Thursday, May 10, 2012

A partial victory for transparency: 2010 COA Consolidated Audited Annual Report shows partial reforms on U.P. affiliated Foundations

by Chanda Shahani

Almost two years after the Diliman Diary broke the story on conflicts of interest in several University of the Philippines affiliated foundations, the Diliman Diary and its readers are at least now a witness to partial reforms already being undertaken by the University of the Philippines administration working with the Commission on Audit (COA) to address the problems.

The Diliman Diary story, dated June 20, 2010 and entitled Interlocking Directorates between the University of the Philippines and U.P.-based foundations present a compelling case of for intensifying and further scrutinizing financial audits of these foundations, says COA. The Diliman Diary digs further into the details and shows why. extensively detailed how U.P.-affiliated foundations were manned by by high ranking faculty members of several colleges, placing them in what COA called an "undue advantage" in its earlier reports from 2009 and spanning several years.

COA's 2010 Consolidated Audited Annual Report (CAAR) which covers the entire 2010 period, saw former U.P. President Emerlinda R. Roman in charge of the University of the Philippines System. U.P. President Alfredo E. Pascual was only sworn into office on January 31, 2011 as the 20th U.P. President by President Benigno S. Aquino III.

The 2010 CAAR of COA also criticized U.P. for a lack of an independent oversight body that would monitor how funds raised by its foundations would be disbursed and accounted for.  COA said this was problematic because there was a lack of transparency in the transactions of these foundations which were utilizing university facilities, personnel and the good name of U.P. itself in raising funds.

COA is calling for a formal Memorandum of Agreement between each U.P.-affiliated foundationand U.P. itself, with COA acting as the independentv oversight body. COA says that it is problematic for foundations to rely on external auditors since there may be bias since it is the foundations who will be paying the external auditors to prepare financial statements.

While external auditors would nominally be expected to point out foundation management oversight or excesses, thee is frequently a possibility of collusion between foundation management and external auditors, because the external auditors do not want to jeopardize their future contracts with these foundations, COA officials told the Diliman Diary.

However, U.P. has already taken active steps to inform the heads of units that no head of units may become a head of a foundation, and that faculty members will no only comprise a minority in these U.P.-affiliated foundations.

The COA report said that the Dean of the U.P. Diliman College of Business Administration (CBA) will no longer head the U.P. Business Research Foundation.

COA said that there are still other foundations that need to show proof of compliance and that this information will continue to remain in the pipeline.

The DIliman Diary will continue to cover this issue whenever there are any significant developments.

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