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 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: "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.

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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.

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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): 1. Polytechnic University of the Philippines

1. Polytechnic University of the Philippines (continued)

COA said that PUP officials agreed to “comply strictly with the provisions of COA Circular No. 97-002 dated February 10, 1997 on the grant, utilization and liquidation of cash advances; to issue demand letters to accountable officers with long outstanding cash advances and enforce salary deduction, when necessary to ensure liquidation, and to avoid being reported to appropriate agencies for the filing of charges in accordance with COA Memoranda Nos. 2004-014 dated February 24, 2004 and 2005-074 dated September 15, 2005.” PUP officials also agreed to require the accountable officers with dormant Petty Cash Funds to immediately liquidate said funds in their possessions.

But the procedural lapses in the billing, collection and monitoring of the University’s income generating project’s (IGP) operations resulted in PhP 13 million accumulated receivables, non-recording of PhP 1.7 million thereof and possible losses of PhP 10.8 million due to bad debts from delinquent or absconding concessionaires, hindering the University’s capability to generate additional funds, COA said in its report.

COA recommended that the Business Relations Office furnish the Accounting Office with complete rental contracts issued to concessionaires in all PUP-Branches including subsequent changes; and strictly monitor collections and adopt strict measures by disconnecting utilities of delinquent tenants and coordinate such actions with the Accounting Office.

Likewise, COA required the Accounting Office to: (a) issue billing statements to all concessionaires in the main campus and demand letters to delinquent lessees or tenants and to monitor collections or settlements thereof by maintaining complete and updated subsidiary ledgers; (b) set up receivables as income are realized and to determine and record unbooked receivables

A total of PhP 1.1 million unauthorized expenses for the University Governing Board’s honoraria/per diem was incurred from CY 2004-2009 as payments thereof were in excess of the limit prescribed under DBM Circular No. 2003-6 dated September 29, 2003, COA said.

COA recommended that the PUP administration require the members of the Governing Board refund the honoraria/per diem received in excess of the limit prescribed under DBM Budget Circular Nos.2003-5 and 2003-6; and to adhere strictly to the rates prescribed in the said DBM budget circulars in the payment of honoraria and per diem, as the case may be.

A review of the Student Financial Assistance Program’s (STUFAP) implementation likewise disclosed an absence of records to adequately monitor student borrowers after graduation, hence, affecting the capacity of the University to provide continuous funds to sustain the Program.

COA recommended and management agreed to: (a) revisit the loan agreements entered into with the student borrowers to determine the university official/s responsible of the stipulated repayment period which was not uniformly applied and did not conform to CHED Memorandum Order No. 4, series 2004 which could have contributed to the very low rate of loan repayment; (b) require the STUFAP to maintain and up-date their borrowers’ records and extensively monitor their whereabouts and employment status, and issue demand letters to all student-borrowers and their co-makers/guarantors and to coordinate with their relatives or friends some of whom may be employed in the University to establish the whereabouts of the borrowers/grantees; (c) submit to CHED the required reports as stipulated in the Memorandum of Agreement; and (d) review the provisions of the loan agreements with students and see to it that it includes clear and detailed program implementation, repayment scheme with established dates whey repayment will commence, including the manner of payment to allow other student borrowers to avail of the program.


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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)