EXECUTIVE SUMMARY

A INTRODUCTION

Under Executive Order (EO) No. 710 datedJuly 27, 1981, the Ministries of Public Works and PublicHighways were merged for a more effective and sustainedimplementation of infrastructure projects. Under therestructured set-up, the agency was known as the Ministry ofPublic Works and Highways (MPWH) with 14 regional offices,94 districts and 60 city engineering offices, five bureaus andsix service offices, in addition to corporations and councilsattached to the Ministry for administrative supervision. Byvirtue of EO No. 124 dated January 30, 1987, the agency wasrenamed as the Department of Public Works and Highways(DPWH).

The DPWH functions as the engineering andconstruction arm of the Government tasked to continuouslydevelop its technology for the purpose of ensuring the safetyof all infrastructure facilities and securing for all public worksand highways the highest efficiency and quality inconstruction. It is currently responsible for the planning,design, construction and maintenance of infrastructure,especially the national highways, flood control and waterresources development system, and other public works inaccordance with national development objectives.

The agency iscomposed of 9service offices, 6bureaus, 6 UnifiedProjectManagementOffice (UPMOs). Ithas also 17Regional Officesand 181 DistrictOffices. TheDPWH is headedby a Secretaryand assisted byseven (7)Undersecretaries.

1

As of December 31, 2016, the agency has a total personnel complement of 53,053 inclusive of the

regional and district engineering offices, composed of the following:

Category Authorized Filled-up Vacant

Presidential Appointees 68 61 7

Regular/Permanent Employees 16,262 15,096 1,166

Co-terminus with the Incumbent 2,510

Job Order 35,386

Total 16,330 53,053 1,173

B FINANCIAL HIGHLIGHTS

For CY 2016, the Department’s total current appropriations amounted toP477,815,031,326.00 consisting of (a) agency specific appropriations ofP384,287,164,000.00 per General Appropriations Act for FY 2016, adjustment onAppropriations for Terminal Leave of P20,523,840.00 and appropriations of P84,920,699,000.00coming from the Special Provisions of other government agencies; (b) automatic appropriationof P697,658,734.00; (c) Special Purpose Fund (SPF) of P7,888,985,752.00. In addition, DPWHalso had continuing appropriations amounting to P77,142,321,043.26. During the year, theDepartment received total allotments of P542,234,687,092.26, with obligations incurred ofP419,278,703,801.02, leaving an unobligated balance of P122,955,983,291.25. The unobligatedallotments of P92,524,144,729.76 was extended while the remaining P30,431,838,561.49, or24.75% of the total unobligated allotments, had already expired and was reverted to theBureau of the Treasury (BTr). Details are as follows:

Source of Funds Appropriations Allotments Obligations Incurred

Unobligated Allotments

Total Reverted Extended

A. Current

I. Agency Specific Budget

Personal Services 6,348,478,936.00 6,102,282,930.00 6,038,614,976.94 63,667,953.06 63,667,953.06

Maintenance and

Other Operating

Expenses (MOOE)

13,176,527,904.00 12,745,017,737.00 9,932,938,188.55 2,812,079,548.45 2,812,079,548.45

Capital Outlay (CO) 449,703,380,000.00 437,658,420,896.00 352,482,045,180.12 85,176,375,715.88 85,176,375,715.88

Sub-total 469,228,386,840.00 456,505,721,563.00 368,453,598,345.61 88,052,123,217.39 63,667,953.06 87,988,455,264.33

II. Automatic Appropriation

Retirement and Life

Insurance Premiums

633,439,891.00 633,439,891.00 621,298,629.08 12,141,261.92 12,141,261.92

Customs, duties and

Taxes

64,218,843.00 64,218,843.00 64,218,843.00

Sub-total 697,658,734.00 697,658,734.00 685,517,472.08 12,141,261.92 12,141,261.92

III. Special Purpose Fund

Miscellaneous

Personnel Benefits

1,616,362,121.00 1,616,362,121.00 1,542,755,993.88 73,606,127.12 73,606,127.12

Pension and Gratuity

Fund

141,549,660.00 141,549,660.00 141,152,323.59 397,336.41 397,336.41

NDRRM Fund (CO) 6,131,073,971.00 6,131,073,971.00 1,595,384,505.57 4,535,689,465.43 4,535,689,465.43

