A. IntroductionUnder Executive Order (EO) No. 710 dated July 27,

1981, the Ministries of Public Works and Public

Highways were merged for a more effective and

sustained implementation of infrastructure projects.

Under the restructured set-up, the agency was known as

the Ministry of Public Works and Highways (MPWH)

with 14 regional offices, 94 districts and 60 city

engineering offices, five bureaus and six service offices,

in addition to corporations and councils attached to the

Ministry for administrative supervision. By virtue of EO

No. 124 dated January 30, 1987, the agency was

renamed as the Department of Public Works and

Highways (DPWH).

The DPWH functions as the engineering and construction arm of the Government tasked to

continuously develop its technology for the purpose of ensuring the safety of all infrastructure

facilities and securing for all public works and highways the highest efficiency and quality in

construction. It is currently responsible for the planning, design, construction and

maintenance of infrastructure, especially the national highways, flood control and water

resources development system, and other public works in accordance with national

development objectives.

The agency is composed of 9 services, 6 bureaus, 27 PMOs of which 11 maintained separate

set of books of accounts. It has also 16 Regional Offices and 180 District Offices. The DPWH

is headed by a Secretary and assisted by six Undersecretaries.

60

14,366

2,71913232,770

As of December 31, 2015, the agency has a total personnel complement of

50,047 inclusive of the regional and district engineering offices, composed of

the following:

Presidential Appointees

Regular/Permanent Employees

Co-Terminus with the

Incumbent

Permanent Charged to

Maintenance Fund

Job Order

i

B. Financial Highlights

For CY 2015, the DPWH received total appropriations of

P354,523,078,789.22 consisting of (a) regular appropriation of

P348,479,661,270.00, of which P290,470,888,000 pertained to

the Department’s agency specific appropriations per General

Appropriations Act for FY 2015 while P58,008,773,270.00

pertained to appropriations from the Special Provisions of other

government agencies; (b) automatic appropriation of

P568,307,227.00; and (c) Special Purpose Fund (SPF) of

P5,475,110,292.22. During the year, the Department received

total allotments of P435,576,413,641.82, with obligations

incurred of P339,754,671,299.38, leaving an unobligated

allotments of P95,821,742,342.44, of which

P66,473,631,406.25 was extended and P29,348,110,936.19 was

reverted. Details are as follows:

Source of FundsAppropriations Allotments

Obligations

Incurred

Unobligated Balance

Total Reverted Extended

(In Php)

Current Year

1. Regular 348,479,661,270.00 330,977,876,776.00 266,852,684,570.17 64,125,192,205.83 61,364,062.27 64,063,828,143.56

2. Automatic

Appropriations

568,307,227.00 568,307,227.00 558,817,350.43 9,489,876.57 9,489,876.57 0.00

a. RLIP 546,644,664.00 546,644,664.00 537,154,787.43 9,489,876.57 9,489,876.57 0.00

b. Customs

Duties & Taxes

21,662,563.00 21,662,563.00 21,662,563.00 0.00 0.00 0.00

3. SPF 5,475,110,292.22 5,475,110,292.22 3,043,069,937.01 2,432,040,355.21 22,237,092.52 2,409,803,262.69

a. NDRRMC 3,571,534,732.00 3,571,534,732.00 1,256,903,424.32 2,314,631,307.68 0.00 2,314,631,307.68

b. RRP (101411) 700,000,000.00 700,000,000.00 604,828,044.99 95,171,955.01 0.00 95,171,955.01

c. MPBF 1,037,651,215.22 1,037,651,215.22 1,018,002,868.20 19,648,347.02 19,648,347.02 0.00

d. PGF 165,924,345.00 165,924,345.00 163,335,599.50 2,588,745.50 2,588,745.50 0.00

Subtotal 354,523,078,789.22 337,021,294,295.22 270,454,571,857.61 66,566,722,437.61 93,091,031.36 66,473,631,406.25

Extended

1. Regular 0.00 65,406,683,227.18 38,734,129,886.82 26,672,553,340.36 26,672,553,340.36 0.00

2. SPF 0.00 2,648,886,776.41 2,392,959,660.96 255,927,115.45 255,927,115.45 0.00

3. Continuing

Appropriations

0.00 27,796,806,343.01 25,825,546,218.90 1,971,260,124.11 1,971,260,124.11 0.00

4. Supplemental 0.00 2,702,743,000.00 2,347,463,675.09 355,279,324.91 355,279,324.91 0.00

Subtotal 0.00 98,555,119,346.60 69,300,099,441.77 29,255,019,904.83 29,255,019,904.83 0.00

