PAARLFact-Finding Board Report

Prepared by FE ANGELA M. VERZOSA, CHAIR

Philippine Association of Academic/Research Librarians, Inc.Rm. 301, The National Library Building, T.M. Kalaw St., Ermita 1000 Manila, Philippines

Created to investigate the missing TD

Scope and Purpose investigate into the circumstances surrounding the missing

time deposits placed originally with Banco de Oro (Taft Avenue branch) in 2005 for a 5-year placement, and subsequently transferred to BPI Family Savings Bank (Pedro Gil Branch) in the amount of P1.25 million in December 2010

establish a documented basis to determine liability, culpability, and/or accountability of the parties involved in the incident

identify what action/s will be needed to protect the organization

assess any potential or developing problems that could impact on the confidence of the members on the governance of the Association, and on the image of the association resulting in damage to its reputation, by disclosing the conclusions arrived at by the Fact-Finding Board to the general membership in a special meeting to be called for this purpose.

Background

Photocopy of the Time Deposit Certificate for Php 1,040,000 placed in 2005

8 Sept 2010

Interest of 10% per annumOr 50% after 5 years

Note: By Dec 2010 the total interest income was Php 449,355.74 net of taxes, and

the total time deposit Php 1,489,355.74

On 8 September 2010 the interest earnings of the BDO Account No. 45800-883-12 totaled to Php 425, 774.54, based

on an email dated 8 September 2010, sent by 2010 Vice-President Roderick B. Ramos to update the 2010 Treasurer Aisa de la Torre- Morana on the outstanding balance on the

passbook.

Facts and Sequence of Events

13 Sept 2010 – Pres. Paras picks up original TD certificate from Treasurer Morana, and a blank withdrawal slip signed by Ms. Morana

15 Sept 2010 – Board of Directors meeting minutes after MIBF Forum at SMX Mall of Asia did not mention any resolution authorizing him to withdraw

14 Oct 2010 – Board of Directors meeting (no attendance from Council of Elders who were invited) to discuss the transfer of the TD, no Board Resolution signed for the final disposition of the Time deposits

18 Oct 2010 - Mr. Paras withdraws the amount of Php 250,000 in cash from the passbook account no. 45800-883-12 with Banco de Oro, which represented the interest earnings of the time deposit, and kept passbook and cash (no mention to the Board)

21-24 Oct 2010 – Benchmarking tour of PAARL in Singapore

Signature of Mrs. Aisa de la Torre- Morana attesting to the turn-over Signature of Mr.

Paras acknowledging receipt of the TD certificate

Scanned copy of the original TD Certificate which was eventuallyturned over to BDO on18 Nov 2010

FACT ONE: 13 Sept 2010 – Pres. Paras picks up original TD certificate from Treasurer Morana

FACT TWO: A blank withdrawal slip pre-signed by Ms. Morana for Php 250,000

Paras signs receipt of cash withdrawn

Cash breakdown:

1000 x 200

50 x 100

This cash of Php 250,000 disappears after Paras withdrawal, since it was not deposited to any account of PAARL with BPI Family Savings Bank since Oct 18.

Facts and Sequence of Events

FACT THREE: 9 Nov 2010 2010 Secretary Sonia Gementiza signs Secretary’s certification prepared by Pres. Paras authorizing him and Treasurer Morana to open a SCHOLARSHIP FUND at BPI Family Savings Bank, without any Board resolution signed by directors to effect ANY transfer. Document was notarized 11 November.

Secretary’s certification authorizing Paras and Morana to open a PAARL Scholarship Fund with BPI Fam Bank

No Board resolution attachedto open a time deposit account

This certification was used toopen only a Maxi-Saver account (savings account only) on 8 Dec

Facts and Sequence of Events

FACT FOUR: 18 Nov 2010

Paras withdraws the time deposit of P1,040,000 from BDO, with a blank withdrawal slip and pre-signed application for manager’s check signed by Morana; without any board resolution authorizing him AND Morana to withdraw

Paras withdraws the amount of Php 198, 711.73 in cash from the passbook account no. 45800-883-12 with Banco de Oro (after obtaining passbook from VP Roderick Ramos, which represented the interest earnings of the time deposit, and kept passbook and cash (no mention to the Board)

blank withdrawal slipPre-signed by Morana

blank withdrawal slipPre-signed by Morana

Paras and Morana sign application for manager’s check

Application form for Manager’s CheckPre-signed by Morana and Paras

Paras withdraws P 198,711.73From passbook for interest income Of the time deposits.

Cash breakdown

Paras signs receipt of cash withdrawn

total sum now withdrawn from this account amounted to Php 448,711.73, which disappears from the books of account.

