Audit Criteria:

Administrative Code of 1987(Sec.2 Rule

XI)
2. Sections 209, 211 and 517 of GAAM
3. RA 7160 of the Local Government Code
(Sec. 77)
4. RA 6850 Sec. 1)
5. PD No. 442 Labor Code of the Phil.
1.

Possible Risk

Hiring of casuals/contractuals/job order personnel maybe

made without specific policy guidelines for the same.
Payment of Salaries and Wages of casuals/contractuals/job
order personnel, is not in accordance with existing labor/civil
service and revenue regulation/laws/rules.
Improper accounting for the payment of Salaries and Wages.
Payment of Salaries and Wages could be over/under the
Personal Service limitation set under RA 7160.

AUDIT OBJECTIVES
a. To ascertain the necessity, propriety and legality of
hiring casuals, job orders, contractuals and consultants.
b. To validate the actual services rendered by these local
government personnel and the propriety of the manner
of payment of their salaries

Audit Procedures:

o
o
o
o

Obtain the following:

Complete listing of all casuals, contractuals, job orders, consultant;
Statement of duties and responsibilities of casuals and job orders;
Contracts of Service of contractuals and consultants; and
Accomplishment Reports.

Look into the program, projects and activities and accounts where payments are
charged and accounted for.

Conduct head count and require the presentation of government issued identification
(ID) cards, such as, GSIS, SSS, Philhealth, Pag-ibig IDs, Passport and Drivers License
to establish identity.

Compare the Contracts of Consultancy Services executed for the hiring of contractuals
and consultants and statement of duties and responsibilities of casuals, contractuals, and
job orders against their corresponding Accomplishment Reports.

Observe on test basis actual payments of salaries to casuals, job orders, contactuals and
consultants.

Audit Observation
The

necessity, propriety and legality of

hiring Contract of Services/Job Orders of
the City Government is questionable
because Section 2, Rule XI of the Omnibus
Rules Implementing Book V of Executive
Order (EO) No. 292, Sections 209, 211,
Volume I of the GAAM and various labor
and tax laws were not strictly followed.

1.1 Section 2, Rule XI of the Revised Omnibus on Appointments and other Personnel
Actions, Rules Implementing Book V of EO No. 292, Otherwise known as the
Administrative Code of 1987.
The contract covers lump sum work or services such as janitorial, security, or
consultancy services where no employer-employee relationship exist;
o

The job order covers piece of work or intermittent job of short duration not exceeding
six months on daily basis;

In the review of the Job Order Contracts, it was revealed that the hiring of Job
Order employees does not cover specific lump sum work, piece of work,
intermittent job that is identified with a specific project, job requiring special or
technical skills, for a specific period of time, and/or have a definite expected
output.

1.2 Sections 209, 211 and 517 of Volume 1 of the Government Accounting and
Auditing Manual (GAAM).
Section 209. Contractual Personnel. - Contractual personnel are those
employed in the government in accordance with a special contract to undertake a
specific work or job requiring special or technical skills not available in the
employing agency.
Job order personnel were hired to perform functions similar to the
vacant regular plantilla positions.

62

The 243 job order personnel assigned in the various offices are all nontechnical personnel and their duties and functions are clerical or
administrative in nature.

Section 211. Hiring of contractual personnel.

a. x x x
b.
In no case shall contractual appointments or contracts of personnel services
be issued to non-technical personnel or those whose duties and functions are
clerical or administrative in nature and those who will hold positions in the labor
or trades and crafts group. If such services are needed in support of the job or
project, the regular staff or personnel may be augmented by hiring casual or
emergency staff.
The 243 job order personnel assigned in the various offices are all nontechnical personnel and their duties and functions are clerical or
administrative in nature.

