Continuation of "8. Rizal Technological University"

Though it was founded in 1975 as Rizal Technological Colleges (RTC), the College was converted into the Rizal Technological University (RTU) on October 11, 1997, by virtue of Republic Act No. 8365. RTU is tasked to provide highly professional, scientific, technological and special instructions in the fields of engineering and technology, education, business and entrepreneurial technology and arts and sciences and to the promotion of research, extension and advance studies in its area of specialization.

The Commission on Audit's (COA) 2009 Consolidated Audited Annual Report (CAAR) of RTU found that RTU's income increased from P 359 million in 2008 to P 397 million in 2009 or an increase in P 38 million. Of this, P 25 million  was from the National Government and P 12.7 million was from other income, 

But COA's 2009 CAAR also found the following problems with RTU's usage of the taxpayer's money:

• A misstatement in the Receivables-Disallowances or charges was committed due to the erroneous debit of P5,954,279.25 to the same account for the disallowed Emergency Cost of Living Allowance (ECOLA) which was not yet final and executory, instead of P8,418,620.34, the total amount of the Notice of Disallowance, subject of two the Notices of Finality of Decision (NFD), both dated November 27, 2009 pursuant to COA Circular No. 2009-006, thus, casting doubt on the reliability of the Account Receivables-Disallowances/Charges balance of P5,954,279.25 as at year end.
• COA is asking the RTU Administration to require the Accountant to prepare the journal entry voucher to adjust the Receivables-Disallowances/Charges and henceforth, ensure the accuracy of balances and reliability of the accounting reports pursuant to provisions of the NGAS Manual, Volume III and Section 22 of COA Circular No. 2009-065 dated September 15, 2009; and also to comply strictly with Section 7.2 of COA Circular No. 2009-006 dated September 15, 2009.
• The validity and existence of the Property, Plant and Equipment (PPE) accounts totaling P779.72 million could not be ascertained due to the inclusion of unaccounted/missing properties costing P0.65 million; non-reclassification of unserviceable properties to Other Assets awaiting disposal costing P30.88 million; non-dropping from the books of accounts of disposed properties costing P3.88 million and the incomplete physical inventory of properties hence, unreconciled variance of P46.88 million between the Property and Accounting records existed contrary to sound property management system. 
• COA is correspondingly asking the RTU Administration to formally create an inventory team to complete and submit the physical inventory reports of all properties of the University and reconcile these with the accounting records; identify the accountable persons for the missing/unaccounted properties and require them to settle their accountabilities and/or submit the request for relief from accountability in accordance with Section 73, PD 1445; and require the Accounting Office to prepare a journal entry voucher to reclassify to Other Assets account all unserviceable properties awaiting disposal and drop from the books all disposed properties.
• COA also said the janitorial and sanitation services rendered by RTU-KAWANI Multi-Purpose Cooperative was procured thru negotiation since CY 2002, renewed and extended on a monthly basis thereafter until 2009 with total payment of P49.50 million thereby manifesting conflict of interest as the Cooperative is an association of the University’s employees. Moreover the mode of procurement was contrary to Section 10, Article IV of R.A. 9184 and Section 5 of the Government Procurement Policy Board Resolution No. 24-2007 thus, defeating the procurement principles of transparency and competitiveness.
• COA is recommending that RTU's Administration submit an explanation as to why the procurement of janitorial services was not done thru public bidding;comply strictly with the provisions of R.A. 9184 and its IRR-A regarding procurement of janitorial services; require the RTU-KAWANI Multi-Purpose Cooperative to deliver all the equipment and supplies listed in the Breakdown of Cleaning Supplies and Materials and be duly received by the University.
• Additionally, COA said that RTU's Administration should deduct the amount of Supplies and Materials not delivered by the Service Agency amounting to P25,885.50 from their succeeding payment of Janitorial services; and require the Service Agency to comply with the provisions of the Contract of Janitorial and Sanitation Services efficiently and effectively to avoid sanctions for not complying with the terms and conditions thereof.
• Another problem COA found and pointed out in its 2009 CAAR was the issue of reimbursements of P1.97 million representation and travelling expenses by 74 university personnel which were not supported with sufficient documentation as required under existing government laws, rules and regulations, thus, casting doubts on the legality and validity of those payments.
• COA is asking the RTU Administration to comply strictly with existing laws, rules and regulations on the payment of reimbursable representation and traveling expenses; require the concerned personnel to submit sufficient documents for the aforementioned reimbursements of representation and traveling expenses pursuant to the Government Auditing Code of the Philippines or P.D. No. 1445 to establish the legality and propriety of the disbursements; and submit certificate of appearances of the companies visited complete with telephone numbers and the official stationery of the company visited for confirmation purposes.
• COA also pointed out deficiencies noted in the RTU Administration's procurement of goods worth P47.02 million thru Direct Contracting cast doubts on the regularity of the transactions. COA is asking the RTU Administration to render an explanation on the abovementioned deficiencies for evaluation; and comply strictly with the provisions of RA 9184 and its Implementing Rules and Regulations in the procurement of goods and services.

RTU's governing body is vested in the Board of Regents which is composed of the Dr. Patricia Licuanan, the Chairman of the Commission on Higher Education (CHED) as Chairman, the President of the University as Vice-Chairman, and the Chairmen of the Congressional Committees on Education and Culture, the Director General of the National Economic Development Authority, the representative of the Department of Science and Technology, the President of the Federation of Faculty Associations, the President of the Federation of Student Councils, the President of the Federation of Alumni Association and two prominent citizens as members.

As of December 31, 2009, there were 654 personnel of RTU Main and Pasig campuses. Out of the 654 total workforce, 105 belong to the academe, 168 are part-timers and 381 are administrative support staff.

During the SY 2008-2009 and 2009-2010, a total of 35,373 students were enrolled at RTU Boni Main and Pasig Campuses broken down as follows with 713 Graduate School students and 34,660 undergraduate students.

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Continuation of "7. Philippine State College of Aeronautics"

COA recommended that the PhilSCA Administration ask the concerned accountable officers to prepare and submit to COA a formal request for relief from property accountability for the fixed assets worth P2.7 million lost thru fire pursuant to Section 73 of the Government Auditing Code of the Philippines (P.D.1445). Failure to comply with the above provision will make the accountable officers concerned liable for the loss of property, COA said.

COA also urged the PhilSCA committees created to hasten their work of completing immediately the physical count and inventory reporting on Property, Plant and Equipment in accordance with the provisions of the Government Accounting and Auditing Manual.

COA is also asking the Accounting Office of PhilSCA to reconcile the balances of accounts in the general ledger against the individual subsidiary/property ledger card including the inventory report that will be prepared by the Committees; and to effect immediately the adjustments after the reconciliation of the said fixed assets accounts.

COA said that Cash Advances to officers and employees amounting to P2.9 million remained unliquidated at year-end even if the purpose for which they were granted have already been served, contrary to Section 89 of P.D. 1445 and COA Circular No. 97-002 dated February 10, 1997, thereby overstating the receivable account and understating the expense account by the same amount.

As a result of the unliquidated advances, COA is recommending that the PhilSCA

Continue withholding the payment of any money due to the accountable officers who have not liquidated their cash advances pursuant to Section 9.3.2 of COA Circular No. 97-002 dated February 10, 1997.