TOTAL 354,523,078,789.22 435,576,413,641.82 339,754,671,299.38 95,821,742,342.44 29,348,110,936.19 66,473,631,406.25

Overall Financial Utilization Rate 78.00%

*Motor Vehicle Users’ Charge (MVUC) appropriations, allotments and obligations are included in a separate report.

ii

98

337

69

270

0 100 200 300 400

Extended

Current Year

(in billions)

Obligations Allotments

The status of fund utilization, as reported by the Department, is as follows:

*Motor Vehicle Users’ Charge (MVUC) appropriations, allotments and obligations are included in a separate report.

Particulars Appropriations Allotments ObligationsUnobligated

Balances

A. Special Provisions for the Department of Public Works and Highways

1. Tulay ng Pangulo Para sa Kaunlarang Pag-

Agraryo

2,101,122,000.00 - - -

2. Tourism Road Infrastructure Program 16,489,518,000.00 16,413,367,000.00 15,155,495,550.51 1,257,871,449.49

3. Public-Private Partnership infrastructure Fund 8,853,600,000.00 2,740,029,960.00 73,687,649.94 2,666,342,310.06

4. Local Infrastructure Program 27,352,691,000.00 27,351,191,000.00 25,519,848,569.34 1,831,342,430.66

5. Payapa at Masaganang Pamayanan Program 519,000,000.00 519,000,000.00 498,235,920.94 20,764,079.06

6. Rehabilitation or Reconstruction of Damaged

Paved National Roads and Road Upgrading

16,325,898,000.00 16,325,898,000.00 13,014,785,322.89 3,311,112,677.11

7. Preventive Maintenance of Roads and Bridges 463,901,000.00 463,901,000.00 418,910,287.00 44,990,713.00

8. Water Supply and Sanitation Infrastructure

Projects

1,000,000,000.00 70,759,000.00 - 70,759,000.00

9. Prior Year’s Right-of-Way Expenses and other

Contractual Obligations

3,212,432,000.00 2,429,111,744.00 1,109,420,917.85 1,319,690,826.15

10. Quick Response Fund 1,000,000,000.00 1,000,000,000.00 334,026,761.17 665,973,238.83

Sub-total 77,318,162,000.00 67,313,257,704.00 56,124,410,979.64 11,188,846,724.36

B. Special Provisions from Other Government Agencies

Dept of Agriculture – Farm to Market Road

(FMR)

6,250,000,000.00 6,250,000,000.00 5,030,771,761.61 1,219,228,238.39

Dept of Education - School Building Program 48,062,599,270.00 46,779,563,027.00 37,044,608,073.75 9,734,954,953.25

Dept of Health – Construction of LGU Health

Care Facilities

3,696,174,000.00 3,303,526,060.00 350,587,574.87 2,952,938,485.13

Sub-Total 58,008,773,270.00 56,333,089,087.00 42,425,967,410.23 13,907,121,676.77

Total 135,326,935,270.00 123,646,346,791.00 98,550,378,389.87 25,095,968,901.13

iii

Included in the current year regular appropriations of P348,479,661,270.00 are the

appropiations from the Special Provisions in the GAA for FY 2015 of the Department of

P77,318,162,000.00 and from the Special Provisions in the GAA of other government

agencies amounting to P58,008,773,270.00, intended for the implementation of various

infrastructure projects.

