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TABLE OF CONTENTS

I. Mandates and Organizational Outcomes

Figure 1 DOT Budget Diagram and Organizational Outcomes, 2019 1

II. Sources of Appropriations

Table 1 DOT Sources of Funds, 2015-2019 2

Table 1.1 Sources of Funds (Office of the Secretary), 2015-2019 3

III. Expenditure Program

Table 2 Expenditure Program by Agency, 2015-2019 4

Table 3 Expenditure Program by General Expense Class, 2015-2019 5

Table 4 Unfilled Positions by Agency, 2015-2019 5

Table 5 Regional Distribution of the (Department) Budget, 2017-2019 6

IV. New Appropriations

Table 6 New Appropriations by Agency, 2015-2019 7

Table 7 Summary of Programs for 2018-2019 7 Table 8 DOT-OSEC Operations Budget by Organizational Outcome,

Program and General Expense Class, 2019 8

V. Performance Review

Table 9 Obligation-Appropriations Ratio (%), 2013-2017 9

Table 10 Unused Appropriations, 2013-2017 9

Table 11 Obligation-Allotment Ratio (%) by General Expense Class, 2013-2017 10

Table 12 Performance Indicators by Organizational Outcome, 2016-2017 10

Table 13 Performance Indicators of Major Programs, 2018-2019 11

VI. COA Findings and Recommendations

Table 14 Status of Implementation of COA Recommendations 12

(as of December 31, 2017)

Table 15 COA Auditor’s Opinions, 2013-2017 13

HIGHLIGHTS

Sources of Appropriations. The total cash-based budget of the Department of Tourism and its

attached agencies amounts to P3.39 billion in 2019, lower by P133.4 million from the P3.52

billion obligation-based budget in 2018.

Expenditure Program. The share of the Office of the Secretary will increase to 90.9 percent in

the 2019 cash-based budget of the Department of Tourism while those of the Intramuros

Administration and National Parks Development Committee will go down to 1.9 percent and

7.1 percent, respectively. Nearly 80 percent of the total obligations of Department of Tourism

and its attached agencies in 2019 will be allotted for maintenance and other operating expenses

(MOOE) amounting to P2.6 billion, followed by personal services (PS) at 20.1 percent, and

capital outlay (CO) at 1.6 percent. The share of PS to the total budget in 2019 will increase

while that of the MOOE and CO will decline.

Regional Allocation. Bulk of the Department of Tourism budget is allocated to NCR which

accounts for 89.8 percent of the total budget in 2019. The share of the other regions in 2019

which are all below one percent of the total budget have remained relatively steady compared

to their shares in 2018. The highest allocation was cornered by Region 6 amounting to P32.1

million or 0.9 percent of the total.

New Appropriations. The proposed new cash-based appropriations of the Department of

Tourism and its attached agencies for 2019 amounts to P3.34 billion. The Office of the

Secretary and the two attached agencies will get lower allocations for 2019 compared to the

obligation-based 2018 budget.

Allocation by Major Programs. The Department of Tourism-Office of the Secretary will implement the bulk of the programs for 2019. The Market and Product Development Program will corner 68.0 percent of the total program budget amounting to P1.6 billion, of which P1 billion will be used for the Branding Campaign Program. Other major programs are on Tourism Policy Formulation and Planning Program (P252.0 million), Tourism Industry Training Program (P155.5 million), and Parks Management Program (P153.6 million).

Budget Utilization and Unused Appropriations. For the last five years, the Department of Tourism- Office of the Secretary was able to obligate an average of 93.1 percent out of its total available appropriations. In terms of the amount of unused appropriations, the Office of the Secretary recorded an average of P200.2 million for the period 2013-2017, recording as high as P333.5 million in 2016. The National Parks Development Committee and Intramuros Administration posted an average of unused appropriations amounting to P22.3 million and P900,000, respectively, during the period.

Performance Assessment. The 2017 targets for the performance indicators of the organizational outcome - increasing tourism revenues, employment and arrivals - were achieved. The actual growth rate in tourism direct Gross Value-Added of 63 percent was significantly higher than the 9 percent target but the actual percentage increase in tourism employment only met the target of 2 percent or 5.3 million. The actual number of tourist arrivals also exceeded the targets.

Compliance of Audit Recommendations of COA. Based on the 2017 report of the Commission on Audit (COA), the Office of the Secretary has fully implemented 34.0 percent or 16 out of the 47 recommendations and partially implemented the remaining 66.0 percent. The Intramuros Administration managed to implement almost half of the 32 COA recommendations, 31.3 percent was partially implemented and 21.9 percent not implemented. The National Parks Development Committee had the highest percentage of unimplemented recommendations at 44.8 percent or 13 out of 29.

Audit Opinions. The opinions of auditors on the audit of the financial statements of the

Department of Tourism- Office of the Secretary and its attached agencies have remained the

same – qualified - for 2016 and 2017. Some of the significant observations of the 2017 audit

of the Office of the Secretary include the following:

i) No monitoring and evaluation on the PAPs of the 12 Philippine Tourism Offices (PTOs).

ii) Unutilized Tourism Development Fund (TDF) amounting to P49.9 million. iii) Possible conflict of interest on the Memorandum of Agreement (MOA) for the airing of

Department of Tourism Television Commercial (TVC).

