OBSERVATIONS AND RECOMMENDATIONS

FINANCIAL AUDIT

1. Accounts receivable (AR) amounting to P6.536 billion remained past due for over
one year to over five years, thus, depriving the Authority of funds that could have
been used in carrying out its mandate under Executive Order No. 90. Further, the
balances of AR presented in the financial statements (FSs) and the Aging of
Accounts Summary (AAS) show a discrepancy of P2.398 billion, casting doubt on
the recorded balance and affecting the fair presentation of the account in the FSs,
contrary to Section 111 of Presidential Decree (PD) No. 1445 and Paragraph 27 of
Philippine Public Sector Accounting Standards (PPSAS) 1.

1.1 Section 6.1 of COA Circular 2016-005 dated December 19, 2016 provides that All
government entities shall conduct regular monitoring and analysis of receivable
accounts to ensure that these are collected when these become due and
demandable.

1.2 Section 111, PD No. 1445, on keeping of accounts, requires that: (1) The
accounts of an agency shall be kept in such detail as is necessary to meet the
needs of the agency and at the same time be adequate to furnish the information
needed by fiscal or control agencies of the government, and (2) The highest
standards of honesty, objectivity and consistency shall be observed in the
keeping of accounts to safeguard against inaccurate or misleading information.

1.3 Paragraph 27 of PPSAS 1, Presentation of Financial Statements, provides that

financial statements shall present fairly the financial position, financial
performance, and cash flows of an entity. Fair presentation requires the faithful
representation of the effects of transactions, other events, and conditions in
accordance with the definitions and recognition criteria for assets, liabilities,
revenue, and expenses set out in PPSASs.

1.4 In 2018, NHA issued several guidelines aimed at improving collection from
beneficiaries, viz: (a) Memorandum Circular (MC) No. 003 dated February 21,
2018, New Guidelines on the Settlement of Obligations of Matured Residential
and Related Accounts; (b) Memorandum No. 2018-022 dated July 25, 2018,
Reduction of Rate of Amortization Interest for Accounts/Loans Covering NHA
Horizontal and Vertical Housing Projects; and (c) MC No. 2018-023 dated July
25, 2018, Guidelines for the Implementation of a New Socialized and Low Cost
Housing Loan Restructuring and Condonation Program.

1.5 Despite these issuances, verification disclosed that of the total outstanding AR of
P6.640 billion as at December 31, 2018, P6.536 billion or 98.44 per cent,
consisting of 97,802 accounts, are past due for over one year to over five years.
Management informed that their beneficiaries are the lowest 30 per cent of the
urban population, hence, the high percentage of past due accounts of
receivables. Details as follows:

52
 Amount
Age No. of accounts
(in millions)
one year and below 44,259 103.885
over one year 21,252 367.869
over three years 17,236 628.779
over five years 59,314 5,539.382
Past due accounts 97,802 6,536.030
Percentage of past due accounts 68.85 98.44
TOTAL 142,061 6,639.915

1.6 Further, comparative analysis of the AR balances under the AAS and the Notes
to FS Nos. 6.1 and 12 disclosed a variance of P2.398 billion, summarized below:

Outstanding balance
(in millions)
Accounts Receivable Per AAS Per Notes to FS
Installment 4,097.766 1,539.398
Rental 2,542.149 2,552.610
Mortgage - 148.864
Cash sale - 0.606
Total 6,639.915 4,241.478
Difference (AAS vs. FS) 2,398.437

1.7 Review of the processes revealed that the Aging Report is one of the reports
generated by the Billing and Collection System (BCS) maintained by the Project
Offices. The Finance Units of the Project Offices submit to the Accounting
Department the Group Award (GA)/Sales Report (SR), Individual Account Ledger
(IAL) and Aging Report. The Accounting Department, on the other hand, is
manually consolidating the submitted reports to record the sales in the books of
accounts, and based on the recorded sales, aging of accounts receivables is
prepared. However, these records of the Finance Units and the Accounting
Department do not agree.

1.8 The resulting unreliable data, records and reports could be attributed to the non-
reconciliation of records by the Finance Units in Project Offices and the
Accounting Department. Further, it could also be ascribed to the absence of an
integrated accounting and information system that will have the function, among
others, of recording the receivables and monitoring the collection of due and
demandable accounts.

1.9 It was informed that the acquisition of an accounting information system

interconnecting the Finance Units of Regional/District offices and the Accounting
Department to facilitate generation of reliable data, records and reports as well as
audit trail is already included in the NHA Information System Strategic Plan for
2019-2021.

53
 1.10 We recommended and Management agreed to:

a. Exert extra effort in collecting the past due accounts by conducting

massive information dissemination of the available payment options or
schemes applicable to the concerned beneficiaries/awardees; and

b. 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.

2. The balances of Receivables and Inter-Agency Receivables/Payables-Due from

Other NGAs/Other GOCCs/LGUs accounts per books differed by P2.800 billion
against the balances confirmed by the implementing and source agencies, casting
doubt on the accuracy and reliability of the year-end balances of said accounts.
Further, confirmation of accounts of 14 LGUs/NGAs/GOCCs disclosed an
overstatement of P67.846 million as at December 31, 2018 due to unrecorded
liquidations.

2.1 Section 111 of PD No. 1445 on the keeping of accounts as cited in Paragraph
1.2, Part II of this report is the criteria for this observation.

2.2 Comparison of the balance per books of various Receivable accounts totaling
P3.746 billion as against the confirmed total balance of P945.421 million from the
different agencies revealed a discrepancy in the total amount of P2.800 billion, to
wit:

Response A m o u n t
No. of
Account Name Per
Letters With Without Per Books Variance
Confirmation
Rental Receivable 1 1 - 2,235,100,773.44 18,789,088.95 2,216,311,684.49
Interest Bearing Loan-
LGUs (Main) 9 4 5 29,053,184.97 26,722,840.47 2,330,344.50
Due from NGAs 7 5 2 1,200,229,811.04 783,263,252.20 416,966,558.84
Due from GOCCs 5 4 1 8,294,818.39 2,486,566.23 5,808,252.16
Due from LGUs 64 21 43 273,151,839.36 114,159,292.53 158,992,546.83
Total 86 35 51 3,745,830,427.20 945,421,040.38 2,800,409,386.82

2.3 Out of the 35 agencies that responded, 30 agencies or 86 per cent of the
receivable accounts did not agree with the recorded balances per books,
showing a total discrepancy of P2.800 billion.

2.4 Further, seven LGUs with total outstanding balance of P48.599 million in NHA
books had already liquidated with the District Offices the funds transferred to
them. However, the liquidations/payments were not recorded in the books of
NHA due to the absence/non-submission of documents/reports to support the
liquidation, such as the Statement of Receipts and Disbursements or Fund
Utilization Report of District Offices to Accounting Department. On the other
hand, two LGUs, two NGAs and three GOCCs with an aggregate balance of
P19.247 million confirmed zero balances with NHA as at December 31, 2018.
Details are as follows:

54
 Date Balance
Particulars Paid/Liquidated per books
Due from LGUs
1 City Government of Legazpi March 2016 10,478,000.00
2 Municipal Government of Mainit, Surigao del Norte July 2018 6,283,375.61
3 Municipal Government of Pangil, Laguna February 2017 11,965,000.00
4 City Government of Cavite February 2018 5,000,000.00
5 Municipal Government of Bantayan, Cebu August 2018 7,499,760.00
6 Municipal Government of Alangalang, Leyte February 2018 4,897,000.00
7 Municipal Government of Pototan, Iloilo April 2018 2,476,032.00
48,599,167.61
Interest Bearing Loan - LGUs
1 City of Bacolod 81,528.67
2 City of Navotas 2,260,798.92
Due from NGAs
3 DPWH, Port Area Manila 93,480.02
4 DOH Center for Health Development 11,000,000.00
Due from GOCCs
5 Metropolitan Waterworks Sewerage System 5,630,350.23
6 National Home Mortgage Finance Corporation 99,239.52
7 Pag-IBIG Fund 81,438.53
19,246,835.89
14 Total 67,846,003.50

2.5 We recommended that Management require the Accounting Department in

coordination with the Regional Managers/Acting Regional Managers and
District Managers/Officers-In-Charge to:

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.

2.6 Management clarified that the variance of P2.800 billion is classified into two,
viz: (1) the discrepancy of P2.216 billion is a receivable from the Department of
Transportation and Communication, now Department of Transportation (DOTr).
The Authority never failed to provide DOTr copies of Statements of Account and
follow-up letters, but no action has been received from the said agency; and (2)
the total of P584.098 million difference refers to Loans and Due from accounts, of
which the P291 million represents receivable from the Department of Education
wherein payments are collected regularly, and the remaining P293 million
pertains to unrecorded liquidations from cash advances to LGUs due to
absence/non-submission of documents/reports.

2.7 Further, it is informed that Memorandum dated April 16, 2019 was sent to Project
Offices reiterating the responsibility and accountability of NHA Project Offices in
reporting and liquidation of funds. It also emphasized the proper monitoring of the

55
 return of the unutilized funds and due dates the funds should be returned to the
Authority.

2.8 As a rejoinder, we further recommend that Management create a unit that

will monitor the funds transferred to/from implementing agencies/source
agencies and coordinate with Accounting Department and the different
district/regional offices on the status of the funds transferred or projects
being implemented.

3. Nine accounts with an aggregate amount of P275.392 million remained dormant

for 11 to 40 years, casting doubt on the accuracy and reliability of the balances
as at December 31, 2018.

3.1 Item 5.4, COA Circular No. 2016-005 dated December 19, 2016 defines dormant
receivable accounts as accounts which balances remained inactive or non-
moving in the books of accounts for ten years or more and where
settlement/collectability could no longer be ascertained.

3.2 Item 6.1, COA Circular No. 2016-005 requires that all government entities shall
conduct regular monitoring and analysis of receivable accounts to ensure that
these are collected when these become due and demandable and that cash
advances and fund transfers are liquidated within the prescribed period
depending upon their nature and purpose.

3.3 Item 7.1 of the same Circular demands that the accountant shall conduct regular
and periodic verification, analysis, and validation of the existence of the
receivables, unliquidated cash advances, and fund transfers, and determine the
concerned debtors, accountable officers (Regular and Special Disbursing
Officers, Collecting Officers, Cashiers) and the source and implementing
government entities concerned.

3.4 Analysis of the accounts revealed that the asset and liability accounts listed
below with an aggregate amount of P275.392 million remained dormant from 11
to 40 years, affecting the accuracy and reliability of the year-end balances.

Number of Years
Account Name Amount Dormant
Loans Receivable-Others 102,645,882.97 16 - 32
Receivable from Mortgage Sales 42,813,371.94 24
Other Assets 35,000,000.00 12
Due from NGAs 19,534,124.31 40
Loans Receivable-LGUs 18,940,917.75 14 - 40
Due from GOCCs 17,252,211.93 11
Advances to Contractors 16,571,321.00 33
Other Deferred Credit-Uncollected Claims 14,788,140.74 11
Due to Government Corporations-NHMFC 7,845,559.00 13 - 23
Total 275,391,529.64

3.5 The Loans Receivable-Others balance of P102.646 million include, among

others, the bridge financing facility extended to private developers for housing
projects amounting to P89.868 million which have been dormant from 16 to 24
years; commercial and industrial loans totaling P5.982 million which have been

56
 dormant from 17 to 29 years; small business loans of P583,941 that have
remained dormant from 16 to 27 years; and others with an aggregate amount of
P3.090 million which have been dormant from 20 to 32 years.

3.6 The Receivable from Mortgage Sales account balance of P42.813 million
represents receivable from National Home Mortgage Finance Corporation for the
housing units that were taken out.

3.7 The Other Assets-Investment in Trustek account balance of P35 million was for
the joint venture with Trustek Conclad Aus-Phil, Inc. which has been terminated
on December 20, 2005.

3.8 The Loans Receivable-LGUs totaling P18.941 million pertains to funds advanced
to LGUs for the financing of, among others, the zonal improvement program to
the cities of Caloocan, Pasay, Makati and Pasig totaling P4.010 million which
have remained dormant for a period of 40 years for the first three cities and 30
years for the last one; implementation of the Pambansang Bagong Nayon Project
in Bacolod and Marawi with an aggregate amount of P6.566 million which have
been dormant for 14 and 29 years, respectively; and implementation of a joint
venture program in Tawi-Tawi amounting to P5.008 million which has been
dormant for 26 years.

3.9 The Due from GOCCs account balance of P17.252 million relates to
advances/receivables from government corporations like GSIS, HDMF and
NHMFC for mortgage take-out loans.

3.10 The Advances to Contractors balance of P16.571 million pertains to the 15 per
cent mobilization fee advanced to contractors.

3.11 The Other Deferred Credits-Uncollected Claims account balance of P14.788

million refers to deferred income pertaining to the sum of money receivable from
G&M Realty Construction and Development Corporation (GMRCDC), joint
venture partner of NHA, for the over expenditure in the development of housing
projects in Tuguegarao, Cagayan, pursuant to a Court Decision dated February
2, 1998 in favor of NHA and Writ of Execution dated March 1, 1999 relative to
Civil Case No. Q95-24669. NHA, however, did not immediately act on the writ of
execution. It failed to enforce the execution of judgment in accordance with the
procedures provided under Section 9, Rule 39 of the 1997 Rules of Civil
Procedure, Rules of Court (ROC).

3.12 Management informed that a demand letter dated May 15, 2014 was sent to
GMRCDC. Nonetheless, the issuance of demand letter after the lapse of 15
years from the date of finality of judgment and writ of execution is a futile and
meaningless action. As provided under Section 6, Rule 39 of the 1997 Rules of
Civil Procedure, ROC, a final and executory judgment or order may be executed
on motion within five years from the date of its entry. After the lapse of such time,
and before it is barred by the statute of limitations, a judgment may be enforced
by action.

3.13 In the case of Rubio, et.al. vs. Alabata, G.R. No. 203947, February 26, 2014, the
Supreme Court ruled that:

57
 Once a judgment becomes final and executory, the prevailing party
can have it executed as a matter of right by mere motion within five
(5) years from the date of entry of judgment. If the prevailing party
fails to have the decision enforced by a motion after the lapse of five
(5) years, the said judgment is reduced to a right of action which
must be enforced by the institution of a complaint in a regular court
within ten (10) years from the time the judgment becomes final.

3.14 After the lapse of five years, NHA, however, failed to revive the judgment by filing
a complaint in the regular court within ten years from the time the judgment
became final as provided in the above-cited jurisprudence. Thus, NHA lost its
opportunity to recover the amount of P14.788 million plus interest from GMRCDC
as it slept on its right to act on the matter.

3.15 The failure of NHA to avail of the appropriate legal actions/remedies resulted in
the wastage of the scarce resources of the government. If not for NHA’s inaction,
the amount of P14.788 million plus interest could have been recovered and used
in alleviating homelessness in consonance with its mandated function under the
law.

3.16 Further analysis of the receivables revealed that some dormant accounts were
not recorded or recognized in the books of LGUs, implementing agencies,
contractors, and some receivables were already fully paid or liquidated but
remained unadjusted in the books of NHA.

3.17 We recommended that Management:

a. Direct the Accounting Department to establish the validity of the

receivables by producing the supporting documents and to show
evidence of efforts exerted to collect the receivables;

b. Since the claim of the government never expires, instruct the Legal
Department to work out appropriate legal actions/remedies against
GMRCDC to recover the P14.788 million, otherwise a Notice of
Disallowance shall be issued against those responsible for failing to
take action to enforce the final judgement on the case; and

c. Submit plan of actions to recover/settle the dormant receivable/payable

accounts.

3.18 Management informed that memoranda were sent to Regional/District Offices on

the subject dormant accounts and the Accounting Department is continually
monitoring the status of the accounts, however, the documents submitted by the
Regional/District Offices are insufficient to effect the necessary adjusting entries.

3.19 The Accounting Department shall prepare a Work Program or Balance Sheet
Clean-up Program to facilitate the analysis and monitoring of dormant accounts
through the following actions: (a) notify on a regular basis concerned
employee/Project Office to act on the required documents; (b) inform them to
submit documents for proper recording in the books; (c) refer to Legal

58
 Department accounts that need appropriate legal actions; and (d) issue simplified
guidelines and procedures on writing-off of accounts.

3.20 With respect to the receivable from GMRCDC, it was informed that verification
with the Securities and Exchange Commission (SEC) disclosed that the said
entity no longer exists. Thus, collection of the receivable is not possible.

4. The accuracy and reliability of the Other Deferred Credits-Depository Liabilities

account are doubtful due to the aggregate balance of P90.530 million of 155
district/project offices that remained outstanding and non-moving for four years,
thereby, overstating the liability account and understating the receivable and
revenue accounts as at December 31, 2018. Moreover, the balances of 18 project
offices amounting to P346.665 million or 60 per cent of the total depository
liabilities balance as at December 31, 2018 have been increasing.

4.1 In recognizing assets/rights and liability/obligations, Paragraph 2.14 of the

Conceptual Framework for Financial Reporting as prescribed by PPSAS,
provides that information about the financial position of a government or other
public sector entity will enable users to identify the resources and claims to those
resources at the reporting date. This will provide information useful as input to
assessments of such matters as the extent to which management has discharged
its responsibilities for safekeeping and managing the resources of the entity.

4.2 Analysis of the Other Deferred Credits-Depository Liabilities account disclosed

that P90.530 million pertaining to 155 district/project offices have remained
outstanding and non-moving for the past four years, mostly due to lack of
required documents from the awardees/beneficiaries. Another reason is the slow
processing of amended sales report by the district offices, wherein amended
sales report is the document required by the Branch Accounting and Property
Division (BAPD) before they can prepare the journal entry to record the
sale/disposal of housing units.

4.3 Further analysis revealed that in addition to the P90.530 million non-moving
accounts, the balances totalling P346.665 million of 18 project offices have been
increasing for the last four years.

4.4 The Dagat-dagatan Development Project (DDDP) is one of the project offices
with balance in the Other Deferred Credits-Depository Liabilities account that has
been increasing in the last four years. The Finance Unit of the DDDP informed
that the balance of P119.434 million recorded in the Other Deferred Credits-
Depository Liabilities account was mainly the accumulated payments received in
Calendar Years 2015 to 2018 from awardees of disposed commercial/industrial
lots awaiting the proper subdivision so that the Lot Inventory System can properly
tag the subject lots to the awardees. This is one of the concerns of the BAPD
because they cannot properly identify the subject lots disposed and the cost of
those lots that would be derecognized.

4.5 It can be inferred from the said observations that there is a sizeable number of
beneficiary accounts pending or awaiting completion of requirements. The
payments made by the beneficiaries are still reflected in the Other Deferred

59
 Credits-Depository Liabilities account as at December 31, 2018, which overstate
the liability account and understate the receivable and revenue accounts.

4.6 The BAPD also informed that they are taking actions in cleaning up the account
and they are also reviewing the appropriateness of the recorded balances from
prior years. This shows that Management failed to monitor and take necessary
steps to ensure compliance and submission of required documents by the
awardees and beneficiaries.

4.7 Also, this only shows the lack of interest on the part of the beneficiary or awardee
to comply with the requirements given the leniency of Management with regard to
the subject matter. As of this writing, there is no existing retention policy for
deposit on lots/housing units pending compliance to the requirements which only
causes to prolong the outstanding balances under the Other Deferred Credits
account.

4.8 We recommended and Management agreed to:

a. Require the BAPD to determine the status of the Other Deferred Credits-
Depository Liabilities account, analyze, reconcile, at least quarterly, their
records with the respective District/Project Offices and make the
necessary adjusting entries to reflect the correct balance of the account;

b. Hasten the subdivision of commercial/industrial lots disposed in Dagat-

dagatan for fair presentation of Other Deferred Credits and related
accounts in the financial statements;

c. Follow-up or issue notices to the concerned awardees or beneficiaries

for their deficiencies in the documentary requirements;

d. Consider the possibility of having a retention policy for deposits on

lots/housing units to compel the awardees/beneficiaries to submit the
required documents and to include a provision that failure to comply
with the requirements within a certain period will mean forfeiture of
deposits already made;

e. Monitor and ensure efficient compliance of the awardees and

beneficiaries in the submission of documentary requirements; and

f. Require the District Offices to expedite the processing of sales report

and submit the same to BAPD for preparation of necessary journal
entry/ies.

