Professional Documents
Culture Documents
1. The UH, formerly the Philippine Center for Economic Development (PCED),
was donated to the University of the Philippines (UP).
2. The Deed of Donation was executed between the PCED and the UP through its
former President, that took effect on June 10,1983. It involved the conveyance of
assets worth P14.6 million including the Hostel building valued at P10.99 million, but
incorporating therein 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…”
3. 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.
5. The audit 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.
6. For CYs 2009 and 2008, the UH had reported a gross income from operations
of P30,457,660.00 and P25,931,701.00, respectively, but these were not reflected in
the UP System’s books due to the present set up.
7. The UP President 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
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its current situation as well as the University’s needs and responsibilities. The report
was due in July 2007, however, to date we have not been informed of the committee’s
report, if any.
8. 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.
o “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.”
11. The Audit Team would like to stress 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.
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B. Absence of standard qualification requirements for appointees to the 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.
12. 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.
13. AO No. 108 creating the BOO as appointed by the President had vested to the
Board full powers and control of the UH operations as provided in Section 2 thereof,
to wit:
c. Promulgate rules and regulations regarding the use of the facilities, the
hiring, dismissal and the salaries of its personnel;
d. Schedule of prices of foods and services of the Hostel, etc. which shall
take effect upon the approval of the President;
14. 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
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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.
15. 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.
16. 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.
The manner by which the UP System, through its formulated guidelines, addressed
the existence of conflict of interest of its officials who are at the same time officers
of the UP-affiliated foundations, as well as the absence of an independent
oversight office to monitor the transactions entered into by these foundations,
appears inadequate to substantially resolve the issue on transparency required in
public governance.
19. In addition, Section 63 of Presidential Decree (PD) No. 1445 reads as follows:
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property shall be taken up in the books of the agency concerned at
acquisition cost or appraised value.”
20. The University, in compliance with the previous audit recommendations on the
UP- affiliated foundations, issued a “Guidelines for Recognition of the UP-Affiliated
Donor Organizations” with the following information:
a. General Principles
b. The Need for Guidelines
c. Criteria for Recognition
d. Partial List of Foundations Generally Recognized by UP as Donor
Organizations
21. Moreover, in June 2009, the University Vice President for Development shared
with the Audit Team a checklist/matrix of information gathered from monitoring of
the UP-affiliated foundations. The checklist summarized the submissions received
from the different constituent universities and their colleges concerning their affiliate
foundations, with information such as date of registration with the Securities and
Exchange Commission (SEC), donee status, officers, assistance to the UP and
financial data as of a given year. Below are some of these foundations in the UP
Diliman and the UP System:
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University/College Foundation Officers
School of Urban and UP Planning and Development 8 trustees mostly UP
Regional Planning Research Foundation Inc. faculty
College of Arts and Letters UP College of Arts and Letters 15 trustees mostly UP
Foundation faculty
School of Economics UP Economics Foundation, Inc. 9 trustees mostly UP
faculty
22. As there was no information given with regard to the officers of the UP
Foundation, Inc., available data gathered disclosed that in its amended by-laws, the
President of the UP System is the Chairman and President of the U.P. Foundations,
Inc. In addition, the Chancellors of its four autonomous units and three members of
the Board of Regents sit on the Board of Trustees. Likewise, per inquiry, its current
executive director is a professor of the University.
23. It appears that the creation of these Foundations is tainted with legal infirmity
as an apparent conflict of interest existed considering that some of its officers are at
the same time officials of the University, thus, transactions and dealings entered into
by these public officers channeled through the Foundations are within the ambit of
the public’s right to be informed as mandated by the Constitution consistent with the
policy on transparency in government affairs.
24. 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,
manifest a conflicting arrangement and raise questions on 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.
26. We recognize 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.
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including how to account and share for the income/revenues earned from its
operation. Moreover, 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.
28. Management commented that it will address the conflict of interest issue, such
that it will inform the foundation that:
D. Non-compliance with the Terms and Conditions of the Contract for Chemicals
and Reagents
At the UP Manila, the P4.3 million worth of 72 laboratory reagents delivered with
Lot No. 187, which was not from the same Lot No. 185 previously delivered kits
and with less than a year shelf life, were inconsistent with the terms and conditions
of the contract, which may adversely affect the laboratory test performance.
29. Article 2 of the Supply Contract entered into by and between the UP Manila
and Lifeline Diagnostics Supplies, Inc., for the purchase of the Newborn Screening
Laboratory’s reagents Neonatal Phenylketonuria (PKU), 2000T, provides the
following provisions:
“ARTICLE 2. DELIVERY:
2.1 The expiry date of the reagents shall be at least one year from the
date of each staggered delivery.
2.2 The delivery shall be the same lot number with the previous
delivered kits.”
30. The foregoing provisions were the result of the end user’s justification to
ensure that the reagents will be from the same lot number, which is critical in
ensuring consistency of test performance.
31. The results, however, of the inspection conducted by the COA Technical Audit
Specialist based on the delivered laboratory reagents revealed non-compliance with
the aforementioned contract provisions as follows:
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a. The 2nd delivery of 72 kits amounting to P4.3 million under Charge
Sales Invoice No. 012204 dated August 7, 2009, with Lot No. 187 was
different from the 1st delivery Lot No. 185.
b. Expiry date of the Elution Buffer is March 31, 2010, which is less than
a year from the August 7, 2009 delivery date.
a. The inclusion of one box of Elution Buffer is free of charge for every
order of one kit MP Neonatal PKU, 2000T- Biorad. However, when
the diluents expire on March 31, 2010, additional expense for the
replacement of the expired Elution Buffer will be incurred; and
33. Further, review of the Inspection and Acceptance Report (IAR) dated August 7,
2009 and its supporting documents disclosed the following deficiencies:
a. The deliveries were accepted not by the end-user but by the Institute of
Human Genetics (IHG) Administrative Officer but approved by the
management inspector;
b. The date of approval of the Supply Contract was not indicated; and
34. The delayed receipt of the Supplier of the aforementioned documents reflect
the inefficiency of the offices concerned, which also resulted in the delivery of the
items beyond the required schedule; and may adversely affect the operation of the
IHG.
35. Moreover, the disbursement voucher was not submitted to the Auditing Unit for
pre-audit, contrary to the provisions of Section 4.5.3. of the COA Circular No. 2009 –
002 dated May 18, 2009, which provides that:
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“First and last payments of contracts entered into through any of
the various modes of procurement involving an amount of at least P2
million for national government agencies, government-owned and/or
controlled corporations, cities within Metro Manila, other highly
urbanized cities and first class provinces, P1 million for provinces/cities
below first class, and P 500,000 for municipalities, shall be subject to
pre-audit….”
• Require the end-users and its Technical Inspector to ensure that all
deliveries made by the Suppliers are in conformity with the terms
and conditions of the contract/purchase order/notice of award.
Indicate in the IAR any deficiency noted in the delivered items for
appropriate action of the concerned officials;
• Ensure that transactions covered by the COA Circular No. 2009 – 002
on pre audit are submitted to the Auditor prior to payment.
Transactions or claims covered by the Circular but not submitted
for pre-audit, shall be a ground for initiating administrative
disciplinary action, without prejudice to the disallowance of the
transactions in post audit, if warranted.
37. Management commented that the inventories were consumed before any
component had reached the expiry date.
The submitted documents for the liquidation reports of the DSWD fund transfer
amounting to P2.3 million to support the use of the endowment fund for the DSWD
indigent clients treated at the UP-PGH failed to establish that only the deserving
patients availed of the hospital services.
38. COA Circular No. 94-013 dated September 1994, which provides the rules and
regulations on the grant and utilization of funds transferred to implementing
agencies, states among others that:
“4.1 The Source Agency (SA) shall enter into agreement with
Implementing Agency (IA) for the undertaking by the latter of
the project of the former. The agreement shall provide for the
requirements for project implementation and reporting.”
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“4.8 The IA Auditor shall audit the disbursement out of the trust
accounts in accordance with existing COA regulations.”
40. To avail of the medical services, patients have to submit pertinent documents
required in the MOA between the DSWD and the UP PGH on the use of the DSWD
fund.
42. The audit of the liquidation reports for 1,819 patients with P5,642,933.63
charged to the endowment fund for the period October 1, 2007 to December 31, 2008
disclosed inadequate documentation of about 40 percent or 730 patients with a total
charge of P2,346,645.21 as follows:
Lacking Documents
No. of Letter of PGH Social Case Medical ID or Barangay
Patients Authority Referral Summary Abstract Clearance
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• Ensure that the requirements set forth in the guidelines of the
MOA are complied with in the grant of medical assistance and in
processing claims of the DSWD indigent clients.
45. Management commented that the UP PGH Accounting and MSS Offices, in
coordination with the DSWD, were able to comply with the documentation
requirements and supporting papers needed in the pre-audit of the liquidation of the
DSWD fund. As of June 25, 2010, the amount with no sufficient documentations was
reduced from P2.3 million to P367,474.33. The hospital is hopeful that the 100%
liquidation will be made within the year 2010.
46. Rule VIII of the Revised Implementing Rules and Regulations (IRR) of the
National Health Insurance (NHI) Act of 1995 provides that Philhealth may deny or
reduce any benefit when the claims are attended by any of the following
circumstances: a) over- utilization and under-utilization of services; b) unnecessary
diagnostic and therapeutic procedures and intervention; c) irrational medication and
prescriptions; d) fraud; e) gross unjustified deviations from currently accepted
standards of practice and/or treatment protocols; f) inappropriate referral practices; g)
use of fake adulterated or misbranded pharmaceuticals, or unregistered drugs; or, h)
use of drugs other than those recognized in the latest Philippine National Drug
Formulary (PNDF) and those for which exemptions were granted by the Board.
47. The audit of the 361 refunds to patients from January to March 2009 amounting
to P1,257,856.93 disclosed 35 refunds with erroneous computation and/or
classification of Philhealth benefits amounting to P202,336.99. These refunds were
either due to the Billing Section’s over- or under-charging of hospital room rates, cost
of medicines, laboratory and supplies, and operating room/delivery room caused by
the Billing Section’s desires to at least minimize hospital Philhealth claims’ reduction
or denials by resorting to the most conservative computation and/or classification of
patients’ Philhealth claims without proper coordination with the Philhealth.
48. Another cause in the difficulty of the Billing Section to determine the correct
classification of the diseases of the patients for purposes of assessing their Philhealth
benefits was due to the absence of the ICD – 10 Code in the Philhealth Claim -Form
2 which were supposed to be filled – up by the attending physicians. Instead of
returning the Philhealth Form without the ICD – 10 Code to the attending physician,
the Billing Section took the initiative to classify the disease in its less complicated
stage with lesser Philhealth benefits for the patients.
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49. The erroneous computation and/or classification of Philhealth benefits affects
the efficiency of the fiscal services due to processing of claims for refunds and
additional cost of office supplies, notwithstanding the burden to the patients and/or
their family members in coming back to the Hospital just to claim for these refunds.