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DEPARTMENT OF TOURISM

I. MANDATE AND ORGANIZATIONAL OUTCOMES

1.1 The Department of Tourism (DOT) was established by virtue of Presidential Decree No. 189

and was reorganized structurally and functionally under Executive Order No. 120. It has the

mandate to encourage, promote and develop tourism as a major socio-economic activity to

generate foreign currency and employment, spread the benefits of tourism to a wider segment

of the population with the support and cooperation of both the private and public sectors, and

assure the safe, convenient, enjoyable stay and travel of both foreign and local tourists in the

country.

1.2 Under the Tourism Act of 2009 (Republic Act No. 9593), the DOT is directed to be the

primary planning, programming, coordinating, implementing and regulatory government

agency in the development and promotion of the tourism industry, both domestic and

international, in coordination with its attached agencies and other government institutions. It

is also tasked to instill in the Filipino the industry’s fundamental importance in the generation

of employment, investment and foreign exchange.

FIGURE 1

DOT BUDGET DIAGRAM AND ORGANIZATIONAL OUTCOMES, 2019

Note: Totals may not add up due to rounding off.

Source: NEP 2019

This document was prepared by Rosemarie R. Sawali as an input to the deliberations of the House Committee on Appropriations on the FY 2018 proposed National Budget. The report benefitted from the inputs of Director Elsie C. Gutierrez and Executive-Director Manuel

P. Aquino, and the overall guidance of Director-General Romulo E. M. Miral, Jr. The views, opinions, and interpretations in this document do not necessarily reflect the perspectives of the House of Representatives as an institution or its individual members. This Agency Budget Notes is available online at http://cpbrd.congress.gov.ph/.

DEPARTMENT OF TOURISM P3,342.8 M

Office of the Secretary (P3,044.1 M) OO1 (P2.15 B): Tourism Revenue, Employment and Arrivals Increased

Intramuros Administration (P62.8 M) OO1 (P18.7 M): Cultural Heritage Conserved OO2 (P12.4 M): Tourism Development Promoted and Visitor Experience Enriched

National Parks Development Committee (P235.8 M) OO1 (P153.6 M): National Parks Preserved and Developed OO2 (P43.9 M): Visitor Experience Enriched

OSEC 830.6

IA 19.0

NPDC 38.3

General Administration

and Support

P887.9 M (26.6%)

OSEC 61.9

IA 12.7

NPDC 0. 0

Support to Operations

P74.6 M (2.2%)

OSEC 2,151.6

IA 31.1

NPDC 197.6

Operations

P2,380.3 M (71.2%)

http://cpbrd.congress.gov.ph/

2

1.3 The DOT has one sector outcome - economic opportunities in industry and services expanded

- which is expected to contribute to the attainment of the targets of the Philippine

Development Plan 2017-2022. To achieve the sector outcome, several organizational

outcomes were identified which include: (i) tourism revenue, employment and arrivals

increased; (ii) cultural heritage conserved; (iii) tourism development promoted and visitor

experience enriched; (iv) national parks preserved and developed; and (v) visitor experience

enriched. (Figure 1).

1.4 The DOT has two attached agencies: the Intramuros Administration which is responsible for

the orderly restoration and development of Intramuros as a monument to the Hispanic period

of Philippine history, and the National Parks Development Committee which is mandated to

develop, preserve and manage parks in the country such as the Rizal and Paco Parks in Manila

and the Pook ni Maria Makiling Forest Park in Los Banos, Laguna.

II. SOURCES OF APPROPRIATIONS

2.1 The proposed budget for 2019 marks the transition to annual cash-based appropriations from

the obligations-based budget system to “promote better designed, better coordinated projects

and programs and speed up the delivery of goods and services to the people.” This system

requires that obligations or contracts for programs, activities and projects (PAPs) for

implementation during the fiscal year must be fully delivered, inspected and accepted by the

end of the year with an Extended Payment Period of up to three months of the succeeding

year. The transition is in line with the objective of modernizing the budgeting system to meet

international standards and adopt good practices.

TABLE 1

SOURCES OF FUNDS, 2015-2019


Particulars Obligation-Based Cash-Based

2015 2016 2017 2018 2019

Levels (in Million Pesos)

New Appropriations 2,478.7 3,619.7 2,529.5 3,483.7 3,342.8

Automatic Appropriations 27.5 30.7 33.1 39.7 47.2

Continuing Appropriations 107.3 157.6 336.7 0.0 0.0

Budgetary Adjustments 63.1 78.7 1,115.1 0.0 0.0

Total Available Appropriations 2,676.6 3,886.8 4,014.4 3,523.5 3,390.0

LESS: Unused Appropriations 220.6 394.9 0.0 0.0 0.0

Total Obligations/Expenditure Program 2,456.0 3,491.9 4,014.4 3,523.5 3,390.0

Percent Share (%)

New Appropriations 92.6 93.1 63.0 98.9 98.6



Budgetary Adjustments 2.4 2.0 27.8 0.0 0.0

Total Available Appropriations 100.0 100.0 100.0 100.0 100.0

Sources of basic data: NEP 2017-2019

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2.2 As a result of the change in the budget system, the total budget of the DOT and its attached

agencies for 2019 is composed only of new and automatic appropriations as opposed to

previous years when these were supplemented by continuing and budgetary adjustments. It

should be noted that the budget of the DOT can still be supplemented by budgetary

adjustments, e.g., hosting of special events like the ASEAN meeting. On the other hand,

continuing appropriations from unused appropriations of the previous fiscal years will not be

carried over.