5. The accuracy and reliability of 11 financial asset and liability accounts with an
aggregate amount of P55.296 million are doubtful due to abnormal/negative
balances.

5.1 Paragraph 27 of PPSASs as cited in paragraph 1.3, Part II of this report is the
criteria for this observation.

60
5.2 Verification of the schedules and subsidiary ledgers of the following asset and
liability accounts disclosed abnormal/negative balances, thereby understating the
asset and liability accounts by P41.090 million and P14.206 million, respectively,
and overstating/understating the corresponding affected accounts as at
December 31, 2018, details as follows:

Account Name Amount

Assets:
Cash Collecting Officers 3,113,181.97
Cash in Bank - Savings Account 572,357.98
Receivable from installment sales 36,691,721.13
Loans Receivable - Others 195,866.44
Other Receivables 516,498.20
41,089,625.72

Liabilities:
Due to GSIS 533,083.58
Due to Government Corporations 2,126,379.88
Due to Subsidiaries/JV Projects/Associates/Affiliates 7,386,619.11
Trust Liabilities 162,550.65
Deferred gross profit 166,903.55
Other Payables 3,830,862.54
14,206,399.31
Total 55,296,025.03

5.3 Analysis disclosed that the negative/abnormal balances were caused, among
others, by the following:

• Cash Collecting Officers account - Erroneous deposit of collections from NHA

Main Office bank account to CISFA bank account and vice versa were
adjusted before the transfer of collections from said bank accounts were
requested, thus resulted in negative balance in the subsidiary ledger of the
account.

• Cash in Bank-Savings account - Journal entry transferring the deposits from

the savings account to the checking accounts were made before the journal
entry for the fund transfers/deposits made by collecting officers to the savings
accounts in the different project offices were made.

• Receivable accounts - Collections from beneficiaries were credited to

receivables before the receivable accounts were set-up.

• Due to GSIS account - Remittances were recorded before the contributions

were recorded.

• Due to Government Corporations/Trust Liabilities/Other Payables accounts -

Payments were made before the payable accounts were set-up.

61
 • Deferred Gross Profit account - Adjustments and change in the selling price of
the asset without the corresponding adjustment on the gross profit resulted in
abnormal balance of deferred gross profit account.

5.4 We recommended and Management agreed to require the:

a. 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;

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.

COMPLIANCE AUDIT

6. 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
resulted in prolonged completion of 22 projects with total contract cost of P1.576
billion.

6.1 Paragraph 1, Annex A of the 2016 Revised Implementing Rules and Regulations
(IRR) of RA No. 9184 provides that detailed engineering shall proceed only on
the basis of the feasibility or preliminary engineering study made which
establishes the technical viability of the project and conformance to land use and
zoning guidelines prescribed by existing laws.

6.2 Paragraph 2, Annex A thereof, enumerates several detailed engineering activities

which include, among others, survey, site investigation, soil and foundation
investigation.

6.3 Article V - Work Completion of the contract executed between NHA and various
contractors under the Z3R Project provides that the contractor shall commence
work as stated in the Notice to Proceed and expressly warrants to complete the
project within the target number of calendar days.

6.4 Review of the Shelter Production Report as at January 22, 2019 disclosed that
NHA entered into several contracts for the land development and construction of
6,343 housing units (HUs) consisting of 25 projects with a total contract cost of
P1.642 billion.

6.5 Examination of the records revealed that 22 of the 25 projects with total contract
cost of P1.576 billion were not completed within the target completion dates.
Most of the time extensions exceeded the original contract duration caused by
work suspensions and variation orders ranging from 30 to 658 days, details as
follows:

62
 Number Percentage of Number
of Target Revised Completion as Original of Days of
Housing Completion Completion at January 22, Contract Time
Name of Project Units Date Date 2019 Duration Extension Project Cost
Land Development
Christian-Muslim Urban 04-24-2015 08-28-2015 96.43 155 126 11,461,522.32
Poor Association
Subdivision, Inc.
(UPAI)
Tulungatung West Town 06-04-2015 05-25-2016 93.41 196 356 13,823,990.68
Site Development
Phase 2
Temporary Sanitation 02-27-2016 07-16-2016 94.96 30 140 12,757,188.37
Facilities for Z3R
House-on-Stilts
(HOS) (1,035
units)
Temporary Sanitation 09-02-2017 Suspended 70.66 180 485 38,914,429.44
Facilities for Z3R
Phase 2 (3,125
units)

One-Storey HUs
Martha Drive 44 11-01-2014 12-01-2014 100.00 120 30 9,966,087.37
Homeowners
Association, Inc.
(HOAI)
Paniran Site 146 01-08-2015 06-09-2015 100.00 180 152 42,602,423.70
Tulungatung 383 01-07-2015 08-06-2016 95.10 180 576 79,162,347.42
St. Peter’s Compound 16 10-24-2014 03-22-2015 100.00 90 149 4,215,887.29
Christian Muslim 259 01-22-2015 07-09-2016 90.89 180 534 56,615,196.39
UPAI, Subdivision
Islamic Village 67 12-10-2014 07-25-2015 100.00 150 228 23,547,783.94
HOAI, Subdivision
Lustre HOAI, 152 01-28-2015 07-29-2015 96.78 150 181 43,078,726.38
Subdivision
Ayer Village 1 75 07-31-2015 12-01-2015 84.82 180 123 22,057,227.86
Rio Hondo 320 10-24-2015 06-03-2017 93.00 240 587 156,050,992.97
Ayer Village 2 34 06-06-2016 08-14-2017 93.00 120 465 10,642,893.46

Two-Storey HUs
Aplaya Compound 176 08-07-2015 07-14-2016 100.00 240 341 66,090,418.62
Vista Homes R. 184 08-08-2015 07-15-2016 95.00 240 342 71,939,985.02
Evangelista
Property

House-on-Stilts
Mariki 642 06-24-2015 01-22-2016 100.00 300 212 147,352,259.57
Vale Vista Phase 1 828 10-02-2015 09-29-2016 86.04 240 362 167,817,554.92
Vale Vista Phase 2 794 10-24-2015 11-09-2016 100.00 240 381 179,282,837.69
Vale Vista Phase 3 866 10-02-2015 02-28-2017 100.00 240 514 172,832,910.96
Vale Vista Phase 4 917 03-13-2017 Suspended 62.62 330 658 192,450,308.40
Sitio Hongkong 240 08-16-2016 06-01-2017 94.99 180 288 53,513,083.41
Total 6,143 4,161 7,230 1,576,176,056.18

6.6 The reasons for the prolonged completion of the projects are as follows:

a. Variation Orders (VOs) due to:

• Changes in original quantities and additional items of work such as

revision of the approved drainage layout, reduction in road lots size,
additional filling materials, subdivision survey with Land Management
Services, additional excavation works.

• Decrease in quantities of housing units, items under road works, additional

quantities applied to the length of covered canal and imported fill as
embankment to all residential lots to attain a grade line higher than the
existing concrete road.

63
 • Increase in capacity of septic tanks in compliance with the findings of the
City Planning and Health Offices based on the Revised National Plumbing
Code of the Philippines, and the corresponding delay in its approval.

• Change in plumbing layout plan as recommended by the City Health

Office, change of dimensions for septic tanks, additional loose for
embankment, road works and drainage appurtenances due to the newly
constructed Department of Public Works and Highways (DPWH) road
package.

• Additional works needed in the preparation for the transfer of 127 families
to the project site that will be subjected to extra works and repair by NHA
of the existing 3.00m concrete footbridge as agreed with DPWH.

• Existing footbridge which can be used as access road was already

dilapidated, hence, it is no longer capable of supporting the volume of
construction materials to be brought to the project site and construction of
1.00m width by 1.00m length wooden footbridge connecting the house-on-
stilts with another 1.5m wooden footbridge.

• Changes in original quantities of work on House-on-stilts and revision in

the design and additional construction of wooden footbridges.

• Packaging from wooden to concrete for Vale Vista Phase IV project.

b. Delay in the approval of VOs;

c. Acquisition issues on the land as site of Ayer Village Phase 2;

d. Shortage in the supply of lumber due to Department of Environment and

Natural Resources (DENR) Executive Order No. 23 on total log ban;

e. Clearing of obstruction during the land development along some roads of the
project site;

f. Unavailability of access road to the job site due to construction by DPWH of

Dimarunsing Road and connecting road from Evangelista to Martha Drive and
the lined canal of DPWH Projects;

g. Discrepancy between site development finish elevation of Islamic Village

HOAI Subdivision with DPWH ongoing reconstruction of existing concrete
road Fishpond North (Datu Dimarunsing Road);

h. Construction by DPWH of a road passing through Lustre HOAI Subdivision to

connect Lustre Road with Martha Drive;

i. Delay in the construction of the DPWH canal/waterway along Ayer Village

Housing Site that may pose danger to the on-going HUs construction when
the imported fill shows settlement (shear failure);

64
 j. Pending approval of DPWH Region lX on the request in regard to tapping
point of 600-mm reinforced concrete cylinder pipe to the concrete sidewalk of
DPWH Road Project for Martha Lulua Link on the drainage system of the
project;

k. No road right of way due to on-going construction of the 1st and 2nd portion of
the DPWH Road Project concreting of Martha Lulua Link Road;

l. Investigation and/or exploration of soil/foundation to correct observed

settlement of introduced filling materials at the project site;

m. Discrepancy of boundary survey;

n. Unavailability of filling materials due to temporary closure of quarry sites by

the City Government of Zamboanga;

o. Poor weather condition; and

p. Delay in the compliance of the permits and licenses needed for the
construction of HUs.

6.7 The Ayer Village Phase 2 project for the construction of 34 HUs has original
contract duration of 120 days but was suspended for a total of 465 days due to
acquisition issues of the property. On March 15, 2016, the Local Inter-Agency
Committee (LIAC) passed a resolution which requested the NHA to proceed with
the land acquisition, development and construction of HUs on the said property.
Notwithstanding the said resolution by the LIAC, the acquisition of property with
lien or encumbrance incurred delays and took 585 days to reach 93 per cent
completion of the 34 HUs.

6.8 The completion of six House on Stilts (HOS) projects which targeted to construct
4,287 HUs with original contract duration of 1,530 days was also delayed. As at
January 22, 2019, the Z3R Shelter Production Report disclosed that these
projects incurred total time extension of 2,415 days, with only three projects,
Mariki, Vale Vista Phases II and III, were completed. The shortage in the supply
of lumber by virtue of Executive Order No. 23 dated February 01, 2011, which
declared a moratorium on the cutting and harvesting of timber in the natural and
residual forests, was the common reason for the work suspensions on the HOS
projects. However, despite the log ban, the HOS were designed to be
constructed using wood as materials.

6.9 Time extensions were also caused by the revision in the components of the
original items of work, changes in original quantities and additional items of work
such as revision of the approved drainage layout, reduction in road lots size,
additional filling materials, and increase in dimensions of septic tanks.

6.10 The detailed engineering activities, which include site investigation and soil and
foundation investigation, appeared not undertaken as no documents relative
thereto were attached to the contract documents. These activities were designed
to address issues/concerns on the accessibility of road to the job site, obstruction
during land development and layout of houses due to existing transitory site in

65
 the area, discrepancy between site development finish elevation with DPWH
reconstruction of existing road, and investigation and/or exploration of
soil/foundation to correct observed settlement of introduced filling materials at the
project site, among others.

6.11 Some of the time extensions could have been prevented, had NHA thoroughly
evaluated and addressed the issues during the planning and pre-procurement
conference, and when deliberations for projects implementation were conducted
with Management officials to arrive at decisions advantageous to the
government.

6.12 Further, regular coordination with the Local Government of Zamboanga City,
DPWH, DENR and other involved agencies should have been conducted to
address the issues on permits/licenses, road right of way, and road elevation
issues.

6.13 The 22 Z3R projects incurred total time extensions of 7,230 days which is 174
per cent of the original contract duration of 4,161 days. Thus, resulted in delayed
completion of the projects, which deprived the timely use of the HUs, considering
the pitiful condition of the affected families in the evacuation and temporary
shelters.

6.14 As at January 22, 2019, the status of the 22 Z3R Projects are as follows:

Number of Percentage of
Status
Project Completion
8 100 Completed; 3 projects for final acceptance by the
Acceptance Committee; 1 project for submission of
Occupancy Permit
12 84.82 to 96.78 On-going rectification of defects and awaiting
submission of lacking requirements
1 62.62 Suspended due to proposed change of materials from
wooden to concrete for Vale Vista Phase IV project
1 70.66 Project on sanitation facilities, suspended awaiting
completion of Vale Vista Phase IV
22

6.15 During the exit conference, it was informed that the circumstances surrounding
the Z3R projects was difficult and there were miscoordination with the
concerned/involved agencies during the implementation of the projects. NHA
lacks technical positions/supervisors to efficiently implement the projects and its
manpower, mostly Senior Engineers and emergency hires, are always on
fieldwork. It was also disclosed that the remaining project under the House on
Stilts, the Vale Vista Phase IV, including the footbridges, will be redesigned from
wooden to concrete.

6.16 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 HUs to the
affected families;

66
 b. Conduct adequate and effective planning by closely coordinating with
the LGU, DPWH, DENR 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.

7. There were no proper site inspections and prompt coordination with the DPWH
for the filling works of the two housing sites under the Z3R projects with
aggregate revised contract cost of P21.605 million. The projects were already
completed when the procurement processes were conducted, contrary to
Section 3 of RA No. 9184 and its IRR.

7.1 Section 3 of RA No. 9184 and its IRR provide that government procurement shall
be governed by principles which include, among others, the transparency in the
procurement process and in the implementation of procurement contracts
through wide dissemination of bid opportunities and participation of pertinent non-
government organizations.

7.2 In December 2015, the NHA entered into contract for the filling works of two
housing sites, the Christian-Muslim UPAI Subdivision and Islamic Village. As at
January 22, 2019, the Z3R Shelter Production Report disclosed the following:

Revised Revised
Name of Project Date Started Completion Date Contract Cost
Filling Works of January 21, 2016 March 21, 2016 10,529,853.71
Christian-
Muslim UPAI
Subdivision
Filling Works of January 4, 2016 March 24, 2016 11,075,075.86
Islamic Village
Total 21,604,929.57

7.3 Scrutiny of the records revealed that these projects appeared to have been
completed when the procurement process started, discussed as follows:

a. Filling Works of Christian-Muslim UPAI Subdivision (CMUS)

• Certification dated February 1, 2016 issued by the NHA Supervising

Engineer and District Manager states that the actual accomplishment of
the site filling work was already 97.91 per cent completed as at July 26,
2014, which was prior to the development and construction of 259 duplex
housing units.

67
 • Colored photographs of the project includes a remark that “the filling works
was completed prior to start of housing construction which was on July 26,
2014”.

• Project Profile dated February 1, 2016, prepared and signed by the NHA
Principal Engineer, shows that the accomplishment of the said project is
already 100 per cent.

• Results of materials test analysis relative to filling works were dated as

early as July 28, 2014 and the latest was November 23, 2015.

b. Filling Works of Islamic Village

• Certification dated January 8, 2016 issued by the NHA Supervising

Engineer and District Manager disclosed that the actual accomplishment
of the filling work was already 100 per cent completed as at September
25, 2014 prior to the development and construction of 67 duplex housing
units.

• Project Profile dated October 17, 2015, prepared and signed by the NHA
Supervising Engineer, shows that the accomplishment of the said project
is already 100 per cent.

• Results of materials test analysis relative to filling works were dated

August 11 and 12, 2014.

• Colored photographs supporting the disbursement voucher for the filling

works project are the same colored pictures attached to the 4th progress
payment for land development and construction of one-storey HUs
received by COA on February 19, 2016 and December 11, 2015,
respectively.

7.4 Prior to the procurement of the said filling work packages, the NHA has entered
into contract with the same contractors for the rehabilitation of the CMUS and
Islamic Village that includes the land development and construction of HUs as
follows:

Revised Revised
Date Started Completion Date Contract
Name of Project Cost
Christian-Muslim UPAI Subdivision
Construction of one – July 26, 2014 July 9, 2016 56,615,196.39
storey – 259 HUs
Land development November 21, 2014 August 28, 2015 11,461,522.32

Islamic Village
Land development and July 14, 2014 July 26, 2015 23,547,783.94
construction of one-
storey – 67 HUs

68
7.5 Review of the Project Proposal for the two filling work projects disclosed, among
others, the following information:

• The contractors started the clearing and demolition works of the areas for the
construction of HUs project even without the Notice to Proceed (NTP). During
these activities, the DPWH in Region IX Office also started the construction of
Road Package B-1 (Datu Dimarunsing Road) located at the Southern side of
the Christian-Muslim UPAI Subdivision and Islamic Village.

• In view of the road construction by the DPWH, the established finish grade
elevation was higher than the existing natural ground of the adjacent areas of
the two housing sites, still without considering the extraction of unsuitable
materials within the areas.

• After series of meetings with DPWH officials (both local and national) and the
City Government of Zamboanga (CGZ), the NHA was instructed to level the
finish grade elevation of the two housing sites with the finished grade
elevation of the DPWH roads to avoid flooding in the housing sites.

• The costs estimated by the NHA for the filling works cannot be covered by a
Variation Order because the 10 per cent was not sufficient to cover such
volume/cost of filling materials required, thus, resulting in a separate work
package.

7.6 As presented in the Certifications dated February 1 and January 8, 2016 issued
by the NHA Zamboanga Project Office, the filling works for the two housing sites
were 97.91 per cent and 100 per cent complete on July 26, 2014 and September
25, 2014, respectively, or after a year when the opening of bids for said projects
was conducted on October 21, 2015. The contracts for the filling works of the
CMUS and Islamic Village were awarded to the contractors on November 12,
2015.

7.7 The pertinent documents show that the contractors started the filling works on
CMUS and Islamic Village, despite short of award, to comply with the instruction
of the DPWH and CGZ to level the finish grade elevation of the two housing sites
with the finished grade elevation of the DPWH roads to avoid flooding in the
housing sites. They are the same contractors awarded for the land development
and housing construction of the CMUS and Islamic Village. This practice posed
doubt on the biddings conducted and defeats the purpose of transparency,
competitiveness, efficiency and economy in the procurement process.

7.8 Notwithstanding the instructions of DPWH and CGZ, the NHA should have
started the procurement process upon learning the result of the finish grade
elevation. The issue on the leveling of the housing sites with the road could have
been avoided, had there been site inspection conducted and prompt coordination
with DPWH to determine the proper scope of work and efficiently plan the
procurement.

69
7.9 We recommended that Management:

a. Strictly adhere to the provisions of RA No. 9184 and its IRR in all stages
of the procurement of infrastructure projects to ensure transparency,
competitiveness, efficiency and economy in the procurement process;
and

b. Conduct site inspection/evaluation and coordinate promptly with DPWH

and other involved agencies to determine the proper scope of work so
as to efficiently plan the procurement for future projects.

7.10 Management commented that proper site inspection of target sites and proper
coordination were conducted with the concerned government agencies. The
project proposal for the CMUS and Islamic Village were already approved when
the Road Package B-1 (Dimarunsing Road) was implemented. The elevation of
said road was not incorporated in the project proposals of the two filling work
projects as these were not yet available at the time the said proposals were
made.

7.11 The Certifications dated February 1, 2016 and January 8, 2016 issued by NHA
Zamboanga Project Office for the filling works of the CMUS and Islamic Village
Housing with 97.91 per cent and 100 per cent completion as at July 26 and
September 25, 2014, respectively, and other documents pertains to the imported
fill item included in the CMUS and Islamic Village Housing Projects and not to the
separate package of filling works for the CMUS and Islamic Village awarded to
the contractors.

7.12 The Authority substantially complied with the provisions of RA No. 9184 despite
certain minute lapses during the planning stage, which could have been properly
addressed where if not for the emergency nature of the projects.