Section 517. Contracting activities. Agencies may enter into

contracts with individuals or organizations, both public and
private, subject to the provisions of law and applicable
guidelines approved by the President: Provided that contracts
shall be for specific services which cannot be provided by the
regular staff of the agency, shall be for a specific period of
time, and shall have a definite expected output.
Review of the Job Order Contracts revealed that the
hiring of Job Order employees does not cover specific
lump sum work, piece of work, intermittent job that is
identified with a specific project, job requiring special or
technical skills, for a specific period of time, and/or have
a definite expected output.

1.3 RA 7160 Local Government Code

Section 77. Responsibility for Human Resources and Development. - The
chief executive of every local government unit shall be responsible for
human resources and development in his unit and shall take all personnel
actions in accordance with the Constitutional provisions on civil service,
pertinent laws, and rules and regulations thereon, including such policies,
guidelines and standards as the Civil Service Commission may establish:
Provided, That the local chief executive may employ emergency or casual
employees or laborers paid on a daily wage or piecework basis and hired
through job orders for local projects authorized by the sanggunian
concerned, without need of approval or attestation by the Civil Service
Commission: Provided, further, That the period of employment of
emergency or casual laborers as provided in this Section shall not exceed
six (6) months.

It appears that the services rendered by the Contract of Services/Job Orders hired by the
LGU can already be considered as government services because of SC Rulings, the power of
control as the ultimate factor in determining the existence of employer-employee
relationship is evident such as (a) selection of the employee; (b) the payment of wages; (c)
the power of dismissal; (d) power to control the employees conduct. Although it is
stipulated in their contract that their services are not considered as government services,
based on the SC ruling the job orders do not cover lump sum work nor cover piece of work
or intermittent job that is identified with a specific project. As previously mentioned, they
render continuous service and their contracts are renewed every after six months.
SP/SB Resolution/Ordinance
Lack of documented guidelines and policies in hiring Contract of Service/Job Orders. The
Human Resource Management Office (HRMO) has no direct participation in the hiring of
personnel rather the office awaits recommendations from Officials/Department Heads on who
would be accepted/recruited. The hiring has no criteria to base on (designation/functions,
qualifications, rates, prohibitions, etc) and done as the need arises by the various Offices of the
LGU.

1.4 Article 99 of PD No. 442 (Labor Code of the Philippines)

The minimum wage rates for agriculture and non-agricultural employees and
workers in all regions in the country shall be those prescribed by the Regional
Tripartite Wages and Productivity Boards (RTWPBs)
Minimum wage for Region 12 is P260.00 effective January 1, 2012 as per Wage
Order No. RB XII-16, as amended. This was further increased to P270.00 effective
April 18, 2012 pursuant to Wage Order No. RB XII-17.
The daily rates of 84 Job Orders are below the minimum wage rate (P200 to
250/day < P270/day) approved by the Regional Tripartite Wages and
Productivity Board.
The compensations received by these employees are not subjected to the
graduated rates of withholding tax on compensation contrary to Section 2.78 of
BIR Revenue Regulation No. 2-98.

1.5 Republic Act No. 6850

Section 1. All government employees as of the approval of this Act who are
holding career civil service positions appointed under provisional or
temporary status who have rendered at least a total of seven (7) years of
efficient service may be granted the civil service eligibility that will qualify
them for permanent appointment to their present positions.
The 243 job order personnel assigned in the various offices are all nontechnical personnel and their duties and functions are clerical or
administrative in nature.
They render continuous service and their contracts are renewed every
after six months. Several job orders have been serving as such for 2
to11 years now.

We recommend that the LGU issue policy guidelines in the

hiring of job order in accordance with Section 2, Rule XI of
the Revised Omnibus Rules Implementing Book V of EO
No. 292, COA rules and regulations and existing labor and
tax laws specified above.
If possible, plan further on how to achieve the ideal and
realistic personnel complement of the LGU otherwise
follow the Organizational Structure of the LGU instead of
resorting to Job Order scheme.
Further, if merited under existing Civil Service rules and
regulations, the performances of the said job order
personnel should be evaluated for possible appointment to
permanent regular positions.