The total budget of the DOT and its attached agencies amounts to P3.39 billion, lower than

the P3.52 billion obligation-based budget in 2018. The proposed new appropriations for 2019

amounting to P3.34 billion is also lower by P140.9 million compared to 2018. Note that the

obligation-based 2018 budget and the cash-based 2019 budget are comparable because they

have the same sources of funds – new and automatic appropriations. (Table 1)

2.3 In previous years, these additional sources of funds have significantly contributed to the total

available budget for the DOT and its attached agencies. The amount provided by these sources

reached as high as P1.5 billion in 2012 on account of budgetary adjustments of the DOT Office

of the Secretary budget from the Office of the President (P749.6 million) for the hosting of

the 50th ASEAN Summit and from the National Disaster Risk Reduction and Management

Fund (P330.1 million) in relation to the Yolanda Rehabilitation Program (Table 1.1).

2.4 The ratio of new appropriations to total available appropriations will significantly improve

from 61.7 percent in 2017 to 99.0 percent and 98.7 percent in 2018 and 2019, respectively.

TABLE 1.1

SOURCES OF FUNDS, 2015-2019

DOT OFFICE OF THE SECRETARY

Particulars Obligation-Based Cash-Based

2015 2016 2017 2018 2019

New Appropriations 2,286.3 2,966.3 2,275.5 3,107.4 3,044.1


of which: RLIP * 21.2 21.8 25.9 27.8 34.2

Special Account 0.0 2.3 0.0 4.6 4.6


Budgetary Adjustments 51.7 59.4 1,109.6 0.0 0.0

Transfers from: 51.7 59.4 1,109.6 0.0 0.0

Office of the Pres

The President's Offices 0.0 0.0 749.563 0.0 0.0

NDRRMF (Calamity Fund) 0.0 0.0 330.133 0.0 0.0

Miscellaneous and Personnel Benefit Funds

42.6 47.6 22.781 0.0 0.0

Pension Gratuity Fund 9.1 11.8 7.138 0.0 0.0

Total Available Appropriations 2448.5 3204.4 3690.8 3139.7 3082.9

LESS: Unused Appropriations 204.5 333.5 295.5 0.0 0.0

Total Obligations/Expenditure Program 2244.0 2870.9 3395.3 3139.7 3082.9

New Appro/Total Available Appro Ratio (%) 93.4 92.6 61.7 99.0 98.7

* RLIP - Retirement and Life Insurance Premiums Sources of basic data: NEP 2017-2019

4

2.5 Additional funds are made available for the DOT under the Special Provisions of the 2019

National Expenditure Program (NEP). One is through the Tourism Development Fund

amounting to P4.6 million which shall be used for the development, promotion, and marketing

of tourism in the country. This fund is sourced from the accreditation, identification card,

sticker and code fees. Another is Trust Receipts from Income from Merchandising Operations

of the Duty Free Philippines amounting to P150 million to be used for tourism-related projects

and activities.

III. EXPENDITURE PROGRAM

3.1. The budget of the DOT and its attached agencies will amount to P3.39 billion in 2019 arising

from new and automatic appropriations. While the 2019 cash-based budget may not be

directly comparable with the 2018 obligation-based budget, the marginal difference in the

budget of the OSEC amounting to P56.9 million implies that it will need to hasten its

spending given that it has only a year to implement the programs and settle the payments

with the suppliers/contractors. The share of the OSEC will increase to 90.9 percent in the

2019 cash-based budget of the DOT while those of the IA and NPDC will go down to 1.9

percent and 7.1 percent, respectively.

TABLE 2

EXPENDITURE PROGRAM BY AGENCY, 2015-2019

(AMOUNTS IN MILLION PESOS)

Particulars 2015 2016 2017 2018 2019

(Cash-Based)

Nominal Amount

OSEC 2244.0 2870.9 3395.3 3139.7 3082.9

IA 42.1 449.1 43.9 92.5 65.9

NPDC 169.9 171.9 263.0 291.2 241.3

Total Department 2456.0 3491.9 3702.2 3523.5 3390.0

Share to Total Department (%)

OSEC 91.4 82.2 91.7 89.1 90.9

IA 1.7 12.9 1.2 2.6 1.9

NPDC 6.9 4.9 7.1 8.3 7.1


Sources of basic data: BESF 2017- 2019

3.3 Nearly 80 percent of the total obligations of the DOT and its attached agencies in 2019 will be

allotted for maintenance and other operating expenses (MOOE) amounting to P2.6 billion,

followed by personal services (PS) at 20.1 percent, and capital outlay (CO) at 1.6 percent. The

share of PS to the total budget in 2019 will increase while that of the MOOE and CO will

decline. The budget for financial expenses (Fin Ex) which is lodged with the OSEC accounts

for only 0.1 percent of the total budget. Financial expenses includes management

supervision/trusteeship fees, interest expenses, guarantee fees, bank charges, commitment fees

and other financial charges incurred in owning or borrowing an asset property. (Table 3)

