EXECUTIVE SUMMARY

A. Introduction

The University of Southeastern Philippines (USeP) is a regional state university created in

1978 by virtue of Batas Pambansa Bilang 12. USeP became operational in 1979 by
integrating the Mindanao State University in Mintal, Davao City (MSU-Davao), the
University of the Philippines Master of Management in Davao (UPMMPD), the Davao
School of Arts and Trades (DSAT), and the Davao National Regional Agricultural School
(DNRAS).

The University has six campuses, namely: Obrero, Mintal and Malabog Campuses all in
Davao City, Tagum Campus in Apokon, Tagum City, the Mabini Campus in Mabini,
Davao de Oro, and Bislig Campus, in Bislig City, Surigao del Sur. The central
administration is situated in Obrero Campus, Davao City. The financial transactions of
Mabini Campus are recorded in the Tagum Campus’ books of accounts.

As of December 31,2022, the University has recorded a total of 1,152 employees, with
571 regular and part-time faculty members and 581 non-teaching staff including those
hired for the RDE projects funded by external agencies.

A Financial and Compliance audit was conducted on the accounts and operations of the
University for calendar year 2022. The audit covered review of operating procedures,
evaluation of the University’s programs and projects, interview of concerned government
officials and employees, verification, reconciliation, analysis of accounts and such other
procedures considered necessary.

The audit was conducted in accordance with the International Standards of Supreme Audit
Institutions (ISSAIs). Moreover, the Commission on Audit has been implementing the risk-
based audit in the conduct of its audit services, However, to meet the evolving
developments in public governance and fund management, the result-based audit approach
was incorporated. The integration of these two approaches, called the Financial Audit
Manual (FAM) Methodology was applied in the audit of the accounts and operations of
USeP.

B. Financial Highlights

B.1 Sources and Applications of Funds

Total allotments available for CY 2022 is P776,905,158.10 with obligations incurred as of

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the year ended December 31, 2022 amounting to P700,571,340.26 as detailed in the
succeeding page:

Particulars 2022 2021 Increase (Decrease)

Amount Percentage
Appropriations 748,484,000.00 1,142,499,000.00 (394,015,000.00) (34%)
Allotments 776,905,158.10 991,388,782.00 (214,483,623.90) (22%)
Obligations:
Personal Services 408,077,850.87 379,297,609.53 28,780,241.34 8%
MOOE 192,117,004.81 128,511,060.68 63,605,944.13 49%
Capital Outlay 100,376,484.58 453,472,101.12 (353,095,616.54) (78%)
Total 700,571,340.26 961,280,771.33 (260,709,431.07) (27%)
Unexpended
Balance 76,333,817.84 30,108,010.67 46,225,807.17 154%
Continuing
Allotment 72,416,720.71 21,843,838.20 50,572,882.51 232%

B.2 A comparative financial position and performance for CYs 2022 and 2021 is
presented as follows:

Increase (Decrease)
Accounts CY 2022 CY 2021
Amount %
Position:
Assets 2,552,596,014.95 2,425,835,881.32 126,760,133.63 5%
Liabilities 253,666,573.17 249,690,965.14 3,975,608.03 2%
Equity 2,298,929,441.78 2,176,144,916.18 122,784,525.60 6%
Performance:
Income 958,987,299.34 1,164,521,932.79 (205,534,633.45) (18%)
Expenses
Personnel Services 416,587,424.02 396,652,149.87 19,935,274.15 5%
MOOE 298,984,277.35 168,813,835.11 130,170,442.24 77%
Financial Expenses 2,296.30 1,500.00 796.30 53%
Non-Cash Expenses 48,617,816.49 44,947,137.95 3,670,678.54 8%
Total Expenses 764,191,814.16 610,414,622.93 153,777,191.23 25%
Surplus 194,795,485.18 554,107,309.86 (359,311,824.68) (65%)

C. Auditor’s Opinion on the Financial Statements

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In our opinion, except for the effects of the matters described in the Basis of Qualified
Opinion section of our report, the accompanying financial statements present fairly in all
materials respects, the financial position of the University of Southeastern Philippines as
at December 31, 2022, and its financial performance, its cash flows, and its comparison of
budget and actual amounts for the year then ended in accordance with International Public
Sector Accounting Standards (IPSASs).

