EXECUTIVE SUMMARY

A. INTRODUCTION

The Sulu State College was created under Batas Pambansa Bilang 208 on March
25, 1982, merging the two known schools in the Province of Sulu, the Jolo Community
College and the Dayang-Dayang Hadji Piandao Memorial High School and converted them
into a State College.

Its primary mandate is to provide higher technological, professional and vocational

instruction and training in science, agriculture and industrial fields, as well as short-term
technical or vocational courses. It shall promote research, advance studies, and progressive
leadership in its areas of specialization.

The college’s vision is to be recognized as a Centers of Excellence able to produce

globally competitive graduates and as institutional stewards in the development initiatives in
the region.

The governance of the Sulu State College is vested in the Board of Trustees of the
State College. The present Board of Trustees is composed of a Chairman, Vice Chairman and
eight (8) members. The President is providing the institutional leadership and direction of the
State College as well as the coordination of its external and internal development. The
College has been elevated to Level II during the last SUC leveling evaluation in 2007, and
that complementing the educational thrust are the designated Vice President for Academic
Affairs and the Vice President for Research and Extension Services, while the General
Administrative Division is headed by the Administrative Officer V.

The total personnel complement of Sulu State College for SY 2013-2014 is 425
broken down as follows: Regular Permanent (with items) 93; Contractual (Non-Teaching)
173; Contractual (Faculty Members) 133; Casual 26.

B. FINANCIAL HIGHLIGHTS

For CY 2013, the Sulu State College has a current year appropriation of
P69,990,918.00 under RA No. 9524. The actual amount allotted was P69,990,918.00 broken
down as follows: Personal Services P54,267,918.00, MOOE P12,173,000.00, and Capital
Outlay P3,550,000.00. It incurred a total obligation of P69,990,918.00 thus leaving a balance
of P -0- at year-end.

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 Presented below are comparative analysis relative to the financial condition, sources and
application of funds for the last two years:

Increase
CY 2013 CY 2012 %
(Decrease)
Financial Condition
Assets P108,328,070.18 P104,854,026.89 3,474,043.29 3
Liabilities 11,587.760.06 16,867,760.06 (5,280,000.00) (31)
Government Equity 96,740,310.12 87,986,266.83 8,754,043.29 10
Sources and
Utilization of Funds
Subsidy Income from P63,179,359.77 P57,699,170.87 5,480,188.90 9
National Government
Income from 49,659,699.61 56,030,152.10 (6,370,452.49) (11)
Operation
Expenditures 105,594,014.57 102,317,505.75 3,276,508.82 3

C. OPERATIONAL HIGHLIGHTS

The Sulu State College has undertaken various programs, projects and activities for
CY 2013 as reflected in their report. Presented hereunder are the accomplishments in relation
to its targets for the year:

Programs/Projects/Activities Targets Accomplish %

ments

1. Advance and Higher Education

Services
a) Number of Weighted FTE 5,110 5,218 102%
b) Number of Graduates 650 1032 159%
c) FTE Faculty w/ Baccalaureate Highest
Degree 20 20 100%
d) FTE Faculty w/ Masters as Highest
Degree 25 25 100%
e) FTE Faculty w/ Doctoral as Highest
Degree 18 18 100%
f) Licensure Passing Rate (Average/year)
f.1) Education, Teacher Training
f.2) Board Exam for Nursing 25% 25% 100%
50% 51% 102%

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 2. Research Services
a) No. of Research Outputs Published 13 13 100%
b) No. of Research Outputs Presented 13 13 100%

3. Extension Services
a) No. of Persons Trained
a.1) Agricultural Extension 18 18 100%
a.2) Technical/Vocational 5 5 100%
a.3) Continuing Education for
Professionals 10 10 100%
b) No. of LGUs assisted in Dev’t. Planning 10 10 100%

D. SCOPE OF AUDIT

The audit covered the financial accounts and operations of the Sulu State College for
the year ended December 31, 2013. The audit includes examining evidence supporting the
amount and disclosures in the financial statements. It was also aimed at ascertaining the
fairness of the overall financial statement presentation and compliance to laws, rules and
regulations.

