ICSPPS - Session 2.1 - Control Environment - July 25 For TR of Trainers PDO

Internal Control Standards for
the Philippine Public Sector:
Component 1 - Control Environment
For COA PDO

July 25-27, 2023
COA, Quezon City
ESTELA MARIE B. LAGUNOY

Director III
Internal Control Systems Advisory office
Commission on Audit, SAI Philippines 1
Session Overview
IC Component 1: Control Environment
• Principles
• Principal foci
• Attributes/Considerations in complying the
Principles
Learning Objective
Given reference materials,
discussions, and exercises, participants will
be able to describe the Control Environment
as an internal control component, in
accordance with the prescribed internal
control framework, as evaluated by you,
your peers and the facilitator.
3
The IC Framework for Philippine Public Sector
Objectives
Components Level of Agency

Structure
4
Components Structure
5 Components needed to achieve the general
objectives
16 Principles essential concepts associated with

five components
Principal Foci provide guidance in designing,

implementing, & evaluating ICs
Attributes explain principles & principal foci in

greater detail 5
16 Principles of Internal Control
Control Risk Information &
Control Activities Monitoring
Environment Assessment Communication
1. demonstrates 6. identifies and 9. designs control 12.develops and 15.establishes and
personal and defines objectives activities which are maintains reliable operates activities
professional and risk tolerance appropriate, and relevant to monitor the
integrity and in specific and consistently financial and internal control
ethical values measurable terms functioning according nonfinancial system, and
to plan throughout information evaluates the
2. sets the “tone at 7. identifies,
the period, cost 13.communicates results
the top” evaluates, and information
effective, 16.takes appropriate
3. establishes an assesses agency’s throughout the actions on the
comprehensive,
appropriate risks reasonable, and agency findings and of
government 8. determines directly related to the 14.communicates audit and other
organizational appropriate control objectives information with reviews
structure response to the 10.develops control external parties
4. exhibits identified, activities which
commitment to evaluated, and include a range of
competence assessed agency’s diverse policies and
5. establishes human risks procedures
resource policies 11.develops effective
and practices info technology
6
control activities
7
Control Environment
• the foundation for all components of

internal control
• includes set of standards, policies,
procedures, processes, and structures
– basis for carrying out internal controls in
the agency
• manifestation of agency’s kind of governance
8
Control Environment: Principles
1. Management demonstrates personal and professional
integrity and ethical values.
2. Management sets the “tone at the top.”
3. Management establishes an appropriate government
organizational structure.
4. Management exhibits commitment to competence.
5. Management establishes human resource policies and
practices.
9
P1 Management demonstrates personal and professional
10
P1 Management demonstrates personal and professional
Principal Foci:
1.1 Establish and communicate the integrity and

ethical values.
1.2 Exhibit a supportive attitude toward internal control

at all times.
1.3 Maintain and demonstrate personal and

professional integrity and ethical values, and
comply with the applicable code of conduct.
11
Comparison of personal and professional ethics
Personal Ethics Professional Ethics

➢ Honesty and integrity ➢ Integrity and accountability
➢ Mindfulness of personal ➢ Adherence to company values
values and policies
➢ Loyalty and devotion ➢ Trustworthiness and
➢ Self-respect and courtesy to dependability
others ➢ Respectfulness of others at
➢ Compassion work
➢ Commitment to diversity and
inclusion
12
PF
1.1
Establish and communicate the integrity and ethical values.
2 Essential Elements of Control Environment
Standards of
honesty
behavior
fair dealing form the framework
for conduct
truthfulness
guide in making
decisions
13
PF
1.1
Design
Administration
Monitoring
14
PF
1.1
Attributes:
a. Develop, establish, regularly review, & update

clearly articulated statement of ethical values
b. Communicate values and standards through policy

statements, code of conduct, value development
programs, and example or action.
15
PF
1.1
Attributes:
a. Develop, establish,
regularly review, & update
clearly articulated
statement of ethical values
b. Communicate values and

