EXECUTIVE SUMMARY

A. Introduction

The Department of Health (DOH) is mandated to be the over-all technical authority

on health. The major mandate of DOH is to provide national policy direction and develop
national plans, technical standards and guidelines on health. It is also a regulator of all
health services and products; and provider of special or tertiary health care services and of
technical assistance to other health providers especially to Local Government Units (LGU).

With other health providers and stakeholders, the DOH shall pursue and assure the
following:

Promotion of the health and well-being for every Filipino;

Prevention and control of diseases among population at risk;
Protection of individuals, families and communities exposed to health hazards
and risks; and
Treatment, management and rehabilitation of individuals affected by diseases
and disability.

Essentially, the DOH has three specific roles in the health sector: leadership in health,
enabler and capacity builder and administrator of specific services namely, national and
sub-national health facilities and hospitals serving as referral centers, direct services for
emergent health concerns requiring complicated technologies and assessed as critical for
public welfare and health emergency response services, referral and networking systems
for trauma, injuries, catastrophic events, epidemics and other widespread public danger.

To accomplish its mandate and roles, the Department has the following power and
functions based on Executive Order 102:

Formulate national policies and standards for health;

Prevent and control leading causes of death and disability;
Develop disease surveillance and health information systems;
Maintain national health facilities and hospitals with modern and advanced
capabilities to support local services;
Promote health and well-being through public information and to provide the
public with timely and relevant on health risks and hazards;
Develop and implement strategies to achieve appropriate expenditure patterns
in health as recommended by international agencies;
Develop sub-national centers and facilities for health promotion, disease control
and prevention, standards, regulations and technical assistance;
Promote and maintain international linkages for technical collaboration;
Create the environment for the development of a health industrial complex;
Assume leadership in health in times of emergencies, calamities, and disasters
and system failures;

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 Ensure quality of training and health human resource development at all levels
of the health care system;
Oversee financing of the health sector and ensure equity and accessibility to
health services; and
Articulate the national health research agenda and ensure the provision of
sufficient resources and logistics to attain excellence in evidenced-based
intervention for health.

Together with its attached agencies, the DOH with seven Functional Management
Teams in the Central Office, Centers for Health Development (CHD) in every region,
DOH-Hospitals and Treatment for Rehabilitation Centers (TRCs) performs its roles to
continuously improve t FOUR
One Plus for Health (F1+for Health) Strategic Framework.

To perform these functions are the various central bureaus and services in the Central
Office, Center for Health Development (CHD) in 16 regions, 65 hospitals, one (1)
laboratory facility and 18 Treatment and Rehabilitation Centers (TRCs), two (2) two
bureaus, namely Food and Drug Administration (FDA) and Bureau of Quarantine (BOQ).
(Annexes A).

The DOH has the following attached agencies: one national government agency, the
National Nutrition Council (NNC); two government corporations, namely: Philippine
Health Insurance Corporation (PHIC) and Philippine Institute of Traditional and
Alternative Health Care (PITAHC); and four specialty hospitals, namely Lung Center of
the Philippines (LCP), National Kidney and Transplant Institute (NKTI), Philippine
C M C (PCMC) P H C (PHC).

The PHIC, as an attached agency, is implementing the National Health Insurance

Law and administers the medical care program for both public and private sectors. It has
provincial health teams made up of DOH representatives to local health boards and
technical personnel for communicable disease control.

The Centers for Health Development (CHDs) are responsible for the field operations
of the Department in each region and for providing catchment areas with efficient and
effective medical services. They are, likewise, tasked to coordinate with regional offices
of the other Departments, offices and agencies for health-related concerns, as well as with
the LGUs, the DOH partners, in the implementation of various public health programs.

On the other hand, the DOH hospitals provide hospital-based medical care,
specialized or general services, some conduct research on clinical priorities and some are
training hospitals for medical specialization. In 2003, the DOH hospitals were provided
, 100
health facilities.

