EXECUTIVE SUMMARY

A. Introduction
The Commission on Higher Education (CHED) was created on May 18, 1994
through the passage of Republic Act (RA) No. 7722, the Higher Education Act of 1994.
The establishment of the Commission was part of the broad agenda of reforms outlined
by the Congressional Commission on Education in 1992, wherein the management of the
country’s education sector is confined to three governing bodies with its own area of
focus: 1) CHED for tertiary and graduate education; 2) the Department of Education
(DepEd) for basic education; and 3) the Technical Education and Skills Development
Authority (TESDA) for technical-vocational and middle-level education.

The CHED is attached to the Office of the President for administrative purposes.
It covers both public and private higher educational institutions as well as their degree
granting programs in all post-secondary educational institutions. Pursuant to RA No.
7722, it is mandated to undertake the following tasks: 1) promote quality education;
2) broaden access to higher education; 3) protect academic freedom for continuing
intellectual growth; and 4) ensure advancement of learning and research.

It is presently headed by Chairperson Patricia B. Licuanan and assisted by four

Commissioners, namely: Commissioners Maria Cynthia Rose B. Bautista, Minella C.
Alarcon, Alex B. Brillantes, Jr. and Ruperto S. Sangalang. They generally act as collegial
body in formulating plans, policies and strategies relating to higher education and in
deciding important matters and problems regarding the operation of the CHED. It has an
Executive Office, headed by Executive Director Julito D. Vitriolo, which oversees the
over-all implementation of policies, programs, projects and operations of the various
offices including its 16 regional field offices.

As of December 31, 2015, the CHED had an approved plantilla of 625 positions,
of which 249 is for the Central Office and 376 for the 16 Regional Offices. The 522
positions are filled while the 103 are unfilled.

B. Financial Highlights
For CY 2015, CHED has a total appropriations of P7,444,230,858.40 as provided
for in the General Appropriations Act (GAA) for Fiscal Year (FY) 2015 or the RA No.
10633 including the prior year’s continuing appropriations. During the year, the
Commission had a total allotments of P7,444,230,858.40 including the continuing
appropriations, out of which, total obligations of P7,036,217,143.55 were incurred
leaving an unexpended balance of P408,013,714.85 as at year-end, details of which are
presented on next page:

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 Unobligated
Appropriation Allotment Obligations
Particulars Balance of
Received Received Incurred
Allotment
Current Year’s Budget
1. Agency Specific Budget 2,368,731,627.00 2,368,731,627.00 2,032,623,133.92 336,108,493.08
2. Special Purpose Funds 44,943,473.00 44,943,473.00 44,299,165.38 644,307.62
3. Automatic Appropriation
–HEDF and RLIP 1,067,618,521.00 1,067,618,521.00 1,047,836,570.67 19,781,950.33
Sub-Total 3,481,293,621.00 3,481,293,621.00 3,124,758,869.97 356,534,751.03
Prior Year’s Budget (continuing)
1. Unobligated Allotment as
of 12/31/2013 3,962,937,237.40 3,962,937,237.40 3,911,458,273.58 51,478,963.82
Sub-Total 3,962,937,237.40 3,962,937,237.40 3,911,458,273.58 51,478,963.82
Grand Total 7,444,230,858.40 7,444,230,858.40 7,036,217,143.55 408,013,714.85

The Commission’s assets, liabilities, equity and sources and application of funds
for CY 2015 are as follows:

Particulars 2015 2014

Financial Position
Assets 18,494,633,245.56 15,212,538,050.83
Liabilities 4,478,116,482.64 3,996,985,120.02
Equity 14,016,516,762.92 11,215,552,930.81

Sources and Application of Funds

Revenue 7,957,263,670.48 5,691,055,588.59
Less: Current Operating Expenses
Personnel Expenses 308,062,014.21 287,117,541.92
Maintenance and Other 3,215,469,528.19 2,344,865,364.34
Operating Expenses
Non-Cash Expenses 23,438,908.03 18,362,396.13
Total Current Operating 3,546,970,450.43 2,650,345,302.39
Expenses
Surplus/(Deficit) for the Period 4,410,293,220.05 3,040,710,286.20