5

3.4 The share of unfilled positions of the DOT OSEC to total authorized positions declined from

35.3 percent in 2016 to 28.6 percent in 2018 and is expected to remain the same in 2019. At

an average of 215 unfilled positions representing 29.7 percent share to authorized positions

for the period 2015 -2019, the DOT OSEC should consider studying whether these positions

are still needed to free up resources for other productive uses. The number of unfilled

positions of the IA and NPDC for 2017 to 2019 have remained the same at 6 and 21 or 10.2

percent and 9.3 percent share, respectively. (Table 4)

TABLE 3

EXPENDITURE PROGRAM BY GENERAL EXPENSE CLASS, 2015-2019


Particulars 2015 2016 2017 2018 2019 (Cash-Based)

Amount % Amount % Amount % Amount % Amount %

PS 304.6 13.6 380.0 13.2 444.4 13.1 489.3 15.6 575.0 18.7

MOOE 1933.9 86.2 2487.3 86.6 2661.0 78.4 2606.5 83.0 2490.8 80.8

CO 2.8 0.1 2.1 0.1 288.5 8.5 40.4 1.3 13.5 0.4

Fin Ex 2.7 0.1 1.5 0.1 1.4 0.0 3.6 0.1 3.6 0.1

Total, OSEC 2244.0 100.0 2870.9 100.0 3395.3 100.0 3139.7 100.0 3082.9 100.0

PS 24.2 57.5 26.6 5.9 29.4 67.1 26.6 28.7 37.5 56.9

MOOE 17.9 42.5 12.5 2.8 14.5 32.9 39.9 43.2 22.1 33.5

CO - - 410.0 91.3 - - 26.0 - 6.3 -

Fin Ex - - - - - - - - - -

Total, IA 42.1 100.0 449.1 100.0 43.9 100.0 92.5 100.0 65.9 100.0

PS 63.9 37.6 73.9 43.0 69.2 26.3 65.9 22.6 69.1 28.6

MOOE 100.7 59.3 91.9 53.5 126.7 48.2 152.8 52.5 136.5 56.6

CO 5.3 3.1 6.1 3.5 67.1 25.5 72.5 24.9 35.7 14.8

Fin Ex - - - - - - - - - -

Total, NPDC 169.9 100.0 171.9 100.0 263.0 100.0 291.3 100.0 241.3 100.0

PS 392.7 16.0 480.5 13.8 543.0 14.7 581.7 16.5 681.6 20.1

MOOE 2052.6 83.6 2591.7 74.2 2802.1 75.7 2799.2 79.4 2649.4 78.2

CO 8.1 0.3 418.2 12.0 355.7 9.6 138.9 3.9 55.5 1.6

Fin Ex 2.7 0.1 1.5 0.04 1.4 - 3.6 0.1 3.6 0.1

Total, Department

2456.0 100.0 3491.9 100.0 3702.2 100.0 3523.5 100.0 3390.0 100.0

Sources of basic data: BESF 2017- 2019

TABLE 4

UNFILLED POSITIONS BY AGENCY, 2015-2019

Agency Number of Unfilled Positions Share to Authorized Positions (%)

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

OSEC 134 263 255 212 212 22.2 35.3 33.8 28.6 28.6

IA 10 12 6 6 6 16.9 20.3 10.2 10.2 10.2

NPDC 21 21 21 21 21 9.3 9.3 9.3 9.3 9.3

Source: Staffing Summary 2017-2019

3.5 In terms of regional distribution, the bulk of the DOT budget is allocated to the National

Capital Region (NCR). In 2019, the allocation of NCR amounts to P3.0 billion which accounts

6

for 89.8 percent of the total budget in 2019, which is marginally lower compared to the 90.7

percent share in 2018. The share of the other regions in 2019 which are all below one percent

of the total budget have remained relatively steady compared to their share in 2018. The

second highest allocation was cornered by Region 6 amounting to P32.1 million.

Note that for 2017, the actual total DOT budget was higher by 44.4 percent or P1.1 billion

compared to what was provided for under the GAA. The NCR got the highest increase

reaching P2.78 billion, P2.5 billion or 866.3 percent higher compared to GAA allocation,

followed by Region 8 with P331.6 million or 2,116.6 percent growth. Apparently, the

budgetary requirements of the Central Office has been lumped under the NCR. To allow

proper comparison of the budget allocation to the different regions, it is important to separate

the allocations/expenditures strictly attributable to the operations of the NCR as a regional

office from that of the Central Office.

TABLE 5

REGIONAL DISTRIBUTION OF THE DOT BUDGET, 2017-2019


Region

Amounts Share to Total (%)

