Emmanuel Valdenor

 AUDIT OBSERVATION MEMORANDUM For: Dir. EXEQUIEL B. SARSAUGA Department of Labor and Employment Regional Office No. VII Cebu City Attention: Mr. EUNOCO A. ARELLANO, Chief, Administrative and Financial Division We have reviewed the hiring of Job Order Employees of the agency and observed the following deficiency: Fifteen contractual personnel were hired on a relatively permanent and continuous basis by Job Order Contracts, in spite of empirical evidence that a valid employeremployee relationship has existed, contrary to established jurisprudence on fair labor practices as decided by the Supreme Court in the Case of Alexander Lopez vs. MWSS (GR No-) dated June 30, 2015. 1. CSC MC No. 40, s. 1998 (as amended by CSC MC No. 15, s. 1999), refers to employment by Contract of Service” and “Job Orders”, featuring the following basic characteristics of employment: Lump sum work or services, such as janitorial, security or consultancy services,whereno employer-employee relationship exists,is rendered; Piece of work or intermittent job of short duration on a daily basis, not exceeding six (6) months; Governed only by COA rules and regulations,not by the CSC law (/in CSC Memorandum Circular No. 1, s. 2007, “Contracts of Service” and “Job Orders” are used synonymously, where those who have been hired under either contract no longer require prior CSC approval as before); Non-entitlement of Employees to benefits, unlike those enjoyed by regular employees. 2. In hiring contractual personnel, CSC MC No. 38, s. 1993,provides that a contractual appointment is issued to a person who shall undertake a specific work or job for a limited period not to exceed one (1) year, for which the appointing authority may indicate the duration of the appointment for purposes of crediting services. Relatively, Section 209 of the Government Accounting and Auditing Manual (GAAM), Volume I provides that the “specific work or job requires special or technical skills not available in the employing agency”, to be accomplished within a specific period, which in no case shall exceed one year and performed or accomplished on the employee’s own responsibility with minimum direction or supervision.” 3. Further, in Alexander Lopez vs. MWSS (GR No. 154472, 6/30/05), the Supreme Court cited four-fold testin determining the existence of employer-employee relationship, based on the following criteria: Employer has power to select before engaging the services of an employee; Power of CONTROL is exercised by Employerover employee, not only as to the result of the work to be done but also with respect to the means and methods by which work is to be accomplished; Employer can exercise the power to dismiss; and Whether employee is being paid wages by Employer 4. Through the Control Test, the Supreme Court explained further that, “the existence of an employer-employee relationship cannot be negated by expressly repudiating it in an agreement (i.e. stating that there is no employer-employee relationship created under the contract) when the terms of the agreement and the surrounding circumstances indicate otherwise. That isbecause the status of employment is defined and prescribed by law, andnot by what the parties say it should be. In addition, the control test merely calls for the existence of the right to control, and not the actual exercise of such power. Furthermore, it is not necessary that the employer actually supervise how the employee performs his duties; it is enough, according to the ruling,that the former has the right to wield that power. “Manifestations of control considered by the Court to be in existence include the following: Power to transfer and reassign employees. Controlled working hours of employees. Provision by employer of office space, supplies and equipment  Provision of IDs declaring them as employees. Deduction of withholding taxes and Medicare contributions. Performance by the employees of work necessary or desirable to the principal trade or business of the employer. Daily reporting by employees. Exclusive work rendered by employees for the employer. Nature of work is not intermittent and seasonal but rather continuous. 5. In line with the audit trust of the Commission pursuant to COA Memorandum No- dated October 17, 2012, we have performed an audit to determine the legality, necessity and propriety of casual, job order and consultancy employment. 6. The audit disclosed that15 employees were hired by the Agencyduring the year through Job Order Contracts. A review of their individual background revealed that most of them were hired for their special or technical skills and training, for which they were being paid a daily wage of P 435.00 chargeable against MOOE. As shown in Table 1, the Agency has paid a total of P1,854,896.71 to cover their wages for various services performed in different units in the organization, as follows: Name of Employ ee Educational background and special trainings/skills Unit assigned Actual duties performed Total amount received 2014 Fund Source Asuque, Samson B.S. in Electronic Engg (undergrad) IMSD Driver 160,426.17 APF Baracoso, Ricardo B.S. Computer Science (undergrad) IMSD Driver 156,386.13 APF Castillo , Blanche B.S.Commerce (Management) EW SPES Encoder/Evaluator 105,114,38 APF Mesa, Armando B.S. Computer Science IMSD Bldg. Maintenance/IT 263,452.10 APF Perez, Deogenes High School graduate IMSD Utility/Messenger 157,885.08 APF Suerte, Clyde TESDA-BWI NC II - Driing IMSD Driver 16,924.31 APF Demiar, Ervin B.S.in Info Technology (multimedia) CPFO SRS Staff 122,718.85 GF-SRS Genolos, Harry B.S.I.T. (undergrad) TCFO SRS Staff 122,817.22 GF-SRS Peligro, Concepcion B.S. Economics BFO Encoder 123,300.38 APF Licong, Vilma Midwifery (graduate) BFO Encoder 45,375.81 GF-SRS Suela Joel Electronics and Computer Technology NOFO I.T. 81,183.17 APF Sastrillo, Julian Driver, Auto Deisel Mechanic NOFO Driver 151,525.60 SAP funds Gantalao, Claire B.S. MngtAcctg NOFO SAP (Social Amelioration Program) 112,932.95 SAP funds Vasadre, Jeffrey B.S.I.T. DOLE 7-IT unit Technical support staff 108,045.61 APF Alam, Jerome B.S. Commerce (economics0 Siquijor FO Project asst./encoder/asstsena/Job fair office maintenance 126,808.95 APF total P1,854,896.71 APF -Alien Publication Fund GF-SRS - General Fund, Skills Registry System SAP funds - Social Amelioration Program 7. Review and evaluation of the records revealed further that, in some instances, these personnel were hired by the Agency in separate “contract of services”, who, as shown also in the records, could be transferred/reassigned to perform other jobs performing works relative to the principal mandate of the Office, at the instance of the management. 