Republic of the Philippines

COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City

Dear Administrator Calzado:

Management Letter on the Audit of the

Philippine Overseas Labor Office (POLO)
Seoul, South Korea
For the period September 15, 2014 to September 18, 2016

I. INTRODUCTION

1. Pursuant to the constitutional mandate of this Commission and in line with its
continuing commitment to provide value-added services for the improvement of
fiscal responsibility and accountability structure of government agencies, an audit
team composed of Carmelita T. Sanchez, Director III as Team Leader with
Rochie J. Felices SA V and Fe V. Elleco, SA IV as Team Members, conducted an
audit of Philippine Overseas Labor Office(POLO) under the Department of Labor
and Employment (DOLE), Seoul, South Korea from September 12-23, 2016
pursuant to Office Order No. 2016-375 dated May 16, 2016.

2. The audit covered the examination of the cash and property accountabilities of
Ms. Manuela N. Pena, Welfare Officer, acting as Collecting and Disbursing
Officer, OWWA, Seoul, South Korea as well as the review and evaluation of
existing procedures relative to cash and property management and the
disbursement system.

3.

Honorable REBECCA J. CALZADO

Administrator
Overseas Workers Welfare Administration
OWWA Center Building, FB Harrison St.
Pasay City

Attn: Ms. Manuela N. Pena

Welfare Officer
WSO, Embassy of the Philippines
Seoul, South Korea
 II. BACKGROUND INFORMATION

Mandate/Function/Jurisdiction

4. The Philippine Overseas Labor Office (POLO) in Seoul, South Korea is one of
the foreign posts of the Department of Labor and Employment (DOLE) tasked to
handle and monitor the welfare and assist the Overseas Filipino Workers (OFWs)
during their stay in foreign countries as contract workers. It is authorized to
collect verification fees (VF) from employers hiring Filipino workers. It also
served as the collecting arm of the Philippine Overseas Employment
Administration (POEA) in securing payments of overseas employment contract
(OEC) issued to OFWs in the course of their employment abroad.

5. The territorial jurisdiction of the Post covers Seoul, Busan and other district of
South Korea.

Personnel Complement

6. The Post is headed by Ms. Manuela N. Pena, Officer-In-Charge (OIC) in

concurrent capacity as Welfare Officer, Overseas Workers Welfare
Administration, who assumed office on March 28, 2016. She is assisted by Mr.
Rene N. Mangune, Administrative Assistant. At the time of audit, the Post had
one locally-hired employee.

Major Accomplishments

7. The reported major accomplishment of the Post (in relation to MFO) for the
period September 15, 2014 to September 18, 2016 are within their targets except
for MFO 1 (Job Search Assistance Program) where there was no report targets
and accomplishments.

Financial Highlights

8. The audit of POLO, South Korea covered the financial transactions for the period
from September 16, 2014 to September 18, 2016. However, the examination on
the cash and accounts of the Accountable Officer (AO) was conducted only on the
current AO, Ms. Manuela N. Pena, OIC-POLO, particularly, from the date of her
assumption to office, March 1, 2015 to September 18, 2016.

9. For the period September 15, 2014 to September 18, 2016, the Post has an
allotment/cash advance for its operations and incurred obligations/disbursements
as follows: (insert table)
10. For the period September 15, 2014 to September 18, 2016, the Post had
collections amounting to KRW 13,861,060.00 present in a matrix as shown
below:

Purpose/ Name Collections Deposits/ Balance

Disbursements
Verification Fee (VF) 6,629,480.00 6,616,060.00 26,840.00
Overseas Employment 7,239,000.00 7,245,000.00 (6,000.00)
Certificate (OEC)
Others
TOTAL 13,861,060.00 13,861,060.00 20,840.00

III. OVER-ALL RESULTS OF AUDIT

11. The AO complied with the rules, regulations and controls pertaining to recording,
reporting and handling of cash. There was a cash overage discovered in the
amount of US$ 675.91.

12. There were weaknesses in controls regarding cash management for non-
remittance of verification fees and issuance of official receipts not in numerical
sequence. Also, in the property management the non-disposal of unserviceable
property and non-valuation of some properties were noted.

13. The Post reported an accomplishment of

IV. OBSERVATION AND RECOMMENDATIONS

Cash Management

14. Collections of Verification Fees amounting to KRW 47,213,477.00 as of

September 18, 2016 was not remitted to the DOLE leaving the funds idle at
the Post which in turn deprives the DOLE-Head Office (HO) the utilization
of the funds for its other programs/projects/activities and/or for its
operations.

The practice of holding collections way behind the time frame stipulated exposed
the Post’s funds to unwarranted losses.

