N~ Republic of the Philippines COMMISSION ON AUDIT Commonwealth Avenue. Quezon City National Government Sector 0p THE Cluster 6 - Health and Science INDEPENDENT AUDITOR'S REPORT The Secretary Department of Social Welfare and Development (DSWD) Batasan Hills, Quezon City Qualified Opinion We have audited the financial statements of the Department of Social Welfare and Development, which comprise the Statement of Financial Position as at December 31, 2018, and the statements of financial performance, statements of changes in net assets/equity, statements of comparison of budget and actual amounts and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information. In our opinion, except for the effects/possible effects of the matters discussed in the Basis for Qualified Opinion section of our report, the accompanying financial statements present fairly, in all material respects, the financial position of the Department of Social Welfare and Development as at December 31, 2018, and its financial performance, changes in net assets/equity, cash flows and comparison of budget and actual amounts for the year then ended in accordance with the Philippine Public Sector Accounting Standards (PPSAS). Basis for Qualified Opinion As discussed in Part 11 of this report, the asset accounts of DSWD contain misstatements amounting to P358.092 million which represent 0.33 percent of its total assets as at December 31, 2018, while the total misstatements in Liabilities account amounted to P47.328 million or 0.10 percent of the total liabilities as at year-end. Moreover, we noted deficiencies amounting to P4,847.443 million in keeping of the accounts affecting fair presentation of the assets and liabilities accounts balances reported in the financial statements by P3,768.949 million and P1,078.494 million, respectively, which represent 3.45 percent of the total assets and 2.24 percent of the total liabilities. We conducted our audit in accordance with International Standards of Supreme Audit Institutions (ISSAI). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the agency in accordance with the Revised Code of Conduct and Ethical Standards for Commission on Audit Officials and Employees (Code of Ethics) together with the ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Information Management is responsible for the other information. The other information obtained at the date of this auditor's report is included in the Annual Report of the Agency, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. However, we have nothing to report in this regard. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with PPSAS, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement. whether due to fraud or error, and to issue an Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAls, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: 2 * Identify and assess the risks of material misstatement of the financial statements. whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the agency's internal control * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit observations, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significant in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. COMMISSION ON AUDIT By: CORAZON S. ROCAS State Auditor V Supervising Auditor June 27. 2019 3