AOM NO. 2013-001

Date: October 13, 2013
AUDIT OBSERVATION MEMORANDUM
For:
Attention:
We have audited the accounts and operations of the Local Government Unit (LGU) as of December 31,
2012 and observed the following deficiencies/ errors:

The necessity, propriety and legality of hiring Contract of Services/Job Orders of the Local Government
Unit is questionable because Section 2, Rule XI of the Omnibus Rules Implementing Book V of
Executive Order (EO) No. 292, Sections 209 to 211, Volume I of the GAAM and various labor and
tax laws were not strictly followed.
Legal Framework
The hiring of personnel under Contract of Services/Job Orders/Contractuals applicable to Local
Government Units is governed by the following laws, rules, and regulations:

Laws, Rules and

Regulations
Section 2, Rule XI of
the Revised Omnibus
on Appointments and
Other
Personnel
Actions,
Rules
Implementing Book V
of EO No. 292,
otherwise known as the
Administrative Code of
1987

Pertinent Provisions/Particulars
Contracts of Services/Job Orders refer to employment described as
follows:
a. The contract covers lump sum work or services such as janitorial,
security, or consultancy services where no employer-employee
relationship exist;
b. The job order covers piece of work or intermittent job of short
duration not exceeding six months on daily basis;
c. The contracts of services and job orders are not covered by Civil
Service Law, Rules and Regulations, but covered by COA rules;
d. The employees involved in the contracts or job orders do not enjoy
the benefits enjoyed by government employees, such as PERA,
COLA and RATA.

Laws, Rules and

Regulations
Sections 209, 210, 211
and 517 of Volume I of
the
Government
Accounting
and
Auditing
Manual
(GAAM)

Pertinent Provisions/Particulars
Section 209. Contractual Personnel. - Contractual personnel are those employed in the
government in accordance with a special contract to undertake a specific work or job
requiring special or technical skills not available in the employing agency, to be
accomplished within specific period, which in no case shall exceed one (1) year and
who perform or accomplish the specific work or job under their own responsibility
with minimum direction or supervision
Section 210. Compensation of contractual personnel.- When hiring of contractual
personnel is authorized in the appropriation of the agency, they may be paid
compensation inclusive of fees, honoraria, per diems compensation and allowances not
exceeding 120 percent of the minimum salary of an equivalent position in the National
Classification and Compensation Plan except as may be authorized by the Department
of Budget and Management in the following instances:
a. when the consultant or expert is an acknowledged authority in his field of
specialization; and
b. where the consultant or expert is hired to perform specific activity or service that
requires technical skill and expertise which local labor force cannot provide or, if
such expertise is available, the supply is limited.
Provided, that in no case shall such compensation exceed the salary of his immediate
superior, except as may be otherwise approved jointly by the Civil Service Commission
and the Department of Budget and Management.

Laws, Rules and

Regulations

Pertinent Provisions/Particulars
Section 211. Hiring of contractual personnel.
a. x x x
b. In no case shall contractual appointments or contracts of personnel
services be issued to non-technical personnel or those whose duties and
functions are clerical or administrative in nature and those who will hold
positions in the labor or trades and crafts group. If such services are
needed in support of the job or project, the regular staff or personnel may
be augmented by hiring casual or emergency staff.
Section 517. Contracting activities. Agencies may enter into contracts with
individuals or organizations, both public and private, subject to the
provisions of law and applicable guidelines approved by the President:
Provided that contracts shall be for specific services which cannot be
provided by the regular staff of the agency, shall be for a specific period of
time, and shall have a definite expected output.

