Republic of the Philippines

Commonwealth Avenue, Quezon City

State Auditor’s Report

The President
University of the Philippines
Diliman, Quezon City

Pursuant to Section 2, Article IX-D of the Philippine Constitution and pertinent

provisions of Presidential Decree No. 1445, we have audited the accompanying balance
sheet of the University of the Philippines as of December 31, 2009 and the related
statements of income and expenses and cash flows for the year ended. These financial
statements are the responsibility of the Auditee. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted state auditing

standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material misstatement/s. Our
audit included examining, on a test basis, evidence supporting the amounts and disclosure
in the financial statements. It also included assessing the accounting principles used and
significant estimates made by the Auditee, as well as, evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our
opinion.

As discussed in the Observations and Recommendations portion of the

Consolidated Annual Audit Report, exceptions are made on the following accounts:

The undisclosed or unreported result of the University Hotel’s financial position and
operations in the System’s books of accounts of P30.46 million;

1. The understatement of Cash in bank balances by P15.66 million due to non-

restoration of cash equivalent to unreleased checks amounting to P14.43 million
required under GAFMIS Circular Letter No. 2002-001 and the unrecorded on-line
collections of P1.23 million of the G6PD Confirmatory Test;
2. The mistatement of Cash in Bank Local Currency-Current and Savings Accounts
(LCCA & LCSA), and the Foreign Currency-Savings Account (FCSA) due to
unreconciled differences between the books and bank balances amounting to

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 P131.90 million and $104,809.07 respectively, for failure of the Accounting
Unit to prepare/update of the Bank Reconciliation Statements (BRS);

3. The lapses in internal control on the granting/liquidation of cash advances, that

resulted to a total of P21.8 million cash advances remained unliquidated for two
years or more contrary with COA Circular No. 97-002 dated February 10, 1997;

4. The doubtful validity of Inventories and related expense accounts of P46.70

million due to unreconciled reports/records of the Property and Accounting
sections and the practice of some campuses of directly charging to expense
account purchases of supplies, materials and other inventory items;

5. The doubtful validity of PPE accounts totalling P6.96 billion due to undetermined
negative variance of at least P506.09 million existing between the books and the
Physical Inventory Reports;

6. The undocumented payables of P68.43 million recognition of which is not based

on actual claims for goods delivered or service rendered;

7. The overstatement of Other Payable account by P686.50 million due to error in

recording income collections, misclassification of accounts, inadequate
documentation and non-maintenance of subsidiary ledger;

8. Irregular expenses totaling P10.96 million due to either lack of appropriate legal
basis or incurred in excess of allotments;

9. The understatement of Electricity Expense account 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;

10. The unreliable balance of Items in Transit account of P550.50 million as it

includes long outstanding charges amounting to P242.48 million; and

11. The overstatement/understatement of Other Deferred Credits and Income accounts

by at least P17.59 million due to the practice of recording income realized but not
yet collected to Other Deferred Credits account instead to an appropriate Income
account.

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 In our opinion, except for the effect on the matters discussed in the preceding
paragraphs, the financial statements referred to above present fairly the financial position
of the University of the Philippines as of December 31, 2009 and the results of its
operations and cash flow for the year then ended, in accordance with applicable laws,
rules and regulations and in conformity with generally accepted state accounting
principles.

COMMISSION ON AUDIT

SUCs/CHED Audit Group

30 August 2010