09-UP09 Part2-Observations and Recommendations

OBSERVATIONS AND RECOMMENDATIONS
I. Efficiency and Economy Audit
A. Unreported/undisclosed results of the University Hotel’s (UH) operations
The UH, 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/unreported in the System’s books of accounts thus, affecting
the fair presentation of the University System’s consolidated financial statements.
1. The UH, formerly the Philippine Center for Economic Development (PCED),
was donated to the University of the Philippines (UP).
2. The Deed of Donation was executed between the PCED and the UP through its
former President, that took effect on June 10,1983. It involved the conveyance of
assets worth P14.6 million including the Hostel building valued at P10.99 million, but
incorporating therein some conditions, that include among others,” that the Donee
assumes any and all the liabilities of the PCED Hostel as shown in the balance
sheet, including certain contingent liabilities…”
3. In view of such donation, the UP was vested with the ownership, management
and control of the hotel and its operations. However, its management’s right and
privileges were conferred to the Board of Overseers (BOO) created by the University
President under Administrative Order (AO) No. 108 on July 14, 1983, as reaffirmed
in Section 2 of AO No. FN-03-56 dated October 2003.
4. The UH continued to operate under the name and authority of UP but

apparently as a separate and distinct entity with a separate books of accounts. In
effect, the results of its operations were not publicly disclosed/reported in the
University System’s books of accounts.
5. The audit disclosed that the UH financial and operation reports were never
recorded in the University’s books since 1983 despite the previous years’ audit
recommendations for management to take appropriate action to consolidate in the
University’s books of accounts the result of the UH operations as well as its financial
condition.
6. For CYs 2009 and 2008, the UH had reported a gross income from operations
of P30,457,660.00 and P25,931,701.00, respectively, but these were not reflected in
the UP System’s books due to the present set up.
7. The UP President 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
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its current situation as well as the University’s needs and responsibilities. The report
was due in July 2007, however, to date we have not been informed of the committee’s
report, if any.
8. While the efforts exerted by the management and staff of the UH for the
maintenance, development and continuous operation of the same are commendable,
however, these activities must be governed by applicable government rules and
regulations, specially the preparation of required monthly and year-end financial
reports, which have to be consolidated with the UP System financial reports.
9. We therefore reiterate our previous recommendation that management

require the BOO to submit the financial reports of the UH operations for
consolidation in the books of the University System. Further, the UH
monthly/year-end financial reports and supporting documents required under
government rules and regulations should be submitted regularly to the
Commission on Audit (COA) for audit purposes.
10. Management commented that the University faithfully implemented AO 108

issued on July 14, 1983, as in :
o “Section 1- Creation and Composition. There is hereby created a Board of

Overseers whose compositions shall not exceed 7. They shall serve at the
pleasure of the President.”
o “Section 3- Income of Hotel. The Board shall recommend to the President the
amount or percentage of income that shall be remitted regularly to the
Faculty Development Fund.”
o “Section 5- Submission of Reports. The Board shall submit a quarterly report

to the President through the Vice-President for Planning and Finance. It shall
submit a report on the disposition of the Hostel and such other benefits and
privileges which it may deem appropriate.”
11. The Audit Team would like to stress that the AO 108 was issued in the
meantime that management has not yet come up with a final plan on what to do with
the donated property, so as not to interrupt the Hotel operations. Further, more than
20 years had passed, but the succeeding administrations did not bother to introduce
possible amendments to the said AO 108 to address the issues on management,
operations and financial reporting. Any law, order or issuance may be subjected to
possible amendments when, during the implementation period, provisions therein
become irrelevant or unnecessary or are no longer sufficient to address subsequent
changes or events.
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B. Absence of standard qualification requirements for appointees to the BOO
positions
AO No. 108 dated July 14, 1983, creating the Board of Overseers to manage the
University Hotel, and giving its management the power and control, did not clearly
specify the qualification requirements of the appointees to the Board that will
standardize criteria for eligibility requirement and will govern future selection and
appointments to the Board.
12. The UH, since its construction and operation under the PCED and until the time
of its donation to the UP in 1983, is a government property. The corporate nature of
its function and operation does not change the fact that it is a government property
subject to existing applicable rules and regulations of the government.
13. AO No. 108 creating the BOO as appointed by the President had vested to the
Board full powers and control of the UH operations as provided in Section 2 thereof,
to wit:
a. Oversee and supervise the operation of the PCED Hostel;
b. Undertake or commission studies designed to improve the management

and operation of the PCED Hostel and the possible terms in the event of lease
or other arrangements;
c. Promulgate rules and regulations regarding the use of the facilities, the
hiring, dismissal and the salaries of its personnel;
d. Schedule of prices of foods and services of the Hostel, etc. which shall
take effect upon the approval of the President;
e. Enter into contracts in matters relating to the operation and management

of the Hostel;
f. Enter into loan agreement upon the recommendation of the Vice-President

for Planning and Finance and the approval of the President;
g. Determine the name of the Hostel for approval of the President;
h. Recommend to the Presidential Committee on Campus Planning and

Development necessary improvements within the vicinity of the Hostel; and
i. Performs such other powers and functions as may be assigned to it by the

President.
14. The foregoing powers and functions vested to the BOO more than 20 years ago
gave the Board full power and control over the operations of the UH. It was
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observed that the UP System management had not actively participated nor got
involved in the UH’s operations except to acknowledge the 2% share of income it
remitted to the System for the Faculty Development Fund.
15. The functions given to the BOO covers all vital management and control
functions, therefore, it is desirable if the appointees to the Board pass through specific
qualifications criteria that will at least consider the expertise, relevant trainings,
employment status and tenure of office to standardize eligibility criteria and
encourage transparency in the selection process. Moreover, this is to insure proper
accountability, responsibility and liability for the management of government funds
and property.
16. We want to stress that we are not undermining the capabilities of the present
members of the board, as we acknowledge their competence in turning the Hotel to
what it is today. But there is a necessity to establish written or formal rules and
regulations with regard to qualification, selection and appointment to insure that
future appointments will be guided properly and will be based on established
standards.
17. We recommended that the UP President introduce amendments to the AO

No. 108 to clearly establish proper accountability and responsibility of the UH,
and to establish standard rules on or criteria for the qualification requirements
of the members of the BOO.
C. Inadequate UP System Guidelines on UP-affiliated foundations
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.
18. Section 1, Article XI, of the 1987 Constitution provides that:
“Public Office is a public trust. Public Officers must at all

times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty and efficiency, act with patriotism and
justice and lead modest lives.”
19. In addition, Section 63 of Presidential Decree (PD) No. 1445 reads as follows:
“Except as may otherwise be specifically provided by law or

competent authority all moneys and property officially received by a
public officer in any capacity or upon any occasion must be accounted
for as government funds and government property. Government
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property shall be taken up in the books of the agency concerned at
acquisition cost or appraised value.”
20. The University, in compliance with the previous audit recommendations on the
UP- affiliated foundations, issued a “Guidelines for Recognition of the UP-Affiliated
Donor Organizations” with the following information:
a. General Principles
b. The Need for Guidelines
c. Criteria for Recognition
d. Partial List of Foundations Generally Recognized by UP as Donor
Organizations
21. Moreover, in June 2009, the University Vice President for Development shared
with the Audit Team a checklist/matrix of information gathered from monitoring of
the UP-affiliated foundations. The checklist summarized the submissions received
from the different constituent universities and their colleges concerning their affiliate
foundations, with information such as date of registration with the Securities and
Exchange Commission (SEC), donee status, officers, assistance to the UP and
financial data as of a given year. Below are some of these foundations in the UP
Diliman and the UP System:
University/College Foundation Officers

UP System UP Foundations, Inc. Not indicated
UP Diliman
College of Business UP Business Research 11 in Board, mostly
Administration Foundation alumni, with Dean as
Executive Director
College of Mass Comm. UP College of Mass. Com. 15 trustees, 6 ex officio
Foundations from UP
College of Science Diliman Science Research 7 trustees, Dean as
Foundation chairman
College of Engineering UP Engineering Research and 15 trustees, 4 from UP
Development Foundation ex-officio
National College of Public UP Public Administration 11 trustees, 6 must be
Admin & Governance Research and Extension Service NCPAG faculty
Foundation
School of Labor and Center for Labor Education 15 trustees, 3 ex officio
Industrial Relations Advocacy Research and from UP-SOLAIR, Dean
Development as Executive Director
Institute for Small-Scale Small Enterprises Research and 15 trustees, 3 ex-officio
Industries Dev’t Foundation from UP, ISSI Director
as Executive Director
College of Social Science & Social Sciences and Philosophy 15 trustees mostly CSSP
Philosophy Research Foundation faculty
Center for Women’s Studies UP Center for Women’s Studies 15 trustees mostly UP
Foundation faculty
Statistical Center UP Statistical Center Research 7 trustees mostly UP
Foundation faculty
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University/College Foundation Officers
School of Urban and UP Planning and Development 8 trustees mostly UP
Regional Planning Research Foundation Inc. faculty
College of Arts and Letters UP College of Arts and Letters 15 trustees mostly UP
Foundation faculty
School of Economics UP Economics Foundation, Inc. 9 trustees mostly UP
faculty
22. 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.
23. 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.
24. Although these Foundations are registered as private institutions, by the nature
of its creation, function and purpose, the inclusion of the abbreviated word “UP” in
their registered name and using the UP premises as their place of business, however,
manifest a conflicting arrangement and raise questions on their legal status as a
separate and distinct entity from the UP, which is a government or public entity by its
creation and mandated functions.
25. Moreover, the issue on monitoring and transparency of the Foundations

programs/projects/activities and fund sources that should be regularly reported to the
University has not been addressed in the guidelines. The absence of an independent
oversight body to monitor the affairs of the Foundations would mean giving them full
discretion to handle funds supposedly intended for UP as the primary beneficiary,
including the generation of revenues without proper reporting and disclosure.
26. We recognize the Foundations’ support and concern to the different activities
and programs for the improvement and development of the University in general and
the respective Colleges in particular. However, for transparency and accountability,
and for the information and protection of the concerned beneficiaries or recipients,
proper financial accounting and reporting should be made by these institutions to the
UP System.
27. 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,
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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 for and
reported to the UP System management and be subjected to the COA review,
verification and audit.
28. Management commented that it will address the conflict of interest issue, such
that it will inform the foundation that:
• No head of unit will become an officer of the foundations; and
• Faculty members of the unit serviced by the foundations should comprise

only a minority of the Board Membership.
D. Non-compliance with the Terms and Conditions of the Contract for Chemicals
and Reagents
At the UP Manila, the P4.3 million worth of 72 laboratory reagents delivered with
Lot No. 187, which was not from the same Lot No. 185 previously delivered kits
and with less than a year shelf life, were inconsistent with the terms and conditions
of the contract, which may adversely affect the laboratory test performance.
29. Article 2 of the Supply Contract entered into by and between the UP Manila
and Lifeline Diagnostics Supplies, Inc., for the purchase of the Newborn Screening
Laboratory’s reagents Neonatal Phenylketonuria (PKU), 2000T, provides the
following provisions:
“ARTICLE 2. DELIVERY:
2.1 The expiry date of the reagents shall be at least one year from the
date of each staggered delivery.
2.2 The delivery shall be the same lot number with the previous
delivered kits.”
30. The foregoing provisions were the result of the end user’s justification to
ensure that the reagents will be from the same lot number, which is critical in
ensuring consistency of test performance.
31. The results, however, of the inspection conducted by the COA Technical Audit
Specialist based on the delivered laboratory reagents revealed non-compliance with
the aforementioned contract provisions as follows:
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a. The 2nd delivery of 72 kits amounting to P4.3 million under Charge
Sales Invoice No. 012204 dated August 7, 2009, with Lot No. 187 was
different from the 1st delivery Lot No. 185.
b. Expiry date of the Elution Buffer is March 31, 2010, which is less than
a year from the August 7, 2009 delivery date.
32. In view of the foregoing conditions, the effects would be as follows:
a. The inclusion of one box of Elution Buffer is free of charge for every
order of one kit MP Neonatal PKU, 2000T- Biorad. However, when
the diluents expire on March 31, 2010, additional expense for the
replacement of the expired Elution Buffer will be incurred; and
b. In accepting deliveries of reagents with different lot numbers, the end-

user may prepare another laboratory test to determine the control
standards, thus, a waste of time and reagents. This may also adversely
affect the test performance for the Newborn screening.
33. Further, review of the Inspection and Acceptance Report (IAR) dated August 7,
2009 and its supporting documents disclosed the following deficiencies:
a. The deliveries were accepted not by the end-user but by the Institute of
Human Genetics (IHG) Administrative Officer but approved by the
management inspector;
b. The date of approval of the Supply Contract was not indicated; and
c. The delayed issuance of the Notice of Award and PO to the Supplier

ranged from 64 to 68 days. The Notice of Award was dated March 19,
2009 but the Supplier receipt was May 21, 2009; while the date of the
PO was March 20, 2009, and the Supplier’s receipt was on May 26,
2009. Likewise, the date of the 1st delivery was on May 26, 2009,
which was 25 days delayed from the first week of May 2009 delivery
as indicated in the Supply Contract.
34. The delayed receipt of the Supplier of the aforementioned documents reflect
the inefficiency of the offices concerned, which also resulted in the delivery of the
items beyond the required schedule; and may adversely affect the operation of the
IHG.
35. Moreover, the disbursement voucher was not submitted to the Auditing Unit for
pre-audit, contrary to the provisions of Section 4.5.3. of the COA Circular No. 2009 –
002 dated May 18, 2009, which provides that:
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“First and last payments of contracts entered into through any of
the various modes of procurement involving an amount of at least P2
million for national government agencies, government-owned and/or
controlled corporations, cities within Metro Manila, other highly
urbanized cities and first class provinces, P1 million for provinces/cities
below first class, and P 500,000 for municipalities, shall be subject to
pre-audit….”
36. We recommended that management:
• Require the end-users and its Technical Inspector to ensure that all
deliveries made by the Suppliers are in conformity with the terms
and conditions of the contract/purchase order/notice of award.
Indicate in the IAR any deficiency noted in the delivered items for
appropriate action of the concerned officials;
• Immediately release the Notice of Award and the PO to the Supplier;

and
• Ensure that transactions covered by the COA Circular No. 2009 – 002
on pre audit are submitted to the Auditor prior to payment.
Transactions or claims covered by the Circular but not submitted
for pre-audit, shall be a ground for initiating administrative
disciplinary action, without prejudice to the disallowance of the
transactions in post audit, if warranted.
37. Management commented that the inventories were consumed before any
component had reached the expiry date.
E. Inadequate liquidation reports on the Department of Social Welfare and

Development (DSWD) fund transfer of P2.3 million
The submitted documents for the liquidation reports of the DSWD fund transfer
amounting to P2.3 million to support the use of the endowment fund for the DSWD
indigent clients treated at the UP-PGH failed to establish that only the deserving
patients availed of the hospital services.
38. COA Circular No. 94-013 dated September 1994, which provides the rules and
regulations on the grant and utilization of funds transferred to implementing
agencies, states among others that:
“4.1 The Source Agency (SA) shall enter into agreement with
Implementing Agency (IA) for the undertaking by the latter of
the project of the former. The agreement shall provide for the
requirements for project implementation and reporting.”
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“4.8 The IA Auditor shall audit the disbursement out of the trust
accounts in accordance with existing COA regulations.”
“8.3 Issue separate Certificate of Settlement and Balances (CSB)

and Credit Notice (CN) for the trust account and furnish the SA
Auditor with a copy.”
39. The DSWD transferred to the UP PGH P6 million on May 7, 2007, as an

endowment fund to cover the expenses for medical procedures and medicines of the
DSWD indigent clients.
40. To avail of the medical services, patients have to submit pertinent documents
required in the MOA between the DSWD and the UP PGH on the use of the DSWD
fund.
41. As a procedure, the Accounting Services Division in coordination with the

PGH-MSS furnishes the DSWD on a monthly basis, the name of clients who availed
of the medical assistance during the period accompanied by the acknowledgement
slip signed by the client and attested by the PGH Social Worker.
42. The audit of the liquidation reports for 1,819 patients with P5,642,933.63
charged to the endowment fund for the period October 1, 2007 to December 31, 2008
disclosed inadequate documentation of about 40 percent or 730 patients with a total
charge of P2,346,645.21 as follows:
Lacking Documents
No. of Letter of PGH Social Case Medical ID or Barangay
Patients Authority Referral Summary Abstract Clearance
730 36 37 309 244 704
43. We cannot ascertain if the DSWD-funded services at the PGH were

implemented in accordance with the objectives envisioned of the project, due to
incomplete documentation.
• Require the Accounting Services Division and the MSS of the

Hospital to coordinate with the DSWD and the patients or their
relatives to immediately submit the required supporting
documents to avoid audit suspensions and delay in the succeeding
release of the DSWD endowment fund for indigent clients seeking
medical treatment at the UP-PGH; and
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• Ensure that the requirements set forth in the guidelines of the
MOA are complied with in the grant of medical assistance and in
processing claims of the DSWD indigent clients.
45. Management commented that the UP PGH Accounting and MSS Offices, in
coordination with the DSWD, were able to comply with the documentation
requirements and supporting papers needed in the pre-audit of the liquidation of the
DSWD fund. As of June 25, 2010, the amount with no sufficient documentations was
reduced from P2.3 million to P367,474.33. The hospital is hopeful that the 100%
liquidation will be made within the year 2010.
F. Excess Hospital Fees of P202,336.99
Errors in computation and/or classification of the UP-PGH patients’ Philhealth

benefits resulted to refunds of excess hospital fees totalling P202,336.99 caused by
the conservative benefits assessment and the absence of the International Code of
Diseases (ICD) – 10 Code in the Philhealth Claim (Form 2) of the attending
physicians.
46. Rule VIII of the Revised Implementing Rules and Regulations (IRR) of the
National Health Insurance (NHI) Act of 1995 provides that Philhealth may deny or
reduce any benefit when the claims are attended by any of the following
circumstances: a) over- utilization and under-utilization of services; b) unnecessary
diagnostic and therapeutic procedures and intervention; c) irrational medication and
prescriptions; d) fraud; e) gross unjustified deviations from currently accepted
standards of practice and/or treatment protocols; f) inappropriate referral practices; g)
use of fake adulterated or misbranded pharmaceuticals, or unregistered drugs; or, h)
use of drugs other than those recognized in the latest Philippine National Drug
Formulary (PNDF) and those for which exemptions were granted by the Board.
47. The audit of the 361 refunds to patients from January to March 2009 amounting
to P1,257,856.93 disclosed 35 refunds with erroneous computation and/or
classification of Philhealth benefits amounting to P202,336.99. These refunds were
either due to the Billing Section’s over- or under-charging of hospital room rates, cost
of medicines, laboratory and supplies, and operating room/delivery room caused by
the Billing Section’s desires to at least minimize hospital Philhealth claims’ reduction
or denials by resorting to the most conservative computation and/or classification of
patients’ Philhealth claims without proper coordination with the Philhealth.
48. Another cause in the difficulty of the Billing Section to determine the correct
classification of the diseases of the patients for purposes of assessing their Philhealth
benefits was due to the absence of the ICD – 10 Code in the Philhealth Claim -Form
2 which were supposed to be filled – up by the attending physicians. Instead of
returning the Philhealth Form without the ICD – 10 Code to the attending physician,
the Billing Section took the initiative to classify the disease in its less complicated
stage with lesser Philhealth benefits for the patients.
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49. The erroneous computation and/or classification of Philhealth benefits affects
the efficiency of the fiscal services due to processing of claims for refunds and
additional cost of office supplies, notwithstanding the burden to the patients and/or
their family members in coming back to the Hospital just to claim for these refunds.
• Require the Billing Section to coordinate from time to time with

the Philhealth and to verify the accuracy of information given by
the patient which could easily be done if the hospital can have an
on-line communication with the said office; and
• Require the attending physician to indicate the ICD – 10 Code of

the patients in Philhealth Form 2 to guide the Billing Section in the
classification of hospital benefits due to the patients.
51. Management commented that there are various reasons why there are refunds,
some of these are as follows:
o Late submission of PhilHealth papers;

o ICD is not done by the doctor, and
o Excess hospital deposit of the patient confined.
52. The refund, as further commented, maybe minimized but may not be totally
eliminated. It may be partly the fault of the patient, hence, the Billing Section may not
be totally blamed for refunds. In any case, the hospital will find ways to reduce the
number of refunds. All the other recommendations of COA are noted for compliance,
if feasible, especially the on-line verification with PhilHealth.
G. Inadequate implementation of Gender and Development (GAD) Program
The six UP units/campuses failed to allocate at least 5% of their CY 2009 approved

budget for the GAD Program resulting to 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.
53. Section 29 of the General Provisions of RA 9524 (General Appropriation Act

(GAA) of 2009) provides that government agencies shall formulate a GAD Plan
designed to address gender issues within their concerned sectors or mandate and
implement applicable provisions in the Convention on the Elimination of All Forms
of Discrimination Against Women, the Beijing Platform for Action, the Millennium
Development Goals (2000-2015), the Philippine Plan for Gender – Responsive
Development (1995 – 2025), the Framework Plan for Women and the Ten – Point
Legacy Agenda of the Macapagal – Arroyo Administration. It also provides that the
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cost of implementing the GAD Plan shall be at least five percent (5%) of the agency’s
or local government’s total FY 2009 budget appropriations.
54. Joint Circular No. 2004 – 1 issued by the Department of Budget and
Management (DBM), National Economic Development Authority (NEDA) and the
National Commission on the Role of Filipino Women (NCRFW) provides among
others, that:
Section 4.4.1 Agencies shall formulate their annual GAD plans and budgets
within the context of their mandate and overall plans and
programs.
Section 4.4.3 The conduct of massive information, education and

communication campaigns on the gender issue/s being addressed
by the agency and on corresponding agency programs, activities
and projects shall be given priority in terms of budget allocation.
Section 4.4.4 GAD planning and budgeting shall be observed annually and
incorporated in all programming and budgeting exercises of
agencies.
Section 4.4.6 Department/agency heads shall ensure the implementation of the

annual GAD plan and the utilization of the GAD budget of the
agency including its attached bureaus and offices both at the
national and the sub-national levels.
Section 4.4.8 Agencies shall prepare their annual GAD accomplishment reports
for the previous year that contain actual accomplishments vis-à-
vis targets as well as the amounts utilized for the achievement of
such.
Section 5.5.1 Agencies shall submit their annual GAD plans and budgets to the
NCRFW for review and endorsement prior to the submission of
the agency budget proposal and submit to the DBM their
NCRFW-endorsed annual GAD plans and budgets along with the
agency budget proposals in accordance with the budget call.
55. The GAD budget allocation and program implementation of the six UP
campuses are as follows:
Unit/Campus Allocation Remarks
UP System P3,800,000.00 a. Allocation was only 1.74%, of its P218,106,000.00

total budget appropriations, a lot less than the
required 5% or P10,905,000.00 of the latter. More
could be done if the allocated budget was within
the required percentage to fully institutionalize the
GAD program to serve the envisioned
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beneficiaries.
b. The actual expenditures of P3,990,547.47 incurred
for the GAD implementation exceeded the budget
by P190,547.47 as the following reported activities
were undertaken though not planned:
• Teaching of basic and advanced ICT

courses to capacitate women and other
marginalized groups; and
• Strengthening linkages with other

government and non-government organizations
women’s group.
c. Budget and plan was not submitted to the NCRFW

for review and endorsement.
UP Diliman 3,938,280.00 a. Allocation for the GAD program was only

