EXECUTIVE SUMMARY

A. INTRODUCTION

The Commission on Higher Education (CHED) was established by virtue of

Republic Act No. 7722 otherwise known as the Higher Education Act of 1994, which
was signed into law on May 18, 1994. The creation of the Commission abolished the
Bureau of Higher Education, and confined the jurisdiction of the Department of
Education (DepEd) to elementary and secondary levels of education.

The CHED is under the Office of the President. It covers both public and private
higher educational institutions as well as the degree granting programs in all post-
secondary educational institutions.

Pursuant to Republic Act No. 7722, the CHED is mandated to:

a. promote quality education;

b. broaden access to higher education;

c. protect academic freedom for continuing intellectual growth; and

d. ensure advancement of learning and research.

The CHED is composed of a Chairman and four Commissioners with a term of

four years, namely: Chairperson Patricia B. Licuanan and Commissioners Hadja
Luningning Misuarez-Umar, Nona S. Ricafort, Nenalyn P. Defensor and William C.
Medrano. In general, they act as collegial body in formulating plans, policies and
strategies relating to higher education and in deciding important matters and problems
regarding the operation of the CHED. It has an Executive Office, headed by Executive
Director Julito D. Vitriolo, which oversees the over-all implementation of policies,
programs, projects and operations of the various offices of CHED.

The CHED has an approved plantilla of 609 positions, of which 484 are filled-up
while 125 are unfilled. To augment their existing manpower, 90 contractuals and 14
under Job Order were hired.

B. OPERATIONAL HIGHLIGHTS

The CHED management reported the following major accomplishments vis-à-vis

their targets for Calendar Year (CY) 2010:

i
 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments

1. Plans/Policies/Standards/Programs for
Higher Education

Implementation of Medium Term 20% 20% 100%

Development Plan for Higher Education
2005-2010

Formulation of Medium Term 25% 25% 100%

Development Plan for Higher Education
2011-2016

Implementation of Information System 20% 19% 95%

Strategic Plan

Reformulation of National Higher 100% 100% 100%

Education Research Plan as NHERA2

Implementation of CHED Communication

Plan 2011 30% 30% 100%

Implementation of the National Agriculture

and Fisheries Education System (NAFES) 40% 40% 100%
Plan

No. of policies/guidelines formulated on 16 16 100%

students’ concerns

Bills evaluated 150 357 238%

Position papers prepared 73

Opinions rendered on legal concern 250 225 90%

No. of Policies, Standards and Guidelines 62 56 90%

developed/updated/reviewed/harmonized

No. of Bilateral and Multilateral 12 17 142%

MOAs/MOUs negotiated

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 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments
2. Quality Assurance Services

HEIs Programs Evaluation/Monitoring

 No. of permits and recognition 55 192 349%

issued/processed

Centers of Excellence/Centers of
Development (COEs/CODs) Program

 No. of COEs/CODs
o Processed 250 64 26%
o Identified 59
 No. of COEs/CODs supported 44 36 82%

Institutional Quality Assurance through

Monitoring and Evaluation (IQAME)

 No. of HEIs monitored and evaluated 50 5 10%

Legal Education Institutions (under the

Legal Education Board)

 No. of HEIs monitored 25 15 60%

No. of Securities and Exchange

Commission (SEC) Registration /tax 440 370 84%
exemptions evaluated

Evaluation and Monitoring of HEIs with

Deregulated/Autonomous Status

 No. of applications processed 85 23 27%

Evaluation and Monitoring of Universities

and University System

 No. of HEIs processed 10 11 110%

 No. of HEIs monitored 5 9 180%

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 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments
Monitoring and Evaluation of Alternative
Learning System

- Expanded Tertiary Education

Equivalency Accreditation Programs
(ETEEAP)

 No. of HEIs evaluated/ 50 90 180%

deputized/monitored
 No. of programs evaluated/ 50 90 180%
monitored

- Ladderized Education Program

 No. of developed programs 23 4 17%

- Distance Education and Transnational

Education (DE and TE)

