Thursday, December 9, 2010

Former National Treasurer and U.P. NCPAG Professor Leonor M. Briones on U.P.'s budget and COA's 2009 U.P. Audits

(Professor Briones at the NCPAG Library. 
Photo by: Chanda Shahani)

A total reliance by the University of the Philippines (U.P.) System on exclusive government funding is no longer realistic when the government itself is facing a PhP 300 billion deficit said Former National Treasurer and National College of Public Administration and Governance (NCPAG) Professor Leonor M. Briones in an interview with the Diliman Diary yesterday.

A former nominee for U.P. President, Professor Briones that a there will have to a maximization of the different properties of the university, but given the very intelligent but differing ideologies of segments of the U.P. System which has 1000 Ph.Ds and many more with advanced degrees in a total faculty population of 4,000, the new President of U.P., Alfredo E. Pascual will have to respect the various issues involved, including the historical antipathy to commercialization by many segctors within the U.P. System

Former President Gloria Macapagal-Arroyo committed herself to the construction of the Engineering and Science complexes which is why the budget became bigger. Now that the construction works are finished, then the budget reverts to its former status, ProfessorBriones said.

Former President Gloria Macapagal-Arroyo committed herself to the construction of the Engineering and Science complexes which is why the budget became big. Now that the construction works are finished, then the budget reverts to its former status.

She said that lead convenor in the Philippines of Social Watch their battle cry for U.P. was “to increase and not to restore the budget.”

She said that by way of analogy if you were the owner of a house, then it would cost so much to maintain it. But if you decided to build an extension of the house, then this would cost so much more and the overall budget would go up.

She said that the costs for maintaining the house or the expenses of U.P. fell under Maintenance and Other Operating Expenses (MOEE) and this hs not been removed but now that the house annex or in U.P., the critical works for new buildings have been completed, then it stood to follow that the overall budget would revert back to its original status.

The proposed budget as submitted to Congress by the Department of Budget and Management and which still remains in bicameral conference committee as of this writing and gives the U.P. System PhP 5.52 billion in 2011 as opposed to PhP 6.9 billion in 2010 and PhP 8.2 billion in 2009 (see: ). 

The crux of the debate centers on the interpretation of whether the PhP 1.39 billion decrease in subsidy from 2010 to 2011 really represents a decrease in budgetary allocations or not because critical capital expenditure requirements of the U.P. System have already been met. 

Professor Briones says the completion of the Science and Engineering complexes in U.P. Diliman strictly speaking meant that very critical works have already been capitalized. However, there would nevertheless still need to be an increase in U.P.'s budget, because the wherewithal needed to operate these new facilities was lacking.

Moreover other factors such as a constant deterioration of the real value of the peso, inflation, and the needs to fund U.P.'s other strategic initiatives for growth and to maintain its overall standards of excellence in an increasingly competitive educational environment both globally and locally necessitated an increase in U.P.'s budget anyway and this should still be funded by the national government she said.

No to increasing tuition fees for students but yes to maximizing U.P.'s land assets 

Professor Briones said that she was against the increase in tuition fees for students considering that U.P. was a national university and that 33% of the entire country still lived below the poverty line. Instead U.P., being a land grant university should utilize its existing properties to generate revenues related to academic work, such as research centers and housing for retired faculty to ensure a decent quality of life even if they are no longer teaching.

She said there were two models for asset maximization with Harvard University at one end and Thailand's Chulalongkorn University at the other end. Given that the government really doesn't have a lot of money with a current budget deficit of PhP 300 billion, Professor Briones said that in the long run she would like to see U.P. sourcing 80% of its budgetary requirements from other revenues (but not including tuition fee increases), and 20% from the government.

She said that she preferred the Harvard model for revenue generation on revenues generated by state-of-the art research and other facilities driven by the expertise of its faculties. She said that although some pundits had espoused the University of Chulalongkorn in Thailand as a model worthy of emulation given that the Thai university even had bars and hotels and other revenue generating activities which were less relevant within the context of a university environment.

In 2009 the COA's Consolidated Audited Annual Report (CAAR) of the U.P. System showed a summarized Sources and Uses of Funds statement for the entire U.P. System showing that in 2009 the subsidies from the National Government were PhP 6 billion, and other revenue was PhP 1.4 billion.

She called for a comprehensive land use plan for all of U.P.'s land assets. For example, she said that in Talisay City, Negros Oriental U.P. owned hectares of sugar land that was now generating revenue as a sugar research facility. Unfortunately, there were many more U.P. properties that were populated with informal settlers and the issue of maximizing revenues from these properties was still left hanging.

She said that when she was Chairperson of the Board of Siliman University it became possible to systematically increase the salaries of the faculty every year due to a comprehensive land use plan that resulted in additional revenues for Siliman University.

In comparison, U.P. also leases out the 37.5 hectare North Science and Technology Park, located along Commonwealth Avenue in Diliman where the U.P.-AyalaLand Technohub is located. She said that the original concept for the usage of this property, as hatched under former U.P. President Emil Javier was for the property to house big research institutions interfacing with the best scientific and engineering minds in the U.P. faculty backed up by U.P. graduate and undergraduate students.

Instead of this original vision being implemented what is on hand these days in terms of locators are low-end call centers who are even at the bottom-end of the food chain the outsourcing industries as these add the least value compared to knowledge process outsourcing locators or research labs who require higher-end technical, scientific and engineering talents that U.P. has.