As discussed in Part II of this Report, the Auditor rendered a qualified opinion on the
fairness of presentation of the Financial Statements due to the misstatements of the
following accounts: (a) non- recording of cash collections and credit memo of Obrero and
Tagum-Mabini Campuses amounting to P56,206,812.57 and P3,220,979.70,
respectively;(b) non-recording of disbursements and debit memoranda of USEP Tagum-
Mabini Campus amounting to P154,195.20; (c) inconsistent computations of the
depreciation expenses of the Property, Plant and Equipment (PPE) of Mintal Campus
resulted in the understatement of the PPE account by P1,438,932.59; and (d) unrecorded
Water Supply System of Tagum-Mabini Campus amounting to P185,000.00, which
resulted in the net understatement of assets/equity by P60,897,529.66 in the financial
statements as at December 31, 2022.

D. Summary of Significant Audit Observations and Recommendations

Some significant audit observations and recommendations for the year 2022, which were
duly discussed with concerned USeP management officials on February 27, 2023 are
summarized as follows:

1. Continuing and returning students currently enrolled in the 1st Semester of

Academic Year (A.Y) 2022-2023 with accumulated tuition and other school fees
(OSF) totaling P48,558.00 were billed to CHED despite being ineligible to avail of the
Free Higher Education Program which precluded the optimized utilization of
government resources in education.

We therefore recommended Management to:

a. Discuss with the 13 students their ineligibility to avail of the Free Higher Education
program, and collect their respective tuition and other school fees (TOSF);

b. Reevaluate the eligibility of the other continuing and returning students enrolled in
the 1st Semester, A.Y. 2022-2023, and amend the billed amount to CHED after
incorporating the results of the reevaluation;

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 c. Reassess the eligibility of the continuing and returning students enrolled in A.Y.
2021-2022 and apprise the Audit Team of the results of the reevaluation;

d. Direct the Head of the OSAS to strictly implement the provisions of Section 6 (c) of
RA 10931; and

e. Submit a Flow Chart of the evaluation of students until the Free HE billing is
submitted to CHED for review.

2. Non-compliance and insufficient validation by the Bids and Awards

Committee (BAC), BAC Secretariat and Technical Working Group (TWG) on the
procurement process of infrastructure projects amounting to P111,892,578.91,
contravened some provisions of the RIRR of RA 9184, resulting in lack and
inaccurate reports/bid documents which could have rendered the process null and
void.

A. Construction of Quality Assurance, Accreditation, TLE Bldg Phase I -

P20,667,495.31 – RRSeismundo Construction and Supply (Completed)
B. Construction of Quality Assurance, Accreditation, TLE Bldg Phase IB -
P5,273,422.00 – RR Seismundo Construction and Supply
C. Construction of Quality Assurance, Accreditation, TLE Building Phase II -
P28,980,563.14 ASMFrancisco Const. and Dev’t. Corp.
D. Construction of Quality Assurance, Accreditation, TLE Building Phase III -
P27,292,980.82-LVLedesma
E. Completion of School of Applied Economics Phase I- P23,472,338.61- MAG
Corporation

We therefore recommended Management to:

1. Submit all the documents as required;

2. Justify the following:

a. Why the review/evaluation of bid documents were not meticulously done as to

completeness/correctness/validity and veracity which could have a great impact
on the BAC’s decision whether to award the contract or not;

b. The NFCCs were not properly evaluated and considered erroneous;

c. Statements of all Ongoing and Private Construction Contracts were not properly
reviewed and validated, thereby allowing the Bidder to misrepresent and falsify
the same;

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 d. The failure of the TWG to properly validate the Key Personnel’s Certificate of
Employment (KPCE) and the List of all Ongoing Government and Private
Contracts, which resulted in the same personnel to undertake more than two
projects at the same time resulting in misrepresenting the documents submitted;

e. These procurement processes for the procurement of the five Infrastructure

Projects should not be declared invalid for failure to comply with the eligibility
requirements of 2016 Revised IRR of RA 9184 and the misrepresentations made
by the bidders be eventually disallowed in audit.

E. Summary of Total Suspensions, Disallowances and Charges

Beginning Balance This Period Ending Balance

Audit Action
December 31, 2021 NS/ND/NC NSSDC December 31, 2022
Suspensions P340,000.00 0.00 0.00 P340,000.00
Disallowances 4,157,981.16 0.00 15,897.50 4,142,083.66
Charges 0.00 0.00 0.00 0.00
Total P4,497,981.16 P0.00 P15,897.50 P4,482,083.66

F. Status of Implementation of Prior Years’ Audit Recommendations

The status of implementation by the University management of the prior years’ audit
recommendations as at 31 December 2022, were as follows:

Status of Implementation
Total No. of
Year Reported Outstanding as of December 31, 2022
Recommendation Implemented Not Implemented
2021 105 73 32
2020 36 25 11
2019 46 39 7
2018 25 22 3
2017 8 4 4
2016 2 1 1
2014 1 0 1
Total 223 164 59
Percentage 100% 74% 26%