected CY 2006 expenditures charged against these funds and
similar expenses charged against other accounts.

During the audit, the team employed the following audit techniques, among
others:

• Reviewed and evaluated extent of compliance with

existing rules and regulations on the allocation and
utilization of funds intended for discretionary,
extraordinary and miscellaneous expenses and
analyzed nature of expenses charged thereon;
• Interviewed concerned GOCC and LGU officials and
employees involved in the allocation and utilization of
these funds; and
• Assessed the control/monitoring mechanism for the
allocation and utilization of these funds.

3
 EXECUTIVE SUMMARY

AUDIT CONCLUSION

The audit concluded that the MWSS’s existing systems on the allocation and
utilization of funds intended for extraordinary and miscellaneous expenses were
not effective in ensuring that the limitations prescribed under existing rules and
regulations were observed and that funds were used for the purposes intended.

The rates approved under Board Resolution No. 263-2000 for extraordinary and
miscellaneous expenses of MWSS officials exceeded the rates prescribed in the
GAA.

During the three-year period, in addition to the approved excessive rates, a

lumpsum amount of P2.6 million was still set aside for this purpose and 12
Division Managers with Salary Grade below 26 were allocated P24,000 each
annually. These brought the Board-approved allocation for these expenses
during the three-year period to P20.375 million which far exceeded the
computed total allowable amount of P8.298 million considering the rates
prescribed in the GAA for each official by P12.077 million.

While the Board-approved allocation was already excessive, reported

expenditures even exceeded such allocation by P104.909 million. Thus, the total
reported expenditures exceeded the prescribed limitation of P8.298 million by
P116.986 million:

Difference
Allowable Board Excess Expenditures over
Budget per Approved Reported Excess Board-approved
GAA Budget Expenditures Allocation GAA Budget budget
Officials (a) (b) (c) (d=b-a) (e=c-a) (e=c-b)
MWSS-CO and BOT
BOT P2,760,000 P 5,184,000 P2,424,000
Administrator 345,000 1,440,000 1,095,000
Senior Deputy
Administrator 255,000 648,000 393,000
Deputy Administrator 480,000 648,000 168,000
Project/Department
Manager 204,000 (204,000)
Department Manager 1,212,000 1,512,000 300,000
Division Manager 864,000 864,000
Lump sum 1,500,000 1,500,000
Sub-total 5,256,000 11,796,000 P105,565,226.19 6,540,000 P100,309,226.19 P 93,769,226.19
MWSS-RO
Senior Deputy
Administrator 255,000 695,000 440,000
Deputy Administrator 960,000 4,695,824 3,735,824
Department Manager 1,827,000 2,088,000 261,000
Lump sum 1,100,000 1,100,000
Sub-total 3,042,000 8,578,824 19,718,856.29 5,536,824 16,676,856.29 11,140,032.29
Total P8,298,000 P20,374,824 P125,284,082.48 P12,076,824 P116,986,082.48 P 104,909,258.48

4
 EXECUTIVE SUMMARY

In CY 2006, out of the total reported expenditures of P32.123 million, P20.298

million represent payments of various types of allowances to MWSS employees,
some of which maybe considered questionable. Payments of these expenses
against Miscellaneous Expense account is prohibited under existing rules and
regulations. On the other hand, other miscellaneous expenses were being
charged against other accounts such as Other Maintenance and Operating
Expenses and Donations. In CY 2006 alone, miscellaneous expenses charged
against these accounts amounted to P1.075 million.

Under COA Circular No. 2006-001, if the ceiling for extraordinary and
miscellaneous expenses were not provided in the GOCC’s charters, the amounts
fixed in the GAA shall be considered as the ceiling. In the case of MWSS, the
GAA provisions apply as the ceiling for these expenses was not provided in its
charter. Thus, upon review of the MWSS’s budgets for CYs 2004 to 2006 by the
DBM, MWSS was instructed to limit disbursements for this purpose within the
rates prescribed in the GAA. Such instruction was, however, not adhered to.

The propriety of some charges by MWSS officials could also not be validated.
Meals and snacks amounting to P2.969 million incurred in CY 2006 were not
properly documented. The purpose for which such expenses were incurred were
not disclosed and payments were supported merely with invoices bearing almost
consecutive dates. In a number of instances, the same officials submitted four
(4) to seven (7) invoices bearing the same dates. This means then that
meetings/conferences were being conducted almost daily and simultaneously
and even during Saturdays and Sundays as P646,000 were spent on these days.

MANAGEMENT’S COMMENTS

The results of the audit were forwarded to MWSS on February 29, 2008 for
comments. In reply, the team was informed that MWSS is presently discussing
the policies adopted on the grant of extraordinary and miscellaneous expenses to
its key officials and employees with the end in view of faithfully complying with
the team’s recommendations. It is expected that such discussions would result in
changes of policies adopted by the MWSS.

The team was also assured that the agency will always seek to adopt policies that
are consistent with existing laws, rules and regulations in order to judiciously
and prudently utilize government resources.

5
 EXECUTIVE SUMMARY

AUDIT RECOMMENDATIONS

Considering that extraordinary and miscellaneous expenses are recurring

expenses, the team recommended measures under Part V of the report to address
these deficiencies. In general, the team recommended that MWSS should adopt
the rates prescribed in the GAA in allocating funds for these expenses. It was
also recommended that funds be spent only for the purpose intended, only claims
properly documented be processed, and concerned officials be required to submit
appropriate documents to assess the propriety of P2.969 million previous
charges.

The Resident Auditor was likewise advised to take appropriate actions on

excessive allocation and expenditures under this account and on expenditures
which were not properly documented and justified.

6
 Part II

The Allocation and Utilization Guidelines

7
THE ALLOCATION AND UTILIZATION GUIDELINES

INTRODUCTION

On September 8, 1985, COA issued COA Circular No. 85-55A to prescribe the
amended rules and regulations on the prevention of irregular, unnecessary,
excessive or extravagant expenditures or uses of funds and property. These rules
and regulations included the use of funds for extraordinary and miscellaneous
expenses formerly known as discretionary fund.

In 1986, COA issued the State Audit Manual to consolidate current laws,
regulations and modern concepts in state auditing and prescribe new objectives
and procedures consistent with the goals of efficient and effective audit of
government expenditures. It also defines the different expenditure accounts
including the following expense accounts:

• Discretionary Expenses (3-18-000) includes the cost of services

which are confidential in nature, rendered by persons who are
temporarily employed by authorized administrative or executive
officers to carry on successfully administrative activities;
compensation of informers employed to detect the whereabouts of
criminals or the existence of prohibited games, which compensation
shall not exceed ten percent of the fines imposed upon the convicts;
and expressly authorized confidential expenses for which
appropriations have been approved specifically for the purpose.

• Extraordinary Expenses (3-20-000) includes but not limited to,

expenses incurred for or during meetings, seminars and
conferences, official entertainment, public relation, educational,
athletic and cultural activities, contributions to civic or charitable
institutions, membership fees in government associations,
subscriptions to professional magazines, library books and
materials, office equipment and supplies and other similar expenses
that are not supported by the regular budget allocations.

• Contingency/Emergency Expenses (3-20-000) includes unforeseen

expenditures arising from the occurrence of natural calamities or
financial dislocations on account thereof which are chargeable
against the appropriation reserve. It shall also include losses
incurred in converting foreign currencies to Philippine peso.