Laws, Rules and

Regulations

Pertinent Provisions/Particulars

RA
7160.
Local Section 77. Responsibility for Human Resources and
Government Code
Development. - The chief executive of every local government

unit shall be responsible for human resources and development

in his unit and shall take all personnel actions in accordance
with the Constitutional provisions on civil service, pertinent
laws, and rules and regulations thereon, including such policies,
guidelines and standards as the Civil Service Commission may
establish: Provided, That the local chief executive may employ
emergency or casual employees or laborers paid on a daily wage
or piecework basis and hired through job orders for local
projects authorized by the sanggunian concerned, without need
of approval or attestation by the Civil Service Commission:
Provided, further, That the period of employment of emergency
or casual laborers as provided in this Section shall not exceed
six (6) months.

Laws, Rules and

Regulations

Pertinent Provisions/Particulars

Republic Act No. 6850 Section 1. All government employees as of the approval of this Act who
are holding career civil service positions appointed under provisional or
temporary status who have rendered at least a total of seven (7) years of
efficient service may be granted the civil service eligibility that will
qualify them for permanent appointment to their present positions.

Article 99 of PD No. The minimum wage rates for agriculture and non-agricultural employees
442 (Labor Code of the and workers in all regions in the country shall be those prescribed by the
Philippines)
Regional Tripartite Wages and Productivity Boards (RTWPBs)
Minimum wage for Region 12 is P260.00 effective January 1, 2012 as per
Wage Order No. RB XII-16, as amended. This was further increased to
P270.00 effective April 18, 2012 pursuant to Wage Order No. RB XII-17.

Laws, Rules and

Regulations

SC Ruling, Traders
Royal Bank vs. NLRC,
G.R.
No.
127864,
December 22, 1999.

Pertinent Provisions/Particulars

This Court has ruled that the existence of employer-employee

relationship cannot be proved by merely showing the agreement of the
parties. It is a question of fact which should be supported by substantial
evidence. And in determining the existence of such relationship the
elements usually considered are: (a) the selection of the employee; (b)
SC Ruling, GR No. the payment of wages; (c) the power of dismissal; (d) power to control
G.R. No. 154472 dated the employees conduct, with the control test generally assuming primacy
June 30, 2005.
in the over-all consideration.
CSC Resolution No.
030102 dated January
22, 2003

Personnel Profile
Based on Resolution No.251-3 series of 2005 also known as Resolution Adopting and
Approving the Revised Organizational Structure and Staffing Pattern of the Local Government
Unit (LGU) the LGU has a total of 621 regular permanent plantilla positions. For CY 2012 the
LGU has funded only 328 regular permanent plantilla positions and of these, only 309 positions
are filled up. To supplement its manpower requirements, the LGU hired 62 casual and 311 job
order employees. The details are shown in the table below:

VACANT
Personnel

Plantilla

Funded

Filled Up
Unfunded

Funded

Total

Permanent

621

328

309

293

19

312

Elective

14

14

14

Co-terminus

16

16

13

Casual

68

62

Job Order

311

311

Budget and Expenditure

Based on the approved annual and supplemental budgets for CY 2012, of the LGUs
total appropriation of P374,172,431.87, the appropriation for Personal Services and job
order services under the MOOE are 34.45% and 5.54%, respectively.
From the budget, a total of P148,747,500.25 was expended, as shown in the table:
Object of
Expenditure

Appropriation

Actual Expenditure

Balance

Personal Service

128,906,131.00

128,906,131.00

0.00

MOOE (Job Order)

20,722,568.00

19,841,369.25

881,198.75

Total

149,628,699.00

148,747,500.25

881,198.75

In addition, the PS appropriation of P128,906,131.00 is 41.58% of the LGUs total income

from regular sources realized in the next preceding fiscal year which is below the 55%
limitation rule under Section 325(a) of R.A. 7160, as shown in the table below.

Total Regular Income (CY 2010)

P 310,002,412.40

Total PS Allowable for CY 2012 (55%)

170,501,326.82

Less: PS for Budget Year 2012 (41.58%)

128,906,131.00

PS Available for Appropriation (13.42%)

P 41,595,195.82