CESB

presentation

JOSEPHINE A. TILAN
acting assistant director
claims & adjudication office – corporate
commission proper adjudication & secretariat
support services
Commission on Audit

Tilan CES Congress November 22, 20179

 PHILIPPINE AUDIT LAWS, RULES,
AND PRACTICES

strengthening
fiscal
accountability
among public
officials

Tilan CES Congress November 22, 20179

DISCUSSION OUTLINE
Responsibility, Accountability and Liability for Government Funds

COA’s Audit Function

Audit Action and Audit Notice

Disallowable Transactions

Determination of Persons Liable

Acts Constituting Liability

Appeal from Disallowance

Nature of Liability for Disallowance

Enforcement of Liability

Tilan CES Congress November 22, 20179

 FISCAL RESPONSIBILITY
Sec 2- PD 1445 - Declaration of Policy

Safeguarded against
loss or wastage
through illegal/
improper disposition
Managed,
spent,
utilized according
to laws/
regulations With a view to ensuring
efficiency, economy
and effectiveness in
Government government
operations
Resources

Tilan CES Congress November 22, 20179

 FISCAL RESPONSIBILITY

Sec 2- PD 1445

management,
expenditure and “The responsibility
utilization of
government resources to take care that
in accordance with such policy is
law and regulations faithfully adhered
to rests directly
safeguarding with the head of
government resources agency.”
against loss or
wastage through
illegal or improper
disposition

Tilan CES Congress November 22, 20179

 FISCAL RESPONSIBILITY

Sec 4 (4)- PD 1445

• Fiscal responsibility
shall, to the greatest
extent, be shared by
all those exercising
authority over the
financial affairs,
transactions, and
operations of the
government agency.

Tilan CES Congress November 22, 20179

 FISCAL RESPONSIBILITY
Sec 25
(1), PD
1445

The COA shall

determine whether or
not the fiscal
responsibility that rests
directly with the head
of the government
agency has been
properly and
effectively discharged

Tilan CES Congress November 22, 20179

COA’s mission

To ensure accountability for

public resources, promote
transparency, and help
improve government
operations, in partnership
with stakeholders, for the
benefit of the Filipino
people

Tilan CES Congress November 22, 20179

 COA’s
AUDIT
FUNCTION

Tilan CES Congress November 22, 20179

COA’s AUDIT FUNCTION
Constitutional mandate

• Examine, audit & settle

Article accounts
• Post-audit- “disallow”
IX-D, IIUUEE
Sec 2 • Special or temporary
pre-audit
(1) • Inadequate internal
control systems

Tilan CES Congress November 22, 20179

COA’s AUDIT FUNCTION
Constitutional mandate

• Exclusive authority to-

Article IX- • Define the scope of audit
• Adopt methods and
D, Sec 2 (2) techniques in the conduct
of audit

Article IX- • Jurisdiction over government

funds cannot be
D, Sec 2 (3) reduced by law

Tilan CES Congress November 22, 20179

COA’s AUDIT FUNCTION
Powers & Functions Incident
to audit function

Adjudication

Rule-making

Keeping of accounts

Recommendatory

Tilan CES Congress November 22, 20179

COA’s AUDIT FUNCTION

• Exclusive external
Supreme auditor
Audit • Findings take
Institution precedence over
(SAI) result of audit of
other bodies

Tilan CES Congress November 22, 20179

COA’s AUDIT FUNCTION

• All government
accounts
Article • Revenues and receipts
IX-D • Funds and property
• Expenditures and uses
Sec 1 • Funds and property

Tilan CES Congress November 22, 20179

 COA’s AUDIT FUNCTION
Non-government
bodies

Non-government
Private entities Public utilities organizations
(Sec 29, PD 1445) (Sec 38, PD 1445) (Secs 26, 29, PD
1445)