0.24% or 4.76% less of the required 5% or
P82,238,884.42 of its P1,644,777,688.38 total
budget appropriations.
b. Per 2009 Annual Report, the GAD activities

were focused on training, information, advocacy,
counseling services, and networking/partnership
building among the University Administrators,
Heads, Faculty Members, Students and partner
organizations, but the following GAD programmed
activities were unaccomplished as of year-end:
• Review, creation, production,

reproduction of information and advocacy
materials on gender - P 200,000
• Special Activities - P 120,000
• Research and monitoring the

progress of gender mainstreaming - P
1,350,000
c. The recorded accomplishments failed to
disclose the actual cost incurred for each program,
which is needed to evaluate compliance with the
budgetary requirements.
d. The budget and plan was not submitted to the

NCRFW for review and endorsement as a
procedural requirement under the law.
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UP-Manila/ 3,600,000.00 a. The GAD focal persons submitted to the Budget

PGH Office the FY 2009 GAD Plans and Budget, which
were incorporated in its budget proposal for the
same year that included a P3.60 million GAD
allocation. However, as only 31.93% or
P1.854 billion appropriation for CY 2009 was
approved out of the proposed P5.807 billion
budget, the UPM/PGH has to prioritize its funds
for the most important projects/activities of the
University, thus, compromising the implementation
of the GAD projects.
b. The GAD plan and budget was not approved by the

NCRFW prior to submission to the DBM of its
budget proposal.
c. For UPM, the GAD related activities were

seminars, training and film showings during the
2009 UP Manila Women’s Week with the theme:
“Women and Men United to End the Violence
Against Women and Children” costing P45,866.50
which was charged against Fund 164 -Revolving
Fund.
d. For UP- PGH, the Women’s Desk Unit conducted

Orientation on Violence Against Women, various
training/workshops and research, handled cases of
women survivors of physical and sexual abuse and
participated in events organized by other women’s
group to improve its network, with expenses
incurred of P47,644.63 charged against the donors
trust fund.
UP-Baguio a. The GAD focal person claimed that 70% of the

GAD related activities were implemented during
the year as shown in their Annual GAD
accomplishment report.
b. Due to the absence of an annual GAD plan and

budget endorsed by NCRFW there was no
assurance that the reported accomplishments were
GAD-related activities and part of the GAD
priority agenda of the government.
UP Los 100,000.00 • The amount appropriated for the GAD program

Baños was only P100,000.00 instead of the
64
P57,995,039.52 or 5% of their total appropriation

of P1,159,900,790.41. The amount was utilized by
the UPLB Gender Center.
Open • The amount appropriated for the GAD program

University was P48,488.30 instead of the P2,743,059.38 or
5% of the total appropriation of P54,861,187.63.
56. We recommended that management strictly comply with the existing GAD
rules and regulations.
57. Management commented, thus:
Unit/Campus Management Comment Audit Team’s Rejoinder

UP System • Approximately 80% of the
University’s budget is
classified as personnel
services representing
mandatory expenses for
salaries and benefits of
employees. Furthermore,
the University does not get
full cash release of its
budget and hence, there is
little room for incremental
budget for GAD activities.
• However, the University

conducts GAD activities
alongside its mainstream
operations. The University
does not discriminate on its
policies for admission,
recruitment, hiring,
scholarships and in the case
of PGH, the admission of
patients. The President has
even formed a President’s
Committee to study and
recommend guidelines to
implement the Magna Carta
of Women in the University
of the Philippines.
The UP Management will

endeavour to properly report its
GAD activities and submit
annual reports on the GAD plans
65
and budgets to the NCRFW.
UP Diliman UPD management expressed its The Audit Team recognized

respects to gender equality and Management’s support to
women’s empowerment by gender equality and women’s
recognizing that women and empowerment; however,
men enjoy the same status and management’s contention that
conditions and that they have P101,799,968.54 was actually
equal opportunity to realize their spent for the program in CY
potentials and contribute to the 2009 including the
development of UP Diliman, in P96,047,890.00 spent for the
particular and of the country, in salaries and other benefits of
general. This belief was evident women administrators may be
in UPD’s practice of supporting given due consideration if the
and sustaining the appointment activity/program was among
of women administrators in the proposed plans and
various management level and programs during the year and
key positions of different much better if this was
colleges and units of UP endorsed to the NCRFW.
Diliman. For CY 2009 alone, a Further, the activity was not
total of P96,047,890.00 was among those reported in the
spent for the salaries and other accomplishment report
benefits of women submitted for the current year
administrators. Thus, a total and likewise the reported
amount of P101,799,968.54 was gender-related conference
actually spent in CY 2009 for expenses covering the years
GAD-related programs and from CY 2007 to 2010.
activities, and is therefore more
than the required 5% or
P82,238,884.42 of the UPD’s
total budget appropriation for
CY 2009.
UP PGH The total IOB of PGH for CY

2009 is P1,638,014,000.0, hence
the 5% budget required for
GAD is P81,900,700.00. Per
report of the Budget Division,
the total allocation given to the
Department of OB-Gyne was
P103,587,611.96 which exceeds
the requirement. PGH is
therefore compliant with R.A
9524.
UP Baguio Management claimed that their However, verification from the

2009 annual GAD plans and memorandum dated November
budget had been submitted to 20, 2009 of the Director,
UP System for consolidation/ National Government Sector,
66
submission to NCRFW. Cluster A–General Public
Services I, COA, revealed that
UP was not included in the list
of agencies whose GAD Plans
and Budgets for FY 2009 were
endorsed by the NCRFW.
UP Los Baños According to the Budget
Officer, the amount is
augmented by the Project Funds
whenever the need for fund for
GAD activity arises.
UP Open University Management agreed with the

recommendation.
H. Unresolved legal issues and inadequacy of auditorial documentary

requirements on the 25- year lease contract of the Faculty Medical Arts
Building (FMAB)
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.
58. The All UP Workers Union, based on its preliminary analysis and evaluations
of the subject contract, raised an issue that certain provisions of the University
Charter (RA 9500), particularly Section 23 thereof on the “Safeguards on Assets
Disposition” may have been violated, hence, the contract is allegedly disadvantageous
and contracted with attendant irregularities.
59. Accordingly, the issue was submitted to the Department of Justice (DOJ) for an
opinion on whether the new requirements provided in Section 23 of the R.A. No.
9500, which took effect only in May 2008, or three years after the approval of the
FMAB Project, apply retroactively to the subject contract. The DOJ Secretary, in
Opinion No. 8 s, 2010, commented that the non-impairment of contracts clause as
claimed by the UP would not apply to the FMAB Lease Contract, or assuming it is
applicable, the non-impairment clause must yield to the police power of the state and
that there may be certain provisions in the Terms of Reference (TOR) which was
approved before R.A 9500 was passed that are no longer applicable or needs to be
revisited in order to be beneficial to all the parties involved.
To quote:
“Records would show that the University was in the middle of

negotiations when the UP Charter of 2008 was passed. No contract was
67
entered into, no agreement was yet in effect. It approved the renegotiated
terms of the contract months after the effectivity of the UP Charter of
68
2008. It was only at that time that the contract was perfected between
the parties. Hence, the non-impairment clause as claimed by UP, would
not apply.
Besides, assuming that the non-impairment clause is applicable,

UP’s contention would still not stand. In Oposa vs. Factoran, Jr (G.R.
No. 101083, July 31, 1993, 224 SCRA 792) the Supreme Court held that
the non-impairment clause must yield to the police power of the state.
Property rights and contractual rights are not absolute. The
constitutional guaranty of non-impairment of obligations is limited by
the exercise of the police power of the State for the common good of the
general public. In this case, the State makes it clear that the preservation
of UP property is of primordial concern which is the reason why in
passing the law, Congress deemed it fit to provide for safeguards in asset
distribution. This is more on the protection of the University itself and
its properties.
Moreover, it was pointed out that the TOR has been approved
long before the new law was passed, but since the project has dragged
on for years, the situation now may be different, there may be certain
provisions in the TOR that are no longer applicable or needs to be re-
visited in order to be beneficial to all the parties involved.
Lastly, we call your attention to Section 22 (f) of RA 9500 which

states that, “any plan to generate revenues and other sources from land
grants and other real properties entrusted to the national university, shall
be consistent with the academic mission and orientation of the national
university as well as protect it from undue influence and control of
commercial interests”. Provided, that such programs, projects or
mechanisms shall be approved by the Board subject to a transparent and
democratic process of consultation with the constituents of the national
university; xxx” (emphasis ours).
60. Further, Section 5 of Article 5 of the contract exempts the University, among
others, from any liability, loss or damage to persons and properties during the lease
period which is contrary with Section V A.1 Policies and Guidelines of the
Department of Health (DOH A.O. No. 2007 – 0021 dated June 6, 2007 on the
issuance of a Single License to Operate (LTO), quoted below:
“Section V A. 1 Policies and Guidelines provides, among others:
• Ancillary and other facilities that are located within the premises
of the hospital shall be included in the LTO.
• Sanctions for violations involving ancillary and other facilities,

regardless of the ownership, shall be borne by the hospital.”
69
61. Moreover, legal and auditorial review showed absence of the following
additional documents/information necessary to determine reasonable assurance of the
contract’s compliance to existing government rules to establish the validity and
regularity of the transaction:
a. Authority from the National Historical Institute (NHI) for the

conversion, rehabilitation and development of the PGH Dispensary
Building, a historical three-storey concrete building into the FMAB in
compliance with Section 5 of Presidential Decree (PD) No. 260 as
amended by P.D. No. 1505, which provides that:
“It shall be unlawful for any person to modify,

alter, repair or destroy the original features of any national
shrine, monument, landmark and other important historic
edifices declared and classified by the National Historical
Institute as such without the prior written permission from
the Chairman of the said Institute.”
b. As the contractual arrangement for the FMAB Project is under the

Build Operate and Transfer scheme, the approval of the Investment
Coordination Committee (ICC) of the NEDA pursuant to Section 2.7
of the IRR of R.A. 6957 as amended by R.A. 7718, which provides as
follows:
“Section 2.7 Approval of Priority Projects – The

approval of projects prosecuted under this Act shall be in
accordance with the following:
National Priority Projects – The projects must be part of the

Agency’s development programs, and shall be approved as
follows:
1. projects costing up to P300 million, shall be

submitted to the ICC for approval;
2. projects costing more than P300 million, shall be

submitted to the NEDA Board for approval upon
the recommendation of the ICC; and
3. negotiated projects shall be submitted to the ICC for

it to prescribe the reasonable rate of return prior to
negotiation and/or call for comparative proposals.
c. Financial and Technical Evaluation of the Negotiated Lease Contract is

required under Section 9.4 of the said IRR, which shall include among
others, assessment of the technical, operational, environmental and
70
financing viability of the proposal vis-à-vis prescribed requirements
and criteria/minimum standards;
d. UPM infrastructure/development programs and list of priority projects

published and provided to project proponents;
e. The UPM did not invite a Technical Officer from a concerned

regulatory body, two representatives from the private sector as non-
voting member and representative from the Coordinating Council of
the Philippine Assistance Program (CCPAP) as non-voting observer in
the Bids and Awards Committee (BAC);
f. Invitation to pre-qualify and bid was only published in the Philippine

Star and not in at least two newspapers of general circulation and in at
least one local newspaper of general circulation;
g. Information to bidders of the results of the BAC action/decision;
h. Bidders’ acceptance of criteria and waiver of rights to enjoin project;
i. Department of Environment and Natural Resources (DENR)

environmental clearance;
j. Notice to Proceed;
k. Insurance; and
l. Monitoring and Supervision Reports.
62. The foregoing conditions cast doubts on the legality and validity of the 25-year
FMAB contract of lease.
63. We recommended that management submit the aforementioned

information/documents requested for further review and evaluation as well as its
legal stand on the issues raised over the subject contract.
64. Management comment was forwarded to the UP System Administration

through the Vice President for Legal Affairs, copy furnished the Auditor. Since the
case was already referred to the COA Legal Office, management comment will be
forwarded to that Office for consideration.
I. Idle Funds of P151.65 million due to unfilled scholarship slots for Engineering
and Development for Technology (ERDT) Program
The implementation of the UP Diliman ERDT program disclosed 127 unfilled

scholarship slots, 20 incidents of voluntary and involuntary termination of
71
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.
65. Consistent with the Philippine Medium Term Development Plan (MTDP) and
the National Science and Technology Plan (NSTP) to address the immediate need of
Researchers, Scientist and Engineers (RSEs) with advanced degrees to make Science
and Technology work for Filipinos, the ERDT Program was approved by President
Arroyo in April 2007.
66. The Human Resource Development (HRD) is the main component of the
ERDT Program aimed to produce research graduates to enable the country to be
globally competitive. Relative thereto, a consortium was established among different
Universities identified to have the ability to absorb and produce masters of science
(MS) and doctors of philosophy (PhD) of traditional engineering, computer science
and agricultural engineering, in collaboration with the Department of Science and
Technology-Science Education Institute (DOST-SEI). Members of the consortium
are the following:
a. University of the Philipines-Diliman (UPD)

b. Ateneo de Manila University;
c. De La Salle University;
d. Mapua Institute of Technology;
e. Mindanao State University of Iligan;
f. University of San Carlos;
g. Central Luzon State University; and
h. University of the Philippines – Los Baños.
67. Generally, the program is expected to produce a critical mass of engineers with
advanced degrees who are equipped to do research and development (R&D) in order
to address the needs of the industries, R&D institutions and academe. It aims to raise
the level and increase the number of local research and other engineering activities
that will make the country globally competitive. Among the specific program
objectives are the following:
a. Implementation of research agenda aligned to the NSTP and MTDP;

b. Attainment of a critical mass of MS and PhD graduates (RSEs);
c. Upgrading of the qualifications of practicing engineers;
d. Accessible graduate education;
e. Upgrading of engineering colleges; and
f. Development of a culture of R&D.
68. The HRD scholarship program’s target applicants are the new engineering
graduates and engineers working in the industries and in the government. As such,
beneficiaries are entitled to actual tuition fee and other fees, research grant to be
released directly to the university, book allowance, thesis/dissertation allowance,
72
monthly stipend, and transportation assistance during the duration of their scholarship
grant.
69. The UPD thru the College of Engineering was designated as the lead agency in
implementing the Program having the highest concentration of PhD holders in an
engineering institution throughout the country. Thus, the DOST-SEI in its efforts to
decentralize the implementation of the ERDT program enrolled the services of its
Dean as the Project Director and is officially designated by the University President.
70. As the lead agency, UPD received the bulk of the funding and the available
scholarship slots for the HRD program. It had started the pilot run of the ERDT
program in SY 2007-2008 and had admitted for Local Scholarship alone, 55 MS and
19 PhD scholars during the initial year of implementation.
71. The audit of the scholarship fund showed that out of the P209,167,707.40 fund
received from the DOST-SEI, only P57,521,67.38 was disbursed as of December 31,
2009, leaving an unexpended balance of P151,646,340.02 at year-end, as follows:
HRD Scholarship No. of Balance as of December 31, 2009

Program implemented by Scholars
UP-Diliman enrolled Fund Released Disbursements Unexpended
to the Program made balance
I. Local Scholarship 221 P61,406,478.27 P34,173,500.90 P27,232,977.37
II. Sandwich Program 4 31,285,892.90 1,543,520.04 29,742,372.86
III. Foreign Phd 16 63,613,485.56 15,012,296.12 48,601,189.44
IV. Post Doctoral 1 14,000,000.00 2,458,154.07 11,541,845.93
V. Visiting Professors 19 14,224,425.31 3,593,440.79 10,630,984.52
VI. Visiting 2 24,637,425.36 740,455.46 23,896,969.90
Researchers
TOTAL 263 P209,167,707.40 P 57,521,367.38 P151,646,340.02
72. Likewise, it was noted that on the 3rd and last year of the three-year
scholarship program, only 263 or 67.6% scholars were enrolled out of the 389
allotted slots leaving 127 or 32.4% unfilled slots resulting to the unexpended balance
or idle funds of P151 million as of December 31, 2009. Information as to the number
of absorbed or admitted scholars during the three-year period is shown in the table
below:
HRD No. of available Unfilled

No. of Scholars
Scholarship scholar slots CY2007, scholarship
enrolled to date
Program 2008 & 2009 slots
I. Local Scholarship
a. MS 189 176 13
b. PhD 44 45 -
II. Sandwich Program 17 4 13
73
HRD No. of available Unfilled
No. of Scholars
Scholarship scholar slots CY2007, scholarship
enrolled to date
Program 2008 & 2009 slots
III. Foreign Phd 44 16 28

IV. Post Doctoral 28 1 26
V. Visiting Professors 43 19 24
VI. Visiting Researchers 24 2 23
Total 389 263 127
73. It was further noted that the scholarship contracts of 20 scholars were
voluntarily or involuntarily terminated for failing to meet the rigid requirements of
the program. These incidents likewise, resulted to unexpended funds and derailment
in the attainment of the Program’s objective. Consequently, the University faced the
problem of how to recover the amount of P3,429,929.74 already spent for the tuition
fees and allowances of these 20 scholars, as follows:
Scholarship No. of Amount spentto
Reasons
Program scholars date
MS 7 P616,911.50 Withdrawn
3 719,137.0 No show
2 0 Terminated
2 375,007.5 Disqualified
1 0 Suspended
190,183.0
0
281,289.5
0
PhD 2 269,653.0 Withdrawn
1 0 No show
1 292,551.0 No extension requested
1 0 Disqualified
276,089.5
0
409,107.7
4
Total 20 P3,429,929.74
74. Finally, on its 3rd year of implementation, only 23 scholars graduated at UPD
out of the 55 expected number for MS, and two for PhD graduates at the end of SY
2009, with an equivalent completion rate of only 40%. The reason why many scholars
failed to finish the course within the prescribed period was also attributed to the rigid
requirements of the course, especially in the preparation of the required thesis or
dissertation.
75. The foregoing condition, if not closely monitored, may result to the non
attainment of the Program’s objective to produce a critical mass of MS and PhD
graduates in the field of Engineering for national development and global
competitiveness.
74
76. We recommended that management closely supervise and monitor the
scholars in order to guide and assess early on their capability to cope with the
rigid requirements of the study to institute proper measures to prevent the
untimely termination of the scholarship contract. Further, slots must be
expediently filled up if still possible, or else return the unexpended or idle funds
to the source Agency.
75
77. Management agreed with the observation as stipulated in their reply dated June
7, 2010, but gave some explanations of the deficiencies as summarized hereunder:
• That the ERDT Program’s three-year run is from school year 2008-
2009 to school year 2010-2011. The school year 2007-2008 was just a
pilot run.
• That the remaining scholarship slots for UP Diliman are 87 MS and 12

PhD. Based on historical data, about 26 MS and 7 PhDs were accepted
last school year during the second semester. Thus, at the end of this
school year, 2010-2011, they would fulfill 80% of their target.
• The uptake in school year 2007 was quite low, due to the short period
between the approval of the program in April and the deadline for
application for their graduate programs. That they went to over 40
universities on several road shows in 2008, 2009 and 2010 to recruit
scholars and they feel confident that by the end of school year 2010-
2011, they will reach the targeted 708 local scholars.
• That when the ERDT Program was proposed, the UP College of

Engineering submitted a proposal to the University for a
corresponding increase in the number of faculty items and
administrative personnel and REPS items. But their request was
granted 2 years later than expected. As such, they could not send their
faculty members for foreign doctoral studies right away since they
were needed to teach their program.
• They realized difficulty in inviting Visiting Researchers to the

Philippines for various reasons, one of which is the security situation
in the country. Thus, they decided to decrease the number of slots.
• They have terminated some scholarships and had sent demand letters
to the scholars. That they cannot lower the standards of the UP College
of Engineering as this is the very reason why they are leading the
ERDT Program. As advised by the ERDT Program Advisory
Committee, they have enforced stricter admission requirements to
ensure that those who are accepted to the scholarship program have the
mental ability, and more importantly, the right attitude to finish their
program study.
78. The Audit Team considered management explanations on the matter, but
measures could have been earlier instituted if the program’s output/accomplishment
were closely monitored and deficiencies were immediately noted. Nevertheless, the
team acknowledged management commitment that they will reach the targeted output
on the targeted date, as it will keep track of the program’s implementation for the
remaining years.
76
J. Deficiencies on the collection of income and other receivables
Laxity in the control and monitoring of receivable accounts increased the risk that
the P230.97 million receivable accounts of the five UP campuses may become
doubtful, hence may deplete financial resources to finance programs and projects.
79. In view of the declining financial support from government, the University in
its desire to augment its subsidy for operations, ventured in income generating
activities such as lease of idle lands, facility, stalls and similar undertaking to sustain
its operations and generate additional resources to finance its projects.
80. Likewise, as an educational institution, it provides auxiliary facilities and

services to its administrative staff, faculty, and students either to generate income to
sustain and augment declining government subsidies or purely to provide services to
upgrade their working and school conditions and enhance their constituents’ physical
welfare and social well-being.
81. Further, Section 24 of the New Government Accounting System (NGAS)

Manual provides that Accounts Receivable is used to record the amount due from the
customers and clients resulting from services rendered, trading, business transactions
and sale of merchandise or property which are expected to be collected in the regular
course of business or over a definite period.
82. The accounting records of the five UP Campuses showed the following
uncollected receivables:
Campus Amount Remarks
UP Diliman P 4,295,326.50 Long outstanding Student Loans

