EXECUTIVE SUMMARY

A. Introduction

1. Surigao del Norte State University (SNSU) is the first and only state university in the
Province of Surigao del Norte. It traces its beginning as the Surigao del Norte School
of Arts and Trades (SNSAT) in 1969 by virtue of R.A. 6057; converted into Surigao
State College of Technology in 1998 through the passage of R.A. 8650 merging Surigao
del Norte School of Arts and Trades (SNSAT) and Malimono School of Fisheries; and
finally into Surigao del Norte State University (SNSU) through RA 10600 signed by
former President Benigno S. Aquino III on June 4, 2013 as amended by R.A. 11010
enacted into law by President Rodrigo R. Duterte on March 27, 2018 which integrated
the Surigao State College of Technology, Siargao National College of Science and
Technology, and the Surigao del Norte College of Agriculture and Technology.

2. The mandate of Surigao del Norte State University is to provide advance education;
higher technological, professional instruction and training in the fields of agriculture
and environment studies, fishery, engineering, forestry, industrial technology,
information technology, arts and sciences, and other related courses. It also provides
primary consideration to the integration of research and extension activities as an aid
in developing the Province of Surigao del Norte.

3. The SNSU is composed of the Main Campus in Surigao City, three (3) satellite
campuses namely: the Malimono Campus in Malimono, Surigao del Norte, the Del
Carmen Campus situated in Del Carmen, Surigao del Norte, the Mainit Campus in
Mainit, Surigao del Norte, and one (1) extension campus, the Claver Extension Campus
in Municipality of Claver, Surigao del Norte.

4. The audit was conducted in accordance with applicable legal and regulatory
requirements, and the International Standards of Supreme Audit Institutions (ISSAIs).
Those standards require that we plan and perform the audit to obtain reasonable basis
for our conclusions.

5. The audit covered the accounts and operations of the SNSU for Calendar Year
CY 2022 and was aimed at ascertaining the propriety of financial transactions,
Management’s compliance with prescribed rules and regulations, and the fairness in
the presentation of financial statements. Performance/Value for Money audit was also
conducted on programs/activities/projects and operations to determine whether the
objectives of the projects were attained, and efficiency, effectiveness and economy
were observed in the performance of duties and functions.

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B. Financial Highlights

6. The financial condition, results of operations and the sources and applications of funds
for CY 2022 with comparative figures for CY 2021 are shown below:

a. Comparative Financial Position and Results of Operations

Increase
Particulars 2022 2021
(Decrease)
Assets 1,396,961,589.78 1,385,410,122.16 11,551,467.62
Liabilities 163,232,210.54 164,779,630.80 (1,547,420.26)
Total Net Assets/Equity 1,233,729,379.24 1,220,630,491.36 13,098,887.88
Revenue 57,250,412.89 118,776,842.55 (61,526,429.66)
Expense 386,652,446.92 389,994,617.50 (3,342,170.58)
Financial Assistance/
Subsidy from NGAs, 364,013,615.09 428,064,480.40 (64,050,865.31)
LGUs, GOCCs
Net Surplus 34,611,581.06 156,846,705.45 (122,235,124.39)

b. Comparative Sources and Applications of Funds

Increase
Particulars CY 2022 CY 2021
(Decrease)
Appropriations 486,900,073.00 425,209,169.00 61,690,904.00
Allotment 435,844,426.00 370,572,782.81 65,271,643.19
Obligations 433,094,426.00 370,572,782.81 62,521,643.19
Funds received from other
243,290,012.50 *114,414,708.87 128,875,303.63
agencies
Funds received from
0 0 0
NGOs/POs
Prior Year’s Authorized
941,632,000.00 *955,261,000.00 (13,629,000.00)
Budget
Budgeted Income 1,044,598,000.00 *941,632,000.00 102,966,000.00
Expenditures 748,868,000.00 *723,472,000.00 25,396,000.00
*Adjusted balances

