IMPOSING THE PENALTY OF SEVERE REPRIMAND WITH A WARNING ON OFFICER-IN-CHARGE/REGIONAL DIRECTOR RENATO F. HERRERA OF THE DEPARTMENT OF AGRARIAN REFORM-REGION IV

This refers to the administrative complaint filed against
Officer-in-Charge/Regional Director Renato F. Herrera of the Department
of Agrarian Reform (DAR) – Region IV (formerly OIC-RD of Region III) for
gross dishonesty, conduct prejudicial to the best interest of the
service, gross neglect of duty, gross misconduct, and violation of Sec. 3
(e) of Republic Act 3019, as amended, otherwise known as the Anti-Graft
and Corrupt Practices Act.

The case arose out of the letter-complaint of demoralized DAR Region
III rank and file personnel dated July 23, 1998 addressed to this Office
charging the respondent with acts constituting graft and corruption, as
earlier mentioned. On August 1, 1998, the Presidential Commission
Against Graft and Corruption (PCAGC) received its own copy of the
complaint.

The complainants appeared to be anonymous. In line, however, with its
mandate, i.e., to investigate on its own, and considering that there
appeared to be pursuable leads based on the 1997 Annual Audit Report of
the Commission on Audit, after a fact-finding investigation, the PCAGC,
acting as the nominal complainant, filed the “Formal Charge” against the
respondent. Finding sufficient cause for an administrative
investigation, the PCAGC, in an order of April 27, 1999, required the
respondent to file his counter-affidavit.

The facts of the case are as follows:

1.  Respondent was Director III, Administrative Services, DAR
Central Office when he was designated as Officer-in-Charge/Regional
Director (OIC/RD) of Region III in Special Order No. 476, series of
1997, dated June 2, 1997 signed by Secretary Ernesto D. Garilao. He
assumed office as OIC/RD of DAR Region III on June 23, 1997 and stayed
as such until February 28, 1999, when he was assigned as OIC/RD of
Region IV effective March 1, 1999 through Special Order No. 27, series
of 1999 issued by Secretary Horacio R. Morales, Jr.;

2.  That sometime in April 1994, Disbursement Voucher No.
15-94-040583 was drawn in favor of Lit’s Litson in the amount of P6
,000.00 for the payment of meals and snacks served during the
Pre-Regional Planning Workshop held on January 11, 1994. Consequently,
LBP check no. 288838 in the amount of P6 ,000.00 was issued in the name
of Lit’s Litson as payment therefor. The disbursement voucher was
approved by the respondent in his capacity as the OIC/Assistant Regional
Director for Administrative Services of DAR Region III and the
corresponding check in his capacity as the countersigning authority; and

3.  That the 1997 Annual Audit Report on DAR Region III issued by
the Commission on Audit disclosed audit findings which was the basis of
other charges leveled against the respondent, details of which are as
follows: a) illegal disbursements resulting in disallowances in the net
amount of P884,448.82; b) habitual failure to follow established
accounting rules and regulations resulting in unascertainable validity
of inventory-items for sale and fixed assets accounts; and c)
unnecessary expenditures during the celebration of the 9th anniversary
of CARP amounting to P25,375.00 and conduct of seminars/workshops in
different hotels and restaurants resulting in unnecessary expenditures
of P224,653.50 or a total of P250,028.50.

After due hearing, the Commission found that:

“There are two issues to be resolved in the case at bar, which are:
1) Whether or not the respondent is administratively responsible for
the failure of his office to withhold the caterer’s tax; and 2) Whether
or not the respondent is administratively responsible for the audit
findings in the 1997 Annual Audit Report.

I.        Failure to withhold caterer’s tax

The evidence disclosed that Disbursement Voucher No. 15-94-040583
was drawn in favor of Lit’s Litson in the amount of P6 ,000.00 for the
payment of meals and snacks served during the Pre-Regional Planning
Workshop held on 11 January 1994. A check, LBP check no. 288838 in the
amount of P6 ,000.00 in favor of Lit’s Litson was issued as payment
therefor. The respondent was found to have approved the voucher in his
capacity as the OIC/Assistant Regional Director for Administration of
DAR Region III and signed the corresponding check as countersignatory.

The transaction in question is no doubt subject to 4% caterer’s tax
pursuant to Section 114 of the National Internal Revenue Code which
reads as follows:

‘Section 114. Caterer’s Tax. — A caterer’s tax is hereby imposed as follows:

(1)     On operator or operators of restaurants, refreshment
parlors, and other eating places, including clubs and caterers, four per
centum (4%) of their gross receipts. . . .

