The Commission on Audit (COA) has released yesterday its 2009 Consolidated Audited Annual Report (CAAR) of the U.P. System on its website (http://www.coa.gov.ph/Audit/AAR.htm). The 2009 CAAR shows signifcant problems with the way the U.P. Administration has failed to address many COA criticisms over the U.P. Administration's handling of taxpayer-owned cash, financial instruments and other assets in 2009.
But the problem goes back further in time. For an analysis of the U.P. System's previous performance from 2006 to 2008, please click on a Diliman Diary authored article here: http://tinyurl.com/24kkbtv. The U.P. System's troubling financial history should also be looked at within a broader context of systemic financial abuse by officials of several State Universities and Colleges (SUCs) as can be seen by our reportage on COA's 2009 CAARs on other Metro Manila-based SUCs. To read that report, please click here: http://tinyurl.com/399fekf
Here are the highlights of the COA 2009 CAAR of the U.P. System:
1. On the issue of conflicts of interest among ranking university officials and university-affiliated foundations:
COA's 2009 CAAR of the U.P. System said that: “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."
"We therefore reiterate our previous recommendation that Management formalize an arrangement through a Memorandum of Agreement with these Foundations by defining the functions and responsibilities of both parties, including how to account and share for the income/revenues earned from 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 and reported to the UP System management and be subjected to the COA review, verification and audit.”
“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” (emphasis supplied by Diliman Diary).
"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."
See the rest here: http://tinyurl.com/3ywj72l
2. On the basis of a complaint filed by the All U.P. Workers Union (AUPWU), the Commission on Audit (COA) has now cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through U.P. Manila- Philippine General Hospital (UPM-PGH), and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the Faculty Medical Arts Building (FMAB) in its recently released 2009 Consolidated Audited Annual Report (CAAR).
The FMAB is a priority project of the Administration of outgoing U.P. President Emerlinda R. Roman. However, the 2009 CAAR refers extensively to “unresolved legal issues and inadequacy of auditorial documentary requirements on the 25- year lease contract of the Faculty Medical Arts Building (FMAB).”
COA said the unresolved legal issues and inadequacy of the auditorial documentary requirements cast doubts on the legality and validity of the 25-year lease contract entered into by and between the UP, through the UPM-PGH, and the Mercado General Hospital, Inc. (MGHI), for the conversion and development of the PGH Dispensary historical three-storey concrete building into the FMAB.
See the rest here: http://tinyurl.com/32c9khm
3. The University Hotel (formerly PCED Hostel) as a special project under the UP System Administration, continues to operate as a separate and distinct entity since 1983 and the results of its financial position and operations, which reflected a gross income of P30.46 million in 2009, remained undisclosed or unreported in the System’s books of accounts thus, affecting the fair presentation of the University System’s consolidated financial statements.
See the rest here: http://tinyurl.com/3yoa366
4. The UP Diliman manner of recording income realized but not yet collected from its auxiliary and income generating activities did not conform with the usual accrual method of accounting, which is a norm. Instead, what U.P. does is to recognize income by recording it as Other Deferred Credits account instead of an appropriate Income account thus, overstating and understating respectively these aforementioned accounts by at least P17.59 million as of December 31, 2009.
This can lead to possible corruption known as “kiting”, because by understating actual income for a given year, then the understated income can be spent without the auditors looking for this money in bank balances or through receipts and vouchers, etcetera.
COA is recommending that the U.P. Diliman Administration require the Accounting Office to prepare a Journal Entry Voucher to adjust the identified erroneous credit made to Other Deferred Credits account, and to henceforth comply strictly with the prescribed government accounting system.
5. The 2009 Consolidated Audited Annual Report (CAAR) of COA also pointed out that the balances of Cash in Bank Local Currency-Current Accounts and Savings Accounts (LCCA & LCSA) of P152.48 million of U.P. Manila and Visayas and Foreign Currency Account of $187,674.61 of U.P. Manila were misstated due to unreconciled differences between the books and bank balances amounting to P131.90 million and $104,809.07 respectively, due to the failure of the Accounting Division to prepare and update the bank reconciliation statements (BRS).
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/contnuation-of-balances-of-cash-in-bank.html
6. The six UP units/campuses failed to allocate at least 5% of their CY 2009 approved budget for the Gender and Development Program, as required by law, resulting in inadequate promotion of gender-responsive governance to address gender issues and concerns of their constituents/sectors as required under Section 29 of the General Provisions of RA 9524 and Joint Circular No. 2004- 1.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/6.html
7. COA's 2009 CAAR repeatedly scores the outgoing U.P. administration for “lapses in internal control on the granting/liquidation of cash advances were observed in all of the UP campuses of which a total of P21.77 million unliquidated cash advances have been long outstanding for two years or more contrary to COA Circular No.97-002 dated February 10, 1997.”
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/7.html
8. 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.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/8.html
9. The UP Visayas-Iloilo, Tacloban, Baguio and Open University incurred expenses totaling P10.96 million, which either lacks the appropriate legal basis or in excess of allotments, contrary to Section 28, Volume I, NGAS Manual, thus overstating the expense account of the same amount.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/9.html
10. Other Payables account of 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, inadequate documentation and absence of a Subsidiary Ledger, rendering the account balance unreliable.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/10.html
11. Procedural lapses in the recording and control of inventories such as non-observance of Perpetual Inventory method and non reconciliation of the accounting and property records in the UP Los Baños, Open University and Mindanao cast doubts on the validity of the P46.70 million inventories and related expense accounts.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/11.html
12. The implementation of the UP Diliman ERDT program disclosed 127 unfilled scholarship slots, 20 incidents of voluntary and involuntary termination of scholarship grants and idle funds of P151.65 million 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.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/12.html
13. 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.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/13.html
14. The PPE accounts of the nine UP offices/campuses totalling P6.96 billion is of doubtful validity with a negative variance of least P506.09 million existing between the books and the Physical Inventory Reports, which was attributed to unrecorded reconciling items, incomplete or lack of inventory reports, and the absence of regular reconciliation of property and accounting reports/records.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/13.html
15. Recognition of payables was not based on actual claims for goods delivered or service rendered, as P68.43 million listed as payables in three UP offices/campuses were not found to be valid claims supported by sufficient evidence, contrary to Section 46 Par. 2 of PD 1177, and likewise overstating the expense and liability accounts at year-end by the same amount.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/15.html
16. The Electricity Expenses account of P6.32 of the UP System appeared is understated by P3.10 million as only P1.52 million was certified to accounts payable from the unpaid charges of P4.62 million due to inadequate monitoring and control of MERALCO bills of which processing and payment were allocated by office.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/16.html
17. 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.
See the rest here: http://diliman-diary-sidebars.blogspot.com/2010/11/17.html
(Editor's note: The remainder of this dispatch is still under construction and will be updated shortly. We apologize to our readers for the inconvenience. For readers who wish to read the report directly, we encourage them to refer directly to the 2009 COA report at: http://www.coa.gov.ph/Audit/AAR.htm.)