Sub-total 7,888,985,752.00 7,888,985,752.00 3,279,292,823.04 4,609,692,928.96 74,003,463.53 4,535,689,465.43

Total Current 477,815,031,326.00 465,092,366,049.00 372,418,408,640.74 92,673,957,408.27 149,812,678.51 92,524,144,729.76

B. Continuing/Extended

I. Agency Specific

Budget (CO)

7,425,605,267.00 7,425,605,267.00 6,138,732,335.42 1,286,872,931.58 1,286,872,931.58

II. Foreign Assisted

Projects

2,159,122,000.00 2,159,122,000.00 2,043,992,547.91 115,129,452.09 115,129,452.09

III. Special Purpose

Fund (CO)

NDRRM Fund 4,366,199,176.68 4,366,199,176.68 3,793,865,534.90 572,333,641.78 572,333,641.78

RRP Fund 215,171,955.01 215,171,955.01 103,591,779.26 111,580,175.75 111,580,175.75

MOOE 2,254,228,687.82 2,254,228,687.82 1,537,189,387.04 717,039,300.77 717,039,300.77

Capital Outlay 60,721,993,956.75 60,721,993,956.75 33,242,923,575.75 27,479,070,381.01 27,479,070,381.01

Total Continuing/

Extended77,142,321,043.26 65,386,025,907.26 37,007,735,761.16 28,378,290,146.10 28,378,290,146.10

Grand Total 554,957,352,369.26 542,234,687,092.26 419,278,703,801.02 122,955,983,291.25 30,431,838,561.49 92,524,144,729.76

2

Included in the current year regularappropriations of P477,815,031,326.00are the appropriations from the SpecialProvisions in the GAA for FY 2016 of theDepartment of P98,104,556,000.00 andfrom the Special Provisions in the GAA ofother government agencies amounting toP84,920,699,000.00, intended for theimplementation of various infrastructureprojects. The status of fund utilization,as reported by the Department, is asfollows:

From OtherAgencies

For DPWH

Special Provisions

Unobligated Balance

Obligations

Allotments

Part of the Special provisions in the GAA of DPWH is appropriations for MVUC. Said appropriations are not included in the tableabove because the Financial Statements for the MVUC Funds are prepared separately and the results of audit thereon are presentedin a separate Annual Audit Report.

The comparative financial condition and financial performance of the Department for Calendar Years (CY) 2016 and 2015 are shown below:

0

500

1,000

1,500

2,000

2,500

3,000

2015 2016

(in

bill

ion

s)

Financial Position

Assets Liabilities Accumulated Surplus

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2015 2016

(in

mill

ion

s)

Financial Performance

Revenue/Subsidy/Income Expenses Surplus

Particulars Appropriations Allotments

Obligations Incurred Unobligated Balances

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

1. Tourism Road Infrastructure Program 28,273,944,000.00 28,273,944,000.00 23,874,420,789.12 4,399,523,210.88

2. Public Private Partnership Infrastructure Fund 10,000,000,000.00 1,221,521,157.00 615,336,020.81 606,185,136.19

3. Local Infrastructure Program 25,942,487,000.00 25,938,487,000.00 23,444,325,936.90 2,494,161,063.10

4. Rehabilitation or Reconstruction of Damaged

Paved National Roads and Road Upgrading 15,781,709,000.00 15,781,709,000.00 13,711,966,841.89 2,069,742,158.11

5. Preventive Maintenance of Roads and Bridges

5,075,847,000.00 5,075,847,000.00 4,586,199,683.86 489,647,316.14

6. Water Supply and Sanitation Infrastructure

Projects 2,000,000,000.00 500,000,000.00 - 500,000,000.00

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

Contractual Obligations 9,730,569,000.00 8,423,946,112.00 6,670,001,496.47 1,753,944,615.53