0

10

20

30

40

50

60

70

DPWH Other Agencies

675656

42

(in

bill

ion

s)

Allotments Obligations

The comparative financial condition and financial performance of the Department for

Calendar Years (CY) 2015 and 2014 are shown below:

Particular 2015 2014 Increase/(Decrease) %

Financial Condition

Assets 1,183,716,652,875 593,644,356,686 590,072,296,189 99.40%

Liabilities 66,915,883,249 63,314,187,531 3,601,695,718 5.69%

Accumulated Surplus 1,116,800,769,626 530,330,169,155 586,470,600,471 110.59%

Financial Performance

Revenue 7,262,269,301 1,244,724,300 6,017,545,001 483.44%

Current Operating Expenses 79,418,066,807 16,997,455,322 62,420,611,485 367.24%

Surplus/(Deficit) from Current

Operations

(72,155,797,506) (15,752,731,022) (56,403,066,484) 358.05%

Net Financial Assistance/Subsidy 236,898,311,210 159,752,447,807 77,145,863,403 48.29%

Gain/(Losses) 13,722,245 8,643,042 5,079,203 58.77%

Surplus/(Deficit) for the period) 164,755,287,575 144,007,552,353 20,747,735,222 14.41%

The significant increases in the Assets and Current Operating Expenses were due to the

implementation of Department Order No. 176 wherein Infrastructure Assets transferred from

the Roads and Bridges Information Application and other funding source and the

corresponding depreciation thereon were recognized in the books of accounts in the current

period.

iv

0

200

400

600

800

1000

1200

1400

Assets Liabilities AccumulatedSurplus

(in

bill

ion

s)

Financial Condition

2015

2014

0

50

100

150

200

250

Revenue Expenses Subsidy

(in

bill

ion

s)

Financial Performance

2015

2014

C. Operational Highlights

The Department’s reported targets and

actual accomplishments measured in

terms of its major final outputs (MFOs)

are as follows:

Performance IndicatorsTargets (Per

GAA)

Actual

AccomplishmentsVariance

Quantity Percent Quantity Percent

MFO 1: National Road Network Services

Length of national roads maintained 1,044 kms. 598.873 kms. 57.36 - 445.127 kms - 42.64

Length of national roads constructed 1,934 kms. 723.858 kms. 37.43 - 1,210.142 kms. - 62.57

Length of unpaved roads paved 1,457 kms. 242.404 kms. 16.64 -1,214.596 kms. - 83.36

Length of bridges constructed 17,736 l.m. 10,774.521 l.m. 60.75 - 6,961.479 l.m. - 39.25

Average Physical Delivery Rate – MFO 1 43.04

MFO 2: Flood Management Services

No. of flood control structures and drainage systems constructed/maintained 845 739 87.45 - 106 12.54

No. of flood control structures constructed/rehabilitated 119 20 16.81 -99 -83.19

Average Physical Delivery Rate – MFO 2 52.13

MFO 3: Maintenance and Construction Services of Other Infrastructures

Length of access roads leading to airports constructed/approved 87 kms. 19.296 kms. 22.18 -67.704 kms. - 77.82

Length of access roads leading to sea ports constructed/improved 92 kms. 30.930 kms. 33.62 61.07 kms. 66.38

Length of access roads leading to tourist destinations constructed/ improved 784 kms. 226 kms. 28.83 558 kms. 71.17

No. of septage and sewerages projects constructed 1 1 100 0 0

No. of rainwater collectors constructed 594 503 84.68 91 15.32

Average Physical Delivery Rate – MFO 3 53.86

Overall Physical Delivery Rate 49.68

v

MFO 1

1,044

599

Roads Maintained

1,934

724

Roads Constructed

1,457

242

Roads Paved

17,736 10,775

Bridges Constructed

MFO 2845

739

Flood Control Constructed/Maintained

119

20

Flood Control Constructed/Rehabilitated

MFO 3

87

19

Roads to AirportConstructed/Improved

92

31

Roads to SeaportConstructed/Improved

784

226

Roads to TouristDestinations

Constructed/Improved

1 1

Septage/SewerageConstructed

594

503

Rainwater CollectorConstructed

Target Actual

For the Special Provision on appropriations received from other national government agencies,

presented below are the details of accomplishment:

AgencyNo. of

ProjectsCompleted On-going

Not yet

Started

% of

completion

Department of Education –

School Building Program

6,963 664 4,459 1,840 9.54

Department of Agriculture

– Farm-to-Market Roads

1,388 886 386 116 63.83

Department of Health –

Construction of LGUs

Health Care Facilities

47 0 3 44 0.00

vi

0

500

1000

1500

2000

2500

3000

3500

4000

4500

DepED DA DOH

664 886

-

4,459

386

3

1,840

116 44

Completed

On-going

Not yetStarted

D. Scope of Audit

The audit covered the financial transactions and operations

of DPWH for the year ended December 31, 2015.