51. Management commented that there are various reasons why there are refunds,
some of these are as follows:
52. The refund, as further commented, maybe minimized but may not be totally
eliminated. It may be partly the fault of the patient, hence, the Billing Section may not
be totally blamed for refunds. In any case, the hospital will find ways to reduce the
number of refunds. All the other recommendations of COA are noted for compliance,
if feasible, especially the on-line verification with PhilHealth.
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cost of implementing the GAD Plan shall be at least five percent (5%) of the agency’s
or local government’s total FY 2009 budget appropriations.
54. Joint Circular No. 2004 – 1 issued by the Department of Budget and
Management (DBM), National Economic Development Authority (NEDA) and the
National Commission on the Role of Filipino Women (NCRFW) provides among
others, that:
Section 4.4.1 Agencies shall formulate their annual GAD plans and budgets
within the context of their mandate and overall plans and
programs.
Section 4.4.4 GAD planning and budgeting shall be observed annually and
incorporated in all programming and budgeting exercises of
agencies.
Section 4.4.8 Agencies shall prepare their annual GAD accomplishment reports
for the previous year that contain actual accomplishments vis-à-
vis targets as well as the amounts utilized for the achievement of
such.
Section 5.5.1 Agencies shall submit their annual GAD plans and budgets to the
NCRFW for review and endorsement prior to the submission of
the agency budget proposal and submit to the DBM their
NCRFW-endorsed annual GAD plans and budgets along with the
agency budget proposals in accordance with the budget call.
55. The GAD budget allocation and program implementation of the six UP
campuses are as follows:
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Unit/Campus Allocation Remarks
beneficiaries.
b. The actual expenditures of P3,990,547.47 incurred
for the GAD implementation exceeded the budget
by P190,547.47 as the following reported activities
were undertaken though not planned:
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Unit/Campus Allocation Remarks
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Unit/Campus Allocation Remarks
56. We recommended that management strictly comply with the existing GAD
rules and regulations.
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Unit/Campus Management Comment Audit Team’s Rejoinder
and budgets to the NCRFW.
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Unit/Campus Management Comment Audit Team’s Rejoinder
submission to NCRFW. Cluster A–General Public
Services I, COA, revealed that
UP was not included in the list
of agencies whose GAD Plans
and Budgets for FY 2009 were
endorsed by the NCRFW.
UP Los Baños According to the Budget
Officer, the amount is
augmented by the Project Funds
whenever the need for fund for
GAD activity arises.
58. The All UP Workers Union, based on its preliminary analysis and evaluations
of the subject contract, raised an issue that certain provisions of the University
Charter (RA 9500), particularly Section 23 thereof on the “Safeguards on Assets
Disposition” may have been violated, hence, the contract is allegedly disadvantageous
and contracted with attendant irregularities.
59. Accordingly, 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 the UP 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.
To quote:
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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
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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.
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.
60. 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:
• Ancillary and other facilities that are located within the premises
of the hospital shall be included in the LTO.
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61. 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:
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financing viability of the proposal vis-à-vis prescribed requirements
and criteria/minimum standards;
j. Notice to Proceed;
k. Insurance; and
62. The foregoing conditions cast doubts on the legality and validity of the 25-year
FMAB contract of lease.
I. Idle Funds of P151.65 million due to unfilled scholarship slots for Engineering
and Development for Technology (ERDT) Program
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scholarship grants and idle funds of P151.65 million which, if not closely
monitored, may result to the non-attainment of the program’s objective to address
the problem on lack of highly trained research scientists and engineers.
65. Consistent with the Philippine Medium Term Development Plan (MTDP) and
the National Science and Technology Plan (NSTP) to address the immediate need of
Researchers, Scientist and Engineers (RSEs) with advanced degrees to make Science
and Technology work for Filipinos, the ERDT Program was approved by President
Arroyo in April 2007.
66. The Human Resource Development (HRD) is the main component of the
ERDT Program aimed to produce research graduates to enable the country to be
globally competitive. Relative thereto, a consortium was established among different
Universities identified to have the ability to absorb and produce masters of science
(MS) and doctors of philosophy (PhD) of traditional engineering, computer science
and agricultural engineering, in collaboration with the Department of Science and
Technology-Science Education Institute (DOST-SEI). Members of the consortium
are the following:
67. Generally, the program is expected to produce a critical mass of engineers with
advanced degrees who are equipped to do research and development (R&D) in order
to address the needs of the industries, R&D institutions and academe. It aims to raise
the level and increase the number of local research and other engineering activities
that will make the country globally competitive. Among the specific program
objectives are the following:
68. The HRD scholarship program’s target applicants are the new engineering
graduates and engineers working in the industries and in the government. As such,
beneficiaries are entitled to actual tuition fee and other fees, research grant to be
released directly to the university, book allowance, thesis/dissertation allowance,
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monthly stipend, and transportation assistance during the duration of their scholarship
grant.
69. The UPD thru the College of Engineering was designated as the lead agency in
implementing the Program having the highest concentration of PhD holders in an
engineering institution throughout the country. Thus, the DOST-SEI in its efforts to
decentralize the implementation of the ERDT program enrolled the services of its
Dean as the Project Director and is officially designated by the University President.
70. As the lead agency, UPD received the bulk of the funding and the available
scholarship slots for the HRD program. It had started the pilot run of the ERDT
program in SY 2007-2008 and had admitted for Local Scholarship alone, 55 MS and
19 PhD scholars during the initial year of implementation.
71. The audit of the scholarship fund showed that out of the P209,167,707.40 fund
received from the DOST-SEI, only P57,521,67.38 was disbursed as of December 31,
2009, leaving an unexpended balance of P151,646,340.02 at year-end, as follows:
72. Likewise, it was noted that on the 3rd and last year of the three-year
scholarship program, only 263 or 67.6% scholars were enrolled out of the 389
allotted slots leaving 127 or 32.4% unfilled slots resulting to the unexpended balance
or idle funds of P151 million as of December 31, 2009. Information as to the number
of absorbed or admitted scholars during the three-year period is shown in the table
below:
I. Local Scholarship
a. MS 189 176 13
b. PhD 44 45 -
II. Sandwich Program 17 4 13
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HRD No. of available Unfilled
No. of Scholars
Scholarship scholar slots CY2007, scholarship
enrolled to date
Program 2008 & 2009 slots
73. It was further noted that the scholarship contracts of 20 scholars were
voluntarily or involuntarily terminated for failing to meet the rigid requirements of
the program. These incidents likewise, resulted to unexpended funds and derailment
in the attainment of the Program’s objective. Consequently, the University faced the
problem of how to recover the amount of P3,429,929.74 already spent for the tuition
fees and allowances of these 20 scholars, as follows:
Scholarship No. of Amount spentto
Reasons
Program scholars date
MS 7 P616,911.50 Withdrawn
3 719,137.0 No show
2 0 Terminated
2 375,007.5 Disqualified
1 0 Suspended
190,183.0
0
281,289.5
0
PhD 2 269,653.0 Withdrawn
1 0 No show
1 292,551.0 No extension requested
1 0 Disqualified
276,089.5
0
409,107.7
4
Total 20 P3,429,929.74
74. Finally, on its 3rd year of implementation, only 23 scholars graduated at UPD
out of the 55 expected number for MS, and two for PhD graduates at the end of SY
2009, with an equivalent completion rate of only 40%. The reason why many scholars
failed to finish the course within the prescribed period was also attributed to the rigid
requirements of the course, especially in the preparation of the required thesis or
dissertation.
75. The foregoing condition, if not closely monitored, may result to the non
attainment of the Program’s objective to produce a critical mass of MS and PhD
graduates in the field of Engineering for national development and global
competitiveness.
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76. We recommended that management closely supervise and monitor the
scholars in order to guide and assess early on their capability to cope with the
rigid requirements of the study to institute proper measures to prevent the
untimely termination of the scholarship contract. Further, slots must be
expediently filled up if still possible, or else return the unexpended or idle funds
to the source Agency.
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77. Management agreed with the observation as stipulated in their reply dated June
7, 2010, but gave some explanations of the deficiencies as summarized hereunder:
• That the ERDT Program’s three-year run is from school year 2008-
2009 to school year 2010-2011. The school year 2007-2008 was just a
pilot run.
• The uptake in school year 2007 was quite low, due to the short period
between the approval of the program in April and the deadline for
application for their graduate programs. That they went to over 40
universities on several road shows in 2008, 2009 and 2010 to recruit
scholars and they feel confident that by the end of school year 2010-
2011, they will reach the targeted 708 local scholars.
• They have terminated some scholarships and had sent demand letters
to the scholars. That they cannot lower the standards of the UP College
of Engineering as this is the very reason why they are leading the
ERDT Program. As advised by the ERDT Program Advisory
Committee, they have enforced stricter admission requirements to
ensure that those who are accepted to the scholarship program have the
mental ability, and more importantly, the right attitude to finish their
program study.
78. The Audit Team considered management explanations on the matter, but
measures could have been earlier instituted if the program’s output/accomplishment
were closely monitored and deficiencies were immediately noted. Nevertheless, the
team acknowledged management commitment that they will reach the targeted output
on the targeted date, as it will keep track of the program’s implementation for the
remaining years.
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J. Deficiencies on the collection of income and other receivables
Laxity in the control and monitoring of receivable accounts increased the risk that
the P230.97 million receivable accounts of the five UP campuses may become
doubtful, hence may deplete financial resources to finance programs and projects.
79. In view of the declining financial support from government, the University in
its desire to augment its subsidy for operations, ventured in income generating
activities such as lease of idle lands, facility, stalls and similar undertaking to sustain
its operations and generate additional resources to finance its projects.
82. The accounting records of the five UP Campuses showed the following
uncollected receivables:
Total P230,978,075.69
UP Diliman
83. A number of deficiencies were observed over the years of the Student Loan
Program’s implementation, which grants tuition fee loan and short term loan to
qualified students subject to specific conditions expressly provided in the application
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form signed by the applicant and his/her guarantor. However, as of December 31,
2009, it appears that some of these deficiencies still exist, as follows:
• A discrepancy of P5,621,406.02 was noted between the Office of the
Student Scholarship Services’ (OSSS) schedule of unpaid student
loans totaling P21,461,321.50, and that of the Accounting Office’s
recorded accounts receivable balance of P15,839,915.48 for student
loans.
UP Manila-PGH
84. The audit of the billing and collection system of the hospital fees revealed a
total accounts receivable of P192,926,666.77, of which the herein weaknesses may
adversely affect the collection or recovery of said accounts and also the availability of
funds for the acquisition of the Hospital facilities and equipment:
• Out of the 1,005 UPM/PGH regular employees who acted as
guarantors, ten employees with guarantee letters for the total amount
of P901,054.24 were processed by the Billing Section without the
approval by the Deputy Director for Fiscal Services and signature of
the Chief Accountant but instead approved only by the DEMO III for
UP-PGH. The amount guaranteed was more than their three months
take home pay, with excess ranging from P22,000 to P146,000. While
hospital bill No. 268814 dated August 14, 2009 was without a
guarantee letter.
