Audit Report Poro Point Management

Corporation

SOCOTEC Certification UK Unit 6, Gordano Court, Gordano Gate Business Park

Portishead Bristol BS20 7FS

UNITED KINGDOM

Telephone. : +44 1275 849 188 - www.socotec-certification-international.com

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Audit report

Client Audit team

Name of Organization:Poro Point Management Corporation

Name: Laarni T. Narido Merian J. Domingo

Role: Lead Auditor Auditor

Address:PPMC Administration Building, Gov. Joaquin L. Ortega Avenue, Poro Point Freeport Zone, Poro, City of San Fernando 2500, La Union

Client representative (name and role): Atty. Felix S. Racadio President and CEO

Audit

Standard(s)

1. ISO 9001:2015 2. 3.

In case of multi standards, indicate whether the audit is:

Combined ☐ Joined ☐

Type of audit:

� Initial stage 1 � Initial stage 2, � Recertification � Surveillance 1 � Surveillance 2 � Special audit (specify):

Audit Locations: Audit dates: 09-10 Dec 2020

PPMC Administration Building, Gov. Joaquin L. Ortega Avenue, Poro Point Freeport Zone, Poro, City of San Fernando 2500, La Union

Type of Site Main

Recommended scope: Administration of the Poro Point Freeport Zone including frontline services, core, and support processes

In case of different scopes according to sites and or standards or if scope has been extended, reduced, adjusted compared to last audit, specify:

Recommendation from audit team: tick appropriate box

� Certification (subject to satisfactory closure of corrective actions)

� Certification suspension

� Certification withdrawal

� Recertification (subject to satisfactory closure of corrective actions)

� Certification maintenance (subject to satisfactory closure of corrective actions)

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Total number of nonconformities and observations raised*: *: matrix attached

Client signature (for acceptance of the above details only)

Lead auditor signature

1. Introduction to client / general comments:

(Any useful information to help understanding the context of the audit: economic, geographic situation for EMS audits, hazards for OHSMS, etc.)

With a vision to make the Poro Point Freeport Zone an Economic Engine of the North by 2030, it is the organization’s mission to develop and manage the PPFZ, promote economic and social development of Northern Luzon and the country in general, and ensure conversation and protection of environment and natural resources. Aiming to continually improve its services and enhance the satisfaction of its key stakeholders, the organization was seen to establish a management system to address its internal and external issues identified through careful SWOT Analysis. Some of the Strengths identified include : Freeport Zone incentives, major infrastructures like Seaport and Airport, strategic location of the PPFX to its neighboring ASEAN countries and close proximity to the Southeast Asian regions, and presence of tourism facilities and tourist destinations. Weaknesses were also recognized and these include : limited area/land for lease and development, presence of land claimants/ land with legal dispute/litigation, limited airport capacity, manual system of recording and limted automated processes, to name a few. Meanwhile issues like other freeport and economic zones with larger leasable areas and more competitive incentives, construction of new port outside La Union, the Covid-19 pandemic and other natural calamity and disasters pose as threats in the organization. It is also worth noting that a number of opportunities is present for the organization’s development, such as—growing tourism industry in La Union, San Fernando Airport as a potential hub for aviation schools, construction of passenger terminal building (Tri-city Ferry System Initiative connecting the cities of Alaminos to Dagupan, Pangasinan to San Fernando, La Union) and the Luzon Bypass Infrastructure project. Led by the top management of the organization, responsibilities and strategies to address the said issues are identified and recorded in the 2020 SWOT Analysis. While there are some issues found and opportunities for improvement during the audit, the established QMS was seen to address the above-mentioned issues. Further, it was also seen that the implementation is backed up by a solid management support, strong employee engagement and commitment to continually improve their services.