standards through policy
statements, code of
conduct, value
development programs,
and example or action.
16
RA 6713 Code of Conduct and Ethical Standards
for Public Officials and Employees
➢ Norms of Conduct
➢ Duties of Public Officials and Employees
➢ Prohibited Acts and Transactions
➢ Statements and Disclosures
➢ Divestment
➢ Penalties
17
PF
1.1
Attributes:
a. Develop, establish, regularly
review, & update clearly
articulated statement of
ethical values
statements, code of
conduct, value development
programs, and example or
action.
18
PF
1.1
Attributes:

articulated statement of ethical
values

statements, code of conduct,
value development programs,
19
PF
1.1
Attributes:

articulated statement of
ethical values
statements, code of
conduct, value development
programs, and example or
action.
20
PF
1.1
Attributes:

values

21
PF
1.1
Attributes:

values

22
PF
1.1
Attributes:

values

23
PF
1.1
Attributes:

values
b. Communicate values and Regular or special meetings

statements, code of conduct, One-on-one discussions
and example or action. Conducts value development programs
for officials and employees
24
PF
1.1
Attributes:

values

25
PF Establish and communicate the integrity and ethical values
1.1
Attributes:
Address integrity issues through:

• Establishing Code of conduct
• Complying with ethical values and code of
conduct
• Rewarding employee commitment to the
agency's ethical values
• Establishing methods for reporting ethical
violations
• Consistently enforcing disciplinary
practices for all ethical violations.
26
PF Establish and communicate the integrity and ethical values
1.1
Attributes:
Address ethical issues through:

• Commitment to honesty and fairness
• Recognition of and adherence to laws and
policies
• Respect for the agency
• Leadership by example
• Commitment to excellence
• Respect for authority
• Respect for employees' rights
• Conformance to professional standards. 27
PF Exhibit a supportive attitude toward internal control.
1.2
Attributes:
a. Adopt innovative programs/continually conduct
experimentation/research in raising level of
observance of public ethical standards
b. Establish mechanism to regularly educate/
communicate importance of ICs and raise level of
understanding of controls
28
PF Exhibit a supportive attitude toward internal control.
1.2
Attributes:
a. Adopt innovative
programs/continually Achieve strong internal controls
conduct experimentation/ through actions:
research in raising level of
observance of public • systematic accountability
ethical standards
• monitoring and reporting systems
b. Establish mechanism to • seeking improvement suggestions
regularly educate/ from employees at all levels and
communicate importance
of ICs and raise level of • general leadership
understanding of controls
29
PF Maintain and demonstrate personal and professional
1.3 integrity and ethical values, and comply with the
applicable code of conduct.
Attributes:
a. Remove/reduce incentives/opportunities or
temptations for dishonest, illegal or unethical acts
b. Consistent application of policies on integrity and

ethical violations including penalties
30
PF Maintain and demonstrate personal and professional integrity and
1.3 ethical values, and comply with the applicable code of conduct.
Attributes:
a. Remove/reduce
incentives/opportunities • Establish process for evaluations of
or temptations for individual and team
dishonest, illegal or
unethical acts • Put someone in charge of handling
concerns pertaining to integrity and
b. Consistent application of
policies on integrity and ethics
ethical violations
including penalties • Be fair when applying policies
31
Follows the prescribed investigation process
Understanding of issues
and circumstances.
Developing appropriate Personnel awareness on

documentation. investigation process
Remedy the situation with Follows up to support

prescribed guidelines continued compliance.
32
PF Maintain and demonstrate personal and professional integrity and
1.3 ethical values, and comply with the applicable code of conduct.
Attributes:
a. Remove/reduce Management evaluates the adherence to
incentives/opportunities standards of conduct across all levels of the
or temptations for
dishonest, illegal or
agency.
unethical acts
b. Consistent application of Establishes mechanism for reporting violations

