Saturday, May 15, 2010

The University of the Philippines at Diliman's University Hotel is a White Elephant according to the Commission of Audit

By Chanda Shahani

The Commission on Audit (COA) website is a treasure trove of information for amateur sleuths, anti-corruption NGOs, journalists and other concerned citizens and organizations who wish to gather further information on the improprieties or worse of the various organs of the Philippine Government.

If you want an annual accounting of how the People's Money is used or misused, then a lot of the information is all there at the COA website, including the annual audit of the entire University of the Philippines System (U.P.) at: 

Take the University Hotel, which the 2008 Consolidated Audited Annual Report (CAAR) of COA describes, in its own words, as being characterized by "inefficient operations," and that "inadequate monitoring and evaluation including insufficiency of guidelines for the Hotel’s effective operations resulted in lapses of the Board of Overseers’ management, which adversely affected the earning potential of the University of the Philippines (U.P.)."

Here is a brief history of the University hotel, according to the 2008 CAAR of COA:

1. The Philippine Center for Economic Development (PCED) donated the PCED Hostel, now University Hotel (UH), and its income to the UP with Deed of Donation dated June 10, 1983.

2. On July 14, 1983, the UP President issued Administrative Order (AO) No. 108 creating a Board of Overseers (BOO) of not more than seven members University employees to manage the Hotel at the pleasure of the President. By virtue of this Order, the BOO shall recommend to the President the amount or percentage of income to be remitted regularly to the UP Faculty Development Fund (FDF) and to submit a report on the disposition of the Hostel through lease or other arrangements on or before December 31, 1983.

3. The hotel continued to be under the management of the BOO, as reaffirmed in Section 2 of AO No. FN-03-56 dated October 2003 of the then UP President Francisco Nemenzo. The AO was issued to define and clarify the status of the Staff of the UH, and it likewise indicated the status of the Hotel of “being not a regular unit of the University but a special project directly under the Office of the UP President,” among others.

4. On June 20, 2007, UP President Emerlinda R. Roman created a committee to review the status of the Hotel under AO No. PERR-07-50 dated June 20, 2007. The committee was tasked to recommend the best course of action that the university should take given the Hotel’s mandate and its current situation as well as the University’s need and responsibilities. The report was due in July 2007; however, as of this date, the Committee has not officially submitted its report to the University President.

5. Audit of the UH operations during the year by COA disclosed that there was insufficient compliance with the requirement under the PCED Deed of Donation to remit its income to the University’s FDF on the basis of the Hotel’s yearly financial statements resulting in an undetermined amount of income from 1988 to 2008 and highlighting the following problems:

a) UH remitted to beneficiaries other than FDF a total of P3.55 million;

b) There were either delayed/no remittance; and

c) There was no logical basis for remitting only two percent of the gross income since in previous years (CY 1983 – 1996 except 1993 and 1995), an additional 25% of the net income was also remitted.

The 2008 CAAR said the BOO exceeded its authority as defined in the AO, as amended, thus government rules were inconsistently adopted to the hotel’s operations, among others:

a) Hiring of regular employees without valid contract and authority from U.P. President Emerlinda Roman;
b) Increasing the BOO honoraria as approved by themselves;
c) Assignment of UP regular faculty and staff as hotel’s consultants without the approval of President Roman.
The report also said there was laxity in implementing hotel’s policies on collection and room rentals as follows:

1) Delayed collection of revenue due to inefficient collection system; and

2) Non-renewal of the lease contract with the UH health club tenant, Pro Gym which expired in December 1997.

COA also criticized UH for non-compliance with government rules on cash management as follows:

1) In addition to her duties, the Cashier also handles the petty cash loan to employees (from the fund of the Separation Pay) amounting to P2.5 million contrary to sound internal control system;

2) Use of unauthorized, non-UP ORs;

3) Deposit of funds in a non-government depositary bank;

4) Use of provisional receipts to acknowledge payment;

5) Cashiers are not bonded; and

6) Unrecorded hotel income and disbursements in the books of the University System.

