EXECUTIVE SUMMARY

INTRODUCTION

The National Housing Authority (NHA) is a government-owned and controlled

corporation created under Presidential Decree (PD) No. 757 on July 31, 1975. It
operates under the policy and administrative supervision of the Housing and Urban
Development Coordinating Council (HUDCC). It is the sole government agency
mandated under Executive Order No. 90 dated December 17, 1986 to engage in shelter
production, focusing its efforts to provide housing assistance to the lowest 30 per cent of
urban population through slum upgrading, squatter relocation, development of sites and
services and construction of core housing units. The Authority is also under the direct
supervision of the Office of the President and shall exist for 50 years.

NHA is also mandated to: (a) provide technical assistance to Local Government Units
(LGUs) under Republic Act (RA) No. 7279 dated March 24, 1992, otherwise known as
the Urban Development and Housing Act; (b) implement the components of the National
Shelter Program under RA No. 7835 dated December 16, 1994, otherwise known as the
Comprehensive and Integrated Shelter Financing Act; (c) implement as lead agency the
Rail-related Relocation and Resettlement Program under Office of the President (OP)
Administrative Order (AO) No. 111, dated November 8, 2004 and AFP/PNP Housing
Program under OP AO No. 9 issued on April 11, 2011.

The General Manager is assisted in the management of NHA by the Assistant General
Manager, three group managers and three department managers of the Head Office
Staff Departments and 16 regional managers of the operating units.

The powers and functions of NHA are exercised by the Board of Directors composed of
eight members: the Chairman of HUDCC, as Chairman; Executive Secretary of the
Office of the President; Director-General of National Economic and Development
Authority (NEDA); the Secretaries of the Departments of Public Works and Highways
(DPWH), Finance (DOF), Labor and Employment (DOLE) and, Trade and Industry (DTI);
and the General Manager, NHA.

As at December 31, 2018, NHA has a total personnel complement of 2,653 consisting of
the following:

Emergency
Location Permanent Coterminous Temporary Total
Hired
Head Office 395 171 8 2 576
National Capital Region 286 331 63 3 683
Northern Central Luzon Regions 133 195 5 2 335
Southern Luzon/Bicol Regions 151 206 14 2 373
Visayas Regions 139 216 3 - 358
Mindanao Regions 168 160 - - 328
1,272 1,279 93 9 2,653

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The Corporate Operating Budget of NHA for CYs 2018 and 2017 approved by the
Department of Budget and Management (DBM) amounted to P94.356 billion and
P92.560 billion, respectively, which was utilized as follows:

2018 2017
Particulars Budget Utilization Budget Utilization
(In Million Pesos)
Personnel services 1,023.624 804.735 918.597 631.887
Maintenance and other operating expenses 892.058 681.470 776.784 600.091
Capital outlay 92,440.403 13,460.082 90,864.207 14,720.929
Financial expenses - 5.985 - 185.761
Others - 347.661 - -
94,356.085 15,299.933 92,559.588 16,138.668

The total releases of allotments for CYs 2018 and 2017 amounted to P164.989 billion
under the regular and other appropriations summarized as follows (amounts are in billion
pesos):

Total Utilization/
Cash Received
Disbursements
Balance Balance of
Source of Fund SARO 2017 2017
of Cash Allotment
2018 and 2018 and
prior prior

Regular appropriations 89.602 0.319 37.942 8.163 35.965 (5.867) 51.341

Disbursement Acceleration
Program 9.669 - 7.731 0.099 9.690 (2.058) 1.938
Others 64.834 0.034 44.905 4.947 38.952 1.040 19.895
164.105 0.353 90.578 13.209 84.607 (6.885) 73.174

NHA was designated as the lead agency for the implementation and realization of the
Outcome XXII – DRRM/CCA elements mainstreamed in human settlement of the
National Disaster Risk Reduction and Management Plan for CYs 2011-2018 with the
following success indicators: (a) percentage of affected LGUs implementing appropriate
safety codes; (b) percentage of affected LGUs providing safe relocation and
resettlement areas; and (c) relevant government housing programs developed or
implemented.

