PART II

OBSERVATIONS AND RECOMMENDATIONS

I. FINANCIAL AND COMPLIANCE

Unreconciled Property, Plant and Equipment- P1,991,968,010.29

1. The consolidated balance of the Property, Plant and Equipment (PPE) accounts
of PSU totaling P1,991,968,010.29 as of year-end does not reconcile with the
Report on the Physical Count of Property for Plant and Equipment of
P1,701,905,242.39, or a difference of P290,062,767.90, which is not in conformity
with Section 38 and 42 of the Government Accounting Manual (GAM), thus the
accuracy, existence and physical condition of these assets could not be
ascertained.

Section 38, Chapter 10 of Government Accounting Manual (GAM) for

National Government Agencies, Volume 1 on Accounting and Property Records to
be maintained for PPE provides that the entity shall have a periodic physical count
of PPE, which shall be done annually and presented on the Report on the Physical
Count of Property, Plant and Equipment as at December 31 of each year. The report
shall be submitted to the Auditor concerned not later than January 31 of the following
year. Equipment found at station and losses discovered during the physical count shall
be reported to the Accounting Division/Unit for proper accounting/recording.

Section 42 of the same Manual also provides that the Chief Accountant shall
maintain the Property, Plant and Equipment Ledger Card (PPELC) for each category
of PPE including work and other animals, livestock etc. The PPELC shall be kept to
record promptly the acquisition, description, custody, estimated useful life,
depreciation, impairment loss, disposal and other information about the asset.

For check and balance, the Property and Supply Office/Unit shall likewise
maintain PC for PPE in their custody to account for the receipt and disposition of the
same. The balance per PC shall be reconciled with PPELC maintained by the
Accounting Division/Unit. They shall also be reconciled with other property records
like PAR.

The Consolidated Statement of Financial Position of the Pangasinan State

University as of December 31, 2016 showed that Property, Plant and Equipment
(PPE) account amounted to P1,991,968,010.29. The accuracy, existence and physical
condition of these assets could not be ascertained due to the following deficiencies:

a. The PPE balances in the books of the nine (9) University Campuses were not
reconciled with the balances per the 2016 Reports on the Physical Count of
Property, Plant and Equipment.

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 Comparison between the reported PPE balances in the books and the
balances appearing in the Inventory Reports for year 2016 submitted by nine (9)
Campuses revealed a total variance of P290,062,767.90, shown as follows:

Amount per
Campus Amount per Books Variance
Report
1. Asingan P44,067,384.26 P20,296,158.02 P23,771,226.24
2. Alaminos 46,018,708.59 2,022,136.60 43,996,571.99
3. San Carlos 58,048,968.68 91,453,053.57 (33,404,084.89)
4. Infanta 624,603,927.59 624,643,927.50 (39,999.91)
5. Bayambang 74,709,005.85 84,344,407.02 (9,635,401.17)
6. Binmaley 63,695,362.22 63,695,362.22 0.00
7. Urdaneta 197,957,929.68 197,694,933.25 262,996.43
8. Lingayen 792,162,789.13 553,374,594.55 238,788,194.58
9. Sta Maria 90,703,934.29 64,380,669.66 26,323,264.63
Total 1,991,968,010.29 1,701,905,242.39 290,062,767.90

Verification

Verification of the submitted inventory report of the PSU Main Campus

disclosed that the various PPE accounts totaling P85,170,531.86 acquired in year
2005 to 2008 were marked condemned, however, the specific type of equipment
and date when it was condemned were not indicated in the said report.

The Audit Team had sent a follow-up letter to the management dated
November 17, 2016, as to the compliance of the audit recommendation in CY
2015 as far as PPE accounts- particularly on the conduct of inventory of all
University assets and reconciliation with the Ledger balances are concerned. As
this was one of the justifications considered by the CSC in the granting of the
request for one-month extension of service by the retired University Supply
Officer.

The non-reconciliation of the PPE balances per book as against the

inventory report for all Campuses affected the accuracy of the reported PPE
balances in the financial statements as of year-end.

b. Non-submission of reports on changes or movements of Livestock, Trees, Plants

and Crops, and Aquaculture accounts in two(2) university campuses: San Carlos
and Sta. Maria Campus amounting to P8,800.00 and P199,500.00, respectively.

Section 490 (b) of the GAAM Volume I, provides that aside from annual
physical inventory to be taken, the head of the agency shall also direct a running
or test inventory at any other time during the fiscal year for the purpose of

51
 ascertaining the correctness of the property records and determining any possible
losses occasioned by fire, theft or other casualty, or incident to transfer of office
quarters, without intervention of the representative of the Commission on Audit.

Further in accordance with Section 10 of Chapter 11 of Government

Accounting Manual (GAM) for National Government Agencies, Volume 1 on
Agriculture, expressly provides that an entity shall present a reconciliation of
changes in the carrying amount of biological assets between the beginning and
the end of the current period.