Levy /share to Subsidy/donation

Rate-fixing
the gov’t thru the gov’t

Subsidy, gov’t
Franchise tax
equity

Tilan CES Congress November 22, 20179

 COA’s AUDIT FUNCTION

examine
In accordance
• Legality
audit with law and
regulations to
• Propriety
determine

settle

Tilan CES Congress November 22, 20179

EXAMINE
Tilan CES Congress November 22, 20179
SETTLE
Tilan CES Congress November 22, 20179
Tilan CES Congress November 22, 20179
 COA’s AUDIT FUNCTION
Submits receipt and
disbursement records with DV’s,
& supporting documents for Accountable
the transactions or accounts Officer A
ATL U
D
Accountant Audits & Examines
-a) issues AOM/NS

I
-b) prepares ND/NC
Records in books -c) in case of fraud, prepares
Submits to ATL documentation & report

AOM
T
NS

Agency official SA
ND
NC
PROCESS
Prepares management comments Reviews AOM/ NS/ND/NC or
Appeals ND/NC ATL report on fraud
discovered
Tilan CES Congress November 22, 20179
 AUDIT ACTION
& AUDIT
NOTICE

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE

Legal •Sec. 81, PD 1445- to certify

Basis for balances in the accounts of
officers
Audit •Sec 82- to notify in writing the
Notice •officer whose accounts have
•been audited and settled

Tilan CES Congress November 22, 20179

AUDIT ACTION/NOTICE

AUDIT
ACTIONS

1. Allow- no
difference
found;
- in order

“ALLOWED IN AUDIT”
(DV marking)
Tilan CES Congress November 22, 20179
AUDIT ACTION/NOTICE

AUDIT
ACTIONS

2. Defer-
audit
decision
cannot yet
be made

Audit
Observation
Memorandum
(AOM)

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE

• AOM

• Deficiencies with
no pecuniary
loss
• Deficiencies in
documentation
or information – if
with pecuniary
loss

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE

AOM

• Management
to reply
• Auditor to
evaluate reply
• Inform
management
of action

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE

AOM
Not a requirement
before a
disallowance is
issued, if:
1. Clear violation of
law/ regulation
2. Previous similar
transaction was
disallowed

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE

3. Suspend-
temporarily
disapprove and
require
justification

Notice of
suspension
Tilan CES Congress November 22, 20179
AUDIT ACTION/NOTICE

3. For
transaction of
doubtful legality
or propriety, w/
pecuniary loss

Temporary
disallowance

To be complied
w/in 90 days
Tilan CES Congress November 22, 20179
AUDIT ACTION/NOTICE
Compliance
documents to
be evaluated
by the Auditor,
who shall
either: Allow the
transaction
(notify
management
accordingly),
or

Issue an ND or
NC
Tilan CES Congress November 22, 20179
AUDIT ACTION/NOTICE

4. Notice Charge-
of add to
Charge the
(NC) account
ability

• require
payment

Tilan CES Congress November 22, 20179

AUDIT ACTION/NOTICE

•NC
•for audit of revenue
•Non- or under-collection
•Non- or under
assessment
•Under-appraisal
•Non- or under-
remittance

Tilan CES Congress November 22, 20179

AUDIT ACTION/NOTICE

•5. Disallow-
disapprove and
require refund

• Notice of
Disallowance (ND)

Tilan CES Congress November 22, 20179

 AUDIT ACTION/NOTICE
ND

-for disbursement that is:

Illegal I

Irregular I

Unnecessary U

Unconscionable U

Excessive E

Extravagant E
Tilan CES Congress November 22, 20179
 AUDIT ACTION/NOTICE

Authority to
incur expense approval

Audit of Appropriate
Adequate
expenditures- expense
funding
to ascertain classification

Complete
documentation

Tilan CES Congress November 22, 20179

DETERMINATION
OF
PERSONS LIABLE

Tilan CES Congress November 22, 20179

DETERMINATION OF PERSONS
LIABLE

CRITERIA:

Nature of the transaction

Duties and responsibilities of

officer/employee

Extent of participation in the transaction

Tilan CES Congress November 22, 20179

Tilan CES Congress November 22, 20179
FUND ACCOUNTABILITY

Sec 101 (1), PD 1445

Every officer of any government agency

whose duties permit or require the possession
or custody of government funds or property
shall be accountable therefor and for the
safekeeping thereof in conformity with the law.