To achieve the said outcome, the NHA shall undertake the design/construction of
disaster-resilient housing units in coordination with the following implementing partners:
(a) Armed Forces of the Philippines; (b) Department of Agrarian Reform; (c) Department
of Environment and Natural Resources; (d) Department of the Interior and Local
Government; (e) Department of Science and Technology; (f) DPWH; (g) Department of
Social Welfare and Development; (h) Housing and Land Use Regulatory Board; (i) Home
Development Mutual Fund or the Pag-IBIG Fund; (j) NEDA; and (i) LGUs.

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FINANCIAL HIGHLIGHTS (In Billion Pesos)

I. Comparative Financial Position

Increase
2018 2017 (Decrease)
Assets 141.332 136.169 5.163
Liabilities 23.685 17.256 6.180
Net Assets/Equity 117.647 118.913 (1.017)

II. Comparative Results of Operations

Increase
2018 2017 (Decrease)
Revenue from
Subsidy 0.353 19.557 (19.204)
General income 1.369 1.254 0.115
Grants and donations 0.201 - 0.201
Other income 0.069 0.085 (0.016)
1.992 20.896 (18.904)
Expenses (3.226) (2.661) (0.565)
Net income after subsidy (1.234) 18.235 (19.469)

For the period ended December 31, 2018, the general income generated was P1.369
billion, an increase of P0.115 billion or 8 per cent higher compared to the general income
on December 31, 2017 of P1.254 billion.

The P353.000 million subsidy received from the National Government including the
reconstruction and rehabilitation fund releases as of December 2018 is 54 per cent lower
than the previous period’s level, resulting in a net loss after subsidy of P1.234 billion.

For CY 2018, NHA was able to contribute P32.263 million dividends to the National
Treasury.

OPERATIONAL HIGHLIGHTS

2018
Performance Indicators
Targets Accomplishments Rating
Stakeholders/Social Impact
SO 1: Scale-up provision of safe and affordable
housing responsive to the needs of Informal Settler
Families (ISFs) and low-income formal sector
SM 1: Number of housing units (HUs) started 121,006 (HUs) 55,540 5.74%

SM 2: Percent of units completed within the project

90% 35% 4.93%
duration
(82,229 out of 91,366 units) (32,429 / 91,366)
SM 3: Number of community facilities completed in 53 community 6% 0.28%
existing relocation sites (18 Live Cases) facilities completed (3/53)

SM 4: Percent of housing units disposed

65% 19% 2.02%
a) Percent of old inventory disposed
(44,608 / 68,265) (14,747 / 77,638)

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 2018
Performance Indicators
Targets Accomplishments Rating
100% 90% 6.74%
b) Percent of new inventory disposed
(1,643 / 1,643) (1,476 / 1,643)
SM 5: Percent of housing units occupied 75% 59% 7.93%
(78,104 / 104,139) (61,934 / 104,139)
SO 2: Strengthened Strategic Partnerships with
Stakeholders
SM 6: Number of beneficiary-families in NHA-
administered Projects provided livelihood trainings 55,200 47,556 4.31%
and other income generating interventions beneficiary-families
SO 3: Improved Stakeholder Satisfaction
90% of stakeholders gave
SM 7: Customer Satisfaction 74%
Very Satisfactory Rating
FINANCIAL
SO 4: Efficient Budget Management
90% 17%
SM 9: Budget Utilization Rate (BUR)
(P33,578B/P34,499B) (P15.595B/P93.543B)

SCOPE OF AUDIT

Our audit covered, on a test basis, the examination of transactions and accounts of NHA
for the years ended December 31, 2018 and 2017 and were conducted in accordance
with the International Standards of Supreme Audit Institutions (ISSAI). Our audit was
aimed to determine the fairness of the presentation of the financial statements in
accordance with Philippine Public Sector Accounting Standards (PPSASs) and to
assess the propriety of the financial transactions and compliance of NHA with laws, rules
and regulations.