Verification of year-end financial statements of PSU-San Carlos City

campus disclosed that its PPE - Livestock account under Fund 161 (Piggery)
amounted to P4,000.00 and the Trees, Plants and Crops account under Fund 101
amounted to P4,800.00 while PSU-Sta. Maria had P199,500.00 worth of
livestock. The recorded Livestock account balance of PSU-San Carlos amounting
to P4,000.00 was already dormant account because same amount appears yearly
in the financial statements for more than three years.

As in the previous year, no records were available to validate actual

changes or movements of the livestock such as additions through births,
purchases or donations, or dropped/disposed animals due to death, sale, and
transfer. Reported sales in piggery project and rice production during the year in
PSU-San Carlos were P21,600.00 and P69,416.40, respectively, but there were
no documents showing the actual number of swine and sacks of rice sold. Only
the amount of sales and receivables were recorded in the books.

Likewise, dropped/disposed animals on account of death were not

reported nor requested for relief from accountability, as the case maybe in
accordance with existing regulations, by the concerned personnel-in-charge of the
campuses. Such conditions rendered difficult for the team in ascertaining
existence and accuracy of the reported balances of the Livestock accounts as of
December 31, 2016.

c. Non-recording of some Biological Assets in PSU Infanta

The Revised Chart of Accounts of the Government Accounting Manual

(GAM) for National Government Agencies provides the following, to wit:

1. Trees, Plants and Crops (10701030) account is used to recognize the

cost or fair value, if acquired through donation or transfers without
cost of trees for forestry, bearer plants and annual or perennial
cropping, cultivating orchards and plantations and floriculture.

2. Aquaculture (10701040) account is used to recognize the cost or fair

value, if acquired through donation or transfers without cost of fishes
and other marine species.

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 Verification of the Statement of Financial Position of PSU-Infanta Campus as
of December 31, 2016 showed that the PPE accounts did not include Biological
Assets such as Trees, Plants and Crops and Aquaculture accounts under Fund 161.
Among the Income Generating Projects of the campus are Mango, Vegetable and
Tilapia Production; however said Biological Assets were not recorded in the books of
accounts.

The above observations are reiterations of previous year’s audit findings that
still prevail and that management has not yet fully addressed.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the Director of Accounting
Services informed the Team that reconciliation of PPE balances reflected in the books
of accounts with the inventory reports prepared bythe supply office is still on process.
Relative to the observation, the University President also instructed the officials
concerned to implement an internal process to ensure that the acquisition and disposal
of assets are properly valued and taken into account.

Further, the creation of a committee to facilitate the land titling of various

PSU Campuses were also suggested by the University President to the concerned
Officials, and also instructed the concerned officials to facilitate proper inventory
taking and valuation of biological assets who, in turn, signified their willingness to
comply with the Team’s recommendations.

We have recommended to the Management the following courses of

action:

a. Require the Supply Officers and the Accountants of all PSU Campuses to
conduct actual count of all physical assets and to submit the reconciled
copy of the Report on the Physical Count of Property, Plant and
Equipment to the Auditor not later than January 31 of the following year in
compliance to Sections 38 and 42 of the Government Accounting Manual
(GAM).

b. The Project-in-Charge of IGP of PSU San Carlos and PSU Sta. Maria
Campuses to account and update its Livestock Inventory records, prepare
reports on its operations reflect the changes and movements of the
swine/piggery/goat projects, and submit the reports on a regular basis to
the Accounting Office, copy furnished the Office of the Auditor.

c. The Accountant of PSU Infanta Campus to account and recognize the

cost/value of the Biological Assets in order to present fairly the correct
value of the PPE accounts in the financial statements of the affected
Campus.

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Receipts/collections erroneously classified as Trust Liabilities

2. Collections/receipts from students and from other National Government

Agencies (NGAs) were recognized in the books under Trust Liability and Other
Payables accounts amounting P4,543,800.00 and P6,052,168.62, respectively or
a total of P10,595,968.62, which is not consistent with the Revised Chart of
Accounts (RCA) of the Government Accounting Manual (GAM) and the
provisions of CHED Memo No. 20 series of 2011 on the use of income and IRR
of R.A. 8292, thus rendering unreliable the consolidated balance of the liability
account.

Chapter III, Volume III of the Government Accounting Manual- Revised Chart
of Accounts prescribes the proper accounting for revenue collections under the Trust
Fund as well as appropriate accounting for Trust Liabilities. The Trust liability is used
to account for receipt of amount held in trust for specific purpose. Debit this account
for payment or settlement of the liability. On the other hand, the Other Payables is
used to recognize other liabilities not falling under any of the specific payable
accounts and Debited for the settlement of liabilities.