UPM/PGH 192,926,666.77 Hospital Fees
Denied requests for relief from property
UP Baguio 278,450.18 accountabilities
Reneging Fellows
Additional:
UPV Iloilo 27,847,635.20 US$617,042.16
Lease of lots at Batan Mariculture
2,228,394.23 Station (BMS), Aklan
UPV Tacloban 3,401,602.81 Student Loans
Total P230,978,075.69
UP Diliman
83. A number of deficiencies were observed over the years of the Student Loan
Program’s implementation, which grants tuition fee loan and short term loan to
qualified students subject to specific conditions expressly provided in the application
77
form signed by the applicant and his/her guarantor. However, as of December 31,
2009, it appears that some of these deficiencies still exist, as follows:
• A discrepancy of P5,621,406.02 was noted between the Office of the
Student Scholarship Services’ (OSSS) schedule of unpaid student
loans totaling P21,461,321.50, and that of the Accounting Office’s
recorded accounts receivable balance of P15,839,915.48 for student
loans.
• The OSSS records disclosed a long outstanding loan accounts ranging

from two to more than ten years totaling P4,295,326.50. Although the
aggregate percentage of these as reported by the OSSS was very
minimal as compared to the percentage of collection, which is quite
remarkable it would eventually result to additional loss in the future, if
this deficiency cannot be properly addressed.
• The discrepancy can be attributed to inadequate reconciliation and

coordination between the two reporting offices, and the laxity in the
enforcement of existing policies as mentioned above have also
contributed to the accumulation of long outstanding accounts.
UP Manila-PGH
84. The audit of the billing and collection system of the hospital fees revealed a
total accounts receivable of P192,926,666.77, of which the herein weaknesses may
adversely affect the collection or recovery of said accounts and also the availability of
funds for the acquisition of the Hospital facilities and equipment:
• Out of the 1,005 UPM/PGH regular employees who acted as
guarantors, ten employees with guarantee letters for the total amount
of P901,054.24 were processed by the Billing Section without the
approval by the Deputy Director for Fiscal Services and signature of
the Chief Accountant but instead approved only by the DEMO III for
UP-PGH. The amount guaranteed was more than their three months
take home pay, with excess ranging from P22,000 to P146,000. While
hospital bill No. 268814 dated August 14, 2009 was without a
guarantee letter.
• The Accounting Division failed to fully implement the UP-PGH

Memorandum No. 98-145 in the processing of guarantee letters of 91
UPM/PGH contractual employees for hospital fees totaling
P1,712,455.79 as the memorandum requires that only regular
employees may guarantee the payment of patients’ hospital accounts.
The DEMO III approved the guarantee letters instead of the Chief
Accountant as required in the Guarantee Form.
78
• Uncollected hospital fees of P11,980.48 was due to the late submission
of hospital charge slips by the responsible cost center to the Billing
Section, and erroneous computation of room rates and Philhealth
deductions. The Billing Section prepared corrected statement of
accounts after the patients were discharged, however, the same were
not sent to the patients for collection of the additional charges.
• Unsettled hospital bills of 28 expired/deceased patients amounting to

P1,531,964.29 were not covered with approved Promissory Notes but
the provisional clearances were duly processed by the Billing Section
of the Accounting Division.
• Bills of 32 patients were deducted a total of P981,121.25 representing

the amount to be reimbursed by the PCSO, however, these claims
were not covered by approved Guarantee Letters issued by the said
funding institution. Out of the 32 patients’ bills, nine were just
supported by Individual Medical Assistance Program (IMAP) Record
Locator but without the locator number and two were just supported
by PCSO Resolution which was still conditional subject to the
patient’s submission of necessary documentary requirements and
availability of funds.
UP Baguio
85. The Other Receivables Report – Revolving Fund account showed receivables
amounting to P278,450.18 from accountable officers due to loss of property, which
have been outstanding from over six months to more than one year from the date the
Request for Relief from Property Accountability was denied.
86. Interview with the Chief, Accounting Office revealed that the accountable
officers concerned requested that payments will be made upon their retirement and
that the Chair, of Biology Department, College of Science, assumed the
accountability of one of the accountable officers for the lost VHS Player on May 23,
2006.
UP Visayas-Miag-ao, Iloilo
87. The uncollected receivables from reneging fellows of P27,847,635.20 and

USD617,042.16 accumulated from 1984 to 2007, and remained uncollected for over
24 years as management failed to strictly impose the following provisions under
Section 6.2.1 sub-paragraph a.3.b of the Faculty Manual:
“In case the Fellow does not fufill the return service
requirement, then s/he must reimburse the following to the University:
79
o All expenses incurred, plus an equity charge of 50% of the
total amount expended, and interest at the prevailing legal rate
at the time of the breach of contract or revocation of the
contract.”
88. While the lease of fishponds at Batan Mariculture Station (BMS) in Iloilo,
Aklan, revealed that:
o The BMS had 16 lots with a total land area of 78.8475 has. of which
50.4380 has. (13 lots) were rented out to the different lessees/sub-
lessees since August 31, 1993 to date, while 28.4095 has. (3 lots) were
utilized by the UPV for research and income generating projects
(IGP);
o Of the 13 lots leased, only one lot with an area of 5.7683 has. is
covered by a contract while the 12 lots are without lease contracts,
which caused the non-payment of rentals from the lessees amounting
to P2,228,394.23 from 1993 to 2009.
UP Visayas-Tacloban
89. The accounts receivable of P3,401,602.81 pertaining to various student loans

remained uncollected for more than three years, due to the absence of monitoring and
review. However, a total of P69,248.01 paid tuition fees was still included in the
account while P1,680 was recorded twice.
90. We recommended that management implement the following corrective

measures, thus:
UP Diliman
• Instruct the Accounting Office and the OSSS to regularly reconcile
their accounts and records to reflect in the books the actual
balance of the student loans receivable; and
• Verify actual status of long outstanding accounts and institute

appropriate actions or recovery measures for their collections.
Assess those accounts where collection is no longer possible, after
exhausting all the remedies available and exerting diligent efforts
to collect, to consider the possible write-off of these accounts.
UPM/PGH
• Require the Billing Section and/or concerned medical/laboratory
unit to carefully ensure that the correct rate is charged for medical
and/or laboratory services rendered to patients, taking into
consideration the Memorandum Orders pertaining to the increase
on medical and laboratory fees. Accordingly, it should send to the
80
patients concerned the corrected Statement of Accounts for
collection of additional charges;
• Require the responsible cost centers to submit the hospital

charges/charge slips to the Billing Section immediately;
• Require the Accounting Division to ensure that the Hospital’s

policies on the acceptance of Promissory Notes/Guarantee Letters
in fulfillment of the patients’ monetary obligations are complied
with and approved by the authorized officials. The approval of the
DEMO III for the Guarantee Letters should be investigated and
initiate appropriate sanctions, if warranted;
• Stop deducting from Hospital bills charges not covered by approved

Guarantee Letters from the funding entities and any violation
shall be investigated and appropriate sanctions shall be applied to
the erring personnel; and
• Send demand letters to patients/funding institutions with long

outstanding unpaid accounts to the Hospital. Refer to the
UPM/PGH Legal Office all delinquent debtors, for possible legal
action to collect unpaid Hospital bills. Acceptance of postdated
checks and/or collateral should be considered to ensure payment
of hospital bills.
UP Baguio
• Cause the immediate settlement by the accountable officers of the
amount of P278,450.18 representing the money value of the lost
equipment.
UP Visayas, Miag-ao, Iloilo
a. On the receivables from Reneging Fellows:
• Require the Committee on Reneging Fellows to strictly impose

the sanctions provided under Section 6.2.1 (a.3.b) of the UP
Faculty Manual as reiterated in Section 6 of the Local Fellowship
Study Leave Agreement and Section 7 of Foreign Fellowship
Study Leave Agreement;
• The Management to:
i. exert extra efforts to collect the financial obligations of

Reneging Fellows, which could be used by the University
in the implementation of other related programs;
81
ii. stipulate in the Fellowship/Scholarship Agreement that the
UPV official who recommended/approved the grant shall
have the primary obligation to ensure that the grantee will
fulfill his/her contractual obligations towards the University
after completion of the fellowship, otherwise, said official
shall be held jointly and severally liable for the financial
obligations arising from any breach of contract committed by
the grantee/fellow; and
iii. send demand letters to the reneging fellows and/or their

families at their latest known addresses requiring them to
settle their obligations.
b. On Lease of fishponds at BMS, Aklan
• Review the operation of the BMS and prepare the Lease

Contracts for each lessee in order that proper sanctions could be
imposed in case of any breach of contract that may be committed
by the parties involved to protect the interest of the University.
UP Visayas-Tacloban
• Require the Accountant to monitor and review extensively the cause
of the accumulation of the accounts receivable. Prepare Journal
Entry Vouchers to take up the necessary adjustments and issue
demand letters to students with long outstanding loans and unpaid
tuition fees. Withhold the Transcript of Records of the concerned
students unless they settle their unpaid accounts.

UP Diliman It was informed that the Office has The Audit Team appreciates
never been remiss in sending out a) the OSSC’s diligence in
memorandum to all colleges and sending out memorandum
units requesting students to settle and reminders to all
their obligations before the final
examinations or they should not be concerned, but such effort
allowed to register in the succeeding would have gain better
semester and b) reminders to co- results if evaluation and
debtors. monitoring as to compliance
were also performed.
82
UP PGH • The findings/observations of
COA were duly noted. The
hospital is now strictly complying
with PGH Memorandum No. 98-
145 regarding the approval of
hospital bills for salary deduction.
• The Billing Section of the

hospital has changed the manner
of treatment of PCSO guarantee
letters after the receipt of the
COA observation. The PCSO
GL is not deducted anymore from
the hospital bill, instead, it is
attached to the promissory note
signed by the patient/relative.
The patient is informed that in
case the hospital will not receive
payment from the PCSO, he is
still liable for the payment of the
hospital bill.
UP Baguio The VHS Player reported lost has

been replaced on February 10, 2010.
Meanwhile, appeal from the ASB
decision No 2009-062 dated June 3,
2009 for the relief from the
accountability for the loss of
government properties by Mr. Delfin
Tolentino, former Dean of the
College of Arts and
Communications, was submitted and
is pending consideration before the
Commission proper. A final
decision is being awaited based on
the letter of the COA Adjudication
and Legal Services Office dated
June 16, 2010.
UPV Miag-ao, The Chancellor convened the UPV

Iloilo officials concerned and resolved that
appropriate legal action be instituted
against the lessees to effect
collection of back rentals or to
enforce ejectment proceedings
against those whose lease contracts
have already expired, as well as
those who were identified as illegal
settlers.
83
UPV Tacloban The management agreed with the
recommendation.
84
K. Incomplete In-house Research Projects
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.
92. One of the ten-point plans in the UP President’s thrust is: “The UP: A National
University in the 21st Century” is “Strengthening UP’s position as the leading R&D
university in the country and eventually in the whole Asian Region”. An important
part of the mission of a national university is not only to transmit knowledge but to
discover new knowledge, art, and technology, through research.”
93. The Office of the Vice Chancellor for Research and Extension (OVCRE) is
mandated to layout plans, programs and activities that will respond to the research
needs of the different colleges of the UPV, work with, assist them in their research
proposals and initiate development of grant proposals that are interdisciplinary but
not limited to a single field and linkages which will enhance and bring in resources
for research.
94. Likewise, the OVCRE publishes research outputs regularly through abstract
publication, and the research-based papers in the UPV’s peer-reviewed journal: The
UPV Journal of Natural Sciences and Danyag (UPV Journal of Humanities and Social
Sciences).
95. A research contract is executed by and between the UPV Chancellor and the
researcher/s witnessed by the VCRE and the Dean of the respective college before a
research can commence. One of the stipulations in previous research contracts
requires that the proponent has one year to finish a research project with a maximum
of two years extension.
96. A perusal of the Inventory of UPV In-House Researches conducted from

January 2002 to December 2009 by different project leaders/researchers disclosed
that there are 112 internally funded researches with a total cost of P18,606,502.92 and
their status were as follows:
85
Status Quantity
No updates as of year end 44
On going 18
Terminated 16
Draft/final copies of terminal reports 14
Final draft reports 5
Progress reports 4
Awaiting copy of final report 1
Newly implemented 10
Total 112
97. Further, 61 research projects (exclusive of terminated researches) were not

completed despite the two year-extension granted to the proponents. Some of the
projects were already overdue for more than four years.
98. The interview with the OVCRE staff revealed that despite
reminders/memoranda sent by their Office to the faculty researchers, no action was
taken by the said faculty researchers.
99. On the other hand, the inventory of UPV In-house Research Projects for CY
2009 disclosed that 80 Research Projects with a total cost of P11,263,291.45 were
completed, of which the University through the OVCRE was able to publish only ten
or 12.50% of the outputs, excluding completed projects that were already published
in 2008. The low output defeats the University’s objective insofar as regular
publication of the research outputs is concerned and deprived the beneficiaries of the
benefits that could be provided by the research projects.
100. We recommended that the UPV, through the OVCRE, strictly implement
and closely monitor the research projects to ensure timely completion,
submission and dissemination of research outputs to target beneficiaries through
regular publication; and impose the legal sanctions stipulated in the contracts.
101. Management commented that remedies have been implemented such as:
o Frequent and regular issuance of reminders from the OVCRE until they
have submitted their output;
o No additional projects will be funded by the University to researchers
who have not complied with the required output of the existing on-
going projects; and
o Review of contracts to include sanctions on salary deductions of the
amount received in case of failure to deliver the required output.
86
L. Inadequate delivery of security services logistics
The UPV failed to require and monitor the security service contractor to provide
the standard logistics for its security guards as provided for under Section 23 of the
P3.08 million contract and Section V of the Terms of Reference, which affected the
efficient delivery of the security services to the University.
102. On November 3, 2009, a contract was entered into by and between the UP
Visayas, Miag-ao, Iloilo and Care Best International Security Services, Inc., Makati
City for the delivery of security services at UPV Iloilo City Campus; Marine
Biological Station (MBS), Aklan; BMS in Taklong, Guimaras; Brackishwater
Aquaculture Center, Leganes, Iloilo; and TRV Sardinella, Iloilo City Port in the
amount of P3,082,341.00.
103. Section 23 of the contract provides that:
• upon execution of this CONTRACT the AGENCY shall make

available the following for the use and/or proper implementation of the covenants
herein:
A.1 Three (3) Base Radios with 12-volt car battery as back-up
during brown-outs or power interruptions to be installed and
used during the entire contract period at the designated UPV
facilities in Iloilo City campus, BAC in Leganes and MBS in
Taklong, Guimaras;
A.2 Eight (8) radio handsets to be used at:

Iloilo City campus – 4 units
BAC, Leganes – 2 units
Batan Station – 2 units
A.3 Two (2) mobile phones to be used at:

TRV Sardinella – 1 unit
Batan Station – 1 unit
A.4 Mobile Transport

One (1) unit Motorcycle
104. Likewise, Section V of the Terms of Reference provides that:
B.2 To ensure efficient operations, the Agency must provide for

the following:
a At least one (1) motorcycle at the Iloilo City

campus to be used on a 24-hour basis which will be for the
exclusive use of the University;
87
b At least three (3) base3 radios with 12-bolt car
battery as back-up during brown-outs or power
interruptions to be installed and used during the entire
contract period at the designated UPV facilities in Iloilo
City campus, BAC in Leganes and MBS in Taklong,
Guimaras;
c Adequate communication/handset radios and other

communication facilities such as, but not limited to, the
following:
• At least eight (8) radio handsets to be used at:

Iloilo City campus – 4 units
BAC, Leganes – 2 units
Batan Station – 2 units
• At least
two (2) mobile phones to be used at:
TRV Sardinella – 1 unit
Batan Station – 1 unit
105. During the pre-bid conference, the bidders were informed that any firearms will
be accepted except for Batan and Leganes that need long arms. Inspection and
inquiries conducted by the Audit Team revealed that the above provisions of the
contract and terms of reference were not complied with by the Agency, specifically
the following:
• One (1) unit of motorcycle;

• One (1) Base Radio at MBS in Taklong, Guimaras;
• Two (2) units of radio handsets at Batan Station;
• One (1) unit mobile phone at TRV Sardinella;
• One (1) mobile phone at Batan Station; and
• Two long arms for Batan Station and BAC, Leganes.
106. The University was informed of the violations of the contract and its terms of
reference, however, the deficiencies remained unimplemented. The non-compliance
by the Agency to provide the above logistics resulted in the inefficient and ineffective
delivery of security services to the designated areas or campuses of the University.
107. We recommended that management require the immediate delivery by the

Security Agency of the aforementioned logistics in compliance with Section 23 of
the Contract and Section V of its terms of reference to avoid rescission of the
contract for security services and/or disallowance in audit of the payments
therefore.
108. Management commented that the Chief Security Services has confirmed the
Agency’s submission of some of the requirements provided for in the contract and
Terms of Reference. The Chief Security Services has also identified specific actions
to be taken in case the Agency fails to meet the stipulations of the security contract.
88
89
II. Financial and Compliance Audit
A. Understatement of the Cash in Bank Account balance by P15,665,747.79
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.
2002-001 and the unrecorded P1.23 million on-line collections of the G6PD
Confirmatory Test.
UP Diliman
109. Section 2.4 with reference to Sec. 2.3 of Circular Letter No. 2002-001 of the
Government Accounting and Financial Management Information System (GAFMIS)
requires that at the end of the year, the Schedule of Unreleased Checks shall be
prepared by the Cashier for submission to the Accounting Section. The latter shall
prepare a Journal Entry Voucher (JEV) to record the entry for the restoration of the
cash equivalent to the unreleased checks and the recognition of payable/liability
accounts. In the ensuing year, a JEV shall be prepared to reverse the entries made
debiting the appropriate payable/liability accounts and crediting Cash-National
Treasury, MDS and/or Cash in Bank-Local Currency, Current Account. The rationale
of this procedure is for the proper recording and reporting of disbursements and to
show the actual Cash Balance available at year-end.
110. Verification of the reports and records of the UP Diliman showed that the
unreleased checks totaling P14,431,927.79 drawn for the general and trust fund
accounts, were not restored back to cash as required under the GAFMIS Circular
Letter No. 2002-001, which understated the cash in bank and payable accounts’
balances at year-end by the same amount.
UP Manila
111. The NIH-UPM is one of the facilities conducting confirmatory testing of

patients with abnormal initial results to ensure the accuracy of the newborn screening
tests. The initial laboratory fee was P750 but was reduced to P400 pursuant to the
DOH Memorandum No. 2009 – 0139 dated May 20, 2009.
112. Verification of the collection procedures on the G6PD Confirmatory Test

disclosed that:
a. Walk-in patient fills-up the Patient’s Form and pays to the Cashier the
corresponding laboratory fee of P400.
b. For blood specimens from hospitals/Newborn Screening Facilities

(NSF), the University Research Assistant (URA) upon receipt
sends the blood
90
samples to the NIH laboratory and tests are conducted prior to
payment. Thereafter, it sends the Statement of Accounts to the NSF for
collection.
c. For check payment sent to NIH, the Cashier issues OR.
d. In case of on-line collections, the amount is credited to the UPM-

Revolving Fund (RF) accounts maintained with the LBP SA No.
0591-0558-52 and PNB SA No. 200-546-283-8.
e. The University has no existing MOA with the banks regarding on-line
collections, thus, the NIH required their hospital clients/NSF to send
the validated deposit slips as proof of their payments for the G6PD
confirmatory tests through courier on or before the payment due date,
otherwise the laboratory result is withheld. The name of the hospital is
indicated on the deposit slip and the list of patients covered by the
remittance is attached to the deposit slip. This additional expense is
shouldered by the patient/hospital.
113. Due to the absence of an existing MOA, the on-line bank collections from CYs
2007 to 2009 totalling P1,233,820.00 was not recorded, resulting in the
understatement of the cash-in-bank and the corresponding income accounts.
UP Diliman
• Comply strictly with GAFMIS Circular No. 2002-001 on the

restoration of the cash equivalent of the unreleased checks and the
recognition of payable/liability accounts.
UP Manila
• Execute a MOA with the collecting banks regarding on-line

collections to facilitate submission of bank financial reports to the
University for the timely and periodic recording of transactions in
the books.
UP Diliman
• Management agreed with our recommendation, and the Cash and

Accounting Offices will observe proper coordination in the control,
monitoring and proper reporting of cash as already done.
91
UP Manila
• Amendments to the existing MOA with the LBP and the PNB-PGH
are in process as discussed with the LBP Taft and the PNB-PGH
Branch Managers.
B. Unreconciled Balances of Cash-In-Bank
The balances of Cash in Bank Local Currency-Current and Savings Accounts

(LCCA & LCSA) of P152.48 million of the UP Manila and Visayas and Foreign
Currency Account of $187,674.61 of the UP 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/update the bank reconciliation statements (BRS).
116. Section 74 of P.D. No. 1445, otherwise known as the State Audit Code of the
Philippines, provides that: “At the close of each month, depositories shall report to
the agency head, in such form as he may direct, the condition of the agency account
standing on their books. The head of the agency shall see to it that reconciliation is
made between the balance shown in the report and the balance found in the books of
the agency.”
117. The reconciliation of cash in bank account balances with bank records provides
a periodic determination of the validity of cash balances appearing in the books of the
agency concerned. Bank reconciliation statements prepared on a regular and timely
basis is an essential control over these cash accounts. The agency accountant shall
draw journal vouchers to record all valid reconciling items that require adjustment
and correction in the GL.
118. Cash in Bank local and foreign currencies of the two UP Campuses showed the
following unreconciled balances:
Campuses Per Books Per Banks Variance

Local Currency
UP-Manila/PGH P 142,689,776.86 P 74,480,379.96 P131,790,603.10
UP-Visayas 9,787,307.82 9,897,874.82 110,567.00
Total P 152,477,084.68 P 84,378,254.78 P 131,901,170.10
Foreign Currency
UP-Manila/PGH $187,674.61 $292,483.68 $104,809.07
Total $187,674.61 $292,483.68 $104,809.07
UP Manila/PGH
119. Verification of the Cash in Bank - LCCA and LCSA and Foreign Currency
Savings Account (FCSA) balances disclosed unreconciled variances of
P91,107,656.03, P40,682,947.07 and $104,809.07, respectively, as against confirmed
bank balances as of December 31, 2009, which affect the reliability of the accounts’
balances, as follows:
92
Account Name Per Books Per Bank Variance
Current Account (111) P162,041,409.66 P 253,149,065.69 P 91,107,656.03

(19,351,632.
Savings Account (112) 80) 21,331,314.27 40,682,947.07
P131,790,603.1
GRAND TOTALS P 142,689,776.86 P 274,480,379.96 0
Foreign Currency US$ $187,674.61 $292,483.68 $104,809.07

