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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 their 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 (who resigned November 15, 2011), 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 258 is for the

Central Office and 351 for the fifteen regional offices. The 497 positions are filled up while 112 are unfilled.

B. OPERATIONAL HIGHLIGHTS

The CHED management reported the following major accomplishments vis-à-vis their targets for Calendar Year (CY) 2011:

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Major Thrusts/Activities Targets Accomplish-ments

Percentage of Accom-plishments

1. Anti-corruption/transparent, accountable and participatory governance

1.1 Tibay Edukasyon, mediation, fact

findings, and investigation of violations of laws, rules and regulations

- Complaints Resolved

1.2 Information System Strategic Plan

- ICT systems developed/operational - % of HEIs data - Structured Cabling system

1.3 Fund Management Services

Institutional capability - Project proposals processed - Projects supported

Rationalization - Proposals processed/implemented - Programs and Projects monitored - Impact assessment conducted

Management of Higher Education Development Fund

1.4 CHED Human Resource Development –

training and professionalization

- No. of Scholarship Grants for CHED employees

- No. of CHED employees trained

98 8

90% 100%

44 80

50 350 12

100%

10 387

50 8

100% 70%

50 80

117 412 11

99.19%

10 190

51%

100% 100% 70%

114% 100%

234% 118% 92%

99.19%

100% 49%

2. Poverty Reduction and empowerment of the Poor

2.1 Higher Education Institution (HEIs)

Research, Development and Extension Programs in the NAPC identified focus municipalities

- Researches - Extension Proposals

15 7

26 8

173% 118%

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Major Thrusts/Activities Targets Accomplish-ments

Percentage of Accom-plishments

2.2 Job-Skills Matching Program

- No. of curricula revised/reviewed - Reports on labor-market signals - Conduct of Focal Group

Discussions/Workshops/ consultations

2.3 Students Financial Assistance Programs (STUFAPS)

- No. of grantees awarded/supported

2.4 Expanded Tertiary Education

Equivalency and Accreditation Program (ETEEAP)

- No. of HEIs evaluated/deputized/

monitored - No. of programs evaluated/monitored - No. of graduates

2.5 Ladderized Education Program

- No. of programs developed/

implemented

2.6 National Agriculture and Fisheries Education System (NAFES) Program

- No. of NUCAFs/PIAFs supported

2.7 Gender and Development (GAD)

Program

- No. of activities conducted

6 1 4

63,789

50 50

1,100 5

77 5

6 1 4

60,240

68 116

2,587 5

61 5

100% 100%

100%

94%

136% 232% 235%

100%

79.22%

100%

3. Rapid, Equitable and Sustained Economic Growth

3.1 Rationalization of Higher Education

- Framework developed - Updating of databases

1

100%

1

100%

100% 100%

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Major Thrusts/Activities Targets Accomplish-ments

Percentage of Accom-plishments

- No. of new HEIs and programs mapped

- Blueprint for Public HEIs developed - No. of Regional University System

(RUS) pilot tested - No. of Specialized HEIs pilot tested - Bills evaluated - Position Papers prepared - Opinions on legal concerns

3.2 Quality Assurance

- No. of Policies, Standards and

Guidelines (PSGs) developed/ updated/ reviewed/harmonized

- No. of PSGs published - No. of competency standards

drafted/revised - No. of guidelines for equivalency

program - No. of Centers of Excellence/Centers

of Development (COEs/CODs) criteria developed

- No. of non-compliant programs phased out

- No. of Institutions monitored/ evaluated

- No. of permits & recognitions issued/processed

Regions Central

- No. of Programs supported/accredited

3.3 Institutional Capacity Building

- No. of COEs/CODs Identified/

Processed - No. of COEs/CODs supported - No. of research centers established/

supported - No. of faculty/researchers trained

100% 100%

3 2

255 65 275

41 25 7 2 5

600

570

2,666 55

10

150 10

19 116

100% 50%

2 0

354 73 182

42 18 4 2 3

358

352

4,473 310

166

16 57

19 118

100% 50%

67% 0%

139% 112% 66%

102% 72%

57%

100%

60%

60%

62%

168% 564%

1660%

11% 570%

100% 102%

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Major Thrusts/Activities Targets Accomplish-ments