Tilan CES Congress November 22, 20179

FUND ACCOUNTABILITY

Sec 105 (2), PD 1445

Every officer accountable for government

funds shall be liable for all losses resulting
from the unlawful deposit, use or application
thereof and for all losses attributable to
negligence in the keeping of the funds

Tilan CES Congress November 22, 20179

ACTS CONSTITUTING
LIABILITY

Tilan CES Congress November 22, 20179

 DETERMINATION OF
PERSONS LIABLE

• Appointment
• General Services Officer
DUTIES AND • Chief Engineer
RESPONSIBILITIES
OF OFFICER • Accountant
• Budget Officer
• Board of Directors

Tilan CES Congress November 22, 20179

 DETERMINATION OF
PERSONS LIABLE

• Designation
• Inspection and Acceptance
DUTIES AND Committee
RESPONSIBILITIES • Bids and Award Committee
OF OFFICER • Special Disbursing Officer
• Property Inventory
Committee

Tilan CES Congress November

22, 20179
 FUND ACCOUNTABILITY

Sec 4.2,
Rules & Regulations on
Settlement
of Accounts (RRSA)

Public officers, although not accountable for

government funds by the nature of their duties, may
be held accountable therefor through their
participation in the use or application thereof

Tilan CES Congress November 22, 20179

 LIABILITY FOR FUNDS

Sec 103, PD 1445

Expenditures of government funds or

uses of government property in violation
of law or regulations shall be a personal
liability of the official or employee found
to be directly responsible therefor

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

Tilan CES Congress November 22, 20179

ACTS CONSTITUTING LIABILITY

•Certifications:
•“Deliveries are in accordance
with quantity and specifications.”

•“Project is 100% accomplished

in accordance with plans/POW.”

•“Funds available in the amount

of P___.”
Tilan CES Congress November 22, 20179
ACTS CONSTITUTING LIABILITY

Tilan CES Congress November 22, 20179

 RESPONSIBILITY &
LIABILITY FOR FUNDS

Sec •AO- liable for loss

of funds
104, •HOA- jointly and
PD severally liable with
AO if negligent in
1445 supervising the AO

Tilan CES Congress November 22, 20179

 DETERMINATION OF
PERSONS LIABLE

• Liability up to the amount

certified/ authorized/approved
• Partial payment
• Progress billings
• Payment in tranches

EXTENT OF
PARTICIPATION
Tilan CES Congress November 22, 20179
 DETERMINATION OF
PERSONS LIABLE

•Liability of payee or
recipient-
•up to the amount
received

EXTENT OF
PARTICIPATION
Tilan CES Congress November 22, 20179
 DETERMINATION OF
PERSONS LIABLE

•Liability for Acts done by

subordinate under direction
of superior
•(Sec 106,PD 1445)

EXTENT OF
PARTICIPATION
Tilan CES Congress November 22, 20179
Section 106

Liability for acts done by direction of superior

officer.
No accountable officer shall be relieved from
liability by reason of his having acted under the
direction of a superior officer in paying out,
applying, or disposing of the funds or property
with which he is chargeable, unless prior to that
act, he notified the superior officer in writing of
the illegality of the payment, application, or
disposition. The officer directing any illegal
payment or disposition of the funds or property
shall be primarily liable for the loss, while the
accountable officer who fails to serve the
required notice shall be secondarily liable.

Tilan CES Congress November 22, 20179

 DETERMINATION OF
PERSONS LIABLE

•Conspiracy
•“the act of one is the
act of all”
•(liability is solidary)

EXTENT OF
PARTICIPATION
Tilan CES Congress November 22, 20179
 DETERMINATION OF
PERSONS LIABLE

•Conspiracy need not be proved by

direct evidence of the acts
charged but may and generally
must be proven by a number of
indefinite acts, conditions and
circumstances

EXTENT OF
PARTICIPATION
Tilan CES Congress November 22, 20179
ACTS CONSTITUTING LIABILITY

Tilan CES Congress November 22, 20179

ACTS CONSTITUTING LIABILITY

Tilan CES Congress November 22, 20179

ACTS CONSTITUTING LIABILITY

Tilan CES Congress November 22, 20179

ACTS CONSTITUTING
LIABILITY

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

Tilan CES Congress November 22, 20179

Tilan CES Congress November 22, 20179
 ACTS CONSTITUTING
LIABILITY

Good faith

“Good faith connotes an honest intention to abstain

from taking unconscientious advantage of another;

it is not a visible, tangible fact that can be seen or

touched, but rather a state or condition of mind which
can only be judged by actual or fancied token or signs.”