C. Audit Opinion

7. The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements of the Surigao del Norte State University for CY 2022 in view of the
following:

a. The year-end balance of the Construction in Progress (CIP) account totaling

₱334.421 million could not be relied upon due to: (a) inclusion of 22 completed
infrastructure projects, which were not reclassified to its appropriate asset account,
thus, resulted in the overstatement of the CIP account by ₱203.951 million and
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 understatement of the Power Supply Systems account by ₱16.556 million, Water
Supply Systems account by ₱25.366 million, Buildings account by ₱24.905
million, School Buildings account by ₱97.126 million and Hotels and Dormitories
account by ₱39.998 million; (b) misclassification of an on-going project with an
accumulated amount of ₱2.392 million as CIP-Infrastructure Assets instead of CIP-
Buildings and Structures; and (c) unrecorded payment for the first progress billing
of an on-going rehabilitation project amounting to ₱1.977 million to the proper CIP
sub-account.

8. For the above-mentioned audit observation, which has caused the issuance of a
qualified opinion, we recommended the following:

a. The Accountant to prepare the necessary adjusting entries to reclassify the 22

completed infrastructure projects and one (1) misclassified on-going project to their
respective appropriate PPE and CIP accounts;

Ensure correct posting of the payment amounting ₱1,977,623.96 to the CIP-

Buildings and Other Structure account in its assigned subsidiary ledger; and

Plan for proper delegation of workload to motivate productivity, and conduct

comprehensive training/orientation for preparers of journal entries and reports for
them to assimilate the relevant accounting procedures and encourage competence
and due care in the workplace.

D. Significant Accomplishments

9. We commend Management for the following accomplishments they made for

CY 2022:

a. The conversion of Surigao del Norte State College of Technology (SSCT) to

Surigao del Norte State University (SNSU), the first and only state university in
the Province of Surigao del Norte.

b. Completion of 26 infrastructure projects aggregating to ₱103,105,936.55 in

CY 2022 of which 22 started implementation in the current year and four (4) were
continued projects from CY 2021. Details in Annex H.

c. Development of Learning Management System and Financial Information System,

and set up of Campus Area Network under the Smart Campus Development Project
funded from the “Bayanihan to Recover as One Act” which aimed to create smart
campuses through investments in ICT infrastructure, acquisition of learning
management systems, and other appropriate equipment to fully implement flexible
learning modalities.

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 d. Significant decrease in the amount of ₱1,576,371.39 or 43.42% of the agency’s
Accounts Receivable balance from ₱3,630,272.76 as of CY 2021 to ₱2,053,901.37
as of CY 2022 which indicates efficient and effective collection of receivables.

E. Summary of Significant Observations and Recommendations

10. The other significant audit observations and recommendations are as follows:

a. The accuracy, existence and completeness of Inventory account with a year-end

balance of P27.987 million could not be relied upon due to noted deficiencies, such
as: (a) unreconciled Inventory balance between the Supply and Accounting Offices
amounting to P10.700 million; (b) non-conduct of complete physical count of
inventory; and (c) un-updated Supplies Ledger Card (SLC) by the Accounting
Office.

We recommended that the Accounting and Supply Offices reconcile their Inventory
records as mandated in Chapter 5 of the Property and Supply Management
Handbook, and direct the Building and Estates Office to submit the necessary
reports of completed inventory works to facilitate the reconciliation process;

The Inventory Team conduct a complete physical count of the University’s

inventories at least semi-annually, June 30 and December 31 of each year, and
submit the corresponding RPCI to the Supply Office, including the Audit Team;
and

The Accountant update the SLCs as required in Section 17, Chapter 8 of the GAM
for NGS.

b. The accuracy, existence and completeness of the Property, Plant and Equipment
(PPE) account with a year-end net value balance of P889.656 million could not be
fully relied upon due to unreconciled PPE balance between the Supply and
Accounting Offices of P62.349 million; and un-updated Property, Plant and
Equipment Ledger Card (PPELC) by the Accounting Office and Property Card (PC)
by the Supply Office.