C. Operational Highlights

The CHED reported the following major accomplishments per Major Final
Output (MFO) and Performance Indicator for CY 2015:

Major Final Output Targets Accomplishments Percentage

Part A
I – Operations
MFO 1 - Higher Education Policy Services
 Formulation of plans/programs development/formulation/implementation
No. of CHED policies on education, 70 78 111
instruction, research and extension,

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 Major Final Output Targets Accomplishments Percentage
updated, issued and disseminated in the last
three years
Percentage of stakeholders who rate CHED 90% 96% 106
policies as good or better
Percentage of CHED education policies 54% 54% 100
that are updated, issued and disseminated
in the last three years
MFO 2 – Higher Education Development Services
 Higher Education Development Fund (HEDF)
No. of Project Proposals reviewed 144 171 119
No. of Project Proposals funded 54 72 139
 StuFAP
Total no. of scholarship application 20,000 36,048 180
No. of scholarship awarded 15,000 22,790 152
 Institutional Quality Assurance Monitoring and Evaluation
No. of HEIs helped to put Institutional QA 20 22 110
systems in place
 Relevant and Responsive Research and Development and Extension
Percent of research project completed 25% 35.08% 140
within the last three years whose results are
published in a recognized journal/
presented in a credible institutions
Percent of stakeholders who rate HEDF 50% 87% 174
development initiatives as good or better
 Job-Skills Matching Project
Percent of scholars/grantees awarded in 90% 95.96% 106
undersubscribed/priority disciplines related
to total number of grantees
Percent of scholarship holders who 85% 86.49% 102
complete their degree
Percent of HEIs assisted as a percent of 60% 68.02% 113
total number of HEIs needing assistance
 Cross-cutting
Percent of applications that are acted upon 90% 93.69% 104
within three months
Percent of payments received within five 100% 100% 100
working days of the scheduled payment
date
Percent of request for assistance acted upon 90% 94.94% 105
within 20 working days of receipt of
request
MFO 3 – Supervision of the Higher Education Development Fund
 Management of receipts and payments in relation to the HEDF
Average value of assets under 238 236 million 99
administration million
No. of evaluation review of 4 4 100
administrator’s performance

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 Major Final Output Targets Accomplishments Percentage
The average margin of the risk-adjusted 2.22% 3.28% 148
annual rate of return on the investment
portfolio to the average BSP overnight
deposit rate
Percent of performance evaluation review 100% 100% 100
completed within five days of the end of
each month
MFO 4 – Higher Education Regulation Services
 Standard Setting
No. of SUCs’ budget reviewed with advice 112 112 100
to DBM
No. of application for conversion or 10 10 100
elevation of schools acted upon
No. of HEIs with accredited programs as 22% 23.84% 108
percent of the total number of HEIs
Percent of stakeholders who rate CHED’s 50% 98% 196
minimum standards for programs and
institutions of higher learning as good or
better
Percent of SUCs which budget reviews are 100% 100% 100
submitted to DBM at least eight months
before the start of the financial year
 Monitoring
No. of public and private HEIs subject to 1,000 933 93
standards
No. of quality assurance inspections carried 60 71 118
out
 Cross-Cutting
Percent of inspections that resulted in the 20% 30% 150
recommendation of an incentive sanction
or other interventions
Percent of public and private HEIs 20% 20% 150
subjected to 1 or more quality assurance
inspections within the last three years
 Enforcement
No of incentive or sanctions undertaken 150 137 91
Percent of HEIs with more than 50% of 5% 7.37% 147
students enrolled in priority programs
Percent of incentive or sanction 70% 70.8% 101
implemented within three months of
recommendation
II – Projects
 Philippine California Advance Research Institutes (PCARI)
No. of research project proposal endorsed 26 26 100
No. of research project proposal approved 26 8 31
 Payapa at Masaganang Pamayanan (PAMANA)
No. of grantee 600 475 79
 Legal Education Board

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 Major Final Output Targets Accomplishments Percentage
No. of law schools inspected and evaluated 48 10 21
No. of law schools given administrative 10 10 100
sanctions
 Higher Education Management Information System
No. of activities implemented 8 0 0
Part B
Poverty Reduction and Empowerment of the Poor and the Vulnerable
1. National Agriculture and Fisheries 50 70 140
Education System
2. StuFAPs including Grants 350,000 391,817 112

D. Scope of Audit
The audit covered the review of accounts and operations of the CHED for CY
2015 and to a limited extent, its reported accomplishments. The audit was conducted to:
a) verify the levels of assurance that may be placed on the management’s assertions on
the financial statements; b) recommend agency improvement opportunities; and c)
determine the extent of implementation of prior year’s audit recommendations.