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• Uncollected hospital fees of P11,980.48 was due to the late submission
of hospital charge slips by the responsible cost center to the Billing
Section, and erroneous computation of room rates and Philhealth
deductions. The Billing Section prepared corrected statement of
accounts after the patients were discharged, however, the same were
not sent to the patients for collection of the additional charges.
UP Baguio
85. The Other Receivables Report – Revolving Fund account showed receivables
amounting to P278,450.18 from accountable officers due to loss of property, which
have been outstanding from over six months to more than one year from the date the
Request for Relief from Property Accountability was denied.
86. Interview with the Chief, Accounting Office revealed that the accountable
officers concerned requested that payments will be made upon their retirement and
that the Chair, of Biology Department, College of Science, assumed the
accountability of one of the accountable officers for the lost VHS Player on May 23,
2006.
UP Visayas-Miag-ao, Iloilo
“In case the Fellow does not fufill the return service
requirement, then s/he must reimburse the following to the University:
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o All expenses incurred, plus an equity charge of 50% of the
total amount expended, and interest at the prevailing legal rate
at the time of the breach of contract or revocation of the
contract.”
88. While the lease of fishponds at Batan Mariculture Station (BMS) in Iloilo,
Aklan, revealed that:
o The BMS had 16 lots with a total land area of 78.8475 has. of which
50.4380 has. (13 lots) were rented out to the different lessees/sub-
lessees since August 31, 1993 to date, while 28.4095 has. (3 lots) were
utilized by the UPV for research and income generating projects
(IGP);
o Of the 13 lots leased, only one lot with an area of 5.7683 has. is
covered by a contract while the 12 lots are without lease contracts,
which caused the non-payment of rentals from the lessees amounting
to P2,228,394.23 from 1993 to 2009.
UP Visayas-Tacloban
UP Diliman
• Instruct the Accounting Office and the OSSS to regularly reconcile
their accounts and records to reflect in the books the actual
balance of the student loans receivable; and
UPM/PGH
• Require the Billing Section and/or concerned medical/laboratory
unit to carefully ensure that the correct rate is charged for medical
and/or laboratory services rendered to patients, taking into
consideration the Memorandum Orders pertaining to the increase
on medical and laboratory fees. Accordingly, it should send to the
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patients concerned the corrected Statement of Accounts for
collection of additional charges;
UP Baguio
• Cause the immediate settlement by the accountable officers of the
amount of P278,450.18 representing the money value of the lost
equipment.
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ii. stipulate in the Fellowship/Scholarship Agreement that the
UPV official who recommended/approved the grant shall
have the primary obligation to ensure that the grantee will
fulfill his/her contractual obligations towards the University
after completion of the fellowship, otherwise, said official
shall be held jointly and severally liable for the financial
obligations arising from any breach of contract committed by
the grantee/fellow; and
UP Visayas-Tacloban
• Require the Accountant to monitor and review extensively the cause
of the accumulation of the accounts receivable. Prepare Journal
Entry Vouchers to take up the necessary adjustments and issue
demand letters to students with long outstanding loans and unpaid
tuition fees. Withhold the Transcript of Records of the concerned
students unless they settle their unpaid accounts.
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Unit/Campus Management Comment Audit Team’s Rejoinder
UP PGH • The findings/observations of
COA were duly noted. The
hospital is now strictly complying
with PGH Memorandum No. 98-
145 regarding the approval of
hospital bills for salary deduction.
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Unit/Campus Management Comment Audit Team’s Rejoinder
UPV Tacloban The management agreed with the
recommendation.
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K. Incomplete In-house Research Projects
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 to impose sanctions against the erring proponents thus,
defeating the purposes of the researches and compromising the UP’s objective of
strengthening its position as the leading research and development university in the
country. Moreover, publications of the outputs in the abstract publication and in
the UPV Journals were not fully attained as only ten out of the 80 Research
Projects that started in January 2002 costing P11.26 million were completed in
CY 2009 thus, depriving the beneficiaries of the benefits that could be provided by
these research projects.
92. One of the ten-point plans in the UP President’s thrust is: “The UP: A National
University in the 21st Century” is “Strengthening UP’s position as the leading R&D
university in the country and eventually in the whole Asian Region”. An important
part of the mission of a national university is not only to transmit knowledge but to
discover new knowledge, art, and technology, through research.”
93. The Office of the Vice Chancellor for Research and Extension (OVCRE) is
mandated to layout plans, programs and activities that will respond to the research
needs of the different colleges of the UPV, work with, assist them in their research
proposals and initiate development of grant proposals that are interdisciplinary but
not limited to a single field and linkages which will enhance and bring in resources
for research.
94. Likewise, the OVCRE publishes research outputs regularly through abstract
publication, and the research-based papers in the UPV’s peer-reviewed journal: The
UPV Journal of Natural Sciences and Danyag (UPV Journal of Humanities and Social
Sciences).
95. A research contract is executed by and between the UPV Chancellor and the
researcher/s witnessed by the VCRE and the Dean of the respective college before a
research can commence. One of the stipulations in previous research contracts
requires that the proponent has one year to finish a research project with a maximum
of two years extension.
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Status Quantity
No updates as of year end 44
On going 18
Terminated 16
Draft/final copies of terminal reports 14
Final draft reports 5
Progress reports 4
Awaiting copy of final report 1
Newly implemented 10
Total 112
98. The interview with the OVCRE staff revealed that despite
reminders/memoranda sent by their Office to the faculty researchers, no action was
taken by the said faculty researchers.
99. On the other hand, the inventory of UPV In-house Research Projects for CY
2009 disclosed that 80 Research Projects with a total cost of P11,263,291.45 were
completed, of which the University through the OVCRE was able to publish only ten
or 12.50% of the outputs, excluding completed projects that were already published
in 2008. The low output defeats the University’s objective insofar as regular
publication of the research outputs is concerned and deprived the beneficiaries of the
benefits that could be provided by the research projects.
100. We recommended that the UPV, through the OVCRE, strictly implement
and closely monitor the research projects to ensure timely completion,
submission and dissemination of research outputs to target beneficiaries through
regular publication; and impose the legal sanctions stipulated in the contracts.
101. Management commented that remedies have been implemented such as:
o Frequent and regular issuance of reminders from the OVCRE until they
have submitted their output;
o No additional projects will be funded by the University to researchers
who have not complied with the required output of the existing on-
going projects; and
o Review of contracts to include sanctions on salary deductions of the
amount received in case of failure to deliver the required output.
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L. Inadequate delivery of security services logistics
The UPV failed to require and monitor the security service contractor to provide
the standard logistics for its security guards as provided for under Section 23 of the
P3.08 million contract and Section V of the Terms of Reference, which affected the
efficient delivery of the security services to the University.
102. On November 3, 2009, a contract was entered into by and between the UP
Visayas, Miag-ao, Iloilo and Care Best International Security Services, Inc., Makati
City for the delivery of security services at UPV Iloilo City Campus; Marine
Biological Station (MBS), Aklan; BMS in Taklong, Guimaras; Brackishwater
Aquaculture Center, Leganes, Iloilo; and TRV Sardinella, Iloilo City Port in the
amount of P3,082,341.00.
A.1 Three (3) Base Radios with 12-volt car battery as back-up
during brown-outs or power interruptions to be installed and
used during the entire contract period at the designated UPV
facilities in Iloilo City campus, BAC in Leganes and MBS in
Taklong, Guimaras;
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b At least three (3) base3 radios with 12-bolt car
battery as back-up during brown-outs or power
interruptions to be installed and used during the entire
contract period at the designated UPV facilities in Iloilo
City campus, BAC in Leganes and MBS in Taklong,
Guimaras;
• At least
two (2) mobile phones to be used at:
TRV Sardinella – 1 unit
Batan Station – 1 unit
105. During the pre-bid conference, the bidders were informed that any firearms will
be accepted except for Batan and Leganes that need long arms. Inspection and
inquiries conducted by the Audit Team revealed that the above provisions of the
contract and terms of reference were not complied with by the Agency, specifically
the following:
106. The University was informed of the violations of the contract and its terms of
reference, however, the deficiencies remained unimplemented. The non-compliance
by the Agency to provide the above logistics resulted in the inefficient and ineffective
delivery of security services to the designated areas or campuses of the University.
108. Management commented that the Chief Security Services has confirmed the
Agency’s submission of some of the requirements provided for in the contract and
Terms of Reference. The Chief Security Services has also identified specific actions
to be taken in case the Agency fails to meet the stipulations of the security contract.
88
89
II. Financial and Compliance Audit
The Cash in bank balances of the UP Diliman and Manila were understated by
P15.66 million due to the non-restoration of the cash equivalent of unreleased
checks amounting to P14.43 million required under GAFMIS Circular Letter No.
2002-001 and the unrecorded P1.23 million on-line collections of the G6PD
Confirmatory Test.
UP Diliman
109. Section 2.4 with reference to Sec. 2.3 of Circular Letter No. 2002-001 of the
Government Accounting and Financial Management Information System (GAFMIS)
requires that at the end of the year, the Schedule of Unreleased Checks shall be
prepared by the Cashier for submission to the Accounting Section. The latter shall
prepare a Journal Entry Voucher (JEV) to record the entry for the restoration of the
cash equivalent to the unreleased checks and the recognition of payable/liability
accounts. In the ensuing year, a JEV shall be prepared to reverse the entries made
debiting the appropriate payable/liability accounts and crediting Cash-National
Treasury, MDS and/or Cash in Bank-Local Currency, Current Account. The rationale
of this procedure is for the proper recording and reporting of disbursements and to
show the actual Cash Balance available at year-end.
110. Verification of the reports and records of the UP Diliman showed that the
unreleased checks totaling P14,431,927.79 drawn for the general and trust fund
accounts, were not restored back to cash as required under the GAFMIS Circular
Letter No. 2002-001, which understated the cash in bank and payable accounts’
balances at year-end by the same amount.
UP Manila
a. Walk-in patient fills-up the Patient’s Form and pays to the Cashier the
corresponding laboratory fee of P400.
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samples to the NIH laboratory and tests are conducted prior to
payment. Thereafter, it sends the Statement of Accounts to the NSF for
collection.
e. The University has no existing MOA with the banks regarding on-line
collections, thus, the NIH required their hospital clients/NSF to send
the validated deposit slips as proof of their payments for the G6PD
confirmatory tests through courier on or before the payment due date,
otherwise the laboratory result is withheld. The name of the hospital is
indicated on the deposit slip and the list of patients covered by the
remittance is attached to the deposit slip. This additional expense is
shouldered by the patient/hospital.
113. Due to the absence of an existing MOA, the on-line bank collections from CYs
2007 to 2009 totalling P1,233,820.00 was not recorded, resulting in the
understatement of the cash-in-bank and the corresponding income accounts.
UP Diliman
UP Manila
UP Diliman
91
UP Manila
• Amendments to the existing MOA with the LBP and the PNB-PGH
are in process as discussed with the LBP Taft and the PNB-PGH
Branch Managers.
116. Section 74 of P.D. No. 1445, otherwise known as the State Audit Code of the
Philippines, 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.”
117. 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 GL.