Percentage of Accom-plishments

- No. of faculty scholars - No. of HEI officials trained

3.4 Internationalization of Philippine Higher

Education

Commitment to International Standards

- Development of accreditation certification system on CHED’s membership in Washington Accord

Participation in Regional and International Cooperation Program

- No. of MOU/MOA negotiated on

CHED’s - No. of Ministerial

international/regional meetings attended

- No. of Balik Scientist Research Fellowship Awarded

770 500

85%

12 9 1

630 537

85%

19 8 1

82% 107%

100%

158%

89%

100%

4. Integrity of the Environment/Climate Change Mitigation and Adaptation (CCM&A)

4.1 Biodiversity Assessment and Database

Program

- Updated and consolidated Central Biodiversity Database

- Monitored GIA Biodiversity studies

4.2 R & D on environment and biodiversity

- No. of proposals processed

4.3 HEI extension programs on environmental protection and risk reduction

- No. of proposals processed

15,000 9 3 2

15,013 13 4 2

100% 144%

133%

100%

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C. FINANCIAL HIGHLIGHTS

RA 10147 also known as the GAA of CY 2011 provided a total appropriation of P925,278,000, for the operations of CHED, including their requirements for Maintenance and Other Operating Expenses (MOOE) for P714,198,000, of which P20,000,000 was used in support of the programs and projects under the Agriculture and Fisheries Modernization Program, and Capital Outlays amounting to P6,680,000, P5,000,000 of which was intended for the construction of Store Room as previously proposed and authorized in the CHED Central Office. In addition to the amounts appropriated herein, the requirements for MOOE of P750,827,000 for HEDF 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.

The total allotments received by the CHED amounted to P1,517,179,984.50

inclusive of P198,933,467.08 for continuing appropriations, of which P346,435,806.79 was sub-alloted to CHEDROs and P896,597,244.59 was incurred, thereby leaving an unobligated balance of P274,146,933.12.

The CHED’s assets, liabilities, government equity and sources and application

of funds for CY 2011, with comparative figures in CY 2010, are presented as follows:

I. Financial Condition

Particulars 2011 2010 Increase/(Decrease) Assets P10,914,979,319.37 P6,929,979,630.98 P3,984,999,688.39 Liabilities 8,106,925,046.46 3,848,180,152.01 4,258,744,894.45 Government Equity 2,808,054,272.91 3,081,799,478.97 (273,745,206.06)

II. Sources and Application of Funds

Particulars 2011 2010 Increase/

(Decrease) Sources: Subsidy Income from National

Government (SING) P 1,695,074,467.39 P 1,681,121,585.19 P 13,952,882.20

Other Income 7,280,631.49 7,355,259.18 (74,627.69) Total Income P 1,702,355,098.88 P 1,688,476,844.37 P 13,878,254.51

Application of Funds: Personal Services P 239,996,804.52 P 207,928,708.21 P 32,068,096.31 Maintenance and Other

Operating Expenses

1,224,381,291.29

1,111,503,746.85

112,877,544.44 Financial Expenses 100.00 0.00 100.00 Total Expenses P1,464,378,195.81 P 1,319,432,455.06 P 144,945,740.75

Excess of Income over Expenses P 237,976,903.07 P 369,044,389.31 P (131,067,486.24)

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D. SCOPE OF AUDIT

The audit covered the review of accounts and operations of the CHED, excluding CHEDROs 3, 5, 7 and 8 for CY 2011 and, to a limited extent, its reported accomplishments. 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 of CHED as of December 31, 2011 due to material exceptions noted in audit which are stated in the Independent Auditor’s Report and discussed in detail in Part II of the report.

F. SUMMARY OF SIGNIFICANT AUDIT OBSERVATIONS AND

RECOMMENDATIONS

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

1. Cash accounts of P47.88 million in NCR and RO 11 are unreliable due to

erroneous recording of unreleased checks which overstated the Cash NT-MDS account by P32.85 million, unadjusted accounting errors of P0.78 million, doubtful adjustment of P0.31 million, absence of Bank Reconciliation Statements (BRS) and non/inadequate maintenance of subsidiary and general ledgers.