2017 2018

2019 2017 2018

2019

GAA Actual Cash-Based GAA Actual Cash-Based

Nationwide - - - - - - - -

Central Office 1,941.5 - - - 75.7 - - -

NCR

287.8

2,780.4

3,196.4 3,044.3

11.2

75.1

90.7 89.8

CAR

21.5

35.9

24.1 24.0

0.8

1.0

0.7 0.7

Region 1

23.4

46.3

26.4 28.2

0.9

1.3

0.7 0.8

Region 2

13.2

28.3

15.4 17.4

0.5

0.8

0.4 0.5

Region 3

19.6

38.2

23.1 22.5

0.8

1.0

0.7 0.7

Region 4A

21.9

38.8

24.2 25.9

0.9

1.0

0.7 0.8

Region 4B

19.1

35.0

21.5 24.1

0.7

0.9

0.6 0.7

Region 5

16.2

44.0

18.6 21.8

0.6

1.2

0.5 0.6

Region 6

27.5

44.7

30.1 32.1

1.1

1.2

0.9 0.9

Region 7

23.8

58.0

24.9 26.4

0.9

1.6

0.7 0.8

Region 8

15.7

347.3

28.0 18.1

0.6

9.4

0.8 0.5

Region 9

16.6

25.1

18.9 20.0

0.6

0.7

0.5 0.6

Region 10

15.5

30.2

17.7 18.9

0.6

0.8

0.5 0.6

Region 11

21.6

34.2

22.4 28.2

0.8

0.9

0.6 0.8

Region 12

16.2

33.8

18.5 20.4

0.6

0.9

0.5 0.6

CARAGA

63.6

81.7

13.2 17.6

2.5

2.2

0.4 0.5

ARMM - - - - - - - -

TOTAL DOT Budget 2,564.5 3,702.2 3,523.5 3,390.0 100.0 100.0 100.0 100.0

Source: Updated BESF Based on 2017 GAA and BESF 2019

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IV. NEW APPROPRIATIONS

4.1 The proposed new cash-based appropriations of the DOT and its attached agencies for 2019

amounts to P3.34 billion. The OSEC and the two attached agencies will get lower allocations

for 2019 compared to the obligation-based 2018 budget. (Table 6)

TABLE 6

NEW APPROPRIATIONS BY AGENCY, 2015-2019


Particulars 2015 2016 2017 2018 2019

(Cash-Based)

Nominal Amount

OSEC 2286.3 2966.3 2275.5 3107.4 3044.1

IA 39.2 444.2 40.1 90.3 62.8

NPDC 153.3 209.2 213.9 286.1 235.8


Share to Total Department (%)

OSEC 92.2 81.9 90.0 89.2 91.1

IA 1.6 12.3 1.6 2.6 1.9

NPDC 6.2 5.8 8.5 8.2 7.1


Sources of basic data: GAA 2015- 2018 and NEP 2019

TABLE 7

SUMMARY OF PROGRAMS FOR 2018-2019


Program Implementing

Agency

Amount (In Million Pesos)

% Share to Total Program

2018 2019

(Cash-Based) 2018 2019

Tourism Policy Formulation and Planning Program

OSEC 255.9 252.0 10.3 10.6

Tourism Industry Training Program OSEC 160.2 155.5 6.4 6.5

Standards Development and Enforcement Program

OSEC 124.1 125.3 5.0 5.3

Market and Product Development Program OSEC 1654.5 1618.7 66.4 68.0

Intramuros Property Conservation & Devt Program

Intramuros Administration

31.0 14.4 1.2 0.6

Intramuros Commercial Property Leasing Program

Intramuros Administration

2.5 4.3 0.1 0.2

Intramuros Tourism Promotions Program Intramuros Administration

4.9 3.9 0.2 0.2

Intramuros Regulatory Program Intramuros Administration

31.3 8.5 1.3 0.4

Parks Management Program NPDC 205.4 153.6 8.2 6.5

Cultural and Events Program' NPDC 21.8 43.9 0.9 1.8

Total Programs 2491.6 2380.3 100.0 100.0

Source: GAA 2018 and NEP 2019

4.2 The bulk of the programs for 2019 will be implemented by the OSEC. (Table 7) The Market

and Product Development Program will corner 68.0 percent of the total program budget

amounting to P1.6 billion, of which P1 billion will be used for the Branding Campaign Program

8

under locally-funded projects. In the past, allocation for the Branding Campaign Program

which was previously lodged under the budget for projects has been provided with substantial

amounts as high as P1.15 billion in the 2016 General Appropriations Act (GAA). Other major

programs are the Tourism Policy Formulation and Planning Program (P252.0 million),

Tourism Industry Training Program (P155.5 million), and Parks Management Program

(P153.6 million).

4.3 There are four programs under total operations supporting the attainment of the OSEC’s

organizational outcome -Tourism Revenue, Employment and Arrivals Increased. (Table 8) By expense

class, the allocation for MOOE will account for 92.1 percent amounting to nearly P2 billion

of the total budget for the achievement of the OSEC’s organizational outcome. The budget

for Program 4 or Market and Product Development Program will amount to P1.6 billion or

more than three fourth of the total operations budget of the OSEC. The budget was allocated

between market and product development (P618.7 million) and the Branding Campaign

Program (P1 billion).