Atty. Felix S. Racadio President and CEO

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2. Significant changes since last audit:

Company name � Main site or other site address � Scope of certification �

Code � Staff � Function process �

Top management � Policy �

In case one or more of the boxes is/are ticked, comment:

- Change in the organization’s Vision Statement - Enrolment of the Citizen’s Charter 2nd Edition approved 31 July 2020 to the existing QMS Documents - PPMC’s Citizen’s Charter has been expanded to include both Internal and External Services - Additional position: Corporate Secretary/Compliance Officer which will be funded in 2021 - Four additional risks emanated from PPMC’s Strategic Measures and these were added to the

organization’s risk registry. These are the following: § Limited flights due to limited airport capacity § Fire occurrence due to improper refueling § Runway lighting system § Unmet target for actual investment due to locators’ decision to put on hold their investment plans

and expansion projects and no new investments from new locators § Responsible persons and actions required were all clearly identified

- Minor change in the PPMC’s stakeholder analysis 2020 (Seaport Users and Clients) - For CY 2020 and for reasons involving the pandemic and the community quarantine, PPMC requested

GCG for recalibration of targets

3. Deviations of audit plan and reasons:

Yes � No � If yes provide details:

No deviation of the audit plan.

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4. Audit findings:

Summary of conformity:

The organization’s top management demonstrates leadership and commitment with respect to the QMS implementation by ensuring the quality policy and quality objectives are aligned with the context and strategic direction of the organization, ensuring the QMS is integrated into the business processes, enhancing customer focus, providing resources and supporting relevant management roles. Risks and Opportunities per process are recorded in a form of a Risk Registry and this was last updated during the June 2020 Corporate Planning. Effectiveness of actions in the past year was seen covered in the organization’s last Management Review. Monitoring of QMS and process performance are also in place in the form of monthly accomplishment reports. This is further evidenced by the implementation of the established internal audit programme and management review activities for the past year. Status of quality objectives, and effectiveness of implemented actions to address risks and opportunities are also monitored and reported to the top management. Due to the pandemic, the last Management Review was conducted online via Zoom on 18 November 2020. Some of the highlights include:

§ Pending issue from last Management Review - case with Soiltech now resolved § Discussion on utility infrastructure and additional security personnel, status of current services and on-going

procurement of motor vehicle § Result of annual Stakeholders Satisfaction Survey participated by 3 locators; wherein 92.59% of the respondent leasees

and licensees responded Satisfactory/ Very Satisfactory; analysis include discussion of findings, conclusion and recommendation for further improvement

§ Status of Quality Objectives and Plans for all offices § Performance of External Providers and Supplier Performance indicating delays in delivery for the period of January to

October 2020 because of the community quarantine and travel restrictions § Status of 18 CPARs issued to addressed OFIs raised during the last internal audit, responses and actions taken to

address findings during the last external audit by SCPI § Adequacy of resources both in manpower and equipment § Organizational changes that might impact the QMS § Improvement projects to span to 2021 such as improvement of facilities in the PPFZ (addition of restrooms, canteen/food

stalls, ATM and gas up stations, modernization of buildings and driveway for taxiing), improvement in the dissemination of information between PPMC and stakeholders, and to invite more stakeholders to invest at PPFZ

Controls for the operation of its processes, actions to address risks and opportunities and other evidences of QMS implementation are found below: Office for Infrastructure Management - Currently composed of six employees with one vacant position, the office is in-charge of facilities management (building, structures and electrical equipment) and handles the application of building and occupancy permit within the PPFZ. - Identified risk as documented in Risk Registry last reviewed updated during the June 2020 corporate planning: delayed implementation of CAPEX project which is greatly affected by the flow of the bidding process. - Functional objectives and targets are defined and KPIs/KPMs are established and monitored on a regular basis. These are the following:

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§ 100% of Building Permit applications processed within 11 working days upon receipt of complete documents -3rd and 4th quarter of 2019= 4, 2020= 1; achieved within the processing time

§ 100% of Occupancy Permit applications processed within 1 month upon receipt of complete documents -3rd and 4th quarter of 2020= 5, 2020= 2; achieved within the processing time

§ 100% of facilities and equipment inspected and maintained as planned—also achieved

- Reviewed samples for the application of building permit include: § Application No. 0206202001 with accompanying OR 28943891, Architectural Permit 02062002,

Civil/Structural Permit 02062003, Electrical Permit 02062004 and Plumbing Permit 02062005 - Schedule of maintenance of equipment is defined and inspection was seen to be performed as scheduled.