14.1 The cash examination conducted on September 18, 2016 disclosed that as of
said date, the bank account for VF had a balance of W 47,213,477.00. The
said amount in inclusive of the KRW 26,840.00 over deposit made on May
19, 2016 which to date is still in the bank. The DOLE HO had issued
 Memorandum Order No. AD -60-361 Series of 2016 dated September 15,
2016 authorized the OIC, to withdraw the amount of W 26,840.00.

14.2 Inquiry revealed that remittance of VF collections was made only upon the
written directive of the HO and that to date, no such directive was received.
The last remittance as shown in the bank book was on April 10, 2014 in the
amount of W 31,953,000.00.

14.3 Considering that it had been more than two years since the last remittance
and that the amount had accumulated to KRW 47,186,607.00 net of the
amount W 26,840.00 due to the staff making the deposit, the continued
holding of collections in the Post resulted to funds being left idle to the
disadvantage of the agency.

14.4 We recommended that POLO officials inform the DOLE HO of the

existence of the amount and ask for authority to remit the amount of
KRW 47,186,607 so that the amount can be utilized by the Central
Office for its operation.

15. The Cash Receipts Register Record (CRR) for OEC collections does not
contain information on the beginning and ending balances, date and amount
of deposits made thus the cash accountability of the accountable officer could
not be immediately determined.

Failure in determining the beginning and ending balance makes it difficult to

determine the accountability and thus exposes the risk for possible loss.

15.1 Accountable Officers are required to maintain the CRR to enable them and
the reviewing officials to determine the cash accountability at any given
period of time. All columns provided for in the report should be completely
filled up as these are information considered necessary for the form to
achieve its purpose which is to facilitate monitoring and the immediate
determination of cash accountabilities.

15.2 The CRR prepared by the OIC does not contain information on the
undeposited collections from the previous month, the date and amount of
deposits made during the month and the undeposited collections in the
current month. The absence of this information rendered difficult the
monitoring on the frequency of deposits and its compliance to the regulation
governing the frequency of deposits of collections.

15.3 We recommended that all information contained in the CRR be

completely filled up to facilitate the determination of the accountability
of the AO at any given period of time.
16. Official Receipts (ORs) not sequentially issued as mandated in ___________

Failure to observe the issuance of ORs in sequence exposes the risk of

possible loss and unaccounted ORs.

16.1 Review of the Report of Collections showed that ORs were issued in
numerical sequence contrary to the No. 6 Instruction of Appendix 54,
Manual of National Government Accounting Standard, Volume II which
resulted to difficulty in the accounting of ORs. Example of these are
presented below:

Official Receipt No. Date of Issuance

8202072 April 25, 2016
8202073-8202077 April 24, 2016
8202297-8282300 May 15, 2016
8202301-8202363 May 10, 2016
8202527-8202530 June 2, 2016
8202531-8202534 June 1, 2016
7986721 July 10, 2016
7986722-7986734 July 6, 2016
7986882 July 18, 2016
7986883-7986905 July 17, 2016

16.2 The audit team also noted that official receipts were being peeled off from
the booklets which delayed the verification of the correctness and accuracy
of the amounts recorded in the reports.

16.3 We recommended that ORs be issued in numerical sequence to facilitate

monitoring and to ensure that all ORs are fully and accurately
accounted for.

17. Overage in deposits of KRW 26,840.00 for the VF and KRW 6,000.00 for the
OEC collection.

Overage in deposits are considered abnormalities which is an indication of

possible error in recording and affects the reliability of the documents.

17.1 Verification of the cash receipts records revealed that on May 19 and
September 8 all of 2016 the amount of KRW 26,840.00 and KRW 6,000.00
were deposited to the bank accounts maintained for VF and OEC
collections. These deposits exceeded the collections made during the said
months.
 17.2 As confirmed by the Administrative Assistance, the CRReg is prepared
monthly hence there exist the possibility for errors to be committed in
summarizing the collections to be deposited in a given period.

17.3 We recommended that the CRReg be updated before making any

deposits to avoid overage/shortages which may have an unfavorable
effect not only on the part of the Post but also on the staff concerned.

18. Cash overage amounting to US$ 675.91

Shortage or Overage are considered indications of possible misuse of funds

or unreliability of documents. It further exposes the risk of possible
mishandling of collections.

18.1 The cash examination resulted in an overage amounting to $675.91. The

Post disbursed a total of $10,581.85 with a MOOE fund balance of
$9,852.41 only, thus disbursements exceeded by $ 675.91. The
disbursements from the cash advances for MOOE covering June and July
2016 totaling to $ 6,968.59 had remained not replenished thus, contributing
to the cash overage amounting to $ 675.91.

19. We recommended and Management agreed that request for replenishment of

the cash advance will be done when the disbursement reach at least 75
percent as the need requires pursuant to Section 5 of DOLE Administrative
Order No. 153 series of 2002 dated April 25, 2002.