On December 19, 1991, COA Circular No. 91-368 was issued to institute a
Government Accounting and Auditing Manual (GAAM) and prescribe its use.
The account Discretionary Expenses (3-18-000) was changed thereon to
Confidential and Intelligence Expenses (3-19-000) while account
Extraordinary/Contingency/Emergency Expenses (3-20-000) was split into

8
 THE ALLOCATION AND UTILIZATION GUIDELINES

Extraordinary and Miscellaneous Expenses (3-18-000) and Anti-

insurgency/Contingency/Emergency Expenses (3-20-000). Extraordinary and
Miscellaneous Expenses now includes not only those expenses enumerated
under 3-20-000 of the State Audit Manual but also expenses for the official
entertainment of the Official’s authorized representative. It also provides a
condition that no portion of the amounts authorized thereon shall be used for the
creation of positions, for salaries, wages, allowances, intelligence or confidential
expenses.

Under the New Government Accounting System (NGAS), the accounts

Extraordinary and Miscellaneous Expenses (3-18-000) and Confidential and
Intelligence Expenses (3-19-000) were broken down into the following expense
accounts:

Account
Title
Confidential Expenses
Intelligence Expenses
Extraordinary Expenses
Miscellaneous Expenses
Number Description
Cost of services which are
881 confidential in nature
Amount of expenses for highly
882
sensitive activities
Amount of expenses of government
883 officials for authorized public
relations activities
Amount of expenses other than those
classified under specific confidential,
884
intelligence and extraordinary
expense accounts

The foregoing definitions are applicable to all national government agencies

(NGAs), local government units (LGUs), and government-owned and controlled
corporations (GOCCs).

As reported by the Government Accounting and Financial Management

Information System (GAFMIS) of the Commission on Audit, the consolidated
extraordinary and miscellaneous expenses of NGAs, LGUs and GOCCs for CYs
2004 to 2006 amounted to P29.054 billion as tabulated below:

In Thousand Pesos
Sector CY 2006 CY 2005 CY 2004 Total
NGAs P 861,432.88 P 691,664.09 P 739,620.60 P 2,292,717.57
LGUs 1,131,643.02 892,727.00 900,740.30 2,925,110.32
GOCCs 7,089,916.37* 7,461,054.70* 9,285,535.70 23,836,506.77
Total P 9,082,992.27 P9,045,445.79 P10,925,896.60 P29,054,334.66
* Includes confidential and intelligence expenses

9
 THE ALLOCATION AND UTILIZATION GUIDELINES

GOVERNING LAWS, RULES AND REGULATIONS

The allocation and utilization of funds intended for discretionary, extraordinary

and miscellaneous expenses in GOCCs and LGUs are governed by the following
laws, rules and regulations:

Laws, Rules and

Regulations Provisions
GOCCs
COA Circular No. 2006-001 dated January 3, 2006

Para. I- Scope and It shall cover extraordinary and miscellaneous expenses and
Coverage other similar expenses, such as discretionary, business
development expenses, representation expenses and the like,
provided that the nature or purpose of said expenditures
pertain to any of the following:

• meetings, seminars and conferences;

• official entertainment;
• public relations;
• educational, athletic and cultural activities;
• contribution to civic and charitable institutions;
• membership in government associations;
• membership in national professional organizations duly
accredited by the Professional Regulation Commission;
• membership in the Integrated Bar of the Philippines;
• subscription to professional technical journals and informative
magazines, library books and materials; and
• other similar expenses not supported by regular budget
allocation.

Para. III- Audit The amount of extraordinary and miscellaneous expenses, as

Guidelines authorized in the corporate charters of GOCCs/GFIs, shall be
the ceiling in the disbursement of these funds. Where no such
authority is granted in the corporate charter and the authority
to grant extraordinary and miscellaneous expenses is derived
from the General Appropriations Act (GAA), the amounts
fixed thereunder shall be the ceiling in the disbursements.
Under Section 25 of the GAA, appropriation for this purpose
for officials and those of equivalent rank as may be authorized
by the DBM shall not exceed:

(a) P180,000 for each Department Secretary;

(b) P65,000 for each Department Undersecretary
(c) P35,000 for each Department Assistant Secretary;

10
 THE ALLOCATION AND UTILIZATION GUIDELINES

Laws, Rules and

Regulations Provisions

(d) P30,000 for each head of bureau or organization of equal

rank to a bureau and for each Department Regional
Director;
(e) P18,000 for each Bureau Regional Director; and
(f) P13,000 for each Municipal Trial Court Judge, Municipal
Circuit Trial Court Judge, and Shari’a Circuit Court Judge.

In addition to the prescribed rate, miscellaneous expenses

not exceeding Fifty Thousand Pesos (P50,000) for each of
the offices under the above named officials are also
authorized under the said Section.

Payment of these expenditures shall be strictly on a non-

commutable or reimbursable basis;

The claim for reimbursement of such expenses shall be

supported by receipts and/or other documents evidencing
disbursements; and

No portion of the amounts appropriated shall be used for

salaries, wages, allowances, intelligence and confidential
expenses which are covered by separate appropriations.

LGUs
R.A. 7160

Section 325- The annual appropriations for discretionary purposes of the

General local chief executive shall not exceed two percent (2%) of the
Limitations actual receipts derived from the basic real property tax in the
next preceding calendar year. Discretionary funds shall be
disbursed only for public purposes to be supported by
appropriate vouchers and subject to such guidelines as may be
prescribed by law. No amount shall be appropriated for the
same purpose except as authorized under this Section.

GOCCs and LGUs

COA Circular No. 85-55A dated September 8, 1985

Item 4.7- For the National Government Sector

Extraordinary and
Miscellaneous Extraordinary and miscellaneous expenses shall include, but
Expense (formerly not limited to expenses incurred for or during meetings,
Discretionary seminars and conferences, official entertainment of the official
Fund) or through his authorized representative, public relations,
educational, athletic and cultural activities, contributions to

11
 THE ALLOCATION AND UTILIZATION GUIDELINES

Laws, Rules and

Regulations Provisions
civic or charitable institutions, membership fees in
government associations, informative magazines, library
books and materials, office equipment and supplies and other
similar expenses that are not supported by the regular budget
allocations, Provided, that no portion of the amounts
authorized thereon shall be used for the creation of positions,
nor for salaries, wages and allowances, intelligence or
confidential expenses.

For the Local Government and Corporate Sectors

The above provision contained in 4.7.1 shall also apply to the

local government and corporate sectors.

12
 Part III

The Metropolitan Waterworks

and Sewerage System

13
THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

BACKGROUND

The first waterworks and sewerage system was constructed in 1878 with a 15
million liters per day (MLD) capacity. The initial infrastructure consisted of a
pumping system from the Marikina River to an underground reservoir in San
Juan and 650 mm transmission main conveyed by gravity for the 300,000
residents of Manila.

By 1909, the capacity of the System was increased to 92 MLD with the addition
of pumping facilities and the construction of Wawa Dam. In 1919, the first
common institution, the Metropolitan Water District, was created serving
adjoining cities and municipalities. During the 1920s, the Ipo Dam was
constructed using water resource from the Angat basin. By 1938, the treatment
capacity was increased to 200 MLD for an urban population of 900,000 people.

In 1955, the National Waterworks and Sewerage Authority (NAWASA) was

created to take over water supply and sewerage services for the whole country.
This was dissolved in June 1971 pursuant to Republic Act No. 6234 creating the
present Metropolitan Waterworks and Sewerage System (MWSS) which since
then has jurisdiction and control over all waterworks and sewerage systems in a
service area covering the following regions with a territory of more than 200,000
hectares.

• National Capital Region: seven (7) cities and 10 municipalities (Manila,

Quezon City, Pasay, Kalookan, Makati, Mandaluyong, Las Piñas,
Malabon, Marikina, Muntinlupa, Navotas, Pateros, Parañaque, San Juan,
Taguig, Valenzuela)
• Rizal Province: 14 municipalities; and (Cavite, Bacoor, Imus, Kawit,
Noveleta, Rosario)
• Cavite Province: one (1) city and 5 municipalities (Antipolo, San Mateo,
Taytay, Cainta, Montalban) or 8 cities and 29 municipalities.

