EXECUTIVE SUMMARY Introduction The Philippine Science High School, operating under one system of governance and management, provides scholarship to students with high aptitude in science and mathematics with the purpose of preparing them for careers in S&T in order for them to contribute to nation building by helping the country attain a critical mass of professionals and leaders in S&T. It was created by RA 8496 issued on February 12, 1998, as amended by RA 9036 dated March 12, 2001, otherwise known as the Philippine Science High School System (PSHSS) Act of 1997. This law ensures that every region is given an equal opportunity to benefit from the establishment of the PSHSS and integrates the operation of eight PSHS campuses located in various regions. Under the administrative supervision of the Department of Science and Technology (DOST), the PSHSS is governed by a Board of Trustees (BOT) composed of a Chairman, a Vice-Chairman and ten members, which include the PSHS System Executive Director who, in turn, coordinates the implementation of policies and guideline set by the BOT and articulates to the Board the mutual concern of all the eight PSHS campuses operating under the PSHS System. The PSHSS’ operation is complemented with an approved plantilla of 565 permanent positions consisting of 207 staff and 358 faculties. However, 46 items were not filled-up as of year end. Financial Highlights Below is the comparative presentation of the PSHSS’ financial profile: Accounts
2007
2006
Increase (Decrease)
Total Assets
P596,462,099
P511,865,935
P84,596,164
Liabilities
P 60,461,359
P 23,687,549
P36,773,810
Equity
P536,000,740
P488,178,386
P47,822,354
Total Liabilities & Equity
P596,462,099
P511,865,935
P84,596,164
For the current year, the system’s campuses operate on an approved budget in the amount of P423,378,000. However; actual releases including continuing appropriation amounted to P439,620,566. On the other hand, the system had incurred obligations totaling P340,934,012 leaving a balance of P98,686,554. Total NCA released by the DBM was P281,165,226. In addition to the regular funding from authorized appropriation, the system received grants from the DOST to finance projects totaling P9,065,000
and incurred obligations totaling P5,404,061 leaving a balance of P3,660,939. Income collected from various sources such as dorm fees, library fines, conduct of national competitive examinations, payment of equivalent cost of scholarship grant for waiver of scholarship, and other sources for the use of school facilities amounted to P5,420,352.
Operational Highlights For the year 2007, the system was able to undertake various activities that contributed to the advancement and prestige of the students, the faculty, and the school as a whole. The PSHSS had graduated 689 scholars for the SY 2006-2007, of which thirty (30) were recipient of the UP Oblation Scholarship. Other major accomplishments for the year were as follows: Output/Activity
Targets
Support to Operations a. Conduct of National Competitive 17000 Examination Operations a. Scholarship basis (SY 2006-2007) 1. New scholars 849 2. Scholars 2nd to 4th yr 2141 b. Performance 1. Percentage in top 20 of UPCAT 100% 2. Qualifiers in SEI - Program A 168 - Program B 468
Accomplishment Accomplishment Variance 2007 2006 Increase Qty % Qty % (Decrease) 17,359
1.02
16,721
98
772 2192
1.24 1.02
859 2,043
1.09 97
642
92.77
618
92.56
132 185
78.57 39.53
106 179
67 41
Scope of Audit The audit covered the review of financial transactions of the PSHS for the year ended December 31, 2007, aimed at ascertaining the propriety of financial transactions of the agency in compliance with prescribed laws, rules and regulations; the accuracy of financial records and reports, and the fairness of presentation of the financial statements. Furthermore, the audit was conducted in accordance with the Generally Accepted Auditing Standards, and we believe that it provides a reasonable basis for the results of the audit. Auditor’s Report The auditor rendered a qualified opinion on the financial statements because of the doubtful validity, existence and accuracy of the Property, Plant and Equipment (PPE) with Net Book Value of P549,842,229 in the books of the PSHS-Main Campus (PSHS-MC), PSHS-Western Visayas Campus (PSHSWVC), PSHS- Central Mindanao Campus (PSHS-CMC), PSHS- Cagayan Valley (PSHS-CVC); the unascertained balances of Inventory accounts totaling
P22,815,686 in the books of the PSHS-MC , PSHS-CMC and PSHS-CvisC; doubtful validity of Accounts Payable and Other Payables totaling P2,656,656 and P8,274,864 in the books of PSHS-MC.