Aside from land use, she said that from a revenue perspective, AyalaLand was making even more money by subleasing the property it was renting out from U.P. to higher-end restaurants and U.P. could have swung a better deal and should do so in the future with its other properties.

She said even though former U.P. President and now Senator Edgardo J. Angara had coined the term, “University of the Philippine System,” it was still a misnomer to regard the U.P. System as one entire organic entity with overlapping and redundant course offerings straddling the entire Philippine archipelago.

The U.P. System is actually made up of seven constituent universities serving their geographic areas of jurisdiction with particular strengths which is why it would be a mistake to only have a department or Institute of Biology or other foundation course in only one constituent university as thiis base o knowledge would be needed no matter what was the area of specialization in life sciences, for example.

She said that while U.P. Diliman had the best public management program in NCPAG, there was still a need to have this program in the other constituent universities, many of the faculty of whom come from NCPAG anyway, she said.

“We should be looked at as different universities without any redundancies,” she said of the constituent universities comprising the U.P. System.

The great challenge, she said is for all the constituent universities to pursue the development and improvement of quality graduate education programs .

You should also bear in mind that there is a big difference between public institutions versus private instutions. While the intellectual expectations and standards are similar in public institutions such as U.P., the very public character of U.P. creates less freedom of movement, she said.

She said that for example for U.P. to become a more flexible institution, Faculty salaries had to become more competitive if you want to retain its quality faculty.

The evolution of university-affiliated foundations and the need to remove conflicts of interest 

Professor Briones said that as a natural consequence, foundations evolved in order to augment the incomes of faculties in such a way that no resources were siphoned off from the coffers of the state.

She said that even Congressmen and Senators put up their own private foundations because of the great bureaucratic restrictions placed upon expenditures of funds coming directly from the National Government’s budgets. “Even honest Congressmen with the best intentions in the world to find imaginative ways to help their constitutents put up foundations inorder to maximized their freedom of movements,” she explained.

But she also said that her long experience as an administrator in U.P. demonstrated to her that U.P. faculty members who were administrators who simultaneously headed foundations such as the U.P. Foundation did so honestly and should be given the benefit of the doubt.

“Malicious minds can impute bad motives into structural deficiences in the system” which inherently create conflict-of-interest type situations, she said. However she said while she did not believe that U.P. officials were benefitting from these, it was still important to remove the conflict of interest by requiring that the U.P. President or official heading any of these university-affiliated foundations not be allowed to do so “for structural reasons because the temptation is always there.”

Professor Briones referred to Diliman Diary reportage on the issue, including a Diliman Diary report last November 5, 2010 ( which quoted the Commission on Audit's 2009 Consolidated Audited Annual report which criticized the current U.P. Administration for tolerating the existence of university-affiliated foundations that were headed by ranking U.P. officials which created undue advantage

She added that the COA CAAR of 2009 showed that in 2009 the U.P. System had assets of PhP 36 billion and liabilities of PhP 13 billion and so in the balance sheet the remaining equity of the government owned U.P. System was PhP 23 billion which seemingly represented a lot of money.

Fortunately she said that former College of Business Dean Jaime Laya who was a Department of Budget and Management Commissioner worked out an arrangement with COA when she was Secretary to the Commission on Audit which allowed U.P. to keep its unused income instead of it reverting back to the National Treasury.

Does U.P. Have Lots of Money? NOT.

Professor Briones showed the Diliman Diary the consolidated financial statements of the U.P. System derived from COA's 2009 CAARs (to download these, please click: and pointed out areas that she thought were troubling. "We have to improve and respond to these findings. Dapat huwag pabayaan," she stressed.

"For example, Senate Finance Committee Chairman Franklin Drilon thinks that the U.P. System has lots of money, because if you look at the ending cash balance of the 2009 statement of cash flows, the figure is positive PhP 12 billion," she said.

"What Senator Drilon did not consider is that most of this money is already programmed for legitimate university expenses and is therefore already spoken for," she said.

COA's scathing criticisms of U.P.'s multi-year refusals to allow the opening up of the books of university-affiliated foundations to COA oversight adds to the impression that U.P. is rolling in easy money from private donations and other funding when it is in fact not. However, U.P. would make its case stronger with DBM and Congress if there were fewer highlighted findings from COA, she said.

Professor Briones also pointed out to COA's report about the operations of the University Hotel in U.P. Diliman which had a gross income of PhP 30 million in 2009. Unfortunately, other details such as net income were not available because the U.P. Administration has not followed COA's previous year's recommendations to submit the financial reports of University Hotel operations for consolidation in the U.P. System books.

"It was important in the interests of oversight, for the concerned authorities to have access to the contract between the University Hotel and the U.P. Administration," she said.

She also pointed out to the following items from COA which tended  to show that the U.P. System was not exercising good financial management:

  • PhP 151.65 million in unutilized scholarship grants in 2009.
  • In the 2009 U.P. System Balance Sheet, while PhP 36 billion in total assets might look good, a deeper analysis showed that there was PhP 445 million is accounts receivable, which meant that the U.P. System as a whole was not doing a good enough job in collecting money owed to the System.
  • Unreconciled book and bank balances (U.P. System wide)
  • While total Property Plant and Equipment might show a hefty PhP 24 billion in 2009, in reality much of this equipment may or may not be in good shape and this was an uknown precisely because updated inventories of these assets did not yet exist.
"We have to be very careful on the accounting side," Briones said if U.P. is to successfully make its case with the national government for an increase in its annual budget.

(With reporting by Chanda Shahani)

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