ENHANCING AUDIT THRU POLICY REFORMS

By Hon. Juanito G. Espino Jr. COA Commissioner

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COMMISSION ON AUDIT
Principal MANDATE ² ARTICLE IX-D, 1987- CONSTITUTION Examine, audit, and settle accounts pertaining to the revenue and receipts of and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters. Exclusive authority to define the scope of its audit and examination, establish techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties. Keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.

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7-POINT PRIORITY AREAS OF THE COMMISSION ON AUDIT

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7 - POLICY ISSUES (COA RESOLUTION NO. 2008-008 DATED JUNE 25, 2008)

POLICY ISSUE 1. Risk-Based Audit Approach Risk2. Revisiting Pre-Audit Pre3. Organizational Restructuring 4. Assessment of e-NGAS Implementation e5. Settlement of Accounts 6. Intensified Fraud Audit 7. Keeping of the General Accounts
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RISK-BASED AUDIT APPROACH Rationale ±  Innovation from comprehensive audit ± focus of the audit on risk areas/operation where losses likely to occur Designed to exceed the auditee expectations by aligning the audit process with management¶s needs to improve performance and managed agency risks Gives management and third party users of the financial statements higher level of assurance 5 .

Actions taken:  Proposed changes to RBA Manual with Simplification/ Customization of Templates.RISK-BASED AUDIT APPROACH a. It is now for deliberations by the Ascoms Group for presentation to the Commission Proper Created/Activated RBAA TWG in the sector Identified/Resolved issues and concerns within sector Simplified/Customized RBAA within the framework of ISAs/Best Practice Included techniques/procedures in financial analysis     6 .

323 % 74.20 65. the extent of RBA Implementation in the three (3) audit sectors is as follows: Sector LGS CGS NGS Total No.85 93. of auditees 1.905 123 3.62 7 .RISK-BASED AUDIT APPROACH As of 2008.

Local and Corporate)  Recommend to the appropriate Oversight Committee the institutionalization of Risk Management Process in all agencies  Issue policy guidelines on materiality level  Issue policy guidelines on sampling and to train Auditors on the adoption of the prescribed sampling methodology 8 .RISK-BASED AUDIT APPROACH b. For Implementation:  On-going simplification of the Manual  Customization/reduction of templates  Harmonization of all sectors (National.

illegal.REVISITING PRE-AUDIT Rationale ±  Present policy needs to be revisited due to the following: a) Rising incidents of irregular. wasteful and anomalous disbursements of huge amounts b) Assessment of risk-prone areas in government operations shows inadequacy in internal controls as exemplified by the frequency of anomalies uncovered 9 .

180.00 1.944.00 10 .Notices of Disallowance Issued Year 2006 2007 2008 Total No.00 2. 397 534 186 1.229.427.117 Amount (PhP) 193.992.00 538.893.634.496.465.808.

425. 6 4 4 14 Amount (PhP) 173.Notices of Charge Issued Year 2006 2007 2008 Total No.00 10.728.00 2.712.350.751.00 7.298.686.00 11 .

268 13.2008 Year 2005 2006 2007 2008 Amount in Billion pesos 16.586 12 .311 9.819 10.Unliquidated Cash Advances CYs 2005 .

REVISITING PRE-AUDIT a. as amended. 2009. 2009-002 dated May 18. payment of terminal leave 13 . last payment prior to transfer. Action taken:  The Commission has issued COA Circular No. entitled ´Reinstituting Selective Pre-Audit on Government Transactionsµ Agencies excluded  GOCCs audited under team approach  National High School  Barangays Transactions covered by pre-audit  Cash Advance  Payment of first salary after appointment by transfer or reinstatement.

(With pre-determined threshold limit as indicated in the aforesaid Circular) 14 .REVISITING PRE-AUDIT a.  Transactions covered con·t. and claim of contract price variations.:  Payment of infrastructure projects with respect to advance payment. first payment of progress billings. Action taken con¶t. payment to variation orders which exceeds the limit provided by RA 9184.

        Action taken con¶t. 15 . Transactions covered con·t.of. Payment made thru ADA (suspended) Release of funds to NGOs/POs Transfer of funds between gov t.: All payments for road right. which are over the threshold amount. agencies Disbursements from trust funds of LGUs Disposal of real and unserviceable property.way Payment for procurement of goods and services which are over the threshold amount.REVISITING PRE-AUDIT a.

COA reorganized its structure for the following reasons: a) The structure would not allow COA to completely perform and effectively accomplish its constitutional and statutory mandates b) The developments in governance mechanisms affect the audit environment and demand appropriate audit responses in terms of methods and techniques to enhance accountability c) There is a need for COA to be realigned with the national government¶s thrusts towards decentralization and regionalization  16 .Organizational Restructuring Legal Basis and Rationale ± Under the GAA of the current and past years. COA and other agencies granted with fiscal autonomy are authorized to undertake a continuing reorganization within the limits of their appropriations  Recently.

from 8 to 4. 2008-012 dated October 10. 2008 directing the reorganization of COA with the following salient features:  Reduction of no. Actions taken:  Issuance of Resolution No.Organizational restructuring a. of Clusters in the operating sectors: NGS . CGS ² from 6 to 3. and LGS ² from 6 to 1  Creation of Departmental Scheme  Reinstitution of Provincial Scheme 17 .