Since the early 1980's, the Metro Manila area experienced increased
industrialization and sustained population growth. By then, the existing water
distribution and sewerage collection networks managed by MWSS had already
deteriorated and urgently required rehabilitation and expansion to meet the
region's increasing demands. Thus, in 1997, the government privatized MWSS
by awarding two private concession contracts.

At the time of takeover by the Concessionaires, MWSS was producing an

estimated 3200 MLD of potable water to an area of competence totaling 1940
km2. (approximately 203,393 hectares) which consists of approximately 1274
km2 of urban area with 11.0 million inhabitants. Total population connected to

14
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

the water distribution network is 65%, while the remaining 35% are served by
private/individual deep wells.

The MWSS charter of 1971 (RA 6234) mandates that MWSS operate and
maintain water and sewerage services in Metropolitan Manila as an autonomous
government owned and controlled corporation.

THE PRIVATIZATION OF MWSS

The expanding populations of Manila, the age of water system, (oldest in Asia)
and looming environmental problems have placed a need on the Philippines to
develop alternatives to the current system.

Drawing from Philippines as well as international expertise, privatization is seen

as the key to bringing in much needed financing resources and expertise
necessary to transform MWSS into a service that provides universal coverage of
24 hour supply of potable water throughout Manila area.
After almost 3 years in preparation, the operational and investment functions of
MWSS in water and sewerage services have been privatized through an
international bidding. Two (2) water and sanitation concessions were created
with the signing of Concession Agreements (CA) by the Government with the
following concessionaires:

East Zone: Manila Water Company, Inc. (MWCI)

A Filipino firm owned by AYALAs in joint venture with International Water
Ltd (IWL) formed by the US-based Bechtel Overseas Corp and UK firm
Northeast Water
West Zone: Maynilad Water Services, Inc. (MWSI)
A Filipino firm BENPRES owned by the Lopezes in joint venture with French
firm Lyonnaise Des Eaux

Two independent government entities were likewise created, to perform distinct

functions, i.e.:

1. MWSS- Corporate Office (erstwhile named Residual)

ƒ Facilitating the exercise by the Concessionaires of its agency

powers;
ƒ Administration and management of retained assets
ƒ Administration of existing loans
ƒ Providing bulk water

15
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

ƒ Development of new water sources

ƒ Providing such other services or functions as are assigned under
the Concession Agreement

2. MWSS-Regulatory Office

ƒ Monitoring and/or enforcement of Concession Agreement

ƒ Ensure appropriate measures are undertaken in case of
Concessionaires’ non-compliance
ƒ Review water supply and sewerage rates and implementation of
extraordinary price adjustment and rate rebasing provisions
ƒ Prosecute or defend proceedings before the Appeals Panel

As Agents of MWSS in the provision of water and sewer services, MWSS

transferred to the concessionaires the tenancy to land and operational fixed assets
and an exclusive rights to:

ƒ Produce and treat raw water;

ƒ Transport, distribute and market potable water; and
ƒ Collect, transport, treat, dispose and eventually reutilize
wastewater, including industrial effluent discharged into the
sewerage system.

Under the CA, whatever is transferred, acquired or built by the Concessionaires

shall remain in the name of MWSS, and that all such assets will revert to MWSS
upon termination or expiration of the CA. The primary service improvement
goals as outlined in the CA are:

ƒ The renewal of the sewerage system in the Concession area; and

ƒ Building a new infrastructure which will support the expansion of
the water and sewerage system, thereby connecting 100% of the
urban population of the Concession area to potable water and
95% of the urban population to the sewerage system, and treating
100% of the sewage produced.

The Concession is structured on the achievement of gradual performance targets

set for such parameters as water and sewerage coverage in terms of:

ƒ Percentage of population served;

ƒ Percentage of wastewater to receive primary and secondary
treatment;
ƒ Percentage of water and sewerage network to be renovated,
ƒ Maximum percentage of unaccounted-for water;
ƒ Service expansion; and
ƒ Quality of service i.e., water pressure, continuity of supply, and
water quality.

16
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

ORGANIZATIONAL STRUCTURE

The operation of MWSS-CO is being managed by an Administrator who is

assisted by a Senior Deputy Administrator (SDA). Under the SDA are two
Deputy Administrators (DAs), namely: DA for Administration and Support
Services and DA for Operations. The DAs directly supervise two departments
each which are headed by a manager. These departments and their respective
divisions are as follows:

DA for Department/Division
Administration and Finance Department
Support Services Managerial Finance and Budget Division
Controllership Division
Administrative and General Services Department
Operations Property Management Department
Real Estate and Right-of-Way Division
Equipment, Materials and Inventory Control Division
Engineering and Project Management Department
Engineering Division
Project Management Division
Umiray Angat Transbasin Project

On the other hand, the MWSS-RO is headed by a Chief Regulator who is

assisted by four (4) Deputy Administrators (DAs). Each DA supervises two
departments as presented below:

DA for Department
Administration and Administration Department
Legal Legal Department

Customer Service Complaints Services Monitoring Department

Regulation Metering Efficiency Department

Financial Regulation Financial Asset and Audit Monitoring Department

Tariff Control and Monitoring Department

Technical Regulation Operations Monitoring Department

Water Quality Control Department

17
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

PERSONNEL COMPLEMENT

During the period covered in the audit, the MWSS-CO and RO were manned by
officials and employees of different employment status as presented below:

Employment Status 2004 2005 2006

MWSS-CO
Co-terminus 17 17 16
Regular 97 128 132
Contractual 59 30 25
Contract of Service 18 18 14
Sub-total 191 193 187
MWSS-RO
Permanent 61 62 63
Contractual 8 8 7
Sub-total 69 70 70
Total 260 263 257

THE BOARD OF TRUSTEES

Composition and Tenure

The corporate powers and functions of the MWSS are vested in and exercised by
a Board of Trustees composed of nine (9) members consisting of the Secretary of
Public Works and Highways as ex-officio Chairman, unless the President of the
Philippines will appoint another person as Chairman, the Administrator of the
MWSS as Vice-Chairman, six (6) members who will be appointed by the
President of the Philippines, and the Government Corporate Counsel as ex-
officio member who will be the legal adviser of the Board.

As of December 31, 2006, the Board consisted of the following members:

Designation Name of Official

Chairman Oscar I. Garcia (Private Sector)
Vice-Chairman Lorenzo H. Jamora (MWSS Administrator)
Members
Private Sector Alfredo C. Reyes
Jay C. de Castro
Andoni T. Dumlao
Lorenzo S. Sulaik
Ma. Teresa Habitan
Amaury R. Gutierrez
Ex-officio Agnes Devanadera (OGCC)

18
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

The Chairman, if appointed, and the six (6) appointive members of the Board
shall hold office for a period of five (5) years and any person appointed to fill a
vacancy will serve only for the unexpired portion of the term of the member he
succeeds.