INDEPENDENT AUDITOR’S OPINION

We rendered a qualified opinion on the fairness of the presentation of the financial

statements of the NHA as at December 31, 2018 and 2017 due to the following:

Confirmation of balances of Receivables and Inter-Agency Receivables of

LGUs/NGAs/GOCCs disclosed an overstatement of P67.846 million and P36.703 million
as at December 31, 2018 and 2017, respectively, due to unrecorded liquidations whilst
the equity was overstated by the same amount. More so, the accuracy and reliability of
the financial assets and liabilities amounting to P55.296 million and P88.381 million as at
December 31, 2018 and 2017, respectively, are doubtful due to inappropriate recording
and posting of transactions that resulted in the understatement/overstatement of the
balances of the assets, liabilities and equity. Further, the balance of Accounts
Receivable presented in the financial statements and the Aging of Accounts Summary
generated by the Billing and Collection System showed a discrepancy of P2.398 billion
and P2.136 billion in CYs 2018 and 2017, respectively, casting doubt on the recorded
balance and affecting the fair presentation of the account in the financial statements.

The provisioning for impairment of receivables is not uniform and made on selective
basis. Allowance for impairment for rental receivable is based on estimated collectability,
wherein a higher rate of allowance is provided for long-outstanding accounts, while loans
and other receivables that remain dormant for five years are fully impaired. On the other
hand, impairment for installment receivable is not provided. Thus, the impairment loss

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and the corresponding allowance for impairment for the year was understated by P4.047
billion in 2018 and P4.705 billion in 2017.

The Property and Equipment account is overstated by P1.124 billion because only
P78.629 million out of the P1.203 billion we recommended for reclassification in CY
2017 was reclassified to Inventory account.

We recommended that Management:

For the unrecorded liquidations of funds transferred to implementing agencies

a. Enforce timely submission of liquidations/Report of Disbursements and/or Utilizations

of Funds by sending Statements of Account and follow-up collection letters regularly
to Implementing Agencies and/or to return any excess funds; and

b. Exert effort to determine the causes of the discrepancy/variance between the amount
per books and amount as confirmed by the implementing/source agencies and effect
appropriate adjustments to reconcile the balances of the receivable accounts.

For the inappropriate recording and posting of transactions

a. Require the Accounting Department to analyze and determine the causes of the
abnormal/negative balances and accordingly prepare the necessary adjustments to
reflect the correct balances for fair presentation of the affected accounts in the
financial statements; and

b. Accounting and Treasury Departments to regularly reconcile their records, at least on

a quarterly basis, to ensure that the recorded transactions are correct and updated.

For the discrepancy in the recorded Accounts Receivable balance

 Conduct regular periodic verification, analysis and validation of the existence of the
receivables, and to regularly reconcile the records, at least on a quarterly basis.

For the understatement of Allowance for Impairment and corresponding Impairment

Loss

 Recognize the impairment of receivables and adjust the understatement of the

affected accounts.

For the overstated Property and Equipment

 Prepare the necessary adjusting entry to transfer land assembly for future projects to
Inventory account pursuant to paragraph 11 of PPSAS 12.

OTHER SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS

1. The NHA was not able to implement efficiently the land development and
construction of housing units under the Zamboanga City Roadmap to Recovery
and Reconstruction (Z3R) projects as indicated by several time extensions that

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 resulted in prolonged completion of 22 projects in the total amount of P1.576
billion.

We recommended and Management agreed to direct the Project Manager and

Regional Manager to:

a. Regularly monitor and closely supervise the immediate completion of the

remaining Z3R projects to make available the expected housing units to the
affected families;

b. Conduct adequate and effective planning by closely coordinating with the

Local Government Units, Department of Public Works and Highways,
Department of Environment and National Resources and other agencies
involved in the project to ensure that problems on the issuance of permits and
licenses, right of way, and road elevation are timely addressed to efficiently
implement the completion of the projects; and

c. Include in the detailed engineering activities the conduct of site, soil and
foundation investigation to address problems relative thereto and consider
such in the program of work of the project to minimize time extensions.

