i

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

xiv

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;

xv

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

xvi

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.

xvii

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.

xviii

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;

xix

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;

xx

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;

xxi

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.