Property Management

Lack of proper turnover of property accountability from former to incumebent

Accountable Officer (AO) as required under _______. Furthermore, Non-
disposal of unserviceable property not in keeping with Section 79 of PD 1445
thus continuously loses its value.

The AO is not relieved of his custodial responsibility unless there is a proper

turnover, also, the space occupied by the obsolete property could not be used
for other useful purpose and these property will be subjected to further
damage, deterioration and decrease in economic value

20. Interview with Ms/Mr. _________________, OWWA Welfare Officer, the

incumbent AO, who assumed office on March 1, 2016 as Officer-in-Charge,
POLO revealed that the former AO just presented/turnover the Inventory List of
the Property. No physical count was conducted as she presented that all property
listed in the inventory list were all within the office premises.
 20.1 Five unserviceable equipment remain undisposed which is not in keeping
with Section 79 of PD 1445, thus, continuously loses its value
notwithstanding the office space these occupy which could have been used
for other purpose.

20.2 During the inspection, the Audit Team noted that there were five office
equipment kept in the storage and are already unserviceable:

ARTICLE DESCRIPTION PROPERTY NUMBER

Car navigator Maxtek M9700
Mobile phone LG SH470 Black/gray FQB-2011-01
Vacuum cleaner, Red FQB-2011-02A
featherlite bagless upright
Mobile phone Samsung Black FQB-2011-08
SCH-W860 (Hotline)
Clerical chair Clerical chair black FQB-2012-04

20.3 Section 79 of PD 1445 provides that:

When government property has become unserviceable for any cause, or is no

longer needed, it shall, upon application of the accountable officer therefore,
be inspected by the head of the agency or his duly authorized representative
in the presence of the auditor concerned and if found, to be valueless or
unsalealb,e it may be destroyed in their presence. If found to be valuable, it
may be sold at public auction to the highest bidder under the supervision of
the proper committee on award or similar body in the presence of the
Auditor concerned or duly authorized representative of the Commission.

20.4 The non-disposal of the said property resulted in the following: a) the AO is
not relieved of his custodial responsibility; (b) the space occupied by the
obsolete property could not be used for other useful purpose; and (c) these
property will be subjected to further damage, deterioration and decrease in
economic value.

21. We recommended and Management agreed to undertake proper turnover of the

property accountability to determine the accurate accountabilities of both the
outgoing and incoming accountable officers. It is imperative that a complete
count of what is being relinquished and accepted as accountabilities be conducted
to established accurate and proper accountabilities. Dispose all unserviceable
assets properly by complying with the procedures required by government rules
and regulations, i.e., creation of a disposal committee, assessment of reasonable
value, and request for disposal from COA, conduct of auction sales, etc.
Some of the item in the Inventory Report has no assign unit value
 No assignment of unit value in the items in the Inventory Report makes the
report unreliable and possible understatement of the account balances.

22. Review of the RPCPPE as of September 15, 2016 revealed that the unit value of
some of the equipment and furniture were not indicated and some has no property
number. These property are as follows:

ARTICLE PROPERTY
1. Filing cabinet SKPOLO-FC-003-99
2. Steel cabinet SKPOLO-001-99
3. Steel cabinet SKPOLO-SC-002-00 to 003-00
4. Computer table SKPOLO-CT-001-99
5. Portable drive (Western Digital No property number
1TB)
6. Laptop Toshiba Satellite L500 No property number
PSLU3K-00G002, mouse,
mouse pad
7. Memory cards No property number

22.1 The failure to indicate the unit value of the office equipment and furniture
resulted in the non-determination of the actual amount of the property
accountability of the AO.

22.2 We recommended and the management agreed that they will undertake
the proper valuation of the assets taking into account the date of their
acquisition as indicated in the support documents of their purchase. If
these records are no longer available, consider having them appraised
by third party appraisers.

V. STATUS OF IMPLEMENTATION OF PRIOR YEARS’

AUDIT RECOMMENDATIONS

23. The status of actions taken by the Post on the prior year’ audit recommendations
follows:

Status of Implementation No. of Recommendations

Implemented 4
Partially Implemented 1
Total 5

24. The results of validation by the Audit Team on the suggested action on prior
year’s recommendations are presented in Annex E.
 VI. ACKNOWLEDGMENT

25. We express our appreciation to the Welfare Officer and staff of the Post, for the
cooperation and support extended to the Audit Team during the audit.

26. We request that the Supervising Auditor of the Department of Trade and
Investment be provided within sixty (60) days from the date of receipt hereof a
status report on the actions taken on the audit recommendations.

Very truly yours,

For the Commission on Audit

By:

CARMELITA T. SANCHEZ
Director III
Audit Team Leader