The Consolidated Financial Statements (FS) as of December 31, 2015 consisted of the FS of

the Office of the Secretary and all Regional Offices for Regional Agency Fund, Foreign-

Assisted Projects Fund, Business Related Fund and Trust Receipts Fund. Part II of this report

does not include the observations and recommendations pertaining to the operations of

DPWH Regions VII and its District Engineering Offices because the regional consolidated

management letters thereat were not submitted as of this writing.

The objectives of the audit were to :

(a) verify the level of reliance that

may be placed on management’s

assertions on the financial

statements;

(b) determine the extent of

compliance with applicable laws,

rules and regulations;

(c) recommend agency

improvement opportunities; and

(d) determine the extent of

implementation of prior year’s audit

recommendations.

vii

E. Independent Auditor’s Report

The Auditor rendered an adverse opinion on the fairness

of presentation of the consolidated financial statements of

the DPWH due to accounting errors and deficiencies

enumerated below:

Dormant bank accounts of P196,228,400.06 were not closed and reverted to BTr contrary to the provision of

Section 5.7 of DOF-DBM-COA Joint Circular No. 4-2012 dated September 11, 2012. Moreover, unsubstantiated

cash balance of P1,175,047,314.84 remained in the books which rendered the cash account unreliable.(Observation No. 9)

We recommended and Management agreed to:

a. enforce the closure of the existing dormant bank accounts and effect the necessary reversion to the Bureau ofTreasury; and

b. reactivate the Composite Team created under Department Order No. 40 series of 2013 not only at the OSEC

level but also in Regional and District Offices to analyse and reconcile the long outstanding unreconciled balances,make the necessary adjustments thereon and closely monitor the progress of reconciliation being made within the

set timelines.

Despite prior year’s audit recommendations that DPWH demand full liquidation of fund transfers to variousImplementing Agencies and monitor the implementation by the IAs of the intended projects, Inter-AgencyReceivables of P7,851,574,754 remained unliquidated as at December 31, 2015, of which P5,703,709,918 or72.64%, which includes fund transfer to CHED of P2,894,078,566, has been outstanding for over two years; thus,the timely completion of the intended projects was not assured. Moreover, the difference of P392,377,555 betweenthe balances in the books of the DPWH and the recipient agencies rendered the account balance unreliable.(Observation No. 10)

We recommended that the concerned DPWH Office to:

a. coordinate with the CHED to immediately remit any unutilized DAP Funds released to various SUCs andfurnish evidence of remittances as proof of settlement of the transferred funds;

b. issue demand letters to the Implementing Agencies supported with copies of MOA and Disbursement Vouchersto enforce the immediate liquidation of the fund transfers received and require the immediate remittance of anyexcess funds to the BTr; and

c. reconstitute the D.O. No. 40 series of 2013 by assigning an effective and responsible Team Leader and Membersfor the reconciliation of the accounts between the books of DPWH as the source agency and various implementingagencies/units with a prescribed and prepare the necessary adjustments.

The Inventory account of P885,226,402.00 was overstated by a net amount of P1,719,516.19 due to unrecordedpurchases/donations of P12,712,797.51, unrecognized issuances of inventories in the amount of P83,408,086.55,and purchases directly recorded as expense amounting to P68,975,772.85. (Observation No. 11)

We recommended and Management agreed to require the Supply Officers of the concerned offices to promptlysubmit the DRs and RSMIs to the Accountants as basis for recording the inventory purchases/donations andissuances, and direct the Accountants to adhere to the perpetual inventory system of recording supplies andmaterials as inventory and recognizing expense only upon issuance of the same.

The Advances to Contractors account of P25,364,094,545.00 included past due unrecouped advances ofP3,794,288,749.19 pertaining to terminated projects and completed projects with no final payment due to theDepartment’s failure to forfeit the corresponding irrevocable standby letter of credit or guarantee payment postedby the contractors or deduct the amount from the final payment of the projects or other money claims of thecontractors. Moreover, erroneous recording of transactions overstated the account by P3,880,574.48 while theundocumented balances of P231,793,650.88 further rendered the account unreliable. (Observation No. 12)