E. AUDITOR’S OPINION ON THE FINANCIAL STATEMENTS

A disclaimer of opinion was rendered due to the following reasons:

• Cash in Bank – LCCA Account does not reflect its true and correct balance as
the agency failed to identify the discrepancy of P3,812,302.59 between the
books and the bank for underdetermined period, rendering the account balance
unreliable in violation of Section 74 of P.D. 1445.

• Use of income amounting to P10,183,056.59 bereft of legal basis, as it is not

supported with a duly approved supplemental budget, hence, tantamount to
unauthorized utilization, which is not in accord with section 2.3 of COA
Circular No. 2000-002 dated April 4, 2000.

• Agency’s procured items worth P10,799,661.45 , which is 90% of the total

purchases were not presented to the office of the auditor for inspection before
utilization in violation of section 6.06, COA Circular No. 95-006, dated May
18, 1995 and section 44 of P.D. 1445.

• Failure of the agency to create an Inventory Committee resulted to non conduct

of physical count on non-expendable property at year-end, which contravenes
section 156 of COA Circular No. 92-386 dated October 20, thus, also led to

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 erroneous year- end balances of PPE (net of CIP) account in the financial
statements amounting to P89,428,087.44.

SIGNIFICANT FINDINGS AND RECOMMENDATIONS

We have noted significant audit observations, among them are the following:

1. Cash in Bank – LCCA Account does not reflect its true and correct balance as the
agency failed to identify the discrepancy of P3,812,302.59 between the books and the
bank for underdetermined period, rendering the account balance unreliable in violation
of Section 74 of P.D. 1445.

We recommended that the College President should require the accountant to:

- Exert more efforts to locate the records and determine the nature of the
unreconciled amount.

- Prepare updated Bank Reconciliation Statement and take up immediately

necessary adjustments to establish correct balance of the Cash In Bank-
LCCA account.

- Moreover, follow-up regularly agency’s monthly bank statements with

the authorized government depository bank, so that timely preparation
and submission of monthly bank reconciliation statements both for bank
current accounts and MDS savings account shall be met.

2. Grant of additional cash advance to several officials and employees of the agency
despite non-liquidation/non-settlement of the previous cash advances granted to him
has caused the accumulation of unliquidated cash advances as of year-end amounting
to P722,976.00 which contravenes Section 4.1.2, 5.7 and 5.8 of COA Circular 97-002
dated February 10, 1997.

Refrain from granting additional cash advance if the previous ones were not fully
settled or accounted for. Consider possible withholding of salaries of those
officials and employees who persistently refuse to cooperate and still fails to
liquidate their cash advances within the timeframe as required by the present
regulation.

Liquidate cash advances as soon as the purpose for which it was given has
already been served to avoid accumulation of the same.

Issue demand letter to Accountable Officers requiring immediate liquidation of

their cash advances and enforce salary deduction, where necessary, to ensure
liquidation and avoid being reported to appropriate agencies as cited under COA
Memoranda Nos. 2004-014 dated February 24, 2004 and 2005-074 dated
September 15, 2005.

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3. Settlements on cash advances amounting to P88,104.11 were booked-up by the
college accountant even without the required supporting documents which is not in
consonance with section 5.2 of COA Circular 97-002 dated February 10, 1997.

Discontinue the practice of recording settlement on cash advances, unless,

supported with sufficient liquidation documents.

Entries made to take up liquidations amounting to P88,104.11 shall be reversed

accordingly, and restore unliquidated cash advance to its original amount of
P811,080.11.

4. Use of income amounting to P10,183,056.59 bereft of legal basis, as it is not

supported with a duly approved supplemental budget, hence, tantamount to
unauthorized utilization of income, which is not in accord with section 2.3 of COA
Circular No. 2000-002 dated April 4, 2000.

Furnish us immediately copy of the approved supplemental budget and other

pertinent documents to support utilization thereof, otherwise, we will be
compelled to disallow transactions in excess of what is budgeted.

Discontinue the use of income not covered by an approved budget to prevent

possible audit disallowance.