Scheduled for weekly inspection are ACU and lights, monthly for buildings and infrastructure and quarterly for preventive maintenance of ACU. The following samples were reviewed during the audit: § Maintenance Checklist for Nov 15-19, 2020 for ACU covering Powerhouse/WRS, Control tower,

passenger terminal, fire station and admin building § Construction & Maintenance Checklist for Zone Security located at old admin building dated 24 Nov 2020

covering architectural, structural and plumbing inspection—actions were implemented to address remarks/recommendation during the activity

§ Preventive Maintenance Report for Airconditioning Units for the 2nd Quarter (April-June 2020) - Performance of personnel under the Office of Infrastructure Management are done on a monthly basis as

seen in consolidated accomplishment reports for the following personnel: § R.J.D/ Land and Assets Development Assistant, Electro-mechanical Technician (period covered 15-21

June 2020) § K.L.C/ Electro-mechanical Technical (period covered 07-10 September 2020, and 25 September to 04

October 2020) Office for Regulatory Services (Zone Security & Public Safety) - In-charge of maintaining security and public safety within the zone, this arm of the Office of the Regulatory

Services is responsible for the implementation of traffic rules and regulation, inspection of inbound and outbound articles and securing of all PPMC/BDCA properties, to name a few. It has set functional objectives and targets and these are the following:

§ 100% inspection of all incoming and outgoing articles at CCA § 100% traffic violations apprehended § Zero incidence of loss for PPMC/BDCA properties § Daily mustering of guards and monitoring (2x a day, 30 minutes before posting) § At least once a day inspection of all areas within the zone § Timely submission of vessel status to local PNP and other law enforcement agencies upon request

- Status of QOP is monitored and reported on a monthly basis (as seen in 01-30 November 2020 status report); also seen Daily Logbook at CCA area for article monitoring, Received Deputized LTO ID dated 25 Nov 2020, SO logbook and vessel status report to PNP dated 18 Nov 2020.

- Action and actual reporting were reviewed during the audit: § First is in reference to a grass fire incident which occurred February at the vicinity between PPMC

Admin Building and LU/ECO Substation. Presented was Information Report dated 02 March 2020 for the Director and VP for Regulatory Services and dated 29 February 2020 for the Senior Security Officer.

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§ Also reviewed was a vehicular accident involving a motorcycle on 18 May 2020 recorded in the Incident Report for Director and VP for Regulatory Services and Traffic Accident Report for the Senior Security Officer dated 18 May 2020

- Other records seen include: Vessel Status Report (periods of 23 June-14 July and 13 August- 14 September 2020) with details of berthing area, name and type vessel, port of origin and discharge, and information on cargo, arrival and departure. Also presented was Daily Apprehension Report for vehicular apprehensions for the month of October.

- Inspection of articles- inbound and outbound, implementation of traffic rules and regulations and mustering of guards, conduct of random inspection over the PPFZ and submission of vessel status report are all detailed in the monthly accomplishment report from the office of the Director and VP for Regulatory Services to the President and CEO.

- Records of relevant trainings presented include the following : § Seminar on Ambulance Management Operation (24 hours ; 23-25 May 2019)

Submitted training reports from Security Officers R.P.H., F.E.P. G.B.P. and J.R.B.D. § Standard First Aid and BLS with AED Training (18-21 June 2018 for 22 participants with Certification

from the Philippine Red Cross dated 09 July 2018 § TESDA Online Training on Covid-19 Awareness on 19 August 2020 for the same security officers

above Business Development

- Business Development main duties and responsibilities is to promote and market the PPFZ including business opportunities (estate management) operate and manage and disposition and leasing of lands inside the zone.