We recommended that the Director of NCR require the Chief Administrative Officer (CAO) to closely monitor and supervise the Cash and Accounting Units, including the review of their works to ensure the:

• timely preparation and submission by the Cashier II of the year end’s

Inventory of Unreleased Checks to the Accountant for the immediate preparation of JEV to adjust the account for the unreleased checks;

• diligent and accurate preparation of the BRS by the Accountant;

• proper adjustment of the misstatements in the accounts affected by

the deficiencies in the recordings;

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• submission of the MTB within ten days after the end of the month to

the COA Resident Auditor, pursuant to Section 71 of the Manual on the NGAS, Vol. I; and the

• proper implementation of our reiterated recommendations to adopt the government accounting system and procedures in accordance with the Manual on the NGAS such that the required books of accounts are maintained and the financial statements extracted thru the journals and the general/subsidiary ledgers.

For RO 11, we recommended to require the Accountant to maintain SL and GL which should contain accurate and reliable information; and to find solution on the lack of manpower in the Accounting Section.

2. Unutilized scholarship funds in CAR of P1.9 million and RO 6 are still

deposited with the current accounts and not remitted to the BTr, contrary to Section 2 Executive Order No. 338; thereby, denying the government of other beneficial use of said funds. We recommended that the Management of both regions comply with EO No. 338 and remit to the BTr the deposited funds in the current accounts. Further, for RO 6 to ensure that financial transactions are supported by JEVs.

3. The Receivable accounts balance of P295.58 million in six ROs is overstated by P41.33 million due to unrecorded transactions and non liquidation of fund transfers the purposes thereof have already been served or accomplished and a total of P209.76 million cannot be substantiated, which rendered the account of doubtful validity. We recommended to the concerned Director:

• For NCR - to require the CAO to initiate the preparation of the

schedule of the Loans Receivables account in proper form and substance that will facilitate referencing on the total loans per student-borrower as of a given period and serves as supporting details for the account balance.

• For ROs NCR, 2 and 10 – to require their Accountants to draw JEV

to record the collection of loans and liquidation of fund transfers, which liquidation reports submitted to RO 10 should first be evaluated by the Accountant prior to recording.

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• For ROs 6 and 11 – to require the Accountant to maintain the required schedule and SLs of Receivable accounts. The GLs of RO 11 must contain accurate, complete and reliable information. It is also recommended that Management of both regions find workable solution on the lack of manpower in the Accounting Section.

• For RO 4 B - to require the Accountant to a) send demand letters to concerned NGAs/NGOs to enforce the submission of liquidation reports in pursuance of COA Circular No. 94-013 dated December 13, 1994 and COA Circular No. 2007-001 dated October 25, 2007; and b) properly booked up the duly reviewed liquidation reports to correct the overstatement in the Receivable accounts.

4. The failure to reconcile the discrepancy of P12.28 million between the NCR’s

Due to CO account’s balance of P139,200.62 and the CO’s Due from RO/Staff Bureaus balance of P12.42 million and to adjust the accounting errors of P308,316.97 cast doubts on the validity of said accounts. We recommended that the Director of NCR require the CAO to ensure that the Accountant comply on the following reiterated audit recommendations:

• submit regularly the report of disbursements/liquidation report on the

expenses incurred from the fund transfers as basis of the Central Office in preparing the corresponding entries;

• prepare the necessary entries to take up unrecorded liquidations and over-recording of fund transfers;

• reverse the entry on the adjustment made to tally the Pre-Closing and Post Closing Trial Balances and analyze first the transactions before effecting adjustments;

• coordinate with her counterpart at the Central Office and exert utmost effort for the immediate reconciliation of reciprocal accounts and subsequent adjustments of the deficiencies in order to present the accurate balances of the affected accounts; and

• henceforth, the reconciliation of reciprocal accounts should be done on a regular basis by the CHED finance group for the timely correction of deficiencies/errors.

Further, we reiterated our recommendation that Management maintain a complete set of books of accounts and record the financial transactions and operations conformably with generally accepted accounting principles and in accordance with the Manual on NGAS to prevent the recurrence of the deficiencies in the past.

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5. The non recording in the books of the recipients state universities the donated

property, plant and equipment (PPE) of the CHED’s Call Center project valued at P183.48 million, due to inadequate procedures and coordination among the implementers thereof, resulted to understatement of the PPE accounts by the same amount of the government bureaucracy’s consolidated financial statements at year-end as these PPE were already dropped from the CHED books of accounts.