5. Agency’s procured items worth P10,799,661.45 , which is 90% of the total purchases
were not presented to the office of the auditor for inspection before utilization in
violation of section 6.06, COA Circular No. 95-006, dated May 18, 1995 and section
44 of P.D. 1445.

The management should direct the procuring officer to strictly adhere to the
above-cited provision of law (COA Circular 96-006 dated May 18, 1995). All
deliveries of office supplies and materials, office equipments & furniture &
fixtures, IT and agricultural equipments shall be duly inspected by COA Audit
Team Leader or his representative.

However, delivered items not inspected by COA shall now be disallowed in audit.

6. Procurement amounting to P5,690,231.40 was done on staggered basis instead of in

bulk thru procurement service or public bidding, which is an indication of a poor
procurement planning and a violation of section 1 of DBM Circular Letter No. 2011-6
dated August 25, 2011 and section 10 and 17 of RA 9184.

Concerned officials should give utmost importance to proper procurement

planning where actual needs, right quantity and right processes, among others
are considered. Further, to ensure continues supply, the college should make

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 purchases in bulk and maintain buffer stocks good for one quarter consumption
of items that are vital in their operations.

Moreover, procure goods and services thru public bidding or thru procurement
service. Stop the practice of splitting requisition and purchase order. Items
needed for one quarter should be consolidated and procured in one purchase
order.

7. Report of Accomplishment/Progress Report on the construction of the BSBA building

does not reflect its actual percentage of completion, thus, resulted to providing
advance payment to contractor and overstatement of the year-end balance of the
Construction In Progress(CIP) account, which is a violation of section 88 of P.D.
1445.

We hereby recommended the following:

- The management shall strictly adhere with pertinent provisions under RA

9184 more specifically on Infrastructure Projects.

- Validate the accuracy of the submitted Accomplishment Reports before

finally making the payment to contractor and refrain from giving advance
payment unless circumstances warrant its application.

- Require concerned contractor to fast-track construction, if not to refund

the advance payment.

8. Failure of the agency to create an Inventory Committee resulted to non conduct of

physical count on non-expendable property at year-end, which contravenes section
156 of COA Circular No. 92-386 dated October 20, 1992, thus, also led to erroneous
year- end balances of PPE (net of CIP) account in the financial statements amounting
to P89,428,087.44.

The management shall undertake the following:

- Consider the importance of Annual Physical Count on Non-Expendable

Property in the overall financial operation as this will help concerned
officials in the proper discharge of their duties and responsibilities
towards fair presentation of the agency’s Financial Statements.

- Create an Inventory Committee to take charge in the overall physical

count on PPE and submit corresponding reports to the Office of the
Auditor immediately thereafter.

- Include in the yearly action plan the conduct of physical count on all PPE,
as this activity in very important in checking actual existence of the assets
and determining its usefulness and current condition as well as pinpoint
custodial responsibilities.

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 - Maintain/provide General Ledgers, Subsidiary Ledgers (Equipment
Ledger Cards) on PPE accounts and reconcile balances with property
records and likewise with Report on Physical Count of PPE to be able to
reflect complete and accurate PPE balance in the Financial Statements.

- Provision for depreciation shall be accurately provided on all depreciable

assets.

9. Unnecessary/excessive grant of travelling allowances to several agency’s officials

and employees which is not in accordance with section 1.a.2 of Administrative
Order No. 103, s. 2004 and Rules and Regulations on the Prevention on
Unnecessary Expenditures as prescribed under COA Circular No. 85-55 dated
September 8, 1985.

We hereby recommended that:

- Strict adherence to foregoing laws and regulations is hereby enjoined.

- Limit the grant of authority to travel to officials and employees, whose

attendance to seminars and trainings is urgently needed.

- Complete and proper documentation shall be attached to the travel claim

to avoid disallowance in audit.

F. STATUS OF PRIOR YEAR’S AUDIT RECOMMENDATIONS

Implementation of the audit recommendations contained in the previous year’s Annual

Audit Report is summarized as follows:

2012 AAR 2011 AAR and Prior Years

Fully Implemented
Partially Implemented
Not Implemented 4 2

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