Powers and duties

The Board shall have the following specific powers and duties:

ƒ To formulate and adopt policies and measures for the management and
operation of the System;
ƒ To adopt an annual and supplemental budget of receipts and
expenditures of the System according to its requirements;
ƒ Subject to the provisions of existing laws and regulations and upon the
recommendation of the Administrator, or motu propio to organize, re-
organize in a manner other than Act No. 4177, and determine the
System’s staffing pattern and the number of personnel, to fix their
salaries including other emoluments, and to define their power and
duties. WAPCO rules and regulations shall not apply to the System;
However, for the above purpose, the Board shall take into consideration
similar staffing patterns and salary ranges obtaining in other government
corporations of the same category of the System:
ƒ To recommend to the President of the Philippines the appointment of the
Administrator of the System and to fix his compensation which shall be
not less than P96,000/ annum;
ƒ To appoint and fix the compensation of the Senior Deputy Administrator
and the Deputy Administrator;
ƒ By a majority vote of all its members, to suspend or remove for cause
the Senior Deputy Administrator or any Deputy Administrator, subject
to the provisions of the Civil Service law, rules and regulations;
ƒ To adopt and establish guidelines for the employment of personnel on
the basis of merit, technical competence and moral character;
ƒ To issue such rules and regulations as may be necessary for the sanitary
protection of watersheds, reservoirs, conduits, springs and other water
sources; for proper operations of water supply lines and sanitary sewers;
for the preservation and protection of water and sewer service as soon as
established; and for proper procedures in applying for approval of, and
connection to, water and/or sewer services which rules shall take effect
after publication at least once a week for three consecutive weeks in a
newspaper of general circulation in the territory served by the System.

19
 THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

Remuneration

For actual attendance at meetings, the Chairman, the Vice-Chairman and the
members of the Board will each receive a per diem of not less than P500 for
every regular or special Board meeting; Provided, that the total number of said
meetings will not exceed five a month; Provided, further, that all the members of
the Board will be entitled to reasonable transportation, representation and/or
other allowances as shall be fixed by the Board.

APPROPRIATIONS AND EXPENDITURES

For the three-year period, the appropriations and expenditures of the MWSS-CO
and RO for Extraordinary and Miscellaneous Expenses in relation to the total
appropriations and expenditures follow:

Appropriation Expenditures
Extraordinary Extraordinary
& Miscellaneous & Miscellaneous
CY Total Expenses % Total Expenses %
2004 P 11,023,342,701 P 7,783,324 0.07 P2,279,004,340.29 P 6,702,573.73 0.29
2005 309,983,000 5,732,000 1.85 2,535,130,204.05 86,458,548.12 3.41
2006 4,505,436,805 6,859,500 0.15 2,874,418,299.00 32,122,960.63 1.12
Total P15,838,762,506 P20,374,824 0.13 P7,688,552,843.34 P 125,284,082.48 1.63

20
 Part IV

Audit Observations

21
 Chapter 1

Conformity with Prescribed Limitations

22
CONFORMITY WITH PRESCRIBED LIMITATIONS

INTRODUCTION

Limitations on certain government expenditures are prescribed under existing

rules and regulations to eliminate unnecessary expenses and prevent possible
abuse of power by those exercising authority. Thus, while the State recognized
that government officials are incurring extraordinary and miscellaneous
expenses in the performance of their duties, the amount intended for this purpose
is limited.

In the case of GOCCs/GFIs, the limitations were prescribed under COA Circular
No. 2006-001 issued on January 3, 2006. Under this Circular, the amounts
fixed in the GAA shall be the ceiling for disbursements in case the authority to
grant extraordinary and miscellaneous expenses is derived from the GAA and
not specifically provided in their corporate charters.

The audit disclosed that the ceiling for extraordinary and miscellaneous expenses
of MWSS was not specified in its corporate charter. Thus, in the review of its
budget by the Department of Budget and Management (DBM), it was
specifically provided that disbursement for these expenses shall be subject to the
limitations prescribed under Section 25, General Provisions of the GAA.

Records show that MWSS set aside amounts for extraordinary and
miscellaneous expenses in excess of the prescribed limitation which were not
adjusted despite DBM’s reviews and comments. Moreover, expenditures even
exceeded the allocation approved by the Board by P106,139,928.85. This then
resulted in total expenditures exceeding the limitation prescribed in the GAA for
each official by P116,986,082.48.

In addition to charges against this Board-approved allocation, other

extraordinary and miscellaneous expenses were being charged to other accounts
such as Other Maintenance and Operating Expenses and Donations. In CY 2006
alone, expenses of this nature charged to other accounts amounted to P1.075
million.

The reported expenses in the books of MWSS-CO in CY 2006 did not yet
include MWSS-RO share of BOT expenses amounting to P715,788.96. These
expenses were likewise not yet reflected in the books of MWSS-RO.

23
 CONFORMITY WITH PRESCRIBED LIMITATIONS

OBSERVATIONS

The Board-approved allocation for discretionary fund of MWSS officials in

CYs 2004 to 2006 exceeded the limitation prescribed in the GAA for each
official. In addition, a lumpsum amount of P2,600,000 was still set aside for
office functions and 12 Division Managers were allocated P24,000 each
yearly. Thus, total Board approved allocation exceeded the allowable
allocation by P12,076,824. Moreover, expenditures for the three-year period
even exceeded the Board approved allocation by P106,139,923.85. This
resulted in total expenditures exceeding the GAA limitation by
P116,986,082.48. Other extraordinary and miscellaneous expenses were also
being charged to other accounts. For CY 2006 alone, expenses of this nature
charged against other accounts amounted to P1,074,881.48.

Under COA Circular No. 2006-001, the amounts of extraordinary and

miscellaneous expenses, as authorized in the corporate charters of GOCCs/GFIs,
shall be the ceiling in the disbursements of these funds. It is also provided that
where no such authority is granted in the corporate charter and the authority to
grant extraordinary and miscellaneous expenses is derived from the GAA, the
amounts fixed therein shall be the ceiling in the disbursements.

The MWSS Corporate Office (CO) and Regulatory Office (RO) were operating
pursuant to R.A. No. 6234 as amended by several laws where the authority to
approve the budget was vested with the Board of Trustees (BOT). The ceiling
for extraordinary and miscellaneous expenses was, however, not among those
provided under the law.

The MWSS budgets approved by the BOT are subject to the reviews of the
Department of Budget and Management (DBM). Upon review, DBM imposed
the condition that disbursement for extraordinary and miscellaneous expenses
shall be subject to the limitations prescribed under Section 25, General
Provisions of the GAA. This Section provides, among others, the agency
officials and those of equivalent rank allowed to claim extraordinary and
miscellaneous expenses and the corresponding rates.

Based on the MWSS organizational structure and approved plantilla of

personnel, there were 27 MWSS officials in CYs 2004 to 2006 entitled to claim
extraordinary and miscellaneous expenses with combined rates ranging from
P63,000 to P115,000 yearly.

Review of MWSS records, however, revealed that the rates approved by the
BOT under Board Resolution No. 263-2000 were way above the rates prescribed
in the GAA as illustrated in the next page:

24
 CONFORMITY WITH PRESCRIBED LIMITATIONS

Board-Approved Rates Rates per

Official Monthly Yearly GAA Excess

Department Managers P 6,000 P 72,000 P 63,000 P 9,000

Deputy Administrators 18,000 216,000 80,000 136,000
Chief Regulator 18,000 216,000 80,000 136,000
Administrator 40,000 480,000 115,000 365,000
Board Members 18,000 216,000 115,000 101,000

In addition to the computed rates per official, a lumpsum amount of P2,600,000

was still set aside for office functions, athletic and cultural activities,
civic/charitable contributions, membership fees to professional associations and
gender and development. Twelve (12) Division Managers with Salary Grade
(SG) 24 were also allocated P24,000 each annually which is not in accordance
with DBM’s regulations entitling only positions with Salary Grade 26 and above
to these types of expenses.

