EXECUTIVE SUMMARY

A. Introduction

The Bulacan State University (BulSU) is a state-funded institution of higher

learning established in 1904 and converted into a University in 1993 by virtue of
Republic Act 7665. The BulSU is mandated to provide higher professional / technical
and special instruction for special purposes and to promote research and extension
services, advanced studies and progressive leadership in Engineering, Architecture,
Education, Arts & Sciences, Fine Arts, Information Technology, Technological Courses,
Commerce, Agriculture, Forestry, Medicine, Law, Public Administration, Fishery,
Technical and other courses as circumstance warrants.

The University main campus is located in Malolos City, the capital of Bulacan. It
has four extension campuses all located in the province of Bulacan, namely: Bustos
(Bustos); Sarmiento (City of San Jose del Monte); Meneses (Bulakan); and Hagonoy
(Hagonoy).

The Board of Regents is the policy-making body of the BulSU, which is

composed of 11 members, listed as follows:

Chairman - Chairman, Commission on Higher Education

Vice-Chairman - President, Bulacan State University
Members - Chairman, Senate Committee on Education
- Chairman, House Committee on Education
- Director, NEDA Region III
- Director, DOST Region III
- President, BulSU Faculty Union
- President, BulSU Student Council
- President, BulSU Alumni Association
- Two Prominent Citizens

The University Administration is headed by Dr. Cecilia N. Gascon, President, and

assisted by five designated Vice-Presidents for: Finance and Administration; Academic
Affairs; Planning, Research, and Extension; International and Community Affairs;
Executive Operations.

As of December 31, 2017, the Univesity had a manpower complement of 707

full-time faculty members, 462 part-time faculty members, 95 regular non-academic
personnel, 82 contract of service and 296 employees by job order, or a total of 1,642
personnel.
B. Financial Highlights

The financial highlights of the Bulacan State University for CY 2017 with
comparative figures for CY 2016 are presented below:

Increase %
2017 2016
(Decrease)
Financial Condition
Total Assets P 2,773,523,839 P 2,435,629,258 P 337,894,581 14%
Total Liabilities 1,058,038,065 868,711,485 189,326,580 22%
Total Equity 1,715,485,773 1,566,917,773 148,568,000 9%
Result of Operations
Total Revenue 1,114,204,684 891,053,373 223,151,311 25%
Total Expenses 883,908,392 747,126,615 136,781,777 18%
Gains 3,310,749 3,359,103 (48,354) (1%)
Surplus/(Deficit) P 233,607,042 P 147,285,861 P 86,321,181 59%

C. Scope of audit

Our audit was conducted on the accounts and operations of BulSU for calendar
year 2017. We conducted our audit in accordance with Philippine Public Sector
Standards on Auditing. The objectives of the audit were to (a) verify the level of
assurance that may be placed on management’s assertions on the financial statements; (b)
recommend agency improvement opportunities; and (c) determine the extent of
implementation of prior years’ audit recommendations. The thrust areas identified in the
audit instructions were audited on sampling basis and the findings are incorporated in
Part II of the report, as follows:

1. Financial Audit

Audit of Financial Statements:

a. Cash and Cash Equivalents

b. Receivables
c. Inventories
d. Property, Plant and Equipment
e. Financial Liabilities
f. Inter-Agencies Payables

2. Compliance Audit

a. Enforcement of timely submission of financial statements, reports and

supporting documents such as paid vouchers and official receipts.

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 b. Enforment of COA issuances on immediate liquidation and settlement of
outstanding cash advances under, among others, COA Circular No. 2012-004,
COA Memorandum No. 2015-072, COA Memorandum No. 2004-014, giving
priority to recent transactions that can be fully documented.
c. Expanded Students’ Grants-in-Aid Program for Poverty Alleviation (ESGP-
PA) and Tulong Dunong Program.
d. Compliance by the agencies with their obligations under the MOA covering
funds transferred to them by other government agencies.
e. Compliance with RA. 9184.
f. Compliance with RA No. 8291 (GSIS)
g. Programs and projects related to Gender and Development
h. Compliance with tax laws and regulations
i. Compliance with RA No. 9679 (Pag-IBIG)

3. Performance Audit

a. Programs/Projects/Activities implemented by the agency.

D. Independent Auditor’s Report

We rendered a qualified opinion on the fairness of the presentation of the

financial statement because as discussed in Part II of this report, the validity, correctness
and existence of the Property, Plant and Equipment (PPE) accounts with acquisition cost
of ₱1,912,526,058.91 as of year-end were unreliable due to (a) difference of
₱249,572,188.63 between accounting records and Report on the Physical Count of
Property, Plant and Equipment (RPCPPE); (b) missing/unaccounted PPE during actual
inventory amounting to ₱12,910,552.67; (c) incomplete lapsing schedules for PPEs; and
(d) absence of subsidiary records for all PPE accounts, contrary to Section 42 of Chapter
10 of GAM, Volume I.