We recommended that Management:

• closely coordinate with the concerned SUCs for a) the proper booking

up of the Call Center Project’s assets to fairly present the financial position of the Philippine Government; and b) complete documentation/delineation of accountability over the assets to ensure diligence of the accountable officers in safeguarding the assets against loss; and

• adjust the erroneous recording of transferred assets from Donations

account to Prior Year’s Adjustment account.

6. Erroneous/omission of entries resulted in net understatement of P9.08 million in PPE accounts of the CO and RO 12; and the accuracy of the PPE accounts of P5.42 million in ROs 10 and 11 cannot be ascertained due to the absence of inventory or inadequacy of records.

We recommended adjustment of the misstated accounts in CO and RO 12 to present the correct balances thereof. For RO 10, there should be a regular inventory taking of property and equipment, which inventory report should be reconciled with the accounting records and any discrepancy adjusted accordingly. SLs and GLs for the PPE accounts in RO 11 should be properly maintained with accurate/reliable data.

. 7. The Construction in Progress-Agency Assets account is overstated by P165.06

million representing the cost of completed projects not yet adjusted to appropriate asset accounts in CO; thus, correspondingly resulted in the understatement of the Office Buildings account by P151.54 million and misstatements of other affected accounts. We recommended that the Executive Director require the Accountant to coordinate with TWG for proper documentation of the completed projects of CHED as the Accountant’s basis in the reclassification entry for the Construction in Progress -Agency Assets account to the appropriate asset accounts and in the computation and recording of the corresponding annual depreciation for fair presentation in the Financial Statements.

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8. The Other Investment and Marketable Securities account balance of P114.88

million is unreliable due to a) unsubstantiated investments of P35.49 million, b) unreconciled discrepancy/transactions of P9.33 million and c) unrecorded withdrawal of P207,000.00. We reiterated our recommendations that Management:

• closely coordinate with the concerned GFIs/agency for the proper

documentation, reconciliation and adjustments of the CHED’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; and

• restudy the present status of the SNPLP funds with the GOCCs so that appropriate measures may be adopted to ensure the maximum utilization of the funds in pursuance of the objective of the Program.

We further recommended that the Accountant adjust the account for the unrecorded transaction of P207,000.00. Likewise, submit the MOAs related to Educational Guarantee Fund, PNB-Teijin and the investment of P455,000.00 transferred from DECS (now DepED).

9. The Guaranty Deposits account balance of P4.3 million is of doubtful validity due to the absence of documents to prove the existence of the P1.9 million and the unadjusted balance of P2.4 million which the lessor, Development Academy of the Philippines (DAP) already charged against the unpaid accounts of the CHED upon termination of the rental contract.

We recommended that the Head of the Agency require the Accountant to:

• adjust the Guaranty Deposit account by P2,350,788.00 pertaining to the DAP advance rentals which was already charged against the unpaid accounts of the CHED per JEV No. 2007111649 dated November 2007 and JEV No. 10-12-2010 dated December 29, 2010, which have to be secured from the DAP; and

• submit to the Auditor the MOA/contract/Certificate or similar documents on the guaranty deposits with PAL, PLDT, Manila Water Company, MERALCO and DepEd.

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10. The Accounts Payable balance is overstated by a net amount of P23.79

million due to erroneous entry on the unreleased checks in NCR and the failure of CO to set up the payables for completed infrastructure projects due to the absence of final billing from the contractors and inadequate coordination with the Technical Working Group (TWG). Further, the accuracy of Accounts Payable of P1.48 million in RO 11 is unascertained for lack of SL and adequately maintained GL.

We recommended that:

• For CO - the Executive Director require the Accountant to coordinate

with TWG and the contractors concerned for proper documentation of the completed projects of CHED as the basis of the Accountant in preparing the Journal Entry Voucher to set up the Accounts Payable and adjust the other accounts affected for fair presentation in the Financial Statements.

• For NCR - the Director require the CAO to closely monitor, supervise and review the works of the Cash and Accounting Units to prevent recurrence of the deficiency in accounting the unreleased checks.

• For RO 11 - the Accountant to properly maintain SLs and GL which should contain accurate and reliable information.