118. Cash in Bank local and foreign currencies of the two UP Campuses showed the
following unreconciled balances:
UP Manila/PGH
119. Verification of the Cash in Bank - LCCA and LCSA and Foreign Currency
Savings Account (FCSA) balances disclosed unreconciled variances of
P91,107,656.03, P40,682,947.07 and $104,809.07, respectively, as against confirmed
bank balances as of December 31, 2009, which affect the reliability of the accounts’
balances, as follows:
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Account Name Per Books Per Bank Variance
120. It appeared that the foregoing variances resulted due to the failure of the
management to enjoin its Accounting Unit to prepare on a regular and timely basis
the BRS as an essential control over the cash accounts as shown below:
a. BRSs were not prepared for 26 bank accounts while 18 were not updated.
Only the BRS for UP-PGH General Fund LCCA is kept current. The
BRSs of the UP-SHS in Palo, Leyte were not appropriately prepared
and were returned for revision.
b. Except for trust accounts which are subject to existing agreements with the
donors, management maintained more than one bank account for other
funds under the same account name, thus, reconciliation of the
accounts’ balances with the banks’ records became a tedious process,
hence, reconciliation was not done on a regular basis.
Account
Name of Bank Account Name Amount
Number
LCCA
Philippine National
Bank (PNB) – Taft Ave. 200-850025-0 UPM Revolving Fund (P308,480.48)
Development Bank of the
Philippines (DBP)– 0410-002882-034 UPM Revolving Fund ( 2,132,484.80)
Arroceros
UPM FB Herrera Med. Lib.
PNB – Ermita 220-840352-7 Foundation (1,962,370.87)
DBP – Arroceros 0410-002882-030 UPM Drugs & Medicines (2,432,878.29)
Land Bank of the
Philippines (LBP) – Taft 0592-1063-45 Institute of Human Genetics (4,458,336.41)
Ave.
PNB - Taft Ave. 200-546280-3 UPM General Fund (56,400,590.79)
PNB – Taft Ave. 384563900014 UPM Special Endowment Fund (1,560,091.36)
PNB – Taft Ave. 384564000011 UPM Trust Liabilities (6,016,488.00)
PNB – Taft Ave. 200-546285-4 UPM Special Endowment Fund (867,969.55)
Total (P76,139,690.55)
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d. Six cash in bank subsidiary ledger balances totalling P4,008,789.24 (net)
were non-existing or not confirmed by the bank, to wit:
Account 112
UP-Visayas
121. The last BRS submitted was September 2004 for Fund 164, July 2007 for Fund
184 and 1980 for Fund 101. Fund 101 disclosed a net discrepancy of P110,567.00
between the bank and book balances as of December 31, 2009, due to erroneous
and/or unrecorded deposits and withdrawals/disbursements, as follows:
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Particulars Bank Book Difference
122. As shown above, there were adjustments in the prior years which were not
taken up, thus, these were added to the adjustments in the current year.
124. Due to the resignation of the former Accountant in October 2007, the
Accounting Office lacks personnel to update the BRS. His duties were distributed to
the other personnel who were also loaded with their regular assignments. It was only
in May 2009 that a new accountant was hired.
UP PGH
95
• Reconciliation of accounts and reduction in number of existing
accounts are being done, as recommended by COA.
96
UP Visayas
The procedural lapses such as absence of clear cut policies on investments, the
UPM-IIC not acting as one collegial body regarding approval of placements/
termination/renewals of time deposits as well as the utilization of the SEF of P1.56
billion and P222.77 million balances as of December 31, 2009, in the UP-Manila
and PGH, respectively, may not yield the most advantageous investment rate of
return and full utilization to which the SEF was created.
127. The UPM AO No. RLA 2006-074 and 2006-080 provides, among others, the
creation of the UPM – Investment and Income Committee (IIC) composed of: the
Vice-Chancellor for Administration as Chairman; Budget Officer, Cashier and the
Chief Accountant of the UPM and the Director and the Chief Accountant of the UP-
PGH as members; with one secretary and one support staff.
129. The UP-BOR 968th Meeting held on May 31, 1984, approved the creation of
the SEF under the Revolving Fund out of the 20% of the interest earnings of
investments in various University Funds, effective 1984. The objective of the SEF is
to build up capital for investment purposes.
97
130. Excerpts of the said meeting indicated that the SEF of P176 million as of
March 2000 is enough CORPUS/capital for the UP Manila, and it may start
“spending” profits earned by this corpus on projects/programs of the University that
are approved by the UP President and/or by the BOR or depending on the ceilings
previously provided by pertinent University rules regarding disbursement of funds.
The corpus is not to be spent but shall continuously be invested as time deposit, loans
and other investments as approved by the UP President and/or the BOR.“
131. Interest earned for the SEF shall be utilized as follows (UP-BOR 1145 th
Meeting on September 28, 2000:
132. The SEF due to the PGH from the UP Manila SEF shall have a minimum
balance of P55 million.
133. The review of the University’s time deposits (TD) investment processes
revealed the following procedural weaknesses:
b. The UPM-IIC did not act as one collegial body on the following
occasions :
• Only eight UPM-IIC Meetings were held during the year which in most cases,
were not attended by the UP-PGH representatives, despite the 133 new
placements worth P 1.74 billion.
• the members did not attend meetings nor sign UP-PGH Investment Form. For
UPM initiated investments, the UP-PGH members were not a party to the
investments made.
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c. The authorized UPM/PGH officials, in most cases, approved
time deposits placements/termination/renewals without
recommendation from the UPM- IIC.
2) There are more than four placements for investible funds under
the General Fund 101, Revolving Fund, IHG and Trust Funds.
The Cash Office, UPM, committed errors in reporting in nine
instances.
B. For SEF:
• For the SEF corpus, only two CTDs shall be maintained, one for
UPM and another for PGH, with longer maturity dates since only
the interest of the corpus could be utilized by the University.
99
100
of the University with accounts maturing weekly to answer for
unforeseen payables, thus, UP-IIC meeting shall be done weekly.
135. Management commented that the UPM-IIC would prepare the Investment
Policy Guidelines.
136. Section 4.1 of COA Circular No. 97-002 – General Guidelines states, among
others, that:
4.1.1. No cash advance shall be given unless for a legally specific purpose.
4.1.3. A cash advance shall be reported on as soon as the purpose for which
it was given has been served.
101
137. Section 16 Title III of Executive Order 248 and Par. 5.1.3 of COA Cir. 97-002
also provides 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.”
138. 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.
139. 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 incurrence.
140. Recently, COA Circular No. 2009-002 provides for the selective restitution of
pre-audit on government transactions, which pertinent provision is quoted hereunder:
141. 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.
142. The following data shows the total unliquidated cash advances to the officers
and employees of the following UP units/campuses as shown in the consolidated
financial statements:
102
143. Verification of the manner of implementation and recording of cash advances’
transactions disclosed the following deficiencies/condition noted in five campuses,
which caused the accumulation of the outstanding cash advances contrary to the
foregoing rules and regulations, to wit :
UP System
Fund Balance
101 P 640,187.97
164 29,481,773.01
184 209,877.63
Total P30,331,838.61
145. Out of this balance, P15,700,216.19 are long outstanding accounts aging two to
more than ten years, P15,222,093.74 of which are cash advances granted for
Doctorate Studies as financial assistance, which were regularly given despite the
grantee’s failure to submit the liquidation documents, resulting to the impairment of
the promissory note executed embodying its commitment to submit the liquidation
papers prior to the release of another cash advance.
147. It was also noted in the report submitted that 22 liquidation reports totaling
P6,830,430.69 were already in process at the Accounting Unit. Taking into account
this number, it may be stressed that problems may be overlooked in the processing of
liquidation vouchers resulting to the delay in the approval and the recording in the
books.
UP Diliman
148. The total unliquidated cash advances of P5,436,037.50 granted to its officers
and employees were mostly for short bound undertakings such as study grant abroad
and for other purposes, which had been long outstanding in the books and already
aging 30 days to three years
149. This condition of unliquidated cash advances had already been reported in the
previous Audit Reports, but it is apparent from the recent reports that management
has not yet taken major steps to address the problem. This situation works against
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promoting adherence to policies and procedures and reflects the attitude of
management towards internal control.
UP-Manila
153. Continued granting of additional cash advances to the accountable officials and
employees with outstanding cash advances resulted in the accumulation of
unliquidated cash advances contrary to Section 89 of PD 1445 and COA Circular No.
97-002 dated February 10, 1997.
UPV-Miag-ao, Iloilo
155. Additional cash advances were granted amounting to P1,890,848.61 for the
period April to December 2009 to accountable officers who have outstanding or
unliquidated cash advances, despite of the information given to the University
Officials regarding COA Circular 2009-002.
UP Visayas – Tacloban
158. The total amount per Trial Balance as of December 31, 2009 of P2,053,286.95
representing Fund 101, 164 and 184 was overstated by P165,274.00 as compared to
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the amount of P1,888,012.95 per audit. The variance was traced to unrecorded
liquidations of cash advances and erroneous posting of accounting journal entries of
some liquidations of cash advances. The details are shown below:
UP System
• Strictly observe the governing rules in the granting, utilization, and
liquidation of cash advances, such as but not limited to the
following:
• 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”;
• Revisit the previous request for write off which was returned by the
Auditor for submission of lacking documents; and
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
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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;
• 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.
106
160. Management commented, thus:
• Sanctions such as
withholding of salaries are
also implemented to persons
concerned who, despite
receipt of several demand
letters, continue to ignore
their obligations to settle.
Request for write-off will be
sent to COA for long
outstanding accounts which
could no longer be collected
together with the necessary
attachments as recommended
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Unit/Campus Comment Audit Team’s Rejoinder
by COA.
108
Unit/Campus Comment Audit Team’s Rejoinder
cash advances of each
accountable officer. Likewise,
demand letters will soon be
issued to accountable officers
with unliquidated cash
advances. Adjusting journal
entries were already recorded
in the books starting this
month of January 2010, to
correct the balance of the
account.
The Due to Officers and Employees account of P1.9 million of the UP Diliman,
and the P18.24 million Due from Central Office account dropped from the books of
the UP-Los Baños, have been non-moving or dormant for more than five years,
and the lack/unavailable supporting documents thereof cast doubts on their
validity.
162. Paragraph III-A of COA Circular No. 97-001 dated Feb. 5, 1997 providing
guidelines on the disposition of dormant accounts requires that:
UP Diliman
163. The Due to Officers and Employees account is used to record the amount of
liabilities due to officers and employees of the agency.