8. Quick Response Fund 1,300,000,000.00 1,300,000,000.00 473,612,260.73 826,387,739.27

Sub-total 98,104,556,000.00 86,015,454,269.00 73,375,863,029.78 12,639,591,239.22

B. Special Provisions from Other Government Agencies

1. Department of Education 73,182,500,000.00 73,182,500,000.00 55,812,689,307.64 19,146,989,517.36

2. Department of Health 3,446,632,000.00 3,446,632,000.00 812,326,031.72 2,634,305,968.28

3. Department of Agriculture 7,377,167,000.00 7,377,167,000.00 6,527,797,371.86 849,369,628.14

4. Sugar Regulatory Administration (SRA)- Farm

to Mill 914,400,000.00 914,400,000.00 684,047,968.25 230,352,031.75

Sub-total 84,920,699,000.00 84,920,699,000.00 63,836,860,679.47 21,083,838,320.53

Total 183,025,255,000.00 170,936,153,269.00 137,212,723,709.25 33,723,429,559.75

3

Particular 2016 2015 Increase/(Decrease) %

Financial Condition

Assets 1,416,787,022,611 1,183,716,652,875 233,070,369,736 19.69

Liabilities 76,726,245,016 66,915,883,249 9,810,361,767 14.66

Accumulated Surplus 1,340,060,777,595 1,116,800,769,626 223,260,007,969 19.99

Financial Performance

Revenue 1,929,642,237 7,262,269,301 (5,332,627,064) (73.43)

Current Operating Expenses 62,993,156,151 79,418,066,807 (16,424,910,656) (20.68)

Surplus/(Deficit) from Current

Operations

(61,063,513,914) (72,155,797,506) 11,092,283,592 (15.37)

Net Financial Assistance/Subsidy 324,994,593,216 236,898,311,210 88,096,282,006 37.19

Other Non-Operating Income 25,377,431 25,377,431

Gain/(Losses) 278,888 12,773,871 (12,496,983) (97.83)

Surplus/(Deficit) for the period) 263,956,733,621 164,755,287,575 99,201,446,046 60.21

The significant decrease in the Revenue was attributed to the collection of the20% concession fee in CY 2015 for the CALAX project, while the decrease in Current OperatingExpenses was due to the non-recognition depreciation for fully depreciated PPEs. The increase inAssets and Liabilities were due to the increase of infrastructure projects implemented during theyear.

C OPERATIONAL HIGHLIGHTSThe Department’s reported

targets and actual accomplishmentsmeasured in terms of its major final outputs(MFOs) are as follows:

Performance Indicators Targets

Actual Accomplishments Variance

Quantity % Quantity %

MFO I-National Roads Network Services

1. Length of National Roads maintained (km) 525.330 503.391 95.824 (21.94) (4.176)

2. Length of National Roads constructed (km) 224.870 362.211 161.076 137.341 61.076

3. Length of National Roads paved (km) 1,587.830 255.460 16.089 (1,332.37) (83.911)

4. Length of National Roads constructed (km) 7,110.983 4,594.732 64.615 (2,516.25) (35.385)

Average percentage rate 84.400

MFO 2- Flood Management Services

No. of flood Control Structures and Drainage Systems

constructed/maintained (pr) 1,868.00 996.00 53.319 (872.00) (46.681)

Average percentage rate 53.319

MFO 3- Construction and Maintenance Services of Other Infrastructure

1. Length of Access Roads leading to Airports

constructed/maintained (km)

50.305 7.247 14.406 (43.058) (85.590)

2. Length of Access Roads leading to sea ports

constructed/maintained (km)

88.025 26.196 29.760 (61.829) (70.240)

3. Length of Access Roads leading to declared Tourist

Destination constructed/improved (km)

477.865 133.721 27.983 (344.144) (72.017)

4. No. of Septage/ Sewerage/ Rain Water Collection

constructed

3,500.000 3,208.00 91.657 (292.000) (8.343)

Average percentage rate 40.952

Overall percentage rate of accomplishment 59.557

84%53%

41%

MFO 1 MFO 2 MFO 3

Target

Actual

4

For the Special Provision on appropriations received from other nationalgovernment agencies, presented below are the details of accomplishment:

Agency No. of Projects Completed On-goingNot yet

Started

% of completed

projects

Department of Education (DepEd)– Basic Educational

Facilities Fund

5,110 985 2,884 1,241 19.27

Department of Agriculture (DA) –Farm to Market Road 1,883 1,244 441 118 69.00

Department of Health (DOH)– Health Facilities

Enhancement Program

891 7 142 742 0.79

Sugar Regulatory Administration (SRA)- Farm to Mill 43 4 34 5 9.30

D SCOPE OF AUDITThe audit covered the financial transactions and operations of DPWH for the year

ended December 31, 2016. The objectives of the audit were to (a) verify the level of reliance thatmay be placed on Management’s assertions on the financial statements; (b) determine theextent of compliance with applicable laws, rules and regulations; (c) recommend agencyimprovement opportunities; and (d) determine the extent of implementation of prior year’saudit recommendations.

The Consolidated Financial Statements (FS) as of December 31, 2016 consisted ofthe 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. The MVUC fund is notincluded in the consolidated financial statements presented in this report.

525

503

Roads Maintained

Target Actual

225

362

Roads Constructed

Target Actual

1,588

255

Roads Paved

Target Actual

7,111

4,595

Bridges Constructed

Target Actual

1,868

996

Flood Controls Constructed/Maintained

Target Actual

50

7

Airport Roads Maintained / Constructed

Target Actual

88

26

Seaport Roads Constructed/ Maintained

Target Actual

478

134

Tourist Destination Roads Constructed/

Improved

Target Actual

3,500

3,208

Septage/Sewerage/ Rain Water Collector

Constructed

Target Actual

5

E INDEPENDENT AUDITOR’S REPORT

The Auditor rendered an adverse opinion on the fairness ofpresentation of the consolidated financial statements of the DPWH due toaccounting errors and deficiencies enumerated below:

The year-end balance of the Cash and Cash Equivalents accounts amounting toP9,327,695,239.00 was unreliable due to (a) erroneous/non-recording oftransactions totaling P1,039,760.19; and (b) cash balances without existing cashback-up in the bank of P1,288,574,870.22. Moreover, dormant and unnecessarybank accounts of P92,873,933.40, and interest income and collections of proceedsfrom bids documents amounting to P227,919,394.11 were still not remitted to BTr.(Observation No. 6)

We recommended and Management agreed to:

a. coordinate with the concerned top officials of the LBP and DBP for thesubmission of the confirmation reply to the Audit Team; and enforce the closure ofthe existing dormant bank accounts and effect the necessary reversion to theBureau of Treasury;

b. remit to the National Treasury the interest income and other excess/unutilizedproceeds from sale of bids and collected conference fees;

c. prepare the necessary adjusting entries to correct the recording errors noted;and

d. require the newly created Composite Team per Special Order No. 05, Series of2017 dated January 27, 2017 to fast track the reconciliation of the long outstandingunreconciled balances and make the necessary adjusting entry to correct theaccount balances, if any.

Inter-Agency Receivables amounting to P4,309,578,083.87 or 59.23%of the accountbalance of P7,276,600,749.00, have been outstanding and remained unliquidatedfor one year to more than three years. Consequently, the implementation ofintended projects was not properly monitored and the corresponding expensesincurred against the fund transfers were not recognized in the year of occurrence,contrary to the accrual basis of accounting. (Observation No. 7)

We reiterated our previous year recommendation that Management makerepresentation with the heads of the concerned NGAs, GOCCs and LGUs for theimmediate liquidation of the outstanding fund transfers and the return of anyunspent balances to finance other priority programs/projects of the government.For future/succeeding projects, Management should refrain from entering intocontracts/Memorandum of Agreement with the identified delinquent governmentagencies until substantial liquidations have been made on their unsettledobligations.