E. Independent Auditor’s Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the
financial statements of CHED as of December 31, 2015 due to exceptions noted in audit
which are stated in the Independent Auditor’s Report and discussed in detail in Part II of
the report.

F. Summary of Significant Audit Observations and

Recommendations
The following are the significant audit observations and recommendations which
are discussed in detail in Part II of the report:

1. The efficient implementation of StuFAPs was affected due to deviations noted

from established criteria such as: a) excess/double/multiple payments of benefits
to 320 grantees totaling P1.813 million in six CHEDROs; b) unliquidated transfer
to Higher Education Institutions (HEIs) totaling P136.466 million in three
CHEDROs; c) delay in the processing of claims and release of payments in an
aggregate amount of P141.69 million from one month to more than a year in
nine CHEDROs; d) payment of educational benefits totaling P6.717 million to
scholars in two CHEDROs with failing grades, not enrolled in priority courses
and other violations of the scholarships guidelines; e) benefits totaling P39.609
million without proper documentation in four CHEDROs; and f) unclaimed/stale
checks totaling P42.146 million in three CHEDROs due to lapses in the
processing/releasing of claims of scholars/grantees/HEIs. (Observation No. 1)

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 We recommended that the Management strengthen the internal control
system in enhancing/expediting the processing of student claims, ensuring
among others, strict compliance with the StuFAPs guidelines and existing
accounting and auditing rules and regulations to ensure that the educational
benefits are processed timely and released directly to rightful
claimants/beneficiaries. Further, require the refund of overpayments for
double/multiple/excess payments/claims made to participating
HEIs/grantees.

2. Of the P84.576 million due and demandable SNPLP loans receivable reported in
five CHEDROs, out of the total loan balance of P399.11 million, only P0.433
million or 0.51 percent was collected in CY 2015, due to weak loan repayment
mechanisms in place and inadequacy of records of both the Accounting and
Scholarship Sections. (Observation No. 2)

We recommended and Management agreed to:

a. intensify the collection efficiency of loans due from student borrowers by

coordinating and partnering with appropriate government agencies such
as SSS, GSIS, BIR and NBI to request assistance in obtaining the current
information on the whereabouts of the student-borrowers and their
guarantors for sending of demand letters;

b. improve collections of loans by sending follow-up demand letters and the

Statement of Accounts to the borrowers and their guarantors;

c. enforce the legal remedy for the non-payment of the due and demandable
SNPLP loans; and

d. instruct the Accountant to:

 review the accounting entries made on the SNPLP loan and prepare
the necessary adjusting entries to correct the balances of Loans
Receivable-Others and other affected accounts;

 provide adequate disclosure of the account in the F/S pursuant to the

PPSAs; and

 maintain/update the subsidiary records of the student borrowers

3. Inadequate monitoring/evaluation and recording on the implementation of the

HEI-Based Loan Programs with allocation totaling P1.065 billion which resulted
to: a) only 9 or 18 percent out of the 51 HEIs were monitored in CHEDRO – II; b)
unutilized Loan Funds of P11.716 million in five CHEDROs; c) absence of
Monitoring and Evaluation Reports in two CHEDROs; and d) variance of
P81.341 million (net) between the CHED-CO allocations/releases and the
balance per books for HEI-Based Loan Fund in four CHEDROs, contrary to the

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 Memorandum of Agreement (MOA) between the HEIs and the CHEDROs and
the CHED guidelines. (Observation No. 3)

We recommended that the Management conduct a review, evaluation and

strict monitoring of the HEI-Based Loan Programs to determine
enhancements in its administration/implementation, account for all of the
funds downloaded to CHEDROs, submit the list of the participating HEIs
which have availed of the loan program and those that have already
refunded the amount to the CHEDROs (indicate the OR No. Date and
Amount), address the deficiencies noted and require the return of unutilized
funds.

