COA-AOM No. RA-2014-020 (2013) Dated 08 April 2014

April 28, 2014 BIR MEMORANDUM FOR : DCIR Celia C. King Resource Management Group HREA Lucita P. Oandasan Finance Service Teresa A. Cancino Chief, Disbursement Accounting Division Nelly S. Ibo Chief, Procurement Division All Revenue Officials and Employees Concerned RE : COA-AOM No. RA-2014-020 (2013) Dated 08 April 2014 In line with the recommendations of the COA-BIR in its AOM No. RA-2014-020 (2013) dated 08 April 2014, Re: Unreliable Balance of Accounts Payable (copy attached), the following officials are hereby directed to: (1) The Chief, Disbursement Accounting Division, in coordination with the Procurement Division and other concerned offices, to determine which of the items listed in AOM No. RA-2014-020 (2013) as long-outstanding accounts payable have actual valid claims, including the amount set up as reconciling items and revert those which could not be fully documented, in line with Section 98 of Presidential Decree (PD) No. 1445. For observance and strict compliance of all concerned. ICacDE (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT Commission on Audit Office of the Auditor AOM No.: RA-2014-020 (2013) Date: April 8, 2014 AUDIT OBSERVATION MEMORANDUM (AOM) For: HON. KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Quezon City Attention: MS. MARIETTA U. LORENZO Assistant Commissioner Project Management and Implementation Service Project Manager, NPSTAR MS. MYRNA E. SOBREMONTE Head Revenue Executive Assistant Administrative Service Chief Accountant, FMU We have audited the Accounts Payable of the Bureau of Internal Revenue National Office (BIR-NO) and noted the following deficiency: The balance of Accounts Payable amounting P626,004,889.01 as of December 31, 2013 includes accounts which had been outstanding for two to five years and items for reconciliation totaling P131,765,017.57 or 21.049 percent and P4,542,033.41 or .726 percent of the total balance, respectively, thus, validity and reliability of the account balance cannot be ascertained. Section 98 of PD 1445 states that " the Commission, upon notice to the head of agency concerned, may revert to the unappropriated surplus of the general fund of the national government, any unliquidated balance of accounts payable in the books of the national government, which has been outstanding for two years or more and against which no actual claim, administrative or judicial, has been filed or which is not covered by perfected contracts on record. . . . " Verification showed that the balance of Accounts Payable as of December 31, 2013 under various funds is comprised of the following: DAaHET Fund Active Accounts Unreleased Reconciling Aged 2 to Total Checks Items 5 yrs. Fund 101 - RA 415,996,664.97 35,318,017.82 4,289,633.43 104,264,449.66 559,868,765.88 General Fund Fund 101 - 65,883,723.15 65,883,723.15 NPSTAR Fund 102 6,372.00 6,372.00 Fund 152 246,488.88 246,488.88 Fund 153 (460.90) (460.90) Total 481,880,388.12 35,318,017.82 4,542,033.41 104,264,449.66 626,004,889.01 ============ =========== =========== ============ ============ Review of the subsidiary ledgers (SLs) revealed that payables numbering 44 with a total of P131,765,017.57 have remained outstanding for two to five years now. Details are as follows: SEA CTH Component Activity/Project Accomplishment as of 12/31/12 Management Response to AOM (April 2013) Updated Status as of 12/31/13 Tax Compliance Electronic Accreditation & Registration System (eAccReg) and eSales System On-going On-going Project Completed on May 31, 2013; With ongoing system fixes under warranty period Geographical Information System On-going On-going Project was pre-terminated due to inability of the contractor to deliver requirements of the contract Procurement of Services for the Redesign of Certain Tax Return Forms and the Packaging of the Annual Income Tax Return Forms No reported accomplishment * Included in the Technical Assistance to be provided by the US Treasury funded by Millenium Challenge Corporation (MCC)/MCA-P Cancelled Excise Tax Administration-Consulting Services for Development of eOfficial Register Books for Tobacco Products On-going Project Completed on February 1, 2013 Project Completed on February 1, 2013; With ongoing system fixes under warranty period Audit-Enhancement of eLetter of Authority Monitoring System Completed; with on-going system fixes under warranty phase Completed; with on-going system fixes under warranty phase Still with ongoing system fixes Enhancement and Expansion of e-Registration System No reported accomplishment * Failure of bidding Cancelled Tax Enforcement and Control Consultancy Services for Application Development of the Collection Reconciliation System On-going On-going Project Completed on August 31, 2012 Consultancy Services- Communication