6

The balance of the account Due from Non-Government Organizations (NGOs)pertaining to the Federation of Filipino-Chinese Chamber of Commerce andIndustry, Inc. (FFCCCII) amounting to P4,983,062.50 sourced from the PDAF oftwo (2) legislators has been outstanding for more than 10 years in the books ofaccounts of the Department, thus, timely completion of the project is not assuredand the corresponding expenses incurred against the fund transfers were notrecognized in the year of their occurrence. Moreover, fund transfers amountingto P696,847,937.50 were granted even without necessary supporting documents.(Observation No. 8)

We recommended that Management:

a. require the FFCCCII to submit immediately the liquidation reports pertaining tothe unliquidated fund transfer with complete supporting documents; and refundany unutilized amount thereof to preclude the issuance of a Notice/s ofDisallowance;

b. direct the Project Monitoring Team to (i) conduct inspection and validation ofcompleted projects to determine that government funds were used for theintended purpose for the benefit of the school children; and (ii) issue inspectionreport and Certificate of Completion to support the liquidation report of theNGO; and

c. comply strictly with COA Circular Nos. 95-003 dated February 15, 1995, 96-003dated February 27, 1996, 2007-001 dated October 25, 2007 and 2012-001 datedJune 14, 2012 for fund transfers to NGOs/POs.

The reported balances of Inventory accounts as of December 31, 2016 ofP1,129,412,393.00 was understated by a net amount of P3,905,112.07due to (a) unrecorded issuances of inventories amounting toP23,859,209.41; (b) erroneous recording of inventory transactionstotaling P210,942.05; (c) direct recording of purchases as expense ofP39,125,219.21; and (d) obsolete inventories amounting toP11,149,955.68 not written down to its fair value. Moreover, existenceof a difference of P111,287,939.41 between the Accounting andProperty records resulted in doubtful accuracy of the account balancesas at year-end. (Observation No. 9)

We recommended that Management:

a. instruct the Accountant to prepare adjusting entries to correct theerroneous recording of inventory transactions; and henceforth, requirethe Supply Officer to regularly prepare and submit the RSMIs tofacilitate recording of the issuances; and

b. direct the Accountant and the Supply/Property Officer to monitor andreconcile their records, identify the causes of discrepancy and make thenecessary adjustments on the reconciling items noted.

7

Advances granted to contractors were not recouped despite completion and termination ofprojects amounting to P3,795,288,531.28 and P432,402,223.10, respectively. Moreover, thereported Advances to Contractors account as of December 31, 2016 amounting toP35,350,238,822.00 was incorrect due to (a) unrecorded recoupment of P3,733,058.37; (b)over-recoupment of P115,870.73; (c) erroneous recording of recoupment of P19,995,616.02;and (d) existence of unsubstantiated balances totaling P269,111,931.28. (Observation No.11)

We reiterate our previous year’s recommendations that Management:

a. strictly comply with Section 4.3 of Annex E of the Revised IRR of Ra 9184 and imposesanction against erring personnel as provided under the law;

b. make the necessary adjusting entries to correct the recording errors noted;

c. recover advance payments to contractors whose contracts were terminated by forfeitingthe corresponding surety bond posted by the concerned contractors or by deducting theamount from the final payment of the project or from any other money claims due them;

d. coordinate with the project engineer thru the Project Monitoring Group and ProjectManagement Office on projects completed and require the submission of the certificate ofcompletion in order that the payables to the contractors can be recorded, net of advances tobe fully recouped; and

e. require the Composite Team created on January 27, 2017 to fast track the reconciliation ofthe long outstanding unreconciled balances and closely monitor its progress and provideadministrative sanctions on employees for non-compliance with instructions.

The Property, Plant and Equipment (PPE) balance of P1,354,379,955,977.00 was inaccuratedue to: (a) various recording errors which understated the accounts by P434,595,468.83; (b)completed infrastructure assets still in CIP account of P129,126,628,198.98; (c) non-reconciliation of accounting and property records amounting to P35,642,507,763.46; and (d)existence of undocumented balances in the total amount of P1,210,048,076.87.(Observation No. 12)

We recommended and Management agreed to:

a. direct the accountant to: (i) prepare the necessary adjusting entries to correct the errors inthe affected PPE and other accounts; (ii) coordinate with the Monitoring Section to identifycompleted projects and secure Certificate of Completion as evidence of reclassification to theappropriate assets accounts; and (iii) cause the immediate verification of the nature of theunreconciled balances to provide details that would lead to its proper disposition;

b. instruct the concerned officials to exert efforts to recover the monetary value of themissing items of PPE’s and impose proper control measures to ensure that all propertyaccountabilities are settled prior to retirement/separation from government service ortransfer of their officials/employees; and

c. require the Property Custodian to coordinate with the Accounting Office and reconcile thedifferences between the inventory report and the accounting records.

