LEGAL BASES FOR INTERNAL AUDIT

RA No. 7160 The Local Government Code of 1991

Section 3 (b) Mandated the establishment of an accountable, efficient, and

dynamic organizational structure and operating mechanisms for the LGUs

Section 76 Each LGU shall design and implement its own organizational
structure and staffing pattern subject to service requirements, financial capability and CSC
minimum standards

AO No. 278 dated 28 April 1992

Directing and Strengthening of the Internal Control Systems of Government Financial
Institutions (GFIs) and LGUs in their Operations

AO 119 dated March 29, 1989

Mandatory Government entities to Strengthen their Internal Control System
LEGAL BASES FOR INTERNAL AUDIT
AO No. 70 dated 14 April 2003
Strengthening of the Internal Control Systems of Government Offices, GOCCs, including GFIs,
State Universities and Colleges (SUCs) and LGUs

DBM Budget Circular No. 2004-4 dated 22 March 2004

Guidelines on the Organization and Staffing of IAUs

DBM Circular Letter No. 2008-5 dated 14 April 2008

Guidelines in the Organization and Staffing of IAUs and
Management Division/Unit in Departments/Agencies/GOCCs/GFIs concerned

DBM Circular Letter No. 2008-8 dated October 3, 2008

National Guidelines in Internal Control System (NGICS)
VALUE OF INTERNAL AUDIT
To improve effectiveness of risk
management, controls and
governance processes;

To instill public confidence in

the LGU’s ability to operate
effectively;
VALUE OF INTERNAL AUDIT
To determine whether internal
controls are well designed and
properly operated

To strengthen the mechanism

for ensuring the
accountability of LGUs to
their respective constituents
 RELATIONSHIP OF INTERNAL AUDIT
SERVICE WITH KEY STAKEHOLDERS
LOCAL CHIEF EXECUTIVE

SANGGUNIAN COMMISSION ON AUDIT

LOCAL CHIEF EXECUTIVE INTERNAL AUDITOR

Superior-subordinate
Relationship
ADMINISTRATIVELY OPERATIONALLY

Local
Chief
Executive
LCE SP

Internal
Auditor
IA
COMMISSION ON AUDIT

“Where the internal control system of the

audited agencies is inadequate, the COA may
adopt such measures, including temporary or
special pre-audit, as necessary and appropriate
to correct the deficiencies”
- 1987 Constitution
ORGANIZING THE
INTERNAL AUDIT
SERVICE/ UNIT
 OFFICE OF LOCAL CHIEF
EXECUTIVE

IAS/U

MANAGEMENT OPERATIONS
AUDIT DIVISION AUDIT DIVISION

ASSESSORS PLANNING TREASURY ACCOUNTING OTHERS

 IAS/U

OPERATIONS
MANAGEMENT AUDIT DIVISION
AUDIT DIVISION

Shall evaluate the control objectives which Shall evaluate the:

include: ✓ Extent of compliance and ascertain the
✓ Safeguarding of assets effective, efficient, ethical and economical
✓ Checking the accuracy & reliability of execution of operations by utilizing internal
accounting data auditing methods
✓ Adherence to managerial policies
✓ Compliance with laws, rules and regulations
by utilizing internal auditing methods
STAFFING THE INTERNAL
AUDIT SERVICE/ UNIT

DBM Budget Circular No. 2004-4

dated 22 March 2004

Guidelines on the Organization and Staffing of

IAUs
 LGUs may organize and staff its IAS/U as follows:

ORGANIZATION STRUCTURE & HEAD OF

LOCAL GOVERNMENT UNIT
THE IAU

May be a department to be headed by a

PROVINCIAL provincial government department head, SG-26

SPECIAL CITY: May be a department to be headed

CITY GOVERNMENT by city government department head III, SG-27
SPECIAL CITY/ HIGHLY
URBANIZED CITY HUC: May be headed by a city government
department head II, SG-26
 LGUs may organize and staff its IAS/U as follows:

ORGANIZATION STRUCTURE & HEAD OF

LOCAL GOVERNMENT UNIT
THE IAU

May be a department to be headed by city

COMPONENT CITY government department head I, SG-25

May be a department to be headed by a

MUNICIPAL municipal government department head II, SG-25
(within Metro Manila)