For the noted deficiencies, we reiterated our previous year’s recommendations and
the Management agreed to direct (a) the Accountant and Property Officer facilitate the
reconciliation of their records and adjust the balances of PPE accounts; (b) the
Accountant to (i) prepare lapsing schedules of PPE, subsidiary records for all PPE
accounts starting with the current year’s transactions; and (ii) work back to establish the
PPE balances for prior year’s transactions, if necessary; and (c) the Property Officer to
exert extra effort to locate the missing/unaccounted PPE, otherwise require the
accountable person to pay the cost of the missing PPE items.

E. Summary of Other Significant Audit Observations and Recommendations

Summarized below are the other significant audit observations with their
recommendations, the details of which are presented in Part II of this report. Management

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views and comments including those offered during the exit conference were
incorporated in the report, where appropriate.

1. Receivables of ₱257,220,456.40 remained uncollected/unsettled due to failure of

Management to adopt adequate and strict measures to collect the amounts due from
students, officers and employees, and lessees. Out of these receivables, ₱6,854,254.47
could not be substantiated and remained doubtful due to inadequate records/list. Also,
the receivables were understated by ₱272,454.74 due to unbooked/unbilled receivables
and erroneous computations thereof. (Observation No. 2)

We reiterated our recommendation and the President agreed to instruct the (a)
Accountant, Administrator of Management Information System (MIS) and Director for
Scholarship to reconcile their respective records on receivables and adjust the balances,
as necessary; (b) Accountant to (i) maintain individual subsidiary ledger (SL) for each
student to allow monitoring of payment of tuition fees and loan installments for Student
Financial Assistance Program (STUFAP) and food/service stalls; (ii) adopt the accrual
basis of recording the receivables from tuition fees; (iii) record the unbooked receivables;
and (iv) issue order of payments for the taxes paid by the University in behalf of
concerned officers and employees; (c) Legal Officer to reviewed the contract of lease and
incorporate any necessary provisions and strictly implement the same and to initiate
appropriate action for the collection from the (i) concerned students with unpaid tuition
fees; and (ii) Graceland 23 Inc. for the non-payment of its obligations; and (d) the HRMO
to submit to the accounting office the list of officials and employees who have the
underpayment of withholding taxes.

2. The Cash-in-Bank account balance was understated by ₱32,553,436.79 due to

improper recording and unadjusted reconciling items in the bank reconciliation
statements such as unrecorded deposits, fund transfers, debit/credit memos, stale checks,
cancelled checks and liquidations of petty cash fund. (Observation No. 3)

We reiterated our previous year’s recommendation and the University Accountant agreed
to direct the personnel concerned to draw JEV to adjust the reconciling items to present
fairly the recorded cash in bank and the related expense and payable accounts.

3. Cash advances of officers and employees totaling ₱13,123,809.03 was overstated by

₱3,956,849,03 and remained unliquidated as of December 31, 2017 which delayed the
recognition of asset/expenses that were paid out of said cash advances and exposed any
unused cash advances to risk of loss and/or misappropriation. Moreover, additional cash
advances were granted even though the previous cash advances were not yet liquidated,
while cash advances remained unaccounted for as long as 255 days. (Observation No. 4)

In view of the foregoing audit observation, we recommended and the University

President agreed to instruct (a) all officials and employees with outstanding cash
advances to immediately submit liquidation papers so that settlements can be effected;
and (b) Accountant to (i) refrain from granting additional cash advances unless the
previous ones are liquidated; (ii) maintain subsidiary ledger for each accountable officer;

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(iii) prepare JEV for each liquidation reports; and (iv) withhold salaries of accountable
officers who persistently fail to settle their cash advances and continue to ignore the
submission of the requirements.

4. Purchases of supplies and materials of ₱9,968,732.27 were directly charged to

expenses without passing through the inventory account for the recognition of the asset or
unconsumed portion under the perpetual inventory method, resulting in the possible
misstatement of the supplies inventory and related expense accounts. (Observation No. 5)

We recommended and Management agreed to (a) exert efforts to provide a central

storage room for its supply requirements for stocking purposes; (b) strictly observe the
prescribed accounting guidelines and control procedures on the receipt, issuance, and
storage/custodianship of supplies and materials; and (c) pending the availability of a
central storage area for inventories, install adequate controls by designating a “supplies
custodian” and maintaining the required records of receipt and issuances to pave the way
for establishing the reliable cost of ending inventory at the end of the accounting period.