The DOH is headed by Secretary Francisco T. Duque III, who leads the nationwide
implementation of the F1+for Health and exercises overall supervision and control over

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the Teams. He is assisted by seven (7) Functional Management Teams for the
implementation of the F1+for Health Strategic Framework, headed by either an
Undersecretary of Health or Assistant Secretary or both:

1. Office of the Chief of Staff (OCS) and Health Regulation Team (HRT)
2. Health Policy and Systems Development Team (HPSDT)
3. Public Health Services Team (PHST)
4. Health Facilities and Infrastructure Development Team (HFIDT)
5. Field Implementation and Coordination Team (FICT)
6. Procurement and Supply Chain Management Team (PSMT)
7. Administration and Financial Management Team (AFMT)

B. Financial Highlights

T A ,
of funds for CY 2020 compared with that of the preceding year are as follows:

Financial Condition
Amounts (in Thousand Pesos)
Group of Accounts
2020 2019 Restated Increase/(Decrease)
Assets 262,902,652 179,649,533 83,253,119
Liabilities 25,822,822 23,201,507 2,621,315
Net Assets/Equity 237,079,830 156,448,026 80,631,804

Results of Operation
Amounts (in Thousand Pesos)
Group of Accounts
2020 2019 Restated Increase/(Decrease)
Revenue 19,960,964 21,324,573 (1,363,609)
Expenses 104,968,315 83,995,149 20,973,167
Net Financial Subsidy 163,841,632 81,741,028 82,100,604
Gains 13,867 26,541 (12,674)
Losses 35,383 81,953 (46,571)
Surplus/(Deficit) 78,812,764 19,015,039 59,797,725

Sources and application of funds

Amounts (in Thousand Pesos)
Particulars
2020 2019 Increase/(Decrease)
A. Appropriation 205,620,786 114,829,684 90,791,102
New Appropriation 100,298,232 97,653,633 2,644,599
Automatic Appropriations 2,481,032 4,409,868 - 1,928,836
Special Purpose Fund 72,392,069 5,168,519 67,223,550
Sub-total 175,171,333 107,232,020 67,939,313

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 Amounts (in Thousand Pesos)
Particulars
2020 2019 Increase/(Decrease)
Specific Budget - Continuing
15,371,631 6,852,813 8,518,818
Appropriation (CONAP)
Automatic Appropriations (CONAP) 5,312 - 5,312
Special Purpose Fund - (CONAP) 15,072,509 744,851 14,327,658
Sub-total 30,449,453 7,597,664 22,851,789
B. Allotments 200,855,449 110,245,170 90,610,279
New Appropriation 98,804,603 93,146,794 5,657,809
Automatic Appropriations 2,401,612 4,382,372 - 1,980,760
Special Purpose Fund 72,392,069 5,168,519 67,223,550
Sub-total 173,598,284 102,697,685 70,900,599
Specific Budget - Continuing
12,179,343 6,802,634 5,376,709
Appropriation (CONAP)
Automatic Appropriations (CONAP) 5,312 - 5,312
Special Purpose Fund - (CONAP) 15,072,509 744,851 14,327,658
Sub-total 27,257,164 7,547,485 19,709,679
C. Obligations Incurred 176,214,329 97,089,801 79,124,528
New Appropriation 86,771,604 82,875,509 3,896,095
Automatic Appropriations 2,130,717 3,920,844 - 1,790,127
Special Purpose Fund 64,523,610 4,961,979 59,561,631
Sub-total 153,425,931 91,758,332 61,667,599
Specific Budget - Continuing
10,982,015 4,590,028 6,391,987
Appropriation (CONAP)
Automatic Appropriations (CONAP) 1,715 - 1,715
Special Purpose Fund - (CONAP) 11,804,668 741,441 11,063,227
Sub-total 22,788,398 5,331,469 17,456,929
D. Disbursements 141,718,479 71,592,078 70,126,401
New Appropriation 70,045,046 61,197,658 8,847,388
Automatic Appropriations 1,193,055 3,386,159 - 2,193,104
Special Purpose Fund 55,721,095 4,356,232 51,364,863
Sub-total 126,959,197 68,940,049 58,019,148
Specific Budget - Continuing
6,556,082 2,165,399 4,390,683
Appropriation (CONAP)
Automatic Appropriations (CONAP) 1,653 - 1,653
Special Purpose Fund - (CONAP) 8,201,547 486,630 7,714,917
Sub-total 14,759,282 2,652,029 12,107,253
Unreleased Appropriation (A-B) 4,765,338 4,584,514 180,824
Unobligated Allotment (B-C) 24,641,120 13,155,369 11,485,751
Unpaid Obligation (C-D) 34,495,850 25,497,723 8,998,127

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 The DOH has a total appropriation approximately to 205.621 billion, pursuant to
RA No. 11465 or the General Appropriations Act for FY 2020. While the total allotments
received amounted to 200.855 billion. Of the total allotments received, approximately
176.214 billion was obligated and 141.718 billion was disbursed, leaving an unreleased
appropriation, unobligated allotment and unpaid obligation amounting to 4.765 billion,
24.641 billion and 34.496 billion, respectively.