Actions taken con¶t.Organizational restructuring a.  Creation of an Executive Management Committee composed of the Ascoms Groups tasked to deliberate on policy matters before the same are forwarded to the CP  Creation of Public Sector Accounting and Auditing Standard Boards headed by a Commissioner and concerned Ascoms as members 18 .: Salient features con·t.

Organizational restructuring Salient features con·t.  Reinstitution of the Regional Coordination Office as coordinating arm and communication hub of the Commission  Reinstitution of the Information Technology Office to strengthen IT infrastructure and IT related services 19 .

:  On November 11. 2008-256 was issued for the simultaneous assumption to office in December 2008 of Ascoms. lawyers and engineers Constituted Audit Groups and Audit Teams    20 . Office Order No. Actions taken con¶t. Directors and Asst. 2008. Directors in the CO and ROs under the Organizational Restructuring Determination of Plantilla Position for all units of the Organization Resumption of Recruitment and Promotion On-going hiring of CPAs.Organizational restructuring a.

Steps on-going this year:  Manning of Audit Groups and Audit Teams  Issuance of Office Orders by the Chairman  Assumption to Office of Audit Groups and Teams  Determination of Plantilla of Positions for all units of COA 21 .Organizational restructuring b.

2008-109 dated June 25.Keeping of the general accounts & Assessment of E-ngas Rationale ± The keeping of the general accounts is one of the constitutional mandates of COA. Under COA Office Order No. 2008 ± a Technical Working Group (TWG) was created to study the restoration of ³keeping the general accounts of the National Government under the Government Accountancy Sector.´ 22 .

113. whereas under PD 1445 (Secs. there is reservation whether COA is complying with its constitutional mandate 23 .Keeping of the general accounts & Assessment of E-ngas The study will include the reassessment of the present NGAS and e-NGAS. particularly on the following issues:  NGAS only prescribes registry for allotments and obligations. whereas PD 1445 (Section 86) prescribes that the proper accounting official shall certify as to the availability of funds Since NGAS only prescribes maintenance of registries. the Budget Officer maintains registry of allotments and obligations. 117 and 119) prescribes obligation accounting Under NGAS.

disbursements or liquidation and balances b) Recording of NCA as subsidy income c) Maintenance of NG books d) Coordination with DBM on fund releases 24 . allotments.Keeping of the general accounts & Assessment of E-ngas Salient Features ± a) Reconciliation of the appropriations.

Keeping of the general accounts & Assessment of E-ngas The assessment of the NGAS will include review whether it is compliant with the standards prescribed by the International Public Sector Accounting Standards (IPSAS). At present NGAS is compliant on the following standards prescribed by IPSAS: 25 .

Units (LGUs) IPSAS 2 ² Cash Flow Sec. Agencies (NGAs) and Local Gov·t. 72-81 of Partially of NGAS Manual for compliant National Gov·t. 79 of NGAS Substantially Statements Manual for NGAs compliant and LGUs 26 .Status of compliance of NGAS with IPSAS IPSAS NGAS Status of Compliance IPSAS 1 Presentation Financial Statements ² Secs. 4.

4 of NGAS Substantially Compliant Manual IPSAS 9 ² Revenue from Secs.Status of compliance of NGAS with IPSAS Status of Compliance IPSAS NGAS IPSAS 5 ² Costs Borrowing Sec. 16-24 of Substantially Exchange Transactions NGAS Manual Compliant for National Government Agencies 27 .

Not compliant Substantially Plant and Equipment to IPSAS as compliant in regards to other policies Public Infrastructures 28 . 43-44 of Substantially NGAS Manual Compliant for National Government Agencies IPSAS 17 ² Property.Inventories Secs.Status of compliance of NGAS with IPSAS IPSAS NGAS Status of Compliance IPSAS 12 .

4. Sec. agencies Compliant are required IPSAS 19 ² Provisions.0 29 . NGAS Manual Compliant Contingent Liabilities for NGAs. with IPSAS and Contingent Assets Chap. Vol. 2. 1.Status of compliance of NGAS with IPSAS Status of Compliance IPSAS NGAS IPSAS 18 ² Segment Under the Partially Reporting NGAS.

161 as Compliant clarified under COA Circular Letter 2004-004 provides that income collected by agencies required to be remitted to the National Treasury shall be recorded as credit to ´Due to National Treasuryµ 30 .Status of compliance of NGAS with IPSAS Status of Compliance IPSAS NGAS IPSAS 23 ² Revenue from Non-Exchange Transactions (Taxes and Transfers) The NGAS Manual Partially Vol. III. Sec.

Partially Chapter 2. Sec. 1. 4g. Compliant Budgetary accounts are taken up in the registries IPSAS 25 ² No specific policy Partially Employee Benefits provided Compliant 31 .Status of compliance of NGAS with IPSAS IPSAS NGAS Status of Compliance IPSAS 24 ² Presentation of Budget Information in Financial Statements NGAS Vol.