4. Of the 113 research projects funded by CHED and implemented/conducted by

participating HEIs during the past three years (2012-2014) amounting to P455
million, only 33 or 29 percent were completed on time, 63 or 56 percent were not
completed as scheduled and the remaining 17 or 15 percent were on-going at
year-end. Likewise, the imposition of sanctions on the delayed completion of
Research Projects (RPs) are not clearly defined in the MOA, thus increasing the
likelihood of unfinished RPs by the concerned participating HEIs, and eventual
loss of government funds invested thereof (Observation No. 4)

We recommended that the Management:

a. strengthen the project management/review and monitoring capacity of

OPRKM particularly its Research and Management Division by
augmenting its manpower requirements in proportion to the total
number of research projects granted/awarded to HEIs;

b. initiate early intervention on the research undertakings that encounter

difficulties in the research project administration and implementation to
meet the 100 percent research output of participating HEIs; and

c. imposition of sanctions against erring participating HEIs must be specific

and clear to ensure that government funds invested in research are
recovered.

5. The Cash–Modified Disbursement System (MDS), Regular account of

P931,593,997.04 was understated by P3,593,144.87 (net) while the Cash in Bank
– Local Currency, Current Account of P50,131,652.33 was understated by
P76,160.91, and with unreconciled variance of P39,609,108.24, which were not
immediately detected due to non/error in preparation of the Bank Reconciliation
Statement (BRS) in three CHEDROs, contrary to Section 74 of PD No. 1445.
Moreover, the account CIB - LCCA maintained without specific authority/excess
Payroll Fund totaling P1,900,096.17 in four CHEDROs were not yet remitted to
the NT, as required under COA Circular No. 2015-001 dated January 29, 2015
and the Department of Finance (DOF), DBM and COA Joint Circular No. 4-2012

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 dated September 11, 2012 implementing EO No. 431 dated May 30, 2005.
(Observation No. 5)

We recommended and the Management agreed to:

a. deposit/return to the NT the balances of cash in bank maintained for

completed projects and/or without authority;

b. require the Cashier to prepare and ensure the correctness of the List of
Unreleased Checks for submission to the Accountant as basis of adjusting
the balance of the cash in bank; and

c. require the Accountant to:

 prepare the BRS and properly account for all the reconciling items
per books and per banks; and

 prepare the necessary adjusting entries for the reconciling items noted
in the BRS.

6. Out of the P756,741,555.61 balance of the account Due from Non-Government

Organizations/People’s Organizations, P78,537,065.45 or 10.38 percent were
overdue accounts ranging from one year to more than three years, due to the
laxity in monitoring and enforcing the liquidation of funds transferred to PHEIs in
CHED-CO and CHEDRO II, contrary to COA Circular No. 2007-001 dated
October 25, 2007. Moreover, of the 281 Confirmation Letters (CLs) sent to the
PHEIs in CHED-CO, 15 out of the 63 respondents did not agree with the balances
per CHED records, with a discrepancy of P13,753,897.23, casting doubt on the
accuracy of the Due from Non-Government Organizations/People’s Organizations
account balances in the Financial Statements (F/S), contrary to Section 15 of the
GAM, Volume I. (Observation No. 7)

We recommended and the Management agreed to instruct the Director of

Higher Education Development Fund Secretariat and Administrative,
Financial and Management Service to:

a. strictly enforce the provisions of the aforementioned COA Circulars and

the MOA, particularly on the submission by the PHEIs of the financial
and physical status reports and to return any unutilized funds after the
project completion; and in case of non-compliance, refer the matter to the
Legal and Legislative Services, for appropriate action;

b. strengthen the monitoring of the utilization and liquidation of funds and

send demand letters regularly to the concerned PHEIs/NGOs/POs; and

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 c. discontinue the granting of additional funds to PHEIs with outstanding
accounts.

