EXECUTIVE SUMMARY

A. Introduction

The civil service system in the Philippines was formally established under Public
Law No. 5 ("An Act for the Establishment and Maintenance of Our Efficient and
Honest Civil Service in the Philippine Island") in 1900 by the Second Philippine
Commission. A Civil Service Board was created composed of a Chairman, a
Secretary and a Chief Examiner. The Board administered civil service examinations
and set standards for appointment in government service.

It was reorganized into a Bureau in 1905. The 1935 Philippine Constitution firmly
established the merit system as the basis for employment in government. The
following years also witnessed the expansion of the Bureau’s jurisdiction to include
the national, local and corporate sectors of the government.

In 1959, Republic Act No. 2260, otherwise known as the Civil Service Law, was
enacted. This was the first integral law on the Philippine bureaucracy, superseding
the scattered administrative orders relative to government personnel administration
issued since 1900. This Act converted the Bureau of Civil Service into the Civil
Service Commission (CSC) with department status.

In 1975, Presidential Decree No. 807 (The Civil Service Decree of the Philippines)
redefined the role of the Commission as the central personnel agency of government.
Its present mandate is derived from Article IX-B of the 1987 Constitution which was
given effect through Book V of Executive Order No. 292 (The 1987 Administrative
Code). The Code essentially reiterates existing principles and policies in the
administration of the bureaucracy and recognizes, for the first time, the right of
government employees to self-organization and collective negotiation under the
framework of the 1987 Constitution.

At present, the CSC headed by Chairperson Alicia dela Rosa-Bala who was
appointed on October 12, 2015. Assisting the Chairperson in the operation are two
Commissioners, namely: Leopoldo Roberto W. Valderosa, Jr., who retired on
February 2, 2020 and Atty. Aileen Lourdes A. Lizada.

As of December 31, 2020, the CSC has total available positions of 1,399 of which
1,173 were filled up by 366 Central Office and 807 regional/field offices personnel.

B. Financial Highlights

Presented below are the comparative financial condition and the sources and
application of funds of the CSC for the Calendar Years 2020 and 2019:

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 Increase/
Particulars 2020 2019
(Decrease)
(In Philippine Peso)
A. Financial Condition
Assets 2,827,271,706.44 2,598,141,926.49 229,129,779.05
Liabilities 112,594,856.80 194,968,201.50 (82,373,344.70)
Government Equity 2,714,676,849.64 2,403,173,724.99 311,503,124.65
B. Sources and Application of Funds
Allotments Received 1,728,387,009.00 1,817,976,810.00 (89,859,801.00)
Obligations Incurred 1,710,544,358.63 1,817,976,810.00 (107,342,451.37)
Unexpended Balance 17,842,650.37 0.00 17,842,650.37

The Statement of Appropriations, Allotments, Obligations, Disbursements and

Balances for CY 2020 is presented in Annex A of this report.

C. Scope of Audit

The audit covered the accounts and operations of the CSC for CY 2020. The audit
was conducted to: a) verify the level of assurance that may be placed on
Management’s assertions on the financial statements; b) recommend agency’s
improvement opportunities; c) determine the propriety of transactions as well as the
extent of compliance with pertinent laws, rules and regulations; and d) determine
the extent of implementation of prior year’s audit recommendations.

D. Auditor’s Opinion on the Financial Statements

A modified opinion was rendered on the fairness of presentation of the financial

statements of the CSC for CY 2020 due to the following accounting errors and
deficiencies, the details of which are discussed in Part II of this report and the analysis
of their effects on the financial statements are presented in Annex B:

1. The reliability and accuracy of the year-end balance of the account Cash in
Bank-Local Currency Current Account (CIB-LCCA) in the amount of ₱1.042
million is doubtful due to: a) existence of unidentified/unadjusted reconciling
items in the amount of ₱2.073 million; b) inclusion of stale checks in the
amount of ₱52,217.44; and c) non-reversion of unreleased checks in the
amount of ₱343,680.00. (Paragraph No. 1)

We recommended and Management agreed to require the: a) Accountant of

CSC RO III to identify and work on the Cash in Bank unreconciled amount of
₱801,829.29 as at December 31, 2020 and effect adjustments in the books by
preparing the Journal Entry Voucher/s; b) Accountant of CSC RO V, IX, and
XIII to recognize the identified reconciling items – to record direct deposits of
₱664,500 (RO V); reconciling items not yet credited by the bank of ₱47,200.00
(RO IX); and unadjusted reconciling items of ₱559,323.88 (RO XIII) to correct

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 and reconcile the balance of the account; c) Accountant of RO IX to prepare
letter request addressed to the LBP Zamboanga Branch that subject collection
in the amount of ₱47,200.00 be credited back to the account of CSC Training
Fund; d) Accountant of the CSC RO III to prepare the adjusting entries to
recognize the cancellation of stale checks of ₱52,217.44; and e) Cashier of the
CSC RO III to submit a Schedule of Unreleased Checks to the Designated
Accountant on a regular basis for monitoring and facilitate the reversion of the
same to Cash in Bank account at the end of the year in accordance with Section
56 Chapter 19 of Government Accounting Manual (GAM) for NGAs Volume
I.