Savings Account (116)
120. It appeared that the foregoing variances resulted due to the failure of the
management to enjoin its Accounting Unit to prepare on a regular and timely basis
the BRS as an essential control over the cash accounts as shown below:
a. BRSs were not prepared for 26 bank accounts while 18 were not updated.
Only the BRS for UP-PGH General Fund LCCA is kept current. The
BRSs of the UP-SHS in Palo, Leyte were not appropriately prepared
and were returned for revision.
b. Except for trust accounts which are subject to existing agreements with the
donors, management maintained more than one bank account for other
funds under the same account name, thus, reconciliation of the
accounts’ balances with the banks’ records became a tedious process,
hence, reconciliation was not done on a regular basis.
c. Nine bank accounts totalling P76,139,690.55 disclosed unreconciled

negative subsidiary ledger balances as follows:
Account
Name of Bank Account Name Amount
Number
LCCA
Philippine National
Bank (PNB) – Taft Ave. 200-850025-0 UPM Revolving Fund (P308,480.48)
Development Bank of the
Philippines (DBP)– 0410-002882-034 UPM Revolving Fund ( 2,132,484.80)
Arroceros
UPM FB Herrera Med. Lib.
PNB – Ermita 220-840352-7 Foundation (1,962,370.87)
DBP – Arroceros 0410-002882-030 UPM Drugs & Medicines (2,432,878.29)
Land Bank of the
Philippines (LBP) – Taft 0592-1063-45 Institute of Human Genetics (4,458,336.41)
Ave.
PNB - Taft Ave. 200-546280-3 UPM General Fund (56,400,590.79)
PNB – Taft Ave. 384563900014 UPM Special Endowment Fund (1,560,091.36)
PNB – Taft Ave. 384564000011 UPM Trust Liabilities (6,016,488.00)
PNB – Taft Ave. 200-546285-4 UPM Special Endowment Fund (867,969.55)
Total (P76,139,690.55)
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d. Six cash in bank subsidiary ledger balances totalling P4,008,789.24 (net)
were non-existing or not confirmed by the bank, to wit:
Name of Bank Account Number Amount

Account 111
1. PNB-Taft Avenue RF164-CA No. 200-850025-0 (P308,480.48)

Account 112
2. PNB-Taft Avenue) TF184-SANo.200-546288-9(old/ closed) P4,563,975.25

PNB-Taft Avenue TF184-SA No. 384565100018 (new) 395,522.
3. PNB-Ermita - TF184-SA No. 220-556298-5 14
4.PNB-TaftAvenue TF184-SA No. 200-546285-4 (867,969.55)
5. PNB-Taft Avenue TF184-SA No. 200-558081-4 49,328.87
6. PNB-Taft Avenue GF102-SANo.200-546281-1(old/closed) 176,413.01
PNB-Taft Avenue GF102-SA No. 384563700016(new)
P4,008
Total SL balance (net) ,789.24
e. Two new accounts with subsidiary ledger balances totalling P215,868.06

were confirmed by the banks but non-existing in the books, as
follows:
Account 112
1. PNB-Ermita TF184-SA No. 108762400019 P 121,025.42

2. PNB-Ermita TF184-SA No. 108737000012 94,842.64
f. Two dormant accounts were confirmed by the PNB-Tacloban City Branch

for the UPM-SHS, Palo, Leyte under the General Fund Account No.
480-840043-5 with a balance of P39,079.24 and RF Account No.
480-840044-3 with a balance of P77,179.50. Dormant accounts or
those with no deposit or withdrawal for a continuous period of two
years or more are subject to service fees/penalty charges pursuant to
the existing banking laws and policies.
UP-Visayas
121. The last BRS submitted was September 2004 for Fund 164, July 2007 for Fund
184 and 1980 for Fund 101. Fund 101 disclosed a net discrepancy of P110,567.00
between the bank and book balances as of December 31, 2009, due to erroneous
and/or unrecorded deposits and withdrawals/disbursements, as follows:
94
Particulars Bank Book Difference
Beginning Balance - 01/01/09 P12,848,071.49 P14,217,360.61 (P1,369,289.12

Add: Deposit/Debits 41,940,066.04 41,861,339.29 78,726.75
Less: Withdrawals/Credits (44,890,262.71) (46,291,392.08) 1,401,129.37
Unadjusted Balances, 12/31/09 P 9,897,874.82 P 9,787,307.82 P 110,567.00
Add/(Less) – Reconciling Items:
1. Outstanding checks (770,880.86)

2. Unrecorded Bank Deposits in 59,238.74
Jan. 2009
3. Under recording of Chk (6,412.50)
#1737850 on February 2, 2009
4.2009 Summary of 218,834.52
Adjustments 806,299.00
5. 2008
Summary of Adjustments (2,046,258.98)
6. Erroneous PY (2008) 317,231.40
Adj. per GJ/GL (9,146.04)
7. PY Unreconciled balance
8. PY (2008) Per audit adj. # 47 (100.00)
9. PY (2008) Per audit adj. # 35
overstatement of adjustment
Adjusted Balances as of 12/31/09 P9,126,993.96 P9,126,993.96 -0-
122. As shown above, there were adjustments in the prior years which were not
taken up, thus, these were added to the adjustments in the current year.
123. This is a recurring observation. Failure of the Accountant to book the

recommended adjustments on the reconciling items of prior and current years render
the validity of the balance of Cash in Bank –LCCA doubtful.
124. Due to the resignation of the former Accountant in October 2007, the
Accounting Office lacks personnel to update the BRS. His duties were distributed to
the other personnel who were also loaded with their regular assignments. It was only
in May 2009 that a new accountant was hired.
125. We recommended that management of the UP PGH and UPV require

their respective Accounting Divisions to prepare a regular BRS of all Cash in
Bank accounts to provide valid support to the balances reflected in the financial
statements.
UP PGH
95
• Reconciliation of accounts and reduction in number of existing
accounts are being done, as recommended by COA.
96
UP Visayas
• During the exit conference, the Accountant committed to

update the BRSs for the three funds this calendar year 2010.
Adjusting Journal Entries for some errors/deficiencies found
were already recorded in the books starting this month of
January 2010.
C. Procedural lapses on Time Deposit Placements of P1.56 billion and Special

Endowment Fund (SEF) utilization
The procedural lapses such as absence of clear cut policies on investments, the
UPM-IIC not acting as one collegial body regarding approval of placements/
termination/renewals of time deposits as well as the utilization of the SEF of P1.56
billion and P222.77 million balances as of December 31, 2009, in the UP-Manila
and PGH, respectively, may not yield the most advantageous investment rate of
return and full utilization to which the SEF was created.
127. The UPM AO No. RLA 2006-074 and 2006-080 provides, among others, the
creation of the UPM – Investment and Income Committee (IIC) composed of: the
Vice-Chancellor for Administration as Chairman; Budget Officer, Cashier and the
Chief Accountant of the UPM and the Director and the Chief Accountant of the UP-
PGH as members; with one secretary and one support staff.
128. The UPM-IIC has the following functions:
a. Undertake studies and recommend to the Chancellor investment

policies for UPM University – wide fund and cash management
including funds from the National Government, the Revolving Fund
and Trust Liability Accounts;
b. Supervise, coordinate and monitor the safety and progress of

investments by the UP Manila Administration;
c. Identify all incomes collectible (by account types) of UP Manila; and
d. Recommend methods and procedures, income collection and the

monitoring of income-generating activities of UP Manila.
129. The UP-BOR 968th Meeting held on May 31, 1984, approved the creation of
the SEF under the Revolving Fund out of the 20% of the interest earnings of
investments in various University Funds, effective 1984. The objective of the SEF is
to build up capital for investment purposes.
97
130. Excerpts of the said meeting indicated that the SEF of P176 million as of
March 2000 is enough CORPUS/capital for the UP Manila, and it may start
“spending” profits earned by this corpus on projects/programs of the University that
are approved by the UP President and/or by the BOR or depending on the ceilings
previously provided by pertinent University rules regarding disbursement of funds.
The corpus is not to be spent but shall continuously be invested as time deposit, loans
and other investments as approved by the UP President and/or the BOR.“
131. Interest earned for the SEF shall be utilized as follows (UP-BOR 1145 th
Meeting on September 28, 2000:
a. Constituent Universities (equipment/capital outlay, faculty

development/ scholarship and research)
b. PGH (equipment/capital outlay, restoration/repair/purchase of power

supply equipment and information/communication capabilities)
132. The SEF due to the PGH from the UP Manila SEF shall have a minimum
balance of P55 million.
133. The review of the University’s time deposits (TD) investment processes
revealed the following procedural weaknesses:
A. For Time Deposits:
a. The University has no clear-cut policies and procedures on

investments. The Cash Office only provided the team a copy of the
guidelines on the sharing of interest earnings from the investments
where 20% is recorded as income to form part of the internal
operating budget, while the 80% is returned to the principal for roll
over of investment.
b. The UPM-IIC did not act as one collegial body on the following
occasions :
• Only eight UPM-IIC Meetings were held during the year which in most cases,
were not attended by the UP-PGH representatives, despite the 133 new
placements worth P 1.74 billion.
• the members did not attend meetings nor sign UP-PGH Investment Form. For
UPM initiated investments, the UP-PGH members were not a party to the
investments made.
98
c. The authorized UPM/PGH officials, in most cases, approved
time deposits placements/termination/renewals without
recommendation from the UPM- IIC.
d. There were numerous placements thus monitoring becomes a

tedious process such that these are divided into several CTDs with
amounts ranging from P15 million to P51 million and maturity
dates ranging from seven days to 84 days of which interest
earnings could not be maximized. Consider the following:
1) The UPM maintains CIB-TD (Peso and US$) of P1.56

billion scattered in 75 placements; and US$158,874.54
covering two placements.
2) There are more than four placements for investible funds under
the General Fund 101, Revolving Fund, IHG and Trust Funds.
The Cash Office, UPM, committed errors in reporting in nine
instances.
B. For SEF:
a. Time deposit placements of UPM for SEF totaling P156

million was below the UP-BOR approved ceiling of P176 million,
although additional of P2.78 million is deposited under the current
account, while P3.9 million is deposited under the savings account.
b. The UP-PGH SEF amounting to P 66.7 million was more than

the ceiling set by the UP-BOR of P55 million. The UP-PGH is in
need of additional hospital equipment. It could utilize its excess
SEF to procure the equipment needed such as the hemodialysis
machines, ventilators, pulse oximeter, cardiac monitor etc., which
are presently under profit sharing scheme agreement with the
medical suppliers.
134. We recommended that Management require the UP-IIC to prepare policy

guidelines on investment and the sharing and utilization of the SEF Funds for
the guidance of all concerned officials for security, efficiency and transparency.
Consider the following in the preparation of the guidelines:
• For the SEF corpus, only two CTDs shall be maintained, one for
UPM and another for PGH, with longer maturity dates since only
the interest of the corpus could be utilized by the University.
• In the case of the Revolving Fund and the General Fund,

investment placements shall be short-term depending on the cash
requirements
99
100
of the University with accounts maturing weekly to answer for
unforeseen payables, thus, UP-IIC meeting shall be done weekly.
• Canvass of interest rates shall be made by authorized member/s of

the Committee. The Committee shall deliberate on the interest
rates offered by the bank and decide on the terms most favorable
to the University.
• The Committee as a collegial body shall make investment

recommendation to the Chancellor thru the Vice-Chancellor for
Administration. The UPM-IIC shall prepare the Income and
Investment Committee Form with the corresponding
implementation of the placement instruction for approval of the
Chancellor.
• Maximize the earnings on investments by combining the

placements falling under one account name. The bank policy is to
grant higher interest rates for bigger investments with longer
maturity dates.
• Maintain the ceiling for corpus/capital as approved by the BOR of

P176 Million for the UPM and P55 Million for the PGH in Time
Deposit Placements, any excess thereof shall be utilized for the
projects/programs approved by the authorized officials.
135. Management commented that the UPM-IIC would prepare the Investment
Policy Guidelines.
D. Internal control weaknesses in the granting/liquidation of Cash Advances of

P21.8 million
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.
136. Section 4.1 of COA Circular No. 97-002 – General Guidelines states, among
others, that:
4.1.1. No cash advance shall be given unless for a legally specific purpose.
4.1.2. No additional cash advances shall be allowed to any official or

employee unless the previous cash advance given to him is first settled
or a proper accounting thereof is made.
4.1.3. A cash advance shall be reported on as soon as the purpose for which
it was given has been served.
101
137. Section 16 Title III of Executive Order 248 and Par. 5.1.3 of COA Cir. 97-002
also provides that “Within sixty (60) days after his return to the Philippines, in the
case of official travel abroad, or within (30) days of his return to his permanent
station in the case of official local travel, every official or employee shall render an
account of the cash advance received by him in accordance with existing applicable
rules and regulations.”
138. COA Circular No. 97-002 dated February 10, 1997 provides that failure though
on the part of the accountable officers and employees to submit liquidation reports on
a specified period shall constitute a ground for the withholding of the payment of any
money due to them.
139. Moreover, for the proper matching of costs against revenues, it is necessary that
cash advances granted during the year must be liquidated and recorded on that same
year, so that the appropriate expense charges will be properly recognized during the
period of incurrence.
140. Recently, COA Circular No. 2009-002 provides for the selective restitution of
pre-audit on government transactions, which pertinent provision is quoted hereunder:
“4.1.1 -Except for cash advances for payroll, intelligence funds,

petty cash funds, and those granted for local travel expenses of officers
and employees, all other cash advances including those for foreign
travels funded out of the local funds regardless of amount shall pass
through pre-audit.”
141. The foregoing rules and regulations were formulated to provide clear and
extensive guidelines for an efficient and effective control in the granting, utilization
and liquidation of cash advances, and the appropriate recording/recognition of the
same in the books. However, these were not strictly observed and implemented as can
be gleaned from reports and records submitted.
142. The following data shows the total unliquidated cash advances to the officers
and employees of the following UP units/campuses as shown in the consolidated
financial statements:
Unit/Campus Two Years and More than

Below Two Years Total
UP System P 14,631,622.42 P15,700,216.19 P30,331,838.61
UP Diliman 2,486,100.46 P2,949,937.04 5,436,037.50
UP Manila 11,638,425.18 1,547,626.16 13,186,051.34
UP Los Baños 720,171.54 720,171.54
UP Baguio 144.00 144.00
UPVisayas 5,370,092.90 1,571,562.95 6,941,655.85
UPMindanao 377,805.81 377,805.81
Total P 35,224,362.65 P 21,769,342.34 P 56,993,704.65
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143. Verification of the manner of implementation and recording of cash advances’
transactions disclosed the following deficiencies/condition noted in five campuses,
which caused the accumulation of the outstanding cash advances contrary to the
foregoing rules and regulations, to wit :
UP System
144. The outstanding balance of P30,331,838.61 is broken down as follows:
Fund Balance
101 P 640,187.97
164 29,481,773.01
184 209,877.63
Total P30,331,838.61
145. Out of this balance, P15,700,216.19 are long outstanding accounts aging two to
more than ten years, P15,222,093.74 of which are cash advances granted for
Doctorate Studies as financial assistance, which were regularly given despite the
grantee’s failure to submit the liquidation documents, resulting to the impairment of
the promissory note executed embodying its commitment to submit the liquidation
papers prior to the release of another cash advance.
146. Included is the amount of P149,214.67 pertaining to accountable officers who

are already either deceased, retired, or no longer connected with the UP System
which was requested for write off in previous years but returned by the Auditor for
lack of documents. For the unliquidated accounts of those retired and already
separated from the service, it is apparent that there was laxity in the control on the
granting of clearance from money and property accountability.
147. It was also noted in the report submitted that 22 liquidation reports totaling
P6,830,430.69 were already in process at the Accounting Unit. Taking into account
this number, it may be stressed that problems may be overlooked in the processing of
liquidation vouchers resulting to the delay in the approval and the recording in the
books.
UP Diliman
148. The total unliquidated cash advances of P5,436,037.50 granted to its officers
and employees were mostly for short bound undertakings such as study grant abroad
and for other purposes, which had been long outstanding in the books and already
aging 30 days to three years
149. This condition of unliquidated cash advances had already been reported in the
previous Audit Reports, but it is apparent from the recent reports that management
has not yet taken major steps to address the problem. This situation works against
103
promoting adherence to policies and procedures and reflects the attitude of
management towards internal control.
UP-Manila
150. A P1,034,691.09 discrepancy existed between the account’s SL balance of

P14,220,742.43 and the GL balance of P13,186,051.34 due to liquidations and returns
of unused cash advances, among others, which were not yet recorded in the SL.
151. Of the prior years’ unliquidated amount of P5,315,859.23, 70.89% or

P3,768,233.07 had been outstanding from one to two years while the remaining
P1,547,626.16 or 29.11 % were outstanding from two to three years.
152. Of the current year total balance of P8,904,883.20, P833,581.72 or 9% were

outstanding from 30 to 60 days while the amount of P8,071,301.48 or 91.00%
remained outstanding from 60 days to one year.
153. Continued granting of additional cash advances to the accountable officials and
employees with outstanding cash advances resulted in the accumulation of
unliquidated cash advances contrary to Section 89 of PD 1445 and COA Circular No.
97-002 dated February 10, 1997.
154. A total of 39 outstanding cash advances amounting to P4,400,448.54 were

granted to officers and employees, which were not submitted to the Auditor for pre-
audit as required under COA Circular No. 2009-002 dated May 18, 2009.
UPV-Miag-ao, Iloilo
155. Additional cash advances were granted amounting to P1,890,848.61 for the
period April to December 2009 to accountable officers who have outstanding or
unliquidated cash advances, despite of the information given to the University
Officials regarding COA Circular 2009-002.
UP Visayas – Tacloban
156. UPV Tacloban had unliquidated cash advance of P1,888,012.95 as of

December 31, 2009, of which P1,571,562.95 or 83.24% belonged to prior years and
P316,450.00 or 16.76% for the current year 2009.
157. The unliquidated balance of P870,056.27 as of December 31, 2006 had no

schedule or breakdown to support the amount, hence the validity of the balance of the
account as of year-end is doubtful.
158. The total amount per Trial Balance as of December 31, 2009 of P2,053,286.95
representing Fund 101, 164 and 184 was overstated by P165,274.00 as compared to
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the amount of P1,888,012.95 per audit. The variance was traced to unrecorded
liquidations of cash advances and erroneous posting of accounting journal entries of
some liquidations of cash advances. The details are shown below:
Fund Balance Per Audit BalancePer TB Variance

Fund 101 P 794,175.13 P 766,330.33 P 27,844.80
Fund 164 989,952.07 876,437.67 36,874.68
Fund 184 103,886.75 410,518.95 (306,632.20)
Totals P 1,888,012.95 P 2,053,286.95 P 165,274.00
UP System
• Strictly observe the governing rules in the granting, utilization, and
liquidation of cash advances, such as but not limited to the
following:
• Require a yearly liquidation on cash advances for Doctorate studies

which have more than a year duration to prevent accumulation of
cash advances and that appropriate expenditures be properly
recognized during the period of incurrence;
• Observe strictly the rule that “no additional cash advances shall be
allowed to any official or employee unless the previous cash
advance given to him is first settled or a proper accounting thereof
is made”;
• Impose the appropriate penalties/remedies provided for its violation

such as withholding of salaries of erring accountable officers;
• Revisit the previous request for write off which was returned by the
Auditor for submission of lacking documents; and
• No clearance from money and property accountability must be

granted to any officers and employees unless all accountabilities
are cleared. Any concerned officer found to be negligent for the
improper granting of clearance to ineligible employees/personnel
must be held personally or administratively liable.
UP Diliman
• Monitor regularly cash advances granted in order that these are
reported on as soon as the purpose for which these were given
have been served; and
• Impose the appropriate penalties/remedies provided for its violation

such as withholding of salaries of erring accountable officers.
105
UP PGH/Manila
• Issue notice or demand letters to all accountable officers and
employees to settle their accountabilities within the prescribed
period. In case of failure to comply, strictly impose sanctions such
as withholding of salaries or any money due to them pursuant to
Section 9.3.2 of COA Circular No. 97-002 dated February 10, 1997
or course legal action through the Office of the Ombudsman for
demand letters not acted upon;
• Request the COA for the cancellation of those long

outstanding/overdue accounts and other unsettled cash advances
which could no longer be collected in accordance with existing
rules and regulations. Revisit the previous request for write off
which was returned by the Auditor due to lack of documents;
• No clearance from money and property accountability must be

granted to any officers and employees unless all accountabilities
are cleared. Any concerned officer found to be negligent for the
improper granting of clearance to ineligible employees/personnel
must be held personally or administratively liable;
• Require the Accounting personnel to verify and update all accounts

which were not recorded in the books and make regular
reconciliation of their records with that of the Accountable
Officers to effect appropriate adjustments in the books. Likewise,
immediately forward to the Auditing Unit all liquidations, reports,
adjustments, etc. related to the cash advances’ accounts for proper
auditing and issuance of the corresponding credit notices; and
• Require the Cashier to explain in writing why she failed to submit the
disbursement vouchers for cash advances covering foreign travels
and expenses for projects/activities that are required to pass
through pre-audit pursuant to COA Circular No. 2009-002.
Management to refer the matter to the Legal Office, for the
possible filing of administrative disciplinary action to persons
responsible in accordance with Section 127 of Presidential Decree
No. 1445 and Section 55, Title I-B, Book V of the Revised
Administrative Code of 1987, without prejudice to the
disallowance of the transactions in post-audit, if warranted.
UP Visayas – Iloilo
• Subsequent cash advances should be granted only after the issuance
of a Credit Notice for the previous cash advance by the Office of
the Auditor.
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Unit/Campus Comment Audit Team’s Rejoinder

UP System • P4,906,597.61 or 16% of the The Audit Team’s report
total balance have already reflected long outstanding
been settled subject for pre- accounts of P15,700,216.19
audit by the Accounting composed of cash advances
Office. Demand/follow-up granted in 2007 down to 1985,
letters have been sent for hence it does not include the
P8,065,989.39 accounts. accounts not yet due as of
year-end. Management should
• Management will strictly also look into the causes of
follow COA Circular No. 97- delay in the processing of
002. This office will look liquidation reports. The
into this commitment in the previous agreement pertaining
audit of future transactions. to Doctoral Fellows is still
recognized, however, our
finding covers long overdue
• There was a previous accounts. The contention that
agreement with COA that System Accounting Office
Doctoral Fellows receiving does not issue clearance to
Doctoral Studies Grant, employees with outstanding
whose graduate studies obligations until full
abroad cover a period of 3 to settlement of their cash
4 years and usually liquidate advances are made belies the
their cash advance upon their fact that a total of P149,214.67
return shall be required to outstanding accounts pertain
submit “scanned copies” of to accountable officers who
their supporting are either no longer connected
documents/attachments with UP or had already retired.
together with the liquidation We will continue to monitor
report before any additional management’s commitment to
cash advances can be given improve the present system.
to them. This is due to the
risk of losing the documents
if sent through a courier.
• Sanctions such as
withholding of salaries are
also implemented to persons
concerned who, despite
receipt of several demand
letters, continue to ignore
their obligations to settle.
Request for write-off will be
sent to COA for long
outstanding accounts which
could no longer be collected
together with the necessary
attachments as recommended
107
by COA.
• System Accounting Office

does not issue clearance to
employees with outstanding
obligations until full
settlement of their cash
advances are made.
UP Diliman • The amount of