8. Further, it was shown that Management required them to submit DTRs, in addition to being provided with office space, supplies and equipment, including IDs, and though they worked only for six (6) month to a year, or even shorter, their services were performed continuously without interruption through re-hiring, and therefore, non-intermittent. 9. In our interview with the Chief of the Personnel Section, it was noted also that part of the screening process was to require them to submit Personal Data Sheet,as they went through the usual evaluation conducted by the Personnel and Selection Board (PSB). During the evaluation, the PSB looked into theireducational background, experience, eligibility and skills required to perform the job so that they can be assigned specific tasks, once hired, an indicationof control exerted by the Agency, not only as to the result of the work to be done but also with respect to the means and methods by which work is to be accomplished by the employee, whether the Agency would enforce it or not. 10. In view of these observations, it is our view that,in spite of their contractual appointments, theiremployment status is covered by an existing employer-employee relationship, and we are concernedthat the method applied by the Agency to obtain their services through Job Order Contracts has not been in accord with the established standards enunciated by the Court in that aforecited ruling. 11. The agency’s need to hire additional personnel, skilled or non-skilled, in order to augment its actual manpower compliment is well recognized, but we also believe that in hiring them, the manner should be consistent with existing laws and regulations, particularly the Civil Service Rules applicable to the issue at hand.Non-compliance to these standards may have serious legal and financial implications in case certain labor issues are raised against the Agency (i.e. claim for benefits similar to that received by regular employees) as in the above-cited case of Alexander Lopez vs. MWSS. Suffice it to say that the Courts are inclined in such cases to favor labor as a form of social legislation Non-technical personnel whose services were properly compensable as Casual Employees were given contractual appointments, contrary to Section 210, National Accounting and Auditing Manual (NAAM). 12. If there is a need to hire non-technical or unskilled personnel, they should be given Casual, not Contractual Appointments, for which they should be paid salaries chargeable against appropriations for personal Services, as provided for in Section 210, NAAM,which states that “in no case shall contractual appointments be issued to nontechnical personnel or those who holds position in the labor or trade and crafts group. If such services are needed in support of the job or project, the regular staff or personnel may be augmented by hiring casual or emergency staff.” Expenses for these contractual appointments are subject to CSC approval and chargeable against Personal Services (PS). 13. Review of the Job Order list revealed that the following “job order employees” include the following who were assigned to perform non-technical work that are properly classified under the labor and trade craft group, namely: Name Duties performed Hired since fund charged Peres, Deogene s Utility/Messenger 1994 APF Asuque, Samso n Driver 1998 APF Suerte, Clyde Driver 2014 APF Sastrillo, Julian Driver 2014 * SAP  Transferee from BWSC Head Office 14. We recommend the following remedial measures: Strictly adhere to fair labor practices in hiring contractual personnel on the basis of Job order contracts as enunciated and upheld by the Supreme Court in cases where an employer-employee relationship is deemed to exist to avoid serious future legal and financial implications that may be raised against responsible agency officials. If there is a need to avail of the services of highly technical personnel (those not available from the existing manpower resources of the Agency), they should be hired through Contract of Services with a higher pay grade commensurate to the equivalent position in the civil service, but without leave credit benefits for a maximum period of one year, unless there is a justifiable need to continue extending their services. To eliminate the establishment of an employer-employee relationship, consider the alternative of hiring needed personnel through qualifiedand accredited labor recruitment and contracting Agency. Also, study the possibility of hiring personnel who holds labor and trade craft groups like Drivers as Casual Employees consistent with the requirement of Setion 210, NAAM. Study the possibility of hiring including personnel who holds labor and trade craft groups as Casual Employees consistent with the requirement of Section 210, GAAM, May we have your comments on the foregoing audit observations within fifteen (15) calendar days from receipt hereof. If we do not receive a reply within the period specified, the herein audit observations and recommendations shall be deemed accepted and shall be included in the Management Letter/Annual Audit Report. EMMANUEL O. VALDENOR State Auditor IV Audit Team Leader Proof of receipt of AOM: DIR.EXEQUIEL SARCAUGA Date: ________________ EUNOCO A. ARELLANO Date: ________________