Continue issuing demand letters to all accountable officers with outstanding cash advances and exert all possible efforts to go after these individuals who have liability to the College.

Request from COA authority for the write-off of dormant/non-moving accounts in accordance with existing auditing rules and regulations.

Comply strictly with Section 89 of P.D. 1445 and COA Circular No. 97-002 in the granting, utilization and liquidation of cash advances.

COA also said PhilSCA's validity and existence of the Motor Vehicles account balance of P1,053,500.00 cannot be ascertained due to the unreconciled balance of P868,356.00 between the accounting and property records since CY 2004.

COA is recommending that PhilSCA require the Accounting and Property Offices to reconcile the motor vehicle records and reflect the actual physical inventory of the account pursuant to the provisions of GAAM; and mark all motor vehicles “FOR OFFICIAL USE ONLY.”

The 2009 CAAR also said that nineteen college officials and employees whose positions were not among those entitled to Representation and Transportation Allowances (RATA) were paid P0.787 million during CY 2009 out of the Special Trust Fund (STF) contrary to the 2009 General Appropriations Act (GAA), Memorandum Circular (MC) No. 6, series of 2005 of the Civil Service Commission (CSC), National Budget Circular (NBC) No. 404 dated March 29,1989 and COA Circular No. 2000-02 dated April 4, 2000, thus, rendering said payments unauthorized and without legal basis. (paras. 37-51)

COA recommended that the PhilSCA Adminisration require the concerned officials to refund the unauthorized RATA disbursements totalling P0.79 million in the absence of a legal basis to support the payments. Henceforth, all RATA payments should be in accordance with Section 44 of the GAA, NBC 404 dated March 29, 1989 and COA Circular No. 2000-002 dated April 4, 2000, respectively.

The payment of Collective Negotiation Agreement (CNA) incentive to the members of PhilSCA Non-Teaching Association (PHILSCANTEA) Inc., was not supported with complete documentation and funding source to establish the legality and propriety of disbursements totaling P0.682 million as required under the Department of Budget and Management (DBM) Circular No. 2006-1 dated February 1, 2006. (paras. 75-86)

COA recommended that PhilSCA's administration submit necessary documents showing compliance with the prescribed policies, procedures and funding source on the grant of CNA incentive pursuant to DBM Budget Circular No. 2006-1 dated February 1, 2006 and CSC PSLMC dated November 14, 2002; and refrain from paying allowances and incentives, which are not in accordance with existing laws, rules and regulations.

COA said PhilSCA also contracted the services of private legal counsels and paid the total amount of P325,000.00 from six months to two (2) years for legal and consultancy services without the written conformity and consent of the Solicitor General and written concurrence of the Commission on Audit contrary to COA Circular No. 95-011. COA recommended to the PhilSCA Administration to return to itself the amount paid to the aforementioned private lawyers who were hired contrary to existing accounting rules and regulations and Supreme Court jurisprudence; and require the Accountant to reverse the entry made in JEV No. 09-11-008 to correct the consultancy account by P31,380.00.

The 2009 CAAR also said PhilSCA Administrion failed to establish the reasonableness of the amount of fuel consumed totaling P175,750.68 for CY 2009 contrary to COA Circular 77-61 dated September 26, 1977 due to inadequate data on the trip tickets as well as the absence of the subsidiary ledger, Monthly Report of Fuel Consumption and the Monthly Report of Official Travels for each of the four motor vehicles, thus, the control of the usage of the said vehicles could not be determined.

COA is recommending that PhilSCA's Chief of General Services to submit the Monthly Report of Fuel Consumption for each motor vehicle to the Auditor within the first ten days of the succeeding month for audit purposes as required under pursuant to the provisions of the GAAM and pertinent provisions of COA Circular No. 77-61 dated September 26, 1977.

They are also asking PhilSCA Administration to require the drivers of the four motor vehicles to properly accomplish Daily Trip Tickets and ensure that the same is approved by the authorized officials and signed by the end-users or passengers of the motor vehicle, and that this be serially numbered and summarized at the end of the month in a Monthly Report of Official Travels and submitted to the COA for audit purposes.

COA also criticized PhilSCA's practice of assigning more than 12 hours a week teaching load to 108 part-time faculty members resulting in the payment of 24,871 hours of excess loads amounting to P2.96 million which is inconsistent with the College Faculty Workload Manual dated December 2, 2002.

COA is recommending that the PhilSCA Administration revisit its policy on faculty teaching load vis-a-vis its actual implementation tomake sure it conforms with PhilSCA's College Faculty Workload Manual in view of COA's concerns on the matter.

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Continuation of: "The 102 UPV in-house Research Projects worth P16.56 million were not completed before the expiration of the contracts due to the absence of, or laxity of the management"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "The PPE accounts of the nine UP offices/campuses totalling P6.96 billion is of doubtful validity with a negative variance of least P506.09 million"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "Recognition of payables was not based on actual claims for goods delivered or service rendered, as P68.43 million listed as payables in three UP offices/campuses were not found to be valid claims supported by sufficient evidence"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "The Electricity Expenses account of P6.32 of the UP System appeared is understated by P3.10 million as only P1.52 million was certified to accounts payable"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "The Items in Transit account balance of P550.50 million of the UP Diliman and Los Baños cannot be relied upon as it includes long outstanding and undocumented charges amounting to P242.48 million"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "Lapses in internal control on the granting/liquidation of cash advances were observed in all of the UP campuses of which a total of P21.77 million unliquidated cash advances"

COA's 2009 CAAR repeatedly scores the outgoing U.P. administration for “lapses in internal control on the granting/liquidation of cash advances were observed in all of the UP campuses of which a total of P21.77 million unliquidated cash advances have been long outstanding for two years or more contrary to COA Circular No.97-002 dated February 10, 1997.”

COA Circular No. 97-002 guidelines states, among others, that: “No cash advance shall be given unless for a legally specific purpose.” amd that “No additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made.” and also that “A cash advance shall be reported on as soon as the purpose for which it was given has been served.”

The COA report also invoked Section 16 Title III of Executive Order 248 and Par. 5.1.3 of COA Cir. 97-002 which says that “Within sixty (60) days after his return to the Philippines, in the case of official travel abroad, or within (30) days of his return to his permanent station in the case of official local travel, every official or employee shall render an account of the cash advance received by him in accordance with existing applicable rules and regulations.”

COA also said that COA Circular No. 97-002 dated February 10, 1997 provides that failure though on the part of the accountable officers and employees to submit liquidation reports on a specified period shall constitute a ground for the withholding of the payment of any money due to them.

Moreover, for the proper matching of costs against revenues, it is necessary that cash advances granted during the year must be liquidated and recorded on that same year, so that the appropriate expense charges will be properly recognized during the period of occurrence, COA said.

Citing COA Circular No. 2009-002 which provides for the selective restitution of pre-audit on government transactions, the 2009 COA CAAR said that, “Except for cash advances for payroll, intelligence funds, petty cash funds, and those granted for local travel expenses of officers and employees, all other cash advances including those for foreign travels funded out of the local funds regardless of amount shall pass through pre-audit.”