164. Financial reports showed that this account with a balance at year-end of
P1,944,717.44 had been dormant for more than five years as presented in the table
below:
109
Fund Year Beg. Balance Debit Credit Ending Balance
101
2008 1,546,774.89 0 15,027.00 1,531,747.89
2009 1,531,747.89 0 0 1,531,747.89
005
2005 431,915.94 0 13,860.00 418,055.94
2006 418,055.94 0 0 418,055.94
2007 418,055.94 0 0 418,055.94
2008 418,055.94 0 28,599.60 389,456.34
2009 389,456.34 0 0 389,456.34
0 23,513.21
009 2005 23,513.21 0
2006 23,513.21 0 0 23,513.21
2007 23,513.21 0 0 23,513.21
2008 23,513.21 0 0 23,513.21
2009 23,513.21 0 0 23,513.21
165. As can be gleaned from the above information, from CY 2005 to CY 2009, few
transactions totaling P163,717.09 were recorded as charges to the account. It
appeared that out of the CY 2005 balance of P2,108,434.53, the total amount of
P1,944,717.44 became dormant for more than five years.
166. Verbal request to submit the necessary subsidiary ledger to attest the validity
and existence of the recorded amount was not complied since it was disclosed that the
Accounting Section has no available records to identify the composition of the
account. This situation shows weakness of control and the deficiency in the
procedure of recognizing payable accounts.
UP Los Baños
167. As of November 30, 2009, the Due from Central Office of P18,235,619.12
remained outstanding in the books and non-moving since 2002.
168. However, at year end, it was noted that the account’s balance increased to
P66,683,184.70 for the current operating expenses funding requirements released in
January 2010, and the P18,235,619.12 was dropped from the books.
169. Inquiry from the accounting personnel disclosed that a Journal Entry Voucher
was drawn to drop the amount from the books because it did not really exist.
Verification however, disclosed that the dropping from the books of accounts of this
long outstanding balance was not supported with any documentation, which validity
therefore cannot be ascertained.
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170. We recommended that Management:
UP Diliman
• Instruct the Accounting section to exercise the necessary control for its
fund and accounts.
UP Los Baños
111
171. Management commented, thus:
UP Diliman
o Management’s reply through the Accounting Section disclosed that
balance of this account had actually started in CY 2003 when UP
System Administration implemented payment of salaries, wages and
other remunerations directly to the individual account of UP
employees. It was admitted that since the accounts had remained
dormant since 2003, claims pertaining thereto can no longer be
ascertained, hence will be recommended for reprogramming/reversion
as recommended by the COA.
UP Los Baños
o Proper procedures will be adopted in dropping the accounts from the
books.
b. Section 65: Requires the use of the official form, Report on the
Physical Count of Inventories (RCPI) in reporting the results of
conduct of the physical count of Inventory. The RCPI shall be used to
report on the physical count of supplies by type of inventory as of a
given date and shows the balances of inventory items per card and per
count and shortage/overage, if any.
173. Section 79 of P.D, 1445 provides that “when government property has become
unserviceable for any cause, or is no longer needed, it shall upon application of the
officer accountable therefore, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if found
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to be valueless or unsalable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the supervision
of the proper committee on award or similar body in the presence of the auditor
concerned or other duly authorized representative of the Commission, xxx.
174. The audit of the Inventory accounts of the three UP campuses showed the
following deficiencies:
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Open 3,343,712.91 • The Accountant did not observe the Perpetual
University Method of recording supplies as required under
Sec. 43 of the NGAS manual. Purchases of office
Supplies, accountable forms, food supplies,
gasoline, oil and lubricants, and other Supplies
were directly charged to their respective expense
accounts.
UP- Mindanao
• Require both officers/personnel in the Accounting and Supply Units
to revisit the provisions pertaining to the supplies and property
management set forth under the NGAS Manual for their
appropriate guidance in rectifying the above noted deficiencies.
UP Los Baños
• Require the Property Officer to maintain Stock Card of each
inventory item which should always be reconciled with the
Accounting Records in accordance with Sec. 43 of the NGAS
Manual, Vol. II. To see to it that semi-annual physical count of
inventory are conducted and the Report of Physical Count of
Inventories are prepared using the prescribed form provided
under Sec. 65 of the NGAS Manual Vol. II.
Open University
• The Chief Accountant and the Property Officer to fully implement the
Perpetual Inventory Method of recording inventory items.
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• The Property Officer to maintain Stock Card of each inventory item
which should always be reconciled with the Accounting records in
accordance with Sec. 43 of the NGAS manual.
UP Los Banos • Management will abide by the The Auditor would like to
said suggestion. For CY 2010, emphasize that the NGAS has
Supply and Property been in effect since the
Management Office (SPMO) has issuance of COA Circular No.
scheduled to conduct physical 2001-004 dated October 30,
count of inventory in the first 2001, thus, on its 10th year of
week of July and third week of implementation the University
December 2010. should have conformed in all
of its provisions.
• SPMO used to conduct physical
count of inventory at least once a
year based on page 128 of the
COA Manual on Property and
Supply Management System. The
supplies and materials at SPMO
are for temporary storage as such
are immediately forwarded to
UPLB’s various units for their
urgent use.
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Campus Management Comment Audit Team’s Rejoinder
accounted for in accordance to
Sec. 79 of PD 1445.
Open University • The University shall observe • The Auditor would like to
Perpetual Inventory Method reiterate Section 43 of the
when practicable. Manual on NGAS, Vol. II
which provides that
• The University conducted purchases of supplies and
physical count of inventory on a materials for stock
semi-annual basis, but have not regardless of whether or not
submitted the same to COA. they are consumed within
They will provide COA copy of the accounting period shall
this report semestrally from then be recorded as Inventory
on. Account. Under the
perpetual method, an
inventory control account is
maintained in the General
Ledger on a current basis.
G. Due from/to Other Funds accounts of P3.12 million for unreleased Notice of
Cash Allocation (NCA)
The failure of the Accounting office to include charges against the PDAF
guarantee letters in the monthly cash program caused a P3.12 million charges
against the trust/revolving funds for hospital operations, which may deplete the
latter’s funds if not properly controlled and monitored.
177. DBM Circular Letter No. 2008 – 11 dated December 8, 2008 states, among
others, that:
Section 3.3 – Likewise, at the start of the year, OUs may submit to DBM a
request for the release of NCA requirements chargeable
against prior year’s budget.
178. The NGAS provides the use and description of the following accounts:
a. Due from Other Funds – amount due from other funds maintained by
the agency.
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b. Due to Other Funds –amount received/withheld for the account of
other funds.
179. The audit of the Due from/to Other Funds accounts disclosed that the UP-PGH
PDAF balance pertaining to seven legislators showed a total payable of P3.12 million
to the University/Hospital trust and revolving funds as of December 31, 2009. This
resulted from the Accounting Division’s failure to include the PDAF charges in the
MCP submitted to the DBM for release of NCAs corresponding to the SAROs issued
for the medical assistance of the indigent patients of the legislators concerned
pursuant to the guidelines under DBM Circular Letter No. 2008-11 dated December
8, 2008.
180. Accordingly, as there were no NCAs released by the DBM, the Accounting
Division charged its Pharmacy Department’s special trust fund for the medical
assistance extended to the poor patients and against its revolving fund intended for
hospital operations, for the drugs, medicines and laboratory expenses. These charges
were recorded as Due from Other Funds.
181. The foregoing condition if not prevented, will deplete the hospital fund for
operations in the absence of timely PDAF charges in the MCP as these affect the
timely release of NCAs for the PDAF SAROs.
182. Inquiry and verification from the Accounting Division revealed that the last
monitoring of NCA releases for PDAF was done in June 2009 since the staff in
charge resigned from the service and no one took over the position.
184. Management commented that the observations of the Audit Team are noted.
The Accounting is still updating the report on PDAF balances which is needed for the
MCP to be submitted to the DBM for the request of NCA of PDAFs with no cash
release.
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118
incomplete or lack of inventory reports, and the absence of regular reconciliation
of property and accounting reports/records.
185. Accounting controls relate to those methods and procedures used to produce
accurate records and safeguard assets. They should be designed to ensure that:
187. In line with the foregoing, the following specific guidelines were instituted:
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Sections 440 and 441, Volume I of the GAAM provide that physical
inventory of supplies as well as property and equipment should be
reconciled with the control accounts in the general ledger after all
transactions have been posted to the accounts. Any difference between
physical and book inventories should be investigated and cleared or
adjusted immediately to reflect the true financial condition of the
agency
d. Section 66 of the Manual on the NGAS Vol. II-“The Report on the
Physical Count of Property, Plant and Equipment (RPCPPE) shall be
used to report the physical count of property, plant and equipment by
type as of a given date. It shows the balance of property and
equipment per card and per count and shortages/overage, if any.”
g. Also, Section 73, Volume 1, of the same manual states that the
responsibility for the fair presentation and reliability of financial
statements rests with the management of the reporting agency. This
responsibility is discharged by applying generally accepted state
accounting principles that are appropriate to the entity's circumstances,
by maintaining effective system of internal control and by adhering to
the chart of accounts prescribed by the COA.
h. COA Circular 2003-007 dated December 11, 2003 sets the policies and
guidelines on the Revised Estimated Useful Life for depreciation for
all government PPEs.
188. The reported Physical Inventory Reports for PPE vis-a-vis that of the
Accounting Office’s records in the six UP campuses disclosed a total variance of
P557,373,234.27 broken down as follows:
Amount
Campuses Per Physical
Particulars Per books Inventory Report Variance Remarks
21 Motor
UP System P6,906,710.00 P10,104,400.00 (P3,197,690.00) Vehicles
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Amount
Campuses Per Physical
Particulars Per books Inventory Report Variance Remarks
UPM-SHS–Palo, P6,061 P2,47
Leyte P8,539,839.48 ,263.46 8,576.02 December 2009
UPMSHS–Baler, 540,946.
Aurora 275,308.10 05 (265,637.95) October 2009
UP System
189. Verification showed that only 16 vehicles with a total cost of P6,906,710.00
were recorded in the books. However, as the the Supply and Property Management
Office did not maintain a complete list or inventory of vehicles, copies of
Memorandum Receipts (MR) on record were used as reference on the actual
inspection conducted, which disclosed 21 vehicles with a total cost of
P10,104,400.00, thereby showing a discrepancy or understatement per books of
P3,197,690.00. Identification however, of the unaccounted vehicles was difficult
since the report submitted by the Accounting Section failed to disclose the important
information such as the engine number, chassis number and plate number of the
vehicles.
190. It was also noticed that the recorded cost per books of P6,906,710.00 includes
the cost of car accessories amounting to P250,310.00 taken as separate item in the
inventory listing provided by the Accounting unit. The cost of these accessories if
necessary and will extend the serviceable life of the vehicle must be added to the cost
of the vehicle, otherwise, the cost should be directly charged to expense.
191. Further, it was observed that the MRs were not properly accomplished because
the concerned official did not acknowledge the receipt of property as it was done by
the designated driver, hence, the accountability and responsibility of the concerned
officers were not on record. It was also discovered that the two vehicles
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assigned with the Admission Office were not supported with MR. Likewise, MRs
were not regularly renewed every three years to regularly update information therein
as a control measure.
UP Diliman
192. The Supply and Property Management Office’s year-end inventory report of
the University’s Property, Plant and Equipment disclosed a total inventory balance of
P4,996,368,400.50. This balance however, did not reconcile with the corresponding
control accounts in the books that reflected a year-end balance of P4,398,898,691.00
thereby, resulting to a variance of P597,469,709.50.
