My university's policy is to consider only the most recent grade for a failed course that has been retaken, how should I declare my GPA?
You should declare the GPA that is written on your transcript and provide the transcript. You should not compute the GPA yourself. This would only introduce confusion. If someone asks, you can simply give the explanation you just gave us. You can even preemptively include an explanation somewhere in your application, with the simple explanation you wrote.