 No. of HEIs evaluated/monitored

o DE 19 16 84%
o TE 11 11 100%

Quality Enhancement Programs

- Research and Development

Enhancement

 No. of faculty researchers trained 101 115 114%

 No. of research centers
established/supported 13 20 154%

- Faculty Development

 No. of grantees Science and

Engineering Masters and Ph.D
(SEMP) and Faculty Development 1,889 2,157 114%
Program (FDP)

Provision of Support for National

University/College in Agriculture and Agri-
Fisheries (NUCAFs) and Provincial

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 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments
Institutes of Agriculture and Fisheries
(PIAFs)

 No. of NUCAF and PIAF supported

o NUCAF 31 31 100%
o PIAF 77 84 109%

Provision of support for Program

Accreditation

 No. of programs supported 100 127 127%

3. Scholarship and Student Auxiliary

Services

- Faculty Scholarship (see Faculty

Development)

- Student Financial Assistance Programs

(STUFAPS)

 No. of grantees (financial

assistance)

o Scholarship Programs 15,078 18,028 120%

o Grant-in-Aid Programs 35,647 36,237 102%
o Student Loan 4,409 6,206 141%

 No. of grantees promoted

o 2nd Year 13,016 13,622 105%

o 3rd Year 21,854 21,335 98%
o 4th Year 10,830 16,339 151%
o 5th Year 837 886 106%
o 6th Year 2

 No. of graduate-grantees

o Scholarship Programs 2,072 1,198 58%

o Grant-in-Aid Programs 8,374 8,278 99%
o Student Loan 718 320 45%

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 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments
- Student Auxiliary Services

 No. of HEIs monitored in terms of

auxiliary services 100 13 13%

- Certification/Accreditation

 No. of Certificates of 68,858 141,687 206%

Authentication and Verification
(CAVs) issued

 No. of foreign students served 700 885 126%

 No. of Overseas Traineeship 2,000 3,885 194%

Certificates (OTC) issued

 No. of Serial Numbers issued 380,000 193,626 51%

- Other Services

 No. of students’ complaints acted 332 180 54%

on

4. 4. Fund Administration Services

- Project proposals evaluation/

implementation

Institutional Capability

 No. of proposals processed 50 87 174%

 No. of projects implemented 94 131 139%

Rationalization of Policies,
Standards and Guidelines (PSGs)

 No. of proposals processed 220 136 62%

Research and Extension

 No. of proposals processed/ 40 55 138%

projects supported

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 Percentage
Accomplish of Accom-
Major Thrusts/Activities Targets
-ments plishments
- Monitoring and Evaluation

 No. of programs/ projects 500 562 112%

monitored
 No. of impact assessment 24 24 100%
conducted

- Application of State Universities and

Colleges (SUCs) budget allocation
system

 Percentage of SUC budget 100% 100% 100%

subjected to Normative Funding
Formula

- Management of HEDF

 Percentage utilization of HEDF 100% 85.74% 86%

C. FINANCIAL HIGHLIGHTS

RA 9970 also known as the General Appropriations Act (GAA) of CY 2010

provided a total appropriation of P2,522,767,000.00 for the operations of CHED,
including their requirements for Maintenance and Other Operating Expenses and Capital
Outlay amounting to P854,000,000.00 to be charged from the remittances of travel tax
collections of the Philippine Tourism Authority, the share in the sales of the lotto
operations of the Philippine Charity Sweepstakes Office, and the share in the collections
from the Professional Regulation Commission to the HEDF.

The total allotments received by the CHED amounted to P2,397,768,430.99, of

which P1,936,355,754.55 was obligated thereby, leaving an unobligated balance of
P461,412,676.44.