(PNB vs Heirs of Estanislao Militar, et al. GR No. 164801,

June 30, 2006)
Tilan CES Congress November 22, 20179
 “Solutio Indebiti”

if something is
received when there
is no right to demand the person who has
it, and it is unduly no right to receive
delivered through such payment
mistake, the becomes obligated
obligation to return it to return the same;
arises (Art 2154,
NCC);

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

SC
Decisions
on 1. Both officers and
Liability of payees need not
Payees refund (Blaquera vs Alcala-
And 9/11/98, TESDA vs COA,
2/10/15; etc)
Officials

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

SC
Decisions
2. Only officials shall
on refund the full amount of
Liability of disallowance; employee
Payees recipients are exempt.
And (Casal vs COA- 11/30/06, Silang vs COA-
9/8/15, MARINA vs COA- 1/13/15)
Officials

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

SC
Decisions 3. Approving officers
on shall refund but only the
Liability of amounts they received
Payees while other recipients
And need not refund (EME)
Officials (TESDA vs COA- G.R. NO. 204869, 3/11/14)

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

SC 4. The recipients and officers are not

Decisions required to refund the amounts paid
on as WESA, CNASB, back COLA. As to
Liability the LMRG, only the BOD and the
of officials who authorized the approval
Payees and release of the amount shall
And refund. (The COA shall compute the
Officials amount received by them)
• PHIC vs COA, GR N0. 213453, Nov 29,2016

Tilan CES Congress November 22, 20179

 ACTS CONSTITUTING
LIABILITY

SC
Decisions
on 5. Both officials and
Liability employees shall refund
of because of “solutio
Payees
And indebiti” (GSIS vs COA- G.R. No.
162372,9/11/12)
Officials

Tilan CES Congress November 22, 20179

 Because the GSIS the payees, who
Retirement/Financial acquired the retirement
Plan (RFP), is contrary benefits under the GSIS
to law, thus void and of RFP, are considered as
SC trustees of the
no effect, the
Decisions disallowed amounts, as
enrichment of the
on Liability although they
payees is without just
of Payees committed no fraud in
or legal ground.
And obtaining these benefits,
Therefore, the payees it is against equity and
Officials
have no valid claim to good conscience for
the benefits they them to continue
received under the holding on to them. (GSIS
GSIS RFP. vs COA- G.R. No. 162372,9/11/12)

Tilan CES Congress November 22, 20179

 In the case of the
DARPO-Cavite
employees, the SC found
that the CNA Incentives
SC for 2010 were taken from
Decisions the Comprehensive
on
Agrarian Reform Program
Liability of
Payees (CARP) Fund & held the
same as “not only illegal
And
Officials but also inconsiderate of
the plight of Filipino
farmers for whose benefit
the CARP Fund is
allocated.”
Tilan CES Congress November 22, 20179
Citing the principle of unjust
enrichment, the Court
ordered all recipients of the
disallowed incentives to
refund. It pointed out that
their participation in the
negotiation and approval of
the CNA “allows them to
acquire knowledge as to the
prerequisites for the valid
release of the CNA
Incentive” (GR No.
237813, Dubongco v. COA,
March 5, 2019)
 COA’s disallowance of the 2008 CNA Incentive of
P3,915,000.00 funded from the Engineering and
Administrative Overhead instead of the MOOE. - The
DPWH IV-A employees who benefited from the
SC incentive will refund in accord w/ the principle of unjust
Decisions enrichment under Article 22 of the Civil Code. The
Court explained that the principle of unjust enrichment
on Liability requires 1) that a person is benefited without a valid
of Payees basis or justification and 2) that such benefit is derived
at another’s expense or damage. It held that the DPWH
And IV-A employees received the CNA Incentive without
Officials valid basis or justification and that they benefited at
the expense of the government. The Court thus ordered
not just the certifying and approving officers but all the
DPWH IV-A employees who received the subject CNA
Incentive to refund (GR No. 237987, DPWH IV-A v.
COA, March 19, 2019),