5. Payments of cash gifts to loyalty awardees amounting to P1,370,000.00 were not

in accordance with Civil Service Commission(CSC) Memorandum Circular No. 6
Series of 2002, dated March 1, 2002 thus, maybe considered as irregular disbursements
as defined under COA Circular No. 2012-003 dated October 29, 2012. (Observation
No. 6)

We reiterated our previous year’s recommendation and the Management agreed to submit
the required authority for the payment of the cash gifts for our evaluation. Otherwise,
require the refund of the same and strictly comply with CSC Memorandum Circular No.
6 Series of 2002, in order to avoid disallowance in audit.

6. The Bulacan State University (BulSU) has no definite guidelines in the conduct of its
Team Building Activities, thus, resulting to different amount/rates spent for each
employee participant per office/group, with total cost incurred of ₱2,545,703.57 for CY
2017 (Appendix H), which was not patterned with the Civil Service Commission (CSC)
Resolution No. 101262 dated June 22, 2010, CSC being the central personnel agency of
the government. (Observation No. 7)

We recommended and Management agreed to (a) formulate guidelines for the conduct of
Team Building activities, using as reference CSC Resolution No. 101262, dated June 22,
2010 and COA Resolution No. 2012-014 dated November 15, 2012 in order to achieve
their objectives and have a smooth, orderly and economical team building; and (b) ensure
that only the expenses pertaining to the organic/regular employees of the University are
subsidized by the institution.

7. Job Orders and Contract of Service personnel were allowed to attend seminars
with all expenses paid by the University in violation of Section 3.0 of COA Circular
No. 2012-003 dated October 29, 2012. (Observation No. 8)

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We recommended and Management agreed to stop the practice of sending job order and
contract of service personnel to seminars and require the refund of the expenses incurred
from those who attended the seminar

8. The validity, completeness and accuracy of the recorded transactions could not be
timely established due to delayed/non-submission of accounts and supporting documents
to the Audit Team as required under COA Circular No. 2009-006 dated September 15,
2009 which hindered the conduct of post-audit and timely communication to the
management of any deficiencies and/or observations that may have been noted.
(Observation No. 9)

We reiterated our previous year’s recommendation and the President agreed to instruct
the University Accountant and the Cashier to (a) strictly comply with the regulation on
the rendition of accounts and financial reports in order not to cause delay in the
verification and post-audit activities; and (b) observe the due dates of submission of the
required financial reports and documents to the Audit Team. Otherwise, cause the
suspension of payment of their salaries until they shall have complied with the
requirements of the Commission.

9. Due to lack of adequate knowledge on attribution using Harmonized Gender and

Development Guidelines tools, the total appropriation for and utilization of GAD budget
for 2017 totaling ₱10,398,000.00 and ₱11,542,903.73, respectively, did not fully capture
gender related issues, needs and accomplishments, which was not in conformity with
CMO No. 01, series of 2015 re: Establishing the Policies and Guidelines on Gender and
Development in the Commission on Higher Education and Higher Education Institutions
(HEIs). (Observation No. 10)

We reiterated our recommendation and the President agreed to require the GAD Focal
Person to (a) initiate/facilitate the conduct of GAD awareness interventions in the use of
Harmonized Gender and Development Guidelines tools, in coordination of the proper
body; (b) provide ample time for GAD related functions; and (c) spearhead coordination
among the various offices of the University for facilitated planning and implementation
of GAD related activities.

10. The correctness, and validity of collections, remittances, receivables and

disbursements of the University Canteen, Restaurant and Bakeshop cannot be ascertained
due to non maintenance of separate books for each operation and absence of official
receipts to support collections, statements of account/documents to prove receivables,
official receipts and inspection and acceptance report to substantiate liquidations of
expenses. (Observation No. 11)

In view of the noted deficiencies, we reiterated our previous year’s recommendation and
the President agreed to instruct (a) the University Accountant to maintain separate books
to record the financial operations of canteen, restaurant and bakeshops; and (b) require
the accountable officers to (i) issue official receipts or electronic receipts/cash tickets for
each sale/transaction; (ii) obtain official receipts from suppliers of goods to document

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payment of expenses; (iii) prepare statement of account and furnish the Accounting
Department for recording of receivables in the books of account; and (v) conduct actual
inventory of items for sale and goods in stock at the end of the year to determine the
actual cost of sales.