policies on integrity and
ethical violations
including penalties
33
EXERCISE
Objective: To determine the understanding of the
participant on Principal Focus 1.3.
“Maintain and demonstrate personal and professional
integrity and ethical values and comply with the
applicable code of conduct.
1. Identify five unethical act or misconduct that may
arise in your work place.
2. What may be the reason for the identified acts.
3. List down the possible ways/action to
remove/reduce the identified unethical
acts/misconduct.
34
P2 Management sets the “tone at the top.”
culture of
honesty,
integrity,
ethical behavior ethical atmosphere
35
P2 Management sets the “tone at the top.”
Principal Foci:
2.1 Management’s commitment, involvement, and support toward
internal controls.
2.2 The code of conduct, counselling and performance appraisal
support the objective of “ethical operations”
2.3 Promote orderly, ethical, economical, efficient, and effective

conduct of operations
2.4 Personnel are reminded of their obligations under an operative
code of conduct .
2.5 Performance appraisals are based on an assessment of many
critical factors
PF The “tone at the top” should reflect management’s
2.1 commitment, involvement, and support toward internal
controls in the agency.
Attributes:
a. Create Internal Audit Service as part of ICS; provide sufficient

resources to carry out ICs
b. Good governance, risk management, and internal controls are

exemplified both in words and actions, in all levels of the agency
37
PF The “tone at the top” should reflect management’s commitment,
2.1 involvement, and support toward internal controls in the agency.
Attributes:
a. Create Internal Audit Management emphasizes the importance of meeting

Service as part of ICS; internal control objectives through both its words and
provide sufficient actions.
resources to carry out ICs Conduct should reflect what is proper rather than
what is acceptable or expedient.
b. Good governance, risk
management, and internal Consistent from the top management to
controls are exemplified operating unit management levels
both in words and actions,
in all levels of the agency Emphasize the importance of internal auditing
Responsive to information through internal

and external audit.
38
PF The “tone at the top” should reflect management’s commitment,
2.1 involvement, and support toward internal controls in the agency.
Attributes:
Management
a. Create Internal Audit
Service as part of ICS; Internal Specialized Skills
provide sufficient control
resources to carry out ICs mindset
b. Good governance, risk
management, and internal
controls are exemplified
both in words and actions, Programmatic
in all levels of the agency expertise
Financial
expertise
39
PF The code of conduct, counselling, and performance appraisals
2.2 should support the internal control objectives and, in particular, the
objective of “ethical operations.”
Attributes:
a. Establish standards of conduct
b. Develop administrative practices and processes which promote

ethical values and integrity
40
PF Agency’s policies, procedures, and practices should promote
2.3 orderly, ethical, economical, efficient, and effective conduct of
operations.
Attributes:
a. Controls are integrated in the agency systems to regulate and guide

operations
b. Comply with CSC rules and regulations
41
operations.
Attributes:
Operations should be
a. Controls are integrated in the
Orderly
agency systems to regulate Ethical
and guide operations
EFFECTIVEEconomical
Efficient EFFICIENT
b. Comply with CSC rules and Effective
DO THE RIGHT
regulations THINGSDONE RIGHT
at the right time
for the right
length of time the first time
42
operations.
Attributes:
- Follows a periodic, disciplined process for
a. Controls are integrated in the establishing internal control objectives over financial
agency systems to regulate reporting, compliance with applicable laws and
and guide operations regulations, efficiency and effectiveness of
operations, and safeguarding of assets.
b. Comply with CSC rules and

regulations - Operating with the benefit of a written operations
manuals and desk procedures manuals
43
operations.
Attributes: CONTROL POLICIES AND MEASURES
a. Controls are integrated in the

agency systems to regulate
and guide operations
b. Comply with CSC rules and

regulations
44
PF Personnel are reminded of their obligations under an operative
2.4 code of conduct .
Attributes:
a. Provide employees with updated code of ethics/conduct; and

receive periodic training on code application
b. All personnel are aware that the agency’s control environment is

within the framework of public service accountability
45
PF Personnel are reminded of their obligations under an operative
2.4 code of conduct .
Attributes:
a. Provide employees with
updated code of
ethics/conduct; receive
periodic training on code
application
b. All personnel are aware that