The CHED’s assets, liabilities, government equity and sources and application of
funds for CY 2010, with comparative figures in CY 2009, are presented as follows:

I. Financial Condition

Particulars 2010 2009 Increase/(Decrease)

Assets P 6,904,720,228.65 P 6,970,135,530.15 P (65,415,301.50)
Liabilities 3,845,831,671.41 3,765,840,915.46 79,990,755.95
Government Equity P 3,058,888,557.24 P 3,204,294,614.69 P (145,406,057.45)

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 II. Sources and Application of Funds

Particulars 2010 2009 Increase/(Decrease)

Sources:
Subsidy Income P 1,686,433,505.69 P 1,745,082,800.00 P (58,649,294.31)
from National
Government
(SING)
Other Income 7,355,259.18 8,407,204.64 (1,051,945.46)
Total Income P 1,693,788,764.87 P 1,753,490,004.64 P (59,701,239.77)
Application of Funds:
Personal Services P 207,619,397.49 P 183,195,488.92 P 24,423,908.57
Maintenance and 1,138,612,448.10 1,000,110,906.38 138,501,541.72
Other Operating
Expenses
Financial Expenses 0.00 336.64 (336.64)
Total Expenses P 1,346,231,845.59 P 1,183,306,731.94 P 162,925,113.65
Excess of Income
over Expenses P 347,556,919.28 P 570,183,272.70 P (222,626,353.42)

D. SCOPE OF AUDIT

The audit covered the review of accounts and financial operations for CY 2010 of
the CHED–Central Office (CO) and all its Regional Offices (ROs), except RO 7. To a
limited extent, its reported accomplishments were also evaluated. The audit was
conducted to: a) verify the levels of assurance that may be placed on the management’s
assertions on the financial statements; b) recommend agency improvement opportunities;
and c) determine the extent of implementation of prior year’s audit recommendations.

E. INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL

STATEMENTS
The Auditor rendered a qualified opinion on the fairness of presentation of the
financial statements as of December 31, 2010, due to the effects of matters emphasized in
the audit observations as stated in the Independent Auditor’s Report and discussed in
detail in Part II of the report.

F. OBSERVATIONS AND RECOMMENDATIONS

The following are the significant audit observations and recommendations which
are discussed in detail in Part II of the report:

1. Out of the 3,500 targeted scholarship slots per CHED Memorandum Order
(CMO) No. 43 s. 2005, there were only 1,757 actual faculty
scholars/grantees of the 2004-2010 Faculty Development Program-Higher

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 Education Development Fund (FDP-HEDF) for a total obligated
expenditures of P583.66 million, of which only 636 have graduated, 981 are
presently enrolled, and the rest were not successful; thus, CHED failed to
considerably realize its objective of upgrading the academic qualifications
of tertiary faculty to masters and doctorate degree levels to improve their
teaching methods. (paras. 1-15)

We recommended that for the implementation of FDP Phase II, CHED

Management:

strictly enforce its requirement that faculties at the higher education

level must have at least a master’s degree in the field in which they
teach to compel the HEIs to send their faculty and the latter to
pursue and complete the masteral programs;

adopt stricter criteria in allowing extension of the scholarship in

order not to delay the expected benefits from the Program; and

extend the maximum benefits of the Program to the SUCs

considering that they are operating on limited budget per GAA,
which needs augmentation for faculty development to improve their
teaching methods.

2. The 282 slots for the President Gloria Macapagal Arroyo Science and
Engineering Graduate Scholarship (PGMA-SEGS) with total obligated
expenditures of P326.73 million were not equally distributed with 68 slots
or 24.11 percent thereof given to Region X faculty /research personnel,
while other regions have 6-24 slots only; thus students in the different
regions were not granted equal opportunities to have better learning methods
through improved qualifications of their educators. (paras. 23-29)

We recommended that Management include in the Guidelines the

procedures on the allocation of scholarship slots to the different regions,
the SUCs and PHEIs taking into consideration the objective of the
Program. If possible, accord SUCs the maximum benefits from the
faculty scholarship program as they are operating on limited budgets
under the GAA. This would also provide equal opportunity for quality
education to their students who mostly come from the lower and middle
income classes.