C. Scope of Audit

The consolidated audit report covers the audit of the accounts and operations of the
DOH CO, 16 CHDs, 12 TRCs, 65 Hospitals, 1 laboratory facility and 2 Bureaus for the
year ended December 31, 2020 or a total of 97 out of 103 DOH Offices. Annex A-1 shows
the list of DOH Offices not included in this report. The audit was conducted to: (a) verify
the level of assurance that may be placed
statements; ( ) , ( ) determine the
propriety of transactions as well as the extent of compliance with pertinent laws, rules and
regulations, and (d)
recommendations.

The audit covered some of the identified audit thrust areas per Memoranda dated
October 11, 2019 (General Audit Instructions for CY 2020 audit), October 21, 2019
(Specific Audit Instructions on the preparation of DOH CY 2020 Audits), July 27, 2020
(Supplemental General Audit Instructions for CY 2020 audit), and October 1, 2020
(Supplemental Specific Audit Instructions for CY 2019 Audits); in addition to the areas
observed in the course of our risk-assessment during the year.

D. Independent A di Report

An adverse opinion was rendered on the financial statements of the DOH as of

December 31, 2020 due to the total misstatements in Asset accounts amounted to
70,894,401,298.55 26.97% , L
N A /E 944,035,967.72 3.66%
70,171,552,317.53 29.60%, vely. Moreover, accounting deficiencies were
C , R , I PPE 95,140,718,253.12
36.19% , L 3,229,902,013.08
12.51% 33,388,737,795.50 or 14.08% of total equity.

E. Summary of Significant Observations and Recommendations

The observations and recommendations, discussed in detail in Part II of the report,

the most significant of which are shown below:

1. Various deficiencies 67,323,186,570.57 worth of public funds and

intended for national efforts of combatting the unprecedented scale of the COVID-19
crisis were noted. These deficiencies contributed to the challenges encountered and

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 missed opportunities by the DOH during the time of state of calamity/national
emergency, and casted doubts on the regularity of related transactions.

We requested that the SOH implement the recommendations contained in the

Consolidated Management Letter (CML) on the audit of COVID-19 Funds for the
year ended December 31, 2020 and submit a status report on the actions taken on
the audit recommendations stated therein.

2. E 1,225,260,566.29 HFEP
were found to be either undelivered, unutilized, and/or without calibration and
preventive maintenance, while several HFEP infrastructure projects with total value of
2,832,390,057.53 were either idle/unutilized or with substantial delay in
implementation, thus, exposing these properties to the risks of deterioration, loss, lapse
of warranty period and wastage of government funds, thus, depriving the public of the
benefits they could have derived from the immediate and maximum use of said facilities
and resulted to the non-attainment of the program objectives.

We recommended and the SOH agreed to:

a. require the HFEP Team to: (i) properly plan, assess and evaluate the
equipment to be procured in terms of availability of space, facilities and
immediate needs of the recipient hospitals to attain the maximum use of the
HFEP equipment; (ii) immediately address the implementation challenges in
various infrastructure projects and come up with detailed plan on how to
address the problems encountered; and (iii) closely coordinate with the
concerned OUs in planning, monitoring and supervision of HFEP projects;

b. instruct the heads of OUs to: (i) demand the suppliers to deliver the equipment
immediately and in accordance with the terms and specifications so that these
can be utilized by the intended beneficiaries; (ii) ensure readiness of the
recipient facilities in receiving the equipment (i.e. enough power supply,
availability of the space/location, availability and trainings of necessary
personnel, and availability of turn-over documents) during the procurement
and before implementation; and (iii) ensure that the suppliers regularly
conduct calibration and preventive maintenance of the equipment; and

c. instruct both the HFEP Team and concerned OUs to facilitate the full
operation of the newly-built infrastructures and ensure the immediate
installation of needed equipment, electrical power, and all other needed
utilities.

3. Deficiencies were noted in the distribution of centrally-procured assets to various OUs

65,356,720.70
system in the CO.