11. Due to the laxity of the University officials, honoraria for the excess hours of
faculty were approved and paid despite the absence of proper documentation contrary to
Section 4(6) of P.D. No. 1445 and Section 5.7.2 of COA Circular No. 2012-001 dated
June 14, 2012, thus the validity of their payments were doubtful. (Observation No. 12)

We recommended and the President agreed to (a) instruct all her employees, faculty
members, and part time instructors, to use the biometric finger scanner in timekeeping;
(b) require HRMO and the Accounting Unit to (i) stop the processing of claims based on
handwritten DTRs and without the required documents, otherwise such claims will be
suspended/disallowed in audit; and (ii) compute the honoraria in excess of forty (40)
hours per week instead of thirty (30) hours per week; and (c) require the HRMO to
submit the DTRs for the full services rendered of the faculty members for the period and
other required documents to the Audit Team in order for us to determine the accuracy and
the reliability of the honoraria.

12. Income from stalls rental in Sarmiento Campus remained unremitted resulting to
unaccounted/unrecorded income and expenses. (Observation No. 13)

We recommended that the President (a) require Dr. Pedro D. Abanador to prepare and
submit to the Audit Team the correct accounting of his collections from stallholders from
the start of his assumption to Sarmiento Campus up to July 31, 2017 and immediately
remit the same to the BulSU bank account; (b) submit explanations to the Audit Team
why no criminal action may be charged against the official and (c) prepare and issued
contracts to these stall owners.

13. Withheld taxes were not timely and accurately remitted to the Bureau of Internal
Revenue, which accumulated to ₱23,389,824.26 as of December 31, 2017 contrary to
Revenue Regulation No. 2-98 dated April 17, 1998. (Observation No. 14)

We reiterated our previous recommendations and the President agreed to direct the (a)
Accountant to (i) establish details of the prior year’s balance of the Due to BIR account
and coordinate with the BIR for the proper disposition of prior years’ account of
₱11,916,411.41; and (ii) maintain subsidiary ledgers and to make proper transfer of
records in case of employees’ turnover to facilitate the immediate preparation of the
disbursements payable to the BIR; and (b) adhere strictly to the prescribed period in the
remittance of taxes to the BIR.
14. Due to over remittance to GSIS for the year 2017, the balance of Due to GSIS of
₱2,766,606.77 as of December 31, 2017 was less than the amount of deductions by
₱1,174,348.07 for the month of December 2017 of ₱3,940,954.84, contrary to Section
6(b) of RA No. 8291 dated May 30, 1997 otherwise known as the GSIS Act of 1997.
(Observation No. 15)

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We recommended and the President agreed to instruct the Accountant to (a) deduct from
employees as per GSIS billing and remit intact and on time the amounts deducted from
the compensation of the officials and employees of University to avoid over remittances;
and (b) exert extra efforts to account for the under deductions from employees and
officials and deduct the same from succeeding payroll period.

15. The balances of the Due to HDMF account as of December 31, 2017 included
unremitted payables from prior years amounting to P559,185.87. (Observation No. 16)

We recommended and the University Accountant agreed to exert extra effort to trace
back the variances of the above payables as soon as possible. If underpayments are
noted, cause the immediate remittance thereof to HDMF. Any penalty and other charges
imposed by HDMF should become a personal liability of the negligent employee or
official.

16. Due to deficient planning of procurements, infrastructure project costing

₱3,990,473.40 was not completed on target date while sixteen projects costing
₱248,975,851.02 were not undertaken in CY 2017 as planned thereby depriving the
students of the immediate use of upgraded and modernized facilities. (Observation No.
17)

We reiterated our recommendation and the President agreed to (a) instruct the BAC and
PMO to (i) enhance the procurement planning processes for infrastructure to ensure that
projects are implemented as planned, among others; and (ii) ensure the immediate
completion of the ongoing projects and that all issues/concerns pertaining to projects
implementation are immediately resolved; (b) require the PMO to perform regular and
thorough monitoring and supervision of projects to ensure completion of construction
works in accordance with the terms of the contract; and (c) require the Accounting Office
to impose liquidated damages on the defaulting contractor.

17. Equipment in College of Engineering amounting to P1,660,212.00 were

unutilized and idle due to non-availability of power supply system, thus exposing these
properties to deterioration and depriving the students the benefits from upgraded and
modernized training equipment. (Observation No. 18)

We recommended and the President agreed to instruct the BAC (a) to enhance the
procurement planning processes for the purchase of equipment to include the accessories
to ensure the utilization of the equipment as planned; (b) take appropriate action to
purchase the power supply system needed to utilize the equipment; and (c) coordinate
with the supplier to train the concerned faculty members how to operate the laboratory
equipment.

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E. Summary of Total Suspensions, Disallowances and Charges as of year-end

There were no suspensions and charges as of December 31, 2017. However, total
unsettled disallowances amounted to ₱35,940,526.20 as of year-end.

F. Status of Implementation of Prior Years’ Unimplemented Audit Recommendations

Out of the 52 audit recommendations in prior years’ audit reports, 16 were

implemented, eight were partially implemented while 28 were not implemented by
management.

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