Objectives and Targets (Re-calibrated Objectives and Target - PPFZ approved board approved on September 25, 2020 submitted to GCG on September 28, 2020)

1. Number of new locators (target for 2020 is 6 but recalibrated – 2 developmental projects) Reason for recalibration: Difficult and challenging and obtain new locators because of the pandemic. Action Plan: Efforts are focused on developmental projects focusing on airport and seaport. Achievement of Target: 100%

o Approval of the PPMC Board of the Commercialization of the Soiltech Private Pier to encourage more seaport operation and generate revenues for PPMC.

o Signed Contract of Lease with JS Union Oils and Trading Inc (new area and renewal) 2. Actual Investment in the Freeport Zone (120 million) – mainly focuses on the investment of locators

and new locators. (recalibrated to include in capex project or expanded projects) (Achieved) 3. Actual zone revenues from 112. 74 million to 87.68 million

Risks and Opportunities ( last reviewed on November 16, 2020)

1. Unmet target for actual investment due to locators decision to put on hold their investment plans and expansion projects and no new investments from new locators.

2. Failure to meet the target number due to highly negative impact of uncertainty and economic instability. Calibrated Plan (Five Year Business Plan) San Fernando Airport

o hectares for lease (2,438 for 2021) ; 5,720 (2022) o Poro Poro Baywalk – (800 sqm for 2021) o Mixed-used area (72,808 for 2022) o 2 Capex budget for 2020 – water is already turned- over to BCBA

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Process Approach based on the Citizen Charter

- Approval of Business Proposal/Projects, Application for Lease of Areas/ Application for PPFZ Registration and prospective locators/lessess/investors. (Based on the ARTA Format (Highly Technical)

a. Secure application for registration form and list of documentary requirements from the business (4

hours) . Provide the applicant/client with presentation briefing b. Submission of letter of intent and complete documentary requirements and preliminary (4 hours)

complete documentary requirements received on December 2, 2020. - List of documentary requirements:

n Letter of Intent submitted on January 22, 2020 n Business Registration (SEC, License of Transact Business in the Philippines) SEC Registration No.

CS201515680 (JS Union Oils and Trading Inc.) n Application for Registration submitted on January 30, 2020 n Business Plan with Project Implementation Plan (PIP) on January 22, 2020 n Company Profile/Brochures received on January 22, 2020 n Board Resolution of Duly Authorized Representatives submitted on January 20, 2020. n Audited Financial Statement (Certificate of Deposit Balance) – submitted on January 22, 2020 n Existing Site Development Plan

c. Details reviewed and evaluation of business proposal application for lease and documentary

requirements (1 day) – Evaluation of Application as of December 3, 2020 d. Coordinate with applicant/client on the finalize terms and condition in the lease agreement (Confirmed

on November 23, 2020) e. Prepares report and recommendation for he president for approval and endorsement to the PPMC

board f. Review recommendation and endorse approval application to the PPMC Board (Approved on

December 3, 2020) g. PPMC board for deliberation and approval h. Notification of applicant/client of the approval of the Business Proposal/Application for lease and

submission (payment due diligence fee) i. Signing of the contract and lease agreement by the applicant/client j. Signing of the contact lease by PPMC and president and CEO k. Notarization of the Contact Lease agreement

(Total Processing Time --17 working days) Data and Document Control

- Quality Manual is on revision 10 effective December 3, 2020 (PPMC-QM) Changes is the Vision Statement of the organization, approved by President and CEO.

- Procedure for Data and Document Control (Document No. PPMC- QP-01-F01) revision no. 5, effective October 20, 2016.