Article I, Section 3(v) of CHED Memorandum Order No, 20-2011 defines

Special Trust Fund to refer to income of SUC arising from the collection of tuition
fees, miscellaneous fees, service and other income. This is broken into:

1. Tuition Fees
2. Fiduciary Fund
3. Revenues collected by self-liquidating units
4. Revenues generated by IGU
5. Regular and other Trust Fund

Further, Article I, Section 3(e) of CHED Memorandum Order No. 20-2011

defines Fiduciary Fund as funds to which collection of fees for specific purpose shall
accrue and shall be used solely for the purpose for which it was authorized to be
collected. This includes athletic fee, cultural fee, computer fee, laboratory fee, shop
fee, development fee, library fee and the like. The listing of what is classified as
fiduciary fund, as well as the college, office or unit accountable for its utilization
shall be stated in the report of collection submitted to the Board of Regents/ Trustees
for approval.

Section 2 Article I of CHED Memorandum Order No. 20 series of 2011

states the Scope of Application of the policy and guidelines to be observed by SUC
for all receipts and collections accruing to the general income for use in operations,
fiduciary fund, income generating or self-liquidating operations or activities (i.e.
dorm rental, space for rent, services fees and charges, and the like), and regular trust
funds (i.e. NSTP, Publication, PTA, SSG Fund, and the like). SUC constitutes the main
campus, satellite or branches and external campus and any other extension that is

54
directly under the supervision of the President or his duly authorized representative or
designee.

Further, Section 22, Article IV of the same CHED Memorandum Order states
that the budget for the use of income shall be submitted for approval to the BOR/T.
However, no budget shall be submitted for approval by the BOR/T unless
accompanied by a certificate duly signed by the Accountant that collections have
been made, duly receipted and deposited in the official government depository bank.
The certification shall be broken down by college, campus and by fund (fiduciary, self-
liquidating projects and activities and regular funds) showing the details of the fees
collected.

Also, Rule 5, Section 18 (d) of the IRR of RA 8292 provides that any income
generated by the university or college from tuition fees and other charges, as well as
from the operation of auxiliary services and land grants, shall be retained by the
university or college; and may be disbursed by its Governing Board for instruction,
research, extension, or other program/ projects of the university or college.

Post audit of receipts/collections for CY 2016 disclosed that the collections

from students totaling P10,595,968.62 were recognized in the books accounts Trust
Liability and Other Payables which is not consistent with the above provisions of
CHED Memo No. 20 series of 2011 on the collection and use of income and the
Revised Chart of Accounts (RCA). Details are as follows:

Trust Liability

Fund 184 (Collections for Shipboard

and Fine Dining) P4,543,800.00

Other Payables

Fund 164 (Income) P 4,885,743.62

Fund 164 (OUS) 1,166,425.00
Total 6,052,168.62

Grand Total P10,595,968.62

Verification of the subsidiary ledgers of Trust Liabilities under Fund 184 and
Other Payables (Fund 164, OUS, Fund 161 and Fund 184), showed the following
balances as of December 31, 2016:

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 Particulars Balances as of Remarks
Dec. 31, 2016
Trust Liabilities
Fund 184
PBAC-Bid Docs 685,321.98 For payment of honoraria and other BAC
expenses
Shipboard 17,750.00 For payment for various expenses on
board training
Fine Dining 17,000.00 For payment for various expenses on
board training
Total-Trust P720,071.98
Liabilities

Other Payables
Fund 164
Alumni P(9,500.00) With a beginning balance on Jan 1, 2016
in the amount of P412,995.00
Graduation 179,190.00 With a negative beginning balance on Jan
Contribution 1, 2016 in the amount of (P205,090.00),
for adjustment to Fund 161
Yearbook 294,000.00 With a negative beginning balance on Jan
1, 2016 in the amount of (P266,710.00),
for adjustment to Fund 161
Graduation Picture 133,170.00 With a negative beginning balance on Jan
1, 2016 in the amount of (P127,720.00),
for adjustment to Fund 161
Abaray na Dayew 64,030.00 With a negative beginning balance on Jan
1, 2016 in the amount of (P46,000.00),
for adjustment to Fund 161
Uniform 11,300.00 With a negative beginning balance on Jan
1, 2016 in the amount of (8,100.00), for
adjustment to Fund 161
ESGP-PA 7,000.00 For payment of tuition fee of scholars
under Fund 101- for adjustment
Thesis/ Panel 684,901.50 For payment of honoraria
OJT 238,500.00 For payment of various expenses
Field Study 167,120.00 For payment of honoraria & other
expenses
Practice Teaching 234,725.00 For payment of honoraria & other
expenses
ETEEAP 68,225.00 For payment of honoraria
Transfer of funds/ 82,708.62 Errors due to transfer of funds which are
Others for adjustments
Unclaimed Payment 102,837.48 No claimants- for adjustments