Keeping of the general accounts & Assessment of E-ngas The Commission issued COA Circular No. 2008-003 dated December 24. 2008 which suspended the implementation of the revised PGCA 32 .

Settlement of Accounts Rationale -  Settlement of accounts was formerly done by the COA ² LAS For prompt action and efficiency. settlement function was transferred to ATLs and SAs since they are responsible for the audit and examination of accounts 33 .

2009-006 dated September 15.Settlement of Accounts Action Taken - The Commission has issued COA Circular No. 2009 re: ´Prescribing the use of the Rules and Regulations on Settlement of Accountsµ 34 .

918 billion Issued 186 NDs (1. 4 NCs (P7.Settlement of accounts COA has the following accomplishments for the settlement of accounts:  430 decisions were proposed and approved by various offices in the amount of P9.559M) 35   .583M) Issued 68 FOAs (P263.425M) and 30 NS (P24.496B).550M) of which 14 FOAs were settled (P7.

Intensified fraud audit Rationale ²  This is in addition to temporary adoption of pre-audit  Created Fraud Audit and Investigation Office (FAIO) ² tasked to conduct investigation and fraud audit through its initiatives or upon request from any office of the Commission or from third parties This is in collaboration with the campaign of the national government against corruption 36 .

Intensified fraud audit Salient Features ²  The special audit team could re-open accounts already post-audited within three years from the date these were settled Could issue subpoena and take testimonies of witnesses Issue Notice of Disallowance/Charge Under the supervision of a Director and not under the direction of the audit sector 37 .

Intensified fraud audit Status of cases in CY 2008: Particulars Beginning Balance Received Total Acted Upon ** Balance as of 12/31/08 No. of cases 100 880 980 528 452 38 .

Intensified fraud audit **Actions taken: Actions Taken Teams created to conduct audit investigations Evaluated/endorsed (not within jurisdiction) Forwarded to LAO/OGC Forwarded to OMB Filed (to records division/for archival) Proposed for issuance of office order creating a team Total No. of cases 70 350 8 59 39 2 528 39 .

2009) 40 .OTHER POLICY REFORMS BEING PURSUED BY COA  Write-Off of Dormant Accounts (COA Resolution No. 2008 to DBM Secretary)  Relief from Money/Property Accountability (COA Resolution No. 2005-001 dated January 5. 2009-001 dated February 11. 2005)  Transfer of Funds to NGO/PO (COA Circular No. 2009 002 dated January 22. 2007-001 dated October 25. 2003)  Report of Unliquidated Cash Advances (COA Memo No. 2009)  Submission of Contracts/Purchase Orders (COA Circular No. 2003-02 dated January 30. 2007)  Unbooked Valid Obligations (COA Memo dated March 28.

1.Below P1M Action prescribes in 10 years ± Civil Code Art. 1144 Upon written contract Obligation created by law Upon judgment Appeals from the decision of the Board to be brought before the Commission Proper 41 . Write-Off of Dormant Accounts   ‡ ‡ ‡ Authority to approve write-off ± To ASB.

000 and above & (b) Aged 30 days or over from due date of liquidation Auditor¶s Quarterly Report Referral of the report to the Office of the OMB or CSC Issued in accordance with the tripartite CSC-OMB-COA Solana Covenant as part of anti-corruption drive 42 . Unliquidated Cash Advances Submission of List of officials/employees with outstanding cash advances: (a) P50.2.

Results will be included in AAR. Transfer of Funds to NGO/PO Gov¶t. Special Report. VFM. Organization funds to retain their character as public funds No portion of the funds to be released before signing of MOA NGO/PO to submit the final Fund Utilization Report COA to audit the grant and utilization of the funds.3. 43 .

4. COA could certify as to the validity of prior years¶ unbooked obligations Under the present practice. PD 1445) 44 . Unbooked Valid Obligations Under Sections 86 and 87 of PD 1445. COA may still adjudicate unbooked obligations when claimant files a money claim based on quantum meruit on a case-to-case basis (Sec. 26.

000 Adjudication and Over P100. Relief from Money/Property Accountability To facilitate resolution.000 up or Regional Director to P100. the power of the CP to adjudicate application for relief from money/property accountability was delegated to the following officials: Approving Officials Amount Involved Supervising Auditor/ P50.5.000 up Settlement Board (ASB) to P1M Commission Proper Over P1M 45 .000 below Head of the Audit Group Audit Cluster Director Over P50.

± within 5 working days from execution  Auditorial review ± within the same period 46 . Submission of Contracts/POs Contracts  Submission of copy of the contract and supporting docs. ± within 5 working days from execution  Auditorial review ± within 5 to 21 working days from receipt Purchase Orders  Submission of copy of the contract and supporting docs.6.

6. Submission of Contracts/POs Action by the Auditor for noncompliance  Issue AOM requesting compliance  Suspension in audit of the transaction  Recommend administrative disciplinary action against agency officials and employees concerned 47 .

Concluding Remarks ‡ COA theme CY 2009: ³Enhanced Audit Functions Thru Policy Reforms´ ‡ Tangible benefits ‡ Reforms can be achieved through many different ways 48 .

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