TABLE 8

DOT OSEC OPERATIONS BUDGET BY ORGANIZATIONAL OUTCOME

BY PROGRAM AND GENERAL EXPENSE CLASS, 2019

Particulars Levels (In Million Pesos

PS MOOE Fin Ex CO Total

OO: Tourism Revenue, Employment and Arrivals Increased

161.3 1981.6 2.6 6.1 2151.6

Tourism Policy Formulation and Planning Program 93.0 152.9 0.1 6.1 252.0

Tourism Industry Training Program 8.0 147.5 - - 155.5

Standards Development and Enforcement Program 43.1 82.2 0.0 - 125.3

Market and Product Development Program 17.2 1599.0 2.5 - 1618.7

Total Operations 161.3 1981.6 2.6 6.1 2151.6

Particulars Share to Total Operations (%)

PS MOOE Fin Ex CO Total


7.5 92.1 0.1 0.3 100.0

Tourism Policy Formulation and Planning Program 4.3 7.1 0.0 0.3 11.7

Tourism Industry Training Program 0.4 6.9 0.0 0.0 7.2

Standards Development and Enforcement Program 2.0 3.8 0.0 0.0 5.8

Market and Product Development Program 0.8 74.3 0.1 0.0 75.2

Total Operations 7.5 92.1 0.1 0.3 100.0

Source of basic data: NEP 2019

The Standards Development and Enforcement Program will receive the smallest allocation

amounting to P125.3 million or 5.8 percent of the total OSEC operations budget. Bulk of the

allocation under this program is for tourism standards development, regulation and accreditation,

monitoring and enforcement. Several issues which have surfaced in relation to the accreditation

function of the DOT are worth looking into. The results of the 2014 Survey of Tourism

Establishments in the Philippines (STEP) of the Philippines Statistics Authority (released on

September 2017) showed that only 23.8 percent out of the 39,235 establishments under

tourism characteristic industry was accredited by the DOT.

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Quoting the letter of Undersecretary for Tourism Regulation, Coordination and Resource

Generation Alma Rita R. Jimenez to Philippine Councilors League President Luis “Chavit”

Singson, the Business Mirror (2017) reported that the latest survey of the DOT’s Office of

Tourism Standards and Regulation (OTSR) showed that 1,479 out of 2,995 travel and tour

agencies and tourist transport operators or 49.4 percent was non-accredited with the DOT. It

was also mentioned that the OTSR received a total of 59 complaints filed against tourism

entities not accredited with the DOT in 2016 while another nine complaints were received in

the first quarter of 2017.

V. PERFORMANCE REVIEW

5.1 For the last five years, the DOT OSEC was able to obligate on the average 93.1 percent of its

total available appropriations. The utilization rate of the OSEC steadily declined until 2016 to

89.6 percent but slightly increased to 92.0 percent in 2017. (Table 9) The IA recorded the

highest average utilization rate at 98.0 percent, even reaching 100 percent in 2014. The NPDC

recorded the lowest average utilization rate at 90.4 percent during the period.

TABLE 9

OBLIGATION-APPROPRIATIONS RATIO (%), 2013-2017

Particulars 2013 2014 2015 2016 2017

OSEC 97.9 94.2 91.6 89.6 92.0

Intramuros Administration 91.3 100.0 98.7 99.9 100.0

National Parks Development Committee 99.9 92.8 91.6 73.8 94.0


Sources of basic data: NEP 2015- 2019

5.2 In terms of the amount of unused appropriations, the OSEC recorded an average of P200.2

million for the period 2013-2017, recording as high as P333.5 million in 2016. (Table 10) The

NPDC and IA posted an average of unused appropriations amounting to P22.3 million and

P900,000, respectively, during the period. The IA was able to utilize all its appropriations in

2014 and 2017.

TABLE 10

UNUSED APPROPRIATIONS, 2013-2017

(IN MILLION PESOS)

Particulars 2013 2014 2015 2016 2017

OSEC 60.9 106.8 204.5 333.5 295.5

Intramuros Administration 3.4 0.0 0.5 0.5 0.0

National Parks Development Committee

0.4 18.5 15.6 60.9 16.2

Source of basic data: NEP 2015- 2019

5.3 After declining from 97.9 percent in 2013 to 89.8 percent in 2016, the utilization rate of the

OSEC improved to 92.0 in 2017. The upturn can be traced to the almost full utilization of

capital outlay in 2017 from less than half in 2016. The utilization rate of NPDC followed a

similar trend as the OSEC. After declining from 99.6 percent in 2013 to 74.6 percent in 2016,

the utilization rate of NPDC improved to 96.7 percent in 2017 on account of higher utilization

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of capital outlay. The utilization rate of IA, on the other hand, remained relatively steady during

the period.

By expense class, PS recorded the highest utilization rate of nearly 100 percent for the DOT

and its attached agencies. (Table 11) The PS utilization rate for the OSEC which was on the

downward trend from 99.5 percent in 2013 to 91.6 percent in 2015 bounced back to 99.1

percent in 2016 but declined again to 94.1 percent in 2017. Excluding Financial Expenses, CO

generally recorded the lowest utilization rate for the period 2013-2017 for the DOT and its

attached agencies.

TABLE 11

OBLIGATION-ALLOTMENT RATIO (%)

BY GENERAL EXPENSE CLASS, 2013-2017

Particulars 2013 2014 2015 2016 2017

PS 99.5 96.7 91.6 99.1 94.1

MOOE 97.4 93.7 91.9 88.6 90.9

CO 100.0 96.8 84.9 47.4 99.6

FinEx - 25.9 35.1 97.8 83.4

Total, OSEC 97.9 94.2 91.6 89.8 92.0

PS 86.1 100.0 97.8 99.9 100.0

MOOE 98.5 99.9 100.0 96.0 100.0

CO - - - 100.0 -

Total, IA 90.4 100.0 98.7 99.9 100.0

PS 98.6 99.7 101.6 98.1 101.8

MOOE 99.9 99.4 95.9 88.2 92.7

CO 99.9 81.3 30.3 12.0 99.9

Total, NPDC 99.6 92.8 91.6 74.6 96.7

Source of basic data: Statement of Allotment, Obligation, and Balances

5.4 The 2017 targets for the performance indicators of the organizational outcome - increasing

tourism revenues, employment and arrivals - were achieved. (Table 12) The actual growth rate

in tourism direct Gross Value-Added of 63 percent was significantly higher than the 9 percent

target. While there was a substantial increase in the actual Gross Value-Added, the actual

percentage increase in tourism employment only managed to meet the target of 2 percent or

5.3 million.