3. The absence of complete database on the status of scholarship of the student

borrowers, disorderly accounting records and non/minimal collection of
overdue loans receivables showed monitoring and/or accounting control
weaknesses on the Study Now-Pay Later Plan (SNPLP) implementation
affecting the validity of the loans receivable of P150.69 million and the
sustainability of the Program. (paras.36-43)

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 We recommended that the:

o concerned Regional Director require the Accounting Unit and/or

Student Services/Scholarship Section to:

exert efforts to retrieve old records to update the database on

SNPLP and establish the details of the reported Loans
Receivable vis-a-vis the student status to effect adjustments of
any deficiency, enforcement of the repayment scheme in
accordance with the SNPLP contract, and possible
condonation/writing-off of accounts pursuant to existing
regulation;

strengthen the monitoring system on program implementation

and properly manage the accounting records/reports on loans
receivables to minimize the adverse effect of committed
deficiencies in the past; and

intensify collections of loans receivable due from student

borrowers by sending demand letters to them and their
guarantors and coordinating with appropriate government
agencies (i.e. National Bureau of Investigation (NBI), Bureau of
Internal Revenue (BIR), Government Service Insurance System
(GSIS) and Social Security System (SSS) for assistance in
obtaining current information on the addresses of the borrowers
and/or facilitating collection of loans.

o CHEDCO Management revisit the existing policy on the repayment

of loans that will ensure efficient collections of loans receivable and
effective implementation of the SNPLP.

4. Delay in the release of funds from the Central Office to NCR in the amount
of P99.80 million affected the effective implementation of the Student
Financial Assistance Programs (StuFAPs) thus, prejudicial to the indigent
scholars whose continuous education is dependent on the financial benefits
from CHED. (paras. 44-51)

We recommended that the CHED NCR strengthen its linkages with the
HEIs, Central Office and the CHED Special Study Grant Programs’
(CSSGPs’) coordinators for the: a) improvement of scholarship
processes to ensure the enrolment and/or continuity of the scholarships
of the qualified applicants/scholars; and b) the immediate submission of
the masterlist of scholars to expedite the release of funds to sustain the
needs of the students.

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5. The failure of the seven CHEDROs to strictly implement the CHED
Guidelines on Student Assistance for Education (SAFE) Program and the
Commission on Audit (COA) rules and regulation on; a) fund transfers
resulted in unutilized/idle funds of P24.06 million in the depository banks of
HEIs; b) non-submission by HEIs of the Report on the Status of Fund
Utilization of P97.37 million; and c) utilization of the funds for On the Job
Training in the United States and nursing review fees of P2.78 million, thus
defeated the Program’s objectives. (paras. 52-62)

We recommended that Management:

o CHEDROs

strictly implement the SAFE Program’s Guidelines, MOAs and

the COA regulations on fund transfer and enforce compliance
thereto by the HEIs;

monitor the performance of the HEIs by requiring them to

submit the list of borrowers/grantees and status of fund
utilization per semester; and to return any unexpended balance
of fund transfers; and

assess the performance of the HEIs.

o CHEDCO

evaluate the success of the P1 billion SAFE Programs by

requiring all CHEDROs to submit the monitoring reports on its
implementation and status of fund transfers to the HEIs,
together with the related issues and concerns, as reference in
future scholarship program; and

ensure that the related provisions of COA Circular Nos. 94-013

and 2007-001 on fund transfers are incorporated in the future
CHED Guidelines and the MOAs of the CHEDROs, which
should also include the sanctions for non-compliance thereto.

6. The invested fund of P218.99 million with the Development Bank of the
Philippines (DBP) was not utilized since 2004 for the priority programs of
HEDF contrary to Section 10 of RA 7722 and not adequately monitored
resulting in unrecorded transactions of P56.63 million in the books of
CHED. (paras. 69-77)

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 We recommended that Management:

revisit the existing Investment Management Agreement (IMA) with

the DBP and assess the need to maintain that account vis-a-vis the
objectives of the HEDF and legal requirements on the management
and appointment of a portfolio manager of the Fund, as provided in
Sections 10 and 11 of RA 7722;

utilize the existing investments with DBP for the priority programs
of HEDF. However, no part of the seed capital of the Fund,
including earnings thereof, shall be used to underwrite overhead
expenses for administration, and in no case shall the
“PORTFOLIO” have a principal balance less than P1 million
pursuant to the Agreement;

reconcile the difference between the bank and the book balances
and monitor regularly the balance and status of IMA account with
the DBP; and

prepare a JEV to correct the misstatement in Other Investment and

Marketable Securities and the Government Equity accounts.