We recommended and the Management agreed that the Accounting and Supply
Offices coordinate and assign personnel in both offices to focus on the
reconciliation work, and to update their PPELCs and PC, respectively, as mandated
in Section 42 of GAM for NGS, Volume I; and

The aforementioned offices provide the Audit Team with the relative reconciliation
records/documents as proof of reconciliation efforts made by both offices.

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c. Accounts Payable aggregating ₱51,043.34 that had been long outstanding for two
(2) to 10 years were not reverted to the Accumulated Surplus/(Deficit), thereby
overstating the Accounts Payable and understating the Accumulated Surplus by the
same amount.

We recommended and the Management agreed that the Accountant review and
analyze the accounts that remained outstanding for two (2) years or more;

Prepare the necessary JEV to revert such accounts payable to the Accumulated
Surplus/(Deficit) supported with List of Reverted A/Ps, copy furnished the Budget
Office to adjust the RAOD and ORS; and

Maintain a Registry of Reverted Accounts Payable for recording and monitoring

purposes, and as future reference in case payments will be made; and

In case of claims by rightful creditors of reverted Accounts Payable, follow the

procedural guidelines provided in Section 5.3 of COA-DBM Joint Circular No. 1,
s. 2021 dated March 8, 2021.

d. The regularity and propriety of the grant, liquidation and recording of Cash
Advances to Accountable Officers and Employees could not be ascertained due to:
(a) presence of past due cash advances which remained unliquidated as of
December 31, 2022 totaling P14.747 million; (b) grant of additional cash advances
despite existence of outstanding cash advance previously granted; and (c) cash
advances in the amount of P1.323 million were not classified to its appropriate
accounts, thus, not compliant with the existing laws and regulations resulting in the
delayed recognition of corresponding expenses and exposing unused cash advances
to risk of possible loss or misuse of government funds.

We recommended and the Management agreed that the Accountant strictly monitor
the liquidation of cash advances and send demand letters to the concerned
personnel, copy furnished the Auditor; and make the necessary adjusting entries to
correct the misclassified accounts.

Stop granting additional cash advance to officers/employees with existing

unliquidated cash advances, and direct the concerned accounting personnel to
practice due diligence in checking the accountability of each officer/employee
before issuing certification.

e. Cash advances in excess of actual expenditures with an aggregate amount of

₱227,568.86 were not refunded to the University Cashier, but instead, were used to
fund 23 specific time-bound undertakings with purposes other than which the cash
advances were specifically granted for, thus, the disbursements were deemed
irregular.

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 We recommended and the Management agreed to stop the practice of utilizing
excess cash advances to specific undertakings other than which the cash advances
were specifically granted for;

Ensure that any unutilized cash advances are immediately refunded to the
University Cashier as soon as the purpose for which they were granted is served by
issuing a demand letter addressed to the accountable officer requiring such; and

Issue an office memorandum directing the Accountant to ensure that cash advances
are liquidated within a specified period of time and to judiciously examine the
validity and propriety of the corresponding liquidations.

f. The regularity, validity and propriety of the payment of the Hazard Pay,
Subsistence and Laundry Allowance of the University’s medical personnel could
not be ascertained due to: (a) payments of Subsistence Allowance (SA) exceeded
the authorized rates by P20,975.00; (b) lack and/or incomplete documentation to
support the veracity of the allowance claims aggregating P377,923.24; and (c)
grant of Hazard Pay to an ineligible personnel which was deemed irregular and
disallowable in audit.