In view of these conditions, the total MWSS budgets for CYs 2004 to 2006 for
these expenses alone exceeded the DBM’s prescribed limitations by an
aggregate amount of P12,076,824 as computed below:

GAA Board-Approved Budget Difference

Total Total
Officials No. SG Rate/yr. 2004-2006 Rate/yr. 2004-2006 Total
MWSS-CO
Administrator 1 30 P115,000 P 345,000 P 480,000 P 1,440,000 P 1,095,000
Senior Deputy
Administrator 1 29 85,000 255,000 216,000 648,000 393,000
Deputy Administrator 2 28 160,000 480,000 216,000 648,000 168,000
Project/Department
Manager 1 27 68,000 204,000 (204,000)
Department Manager 8 26 404,000 1,212,000 504,000 1,512,000 300,000
Division Manager 12 24 288,000 864,000 864,000
Lump sum 500,000 1,500,000 1,500,000
Sub-total 2,496,000 6,612,000 4,116,000

MWSS-RO
Senior Deputy
Administrator 1 29 85,000 255,000 695,000 440,000
Deputy Administrator 4 28 320,000 960,000 4,695,824 3,735,824
450,000-
Department Manager 9-10 26 500,000 1,827,000 2,088,000 261,000
Lump sum 1,100,000 1,100,000
Sub-total 3,042,000 8,578,824 5,536,824

MWSS-BOT 8 920,000 2,760,000 1,728,000 5,184,000 2,424,000

Sub-total 2,760,000 5,184,000 2,424,000
Total P8,298,000 P20,374,824 P12,076,824

25
 CONFORMITY WITH PRESCRIBED LIMITATIONS

The team also observed that despite DBM’s reviews requiring MWSS to limit
expenditures within the prescribed limitations, the MWSS annual budgets were
adopted as is and were not correspondingly reduced with expenditures even
exceeding the allocation by P106,139,923.85. This then resulted in total
expenditures exceeding the GAA limitation by P116,986,082 during the three-
year period as computed below:

Board GAA Difference

CY Approved Allowable Total Reported Under (Over)
Budget Budget Expenses
(1) (2) (3) (1-3) (2-3)
MWSS-CO and BOT
2004 P 3,932,000 P 1,752,000 P 2,701,334.63 P - P ( 949,334.63)
2005 3,932,000 1,752,000 81,805,729.93 (77,873,729.93) ( 80,053,729.93)
2006 3,932,000 1,752,000 21,058,161.63 (17,126,161.63) ( 19,306,161.63)
Sub-total 11,796,000 5,256,000 105,565,226.19 (94,999,891.56) (100,309,226.19)
MWSS-RO
2004 3,851,324 1,035,000 4,001,239.10 (149,915.10) ( 2,966,239.10)
2005 1,800,000 1,035,000 4,652,818.19 (2,852,818.19) ( 3,617,818.19)
2006 2,927,500 972,000 11,064,799.00 (8,137,299.00) (10,092,799.00)
Sub-total 8,578,824 3,042,000 19,718,856.29 (11,140,032.29) (16,676,856.29)
Total P 20,374,824 P 8,298,000 P 125,284,082.48 P (106,139,923.85) P (116,986,082.48)

As a matter of practice, funds intended for extraordinary and miscellaneous

expenses of the BOT are included in the budget of MWSS-CO. Upon payment
of claims by the Board members, only 50% of the total claims were recognized
in the books of MWSS-CO as expense and the remaining 50% is considered as
receivable from MWSS-RO. Thus, of the total amount incurred by MWSS-CO
in CY 2006, P715,788.96 were recorded during the year as receivable from
MWSS-RO:

Total Reimb./
Payments to Recorded Share VAT
BOT Under Deducted
Accts. 883, from CO
Board Member 884 & 969 CO Share CO RO Share
Hermogenes Ebdane, Jr. P 15,112.77 P 12,256.17 P 11,401.66 P 2,856.60 P 854.51
Oscar Garcia 242,592.75 121,296.40 122,367.53 121,296.38 4,399.76
Orlando Hondrade 446,642.69 406,699.12 437,540.45 0.00 9,102.24
Lorenzo Sulaik 198,591.76 99,295.88 107,802.06 84,410.62 6,379.09
Andoni Dumlao 193,645.78 96,822.89 95,823.91 96,822.89 6,164.48
Alfredo Reyes 231,500.00 115,750.00 108,759.81 115,750.01 6,990.19
Jay de Castro 233,247.14 116,623.57 108,787.05 116,623.57 7,836.54
Amaury Gutierrez 114,038.70 57,019.35 56,168.81 57,019.35 850.55
Ma. Teresa Habitan 153,153.81 76,576.90 73,029.96 76,576.92 3,546.95
Agnes Devanadera 188,644.27 94,322.13 140,202.33 44,432.64 4,009.29
Total P2,017,169.67 P1,196,662.40 P1,261,883.57 P715,788.96 P50,133.60

26
 CONFORMITY WITH PRESCRIBED LIMITATIONS

The receivable is recognized in the books of MWSS-RO as expense upon

remittance by the MWSS-CO of its share of the concession fees. Review of CY
2006 MWSS-RO books revealed that extraordinary and miscellaneous expenses
incurred in CY 2006 were not yet recognized in the books of MWSS-RO.

Detailed analysis of CY 2006 expenses revealed that the excessive expenses

were incurred partly by the MWSS-CO Finance Department and the BOT
Chairman.

GAA Board Total

Allowable Approved Reported
Office Allocation Allocation Expenses Remarks

Finance P 63,000 P 72,000 P726,970.72 The total expenses included

Department reimbursements made to the
Supervising Cashier charged to
the Finance Department
amounting to P662,619.94 for
meals/snacks and other expenses
of other agencies/offices.

Chairman of 115,000 216,000 268,910.08 This includes expenses incurred

the Board by the Secretary of DPWH in
addition to the discretionary
expenses incurred by the one
appointed by the President as
Chairman of the Board. Under
Section 4 of RA 6234 as
amended by EO No. 197 dated
June 17, 1987, the President of
the Philippines may appoint
another person as Chairman other
than the Secretary of DPWH. In
this case, considering that the
President appointed another
person as Chairman, the MWSS
had no basis for granting
discretionary expenses to the
Secretary of DPWH.

Total P178,000 P288,000 P995,880.80

Moreover, in addition to excessive expenses accounted for under extraordinary

and miscellaneous expenses, similar expenses were still being charged to other
accounts. In CY 2006 alone, expenses of this nature charged to other accounts
already amounted to P1,074,881.48. As there were no detailed budget documents
provided to the team, the team could not verify if there were separate budgets for
these expenses. Thus, propriety of charges to these accounts likewise could not
be evaluated.

27
 CONFORMITY WITH PRESCRIBED LIMITATIONS

The summary of charges under these accounts is tabulated below:

Expenses Account Charged Amount

Meals/snacks and groceries during meetings Other Maintenance and

reimbursed to the members of the BOT Operating Expenses(969) P 588,781.48
Contributions to civic and charitable institutions Donations (878) 486,100.00
¾ Philippine Cottage Industry for the Disabled P 10,000.00
¾ Kagitingan Foundation 10,000.00
¾ National Blind Masseurs Services Asso., Inc. 1,000.00
¾ Law Enforcement Hotline Movement, Inc. 10,000.00
¾ Grand Lodge of the Phils. 10,000.00
¾ Light for the Indigent and Disabled Assn., Inc. 2,500.00
¾ Phil. Water Partnership Organization, Inc. 50,000.00
¾ Center for Advanced Phil. Studies, Inc. 100,000.00
¾ Phil. Workers Association for the Blind, Inc. 1,000.00
¾ Resources for the Blind, Inc. 300.00
¾ Dr. Jose Rizal Eye Health Fund 2,000.00
¾ Out of School Youth Program 2,100.00
¾ Sagip Bata Scholarship Fund 3,000.00
¾ Sightless & Handicapped Asssociation of the Phils. 3,000.00
¾ KKK Program 10,000.00
¾ White Cane Club 2,000.00
¾ Manila Bicol Golfers Asso., Inc. 30,000.00
¾ GACPA 10,000.00
¾ Kapwa Tao Foster Care Program 700.00
¾ Phil. Alliance for the Disabled Persons, Inc. 1,500.00
¾ GACPA 2,000.00
¾ Children of Mary Association for the Youth 3,000.00
¾ Handog Kalinga sa Kapwa 3,000.00
¾ National Disaster Coordinating Council 200,000.00
¾ Government Corporations Athletic Association 15,000.00
¾ Voice of the Hydrocephalus Victim Children, Inc. 4,000.00
Total P1,074,881.48