Observations and Recommendations The following are the significant observations and recommendations which were discussed with the concerned officials of the agency, with management’s comments incorporated in the report where appropriate: 1. The validity, existence and accuracy of the consolidated total of Property, Plant and Equipment (PPE) with a Net Value of P549M could not be ascertained due to the non-submission of reconciled physical inventory report; erroneous recording and non-maintenance of property and accounting records; non-recording of donations and the non-conversion to asset account of construction-in-progress on completed projects. It was recommended that management should undertake rigid measures to be able to present complete physical inventory counts of all its assets, require the reconciliation and adjustment of PPE accounts, facilitate the transfer of ownership of all completed construction projects, request for the transfer of title in the name of the Philippine Science High School System so that the value of land could be properly taken up in the books, record all acquisitions and donations of property, maintain and update records and convert to asset account cost of completed projects. (Par. 22-27). 2. The propriety of the consolidated balance of Inventory account in the amount of P22M could not be ascertained because of the agency’s failure to submit Physical Inventory Reports; unreconciled accounting and property records; non-submission of the monthly/regular Report of Supplies and Materials Issued (RSMI) and incorrect procedure undertaken in accounting/recording of supplies and materials purchases. We recommend that management should record regularly issuances per RSMI, reconcile inventory balances per books with physical count and prepare the necessary adjusting entries. The use of the perpetual inventory method in recording all purchases and issuances should be observed (Par. 16- 19). 3. The validity and accuracy of Accounts Payable totaling P36M is doubtful as it includes account of PSHS-MC amounting to P2.6 net of accounts with negative balances totaling P.165, the double recording of prior-year adjustments of P.386M and other accounts which remained dormant for more than two years.
It was recommended that the accountant should properly record and reclassify charges in the Accounts Payable account and revert to the Government Equity payables which are outstanding for more than two years (Par. 28-29). 4. The validity of the account Other Payables amounting to P9M could not be ascertained as it includes accounts totaling to P8M in the book of PSHSMC which could not be verified due to the failure of the accounting unit to submit the schedule in order to validate the composition and nature of such obligations and confirm with the concerned creditors for proper action. We recommend that the accountant should exert more effort to verify the details/nature of the composition of this account and refer to COA circular No. 97-001 dated February 5, 1997 which is the Guidelines on the proper disposition/closure of dormant funds and/or accounts of National Government Agencies” (Par. 32-33). 5. The validity and accuracy of the balance of Due to Other NGAs account totaling P7M remained doubtful as it includes accounts of PSHS-MC amounting to P5.6M which were not supported with complete schedule. We recommend that management should reconcile all GIA funded projects, and return the unexpended / not implemented balances to the Funding/Monitoring Agency so that the fund could be utilized for other government projects. (Par. 30 – 31) 6. The propriety of the balance of Prepayments account totaling P8M includes account of PSHS-MC totaling P3M that could not be ascertained due to the accountant’s failure to prepare the necessary adjusting entry. We recommend that the necessary adjusting journal entries should be taken up to reflect the correct balance in the books. (Par. 20-21) 7. The propriety and accuracy of the balance of Cash accounts totaling P1.9M is doubtful as it includes Trust Fund accounts amounting to P.505M which are dormant for more than five (5) years, the understatement of collections amounting to P.173 due to delayed turn-over of collections and the nonreplenishment of erroneous withdrawal from Trust Account amounting to P.022M. We recommend that balances of Trust Fund should be closed and remitted to the National Treasury as soon as the project which the fund was intended is completed, collections and deposits to be done daily and to replenish and adjust erroneous withdrawal to reflect the correct balance of Cash account. (Par. 1 to 12)
8. The validity and accuracy of the balance of Due from Officers and Employees account totaling P1.7M remained doubtful due to the nonreconciliation of the subsidiary ledger against the general ledger balance leaving the amount of P1.5M cash advances outstanding for more than two (2) years, and failure of the accounting unit to record adjustments. We recommend that management monitor the timely liquidation of cash advances and submit the Schedule of Due from Officers and Employees to determine appropriate action to be taken. (Par.13-15) Compliance 9. The PSHS failed to implement the Gender and Development GAD Programs/Projects prescribed under Section 30 of the General Appropriation Act (GAA) of 2007, R.A. 9401. We recommend that the PSHS System spearhead preparation of the GAD Plan and monitor accomplishment of all campuses to implement Sec. 30 of the GAA of 2007. (Par. 34-36) 10. The agency, particularly PSHS-IRC, PSHS-CMC and PSHS-CvisC failed to insure its properties with the GSIS General Insurance Fund as prescribed under Sec. 489 of the GAAM, thus government interest is not protected. We recommend that the PSHSS management monitor campuses with regard to insurance of all PPE with the GSIS in order that the interest of the government shall be protected (Par.37-38).