P1,894,084.30 representing
cash advance of Mr. Abel
Canlas for the construction
of PGH was dropped from
the UP Diliman books of
accounts as of May 2010 and
will be transferred to the
PGH books of accounts.
• The Accounting Section will

continue to monitor unsettled
cash advances by sending out
reminders to officers and
employees concerned.
Withholding of salaries as
recommended will be
considered.
• On August 3, 2010 the

Office of the Chancellor
issued Memorandum No.
SSC-10-041 instructing the
settlement of outstanding
financial obligation with the
University not later than
September 30, 2010,
otherwise, the management
will be constrained to effect
payroll deductions.
UP Manila Management noted and will

comply with the audit
recommendations.
UP Visayas (Iloilo & The Accountant commented

Tacloban) that the subsidiary ledgers for
the Advances to Officers and
Employees account are now
being updated to monitor the
108
cash advances of each
accountable officer. Likewise,
demand letters will soon be
issued to accountable officers
with unliquidated cash
advances. Adjusting journal
entries were already recorded
in the books starting this
month of January 2010, to
correct the balance of the
account.
E. Inadequate documentation on dormant accounts of P20.2million
The Due to Officers and Employees account of P1.9 million of the UP Diliman,
and the P18.24 million Due from Central Office account dropped from the books of
the UP-Los Baños, have been non-moving or dormant for more than five years,
and the lack/unavailable supporting documents thereof cast doubts on their
validity.
161. Dormant Accounts refer to individual or group of accounts which balances

remained non-moving for more than five years.
162. Paragraph III-A of COA Circular No. 97-001 dated Feb. 5, 1997 providing
guidelines on the disposition of dormant accounts requires that:
• Dormant accounts shall be reviewed, analyzed and reconciled together

with the other related accounts in the trial balance.
• After the review and validation of accounts the procedures for

adjustment, reconciliation and write-off shall be observed.
UP Diliman
163. The Due to Officers and Employees account is used to record the amount of
liabilities due to officers and employees of the agency.
164. Financial reports showed that this account with a balance at year-end of
P1,944,717.44 had been dormant for more than five years as presented in the table
below:
Fund Year Beg. Balance Debit Credit Ending Balance

101
2005 P1,653,005.38 0 0 P1,653,005.38
2006 1,653,005.38 0 P106,230.49 1,546,774.89
2007 1,546,774.89 0 0 1,546,774.89
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Fund Year Beg. Balance Debit Credit Ending Balance
101
2008 1,546,774.89 0 15,027.00 1,531,747.89
2009 1,531,747.89 0 0 1,531,747.89
005
2005 431,915.94 0 13,860.00 418,055.94
2006 418,055.94 0 0 418,055.94
2007 418,055.94 0 0 418,055.94
2008 418,055.94 0 28,599.60 389,456.34
2009 389,456.34 0 0 389,456.34
0 23,513.21
009 2005 23,513.21 0
2006 23,513.21 0 0 23,513.21
2007 23,513.21 0 0 23,513.21
2008 23,513.21 0 0 23,513.21
2009 23,513.21 0 0 23,513.21
Total P2,108,434.53 P163,717.09 P1,944,717.44
165. As can be gleaned from the above information, from CY 2005 to CY 2009, few
transactions totaling P163,717.09 were recorded as charges to the account. It
appeared that out of the CY 2005 balance of P2,108,434.53, the total amount of
P1,944,717.44 became dormant for more than five years.
166. Verbal request to submit the necessary subsidiary ledger to attest the validity
and existence of the recorded amount was not complied since it was disclosed that the
Accounting Section has no available records to identify the composition of the
account. This situation shows weakness of control and the deficiency in the
procedure of recognizing payable accounts.
UP Los Baños
167. As of November 30, 2009, the Due from Central Office of P18,235,619.12
remained outstanding in the books and non-moving since 2002.
168. However, at year end, it was noted that the account’s balance increased to
P66,683,184.70 for the current operating expenses funding requirements released in
January 2010, and the P18,235,619.12 was dropped from the books.
169. Inquiry from the accounting personnel disclosed that a Journal Entry Voucher
was drawn to drop the amount from the books because it did not really exist.
Verification however, disclosed that the dropping from the books of accounts of this
long outstanding balance was not supported with any documentation, which validity
therefore cannot be ascertained.
110
170. We recommended that Management:
UP Diliman
• Initiate/cause the review, verification and validation of the

aforementioned dormant account and effect the necessary
reversion to the general fund if found appropriate;
• If the analysis/review of the accounts/funds is not possible due to

absence of records and documents, the agency head concerned
should request for write-off and/or adjustment of account balances
from the COA, supported by:
a. List of available records and extent of validation made of

the accounts and;
b. Certification and reasons why the books of accounts/records,

financial statements/schedules and supporting vouchers/
documents cannot be located.
• Observe the rules on the proper recognition and recording of payable

accounts;
• Instruct the Accounting section to exercise the necessary control for its
fund and accounts.
UP Los Baños
• The Chief Accountant to submit the document supporting the

dropping from the books of the long outstanding Due from
Central Office of P18,235,619.12.
• The Chief Accountant to review the dormant accounts in the books,

analyze and reconcile together with the other related accounts. If
the analysis/review of the accounts is not possible due to absence of
records and documents, the agency head concerned should request
for write-off and/or adjustment of account balance from the COA,
supported by:
i. List of available records and extent of validation made on the

account; and
ii. Certification and reasons why the books of accounts/records,

financial statements/schedules and supporting vouchers/
documents cannot be located.
111
UP Diliman
o Management’s reply through the Accounting Section disclosed that
balance of this account had actually started in CY 2003 when UP
System Administration implemented payment of salaries, wages and
other remunerations directly to the individual account of UP
employees. It was admitted that since the accounts had remained
dormant since 2003, claims pertaining thereto can no longer be
ascertained, hence will be recommended for reprogramming/reversion
as recommended by the COA.
UP Los Baños
o Proper procedures will be adopted in dropping the accounts from the
books.
F. Deficiencies in recording and control of Inventories
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 Banos, Open University and
Mindanao cast doubts on the validity of the P46.70 million inventories and
related expense accounts.
172. Pertinent rulings of the Manual on NGAS are as follows:
a. Section 43-Vol. II: Purchases of supplies and materials for stock,

regardless of whether or not they are consumed within the accounting
period, shall be recorded as inventory account or in a Perpetual
Inventory Method and issuance thereof shall be recorded based on the
Report of Supplies and Materials Issued (RSMI). Further, the
Accounting Unit shall maintain perpetual inventory records such as the
Supplies Ledger Cards for each stock of inventory which for check
and balance the Supply Unit shall also maintain Stock Cards for
inventories.
b. Section 65: Requires the use of the official form, Report on the
Physical Count of Inventories (RCPI) in reporting the results of
conduct of the physical count of Inventory. The RCPI shall be used to
report on the physical count of supplies by type of inventory as of a
given date and shows the balances of inventory items per card and per
count and shortage/overage, if any.
173. Section 79 of P.D, 1445 provides that “when government property has become
unserviceable for any cause, or is no longer needed, it shall upon application of the
officer accountable therefore, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if found
112
to be valueless or unsalable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the supervision
of the proper committee on award or similar body in the presence of the auditor
concerned or other duly authorized representative of the Commission, xxx.
174. The audit of the Inventory accounts of the three UP campuses showed the
following deficiencies:
Campus Amount (supplies Deficiencies

charged directly
to expense)
UP- P1,065,676.14 • Office Supplies directly charged to the expense
Mindanao accounts upon acceptance and payment contrary
to the NGAS policy of keeping tract of the
issuance of supplies and materials through the use
of RSMI. This manifests poor control in the
handling of office supplies, which could result in
the overstatement of the expense account and
understatement of the agency assets.
UP Los 42,287,588.14 • Inventory purchases directly charged to expense

Baños contrary to the required Perpetual Inventory
Method of recording.
• All inventory accounts were not supported with

Report of Physical Count of Inventories (RPCI).
Semi-annual physical count of inventories was not
undertaken as required and no reconciliation of
inventory records between accounting and
property section;
• Verification on the Journal Entry Voucher (JEV)

taking up the disposed items valued at
P2,422,727.59 disclosed that the supporting
Inspection and Inventory Report was not in the
prescribed form, not duly signed by authorized
officials nor submitted to COA for inspection and
witnessing. A Notice of Suspension was issued on
various JEVs which took up the dropping of the
amount from the books for non-observance of
Section 79 of PD 1445.
113
Open 3,343,712.91 • The Accountant did not observe the Perpetual
University Method of recording supplies as required under
Sec. 43 of the NGAS manual. Purchases of office
Supplies, accountable forms, food supplies,
gasoline, oil and lubricants, and other Supplies
were directly charged to their respective expense
accounts.
• The Supply Officer conducted the semi-annual

physical count of inventories but did not submit
the required Report on the Physical Count of
Inventories.
• No reconciliation of property and accounting on

the inventories’ accounts.
Total P 46,696,977.19
UP- Mindanao
• Require both officers/personnel in the Accounting and Supply Units
to revisit the provisions pertaining to the supplies and property
management set forth under the NGAS Manual for their
appropriate guidance in rectifying the above noted deficiencies.
UP Los Baños
• Require the Property Officer to maintain Stock Card of each
inventory item which should always be reconciled with the
Accounting Records in accordance with Sec. 43 of the NGAS
Manual, Vol. II. To see to it that semi-annual physical count of
inventory are conducted and the Report of Physical Count of
Inventories are prepared using the prescribed form provided
under Sec. 65 of the NGAS Manual Vol. II.
• The Chief Accountant and the Property Officer to see to it that

reconciliation of balances of the RCPI, the GL and the financial
statements are made to ensure the correct and fair presentation of
account balances in the financial statements, to fully implement
the Perpetual Inventory Method in recording inventory accounts,
and to strictly comply with the requirements of Sec. 79 of PD 1445
on disposal of government property.
Open University
• The Chief Accountant and the Property Officer to fully implement the
Perpetual Inventory Method of recording inventory items.
114
• The Property Officer to maintain Stock Card of each inventory item
which should always be reconciled with the Accounting records in
accordance with Sec. 43 of the NGAS manual.
• The Property Officer to see to it that the semi-annual physical count

of inventory be conducted and the Reports of Physical Count of
Inventories are prepared, using the prescribed form in accordance
with Sec. 65 of the NGAS manual Vol. II.
• The Chief Accountant and the Property Officer to see to it that

reconciliation of balances of the RCPI and the general ledger
accounts are made to ensure fair presentation of account balances
in the financial statements.
176. The Management commented, thus:
Campus Management Comment Audit Team’s Rejoinder

UP Mindanao In CY 2010, the Accounting Office
and Supply Office will revisit the
provision of the NGAS Manual and
will try to implement the necessary
corrections or adjustments on the
present practice.
UP Los Banos • Management will abide by the The Auditor would like to
said suggestion. For CY 2010, emphasize that the NGAS has
Supply and Property been in effect since the
Management Office (SPMO) has issuance of COA Circular No.
scheduled to conduct physical 2001-004 dated October 30,
count of inventory in the first 2001, thus, on its 10th year of
week of July and third week of implementation the University
December 2010. should have conformed in all
of its provisions.
• SPMO used to conduct physical
count of inventory at least once a
year based on page 128 of the
COA Manual on Property and
Supply Management System. The
supplies and materials at SPMO
are for temporary storage as such
are immediately forwarded to
UPLB’s various units for their
urgent use.
• The Accounting and Property

Sections would adopt the
perpetual inventory method for
all types of inventories and would
see to it that inventory items are
115
Campus Management Comment Audit Team’s Rejoinder
accounted for in accordance to
Sec. 79 of PD 1445.
Open University • The University shall observe • The Auditor would like to
Perpetual Inventory Method reiterate Section 43 of the
when practicable. Manual on NGAS, Vol. II
which provides that
• The University conducted purchases of supplies and
physical count of inventory on a materials for stock
semi-annual basis, but have not regardless of whether or not
submitted the same to COA. they are consumed within
They will provide COA copy of the accounting period shall
this report semestrally from then be recorded as Inventory
on. Account. Under the
perpetual method, an
inventory control account is
maintained in the General
Ledger on a current basis.
G. Due from/to Other Funds accounts of P3.12 million for unreleased Notice of
Cash Allocation (NCA)
The failure of the Accounting office to include charges against the PDAF
guarantee letters in the monthly cash program caused a P3.12 million charges
against the trust/revolving funds for hospital operations, which may deplete the
latter’s funds if not properly controlled and monitored.
177. DBM Circular Letter No. 2008 – 11 dated December 8, 2008 states, among
others, that:
Section 3.1.2 - Additional NCAs shall be released corresponding to the

SAROs to be issued to the Operating Units (OUs). These
additional NCAs shall be issued on the basis of the separate
MCPs submitted by the OUs as supporting document to their
special budget requests for release of SAROs.
Section 3.3 – Likewise, at the start of the year, OUs may submit to DBM a
request for the release of NCA requirements chargeable
against prior year’s budget.
178. The NGAS provides the use and description of the following accounts:
a. Due from Other Funds – amount due from other funds maintained by
the agency.
116
b. Due to Other Funds –amount received/withheld for the account of
other funds.
179. The audit of the Due from/to Other Funds accounts disclosed that the UP-PGH
PDAF balance pertaining to seven legislators showed a total payable of P3.12 million
to the University/Hospital trust and revolving funds as of December 31, 2009. This
resulted from the Accounting Division’s failure to include the PDAF charges in the
MCP submitted to the DBM for release of NCAs corresponding to the SAROs issued
for the medical assistance of the indigent patients of the legislators concerned
pursuant to the guidelines under DBM Circular Letter No. 2008-11 dated December
8, 2008.
180. Accordingly, as there were no NCAs released by the DBM, the Accounting
Division charged its Pharmacy Department’s special trust fund for the medical
assistance extended to the poor patients and against its revolving fund intended for
hospital operations, for the drugs, medicines and laboratory expenses. These charges
were recorded as Due from Other Funds.
181. The foregoing condition if not prevented, will deplete the hospital fund for
operations in the absence of timely PDAF charges in the MCP as these affect the
timely release of NCAs for the PDAF SAROs.
182. Inquiry and verification from the Accounting Division revealed that the last
monitoring of NCA releases for PDAF was done in June 2009 since the staff in
charge resigned from the service and no one took over the position.
183. We recommended that management of the UP PGH require the

Accounting Division to include in its MCP the funding of prior year’s PDAF
SAROs to adjust the Due from/to Other Funds accounts; and henceforth refrain
from using the University/hospital special trust and revolving funds for the
PDAF Guarantee Letters not covered by NCAs to prevent further depletion of
these funds. Hence, establish a monitoring system for PDAF NCA releases to
prevent a future similar occurrence.
184. Management commented that the observations of the Audit Team are noted.
The Accounting is still updating the report on PDAF balances which is needed for the
MCP to be submitted to the DBM for the request of NCA of PDAFs with no cash
release.
H. Doubtful validity of Plant, Property and Equipment (PPE) accounts of P6.96

billion
The PPE accounts of the six UP units/campuses totalling P6.96 billion is of

doubtful validity with a variance of at least P506.09 million existing between the
books and the Physical Inventory Reports, due to unrecorded reconciling
items,
117
118
incomplete or lack of inventory reports, and the absence of regular reconciliation
of property and accounting reports/records.
185. Accounting controls relate to those methods and procedures used to produce
accurate records and safeguard assets. They should be designed to ensure that:
a. Specified individuals are held accountable for transactions under their

control;
b. Accounting records are accurately and reliably maintained;
c. There is adequate segregation of record keeping duties from

custodianship of the agency’s assets;
d. Transactions are properly authorized;
e. There is adequate segregation of incompatible duties; and
f. There are adequate checking and reconciling procedures.
186. Property custodianship refers to the guardianship of government property by

the person accountable therefor. This includes the receipt of supplies, materials and
equipment, the safekeeping, issuance, repair and maintenance thereof. Likewise, it
includes the accountability, responsibility and liability of accountable or responsible
officers arising from loss, misuse, damage or deterioration of government property
due to fault or negligence in the safekeeping thereof.
187. In line with the foregoing, the following specific guidelines were instituted:
a. Section 492, GAAM Volume 1 - Equipment issued by the property

officer for official use of officials and employees shall be covered by a
Memorandum Receipt (MR) which shall be renewed every January of
the third year after issue. MRs not renewed after three (3) years shall
not be considered in making physical count on the equipment.
b. Section 494, GAAM Volume 1 - Every officer accountable for

government property shall be liable for its money value in case of
improper or unauthorized use or misapplication thereof, by himself or
by any person for whose acts he may be responsible. He shall likewise
be liable for all losses, damage or deterioration occasioned by
negligence in the keeping or use of the property, whether or not it be at
the time in his actual custody. (Sec. 105, P D 1445)
c. Section 53, Volume III, of the GAAM requires the comparison of

recorded accountability with existing assets to determine whether the
actual assets agree with the recorded accountability. Similarly,
119
Sections 440 and 441, Volume I of the GAAM provide that physical
inventory of supplies as well as property and equipment should be
reconciled with the control accounts in the general ledger after all
transactions have been posted to the accounts. Any difference between
physical and book inventories should be investigated and cleared or
adjusted immediately to reflect the true financial condition of the
agency
d. Section 66 of the Manual on the NGAS Vol. II-“The Report on the
Physical Count of Property, Plant and Equipment (RPCPPE) shall be
used to report the physical count of property, plant and equipment by
type as of a given date. It shows the balance of property and
equipment per card and per count and shortages/overage, if any.”
e. Section 67 of the Manual on the NGAS Vol. I-“The cost of property,

plant and equipment are allocated to the periods benefited through the
provision of accumulated depreciation. X x x.”
f. Section 68 of the same Manual prescribed the Straight Line Method of

depreciation to start on the second month of purchase and a residual
value equivalent to ten per cent of the cost shall be set.
g. Also, Section 73, Volume 1, of the same manual states that the
responsibility for the fair presentation and reliability of financial
statements rests with the management of the reporting agency. This
responsibility is discharged by applying generally accepted state
accounting principles that are appropriate to the entity's circumstances,
by maintaining effective system of internal control and by adhering to
the chart of accounts prescribed by the COA.
h. COA Circular 2003-007 dated December 11, 2003 sets the policies and
guidelines on the Revised Estimated Useful Life for depreciation for
all government PPEs.
188. The reported Physical Inventory Reports for PPE vis-a-vis that of the
Accounting Office’s records in the six UP campuses disclosed a total variance of
P557,373,234.27 broken down as follows:
Amount
Campuses Per Physical
Particulars Per books Inventory Report Variance Remarks
21 Motor
UP System P6,906,710.00 P10,104,400.00 (P3,197,690.00) Vehicles
UP Diliman 4,398,898,691.00 4,996,368,400.50 (597,469,709.50) December 2009
UPM 462,339,686.32 437,791,600.98 24,548,085.34 December 2009
UPM-PGH 1,884,775,894.28 1,894,498,715.87 (9,722,821.59) November 2009
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Amount
Campuses Per Physical
Particulars Per books Inventory Report Variance Remarks
UPM-SHS–Palo, P6,061 P2,47
Leyte P8,539,839.48 ,263.46 8,576.02 December 2009
UPMSHS–Baler, 540,946.
Aurora 275,308.10 05 (265,637.95) October 2009
UP-Baguio 59,075,430.97 72,314,511.05 (13,239,080.08) December 2009

Only Report on
UP – Los Baños 9,022,078.78 47,997,496.25 (38,975,417.47) Physical Count
of Motor
Vehicles and
Other
Transportation
Equipment was
submitted. No
Report for
other PPEs.
December 2009
Open University 129,747,086.91 No report submitted 129,747,086.91 (net)
Total P 6,959,580,725.84 P 7,465,677,334.16 (P506,096,608.32)
UP System
189. Verification showed that only 16 vehicles with a total cost of P6,906,710.00
were recorded in the books. However, as the the Supply and Property Management
Office did not maintain a complete list or inventory of vehicles, copies of
Memorandum Receipts (MR) on record were used as reference on the actual
inspection conducted, which disclosed 21 vehicles with a total cost of
P10,104,400.00, thereby showing a discrepancy or understatement per books of
P3,197,690.00. Identification however, of the unaccounted vehicles was difficult
since the report submitted by the Accounting Section failed to disclose the important
information such as the engine number, chassis number and plate number of the
vehicles.
190. It was also noticed that the recorded cost per books of P6,906,710.00 includes
the cost of car accessories amounting to P250,310.00 taken as separate item in the
inventory listing provided by the Accounting unit. The cost of these accessories if
necessary and will extend the serviceable life of the vehicle must be added to the cost
of the vehicle, otherwise, the cost should be directly charged to expense.
191. Further, it was observed that the MRs were not properly accomplished because
the concerned official did not acknowledge the receipt of property as it was done by
the designated driver, hence, the accountability and responsibility of the concerned
officers were not on record. It was also discovered that the two vehicles
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assigned with the Admission Office were not supported with MR. Likewise, MRs
were not regularly renewed every three years to regularly update information therein
as a control measure.
UP Diliman
192. The Supply and Property Management Office’s year-end inventory report of
the University’s Property, Plant and Equipment disclosed a total inventory balance of
P4,996,368,400.50. This balance however, did not reconcile with the corresponding
control accounts in the books that reflected a year-end balance of P4,398,898,691.00
thereby, resulting to a variance of P597,469,709.50.
193. The discrepancy in the reported balances of PPE accounts had already been
brought to management’s attention in prior years’ report, but this has not been traced
or determined, hence, the necessary adjustment of reports/records can not be properly
instituted.
UPM/PGH
194. For the UP PGH, the variance of P9,722,821.59 existed between the Physical
Inventory Report of P1,894,498,715.87 and the total amount of P1,884,775,894.28
posted in the PPE Ledger Cards for CY 2009. The variance is equivalent to the total
cost of unaccounted/missing equipment of which P380,052.86 was covered by
various requests for relief from property accountability filed with the Commission on
Audit but subsequently returned to the Accountable Officers concerned for
submission of additional information/documents.
195. For the UPM, the submitted Inventory Report as of December 31, 2009 totaling
P437,791,600.98 was incomplete as it did not include the inventory report of the
College of Dentistry. Inquiry from the bookkeeper revealed that there were no
beginning balances for PPE account per college but only the totals were reflected in
the books. Also, there was no reconciliation made between the physical inventory
reports with the accounting records of P462,339,686.32, and the SLs maintained by
the Accounting Office were not kept current.
196. The UPM-SHS – Palo, Leyte submitted its Physical Inventory Report as of
October 31, 2009 and the Summary of Annual Physical Inventory Reports of
Equipment by the Property and Supply Office as of December 31, 2009, both in the
amount of P6,061,263.46, while the Accounting Office of UPM had reported a total
balance of Equipment for Palo, Leyte as of December 31, 2009 in the amount of
P8,539,839.48 with a variance of P2,478,576.02.
197. The UPM-SHS, Baler, Aurora submitted its Inventory Report as of October 31,
2009 with a total value of P540,946.05 against the record of the Accounting Office of
P275,308.10 hence a total of P265,637.95 variance existed.
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UP-Baguio
198. The PPE account had a balance of P264,321,418.27. A discrepancy of