We recommended and Management agreed to:

a. require the contractors concerned to refund the unrecouped amount for terminated and completed projects,forfeit the corresponding irrevocable standby letter of credit or guarantee payment posted by these contractors ordeduct the amount from the final payment of the project or from other money claims of the contractors;

b. instruct the Accountants concerned to prepare the necessary adjusting entries to correct the errors noted andvalidate the unsubstantiated balances; and

c. in the future request for advance payments for mobilization, Management strictly require Contractor to include aSchedule of Recoupment as required by DPWH DO No. 52, series of 2012 and strictly implement the outrightdeductions of advances from the first billing until the advances have been recouped.

viii

The Property, Plant and Equipment balance of P1,131,673,556,869 was unreliable due to various recording

errors which overstated the accounts by P336,465,708.74 and existence of undocumented PPE amounting to

P1,212,005,340.19. (Observation No. 13)

We recommended that Management direct the Accountants to prepare the adjusting entries to correct all the

accounting errors noted and validate the unreconciled balance of prior years by reconstituting D.O. No. 40 seriesof 2013 and assigning an effective Team Leader and Members to meet the objective of the team.

Lapses in the adoption and implementation of Department Order No. 176 series of 2015, which prescribes theGuidelines and Procedures in the Recognition and Derecognition of Infrastructure Assets, included (a)inconsistency of the information generated from the Roads and Bridges Information Application (RBIA); (b)inclusion of inventories which were constructed more than 40 years past; (c) adoption of unapproved costestimates in the valuation of roads and bridges; and (d) inadequate guidelines in the recognition of projectscompleted subsequent to 2014, that may result in the misstatement of PPE accounts affecting the reliability ofthe fair presentation in the financial statements. (Observation No. 14)

We recommended that Management instruct the Financial Management Service to:

a. conduct a test of reliability of the RBIA and consider whether the information contained therein (e.g. roads,bridges, and flood control structures) reflect the existing and current condition of the infrastructure assets;

b. conduct actual inventory of infrastructure assets and reconcile the inventory of the RBIA to determine whetherthere were roads, bridges, and flood control structures which are no longer existing that were previouslyrecognized through the master file so that this can be properly adjusted; and

c. consider revisiting the policy to include a more detailed guidelines that address the difficulties encountered bythe Accountants in the ROs and DEOs..

Transferred funds from various NGAs, GOCCs and LGUs which remained unliquidated as at December 31,2015 amounting to P15,628,508,915 included (a) excess funds in the amount of P21,451,083.07 not remitted tothe Bureau of Treasury (BTr); (b) unused/idle funds of unimplemented projects in the amount ofP431,410,470.00 and (c) unliquidated PDAF and DAP funds aggregating to P846,858,038.57. Moreover,expenditures of P9,605,768.11 not related to the intended projects were charged against the transferred funds.There were also errors in the recording of fund transfers and liquidations thereof which rendered the accountsunreliable. (Observation No. 15)

We recommended and Management agreed to:

a. Require the Accountants concerned to remit the excess funds in the amount of P21,451,083.07 to the BTr andsubmit the liquidation reports on completed projects together with the copy of the Official Receipt of theremittance to BTr so that the necessary adjustments to the Inter-Agency Payables and other affected accounts canbe made;

b. Direct the Regional Directors and District Engineers concerned to immediately initiate the construction of theunimplemented projects; otherwise, return the unused/idle funds to the SAs;

c. Submit full liquidation of the balances funded under PDAF/DAP and remit to the BTr any unexpended and/orunutilized balance;

d. Instruct the Accountants concerned to create a composite team to reconcile the balances of the accounts withthe records of the SAs as well as the affected intra-agency accounts which were misstated due to the accountingerrors noted, complete the validation of dormant and undocumented balances, and prepare the necessaryadjusting entries to ensure the fair presentation of the accounts in the financial statements; and

e. Refund/return the amount of unrelated expenses to the SAs concerned and, henceforth, refrain from chargingexpenses not related to the implementation of the projects against the transferred funds.