56
 Particulars Balances as of Remarks
Dec. 31, 2016
Sub-total (Fund P2,258,207.6
164) 0

OUS
Alumni 45,850.00
Graduation 80,390.00 for adjustment to Fund 161
Contribution
Yearbook 112,800.00 for adjustment to Fund 161
Graduation Picture 47,200.00 for adjustment to Fund 161
Abaray na Dayew 23,530.00 for adjustment to Fund 161
Panel 469,105.00 For payment of honoraria
Sub-total (OUS) 778,875.00

Fund 161
For fund transfer 52,827.51 Error for adjustment
Sub-total (Fund 161) 52,827.51

Fund 184
CIBAC/Braganza 24,092.00 Long outstanding in the books/dormant
Scholars
Iskolar ng Bayan 1,512,207.50 Fund transfer from CHED- for
adjustment to Due to NGAs account
DA-ACEF 40,868.00 Fund transfer from DA- for adjustment to
Scholarship Due to NGAs account
Various Errors (113,082.00) For Adjustment
Sub-total 1,464,085.50

Total-Other Payables P4,553,995.6

1
GRAND TOTAL P5,274,067.5
9

We noted from the above table that there were some errors in the recording of
transactions that were classified under the Trust Liabilities and Other Payables
accounts as stated in the remarks column. These transactions should have been treated
as revenue of the trust funds and recognized in the books under the proper accounts
prescribed in the Revised Chart of Accounts.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University President
through the University Accountant signified the management’s willingness to comply
with the Team’s recommendations.

57
 We have recommended that Management ensure strict compliance with
the proper classification fees collected from students as Income of the Special
Trust Fund under which it was collected in accordance with the provisions of
CHED Memo No. 20 series of 2011 on the use of income and IRR of R.A. 8292;
and to classify funds received from other National Government Agencies (NGAs)
to the Inter-agency account, Due to NGAs, consistent with the Revised Chart of
Accounts. Further, for the Accounting Office to document and analyze the
accounts, and to make the necessary adjustments/reclassifications to the proper
accounts.

Undocumented Long-Term Investment- P3,750,000.00

3. Long-Term Investment amounting to P3,750,000.00 included in the balance of

the Other Assets account was not supported by a Certificate of Investment or
equivalent official document containing the terms and conditions of the
investment, rendering the propriety, validity, and existence of the reported
investment doubtful.

Verification of the financial statements of the agency disclosed that the Long-
Term Investment under Fund 101 amounting to P3,750,000.00 represents guarantee
fund put up as a guarantee deposit/collateral for the operation of the PSY Post
Harvest & Processing Center.

Inquiry made with the Accountant disclosed that the Investment account had
been in the books since 2005. A confirmation letter addressed to QUEDANCOR was
sent by the Audit Team on July 19, 2016 to verify the accuracy of the stated
information and to obtain more details on the said transaction.

A reply letter of Quedancor dated August 16, 2016 was received by the Audit
Team stating therein that the University deposited P1.5M to LBP-San Carlos City
Branch in the name of Quedan and Rural Credit Guarantee Corporation with SA#
1341-0501-77 as security for the loan of Federation of Pangasinan Farmers
Cooperative. It was further stated in the reply letter that the said amount was already
applied as partial payment for the guarantee claims filed by Land Bank of the
Philippines for the account of Federation of Pangasinan Farmers Cooperative
amounting to P19.080M.

The above observations are reiterations of previous year’s audit findings that
were communicated and discussed with the management. The Audit Team had issued
Audit Observation Memorandum (AOM) to the management for comments. During
the exit conference, the University President instructed the VP for Finance and
Resource Generation and the University Accountant to require the personnel
concerned to provide a valid explanation and/or produce any valid supporting

58
 documents to substantiate the subject transaction. Nevertheless, the officials
concerned signified their willingness to comply with the Team’s recommendation.

We have recommended that management to account for the Long-Term

Investment of P3,750,000.00 by requesting from the concerned banks a copy of
the loan agreement containing the stipulations binding the University as
guarantor of the said loan agreement granted by the LBP to the Federation of
Pangasinan Farmers Cooperative together with the records on the actual
application against the security deposit posted by the University for its
undertaking, for record and audit purposes.

Unliquidated Cash Advances –P1,886,666.59

4. Cash Advances totaling P1,886,666.59 were not liquidated within the prescribed
period and remained outstanding as of December 31, 2016, although the purpose
for which it were granted have already been served, contrary to COA Circular
No. 97-002, thus, expenses were not immediately recognized when incurred, and
rendering unreliable the balances of the affected accounts.

Sections 4.1.2, 5.7 and 5.8 of COA Circular No. 97-002 provides that no
additional cash advance 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. In addition, when a cash advance is no longer needed or has not been used for
a period of two (2) months, it must be returned or refunded immediately to the
collecting officer. And, at year-end all cash advances shall be fully liquidated.