COA said that the foregoing rules and regulations were formulated to “provide clear and extensive guidelines for an efficient and effective control in the granting, utilization and liquidation of cash advances, and the appropriate recording/recognition of the same in the books. However, these were not strictly observed and implemented as can be gleaned from reports and records submitted.” COA said the following data in Table I shows the total unliquidated cash advances to the officers and employees of the following UP units/campuses as shown in the consolidated financial statements:

(Table I. To enlarge the graphic, just click on it)

COA is recommending that the U.P. Administration adopt the following measures specific to the following areas of jurisdiction:

UP System

• Strictly observe the governing rules in the granting, utilization, and liquidation of cash advances, such as but not limited to the following:

• Require a yearly liquidation on cash advances for Doctorate studies which have more than a year duration to prevent accumulation of cash advances and that appropriate expenditures be properly recognized during the period of incurrence;

• Observe strictly the rule that “no additional cash advances shall be allowed to any official or employee unless the previous cash advance given to him is first settled or a proper accounting thereof is made."

• Impose the appropriate penalties/remedies provided for its violation such as withholding of salaries of erring accountable officers;

• Revisit the previous request for write off which was returned by the Auditor for submission of lacking documents; and

• No clearance from money and property accountability must be granted to any officers and employees unless all accountabilities are cleared. Any concerned officer found to be negligent for the improper granting of clearance to ineligible employees/personnel must be held personally or administratively liable.

UP Diliman

• Monitor regularly cash advances granted in order that these are reported on as soon as the purpose for which these were given have been served; and

• Impose the appropriate penalties/remedies provided for its violation such as withholding of salaries of erring accountable officers.

UP PGH/Manila

• Issue notice or demand letters to all accountable officers and employees to settle their accountabilities within the prescribed period. In case of failure to comply, strictly impose sanctions such as withholding of salaries or any money due to them pursuant to Section 9.3.2 of COA Circular No. 97-002 dated February 10, 1997 or course legal action through the Office of the Ombudsman for demand letters not acted upon;

• Request the COA for the cancellation of those long outstanding/overdue accounts and other unsettled cash advances which could no longer be collected in accordance with existing rules and regulations. Revisit the previous request for write off which was returned by the Auditor due to lack of documents;

• No clearance from money and property accountability must be granted to any officers and employees unless all accountabilities are cleared. Any concerned officer found to be negligent for the improper granting of clearance to ineligible employees/personnel must be held personally or administratively liable;

• Require the Accounting personnel to verify and update all accounts which were not recorded in the books and make regular reconciliation of their records with that of the Accountable Officers to effect appropriate adjustments in the books. Likewise, immediately forward to the Auditing Unit all liquidations, reports, adjustments, etc. related to the cash advances’ accounts for proper auditing and issuance of the corresponding credit notices; and

• Require the Cashier to explain in writing why she failed to submit the disbursement vouchers for cash advances covering foreign travels and expenses for projects/activities that are required to pass through pre-audit pursuant to COA Circular No. 2009-002. Management to refer the matter to the Legal Office, for the possible filing of administrative disciplinary action to persons responsible in accordance with Section 127 of Presidential Decree No. 1445 and Section 55, Title I-B, Book V of the Revised Administrative Code of 1987, without prejudice to the disallowance of the transactions in post-audit, if warranted.

UP Visayas – Iloilo

• Subsequent cash advances should be granted only after the issuance of a Credit Notice for the previous cash advance by the Office of the Auditor.

Rejoinder of U.P. and COA's counter responses

To read the table of U.P.'s rejoinders to COA's criticisms and COA's final word on the matter, please click on this link: http://www.scribd.com/doc/43888586/UP-s-Rejoinders

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Continuation of: "The UP Visayas-Iloilo, Tacloban, Baguio and Open University incurred expenses totaling P10.96 million, which either lacks the appropriate legal basis or in excess of allotments"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: Other Payables account of UP-Manila, Los Baños and Cebu campuses totalling P2.81 billion was overstated by P686.50 million

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "Procedural lapses … in the UP Los Baños, Open University and Mindanao cast doubts on the validity of the P46.70 million inventories and related expense accounts"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "The implementation of the UP Diliman ERDT program disclosed 127 unfilled scholarship slots, 20 incidents of voluntary and involuntary termination of scholarship grants and idle funds of P151.65 million"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "The six UP units/campuses failed to allocate at least 5% of their CY 2009 approved budget for the Gender and Development Program, as required by law"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of "The balances of Cash in Bank Local Currency-Current and Savings Accounts (LCCA & LCSA) of P152.48 million of the UP Manila and Visayas and Foreign Currency Account of $187,674.61 of the UP Manila were misstated"

The 2009 Consolidated Audited Annual Report (CAAR) of COA also pointed out that the balances of Cash in Bank Local Currency-Current Accounts and Savings Accounts (LCCA & LCSA) of P152.48 million of U.P. Manila and Visayas and Foreign Currency Account of $187,674.61 of U.P. Manila were misstated due to unreconciled differences between the books and bank balances amounting to P131.90 million and $104,809.07 respectively, due to the failure of the Accounting Division to prepare and update the bank reconciliation statements (BRS).

In other words, COA is probably being overly polite by referring to the window dressing by the U.P. Administration of its books of accounts as it claims that UP Manila-PGH it was in actual possession of taxpayer funds worth P 142,689,776.86 when it reality the U.P.'s own bank balances for UP Manila-PGH only showed the existence of funds worth P 74,480,379.96 or a staggering variance of P131,790,603.10. Where did this money go? Did university officials dip their hands in the cookie jar one too many times? Perhaps or even perhaps not. However, such endless speculation may be quieted once and for all, if only U.P. officials would simply follow Section 74 of P.D. No. 1445, otherwise known as the State Audit Code of the Philippines, COA said.

P.D. No. 1445 provides that: “At the close of each month, depositories shall report to the agency head, in such form as he may direct, the condition of the agency account standing on their books. The head of the agency shall see to it that reconciliation is made between the balance shown in the report and the balance found in the books of the agency.”

“The reconciliation of cash in bank account balances with bank records provides a periodic determination of the validity of cash balances appearing in the books of the agency concerned. Bank reconciliation statements prepared on a regular and timely basis is an essential control over these cash accounts. The agency accountant shall draw journal vouchers to record all valid reconciling items that require adjustment and correction in the General Ledger

COA's 2009 CAAR also found that U.P. Visayas said that it had at least P 9,787,307.82 in its books, when it reality it had P 9,897,874.82, or a positive variance of P 110,567.00 which, while it might seem like a happy problem, was still problematic from a COA perspective, because it showed that accountants were not practicing sufficient levels of rigor that was in accordance with Generally Accepted Accounting Procedures (GAAP).

In terms of foreign currency holdings, UP Manila-PGH said that it had at least $187,674.61 in its books, but actual bank statements only proved that it was in possession of $292,483.68 or a positive variance of $104,809.07 which again makes it difficult for COA auditors to determine the path of the money trail in terms of where this money comes from and where it is going.

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Continuation of: "PhP 17.59 million in UP Diliman's Income Account was overstated and understated respectively as of December 31, 2009"

(Editor's note: This dispatch is still under construction and will be updated shortly. we apologize to our readers for the inconvenience).

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Continuation of: "On the basis of a complaint filed by the All U.P. Workers Union"

On the basis of a complaint filed by the All U.P. Workers Union (AUPWU), the Commission on Audit (COA) has now cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through U.P. Manila- Philippine General Hospital (UPM-PGH), and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the Faculty Medical Arts Building (FMAB) in its recently released 2009 Consolidated Audited Annual Report (CAAR).