Tilan CES Congress November 22, 2019

NATURE OF LIABILITY FOR
DISALLOWANCE

Tilan CES Congress November 22, 20179

 NATURE of Liability
To Government

Solidary or joint
and several

“One for All”

Tilan CES Congress November 22, 20179

 NATURE of Liability
To Government

creditor
may
Art. proceed until debt
against one,
1216, or some or is fully
NCC- all debtors collected
simultaneou
sly

Tilan CES Congress November 22, 20179

 NATURE of Liability
To Government

•Art 1207,
NCC
Why
solidary? •the law
provides for
•solidarity

Tilan CES Congress November 22, 20179

 [T]here is a solidary liability only
when the obligation expressly so
states, or when the law or the
nature of the obligation requires
solidarity.

Tilan CES Congress November 22, 20179

 NATURE of Liability
To Government

Laws •Sec 43, Ch 5,

providing
for solidary Book 6, RAC
obligation •Section 49, PD
for 1177
disallowan
ces: •Sec 347, RA 7160

Tilan CES Congress November 22, 20179

Section 43. Liability for Illegal Expenditures. - Every
expenditure or obligation authorized or incurred in
violation of the provisions of this Code or of the
general and special provisions contained in the
annual General or other Appropriations Act shall be
void.
Every payment made in violation of said provisions
shall be illegal and every official or employee
authorizing or making such payment, or taking part
therein, and every person receiving such payment
shall be jointly and severally liable to the
Government for the full amount so paid or received.

Tilan CES Congress November 22, 20179

Section 49. Liability for Illegal Expenditure. Every
expenditure or obligation authorized or incurred in
violation of the provisions of this Decree or of the
general and special provisions contained in the
annual General or other Appropriations Act shall be
void. Every payment made in violation of said
provisions shall be illegal and every official or
employee authorizing or making such payment, or
taking part therein, and every person receiving such
payment shall be jointly and severally liable to the
Government for the full amount so paid or received.

Tilan CES Congress November 22, 20179

SEC. 347. Rendition of Accounts. - Local treasurers,
accountants and other local accountable officers shall
render their accounts within such time, in such form,
style, and content and under such regulations as the
Commission on Audit may prescribe. Provincial, city, and
municipal auditors shall certify the balances arising in the
accounts settled by them to the Chairman of the
Commission on Audit and to the local treasurer,
accountant, and other accountable officers. Copies of
the certification shall be prepared and furnished other
local officers who may be held jointly and severally
liable for any loss or illegal, improper or unauthorized use
or misappropriation of local funds or property.
Tilan CES Congress November 22, 20179
 NATURE of Liability
Among Persons Liable

Art 1217,
NCC •-debtor may claim
Among from co-debtors
themselves, the share which
persons
liable are corresponds to
Joint each
Debtors
Tilan CES Congress November 22, 20179
 APPEAL FROM
DISALLOWANCE

Tilan CES Congress November 22, 20179

APPEAL FROM DISALLOWANCE

Cluster
Director
COA Director
- who has audit
supervision Regional
Director
Except: Fraud/ special audit

Tilan CES Congress November 22, 20179

APPEAL FROM DISALLOWANCE

from decision
of Director

COMMISSION
PROPER
From ND/NC
of
special/fraud
audit team
Tilan CES Congress November 22, 20179
 APPEAL FROM
DISALLOWANCE

Period •within 6 months

to (180 days) from
appeal- receipt of
Notice
Tilan CES Congress November 22, 20179
APPEAL FROM DISALLOWANCE

F • 1/10 of 1% of amount of
i disallowance, not
f >P20,000
l • plus research fee (1% of
e appeal fee not > P200)
i • charged to appellant/
e person liable
n
g
Tilan CES Congress November 22, 20179
Re-opening of Accounts
(Re-audit)

Is an AOM proof of settlement

of an account?