Facts and Sequence of Events

FACT FIVE: FROM SEPT THRU NOV 2010 Although the Board of Directors met three times: 15 September 2010 after the MIBF one-day seminar at

SMX Convention Center 14 October 2010 at the National Library headquarters 25 November 2010 after the NBW forum at the National

Library

Directors were not informed of the: Turn-over of the original TD certificate by Aisa Morana Turn-over of the passbook by VP Roderick Ramos Heavy withdrawals of the time deposit and interests Any Board Resolution authorizing withdrawals nor

opening of any accounts to effect the transfer of funds

Facts and Sequence of Events

FACT SIX:

1 Dec 2010 – Manager’s check for Php 1,040,000 was deposited at BPI Family Savings Bank-Carlos Palanca Branch and credited to the Association’s Maxi-Check Account No. 5951-0782-06 at BPI Family Savings Bank-Pedro Gil Branch

8 Dec 2010 – Paras withdraws in cash P1,040,000 with a blank pay-to-cash (check no. 086073) pre-signed by Morana; without any board resolution authorizing him to withdraw the amount

check of Php 1,040,000 was deposited at BPI Family Savings Bank-Carlos Palanca Branch

Pay-to-cash check for Php 1,040,000 was encashed

This bank statement was printed on 3 Jan 2011 at 12:46:23

Facts and Sequence of Events

FACT SEVEN:8 Dec 2010 –

Paras OPENS a PAARL Scholarship Fund (Maxi-Saver Acct. No. 5953-3395-97) from the cash amount of Php1,040,000 with the initial deposit of Php 239, 355.74 after presenting the Secretary’s Certification of Board Resolution No. 6

TAKES OUT the remaining balance in cash amounting to Php 800, 644.26 as indicated with the word “out” written by hand at the back of the check no. 086073, WITH CASH BREAKDOWN.

encashed by Mr. Paras, signed, indicating at the back of the check his “PRC No. 02259 and SSS ID No. 33-2717626-1”

Check no. 086073 of PAARL’s Maxi-Check with BPI Family Savings Bank

the amount of Php 239,355.74deposited to Maxi-Saver Acct. 5953-3395-97

CASH BREAKDOWN:The remaining balance in cash amounting to Php 800, 644.26 was indicated with the word “out” , to mean withdrawn.

Secretary’s certification authorizing Paras and Morana to open a PAARL Scholarship Fund with BPI Fam Bank

No Board resolution attachedto open a time deposit account

This certification was used toopen only a Maxi-Saver account (savings account only) on 8 Dec

Facts and Sequence of Events

FACT EIGHT: 3 Jan 2011–

Paras emails Morana to inform that he has transferred the BDO funds to BPI Family and opened the Scholarship Fund (On the same date when bank statement WAS PRINTED)

13 Jan 2011 – Mr. Paras emails Mrs. Morana indicating that the total sum of Php 449,355.74 was withdrawn from the interest earnings of the time deposit with BDO on 8 December 2010, thereby closing the account. (This amount, when added to the balance of the time deposit encashed by Mr. Paras of Php 800,644.26 would indicate the sum of Php 1,250,000) In truth and in fact, Paras had already withdrawn the bulk of the interest earnings on 18 October and 18 November 2010, AND THE PASSBOOK REMAINED WITH HIM.

25 Jan 2011 – Paras emails Morana attaching 2 scanned images:

*Certificate of Time Deposit for Php 1.25 million * Maxi-Saver Acct. No. 5953-3395-97 for Php 239, 355.74

amount of Php 239,355.74 indicated as NCS (Non-Book Cash Transaction) deposited to Maxi-Saver Acct. 5953-3395-97

amount of Php 77,750.91 withdrawn from PNB savings account, indicated as NCS (Non-Book Cash Transaction) on 31 Jan 2011, thus closing PNB acct.

Facts and Sequence of Events 28 Jan 2011 – Mr. Paras presented the Treasurer’s Report before the

Annual General Assembly held at the National Library’s Epifanio de los Santos Auditorium in lieu of Mrs. Teresita Moran, who was tasked to prepare the report on behalf of Mrs. Morana who was on maternity leave.

31 Jan 2011 – PNB savings deposit amounting to Php 77,550.91 was withdrawn and transferred to the Scholarship Fund with BPI, without any Board Resolution or Secretary’s Certification authorizing him to close the account.

May or Jun 2011 – Mr. Paras came over to Ateneo Professional Schools Library to deliver an envelope containing the TD Certificate of 1.25 million and the Maxi-Saver passbook for PAARL Scholarship Fund.