Analysis disclosed that additional cash advances were being granted to some
university officials although their previous cash advances were not yet liquidated.
Likewise, the cash advances were not immediately liquidated even when the purposes
for which it was given had already been served.

Review of the financial statements as of December 31, 2016 disclosed that

the Advances to Special Disbursing Officer and Advances to Officers and Employees
accounts of various PSU Campuses showed a total balance of P1,697,510.59 and
P189,156.00, respectively. The unliquidated cash advances of previous years for the
said accounts amounted to P129,755.85 and P9,400.00, respectively.

Details of which are shown below:

1. For Advances to Special Disbursing Officer

PSU Campus Unliquidated CA Unliquidated CA Total Unliquidated

granted in of Previous Years Cash Advances
Current Year
Alaminos P7,360.00 P0.00 P7,360.00

59
PSU Campus Unliquidated CA Unliquidated CA Total Unliquidated
granted in of Previous Years Cash Advances
Current Year
Asingan 7,350.00 0.00 7,350.00
Bayambang 1,553,044.74 0.00 1,553,044.74
San Carlos 0.00 59,225.85 59,225.85
Urdaneta 0.00 70,530.00 70,530.00
Sub-total P1,567,754.74 P129,755.85 P1,697,510.59

2. For Advances to Officers and Employees

PSU Campus Unliquidated CA Unliquidated CA of Total

granted in Previous Years Unliquidated
Current Year Cash
Advances
Bayambang P50,000.00 P 0.00 P50,000.00
San Carlos 56,200.00 0.00 56,200.00
Urdaneta 73,556.00 9,400.00 82,956.00
Sub-total P179,756.00 P9,400.00 P189,156.00

Grand Total P1,747,510.74 P139,155.85 P1,886,666.59

The above observations are reiterations of previous year’s audit findings that
management has not yet fully addressed and it deemed important to include the same
since expenses were understated while the accumulated surplus were overstated. The
Audit Team had also issued AOMs to various campuses for the immediate liquidation
of the cash advances.

During the exit conference, the President informed the Team through the
Director of Accounting Services that they had already issued demand letters and
assured that they will consider the withholding of salaries to have the cash advances
liquidated. Further, he informed the Team that an internal process shall be established
to ensure timely liquidation of the cash advances and to consider proper planning for
the incurrence of expenditures on predetermined events so as to encourage direct
payment that would minimize the granting of cash advances.

We have recommended that Management ensure strict compliance with

the provisions of COA Circular No. 97-002 relative to the granting, utilization
and liquidation/settlement of cash advances by the officials and employees
concerned. Likewise, the Management should take appropriate actions against
the agency officials and employees concerned who continuously fail to
settle/liquidate their cash advances and effect the withholding of their salaries
and/or other benefits.

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Deficiencies noted in the Implementation of ESGP-PA Scholarship

5. The implementation of Scholarship Program for Expanded Students’ Grants-

In-Aid Program for Poverty Alleviation (ESGP-PA) in the University for the
2nd semester, SY 2015-2016, and 1st semester, SY 2016-2017 is not in
accordance with the provisions of Section 4(6) of P.D. 1445 and CHED
Memorandum Order No. 13 Series of 2014.

Section 4 paragraph 6 of P.D. 1445 provides that all claims against

government funds shall be supported with complete documentations, as implemented
by COA Circular No. 2012-001.

Section 8.0 of CHED Memorandum Order No. 13 Series of 2014 enumerates

the following documentary requirements for the processing of financial benefits of
scholars, grantees and borrowers, to wit:

For new scholars, grantees and borrowers:

1. Copy of Certificates of Enrollment/Registration Form or Official

Receipt of Payment

For on-going scholars, grantees and borrowers:

1. Photocopy of the certificate of enrollment/registration form;

2. Certified true copy of grades during the previous semester issued
by the office of the registrar or his/her authorized school
representative; and
3. Photocopy of valid school ID, upon claim of financial benefits.

Post-audit of disbursement vouchers/payrolls covering the payments on the

implementation of Scholarship Program for Expanded Students’ Grants-In-Aid
Program for Poverty Alleviation (ESGP-PA) covering the 2nd Semester of 2015-2016
and 1st Semester of 2016-2017 totaling P25,984,781.37 disclosed the following
deficiencies, to wit:

a. Disbursement Vouchers pertaining to the payment of financial benefits of

student-grantees under the ESGP-PA Scholarship Program were not supported
with the required documentation prescribed by CHED Memorandum Order No.
13 Series of 2014.

61
b. The processing of claims and release of payments were considerably delayed
from one month to five months, thus depriving deserving and qualified
beneficiaries of the immediate use of the funds for their educational needs.