7. Out of the PPE accounts with balances totaling P588,079,096.34, the amount of at
least P125,832,206.34 was unreliable due to: a) incomplete/non-submission of
Report on the Physical Count of Property, Plant and Equipment (RPCPPE)
amounting P109,554,182.62 in CHED-CO and four CHEDROs contrary to
Section 38, Chapter 10, GAM Volume I; b) unreconciled variance between
accounting and property records of P14,483,625.27 in CHED-CO and three
CHEDROs; c) understatement of PPE by P1,387,274.20 in CHEDRO II;
d) unrecognized Depreciation Expense of P7,730,651.99 in four CHEDROs;
e) non-maintenance of PPE Ledger Cards (PPELC) and/or Property Cards (PC) in
CHED-CO and three CHEDROs; f) non-insurance of PPE in CHEDROs III and
VIII; and g) 124 items totaling P407,124.25 with unit cost below P15,000.00 were
included in the PPELC, that should be reclassified as Semi-expendable Property
in CHED-CO and NCR, contrary to existing rules and regulations on property
management. (Observation No. 8)

We recommended that Management implement the following:

a. require the accounting and the property sections to reconcile the

RPCPPE with the accounting records to determine the causes of the
variance between both records;

b. require the Property Officer to maintain/update the Property Card for

each PPE to be reconciled with the accounting records and insure with
the GSIS all insurable PPEs;

c. instruct the Chief Accountant to:

 reclassify the PPE below the threshold of P15,000.00 as Semi-

expendable Property;

 prepare the JEV for the book reconciling items; and

 obtain Invoice Receipt For Property and additional information from

CHED-CO of the transferred PPE; and

d. require the Inventory Committee to complete the physical inventory

taking of all PPEs and submit to the Accountant the RPCPPE, copy
furnished the Audit Team.

8. The Donations account is overstated by P7,665,000.00 due to the erroneous entry

made to record transfers of funds to HEIs for the payment of StuFAPs financial
benefits of scholars/grantees for the 1st semester of AY 2015-2016 in CHED –
CAR of P5,040,000.00 and SNPLP of P2,625,000.00, contrary to the COA

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 Revised Chart of Accounts (RCA), which resulted in the understatement of Due
from National Government Agencies and Due from Non-Government
Organizations/People’s Organizations accounts by P3,635,500.00 and
P1,404,500.00, respectively, and Loans Receivable – Others by P2,625,000.00,
thereby, affecting the fair presentation of the said accounts in the F/S.
(Observation No. 9)

We recommended and Management agreed to require the Accountant to

prepare an adjusting entry to recognize the fund transfers to the HEIs and
the SNPLP loans released to student-borrowers as receivables. Likewise, the
Scholarship Coordinator/s submit immediately to the COA the liquidation
reports on the disbursement of funds received by the HEIs concerned to
support the entry for the liquidation of the fund transfers in compliance with
COA regulations.

9. The Accounts Payable balance of P1,345,610,533.69 as of December 31, 2015

was overstated by P206,894,791.11 in two CHEDROs due to a) double recording
of the refund of P30,000.00 for the unutilized scholarship funds; b) inaccurate
reporting of unreleased checks at year-end of P8,259,441.93; c) setting up of
P180,781,851.49 payables without valid supporting documents; and d) non-
reversion of invalid prior years’ claims of P19,295,910.10 and P6,704,708.93
payables outstanding for more than two years; e) existence of abnormal negative
balance of P8,177,121.34; and non-maintenance of SL in the prescribed form,
thus, affecting the fair presentation of the account in the F/S. (Observation No.
10)

We recommended and Management agreed to:

a. cause the reversion to the Accumulated Surplus/(Deficit) account of the

invalid Accounts Payable;

b. instruct the Accountant to:

 correct the double recording of refunds;

 refrain from certifying and recording obligation to Accounts Payable

without the supplier/creditor’s bill for goods/services
delivered/rendered and the master list of scholars including
enrollment records required for the scholarship program;

 examine the abnormal balances of the Accounts Payable due to error

in postings/footings and prepare the adjusting entries; and

 maintain and update the SL for each individual account in

accordance with the prescribed form.

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G. Status of Implementation of Prior Year’s Audit
Recommendations

The status of implementation of prior year’s recommendations is shown below:

Particulars Number Percentage

Fully Implemented 4 11
Partially Implemented 30 86
Not Implemented 1 3
Total 35 100

The details of the status of implementation of prior years’ audit observations are
presented in part III of this report.

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