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 We recommended and the SOH agreed to:

a. require concerned offices to establish coordination among themselves to

ensure that all the equipment and inventories are delivered immediately within
a reasonable period of time to the intended recipients by closely monitoring
the status of deliveries of supplies and equipment, facilitate the immediate
distribution of the items not yet received by the recipients, submit explanation
on the cause/s for the non- or late delivery thereof to the intended recipients,
and execute MOAs, deeds of donation or other equivalent documents in the
transfer of centrally-procured items to ensure clear terms regarding their
utilization;

b. direct the concerned offices in the CO to provide the pertinent

documents/records to the recipient facilities to establish property
acc abi i a d c dia hi a d a ba i i ec di g i he eci ie
books of accounts of transferred accountabilities by the CO, and require them
to record said equipment immediately upon receipt of the equipment and
documents;

c. instruct the Knowledge Management and Information Technology Service

(KMITS) to issue policies and procedures to extend validation and monitoring
of equipment up to the proper recording in the books of accounts, coordinate
with the Accounting Division of the CO and forward the JEVs made by the
latter to the end-users/recipients to ensure proper establishment of the
property custodianship for equipment and computer software distributed by
CO, and ensure that the actual needs of intended recipients or end-users are
considered in the allocation list of computer software for distribution to avoid
idleness and non-utilization;

d. direct concerned offices to submit an action plan as to specific courses of action

that will be undertaken in order to avoid the deficiencies from recurring again,
officials/employees responsible and specific timelines thereof; and

e. impose appropriate sanctions to officials/employees responsible for the

deficiencies, in accordance with PD No. 1445, the Administrative Code and
other applicable laws, rules and regulations.

4. Drugs, medicines and other types of inventories with a total value of ₱95,675,058.98
were found to be nearly expired and/or have expired due to deficient procurement
planning, poor distribution and monitoring systems, and identified weakness in internal
controls. This recurring problem of the DOH has resulted to indiscriminate wastage of
, DOH
leading the country in the development of a productive, resilient, equitable and people-
centered health system.

We recommended and the SOH agreed: (a) take immediate action/concrete steps
in resolving all issues associated with the recurring problem such as improvement

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 of procurement planning, strengthening of distribution and monitoring systems,
and review of internal controls; and (b) direct the Legal Service and AFMT to
conduct thorough investigations and impose appropriate sanctions on all erring
officials and employees whose neglect caused wastage of government funds.

5. Considerable amounts of unobligated allotments totaling 24,641,119,764.42 as of

December 31, 2020, D
access to basic public health services to all Filipinos and further buttressing the health
care delivery system, were noted. This condition affects the efficient utilization of
public funds vis-à-
urgent healthcare needs during the time of state of calamity/national emergency.

We recommended and the SOH agreed to:

a. facilitate the completion of PAPs within the periods provided under existing
a a d eg a i i de f ii ea di e he De a e
spending rate in terms of disbursement of allotments received and avoid any
adverse effect on future budget levels of the agency;

b. immediately address the perennial factors impeding project implementation

through a written plan, such as bidding process and contractor selection and
performance monitoring, improvements in preliminary and detailed
engineering, project monitoring and evaluation system, conduct of early
procurement activities as sanctioned by law and guidelines, more efficient
system of downloading funds to the CHDs and other operating units,
partnerships and coordination with the DOH on project/program
implementation as well as organizational strengthening especially with respect
to project management offices with the end view of rationalizing or
standardizing their sizes either in terms of number, components or total costs
of projects/programs handled; and

c. coordinate with the various operating units, procurement partners, and

implementing agencies, in the form of written communications and series of
meetings (with copies/minutes furnished to the COA Office), on the following
matters: (i) possible reforms that will improve budget determination and
programming; (ii) linkage between fiscal framework and budget preparation
so that funds will be available for use by the operating units, procurement
partners, and/or implementing agencies, and released on time; (iii) need to
institutionalize monitoring of fund utilization and the use of information
de i ed f DBM e fa a age c b dge e ie ; and (iv) greater
flexibility in the provision of technical assistance in project
preparation/planning, design and management, installation of incentive
system in project management offices for early or on schedule completion of
projects and sanctions for delays if delays are caused by inefficiencies.

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6. The non- 306,734,289.77 worth of public funds allotted for
DRRM and during the state of calamity/national emergency in CY 2020 demonstrates
that not enough programs and projects were implemented in order to mitigate related
risks an .

We recommended and the SOH agreed to: (a) facilitate the completion of PAPs
within the periods provided under RA No. 11520, Section 3.4 of DBM National
Budget Circular (NBC) No. 585 and related laws and regulations in order to fully
ii e a d i e he DOH e di g a e i e f di b e e f
allotments received and avoid any adverse effect on future budget levels of the
agency; (b) immediately address the perennial factors impeding project
implementation through a written plan; (c) coordinate with the various operating
units, procurement partners, and implementing agencies, in the form of written
communications and series of meetings (with copies/minutes furnished to the
COA Office), on the downloading of funds, PAPs implementation and
preparation/submission of the FURs and other required reports; and (d) direct
the HEMB to monitor the movement and balances of the DRRM commodities
and current allotment, obligation and disbursements which may be used in
making informed decisions for the formulation of reasonable WFP and PPMP.

