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Parameter G
This area covers the description of the University’s management and financial control mechanism. Specifically, this presents the various fund sources of the university that it uses for its operations. As a Higher Education Institution (HEI) governed by the state, the Polytechnic University of the Philippines is expected to follow the policies of regulatory agencies in fulfilling its mandates efficiently and effectively.
G.1 FINANCIAL CONTROL MANAGEMENT SYSTEM
G.1 FINANCIAL CONTROL MANAGEMENT SYSTEM
The University maintains four (4) funds from various sources namely; General Fund (Fund 101), Special Trust Fund (Fund 164), Regular Trust Fund (Fund 184), and Revolving Fund (Fund 163). Claims against the funds must be supported with complete documentation and must be obligated before being disbursed. Both Obligations and Disbursements are reported in the Quarterly Financial Accountability Report (FAR) required by the Department of Budget and Management (DBM) and Commission on Audit (COA). However, Fund 184 and Fund 163 are monitored by the Accounting Department and reported periodically to the top management.
To ensure that the General Fund or the subsidy from the national government is expended or utilized in accordance with laws and regulations and to avoid wastage, the Budget Services Office,upon receipt of the General Appropriations Act (GAA), prepares the Statement of Comprehensive Release and Other Budgetary Adjustments (CRBA). The CRBA indicates the Quarterly Breakdown of expenditures which shall be the basis for the release of funds for University Programs/Activities/Projects (PAPs) and shall also serve as a basis for the issuance of the Certificate of Availability of Funds (CAF) by the Accountant. The CAF ensures the use of funds solely for the purpose for which it is appropriated.
The pertinent provisions of Republic Act 8292, otherwise known as Higher Education Modernization Act and CHED Memorandum Order No. 20 series of 2011 governs the allocation and utilization of the income of the university that shall constitute the Special Trust Fund (STF).
CMO No. 20 requires a specific budgetary allocation for Programs/Activities/Projects (PAPs), however, modification in the percentage allocation are done in order to provide funds for the teaching overload for regular faculty members and wages of part time faculty members, and to augment the budget deficiencies in the Annual General Appropriations Act (GAA). The Special Trust Fund-Program of Receipts and Expenditures (STF-PRE) is prepared based on income estimates, all obligations and disbursements arising from transactions are to be funded from actual collections as certified by the Director of the Accounting Department. In order to ensure the control of the fund, the BSO prepares a monthly Financial Plan that will serve as guide in the obligation of funds.
The Regular Trust Receipts are collections from non-income sources authorized by law for specific purposes which are collected/received by PUP acting as a trustee, agent, or administrator, or which have been received a guarantee for the fulfillment of an obligation and all other collections classified by law and regulations as trust receipts. Once funds are transferred to the university, an Official Receipt is issued and the same will be recorded in the subsidiary ledger bearing a specific code per donor/funding agency/ies to ensure proper accounting of the project.
Fund Status Report is prepared upon request to ensure funds are available for utilization. Funds utilized will then be recorded in the subsidiary ledger to reflect any remaining available balance.
The Revolving Funds are derived from business-type activities such as income from Canteen Services and Dormitory/Hostel. These funds are self-liquidating. All obligations and expenditures incurred from this business-type activity are charged against the revolving fund. A monthly financial statement is being prepared each for Canteen Services and Dormitory/Hostel to monitor the cash availability of the revolving funds.
G.2 THE FINANCIAL DEVELOPMENT PLAN
The budget is the financial blueprint of the University’s development plan. The PUP Internal Operating Budget (IOB)is specifically sourced from the (1) General Fund which is the university budget provision in the annual General Appropriations Act inclusive of Congressional Initiatives/Insertions and Automatic Appropriation for Retirement and Life Insurance Premium; (2) Special Trust Fund which is the projected income of the University arising from the collection of tuition and other fees, and fiduciary fees; (3) Prior Year Unexpended Balance (if any) representing balances of the programmed amount in the previous year free of any obligation as the program/activity/project is already completed and (4) Unprogrammed income, if any. The IOB is presented to the University Board of Regents for approval. Figure G.1 PUP Internal Operating Budget for FY 2021.
FIGURE G.1: Internal Operating Budget by PAP for FY 2021
G.3 THE BUDGET
The duly appropriated budget of the University in the Annual General Appropriations Act, the budgeted revenue derived from its income and funds from public and private sources otherwise known as Regular Trust Fund, are the major sources of funds that is provided for the estimated operating requirements during the budget year.