P13,239,080.08 was noted between the Physical Inventory Report amounting to
P72,314,511.05 and the GL balances for Office, IT, Communication, Sports,
Technical and Scientific and Other Machineries and Equipment and the Furniture
and Fixtures totaling P 59,075,430.97. According to the Accountant and the Property
Officer, the discrepancies may have been caused by some unserviceable properties
awaiting disposal that are still included in the inventory report and the cost of PPE are
recorded in the books based on the Purchase Orders attached to the
Acknowledgement Receipt for Equipment (ARE) instead of the acquisition cost
reflected in the disbursement vouchers, which is more reliable.
199. Further verification of the Report on the Physical Count of Inventory disclosed
that some equipment found on hand/included in the list have no unit cost indicated in
the report; the total balance of each PPE account was not indicated and the total
number of page/s of each PPE account is not indicated casting doubts as to the
reliability of the report.
UP – Los Baños
200. The University submitted only the Report on the Physical Count of Motor
Vehicles and Other Transportation Equipment as of December 31, 2009 and it was
found that the report was not in accordance with the prescribed form under the
NGAS. No report for other PPEs was submitted.
201. The Inventory Report balances when compared with the book balances of
Motor Vehicle and Other Transportation Equipment revealed the following
understatements:
Per Inventory
PPE Accounts Per Books Difference
Report
6,282, 38,979, (32,696,78
Motor Vehicles 878.78 668.30 9.52)
2,7
Other Transportation Expense 39,200.00 9,017,827.95 (6,278,627.95)
Total 9,022,078.78 47,997,496.25 (38,975,417.47)
202. It was also observed that some of the items listed in the submitted report lacks
information as to acquisition cost, dates or both, which resulted to the difficulty in the
determination of the current Depreciation Charges and Accumulated Depreciation.
203. The Depreciation Expenses and Accumulated Depreciation for both PPE had
the following understatements:
123
Other Transportation
Motor Vehicle Expense
Account Title
Per Under- Per Per Under-
Per Books Audit statement Books Audit statement
Depreciation
Expense 529,090.19 1,082,976.81 -553,886.62 0 260,910.00 -260,910.00
Accumulated
Depreciation 1,652,884.08 3,764,854.77 -2,111,970.69 25,725.00 695,520.00 -669,795.00
204. There were PPE items that include the Firefighting Equipment and Accessories
with a balance of P184,000 which have no provision for depreciation during the year.
The Firefighting Equipment and Accessories were acquired in CY 2006, but since
these have no Accumulated Depreciation balance, it would appear that these were
acquired only in December 2009. Other PPEs have inadequate provision for
depreciation.
205. Machineries valued at P293,663,363.26 have no depreciation charges but the

accumulated depreciation had a balance of P19,801.26. Using the Straight-line
Method of Depreciation, Machineries should have an annual depreciation of
P26,429,702.69.
206. Construction in Progress balance of P67,749,412.84 is composed of

P16,433,511.95 under the General Fund (GF) and P51,315,900.89 under the Trust
Fund. The GF balance of P16,433,511.95 is understated by P23,032,800.31, since the
unpaid amount of P16,433,511.95 was taken up instead of the payments of
P39,466,312.26 made to contractors. The Accounting personnel admittedly erred in
effecting the year-end adjustments and have initiated correcting the errors.
Open University
207. The PPE of P129.747,086.91 is unreliable due to the lack of reconciliation of

Inventory Reports and Subsidiary Records between the SPMO and the Accounting
office. The University however, conducted physical count of PPEs but no Report of
Physical Count of Property, Plant and Equipment (RPCPPE) was submitted. These
deficiencies are clear violations of Section 66 of the NGAS manual Volume II.
208. The foregoing deficiencies as well as the amount of the unreconciled difference
between the Property and Accounting records affected the reliability and fair
presentation of the Property, Plant and Equipment account in the financial statements.
209. We recommended that management institute the following measures to

safeguard its property against loss, misuse or misappropriation due to fault and
negligence in safekeeping:
UP System
• Reconcile the discrepancy noted in the books and property records and
effect the necessary adjustments in the books.
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• Conduct regular physical count and perform regular reconciliation of
accounts and records.
• Regularly update the Memorandum Receipt of Property and have it

acknowledged by the person directly accountable.
UP Diliman
• Instruct the units concerned to trace the discrepancy noted in the books and
property records and record the necessary adjustment in the books.
• Conduct regular reconciliation of book and property records.
UPM-PGH
• Require the Office of the Legal Services to determine the liability of the
Accountable Officers for the lost assets for appropriate recording
of the replacement costs in the books of accounts and for possible
salary deductions.
• Require the Accountable Officers who have requested for the relief of
their property accountabilities to submit all the required
documents to the COA, otherwise, management should require
them to pay the replacement costs of the lost properties.
• Require the UPM Accounting Office to update the PPELC of the UPM
and the UPSHS as of December 31, 2009, indicate the costs of the
assets in the books as appearing in the Inventory Report for
unbooked items. Prepare the necessary adjusting entries for the
deficiencies/discrepancies noted.
• Require the Chief, Property Division of UP-Manila to complete the
Physical Inventory Report for CY 2009.
UP-Baguio
• Require the Accounting and Property sections to reconcile the
discrepancies noted and undertake periodic reconciliation between
the accounting and property records;
• Require the Accountant to effect the corresponding adjustments to
reflect the correct balances of PPE accounts in the financial
statements.
• Require the Supply and Property Management Office (SPMO) and

Accounting Office to reconcile their records as to PPE
classification, fund source and cost.
125
UP – Los Baños and Open University
• Conduct physical count of PPEs every year, and prepare report
thereon using the RPCPPE prescribed under NGAS.
• Reconcile property and equipment contained in the RPCPPE with

that of the Accounting records.
• Strictly follow the Straight-line Method for computing the annual

depreciation charges of the PPEs.
• Take up adjusting entry to restore the correct balance of the

Construction in Progress account in the General Fund from P 16
million to P 39 million.
UP System
o The variance pertains only to 8 vehicles purchased in 1997 which were not
booked because of lack of Memorandum Receipts (MR). Upon
obtaining the MRs from SPMO, the Accounting Office will book these
vehicles and these will be included in the March 2010 Financial
Statements.
UP Diliman
o Reconciliation of records per books and per SPMO for CY 2004 to CY
2005 has been made. Final reconciliation statements are in process.
They are currently reconciling records for the new acquisitions from
CY 2006 to CY 2009. The variance of P111,932,597.88 was traced to
reconciling items prior to CY 2004.
UPM/PGH
o As of December 31,2009 a total amount of P2,874,249.00 equipment was
already recorded, hence, the amount in the audit report should be
adjusted from P13,154,884.50 to P10,280,635.50. The remaining
amount was recorded during the first and second quarters.
UP-Baguio
o Management directed the SPMO and the Accounting Office to reconcile
their records as to PPE classification, fund source and cost.
UP Los Banos
o SPMO has already scheduled the physical count of inventory for 2010.
The reconciliation of records would take tedious back tracking of
transactions since transactions are voluminous. SPMO already
considered the hiring of a contractual to classify and update the
accounts, then reconcile with the Accounting records.
126
o The Straight-Line Method is being followed in the computation of
depreciation. However, not all items were depreciated since the
classification of fixed assets was not established before the
implementation of NGAS. Only acquisitions during the
implementation of NGAS and to date were depreciated.
I. Accounts Payable Overstated by P68.43 million
Recognition of payables was not based on actual claims for goods delivered or
service rendered, as P68.43 million listed as payables in the 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.
211. No obligation shall be certified to accounts payable unless the obligation is

founded on a valid claim that is properly supported by sufficient evidence and unless
there is proper authority for its incurrence. Any certification for a non-existent or
fictitious obligation and/or creditor shall be considered void xxx. Section 46 of PD
1177.
212. For proper matching of costs against revenues, expenses incurred during the
period for goods delivered or service rendered must be recognized and reported
during the period it was incurred.
213. Recognition of Payable should be based on valid claims, and validity shall
include proper authority to incur the obligation, existence of valid contract, actual
delivery of goods and rendition of service, identification of the bonafide supplier or
creditor. Once the Payable account is already certified it can no longer be removed
from the list or be changed, except on the instances specifically provided under the
rules. If these were strictly observed, the practice of reprogramming certain payable
accounts can never be an option to consider.
214. While Section 98 of PD No. 1445 provides for the reversion of unliquidated
balances of accounts payable. “The Commission, upon notice to the head of agency
concerned, may revert to the unappropriated surplus of the general fund of the
national government, any unliquidated balance of accounts payable in the books of
the national government, which has been outstanding for two years or more and
against which no actual claim, administrative or judicial, has been filed or which is
not covered by perfected contracts on record.”
215. On the other hand, Sections 153, 154 and 155 of the same Manual on NGAS
Volume III prescribes the use of the accounts GSIS Payable, Pag-ibig Payable and
Philhealth Payable for liabilities for collections or amount withheld from officers and
employees and government contribution for remittance to GSIS, Home Development
Mutual Fund or Philippine Health Insurance Corporation.
127
216. Likewise, Section 157 prescribes the use of “Due to Officers and Employees”
for unpaid salaries, fringe benefits and other emolument and other obligations due to
officials and employees of the agencies as well as liabilities arising from the
cancellation of checks issued to officers and employees subject to replacement.
217. Verification on the list of Payables and other relevant records showed the
following deficiencies:
Particulars Amount Remarks

UP System P56,728,499.91 The amount based on the report submitted by
Budget office pertains to the different offices
but no documents to establish validity,
reliability and correctness were provided, and
the payees and the nature of service rendered
were not also identified, violating Sec. 46
Par. 2 of PD 1177.
The weakness of control procedures and the

deficiencies noted pointed out that the
payables to various offices under UP Systems
were unreliable, thereby, overstating the
recorded payable and expense accounts
during the year.
UP Diliman P11,603,952.28 Of the P1.7 billion Accounts Payable

balance, P11.6 million aging 91 days to more
than three years, for various personnel
services, and maintenance and other
operating expenses were not supported with
sufficient evidence/documents for goods
delivered or services rendered to establish
proper and valid claims contrary to Section
46 Par. 2 of PD 1177, and overstating the
expense and liability accounts at year-end by
the same amount. Details as follows:
P8,395,531.59 payables to different

offices, represent the unexpended
balance of prior years’ obligations that
need to be reverted back to the general
fund of the government.
P339,460.00 has no identified

supplier/creditor, and the purpose was
not clearly disclosed.
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P1,150,000.00 were funds allotted for
the University’s scholarship program but
no identified awardees to date.
P1,049,702.12 subject for

reprogramming or reversion to LRF.
P669,258.57 administrative cost of

infrastructure projects but with no cash
release, hence, the payables must be
adjusted.
UPV Cebu P97,118.30 The amount outstanding for more than two
years, was not reverted to the GF as required
in Section 98 PD 1445;
Accounts Payable in GF-101 of P 77,368.30

represents various claims of teachers
outstanding for more than two years since
they left the university without clearance to
work abroad, while payables to UP
Cooperative were expenses of P 19,750.00
for reproduction of various documents that
was outstanding for over two years since no
official billing was made.
Total P P68,429,570.49 Overstatement
UP System & Diliman

• Strictly comply with Section 46 Par. 2 of PD 1177,
• Observe the Accounting Principle of the Proper Matching of Cost

against Revenues, for the fair presentation of the Financial
Statements, and
• Indicate the nature of transaction in the Statement (List) of Payables

and clearly identify the Creditor.
UPV Cebu
• Management require the accountant to revert the accounts payable

totaling P97,118.30 to prior year adjustments /government equity
accounts pursuant to Section 98 of of PD 1445.
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219. Management has given their comments as follows:
UP System
o At the end of each year, UP estimates the unpaid obligations for

utilities, scholarships and other operating expenses in anticipation
ofthe submission of relevant documents. Those amounts not spent
within the period have been reprogrammed as authorized by RA 9500.
220. The Audit Team wants to reiterates that recognition of payable accounts should
not be based on estimates, but rather on determined and validly supported claims. The
authority to reprogram accounts has nothing to do with the required fair presentation
of the payable accounts.
UP Diliman
o The Management in its reply dated July 27, 2010 provided the
following information:
a. That savings from allotment totaling P8,395,531.59 are for reversion.
b. P1,490,630.13 unexpected balances of prior years’ obligation are for

reversion/reprogramming.
c. P12,900,000.00 payable to College of Engineering have valid

creditors, contract awarded in CY 2010.
d. P5,000,000.00 payable to the College of Mass Communication was for

Broadcast World Philippines as creditor.
e. P366,470.00 payable to the College of Science was for Compucare

Center Corp. as creditor.
f. P70,500.00 valid payable for UP Solair
g. P315,290.67 payable to the NSRI was for PGM Construction-

Renovation of NSRI DNA Lab.
h. P3,487,142.62 is a valid payable claim to UP System.
i. P1,150,000.00 were fund allotted for the University’s scholarship

program.
j. P339,460.00 payable to NCPAG has no valid claimant.
130
k. P662,675.51 for reversion to LRF.
l. P387,026.61 for reprogramming.
o It was concluded that payable accounts totaling P10,225,621.72 will be

reverted to equity account or will be subjected to reprogramming. It
was also stated that those with valid claimants are all covered by
Obligation Slip/Budget Utilization Request.
221. Further, the Audit Team wants to stress that Obligation Slip/Budget Utilization
Request is not sufficient to support recognition of Payables. It must be supported with
valid contract or PO and proof of delivery and acceptance. This Office will continue
to monitor and evaluate action taken by management on this finding.
J. Overstatement of Other Payables Account by P 686.50 million
Other Payables account of the 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 and inadequate documentation and SL,
rendering the account balance unreliable.
222. Paragraph 2, Section 111 of P.D. 1445 on Keeping of Accounts provides

among others, “that the highest standards of honesty, objectivity and consistency shall
be observed in the keeping of accounts to safeguard against inaccurate or misleading
information.”
223. The description of the accounts as well as the instructions for the use thereof
are carefully prescribed in the NGAS Philippine Government Chart of Accounts
(PGCA), to achieve uniformity in the recording of government transactions.
224. The PGCA is an important control as it provides the framework for determining
the information presented in the Financial Statements. It likewise proves helpful in
preventing classification errors as it describes the type of transactions falling under
each account.
225. The account Other Payables (439) is used to record other liabilities not falling
under any of the specific payable accounts.
226. Section 12 of the Manual on the NGAS provides among others that the SL
contains details/ breakdown of the balance appearing in the GL. The totals of the SL
balances shall be reconciled with the respective control account regularly or at the
end of each month and schedules shall be prepared periodically to support the
corresponding controlling GL accounts.
227. The analysis of the account’s transactions disclosed the following errors which
misstated the Other Payable account balance at year end:
131
Campuses/Fund Per Books Per Audit Difference Remarks
UPM/PGH - P620,427,184.47 P 280,503,555.99 P 71,106,294.93 Misclassification
F 184 268,817,333.55 No SL
UP Cebu P12,837,065.62 - 12,837,065.62 Misclassification
UP – Los Baños P2,179,698,590.85 P 845,981,996.12 P333,716,593.73 Overstatement
Total P 2,812,962,840.94 P 1,126,485,552,11 P 686,477,287.83
UPM-PGH
a. The total of P71,106,294.93 for erroneous items consist of: a) revolving

fund income/collections; b) receipt of funds from the
NGAs/Government Owned and Controlled Corporations (GOCCs)
for research projects; and c) stale checks and unremitted payments of
personal telephone calls, as follows:
Particulars UPM PGH Amount Remarks
Income (RF) 32,139,451.59 - 32,139,451.59 Income

Due to Other NGAs 30,402,130.82 - 30,402,130.82 Misclassification
Due to Other GOCCs 1,246,437.05 - 1,246,437.05 of accounts
Accounts Payable - 7,318,275.47 7,318,275.47
Totals 63,788,019.46 7,318,275.47 71,106,294.93
b. P279,876,974.24 consists of donations/trust funds received for specific

purposes, share from the income of the Hospital from the use of the
supplier’s equipment covered by tie-up agreements and the collections
for special trust funds created for specific purposes as approved by the
UP-BOR totalling P128,547,695.69 which was temporarily parked to
account Other Payables pending provision of the COA for appropriate
account for the restricted income;
c. P626,581.75 pertains to CRECHE and Child Development Center fund

balance as of September 30, 2009; and
d. Other payables of P 268,817,333.55 were not supported by SL rendering

the account unreliable;
e. There were 32 donors’ accounts which remained dormant from two to six
years (CY 2003 to CY 2007).
f. Collections of P32,139,451.59 set aside as special trust account without

the UP-BOR approval were supposed to be credited to income under
the RF and should be included in the yearly Internal Operating Budget
(IOB) of the University to be approved by the UP-BOR.
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g. Collection of hospital fees are being temporarily deposited to UPM Trust
Liabilities under DBP Combo Account No. 0410-002882-033 and at
the end of the month the collections are being reclassified and the
corresponding amount transferred to the appropriate bank accounts
thru the issuance of Transfer Order to the bank.
UPV Cebu
a. Tuition fee increments in the graduate and undergraduate schools

totaling P12,837,065.62 were recorded as Other Payables account,
instead of Income contrary to COA Circular 2004-008 dated
September 20, 2004 which classifies/defines Other Payables (Account
439) under Other Current Liabilities. The practice materially misstated
the income and liability accounts and affects the fair presentation of
the year-end financial statements.
b. The accountant justified that the practice of recording tuition fee

increment income to Other Payables account is a UP system wide
practice.
UP – Los Baños
a. The Other Payables account was overstated by P333,716,593.73 due to

erroneous inclusion of various liability accounts totaling
P143,854,441.79, Other Deferred Credits of P194,625.00 and Service
and Business Income of P 189,667,526.94, thereby, understating the
related accounts and rendering the account balances unreliable. The
details are as follows:
Account Title Amount

151,230.
Due to National Treasury P 52
Due to BIR 80.00

13
Due to Other NGAs 2,202,466.83
1
Due to Officers and Employees ,824,325.27
9
Guaranty Deposits Payable ,412,976.37
Performance/Bidders/Bail/bonds Payable 263,362.80
Other Deferred Credits 194,625.00

18
Service and Business Income 9,667,526.94
Total P P 333,716,593.73
b. Further analysis of the transactions under Other Payables account

disclosed the following errors:
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1. Project funds of P124,575,712.29 received from various NGAs were
not credited to Due to Other NGAS. The SL of these projects were
labeled by project titles without any reference to the agency-source of
the funds, thus, the creditors to which the University has to liquidate
its accountability cannot be easily identified.
2. The Terminal Financial Report on Project: Collection, Conservation,

Regeneration and Re-introduction of Indigenous Orchids in Selected
Protected Natural Habitats from June 1, 2008 to May 31, 2009 funded
by the Philippine Council for Agriculture, Forestry and Natural
Resources Research and Development (PCARRD) had a balance of
P159,512.29, duly certified correct by the Accountant and reviewed by
the Chief, Internal Control Office, however, per audit, the project still
has a balance of P1,184,804.13 as of May 31, 2009 which showed that
the Financial Report was prepared without reconciling its balance with
the balance per books.
3. Unclaimed salaries and wages, honoraria, among others, totaling

P2,074,499.12 was not credited to Due to Officers and Employees
account.
4. Guaranty Deposit Payables of P9,412,976.37 and Other Deferred

Credits of P194,625.00 or a total of P 8,607,601.37 and Service and
Business Income totaling P189,667,526.94. were erroneously
recorded as Other Payables.
5. Previous Years’ balance of P 1,549,663,959.56 consists of several

liability accounts’ balances that were lumped to the Other Payables
account prior to the computerization of the University’s accounting
system in the early 1980’s, which could not be verified for lack of
documentation.
228. We recommended that management require:
UPM-PGH
• The Accounting Office to evaluate the existing MOA of the Donors

with dormant accounts. For completed projects, where the
UPM/PGH is authorized to spend the remaining balance, the
amount could be transferred to the revolving fund (RF) account of
the University and included in the yearly internal operating
budget for approval of the UP-BOR. In case there is a provision
in the MOA to return to the Donor the unexpended balance and
for project implementation dependent on the Donor’s,
Management should communicate with the Donors on the status of
their funds with the University for the return of the unexpended
balances; and
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• The Cashier to transfer the corresponding cash from the Trust
Liability Account to the RF account with the bank for the
unauthorized special trust fund, to deposit the amount collected to
the RF account maintained with the DBP under Account No. 0410-
002882-032 and transfer to the respective trust accounts at the end
of the month the other collections held in trust.
UP – Los Baños
• Take up the necessary adjusting entries to reflect the correct balances

of the Other Payables and other affected accounts.
• Prepare aging of Due to Officers and Employees and Due to Other

NGAs to determine the current and those outstanding for two
years or more.
• Determine the details of P1,549,663,959.56 which should guide the

University in its proper disposition.
UP Manila
o UP Manila and UP PGH are starting to reclassify the amounts accordingly.
UP Los Baños
o Other Payables pertain to Restricted Funds and Trust Receipts approved

by the Board of Reagents. Payment out of such funds shall be made in
accordance with the purposes for which the fund is created and subject
to accounting and auditing regulations.
K. Improper/Illegal Expenditures of P 10.96 million
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.
230. Section 28, Volume I, NGAS Manual provides for the basic requirements
applicable to all types of disbursements made by national government agencies, as
follows:
a. Existence of a lawful and sufficient allotment certified as available by

the Budget officer;
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b. Existence of a valid obligation certified by the Chief Accountant/Head
of Accounting Unit;
231. Section 158 of Volume 1 of the Government Accounting and Auditing Manual
provides:
“Heads of departments, bureaus, office and agencies shall not

incur nor authorize the incurrence of expenditures or obligations in
excess of allotments released by the Budget Secretary for their respective
departments, offices and agencies. Parties responsible for the incurrence
of overdrafts shall be held personally liable therefore.”
232. Sec.317. GAAM, Volume I, states that, “The officials/employees who are
entitled to receive RATA are:
a. Those who are expressly authorized in the General Appropriation