2. Five years after Typhoon Yolanda hit the Philippines: (a) only 117,167 or 58 per
cent of the 203,471 revised targeted housing units (HUs) under the Yolanda
Permanent Housing Program (YPHP) have been completed; (b) a total of 62,474
or 53 per cent of the 117,167 completed HUs remain unoccupied; and (c) 127 of
the 2,075 currently occupying the HUs lack proper authorization/documentation.
The causes of the delayed completion of the YPHP were also noted in the
implementation of other housing projects in National Capital Region. More so,
inadequate procurement planning resulted in the inability to: (a) observe the
maximum procurement period prescribed under Annex C of RA No. 9184 for the
11 In-City projects; and (b) carry out adequate preliminary engineering
investigation, construction design and surveys prior to the bidding and awarding
of contracts and other work activities for the 15 In-City projects, thereby further
resulting in significant delays in completing the projects and incurrence of
additional costs due to Variation Orders.

We recommended and Management agreed to:

For the immediate completion of the housing units

a. Coordinate regularly with the concerned government agencies and LGUs to

address and work on the issues/problems contributing to the delayed
completion of the housing units;

b. Closely monitor timelines for completion of projects by the contractors and if

warranted, subject defaulting contractor to payment of liquidated damages;

c. Act immediately on contracts terminated and with issued Notice and Order of
Termination; and

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 d. For projects with LGUs as implementing agencies, coordinate and monitor
the project accomplishment for the immediate completion of the housing
units.

For the low occupancy of the housing units

a. Coordinate regularly with the local water districts and electric cooperatives
for the supply and installation of basic utilities in the housing projects;

b. Coordinate with the LGUs for the immediate submission and validation of the
master list of beneficiaries and resolve issues relative thereto, to ensure that
housing units are transferred to qualified beneficiaries;

c. Act immediately on request for final inspection and acceptance and create an
Inspectorate/Acceptance Committee once the housing project reaches an
accomplishment of 95 per cent;

d. Require from the contractor the immediate rectification and correction of

housing construction defects after final inspection and findings per the
Constructors’ Performance Evaluation System; and

e. Address immediately the other causes that hindered the occupancy of

housing units by the qualified beneficiaries.

For lack of authorization and documentation of beneficiaries

a. Require the LGU to submit immediately the final list of qualified beneficiaries
to validate the 127 unregistered occupants; and

b. Implement strictly the accomplishment of the Certificate of Inspection and

Acceptance to properly document the turnover of housing units prior to
occupancy.

For the inadequate procurement planning

 Strictly comply to the provisions set forth under RA No. 9184 and its
Implementing Rules and Regulations particularly on the following:

a. Adherence to the maximum period of procurement for infrastructure

projects to ensure the timely execution of the contract; and

b. Revisit the provisions of the Terms of Reference to include site

preparedness and site inspection including soil bearing test and the
requirements of the Bureau of Fire Protection prior to the bidding activities
pursuant to Sections 7 and 13.2 of Annex G for Design and Build
infrastructure projects and the Fire Code of the Philippines, respectively.

3. Various properties with total book value of P17.926 billion were not insured in CY
2018, contrary to Section 5 of RA No. 656, otherwise known as the Property
Insurance Law, thus, exposing the Authority to suffer substantial financial setback

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 in case of damage to or loss of its properties due to fire, earthquake, storm or any
other casualty.

We recommended and Management agreed to:

a. Insure all insurable properties and other assets of the Authority with the
Property Insurance Fund, in compliance with RA No. 656, in order to be
indemnified or compensated for any damage to or loss of its properties due to
fire, earthquake, storm, or other casualty; and

b. Prepare the Property Inventory Form prescribed in Item 5.1.b of COA Circular
No. 2018-002 and submit the same to Government Service Insurance
System to serve as basis for the assessment of general insurance coverage
over all insurable assets, properties and interests of the Authority with the
General Insurance Fund.

SUMMARY OF AUDIT SUSPENSIONS, DISALLOWANCES AND CHARGES

The NHA Main and Regional Offices, have monitored consolidated disallowances and
unsettled suspensions amounting to P427.794 million and P263.057 million,
respectively, as at December 31, 2018, pursuant to the COA Rules and Regulations on
Settlement of Accounts.

STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS

Out of the 75 audit recommendations embodied in the Annual Audit Report for CY 2017,
12 were fully implemented, 52 were partially implemented of which 13 recommendations
were reiterated in Part II of this Report, one was reconsidered and 10 were not
implemented. Of the 10 not implemented recommendations, one was reiterated in Part II
of this Report.

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