Agency On-going On-going Project Completed on June 26, 2013 Consultancy Services for Review of Ruling from 2003-2010 On-going * Project was dropped; the IMF Tax Ruling Expert engaged by MCC/MCA-P focused on the gap analysis and recommendations for process improvement of the tax rulings process Cancelled ARCS Sustainability and Enhancement On-going Project Completed; Rolled-out in all offices handling Accounts Receivable Project Completed Streamlining of the Ruling Process No reported accomplishment * Taken up by the IMF Tax Rulings Expert Cancelled Software Solution for Tax Ruling and Case Management System (TRCMS) On-going On-going Project Completed on June 28, 2013; With ongoing system fixes under warranty period Mass Printing of the Enhanced and Expanded Collection Manual No reported accomplishment * Contract on Packaging and Lay-outing of Collection Manual was rescinded due to inadvertent error in evaluation for the winning bidder; Project Proponent decided to shift the mass printing to in-house printing; ongoing printing of 2,500 copies of the Manual for distribution to Collection Officers nationwide Project Completed Re-engineering of the Rulings Process Program (Law Division) Consultancy Services-Project Study No reported accomplishment * Project proponent decided not to pursue the project due to time constraint Cancelled Consulting Services for Economic Study on Philippines Tax Treaties Benefits vis--vis Revenues Foregone No reported accomplishment * Project proponent decided not to pursue the project due to difficulty in getting qualified consultants Cancelled Consulting Services for Developing and Writing the BIR Manual on Tax Treaty Negotiations No reported accomplishment * Project proponent decided not to pursue the project due to difficulty in getting qualified consultants Cancelled Data Conversion and Scanning of Rulings Issued by the Law Division No reported accomplishment * Project was dropped; Scope of Services included in TRCMS Cancelled Human Resource Development and Management HR Strategy and Reform-Consultancy Services No reported accomplishment On-going Project Completed on June 28, 2013 Enhancement of HRIS No reported accomplishment * Notice of Award was withdrawn due to government-wide implementation of GIFMIS Cancelled Consultancy Services on Manpower Planning No reported accomplishment * Failure of Bidding due to non-submission of requirements of the winning bidder Cancelled BIR Reform, Management, Change Management and Program Management Consulting Services for Technical Writer for Issuances on Re-engineering Business Process On-going On-going Project Completed on June 28, 2013, however RMOs were not accepted by functional owners Consulting Services for the Enhancement of Project Management System (PMS) On-going On-going Project Completed on June 28, 2013 Consulting Services for the preparation of a toolkit for making Tax Administration Reform projects gender responsive No reported accomplishment * Winning contractor decided not to pursue the contract signing due to recently signed contract outside BIR Cancelled Inquiry with concerned accounting personnel disclosed that the claims pertaining to the abovementioned payables were not processed and returned back to the Procurement Division due to lack of supporting documents. However, said claims together with the supporting documents were not yet re-submitted for processing to date, thus, casting doubt on their validity. On the other hand, when the accounts of the Bureau were converted under the eNGAS in 2004, there were accounts which could not be fully supported with subsidiary records. To facilitate the conversion, subsidiary ledger account "Reconciling Items" was temporarily created for the discrepancy between each General Ledger (GL) account and its subsidiary records with the understanding that these items would later be documented and reconciled to their respective GL accounts. Review of the SLs showed that there were four SL account "Reconciling Items" totaling P4,542,033.41 under Accounts Payable which to date have not been reconciled thereby, adversely affecting the reliability of the subject accounts. In view of the foregoing, we recommend that Management require the Chief, Disbursement Accounting Division, in coordination with the Procurement Division and other concerned offices, to determine which of these listed long-outstanding accounts payable have actual valid claims, including the amount set up as reconciling items and revert those which could not be fully documented, in line with Section 98 of PD 1445. TDcEaH May we have your comments on the foregoing audit observation within five (5) working days from receipt hereof. (SGD.) ANNIELY P. IBAEZ Audit Team Leader Audit Team 2-Disbursements (SGD.) GLORIA M. BACANI Supervising Auditor Audit Group F-BIR