7.13 As a rejoinder, we would like to emphasize that the Certifications dated February
1, 2016 and January 8, 2016 issued by the NHA Zamboanga Project Office for
the filling works of the CMUS and Islamic Village with 97.91 per cent and 100 per
cent completion as at July 26 and September 25, 2014, respectively, were
documents supporting the payments for the filling works projects and not for the
Imported Fill item included in the CMUS and Islamic Village housing projects, in
view of the following:

a. The Abstract of Physical Accomplishment for the CMUS housing project

clearly disclosed that the item of work for the Imported Fill is 83.34 per cent
complete as at June 9, 2015, while the Certification of the Actual
Accomplishment for the filling works of the CMUS is already 97.91 per cent as
at July 26, 2014.

b. The Statement of Work Accomplished for the filling works project of CMUS as
at February 1, 2016 disclosed that the percentage of accomplishment from
January 22 to February 1, 2016 is 97.91 per cent which is the same
percentage of completion shown in the Certification of Actual Accomplishment
as at February 1, 2016 for the filling works project of CMUS, both issued by
the NHA Project Office.

70
 c. Certification as to the actual accomplishment of a project is issued per Project
and not by Item of Work.

7.14 In view of the foregoing, we further recommend that Management determine

the persons liable for allowing the contractor to start the projects, short of
award and take appropriate action against them, if warranted.

8. Loans amounting to P1.062 billion has no corresponding awarded beneficiaries

and contractors for 20 housing projects adopting Community Initiative Approach
(CIA) were paid even without supporting Individual Loan Agreement, contrary to
Section 4.6 of PD No. 1445, Section 3.1(b) of Memorandum Circular (MC) No.
2376, Sections 2.5 and 7.6 of the Terms of Reference (TOR) on CIA, and Section
5.4 of MC Nos. 2518 and 2518-A for Informal Settler Families (ISFs) Living in
Danger Areas. Thereby, exposing NHA to risk of loss of opportunity to recover
costs that can be spent for other socialized housing projects.

8.1 Section 4.6, PD No. 1445 requires that claims against the government funds shall
be supported with complete documentation.

8.2 Section 3.1(b) of MC No. 2376 dated July 27, 2011 and Section 2.5 of the TOR
on CIA provides that the required number of housing units to be constructed on
the specific sites shall be based on the number of qualified applicants included in
the AFP/PNP and NHA Approved Masterlist. Further, Section 7.6 of the TOR
and Section 5.4 of MC Nos. 2518 and 2518-A state that prior to movement to the
housing site, each qualified applicant shall execute a Loan Agreement with
Assignment of Loan Proceeds with NHA where the approved loan amount is
assigned in favor of the Landowner-Developer for purposes of the acquisition of a
housing unit.

8.3 The CIA is a mode of financing the acquisition of relocation/resettlement projects

of the NHA adopted in providing housing for the government railway project and
for most of its project since 2004. The communities/beneficiaries of the projects
approve the program financed by NHA. This scheme was also adopted by NHA
in implementing the AFP/PNP Housing Program and ISFs Living in Danger Areas
within Metro Manila since 2012. Under this scheme, the account “Loans
Receivable – Others” is recorded in the books upon paying the contractor for the
developed lots and completed housing units intended for the beneficiaries.

8.4 Comparison of the total paid developed lots and housing units against the
awarded units for the 20 housing projects based on the Status of
Accomplishments as at December 31, 2018 for Off-City Resettlement for ISFs
and as at March 31, 2019 for AFP/PNP, revealed that 5,935 housing units out of
the 28,551 completed units, with total value of P1.062 billion are recorded as
“Loans Receivables–Others” even without corresponding awardees and
supporting Individual Loan Agreement (ILA), details shown next page:

71
 Based on the Status of Difference – Units not
Completed Based on Paid Amount Accomplishments yet Awarded
No. Housing Project
Units* Awarded
DL HU Net Amount Net Amount HU Amount
Units
AFP/PNP Housing Program
1 Hermosa Ville 1,230 1,230 1,184 246,860,000 902 184,910,000 328 61,950,000
2 San Fernando 1,950 1,950 1,950 399,750,000 1,950 399,750,000 - -
Ville, Phase 2 698 698 698 143,090,000 482 98,810,000 216 44,280,000
3 San Lorenzo Heights 1,492** 1,568 1,422 304,660,000 1,392 285,360,000 100 19,300,000
4 San Manuel Homes 1,498 1,494 1,396 295,000,000 992 203,360,000 506 91,640,000
5 Mountain Breeze
1,500 1,388 1,388 284,540,000 829 169,945,000 671 114,595,000
Residences
6 Guardians Hill
1,000 1,000 1,000 205,000,000 908 186,140,000 92 18,860,000
Subdivision
7 Smart Homes 500 457 473 95,516,375 421 86,305,000 79 9,211,375
8 Doricoville Housing 500 500 500 102,500,000 500 102,500,000 - -
Project 53 53 53 10,865,000 49 10,045,000 4 820,000
9 Maiaville
Subdivision 530 530 530 108,650,000 216 44,280,000 314 64,370,000
10 Villa Valencia 433 415 432 84,905,000 178 36,490,000 255 48,415,000
11 St. Michael Village 475 475 475 97,375,000 - - 475 97,375,000
Subtotal 11,384 11,283 11,026 2,378,711,375 8,819 1,807,895,000 3,040 570,816,375

Off-City Resettlement Projects

12 Balagtas Heights 1,185 1,185 1,185 242,925,000 1,147 235,135,000 38 7,790,000
13 Pandi Residences 1 3,522 3,522 3,522 722,010,000 3,158 647,390,000 364 74,620,000
14 Pandi Residences 2 2,297 2,293 2,293 470,065,000 2,268 464,940,000 29 5,125,000
15 San Francesco 1,111 1,111 811 193,255,000 611 125,255,000 500 68,000,000
Villagio
16 Verdant Residences 1,047 1,000 840 186,600,000 363 74,415,000 684 112,185,000
17 St. Joseph 1,274 1,250 1,250 281,250,000 750 168,750,000 524 112,500,000
Residences
18 St. Joseph 1,189 1,150 800 215,000,000 800 180,000,000 389 35,000,000
Residences 2
19 Virgen dela Paz 424 424 424 95,400,000 411 92,475,000 13 2,925,000
Homes Phase 4
20 Sunshineville 1 5,118 5,118 5,118 1,049,190,000 4,764 976,620,000 354 72,570,000
Subtotal 17,167 17,053 16,243 3,455,695,000 14,272 2,964,980,000 2,895 490,715,000
Total 28,551 28,336 27,269 5,834,406,375 23,091 4,772,875,000 5,935 1,061,531,375
Percentage 100 82 18
* Completed units pertains to house and lot packages that includes paid developed lots (DLs) and completed
housing units (HUs).
** For San Lorenzo Heights project, the 1,492 completed units represents DL and HU packages. Although the
total paid DLs was 1,568 lots, 78 of which have no corresponding completed HUs as of reporting date. The
difference of 70 units for the total completed units and paid HUs refers to completed HUs but not yet paid as
of end of the year 2018.

8.5 As required under the CIA scheme, the land development and the construction of
housing units on specific sites are based on the number of applicants included in
the NHA approved masterlist for AFP/PNP housing program, and on the number
of identified families for ISFs housing projects. The AFP/PNP Homeowners
Association and the Community Associations are responsible for ensuring that
each member-beneficiary shall execute and submit the Individual Loan
Agreement (ILA) duly signed and notarized to cover the assignment of the loan
amount in favor of the contractor as payment for the developed home lots and
completed housing units allocated to individual members.

8.6 The Finance Unit of the concerned Project Office is responsible for checking the
documentary requirements to support the payments to the contractor and Pre-
Audit Unit of the Accounting Department for verifying before paying the
contractor. In this regard, we called the attention of Management in our previous
year’s audit observation that there were payments to contractors despite
incomplete submission of ILA. Nonetheless, execution of an ILA will not be
addressed unless a qualified awardee of the housing unit is first identified and the
executed ILA be required to support the claims of the contractor.

72
 8.7 We recommended that Management:

a. Expedite the awarding of the housing units that shall be the basis for the
execution of the ILA and to support the total amount of P1.062 billion
recorded in “Loan Receivable–Others”; and

b. Strictly comply with Section 4.6 of PD No. 1445, Section 3.1(b) of MC No.
2376 and Sections 2.5 and 7.6 of the TOR on CIA and other relevant MCs
issued for ISFs Living in Danger Areas on the requirements for
determining the qualified beneficiaries/awardees as basis for the
execution of ILA.

8.8 Management informed that there is an ongoing redocumentation of awards of the

nine project sites based on the sanitized masterlist submitted by the AFP/PNP
Housing Boards, except for Hermosa Ville located in Hermosa, Bataan. For
Hermosa Ville and off-city resettlement projects, it was informed that NHA
coordinated with the concerned LGUs on the relocation and awarding of the
units. The redocumentation of awarded units will be completed on or before
October 2019.

8.9 As a rejoinder, we understand that the redocumentation pertains to the awarded

units only. The units that remain idle must be awarded to the intended
beneficiaries as soon as possible to avoid deterioration and to recover the
construction cost.

9. Trust funds in the total amount of P5.295 billion were used to cover the cash
requirements of other housing projects/programs, contrary to Section 6, General
Provisions, General Appropriations Act (GAA) for Fiscal Year (FY) 2018 and
Sections 3.4, 4.3 and 84.2 of PD No. 1445.

9.1 Section 6(b), General Provisions, GAA for FY 2018, prescribes that the
following shall be deposited with the National Treasury and recorded as trust
receipts in accordance with E.O. No. 338, s. 1996, as implemented by COA-
DBM-DOF J.C. No. 1-97 dated January 2, 1997, and such other guidelines
issued thereon. It further provides, thus:

(b) Those classified by law or regulations as trust receipts.

Trust receipts shall be disbursed in accordance with the

purpose for which it is created, subject to the applicable
special provisions and accounting and auditing rules and
regulations.

9.2 Sections 3.4, 4.3 and 84.2 of PD No. 1445, provide that:

3.4 Trust funds refers to funds which have come officially into the
possession of any agency of the government or of a public
officer as trustee, agent, or administrator, or which have been
received for the fulfillment of some obligation.

73
 4.3. Trust funds shall be available and may be spent only for the
specific purpose for which the trust was created or the funds
received.

84.2 Trust funds shall not be paid out of any public treasury or
depository except in fulfillment of the purpose for which the
trust was created or funds received, and upon authorization of
the legislative body, or head of any other agency of the
government having control thereof, and subject to pertinent
budget law, rules and regulations.

9.3 Audit of the cash in bank accounts and review of the bank reconciliation
statements disclosed that on various dates, NHA authorized Land Bank of the
Philippines to debit various restricted accounts and to credit the same to the
account of other projects/programs. This is to cross access the restricted funds
to temporarily augment the cash deficiencies of other programs/projects so as
not to hamper their implementation pending release of the remaining fund
balances by the Department of Budget and Management (DBM). The amounts
transferred will be reverted to the source fund upon availability of the
corresponding cash from DBM.

9.4 Records show that a total amount of P5.295 billion were borrowed and utilized
by NHA for Yolanda Permanent Housing Program (YPHP), Housing Program
for ISF Living in Danger Areas (HPISFLDA), AFP/PNP Housing Program,
Housing Program for Marawi Transitional Project (HPMTP), and Various
Resettlement Projects (VRP). As at December 31, 2018, the borrowed funds
totalling P5.295 billion were not reverted to the restricted funds, details as
follows:

Project/Program to where the Fund was Amount

Name of Restricted Fund Transferred/Utilized Borrowed

Socialized Housing Program HPISFLDA 1,300,000,000.00

YPHP 1,150,000,000.00
VRP 280,000,000.00
2,730,000,000.00
Marawi City Recovery HPISFLDA 120,000,000.00
Reconstruction YPHP 650,000,000.00
Housing Program for Marawi Transitional Project 44,795,390.28
VRP 50,000,000.00
864,795,390.28
NLEX/SLEX Connector Road HPISFLDA 300,000,000.00
Project YPHP 500,000,000.00
VRP 100,000,000.00
900,000,000.00
Harbor Link Project-Segment 10 YPHP 500,000,000.00
AFP/PNP Housing Program 300,000,000.00
800,000,000.00
Total 5,294,795,390.28

9.5 We recommended that Management:

a. Revert the amount debited from the Restricted Funds;

74
 b. Strictly comply with the provisions of GAA and PD No. 1445 relating to
the disposition of trust funds; and

c. Coordinate with the DBM for the prompt release of the fund balances
for the YPHP, HPISFLDA, AFP/PNP Housing Projects, HPMTP, and
VRPs.

9.6 Management commented that cross access of funds is inevitable due to the
deficiency of Operating Cash Balances from Corporate Receipts and National
Government Subsidies. So as not to hamper the implementation of NHA’s
projects/programs, the Authority has no option but to resort to cross access or
temporary utilization of its restricted funds due to the slow-moving disbursement
phase.

9.7 Also, it was informed that NHA is continuously coordinating with DBM for the
prompt release of Notice of Cash Allocation/Cash. However, the release of
funds from DBM has been hampered due to the election ban where DBM has to
request from the Commission on Election for exemption to release funds to
NHA.

9.8 Management committed to immediately revert the borrowed funds upon

availability of corresponding NCA/Cash from DBM.

9.9 As a rejoinder, while there is exigency in the implementation of the housing

projects for Typhoon Yolanda victims, ISFLDA, AFP/PNP personnel, Marawi
transitional project beneficiaries, and VRPs, the temporary utilization of the
restricted funds for these projects violates Section 6, General Provisions, GAA
for FY 2018, Sections 4.3 and 84.2 of PD No. 1445. More so, the risk of the
delayed release by DBM of the fund balances of the projects mentioned will
result in the delayed return of the borrowed funds that might prejudice the
implementation of the affected projects under trust agreements.

10. A total of P585.203 million pertaining to the two per cent Expanded Withholding
Tax (EWT) was not deducted from the payments to the contractors of the 112
social housing projects adopting CIA despite non-submission of tax exemption
certificate or ruling, contrary to Bureau of Internal Revenue (BIR) Revenue
Memorandum Circular (RMC) No. 8-2014 dated February 6, 2014.

10.1 Section 20(d), RA No. 7279, known as the Urban Development and Housing Act
of 1992, provides exemption from payment of various taxes to private sector
participating in socialized housing projects of the government, as follows:

SEC. 20. Incentives for Private Sector Participating in Socialized

Housing. – To encourage greater private sector participation in
socialized housing and further reduce the cost of housing units for the
benefit of the underprivileged and homeless, the following incentives
shall be extended to the private sector:

xxx

75
 (d) Exemption from the payment of the following:

(1) Project-related income taxes;

(2) Capital gains tax on raw lands used for the project;

(3) Value-added tax for the project contractor concerned;

(4) Transfer tax for both raw completed projects; and

(5) Donor’s tax for lands certified by the local government

units to have been donated for socialized housing
purposes. xxx

10.2 BIR RMC No. 8-2014 dated February 6, 2014, Presentation of Tax Exemption
Certificate or Ruling by Exempt Entities, provides, among others, that:

Under the provisions of existing tax laws and administrative

issuances, however, some individuals, entities and transactions are
considered exempt from imposition of taxes on income and,
consequently, from withholding taxes.

In this regard, the concerned withholding agents shall require all

individuals and entities claiming such exemption to provide a copy of
a valid, current and subsisting tax exemption certificate or ruling, as
per existing administrative issuances and any issuance that may be
issued from time to time, before payment of the related income. The
tax exemption certificate or ruling must explicitly recognize the grant
of tax exemption, as well as the corresponding exemption from
imposition of withholding. Failure on the part of the taxpayer to
present the said tax exemption certificate or ruling as herein required
shall subject him to the payment of appropriate withholding taxes due
on the transaction. On the other hand, the withholding agent’s failure
to withhold notwithstanding the lack of tax exemption certificate or
ruling shall cause the imposition of penalties under Section 251 and
other pertinent Sections of the Tax Code. (underlining ours)

10.3 Verification of the records disclosed that, despite non-submission of the BIR tax
exemption certificate or ruling, a total of P585.203 million pertaining to the two
per cent EWT was not withheld from the payments to the contractors relative to
the 112 out of 121 housing projects aggregating P29.260 billion, summary as
follows:

No. of
Particulars Project Amount Paid 2% EWT
AFP/PNP/BJMP/BFP/BuCor 59 P13,452,680,982.77 P269,053,619.66
Housing Projects
ISFs Living in Danger 53 15,807,463,666.98 316,149,273.34
Areas Housing Program
Total 112 P29,260,144,649.75 P585,202,893.00

76
 10.4 It may be recalled that in our Audit Query Memorandum No. 2019-002 dated
January 15, 2019, we inquired why the two per cent EWT was not deducted
from the payments made to the contractors even without the BIR tax exemption
certificate or ruling. Also, we requested submission of the certified copy of the
tax exemption certificates or ruling for all socialized housing projects adopting
CIA.

10.5 In reply, the General Manager, in his letter dated January 12, 2019, informed
that the attention of the concerned contractors were already called and they
were required to submit the necessary BIR certificate of tax exemption or ruling,
otherwise the total withholding tax due shall be imposed in their immediate
succeeding billing. Also, it was informed that NHA was coordinating with the BIR
regarding the grant of automatic tax exemption to the contractors of socialized
housing projects of NHA based on the provision of RA No. 7279. To this date,
however, we have not received certified copy of tax exemption certificates or
rulings and any update on the result of the coordination by NHA with BIR.

10.6 We recommended and Management agreed to:

a. Set timeline and direct all concerned Regional/District/Project Offices

to require the contractors to submit the BIR certificate of tax
exemption or ruling for all payments made. Otherwise, instruct the
Accounting Department to deduct the corresponding withholding
taxes from the current amount due to the contractors; and

b. In future socialized housing projects, require the submission of the

BIR tax exemption certificate or ruling before payment of the
claim/billing submitted by the contractors. Else, in view of the
implementation of the NHA reorganization approved by the
Governance Commission for Government-Owned or Controlled
Corporations, require the Finance Units in the Regional Offices and the
Accounting Department in Head Office to deduct the corresponding
EWT from the payments if the contractors cannot submit the required
certificate or ruling.

11. The funds in the aggregate amount of P481.588 million transferred to the Local
Government Units (LGUs) under the Home Materials Assistance (HOMA) Program
were not properly monitored, contrary to the guidelines provided under NHA
Memorandum Circular (MC) No. 2524 dated April 16, 2013 resulting in non-
liquidation by the LGUs, thus, the veracity of the distribution and receipt of
housing materials by the affected families cannot be validated. Further, in 2014 to
2017, four of the LGUs were given additional funds in the total amount of
P138.724 million despite non-liquidation of the funds amounting to P60.717
million transferred in 2013 to 2016 under the HOMA Program, contrary to Item
3.1.1 of COA Circular No. 2012-001 dated June 14, 2012, as amended by COA
Circular No. 2016-002 dated May 31, 2016.

11.1 The HOMA Program of the NHA shall be implemented to benefit low or
marginal-income families whose houses were partially or totally damaged by
calamities, such as typhoon, flood, fire, earthquake, volcanic eruption, and other

77
 forms of catastrophe or disaster. The Program involves the grant of housing
materials to affected households for purposes of repair or reconstruction of
housing units in their current location. The total amount of assistance shall not
exceed P5,000 per family subject to periodic review and updating.

11.2 Pursuant to NHA Board Resolution No. 5565 dated February 14, 2013, the
guidelines in engaging the LGU as alternative project implementor of the HOMA
are laid down in NHA Memorandum Circular No. 2524 dated April 16, 2013.
The relevant provisions of the Circular are as follows:

IV. PROJECT IMPLEMENTATION ARRANGEMENTS

4.1 Request and Requirements for Assistance

4.1.1 Official request for HOMA is submitted by the Local

Chief Executives (LCE) (mayors/governors) or
members of Congress to NHA through its project
office supported by the Official Masterlist of Families
Eligible for HOMA prepared and certified by the
Municipality/City Social Welfare and Development
(SWD) Office; and

Damage Assessment Report on the extent of

damage to residential structures for the said locality
prepared by the local SWD Office and endorsed by
the LGU Chief Executive.

4.1.2 NHA Project Office, after review of the LGU request

and validation of the assessment report, shall
submit to the NHA General Manager through the
Asset Management Office, a project proposal with
an extent of damage, the number of houses totally
or partially destroyed, the number of families to be
assisted and the total funding requirement.