Act (GAA) and those of equivalent rank as may be determined by the DBM;
and
b. Those who are duly designated by competent/appointing authority

to a vacant position which is entitled to RATA.
233. Disbursements made by the three UP campuses were either in excess of

allotment/lack legal basis as follows:
Campuses Expenditures Deficiencies

UPV Miag- P 103,500.00 The honoraria and salaries of the UPV-
ao, College of Arts and Sciences (CAS)
Iloil personnel for the project entitled “Philippine
o Cultural Education Program – Regional
Cultural Mapping Project for Region VI”
from August 1 - November 30, 2008, who
were appointed by the UPV Chancellor
prior to her assumption of Office of the
Chancellor on November 1, 2008.
P18,000.00 The Commission on Higher Education

(CHED) Higher Education Development
Project-Faculty Development Program
(HEDP-FDP) Phase IV transportation
allowance given to grantee who did not meet
the requirements specified in the Revised
Implementing Guidelines of the HEDP-FDP.
The purchase of motor vehicle for UPV-Oil
136
Campuses Expenditures Deficiencies
P 686,000.00 Spill Response Program (OSRP) without
authority from the Office of the President
(OP) as required under Section 75 of
Executive Order No. 292 dated July 25,
1987 and par 9.0 of AO No. 233 dated
August 1, 2008.
UPV- P7,408,594.33 Overdraft due to payment of salary

Tacloban increases, other personnel benefits and
stipend of FM Romualdez’ scholars for CY
2009, despite insufficient allotment/subsidy
in violation of Section 28, Volume I, NGAS
Manual.
UP Baguio P1,257,741.55 The continued payment of Representation

and Transportation Allowance (RATA) to
designated heads of Administrative Offices
and Financial Services in UP – Baguio was
not in accordance with National Budget
Circular (NBC) No. 404
Open P 1,001,376.00 Honorarium payments for the period January
University 1 to December 31,2009 was contrary to
Budget Circular No. 2003-5 dated
September 26,2003, thus overstating the
expense account.
P 480,000.00 The payment of RATA to employees was

contrary to the General Provisions No. 47, of
the GAA and Sec. 317, of GAAM Vol. I,
hence, overstating the expense account.
Total P 10,955,211.88
UPV – Iloilo
• On payment of salaries and honoraria
1. The appointed Project Director, Database Manager and the two

Researchers were paid their honoraria for the months of August to
October 2008 totalling P67,500.00. Subsequently, on August 1,
2008, the Project Director hired a Research Assistant with a monthly
salary of P9,000.00, chargeable against the project cost as presented in
the line item budget and was paid her salaries from August 1 to
November 30, 2008 totaling P36,000.00.
137
2. Documents showed that the temporary appointments issued by the
Chancellor took effect on August 1, 2008, three months before she was
appointed by the UP-BOR as Chancellor on November 1, 2008. The
authority vested by the UP-BOR upon the Chancellor is presumed
effective only during her term, that is, from November 1, 2008 to
October 31, 2011, but not prior to or beyond such term. She had no
authority then to issue said appointments which took effect before her
assumption to office as Chancellor, thus, considered illegal and
improper, hence ineffective.
3. On the other hand, the Project Director cannot hire a research

assistant as of August 1, 2008 inasmuch as her appointment was
considered ineffective due to the above reasons.
• On payment of HEDP-FDP Phase IV transportation allowance
1. The MOA entered into by and between the CHED and the UP - Miag-
ao, Iloilo on August 11, 2006, identified the UPV as one of the
participating Higher Education Institutions (HEIs) where the
scholarship program shall be fully implemented.
2. Section II (4) of the Privileges for Part time Faculty Scholar of the
Revised Implementing Guidelines of the HEDP-FDP provides that:
Transportation Assistance of the following terms:
 Summer: One round trip air/boat/bus fare to and from, subject to

the submission of receipt/s
 Semester/Trimester/Quarter
P1,000 per month for 50 – 150 kilometers

P1,500 per month for 151 – 300 kilometers
P2,000 per month for 301 kilometers above
3. Documents submitted by UPV – CAS and interview of the staff on the

scholarship program revealed that they did not receive a copy of the
scholarship contract for the Master of Chemistry, although there was a
letter dated January 14, 2008, from the Co-Director-in-Charge of the
HEDP-FDP, CHED Central Office, informing that the application for
the said scholarship was approved.
4. The part-time scholar was allotted the amount of P24,000.00 for her
transportation allowance. Records showed that the grantee received
transportation allowance totaling P18,000.00 in violation of the above-
quoted Implementing Guidelines, because she is residing in the City
138
139
proper of Iloilo and the classes were also held at the City Campus of
UPV, and the distance between her residence and the UPV is below 50
kilometers.
• On the purchase of motor vehicle for use of UPV-OSR without

authority from the OP
a. Supporting documents of the DV lacks the following supporting

documents as required by laws/regulations, to wit:
b. Section 75 of EO 292 or the “Administrative Code of 1987” provides

that: “No appropriation for equipment authorized in the GAA shall be
used directly or indirectly for the purchase of automobiles, jeeps,
jeepneys, station wagons, motorcycles, trucks, launches, speedboats,
airplanes, helicopters and other types of motor transport equipment
unless otherwise specifically authorized by the President.”
c. Likewise, Section 9.0 of AO No. 233 dated August 1, 2008 requires all
government agencies enumerated in Section 1 thereof, to seek
approval of the OP for the purchase of the passenger van or pick-up
type vehicle with an engine displacement not exceeding 2200cc, if
gasoline-fed; or 3000cc, if diesel-fed.
d. Surety Bond is required under Section 62.1 IRR of RA 9184 for the
procurement of goods to assure that manufacturing defects shall be
corrected by the supplier, manufacturer, or distributor, as the case may
be. A warranty is also required from the contract awardee for a
minimum of three months for supplies and one year for equipment,
after the performance of the contract. The obligation for the warranty
shall be covered by either retention money equivalent to at least ten
percent (10%) of every progress payment, or a special bank guarantee
equivalent to at least ten percent (10%) of the total contract price. The
said amounts shall be released after the lapse of the warranty period
provided that the goods supplied are free from patent and latent defects
and all the conditions imposed under the contract have been fully met.
UPV Tacloban
a. For CY 2009, the UPV-Tacloban received total GF-101 subsidy of

P39,879,913.63 from their Regional Office, the UP – Iloilo, to cover
operational expenses of the University.
b. Total expenses incurred of P47,288,507.96 was 19% higher than the

subsidy resulting in an overdraft of P7,408,594.33. The expenses
consisted of P43,959,324.95 for Personal Services (PS) and
P3,329,183.01 for Other Maintenance and Operating Expenses
(MOOE).
140
c. Expenses for personal services were for payment of salary increases and
other benefits of the UPV-Tacloban as authorized by UPV-Iloilo
Regional Office. Several requests were made to UPV-Iloilo, but the
corresponding subsidy/allotment as of year-end, was not yet received.
d. MOOE expenses of P829,500.0 were incurred for the scholars of the

Congressman of the first district of Leyte, charged to Fund 101,
however, only P500,000.00 was covered by allotment for CY 2009,
thus, a remaining balance of P329,500.00.
e. In January and February, 2010, the UPV-Tacloban received from UP

Iloilo the total allotments of P 3,572,644.06 to cover for the partial
overdraft in the PS and MOOE of CY 2009, thus, a balance of
P3,835,950.27.
UP Baguio
a. Item 4.5 paragraphs 4.5.1 and 4.5.2 of National Budget Circular

(NBC) No. 404 states that:
“The designated head of Administrative and Financial

Services of state university is entitled to RATA provided the
unit has at least seven (7) personnel occupying regular
items in the Personal Service Itemization.”
b. Payments of similar nature contrary to the above ruling were

previously disallowed through Notice of Disallowance (ND) Nos. 01-
003-101(2001) dated April 17, 2002 and 03-001-101(2002) dated
August 12, 2002. The disallowances were affirmed by the Regional
Legal and Adjudication Office (LAO) under RLA-CAR Decision No.
04-20 dated October 26, 2004 and further affirmed by the
Adjudication Office – National under LAO National Decision No.
2007-023 dated March 9, 2007.
c. On October 13, 2009, the Vice President for Legal Affairs (VPLA),
UP System, wrote the Director, Legal & Adjudication Sector (LAS),
LAO – National, COA, Quezon City requesting status on the LAO –
National Decision No. 2008-075 dated September 30, 2008, which
granted the appeal of UP Open University in Los Baños, Laguna
relative to the disallowance on the payment of RATA to designated
Division Chiefs of UP Open University on whether the said decision
has become final and executory. The Vice President for Legal Affairs
of UP System claimed that UP Open University and UP Baguio are
similarly situated on the grant of RATA to certain chiefs of their
divisions.
d. The OIC-Director of the LAS, LAO – National, COA, Quezon City, in
her letter dated November 10, 2009, informed the VPLA, UP System
that LAO-National Decision No. 2008-075 had been elevated to the
141
COA Commission Proper for automatic review, pursuant to Section 6,
Rule V of the 1997 COA Revised Rules of Procedure. However, final
decision has not been released as of date.
e. Pending final decision, the concerned chiefs of division continued to

receive their RATA, thus, accumulating the amount disallowed from
P809,267.80 to P1,257,741.55 as of December 31, 2009. Waivers
were executed by these Division Chiefs in case the final decision will
be in the negative.
Open University
a. Payment of fixed monthly honoraria of UPOU Officers and casual

employees designated as executive assistant totaling P1,001,376.00 is
contrary to Budget Circular No. 2003-5 dated August 26, 2003.
b. This is a reiteration of the observation from years 2004 to 2008, on

which Audit Observation Memoranda were issued by the Auditor and
acknowledged by the management. However, the practice was never
stopped since management insists on granting of fixed honoraria to
personnel not entitled to it as per Budget Circular No. 2003-5.
c. Moreover, payment of RATA to employees totaling P480,000.00 is

contrary to the General Provisions No. 47, of the GAA and Sec. 317,
of GAAM Vol. I, hence, overstating the expense account.
UPV – Iloilo
• On payment of salaries and honoraria
a. Temporary appointments of personnel to special projects be issued

only by duly authorized appointing officer/s of the University; and
b. Require the project staff to refund the salaries and honoraria

paid to them for the period August 1, 2008 to October 31, 2008,
otherwise, the person responsible for the illegal and unauthorized
payment thereof, be held jointly and severally liable therefore.
• On payment of HEDP-FDP Phase IV transportation allowance
a. Scholarship coordinator to review the guidelines before granting

privileges to scholars; and
142
b. Scholar/grantee to refund the transportation allowance or require
the Accountant to deduct the amount from other
claims/entitlements of the scholar.
• On the purchase of motor vehicle for use of UPV-OSRP without

authority from the OP
a. Secure authority from the Office of the President for the purchase
of motor vehicle and to require the Supplier to post a Surety bond.
UPV Tacloban
• Strictly comply with the provisions of the NGAS Manual and
require the accountant to follow up the additional
allotment/subsidy from the UP-Iloilo for the balance of the
overdraft in the amount of P3,835,950.27.
UP Baguio
• To prevent accumulation of the disallowed amount, discontinue
the granting of RATA to the concerned Division Chiefs until the
release of the final decision of the COA Commission Proper.
Open University
• We recommend that management secure authority for exemption
to Budget Circular No. 2003-5 to make the payments legal.
• Management to stop the granting of RATA to officials and

employees who are not among those enumerated in the above-cited
provisions of law.
UP Visayas
o Regarding the honoraria and salaries of UPV-College of Arts and Sciences
(CAS), Chancellor Minda J. Formacion signed the appointments on
the basis of the approval of the former Chancellor Dr. Glenn D.
Aguilar. As explained, the project funds usually come late and the
appointment cannot be issued unless funds are received by UPV.
o The Accountant promised to follow up the lacking subsidy/allotments

from their Regional Office for CY 2009 to cover for the overdraft.
On the purchase of motor vehicle for use of UPV-OSRP
o In November 2007, the former Chancellor of UPV endorsed to the UP

President the request of Program Manager of OSRP to purchase a land vehicle
which was endorsed by the UP System to the DBM for issuance of authority to
purchase said vehicle as reiterated in its letter
143
of November 2008. The UP System Budget Office advised verbally
UPV Budget Office that there is no need for a separate written
approval from DBM as the SARO has been issued to UPV, and that it
represents the authority to purchase the vehicle.
236. The Audit Team pointed out that Sub-SARO No. UP-S-292-05-014 does not
constitute an authority to purchase motor vehicle as it is only an advice that the
allotment of P50,000,00.00 was released to the UPV. Moreover, said Sub-SARO
requires that the purchase of vehicle/s shall be subject to the provisions of
pertinent laws and shall be in accordance with NBC Nos. 446 and 446-A, as amended
by AO No. 223 dated August 1, 2008 which requires all government agencies
enumerated therein to seek approval of the OP for the purchase of the passenger van
or pick-up type vehicle with an engine displacement not exceeding 2200cc, if
gasoline fed; or 3000cc, if diesel fed.
237. Likewise, we noted that the Service Warranty issued by the supplier, was not in
the form of a Surety Bond as required under Section 62.1 IRR of RA 9184.
Inspection conducted by the COA Technical Audit Specialist revealed that the 10%
retention or special bank guarantee as required under Section 62 of RA 9184 was not
imposed by the University or complied with by the Supplier. The applicable laws,
rules and regulations governing purchase of motor vehicles should be duly complied
with to protect the interest of the government and avoid possible suspension of the
transaction in audit.
Open University
o In a letter dated June 9, 2010, management commented that Budget
Circular No. 2003-5 is not necessary and applicable and the payment of
honorarium were charged against the income of the University and not to its
regular appropriation in the GAA, hence, the payment is not covered by the said
DBM Circular.
238. The Auditor also emphasized that Authority for the use of income should also
be secured.
239. Management commented that COA-LAO-National, in its decision No. 2008-

075 dated September 30,2008, granted the Motion for Reconsideration of the UP
Open University on the disallowance issued by the RCD-LAS, COA Region IV on
the payment of RATA to the designated chiefs of UPOU.
240. The aforecited LAO-National Decision No. 2008-075 is subject for deferment.
Payment of RATA to employees was contrary to the General Provisions No. 47, of
the GAA and Sec. 317, of GAAM Vol. I, hence, overstating expense account.
144
L. Understated Electricity expense
The Electricity expense account of P6.32 million of the UP System 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.
241. Bills for mandatory expenses should be closely monitored and controlled for
proper budget allocation and appropriate recording of charges in the books. Payments
should be prioritized to avoid service interruptions.
242. During the year 2009, the UP System Administration incurred a total of
P6,317,219.00 expenditures for MERALCO electricity bill. Audit on a test basis of
the expenditure vis-a-vis the corresponding MERALCO bills for the period of August
to October 2009 disclosed an accumulated unpaid charges of P4,615,708.92, or 89
percent of the total charges of P5,185,804.89 during the said period.
243. However, only P1,523,318.54 or 33 percent of the unpaid amount was certified
to accounts payable hence, the balance of P3,092,390.38 was unrecorded resulting to
understatement of the Electricity expense at year end.
244. It was observed that the UP System allocates the MERALCO bill/charges to the
different offices within the area covered by the bill statement. Each office is required
to prepare an individual disbursement voucher payable to MERALCO for its
equivalent share charged against its office’s budget for the year. This manner of
preparing and paying the electricity bill by office in the absence of close monitoring
of its total payments against the appropriate billing statements led to unpaid charges.
245. It has to be stressed that as electricity consumption is a mandatory expense, the

payment of which is regularly funded from the System’s appropriations hence, the
MERALCO bill for the period indicated therein can be paid in full. This will simplify
processing of transactions and insure full payment on time. As it is, the different
offices would no longer receive allocation for electricity expenses as the funding and
payment would be centralized at the System Administration.
246. We recommended that management of the UP System:
• Reconcile and make the necessary adjustment for the discrepancy

between the certified MERALCO payable and the unpaid accounts
appearing in the monthly billing statement; and
• Consider the centralized payment of MERALCO bill rather than

preparing individual voucher by office to avoid unnecessary delay and to
facilitate monitoring of electricity expenses.
145
247. Management commented that :
o The discrepancy can be due to the usual one - to two-month delay of

the Statement of Accounts from MERALCO and the two - to three-week
processing time for payments.
o The practice of decentralizing electricity expense vouchers has been

adopted to ensure the accountability for usage from the different offices. It would
not be desirable to centralize the payment of MERALCO bills for monitoring and
control reasons.
248. The Audit Team would like to emphasize that reconciliation of accounts should
be done to clear the billing statement of prior periods’ unpaid charges. Accountability
can still be determined on the suggested system. The presence of unpaid prior periods
charges negates the view that proper monitoring was easier in the present practice.
M. Long outstanding and undocumented P242.48 million charges to Items in

Transit account
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.
249. Sec.4 (v) of the New Government Accounting System (NGAS) Manual
provides that the use of corollary and negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be debited/credited to the appropriate asset
accounts. If an error is committed, a correcting entry to adjust the original entry shall
be prepared.
250. Sec. 41 of the same manual states that Property, Plant and Equipment acquired
through purchase shall include all costs incurred to bring them to the location
necessary for their intended use, like transportation costs, freight charges, installation
costs, etc. These are recorded in the books of accounts as Assets after inspection and
acceptance of delivery.
251. The NGAS Chart of Accounts provides that Items in Transit Account (284) is
used to record the cost/appraised value of equipment already paid but not yet
received, where shipment is FOB Shipping Point.
UP Diliman
252. As of December 31, 2009, the University has a total balance of

P468,632,510.46 for Items in Transit account composed of current and prior years’
acquisitions as summarized in the table below:
146
Period Fund 101 Fund 005 Fund 009
Debit Credit Debit Credit Debit Credit

Balance
Dec. P 75,732,402.70 P14,555,338.94 P70,609,029.24
2007
CY 8,232,258.43 P29,224,159.20 10,147,968.21 P8,057,436.46 29,071,461.55 P6,653,525.41

2008
CY 180,544,322.18 0 8,045,181.76 2,716,479.48 153,841,457.69 3,5495,309.69

2009
Bal.
Dec. P235,284,824.11 P21,974,572.97 P211,373,113.38
2009
Total
Balance P468,632,510.46
253. However, the reported year-end balance of P468,632,510.46 cannot be relied

upon in the absence of subsidiary ledger, hence, remained unidentified as of year-end.
254. Based on available records, out of the P164,413,338 balance of 2007 and 2008
charges to Items in Transit account, only P3,796,415.00 was adjusted to proper asset
account during the year, leaving a long outstanding balance of P160,616,923.00
which remained unidentified.
UP Los Baños
255. Moreover, Items in Transit account of P81,867,622.42 have been dormant since
CY 2002. A review of records showed that no transactions affecting the account
occurred through the years.
256. It was revealed that the account was temporarily charged in CY 2002 during
the conversion of the books of accounts to the New Government Accounting System
(NGAS) for the semi-expendable inventory property items not knowing the correct
account to use in that instance.
257. We recommended that management require the Accounting Section to:
UP Diliman
• Maintain a subsidiary ledger of Item in Transit account to facilitate
monitoring and adjustments of the account;
• Review the charges to the account and prepare a Journal Entry

Voucher to effect the necessary adjustment in the books; and
147
• Observe the rules provided under NGAS on the appropriate use of the
subject account.
UP Los Baños
• Submit the list of the Items in Transit of P81,867,622.42 to determine
correct classification of the items for adjustment in the books.
258. Management comments and the Audit Team’s rejoinder are as follows:
UP Diliman
• That the Accounting Office always maintained a subsidiary ledger of all
the accounts and forwarded the same to COA on a regular basis. In
addition, for CY 2009, the Accounting Office prepared a
schedule/analysis to support the reliability of subsidiary ledger of
Items in Transit account.
• That the Accounting Office has its documents and records on file to
support and identify the Items in Transit account. The office adjusts
and reclassifies the Items in Transit account to its specific equipment
account based on the Inspection and Acceptance Report (IAR) and/or
Acknowledgement Receipt of Equipment (ARE) forwarded to
Accounting Office by the units concerned and or the Cash Office.
• Of the P160,616,923.00, P45,565,000.00 and P8,000,000.00 under check

nos. 25192876 and 27619450, have not been classified to the
appropriate account. The unit concerned did not submit ARE since
DOST maintains the ownership. The unit concerned was required to
submit documents for recording in the books. However, a total amount
of P57,547,006.54 out P160,616,923.00 was adjusted to asset account
in May 2010.
259. The Audit Team wants to stress that the subject ledger was not submitted to
COA to support audit of accounts as stated. Our working paper was extracted from
available documents we have to support our AOM and the submission of
schedule/analysis was made only after the receipt of the AOM. We however,
appreciate the Accounting unit’s initial steps taken on our observation.
UP Los Baños
• Items in Transit in the amount of P81,867,622.42 pertain to old account
Fixed Assets-Furniture, Fixtures, Equipment Work Animals and
Books- In Process/Transit. These were corollary entries made to record
the cost or appropriate value of the above mentioned assets
requisitioned or purchased but not received. It remained dormant in
the books for several years. A request for dropping from the books will
be made to the Commission on Audit.
260. Management should be advised that Items in Transit Account should be

adjusted to proper asset account, not to be dropped from the books of accounts.
148
N. Non conformity with accrual method of recognizing income
The UP Diliman manner of recording income realized but not yet collected from
its auxiliary and income generating activities did not conform with the accrual
method of accounting for income due to the practice of recording it to Other
Deferred Credits account instead of an appropriate Income account thus,
overstating and understating respectively the aforementioned accounts by at least
P17.59 million at year end.
261. The validity and completeness assertions of the Income account in the
Financial Statements are intended to establish that all revenues earned are recorded in
the books in the correct accounting period.
262. Thus, consistent with sound accounting principles, the recognition of revenue
by the government or the time of recording income is described as being at the “point
of performance”, the time when services were actually rendered.
263. This is essentially the accrual basis of accounting prescribed for use in the
Government Accounting System. Under the said system, transactions and other
events are recorded in the books and reported in the financial statements on the period
to which they relate and not only when cash or its equivalent is received or paid.
264. The University operates various auxiliary services and income generating
activities such as University Food Service, Housing Office, Business Concessions
Office, and University Health Service to augment the diminishing government
subsidies for its school’s operations and enhancing the welfare of its employees and
students thru the income generated from these services.
265. At year-end, Other Deferred Credits account showed a total balance of

