Republic of the Philippines

COMMISSION ON AUDIT
Office of the Audit Team Leader
NGS Cluster 8
Audit Group D, E, G – Team 8
San Fernando City, La Union

AOM No. 20-03

January 21, 2020

AUDIT OBSERVATION MEMORANDUM

FOR: ATTY. RAUL C. LALUAN

PARPO II
Department of Agrarian Reform
La Union Provincial Office
San Fernando City, La Union

Attention: Atty. Lobayto P. Lang-ay – BAC Chairman

Ms. Shirley B. Verceles – Chief, PBDD
Ms. Lourdes E. Paneda - PCAO

Please be informed that we have observed the following:

The DARLU Bids and Awards Committee did not conduct the processes on
procurement short of award as required under Section 4 of Executive Order
No. 91 dated September 9, 2019 because the CLAAP cash allocation of
P3,277,500.00 was not promptly issued by the DAR Regional Office No.1 thus
resulted to less efficient and less effective fiscal management and delayed
implementation of the 2019 CLAAP Projects to the intended beneficiaries.

Executive Order (EO) 91 dated September 9, 2019 requires the adoption

of the cash budgeting system effective FY 2019 in order to formulate and
implement a National Budget that is supportive of and consistent with the
socio-economic development plan, and oriented towards the achievement
of explicit objectives and expected results, to ensure that funds are utilized
and operation are conducted effectively, economically and efficiently.
With this purpose, Section 4 of the same EO encourages that-

EARLY PROCUREMENT ACTIVITIES OF GOVERNMENT

AGENCIES. Pursuant to Section 20 of the General Provisions
of the FY 2019 GAA, government agencies are authorized to
undertake procurement activities short of award, to the extent
consistent with RA 9184 or the Government Procurement

Integrity, Commitment and Competence in the Commission

 Reform Act” and its Revised Implementing Rules and
Regulations.

The DARLU received P3,755,531.00 from its total 2019 Convergence on Livelihood
Assistance for Agrarian Reform Beneficiaries Project (CLAAP) Allocation to alleviate the
economic plight of its intended beneficiaries particularly the less favored smallholder
farmers including farmworkers in the various Agrarian Reform Beneficiary Organizations
(ARBOs) of La Union. Hereunder is the breakdown of the 2019 CLAAP-

NTCA Disburse- Unobligated

Category Allocation Obligations
Received ment Allotment
1. NTCA No. 2019-001LU dated March 4, 2019 amounting to P478,031.00 -
Social 98,531.00 98,531.00 98,531.00 98,531.00 0.00
Preparation
ARB profiling –
P22,650
Project Proposal
Development -
75,881
Engagement of 283,500.00 283,500.00 274,287.40 274,287.40 9,212.60
PDOs
Procurement of 25,000.00 0.00 0.00 0.00 0.00
laptop for PDO
Supervision/Monitoring/ Evaluation:
Coordinative and 19,500.00 0.00 0.00 0.00 0.00
Consultative
Meetings
Field Validation 14,000.00 0.00 0.00 0.00 0.00
(2018 Continuing
Fund)
Field Validation 96,000.00 96,000.00 78,480.00 78,480.00 17,520.00
and Monitoring
(2019 Fund)
Sub-Total 536,531.00 478,031.00 451,298.40 451,298.40 26,732.60
2. NTCA No. 2019-002LU dated 10/21/19 amounting to P1,500,000.00 -
Procurement of 900,000.00 900,000.00 870,000.00 870,000.00 30,000.00
live goat
(breeders)
Capacity 600,000.00 600,000.00 600,000.00 600,000.00 0.00
Development
-Trainings for
goat raising/
production
Sub-Total 1,500,000.00 1,500,000.00 1,470,000.00 1,470,000.00 30,000.00
3. NTCA No. 2019-003LU dated 11/04/19 amounting to P1,777,500.00 -
Procurement of 1,350,000.00 1,350,000.00 540,000.00 540,000.00 -0-
piglets
Procurement of 801,900.00 801,900.00 8,100.00
feeds for swine
fattening
Capacity 427,500.00 427,500.00 427,500.00 427,500.00 0.00
Development –
Trainings for
swine fattening
Sub-Total 1,777,500.00 1,777,500.00 1,769,400.00 1,769,400.00 8,100.00
TOTAL 3,814,031.00 3,755,531.00 3,690,698.40 3,690,698.40 64,832.60
(1st Release 2019 CLAAP Allocation Distribution is provided under DAR Memo75 dated Feb. 12, 2019.)

Integrity, Commitment and Competence in the Commission

 Based on the above Table, the DARPO-La Union received only P3,755,531.00
out of the total allocation of P3,814,031.00 or a difference of P58,500.00. Our audit
revealed that the unreleased allocation of P58,500 is composed of:

Particulars Amount
Procurement of laptop for PDO P 25,000.00
Coordinative and Consultative Meetings 19,500.00
Field Validation (2018 Continuing Fund) 14,000.00
Total P 58,500.00

Further, early procurement activities is allowed under Section 20 of RA 9184 and

reiterated in Section 4 of EO 91 dated September 9, 2019. Contrary to the aforementioned
provision, the DARPO-La Union Bids and Awards Committee conducted the procurement
activities for the goat raising, swine fattening and capacity development- trainings related to
said project just before the receipt of NTCA Nos. 2019-002LU dated October 21, 2019 and
after the receipt of 2019-003LU dated November 4, 2019 and subsequently awarded the
Purchase Orders # 12-412-2019, 12-413-2019, 12-422-2019 dated December 4 and 10, 2019.