Inquiry made with the University Accountant disclosed that the late
submission of validated official list from the DSWD was one of the reasons why
release of grants was considerably delayed. Likewise, some Campus Accountants
informed the Audit Team that the procedure on fund transfer and the late receipt of
Master list of qualified grantees duly endorsed by the Student Services Office (SSO)
caused the delayed payments of tuition and miscellaneous fees, book allowance and
the monthly stipends of the qualified scholars.

The Director of the SSO who had just assumed office last September, 2016
explained that the absence of strict monitoring mechanism and the non-establishment
of data base system resulted in the delay in processing and releasing of
claims/benefits to scholars/grantees under the ESGP-PA.

The above observations are reiterations of previous year’s audit findings the
conditions of which still prevails and for which that management has not yet fully
addressed.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University President
instructed the concerned officials to comply with the team’s recommendations. He
also instructed them to facilitate proper information and dissemination to students-
grantees such as the installation of Bulletin Board solely for the Scholarship Program
of the University to ensure timely release and liquidation of advances for the said
purpose and to ensure utilization of the funds transferred.

We have recommended that the University President ensure compliance

with the provisions of Section 4(6) of P.D. 1445 on the documentary
requirements prescribed under the CHED Memorandum Order No. 13, Series
of 2014 on the grant of scholarship to qualified students under the STUFAPs
particularly the ESGP-PA by undertaking the following:

a. The Student Services Office to set deadlines for the complete submission of
the required documents by the ESGP-PA scholars in order to facilitate the
early release and prompt payment of their scholarship grants; and

b. Set up more strict monitoring mechanism in the implementation of the

ESGP-PA and the establishment of database system.

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Compliance with Procurement Law and its Revised IRR of R. A. 9184

6. The Procedural Guidelines and documentary requirements prescribed under

pertinent provisions of the Revised IRR of R.A. 9184, and as prescribed under
COA Circular No. 2012-001 were not fully complied, thus delayed the audit
action on the affected procurement transactions.

The Revised IRR of RA 9184 prescribes the Procedural Guidelines and

documentary requirements in the procurement of goods and infrastructure projects through
Public Bidding or through the Alternative Modes of procurements in the government.

On the other hand, Section 4 paragraph 6 of P.D. 1445 provides that all claims
against government funds shall be supported with complete documentations, as
implemented by COA Circular No. 2012-001.

Post audit on the procurement of goods and infrastructure projects disclosed the
following observations:

1. Some procurements were not supported with complete documentations when

submitted to the Office of the Auditor, such as: Contract, Approved ABC,
Warranty Security, Checklist on Financial and Technical Documents, duly
accomplished Abstract of Bids, and other documents as required under COA
Circular No. 2012-001.

2. Requests for Price Quotations were not sent to at least three (3) suppliers of
known qualifications after complying with the posting requirements for
procurements made under the alternative mode on Small Value Procurement
as prescribed under Section 53.9 of the Revised IRR of RA 9184. As provided,
the procuring entity shall draw up a list of at least three (3) suppliers of known
qualifications which will be invited to submit proposal.

In addition, Appendix 19, Section 3(c & d) of the Handbook on Philippine

Government Procurement on the procedural Guidelines for Small Value
Procurement requires that the Request for Price Quotation (RFQ) shall be
sent to at least three (3) suppliers, contractors or consultants of known
qualification and also to post the RFQs for a period of seven (7) calendar days
in the PhilGEPS website, website of the procuring entity, if available, and at
any conspicuous place reserved for this purpose in the premises of the
procuring entity.

3. Extra Work Orders and Extensions of Contract Time and Suspension Orders
were sometimes not fully documented as required under Annex “E” of the
Handbook on Philippine Procurement.
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 The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University Accountant and the
University Engineer assured the Team that appropriate action be taken to comply with the
recommendations.

We have recommended that the University President as Head of the Procuring

entity to ensure compliance on the Procedural Guidelines and documentary
requirements on procurement, as well as in the implementation and monitoring of
infrastructure projects prescribed in Handbook on Philippine Government
Procurement.

Grant of Representation and Transportation Expenses charged against Fund 164

7. Regular monthly Representation and Transportation Expenses (RETE) PSU

Officials totaling P322,000.00 were granted and charged against the
appropriation for MOOE under Fund 164 , contrary with the provisions of NBC
No. 461 dated June 1, 1998, Revised Chart of Accounts of the GAM, as well as
National Budget Circular No. 404 dated March 29, 1989 and DBM National
Compensation Circular No. 67 dated January 1, 1992.