General Fund (Fund 101)
As a public Higher Education Institution (HEI), PUP’s primary source of funds is the subsidy from the national Government. The appropriations are provided annually in the General Appropriations Act (GAA) and are released by the DBM in the form of allotments.
Other releases from the Special Purpose Funds (SPFs) for Compensation Adjustments and Terminal Leave benefits for retirees also form part of the budget from the General Fund.
Congressional Initiatives or Congress-introduced items in the Annual GAA also represent additional funding for Programs / Activities / Projects (PAPs).
Special Trust Fund (Fund 164)
With the enactment of RA 8292, otherwise known as the Higher Education Modernization Act of 1997, the income generated by the University is retained and constitutes the Special Trust Fund for the use of the University, subject to the approval of the Board of Regents (BOR).
The STF sources are from fees and other charges collected from students and other internally-generated receipts which are deposited to an Authorized Government Depository Bank (AGDB), and accumulated unexpended balances / savings from prior years. This shall be utilized to augment the Personnel Services (PS), Maintenance and Other Operating Expenses (MOOE), and Capital Outlays (CO) budget from the General Fund.
Revolving Fund (Fund 163)
These are funds derived from business type activities such as income from Canteen Services and Dormitory/Hostel. These funds are self liquidating. All obligations and expenditures incurred from this business type activity are charged against the revolving fund.
Regular Trust Fund (Fund 184)
Funds wherein the University acts as trustee or administrator for the amount that have been received for the fulfillment of a particular obligation. This includes inter-agency transferred funds such as fund transfers from DOST, CHED, and from private sources.
G.3.1 THE BUDGET PREPARATION
This portion describes the process of the university’s budget preparation. Detailed steps from the Budget Call and its approval by different national government agencies concerned are also included.
I. The PUP Budget Preparation Process for General Fund (Fund 101)
The budget preparation phase commenced through the issuance of a National Budget Call by the Department of Budget and Management (DBM). The National Budget Call contains the budget parameters as well as the guidelines, procedures, and timetable for budget preparation to aid government agencies in the preparation and submission of their budget proposals.
Upon receipt of the National Budget Call, the Office of the Vice President for Finance thru the Budget Services Office (BSO) conducts a Budget Briefing/ Forum attended by representatives from all Sectors of the University who are directly involved in the preparation of the budget. The operating units prepare and submit their respective budget proposals, supported with the required documents to the designated focal persons. The Focal Persons evaluate the technical viability, reasonableness, and implementation-readiness of the proposals using a process analysis tool for comparing choices using specific criteria, and figuring out what to prioritize. This Fund Prioritization Criteria Matrix was developed to help the committee decide scientifically on which proposals to focus on and avoid arbitrary approval of projects as presented in Figure G.2. Evaluated proposals are then forwarded to the BSO to determine if the proposals have sufficiently complied with the guidelines and prescribed forms. The consolidated budget proposals are then presented to the University Budget Development Coordinating Committee (UBDCC) for further review and approval.
The BSO finalizes the proposals based on the results of the deliberations of the UBDCC. The UBDCC-approved budget proposals are then recommended to the University Finance Committee and Executive Committee for approval. The result is an overall budget that is presented to the representative of students, alumni, faculty, and non-teaching personnel during the Budget Partnership Dialogue.
The University presents the Budget Proposals to the Social Development Sector of the Regional Development Council (RDC) during its budget review. The RDC endorse the approved proposals to the DBM. The RDC-reviewed proposals is then submitted to the DBM and presented before a panel in a scheduled technical budget hearing wherein the university is given the opportunity to defend its proposals.
The DBM recommends the university budget into the National Expenditure Program (NEP), and is submitted by the President of the Republic to both Houses of Congress for deliberations. After the bicameral committee composed of both houses of Congress arrives at a common version, its is submitted to the president for signing into a law or the General Appropriations Act (GAA).
Upon receipt of the copy of the GAA by the BSO, the said office prepares the budget execution documents (BEDs) in accordance with the GAA, and the Internal Operating Budget for approval of the University Board of Regents. It is at the budget execution phase that the expenditure program of the university is implemented in accordance with the General and Special Provisions of the GAA, and Guidelines on the Release of Funds issued by the DBM. The last phase of the budget process is accountability. It is in this phase wherein reports on actual physical and financial accomplishments are submitted to the DBM and COA.