28
 Chapter 2

Judicious Spending

29
JUDICIOUS SPENDING

INTRODUCTION

To ensure that the funds allocated for extraordinary and miscellaneous expenses
were properly utilized, control mechanism in the disbursement, accounting and
reporting were likewise prescribed under existing rules and regulations. These
policies provide, among others, the nature of expenses authorized to be charged
against the funds, the manner of payment, the prescribed rates and the accounts
to be used in recording the expenses.

The audit disclosed that funds appropriated for extraordinary and miscellaneous
expenses were not wisely spent. Of the total expenses incurred in CY 2006,
P20,298,069.08 pertain to expenses specifically prohibited to be charged against
the funds. Moreover, expenses for meals and snacks incurred by officials and
members of the Board amounting to P2,968,777.34 could not be assessed as the
same were not properly documented. Of this amount, P646,600.18 were spent on
Saturdays and Sundays.

OBSERVATIONS

1. In CY 2006, expenses amounting to P20,298,069.08 specifically prohibited

to be charged against extraordinary and miscellaneous funds were
nonetheless charged thereon. These include payments of various types of
allowances and bonuses, some of which may be considered questionable.

The nature of expenses to be charged against extraordinary and

miscellaneous expenses are provided in COA Circular No. 85-55A and
reiterated in COA Circular No. 2006-001. It is further provided therein that
no portion of the amounts appropriated shall be used for salaries, wages,
allowances, intelligence and confidential expenses which are covered by
separate appropriations.

Review of disbursements under these accounts, however, revealed that for

CY 2006 alone, P20,298,069.08 were utilized to pay for expenses otherwise
prohibited to be charged therein. These include payments for various types
of allowances and bonuses some of which may be considered questionable
as these are not among the regular allowances allowed under existing rules
and regulations.

30
 JUDICIOUS SPENDING

These expenses follow:

Charged to
Nature of Expenses 883 884 Amount
Reimbursement of transportation and
miscellaneous expenses of OGCC lawyers in the
performance of special duties and functions P 217,500.00 P 217,500.00
Salaries and allowances of contractual employees 1,207,559.62 1,207,559.62
Christmas Bonus for MWSS personnel and OGCC
lawyers for CY 2005 341,250.00 341,250.00
Anniversary bonus for CY 2006 4,799,341.28 4,799,341.28
Enhancement incentive bonus for CY 2006 547,500.00 547,500.00
Midyear financial assistance 96,735.50 96,735.50
Family day allowance for CY 2006 3,065,636.50 3,065,636.50
Modified grocery incentive for CYs 2005 and 2006 8,741,775.00 8,741,775.00
Productivity incentive bonus of MWSS personnel
and OGCC lawyers for CY 2005 292,500.00 292,500.00
Plane tickets P 17,377.00 17,377.00
Honorarium of PBAC and BAC members and driver 727,326.25 727,326.25
Registration, inspection, insurance and
maintenance of vehicles 149,161.56 149,161.56
Terminal leave 5,031.37 5,031.37
Consultancy services, grocery and midyear bonus 80,000.00 9,375.00 89,375.00
Total P97,377.00 P20,200,692.08 P20,298,069.08

2. Expenses for meals and snacks amounting to P2,968,777.34 could not be

assessed as these were not properly documented. These were merely
supported with invoices bearing the same or almost consecutive dates.
This means then that meetings were being conducted almost daily and
simultaneously including during Saturdays and Sunday as about
P646,600.18 were spent on these days.

Records show that for CY 2006, discretionary expenses amounting to

P3,480,564.68 incurred by MWSS-CO officials were charged against funds
intended for Extraordinary Expenses, Miscellaneous Expenses and Other
MOOE accounts. Of this amount, P2,989,420.63 represent payment for
meals and snacks.

As provided under Section 4(6) of P.D. 1445, claims against government

funds shall be supported with complete documentation. Review of
documents, however, revealed that payments amounting to P2,968,777.34
representing 99.31% of payments for meals and snacks were not properly
documented. The purpose for conducting the meetings and their participants
were not disclosed. Thus, propriety of such payments could not be assessed.

31
 JUDICIOUS SPENDING

These expenses were incurred by the following officials:

Position/Designation/Office Amount
Manager, Corporate Planning Department P 58,720.37
OIC, Engineering & Project Management Department 60,674.02
Manager, Finance Department 62,292.41
Head, Legal Services Department 59,046.85
OIC, Property Management Services 16,229.74
Supervising Cashier 609,359.41
OIC, Deputy Administrator for Operation 67,241.28
Deputy Administrator 133,873.06
Senior Deputy Administrator 89,248.99
Administrator 331,444.83
Chairman, BOT 237,234.50
Various Members, BOT 1,242,315.38
Secretary, DPWH 1,096.50
Total P2,968,777.34

Further analysis of expenses revealed that these officials were entertaining

guests and/or conducting meetings almost daily and simultaneously as may
be deduced from the dates of receipts for meals and snacks as illustrated in
the following cases:

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
Chairman, BOT
155345 8/1/2006 P 31,112.76 7/1/2006 Steak Plus Grill P 812.00
The Sulo Hotel 975.45
7/2/2006
Steak Plus Grill 521.00
Merced Bake House, Inc. 195.00
7/3/2006
The Halfway Canteen 1,300.00
7/4/2006 Pancake House 432.00
7/5/2006 MB Cuisine, Inc. 1,500.00
7/7/2006 Hap Chan Tea House 145.00
7/10/2006 The Halfway Canteen 1,200.00
7/11/2006 Chowking 415.00
7/12/2006 Mcdonalds 334.40
7/15/2006 Steak Plus Grill 358.40
7/16/2006 Yaku 984.17
7/17/2006 The Oriental Park 3,095.50
Shakeys 143.79
7/18/2006 Freino's Bibingka 360.00
The Halfway Canteen 1,800.00
7/20/2006 Max's Restaurant 751.05

32
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
The Halfway Canteen P 900.00
7/23/2006 Ma Mon Luk 7,488.00
Goldilocks 49.50
7/24/2006
The Halfway Canteen 1,300.00
Jollibee 128.00
7/26/2006
Chowking 221.00
7/27/2006 Chowking 116.00
7/28/2006 The Halfway Canteen 1,500.00
7/29/2006 The Halfway Canteen 1,200.00
The Halfway Canteen 1,710.00
Chowking 75.00
7/30/2006
Goldilocks 471.50
Goldilocks 521.00
7/31/2006 Burger King 110.00
21948 10/4/2006 P28,474.75 Kulinarya Kitchen 1,424.50
10/1/2006
Healthy Foods Corp. 1,808.80
Merced Bake House, Inc. 190.00
10/2/2006
22257 11/8/2006 29,973.97 Panciteria Lido 789.15
10/3/2006 Ferino's Bibingka 420.00
Delifrance 63.00
10/4/2006
MB Cuisine, Inc. 650.00
The Halfway Canteen 965.00
10/5/2006 Panciteria Lido 595.00
Merced Bake House, Inc. 270.00
10/6/2006 Ferino's Bibingka 500.00
Healthy Foods Corp. 1,444.80
10/7/2006
Ferino's Bibingka 360.00
Hap Chan Tea House 95.00
10/8/2006
The Halfway Canteen 1,142.00
Merced Bake House, Inc. 620.00
10/9/2006
Ferino's Bibingka 240.00
10/11/2006 Pancake House 1,146.00
10/13/2006 Mamia's Rest. 1,783.00
Don Altilano Rest. 3,503.50
10/14/2006 Panciteria Lido 819.00
La Residencia Al Mar 610.50
La Dulcinea 308.66
10/16/2006
Sin Sippon Japanese Rest. 1,042.37
10/17/2006 MB Cuisine, Inc. 802.00
Merced Bake House, Inc. 200.00
10/18/2006
The Halfway Canteen 1,750.00
The Halfway Canteen 1,030.00
10/19/2006
The Oriental Park 595.00
10/20/2006 Pancake House 1,098.00