11. The payment of CNA Incentives by the CO and six ROs totaling P18.47 million is not consistent to the DBM Budget Circular No. 2011-5 dated December 26, 2011 resulting in total refundable irregular/excess payment of P9.63 million.

We recommended that the Head of the Agency require:

• all recipients to settle in full the excess incentives granted to them; • Chief Accountants to bill those resigned/retired/terminated

employees; and

• OIC - Administrative and Finance Services to submit the computation of the savings for the CNA and the Report required under Circular No. 2011-9.

We further recommended submission of justification for the granting of CNA despite the increase in the utility expenses and compliance with Section 4.0 of DBM Budget Circular No. 2011-5 dated December 26, 2011 regarding the personal liability of the Agency Head for any payment of the CNA incentive contrary to the said Circular.

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12. The sustainability of the educational needs of indigent scholars was affected

by the delay in the release of funds from the Central Office and/or the lapsing of the NCAs due to the flaws in the Guidelines and late/non-submission of request for funding and masterlists from the CHEDROs/HEIs/CSSGP scholarship coordinators. Further, related deficiencies raise concerns on the enforcement/effectiveness of management’s policies on StuFAPs.

We recommended to Management: • For CO restudy the existing Guidelines on StuFAPs, provide for

appropriate remedial measures for an effective implementation of the different scholarship programs and issue a specific Guidelines on Scholarship Program under PDAF for uniformity of application. The Guidelines should ensure the timely release of funds, problem-free enrolment and continuity of the scholarships of the qualified applicants/scholars; and

work out with the DBM for the possibility of exempting the

scholarship program from the policy on the reversion of NCAs.

Further, we recommended that the Directors of ROs 1, 4A and 6 require their Accountants and Scholarship coordinators strictly assess the completeness of the documents submitted by the schools/scholars before processing and payment of claims. The same should be attached to the DVs and forwarded to the Auditor for audit. And for the following:

• RO 6 - to maintain updated individual ledger card to monitor and

facilitate payments of scholarship benefits; thereby, ensuring accurate and timely payments to scholars.

• RO 4A and 6 - to strictly implement CMO No. 29, as amended, specifically on the discontinuity of the scholarships due to failure to maintain satisfactory academic performance in accordance with the policies and standards of the school.

• RO 9

investigate the irregularity of payment to the three student grantees who denied receiving the checks and signing the payroll;

ensure that checks are received by the right person. Otherwise,

recipient should be properly authorized and the check is marked “for deposit only”; and

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require the students to open an ATM bank account at any

authorized government bank most accessible and convenient to all grantees and release their claims through the ATM. Arrangement can be made with government servicing banks for minimum maintaining balance of the grantees.

13. Inadequate monitoring on the implementation of the Student Assistance Fund

for Education (SAFE) Program and the non-compliance with the guidelines by the participating HEIs negatively impact on the success of the Program, as funds of P6.32 million released to HEIs in CY 2008 and 2009 by NCR were still unutilized as of May 2011 and P605,011.88 was not utilized as intended; while P41.73 million in RO 12 has remained unliquidated by HEIs.

To determine the over-all outcome of the 1 Billion SAFE Program, we reiterate our prior year’s recommendations for the CO Management to require all ROs 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 to ensure that related provisions of COA Circular Nos. 94-013 and 2007-001 on fund transfers are incorporated in the prospective CHED Guidelines and the MOAs of the ROs, which should also include the sanctions for non-compliance.

Regarding the aforesaid findings in NCR and RO 12, we recommended that Management:

• For NCR and RO 12

require the participating HEIs to comply with the Guidelines in

the implementation of the Program particularly on the utilization of the funds and their responsibilities to submit the required reports/data regularly to the RO;

immediately conduct monitoring/assessment and evaluation of the

SAFE Program by requiring the participating HEIs to submit complete and updated data on the list of grantees; status of fund utilization per semester, which shall include the amount of releases and records of loan repayments; and status/grades of student-grantees per semester;

maintain a database to document the result of the SAFE Program implementation particularly on the student grantees/beneficiaries who are able/failed to complete their courses in the participating HEIs;

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comply with the requirement of the Guidelines on the submission of masterlist to OSS for consolidation of data regarding the Program; and

require the participating HEIs who opt not to continue the implementation of the Program to return to RO the unutilized balance, including the bank interests thereon, which should be remitted by the latter to the BTr.