The FMAB is a priority project of the Administration of outgoing U.P. President Emerlinda R. Roman. However, the 2009 CAAR refers extensively to “unresolved legal issues and inadequacy of auditorial documentary requirements on the 25- year lease contract of the Faculty Medical Arts Building (FMAB).”

COA said the unresolved legal issues and inadequacy of the auditorial documentary requirements cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through the UPM-PGH, and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the FMAB.

COA said AUPWU, based on its preliminary analysis and evaluations of the subject contract, raised an issue that certain provisions of the 2008 University of the Philippines Charter (RA 9500), particularly Section 23 thereof on the “Safeguards on Assets Disposition” may have been violated, and that the contract is allegedly disadvantageous and contracted with attendant irregularities.

Correspondingly, the issue was submitted to the Department of Justice (DOJ) for an opinion on whether the new requirements provided in Section 23 of the R.A. No. 9500, which took effect only in May 2008, or three years after the approval of the FMAB Project, apply retroactively to the subject contract. The DOJ Secretary, in Opinion No. 8 s, 2010, commented that the non-impairment of contracts clause as claimed by U.P. would not apply to the FMAB Lease Contract, or assuming it is applicable, the non-impairment clause must “yield to the police power of the state and that there may be certain provisions in the Terms of Reference (TOR) which was approved before R.A 9500 was passed that are no longer applicable or needs to be revisited in order to be beneficial to all the parties involved.”

Quoting from the DOJ opinion, COA said in the 2009 CAAR that:

“Records would show that the University was in the middle of negotiations when the UP Charter of 2008 was passed. No contract was entered into, no agreement was yet in effect. It approved the renegotiated terms of the contract months after the effectivity of the UP Charter of 2008. It was only at that time that the contract was perfected between the parties. Hence, the non-impairment clause as claimed by UP, would not apply.”

“Besides, assuming that the non-impairment clause is applicable, UP’s contention would still not stand. In Oposa vs. Factoran, Jr (G.R. No. 101083, July 31, 1993, 224 SCRA 792) the Supreme Court held that the non-impairment clause must yield to the police power of the state. Property rights and contractual rights are not absolute. The constitutional guaranty of non-impairment of obligations is limited by the exercise of the police power of the State for the common good of the general public. In this case, the State makes it clear that the preservation of U.P. property is of primordial concern which is the reason why in passing the law, Congress deemed it fit to provide for safeguards in asset distribution. This is more on the protection of the University itself and its properties.”

“Moreover, it was pointed out that the TOR has been approved long before the new law was passed, but since the project has dragged on for years, the situation now may be different, there may be certain provisions in the TOR that are no longer applicable or needs to be re-visited in order to be beneficial to all the parties involved.”

“Lastly, we call your attention to Section 22 (f) of RA 9500 which states that, “any plan to generate revenues and other sources from land grants and other real properties entrusted to the national university, shall be consistent with the academic mission and orientation of the national university as well as protect it from undue influence and control of commercial interests”. Provided, that such programs, projects or mechanisms shall be approved by the Board subject to a transparent and democratic process of consultation with the constituents of the national university; xxx” (emphasis ours).”

“Further, Section 5 of Article 5 of the contract exempts the University, among others, from any liability, loss or damage to persons and properties during the lease period which is contrary with Section V A.1 Policies and Guidelines of the Department of Health (DOH A.O. No. 2007 – 0021 dated June 6, 2007 on the issuance of a Single License to Operate (LTO), quoted below:

“Section V A. 1 Policies and Guidelines provides, among others:

Ancillary and other facilities that are located within the premises of the hospital shall be included in the LTO.

Sanctions for violations involving ancillary and other facilities, regardless of the ownership, shall be borne by the hospital.”

“Moreover, legal and auditorial review showed absence of the following additional documents/information necessary to determine reasonable assurance of the contract’s compliance to existing government rules to establish the validity and regularity of the transaction:

a. Authority from the National Historical Institute (NHI) for the conversion, rehabilitation and development of the PGH Dispensary Building, a historical three-storey concrete building into the FMAB in compliance with Section 5 of Presidential Decree (PD) No. 260 as amended by P.D. No. 1505, which provides that:

“It shall be unlawful for any person to modify, alter, repair or destroy the original features of any national shrine, monument, landmark and other important historic edifices declared and classified by the National Historical Institute as such without the prior written permission from the Chairman of the said Institute.”

b. As the contractual arrangement for the FMAB Project is under the Build Operate and Transfer scheme, the approval of the Investment Coordination Committee (ICC) of the NEDA pursuant to Section 2.7 of the IRR of R.A. 6957 as amended by R.A. 7718, which provides as follows:

“Section 2.7 Approval of Priority Projects – The approval of projects prosecuted under this Act shall be in accordance with the following:

National Priority Projects – The projects must be part of the Agency’s development programs, and shall be approved as follows:

1. projects costing up to P300 million, shall be submitted to the ICC for approval;

2. projects costing more than P300 million, shall be submitted to the NEDA Board for approval upon the recommendation of the ICC; and

3. negotiated projects shall be submitted to the ICC for it to prescribe the reasonable rate of return prior to negotiation and/or call for comparative proposals.

c. Financial and Technical Evaluation of the Negotiated Lease Contract is required under Section 9.4 of the said IRR, which shall include among others, assessment of the technical, operational, environmental and
financing viability of the proposal vis-à-vis prescribed requirements and criteria/minimum standards;

d. UPM infrastructure/development programs and list of priority projects published and provided to project proponents;

e. The UPM did not invite a Technical Officer from a concerned regulatory body, two representatives from the private sector as non-voting member and representative from the Coordinating Council of the Philippine Assistance Program (CCPAP) as non-voting observer in the Bids and Awards Committee (BAC);

f. Invitation to pre-qualify and bid was only published in the Philippine Star and not in at least two newspapers of general circulation and in at least one local newspaper of general circulation;

g. Information to bidders of the results of the BAC action/decision;

h. Bidders’ acceptance of criteria and waiver of rights to enjoin project;

i. Department of Environment and Natural Resources (DENR) environmental clearance;

j. Notice to Proceed;

k. Insurance; and

l. Monitoring and Supervision Reports.”

“The foregoing conditions cast doubts on the legality and validity of the 25-year FMAB contract of lease.”

“We recommended that management submit the aforementioned information/documents requested for further review and evaluation as well as its legal stand on the issues raised over the subject contract.”

COA said the DOJ comment was forwarded to the UP System Administration through the Vice President for Legal Affairs, Atty. Theodore Te, copy furnished the Auditor. Since the case was already referred to the COA Legal Office, the DOJ's comment will be forwarded to that Office for consideration.

Last March 3, 2010, the Diliman Diary reported on a press conference held by the All U.P. Workers Union, then-PGH Director Jose Gonzales, Faculty Regent Judy M. Taguiwalo and former Student Regent Charisse Banez where it was first revealed that the DOJ had already questioned the validity of the contract (see http://diliman-diary.blogspot.com/2010/03/department-of-justice-up-board-of.html).