the agency’s control
environment is within the
framework of public service
accountability
46
PF Overall performance appraisals should be based on an
2.5 assessment of many critical factors, including the employees’ role
in effecting internal control.
Attribute:
a. Establish Performance
Evaluation System
47
PF Overall performance appraisals should be based on an
2.5 assessment of many critical factors, including the employees’ role
in effecting internal control.
Attribute:
a. Establish Performance
Evaluation System
48
P3 Management establishes an appropriate government
Principal Foci:
3.1 Clearly define key areas of authority, responsibility and

appropriate lines of reporting
3.2 Awareness and understanding of duties and

responsibilities, delegation, and accountability.
3.3 Develop and maintain documentation of its internal

control system
49
PF Clearly define key areas of authority, responsibility and
3.1 appropriate lines of reporting
Attributes:
a. Maintains an organizational structure that facilitates effective

reporting and other communications about internal control among
various functions and positions of management
b. The agency holds individual accountable for their internal control

responsibilities
50
PF Clearly define key areas of authority, responsibility and appropriate
3.1 lines of reporting
Attributes:
a. Maintains an
organizational structure
that facilitates effective
reporting and other
communications about
internal control among
various functions and
positions of management
b. The agency holds individual

accountable for their
internal control
responsibilities
51
PF Awareness and understanding of duties and
3.2 responsibilities, delegation, and accountability
Attributes:
a. Clearly defined and communicated job description, authorities and

responsibilities
b. Appropriate delegation/assignment and segregation of

responsibilities
52
PF Develop and maintain documentation of internal control
3.3 system
Attribute:
a. Establish, document and communicate the who, what, when, where,

and why of internal control execution to personnel.
To identify controls
To communicate to those
responsible for their performance
To monitor and evaluate
53
Management and staff exhibit commitment to
P4 competence.
Principal Foci:
4.1 Establish policies and procedures in hiring staff with the

necessary skills and knowledge
4.2 Provide adequate ongoing training, mentoring, and

supervision
4.3 Determine the level of knowledge and skill needed
4.4 Define succession and contingency plans

54
PF Establish policies and procedures in hiring staff with the
4.1 necessary skills and knowledge
Attributes:
a. Management has identified competencies that support effective

internal control systems.
b. Policies and practices reflect expectations of competence
c. The agency employs / utilizes individuals who possess the required

competencies.
55
PF Establish policies and procedures in hiring staff with the necessary
4.1 skills and knowledge
Attributes:
a. Management has
identified competencies
that support effective
b. Policies and practices

reflect expectations of
competence
c. The agency employs /

utilizes individuals who
possess the required
competencies.
56
PF Establish policies and procedures in hiring staff with the necessary
4.1 skills and knowledge
Attributes:
a. Management has
identified competencies
that support effective
b. Policies and practices

reflect expectations of
competence
c. The agency employs /

utilizes individuals who
possess the required
competencies.
57
PF Provide adequate ongoing training, mentoring, and
4.2 supervision
Attributes:
a. Management develops training programs to enforce and promote

ethical behavior and internal control.
b. Management supports employees by providing access to the tools

and training needed to perform their roles.
c. Management determines the level of knowledge and skill needed
d. Management defines succession and contingency plans

58
PF Provide adequate ongoing training, mentoring, and supervision
4.2
Attributes:
a. Management develops
training programs to
enforce and promote
ethical behavior and
internal control.
b. Management supports
employees by providing
access to the tools and
training needed to perform
their roles.
59
PF
Provide adequate ongoing training, mentoring, and supervision
4.2
Attributes:
c. Management determines
the level of knowledge
and skill needed
d. Management defines
succession and
contingency plans
60
Management establishes human resource policies and
P5 practices.
Principal Foci:
5.1 Establish human resource policies and practices
5.2 Hiring and staffing decisions exemplify assurance that

individuals recruited are qualified
5.3 Enforce transparency in recruitment, performance

appraisal, and promotion processes
61
PF
Establish human resource policies and practices
5.1
Attributes:
a. Policies and practices demonstrate its commitment to integrity,

ethical behavior, and competence
b. Employee recruitment and retention for key positions are guided by