7. The implementation of the Legal Education Reform Act of 1993 was not
well coordinated and managed resulting to: a) return of unutilized fund of
P10 million to the Bureau of the Treasury (BTr), b) 14 stale checks of P7
million for the Staff Development activities of the 14 top law schools,
c) lapsed allotment of P7.4 million d) unreleased current year’s allotment of
P20 million, and e) utilization of the P4.03 million allotment for
Maintenance and Other Operating Expenditures (MOOE) for personal
services and capital outlay expenditures contrary to the General
Appropriations Act. (paras. 78-87)

We recommended that the Management of:

o Legal Education Board (LEB)

prepare/issue the policy and specific guidelines and procedures

on the implementation of the Legal Education Reform Act of
1993, the operation of the LEB and the utilization of the Legal
Education Fund;

strengthen coordination with the implementers/ beneficiaries of

the Reform Act and appropriate governmental bodies to ensure
attainment of intended beneficial reform in the legal education
system; and

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 monitor the utilization of funds granted as financial assistance to
the law schools and the immediate liquidation thereof.

o CHED

secure DBM approval for the utilization of MOOE funds for the
salaries and wages of the officials and employees of LEB and the
procurement of goods falling under capital outlay expenditures;
and

request from DBM authority to realign portion of the budgeted

MOOE funds in CY 2011 for Personal Services and if feasible,
work out for the creation and approval by DBM of plantilla
items for the LEB.

8. Unrealistic Monthly Cash Program (MCP) and non-maintenance of the

Registry of Allotment and NCA (RANCA) contrary to the provisions of
Department of Budget and Management (DBM) National Budget Circular
No. 523 and Sec. 22, Volume II of NGAS Manual resulted in the lapsing of
NCAs amounting to P30.37 million in CHEDRO 8, thereby depriving other
government agencies of much needed NCAs to finance urgent programs.
(paras. 88-94)

We recommended that Management of CHEDRO 8:

prepare and submit to DBM a realistic MCP following the

Guidelines issued/to be issued by DBM, to prevent or at least reduce
the unutilized NCAs; and

maintain the RANCA to ensure proper monitoring of the allotments

and NCAs received and utilized, and their balances.

9. Non-compliance with existing regulations, inadequate financial accounting

system and/or frequent errors in the recording of financial transactions in
seven CHEDROs resulted in idle scholarship funds in the bank of P5.81
million, non-preparation of the bank reconciliation statements, and the
understatement of Cash accounts by P12.37 million. (paras. 95-107)

We recommended to concerned Regional Director to require the

Accountant/ Cashier:

CHEDRO 11- to remit the excess fund to the BTr and furnish the
Audit Team a copy of the duly validated deposit slip.

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 CHEDROs 6 and 10 - to prepare the monthly Bank Reconciliation
Statements and submit the same to the Auditor for verification to
ascertain the accuracy of the Cash in Bank account balances.

CHEDROs 8, 9, CAR and NCR to comply with the GAFMIS

Circular Letter No 2002-001 dated December 16, 2002. The JEVs
should be based from the Schedule of Unreleased Checks which
should be timely submitted to the Accountant by the Cashier.

We further recommended to the Regional Director of NCR to:

require the Accountant to adopt the government accounting system

and procedures in accordance with the provisions of PD 1445 and
the Manual on the NGAS. The required books of accounts should be
maintained and the financial statements extracted thru the journals
and the general/subsidiary ledgers;

hire an experienced, qualified and competent accountant to improve

the accounting system of the agency; and

consider the adoption of the electronic NGAS to address the

problem/deficiencies on manpower, bookkeeping and financial
statements preparation/presentation.

10. The failure of the three CHED offices to fully enforce COA Circular No. 94-
013 dated December 13, 1994 and the provisions of the MOA resulted in the
non-liquidation of overdue fund transfers of P472.36 million to
SUCs/National Government Agencies (NGAs), thereby misstating Due from
NGAs and Government Equity accounts. (paras. 125-134)

We recommended that Management:

demand for the immediate submission of liquidation reports by the

concerned NGAs to ascertain if funds were disburse accordingly,
return the unutilized balances and reconcile respective accounting
records to present the accurate balances of accounts affected;

discontinue granting additional funds to those with outstanding

overdue fund transfers to prevent the accumulation thereof; and

monitor regularly the utilization of fund transfers and compliance

by the concerned NGAs with the reporting requirements, as
provided in the MOAs, COA Circular No 94-013 and the CMOs.