4.2 xxx

4.3 Execution of a Memorandum of Agreement (MOA)

Upon approval of the request for HOMA by the NHA, a

MOA that will indicate the assistance provided, the specific
roles and responsibilities, transfer of funds, reporting and
liquidation of funds, shall be executed between NHA and
the LGU. A Sanggunian Resolution shall be issued
authorizing the Governor/Mayor to enter into agreement
with NHA.

4.4 Release and Utilization of Funds

Upon execution of the MOA, the NHA shall undertake

release of funds to the LGU. The full amount of assistance

78
 shall be released to the LGU and supported by the
approved project proposal, the MOA and the Sanggunian
Resolution. The full amount of assistance shall be released
to the LGU. The local office of the COA shall be furnished a
copy of the MOA by the LGU.

4.5 xxx

4.6 Implementation Period.

The project shall be implemented within fifteen (15) days

from release of funds to the LGU and shall be completed
within sixty (60) days.

V. FUND MANAGEMENT and PROJECT MONITORING

5.1 xxx

5.2 xxx

5.3 The project implementation shall be monitored by the

NHA in coordination with the local SWD officer.

5.4 LGUs shall submit monthly Project Implementation

Reports to NHA covering the distribution of materials and
fund disbursements.

5.5 Within 30 days after project completion, the LGU shall

submit to NHA a Project Completion Report indicating the
actual number of families benefited and the total amount
of assistance. This shall be supported by a Statement of
Disbursements certified by the LG Treasurer, approved by
the Mayor/Governor and audited by the local COA
Auditor.

5.6 Any unutilized funds shall be returned to the NHA

together with the submission of the Accomplishment
Report and Statement of Disbursements to the LGU.

11.3 Review of the Schedule of the Due from LGUs-Advances account and its
supporting Subsidiary Ledger disclosed that P481.588 million or 42 per cent of
the total P1.134 billion funds transferred under the HOMA Program during the
period April 2013 to August 2018 were not liquidated by the LGUs as of
December 31, 2018, details as follows:

Calamity Region Year of Release Amount

Buhawi NCR 2014 480,000
Earthquake VII 2013 65,225,914
Fire IV-B 2017 600,000
VII 2013 - 2014 2,880,900
IX 2015 9,460,000

79
 Calamity Region Year of Release Amount
X 2014 & 2017 195,000
XII 2013 205,000
XIII 2017 & Aug. 2018 2,800,000

Typhoon Glenda IV-A 2014 - 2015 45,092,000

V 2015 29,360,000
VIII 2015 - 2016 18,485,680
Typhoon Gorio VIII 2013 - 2014 9,936,152
Typhoon Lando CAR 2016 2,000,000
II 2016 1,400,000
III 2016 15,000,000
Typhoon Lawin I March - Aug. 2018 3,435,000
II Jan.- April 2018 5,053,000
Typhoon Maring IV-A 2014 2,000,000
VI 2014 1,095,000
Typhoon Nina V April & Aug. 2018 2,285,000
Typhoon Nona IV-B 2016 - 2017 175,060,000
Typhoon Ofel VIII 2014 9,115,000
Typhoon Pablo IV-B 2013 2,475,000
VI 2013 - 2014 4,100,000
Typhoon Pepeng I 2013 2,265,000
Typhoon Quinta VI 2013 6,724,752
VIII 2013 16,950,000
Typhoon Ruby VIII 2016 3,216,000
Typhoon Santi III 2014 - 2015 3,000,000
Typhoon Sendong VII April 2013 280,000
Typhoon Seniang VII 2016 744,128
Typhoon Yolanda IV-B 2013 - 2014 19,696,000
V 2014 1,500,000
VI 2014 4,999,120
VII 2014 - 2015 14,474,393
Total 481,588,039

11.4 An aging of the unliquidated amounts is shown below:

Period Percentage Amount

Over 30 days to one year 31 149,233,000
Over one year to three years 35 169,792,447
Over three years 34 162,562,592
Total 100 481,588,039

11.5 Review of the Memoranda of Agreement (MOAs) entered by the NHA with the
LGUs disclosed a uniform period of implementation of the projects, which shall
commence within 15 days from release of funds to the LGU and shall be
completed within 60 days. This is in accordance with the implementation period
provided under the above-cited Paragraph 4.6 of NHA Memorandum Circular
No. 2524 dated April 16, 2013.

11.6 Relatively, as provided in the MOA, within 30 days after the completion of the
project, the LGUs are required to submit to NHA a Project Completion Report
indicating therein the actual number of families benefited and the total amount of
assistance given. This shall be supported by a Statement of Disbursements

80
 certified by the Local Government Treasurer, approved by the Mayor/Governor
and audited by the local COA Auditor.

11.7 In December 2017 and April 2018, the Accounting Department, in compliance
with COA’s request for Status of Due from LGUs, furnished the Regional
Managers (RMs) a report on the Status of Fund Transfers to Other
Government/Implementing Agencies as of December 31, 2017, and requested
the submission of the Terminal/Liquidation Report. The request is for the
Regional Managers to monitor and follow-up with the LGUs the liquidation of the
funds transferred and return any unutilized balance. Notwithstanding this
request, the unliquidated fund transfers as at December 31, 2017 in the total
amount of P472.625 million remained unliquidated as at December 31, 2018.

11.8 Paragraph 5.3 of the MOA provides that the NHA, in coordination with the local
SWD officer, shall monitor the project implementation covering the distribution of
materials and fund disbursements based on the Monthly Project Implementation
Status Report (MPISR) submitted by the LGUs. On the basis of the MPISR, the
Project Office shall coordinate and follow-up with the LGUs the liquidation of the
funds transferred, and submit the Project Completion/Accomplishment Report
(PC/AR) supported by the Statement of Receipts and Disbursements (SDR)
certified by the Local Government Treasurer, approved by the Mayor/Governor,
and audited by the local COA Auditor.

11.9 However, aside from the PC/AR supported by the SDR, a masterlist of the
beneficiaries with their signatures acknowledging the receipt of the housing
materials is not among the documents required under the MOA. The masterlist
could have been a good tool in validating the distribution to and actual receipt
by the beneficiaries of the housing materials.

11.10 Further examination of the HOMA transactions, other than the foregoing,
disclosed the following:

a. The LGUs of Bongabon, Nueva Ecija, Dagupan, Pangasinan, Laoag, Ilocos

Norte, Baliuag, Bulacan, Alangalang, Leyte and Boljoon, Cebu returned the
total amount of P80,577 but did not liquidate the balance in the total amount
of P12.112 million, details as follows:

Amount of Amount Unliquidated

Municipality Assistance Returned Balance
Bongabon, Nueva Ecija 2,980,000 23,840 2,956,160
Dagupan, Pangasinan 2,500,000 40,500 2,459,500
Laoag, Ilocos Norte 2 600,000 300 599,700
Baliuag, Bulacan 1,000,000 740 999,260
Alangalang, Leyte 4,903,000 6,000 4,897,000
Boljoon, Cebu 210,000 9,197 200,803
Total 12,193,000 80,577 12,112,423

b. The Municipality of Calape in Bohol and Municipality of Aparri in Cagayan

did not fully liquidate the total amount of assistance of P39.830 million with
total outstanding balance of P47,498, details as follows:

81
 Amount of Amount Amount to Amount Outstanding
Municipality Assistance Liquidated be Returned Returned Balance
Calape, Bohol 38,330,000 38,280,554.30 49,445.70 4,415.70 45,030.00
Aparri, Cagayan 1,500,000 1,497,532.00 2,468.00 - 2,468.00
Total 39,830,000 39,778,086.30 51,913.70 4,415.70 47,498.00

c. Some of the names of the beneficiaries appeared twice in the lists submitted
by the Municipality of Pola, Oriental Mindoro to support its requests for
assistance for the victims of Typhoon Nona amounting to P40 million and
P135.060 million released on December 6, 2016 and November 20, 2017,
respectively;

d. The Status of Receipts and Disbursements supporting the liquidations of the

Provincial Government of Cagayan, Municipalities of Bacnotan, La Union,
Malanday, Marikina, Municipality of San Francisco, Cebu, and Municipalities
of Dinapigue and Naguilian, Isabela were not submitted for audit to the local
COA Auditor; and

e. Unutilized funds of P3.130 million released on July 14, 2014 to the

Municipality of Pototan, Iloilo for the 626 victims of Typhoon Quinta was
returned to NHA only on May 31, 2018 or almost four years since check was
released.

11.11 The above observations could have been prevented and the total amount of
P481.588 million could have been promptly liquidated, had the NHA, as
required in the MOA, properly monitored the funds transferred to the LGUs.

11.12 Relatively, in 2014 to 2017, four of the LGUs referred to above were given
additional funds in the total amount of P138.724 million despite non-liquidation
of the funds amounting to P60.717 million transferred in 2013 to 2016 under the
HOMA Program, contrary to Item 3.1.1 of COA Circular No. 2012-001 dated
June 14, 2012, as amended by COA Circular No. 2016-002 dated May 31,
2016.

11.13 Item 3.1.1 of COA Circular No. 2012-001 dated June 14, 2012, as amended by
COA Circular No. 2016-002 dated May 31, 2016, prescribes the documentary
requirements for the transfer of funds by the Source Agency which includes,
among others, the Certification by the Accountant that funds previously
transferred to the Implementing Agency (IA) has been liquidated and accounted
for in the books.

11.14 Verification of the Subsidiary Ledgers under the account Due from LGUs -
Advances covering the Municipal Government of San Miguel, Bulacan,
Provincial Government of Palawan, Municipal Government of Pola, Oriental
Mindoro and City Government of Cebu disclosed that the fund transfers
aggregating P60.717 million under the HOMA Program for the affected families
of Typhoon Yolanda were not liquidated for ten months to more than five years
since the assistance were received in 2013, 2014, 2016 and 2017, details as
follows:

82
 Calamity/Region/ Amount Number of
Province/ Check Date Initial Succeeding Years/Months
Municipality/City No. Check Date Transferred Transfer Transfer Unliquidated
Typhoon Santi
III -San Miguel, 1171854 May 08, 2014 May 20, 2014 2,000,000 3 yrs. & 4 mos.
Bulacan 1248850 Jan. 14, 2015 May 21, 2015 1,000,000 2 yrs. & 4 mos.
Typhoon Yolanda
IV-B - Province 1172312 Dec. 2, 2013 Dec. 2, 2013 17,500,000 4 yrs. & 9 mos.
of Palawan 1171872 June 2, 2014 June 2, 2014 1,000,000 4 yrs. & 3 mos.
Typhoon Nona
IV-B - Pola,
Oriental 1248973 Dec. 02, 2016 Dec. 06, 2016 40,000,000 1 year & 9 mos.
1406406 Nov. 06, 2017 Nov. 20, 2017 135,060,000 10 mos.
Mindoro
Fire
VII - City of 316243 May 21, 2013 May 21, 2013 1,217,350 5 yrs. & 2 mos.
Cebu 1248866 Mar. 10, 2014 June 13, 2014 1,663,550 4 yrs. & 3 mos.
Total 60,717,350 138,723,550
Difference between initial and succeeding transfers 199,440,900

11.15 As can be gleaned from the table above, despite the non-liquidation of the initial
funds transferred amounting to P60.717 million, additional funds in the total
amount of P138.724 million were released to the same LGUs to support the
affected families under the HOMA Program.

11.16 Scrutiny of the records revealed that the subsequent transfers of funds were not
supported by Certifications by the NHA Accountant that the funds previously
transferred have been liquidated and accounted for in the books.

11.17 As of December 31, 2018, the funds transferred to the above four LGUs in the
total amount of P199.441 million have not yet been liquidated.

11.18 We recommended and Management agreed to:

a. Instruct the Accounting Department to:

a.1 Furnish the Project Offices with monthly report on the Status of
Fund Transfers to the LGUs; and

a.2 Ensure that before the release of additional funds to LGUs,

previous fund transfers have been liquidated and accounted for
in the books supported by documents pursuant to Item 3.1.1 of
COA Circular No. 2012-001 dated June 14, 2012, as amended by
COA Circular No. 2016-002 dated May 31, 2016.

b. Direct the Project Offices to:

b.1 Coordinate with and require the LGUs to immediately liquidate

the funds transferred and return any unutilized funds as reported
in the Status of Fund Transfers to LGUs provided by the
Accounting Department; and

b.2 Monitor the timely submission by the LGUs of the Monthly Project
Implementation Status Report to determine funds transferred due
for liquidation.

83
 c. Require the concerned LGUs to submit, as additional requirement in
liquidating the funds transferred to them, a masterlist with signature of
the beneficiaries acknowledging receipt of the housing materials.
Henceforth, include this in the list of documents required in the MOA
to support the liquidation so as to enhance transparency in the
implementation of the HOMA Program.

12. The five projects for the land development and construction of 2,428 housing
units under the YPHP located in the provinces of Palawan, Masbate and Dinagat
Islands with 15 per cent advance payment in the aggregate amount of P121.981
million have not been completed as of December 31, 2018, thus delaying the
resettlement of the affected families of Typhoon Yolanda.

12.1 Paragraph 3.2.3 of NHA Memorandum Circular No. 2427 dated April 26, 2012
provides that in case of Local Government implementation of development
components covered by NHA’s fund assistance, funds shall be released to the
LGUs on staggered basis, as follows: (a) 15 per cent mobilization costs, and (b)
the balance shall be released on progress billing basis after utilization of the
mobilization cost subject to submission by the LGU of project accomplishment
reports and evaluation by NHA of accomplishment.

12.2 Further, Paragraph 3.2.4 of the same Circular provides that funds released to
the LGUs shall be deposited in a Trust Fund under the account of the Project
and under the custody of Local Government Treasurer. It shall be utilized
exclusively for the specific purpose as provided for in the MOA.

12.3 Review of the Status of Accomplishment and the releases/transfers of funds

under the YPHP disclosed that 37 projects for the land development and
construction of 21,013 housing units (HUs) shall be implemented by the LGUs
affected by Typhoon Yolanda. Five of these projects, consisting of 2,428 HUs,
shall be implemented in the Municipalities of Culion, Coron and Busuanga, all in
the Province of Palawan, Municipality of Balud in the Province of Masbate, and
Municipality of Loreto in the Province of Dinagat Islands. As of December 31,
2018, the status of accomplishments of these five projects are shown below:

Region/ 15%
Municipality/ Check No./ Advance LGU OR Target Date of Status as of December
No. of HUs Date Payment No./Date Completion 31, 2018/Remarks
IV-B
Culion, Palawan 1476291 29,205,000 6775875 Project was awarded to a
August 3, 2019
708 11/02/2016 12/21/2016 contractor on August 6,
2018
Coron, Palawan 1476300 41,250,000 6775877
1,000 11/04/2016 12/21/2016 Clearing, on-going
End of
Busuanga, 1476301 25,492,500 6775876 December 2015 LGU acquired a 2-has. of
Palawan 11/04/2016 12/21/2016 land. On-going survey
618
V
Balud, Masbate 1589270 4,284,000 5291501 180 calendar Project was started on
102 05/07/2018 05/22/2018 days August 24, 2018. On-going
land development and core
housing construction at
Immacon Residence located
at Barangay Tonga

84
 Region/ 15%
Municipality/ Check No./ Advance LGU OR Target Date of Status as of December
No. of HUs Date Payment No./Date Completion 31, 2018/Remarks
XIII
Loreto, Dinagat 1589202 21,750,000 0648772 End of Only ground-breaking
Islands 03/23/2018 04/10/2018 December 2018 activity was conducted on
500 May 11, 2018
2,428 121,981,500

Municipalities of Culion, Coron and Busuanga, all in Palawan

12.4 Records disclose that 8,760 houses affected by Typhoon Yolanda shall be
constructed in five municipalities in the Province of Palawan, details as follows:

Municipality Number of Units 1st Batch 2nd Batch

Culion 2,164 708 1,456
Coron 4,500 1,000 3,500
Busuanga 618 618 -
Agutaya 200 - 200
Linapacan 1,278 - 1,278
Total 8,760 2,326 6,434

12.5 On February 5, 2015, a Memorandum of Agreement (MOA) was executed by

and between NHA and the Provincial Government of Palawan (PGP) for the
transfer and utilization of funds, amounting to P639.650 million or maximum of
P275,000 per housing unit, for the land development and construction of 2,326
HUs in the Municipalities of Culion, Coron and Busuanga.

12.6 Article V-I of the MOA provides, among others, that the PGP shall undertake the
procurement of the land development and housing construction through
Negotiated Procurement in accordance with RA No. 9184, and to ensure that
the projects are completed before the end of December 2015.

12.7 On June 29, 2015, the Division Manager of NHA - Palawan District Office (PDO)
certified that the PGP construction for the land development and construction of
the HUs in the three municipalities have actually been mobilized, but since then
or after three years, the projects have not been completed.

12.8 On July 28, 2015 and October 21, 2016, the PGP requested for the release of
the 15 per cent advance payments. The advance payments totaling P95.948
million were released in November 2016 and received by the PGP in December
2016, yet at that time, contracts for the projects have not been awarded to
contractors.

12.9 Confirmation with the PGP disclosed that the contract for the project in Culion
was awarded only on August 6, 2018, and the Notice to Proceed was received
by the contractor on September 4, 2018. The PGP provided the contractor
advance payment in the amount of P29.205 million for the concreting and
construction of NHA Yolanda housing units located in Barangays Binudac,
Galoc, and Baldac in Culion, Palawan.

85
12.10 On October 29, 2018, the Governor of the PGP requested the NHA-PDO for
one year extension for the completion of the project or until December 31, 2019
and proposed that Article VIII - Effectivity of the MOA be amended to include the
proposed extended period. On November 13, 2018, the NHA-PDO requested
clarification from the PGP if the proposed amendment covers the construction of
the entire 8,760 HUs in Palawan. As of December 31, 2018, the MOA with
notarized date of February 5, 2015, particularly on the extension of the project,
has not been amended.

12.11 As of December 31, 2018, the Status of Accomplishment for the YPHP
disclosed that the PGP is still in the process of conducting survey and site
clearing for the projects in Coron and Busuanga. The project in Culion is 8.82
per cent complete per Accomplishment/Inspection Report of the Provincial
Engineers Office, PGP as of March 22, 2019.

12.12 The projects in the Municipalities of Culion, Coron and Busuanga, all in Palawan
are not yet completed in spite the lapse of two years since the 15 per cent
advance funds were released to the PGP.

Municipality of Balud, Masbate

12.13 On October 25, 2017, a MOA was executed by and between the NHA and the
Municipal Government of Balud, Masbate (Municipality) for the transfer and
utilization of funds, amounting to P28.560 million or a maximum of P280,000 per
unit, for the land development and construction of 102 HUs for the families
located within Immacon Residences, Barangay Tonga in Balud, Masbate
affected by Typhoon Yolanda.

12.14 On May 7, 2018, the NHA, upon the request of the Municipal Mayor of Balud,
released to the Municipality the 15 per cent advance payment of P4.284 million.
Three months after the release, the contractor started the project on August 24,
2018. The Project Profile disclosed the timeline/duration of 180 calendar days or
six months to complete the project, but this was not provided in the MOA.

12.15 As of January 16, 2019, the Statement of Work Accomplishment from the
Municipal Engineer of the Municipality disclosed that the project is 76.78 per
cent complete with February 20, 2019 as the target date of completion. On
January 24, 2019, the project was suspended due to lack of supply of coarse
aggregates which caused, among others, the delayed completion of the
remaining 23.22 per cent of the project.

Municipality of Loreto, Dinagat Islands

12.16 On September 25, 2017, a MOA was executed by and between the NHA and
the Municipal Government of Loreto, Dinagat Islands (Municipality) for the
transfer and utilization of funds, amounting to P145 million or P290,000 per unit,
for the acquisition of property, land development and construction of 500
housing units.

86
 12.17 On February 1, 2018, the Municipal Mayor of Loreto, Dinagat Islands requested
for the release/download of the subsidy fund of P145 million. On even date, the
Municipality requested for the release of the 15 per cent advance payment.

12.18 On March 23, 2018, the 15 per cent advance payment amounting P21.750
million was released by NHA and received by the Municipality on April 10, 2018.
The project, however, has not been awarded to a contractor.