This case has turned out to be a major embarrassment for the U.P. Administration because COA has now closed ranks with the DOJ in questioning the contract in the 2009 CAAR even as it is now up for review by the legal department of COA. Additionally, another Diliman Diary story dated April 29, 2010 revealed that the legal personality signing with U.P., Mercado General Hospital, Inc. (MGHI) (see: http://diliman-diary.blogspot.com/2010/04/up-philippine-general-hospital-contract.html) should logically have been disqualified from even bidding on the FMAB project, as its articles of incorporation shows the capital stock of MGHI that is actually subscribed is a meager PhP 2 million only. What is baffling, however is the failure of the U.P. Administration-dominated Board of Regents to disqualify MGHI from bidding on the contract in the first place, which was signed on July, 2009 when the minimum amount of PhP 400 million will be spent on a pharmacy and a medical diagnostics center but where MGHI clearly was severely undercapitalized.

Clearly, such a public-private sector partnership would never have passed muster by the NEDA Board, since the contract does not make clear what is in it for U.P. in terms of such traditional strait-laced financial criteria, such as Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI), and acceptability by and among affected constituents which are criteria employed by the NEDA Board in approving large-scale projects. Additionally, the NEDA Board typically would require proof of capability of the project proponent and thus at a mere capitalization of PhP 2 million, MGHI's severe undercapitalization of  a PhP 2 million company that aggressively pursued a PhP 400 million project, causes it to join the ranks of other equally ambitious but tiny companies who dared to bid for government projects far beyond their allowable margin for error commensurate with their financial capabilities.One example of this in the past is the failed attempt in 1996 of Domestic Satellite Co., Inc. (DOMSAT) to band together a consortium of equally tiny companies to launch the first Philippine satellite in space, the Philippine Agila satellite, Inc. (PASI) consortium on a Philippine government owned orbital slot. However, the project ultimately failed when its financing fell apart (see: http://pdff.sytes.net/ar/t2890.htm).

Although the FMAB construction along Taft Avenue has already exceeded 60% completion, with the essential structure finished, the major dillema now facing the U.P. Administration is that COA may actually disallow the contract, leading to a possible capital flight on the part of the investing company, MGHI and its possible "silent" investors. This could create a huge headache, as the remaining renovation works could be left hanging with a possible adverse COA decision disallowing the contract in the pipeline. The question is, why did a project of such questionable legality and financial viability be allowed to fly in the first place by the current U.P. Administration? With the facts starting to emerge, more tough questions are sure to follow, now that the national government authorities are taking a direct hand in investigating this case.

To return to the main story, please click here: http://diliman-diary.blogspot.com/2010/11/breaking-news-coa-releases-2009-audit_05.html

Continuation of "The University Hotel (formerly PCED Hostel) as a special project under the UP System Administration"

The UH, as a special project under the UP System Administration, continues to operate as a separate and distinct entity since 1983 and the results of its financial position and operations, which reflected a gross income of PhP 30.46 million in 2009, remained undisclosed or unreported in the System’s books of accounts thus, affecting the fair presentation of the University System’s consolidated financial statements.

Formerly known as the Philippine Center for Economic Development (PCED) Hostel, the University Hotel was donated to the University of the Philippines (UP).

The Deed of Donation was executed between the PCED and the U.P. through its former President, Senator Edgardo J. Angara on June 10,1983. It involved the conveyance of assets worth PhP 14.6 million including the Hostel building valued then at PhP 10.99 million, but incorporating some conditions, that include among others,”that the Donee assumes any and all the liabilities of the PCED Hostel as shown in the balance sheet, including certain contingent liabilities…”

In view of such donation, the UP was vested with the ownership, management and control of the hotel and its operations. However, its management’s right and privileges were conferred to the Board of Overseers (BOO) created by the University President under Administrative Order (AO) No. 108 on July 14, 1983, as reaffirmed in Section 2 of AO No. FN-03-56 dated October 2003.

The UH continued to operate under the name and authority of UP but apparently as a separate and distinct entity with a separate books of accounts. In effect, the results of its operations were not publicly disclosed/reported in the University System’s books of accounts.

COA's 2009 Consolidated Audited Annual Report (CAAR) disclosed that the UH financial and operation reports were never recorded in the University’s books since 1983 despite the previous years’ audit recommendations for management to take appropriate action to consolidate in the University’s books of accounts the result of the UH operations as well as its financial condition.

For CYs 2009 and 2008, the UH had reported a gross income from operations of PhP 30,457,660.00 and PhP 25,931,701.00, respectively, but these were not reflected in the UP System’s books due to the present set up.

The 2009 CAAR said that U.P. President Emerlinda R. Roman created a committee to review the status of the Hotel under AO No. PERR-07-50 dated June 20, 2007. The committee was tasked to recommend the best course of action that the university should take given the Hotel’s mandate and its current situation as well as the University’s needs and responsibilities. The report was due in July 2007, however, to date COA has not been informed of the committee’s report, if any.

COA said that, “while the efforts exerted by the management and staff of the UH for the maintenance, development and continuous operation of the same are commendable, however, these activities must be governed by applicable government rules and regulations, specially the preparation of required monthly and year-end financial reports, which have to be consolidated with the UP System financial reports.”

“We therefore reiterate our previous recommendation that management require the BOO to submit the financial reports of the UH operations for consolidation in the books of the University System. Further, the UH monthly/year-end financial reports and supporting documents required under government rules and regulations should be submitted regularly to the Commission on Audit (COA) for audit purposes.”

The U.P. Administration has replied that the University faithfully implemented AO 108 issued on July 14, 1983, as in :

“Section 1- Creation and Composition. There is hereby created a Board of Overseers whose compositions shall not exceed 7. They shall serve at the pleasure of the President.”

“Section 3- Income of Hotel. The Board shall recommend to the President the amount or percentage of income that shall be remitted regularly to the Faculty Development Fund.”

“Section 5- Submission of Reports. The Board shall submit a quarterly report to the President through the Vice-President for Planning and Finance. It shall submit a report on the disposition of the Hostel and such other benefits and privileges which it may deem appropriate.”

However, COA stressed that the AO 108 was issued in the meantime that management has not yet come up with a final plan on what to do with the donated property, so as not to interrupt the Hotel operations. Further, more than 20 years had passed, but the succeeding administrations did not bother to introduce possible amendments to the said AO 108 to address the issues on management, operations and financial reporting. “Any law, order or issuance may be subjected to possible amendments when, during the implementation period, provisions therein become irrelevant or unnecessary or are no longer sufficient to address subsequent changes or events,” the COA 2009 CAAR said.

COA also criticized an absence of standard qualification requirements for appointees to the Board of Overseers (BOO) positions.

AO No. 108 dated July 14, 1983, creating the Board of Overseers to manage the University Hotel, and giving its management the power and control, did not clearly specify the qualification requirements of the appointees to the Board that will standardize criteria for eligibility requirement and will govern future selection and appointments to the Board, COA said.

COA said that the UH, since its construction and operation under the PCED and until the time of its donation to the UP in 1983, is a government property. The corporate nature of its function and operation does not change the fact that it is a government property subject to existing applicable rules and regulations of the government.