- Document Review and Approval Request is used to record, and process revised and newly registered documents. Review and approval is done by the QMR and President respectively

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- Master List is used for the monitoring and stamp is use for the identification “Master Copy” for original documents, “Obsolete Copy” for superseded, while “Controlled Copy” for the issued copy to other areas.

- Distribution and Retrieval List being signed by the process owner and the person received the revised documents.

- Sampled documents: Quality Manual (PPMC-QM) revised on December 3, 2017 requested on December 2, 2020 and effective on December 3, 2020

- Document Review and Approval Request (PPMC-QP-0-F01) requested on July 21, 2020 and effective on July 31, 2020.

- Retention and disposition are according to NAP Guidelines. Internal Audit

- QMS and process performance of the organization was audited during their last internal audit on 24-26 August 2020 and 8-14 September 2020. This internal audit covered the period of 01 July 2019 to 30 June 2020.

- Presented were the approved Annual Audit Plan and individual Audit Schedule per process which clearly defines areas/functions to be audited, audit criteria, scope and purpose/objective of the audit. Samples seen include: Environmental Management and Health Services process, Internal Quality Audit, Management Review, Human Resource Management Processes and Frontline Services. Moreover, the utilized checklists were also presented clearly bearing details of the evidences found during the audit, commendable findings and OFIs.

- The audit resulted in 18 Opportunities for Improvement (OFIs) and no non-conformity was noted. - The internal audit team is currently composed of 20 members including 11 lead auditors. OFIs were still

issued CPARs to necessitate improvement in the process. Status of CPARs issued is monitored through a registry. Sample forms reviewed during the audit include:

§ CPAR 2020-18 issued to Infrastructure & Facilities, closed 16 September 2020 § CPAR 2020-14 to Airport Management, closed 08 September 2020 § CPAR 2020-12 to Customer Feedback

Positive findings:

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- Commitment of the top management to the QMS implementation is commendable- from the awareness of

the internal and external issues of the organization, potential risks, opportunities, monitoring of performance up to the participation during the second surveillance audit- management commitment is clearly present.

- Maintenance of records as evidence to QMS performance is noteworthy.

Opportunities for improvement:

- Revisit IQA checklists for Internal Audit (there is a mention of ISO 19011:2002- present version/reference is ISO 19011:2018) and Checklist for Management Review, where in Management Review Outputs are listed as 9.3.2 where it should be 9.3.3.

Reference to major and minor NC and observations being raised on attached matrix: Number of major non conformities 0 Number of minor non conformities 1 Number of observations 2

5. OHSMS specific (delete if not applicable): N/A

- Did any reportable serious incident or breach of regulation occurred since last audit? Yes � No � If yes, specify:

N/A

- Is a special audit recommended following a OHSMS reportable serious incident or breach of regulation? Yes � No � If yes, specify:

N/A

- Has there been a closure of facilities/work areas since the last audit?

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Yes � No � If yes, confirm risks have been identified and handled in compliance with requirement. Provide evidence.

N/A

- Are there any relevant regulatory requirements that have been identified as a non-conformance and need to be

communicated to the organisation? Yes � No � If yes, specify:

N/A

End of OHSMS specific

6. Use of certification documents and marks

- Is the use of certification documents and marks correct on exhaustive supports? Yes � No � If yes, specify:

- AJA Logo and Accreditation Marks are used properly in the organization’s website.

7. Audit programme

- Are there any significant issues impacting on audit program (audit duration, auditor competency, sufficient coverage)? Yes � No � If yes, specify:

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None

8. Unresolved issues:

- Are there any unresolved issues by the end of closing meeting that would lead to appeal complaint, or other? Yes � No � If yes, specify:

No unresolved issues.

By signing the first page of this report, the audit manager confirms that:

- the objectives of the audit have been met and that the recommendation shown on first page of this report reflects the relevance and the ability of the management system to achieve the expected results

- the certification scope is appropriate - this report is based on a sampling process of the information available. The CB cannot be held responsible for the possible

non representativeness of the audit findings.