Likewise, the responsibility of withholding the prescribed creditable
value-added tax from any payment due the seller of goods and the
designation of withholding agents have been clearly established under
Section 4 of the Bureau of Internal Revenue (BIR) Revenue Regulation No.
10-93, thus:

Section 4.     Withholding Agents Charged With the Duty to
Withhold and Remit. — All local government units, represented by the
Provincial Treasurer in provinces, the City Treasurer in cities, the
Municipal Treasurer in municipalities, and Barangay Treasurer in
barangays, the Treasurer of the GOCCs, and the Chief Accountant or any
person holding similar position and performing similar function in
national government offices, as withholding agents, shall deduct and
withhold the prescribed creditable value added-tax before making any
payment to seller of goods or employees.

In his Counter-Affidavit, respondent Herrera denied that there was
overpayment since the service contract shows that the total expenditure
to be paid was Six Thousand Pesos (P6 ,000.00) and the amount disbursed
by government was the same amount of Six Thousand Pesos. Further,
respondent Herrera averred the following:

‘1.      That even assuming that there was a need to withhold
taxes, there can be no liability when there is no obligation imposed.
The obligation to pay the taxes assuming that taxes are indeed required,
falls on the supplier of the services or food and not on the
respondent;

2.       That Section 4 of BIR Revenue Regulation No. 10-93
designates the Chief Accountant as the withholding agent tasked with the
duty to deduct and withhold the prescribed creditable value added tax
before making any payment to the seller of goods or employees;

3.       That the approval of the voucher and the signing of the
check which resulted in the alleged overpayment was a mere ministerial
act on the part of the respondent since the duty to withhold taxes, if
any, is lodged with the Office of the Chief Accountant of DAR Region
III, and not on the respondent.

“It is established that the contract between DAR Region III and Lit’s
Litson for the latter to serve the meals and snacks of participants of
the Pre-Regional Planning Workshop on the 11th of January 1994 is
subject to the caterer’s tax equivalent to 4% of the gross receipt
pursuant to Section 114 of the National Internal Revenue Code.

A close examination of Disbursement Voucher No. 15-94-040583 shows
that a withholding tax equivalent to 4% of the gross amount of P6,000.00
or P240.00 was withheld by means of account 8-84-1-100 resulting in a
net amount due the seller of P5,760.00 shown by means of account
8-70-707. Contrary however to the accounting entries in the voucher, the
check issued as payment therefor, LBP check no. 2888838 dated 18 April
1994 was in the gross amount of P6 ,000.00, instead of the net amount of
P5,760.00.

The error resulted in the failure of DAR Region III to withhold the
caterer’s tax that should have been deducted from the gross amount due
Lit’s Litson for remittance to the BIR pursuant to Sec. 4 of BIR Revenue
Regulation No. 10-93.

The respondent, not only as OIC/Assistant Regional Director of
Administration of DAR Region III but approving official of the voucher
and signatory to the check cannot, and should not be allowed to
conveniently pass on to his subordinates, in this case, the Chief
Accountant, his fiscal duties and responsibilities in line with the
principle of primary responsibility enunciated under Section 102 of
Presidential Decree No. 1445, which reads as follows;

‘Section 102.    Primary and secondary responsibility. — (1) The
head of any agency of the government is immediately and primarily
responsible for all government funds and property pertaining to his
agency. . . .

While it is true that there was no overpayment committed, respondent
Herrera is found remiss of his duties and responsibilities as the
Officer-in-Charge for the failure of his office to withhold the
caterer’s tax.”

II.  Audit Findings in the 1997 Annual Audit Report

“There are three charges leveled against the respondent based on
the 1997 Annual Audit Report, namely: a) illegal disbursement resulting
in disallowances in the net amount of P884 ,448.82; b) habitual failure
to follow established accounting rules and regulations resulting in
unascertainable validity of inventory-items for sale and fixed assets
accounts; and c) unnecessary expenditures of P250,028.50 as a result of a
Value For Money Audit.”

A. Illegal disbursement resulting in disallowances in the net amount of P884 ,448.82.

“The post-audit by the Commission on Audit on the 1997 transactions
resulted in disallowances of P891 ,234.52, while settlement during the
year amounted to P6,785.70, thus leaving a balance of P884,448.82 at the
end of the year.