principles of integrity and by the necessary competencies
associated with the positions
c. Policies on adequacy of training, performance evaluation,

compensation processes, and succession plan exist.
62
PF Establish human resource policies and practices
5.1
Attributes:
a. Policies and practices
demonstrate its commitment to • Reviewed
integrity, ethical behavior, and • Approved
competence
b. Employee recruitment and
• Disseminated
retention for key positions are • Updated
guided by principles of integrity
and by the necessary
competencies associated with Policies over conflict of interest
the positions
regarding employment relationships
c. Policies on adequacy of training,
are in place and enforced.
performance evaluation,
compensation processes, and
succession plan exist. 63
PF
Hiring and staffing decisions exemplify assurance that
5.2
individuals recruited are qualified
Attribute:
a. Develop and maintain position / job descriptions that reflect values

and the competencies needed to fulfill the position requirements
64
PF
Enforce transparency in recruitment, performance
5.3
appraisal, and promotion processes
Attribute:
a. Openness of the selection, performance appraisal, and promotion

processes should be secured
Employees understand the HR processes

Publish both the recruitment rules and vacant
positions
Publish both the qualified and non- qualified
applicants /contenders for promotions
65
SUMMARY
Control Environment
• the foundation for all components of

internal control
• includes set of policies, procedures,
processes, standards and structures
– basis for carrying out internal controls in
the agency
• manifestation of agency’s kind of governance
67
Control Environment: Principles
1. Management demonstrates personal and professional
2. Management sets the “tone at the top.”
3. Management establishes an appropriate government
4. Management exhibits commitment to competence.
5. Management establishes human resource policies and
practices.
68
Thank you!
69

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Internal Control Standards for

the Philippine Public Sector:

Component 1 - Control Environment

For COA PDO

ESTELA MARIE B. LAGUNOY

Components Level of Agency

16 Principles essential concepts associated with

Principal Foci provide guidance in designing,

Attributes explain principles & principal foci in

• the foundation for all components of

1.1 Establish and communicate the integrity and

1.2 Exhibit a supportive attitude toward internal control

1.3 Maintain and demonstrate personal and

Personal Ethics Professional Ethics

2 Essential Elements of Control Environment

a. Develop, establish, regularly review, & update

b. Communicate values and standards through policy

b. Communicate values and

a. Develop, establish, regularly

b. Communicate values and

a. Develop, establish, regularly

a. Develop, establish, regularly

b. Communicate values and

a. Develop, establish, regularly

b. Communicate values and

a. Develop, establish, regularly

b. Communicate values and

a. Develop, establish, regularly

b. Communicate values and Regular or special meetings

a. Develop, establish, regularly

b. Communicate values and

Address integrity issues through:

Address ethical issues through:

b. Consistent application of policies on integrity and

Developing appropriate Personnel awareness on

Remedy the situation with Follows up to support

b. Consistent application of Establishes mechanism for reporting violations

2.3 Promote orderly, ethical, economical, efficient, and effective

a. Create Internal Audit Service as part of ICS; provide sufficient

b. Good governance, risk management, and internal controls are

a. Create Internal Audit Management emphasizes the importance of meeting

Responsive to information through internal

a. Establish standards of conduct

b. Develop administrative practices and processes which promote

a. Controls are integrated in the agency systems to regulate and guide

b. Comply with CSC rules and regulations

b. Comply with CSC rules and

a. Controls are integrated in the

b. Comply with CSC rules and

a. Provide employees with updated code of ethics/conduct; and

b. All personnel are aware that the agency’s control environment is

b. All personnel are aware that

3.1 Clearly define key areas of authority, responsibility and

3.2 Awareness and understanding of duties and

3.3 Develop and maintain documentation of its internal

a. Maintains an organizational structure that facilitates effective

b. The agency holds individual accountable for their internal control

b. The agency holds individual

a. Clearly defined and communicated job description, authorities and

b. Appropriate delegation/assignment and segregation of

a. Establish, document and communicate the who, what, when, where,

4.1 Establish policies and procedures in hiring staff with the