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 Further, we recommended to the Management of CHED- NCR to:

require the Accountant to exert efforts to account the 2008 and

prior years’ balances; and

ensure that funds transferred are covered by MOA, which shall

provide the requirements for project implementation and reporting.

11. Leniency in the enforcement of the existing regulations and the provisions
of the MOAs in four CHED offices resulted in the a) accumulation of fund
transfers of P510.09 million which included P278.29 million past due
receivables the purposes for which the same were granted have already been
served and accomplished, thereby, misstating Due from Non-Government
Organizations/Peoples Organizations (NGOs/POs) and the Government
Equity accounts; and b) their inability to fully assess fund utilization and
program implementation. (paras. 135-145)

We recommended that Management:

strictly enforce the provisions of the aforesaid COA Circulars and

the MOAs, particularly on the obligations of the PHEIs to submit
the periodic financial and physical status reports and final Fund
Utilization Report and the return of unutilized funds;

send demand letters regularly for the immediate submission of

liquidation reports by the concerned PHEIs/NGOs and reconcile
respective accounting records to effect the necessary adjustments
and present the accurate balances of accounts affected;

suspend/discontinue granting additional funds for those with

outstanding overdue fund transfers to prevent the accumulation
thereof; and

strengthen the monitoring of the utilization and liquidation of funds

to ascertain if funds were disbursed accordingly and ensure the
efficient and effective program implementation;

We further recommended:

CHEDCO- to coordinate with the concerned PHEIs named in para.

141 (b) for the reconciliation of the disparity in their respective
records with CHED and prepare the necessary adjusting entry to
correct the Due from NGOs/POs account.

CHEDRO 8 -to require the Asian Development Foundation College

to submit the masterlist of CSSGPCD grantees to establish validity
of the fund transfer.

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 NCR – to see to it that funds transferred for the implementation of
the Program are covered by MOAs which shall embody the
required terms of reference per COA Circular No. 2007-001.

12. In seven offices, Receivable accounts balance is unreliable due to

overstatement by a net amount of P24.55 million and doubtful validity of
P74.96 million receivables because of inadequacy of records. (paras. 146-
154)

We recommended to the concerned heads of office to require their

Accountants to prepare the JEVs to adjust the deficiencies, thus
reflecting the correct balance of the accounts affected.

Further, we recommended:

CHEDRO 11 and NCR - to adhere strictly to the standard

accounting procedures in the keeping and maintenance of accounts
for fair presentation of the accounts in the financial statements.

CHEDCO Accountant - to initiate action to establish the validity of

the recorded receivables of P17,926,095.20 by gathering
data/information, particularly the accounting of the funds, from
the responsible persons/coordinator of the NGOs/POs and CHED–
CO Technical Panels/Project Secretariat for proper adjustment of
the account. Otherwise, request authority for the writing-off of
dormant accounts from the Commission on Audit following the
procedures in COA Circular No. 97-001.

13. Reciprocal accounts Due from Regional Office/Staff Bureaus and Due to
Central Office remained unreconciled and not eliminated, showing a net
discrepancy of P52.34 million; thereby, affecting the fair presentation of
the CHED’s consolidated financial statements. (paras. 155-162)

We recommended that the CHEDCO Accountant to:

coordinate with all the accountants of the Regional Offices for the
immediate reconciliation and adjustments of the reciprocal accounts
to present the accurate balance of affected accounts;

eliminate reciprocal accounts in the consolidation process.

Henceforth, reconciliation of reciprocal accounts should be
considered a regular activity of the CHED finance group for the
timely correction of deficiencies; and

provide JEVs on intra-agency transactions to the concerned

CHEDROs and require the same from them for any accounting

xvi
 entry on Due to CO account, to prevent further unreconciled
transactions in succeeding year/s.