12.19 Paragraph 5.2.3 of Article V of the MOA provides that the Municipality shall
ensure that the Project is completed before the end of December 2018. This,
notwithstanding, the Status of Accomplishment as of December 31, 2018
showed that ground breaking conducted last May 11, 2018 was the only activity
undertaken.

12.20 It has been eight months since the 15 per cent advance payment was released
to the Municipality, yet, the project was not completed by end of December 2018
as provided in the MOA.

12.21 In summary, the 15 per cent advance payments for the above-mentioned
projects were released to the LGUs despite that no contracts for the land
development and construction of housing units were awarded to independent
contractors. As a consequence, the implementation of the projects was delayed
to the prejudice of the families affected by Typhoon Yolanda.

12.22 We recommended and Management agreed to:

a. Consider, as a requirement, the awarding of contract before the 15 per

cent advance payment is released/transferred to the LGU so that it will
be prompted to implement and complete the project within the target
date of completion; and

b. Require the Provincial Governments of Palawan, Masbate and Dinagat

Islands to fast-track the completion of their respective projects in the
Municipalities of Culion, Coron, Busuanga, Balud and Loreto, in view
of the immediate need to provide permanent shelter to the affected
families of Typhoon Yolanda.

13. 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 NCR. Moreso, 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.

87
13.1 Section 2, PD No.1445 provides that it is the policy of the State that all
resources of the government shall be managed, expended or utilized in
accordance with law and regulations, and safeguarded against loss or wastage
through illegal or improper disposition, with a view to ensuring efficiency,
economy and effectiveness in the operations of government. The responsibility
to take care such policy is faithfully adhered to rests directly with the chief or
head of the government agency concerned.”

13.2 On November 11, 2013, Proclamation No. 682 was issued by the Office of the
President (OP), declaring a state of national calamity, as a result of the
widespread death, destruction and damage in several areas of the country
caused by Typhoon Yolanda that occurred on November 8, 2013. Under the
Comprehensive Rehabilitation and Recovery Plan for victims of Typhoon
Yolanda, NHA was tasked to provide permanent housing for 205,128 families,
which was later revised to 203,471 families due to non-construction of houses
on unbuildable areas.

13.3 Review of the Status of Accomplishment for the YPHP as of April 30, 2019
disclosed the following:

Completed Occupied Unoccupied

Revised
Region Target Percentage
No. of Percentage No. of No. of
HUs of Percentage
HUs of Completion HUs HUs
Occupancy
IV 8,760 - - - - - -
V 102 - - - - - -
VI-A 89,075 57,059 64 25,636 45 31,423 55
VI-B 27,055 23,782 88 9,865 41 13,917 59
VII 22,423 5,272 23 731 14 4,541 86
VIII 55,556 31,054 56 18,461 59 12,593 41
XIII 500 - - - - - -
Total/
203,471 117,167 58 54,693 47 62,474 53
Percentage

13.4 As shown in the above table, out of the revised targeted 203,471 HUs, only
117,167 HUs or 58 per cent have been completed. As disclosed in the Status of
Accomplishment for Permanent Housing Program as of December 31, 2018, the
low percentage of completion is caused by land boundary disputes, issues on
road right of way, unbuildable area on site, non-issuance/delayed approval of
permits, inclement weather condition, change of site location/housing design,
issuance of Notice and Order of Termination of Contracts, and termination of
contracts.

Delayed completion of housing units

13.5 Of the 203,471 revised targeted housing units, the construction of 21,013 HUs
are to be implemented by the LGUs through fund released on
staggered/progress billing basis, subject to submission of project
accomplishment report to be evaluated by NHA. As of December 31, 2018, a
total of P300.707 million was released to five LGUs which targeted to construct
4,695 HUs, yet no HUs have been completed, details as follows:

88
 Number of HUs
Target to be Constructed with the Constructed
Region Target to be as of
Implemented Amount Released as of 12-31-2018
12-31-2018
by LGUs Amount Quantity
IV 8,760 95,947,500 2,326 -0-
V 102 4,284,000 102 -0-
VI-A 3,533 154,000,816 1,198 -0-
VI-B 220 24,724,554 - -0-
VII 7,075 - 569
VIII 823 - -
XIII 500 21,750,000 500 -0-
Total 21,013 300,706,870 4,695 -0-

13.6 Likewise, the delayed approval of land development/building permit, problem on

DAR conversion, revision of site development plan to suit actual field condition,
slow activities on site due to lack of materials, equipment and manpower, site
insurgency problem and lack of suitable sites, caused the delayed completion of
the housing projects as observed by the audit teams in COA Regional Office
Nos. VI and VIII.

13.7 Further, review of ten projects by the audit team from COA Regional Office No.
VI - Iloilo per Contract Monitoring Report from the NHA Project Implementation
Team-B (NPIT-B) as of December 25, 2018 and the Constructors’ Performance
Evaluation System (CPES) Rating of Contractors as of December 31, 2018
from the Project Operations Support Services Department (POSSD), disclosed
the following:

Target Percentage of
Completion Accomplishment Percentage CPES Rating/
Project/Location Date/ Days of Slippage Qualitative
Target Actual
Delayed Description

Adcadarao People’s 10-31-2018 100 90.71 9.29 First Visit – 75.37%

Village, Barangay 55 days Unsatisfactory
Adcadarao, Ajuy, Iloilo

Malayuan People’s 11-04-2018 100 90.00 10.00 -

Village-2, Barangay 51 days
Malayuan, Ajuy, Iloilo

Balasan People’s Village 09-19-2018 45.48 10.73 34.75 -

Brgy. Mamhut Norte, 96 days
Balasan, Iloilo

Barotac Nuevo People’s 12-01-2018 100 81.75 18.25 -

Village, Brgy. Baras, 24 days
Barotac Nuevo, Iloilo

Guinticgan People’s 10-24-2018 100 91.75 8.25 First Visit – 78.45%

Village, Barangay, 61 days Second Visit -77.60%
Guinticgan, Both Unsatisfactory
Carles, Iloilo

Villa Guinbanga-an 10-16-2016 100 68.17 31.83 -

Nuevo, Barangay 799 days
Guinbanga-an,
Laua-an, Antique

Sta. Cruz Homes Site 1 06-10-2018 100 80.64 19.36 First Visit – 75.19%

89
 Target Percentage of
Completion Accomplishment Percentage CPES Rating/
Project/Location Date/ Days of Slippage Qualitative
Target Actual
Delayed Description
Barangay Sta. Cruz, 195 days Unsatisfactory
Pandan, Antique Second Visit – 70.69%
Poor

Batan Permanent 01-18-2018 95.83 87.62 8.21 -

Housing 337 days
Site 4, Barangay Bay-
ang,
Batan, Aklan

Nalook Ville, Barangay. 10-28-2018 18.90 4.14 14.76 -

Nalook, Kalibo, Aklan 57 days

Olympus Residences- 12-05-2018 59.53 45.19 14.34 -

Site 4, Barangay 20 days
Ochando, New
Washington, Aklan

13.8 The above table shows that the completion of ten projects located in the
provinces of Iloilo, Antique and Aklan in Region VI-A were delayed for a period
ranging from 20 to 799 days and incurred negative slippage ranging from 8.21
per cent to 34.75 per cent. The delayed completion of the HUs were caused,
among others, by the revision of the site development/subdivision plan due to
unbuildable areas, unsettled boundary dispute, inclement weather condition and
land conversion issues.

13.9 The Notices and Orders of Termination were issued in 10 and 45 projects in
Regions VI and VIII, respectively, due to slippage of more than 15 per cent and
non/inadequate deployment of necessary resources on site. The contract of a
project in Region VI was mutually terminated because large portion of the site is
unbuildable due to presence of rock formation.

13.10 The issuance of Notices and Orders of Termination and contracts “mutually
terminated”, likewise affected the completion of 14,711 housing units. As of
December 31, 2018, the projects under the YPHP with Orders and Notices of
Termination and contracts mutually terminated as reported by the POSSD
disclosed the following:

Notice of Order of Mutually

Termination Termination Terminated Total
Region
VI 8 2 1 11
VIII 25 20 - 45

13.11 Three of the above 10 projects were issued Notices of Termination which
included Villa Guinbanga-an Nuevo project with 799 longest days of delay.
Despite the said Notice, the Developer continued to work in the site to finish the
project, at its own risk. The NHA Iloilo Project Office had been monitoring the
project implementation.

13.12 Likewise, the evaluation of the contractors’ performance conducted on the three
projects as shown in the above table and per report on CPES Rating as of
December 31, 2018 disclosed that said contractors had unsatisfactory and poor
ratings.

90
13.13 The above conditions that delayed the completion of the YPHP projects also
hold true for the other housing projects. Review of the implementation of the 15
housing projects in NCR revealed the following deficiencies that led to its
delayed completion:

a) Requirements of the Bureau of Fire Protection (BFP) pursuant to RA No.

9514, otherwise known as the Fire Code of the Philippines, were not
considered in the scope of works prior to the bidding, viz:

Additional
number of
Project Particulars days to
project
duration
Camarin Installation of smoke detector and conventional fire alarm 45*
Residences II control panel (SMCFARCP)
Camarin Installation of SMCFARCP 45*
Residences III
Camarin Installation of SMCFARCP 45*
Residences IV
NGC Phase 4 Installation of the Fire Detection and Alarm System (FDAS) 120
Package 1 which includes the devises such as: 1) Fire Alarm Control
Panel; 2) Heat and Smoke Detectors; Alarm Bells; and 4)
Manual Call Points. It also states that the Automatic Fire
Sprinkler System (AFSS) is for the suppression of fire.
St. Joseph Provision of fire equipment 30*
*approximate number of days for all additional work items in which the BFP requirements is included.

Non-compliance with Section 2 of Quezon City Ordinance No. SP-1025, S-

2001 dated February 20, 2001 which provides that “no building permit shall
be issued by the City Building Official for the construction, renovation, or
alteration of residential units unless the architectural plan thereof carry with
it a design for the installation of at least one (1) smoke or heat device within
the residential unit.” Hence, the BFP required the installation of FDAS and
AFSS for the NGC Phase 4 Package 1 project as requirement in the
approval of the building permits.

b) Lack of site preparedness and enforcement of site inspection for the

implementation of the following ten (10) projects, details are shown in Annex
B:
1. Malabon Homes 1;
2. Navotas Homes I;
3. Navotas Homes II;
4. Tala II;
5. Disiplina Village Site 1 Package 1;
6. Disiplina Phase 2;
7. NGC Phase 4 Package 1;
8. Paradise Heights;
9. St Joseph; and
10. Manggahan Floodway.

c) Late consideration of the results of Geotechnical Investigation/soil bearing

test for two (2) projects such as follows:

91
 Project/Start
Particulars Effect/Impact
Date
Camarin NHA Letters dated September 30 and October 10, Delay by 70cd from date of
Residences I 2013 disclosed that there was a need for suspension (September 30,
February 10, 2013 redesigning/replanning works to stabilize the foundation 2013) to date of resumption on
which was brought by the unfavorable result of the December 9, 2013.
Geotechnical Investigation/soil bearing test conducted
for the four buildings. This was lifted on December 9, The additional cost for the
2013. change in foundation elevation
and structural foundation design
NHA Memorandum dated October 21, 2013 on the of P11,078,740.34, as result of
approved Variation Order (VO) No. 1 disclosed that the unfavorable soil bearing test,
additive cost of individual design on foundation also increased the cost of the
structural works was based on the result of soil bearing two (2) service vehicle rentals by
capacity per building conducted prior to start of building P768,518.97 and unit cost of
construction in compliance with the Terms of architectural plans and
Reference. earthworks by P339,262.20 (3%
on design fee) from its original
unit cost of P20 million.

Tala II NHA Memorandum dated July 19, 2013 on the Causing delay of approximately
December 22, 2012 approved Variation Order No. 1 was due to the reasons 90 days which attributed to not
which includes the additive cost for the building considering the Geotechnical
construction of P6,932,413.51 due to the individual Investigation/soil bearing testing
design on foundation structural works based on the prior to bidding/awarding of
result of soil bearing capacity per building conducted contract.
prior to start of building construction in compliance with
the Terms of Reference.

d) Inadequate coordination with the concerned Local Government Units of its

plan to construct socialized housing project.

The implementation of Pleasant Hills, Package 1 was delayed by 205 days

due to suspension of works and extension of 216 days due to non-issuance
of development permit and building permit because of lack of coordination
with the Local Government prior to the plan to construct the socialized
housing project.

Relative thereto, Cease and Desist Order (CDO) for the construction
activities per Letter dated November 3, 2014 from the office of the City
Mayor of San Jose del Monte was issued as a result of the negative
feedback of the inspection conducted by the City Engineering Office. Per
Inspection Report and General Assessment dated October 29, 2014, there
were three on-going works within the area and have different level of
elevation and natural grade line. During the construction of the project,
spillage and soil erosion occurred that caused inconvenience to the
residents of the subdivision adjacent to the Project. The CDO affected the
critical path schedule in the completion of Bldgs. 5, 6 and 7. It was further
recommended to provide a permanent slope protection for three side areas
(retaining wall or structurally safe rip-rap wall) with 3.0 meters high CHB
perimeter wall on top of slope protection. The CDO was settled with the City
Mayor only on April 28, 2015. Thus, another delay of 115 days occurred.

13.14 The other causes that contributed to the delay in the implementation of the
projects are summarized as follows:

Project/Start
Date Particulars Effect/Impact
Paradise NHA Memorandum dated June 25, 2015 on the approved Since the titling works are already
Heights / Dec. VO No. 1 disclosed that additional cost for the survey and expected to be done for the subject
13, 2012 titling works for the issuance 35 Transfer Certificate of Tiles project and that the 2,520 CCTs
(TCTs) and 3,490 Condominium Certificate of Tiles (CCTs) to have not been settled for a long
the housing units generated from the 30 five storey LRB in time, this works should have been

92
 Project/Start
Date Particulars Effect/Impact
the Smokey Mountain Development and Reclamation Project included in the scope of works prior
(SMDRP). Of the 3,490 CCTs, 2,520 CCTs are said to the bidding. Thus, the cost could
originally part of the contract of the CONSORTIUM which not be considered as the most
was long deferred and not realistic anymore at a budget of advantageous price to the
P1,669,664.69. government.

NHA Letter to ITP dated January 7, 2013, where Pile Delayed by 451 days for the
Integrity Tests (PIT) on the pile caps of the building Nos. 27, retesting of the concrete piles of
29 and 30 failed. On April 3, 2014, only the concrete piles for building no. 30 while building no.
building 30 undergone and passed the required PIT and Pile 27 and 29 were delayed by 950
Dynamic Analyzer (PDA) while the results of PDA for building days.
27 was not submitted and PDA for building 29 was
incomplete.

Navotas Homes NHA Memorandum dated March 6, 2015 on the approved The construction testing and
II / July 20, 2013 Suspension Order No. 2 was due to the reasons which processing of variation orders
includes among others, the following: should have been considered in
1. Conduct further testing on all buildings for waterlines, the computation of the original
fire protection system, electrical continuity; and contract duration since the testing
2. Facilitate processing of variation orders for new and are required work activities and the
additional works. processing of variation order can
be considered upon requesting the
The above suspension was resumed on June 1, 2015 and the approval of such order and not
subject Variation Order was approved only on September 10, through Suspension Order. Thus,
2015 with additional contract duration of 120 days. delayed by approximately 87 days.

St. Joseph / NHA Memorandum dated September 8, 2014 on the subject The titling works for CCTs has
Feb. 4, 2014 Suspension Order No. 2 disclosed that the delay in the indefinite number of delays since
approval of DENR of the Project’s Special Patent Application the approval of DENR special
caused the suspension survey works for CCTs amounting to patent application was not yet
P46,064. As of now, no record showing the resumption of resolved.
such work items.

Camarin NHA Letter dated May 2, 2017 officially suspend the partial As of December 31, 2018, we
Residences II / suspension on the installation of jockey pump, fire pump and noted that there was no
March 5, 2015 generator set under Fire Protection Works for same projects Resumption Order yet showing the
and III/May 27, due to inability of MERALCO to comply with BFP requirement settlement of the issue on
2015 in suppling separately the power service to fire pump. installation of materials for Fire
Protection Works. Hence, delayed
by 608 days as of year-end.

It is noteworthy to mention that the

Suspension Order No. 2 dated
March 6, 2015 on the issue of non-
compliance with the required
specifications for the jockey
pumps, fire pumps and transfer
pumps for Navotas Homes 1 were
resolved on June 1, 2015 per its
Resumption Order.

Camarin The suspension on the proposed design capacity of the Contributed significant additional
Residences II/ generator set for Automatic Fire Sprinkler System took 278 extension of 150 and 75 days for
March 5, 2015 days (April 27, 2016, suspension to January 30, 2017, Carmarin II and IV, respectively, in
and Camarin resumption date) for Camarin I and 284 days (April 27, 2016 completing the project on May 30,
Residences IV / to February 6, 2017) for Camarin IV to settle the required 2017.
February 15, design for said generator set.
2015

Low occupancy of housing units of YPHP

13.15 Of the 117,167 completed HUs, 62,474 or 53 per cent were not occupied by the
affected families. The causes of low occupancy were due to lack of water and
power supply, accessibility of the housing site to source of livelihood,
rectification and correction of findings per CPES, delay in approval of individual
lot titling by DENR as portion of the property is traversed by dried up creek
where some HUs were built and delay in the final inspection and acceptance of
completed housing units.

93
13.16 Results of validation on 12 projects in Region VI-A conducted by the audit team
from COA Regional Office No. VI, Iloilo disclosed that the 7,609 completed HUs
per contract/site plans actually existed. Of the 7,609 completed HUs, 4,163 or
55 per cent were not occupied by beneficiaries, details shown below.

Occupied Unoccupied
No. of
Project/Location No. of No. of
HUs Percentage Percentage
HUs HUs
Olympus Residence Site 1
New Washington, Aklan 340 186 55 154 45
Olympus Residence Site 2
New Washington, Aklan 343 124 36 219 64
Concepcion People’s Village
Site 1, Concepcion, Iloilo 803 215 27 588 73
Pontevedra Ville
Pontevedra, Capiz 718 505 70 213 30
San Jose Ville Housing Site 3
Roxas City, Capiz 718 187 26 531 74
Villa Medalla Milagrosa
Housing Project
Panit-an, Capiz 572 572 100 - -
Bacay People’s Village
Dumangas, Iloilo 1,000 582 58 418 42
Paloc-Sool People’s Village
Dumagas, Iloilo 588 424 72 164 28
Abong People’s Village Site 1
Carles Iloilo 387 39 613 61
Abong People’s Village Site 2
Carles Iloilo 500 - - 500 100
St. John The Baptist Ville
Carles, Iloilo 527 104 20 423 80
Guia Homes
Pandan, Antique 500 160 32 340 68
Total 7,609 3,446 45 4,163 55

13.17 The other causes of low occupancy observed in Region VI were as follows:

• Site where the raffled-off and turned-over housing units are far from the
source of livelihood of the beneficiaries;
• Other beneficiaries merely accepted the units and never returned;
• Housing units were not raffled-off since the LGUs are yet to submit the
masterlist of beneficiaries for pre-qualification/validation of NHA;
• Some beneficiaries were absent during turnover of housing units;
• Issues on swapping of units between beneficiaries;
• Minor repairs or yet to be completed works such as installation of windows
and doors; and
• Double entries of beneficiaries per NHA records.

13.18 The audit team further noted that most of the unoccupied units have broken
doors and fixtures while some have no doorknobs, windows and electrical
installation. The non-occupancy of the completed HUs may result in its fast
deterioration due to non-maintenance and exposes the units of being occupied
by families other than the intended beneficiaries. Thus it is apparent that the
purpose of these projects were not fully attained, resulting in wastage of
government funds.

94
Lack of proper authorization/documentation

13.19 NHA Memorandum Circular No. 2773 dated December 2, 2015 prescribes the
guidelines on the disposition of lots/lots with housing units for qualified
families/households in areas declared under a state of calamity. Quoted below
is the provision in Item “f” of Paragraph 7.1, to wit:

f. Package/organize all documents in a records folder per qualified

applicant.