We recommended and the Management agreed that the concerned medical

employee refund the amount of Hazard Pay ineligibly paid in the amount of
₱5,399.24;

Stop the payment of Subsistence Allowance to the University’s medical personnel

in excess of the authorized rates of P 50.00 per day for actual full-time service
and/or P25.00 for actual part-time service as provided for in Section 8 of DBM-
DOH Joint Circular No. 1 s.2012;

All personnel claiming Hazard Pay, Subsistence and Laundry Allowance to attach
complete necessary and valid documentary evidence to support their claims, and
the Accountant to exercise due diligence in making sure all transactions bear
complete necessary attachments before approval as enumerated in COA Circular
No. 2012-001 and other appropriate relevant provisions to avoid suspension in
audit; and

Remind the Accountant, in writing, to be updated of the new rules on the grant of
Hazard Pay pursuant to DBM-DOH Joint Circular No. 1 s. 2016 and other
appropriate provisions to avoid payments of irregular transactions.

g. Daily Travel Expenses (DTE) claimed by University Officials and Employees

aggregating to ₱354,360.00 included the corresponding portion for meals/snacks
and hotel accommodation/lodging which were already paid for along with other
necessary expenditures in the conduct of Board of Regents (BOR) meetings, thus,
claims of the said amount constituted double payment of travel expenses and
deemed excessive, thereby disallowable in audit.
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 We recommended and the Management committed that the concerned officials and
employees refund the meals/snacks and hotel/lodging portions totaling
₱268,740.00 of the claimed travel expenses which were subjected to a double
payment;

Strictly comply with the prescribed rates of expenses and allowances during official
local travels and properly observe the rules and procedures provided in the
Executive Order No.77 dated March 15, 2019; and

Ensure economical and prudent utilization of government funds to avoid incurrence

of irregular and excessive expenses which could lead to issuance of notice of
disallowance.

h. Due to lapses in the timelines set for the implementation of the University's Smart
Campus Development Project, the unobligated fund amounting to ₱4.313 million
was returned to CHED after the lapse of the prescribed period, thus, deprived the
students of the benefits that could be derived from the facilities that were supposed
to have been established or provided out of the implementation of such project.

We recommended and the Management agreed that the Project Team/Committee

be vigilant on the terms and conditions for every funding received most specially
with the timelines set forth in the Memorandum of Agreement and other related
memoranda, in order to properly plan by implementing effective strategies,
procedures, and controls to ensure complete and timely implementation of
programs, projects, and activities.

i. Of the 24 GAD activities of the University embodied in its GAD Plan and Budget
(GPB) for CY 2022, 21 programs/activities were significantly accomplished,
incurring P20,189,707.41 in actual expenditure or 50.90 percent of its GAD budget
of P39,665,000.00. However, discrepancies were noted in the GAD
Accomplishment Report (AR) and necessary attachments for GAD AR were not
submitted, thus, impeding the substantial verification process of the agency’s GAD
Fund utilization.

We recommended and the Management committed to submit required documents

of expenditure breakdown and other means of verifications incurred for GAD
programs/activities to substantiate the amounts utilized presented in the GAD AR,
as required in item 1.5.3 of PCW Memorandum Circular No. 2022-07, and to
remind the GAD secretariat and focal person to exercise due diligence in the report
preparation, particularly in calculating relevant amounts to be reflected in the
reports.

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F. Summary of Total Suspensions, Disallowances and Charges

11. The Statement of Audit Suspensions, Disallowances, and Charges, which summarizes
the total audit suspensions, disallowances, charges, and settlements issued by the
Commission, showed a balance of ₱107,990.08 for unsettled suspensions and a balance
of ₱7,773,108.07 for unsettled disallowances as of December 31, 2022.

12. Moreover, the Report on Notices of Suspension, Notices of Disallowance, and Notices
of Charge issued prior to the 2009 Rules and Regulations on Settlement of Accounts
(Annex 9, COA Circular 2009-006) showed a balance of ₱181, 736.32.

G. Status of Implementation of Prior Years’ Audit Recommendations

13. Out of the 60 audit recommendations embodied in the CY 2021 and prior year’s Annual
Audit Reports, 51 were fully implemented, and nine (9) were partially implemented.

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