8

Effects of changes in accounting policies, prior period errors and otheradjustments aggregating P51,482,866,888.00 were not appliedretrospectively nor were the nature thereof disclosed in the Notes toFinancial Statements, contrary to PPSAS 3, thus, affecting the relevance,reliability, comparability and understandability of the informationprovided in the FS. (Observation No. 18)

We recommended that the Chief Accountant (a) make the necessaryrestatement of the Financial Statements; and (b) disclose the effects ofthe prior period errors in the Notes to Financial Statements in compliancewith PPSAS 3.

The unposting and/or alteration of accounting entries from the e-NGASwere not in consonance with the Philippine Public Sector AccountingStandard (PPSAS) No. 3 thus affected the integrity of the information andfair presentation of the financial statements. (Observation No. 17)

We recommended that Management completely discontinue and stop thepractice of unposting and/or alteration of accounting entries from theeNGAS. Comply strictly with the PPSAS for the fair presentation ofFinancial Statements. Also, we recommended that the Managementrequire the Head of Accounting Division, or any designated accountingpersonnel, to properly review and validate each and every transactionentered in the eNGAS before they are posted in the system in order tominimize the need for adjusting entries due to errors.

F OTHER SIGNIFICANT OBSERVATIONS

Hereunder are the other significant audit observations noted duringthe year and the corresponding recommendations that are discussed in detail in PartII of this Report:

The DPWH received a total appropriations of P554,957,352,369.26 consistingof continuing appropriations of P77,142,321,043.26 and current yearappropriations of P477,815,031,326.00. Of the total allotments received ofP542,234,687,092.26 for CY 2016, however, only P419,278,703,801.02 wasobligated, leaving an unobligated balance of P122,955,983,291.25 due tonon-implementation of some projects. The unobligated allotments ofP92,524,144,729.76 was extended while the remainingP30,431,838,561.49 or24.75% had already expired and was reverted to the BTr, thus utilization ofthe authorized budget was not fully maximized. (Observation No. 1)

We recommended and Management agreed to maximize the utilization of itsallotment to avoid accumulation of unobligated allotments by ensuring theprompt execution/implementation of the planned activities during the year.

9

The Department’s reported targets and actual accomplishmentsmeasured in terms of its Major Final Outputs (MFOs) showed arelatively low delivery rate of only 59.557 percent due to projectsthat were not completed within the specific contract time or targetcompletion dates and projects that were not yet started during theyear. (Observation No. 2)

We recommended that Management improve its operations toaccomplish the mandated targets it committed for the year byensuring the immediate implementation and completion of on-going and unimplemented projects, thus, effectively provide thepublic the intended benefits from the projects.

Out of the 4,000 validated projects for CY 2016, 1,685 were completed,2,049 were on going, 104 were suspended and 162 were not yet starteddue to inadequate planning and monitoring of project implementation,thus, government funds were either tied up on uncompleted projects,and also deprived the intended beneficiaries of the immediate benefitsthat can be derived therefrom. (Observation No. 3)

We recommended that Management perform regular monitoring andsupervision to ensure the immediate completion of the delayed andunimplemented projects and carry out sufficient detailed engineeringactivities by reviewing thoroughly the Program of Work and evaluatingproject design and estimates, and promptly addressing ROW clearanceand permit issues, to minimize variation orders and time extensions.