The National Housing Authority shall issue the Certificate of

Entitlement to Lot Allocation (CELA) to the beneficiaries. The
CELA shall contain the general information of the location of the
lot/lot with housing unit/condominium units to be awarded. It will
serve as an Authority to Occupy (ATO) the abovementioned lot/lot
with housing unit/condominium unit.

13.20 Item 3.2 of NHA Memorandum Circular No. 2018-005 dated February 21, 2018
also provides that:

3.2 Prior to occupancy of the unit, the LGU shall ensure that the
beneficiary sign the Certificate of Inspection and Acceptance of the
unit (Annex C), attesting that he has inspected the unit and is
accepting the same in good condition. For recording and monitoring
purposes, the signed Certificates of Inspection and Acceptance of
the units shall immediately be submitted to NHA by batches per
project preferably, after each scheduled movement of families to the
site is conducted.

13.21 The Audit Team from COA Regional Office No. VI, Bacolod observed that 127
HUs intended for the affected families of Super Typhoon Yolanda were
occupied by unqualified families/households with no proper authorization and
documentation, contrary to the above-cited NHA Memorandum Circulars. Thus,
depriving the rightful and legitimate beneficiaries and defeating the
purpose/objectives of the housing projects.

13.22 Ocular inspection and verification of the four YPHP located at Victorias City,
Negros Occidental by the Audit Team from COA Regional Office No. VI on
February 6 to 8, 2019 disclosed that 2,075 HUs were currently occupied while
the contractor’s report to the NHA reported 1,948 occupants, thus a difference
of 127 household occupants, details as follows:
Targeted Per Contractor’s Report Per Validation Variance
Project No. of No. of HUs No. of HUs No. of HUs
HUs Completed Occupied Completed Occupied Completed Occupied
Villa
687 687 626 687 674 - (48)
Victoria 1
Villa
685 685 598 685 620 - (22)
Victoria 2
Villa
683 683 534 683 560 - (26)
Victoria 3
Villa
266 266 190 266 221 - (31)
Victoria 4
Total 2,321 2,321 1,948 2,321 2,075 - (127)

95
13.23 The variance of 127 represents household occupants were not registered in the
office of the contractor’s representative. In order to be registered, the
beneficiaries shall submit their Certificate of Housing Unit Allocation (CHUA)
duly signed by the head of city housing office and the city mayor’s office. The
said CHUA, serves as the authority to occupy a certain housing unit. Thereafter,
the keys of the housing unit will be turned-over by the representative of the
contractor to the beneficiary who shall then inspect and accept the unit including
its components by accomplishing the Certificate of Inspection and Acceptance
(CIA) within seven days from the date of occupancy.

13.24 Pursuant to NHA Memorandum Circular No. 2018-004 dated February 21,
2018, the selection of beneficiaries and disposition of developed lots with
housing units shall be undertaken by the concerned LGU with NHA providing
technical assistance. Accordingly, the issuance of CELA by Management is
dispensed with, instead, the LGU used the form CHUA which serves the same
purpose.

13.25 During the conduct of inspection and validation by the audit team together with
the representatives from the NHA and City Housing Office, none of the 127
unregistered occupants were able to present the CHUA and CIA. When asked
for comment, they explained that they have an endorsement from their
respective barangays and are waiting for their CHUA to be released.

13.26 Further verification disclosed that majority of the identified occupants were not
included in the Masterlist of Qualified Households (MQH) submitted by the
LGU’s housing office to NHA. The MQH was also not approved by the City
Mayor. Correspondingly, NHA explained that the LGUs are still finalizing the list
and conducting further verification on some beneficiaries who are undecided or
have waived their application.

13.27 Even with the deficiencies noted, the housing units got occupied by families who
may not be the intended beneficiaries, hence defeating the very purpose or
objectives of the housing program/projects of the government and ultimately
depriving the rightful beneficiaries of the same.

13.28 It has been more than five years since Typhoon Yolanda hit the country on
November 8, 2013, but only 117,167 or 58 per cent of the revised targeted
203,471 HUs were completed, out of which 62,474 or 53 per cent remained
unoccupied. Management should exert more effort to address the causes for
the prolonged completion and non-occupancy of the HUs to provide the
permanent housing units for the intended beneficiaries.

Inadequate procurement planning

13.29 Section 38.1 of the 2009 IRR of RA No. 9184 provides that the procurement
process from the opening of bids up to the award of contract shall not exceed
three months, or a shorter period to be determined by the procuring entity
concerned. As provided under Annex “C” of the same IRR, to fast track the
implementation of infrastructure project, the maximum period of procurement
process, from advertisement/posting of Invitation to Bid (ITB) to Issuance of
Notice to Proceed (NTP), is maximum of 144 calendar days (cd).

96
13.30 Section 7 of Annex G of the 2009 IRR of RA No. 9184 on the Guidelines for the
Procurement and Implementation of Contracts for Design and Build
Infrastructure Projects, provides:

7. PRELIMINARY DESIGN AND CONSTRUCTION STUDIES

No bidding and award of design and build contracts shall be made

unless the required preliminary design and construction studies have
been sufficiently carried out and duly approved by the Head of the
Procuring Entity that shall include, among others, the following:

i. Project Description
ii. Conceptual Design
iii. Performance Specifications and Parameters
iv. Preliminary Survey and Mapping
v. Preliminary Investigations
vi. Utility Locations
vii. Approved Budget for the Contract
viii. Proposed Design and Construction Schedule
ix. Minimum requirements for a Construction Safety and Health Program
for the project being considered

13.31 Review of the records revealed that the maximum procurement period of 144 cd
was not observed in the procurement of 11 projects, exceeding the same by 38
to 224 cd, as summarized below.

Actual Period Number Contrary to the applicable

of Procurement of days Procurement activities which
Project Process Delayed incurred significant delays
1. Camarin 209 cd (July 24, 65 cd Delay was made on the execution
Residences I 2012 to Feb. of contracts, with same date of
2013) issuance of Notice to Proceed
(NTP) on February 18, 2013,
which took 131 cd from the
issuance of Notice of Award
(NOA) in October 10, 2012.
Signing of Contact requires the
NHA General Manager only since
there was already authority or
approval from the Board upon
issuance of NOA.
2. Camarin 367 cd (Mar. 3, 223 cd Deadlines on the submission and
Residences II 2014 to Mar. 5, opening of bids for Camarin II, III
2015) and IV were reset to June 25 and
3. Camarin 347 cd (Mar. 3, 203 cd July 1, 2014, respectively, which is
Residence II 2014 to Fe already 107 and 113 cd from last
4. Camarin 347 cd (Mar. 3, 203 cd day posting of ITB.
Residence IV 2014 to Feb. 13,
2015) Also, bid evaluation and post-
qualification took 204 cd for
Camarin II and 114 cd for both
Camarin III and IV before the
issuance of NOA. Subsequently, it
took additional 113 cd for Camarin
IV before issuance of NTP.
The procurement of Camarin IV
project was scheduled from
October 2013 to January 2014
and included in the APP of CY
2013 but extended to APP of CY
2014 (awarding of Contract was
reset to September 2014) due to
abovementioned delays.
provision of IRR of RA
9184
Section 37.2.1 of the RA 9184
provides that the Procuring
shall enter into contract with
the winning bidder within same
10 day period provided that all
the documentary requirements
are complied with.
Section 25.4 provides that the
BAC shall observe the
maximum period of 65 cd from
last day of posting of the ITB to
submission and receipt of bids.
Section 32.4 states that the
entire evaluation process shall
be completed within seven (7)
cd from the deadline of receipt
of proposals and Section 34.8
requires that the post-
qualification period may be
extended by the HOPE, but in
no case shall the aggregate
period exceed 30 cd.

97
 Actual Period Number Contrary to the applicable
of Procurement of days Procurement activities which provision of IRR of RA
Project Process Delayed incurred significant delays 9184
5. Navotas 224 cd (Oct. 10, 73 cd Bid evaluation up to issuance of Sections 32.4, 34.8 and
Homes 1 2012 to May 15, award took 71 cd. 37.1.2 specifically provides
2013) maximum period on the bid
evaluation, post-qualification
and approval of BAC
recommendation or issuance
of award for seven (7), 30
and seven (7) cd,
respectively, totaling 44 cd.
Also, delay in the submission and
evaluation of other requirement Sections 37.2.1,, 37.3 and
documents by Bidder, execution 37.4 provides for total
of Contract to the release of maximum of 28 cd from the
Notice to Proceed by 97 cd. receipt of NOA to issuance
of NTP
6. Malabon 182 cd (Nov. 24, 38 cd It took 76 days to process the Sections 37.1.2, 37.2.1, 37.3
Homes I 2014 to May 25, awarding of contract to the and 37.4 provides the
2015) issuance of NTP. awarding and signing of
contract to issuance of NTP
shall be undertaken within a
total maximum 35 days.

7. Navotas 246 cd (Nov. 8, 102 cd It took 161 days to process the - do -

Homes II 2012 to July 12, awarding of contract to the
2013) issuance of NTP.

8. Tala II 212 cd (May 28 68 cd It took 117 days to process the - do -

to Dec. 19, awarding of contract to the
2012) issuance of NTP.

9. Pleasant Hills 309 cd (Nov. 21, 224 cd It took 224 days to process the - do -
2012 to Sept. 26, awarding of contract to the
2013) issuance of NTP.

10. Paradise 238 cd (Apr. 13, 94 cd It took 173 days to process the - do -
Heights 2012 to Dec. 11, awarding of contract to the
2012) issuance of NTP.

11. Manggahan 271 cd (Oct. 10, 127 cd It took 202 days to process the - do -
Floodway 2012 to July 8, awarding of contract to the
2013) issuance of NTP.

13.32 Moreover, additional significant delays were incurred in the implementation of

the projects in view of the inability of NHA to carry out adequate preliminary
engineering investigation, construction design and surveys prior to the bidding
and awarding of contracts and other work activities.

13.33 For instance, in the following projects, the requirements of the Bureau of Fire
Protection (BFP) pursuant to RA No. 9514, otherwise known as the Fire Code of
the Philippines, were not considered in the scope of works prior to the bidding,
viz:
Cost per
Project Particulars
Variation Order
Camarin Residences Installation of smoke detector and conventional fire alarm P7,594,190.50
II control panel (SMCFARCP)
Camarin Residences Installation of SMCFARCP 7,302,356.10
III
Camarin Residences Installation of SMCFARCP 7,594,190.50
IV
NGC Phase 4 Installation of the Fire Protection and Alarm System (FDAS) 9,245,645.76
Package 1 which includes the devises such as: 1) Fire Alarm Control
Panel; 2) Heat and Smoke Detectors; Alarm Bells; and 4)
Manual Call Points. It also states that the Automatic Fire
Sprinkler System (AFSS) is for the suppression of fire.
St. Joseph Provision of fire equipment 2,431,426.48
Total P34,167,809.34
*approximate number of days for all additional work items in which the BFP requirements is included.

98
13.34 Likewise, site inspection which could have provided information on the
circumstances of the project site and could have been considered during
procurement, was not undertaken. Results of geotechnical investigation/soil
bearing test was also not considered prior to bidding as it was belatedly
undertaken.

13.35 The foregoing conditions manifest inadequate procurement planning that

resulted in additional cost due to variation cost and additional works during
procurement.

13.36 For the immediate completion of the housing units, we recommended and
Management agreed to:

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

d. For projects with LGUs as implementing agencies, coordinate and

monitor the project accomplishment for the immediate completion of
the housing units.

13.37 For the low occupancy of the housing units, we recommended and
Management agreed to:

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 masterlist of beneficiaries and resolve issues relative thereto, to
ensure that housing units are transferred to qualified beneficiaries;

c. Act immediately on requests 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 CPES; and

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

housing units by the qualified beneficiaries.

99
 13.38 For the lack of authorization and documentation of beneficiaries, we
recommended and Management agreed to:

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.

13.39 For the inadequate procurement planning, we recommended and

Management agreed to strictly comply to the provisions set forth under
RA No. 9184 and its IRR 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 BFP 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.

14. NHA Memorandum Circular No. 2018-021 dated July 19, 2018, providing for the
Guidelines for the Disposition of Lots and/or Housing Units to Non-AFP/PNP
Personnel in the AFP/PNP Housing Projects pursuant to Senate and House of
Representatives Joint Resolution No. 2, was not properly implemented resulting
in: (a) 3,965 or 16.63 per cent of the total completed housing units for 27
AFP/PNP housing projects awarded to high ranking officers; and (b) out of the
total 64,467 completed housing units, 3,461 housing units not awarded and
26,013 awarded units not occupied by the awardees.

14.1 The AFP/PNP Housing Project was established, through Administrative Order
(AO) No. 9 dated April 11, 2011, to address the housing needs of the low-
salaried members of the AFP and PNP in recognition of their sacrifices in
putting their lives at risk to uphold the laws of the land and maintain peace and
order in the country. The NHA was directed to principally carry out the
implementation of the housing program for military and police personnel. This
involves the provision of permanent housing sites for applicants who shall
qualify under the beneficiaries selection criteria formulated for the program.

14.2 Relative thereto, Memorandum Circular (MC) No. 2361 dated July 27, 2011 and
Terms of Reference (TOR) on the guidelines for the financing of the acquisition
of developed lots and completed housing units under AFP/PNP Housing
Program were formulated by NHA with the same objective of addressing the
housing needs of the low-salaried uniformed men and women of the AFP and
PNP, BFP, BJMP and BuCor, particularly those occupying the lowest three
ranks, as follows:

100
 Rank PNP AFP BFP/BJMP/BuCor
1st Lowest Rank Police Officer I Private/Private First Class Fire/Jail/Correction Officer 1
2nd Lowest Rank Police Officer 2 Corporal/Sergeant Fire/Jail/Correction Officer 2
3rd Lowest Rank Police Officer 3 Staff Sergeant/Technical Sergeant Fire/Jail/Correction Officer 3

14.3 The program was determined to be not efficiently implemented because of the
low occupancy rate of the completed housing units. In this regard, under the
Senate and House of Representatives Joint Resolution No. 2 dated May 9,
2018, NHA was authorized to immediately award to other qualified beneficiaries
the: (a) unawarded housing units, (b) awarded housing units but not yet
occupied and ownership and possession are surrendered or possessions are
surrendered by the awardees, and (c) housing units which respective awards
were cancelled by reason of default in payment of amortization or for any
violation of the terms and conditions of the individual loan agreement in
accordance with existing laws. The awarding shall give priority to: (1) low-
salaried government employees, like public school teachers, employees of city
or municipality that has jurisdiction over the housing project, barangay officials
and employees, the informal settlers in the area where the project is located,
and other underprivileged and homeless families in urban centers and in areas
affected by government infrastructure and developmental projects who all
deserve a roof over their heads, and (2) other qualified beneficiaries, giving
priority to those belonging to the lowest thirty per cent of the urban income-
earners.

14.4 Pursuant to said Joint Resolution No. 2, NHA adopted MC No. 2018-021 on July
19, 2018 providing guidelines for the disposition of lots and/or HUs to non-
AFP/PNP personnel in the AFP/PNP housing projects. However, audit disclosed
that the MC was not properly implemented. Records disclosed that of the
23,838 housing units of the 27 AFP/PNP housing projects, 3,965 or 16.63 per
cent were awarded to 2,523 high ranking military officers (HRMOs) where 1,442
were awarded two units and 1,081 were granted one unit, details as follows:

NO. OF AWARDEES NO. OF

BRANCH OF HOUSING TOTAL
NO. RANK OF OFFICERS
SERVICE 2 Units 1 Unit Total UNITS COST
AWARDED
1 Major General PA/PM/PAF 0 1 1 1 P175,000
2 Director PNP/BJMP/BFP 0 1 1 1 208,000
3 Brigadier General PA/PM/PAF 4 1 5 9 2,064,000
4 Chief Superintendent PNP/BJMP/BFP 3 3 6 9 1,803,000
5 Colonel PA/PM/PAF 65 35 100 165 34,609,000
6 Captain PN 2 0 2 4 960,000
7 Senior Superintendent PNP/BJMP/BFP 8 18 26 34 7,027,000
8 Lieutenant Colonel PA/PM/PAF 113 41 154 267 56,370,000
9 Commander PN 5 3 8 13 2,860,000
10 Superintendent PNP/BJMP/BFP 39 66 105 144 30,941,000
11 Major PA/PM/PAF 128 35 163 291 62,841,000
12 Lieutenant Commander PN 22 0 22 44 9,780,000
13 Chief Inspector PNP/BJMP/BFP 72 151 223 295 59,080,000
14 Captain PA/PM/PAF 154 38 192 346 74,382,000
15 Lieutenant Senior Grade PN 1 0 1 2 480,000
16 Senior Inspector PNP/BJMP/BFP 62 132 194 256 52,592,000
17 1st Lieutenant PA/PM/PAF 146 48 194 340 73,301,000
18 Lieutenant Junior Grade PN 14 5 19 33 7,173,000
19 Inspector PNP/BJMP/BFP 84 102 186 270 53,789,000
20 2nd Lieutenant PA/PM/PAF 109 46 155 264 53,819,000
21 Ensign PN 1 0 1 2 480,000
22 Chief Master Sergeant PM/PAF 11 7 18 29 5,824,000
23 Master Chief Petty Officer PN 0 1 1 1 175,000

101
 NO. OF AWARDEES NO. OF
BRANCH OF HOUSING TOTAL
NO. RANK OF OFFICERS
SERVICE 2 Units 1 Unit Total UNITS COST
AWARDED
24 Senior Master Sergeant PM/PAF 22 11 33 55 10,702,000
25 Senior Chief Petty Officer PN 0 2 2 2 350,000
26 Master Sergeant PA/PM/PAF 295 216 511 806 157,895,000
27 Chief Petty Officer PN 15 3 18 33 6,490,000
28 Senior Police Officer IV PNP 47 91 138 185 37,350,000
29 Senior Fire/Jail Officer IV BJMP/BFP 20 24 44 64 13,085,000
Total 1,442 1,081 2,523 3,965 816,605,000

14.5 It must be emphasized that the awarding of HUs to HRMOs reduced the
number of units available to the intended beneficiaries, thus affects the
attainment of the objective of the program.

14.6 In our previous audit observation, we already emphasized that the awarding of
housing units to HRMOs reduced the number of available housing units
intended for low salaried military personnel which affects the attainment of the
objective of the housing program. As compared to CY 2016 where 230 units
were granted to HRMOs, this increased to 626 housing units that were awarded
to 558 HRMOs of the 923 fully paid housing units based on the summary of
payments submitted by the Accounting Department as at December 31, 2018.

14.7 Further, of the total 64,467 completed housing units, 3,461 or 5.37 per cent
have not been awarded to qualified beneficiaries and 26,013 or 40.35 per cent
of the awarded units were not yet occupied by the awardees.

Not Not
Project Target Completed
Awarded Occupied
Originally intended for low- 59,700 58,946 936 22,440
salaried military personnel
Occupied by KADAMAY* 2,996 2,996 - 1,048
Allocated to Former Rebels* 2,625 2,525 2,525 2,525
Total 65,321 64,467 3,461 26,013
Percentage 5.37 40.35

14.8 It is noteworthy to emphasize that Management already took consideration that

the AFP/PNP Housing Board addressed the issue on low occupancy by end of
February 2018. As can be gleaned from the above data, however, the low
occupancy as well as awarding of housing units were still not addressed by
NHA as of March 31, 2019. This could be attributed to the absence of NHA
target date or timeline in complying with the awarding and increasing the
occupancy of all completed units, which is dependent on the determination of
the AFP/PNP Housing Board. Hence, the option on the availment of the housing
units by the other low-salaried government employees, ISFs, unprivileged and
homeless families, and other qualified beneficiaries determined under NHA MC
No. 2018-021 pursuant to Joint Resolution No. 2 were not properly
implemented.

14.9 We recommended that Management:

a. Strictly comply with AO No. 9, on the awarding of units to the low-

salaried uniformed men and women of the AFP, PNP, BFP, BJMP and

102
 BuCor as the qualified beneficiaries, and paragraphs 14 and 16 of Joint
Resolution No. 2, which is consistent with NHA’s mandate, on granting
the housing units to other qualified beneficiaries, especially those
belonging to the lowest 30 per cent of the urban income-earners;

b. Revisit the MC No. 2018-021 on the awarding of the AFP/PNP housing

units by considering the following:

• timeline for the AFP/PNP Housing Board to fully award the

completed housing units to qualified beneficiaries, and occupancy
of awarded units by military beneficiaries/awardees temporarily
reassigned to other areas and those with other valid causes;

• defined obligations of the beneficiaries once awarded the housing

units; and

• guidelines on when and how the other low-salaried government

employees, ISFs, unprivileged and homeless families and other
qualified beneficiaries can avail of the vacant/unoccupied/un-
availed housing units under the AFP/PNP Housing Program.