P203,101,037.44. Verification however, of the charges made to the account disclosed
that a total of P17,589,792.24 current and prior years’ receivable income from
auxiliary services were erroneously credited to the account which should have been
recorded as credit to an appropriate income account during the period when earned.
The breakdown is summarized in the table below.
Prior Year’s Current

Service Above 1 year 30 days to 1 year Total
University Food Service P450,263.75 P979,055.50 P1,429,319.25
Housing Office 11,725,916.69 3,195,066.17 14,920,982.86
Business Concessions 201,266.93 80,120.48 281,387.41
University Health Service 201,550.23 756,552.49 958,102.72

Total P12,578,997.60 P5,010,794.64 P17,589,792.24
149
266. Moreover, billings sent to various donors of scholarship grants amounting to
P32,388,743.50 were also debited to receivable account and credited to Other
Deferred Credits account instead of the proper income account, which nature is
similar to the situation previously discussed in paragraph 265.
267. It has to be stressed that the Other Deferred Credits is a liability account, and is
used to record collections of income received in advance but no yet earned. The
nature of the transactions being questioned are not similar to what is contemplated in
the account’s definition.
268. The management justifies that the practice is due to the University’s budget
system where cash collections are recorded as current income, which supports the
Internal Operating Budget (IOB). Thus, as in past year’s observation of the same
issue, management represented thru the OIC of the Accounting Unit that since
current income supports the IOB, recording income earned but not yet collected to an
income account could result to allotment without cash receipts.
269. Internal Operating Budget System must be consistent with sound Accounting
Principles on the accrual method of recognizing income at the point of performance
or the time when services were actually rendered. The IOB system of the University
could not be affected since only income already collected during the period must be
budgeted or allocated for its operations.
270. During the exit conference in April 2007 for the Consolidated Annual Audit
Report, it was agreed with UP System that the audit recommendation on this subject
(Other Deferred Credits) will be complied with in CY 2007. But until this report, no
favorable action has been taken by the officers concerned.
271. We recommended that the UP Diliman management 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.
272. The Management commented in this finding through the Accounting Section,
as follows:
o The amount of P17,589,792.24 are receivables from various auxiliary

services and income generating activities recorded in the books as debit to
Accounts Receivable and credit to Other Deferred Credits since these are not yet
backed up by cash. However, at year-end before the closing of books, an adjusting
entry is made to record income realized but not yet collected, debiting Other
Deferred Credits and crediting the appropriated income account.
o The same procedure is being used for billing sent to various donors of
scholarship grants amounting to P32,388743.50.
150
273. The procedure of crediting Income Account and debiting Other Deferred
Credits for income not yet collected at year-end before the closing of books may, in a
way be able to reflect actual income earned during the year. However, the
corresponding adjustment made in the ensuing year, wherein the Government Equity
account is directly debited and again Other Deferred Credit account is credited for the
adjustment made at year-end, appears to be impractical and inconsistent with the
basic principles of reporting events or transactions.
O. Non submission of supporting documents for payments of Salaries and

Allowances
Non-submission of the approved paid payrolls, daily time records/certificate of

service rendered, summary of absences and under times, approved application for
leave, and other necessary documents to support the P209,643,521.81 payroll
disbursements restricted the conduct of complete audit on a test basis to determine
reasonable assurance on the legality, validity and correctness thereof.
274. Sec. 4 par (6) of PD 1445 states that claims against government funds shall be
supported with complete documentation.
275. Despite the reinstitution of selective Pre-audit on Government Transactions

under COA Circular No. 2009-002, pre-audit audit activities is still a primary
responsibility of the Agency, and in line with the policy on fiscal responsibility, the
Agency Head must institute an adequate internal control system in order to achieve
economy, efficiency and effectiveness in the management and utilization of
resources. The accounting system shall be strengthened and reviewed to assure
timeliness and accuracy in the processing, analysis and reporting of financial
transactions.
276. Verification showed that a total of P209,643,521.81 had been spent for the
employees salaries, allowances and benefits as of December 31, 2009, as shown in
the table below:
Nature of Disbursement Account Amount

Code
P102,659,
Salaries and Wages –Regular 701 718.36
Salaries and Wages-Casual 705 1,146,412.32
Salaries and Wages-Contractual 706 41,396,199.25

Personnel Economic Relief
Allowance (PERA) 711 1,719,733.33
27,343,27
Additional Compensation (ADCOM) 712 5.15
Representation Allowance (RA) 713 8,570,378.01
Transportation Allowance (TA) 714 7,224,010.00
151
Nature of Disbursement Account Amount
Code
Clothing/Uniform Allowance 715 9,286,241.14
Productivity Incentive Allowance 717 3,598,788.70
Other Bonuses and Allowances 719 60,200.00
Overtime and Night Pay 723 696,565.55

1,058,
Cash Gift 724 625.00
Year End Bonus 725 4,883,375.00

P209,643,5
TOTAL 21.81
277. However, the approved paid payrolls, daily time records/certificate of service
rendered, summary of absences and undertimes, approved application for leave, and
other necessary documents to support the payroll disbursements were not submitted
to the Auditor for custody and audit.
278. The interview conducted on the payroll process disclosed the following
information:
a. The Accounting Office prepares the payroll based on the information

(changes in rate due to merit increase or promotion, deduction due to
leave without pay and undertimes) provided by the HRDO on a
monthly basis. However, submission of DTRs/certificates of services
rendered are not required for the payroll preparation and due to time
constraints, counter- checking can no longer be performed by the
Accounting Office. The payroll is paid through the employees’ ATM
accounts.
b. The notice of deduction to employees furnished by the HRDO to the

Accounting Office disclosed prior years’ overpayments, as existing
guidelines do not require specific timelines for submission of
DTRs/certificates of services rendered. At present deductions are
imposed depending on the extent of review conducted by the HRDO
on the submitted DTRs.
279. In view thereof, the complete audit on a test basis of the P209 million payroll
disbursements to determine reasonable assurance on the legality, validity and
correctness thereof was restricted.
152
280. We recommended that management observe strict compliance on the
timely submission of approved payroll and its supporting documents to the
Auditor, hence it should promulgate a policy for the regular preparation and
submission of employees’ DTR/Certificates of service rendered, approved leaves
of absences, and the summary of absences and undertimes to the HRDO to
facilitate submission of said documents to the Accounting Office.
281. Management commented after the exit conference that they will comply with
the Audit Recommendations but with at most, a two-month lag, i.e. supporting
documents attached to payroll will be pertaining to two months prior to the payroll
date
P. Job Order Contract without Employer-Employee Relationship for 93

personnel doing functions of regular staff
The UPM-PGH practice of hiring manpower thru Job Order Contract, which
numbered 93 in 2009 and whose appointments are renewed every six months in a
period of one to four years, should be revisited and should continue requesting
from the DBM for regular plantilla items to protect the interest of the employees
concerned as well as that of the University.
282. Section 47 of the General Provisions of the GAA or R.A. 9524 provides:
“Employment of Contractual Personnel. Heads of

department, bureaus, offices or agencies, when authorized in, and
within the limits of, their respective appropriations under this Act,
may hire contractual personnel as part of the organization to
perform regular agency functions and specific vital activities or
services which cannot be provided by the regular or permanent staff
of the hiring agency.”
283. The contractual personnel employed pursuant to this section shall be considered
as an employee of the hiring agency, limited to the year when their services are
reasonably required.”(underscoring supplied)
284. It has been observed that the University has been hiring Job Order personnel to
augment its workforce because of the creation of additional units/departments without
additional plantilla positions such as the NIH and the Special Operating Room
Nursing Service Program, among others. The following conditions are stipulated in
the Job Order Contract:
“The said job order shall automatically cease upon its

expiration as stipulated, unless renewed. However, services of any
or all of the above-named can be terminated prior to the expiration
of this job order for lack of funds or when their services are no
longer needed. The above-named hereby attests that he/she is not
related within the third degree of consanguinity or affinity to the
1) hiring authority; 2) representatives of the hiring agency 3) that
153
he/she has not been previously dismissed from the government
service by reason of an offense; and 4) that he/she has not already
reached the compulsory retirement age of sixty-five (65).
Furthermore, the service rendered is not considered or will never be
accredited as government service.”
285. During the year 2009, UPM and PGH hired 68 and 25 job order personnel
respectively, or a total of 93 out of the 158 as contained in the List of Job Order
Personnel from the University’s Human Resource Development Office (HRDO),
whose length of service with the University ranges from one year to four years.
These Job Order staff are manning the critical units of the University like the
laboratories of the IHG-NIH, Special Operating Room Nursing Service, the Pharmacy
Department, the Blood Bank and the Accounting Office, etc. The Job Order
personnel’s duties and responsibilities based on their assignments include among
others:
 UP-PGH Laboratories - giving information to patients, receiving

laboratory requests and releasing results, encoding in-patient records,
encoding drugs and supplies issued to donor patients etc.
 UPM- IHG-NIH Biochemical Genetics Laboratory - performs Urine

Metabolic Screening using High Voltage Electrophoresis specifically
the specimen reception, specimen treatment, specimen analysis,
preliminary clinical interpretation and generation of results.
 UPM- IHG-NIH Cytogenetics Laboratory – extracts samples, data

collection from patients of all IHG units, perform blood culture and
harvest, banding and staining of slides, analysis of blood samples,
inventory of supplies and reagents, prepares annual statistical report of
Cytogenetics patients and performs research functions as assigned by
the Head of the Cytogenetics unit.
 UPM- IHG-NBS Laboratory – performs washing and autoclaving of

laboratory glass wares, punches dried blood spots (DBS) for the 5-
panel test of Newborn Screening, performs PKU test (Batch II), does
the daily maintenance of DBS multipuncher, performs G6PD test,
prints and downloads results, and faxes information and follows up
calls of unfit samples.
 UP-PGH Accounting – monitors PCSO Endowment fund, PDAF

guarantee letters and Philhealth claims, prepares disbursement
vouchers for Philhealth and hospital refunds, updates hospital bills of
pay patients, prepares patients ledgers and monthly reports, maintains
Value Added Tax remittance journal, etc. .
154
 UPM-IHG Accounting – provides expertise in statistical analysis
necessary in the researches conducted by IHG faculty and staff,
prepares Sales Invoice for the hospitals under the PO system, checks
and verifies ORs vis-à-vis collection reports submitted by Cashier on
a daily basis, performs bank reconciliation, pre-audits vouchers, and
journalizes receipts, disbursements, payroll and other adjustments..
 UPM Cash – prepares, reconciles, checks and reviews the Report of

Disbursements by checks daily; prepares Monthly Report of
Investments, Investment Order Forms, List of Placements Maturities
for the month and letters for placement of time deposits; receives and
counterchecks deposits against the passbook and monitors and
numbers the requested accountable forms (ORs and Checks).
 UPM Clinical Genetics & Research – writes up/develops/prepares and

evaluates research/project proposals; collects, compiles, analyzes and
interprets data; coordinates with various collaborators relevant to a
particular project; serves as liaison between Research Staff and other
units; and supervises staff (i.e. staff messengers, clerk) for project
related activities such as sample pick-up for data collection, data
encoding and filing.
 UPM IHG HRDO – processes request for filling up of vacated

position, screens job applicants and refers to IHG Director for
interview process appointments, monitors submission of Daily time
Records, Applications for Leave and Certificates of Service, and
prepares service records, Certificates of employment, etc.
286. From the foregoing duties and responsibilities, the Job Order personnel are
doing the work of a regular employee, despite of the fact that their contracts specify
that they have no employer - employee relationship with the University. Their
outputs have to be checked by their immediate supervisor specially in the case of the
IHG which provides services that allow definitive diagnosis and early detection of
potentially treatable conditions. In the case of those assigned with the Accounting
Office, their jobs also involve financial reporting which are also being handled by the
regular employees.
287. We acknowledge the necessity of hiring additional personnel to augment the

University’s workforce and its efforts to continuously request from the DBM for
regular plantilla items in the interest of public service.
288. Moreover, we bring to the University’s attention the case of Lopez et al vs.
Metropolitan Waterworks and Sewerage System (MWSS) under G.R. No. 154472
dated June 30, 2005, which declared that for purposes of determining the existence of
employer-employee relationship, the Court has consistently adhered to the four-fold
test, namely:
155
a. whether the alleged employer has the power of selection and
engagement of an employee;
b. whether he has control of the employee with respect to the means and
methods by which work is to be accomplished
c. whether he has the power to dismiss; and
d. whether the employee was paid wages.
Of the four, the control test is the most important element.
…”It is axiomatic that the existence of an employer-employee

relationship cannot be negated by expressly repudiating it in an
agreement and providing therein that the employee is not an …
employee when the terms of the agreement and the surrounding
circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it
should be. In addition, the control test merely calls for the existence
of the right to control, and not the exercise thereof. It is not essential
for the employer to actually supervise the performance of duties of
the employee; it is enough that the former has a right to wield the
power.”….
289. We recommended that management require the HRDO to revisit the

University’s present plantilla items taking into consideration the additional
units/departments created without additional staff; and to continue requesting
from the DBM thru the UP System the need for regular plantilla items and
funding for the benefit of all concerned.
• The Vice – Chancellor for Administration of UP – Manila informed

that they have been religiously and continuously requesting from the
DBM for additional regular plantilla items and funding whenever they
submit the budget proposal. Unfortunately, they have not received any
formal response from them. Pending release of new positions from the
DBM, Job Order personnel will have priorities in the regularization
and granting of positions in the University provided they pass the
minimum requirements of the vacant positions.
• The Director of the HRDO of UP Manila, also informed that due to

exigencies of the service, the NIH-IHG resorted to hiring of Job Order
personnel. On March 19, 2010, the Chancellor has approved the
creation and filling-up of 25 UPM contractual positions. Some of
these Job Order personnel have already been appointed to these newly
156
157
created positions. To date, there are already nine UPM contractual
positions that have been filled-up. Some colleges and offices are in
the process of identifying vacant items in order to accommodate their
Job Order personnel who are performing the work of regular
employees. Example of this is the College of Medicine which is now
reviewing their existing job vacancies. They are now preparing the
request for unfreezing of items/positions for possible placement of
their Job Orders.
The Director of UP-PGH reasoned out that the exigency of service in

the Hospital, vis–a–vis, the existing financial and administrative
constraints it has been facing, have compelled its previous and present
Administration to resort to job order personnel. They realize, though,
that there are certain aspects of the contract which are wanting. He
also informed that they have continuously submitted and lobbied for
additional funding/positions to augment the existing manpower
requirement of the Hospital. They shall pursue their request from the
DBM and the UP System for additional plantilla items and/or to
unfreeze positions vacated by way of resignation and retirement. They
thank the Audit Team for the audit observation which they believe will
be instrumental for higher authorities to consider their appeal for
additional support, both financially and administratively.
III. Compliance with Tax Laws
The 2,517 UP-Manila/PGH employees, representing 42.47 percent of its 5,927

total workforce subject to withholding taxes as listed in the Alphabetical List for
CY 2009, have no required TIN resulting in the difficulty of monitoring tax
compliance as required under EO No. 98 dated April 28, 1999.
291. EO No. 98 was issued on April 28, 1999 directing all government agencies,
instrumentalities, local government units, and government-owned and/or controlled
corporations to include the TIN as part of the essential requirements in all
applications for a government permit, license, clearance, official paper or document.
292. As TIN is a vital information for tracing a person's taxable transactions under a
computerized system of tax, Section 5 of the EO provides that “Any person who fails
to comply with the requirements of this Executive Order, including the parties
involved in transactions where a TIN is prescribed, and the government functionary
involved in the monitoring or regulating of these transactions, shall be subject to all
the appropriate sanctions provided for in the National Internal Revenue Code and
other pertinent laws and regulations.”
293. Verification showed that for the newly hired employees, the UPM/PGHHuman
Resources Development Division (HRDD) requires the following documents for TIN
application:
158
a. One copy of TIN Application Form (Form 1902)
b. Certified true copy of the following:
For Single Parent with

For Single Employees Dependent Children For Married Employees
Birth Certificate Birth Certificate Birth Certificate
Approved Appointment Birth Certificate of Birth Certificate of dependent
dependent children children
Approved Appointment Approved Appointment
Marriage Contract
Waiver of husband if wife will
claim tax exemption for
their children
294. However, despite the above requirements, perusal of its 2009 Alphabetical List
of Employees showed that of the 5,927 employees, 42.47 percent or 2,517 of them
have no TIN as follows:
No. of Employees per Alpha List With TIN Without TIN % without TIN
UP Manila - 1,327 1,082 245 18.46
UP – PGH - 4,600 2,328 2,272 49.39
Total 5,927 3,410 2,517 42.47
295. The absence of employees TIN resulted in the difficulty of monitoring tax
compliance as required under EO No. 98 dated April 28, 1999.
.
296. We recommended that management comply strictly the provisions of EO
No. 98 for uniform observance by all government agencies of this requirement,
as it is necessary to effectively carry out the purposes of the EO. In case the
application for TIN (Form 1902) was already submitted to the BIR, a copy shall
be submitted to the Auditing Unit for verification.
297. UP-PGH commented that of the 4,600 reported PGH employees, 431 are
UPCM employees, 8 were double entries and 24 were unknown. The HRDD
submitted a report to the Deputy Director for Fiscal Services that the Hospital has a
total of 3,830 employees as of May 31, 2010. Of this number, 3,712 already have
their TINs and only 118 or 3.1% have not yet submitted their TIN. UP-PGH
Memorandum No. 2010 – 57 dated April 5, 2010 was issued requiring each and
every employee to submit their TIN Nos., otherwise their allowances or medicare
shares shall be withheld.
298. The list of 3,830 PGH employees with their corresponding TIN Nos. who
have allegedly complied with the TIN requirement as of May 31, 2010 as well as the
431 allegedly UPCM employees should be submitted to the Auditing Unit, for our
verification.
159
IV. Compliance with Settlement of Suspensions, Disallowances and Charges
Prior Years’ Suspensions, Disallowances and Charges of P5.4 million remained

unsettled in the UP Diliman, PGH and Los Baños campuses contrary to COA
Circular No. 2009-006 on the settlement of government accounts.
299. COA Circular No. 2009 – 006 dated September 15, 2009 prescribes the rules
and regulations on the settlement of accounts audited pertaining to the revenues and
receipts of and expenditures or uses of government funds.
300. Unsettled suspensions, disallowances and charges as of December 31, 2009 as

reflected in the Statement of Audit Suspensions, Disallowances and Charges
(SASDC), of the following UP campuses, showed:
Campuses Amount Remarks

UP Diliman P836,570.18 Unsettled disallowances issued prior to
2009
UP PGH 1,597,115.30 Unsettled Notice of Charges
19,200.00 Unsettled Notice of Disallowance
255,883.99 Unsettled Notice of Suspension
UP - Los Baños 2,678.753.53 The balance of disallowances issued
remained unchanged for the last five years.
The appeals for the various Notices of
Disallowance issued by the RLAO are still
under review by the Legal and
Adjudication Sector, Legal and
Adjudication Office – National. The
disallowances pertain to payment of
honoraria.
Total P5,387,523.00
301. We recommended that management of all the concerned UP campuses

strictly comply with the provisions of COA Circular No. 2009-006 on the
settlement of accounts.
160

09-UP09 Part2-Observations and Recommendations

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09-UP09 Part2-Observations and Recommendations

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OBSERVATIONS AND RECOMMENDATIONS

I. Efficiency and Economy Audit

A. Unreported/undisclosed results of the University Hotel’s (UH) operations

The UH, as a special project under the UP System Administration, continues to

4. The UH continued to operate under the name and authority of UP but

9. We therefore reiterate our previous recommendation that management

10. Management commented that the University faithfully implemented AO 108

o “Section 1- Creation and Composition. There is hereby created a Board of

o “Section 5- Submission of Reports. The Board shall submit a quarterly report

a. Oversee and supervise the operation of the PCED Hostel;

b. Undertake or commission studies designed to improve the management

e. Enter into contracts in matters relating to the operation and management

f. Enter into loan agreement upon the recommendation of the Vice-President

g. Determine the name of the Hostel for approval of the President;

h. Recommend to the Presidential Committee on Campus Planning and

i. Performs such other powers and functions as may be assigned to it by the

17. We recommended that the UP President introduce amendments to the AO

C. Inadequate UP System Guidelines on UP-affiliated foundations

18. Section 1, Article XI, of the 1987 Constitution provides that:

“Public Office is a public trust. Public Officers must at all

“Except as may otherwise be specifically provided by law or

University/College Foundation Officers

25. Moreover, the issue on monitoring and transparency of the Foundations

27. We therefore reiterate our previous recommendation that Management

• No head of unit will become an officer of the foundations; and

• Faculty members of the unit serviced by the foundations should comprise

32. In view of the foregoing conditions, the effects would be as follows:

b. In accepting deliveries of reagents with different lot numbers, the end-

c. The delayed issuance of the Notice of Award and PO to the Supplier

36. We recommended that management:

• Immediately release the Notice of Award and the PO to the Supplier;

E. Inadequate liquidation reports on the Department of Social Welfare and

“8.3 Issue separate Certificate of Settlement and Balances (CSB)

39. The DSWD transferred to the UP PGH P6 million on May 7, 2007, as an

41. As a procedure, the Accounting Services Division in coordination with the

730 36 37 309 244 704

43. We cannot ascertain if the DSWD-funded services at the PGH were

44. We recommended that management:

• Require the Accounting Services Division and the MSS of the

F. Excess Hospital Fees of P202,336.99

Errors in computation and/or classification of the UP-PGH patients’ Philhealth

50. We recommended that management:

• Require the Billing Section to coordinate from time to time with

• Require the attending physician to indicate the ICD – 10 Code of

o Late submission of PhilHealth papers;

G. Inadequate implementation of Gender and Development (GAD) Program

The six UP units/campuses failed to allocate at least 5% of their CY 2009 approved

53. Section 29 of the General Provisions of RA 9524 (General Appropriation Act

Section 4.4.3 The conduct of massive information, education and

Section 4.4.6 Department/agency heads shall ensure the implementation of the

Unit/Campus Allocation Remarks

UP System P3,800,000.00 a. Allocation was only 1.74%, of its P218,106,000.00

• Teaching of basic and advanced ICT

• Strengthening linkages with other

c. Budget and plan was not submitted to the NCRFW

UP Diliman 3,938,280.00 a. Allocation for the GAD program was only

b. Per 2009 Annual Report, the GAD activities

• Review, creation, production,

• Special Activities - P 120,000

• Research and monitoring the

d. The budget and plan was not submitted to the

UP-Manila/ 3,600,000.00 a. The GAD focal persons submitted to the Budget

b. The GAD plan and budget was not approved by the