AO No. 108 creating the BOO as appointed by the President had vested to the Board full powers and control of the UH operations including:

Oversee and supervise the operation of the PCED Hostel;

Undertake or commission studies designed to improve the management and operation of the PCED Hostel and the possible terms in the event of lease or other arrangements;

Promulgate rules and regulations regarding the use of the facilities, the hiring, dismissal and the salaries of its personnel;

Schedule of prices of foods and services of the Hostel, etc. which shall take effect upon the approval of the President;

Enter into contracts in matters relating to the operation and management of the Hostel;

Enter into loan agreement upon the recommendation of the Vice-President for Planning and Finance and the approval of the President;

Determine the name of the Hostel for approval of the President;

Recommend to the Presidential Committee on Campus Planning and Development necessary improvements within the vicinity of the Hostel; and

Performs such other powers and functions as may be assigned to it by the President.

COA said the foregoing powers and functions vested to the BOO more than 20 years ago gave the Board full power and control over the operations of the UH. It was observed that the UP System management had not actively participated nor got involved in the UH’s operations except to acknowledge the 2% share of income it remitted to the System for the Faculty Development Fund.

“The functions given to the BOO covers all vital management and control functions, therefore, it is desirable if the appointees to the Board pass through specific qualifications criteria that will at least consider the expertise, relevant trainings, employment status and tenure of office to standardize eligibility criteria and encourage transparency in the selection process. Moreover, this is to insure proper accountability, responsibility and liability for the management of government funds and property,” COA said.

“We want to stress that we are not undermining the capabilities of the present members of the board, as we acknowledge their competence in turning the Hotel to what it is today. But there is a necessity to establish written or formal rules and regulations with regard to qualification, selection and appointment to insure that future appointments will be guided properly and will be based on established standards,” COA's 2009 CAAR concluded.

To return to the main story, please click here: http://diliman-diary.blogspot.com/2010/11/breaking-news-coa-releases-2009-audit_05.html

Continuation of: On the issue of conflicts of interest among ranking university officials and university-affiliated foundations

The 2009 CAAR of the U.P. System by COA is highly critical of the U.P. Administration, headed by U.P. President Emerlinda R. Roman for its "inadequate U.P. System Guidelines on U.P.-affiliated foundations." This is especially significant, because COA put the U.P. Foundation on the top of its incomplete list of university affiliated foundations, and the U.P. Foundation itself is headed by none other than President Roman (please click on for a PDF copy of the chapter of the COA report containing the list). The responsibility for the U.P. System's unwillingness to move on several years worth of criticism by COA over the issue of not opening the financial records of these university-affiliated foundations thus begins with the very top management of the U.P. System.

Quoting Section 1, Article XI,  of the 1987 Constitution, COA said that “Public Office is a public trust.  Public Officers must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, act with patriotism and justice and lead modest lives.” 

The 2009 CAAR of the U.P. System furthermore quoted Section 63 of Presidential Decree  (PD) No. 1445 which said that, “Except as may otherwise be specifically provided by law or competent authority all moneys and property officially received by a public officer in any capacity or upon any occasion must be accounted for  as  government  funds   and   government   property. Government property shall be taken up in the books of the agency concerned at acquisition cost or appraised value.”

Hanging on by its fingernails onto a legally unsustainable status quo through an inter-year series of delaying tactics, the current U.P. Administration would hardly win a Most Transparent Government Entity of the Year Award in its compliance with COA demands for more transparency by these university-affiliated foundations.

COA said that although these foundations are registered as private institutions, by the nature of its creation, function and purpose, the inclusion of the abbreviated word “UP” in their registered name and using the UP premises as their place of business, however, manifested a conflicting arrangement and raised questions about their legal status as a separate and distinct entity from the UP, which is a government or public entity by its creation and mandated functions.

Last June 20, 2010 the Diliman Diary had earlier written about the close relationship that the U.P. Foundation had with the U.P. President and the equally close relationship the U.P. Business Research Foundation had with the Dean of the College of Business Administration.

The problem is that both the U.P. Foundation and the U.P. Business Research Foundation have been raising millions of pesos, with no independent oversight, using U.P.'s brand name, prestige, personnel and facilities. At a time when U.P.'s 2011 budget has been slashed by an unsympathetic Aquino administration, U.P. needs to make sure that every single peso or unit of foreign currency raised for and on behalf of the U.P. System does not disappear to "systems losses" and this needs an independent oversight mechanism, such as COA (please see: http://diliman-diary.blogspot.com/2010/06/interlocking-directorates-between_20.html).

But these two foundations actually only represent the tip of the iceberg. COA's 2009 CAAR blows the lid wide open on a host of other university-affiliated foundations also operating without proper oversight. COA's 2009 CAAR said that a U.P. Vice President for Development gave them a partial list of 14 university-affiliated foundations in June, 2009 with ranking university officials who served concurrently as ranking officials in these foundations. To download the list, please click on this link: http://tinyurl.com/2vgmk2o.

But political pressure within the university may be too great for a compromised U.P. Administration or its legal department to act quickly and decisively on controlling the activities of these foundations. The Diliman Diary directly contacted the U.P. Administration on this issue, but was quickly rebuffed, as reported on its August 1, 2010 story (please see: http://diliman-diary.blogspot.com/2010/08/coa-updates-diliman-diarys-readers.html).

Nevertheless U.P., in compliance with the previous audit recommendations on the UP- affiliated foundations, has issued a “Guidelines for Recognition of the UP-Affiliated Donor Organizations” with the following information: General Principles, The Need for Guidelines, Criteria for Recognition and the Partial List of Foundations Generally Recognized by UP as Donor Organizations.

COA said the issue on monitoring and transparency of the foundations programs, projects, activities and fund sources that should be regularly reported to the University has not been addressed in the guidelines. The absence of an independent oversight body to monitor the affairs of the foundations would mean giving them full discretion to handle funds supposedly intended for UP as the primary beneficiary, including the generation of revenues without proper reporting and disclosure.

COA said it recognized the foundations’ support and concern to the different activities and programs for the improvement and development of the University in general and the respective Colleges in particular. However, for transparency and accountability, and for the information and protection of the concerned beneficiaries or recipients, proper financial accounting and reporting should be made by these institutions to the UP System.

COA said that it reiterated in the 2009 CAAR (for the Executive Summary please click: http://tinyurl.com/2b3n2sg) its previous recommendations in the 2008 CAAR (for the Executive Summary please click: http://tinyurl.com/22ojh3z), 2007 CAAR (for the Executive Summary please click: http://tinyurl.com/35fp8zb) and 2006 CAAR (for the Executive Summary please click: http://tinyurl.com/38fzubw) that the U.P. Administration formalize once and for all an arrangement through a Memorandum of Agreement with these Foundations by defining the functions and responsibilities of both parties, including how to account and share for the income/revenues earned from their operations.

COA said a policy or guidelines must be established to set the limits and boundaries with respect to the role or participation of the UP employees and officers to any of these Foundations.

Financial transactions entered into by these Foundations for and in behalf of the University must be accounted for and reported to the UP System management and be subjected to the COA review, verification and audit.

The U.P. Administration commented that it will address the conflict of interest issue, such that it will inform the foundations that: no head of unit will become an officer of the foundations; and that Faculty members of the unit serviced by the foundations should comprise only a minority of the Board Membership.

However, the COA report was silent on whether U.P. President Emerlinda R. Roman, who concurrently headed the U.P. Foundation, as stated in the 2009 CAAR, would resign her position within the U.P. Foundation in order to set the example with al the other university-affiliated foundations.

To return to the main story, please click here: http://diliman-diary.blogspot.com/2010/11/breaking-news-coa-releases-2009-audit_05.html.

