Republic of the Philippines

COMMISSION ON AUDIT
NATIONAL GOVERNMENT SECTOR
Cluster 1 –Executive Offices
Commonwealth Avenue, Quezon City

INDEPENDENT AUDITOR’S REPORT

The Director-General
Foreign Service Institute
5th Floor, DFA Building
2330 Roxas Boulevard, Pasay City

We have audited the accompanying financial statements of the Foreign Service Institute
which comprise the statement of financial position as at December 31, 2017, and the
statement of financial performance, statement of changes in net assets/equity, statement
of cash flows and statement of comparison of budget and actual amounts for the year then
ended, and the notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial
statements in accordance with the Philippine Public Sector Accounting Standards
(PPSAS) and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatements, whether
due to fraud or error.

Auditor’s Responsibility

Our responsibiity is to express an opinion on these financial statements based on our

audit. We conducted our audit in accordance with Philippine Public Sector Standards on
Auditing. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial statements,
are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. The audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

The following audit observations affected the fair presentation of the financial
statements:

1. Receivables arising from irregular payment amounting to P283,452.99 were not

recognized in the books, thereby, understating the account Due from Officers and
Employees by the same amount.

2. The Accounts Payable with a balance of P2,162,721.47 as at December 31, 2017

was overstated by P1,659,832.09 due to recognition of liability for goods not yet
delivered in the amount of P263,741.50, contrary to Section 119 of PD No. 1445,
Section 2(a), Chapter 2 of Government Accounting Manual (GAM), Volume I and
Item No. 6.1.2 of DBM Circular Letter No. 2013-16, and erroneous recording of
personnel benefits totaling P1,396,090.59 instead of Due to Officers and Employees.

Qualified Opinion

In our opinion, except for the effects on the financial statements of the matters described
in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all
material respects, the financial position of the FSI as of December 31, 2017, and its
financial performance and its cash flows for the year ended in accordance with the
PPSAS.

COMMISSION ON AUDIT

By:

March 22, 2017