EXECUTIVE SUMMARY

A. Introduction

We conducted an audit on Clark Development Corporation (CDC), a corporation

established under Executive Order No. 80 dated April 3, 1993 as the implementing arm of
the Bases Conversion and Development Authority (BCDA) for the Clark Special Economic
Zone.

Our audit was made in accordance with Philippine Public Sector Standards on Auditing
and we believe that it provided a reasonable basis for the audit results.

The audit covered the accounts, transactions and operations of CDC for calendar year 2015.
The audit was conducted to (a) ascertain the level of assurance that may be placed on
management assertions on the financial statements; (b) recommend agency improvement
opportunities; and (c) determine the extent of implementation of prior year’s audit
recommendations.

B. Financial Highlights

The comparative financial condition and results of operations of CDC for the years ending
December 31, 2015 and December 31, 2014 are as follows:

Amounts in million pesos

Increase (Decrease)
Financial Condition 2015 2014 Amount %
Total Assets 6,367.73 6,265.00 1.63
102.73
Total Liabilities 2,524.52 2,396.34 128.18 5.34
Total Equity 3,843.21 3,868.66 (25.45) (.658)

Results of Operations

Total Income 1,659.93 1,480.42 179.51 12.13

Total Expenses 962.90 925.96 36.94 3.99
Net Profit 697.03 554.46 142.57 25.71

Sources and
Application of Funds
Corporate Budget 2,365.56 2,283.96 81.60 3.57
Actual Expenditures 1,160.46 1,383.24 (222.78) (16.10)

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C. Independent Auditor’s Report

We rendered an unqualified opinion on the fairness of the presentation of financial

statements.

D. Summary of Significant Observations and Recommendations

1. The return of part of the performance bond of Blue Bonnet Amusement Corporation
(BBAC) amounting to ₱25,000,000.00 resulted in foregone revenues that should have been
realized for the failure of said locator to perform its contractual obligations. Further, the
leniency of management in extending the grace period and tolerating the locator
notwithstanding infractions committed under the lease agreement led to waived revenues
of ₱28,696,568.07, all of which acts were prejudicial to the interest of the government.
(Observation No. 1)

We recommended that the Board of Directors and the President and CEO of CDC (a)
explain why they should not be held liable for the foregone income from the performance
bond that should have been forfeited and from the unbilled Minimum Guaranteed Lease
(MGL) of ₱25 million and at least ₱28,696,568.07, respectively; (b) require the issuance
of an Official Receipt (OR) for the return of the ₱25 million to BBAC; (c) invoke the
existing sanctions for infractions by BBAC on the lease agreement; and (d) henceforth,
observe and adhere to the provisions of existing and future lease agreements to ensure that
the stakes of CDC and the government as a whole are protected and that the decisions made
will uphold the best interest of the government.

2. Cash advances amounting to ₱2,290,917.83 remained unliquidated as of year-end

contrary to the provisions of Section 89 of PD No. 1445 and COA Circular No. 97-002
dated February 10, 1997 resulting in the delay in the recording of the related expenses paid
from those cash advances. (Observation No. 2)

We recommended that the President and Chief Executive Officer to instruct the Accountant
to (i) exert all efforts to require the concerned officers and employees to settle their
accountabilities which were due for liquidation; (ii) review and analyze the dormant
accounts for proper disposition; and (iii) refrain from granting additional cash advances to
any official or employee with outstanding cash advances.

3. As of year-end, suspensions of ₱2,526,544.00 and disallowances of ₱41,601,362.93

remained unsettled which was not in consonance with COA Circular No. 2009-006 dated
September 15, 2009. (Observation No. 8)

We recommended that the President and CEO, through the Accountant, require all persons
responsible and liable on the suspensions and disallowances, respectively, to settle them
immediately.
4. Clark Development Corporation has reached new heights in CY 2015 in
transforming the Clark Freeport Zone (CFZ) into a modern industrial estate and premier

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service and logistics hub. Likewise, for the same year, it also achieved outstanding
financial performance and surpassed significant achievements in CYs 2013 and 2014 while
exceeding the much higher goals set for the same year. (Observation No. 9)

We commended CDC’s outstanding financial performance and impressive achievements

in CY 2015 and recommended that it continue to strive harder and remain committed in
transforming CFZ into a globally-competitive investment center and a catalyst of economic
progress.

E. Summary of Total Suspensions, Disallowances and Charges at year-end

As of December 31, 2015, CDC has total suspensions of ₱2,526,544.00 and total
disallowances of ₱41,601,362.93.

F. Status of Implementation of Prior Year’s Unimplemented Audit

Recommendations

Of the 31 audit recommendations contained in the previous year’s Annual Audit Reports
(AARs), 15 were fully implemented, 14 were partially implemented, while two were not
implemented.

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