Continuation of State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link): 5. Philippine Normal University

5. Philippine Normal University (continued)

COA recommended that the PNU Administration review its agreement with the MPC, considering that its Memorandum of Agreement (MOA) had already expired; and study the possibility of directly doing service contracts with the stallholders in order to derive rental income for the University.

Other issues highlighted by COA's 2009 CAAR of PNU showed that:

• The PNU Main Campus procured office supplies, construction materials and equipment totaling PhP 11.9 million during the year which were not included in the Annual Procurement Plan (APP) due to poor procurement planning contrary to R.A. 9184.

• COA recommended that the PNU Administration comply strictly with R.A. 9184 regarding procurement planning as failure to comply in future transactions may be disallowed in audit as warranted by the circumstances.

• At the PNU Negros Occidental branch, cash advances amounting to PhP 250,000.00 remained unliquidated at year end due to lack of monitoring contrary to COA Circular No. 97-002 dated February 1, 1997 resulting in the overstating of the receivable account and understating of the related expense accounts. COA recommended that the PNU Administration comply strictly with COA Circular No. 97-002 dated February 1, 1997 regarding the granting, utilization and liquidation of cash advances.

• Out of the total balance of Other Receivables account amounting to PhP 5.7 million at PNU Main Campus, PhP 704 thousand or 12.3 percent remained uncollected for four to ten years as of December 31, 2009, due to poor monitoring of collections from various debtors. COA correspondingly recommended to the PNU Administration to exert extra efforts to collect long outstanding receivables by sending demand letters to its debtors; and effect salary deductions for those employees with outstanding obligations.

• A comparison of the General Ledger balance of Office Supplies Inventory account amounting to PhP 1.34 million as against the physical inventory of PhP 400,000.00 for CY 2009 at the PNU Main Campus, showed a discrepancy of PhP 933,000.00 due to the absence of periodic reconciliation of accounting records against property reports casting doubts on the validity of the said account. 

• COA recommended and the PNU Administration agreed to require the Accountant and Property Officer to exert extra efforts to reconcile their respective records to ensure accuracy of the reported account balances in the financial statements and the Accountant to prepare a journal entry voucher to reflect the correct balance of the account.

• The balances of dues from the Central Office account of PhP 3.5 million and Due to Regional/Branch Offices amounting to PhP 17.7 million appearing in the books of PNU Branches and PNU Main campus, respectively as of the end of the year resulted in a discrepancy of PhP 14.2 million, due to a lack of regular and periodic reconciliation, casting doubts on the validity of the said accounts. 

•  The PNU Administration, upon COA's recommendation, agreed to reconcile the above noted discrepancy on the two reciprocal accounts and henceforth, to conduct regular reconciliation of said accounts to insure the correctness of financial data.

• The Other Payables accounts balance of PhP 46.5 million at PNU Main Campus could not be ascertained as PhP 10 million could not be verified due to the absence of records and the existence of a negative balance amounting to PhP 57,000.00, casting doubts on the existence and validity of the account. This resulted in COA's recommending that the PNU Administration instruct its Accountant to exert extra efforts to look for documents that will identify the nature of the accounts in the subsidiary ledger in the total amount of PhP 10,079,500.91; and review and analyze the accounts with negative balances which may represent excess expenditure over the amount earmarked for the program or project and immediately prepare journal entry vouchers to correct the recording.

COA said the above observations and recommendations were discussed with the PNU Administration whose comments were incorporated in the 2009 CAAR where appropriate.

To return to the main story, click here: Philippine Normal University

Continuation of State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link): 4. Technological University of the Philippines

4. Technological University of the Philippines (continued)

COA recommended that the TUP Administration require the Chief, Finance Services and/or Accountant to prepare the Journal Entry Vouchers to correct the Accounts Payable; and the necessary supporting schedules to validate the account balance.

Other problems pointed out by the 2009 CAAR:

• Ten computer sets donated to the TUP-Main campus, and covered court, and school building funded by the PDAF in the TUP-Cavite campus were not recorded in the books of accounts, thus resulting in the understatement of the Property, Plant and Equipment and Income from Grants and Donations accounts by the value of the assets and contrary to the Government Accounting and Auditing Manual (GAAM).

• COA recommended and the TUP Administration agreed that in the TUP-Main campus, the Head of the IT Department would be required to appraise the donated computers for proper valuation of the PPE account; the Accounting and Property Sections head would be required to record the ten sets of computer donated by the PPTF to TUP-Manila; and GAAM would be strictly complied with.

• An inadequate review by the Accounting Office on the posting of PPE acquisitions in CY 2009 in the books of the TUP-Main campus, resulted in erroneous accounts classification of PhP 2,.5 million, and unrecorded property of PhP 283,192.80, thus affecting the fair presentation of the PPE accounts’ balances in the financial statements.

• COA recommended and the TUP Administration agreed to require the Accountant/Finance Services Chief to analyze and review the accounting entries prepared by staff prior to approval of JEVs and final posting to the ledgers; reconcile accounting records with the property records and make the necessary adjustments; and prepare the correcting/adjusting entries in the books of accounts to reflect accurate account balances in the financial statements.

• In TUP-Cavite campus, procurement of various supplies and materials totaling PhP 3,2 million and repair of its various facilities amounting to P629,317.61 were made thru splitting of Purchase Orders and Job Order contracts, respectively, contrary to the Implementing Rules and Regulations of Republic Act 9184. COA recommended that the TUP Administration strictly stop the practice of splitting contracts and/or Purchase Orders .and adopt public bidding as the general mode of procurement.

• Notices of Suspension amounting to PhP 18.2 million were issued due to non-conformity with the specifications in the P.O. of I.T. Equipment and Software, repairs or renovation of buildings and facilities and non-submission of the Disbursement Vouchers, checks and contracts or documents by the Chief, Finance Services, casting doubts on the propriety, completeness and accuracy of the said disbursements.

• Correspondingly, COA recommended that the TUP Administration require the supplier or contractor to replace or rectify the items delivered which do not conform with the specifications as called for in the POs; the Chief, Finance Services, to immediately submit the required vouchers together with the checks and supporting documents like contract, progress billings, inspection reports, etc. for post-audit and evaluation; the former Bidding and Awards Committee Chair and members to explain their failure to question the supplier during the prequalification phase about the difference in the price quoted for the same items for which delivery was made earlier during the year compared to Prudent Diamond Square Construction Company. The latter was quoted at a much lower unit cost by 52%; and COA also asked the TUP Administration to require the Inspection Committee to explain why the delivered items were accepted despite of their non-conformity with the PO specifications.

• Status of Audit Suspensions/Disallowances and Charges. As of December 31, 2009, the TUP Manila and Cavite campuses had a total unsettled disallowances of PhP 31.4 million and unsettled suspensions of PhP 18.2 million. 

To return to the main story, click here: Technological University of the Philippines

Continuation of State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link): 3. Marikina Polytechnic College

3. Marikina Polytechnic College (continued)

• Prepayments to the PS-DBM for the purchase of commonly used office supplies amounting to PhP 101,415.20 were erroneously recorded as outright expenses, while the deliveries totaling to PhP 94,680.40 were not recorded resulting in the misstatements of Office Supplies Expense account of PhP 101,415.20, Office Supplies Inventory account of PhP 94,680.40 and Due from NGAs account of PhP 6,734.80 as of the end of 2009.