The reported year-end balance of Accounts Payables of P28,647,729,962 could not be relied upon due to the (a)non-reversion of long outstanding payables amounting to P17,503,845,513.68, aged two years or more, againstwhich no actual claim has been filed; and (b) erroneous recording of various transactions of P35,625,224.55.(Observation No. 16)

We recommended that the Accountants concerned examine/analyze the Accounts Payable which have beenoutstanding for two years or more and revert those accounts which have no valid claim, administrative orjudicial; and prepare the necessary adjusting entries to correct the errors noted.

ix

As pointed out in Note 7.1 and Note 19.1, Infrastructure Assets transferred from the Roads and

Bridges Information Application (RBIA) and other funding source and the corresponding

depreciation were recognized in the books of accounts in the current period instead of restating the

2014 balances of the affected accounts in view of the change in accounting policy, as required under

paragraph 27 of PPSAS 3. Moreover, as indicated in the Statement of Changes in Net

Assets/Equity, prior year’s errors and other adjustments were corrected in the beginning balance of

the Accumulated Surplus for the current period instead of restating the comparative amounts of the

affected accounts in the prior period in which the error occurred, which is not in accordance with

paragraph 47 of PPSAS 3.

x

F. Other Significant Observations and Recommendations

Hereunder are the other significant audit observations

noted during the year and the corresponding

recommendations that are discussed in detail in Part II of

this Report:

For CY 2015, DPWH received total allotments of P435,576,413,641.82 consisting of current year allotments of

P337,021,294,295.22 and extended allotments of P98,555,119,346.60. Out of the total allotments,

P339,754,671,299.38 were obligated, leaving a total unobligated balance of P95,821,742,342.44, of which onlyP66,473,631,406.25 was extended while P29,348,110,936.19 was already reverted; thus, utilization of the

Department’s authorized budget was not fully maximized. (Observation No. 1)

We recommended that management maximize the use of allotments received by promptly initiating the pre-

procurement activities, facilitating the procurement process and coordinating with the DBM for the early release

of SAROs so as to ensure timely implementation of projects, thus, improving its budget utilization andpreventing the accumulation of unobligated allotments.

The Department’s commitment in its Project Implementation Plan was not fully met as indicated by itsaccomplishment rating of 43.04 percent for Major Final Outputs (MFOs) 1, 52.13 percent for MFO 2, and 53.86percent for MFO 3, or an overall delivery rate of only 49.68 percent, due to projects that were not completedwithin the specific contract time or target completion dates and projects that were not yet started during the year.Moreover, the target number of projects to be implemented by the Department, funded out of the specialprovisions of other government agencies, was not achieved, posting low percentages of completion, particularlyin the construction of LGU health care facilities for DOH and the school building project for DepEd.(Observation No. 2)

We recommended that Management:

a. Ensure the immediate implementation and completion of on-going and unimplemented projects by reviewingthoroughly the Program of Work and evaluating project design and estimates to minimize variation orders andtime extensions; and

b. Improve its operations to accomplish the mandated targets it committed for the year and effectively providethe public the intended benefits of the projects. Moreover, adopt complete and adequate procedures toimplement the PIP in order to be responsive to program realities and actual conditions.

The implementation of Central Luzon Link Expressway Project (CLLEX), Phase I and Arterial Road BypassProject (ARBP) Phase II funded by JICA were delayed due to prolonged procurement of consulting services andcivil works which affected the timely utilization of the loan proceeds resulting in the incurrence of commitmentfees in the total amount of P35,524,096.48. (Observation No. 3)

We recommended that management require the concerned Project Management Offices to:

a. Prepare Catch-Up Plans to facilitate the conduct of procurement evaluation procedures/activities and fast-trackthe procurement process in order to implement and complete the infrastructure projects within schedule andmaximize loan utilization;

b. Require the project engineers to perform regular and thorough monitoring and supervision of projects toensure that construction works are accomplished in accordance with the terms of the contract; and

c. Address the causes of negative slippages/issues and, if necessary, issue a suspension once the slippage is morethan negative 15%; or consider rescinding or terminating the contract and imposing liquidated damages on thecontractors for every day of delay in accordance with Section 68 of the Revised IRR of RA 9184.