FIGURE G.2: PUP Budget Cycle Flow Chart for General Fund
II. The Budget Preparation for Special Trust Fund
The University maintains a Special Trust Fund derived from its income and other internally generated receipts inclusive of the fiduciary fund to which collection of fees for a specific purpose shall accrue. This fund is used to augment the deficient allocations from the GAA and to address the needs of the students.
Special Trust Fund Budget Allocation Flow Chart.pdfFIGURE G.3: PUP Budget Cycle Flow for Special Trust Fund
Figure G.3 The preparation of the Special Trust Fund (STF) Program of Receipts and Expenditures (PRE) involves a series of steps that commenced with income projection to the approval of the BOR.
The Accounting Department prepares the income estimates for the ensuing year and submit the same to the Budget Services Office (BSO). Upon receipt of the income estimates, the BSO will also determine the unexpended balances/ savings in the prior years. Upon the determination of the available resources, a Special Trust Fund Program of Receipt and Expenditures (STF-PRE) is prepared taking into consideration the proposed programs/activities/projects of the colleges/branches/offices. The STF-PRE is then presented to the University Finance Committee (FinCom) for evaluation, and recommendation to the Executive Committee (ExeCom) should there be no revisions on the program. Once approved by the ExeCom, the STF-PRE is presented to the Board of Regents (BOR) for approval.
With the creation of the University Budget Development Coordinating Committee (UBDCC), the University will implement this new process in the budget preparation of the Special Trust Fund in 2023.
The Chair of the UBDCC convenes a meeting to define the course of action that the University will undertake in the preparation of the STF Program of Receipts and Expenditures (PRE). The following members are tasked to prepare, evaluate and consolidate data that are essential in the preparation of the STF expenditure program:
1. Accountant for the preparation of income estimates:
2. Designated Focal Persons for the evaluation of proposals;
3. Budget Officer for the determination of university proposals that were not considered by the DBM, and determination of prior years' unexpended balances/savings, if any.
G.3.2 THE ALLOCATION OF THE BUDGET
The annual budget of the university that is sourced from the General Appropriations Act (GAA) is allocated to General Management and Supervision, Support to Operations, Higher Education Program, Advanced Education Program, Research Program, Technical Advisory and Extension Program. All allocations which may be insufficient to cover the expenses of the university will be sourced from the Special Trust Fund (STF).
The budget is allocated based on the following:
No. of personnel in the College / Branch / Office
Priority programs /projects as proposed by the implementing units.
Implementation readiness of projects
G.3.3 THE UTILIZATION OF THE BUDGET
Upon approval of the General Appropriations Act and the Program of Receipts and Expenditure, the BSO notifies the implementing offices of their approved budgets and the documentary requirements to ensure that their approved Programs / Activities / Projects (PAPs) will be implemented during the budget year.
G.4 THE ACCOUNTING SYSTEM
The type of accounting in the Polytechnic University of the Philippines, since it is one of the agencies in the National Government, is Government Accounting, which encompasses the processes of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property, and interpreting the results thereof. We adhered to the Government Accounting Manual (GAM) designed by the Commission on Audit pursuant to PD 1445 and complied to the DBM and COA Circulars related to the allocation and use of government funds.
The University’s Accounting System is centralized. This means that all transactions and records related to the allocation and use of government funds of all its campuses are maintained in the Accounting Office of the Main Campus.
To ensure that funds are available and stable, a Certificate of Availability of Funds (CAF) is issued by the Accounting Department ensuring the use of funds solely for the purpose for which it is appropriated. The Accounting Department prepares the Monthly Report of Disbursements (FAR4) to properly report the NCA balance to the DBM and COA on a monthly basis. A monthly reconciliation between the BSO and Accounting Department is conducted to update and monitor the changes in the obligations and disbursements. The BSO submits to the Office of the Vice President for Finance the Statement of Allotments, Obligations, and Balances (SAOB) every end of the month to be used for decision making of the Management.
G.5 THE AUDITING SYSTEM
Internal audit involves the evaluation of internal controls and its degree of compliance thereof, ensuring that it is consistent with existing laws, regulations, University policies, accountability measures, ethical standards, and contractual obligations.
The basis for its creation within the University can be found in Administrative Order No. 70 issued by the Office the President (Strengthening of the Internal Control Systems of Government Offices, Agencies, Government-Owned and/or Controlled Corporations, Including Government Financial Institutions, State Universities and Colleges and Local Government Units), wherein it reiterated the authority for the creation of the Internal Audit Unit and its functions.