May be a department to be headed by a

MUNICIPAL municipal government department head I, SG-24
(outside Metro Manila)
ROLES AND RESPONSIBILITIES
Local Chief Executive
o Direct responsibility to install, implement and monitor a
sound system of internal control
o Disseminates managerial policies through the issuance of
guidelines and standards

Sanggunian
o Legislate the establishment of IAS/U through the
enactment of an ordinance and by providing funding
support
o Exercises operational responsibility over IAS/U in that
the Head of the IA reports his finding to the Sanggunian
PRESENCE OF INTERNAL AUDIT
IN LOCAL GOVERNMENT UNITS OF REGION VI

27
117
Municipalities
PRESENCE OF INTERNAL AUDIT
IN LOCAL GOVERNMENT UNITS OF REGION VI

2 11 4
2 14 6
Highly Urbanized
Cities Provinces
Cities
PHILIPPINES
WITH
IAS
78 provinces

81 provinces
Why implement the Seal?

influences good governance behavior and local

decision making

complements the Philippine Development Plan

upgrades governance standards

The Seal and the Philippine Development Plan

Ang gobyernong may Malasakit patungo sa Pagbabago

at Patuloy na Pagunlad

✓Citizen-centered, Clean and Efficient Delivery of Public

Goods and Services
✓Promoting Philippine Culture and Values
✓Expanding Economic Opportunities in Industry
✓Building Resiliency of Individuals and Families
✓Security and Public Order
✓Ensure Ecological Integrity, Clean and Healthy Environment
 The SGLG is a progressive
assessment system
Focus Areas
LGU Capacity LGU Performance
‘ability of the LGUs to • Accomplishment against
deliver’ plans, Fund utilization
rate & physical
• Structure accomplishment
• System • Frontline services
• Mechanism Tourism, Culture
and the Arts
• Plan and budget

Governance Principles
Transparency, Participation and Accountability
 Implementation Schedule

Activity Timeline

Regional Assessment May - Jun

Data gathering, Regional validation and certification, online data
entry, and provincial and regional calibration
National Validation Jul - Aug
Data Processing and Quality Check, and Cross-regional validation
Final Selection and Indorsement 1st – 2nd week of
September
Announcement of Results Oct
 Recognition & Incentive Packages

Recognition and/or Incentive to be Received

Awardees / Non-Awardees
Certificate of
Marker PCF Recognition

SGLG Awardees √ √

√
SGLG Non-Awardees Recognizing
Particular Areas Passed
 3 YEAR SGLG Implementation
SGLG number of awardees
448
450
400 306
350 254
300
250
200
150
100
50
0
2015 2016 2017

SGLG number of awardees

SGLG Thematic Areas
Financial Administration
The practice of LGU accountability and transparency
by adherence to accounting and auditing standards
and compliance with:

• Full Disclosure Policy (Good Financial Housekeeping)

• Sound management of resources (Financial Performance)
• Optimal utilization of available mechanisms and resources
to support local development (Financing Development)
 Financial Administration
CY 2017 criteria
• COA Opinion
• Full Disclosure Policy
• GSIS Loans and Premiums
• ADM Fund Utilization
• LDC Functionality
• 20% Local Development Fund
• 70% Component of LDRRM Fund
• Local Revenue Growth
 LGU Performance on Financial Administration, 2015-2017
(as component of the Seal of Good Local Governance)

ALL LGUs (1,715)

Indicator 2015 2016 2017
Financial Administration* 1,517 (88.4%) 796 (46.4%) 939 (54.7%)
20% Local Development Fund - - 1,067 (62.2%)
LDRRM Fund - - 858 (50%)
Local Revenue Growth - 1,410 (82.2%) 1,540 (89.7%)

*The decrease is due to the upgrading of the indicators

 LGU Performance on Financial Administration, 2015-2017
(as component of the Seal of Good Local Governance)
Total no. of LGUs 1715
Province ( P ) 81
City ( C ) 145
Municipality ( M ) 1489
BY PCM
2015 2016 2017
Indicator
P M P C M P C M
Financial Administration* 74 (91%) 1307 (87.7%) 50 (61.7%) 84 (57.9%) 662 (44.5%) 58 (71.6%) 97 (66.9%) 784 (52.7%)
20% Local Development Fund - - - - - 71 (87.6%) 100 (68.9%) 896 (60.1%)
LDRRM Fund - - - - - 42 (51.8%) 63 (43.4%) 753 (50.6%)
Local Revenue Growth - - 72 (88.9%) 137 (94.5%) 1,201 (80.7%) 74 (91.4%) 138 (95.2%) 1,328 (89.2%)