Section 7.13.2 of Chapter 7 of NBC No. 461 dated June 1, 1998 on Position
Classification and Compensation Scheme for Faculty Positions in State Universities
and Colleges provides that faculty members who are designated as Vice-
Presidents/Deans/Directors/Department Heads are authorized RATA based on their
rank equivalence at the rates provided in the annual General Appropriations Act
(GAA), as follows:
For Vice Presidents:

SUC Level Rank Equivalence

4 Bureau Director
3 Assistant Bureau Director
2 Bureau Regional Director
1 Bureau Assistant Regional Director

For Deans equivalent to Assistant Bureau Regional Director:

a. Designated Dean of the Graduate School with at least a Master of

Arts/Master of Science Program with 15 faculty members.

b. Designated Deans of Colleges with at least four (4) degree programs and a
teaching complement of 40 full-time faculty members.

c. In case the SUC cannot meet the minimum number of programs required, it
may still be entitled to a Dean, if it meets the following:

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 No. of Full-Time
No. of Programs Faculty Members
4 40
3 50
2 60
1 70

For Directors/Department Heads equivalent to Chiefs of Division

1. Designated Director of Research Services, with at least P500,000

appropriation for research service function; when no authorized
research function in the GAA, the SUC to have at least 10 research
projects with a total cost of P500,000 per annum.

2. Designated Director of Extension Services, with at least P500,000

appropriation for extension service function; when no authorized
extension services function in the GAA, the SUC to have at least 10
extension services projects with a total cost of P500,000 per annum.

3. Designated Director of Auxiliary Services, provided the SUC has a

yearly income from its operations of at least P60,000 and at least 7
personnel involved in such income generating projects.

4. Designated Director of each satellite campus, branch, center,

institute, duly mandated by law, provided each
campus/branch/center/ institute has a complete administrative staff,
i.e., at least a budget officer, an accountant/bookkeeper, an
administrative officer/administrative assistant, a supply
officer/property custodian, a cashier/disbursing officer and other
support positions such as clerks, janitors and security guards and at
least 1,000 students in the tertiary level.

5. Designated Director of Student Affairs Services for SUCs with at

least 4,000 college students.

6. Designated Department Heads of different departments/colleges,

each one having at least 4 degree programs with each program
differentiated from each other by 33% (the distinction of the
programs to be certified by the CHED).

In connection with the grant of the RATA, Item No. 4 of National

Compensation Circular (NCC) No. 67 dated January 1, 1992 provides that in all
cases, commutable and reimbursable RATA shall be paid from the amount
appropriated for the purpose and other personal services savings of the agency or
project from where the officials and employees covered under this Circular draw their
salaries. No one shall be allowed to collect RATA from more than one source.

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 Inquiry disclosed the Administration granted the RETE to certain university
officials due to the complexity, diversity and volume of activities and functions that
the University performs, various officials were designated to supervise and ensure the
achievement of the University’s functions and uphold its objectives and as such, were
granted fixed monthly representation and transportation expenses “RETE”.

In the post audit of disbursements disclosed that the RETE of PSU officials
paid from January to September, 2016 were charged to Fund 101 (GAA) while part
of September onwards were already charged to Fund 164 (Income) under the
Representation and Travelling Expense accounts classified under MOOE and not as
Personal Services; and that the disbursements were supported only by Certifications
for Representation and Transportation Expenses and Daily Time Records. However,
we find no documents evidencing their designation as Director or the like, their
functions and responsibilities for the entitlement to the RATA, or proof of
compliance with the requirements prescribed under Section 7.13.2 of Chapter 7 of
NBC No. 461.

The Team also observed that the use of Income (Fund 164) is contrary to
Item No. 4 of National Compensation Circular (NCC) No. 67. The use of this fund is
limited only in the implementation of the University’s mandate for Instruction,
Research, Extension and Production. Further, the charging of regular monthly fixed
RETE as Expense classified under MOOE is not authorized.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University Accountant
and other concerned officials assured the Team that they would submit the required
documents and will refrain the charging of RETE against MOOE under Fund 164.

We have recommended that management ensure compliance with the

requirements prescribed under Chapter 7 of the NBC No. 461 on the grant of
RATA and the provisions of National Budget Circular No. 404 dated March 29,
1989 and DBM National Compensation Circular No. 67 on the use of funds.

II. VALUE FOR MONEY AUDIT

8. Had the University immediately utilized the newly constructed Medical and
Dental Infirmary and the Comfort Rooms upon their completion, it could have
served the purpose for which these were constructed.

Review of contracts disclosed that the University implemented the

Construction of the Medical and Dental Infirmary at PSU Lingayen Campus with a
contract cost of P6,981,413.41. Likewise it also implemented the Construction of
Comfort Rooms in all campuses with a total contract cost of P8,985,172.20.

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 Verification of records disclosed that the Construction of the Medical and
Dental Infirmary was completed on June 21, 2016, while the construction of the
Comfort Rooms were all completed on October 17, 2016.

Ocular inspections of the above-mentioned projects disclosed that these

projects were not still being utilized. In the case of the Medical and Dental Infirmary,
it remained unoccupied since it was completed on June 21, 2016. The same is true
with the newly constructed Comfort Rooms that were not yet open for use by the six
(6) campuses of the university, thus these completed infrastructure projects were not
immediately put to use for the purpose for which it were constructed depriving the
intended users the benefits and comforts of these facilities.