The bulk of the disallowances represents the payment of additional
anniversary bonus (P6 ,000.00 per employee) which was disallowed by the
Auditor on the ground that such payment was without legal basis.

Respondent Herrera declared in his Counter-Affidavit that he was not
yet in DAR Region III Office when the alleged unlawful disbursement was
made as he was still assigned to the DAR Central Office, therefore, he
could not be made to answer to charges which occurred prior to his
designation to the post. To support his claim, he submitted copies of
DAR Special Order No. 476 dated 2 June 1997 which designated the
respondent as OIC/RD of DAR Region III and the certification of Ms.
Josephine K. Aguinaldo, Chief, Personnel Section of DAR Region III that
respondent assumed office in compliance with said Order on 23 June 1997.

It is established clearly based on the Certificate of Settlement and
Balances and the Notices of Disallowance issued for the purpose that the
transactions subject of disallowance occurred within the period from 25
September 1996 to 1 April 1997, during which time the respondent was
not the OIC/RD of DAR Region III but the Director III of the
Administrative Services of DAR Central Office.

Hence, respondent Herrera has proven that he had no participation on the transactions subject of disallowance.

“B.     Habitual failure to follow established accounting rules
and regulations resulting in unascertainable validity of inventory –
items for sale and fixed assets accounts.

The Audit Certificate issued by the Auditor as part of her Annual
Audit Report from 1994 to 1997 clearly shows that the Auditor had
consistently rendered no opinion on the financial statements of DAR
Region III in view of the unascertainable validity of inventory – items
for sale and fixed assets accounts with combined amount of P105M.

In his Counter-Affidavit, respondent Herrera asserted that: a) he
should not be held responsible for the alleged habitual failure to
follow established accounting rules and regulations because he only
assumed office in DAR Region III on 23 June 1997 shortly before the COA
conducted its 1997 annual audit; b) granting that there was habitual
failure to follow established accounting rules and regulations, it
should not be blamed on his administration because the period between
his assumption of office, and the conduct of the 1997 annual audit of
COA was too short to implement the necessary corrective measures and
could hardly be said to be habitual; and c) the COA report indicates
that the office has been complying with the recommendations of the
Auditor.

The evidence on hand undoubtedly placed the date of assumption of
respondent Herrera as OIC/RD of DAR Region III on the 23 of June 1997.
Considering that the 1997 audit covered the period from 1 January to 31
December, the time was indeed so short for the respondent to institute
the necessary corrective measures to solve the accounting problem
plaguing the DAR Region III for several years which the respondent
inherited from his predecessors.

Additionally, the Auditor in the 1994 and 1996 Annual Audit Reports
under Part III – Status of Implementation by Management of Prior Year’s
Recommendations reported that there were efforts exerted in the past to
address the accounting problem but was not completed due to some
resignations of concerned employees.

Thus, respondent Herrera, considering the timing of his assumption to
office, cannot be held responsible for the lapses of internal control
committed by his predecessors.

C. Unnecessary expenditures of P25 ,028.50 as a result of a Value For Money Audit.

DAR Region III celebrated its 9th CARP Anniversary on 13 June 1997.
As part of the celebration, a reservation for 350 expected guests and
awardees was made in a restaurant at P203.00 per person even without
confirming their attendance. In view of this lapse in planning, it
resulted in the non-appearance of 125 expected guests and awardees
during the celebration. In spite of this, DAR Region III paid in full
the reservation for 350 persons, resulting in wasteful expenditure of
P25,375.00 (125 x 203).

When the celebration occurred, the respondent was not the incumbent
regional director then since he assumed as OIC/RD of DAR Region III only
on 23 June 1997 or ten (10) days after the celebration.

The DAR Region III conference room has accommodation capacity of more
or less 50 persons, equipped with airconditioners and sound systems
necessary in the conduct of trainings/workshops. DAR Ladies Association
(DARLA) is available to provide the catering services at P150.00 per
person for meals and snacks; its capability has been proven when the DAR
Region III entered into a contract with it during a workshop on 14
October 1997 to serve meals and snacks for 70 participants at P150.00
per person.

The availability of appropriate training/workshop venue in the
regional office notwithstanding, during the year 1997, out of the twenty
five (25) in-house trainings and workshops conducted, eight (8) were
conducted in different hotels and restaurants in the cities of Baguio
and Angeles and the provinces of Laguna and Tarlac within the period 22
January 1997 to 17 October 1997 in violation of Section 396 (b), Volume
I, Government Accounting and Auditing Manual.