Value for Money Audit 11. The PSHS-MC could have realized savings in payment of stipends totalingP.409M had annual re-categorization of scholars has been made as recommended in AAR 2006 and in various AOMs. We recommend that there should be a yearly update and evaluation of the Scholarship Categorization Data accomplished by the parents under oath, so that scholarship categorization of students should be changed accordingly. We also recommend for the refund of the overpayment and the immediate adjustment of scholarship category of the concerned students. (Par. 39-40) 12. The PSHS could have recovered 251% more than the P.801M the collected money value of the scholarship grants from refunds of students who voluntarily abandoned their scholarships, had management reviewed the “Revised Guidelines for Refund of the Monetary Equivalent of the
Scholarship Grant” issued five years ago and upgrade the rates of tuition fees based on the current cost of secondary education. We recommend that the PSHSS should review and update on a regular basis the Revised Guidelines for Refund of the Monetary Equivalent of the Scholarship Grant and upgrade the tuition fee charges to a more realistic amount giving consideration on the current cost of operation of the school. By updating the equivalent tuition fees in the student’s manual, the students will be aware of the value of their scholarship grants that can motivate them in their studies and stay in the school. They may also think twice before they abandon their privileges and of others who are also deserving that could have filled-up their slots. (Par. 41 – 42) 13. The PSHSS had an estimated loss of P8.6M representing the money value of scholarship grants of students who graduated but did not pursue a science/technology course and had not refunded the said amount in violation of the Scholarship Agreement, thereby defeating the objective and purpose of RA 8496 of the PSHS System Act of 1997. We recommend that the PSHSS should review and enhance the contents of the Scholarship Agreement, clearly define the nature of the scholarship and explain to the scholar and his/her parent the objective and mandate of the school as provided for in RA 8496. (Par. 43-47) 14. Proper monitoring of operation of PSHS-MC’s canteen/other concessionaires could have save in electricity expenses totaling P.187M, representing the Cooperative’s share in electric consumption, which had refused to pay pending calibration of the sub-meter and could have earned additional income totaling P.067M had the agency included a stricter provisions in the contracts. We recommend that management review/revise and strictly enforce the terms and conditions of the contracts entered into by the concessionaires, being the administrator of the premises. Provide for the payments of penalty/interest in case of delay or non-payment and for any legal action in case of breach of contract. (Par. 48-53) Implementation of Prior Years’ Recommendations Out of the 18 prior years’ audit recommendations, seven (7) were fully implemented, three (3) were partially implemented and eight (8) were not implemented. The non-implementation of the previous recommendations to wit a) to submit complete physical inventory reports on the PSHS-MC’s PPE and inventory accounts, b) to adjust the PSHS-MC’s PPE accounts for unrecorded
acquisitions/donations and erroneous classifications, c) the non-remittance to the National Treasury dormant Trust Account of the PSHS-MC, d) the nonadjustment of the expended portion of the Prepayment accounts, and e) the nonreplenishment of erroneous withdrawal of the Trust Fund account, materially affected the financial statements and are reiterated in Part II of this report. On the other hand, ongoing efforts to implement prior years’ recommendations to adjust recording errors in the books and to reconcile property and accounting records for PPE and inventory accounts will favorably affect the outcome of subsequent audits.