Teodoro Cruz, et al. vs COA

GR No. 210936, June 28, 2016

The AOM is just an initiatory step in the audit. Any finding

or observation by the auditor stated in the AOM is not yet
conclusive as the justification/comment of the agency is
still necessary before the Auditor can make any conclusion.

Tilan CES Congress November 22, 20179

Re-opening of Accounts
(Re-audit)
By whom?

By the CP “motu proprio”- within 3

years from settlement by the auditor

By the CP or auditor- within 3 years

after settlement when there is fraud,
collusion, or error in calculation; or
when new or material evidence is
discovered

Tilan CES Congress November 22, 20179

 ENFORCEMENT OF
LIABILITY

Tilan CES Congress November 22, 20179

Tilan CES Congress November 22, 20179
Tilan CES Congress November 22, 20179
Tilan CES Congress November 22, 20179
 ENFORCEMENT of
LIABILITY
- Payment by installment
Only for disallowed benefits or
allowances
- Approved by the OGC- COA
- Payment period not > 2 years
graduated according to amount
- Full payment demandable upon
separation from the service
Tilan CES Congress November 22, 20179
Tilan CES Congress November 22, 20179
Other COA initiatives to strengthen
FISCAL ACCOUNTABILITY

promulgates
auditing and
• Updated Guidelines for the
accounting rules Prevention and Disallowance of
and regulations Irregular, Unnecessary,
as shall prevent Excessive, Extravagant and
irregular, Unconscionable Expenditures
unnecessary, (COA CIRCULAR NO. 2012-003)
excessive, or
• Prescribed the Revised
extravagant Guidelines and Documentary
expenditures or Requirements for Common
uses of Government Transactions (COA
government CIRCULAR NO. 2012-001)
funds or property
Tilan CES Congress November 22, 20179
Other COA initiatives to strengthen
FISCAL ACCOUNTABILITY

• Adoption of Financial Audit Manual

Complies (FAM) that is compliant with
with International Standards in auditing
(COA Resolution No. 2019-004 in
International March 22, 2019/COA Circular No.
2018-003, 11/21/18)
Standards of
Supreme • Adoption of the Internal Auditing
Standards for the Philippine Public
Audit Sector (IASPPS) and Internal Control
Institutions Standards for the Philippine Public
Sector (ICSPPS) in all government
(ISSAIs) agencies( COA Resolution No.
2018-007 , Feb. 1, 2018)

Tilan CES Congress November 22, 20179

Other COA initiatives to strengthen
FISCAL ACCOUNTABILITY

Conducts
training to • eLearning Course on IT Audit on 9
September to 25 October 2019 which
enhance is part of the Commission’s initiative
to leverage the use of technology for
the learning
knowledge
• conducted the Course Design and
& skills of Development Writeshop (CDDW) in
auditors Financial Audit for Instructors on 19-27
August 2019 in Phnom Penh,
and Cambodia. Upon approval, the
courseware will be used and
agency delivered in the proposed Financial
officials & Audit Workshop that will be
conducted in April 2020.
employees
Tilan CES Congress November 22, 20179
Other COA initiatives to strengthen
FISCAL ACCOUNTABILITY

Partners with •Memorandum of Agreement (MOA)

other on 2 October 2018 between the
Commission on Audit (COA) and
government Presidential Anti-Corruption
Commission (PACC) for a partnership

agencies to to strengthen coordination and

cooperation in both agencies’ anti-

strengthen
corruption efforts

coordination •formed a partnership with the Institute

of Internal Auditors – Philippines (IIA-P)
in anti- through a Memorandum of
Agreement on 24 October 2017 to

corruption support advocacies and initiatives for

a stronger internal auditing in the

efforts Philippine government.

Tilan CES Congress November 22, 20179

Tilan CES Congress November 22, 20179