Based on the analysis of the Auditor (Annex 6 of AAR), the 8
workshops/sessions had cost DAR Region III a total of P305,953.50; had
these been conducted using the facilities of DAR Region III and DARLA
catering at P150.00 per person, it would cost P81,300.00 only or a
variance of P224,653.50.

During the incumbency of the respondent, three (3) out of the eight
(8) workshops/sessions were conducted outside the DAR Regional Office
involving expenditure in the amount of P104,460.50; compared to if the
facilities of DAR Region III and DARLA catering were used, it would cost
P28,800.00 only or variance of P75,660.50.

Audit findings on unnecessary expenditures were the result of a Value
For Money Audit, thus, there is no record that said expenditures were
suspended or disallowed in audit.

Respondent Herrera in his Counter-Affidavit asserted that the
allegation that Two hundred twenty four thousand six hundred fifty three
and fifty centavos (224,653.50) have been unnecessarily spent in
strategic Planning Workshops/Value Enhancement Sessions because they
were not done in the DAR premises is mere speculation. He further
averred as follows:

‘1)      That DAR premises are not suited to host such activities
because of repairs it will require to become usable for such activities
and such repairs will definitely cost more than what was actually spent;

2)      That the training and seminars took more than one day and
require an overnight stay, which is not possible using the DAR premises
as there are no lodging facilities in the DAR conference room;

3)      That the comparison made between what was expended and the
DARLA charges is not accurate as the charges included lodging while that
of DARLA only included food;

4)      That it was not the respondent’s responsibility to run
these trainings and seminars but that of a division and respondent
should be accorded the reasonable assumption that he may rely on the
sound judgment of his subordinates in such matters; and

5)      That COA Report only recommends the utilization of the
available facilities of the regional office as an alternative venue for
its seminars and workshops, which means that such activities may be held
outside the premises of the regional office, provided such is
justified.

“Section 396 of Volume I of Government Accounting and Auditing Manual
provides the regulations on the conduct of government training and
development programs, quoted hereunder:

Section 396. Regulations on the conduct of government training and development programs. — Programs and allowances:

‘a.      The head of the agency shall be responsible for
approving the training and development programs of their respective
agencies. Likewise, accreditation of such programs for purposes of
personnel actions shall be the responsibility of the head of agency.

b.       All government agencies may conduct in-house training
programs for the development and productivity of agency personnel with
the use of minimal expenses for:

1.      x x x.

5.      x x x

For this purpose, training programs shall refer to those activities
involving instruction and strategies whereby participants will be
required to undergo manual or practical exercises and action learning as
a means of strengthening work and job related skills. In all instances
of training administration, efforts shall be exerted in utilizing
available resources and government facilities.

After careful review of records, the observations of the auditor appeared to be more credible than the claim of the respondent.

By authorizing the conduct of two (2) seminars/workshops at Blake
Hotel, DAU, Mabalacat, Pampanga and another one at Villa Consolacion,
Baguio City, he failed to exercise due prudence in the use of government
funds as head of DAR Region III who is primarily responsible therefor,
in violation of Section 396, Volume I of the Government Accounting and
Auditing Manual and the declared State Policy as provided for in Section
2 of Presidential Decree No. 1445 which reads as follows:

Section 2.     Declaration of Policy. — It is the declared 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 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 of the
government agency concerned.

Recapitulating therefore, the Commissions finds that: a) the
respondent is guilty on the first charge for negligence in the
performance of his duty when his office failed to withhold the caterer’s
tax; b) the second and third charges are without merit; and c) the
respondent is guilty on the fourth charge to the extent of transactions
he participated in for his failure to exercise due diligence of a good
father of a family in the use of government funds and resources which is
tantamount to negligence in the performance of official duty. However,
respondent’s conduct may not be so grave as to deserve a serious
penalty.”

On the basis of the foregoing premises, the PCAGC recommended that respondent be severely reprimanded, with warning.

The findings and conclusions of the PCAGC, supported as they are by,
or at least reasonably inferable from, substantive evidence on record
commend themselves for concurrence.

WHEREFORE, in view of the foregoing and as recommended by the
Presidential Commission Against Graft and Corruption, respondent
Officer-in-Charge/Regional Director RENATO F. HERRERA of the Department
of Agrarian Reform Region IV is hereby SEVERELY REPRIMANDED WITH A
WARNING that a repetition of the same shall be dealt with more
drastically.

Adopted: 29 May 2000

(SGD.) RONALDO B. ZAMORA
Executive Secretary