Unreconciled variances of PhP 30 million existed between the accounting and property records due to absence of regular reconciliations and the absence of inventory taking and non-maintenance of Property, Plant and Equipment (PPE) ledger/property cards.

UH was also found to be in non-compliance with R.A. 9184 in the procurement of goods and services. Procurement was done thru emergency or shopping modes.

UH also said that there was an unauthorized contract with a private external auditor at a cost of PhP11,200 per month or P134,400 a year, since the audit of the hotel being a public entity should be solely and exclusively undertaken by the Commission on Audit (COA).

"The above-mentioned management lapses of the BOO in operating the UH did not ensure transparency and efficiency in its operation, which eventually affected the earning potential of the University," COA said, adding that, "We recommended that the University System strictly monitor and evaluate the performance of the UH in accordance with existing government rules and regulations."

In response, the U.P. Administration said that:
  • The amount of PhP 3.55 million went to beneficiaries other than FDF as decided by previous BOO with the concurrence of the then UP President.
  • There was  no contribution from 1983 to 1987 as the UH was recovering from a huge deficit prior to the donation and was unable to extend any donation during the period in question.
  • The non-contribution for 2001 and 2002 as UPD- HRDO used all the 15 rooms indefinitely after UP CIDS left while its office at Quezon Hall was undergoing renovation. The UH was handicapped in its operation due to the long period of stay by UPCIDS and HRDO free of rental.
  • UH regrets the four-month delay in remitting the two percent contribution for the FDF.
  • On the 39 employees with no records of contract or renewal of their contracts “because of the status of the Hotel (no permanent appointment is issued), current practice is – once an employee is given a regular appointment, there is no need to issue renewal.”
  • On the increased BOO honoraria rates without the approval of the OP, the current honoraria of the BOO was approved by President Francisco Nemenzo on November 5, 2003. As per the AO of President Angara and President Nemenzo, the BOO has the authority to appoint the UH staff including the Resident Manager and set the compensation package for them.
  • On the assignment of UP regular faculty and staff for position at the UH, “delegation of authority is intended to free the UP President from routine administrative operations of the UH. However, out of respect, permission of immediate superiors is solicited everytime the need for consultant/resource person arises.”
  • U.P. said that because of the unusual set up, the UH is not covered by Civil Service Commission (CSC) laws and rules. PD 453 creating the PCED specifically states that the current personnel of the Hotel are exempted from the CSC laws. The Hotel has always been treated as a “special project”.
  • The U.P. Administration agreed that funds should not be expended for payment of external auditor’s fees.

Painted water substation beside Vargas Museum at
U.P. Diliman dramatizes COA's perennial 
concerns about unauthorized organisms
capturing U.P.'s various revenue streams

COA said that while it took note of U.P.'s comments, it nevertheless critiqued the U.P. Administration for the following:

1) The AOs of President Angara and President Nemenzo, do not contain the delegation of authority to the BOO to appoint personnel and increase in honoraria.

2) The conditions set in the Deed of Donation of PCED Hotel to the University that its PCED employees shall be absorbed by the UH no longer exists since none of the current personnel of UH are from the PCED; thus, not covered by the said exemption.

"Since UH is a government entity, hiring of UH personnel are covered by government rules. As a basic requirement, the service contract or appointment should be properly documented and approved to ensure its enforcement and validity. The UH personnel are said to be “regular”, receiving benefits of a private and public employee and yet not evidenced by a duly attested appointment," COA said.

Photos by: Chanda Shahani

(Chanda Shahani is the editor of the Diliman Diary)


  1. the office of the president must issue a delegation of authority to relieve it of most administrative tasks - reviewing/renewing employment/consultancy contracts, etc.

    imo, the university hotel has so much potential. if modernized, it can be a great training ground for UP diliman CHE, BA, and tourism students.

  2. Agree with the previous anonymous. Like St. Benilde, it could be a good training ground for appropriate colleges.


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