The Internal Audit Office (IAO) of the University is currently headed by a Director and three chiefs who each handle a specific unit:
Across the three units, two types of reviews/audits are done: compliance review and process audit.
In compliance review, the team evaluates the degree of compliance with laws, regulations, managerial policies and operating processes by the various University offices. Process audit on the other hand evaluates the effectiveness and efficiency of the process being audited. Reports are usually submitted to the Office of the Executive Vice-President (OEVP). Reports that may need the action of other offices, such as University Legal Counsel Office, are submitted to the Office of the President through OEVP.
Aside from these activities, IAO may be asked by management to perform other related duties, such as performing special audits and participating in various working committees, which is consistent under the revised Philippine Government Internal Audit Manual (2020).
Activities for the coming calendar year are discussed and laid out in the office’s Action Plan. Accomplishments and the level of compliance to the Action Plan are reviewed during the midyear and year-end strategic planning activities.
One of the best practices that the Internal Audit Office has is its compliance review of fund-raising activities by student and faculty organizations. In this review, IAO determines whether the student and faculty organizations complied with the rules under M.O. No. 43, s. 2013. This M.O. aims to ensure that whatever funds raised by the various PUP-recognized organizations will be used for the purpose for which the activity was undertaken and approved by the University. This also exposes the students to the end-to-end government procurement process: from market survey to liquidation and asset inventory.
In its new role, IAO will determine:
Based on initial sectoral discussions in 2020 and expedited by COA AOM 14, IAO will shift its focus from compliance review and process audit to management and operations audits. In these audits, IAO switches from its current front-end gatekeeper role to a back-end, post-audit function. IAO’s current compliance review activities will be transferred to the various offices that oversee the internal controls for their respective processes, ensuring these are in place, have been complied with, and are effective in mitigating risks.
Because of IAO’s new focus, a reorganization of its units will take place. The following new units will take effect starting 2022:
G.6 CITE AT LEAST 3 FINANCIAL CONTROL
MECHANISMS IN FINANCIAL MANAGEMENT
The PUP ensures that there is a sound system of management and financial control. Mechanisms for effective monitoring and control are in place.
Pre-audit of the Accounting - Detailed examinations of every transaction is undertaken by the Accounting Department to ensure that all expenses will be disbursed in accordance with accounting regulations and the purpose(s) for which the funds have been authorized.
Subsidiary Ledgers - shows the transaction and history of all financial transactions, provides the details that make up the balance of a specific account.
Monthly Financial Reports
Post-Audit - Involves the services of the PUP Internal Audit and the Commission on Audit
The Internal Audit Office evaluates the internal controls and its degree of compliance thereof, ensuring that it is consistent with existing laws, regulations, University policies, accountability measures, ethical standards, and contractual obligations.
The Commission on Audit (COA) as represented by the resident auditor conducts examinations of the University’s book of accounts to ensure that all transactions and records have been made in accordance with accounting and auditing rules and regulations.
G.7 CITE AT LEAST 3 DISTINCT PREVAILING BEST PRACTICES REALTED TO FINANCIAL CONTROL
7.a The Income Generation Project Evaluation Committee (IGPEC) oversees the soundness and viability of all of the university's solely business-related initiatives. Its major goals are to assist the University increase the financial capacity and evaluate new sources of income. Additionally, it forges and creates connections with public and private institutions to improve the university's many commercial ventures. The IGPEC continues to implement the stringent criteria of evaluating and endorsing notable IGPs. It aims to identify, track, retain, and reward the strongest service providers for the various IGPs in the University. All IGP proposals that have undergone review and evaluation by the Committee shall be endorsed to the PUP Finance Committee for review and endorsement to PUP Executive Committee (EXECOM).
7.b The PUP Finance Management Portal is a web-based, integrated system that covers specific budget services, accounting, fund and resource generation, procurement, property and supplies management processes, functions, and service of the University to improve convenience, efficiency, accuracy and timely fiscal management and reporting. The Online Payment for ODRS through Link.BizPortal was implemented on June 2, 2022. It provides convenience as more paying options are available, and efficiency of higher payment security and contactless transaction with minimal fee.
7.c. The judicious manner of prioritizing the projects for funding using the Funds Prioritization Criteria Matrix helped the UBDCC decide scientifically on which proposals to focus on to avoid arbitrary approval of projects.
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