TABLE 12

PERFORMANCE INDICATORS BY ORGANIZATIONAL OUTCOME, 2016-2017

Program 2016 2017

Actual Target Actual

Tourism Revenue, Employment and Arrivals Increased

% increase in tourism direct Gross Value Added

14% (P1,243.5 billion) 9% (P1,298.2 billion) 63% (P1,929.3 billion)

% increase in tourism employment 4% (5.2 million) 2% (5.3 million) 2% (5.3 million)

% increase in arrivals

international 9% (5.9 million) 10% (6.5 million) 12% (6.62 million)

domestic 17% (79.3 million) 4% (73.3 million) 37% (96.7 million)

Source: NEP 2018-2019

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The actual tourist arrivals also exceeded the targets. The actual number of international tourist

arrivals of 6.5 million was higher than the 5.9 million target or a difference of 1 percentage

point in terms of percentage increase. On the other hand, the number of domestic tourists

which reached 96.7 million or a growth of 37 percent highly exceeded the 73.3 million target.

Another indicator that may also be looked at is the per capita spending of tourists in the

country. Rivera (2018) suggested that the government policies, promotions, infrastructure,

offerings and packages should encourage tourists to stay longer and spend more time while in

the country. This entails prioritizing nature tourism as this sector usually attracts higher

spending tourists. However, the importance of ensuring the sustainability of ecotourism spots

need to be underscored to avoid the problems encountered in Boracay Island.

TABLE 13

PERFORMANCE INDICATORS OF MAJOR PROGRAMS, 2018-2019

OOs / PIs 2018

Targets Baseline for 2019

2019 Targets


Program 1: Tourism Policy Formulation and Planning Program

Outcome Indicator(s)

1. Number of tourism strategies, policies and action plans implemented 7 6 6

Output Indicator(s)

1. Number of technical assistance provided to tourism stakeholders 3,353 3,353 3,353

2. Number of technical assistance provided to LGUs 2,744 2,744 2,961

3. Percentage of entities assisted who rated the technical assistance as satisfactory 92% 92% 92%

Program 2: Tourism Industry Training Program


1. Percentage of target industry personnel trained that rated the services as satisfactory 90% 90% 90%

Output Indicator(s)

1. Number of training days delivered 3,995 1,451 3,763

2. Percentage of attendees/trainees that completed the training 90% 90% 90%

3. Number of LGUs trained 2,543 2,438 2,438

Program 3: Standards Development and Enforcement Program


1. Percentage of accredited tourism enterprises that maintained the tourism standards and regulation

90% 90% 90%

Output Indicator(s)

1. Number of tourism standards reviewed 2 2 2

2. Number of inspections of tourism enterprises conducted 6,169 6,076 6,076

3. Percentage of accreditation applications acted upon within the prescribed period.

90% 90% 90%

Program 4: Market and Product Development Program


1. Percentage increase in the number of travel partners selling the Philippines in the identified Opportunity Markets.

10% 9% 10%

2. Percentage increase in the number of Philippine properties considering to venture into the new markets and/or willing to offer the new activities.

10% 9% 10%

Output Indicator(s)

1. Number of trade development/trade support activities conducted facilitated-invitational/familiarization tours/missions product presentations facilitated.

102 95 125

2. Number of consumer activations conducted - joint consumer promotions, production of collaterals, tactical ads places/initiated, PR and publicity activities.

100 95 120

3. Numbers of products developed and product partners engaged. 128 120 155

Source: NEP 2019

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5.4 The 2018 and 2019 targets along with the 2019 baseline figures for most of the performance

indicators of major programs are the same. (Table 13) Variations were noted in the output

indicators under the Market and Product Development Program namely, (i) Number of trade

development/trade support activities conducted facilitated-invitational/familiarization

tours/missions product presentations facilitated; (ii) Number of consumer activations

conducted - joint consumer promotions, production of collaterals, tactical ads places/initiated,

PR and publicity activities; and (iii) Numbers of products developed and product partners

engaged, which are all targeted to increase in 2019 compared to 2018 targets and 2019 baseline.

The number of technical assistance provided to LGUs is also targeted to increase to 2,961 compared

to 2,744 for both the 2018 target and 2019 baseline. The most significant change was noted

in the number of training day delivered under the Tourism Industry Training Program which is targeted

to increase to 3,763, more than twice the 2019 baseline of 1,451.