• COA recommended that MPC's accountant prepare the Journal Entry Voucher (JEV) to effect the necessary adjustments in order to reflect the accurate balances of the Office Supplies Expense, Office Supplies Inventory and Due from NGAs accounts; follow strictly the rules and regulations on the proper classification and recording of office supplies as these are procured from, and delivered by the PS and subsequently issued to the requisitioners; and prepare monthly the RSMI to support the JEV for the issued supplies and materials. 

• No depreciation was provided for procured properties during the year amounting to P1.08 million, thus overstating the PPE account by P79,015,15. Likewise, accounts totaling P125,266.00 were misclassified, casting doubts on the reliability of the appropriate PPE accounts. The Diliman Diary also observed that neglecting to factor in depreciation would tend to artificially inflate the amount of “available” balances of MPC. 

• COA recommended that Management require the accountant to prepare a Journal Entry Voucher to effect the proper adjustments of the foregoing errors and to correct the misstatements on the appropriate Property, Plant and Equipment accounts. 

• MPC failed to deduct and withhold Value Added Tax and Expanded Withholding Tax of PhP 143,758.93 and PhP 57,503.57, respectively on payments for security services contrary to the BIR Revenue Regulations Nos. 16-2005 and 30-2003, depriving the government of the use of said funds for its programs and projects.

• As a result of this neglect, COA rrecommended that the MPC Administration require the JAS Security Agency handling them to refund, and cause the immediate remittance to the BIR the amount of P201,262.50 VAT and EWT. Henceforth, require its Accounting Office to comply strictly to the rules and regulations on withholding and the remittances of taxes. 

• MPC's mandate is to be the National Center of Excellence for Higher Professional Teacher and Technical Education and Training, and the Center for Development on Shoe and Leather Craft Industry. It aims to provide quality and relevant education and training for prospective teachers, trainers and technician, and to provide quality research for the development of shoe and leather craft industry.

To return to the main story, click here:
State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link)

Continuation of State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link): 2. Eulogio “Amang” Rodriguez Institute of Science and Technology

2. Eulogio “Amang” Rodriguez Institute of Science and Technology  (continued)

• COA said that the EARIST administration agreed to comply strictly with the provisions of RA 9184 or the regarding funding requirements, modes of procurement and acceptance of deliveries; comply strictly with COA Circular No. 2009-002 dated May 18, 2009 reinstituting selective pre-audit on government transactions; and explain the significant deficiencies noted in audit and submit documents, where applicable.

• The procurement of a Digital Language Laboratory amounting to PhP 8.6 million awarded, supplied and delivered by Mars Laboratory Instrument Center (MLIC) was contrary to RA 9184, Sections 4 and 85 of Presidential Decree No. 1445 (Ordaining and Instituting a Government Auditing Code of the Philippines) and COA Circular No. 85-55A dated September 8, 1985, casting doubts on the validity and regularity of the transaction.

• COA said the EARIST administration agreed to comply strictly with the aforementioned laws, rules and regulations governing procurement of goods, documentation and regularity of transactions; explain the significant deficiencies noted in audit and submit documents, where applicable; explain why the contract was awarded to MLIC which bidded the amount of PhP 8.6 million as against the lowest bid of AMC in the amount of PhP 5.8 million; and explain why the transactions should not be disallowed in audit considering the significant deficiencies noted in audit.

• The payments on the repairs and renovation of the college’s facilities totaling PhP 24.9 million disclosed inadequate supporting documentation required to establish the validity and correctness of the claims against government funds and inadequate accounting and administrative controls in processing and payment of claims contrary to existing laws, rules and regulations. 

COA's 2009 CAAR of EARIST also pointed out that the Business Development Center (BDC) collections of PhP 7.26 million were not deposited promptly and intact with the Philippine National Bank, as these remained in the possession of the Collecting Officer from one to 43 days contrary to existing rules and regulations thereby exposing said funds to possible loss and misuse. The EARIST Administration agreed with COA's recommendation to direct the Collecting Officer to deposit immediately to the PNB the remaining unremitted collections of P9,683.83; and closely monitor the collections and remittances to ensure that collections are promptly remitted to PNB.

The procurement of school and P.E. uniforms amounting to PhP 4.3 million in 2007 and PhP 3.1 million in 2008 by the EARIST Income Generating Project Office (EIGPO) and the corresponding rebates of about PhP 1.1 million thereon were likewise also not recorded in the books of accounts contrary to P.D. 1445, resulting in the understatement of the cash and other related accounts. Likewise, procurement of said uniforms was not in accordance with RA 9184.

COA recommended and the EARIST administration agreed to render an accounting and consolidate all the financial transactions of the EIGPO into the books of accounts and submit thereafter to the Auditor for custody and audit; comply strictly with the provisions of RA 9184; remit to the Bureau of Internal Revenue the taxes withheld from Seed Apparel; and refrain from entering into a contract with official and employees of the Institute to avoid the existence of conflict of interest.

The financial statements of the Institute did not include the PhP 3.53 million total assets, liabilities and government equity as well as the P1.96 million net income of its BDC’s operations which remained unrecorded in its books because the BDC Accountant continuously failed for years to submit the monthly financial reports to the Institute’s Accounting Unit for consolidation. (Paragraphs 82-90)

COA recommended, and the EARIST Administratiion agreed that it would require the BDC Director to remit all collections and all revenues generated by the Center which shall be the source of its funding, such that the funds for the operations of the Center shall be considered fund transfers from the Institute and its releases shall be recorded and accounted in both the books of the Institute and the BDC; require the BDC Director to report as well the Center’s disbursements for recording in the Institute’s books of accounts; and effect the transfer of all bank accounts maintained with private commercial bank to the Institute’s account with its depository bank.

COA also said that the Cash in Bank balance of PhP 47.6 million of EARIST was understated by PhP 1.3 million due to unrecorded transactions of the Institute’s Business Development Center (BDC) and Special Academic Program (SAP); EARIST also suffered from unreconciled variance of PhP 0.3 million between the books and bank balances in the absence of bank reconciliation statements thus, casting doubts on the validity of the cash accounts.

COA recommended that the EARIST Administration require the accountant to prepare a Journal Entry Voucher to record all unrecorded transactions of the BDC and SAP. Likewise, to regularly prepare the bank reconciliation statements of the Cash in Bank for trust and special trust funds to reconcile the cash in bank balances with the bank records.

COA also said the SAP’s estimated receipts of PhP1.4 million and unsupported disbursements of about PhP 2.3 million were not duly accounted for nor taken up in the books of accounts hence, the income or loss from operations cannot be determined for viability and decision making. Moreover, the amount of PhP 102,140.72 appearing in the SAP bank account as of January 31, 2009 was not recorded or ncluded in the cash balance resulting in the understatement of the cash and income accounts’ balances by PhP 1.5 million and expenses by PhP 2.3 million.

Lastly, COA recommended and the EARIST administration agreed to render and submit an accounting of all the receipts and disbursements pertaining to the program together with the disbursement vouchers, payrolls, and Memorandum Receipts for the laptops and printers reportedly disbursed or procured for recording and auditing purposes.

To return to the main story, click here: State Universities and Colleges are Haunted by COA's 2009 Audits into their Financial Expenditures (A Series of Articles co-located on one (1) continuously updated link)