33
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
10/21/2006 The Halfway Canteen P 980.00
10/22/2006 Pancake House 641.23
10/23/2006 Merced Bake House, Inc. 295.00
10/24/2006 The Halfway Canteen 1,550.00
10/27/2006 The Halfway Canteen 973.00
10/28/2006 Delifrance 477.00
Scotts Food Corp. 700.70
10/29/2006
MB Cuisine, Inc. 500.00
10/30/2006 Sizzling Seafoods 166.00
Healthy Foods Corp. 649.06
10/31/2006
Merced Bake House, Inc. 200.00
BOT Member
20785 3/30/06 P 7,237.34 Causeway 4,665.60
3/2/2006
Ma Mon Luk 228.60
21012/ 4/27/06 & 17,106.40 Ilustrado 2,020.62
21083 5/8/06 3/3/2006
Bangus Galleria Rest. 632.50
20785 3/30/06 7,237.34 Yellow Cab Pizza 435.00
Craving Bakeshop & Rest. 58.14
3/4/2006
21012/ 4/27 & 17,106.40 Great Mr. T Food Corp. 1,438.63
21083 5/8/06
Craving Bakeshop & Rest. 145.36
20785 3/30/06 7,237.34 3/5/2006 Brazilian Rest. 1,310.00
21012/21083 4/27 & 5/8/06 17,106.40 3/6/2006 Culinary Innovators, Inc. 1,555.40
20785 3/30/06 7,237.34 3/9/2006 Yellow Cab Pizza 540.00
21012/ 4/27 & 17,106.40 3/10/2006 Café Maria del Cielo 670.00
21083 5/8/06
3/11/2006 Jollibee 126.00
3/13/2006 Bistro Italiano 1,354.20
3/16/2006 Dunkin Donuts 240.00
3/17/2006 Windows Café 1,262.70
3/18/2006 Heaven and Egg 3,066.00
3/19/2006 The Old Spaghetti House 328.00
3/20/2006 Culinary Innovators, Inc. 2,830.40
21321 5/31/06 18,000.00 Alba International, Inc. 3,767.00
3/22/2006
Trellis Rest., Inc. 2,237.00
21012/ 4/27 & 17,106.40 3/23/2006 Fazoli's 285.71
21083 5/8/06
3/24/2006 Starbucks 130.00
Fresno Waffle Rest., Inc 393.00
21321 5/31/2006 18,000.00 3/25/2006 Razon's 180.00
Chowking 152.00
Prime Beverage Corp. 636.00
3/26/2006 The Coffee Bean 139.00
KFC 166.07
Celebrity Sports Plaza 2,000.00
3/29/2006
Starbucks 55.00
21321 5/31/2006 P 18,000.00 Gerry's Grill 619.00

34
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
5/1/2006 Kaiseki Japanese Cuisine P 1,683.60
155112 7/5/2006 17,892.14 Starbucks 290.00
5/2/2006 Gerry's Grill 2,120.00
Celebrity Sports Plaza 7,357.82
5/3/2006 Aveneto Pizzeria & Rest. 500.00
155349 8/1/2006 19,429.70 Causeway 3,073.80
Chowking 83.93
5/5/2006
Chowking 62.00
21321 5/31/2006 18,000.00 Cravings Coffee Beanery 143.81
155112 7/5/2006 17,892.14 Burger King 183.00
155349 8/1/2006 19,429.70 5/6/2006 Tratoria Gourmet's 713.00
Cravings Coffee Beanery 143.81
Top Luck Rest. Inc. 255.20
5/7/2006 Congo Grille 535.00
5/8/2006 Mcdonalds 347.60
155112 7/5/2006 17,892.14 Aysee Rest. 1,167.00
5/11/2006
Cravings Coffee Beanery 353.89
5/13/2006 Pancake House 664.00
155349 8/1/2006 19,429.70 5/14/2006 Bistro Italiano 4,585.00
21321 5/31/2006 18,000.00 Shangri-la 541.64
5/17/2006
155112 7/5/2006 17,892.14 Great Mr. T Food Corp. 1,144.24
21321 5/31/2006 18,000.00 5/19/2006 Hizon's Cakes Pastries 650.00
155349 8/1/2006 19,429.70 Taco Bell 434.00
5/21/2006
Dairy Quenn 140.00
155112 7/5/2006 17,892.14 5/22/2006 Yellow Cab Pizza 438.90
Ppdy's Rice, Noodles & Bar 530.70
5/23/2006
Seattles Best Coffee 140.00
21321 5/31/2006 18,000.00 5/25/2006 Max's Rest. 213.38
5/26/2006 Max's Rest. 446.06
155112 7/5/2006 17,892.14 5/27/2006 Ebisu Grill 3,002.59
21321 5/31/2006 18,000.00 5/28/2006 Yellow Cab Pizza 274.82
155349 8/1/2006 19,429.70 Burger King 163.39
5/29/2006
Gateway Cinema 129.00
21339 7/8/2006 17,368.30 5/30/2006 Fazoli's 369.00
BOT Member
20771 3/28/2006 18,781.45 Kentucky 364.00
2/1/2006 Gloria Maris 1,190.00
Seattle's Best Coffee 275.00
2/2/2006 Yellow Cab Pizza 444.00
Serviam Unlimited, Inc. 120.00
2/3/2006
20966 4/20/2006 12,477.79 Kentucky 257.00
2/6/2006 The French Baker 282.00
20771 3/28/2006 18,781.45 2/7/2006 Burger King 473.00
2/10/2006 Tokyo-Tokyo 386.00

35
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
Shakeys P 307.17
2/13/2006 Hyatt Hotel & Casino 2,549.04
21221 5/24/2006 P 20,034.62 Krocodile Grill 718.58
20771 3/28/2006 18,781.45 Ilustrado 1,739.99
2/15/2006
Shakeys 783.25
Shakeys 259.26
Aling Tonya's Seafood Rest. 530.00
2/16/2006
Seattle's Best Coffee 257.80
Kimpura 2,554.41
2/17/2006 McDonald's 129.00
2/20/2006 Brent Food Corp. 504.00
2/23/2006 McDonald's 130.00
Chowking 216.00
2/24/2006
Life Coffee & Tea 573.00
20966 4/20/2006 12,477.79 2/24/2006 Kimchi 112.00
20771 3/28/2006 18,781.45 2/27/2006 Max's Restaurant 728.65
Jollibee 830.50
2/28/2006
Iceberg 798.00
21221 5/24/2006 20,034.62 3/1/2006 Dome Café 847.00
20966 4/20/2006 12,477.79 3/2/2006 Life Coffee & Tea 197.50
21221 5/24/2006 20,034.62 3/3/2006 Mini Shabu Shabu 963.80
20966 4/20/2006 12,477.79 3/4/2006 Kenny Rogers 706.00
Kentucky 174.00
Kentucky 141.00
Kentucky 174.00
3/6/2006 Kentucky 141.00
McDonald's 216.00
Life Coffee & Tea 144.00
Manila Jumbo Kingdom 638.20
Life Coffee & Tea 560.00
3/7/2006
Life Coffee & Tea 225.00
3/9/2006 Max's Restaurant 639.52
3/10/2006 Viatnamese Lemon 336.00
Max's Restaurant 649.22
3/13/2006
Jollibee 128.00
Tokyo-Tokyo 252.00
Philippine Pizza 542.50
3/14/2006
Tokyo-Tokyo 470.00
21221 5/24/2006 20,034.62 Bistro Italiano 1,037.00
20966 4/20/2006 12,477.79 Sze-Chuan House 245.00
3/15/2006 Sze-Chuan House 355.00
Sze-Chuan House 65.00
3/16/2006 Seattle's Best Coffee 218.80
Eats-Cetera 170.00