Because of delayed released of CLAAP Fund and the delayed conduct of the
procurement and awards activities of the goat raising/production, swine fattening and
capacity development projects, the delivery/implementation of the said projects were made in
such a rush and the following had been observed, to wit:

 The 180 piglets costing P540,000.00 were economically, efficiently and

effectively delivered since the DPERF (supplier) of the project strictly
complied with the contract/purchase order issued to DPERF and the
intended beneficiaries were satisfied to date;

 The goat raising/production project costing P900,000.00 was not very

satisfactorily implemented. The Supplier did not deliver the 60 bucks
and 180 doe breeders (male and female goats) in accordance with the
conditions stated in the PO Nos. 12-412-2019 and 12-413-2019 both
dated December 4, 2019 most especially those delivered at Macalva,
Agoo, La Union. Inspection during the 1st delivery of the goats revealed
that not all of the goats were healthy, not compliant as to size and weight,
not vaccinated, etc. Because of the aforementioned conditions, many
beneficiaries were discouraged on the project and ---- heads of goats
were returned to the supplier. Subsequently these were replaced, hence
the required 240 heads of goat were completed/delivered as of December
23, 2019. However, as of January 9, 2020, total mortality of the
delivered goat is twelve (12) (Annex “A”). As a consequence, the
concerned beneficiaries are left with the problem of having an obligation
to pay the loan amount of P43,000.00 at the ARBO Cooperative instead
of helping them to alleviate their economic plight by gaining a future
additional income from the sale of the goat livelihood project;

 The capacity development trainings for both goat raising/production and

swine fattening projects were not implemented economically, efficiently
and effectively. Audit disclosed that the allocation of P1,027,500.00
intended for capacity development – trainings for goat raising/production
and swine fattening projects were 100% obligated and were fully paid

Integrity, Commitment and Competence in the Commission

 without withholding taxes through Automatic Debit Advice though
delivery/completion of the training activities were not yet fully
implemented (Annex “B”). The actual dates and actual number of
participants were not considered in the settlement of the obligation. Also,
random/spot inspection of trainings conducted by the Audit Team
disclosed that the trainings were done on a half day or up to 2:00 pm and
the Audit Team have not seen complete 2 snacks and meal during the day
contrary to the contrary to the conditions stated in the purchase orders
issued to EMPCI resulting to under delivery. Also, the snacks and meals
were not actually procured from EMPCI. Further, the proposed dates of
trainings were rescheduled. Allegedly, there were conflict of scheduled
activities between the participants and the resource speakers and/or the
training facilitators of DARPO-La Union. Hence, the
obligation/disbursements may be a subject of irregular, unnecessary and
excessive transactions;

 Likewise, there was no recognition of Accounts Payable for the

undelivered feeds for the swine fattening projects as of December 31,
2019. Emphasis is hereby made that a one time delivery of feeds cannot
be done. Instead, installment delivery of feeds was reprogrammed in
order to assure that the food of the piglets are freshly manufactured
within the span of 3-4 months before sale (Annex “C”). Hence, 4 checks
were prepared for PO No. 12-421-2019 dated December 10, 2019 and
Check Nos. 1584208 to 1584210, all dated December 23, 2019
amounting to P474,012.00 were allowed to remain outstanding until
March, 2020 purposely to avoid reversion of the CLAAP Cash
Allocation of P474,012.00 as of December 31, 2019.

 Lastly, equity in the selection of the intended beneficiaries was not

thoroughly implemented as mandated under pertinent provisions of
DSWD-DAR Joint Memorandum Circular No. 01 s. 2018, especially at
the time when many of the original selected beneficiaries were
discouraged and withdrew from receiving the goat during its 1st delivery
at Macalva Central, Agoo, La Union.

In view of the above deficiencies for capacity development-trainings, goat

raising and swine fattening projects, the transactions may become voidable and may
become a subject of audit suspension or even audit disallowances.

We recommend that Management implement strictly the timelines

targeted to be achieved and/or as planned for the CLAAP Projects to avoid
delays in the implementation of the project or inefficient and ineffective
delivery/accomplishment of projects. Further, we recommend compliance with
Section 20 of the 2016 Revised IRR of RA 9184 in order to remedy delays in the
procurements of needed goods.

In addition, we request Management to submit the related Disbursement

Vouchers of the CLAAP Projects together with the supporting documents the
soonest possible time, for post audit purposes.

Also, we suggest Management to request the Supplier of goats to give

discounts on the cost of goats during the 1 st delivery or replace the 12 goats

Integrity, Commitment and Competence in the Commission

that died as of January 9, 2020, there being violations on the conditions stated
in the Purchase Orders.

Finally, inquire from the DARCO/DARRO I Management as to the

reason for the unreleased allocation of P58,500.00 as provided under DAR
Memo 75 dated February 12, 2019.

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof.

LILIA C. CORPUZ REMEDIOS G. MOVIDA

Audit Team Leader Regional Supervising Auditor

Proof of Receipt of AOM No. 20-03 dated January 21, 2020

Name Position Date Signature
Atty. Raul C. Laluan PARPO II
Atty. Lobayto P. Lang-ay BAC Chairman
Ms. Shirley B. Verceles Chief, PBDD
Ms. Lourdes E. Paneda PCAO
Ms. Karen Joy E. Nidoy Accountant II

Integrity, Commitment and Competence in the Commission