*The decrease is due to the upgrading of the indicators

 Top/Bottom Performing Regions
Compliance with Financial Administration, CY 2017

2017
No. of PCM
Region No. of PCM % of Compliance
Complied
1 129 107 82.95
3 137 96 70.07
11 54 37 68.52
TOP 50% 10 98 66 67.35
CAR 83 55 66.27
12 54 35 64.81
4A 147 89 60.54
13 78 47 60.26
NCR 17 10 58.82
6 139 80 57.55
2 98 52 53.06
MIMAROPA 78 39 50.00
8 149 72 48.32
7 136 58 42.65
BOTTOM 9 75 31 41.33
5 120 38 31.67
50% ARMM 123 27 21.95
 Top/Bottom Performing Provinces Compliance
with Financial Administration, CY 2017

2017
No. of
No. of %
PROVINCE PCM
PCM Compliance
Complied
La Union 20 20 100.00
TOP 5 Siquijor 6 6 100.00
Pangasinan 48 45 93.75
Pampanga 22 20 90.91
Davao del Sur 11 10 90.91
Masbate 21 5 23.81
Sorsogon 15 3 20.00
Sulu 19 3 15.79
BOTTOM Lanao del Sur 40 4 10.00
5 Tawi-Tawi 11 0 0.00
 Utilization of 20% LDF
Indicates effective management of available
financial resources to help LGUs implement
priority development initiatives contained in its
local development plans and Annual Investment Program
though its Development Fund.

Benchmark: Prov -54%; City – 61%; Mun- 45%

 Top/Bottom Performing Regions
Utilization of 20% LDF, CY 2017
2017
No. of PCM % of
Region No. of PCM
Complied Compliance
ARMM 123 104 84.55
NCR 17 13 76.47
TOP 50% 11 54 40 74.07
4A 147 108 73.47
3 137 94 68.61
1 129 87 67.44
2 98 60 61.22
13 78 47 60.26
6 139 82 58.99
CAR 83 48 57.83
5 120 69 57.50
8 149 84 56.38
10 98 55 56.12
9 75 42 56.00
MIMAROPA 78 41 52.56
BOTTOM 12 54 28 51.85
50% 7 136 65 47.79
 Average Local Revenue Growth

Indicates the LGU’s financial capacity

as shown in the annual change (increase or decrease) in
local revenue collection over the past 3 years
 Top/Bottom Performing Regions
Local Revenue Growth, CY 2017

2017
No. of PCM % of
Region No. of PCM
Complied Compliance
NCR 17 17 100.00
7 136 131 96.32
11 54 52 96.30
TOP 50% 10 98 94 95.92
4A 147 138 93.88
1 129 121 93.80
13 78 73 93.59
3 137 128 93.43
CAR 83 76 91.57
MIMAROPA 78 71 91.03
9 75 68 90.67
6 139 126 90.65
2 98 86 87.76
8 149 130 87.25
BOTTOM 12 54 47 87.04
5 120 100 83.33
50% ARMM 123 82 66.67
 Utilization of the 70% Component of
LDRRM Fund
70% component of the LDRRMF that is
allocated for disaster prevention
and mitigation, preparedness, response,
rehabilitation and recovery

Benchmark- 45%
 Top/Bottom Performing Regions
Utilization of the LDRRM Fund, CY 2017
2017
No. of PCM % of
Region No. of PCM
Complied Compliance
ARMM
123 104 84.55
NCR 17 13 76.47
11 54 40 74.07
TOP 50% 4A 147 108 73.47
3 137 94 68.61
1 129 87 67.44
2 98 60 61.22
13 78 47 60.26
6 139 82 58.99
CAR 83 48 57.83
5 120 69 57.50
8 149 84 56.38
10 98 55 56.12
9 75 42 56.00
BOTTOM MIMAROPA 78 41 52.56
12 54 28 51.85
50% 7 136 65 47.79
“Growth is never by mere chance; it is the
result of forces working together.”
- James Cash Penney