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Case Study 1.

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Fraud Audit Manual Form FoAM 02 – FRA Template

Agency name: CITY OF MANGGAHAN


Performed By: Date: WP ref:
Reviewed By: Date:

COA auditor should obtain the Understanding the Agency (UTA) template of the IRRBAM portion and we identify the Agency’s Mandate, Operations,
Objectives and Strategies, Critical Success Factor, Key Performance Indicators.

A. Mandate

City of Manggahan became an urbanized city by virtue of Republic Act No. 3847 which took effect on February 8, 1943. Before its historic transaction to its
present stature, the City was a former Barrio.

With the enactment of the Local Government Code of 1991 or Republic Act No. 7160, the City of Manggahan, like other local government units, enjoys autonomy
in the delivery of social services to its constituents involving peace and order, health and sanitation, education and other basic services in conformity with the
National Government’s thrust for sustainable social and economic growth.

B. Functions/Operations

The City is governed by a Mayor, a Vice-Mayor and a twelve-member City Council or Sangguniang Panlungsod, who are elected to serve three-year terms, in
accordance with the provisions of her City Charter.

In addition, the city is represented in the national congress by a lone Representative.

The Mayor, Vice Mayor and the city's Representative are elected at large through a city-wide election. while the members of the Sanggunian are elected by district.

The districts are subdivided into barangays, each governed by a Chairman elected to a five-year term through barangay-level elections. The city is comprised of 27
barangays: 14 in District I and 13 in District II.

Municipal services are delegated to City Departments which are headed by professionally qualified and experienced personnel appointed by the Mayor in his
capacity as chief executive.
Case Study 1.0
Fraud Audit Manual Form FoAM 02 – FRA Template

C. Objectives

An empowered community, competent government sector human resource, and benevolent private sector working in an atmosphere of mutual assistance shaping
the city into a sustainable and globally competitive environment and an effective partner in nation-building.

D. Strategies

In order to achieve the City’s objective, the following actions are set:

(1) Operate independently by focusing on a strong, proactive and progressive political leadership.
(2) Act collectively by standing as one community by implementing responsive, equitable and broad based social programs.
(3) Manage collaboratively by working together to sustain loyal relationships with workforce, investors, and the public.

E. Critical Success Factors

(1) Meet public needs and expectations by providing appropriate quality service.
(2) Implement and maintain low-cost, efficient operations via effective asset utilization.
(3) Successfully attract and retain qualified investors.
(4) Strong private sector involvement in urban development.

F. Key Performance indicators


Case Study 1.0
Fraud Audit Manual Form FoAM 02 – FRA Template

The City has clearly outlined its long-term key measures of financial performance as follows:
 Improving cash flows
 Grow revenue by 10-15% per year.
 Improvement on tax collection.

Other areas of financial performance that are of emphasis:


At the start of each city project, finance department constructs a budget per activity ( e.g. operations, marketing, accounting, etc.). These budgets will then serve
as a benchmark for the actual results. These are summarized on budget variance reports.

G. Others (COA Alert)

Base on the COA web alert, it reported that the Agency had recently purchased office equipment without going thru the process of public bidding. The purchases
were classified as emergency purchase.
Case Study 1.0
Fraud Audit Manual Form FoAM 02 – FRA Template

From the information COA auditor gathered (lists above), COA auditor assesses those information and identifies the fraud risk that might affect the
agency’s Mandate, Operations, Objectives and Strategies, Critical Success Factor, Key Performance Indicators. Using COA auditor’s professional
judgment and FoAM’s fraud categories, we identify all possible fraud risks and schemes of the agency and document them in the table below:

Overall
Fraud category1 Risk Statement2 Process3 Sub-processes4 Impact5 Likelihood6 Assessment7 Audit response8
Case Study 1.0
Fraud Audit Manual Form FoAM 02 – FRA Template

Overall
Fraud category1 Risk Statement2 Process3 Sub-processes4 Impact5 Likelihood6 Assessment7 Audit response8

1. Fraud Category – COA auditor list down if the key fraud risk is under the fraud risk category of; Corruption, Asset Misappropriation, and Financial statement Fraud.
2. Risk Statement – COA auditor would indicate the risk description of the agency.
3. Process(es) – COA auditor identifies which process in the agency is affected by the fraud risk identified.
4. Sub-Process(es) - COA auditor identifies which specific area in the process is affected by the fraud risk identified.
5. Impact – COA auditor should assess the extent of the identified fraud risks to the agency. Factors that may help define the impact rating may include financial effect,
reputation impacts, ability to achieve key objectives, etc.
6. Likelihood – COA auditor should assess the susceptibility of the agency to identified fraud risks.
7. Overall Assessment – COA auditor assess the combined assessment on the impact and likelihood of the fraud risks within the agency and rank this as either low, moderate,
and high.
8. Fraud Response – Base on the overall assessment, COA auditors provides a proper audit response to all identified fraud risk, e.g. test of controls, substantive test, or
detection control.