On Standards Development and Enforcement Program, there is a marginal decline in the target of the

number of inspections of tourism enterprises conducted from 6,169 to 6,076. Given the issues

earlier mentioned on low accreditation, another indicator that targets increasing accreditation

rate should be considered. Instead of the existing indicators such as percentage of accredited tourism

enterprises that maintained the tourism standards and regulation and percentage of accreditation applications

acted upon within the prescribed period, there should be an indicator directly targeting a certain

accreditation rate using the result of the survey of the PSA as the number of tourism

establishments. The Office of Tourism Standards and Regulations which is responsible for

formulating and enforcing standards for the operation and maintenance of tourism enterprises,

prescribing minimum and progressive levels of operating quality and efficiency consistent with

local and international standards has also the power to impose fines, downgrade, suspend or

revoke the accreditation, for any violation of the standards.

VI. COA FINDINGS AND RECOMMENDATIONS

6.1 Based on the 2017 report of the Commission on Audit (COA), the OSEC has fully

implemented 34.0 percent or 16 out of the 47 recommendations and partially implemented

the remaining 66.0 percent. The Intramuros Administration managed to implement almost

half of the 32 COA recommendations, 31.3 percent was partially implemented and 21.9

percent was not implemented. The National Parks Development Committee had the highest

percentage of unimplemented recommendations at 44.8 percent or 13 out of 29.

TABLE 14

STATUS OF IMPLEMENTATION OF COA RECOMMENDATIONS

(AS OF DECEMBER 31, 2017)

Particulars Total Fully Implemented Partially Implemented Not Implemented

Number % Number % Number %

OSEC 47 16 34.0 31 66.0 0 0.0

IA 32 15 46.9 10 31.3 7 21.9

NPDC 29 11 37.9 5 17.2 13 44.8

Source: 2017 Annual Audit Reports (Part 3). Available at www.coa.gov.ph.

http://www.coa.gov.ph/

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6.2 The opinions of auditors on the audit of the financial statements of the DOT-OSEC and its

attached agencies have remained the same – qualified – for 2016 and 2017.

TABLE 15

COA AUDITOR’S OPINIONS, 2013-2017

Particulars 2013 2014 2015 2016 2017

OSEC A Q A Q Q

IA Q Q Q Q Q

NPDC A Q Q Q Q

Note: Auditor’s Opinions are as follows: unqualified (UQ), qualified (Q), adverse (A) and

disclaimer of opinion (D)

Source of basic data: COA Annual Audit Reports available at www.coa.gov.ph.

Some of the significant observations of the 2017 audit of the OSEC include the following:

i) No monitoring and evaluation on the PAPs of the 12 Philippine Tourism Offices

(PTOs). Contrary to the provisions of the Tourism Act of 2009, there is no proper

oversight body designated to conduct monitoring and evaluation including the responsibility

to keep the reports provided by the PTOs. The PTOs received total cash advances

amounting to P605.3 million. Considering the huge amount spent for the PTO operations,

the COA underscored the need to identify a specific division that will regularly monitor and

evaluate the PAPs and accomplishments of PTOs.

ii) Unutilized Tourism Development Fund (TDF) amounting to P49.9 million. The

Tourism Development Fund is intended for the development, promotion and marketing of

tourism and other projects of the DOT. The fund which is maintained under the Special

Account with the National Treasury amounted to P49.9 million as of December 31, 2017

was not utilized due to late formulation of specific guidelines for utilization, delayed

preparation of the Special Budget and late submission of required documents to the DBM.

As a result, the expected benefits from the implementation of tourism projects and activities

chargeable to the TDF were not realized. The COA also noted that some of the activities of

the projects implemented under the TDF are similar activities funded by the GAA.

iii) Possible conflict of interest on the Memorandum of Agreement (MOA) for the airing

of DOT Television Commercial (TVC). The DOT entered into a MOA with The

People’s Television Network, Inc. (PTNI) and/or PTV wherein P89.9 million or 75 percent

of the computed cost per approved media plan will be paid to the program Kilos Pronto

which is under the company owned by the brother of then DOT Secretary Wanda Teo.

Other irregularities noted were: (i) non-compliance with pertinent provisions of the MOA

such as lack of supporting documents on the payments made as of December 31, 2017

amounting to P45 million; (ii) inconsistencies in the frequency of airing of the DOT TVC as

compared with the MOA, approved media plan, and actual telecast. The COA also noted

that the DOT Bids and Awards Committee did not inquire or request quotations from other

television networks nor conduct a cost-benefit analysis as a basis for the recommendation

for the procurement method considering that it is the first time for the DOT to enter into a

news-type magazine segment contract. It was also pointed out that PTV has a low

viewership as compared to other networks which could defeat the purpose of increased

tourism awareness.

http://www.coa.gov.ph/

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Reference: Arnaldo, Ma. Stella F. (2017, June 18). Business Mirror. Thousands of tourism firms have no DOT accreditation Budget of Expenditures and Sources of Financing, 2016-2019 COA Annual Audit Reports, 2013-2017 Department of Budget and Management website for the Release/Status of Disbursements and the Statement of Allotment,

Obligation, Disbursement and Balances DOT Transparency Seal from the DOT website General Appropriations Act, 2014-2018 National Expenditure Program, 2014-2019 Philippine Statistics Authority. (2017, September 1). 2014 Survey of Tourism Establishments in the Philippines (STEP)

- Economy Wide: Final Results. Talavera, Catherine (2017, December 25). Tourism sector urged to focus on high-spending tourists. Philippine Star.

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