The intended water supply and sanitation infrastructure projects for poverty areas and tourism priority sites,under the Tourism Water Supply and Sanitation Infrastructure (TouWa) Program, for CYs 2014 and 2015 werenot implemented, thus, the budget allotted therefor amounting to two Billion and one Billion, respectively, werenot fully utilized. (Observation No. 4)

We recognized the actions taken by Management to address the problems encountered in the implementation ofthe TouWa Program and we recommended that Management immediately carry out the projects as programmedto prevent the further accumulation of unobligated allotments and lapsing of allotments. We also recommendedclose coordination with the Management of the Local Water Utilities Administration for the full liquidation ofthe fund transfers.

xi

Out of the 1,388 Farm-to-Market Road Projects (FMRs) projects allocated for implementation by DPWH, only

886 or 63% were reported completed as at December 31, 2015 due to delayed/on-going preparation of detailed

engineering, approval of plans, and procurement process, as well as re-alignment of projects. The delay in theimplementation of the projects deprived the farmers and fisherfolks the immediate use of FMRs that could

facilitate transportation of produce to markets and contribute to the increase of their income. (Observation No.

5)

We recommended that Management facilitate the completion of the on-going and unimplemented FMR projects

and promptly submit to DA the required reports for updating of the Status of Implementation of FMR projectsin the DA website so that the public can be informed on the current status of the FMRs.

The contract costs of various projects were found excessive by P94,771,377.68 due to (a) cost estimatesexceeding the COA allowable costs by P87,667,301.40; (b) mobilization/demobilization cost which exceededthe 1% limitation of the Estimated Direct Cost (EDC) of the civil work items by P251,921.55; and (c) inclusionof unnecessary, unauthorized, and excessive pay items of P6,852,154.73. (Observation No. 6)

We recommended that management require the concerned contractors to refund the excess costs/variances ordeduct the amounts from any money or retention fee due them or other securities posted by the contractors,whichever is practicable.

The excessive number of motor vehicles requirement for the Central Luzon Link Expressway Project (CLLEX),Phase I and the infrastructures projects in Region I amounting to P64,661,181.21 was not in accordance withDPWH Department Order No. 03 Series of 2010 and Department of Budget and Management (DBM) NationalBudget Circular No. 446. Moreover, the improper imposition of VAT and profit mark-up in seven otherprojects unnecessarily increased projects costs by a total of P5,374,735.19. (Observation No. 7)

We recommended that Management require the concerned officials to be guided by the applicable rules andregulations which require reasonableness of the Pay Items to be included in the computation of project costsand conduct study for possible amendment and modification of the terms and conditions of the contractregarding the provision of service vehicles for the engineers.

The remittance to the Bureau of Treasury (BTr) of the five percent share of DPWH from building permit feescollected by LGUs, as provided under the DILG-DPWH Joint Memorandum Circular No. 001 and Section 210of PD 1096, intended to cover necessary operating expenditures of the DPWH and payment of other prior years'obligations not adequately funded, was not closely monitored by the Department. As at December 31, 2015, theDPWH share estimated at P40,918,577.42 covering the collections of four LGUs in the NCR from CYs 2013 to2015 were not remitted to the BTr. Moreover, the DPWH share amounting to P58,733,838.61, which wasremitted to the BTr from CYs 2013 to 2015, were not utilized by the Department. (Observation No. 8)

We recommended that Management require the NBCDO under the Buldings Management Cluster to:

a. coordinate with the DOF and the DILG for the enhancement of the policy guidelines on the implementationand utilization of the remittances to include specific timelines/deadlines and the correspondingpenalties/sanctions for late remittances; and

b. coordinate with the BTR and COA to formulate accounting policies and guidelines on the recording, releaseand utilization of the funds.

Irregular expenditures pertaining to various personnel benefits totaling P3,611,503.27 were paid bythe DPWH, contrary to COA Circular No. 2012-003. Further, non-project related expenses ofP113,030,048.70 were charged against Engineering and Administrative Overhead (EAO), which isnot in conformity with the Special Provisions of the General Appropriation Act. (Observation No.19)

We recommended and Management agreed to require the persons liable to refund theirregular/unauthorized expenditures and avoid the incurrence of irregular expenditures and thecharging of unrelated expenditures to EAO.

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F. Status of Prior Year’s Audit Recommendations

Of the 64 outstanding prior years’ audit

recommendations (included in the DPWH Consolidated

Annual Audit Report for CYs 2011 to 2014), 30 or

46.87% were fully implemented, 22 or 34.38% were

partially implemented, and 12 or 18.75% were not

implemented as at December 31, 2015. The details are

presented in Part III of this Report.

47%

34%

19% fully implemented

partiallyimplemented

not implemented

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