193. The discrepancy in the reported balances of PPE accounts had already been
brought to management’s attention in prior years’ report, but this has not been traced
or determined, hence, the necessary adjustment of reports/records can not be properly
instituted.
UPM/PGH
194. For the UP PGH, the variance of P9,722,821.59 existed between the Physical
Inventory Report of P1,894,498,715.87 and the total amount of P1,884,775,894.28
posted in the PPE Ledger Cards for CY 2009. The variance is equivalent to the total
cost of unaccounted/missing equipment of which P380,052.86 was covered by
various requests for relief from property accountability filed with the Commission on
Audit but subsequently returned to the Accountable Officers concerned for
submission of additional information/documents.
195. For the UPM, the submitted Inventory Report as of December 31, 2009 totaling
P437,791,600.98 was incomplete as it did not include the inventory report of the
College of Dentistry. Inquiry from the bookkeeper revealed that there were no
beginning balances for PPE account per college but only the totals were reflected in
the books. Also, there was no reconciliation made between the physical inventory
reports with the accounting records of P462,339,686.32, and the SLs maintained by
the Accounting Office were not kept current.
196. The UPM-SHS – Palo, Leyte submitted its Physical Inventory Report as of
October 31, 2009 and the Summary of Annual Physical Inventory Reports of
Equipment by the Property and Supply Office as of December 31, 2009, both in the
amount of P6,061,263.46, while the Accounting Office of UPM had reported a total
balance of Equipment for Palo, Leyte as of December 31, 2009 in the amount of
P8,539,839.48 with a variance of P2,478,576.02.
197. The UPM-SHS, Baler, Aurora submitted its Inventory Report as of October 31,
2009 with a total value of P540,946.05 against the record of the Accounting Office of
P275,308.10 hence a total of P265,637.95 variance existed.
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UP-Baguio
199. Further verification of the Report on the Physical Count of Inventory disclosed
that some equipment found on hand/included in the list have no unit cost indicated in
the report; the total balance of each PPE account was not indicated and the total
number of page/s of each PPE account is not indicated casting doubts as to the
reliability of the report.
UP – Los Baños
200. The University submitted only the Report on the Physical Count of Motor
Vehicles and Other Transportation Equipment as of December 31, 2009 and it was
found that the report was not in accordance with the prescribed form under the
NGAS. No report for other PPEs was submitted.
201. The Inventory Report balances when compared with the book balances of
Motor Vehicle and Other Transportation Equipment revealed the following
understatements:
Per Inventory
PPE Accounts Per Books Difference
Report
6,282, 38,979, (32,696,78
Motor Vehicles 878.78 668.30 9.52)
2,7
Other Transportation Expense 39,200.00 9,017,827.95 (6,278,627.95)
Total 9,022,078.78 47,997,496.25 (38,975,417.47)
202. It was also observed that some of the items listed in the submitted report lacks
information as to acquisition cost, dates or both, which resulted to the difficulty in the
determination of the current Depreciation Charges and Accumulated Depreciation.
203. The Depreciation Expenses and Accumulated Depreciation for both PPE had
the following understatements:
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Other Transportation
Motor Vehicle Expense
Account Title
Per Under- Per Per Under-
Per Books Audit statement Books Audit statement
Depreciation
Expense 529,090.19 1,082,976.81 -553,886.62 0 260,910.00 -260,910.00
Accumulated
Depreciation 1,652,884.08 3,764,854.77 -2,111,970.69 25,725.00 695,520.00 -669,795.00
204. There were PPE items that include the Firefighting Equipment and Accessories
with a balance of P184,000 which have no provision for depreciation during the year.
The Firefighting Equipment and Accessories were acquired in CY 2006, but since
these have no Accumulated Depreciation balance, it would appear that these were
acquired only in December 2009. Other PPEs have inadequate provision for
depreciation.
Open University
208. The foregoing deficiencies as well as the amount of the unreconciled difference
between the Property and Accounting records affected the reliability and fair
presentation of the Property, Plant and Equipment account in the financial statements.
UP System
• Reconcile the discrepancy noted in the books and property records and
effect the necessary adjustments in the books.
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• Conduct regular physical count and perform regular reconciliation of
accounts and records.
UP Diliman
• Instruct the units concerned to trace the discrepancy noted in the books and
property records and record the necessary adjustment in the books.
UPM-PGH
• Require the Office of the Legal Services to determine the liability of the
Accountable Officers for the lost assets for appropriate recording
of the replacement costs in the books of accounts and for possible
salary deductions.
• Require the Accountable Officers who have requested for the relief of
their property accountabilities to submit all the required
documents to the COA, otherwise, management should require
them to pay the replacement costs of the lost properties.
• Require the UPM Accounting Office to update the PPELC of the UPM
and the UPSHS as of December 31, 2009, indicate the costs of the
assets in the books as appearing in the Inventory Report for
unbooked items. Prepare the necessary adjusting entries for the
deficiencies/discrepancies noted.
• Require the Chief, Property Division of UP-Manila to complete the
Physical Inventory Report for CY 2009.
UP-Baguio
• Require the Accounting and Property sections to reconcile the
discrepancies noted and undertake periodic reconciliation between
the accounting and property records;
• Require the Accountant to effect the corresponding adjustments to
reflect the correct balances of PPE accounts in the financial
statements.
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UP – Los Baños and Open University
• Conduct physical count of PPEs every year, and prepare report
thereon using the RPCPPE prescribed under NGAS.
UP System
o The variance pertains only to 8 vehicles purchased in 1997 which were not
booked because of lack of Memorandum Receipts (MR). Upon
obtaining the MRs from SPMO, the Accounting Office will book these
vehicles and these will be included in the March 2010 Financial
Statements.
UP Diliman
o Reconciliation of records per books and per SPMO for CY 2004 to CY
2005 has been made. Final reconciliation statements are in process.
They are currently reconciling records for the new acquisitions from
CY 2006 to CY 2009. The variance of P111,932,597.88 was traced to
reconciling items prior to CY 2004.
UPM/PGH
o As of December 31,2009 a total amount of P2,874,249.00 equipment was
already recorded, hence, the amount in the audit report should be
adjusted from P13,154,884.50 to P10,280,635.50. The remaining
amount was recorded during the first and second quarters.
UP-Baguio
o Management directed the SPMO and the Accounting Office to reconcile
their records as to PPE classification, fund source and cost.
UP Los Banos
o SPMO has already scheduled the physical count of inventory for 2010.
The reconciliation of records would take tedious back tracking of
transactions since transactions are voluminous. SPMO already
considered the hiring of a contractual to classify and update the
accounts, then reconcile with the Accounting records.
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o The Straight-Line Method is being followed in the computation of
depreciation. However, not all items were depreciated since the
classification of fixed assets was not established before the
implementation of NGAS. Only acquisitions during the
implementation of NGAS and to date were depreciated.
Recognition of payables was not based on actual claims for goods delivered or
service rendered, as P68.43 million listed as payables in the three UP
offices/campuses were not found to be valid claims supported by sufficient
evidence, contrary to Section 46 Par. 2 of PD 1177, and likewise overstating the
expense and liability accounts at year-end by the same amount.
212. For proper matching of costs against revenues, expenses incurred during the
period for goods delivered or service rendered must be recognized and reported
during the period it was incurred.
213. Recognition of Payable should be based on valid claims, and validity shall
include proper authority to incur the obligation, existence of valid contract, actual
delivery of goods and rendition of service, identification of the bonafide supplier or
creditor. Once the Payable account is already certified it can no longer be removed
from the list or be changed, except on the instances specifically provided under the
rules. If these were strictly observed, the practice of reprogramming certain payable
accounts can never be an option to consider.
214. While Section 98 of PD No. 1445 provides for the reversion of unliquidated
balances of accounts payable. “The Commission, upon notice to the head of agency
concerned, may revert to the unappropriated surplus of the general fund of the
national government, any unliquidated balance of accounts payable in the books of
the national government, which has been outstanding for two years or more and
against which no actual claim, administrative or judicial, has been filed or which is
not covered by perfected contracts on record.”
215. On the other hand, Sections 153, 154 and 155 of the same Manual on NGAS
Volume III prescribes the use of the accounts GSIS Payable, Pag-ibig Payable and
Philhealth Payable for liabilities for collections or amount withheld from officers and
employees and government contribution for remittance to GSIS, Home Development
Mutual Fund or Philippine Health Insurance Corporation.
127
216. Likewise, Section 157 prescribes the use of “Due to Officers and Employees”
for unpaid salaries, fringe benefits and other emolument and other obligations due to
officials and employees of the agencies as well as liabilities arising from the
cancellation of checks issued to officers and employees subject to replacement.
217. Verification on the list of Payables and other relevant records showed the
following deficiencies:
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P1,150,000.00 were funds allotted for
the University’s scholarship program but
no identified awardees to date.
UPV Cebu P97,118.30 The amount outstanding for more than two
years, was not reverted to the GF as required
in Section 98 PD 1445;
UPV Cebu
129
219. Management has given their comments as follows:
UP System
220. The Audit Team wants to reiterates that recognition of payable accounts should
not be based on estimates, but rather on determined and validly supported claims. The
authority to reprogram accounts has nothing to do with the required fair presentation
of the payable accounts.
UP Diliman
o The Management in its reply dated July 27, 2010 provided the
following information:
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k. P662,675.51 for reversion to LRF.
221. Further, the Audit Team wants to stress that Obligation Slip/Budget Utilization
Request is not sufficient to support recognition of Payables. It must be supported with
valid contract or PO and proof of delivery and acceptance. This Office will continue
to monitor and evaluate action taken by management on this finding.
Other Payables account of the UP-Manila, Los Baños and Cebu campuses totalling
P2.81 billion was overstated by P686.50 million due to error in recording income
collections, misclassification of accounts and inadequate documentation and SL,
rendering the account balance unreliable.
223. The description of the accounts as well as the instructions for the use thereof
are carefully prescribed in the NGAS Philippine Government Chart of Accounts
(PGCA), to achieve uniformity in the recording of government transactions.
224. The PGCA is an important control as it provides the framework for determining
the information presented in the Financial Statements. It likewise proves helpful in
preventing classification errors as it describes the type of transactions falling under
each account.
225. The account Other Payables (439) is used to record other liabilities not falling
under any of the specific payable accounts.
226. Section 12 of the Manual on the NGAS provides among others that the SL
contains details/ breakdown of the balance appearing in the GL. The totals of the SL
balances shall be reconciled with the respective control account regularly or at the
end of each month and schedules shall be prepared periodically to support the
corresponding controlling GL accounts.
227. The analysis of the account’s transactions disclosed the following errors which
misstated the Other Payable account balance at year end:
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Campuses/Fund Per Books Per Audit Difference Remarks
UPM/PGH - P620,427,184.47 P 280,503,555.99 P 71,106,294.93 Misclassification
F 184 268,817,333.55 No SL
UP Cebu P12,837,065.62 - 12,837,065.62 Misclassification
UP – Los Baños P2,179,698,590.85 P 845,981,996.12 P333,716,593.73 Overstatement
Total P 2,812,962,840.94 P 1,126,485,552,11 P 686,477,287.83
UPM-PGH
e. There were 32 donors’ accounts which remained dormant from two to six
years (CY 2003 to CY 2007).