36
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
Jollibee P 368.00
Jollibee 506.00
Century Park Hotel 1,599.00
21221 5/24/2006 P 20,034.62 The Red Crab Seafood & Steaks 4,262.16
3/20/2006
Jollibee 344.00
20966 4/20/2006 12,477.79 3/21/2006 Wendy's 225.50
3/22/2006 Delifrance 334.00
21221 5/24/2006 20,034.62 Mini Shabu Shabu 1,689.70
3/26/2006
Figaro 405.00
3/28/2006 The Century Seafood Restaurant 627.00
20966 4/20/2006 12,477.79 3/29/2006 Iceberg 827.00
Shangri-la's Traders Hotel 325.55
21221 5/24/2006 20,034.62 3/30/2006 Manila Jumbo Kingdom 3,138.60
20966 4/20/2006 12,477.79 Sze-Chuan House 525.00
3/31/2006 Sze-Chuan House 65.00
21221 5/24/2006 20,034.62 Kenny Rogers 454.00
Senior Deputy Administrator
155214 7/16/2006 42,647.22 5/4/2006 Henrilyn Food Stop 200.00
5/8/2006 MWSI Coop 120.00
Henrilyn Food Stop 80.00
Henrilyn Food Stop 137.00
5/9/2006
Henrilyn Food Stop 223.00
Henrilyn Food Stop 150.00
Henrilyn Food Stop 190.00
5/10/2006
Henrilyn Food Stop 158.00
Henrilyn Food Stop 160.00
5/11/2006
Henrilyn Food Stop 569.00
Goldilocks 207.75
5/12/2006
Henrilyn Food Stop 314.00
5/15/2006 Henrilyn Food Stop 100.00
5/17/2006 MWSI Coop 198.75
5/22/2006 Henrilyn Food Stop 205.00
MWSI Coop 41.25
5/24/2006
MWSI Coop 218.75
5/25/2006 Jollibee 126.00
Henrilyn Food Stop 150.00
5/26/2006
Elar's Food 4,900.00
Jollibee 81.00
Jollibee 108.00
5/27/2006
Craving Bakeshop 82.73
Max's Restaurant 1,337.97
Pancake House 108.00
5/28/2006 Craving Bakeshop 330.91
Jibril's (Chicken Bacolod) 520.00

37
 JUDICIOUS SPENDING

Check Expenses
Date
No. Date Amount Incurred Supplier/Restaurant Amount
5/29/2006 MWSI Coop P 183.75
Goldilocks 318.00
5/30/2006
Bolata's Enterprises 106.00
5/31/2006 Starbucks 390.00
155214 7/16/2006 P 42,647.22 6/1/2006 Chowking Food 160.00
MWSI Coop 295.00
6/2/2006
Craving Bakeshop 744.53
6/3/2006 Goldilocks 611.00
Bolata's Enterprises 106.00
6/7/2006
Bolata's Enterprises 954.00
6/12/2006 Jollibee 350.00
Burger King 55.00
6/13/2006
Burger King 55.00
6/14/2006 Henrilyn Food Stop 70.00
Henrilyn Food Stop 97.00
6/15/2006 Henrilyn Food Stop 150.00
Craving Bakeshop 586.36
MWSI Coop 102.00
6/16/2006
Henrilyn Food Stop 125.00
Jollibee 294.00
Henrilyn Food Stop 100.00
6/20/2006
Henrilyn Food Stop 130.00
MWSI Coop 248.50
Jollibee 213.00
6/21/2006
Henrilyn Food Stop 200.00
6/24/2006 Nagomi Japanese Rest. 5,154.96
Jollibee 111.00
6/25/2006
Jollibee 247.00
6/26/2006 Hopia King 832.00
Goldilocks 552.50
6/27/2006
Shoppersville 303.60
Henrilyn Food Stop 50.00
6/29/2006
Henrilyn Food Stop 100.00
Henrilyn Food Stop 40.00
6/30/2006
Max's Restaurant 2,951.88

Out of the total expenses of P2,357,211.60 by 17 officials for meals and

snacks, P646,600.18 or 27.43% were spent on Saturdays and Sundays
which are nonworking days:

38
 JUDICIOUS SPENDING

Total Expenses Incurred on

Position Payments Sat. Sun. Total

Chairman, BOT P 219,468.58 P 33,572.12 P 49,964.46 P 83,536.58

Administrator & BOT 378,305.80 48,309.20 28,168.41 76,477.61
Vice-Chairman
BOT Members 873,655.19 123,966.84 153,414.83 277,381.67
Senior Deputy Adm. 113,278.59 9,959.94 3,929.91 13,889.85
Deputy
Administrator 204,200.09 31,107.17 55,406.68 86,513.85
Managers 191,471.29 26,806.78 19,693.99 46,500.77
Supervising Cashier 376,832.06 20,039.97 42,259.88 62,299.85
Total P2,357,211.60 P 293,762.02 P 352,838.16 P 646,600.18

Management’s Comments Team’s Rejoinder

“Please be informed that Management is The team appreciates management’s

discussing the policies being adopted on the reaction to the issues raised in the report
said benefits with the end in view of and commends its efforts in changing
faithfully complying with the and adopting policies that are consistent
recommendations mentioned in the draft with existing laws, rules, and regulation.
report which will necessarily result in
changes on the policies adopted by the
agency.

Rest assured that the agency will always

seek to adopt policies that are consistent
with existing laws, rules and regulations in
order that government resources will be
utilized judiciously and prudently.”

39
 Part V

Recommendations

40
RECOMMENDATIONS

RECOMMENDATIONS

In order to address the noted deficiencies, the team recommends the following
measures:

• Compute the allocation for extraordinary and miscellaneous

expenses based on the rates prescribed under the GAA for each
official.

• Take into consideration the DBM’s budget reviews and limit

expenses within allowable appropriation;

• Exercise prudence in the utilization of funds. Ensure that all

extraordinary and miscellaneous expenses are charged to this
account and that such allocations are utilized only for the purposes
for which these were established. Classify expenses to their proper
accounts;

• Strengthen control on the disbursement of funds. Comply with the

provisions of Section 4(6), P.D. 1445. Refrain from paying expenses
that are not properly documented; and

• Require concerned officials to submit pertinent documents for

expenses amounting to P2.969 million to the Office of the Resident
Auditor for evaluation and post audit.

The Resident Auditor was likewise advised to take appropriate actions on

allocations and expenditures in excess of the prescribed limitations and on
expenditures which could not be properly documented and justified.

41
Submitted in compliance with MS/TS Office Order No. 2007-011 dated March
22, 2007.

42