• For NCR request the assistance of the RO III to monitor the utilization of

the SAFE funds in the Philippine Merchant Marine Academy and Ramon Magsaysay Technological University and assess/evaluate the performance of these HEIs in the implementation of the Program, with the report thereon submitted to NCR; and

update the schedules to substantiate the Due from NGAs and Due from NGOs/POs account.

14. Deficient monitoring and accounting system in the implementation of the

Study Now-Pay Later Plan (SNPLP) by the five ROs resulted in a very minimal collection of P123,640.00 or barely 0.3 percent of Loans Receivables of P36.15 million, with the overdue loans not yet established due to disorderly accounting records and absence of complete database on the status of scholarship of the student borrowers.

We reiterated our recommendations that the 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 detail 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;

• send collection letters to the student-borrowers and guarantor, monitor the status of employment of the grantees and coordinate with the HEIs to intensify collections of due and demandable receivables;

• strengthen the monitoring system to assess/validate program implementation and properly manage the accounting records/reports on loans receivables to minimize the adverse effect of deficiencies committed in the past; and

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• revisit the existing policy on the repayment of loans that will ensure

efficient collections of loans receivables and effective implementation of the SNPLP.

We further recommended to the NCR Director to issue an Office Order on the reassignment of a Scholarship Coordinator for identification of the person responsible and emphasis on his duties as well as responsibilities in the monitoring of the scholarship programs and the proper management of its records.

15. The implementation of the Agricultural Technology Education Project -

Student Micro-Project Loan Fund (Agritech -SMLF) with a balance of P29.5 million, purposely created to extend loan to student for their micro-projects required in their curriculum, has not been maximized due to inadequate monitoring of CHED as nine out of 14 or 64 percent of the identified participating Provincial Technical Institutes of Agriculture (PTIAs) have ceased from offering either the pre-requisite Diploma on Agricultural Technology (DAT) or the DAT-Bachelor of Agricultural Technology (BAT) Program and /or the absence/decline in the number of enrollees thereof from AYs 2008-2011.

We recommended that Management:

• restudy the Agritech-Project implementation vis-a vis the Guidelines

and prevailing status of the DAT/BAT program offering by the PTIAs and address the related issues and concerns to ensure the viability of the Project and the maximum utilization of the funds towards the realization of its objective of developing the students into bankable agri-entrepreneurs;

• extend the coverage of the Agritech –Project to other qualified PTIAs

to increase the number of student beneficiaries; and • reconcile the difference between the book and bank balances and

make adjusting entry to reflect the correct balance of the Other Investment and Marketable Securities account.

16. Loans receivables of P17.88 million granted in 2005 have remained unpaid by

13 SUCs manifesting non-viability of their Income Generating Projects (IGPs) that were financed from these loans, which condition reflects CHEd’s failure of attaining fully the objective for the establishment of the Corporatization Transformational Fund (CTF) of developing SUCs management and corporate skills.

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We recommended that Management:

• On SUCs with approved extension to return the CTF

execute respective MOAs with the SUCs which should provide for

the a) parties’ responsibilities on the extended term of the CTF; and b) sanction of disqualification from availment of financial assistance/grants from succeeding projects of CHED. Henceforth, comply strictly with the requirements under the MOA/guidelines to ensure operational efficiency and attainment of project objectives;

• On SUCs without an approved extension to return the CTF

send demand letter for the return of the CTF and submission of

financial/status reports of the IGP. In case of default, bar them from participating in the other project of CHED and receiving financial assistance/grants therefrom.

Further, please submit the basis for waiving payments of the Laguna State Polytechnic College and the Report of Disbursements on the utilization of the CTF.

G. STATUS OF SETTLEMENT OF ACCOUNTS

Issued prior to October 6, 2009

As of December 31, 2011, the unsettled disallowances amounted to P21,539.40 in the CO, which represents the unpaid balance of disallowed payment of P1,200/each personnel for Cultural and Athletic activity, and P26,000.00 in CARAGA.

Issued on October 6, 2009 and onwards

In the CO, NCR, ROs 6 and 13, the unsettled audit suspensions and

disallowances as of December 31, 2011 amounted to P7,572,136.32 and P6,090,288.21, respectively.