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g. Collection of hospital fees are being temporarily deposited to UPM Trust
Liabilities under DBP Combo Account No. 0410-002882-033 and at
the end of the month the collections are being reclassified and the
corresponding amount transferred to the appropriate bank accounts
thru the issuance of Transfer Order to the bank.
UPV Cebu
UP – Los Baños
133
1. Project funds of P124,575,712.29 received from various NGAs were
not credited to Due to Other NGAS. The SL of these projects were
labeled by project titles without any reference to the agency-source of
the funds, thus, the creditors to which the University has to liquidate
its accountability cannot be easily identified.
UPM-PGH
134
• The Cashier to transfer the corresponding cash from the Trust
Liability Account to the RF account with the bank for the
unauthorized special trust fund, to deposit the amount collected to
the RF account maintained with the DBP under Account No. 0410-
002882-032 and transfer to the respective trust accounts at the end
of the month the other collections held in trust.
UP – Los Baños
UP Manila
UP Los Baños
230. Section 28, Volume I, NGAS Manual provides for the basic requirements
applicable to all types of disbursements made by national government agencies, as
follows:
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b. Existence of a valid obligation certified by the Chief Accountant/Head
of Accounting Unit;
231. Section 158 of Volume 1 of the Government Accounting and Auditing Manual
provides:
232. Sec.317. GAAM, Volume I, states that, “The officials/employees who are
entitled to receive RATA are:
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Campuses Expenditures Deficiencies
P 686,000.00 Spill Response Program (OSRP) without
authority from the Office of the President
(OP) as required under Section 75 of
Executive Order No. 292 dated July 25,
1987 and par 9.0 of AO No. 233 dated
August 1, 2008.
UPV – Iloilo
137
2. Documents showed that the temporary appointments issued by the
Chancellor took effect on August 1, 2008, three months before she was
appointed by the UP-BOR as Chancellor on November 1, 2008. The
authority vested by the UP-BOR upon the Chancellor is presumed
effective only during her term, that is, from November 1, 2008 to
October 31, 2011, but not prior to or beyond such term. She had no
authority then to issue said appointments which took effect before her
assumption to office as Chancellor, thus, considered illegal and
improper, hence ineffective.
1. The MOA entered into by and between the CHED and the UP - Miag-
ao, Iloilo on August 11, 2006, identified the UPV as one of the
participating Higher Education Institutions (HEIs) where the
scholarship program shall be fully implemented.
2. Section II (4) of the Privileges for Part time Faculty Scholar of the
Revised Implementing Guidelines of the HEDP-FDP provides that:
Semester/Trimester/Quarter
4. The part-time scholar was allotted the amount of P24,000.00 for her
transportation allowance. Records showed that the grantee received
transportation allowance totaling P18,000.00 in violation of the above-
quoted Implementing Guidelines, because she is residing in the City
138
139
proper of Iloilo and the classes were also held at the City Campus of
UPV, and the distance between her residence and the UPV is below 50
kilometers.
c. Likewise, Section 9.0 of AO No. 233 dated August 1, 2008 requires all
government agencies enumerated in Section 1 thereof, to seek
approval of the OP for the purchase of the passenger van or pick-up
type vehicle with an engine displacement not exceeding 2200cc, if
gasoline-fed; or 3000cc, if diesel-fed.
d. Surety Bond is required under Section 62.1 IRR of RA 9184 for the
procurement of goods to assure that manufacturing defects shall be
corrected by the supplier, manufacturer, or distributor, as the case may
be. A warranty is also required from the contract awardee for a
minimum of three months for supplies and one year for equipment,
after the performance of the contract. The obligation for the warranty
shall be covered by either retention money equivalent to at least ten
percent (10%) of every progress payment, or a special bank guarantee
equivalent to at least ten percent (10%) of the total contract price. The
said amounts shall be released after the lapse of the warranty period
provided that the goods supplied are free from patent and latent defects
and all the conditions imposed under the contract have been fully met.
UPV Tacloban
140
c. Expenses for personal services were for payment of salary increases and
other benefits of the UPV-Tacloban as authorized by UPV-Iloilo
Regional Office. Several requests were made to UPV-Iloilo, but the
corresponding subsidy/allotment as of year-end, was not yet received.
UP Baguio
141
COA Commission Proper for automatic review, pursuant to Section 6,
Rule V of the 1997 COA Revised Rules of Procedure. However, final
decision has not been released as of date.
Open University
UPV – Iloilo
• On payment of salaries and honoraria
142
b. Scholar/grantee to refund the transportation allowance or require
the Accountant to deduct the amount from other
claims/entitlements of the scholar.
a. Secure authority from the Office of the President for the purchase
of motor vehicle and to require the Supplier to post a Surety bond.
UPV Tacloban
• Strictly comply with the provisions of the NGAS Manual and
require the accountant to follow up the additional
allotment/subsidy from the UP-Iloilo for the balance of the
overdraft in the amount of P3,835,950.27.
UP Baguio
• To prevent accumulation of the disallowed amount, discontinue
the granting of RATA to the concerned Division Chiefs until the
release of the final decision of the COA Commission Proper.
Open University
• We recommend that management secure authority for exemption
to Budget Circular No. 2003-5 to make the payments legal.
UP Visayas
o Regarding the honoraria and salaries of UPV-College of Arts and Sciences
(CAS), Chancellor Minda J. Formacion signed the appointments on
the basis of the approval of the former Chancellor Dr. Glenn D.
Aguilar. As explained, the project funds usually come late and the
appointment cannot be issued unless funds are received by UPV.
143
of November 2008. The UP System Budget Office advised verbally
UPV Budget Office that there is no need for a separate written
approval from DBM as the SARO has been issued to UPV, and that it
represents the authority to purchase the vehicle.
236. The Audit Team pointed out that Sub-SARO No. UP-S-292-05-014 does not
constitute an authority to purchase motor vehicle as it is only an advice that the
allotment of P50,000,00.00 was released to the UPV. Moreover, said Sub-SARO
requires that the purchase of vehicle/s shall be subject to the provisions of
pertinent laws and shall be in accordance with NBC Nos. 446 and 446-A, as amended
by AO No. 223 dated August 1, 2008 which requires all government agencies
enumerated therein to seek approval of the OP for the purchase of the passenger van
or pick-up type vehicle with an engine displacement not exceeding 2200cc, if
gasoline fed; or 3000cc, if diesel fed.
237. Likewise, we noted that the Service Warranty issued by the supplier, was not in
the form of a Surety Bond as required under Section 62.1 IRR of RA 9184.
Inspection conducted by the COA Technical Audit Specialist revealed that the 10%
retention or special bank guarantee as required under Section 62 of RA 9184 was not
imposed by the University or complied with by the Supplier. The applicable laws,
rules and regulations governing purchase of motor vehicles should be duly complied
with to protect the interest of the government and avoid possible suspension of the
transaction in audit.
Open University
o In a letter dated June 9, 2010, management commented that Budget
Circular No. 2003-5 is not necessary and applicable and the payment of
honorarium were charged against the income of the University and not to its
regular appropriation in the GAA, hence, the payment is not covered by the said
DBM Circular.
238. The Auditor also emphasized that Authority for the use of income should also
be secured.
240. The aforecited LAO-National Decision No. 2008-075 is subject for deferment.
Payment of RATA to employees was contrary to the General Provisions No. 47, of
the GAA and Sec. 317, of GAAM Vol. I, hence, overstating expense account.
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L. Understated Electricity expense
241. Bills for mandatory expenses should be closely monitored and controlled for
proper budget allocation and appropriate recording of charges in the books. Payments
should be prioritized to avoid service interruptions.
242. During the year 2009, the UP System Administration incurred a total of
P6,317,219.00 expenditures for MERALCO electricity bill. Audit on a test basis of
the expenditure vis-a-vis the corresponding MERALCO bills for the period of August
to October 2009 disclosed an accumulated unpaid charges of P4,615,708.92, or 89
percent of the total charges of P5,185,804.89 during the said period.
243. However, only P1,523,318.54 or 33 percent of the unpaid amount was certified
to accounts payable hence, the balance of P3,092,390.38 was unrecorded resulting to
understatement of the Electricity expense at year end.
244. It was observed that the UP System allocates the MERALCO bill/charges to the
different offices within the area covered by the bill statement. Each office is required
to prepare an individual disbursement voucher payable to MERALCO for its
equivalent share charged against its office’s budget for the year. This manner of
preparing and paying the electricity bill by office in the absence of close monitoring
of its total payments against the appropriate billing statements led to unpaid charges.
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247. Management commented that :
248. The Audit Team would like to emphasize that reconciliation of accounts should
be done to clear the billing statement of prior periods’ unpaid charges. Accountability
can still be determined on the suggested system. The presence of unpaid prior periods
charges negates the view that proper monitoring was easier in the present practice.
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.
249. Sec.4 (v) of the New Government Accounting System (NGAS) Manual
provides that the use of corollary and negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be debited/credited to the appropriate asset
accounts. If an error is committed, a correcting entry to adjust the original entry shall
be prepared.
250. Sec. 41 of the same manual states that Property, Plant and Equipment acquired
through purchase shall include all costs incurred to bring them to the location
necessary for their intended use, like transportation costs, freight charges, installation
costs, etc. These are recorded in the books of accounts as Assets after inspection and
acceptance of delivery.
251. The NGAS Chart of Accounts provides that Items in Transit Account (284) is
used to record the cost/appraised value of equipment already paid but not yet
received, where shipment is FOB Shipping Point.
UP Diliman
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Period Fund 101 Fund 005 Fund 009
254. Based on available records, out of the P164,413,338 balance of 2007 and 2008
charges to Items in Transit account, only P3,796,415.00 was adjusted to proper asset
account during the year, leaving a long outstanding balance of P160,616,923.00
which remained unidentified.
UP Los Baños
255. Moreover, Items in Transit account of P81,867,622.42 have been dormant since
CY 2002. A review of records showed that no transactions affecting the account
occurred through the years.
256. It was revealed that the account was temporarily charged in CY 2002 during
the conversion of the books of accounts to the New Government Accounting System
(NGAS) for the semi-expendable inventory property items not knowing the correct
account to use in that instance.
UP Diliman
• Maintain a subsidiary ledger of Item in Transit account to facilitate
monitoring and adjustments of the account;
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• Observe the rules provided under NGAS on the appropriate use of the
subject account.
UP Los Baños
• Submit the list of the Items in Transit of P81,867,622.42 to determine
correct classification of the items for adjustment in the books.
258. Management comments and the Audit Team’s rejoinder are as follows:
UP Diliman
• That the Accounting Office always maintained a subsidiary ledger of all
the accounts and forwarded the same to COA on a regular basis. In
addition, for CY 2009, the Accounting Office prepared a
schedule/analysis to support the reliability of subsidiary ledger of
Items in Transit account.