14.10 Management explained that the awarding of two units to qualified personnel is
in consonance with the directive of President Rodrigo Roa Duterte to increase
the lot and floor areas of the AFP/PNP housing projects.

14.11 Further, Management committed to conduct actual tagging of units in 2019 so

as to determine the occupants of the awarded units. For the awarded units but
have not been occupied for a certain period of time, the awards will be
cancelled and the awardees will be replaced by those who are really in need of
housing assistance based on AFP/PNP list of interested personnel. In case the
military and police personnel are no longer interested to occupy the awarded
units, Management sounded-off the concern of the military that instead of
awarding the same to the informal settlers the re-award of the units be made to
the formal sectors in need of housing assistance to avoid conflict among the
occupants in the housing sites.

14.12 As regards to the refund of the subsidy to those not falling under the low-
salaried military/police personnel per AO No. 9, it was informed that this may
not be implemented in view of the Resolution passed by the AFP/PNP Housing
Board that they are also qualified beneficiaries to avail of the housing
assistance since they are also serving the country.

14.13 As a rejoinder, we suggest that Management coordinate with the OP and

the legislature to resolve the issue on extending the benefit of the housing
assistance to other military/police personnel aside from the three lowest
ranks as provided under AO No. 9 and Joint Resolution No. 2 (AFP/PNP
Housing Program) and for possible amendment of the conditions of the
program.

103
15. The expiration dates of the surety bonds relative to the implementation of
various housing projects were not regularly monitored, thus exposing the NHA to
risk of loss of valuable financial resources.

Expired substitute surety bonds for released retention moneys

15.1 Retention money is a portion of the approved progress billing of the contractor
which is retained by the client to cover the defects in work between its technical
completion and final acceptance. The purpose of retention is to ensure that the
contractor properly completes the activities required of them under the contract.
It is released after the contractor rectifies the defects and the work is finally
accepted by the client.

15.2 Item 6.2 of Annex E of the 2009 IRR of RA No. 9184 provides:

The total "retention money" shall be due for release upon final
acceptance of the works. The contractor may, however, request the
substitution of the retention money for each progress billing with
irrevocable standby letters of credit from a commercial bank, bank
guarantees or surety bonds callable on demand, of amounts
equivalent to the retention money substituted for and acceptable to
Government, provided that the project is on schedule and is
satisfactorily undertaken. Otherwise, the ten per cent (10%) retention
shall be made. Said irrevocable standby letters of credit, bank
guarantees and/or surety bonds, to be posted in favor of the
Government shall be valid for a duration to be determined by the
concerned implementing office/agency or procuring entity and will
answer for the purpose for which the ten per cent (10%) retention is
intended, i.e., to cover uncorrected discovered defects and third party
liabilities.

15.3 Post-audit of disbursements disclosed that the retention moneys for seven
projects totaling P193.100 million were released to the contractors upon
substitution of surety bonds. Six of these projects have remaining
unaccomplished works, while the other one although with 100 per cent reported
accomplishment as of December 31, 2018 has not been finally accepted.

15.4 The retention moneys were substituted with surety bonds by the contractors, in
accordance with the above-cited provision, however, the expiration dates of the
substitute surety bonds were not properly monitored. Records revealed that the
substitute surety bonds have already expired prior to the completion and final
acceptance of the projects, details as follows:
Released
Released Retention Money (RM) Reported
Retention Total Amount
Revised Date of Expiration and Accom-
Money Paid as of
Project Contract Amount of Substitute plishment
despite December 31,
Amount Amount Date Guaranty/Surety Bond (In per
Expired 2018
cent)
Surety Bond

Camarin 620,306,373.68 61,020,554.43 December 2, 61,020,554.43 September 14, 2016- 610,205,544.22 98.37
Residence I 2015- P30,510,277.21 and
P30,510,277.22 February 18, 2017 -
and P31,015,318.71.
May 20, 2016 -
P30,510,277.21.

104
 Released
Released Retention Money (RM) Reported
Retention Total Amount
Revised Date of Expiration and Accom-
Money Paid as of
Project Contract Amount of Substitute plishment
despite December 31,
Amount Amount Date Guaranty/Surety Bond (In per
Expired 2018
cent)
Surety Bond

Camarin 383,952,097.61 31,419,238.40 March 2, 2016 – 31,419,238.40 February 27, 2017 – 350,999.456.82 91.42
Residence II P21,225,426.48 P21,300,000.00 and
and September June 27, 2017 –
21, 2016 – P10,194,000
P10,193,811.92

Camarin 402,255,195.11 17,225,745.74 March 2, 2016 - 17,225,745.74 February 10, 2017 - 367,314,658.61 91.31
Residence III P20,519,000. P20,519,000.

Tala II 266,494,114.66 26,234,480.70 April 30, 2014 - 12,893,000.00 Until Final Acceptance - 262,349,807.16 98.44
P18,853,684.03 P13,342,609.23 and
and December 17, December 8, 2016 -
2015 – P12,893,000.00
P7,381,296.66
Disiplina
Phase 2 160,430,331.49 16,011,312.74 December 5, 2014 14,972,457.33 November 13, 2015 - 160,113,130.29 *100.00
- P14,972,457.33 P14,972,457.33 and
and May 15, 2015 Until Final Acceptance -
- P1,038,855.41 P1,038,855.41

NGC Phase 4 262,636,492.48 16,499,324.14 December 4, 2014 16,499,324.14 November 25, 2015 - 242,123,030.66 92.19
- P16,499,324.14 P16,500,000

Paradise 444,887,626.96 24,688,694.46 April 8, 2014 - 24,688,694.46 March 17, 2015 - 433,883,038.20 97.53
Heights P24,688,694.41 P24,688,694.41
Total 2,807,456,347.25 193,099,850.61 178,719,014.50 2,426,988,665.96

* The reported 100% accomplishment for Disiplina Phase 2 was based on the Certificate dated December 15, 2014 which was issued by
NHA upon request of the Contractor for the 11th and final payment of the project.

15.5 As a consequence, the full completion and rectification of the defects in works
between the technical completion and final acceptance of the projects were
undermined since they are no longer covered by current bonds.

Expired surety bonds posted to cover advance payments

15.6 Item 4 of Annex E of the 2009 IRR of RA No. 9184, provides, among others,
that:

4.1 The procuring entity shall, upon a written request of the

contractor which shall be submitted as a contract document,
make an advance payment to the contractor in an amount not
exceeding fifteen per cent (15%) of the total contract price, to
be made in lump sum or, at the most, two installments
according to a schedule specified in the Instructions to Bidders
and other relevant Tender Documents.

4.2. The advance payment shall be made only upon the submission
to and acceptance by the procuring entity of an irrevocable
standby letter of credit of equivalent value from a commercial
bank, a bank guarantee or a surety bond callable upon
demand, issued by a surety or insurance company duly
licensed by the Insurance Commission and confirmed by the
procuring entity.

105
 4.3. The advance payment shall be repaid by the contractor by
deducting fifteen per cent (15%) from his periodic progress
payments a percentage equal to the percentage of the total
contract price used for the advance payment.

xxx

15.7 Records disclosed that upon the request of the contractors for the construction
of Medium Rise Buildings (MRBs) for the in-city relocation of ISFs living along
danger areas in Camarin Residences II and IV, and Manggahan Phase 1
projects, and submitting surety bonds posted totaling P115.457 million, NHA
made advance payments equivalent to the submitted bonds.

15.8 Verification revealed that the surety bonds have already expired in 2014 and
2016 leaving unrecouped advance payments in the aggregate amount of
P4.416 million. As of December 31, 2018, these were not replaced with current
bonds, as shown below:

Total 15% Unrecouped Last date of

Advance Advance Payment payment of Posted Surety Bond
Payment of the as of December progress Expiration
Amount
Project Contract 31, 2018 billing Date
Camarin Residences II 55,130,489.70 2,480,571.33 8/15/2017 1/26/2016 55,130,489.70
Camarin Residences IV 51,465,883.84 1,408,119.27 2/18/2017 2/17/2016 51,465,883.85
Manggahan Phase 1 8,861,083.25 527,211.80 12/4/2014 7/25/2014 8,861,083.25
Total 115,457,456.79 4,415,902.40 115,457,456.80

15.9 It was also noted that the expiration dates of the surety bonds were not
monitored despite the approval of the time extensions and suspensions of the
projects.

15.10 We recommended and Management agreed to:

a. Require the contractors to submit current surety bonds to cover the

released retention moneys and unrecouped advance payments; and

b. Direct the personnel concerned to regularly monitor the expiration of

the submitted surety bonds to ensure that all aspects of contract
implementation are covered until the final acceptance of the projects
by NHA.

16. Eleven projects for land development and construction of housing units in
Regions X and XIII remained not completed as of December 31, 2018 caused,
among others, by delayed issuance of permits and lack of resources on sites.
Thereby, depriving the intended beneficiaries availment of the benefits from the
timely completion of the projects.

16.1 NHA has implemented several housing programs and projects nationwide which
include, among others, the following:

106
 a. The AFP/PNP Housing Program which is intended to provide permanent
housing facilities for low-income military and police personnel, anchored on
the policy of the government to improve the welfare of government
employees including military and police personnel by making available
decent and affordable housing.

b. The Resettlement Assistance Program which addresses resettlement

requirements of local government units involving families in danger areas,
those affected by infrastructure projects and calamities and indigenous
peoples.

c. Housing Program for Calamities which is intended to respond to the housing

need of low and marginal-income and/or informal settler families affected by
calamities such as typhoons, landslides, earthquakes, and fires, for
permanent housing in safe areas.

16.2 Validation of 11 housing projects by the Audit Teams in Regions X and XIII
revealed the following deficiencies that caused the delayed completion of the
housing projects:

Project - Completion Date Number

Contract Original Revised of Days Noted Deficiencies
Amount Target Target Delayed
AFP/PNP HP
CDO Mid-land November - 672 The application of Land Conversion with the
– P120 million 11, 2016 Department of Agriculture is still pending. Further,
results of inspections on September 14, 2018 are as
follows:
a. Of 500 contracted units, only 250 developed
lots and 36 housing units erected and five
housing units with roof;
b. No workers were on the site;
c. Most of the erected structures begin to
dilapidate;
d. Only a small portion of the road can be seen
due to tall grass and animal dirt;
e. Undetermined land development; and
f. No project signboard was installed.

Pine Ville – February 3, December 951* Per project profile submitted and interview with the
P120 million 2016 16, 2018. Engineer in Charge, the following factors are the
Copy of reasons of the delayed construction of the new
approved housing units:
revised a. Delayed issuance of permits and licenses (e.g.
target date environmental compliance certificate);
b. Boundary dispute;
was not
c. Unfavorable weather condition;
submitted
d. Non-installation of water and power line supply;
to COA. e. Insufficient fund of the contractor; and
f. Delayed issuance of individual lot titles.

Other deficiencies were noted during inspection on

September 12, 2018:
a. Only 150 out of 500 housing units were
completed;
b. No doors and windows on some units;
c. No electrical wiring on some units; and
d. The project signboard installed does not conform
to the specifications set forth in COA Circular
No. 2013-004 dated January 30, 2013.

107
 Project - Completion Date Number
Contract Original Revised of Days Noted Deficiencies
Amount Target Target Delayed
Resettlement Assistance Program
Dologan December June 21, 642 On September 12, 2018, inspection disclosed the
Paglaum 9, 2016 2017 but following deficiencies:
Village – not a. Project was not yet complete but it was reported
P11.864 approved 100% completed based on the accomplishment
million by General report as of March 2018;
Manager. b. Drainage of 1,400 linear meters is not yet
constructed;
c. Completed drainage starting to dilapidate;
d. Although some of the materials were on site, no
workers were doing the rectification of defects;
and
e. The Inventory/Validation of Project as of July 31,
2018 showed that the project lacks 91 units to
be considered completed.

Gingoong May 6, 2016 August 30, 377 Ocular inspection conducted on September 11, 2018
housing 2017 disclosed the following:
project Phase a. Out of 98 housing units to be constructed, one
1 – P 12 unit was intended for the NHA Office thereat,
million only 66 were completed and construction of 33
units are still on-going; and
b. Some units have no flooring, no doors and no
windows yet.
Jasaan August 15, - 28 The project is 80% complete per
Resettlement 2018. Projects/Programs/Activities Report as of August
Project – 2018 and was abandoned seemingly as commented
P9.924 million
by the Mayor. Ocular inspection conducted on
September 12, 2018 revealed the following
deficiencies:
a. 118 cubic meters of concrete pavement and 75
linear meters of drainage were not yet
constructed as confirmed by the Senior
Engineer; and
b. Project signboard installed does not conform to
the specifications set forth in COA Circular 2013-
004 dated January 30, 2013.
Nasipit July 30, - 154 As of December 31, 2018, only 30.12% of the
Sunrise 2018 contracted land development was completed.
Village Phase
2 – P11.156
million
Prosperidad September - 474 As of December 31, 2018, only 65.46% of the
Dream Village 13, 2017 contracted land development was completed.
– P10.855
million
Sibagat Green April 20, - 985 As of December 31, 2018, only 74.99% of the
Meadows – 2016. contracted land development was completed.
P11.680
million
Alegria July 23, - 526 As of December 31, 2018, only 77.38% of the
Resettlement 2017 contracted land development was completed.
Project –
P10.580
million
Housing Program for Calamities:
Mambuaya October 24, October 1,055** Ocular inspection conducted on September 14,
Village Phase 2015 31, 2018 2018 disclosed that out of the 954 housing units per
1 – P228.960 project plan, 778 were completed, of which 417 units
million were already occupied by the beneficiaries, 77 units
in process, and 99 units were not yet constructed.

108
 Project - Completion Date Number
Contract Original Revised of Days Noted Deficiencies
Amount Target Target Delayed
NHA did not impose liquidated damages for the
delayed completion of projects, contrary to Item
2.2.3 of Article II of the MOA which states that the
landowner/developer shall pay liquidated damages
at an amount at least equal to one-half of one per
cent (0.5%) of the cost of the unperformed portion
for everyday of delay, vis-à-vis the housing
production and delivery schedule.
Interview with the Head of the Operation of the
developer revealed that the contractor has
encountered difficulty in the processing of the titles
with the Land Registration Authority. He cannot
submit the billing without the corresponding title,
hence, the delay in the construction of other units,
but promised to fast track the completion.
Masaysay June 8, August 26, 71 Ocular inspection conducted on September 14,
Housing 2017 2018. 2018 showed that out of the 100 housing units, only
Project – 44 units were partially completed.
P11.260
Interview with the Engineer-in-Charge revealed that
million the dumped debris, lack of materials, stockpile, the
existing trees, and financial constraints contributed
in the delay of the implementation of the project.
NHA failed to terminate the contract when it has
already incurred slippage of more than 15%,
contrary to Section 3.2a Annex I of the IRR of RA
No. 9184.

* The number of days delayed are computed based on the original target date as copy of approved revised completion date
was not provided to COA for Pine Ville and no approval of the revised completion date for Dologan Paglaum Village.
** The number of days delayed for Mambuaya project was computed based on the original target date. The revised completion
date caused by delayed processing of titles was not considered in the computation.

16.3 Inquiry with the Supervising Engineer disclosed that despite their warnings, the
concerned contractors, for land development of Nasipit Sunrise Village Phase 2,
Prosperidad Dream Village, Sibagat Green Meadows, and Alegria Resettlement
Project, failed to satisfactorily improve accomplishment on site. The
contractors lacked the resources on the site, such as manpower, equipment and
materials to complete the projects in accordance with the construction schedule
in the contract. However, they still opted to continue the work implementation
with the corresponding liquidated damages. An Order of Termination was
already issued to the contractor for Nasipit Sunrise Village Phase 2.

16.4 Delayed completion of the projects deprived the intended beneficiaries of

benefits on the use thereof, and the risk of loss of government funds in view of
the payments made to contractors that did not meet the conditions of their
respective contract.

16.5 We recommended that Management:

a. Fast-track the completion of the project by resolving the causes of

delay, particularly the availability of manpower, equipment and
materials on site;

b. Coordinate immediately with the concerned government agencies to

facilitate the issuance of permits and processing of titles;

109
 c. Impose liquidated damages on the developer of the Mambuaya project
as stipulated under Section 2.2.3 of the MOA; and

d. Provide sanctions to contractors for projects that incurred slippages

of more than 15 per cent pursuant to Section 3.2a of Annex I of IRR of
RA No. 9184.

16.6 Management commented, as follows:

a. AFP/PNP Pine Ville – Issuance of individual lot titles needed to support the
billing by the developer is one of the factors that caused the delay in project
completion. Request for first billing was on May 23, 2016 and released on
July 7, 2017, which took one year and two months to release the payment
that affected the cash flow of the developer.

b. CDO Mid-Land Valley Homes – The application for land conversion was
endorsed to Department of Agriculture (DA) National Office because of the
Memorandum issued by the Secretary and Undersecretary of the said
agency granting a two year Moratorium on the acceptance of land
reclassification applications. The conversion process is only within the
Department of Agrarian Reform (DAR) and DA Region 10 Office considering
the project is less than five hectares. It has been two years since
Management submitted all the documentary requirements for the conversion
application.

c. Dologon Paglaum Village Project - Computation of liquidated damages

dated November 20, 2018 was sent to the contractor. The contractor is still
continuing the construction for the completion of the project. As of this date
the accomplishment is 96 per cent.

d. Gingoog Housing Project Phase 1 - After considering possible imposition of

legal actions for the delayed implementation of the project, the concerned
LGU and developer mutually agreed for a revised implementation schedule
pursuant to Section 1.3 Article I of the Amended Memorandum of
Agreement (MOA).

e. Nasipit Sunrise Village Phase 2, Prosperidad Dream Village, Sibagat Green

Meadows and Alegria Resettlement Project – NHA Region XIII will require
the contractor to finish contract on specific period. A contract termination
shall immediately be imposed if they still fail to finish the project.

f. Mambuaya Village Phase 1 – The letter of the developer states that “xxx it is
unreasonable as of this time to impose liquidated damages since the delay
is not attributable to the developer.” Further, the delay on the release of titles
from the Register of Deeds of Cagayan de Oro means the developer’s cash
flow of funds intended/budgeted for the project is heavily affected since it
has to wait for the titles in order to complete the requirement for the billing
before it could be paid for every accomplishment. As early as October 10,
2018, the Developer requested for Time Adjustment which is for approval by
NHA.

110
 16.7 As a rejoinder, we would like to emphasize the following:

a. AFP/PNP Pine Ville – The issuance of individual lot title is part of the
responsibility of the contractor pursuant to Section 12.1(v) of the Terms of
Reference for the implementation of AFP/PNP housing program and certain
provision of tripartite MOA among the NHA, AFP/PNP Homeowner’s
Association and contractor. This assures NHA and beneficiary that the
selected housing site is covered by valid title(s) and free from all liens and
encumbrances. In this regard, the financial capability of the contractor
should have been properly evaluated by the NHA.

b. CDO Mid-Land Valley Homes – The approval of land conversion is part of

the requirements for submission of proposals for housing sites. This
requirement is done before and not during the implementation of the project.
Thus, exposed the completed housing units to risk of fast deterioration and
deprived beneficiaries on the timely use of the units.

c. Gingoog Housing Project Phase 1 – the amended MOA did not include
provision for specific contract period which could lack enforcement to the
developer to complete the project on time. Thus, Management must specify
the project duration in the contract at all times to strongly impose
penalty/sanction for delayed completion of project.

d. Mambuaya Village Phase 1 – liquidated damages should be imposed upon

the developer since it was not able to deliver on October 31, 2018, the
revised target date of completion for the remaining 176 housing units (77 in-
process and 99 not yet constructed).

