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09-UP09 Part2-Observations and Recommendations

09-UP09 Part2-Observations and Recommendations

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Published by: dilimandiary on Jan 15, 2011
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12/15/2012

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OBSERVATIONS AND RECOMMENDATIONS
 I.Efficiency and Economy Audi
A.
Unreported/undisclosed results of the University Hotel’s (UH) operations
The UH, as a special project under the UP System Administration, continues tooperate as a separate and distinct entity since 1983 and the results of its financial  position and operations, which reflected a gross income of 
P
30.46 million in 2009,remained undisclosed/unreported in the System’s books of accounts thus, affectinthe fair presentation of the University System’s consolidated financial statements.
1.The UH, formerly the Philippine Center for Economic Development (PCED),was donated to the University of the Philippines (UP).2.The Deed of Donation was executed between the PCED and the UP through itsformer President, that took effect on June 10,1983. It involved the conveyance of assets worth P14.6 million including the Hostel building valued at P10.99 million, butincorporating therein some conditions, that include among others
 ,” that the Doneeassumes any and all the liabilities of the PCED Hostel as shown in the balance sheet, including certain contingent liabilities…”
3.In view of such donation, the UP was vested with the ownership, managementand control of the hotel and its operations. However, its management’s right and privileges were conferred to the Board of Overseers (BOO) created by the UniversityPresident under Administrative Order (AO) No. 108 on July 14, 1983, as reaffirmedin Section 2 of AO No. FN-03-56 dated October 2003.4.The UH continued to operate under the name and authority of UP butapparently as a separate and distinct entity with a separate books of accounts. Ineffect, the results of its operations were not publicly disclosed/reported in theUniversity System’s books of accounts.5.The audit disclosed that the UH financial and operation reports were neverecorded in the University’s books since 1983 despite the previous years’ auditrecommendations for management to take appropriate action to consolidate in theUniversity’s books of accounts the result of the UH operations as well as its financialcondition.6.For CYs 2009 and 2008, the UH had reported a gross income from operationsof P30,457,660.00 and P25,931,701.00, respectively, but these were not reflected inthe UP System’s books due to the present set up.7.The UP President created a committee to review the status of the Hotel under AO No. PERR-07-50 dated June 20, 2007. The committee was tasked to recommendthe best course of action that the university
 s
hould take given the Hotel’s mandate and50
 
its current situation as well as the University’s needs and responsibilities. The reportwas due in July 2007, however, to date we have not been informed of the committee’sreport, if any.8.While the efforts exerted by the management and staff of the UH for themaintenance, development and continuous operation of the same are commendable,however, these activities must be governed by applicable government rules andregulations, specially the preparation of required monthly and year-end financialreports, which have to be consolidated with the UP System financial reports.9.
We therefore reiterate our previous recommendation that managementrequire the BOO to submit the financial reports of the UH operations forconsolidation in the books of the University System. Further, the UHmonthly/year-end financial reports and supporting documents required undergovernment rules and regulations should be submitted regularly to theCommission on Audit (COA) for audit purposes.
10.Management commented that the University faithfully implemented AO 108issued on July 14, 1983, as in :
o
“Section 1- Creation and Composition. There is hereby created a Board of Overseers whose compositions shall not exceed 7. They shall serve at the pleasure of the President.”
o
“Section 3- Income of Hotel. The Board shall recommend to the President theamount or percentage of income that shall be remitted regularly to theFaculty Development Fund.”
o
“Section 5- Submission of Reports. The Board shall submit a quarterly reportto the President through the Vice-President for Planning and Finance. It shallsubmit a report on the disposition of the Hostel and such other benefits and privileges which it may deem appropriate.”11.The Audit Team would like to stress that the AO 108 was issued in themeantime that management has not yet come up with a final plan on what to do withthe donated property, so as not to interrupt the Hotel operations. Further, more than20 years had passed, but the succeeding administrations did not bother to introduce possible amendments to the said AO 108 to address the issues on management,operations and financial reporting. Any law, order or issuance may be subjected to possible amendments when, during the implementation period, provisions therein become irrelevant or unnecessary or are no longer sufficient to address subsequentchanges or events.51
 
 B.Absence of standard qualification requirements for appointees to the BOO positions
 AO No. 108 dated July 14, 1983, creating the Board of Overseers to manage theUniversity Hotel, and giving its management the power and control, did not clearly specify the qualification requirements of the appointees to the Board that will  standardize criteria for eligibility requirement and will govern future selection and appointments to the Board.
12.The UH, since its construction and operation under the PCED and until the timeof its donation to the UP in 1983, is a government property. The corporate nature of its function and operation does not change the fact that it is a government propertysubject to existing applicable rules and regulations of the government.13.AO No. 108 creating the BOO as appointed by the President had vested to theBoard full powers and control of the UH operations as provided in Section 2 thereof,to wit:a.Oversee and supervise the operation of the PCED Hostel; b.Undertake or commission studies designed to improve the managementand operation of the PCED Hostel and the possible terms in the event of leaseor other arrangements;c.Promulgate rules and regulations regarding the use of the facilities, thehiring, dismissal and the salaries of its personnel;d.Schedule of prices of foods and services of the Hostel, etc. which shalltake effect upon the approval of the President;e.Enter into contracts in matters relating to the operation and managementof the Hostel;f.Enter into loan agreement upon the recommendation of the Vice-Presidentfor Planning and Finance and the approval of the President;g.Determine the name of the Hostel for approval of the President;h.Recommend to the Presidential Committee on Campus Planning andDevelopment necessary improvements within the vicinity of the Hostel; andi.Performs such other powers and functions as may be assigned to it by thePresident.14.The foregoing powers and functions vested to the BOO more than 20 years agogave the Board full power and control over the operations of the UH. It was52

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