Considering that appeals were already filed with the COA Central Office on

the disallowances of P4,570,662.16, the CO Audit Team did not issue the Notice of Settlement of Suspension, Disallowance and Charge (NSSDC) for the deduction of the disallowed payment of P4,070,662.16 from the subsequent claim of E-Services Global Solutions, Inc, paid thru Authority to Debit Account (ADA) and payment under protest of P450,000.00 by the Consultant for the Call Center Project of the disallowed claim of P500,000, inclusive of P50,000.00 tax.

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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 3 11.54% Partially Implemented 22 84.62% Not Implemented 1 3.84% Total 26 100.00%

The recommendations on the following prior year’s audit findings were either

partially or not implemented, viz:

I. Partially Implemented

• Only 11 of the 137 failed/terminated/dropped faculty scholars have returned the grants extended to them; likewise compliance with the repayment and/or service obligations was not adequately monitored by the CHED, contrary to the Guidelines and the Scholarship Contracts;

• CHED failed to bill and collect the a) repayment obligations from

terminated/dropped faculty scholars amounting to P1.68 million, and b) unutilized fund transfers of P0.97 million to Cebu Institute of Technology (CIT) intended for the four scholars;

• 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 SNPLP’s implementation affecting the validity of the loans receivable of P150.69 million and the sustainability of the Program;

• The failure of the seven CHEDROs to strictly implement the CHED

Guidelines on Student Assistance for Education (SAFE) Program and the COA rules and regulation on fund transfers resulted in a) 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;

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• The invested fund of P218.99 million with the 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;

• 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 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 GAA;

• 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 (BRS), and the understatement of Cash accounts by P12.37 million;

• Irregular practices and deficiencies in handling accountabilities were

noted in the audit of the cash and accounts of the AOs in the CHEDCO and three CHEDROs, in violation of existing regulations on cash management;

• Cash advances of P1.45 million remained outstanding although the

purposes for which these were granted have already been served resulting in misstatement of accounts in CHEDCO and other deficiencies were observed in two CHEDROs, contrary to existing regulations;

• 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 the SUCs/NGAs, thereby misstating the Due from NGAs and Government Equity accounts;

• Leniency in the enforcement of the existing regulations and the

provisions of the MOAs in the 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 NGOs/POs and the Government Equity accounts; and b) their inability to fully assess fund utilization and program implementation;

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• In seven CHED 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;

• 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;

• The absence of inventory and regular reconciliation of balances and

delay/non-submission of the Report of Supplies and Materials Issued (RSMI), which resulted in a discrepancy of P1.81 million between the Accounting and Property records in CHEDCO, and the outright recording of purchases as expenses render the Inventories account balance of P2.67 million unreliable in three offices;

• 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;

• 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;

• The failure of the six offices to compute/provide the accurate

depreciations resulted in net understatement of P3.21 million in the Accumulated Depreciation accounts and over-valuation of the property and equipment;

• 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 account in CHEDCO;

• The Payable Accounts balance is understated by a net amount of

P2.20 million in four CHEDROs due to inclusion of invalid/ undocumented claims of P9.92 million and unrecorded unreleased checks of P12.12 million, contrary to existing regulations;

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• The absence of Registries of Allotment and Obligations (RAOs)in

three CHEDROs, due to inadequate manpower to maintain the Registries, rendered the SAOBs inaccurate and unreliable tool in documenting management’s budget accountability, contrary to existing rules and regulations;

• Disbursements of P4.29 million funds were not properly documented

thus casting doubts on the validity of transactions and DVs amounting to P20.96 million were not submitted for audit in eight CHEDROs, in violation of existing regulations; and

• Contracts/Purchase Orders (POs) and their supporting documents,

including the notice of delivery were not submitted by the CHEDCO and ROs 2 & 6 to their Auditors within the period prescribed under COA Circular Nos. 2009-001 and 2009-002 thereby affecting the timely review of the contract and inspection of deliveries and correction of the defect, if any.

II. Not Implemented

• Delay in the release of funds from the CO to the NCR in the amount of

P99.80 million affected the effective implementation of the StuFAPs thus, prejudicial to the indigent scholars whose continuous education is dependent on the financial benefits from CHED.