17. Various properties with total book value of P17.926 billion were not insured in
Calendar Year (CY) 2018, contrary to Section 5 of Republic Act (RA) No. 656,
otherwise known as the Property Insurance Law, thus, exposing the Authority to
suffer substantial financial setback in case of damage to or loss of its properties
due to fire, earthquake, storm or any other casualty.

17.1 Section 5, RA No. 656 provides that every government, except a municipal
government below first class, is hereby required to insure its properties,
with the Fund against any insurable risk herein provided and pay the
premiums thereon. All properties must be insured with the Property Insurance
Fund (PIF) administered by the Government Service Insurance System (GSIS).

17.2 Review of property insurance premium paid by the Authority in CY 2018 under
GIF Policy No. FI-NM-GSISHO-0028258 covering the period January 2, 2018 to
January 2, 2019 disclosed that various housing projects and other properties with
a total book value of P17.926 billion were not covered by the General Insurance
Fund, summarized as follows:

111
 Total Insured Uninsured
Account
Book Value Book Value Book Value
I. Insurable Building Properties
Completed Development for Sale – Buildings
17,878,442,345 2,109,875,170 15,768,567,175
(Main/CISFA/NGC)
Completed Development for Transfer – Buildings 266,675,711 74,330,055 192,345,656
Buildings (Main/PPMO) 103,553,816 68,334,859 35,218,957
School Buildings (PPMO) 8,058,833 - 8,058,833
Hospitals and Health Centers (PPMO) 17,786,132 - 17,786,132
Markets (PPMO) 59,694,397 - 59,694,397
Other Structures (Main/PPMO) 1,795,841,130 33,413,435 1,762,427,695
Sub-Total 20,130,052,364 2,285,953,519 17,844,098,845

II. Other Insurable Properties

Office Supplies 8,764,841
Drugs and Medicines Inventory 105,718
Other Supplies and Material Inventory 103,521
Office Equipment (Main/CISFA/NGC/PPMO) 13,992,640
Information & Communication Technology
92,940,886
Equipment (Main/CISFA/NGC/PPMO)
Communication Equipment (Main/PPMO) 952,047
Medical Equipment 46,226
Sports Equipment 42,850
Other Equipment (Main/PPMO) 2,423,692
Furniture & Fixtures (Main/NGC/PPMO) 1,924,515
Other Property, Plant and Equipment 1,170,435
Total insured value of various building contents 40,677,650
Sub-Total 122,467,371 40,677,650 81,789,721
Total 20,252,519,736 2,326,631,169 17,925,888,567

17.3 Of the total uninsured property with book value of P17.926 billion, P17.159 billion
or 95.72 per cent pertains to various housing projects, administrative buildings
and other structures in different regions. The remaining P767.062 million or 4.28
per cent are located in Metro Manila.

17.4 The total book value of the Other Insurable Property composing of supplies,
machinery, equipment, furniture, fixtures and other PPE of the Authority
amounted to P122.467 million, of which P92.941 million or 75.89 per cent
pertains to various information technology equipment. However, the total insured
value of various contents (e.g. equipment, furniture/fixtures, etc.) placed or
installed in certain insured buildings of the Authority amounted to P40.678 million
only, leaving an uninsured property value of P81.790 million.

17.5 Examination of the renewed GSIS Insurance Policy No. FI-NM-GSISHO-0031460

issued on December 20, 2018, covering the period January 2, 2019 to January 2,
2020, revealed that various properties of the NHA are still not comprehensively
and adequately insured. This situation placed the Authority at risk of not
recovering the value of the properties in case of damage to or loss due to fire,
earthquake, storm or other fortuitous events/casualties.

17.6 Further, scrutiny of the documents submitted to GSIS showed that the latest
appraised values/valuation, appraisal date, location, and other necessary
information of the insured properties, prescribed under Item 5.1.b of COA Circular
No. 2018-002 dated May 31, 2018 were not included. Item 5.1.b requires that the
Heads of government agencies direct the pertinent official under his/her
supervision to prepare the Property Inventory Form (PIF) listing of all the
insurable properties and other assets, showing their latest appraised
values/valuation, appraisal date, location and other information.

112
 17.7 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 GSIS 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.

18. The non-monitoring of the adherence to labor and other social legislations of the
security and janitorial services providers resulted in delayed remittances of the
SSS, PhilHealth and Pag-IBIG Fund contributions of security guards and janitors
assigned at the different NHA Offices, contrary to Paragraph 2 of the Policy
Statement of the Guidelines on the Procurement of Security and Janitorial
Services of the 2016 IRR of RA No. 9184 and other applicable laws.

18.1 Paragraph 2 of the Policy Statement of the Guidelines on the Procurement of

Security and Janitorial Services of the 2016 Revised IRR of RA No. 9184,
otherwise known as the Government Procurement Reform Act, provides that “it
is recognized, however, that the proper and efficient procurement of security
and janitorial services should be based not solely on cost, but should also take
into consideration a range of other factors, such as, but not limited to, length of
contract, standards of internal governance, adequacy of resources, levels of
training, and adherence to labor and other social legislation.”

18.2 The security and janitorial services providers explicitly stated in their Omnibus
Sworn Statements that they comply with existing labor laws and standards.

18.3 As provided in Section 2 of the Contract of Security Services and Section 6 of

the Contract of Janitorial Services, both the Security and Janitorial Agencies
warrant the employment of labor laws now existing or which may hereafter be
enacted including but not limited to the Minimum Wage Law, Social Security
Act, the Workmen’s Compensation Act, and the Labor Code as amended.

18.4 Also, as provided in Section 7 of the Contract of Security Services, the Agency
shall likewise attach in their billing statement proofs of remittance to SSS,
PhilHealth and Pag-IBIG Fund of the guards’ contribution to the said
government agencies. As compliance, the service providers attach a
certification that they have remitted the contributions for the applicable period.

18.5 Examination of the Security Services and Janitorial Services accounts revealed
that the attached remittances were made way beyond the due dates provided
for by law, contrary to the statement in their certifications.

18.6 The range of the number of days of delay of the remittances of security and
janitorial services providers are shown as follows:

113
 Service Providers No. of Days Delayed
Security Agency 1 25 - 76
Security Agency 2 01 - 39
Security Agency 3 19 - 88
Janitorial Service:
NHA Main Complex 15 - 63
NHA Projects 17 - 114

18.7 The contract for security and janitorial services did not specify that remittances
for SSS, PhilHealth and Pag-IBIG Fund of the employees’ contributions to the
said government agencies should be on time and there will be equivalent
sanctions for non-compliance.

18.8 The failure of the security and janitorial services providers to remit on time said
contributions deprive the concerned security guards and janitors to maximize
the benefits for which said contributions are being made. The basis of loan
availment from SSS and Pag-IBIG are updated contribution payments.
Consequently, any missed payment may result in the non-availment of loans for
emergency purposes by the concerned security guards and janitors. PhilHealth,
on the other hand, requires that a member must have updated premium
contributions to ensure eligibility for the availment of health benefits.

18.9 While the NHA has no direct responsibility over the delayed remittance of
contributions of the service providers, it has a responsibility to ensure that they
enter into contract with service providers that strictly adhere to the mandates of
law, specially that the Procurement Act for which the NHA is expected to be
complying with, already provides parameters which can be used in the selection
of the most responsive bidder.

18.10 As the Procuring Entity who awarded the contract to the service providers, the
NHA has the responsibility to monitor strict compliance with the Policy
Statement of the Guidelines on the Procurement of Security and Janitorial
Services and the provisions set forth in the contract to ensure that all are being
observed as agreed.

18.11 Further, the NHA has the responsibility to validate the truthfulness of the
certifications being attached to the claims for payment.

18.12 We recommended and Management agreed to:

a. Call the attention of the service providers, making reference to the

statements in the Omnibus Sworn Statement and Contract and require
them to update their remittances; and

b. Regularly monitor the strict adherence of the service providers to

ensure that the provisions of RA No. 9184, the Contract and the
Omnibus Sworn Statements of the service providers are strictly
complied with.

114
19. Cash examination of accountable officers (AOs) stationed at the Main Office
disclosed certain lapses/deficiencies, namely: (a) non-provision of
cashbox/safe/vault, (b) AOs not properly briefed/trained on their duties and
responsibilities, and (d) non-compliance with bonding requirement. Further, most
of the petty cash funds were granted for emergency purchases of office supplies.

19.1 The cash and accounts of the AOs stationed at NHA Main Office were
examined to determine if: (a) all the government funds in the hands of the AOs
are actually existing and properly accounted for; (2) the agency and its AOs are
adhering strictly to prescribed rules and regulations on cash transactions; and
(3) the agency’s practices and procedures provide adequate safeguards against
fraud and losses of government funds.

Non-provision of cashbox/safe/vault

19.2 Cash is vulnerable to theft and loss, hence, as a safeguard it must be

adequately protected by physically securing them in a locked cashbox or
safe/vault. During the conduct of the cash examination, it was noted that the
AOs do not have cashbox or safe/vault to physically secure their cash
accountabilities. It was informed that they were not provided with cashbox or
safe/vault.

19.3 This is not in conformity with the declared policy of the State under Section 2,
PD No. 1445 that all resources of the government shall be managed, expended
or utilized in accordance with law and regulations, and safeguarded against loss
or wastage through illegal or improper disposition, with a view to ensuring
efficiency, economy and effectiveness in the operations of government. The
responsibility to take care that such policy is faithfully adhered to rests directly
with the chief or head of the government agency concerned.

AOs not properly briefed/trained on their duties and responsibilities

19.4 Section 6.1 of COA Circular No. 97-002 dated February 10, 1997 on the rules
and regulations on the granting, utilization and liquidation of cash advances
provides that a newly appointed or designated AO shall start with a new
cashbook. Before discharging his duties, the new AO shall be briefed by the
accountant and the auditor on the proper recording of the transactions and other
matters related to his work.

19.5 One of the conditions in the granting, utilization and liquidation of cash advance
embodied in the Office Order issued to the respective Disbursing Officers
requires that the DOs must attend briefing/training on the conduct of disbursing,
reporting system and other related activities pertaining thereto at the Treasury
Department before performing the duties and responsibilities as Disbursing
Officer.

19.6 Examination of the accounts disclosed that eight out of the 19 special DOs were
not adept in the handling, custody and disposition of the cash advance as well
as the use and maintenance of the cashbook. They informed that they were not
trained/briefed of their duties and responsibilities as DOs before they
discharged their functions. This is not in accordance with Section 6.1 of COA

115
 Circular No. 97-002 and the condition embodied in the NHA Office Order
separately issued to them.

19.7 Further, some DOs do not record their transactions daily/chronologically and do
not close their books at the end of the month. This is not in accordance with
Sections 6.2 and 6.3 of COA Circular No. 97-002 which requires that:

6.2 The AO shall maintain separate cashbooks for salaries, wages,

allowances, etc. and for petty operating expenses. The AO shall
record the transactions in the prescribed cashbook daily. He
may record each invoice/receipt/voucher individually or the total
disbursements for the day depending on the volume of the
transactions.

6.3 The AO shall reconcile the book balance with the cash on hand
daily. He shall foot and close the books at the end of each
month. The AO and the Accountant shall reconcile their books
of accounts at least quarterly.

19.8 As a consequence, they have difficulty in verifying and monitoring their cash
accountabilities. Also, the non-compliance to the foregoing provisions of COA
Circular No. 97-002 resulted in the co-mingling of cash accountabilities of AOs
handling two funds.

Non-compliance with bonding requirement

19.9 Section 101, PD No. 1445 states that every accountable officer shall be properly
bonded in accordance with law.

19.10 Likewise, Section 4.1 of BTr Circular No. 02-2009 dated August 6, 2009
requires that every officer, agent, and employee of the Government of the
Philippines or of the companies or corporations of which the majority of the
stock is held by the National Government, regardless of the status of their
appointment shall, whenever the nature of the duties performed by such officer,
agent or employee permits or requires the possession, custody or control of
funds or properties for which he is accountable, be deemed a bondable officer
and shall be bonded or bondable and his fidelity insured.

19.11 Verification disclosed that the approved bonds of the two AOs were not enough
to cover their accountabilities and two AOs were not bonded when granted cash
advances.

Inadequate procurement planning

19.12 Section 7, RA No. 9184, provides:

All procurement should be within the approved budget of the

Procuring Entity and should be meticulously and judiciously planned
by the Procuring Entity concerned. Consistent with government fiscal
discipline measures, only those considered crucial to the efficient

116
 discharge of governmental functions shall be included in the Annual
Procurement Plan to be specified in the IRR.

No government Procurement shall be undertaken unless it is in

accordance with the approved Annual Procurement Plan of the
Procuring Entity. The Annual Procurement Plan shall be approved by
the Head of the Procuring Entity and must be consistent with its duly
approved yearly budget. The Annual Procurement Plan shall be
formulated and revised only in accordance with the guidelines set
forth in the IRR. In the case of Infrastructure Projects, the Plan shall
include engineering design and acquisition of right-of-way.

19.13 The APP is the requisite document that the agency must prepare to reflect the
necessary information on the entire procurement activities for goods and
services and infrastructure to be procured that it plans to undertake within the
calendar year.

19.14 During the examination of the cash and accounts of the accountable officers, it
was noticed that most of the expenses charged to the petty cash funds were for
the emergency purchases of office supplies. Under this circumstance, the
Authority had not taken advantage of the volume discount in bulk purchasing.
Also, the procurement period provided under the 2016 Revised IRR of RA No.
9184 may have not been strictly followed. These indicate poor procurement
planning which is not in accord with the objective of RA No. 9184.

19.15 We recommended and Management agreed to:

a. Provide the DOs with cashbox/safe/vault where their accountabilities

will be kept and safeguarded against theft and loss;

b. Require the DOs to maintain appropriate cashbook to record the

transactions so as to facilitate reconciliation and monitoring of their
accountabilities;

c. Direct the training arm of NHA to conduct briefing/training on the

proper handling, custody and disposition of the cash advance and the
use of the cashbook for the incumbent DOs. Henceforth, require the
newly appointed or designated DOs to report to the Accountant for
them to be briefed on the rules and regulations on cash advance
before discharging their duties as DO;

d. Ensure that all AOs are adequately bonded in accordance with Section
101, PD No. 1445 and BTr Circular No. 02-2009 the moment cash
advance is granted and before they are allowed to perform their duties
and responsibilities as AO; and

e. Refrain from using petty cash fund for the procurement of office
supplies. Procurement of the same shall be in accordance to RA No.
9184.

117
GENDER AND DEVELOPMENT

20. The approved GAD budget of P100.103 million for CY 2018 was based only on the
appropriation from the General Appropriations Act (GAA) for FY 2018 of P3.257
billion, without considering the 2018 Corporate Operating Budget (COB)
amounting to P94.356 billion approved by the Department of Budget and
Management (DBM), thus non-compliant with the five per cent requirement under
Philippine Commission on Women-National Economic and Development
Authority-DBM Joint Circular No. 2012-01. The approved GAD Accomplishment
Report for CY 2018 on the other hand, registered an over utilization rate of
7,323.82 per cent against its budget or P8.708 billion relating to 23 partially
implemented client and organizational focused PAPs and one attributed program
in the amount of P19.450 million and P8.827 billion, respectively.

20.1 Joint Circular No. 2012-01 was issued to prescribe the guidelines and
procedures for the formulation, development, submission and implementation,
monitoring and evaluation, including accounting of results of agency annual
GAD plans and budgets and GAD accomplishment reports.

GAD budget below the five per cent requirement

20.2 Item 6.a of the PCW-NEDA-DBM Joint Circular No. 2012-01 provides that:

At least five per cent (5%) of the total agency budget appropriations
authorized under the Annual General Appropriations Act (GAA) shall
correspond to activities supporting GAD plans and programs. The
GAD budget shall be drawn from the agency’s maintenance and other
operating expenses (MOOE), capital outlay (CO) and personal
services (PS). It is understood that the GAD budget does not
constitute an additional budget over an agency’s total budget
appropriations.

20.3 Records disclosed that the total approved budget of NHA for CY 2018 is
P97.614 billion, which is composed of P3.257 billion appropriated under the
GAA for FY 2018 and P94.356 billion COB approved by DBM for CY 2018.
Based on this, NHA’s budget for GAD Programs, Activities and Projects (PAPs)
must at least be P4.881 billion.

20.4 Examination of the records, however, revealed that the approved GAD budget
for CY 2018 was P100.103 million only, which was mainly based on the
appropriation from the GAA. This is below the five per cent requirement under
PCW-NEDA-DBM Joint Circular No. 2012-01, which should be P4.881 billion
based on the total approved NHA budget per GAA and COB for 2018, details as
follows:

GAD Budget Approved

Budget Amount Amount (5%) GAD Budget Variance
COB - PS, MOOE & CO 94,356,085,000 4,717,804,250 - 4,717,804,250
GAA - MOOE 3,257,426,000 162,871,300 100,103,031 62,768,269
Total 97,613,511,000 4,880,675,550 100,103,031 4,780,572,519

118
 Over utilization of GAD budget

20.5 Review of the PCW approved Accomplishment Report revealed that while the
budget for client and organizational PAPs totaling P99.420 million were under-
utilized, the amount for the attributed program exceeded by 45,112.08 per cent
or P8.788 billion the budget of P19.481 million for CY 2018. Thus, the overall
disbursements in implementing GAD PAPs far exceeded the budget by P8.708
billion or 7,323.82 per cent, as shown in the matrix below.

Budget Utilized Difference Percentage

Program/ % of of
No. of No. of No. of
Project Amount Amount Utilization Amount (under)/over
Activities Activities Activities
utilization
Client
Focused 12 79,008,946.74 10 12,886,580.77 16.31 2 (66.122,365.97) (83..69)
Organizational
31 20,411,461.12 13 6,563,068.98 32.15 18 (13,848,391.14) (67.85)
Focused
Sub-total 43 99,420,407.86 23 19,449,649.75 19.56 20 (79,970,757.11) 80.44
Attributed
1 19,480,500 1 8,807,538,750.00 45,212.08 - 8,788,058,250.00 45,112.08
Program
Total 44 118,900,907.86 24 8,826,988,400.75 7,423.82 20 8,708,087,492.89 7,323.82

20.6 Also, the partial implementation and non-implementation of the client and
organizational focused PAPs and attributed programs affect the agency’s
efficiency in addressing gender related issues. These are not in accordance
with PCW-NEDA-DBM Joint Circular No. 2012-01.

20.7 We recommended and Management agreed to:

a. Comply with Item 6.a of PCW-NEDA-DBM Joint Circular No. 2012-01

that at least five per cent of the total budget, inclusive of personal
services, maintenance and other operating expenses, and capital
outlay, be allocated for GAD PAPs for the year;

b. Review the 2018 GAD Plan and Budget and Accomplishment Report to
determine the cause/s for low budget utilization for client and
organizational focused PAPs and the over utilization of the attributed
program to determine the correct budget requirements in the future;
and

c. Formulate an effective monitoring system to ensure that all identified

GAD PAPs will be timely and fully undertaken within the year.

Status of Suspensions, Disallowances and Charges

21. The status of suspensions, disallowances and charges before and after the effectivity
of the 2009 COA Rules and Regulations on Settlement of Accounts (RRSA) as of
December 31, 2018 is summarized as follows:

119
 Issued
This Period Settlement
Beginning January to This Period
Balance December January to Ending Balance
Description January 1, 2018 2018 December 2018 December 31, 2018
Suspensions 266,938,631 515,472,726 519,354,247 263,057,110
Disallowances 427,794,451 - - 427,794,451
Charges - - - -
Grand Total 694,733,082 515,472,726 519,354,247 690,851,561

21.1 The NHA Main and Regional Offices, has a consolidated unsettled suspensions
totaling to P263.057 million as of December 31, 2018 monitored pursuant to the
RRSA.

21.2 Disallowances aggregating to P427.794 million of which P427.607 million was

issued in the NHA Main Office and P187,247 in the Regional Offices remained
unsettled as of December 31, 2018.

21.3 The reported balance of disallowances of P427.607 million includes Notice of

Disallowance (ND) Nos. Special Audit 2008-2009-001 to 007 with an aggregate
amount of P367.845 million with Petition for Review filed but was denied by the
COA Commission Proper under CP Decision No. 2018-124 dated January 26,
2018. The remaining disallowances are under petition for review with the COA
Commission Proper.

120