14. The P110.49 million reported balance of Other Investments and Marketable
Securities account under Fund 101 of CHEDCO is of doubtful validity due
to unsubstantiated investments of P35.49 million and unreconciled
discrepancy/ transactions of P9.01 million; and not utilized as intended.
(paras. 168-174)

We recommended and Management agreed to:

closely coordinate with the concerned Government Financing

Institutions for the proper documentation, reconciliation and
adjustments of the agency’s investments to ensure fair presentation
of the account;

require GFIs to regularly provide CHED with the financial and

operational status reports, for the timely recording of transactions
and effective monitoring of investments;

restudy the present status of the SNPLP funds with the government
owned and controlled corporations (GOCCs) and the Agritech -
Student Micro-Project Loan Fund (SMLF) implementation to
ensure maximum utilization of the funds in pursuance of the
objective of the Programs; and

submit the MOAs related to Educational Guarantee Fund, Agritech-

SMLF, PNB-Teijin and the investment of P455,000.00 transferred
from Department of Education Culture and Sports (DECS) now
Department of Education (DepED); and the lacking documents
mentioned in para. 172.

15. PPE accounts balance of P16.87 million is unreliable and of doubtful

physical existence due to non-compliance with existing COA regulations on
effective control of equipment, discrepancy in the accounting and property
records of P2.05 million and misclassification of accounts in five
CHEDROs. (paras. 175-179)

We recommended and concerned management agreed to conduct the

required physical inventory taking and require the Accounting and
Supply Units to:

reconcile the inventory report with the accounting records and

prepare the necessary adjustments to reflect the correct balances in
their records;

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 strictly comply with the aforesaid existing COA regulations for an
effective monitoring of the properties and equipment and to
substantiate the balances of the Property, Plant and Equipment
(PPE) accounts; and

strictly observe the use of the NGAS Chart of Accounts and prepare
the necessary entries for the misclassification/erroneous entries
made.

It is further recommended and CHEDRO 12 Management agreed to

require the Disposal Committee to appraise and dispose the
unserviceable properties in accordance with the existing guidelines.

16. Completed projects costing P65.80 million in CHEDCO remained

unadjusted to their appropriate asset accounts; thus, the corresponding
depreciation was also not provided resulting in the misstatements of the
affected accounts. (paras.186-191)

We recommended that Management require the:

Project Technical Working Group (TWG) to conduct inspection of

the completed projects and accordingly issue the Certificate of
Completion and Acceptance, as basis of the Accountant on the
proper recording of transactions; and

Accountant to:

 set up the proper payable account for the unpaid project

accomplishments duly supported by the required documentation
in coordination with the Project TWG and the contractors
concerned;

 reclassify the Construction in Progress Agency Assets account to

the appropriate asset accounts; and

 provide the corresponding annual depreciation.

G. STATUS OF SETTLEMENT OF ACCOUNTS

As of December 31, 2010, the unsettled audit suspensions and disallowances

amounted to P1,576,023.31 and P5,278,884.28, respectively in CHEDCO and four ROs.

The audit findings and the corresponding recommendations were discussed with the
management thru the issuance of Audit Observation Memoranda and in an exit conference
conducted on August 5, 2011.

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H. STATUS OF IMPLEMENTATION OF PRIOR YEAR’S AUDIT
RECOMMENDATIONS

The status of implementation of prior year’s recommendations is shown below:

Particulars Number Percentage

Fully Implemented 4 15%
Partially Implemented 21 78%
Not Implemented 2 7%
Total 27 100%

The recommendations on the following prior year’s audit findings were either
partially or not implemented, viz:

A. Partially Implemented

Inadequate documentation of disbursements resulting in the lapsing of the

Notice of Cash Allocations (NCAs) totaling P138.13 million in
CHEDCO;

Lapses in accounting and monitoring control in the implementation of the

SNPLP in four CHEDROs;

Deficiencies in the MOAs of CHEDROs with HEIs, CHED policy and/or

monitoring of the SAFE Loans/Scholarship and STUFAP programs
implementation;

Twenty three students in CHEDRO 8 appeared as having double

scholarship grants for three SYs of P0.11million each per course or a
total transferred funds of P2.53 million;

Inadequate procedures in the processing and releasing of scholarship

loans/grants in three CHEDROs resulted in unclaimed and/or stale checks
totaling P3.64 million;