Inquiry revealed that the reason for the non-utilization of these facilities is
that there is no power and water supply system in place. Had there been proper
planning in the construction of these facilities, its immediate use could have benefited
its intended end users.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University President took
note of the Team’s audit observations and assured compliance with the Team’s audit
recommendations.

We have recommended that the management take appropriate action for

the installation of power and water system to put into use the constructed
facilities for the benefit of the intended end users.

III. GENDER AND DEVELOPMENT (GAD)

9. The University failed to maximize the utilization of its GAD Budget in the total
amount of P6,572,000.00 for Calendar Year 2016, thus failing to implement
projects that could have contributed to the uplifting and protection of the rights
of women and Gender and Development objectives mandated in PCW-NEDA-
DBM Joint Circular No. 2012-01.

PCW-NEDA-DBM Joint Circular No. 2012-01 includes among others,

mandates enunciated under EO 43 (Pursuing our Social Contract with the Filipino
People through the Reorganization of the Cabinet Clusters) which emphasizes the
strengthening of the capacity of government institutions to link their budget with
performance outcomes and enabling citizens and civil society to monitor and evaluate
these, the promotion of equal gender opportunities in all spheres of public policies
and programs and the importance of transparent, accountable, participatory and
inclusive governance that should translate into direct, immediate and substantial
benefits for the poor.

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 Verification of the submitted Annual Gender and Development (GAD)
Accomplishment Report disclosed that P6,572,000.00 was appropriated and allocated
for the plans and activities of GAD for CY 2016. However, only P909,454.51 was
disbursed which represents only 13.84% of the total budget. The non-implementation
of the GAD PAPs for CY 2016 deprived the intended beneficiaries, especially the
women population of the University of the benefits that could have contributed to the
protection of their rights and welfare.

The Audit Team had issued a follow up letter to the management on

November 17, 2016 as to the compliance of the audit observation in CY 2015
regarding the implementation of the GAD plans and programs. We were informed,
however, that the reason for the non- implementation of GAD activities in the
University was that, the GAD Coordinators of the nine (9) Campuses were not given
leave credits corresponding to the performance of their functions, duties and
responsibilities as such and were not provided with an office or space with equipment
and supplies.

The GAD Director of the University had also provided the Audit Team with
her letter request to the University President in the early part of 2016, for the
Construction of the GAD Resource Center to include equipment and other facilities
as embodied in the Approved GAD Plan and Budget for 2016. The implementation
of the other GAD Projects/programs such as, printing of GAD IEC’s and reproduction
of GAD laws to be distributed to students, faculty non-teaching and others was
reiterated in her attached letter request dated December 12, 2016.

The conduct of GAD audit for year under review disclosed the same
observation with that of last year wherein the total expended amount of P909,454.51
were mostly used for payment of travelling allowances in attending GAD Seminars
and Training Workshops, meals and snacks, honorarium, supplies and other related
expenses in the conduct of GAD Workshops and Seminars. It was stated in the
submitted GAD Accomplishment Report for 2016 that the unimplemented
projects/programs will be fully addressed for the ensuing year.

With the above observations, the implementation of programs, activities and

projects in gender mainstreaming in the University show that it has not effectively
implemented its planned PAPs in addressing gender issues in the University, thus the
intended beneficiaries, especially the women population of the University were
deprived of the benefits that may have been derived had the GAD plan and budget for
CY 2016 been efficiently and effectively implemented and delivered.

The Audit Team had issued Audit Observation Memorandum (AOM) to the
management for comments. During the exit conference, the University President took
note of the Team’s audit observations and assured compliance with the Team’s audit
recommendations.

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 We have recommended that the University President instruct the GAD
Coordinators of the nine PSU Campuses to coordinate with the GAD Director
for more efficient and effective implementation and delivery of the University’s
GAD plans, programs and activities that address gender issues of women both in
the teaching and non-teaching profession of the University, and in order to
realize the intended results/ expected benefits contributing to the attainment of
its GAD objectives.

IV. COMPLIANCE WITH TAX LAWS

For the calendar year 2016, the Management was able to remit taxes withheld
on compensation income and value added tax thru Tax Remittance Advice (TRA).
The balance of the Due to BIR account of all campuses as of December 31, 2016
amounting to P4,108,575.17 were due for remittance in January and February, 2016.

V. STATEMENT OF AUDIT SUSPENSIONS, DISALLOWANCES AND

CHARGES (SASDC)

The Statement of Audit Suspensions, Disallowances and Charges (SASDC)

as of December 31, 2016 showed total suspensions and disallowances amounting to
P17,425,134.51 and P12,979,270.96, respectively.

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