2. The reliability and accuracy of the Property, Plant and Equipment (PPE)
accounts in the total amount of ₱734.939 million as at December 31, 2020
could not be ascertained due to: a) unreconciled difference between the
accounting and property records amounting to ₱75.505 million; b) existence
of “Reconciliation SL” balances of ₱88.189 million; c) non-recording of
acquired/donated PPEs of at least ₱13 million d) improper recording of the
value of acquired assets of ₱25.590 million; e) unaccounted/missing properties
amounting to P0.702 million; f) inclusion of negative book value of several
PPE accounts amounting to ₱267,315.98; g) non-derecognition of disposed
properties with carrying amount of ₱154,139.46. (Paragraph No. 4)

We recommended and Management agreed to: a) instruct the Accounting and

Property Division of the CSC CO, NCR and concerned ROs – II, III, IV, IX,
XI, XIII and BARMM, to reconcile their records, investigate the variances and
effect necessary adjustments in both accounting and property records
accordingly; b) require the Accountant of CSC CO and RO XI to prepare a
breakdown/list containing the details, such as nature and status of assets
lumped as “Reconciling SL”, and effect necessary adjusting entries; c) create
an Appraisal Committee to be responsible in the appraisal of the land and
building of CSC NCR to establish their appraised value. Upon appraisal,
instruct the Accountant to recognize separately in the books of account the land
and building taking into consideration the provision of the allowance for
depreciation; d) require the Property Officer of CSC NCR, ROs III and XI to
obtain the necessary documents from the source agencies of properties donated
and use them as basis in recording these assets in the books of accounts; e)
direct the Accountant of CSC RO III and IV to retrieve and examine the
documents related to the purchase of land and building to determine the value
for each property and make the necessary adjustments to correct the balances
of the account; f) require the Property Officer of RO XI to determine the last
known locations of the missing items amounting to ₱701,995.70, send demand
letters to concerned accountable officers to produce the missing items,
otherwise, conduct proper investigation; g) require the Accountant of CSC CO
to extensively analyze the negative PPE balances and effect proper
adjustments, if warranted; and h) direct the Accountant of CSC RO III to
derecognize from the PPE account the cost of unserviceable properties based

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 on the duly accomplished Inventory and IIRUP, and prepare the necessary
adjusting entries thereof.

3. The reliability and accuracy of Inventory accounts as at December 31, 2020

totaling ₱13.424 million could not be ascertained due to: a) unreconciled
difference between the accounting and property records amounting to ₱3.970
million in CO, NCR, ROs III, IV and X; b) non-compliance with Perpetual
Inventory System in NCR and RO III; c) incomplete conduct of semi-annual
physical count of inventory in ROs III, IV and VII; and d) non-adoption of the
weighted average method of costing inventories in RO III. (Paragraph No. 3)

We recommended and Management agreed to: a) instruct the Accountants and

Property/Supply Officers of CSC CO, NCR, ROs III, IV and X to reconcile
their records, investigate the variances and effect necessary adjustments both
in accounting and property records accordingly; b) require the Accountants of
CSC NCR and RO III to strictly comply with Section 9 of GAM Vol. I, on the
use and application of the Perpetual Inventory System by recording purchases
as Inventory and issuance of supplies as expense; c) direct the Inventory
Committee of CSC ROs III, IV and VII to conduct physical count of inventory
every semester with the presence of the Audit Team, and, correspondingly,
prepare and submit the RPCI to the Audit Team; and d) require the Accountant
of CSC RO III to use the weighted average method of inventory costing as
prescribed by Section 6, Chapter 8 of the GAM, Volume I.

4. The accuracy and reliability of the balance of the Due from NGAs account
amounting to ₱78.290 million as at December 31, 2020 is doubtful due to: a)
the unreconciled balances of ₱1.101 million between the CSC CO books and
the inter-agency reciprocal account maintained by the PS-DBM; and b) long
outstanding balance in the books of CSC RO IV for procurements with PS
DBM amounting to ₱0.881 million. (Paragraph No. 2)

We recommended and Management agreed to require the: a) Property Officer

and the Accountant of CSC-CO to coordinate with the PS-DBM to reconcile
their records to account for the difference of ₱1,101,826.48 as well as the non-
moving/dormant balances of ₱647,124.95 and to instruct the Supply/Property
Officer of CSC RO IV to coordinate regularly with the Procurement Services
and reconcile the balance between Due from NGAs- PS-DBM as against Due
to NGAs of the PS-DBM to determine the actual balance and make the
necessary adjustments, if any; and b) Accountant of RO IV to make the
necessary adjustment based on the reconciliation made with the PS-DBM to
reflect the correct balance of Due from NGAs in the financial statement.

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 5. The CY 2019 corresponding figures presented in the CY 2020 financial
statements were not restated to reflect prior year errors and adjustments, which
is not compliant with existing provisions of the GAM. (Paragraph No. 5)

We recommended and Management agreed to require the Accounting Service

to properly present the prior period corrections/adjustments by restating prior
year balances of affected accounts shown as corresponding figures for the
current year financial statements in compliance with the requirements of
Section 42 (b) and 43, Chapter 19 of the GAM Volume I.

E. Other Significant Observations and Recommendations

Other significant observations and recommendations are discussed in detail in Part

II of this report.

In lieu of the exit conference, we furnished the COA officials copy of the Summary
of Audit Observations and Recommendations (SAOR) for Management’s comments
and incorporated them in this report, where appropriate.

F. Status of Audit Suspension, Disallowance and Charge

The status of Notice of Suspensions (NSs) and Notice of Disallowances (NDs) as at

December 31, 2020 showed unsettled audit suspensions and disallowances totaling
₱122,366.13 and ₱719,038.62 respectively.

G. Status of Implementation of Prior Years’ Audit Recommendations

Out of the 58 audit recommendations embodied in the CY 2019 Consolidated Annual

Audit Report, 30 were implemented and 28 were not implemented. The details are
presented in Part III of this report.