8 Dec 2011 – a non-book cash transaction was posted on the passbook of PAARL Scholarship Fund, Maxi-Saver passbook No. 5953-3395-97 with the amount of Php 50,000, which was mistaken as interest earnings by Treasurer Sonia David, and reported as such in the 2011 Annual Treasurer’s Report. No effort was made by the External Auditors to verify/confirm this amount, or to examine the TD certificate.

amount of Php 239,355.74 indicated as NCS (Non-Book Cash Transaction) deposited to Maxi-Saver Acct. 5953-3395-97

amount of Php 77,750.91 withdrawn from PNB savings account, indicated as NCS (Non-Book Cash Transaction) on 31 Jan 2011, thus closing PNB acct.

Cash deposit of Php 50,000 reported as interest when it was indicated here as “NCS” – non-book cash transaction

reported as interest earned from the time deposit in the Treasurer’s report presented by Sonia David at the 2012 General Assembly held

at De La Salle University-Dasmarinas on 27 January 2012

interest

Facts and Sequence of Events

FACT NINE: The Reports of the Independent Auditors for 2010 (submitted on 17

December 2011) and for 2011 (submitted on 11 July 2012) were done by the same auditor, Mario Enrique A. de los Reyes, CPA Reg. No. 63651.

In his report for both audits, he simply mentioned the time deposit

with the same statement (on page 15 and 16 respectively) as “The Association has a time deposit of P1,250,000 at the Bank of the Philippine Islands (BPI)”. No verification or confirmation was made.

According to 2012 President Gementiza, the Independent Auditor was recommended by Mr. Paras himself.

The Time Deposit certificate was kept in the vault of Ateneo Professional Schools Library under the custody of Ms. David until an inquiry on the time deposit interest earning for 8 December 2012 was raised during the General Assembly in January 2013 at TUCP-Cubao.

Facts and Sequence of Events

FACT TEN: On 7 February 2013 Ms. Cecillia Lobo went to BFB-Pedro Gil Branch to inquire

about the interest earning of the time deposit, and presented the Time Deposit Certificate. The bank manager then told her that the certificate bearing Account No. 5952-2816-76 was fake for the following reasons:-The texture of the paper is different from the original, being only a scanned copy-The certificate should bear two signatures of bank officers-There is no annual interest payment schedule; it is either monthly or upon

maturity In a formal reply dated 27 February 2013, BPI-Family Savings Bank declared

that the Time Deposit Certificate presented to the bank was not authentic. -The document was not issued by the branch.-There is no TD placement with this particular number. -The other details on the face of the document were also manufactured or

faked. -The signatures appearing on the authorized signature portion are not the

signatures of branch officers of the bank-The paper used was ordinary paper, a scanned copy to make it look original.-The checkwrite portion is just a copy and not from the official checkwriter of

the bank.

Evaluation of findings 2010 President “misappropriated the amount of

Php 1.25 million”, and “worse, he misrepresented and pretended to have duly invested the money by presenting to the PAARL a copy of a falsified and spurious Peso Time Deposit Certificate containing the said amount.

2010 Treasurer, for her gross incompetence, neglect of duty, and reckless mishandling of the Association’s funds at its most crucial moments, “aided/abetted” wittingly or unwittingly the misappropriation committed by the President

Strategic Lapses -A Conspiracy of Silence

-Failure to secure bank reconciliations/certifications

-Absence of Board resolutions to record major decisions

-Rampant issuance of pay-to-cash checks/blank withdrawal slips

-Failure in proper turn-over and inventory of records

Breach of Fiduciary Duties(1) duty of care – to act with diligence and with the care an ordinarily

prudent person in a like position would exercise; (2) duty of informed judgment – the process of gaining sufficient

familiarity with the background facts and circumstances to make an informed judgment before acting;

(3) duty of disclosure – to disclose material / important information to shareholders / members, including conflicts of interest;

(4) duty of loyalty – to act in the best interests of the corporation.

Evaluation of findings

Imposition of sanctions/disciplinary action on:

President – expulsion, criminal action, administrative complaint

Treasurer – expulsion, criminal action, administrative complaintVice-President – disqualification from appointive/elective position

Secretary – disqualification from elective position Auditor – disqualification from appointive/elective position Strict implementation of By-Laws, Manual, guidelines,

other rules, and Best practices Review of the Manual

-to include provisions to tighten internal controls over the management of the association’s funds and assets; strict observance of proper turn-overs -to formulate standard accounting/auditing guidelines-to formulate election rules to guide all future elections

Rectification of mistakes made

Recommendations