Considerable delays on the intended beneficial reforms in the legal

education system due to the manner by which Act 7662 or the Legal
Education Reform Act of 1993 was implemented;

Unliquidated P10 million CY 2006 fund transfer of CHEDCO to the

Philippine Forest Corporation (PFC) for the implementation of a three-
year “Biofuel Enterprise Development of State Universities and Colleges
Using Jatropha Curcas” ;

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Unliquidated funding assistance of P13.03 million to participating SUCs
and inadequate monitoring on the Jatropha Project’s implementation by
CHEDCO resulting in the delay/non-submission of the required
accomplishment reports;

Delayed release by CHEDCO of the CY 2008 financial assistance of

P8.94 million in CY 2009 to the HEIs for voluntary accreditation of
course programs;

Non-settlement and inadequate enforcement of existing rules and

regulations on the grant and liquidation of fund transfers to the
NGOs/PHEIs of CHEDCO and CHEDROs 2 and 5 resulting in the
accumulation of overdue transfers of P285.41 million or 50 percent of the
P569.18 million unliquidated balance at year end;

Laxity in enforcing the submission of liquidation reports and weak

monitoring of fund releases in CHEDCO and four CHEDROs resulting in
the accumulation of the fund transfers of P142.59 million to
SUCs/NGAs, non-liquidation of P0.72 million by LGU, and the
misstatement of the affected accounts equivalent to the expended amount;

The prescribed accounting rules and regulations on the maintenance and

preparation of records and/or reports not adequately observed in three
CHEDROs; thus, affecting the reliability of the receivable accounts’
aggregate balance of P210.47 million;

Discrepancy of P61.37 million in reciprocal accounts Due from Regional

Office/Staff Bureaus and Due to Central Office affecting the fair
presentation of the CHED’s consolidated financial statements;

Recording of purchases of office supplies and materials as expenses in

three CHEDROs violated the NGAS policy of adopting the Perpetual
Inventory Method of recording purchase of supplies and materials;

Unreliable P105.14 million reported balance of Other Investments and

Marketable Securities account under Fund 101 of CHEDCO due to
absence of supporting details/documents on the investments of P44.72
million for the SNPLP and for the Department of Education, Culture, and
Sports (now DepED) transferred funds, unrecorded interest of P1.82
million and unreconciled difference/transactions of P7.35 million;

Unascertained accuracy of the reported balance of PPE account of P22.44

million in six CHEDROs due to the absence of the PPE Ledger Cards
(PPELC) and Property Cards (PC) and existence of other deficiencies in
property management; and erroneous entries resulted in a net
overstatement of the said account by P0.87 million in five offices;

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 Non-adjustment of completed projects costing P534.43 million of CHED-
CO to appropriate asset accounts with the consequent failure to provide
corresponding depreciation, and erroneous recording resulted in
misstatements of the affected accounts;

Disbursements of funds/financial transactions amounting to P114.35

million in CHEDCO and the three CHEDROs not properly documented;
thus, casting doubts on the validity of claims/transactions and in violation
of Section 4 (items 5 & 6) of PD 1445 and Section 28 of the Manual on
NGAS, Vol. I;

The inadequacy of the accounting system in CHEDROs 8 and NCR and

monitoring of budgetary accounts in CHEDRO 12 due to non observance
of existing rules and procedures resulted in misstatements of accounts;
thus, affecting the fair presentation thereof in the financial statements;

Disbursements of funds of CHEDCO and two CHEDROs amounting to

P0.38 million not in accordance with existing rules and regulations; and

Failure of CHEDCO and seven CHEDROs to formulate plan and allocate

funds for the Gender and Development (GAD).

B. Not Implemented

Transfer of P16.40 million from CHEDRO 6 MDS account to the Local

Currency Current Accounts (LCCA) to avoid the reversion of NCAs for
scholarship funds due to the late release of funds from the Central Office;
and delayed processing of claims due to lack of structured monitoring
system/procedure on scholarship payments, thus exposing unutilized
funds to possible loss or misuse; and

Non submission of contracts/Purchase Orders of CHEDCO to the Auditor

within the period prescribed under COA Circular Nos. 2009-001 and
2009-002.

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