7. The utilization of at least 25 percent allocated hospital income of four OUs totaling
169,578,991.42 for the procurement of equipment and upgrading of hospital facilities
had not been fully maximized, with only 37.43 63,467,670.77 utilized,
OU 4,102,375.65 3.54 ent of its hospital income
116,037,875.84, ,
services that could have been provided to them had the required percentage of said
income been properly allocated, and plans for the efficient utilization thereof were
formulated and implemented.

We recommended and the SOH agreed to direct the heads of concerned OUs to:
(a) plan carefully through proper and complete identification of all
equipment/facilities needed by the hospitals to deliver quality health care services
to intended patients and prioritize the utilization of the allocated hospital income;
(b) require the submission of explanation/justification on the deficiencies noted,
evaluate the same and impose appropriate sanctions to concerned
officials/employees; and (c) henceforth, ensure that at least 25 percent of the
hospital income is allocated for the procurement of necessary equipment and
upgrading of hospital facilities to provide the intended patients with access to
better health care services.

8. Unauthorized and unnecessary balances in depository accounts as well as fees and

441,239,379.94 remained unremitted to
the National Treasury contrary to law and regulations.

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 We recommended and the SOH agreed to direct the concerned OUs to cause the
immediate transfer/remittance of their unauthorized/unnecessary cash balances
and collected fees to the BTr in compliance with law and regulations.

9. Procedural deficiencies in the procurement process and lack of documentation in

various contracts entered into and implemented by the DOH as well as lapses in
implementation of its various projects in the aggregate amount of at least
3,967,249,291.33, were not in keeping with pertinent provisions of RA No. 9184 and
its RIRR, thus, deprived the government of the most advantageous prices and resulted
in doubtful payment transactions and significant delays in project completion.

We recommended and the SOH agreed to direct the CO and OUs to: (a)
henceforth, strictly comply with the requirements of RA No. 9184 and pertinent
laws, rules and regulations, particularly on the conduct of public bidding and
other procurement activities and on the preparation and submission of required
documents; (b) submit explanation/justification on the various deficiencies noted,
evaluate the same and take appropriate actions; (c) conduct periodic assessment
of processes and procedures to streamline procurement activities pursuant to
Section 3(c) of this 2016 Revised IRR; and (d) consider the imposition of proper
liquidated damages on delayed delivery and/or completion of procured goods,
services and infrastructure projects to encourage faithful adherence and timely
execution of contracts.

10. D DOH OU 557,699,748.22 did not

comply with established rules, procedural guidelines, policies, principles or practices,
resulting in the incurrence of irregular, unnecessary, and excessive expenditures.

We recommended and the SOH agreed to direct the OUs to comply fully with
established rules, regulations, procedural guidelines, policies, principles or
practices and avoid IUEEU expenditures to prevent disallowance in audit.

F. Status of Suspensions, Disallowances and Charges

Shown below is the status of the audit suspensions, disallowances and charges
issued as of December 31, 2020:

Summary of NSs, NDs and NCs Issued and Settlements

Amount in PhP
Beg. Balance Movement during the This Period Ending Balance
Particulars year not disclosed in (January 1 to December 31,
(As of 2020) (As of December
Operating Uni
January 1, 2020) NS/ND/NC NSSDC 31, 2020)
Management Letters
NS 7,994,172,020.38 4,518,737.15 439,659,279.68 357,333,206.36 8,081,016,830.85
ND 712,884,980.74 9,557,007.17 29,659,723.63 33,344,199.57 718,757,511.97
NC 1,227,776.28 0.00 0.00 25,000.00 1,202,776.28
Total 8,708,284,777.40 14,075,744.32 469,319,003.31 390,702,405.93 8,800,977,119.10

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G. Status of Implementation of Prior Years Audit Recommendations

Of the 151 audit recommendations in prior years, 136 were implemented which
includes recommendations that are Fully Implemented by the Management; and reiterated
Audit Observations in Part II of CY 2020 CAAR with revised/updated information and
recommendations. While 15 were not implemented which includes recommendations that
are Partially Implemented and Not Yet Implemented by the Management the details of
which are shown in Part III of this Report,

We enjoin management to ensure full implementation of all audit

recommendations to improve the financial and operational efficiency of the DOH, as
well as reliability on financial statements of the agency.

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