Post qualification of bidders and evaluation of bids were not efficientlyconducted to 1,241 infrastructure contracts of 10 District Offices in Region IV-Aamounting to P10,196,256,538.74 resulting in the awarding of multiplecontracts with the same or overlapping implementation period to the samecontractors, contrary to Section 34.1 and 34.3 of the Revised ImplementingRules and Regulations (RIRR) of RA 9184, thus, exposing the government tovarious risks such as delay in project accomplishment and/or substandardquality of work. (Observation No. 4)

We recommended that the Regional Director instruct the concerned DistrictEngineers to direct their respective Bids and Awards Committee (BAC) andTechnical Working Group (TWG) to scrutinize the sufficiency of theContractor’s manpower and equipment on all projects to be awarded and noton an individual project only in cases where the latter is the lowest bidder inseveral projects which have the same or overlapping implementation period.

10

11

Of the total 172 disaster-related infrastructure projects amountingP1,850,736,547.09 in Region V, only one project was completed, leaving the 12projects on-going while 159 remained unimplemented due to late release of SAROsand scarcity of construction materials, thus, affecting the level of preparedness ofthe community from the occurrence of natural calamities and increasing the risk ofdamage to the region in case of disaster. (Observation No. 5)

We recommended that Management ensure the immediate implementation andcompletion of on-going and unimplemented projects, in order to effectivelyincrease the level of preparedness of the community from the occurrence of naturalcalamities and mitigate the risk of damage in case of disaster.

Cash advances granted to officers and employees amounting to P21,485,031.69 as ofDecember 31, 2016 have been outstanding from one year to more than five years due to thefailure of seven DPWH Offices to enforce liquidation thereof as required under COA CircularNo. 2012-001 dated June 11, 2012. (Observation No. 10)

We recommended and Management agreed to adopt measures to enforce settlementand/or liquidation of outstanding cash advances:

a. demand from all officers and employees with outstanding balances to liquidate/settleimmediately their cash advances and/or refund all unexpended balances pursuant to COACircular No. 97-002, otherwise cause the suspension of the salaries and other claims of erringaccountable officers;

b. comply strictly with COA Circular Nos. 97-002 and 2012-001 on the grant, utilization andliquidation of cash advances; and

c. request for COA’s authority to write-off long outstanding cash advances, theaccountability for which could no longer be established and the necessary documentationcould no longer be found in accordance with COA Circular 97-002 dated February 10, 1997.

Long outstanding Guaranty/Deposits Payable without valid claims in the amount ofP320,791,982.27 were not reverted to the Unappropriated Surplus contrary to Section 98of PD 1445. Moreover, retention money of P46,099,415.23 were not deducted from theprogress billing of the contractors, thus exposing the government to the risk ofunnecessary expenses in case of project construction defects and third party liabilities.(Observation No. 13)

We recommended that Management:

a. revert to the Unappropriated Surplus of the General Fund the balance of excavationdeposits and retention money which have remained unclaimed for two years; and

b. require the Finance Section to impose the 10% retention from the claims of thecontractors to protect the interest of the government against project construction defectsand other third party liabilities.

Funds received from various agencies which were sourced from PDAF andDAP amounting to P323,359,797.48 remained unliquidated as atDecember 31, 2016, notwithstanding that PDAF and DAP funds weredeclared unconstitutional by the Supreme Court in its En Banc dated July01, 2014. (Observation No. 14)

We recommended that Management instruct the accountants of theregional/district offices to submit the liquidation documents of the fundsreceived funded from the PDAF/DAP and return to BTr any unexpendedbalance.

H STATUS OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

The above observations and recommendations were discussed with concernedmanagement officials in an exit conference conducted on May 25, 2017 and theircomments were incorporated in this report, where appropriate

Of the 48outstanding prior years’ auditrecommendations, 11 or 22.92%were fully implemented, 28 or58.33% were partially implemented,and 9 or 18.75% were notimplemented as at December 31,2016. The details are presented inPart III of this Report.

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28

9

Fully Implemented Partially Implemented Not Implemented

G STATUS OF SUSPENSIONS, DISALLOWANCES AND CHARGES

The auditsuspensions, disallowances andcharges for various DPWHOffices amounted toP3,149,305,598.52,P1,643,424,131.77 andP4,467,314.88, respectively,remained unsettled as ofDecember 31, 2016. Suspensions –P3.1B

Disallowances –P1.6B

Charges -P4.5M

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