• That the Accounting Office has its documents and records on file to
support and identify the Items in Transit account. The office adjusts
and reclassifies the Items in Transit account to its specific equipment
account based on the Inspection and Acceptance Report (IAR) and/or
Acknowledgement Receipt of Equipment (ARE) forwarded to
Accounting Office by the units concerned and or the Cash Office.
259. The Audit Team wants to stress that the subject ledger was not submitted to
COA to support audit of accounts as stated. Our working paper was extracted from
available documents we have to support our AOM and the submission of
schedule/analysis was made only after the receipt of the AOM. We however,
appreciate the Accounting unit’s initial steps taken on our observation.
UP Los Baños
• Items in Transit in the amount of P81,867,622.42 pertain to old account
Fixed Assets-Furniture, Fixtures, Equipment Work Animals and
Books- In Process/Transit. These were corollary entries made to record
the cost or appropriate value of the above mentioned assets
requisitioned or purchased but not received. It remained dormant in
the books for several years. A request for dropping from the books will
be made to the Commission on Audit.
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N. Non conformity with accrual method of recognizing income
The UP Diliman manner of recording income realized but not yet collected from
its auxiliary and income generating activities did not conform with the accrual
method of accounting for income due to the practice of recording it to Other
Deferred Credits account instead of an appropriate Income account thus,
overstating and understating respectively the aforementioned accounts by at least
P17.59 million at year end.
261. The validity and completeness assertions of the Income account in the
Financial Statements are intended to establish that all revenues earned are recorded in
the books in the correct accounting period.
262. Thus, consistent with sound accounting principles, the recognition of revenue
by the government or the time of recording income is described as being at the “point
of performance”, the time when services were actually rendered.
263. This is essentially the accrual basis of accounting prescribed for use in the
Government Accounting System. Under the said system, transactions and other
events are recorded in the books and reported in the financial statements on the period
to which they relate and not only when cash or its equivalent is received or paid.
264. The University operates various auxiliary services and income generating
activities such as University Food Service, Housing Office, Business Concessions
Office, and University Health Service to augment the diminishing government
subsidies for its school’s operations and enhancing the welfare of its employees and
students thru the income generated from these services.
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266. Moreover, billings sent to various donors of scholarship grants amounting to
P32,388,743.50 were also debited to receivable account and credited to Other
Deferred Credits account instead of the proper income account, which nature is
similar to the situation previously discussed in paragraph 265.
267. It has to be stressed that the Other Deferred Credits is a liability account, and is
used to record collections of income received in advance but no yet earned. The
nature of the transactions being questioned are not similar to what is contemplated in
the account’s definition.
268. The management justifies that the practice is due to the University’s budget
system where cash collections are recorded as current income, which supports the
Internal Operating Budget (IOB). Thus, as in past year’s observation of the same
issue, management represented thru the OIC of the Accounting Unit that since
current income supports the IOB, recording income earned but not yet collected to an
income account could result to allotment without cash receipts.
269. Internal Operating Budget System must be consistent with sound Accounting
Principles on the accrual method of recognizing income at the point of performance
or the time when services were actually rendered. The IOB system of the University
could not be affected since only income already collected during the period must be
budgeted or allocated for its operations.
270. During the exit conference in April 2007 for the Consolidated Annual Audit
Report, it was agreed with UP System that the audit recommendation on this subject
(Other Deferred Credits) will be complied with in CY 2007. But until this report, no
favorable action has been taken by the officers concerned.
272. The Management commented in this finding through the Accounting Section,
as follows:
o The same procedure is being used for billing sent to various donors of
scholarship grants amounting to P32,388743.50.
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273. The procedure of crediting Income Account and debiting Other Deferred
Credits for income not yet collected at year-end before the closing of books may, in a
way be able to reflect actual income earned during the year. However, the
corresponding adjustment made in the ensuing year, wherein the Government Equity
account is directly debited and again Other Deferred Credit account is credited for the
adjustment made at year-end, appears to be impractical and inconsistent with the
basic principles of reporting events or transactions.
274. Sec. 4 par (6) of PD 1445 states that claims against government funds shall be
supported with complete documentation.
276. Verification showed that a total of P209,643,521.81 had been spent for the
employees salaries, allowances and benefits as of December 31, 2009, as shown in
the table below:
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Nature of Disbursement Account Amount
Code
Clothing/Uniform Allowance 715 9,286,241.14
277. However, the approved paid payrolls, daily time records/certificate of service
rendered, summary of absences and undertimes, approved application for leave, and
other necessary documents to support the payroll disbursements were not submitted
to the Auditor for custody and audit.
278. The interview conducted on the payroll process disclosed the following
information:
279. In view thereof, the complete audit on a test basis of the P209 million payroll
disbursements to determine reasonable assurance on the legality, validity and
correctness thereof was restricted.
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280. We recommended that management observe strict compliance on the
timely submission of approved payroll and its supporting documents to the
Auditor, hence it should promulgate a policy for the regular preparation and
submission of employees’ DTR/Certificates of service rendered, approved leaves
of absences, and the summary of absences and undertimes to the HRDO to
facilitate submission of said documents to the Accounting Office.
281. Management commented after the exit conference that they will comply with
the Audit Recommendations but with at most, a two-month lag, i.e. supporting
documents attached to payroll will be pertaining to two months prior to the payroll
date
The UPM-PGH practice of hiring manpower thru Job Order Contract, which
numbered 93 in 2009 and whose appointments are renewed every six months in a
period of one to four years, should be revisited and should continue requesting
from the DBM for regular plantilla items to protect the interest of the employees
concerned as well as that of the University.
282. Section 47 of the General Provisions of the GAA or R.A. 9524 provides:
283. The contractual personnel employed pursuant to this section shall be considered
as an employee of the hiring agency, limited to the year when their services are
reasonably required.”(underscoring supplied)
284. It has been observed that the University has been hiring Job Order personnel to
augment its workforce because of the creation of additional units/departments without
additional plantilla positions such as the NIH and the Special Operating Room
Nursing Service Program, among others. The following conditions are stipulated in
the Job Order Contract:
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he/she has not been previously dismissed from the government
service by reason of an offense; and 4) that he/she has not already
reached the compulsory retirement age of sixty-five (65).
Furthermore, the service rendered is not considered or will never be
accredited as government service.”
285. During the year 2009, UPM and PGH hired 68 and 25 job order personnel
respectively, or a total of 93 out of the 158 as contained in the List of Job Order
Personnel from the University’s Human Resource Development Office (HRDO),
whose length of service with the University ranges from one year to four years.
These Job Order staff are manning the critical units of the University like the
laboratories of the IHG-NIH, Special Operating Room Nursing Service, the Pharmacy
Department, the Blood Bank and the Accounting Office, etc. The Job Order
personnel’s duties and responsibilities based on their assignments include among
others:
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UPM-IHG Accounting – provides expertise in statistical analysis
necessary in the researches conducted by IHG faculty and staff,
prepares Sales Invoice for the hospitals under the PO system, checks
and verifies ORs vis-à-vis collection reports submitted by Cashier on
a daily basis, performs bank reconciliation, pre-audits vouchers, and
journalizes receipts, disbursements, payroll and other adjustments..
286. From the foregoing duties and responsibilities, the Job Order personnel are
doing the work of a regular employee, despite of the fact that their contracts specify
that they have no employer - employee relationship with the University. Their
outputs have to be checked by their immediate supervisor specially in the case of the
IHG which provides services that allow definitive diagnosis and early detection of
potentially treatable conditions. In the case of those assigned with the Accounting
Office, their jobs also involve financial reporting which are also being handled by the
regular employees.
288. Moreover, we bring to the University’s attention the case of Lopez et al vs.
Metropolitan Waterworks and Sewerage System (MWSS) under G.R. No. 154472
dated June 30, 2005, which declared that for purposes of determining the existence of
employer-employee relationship, the Court has consistently adhered to the four-fold
test, namely:
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a. whether the alleged employer has the power of selection and
engagement of an employee;
b. whether he has control of the employee with respect to the means and
methods by which work is to be accomplished
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created positions. To date, there are already nine UPM contractual
positions that have been filled-up. Some colleges and offices are in
the process of identifying vacant items in order to accommodate their
Job Order personnel who are performing the work of regular
employees. Example of this is the College of Medicine which is now
reviewing their existing job vacancies. They are now preparing the
request for unfreezing of items/positions for possible placement of
their Job Orders.
291. EO No. 98 was issued on April 28, 1999 directing all government agencies,
instrumentalities, local government units, and government-owned and/or controlled
corporations to include the TIN as part of the essential requirements in all
applications for a government permit, license, clearance, official paper or document.
292. As TIN is a vital information for tracing a person's taxable transactions under a
computerized system of tax, Section 5 of the EO provides that “Any person who fails
to comply with the requirements of this Executive Order, including the parties
involved in transactions where a TIN is prescribed, and the government functionary
involved in the monitoring or regulating of these transactions, shall be subject to all
the appropriate sanctions provided for in the National Internal Revenue Code and
other pertinent laws and regulations.”
293. Verification showed that for the newly hired employees, the UPM/PGHHuman
Resources Development Division (HRDD) requires the following documents for TIN
application:
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a. One copy of TIN Application Form (Form 1902)
294. However, despite the above requirements, perusal of its 2009 Alphabetical List
of Employees showed that of the 5,927 employees, 42.47 percent or 2,517 of them
have no TIN as follows:
No. of Employees per Alpha List With TIN Without TIN % without TIN
UP Manila - 1,327 1,082 245 18.46
UP – PGH - 4,600 2,328 2,272 49.39
Total 5,927 3,410 2,517 42.47
295. The absence of employees TIN resulted in the difficulty of monitoring tax
compliance as required under EO No. 98 dated April 28, 1999.
.
296. We recommended that management comply strictly the provisions of EO
No. 98 for uniform observance by all government agencies of this requirement,
as it is necessary to effectively carry out the purposes of the EO. In case the
application for TIN (Form 1902) was already submitted to the BIR, a copy shall
be submitted to the Auditing Unit for verification.
297. UP-PGH commented that of the 4,600 reported PGH employees, 431 are
UPCM employees, 8 were double entries and 24 were unknown. The HRDD
submitted a report to the Deputy Director for Fiscal Services that the Hospital has a
total of 3,830 employees as of May 31, 2010. Of this number, 3,712 already have
their TINs and only 118 or 3.1% have not yet submitted their TIN. UP-PGH
Memorandum No. 2010 – 57 dated April 5, 2010 was issued requiring each and
every employee to submit their TIN Nos., otherwise their allowances or medicare
shares shall be withheld.
298. The list of 3,830 PGH employees with their corresponding TIN Nos. who
have allegedly complied with the TIN requirement as of May 31, 2010 as well as the
431 allegedly UPCM employees should be submitted to the Auditing Unit, for our
verification.
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IV. Compliance with Settlement of Suspensions, Disallowances and Charges
299. COA Circular No. 2009 – 006 dated September 15, 2009 prescribes the rules
and regulations on the settlement of accounts audited pertaining to the revenues and
receipts of and expenditures or uses of government funds.
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