Objectives of an audit as stated in paragraph 11 of ISSAI 1200:
(a) To obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or
error, thereby enabling the auditor to express an opinion on whether the
financial statements are prepared, in all material respects, in accordance
with an applicable financial reporting framework; and
(b) To report on the financial statements, and communicate as required by
the ISAs, in accordance with the auditor’s findings.
In addition, the audit team needs to recommend measures to improve the
efficiency and effectiveness of government operations as mandated by the
Philippine Constitution.
The Commission on Audit is the Philippines’ Supreme Audit
Institution. It was formally established by the Americans on
May 8, 1998. Since then, it had undergone several jurisdictional
and organizational reforms under the Philippine Constitutions
of 1935, 1973 and 1987. The appropriation of the Commission
for its annual operating requirements is funded by the General
Appropriations Act (GAA), and utilization of the funds is in
accordance with the GAA, budget circulars and other pertinent
laws, rules and regulation.
The 1987 Constitution grants fiscal autonomy to the COA.
Section 5, Article IX-A, Common Provisions states: “The
Commission shall enjoy fiscal autonomy. Their approved
annual appropriations shall be automatically and regularly
released.” COA is a member of the Constitutional Fiscal
Autonomy Group (CFAG). It is envisioned in the Constitution
that fiscal autonomy guarantees each member of the CFAG the
full management and the control of its financial affairs as well
as the flexibility to allocate, administer and utilize its resources
with the wisdom and dispatch that its official needs require.
1. Examine, audit and settle all 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;
2. Promulgate accounting and auditing rules and regulations
including those for the prevention and disallowances of
irregular,
unnecessary,
excessive,
extravagant
or
unconscionable expenditures, or uses of government funds and
properties;
3. Submit annual reports to the President and the Congress on
the financial condition and operation of the government;
4. Recommend measures to improve the efficiency and
effectiveness of government operations;
5. Keep the general accounts of government and preserve the
vouchers and supporting papers pertaining thereto;
6. Decide any case brought before it within 60 days; and
7. Perform such other duties and functions as may be provided
by law.
Supervising Auditor: Maribeth De Jesus, Director III
Audit Team Leader:
Eden Bunayog, State Auditor III
Audit Team Member: Mark Anthony Flores, State Auditor I
Audit Scope: Financial Year January 1, 2015 – December 31, 2015
Audit Timetable:
1. Planning phase – September 21, 2015 to October 13, 2015
2. Execution phase – October 14, 2015 to February 28, 2016
3. Conclusion/Reporting – March 31, 2016
The Department of Social Welfare and Development
(DSWD) is the executive department of the Philippine
Government responsible for the protection of the
social welfare rights of Filipinos and to promote social
development.
1. To provide social services to NCR residents as well as the
transient inhabitants since NCR is the destination of rural
migrants and settlers from nearby cities seeking domestic
and overseas jobs, temporary stay for studies, or seeking
refuge from calamities and disasters ad finding livelihood or
other means to support their families.
2. Address the concerns of the poor segments of the NCR
population since Urban poverty is a key feature of its
environment. NHTS has identified poverty to be
particularly high in the cities of Manila, Quezon City,
Caloocan, Malabon and Navotas.
3. Oversee social service delivery, referred to as the
“steering/implementing role” to respond to the needs of the
claim holders, such as:
• Provision of services for center-based clients
- Manage and maintain the operations of nine residential care
facilities
- Manage and maintain the operations of three training and
rehabilitation centers
• Implementation of 4Ps/CCT Grants
- Compliance Verification System monitoring
- Verification of Liquidation Reports for OTC mode of payment
of grants
• Assistance to Individuals in Crisis Situation (AICS)
- Provision of medical/financial/burial assistance
• Disaster Relief Operations
• Sustainable Livelihood Programs-SEA-K
• Social Pension to Indigent Senior Citizens - Provides monthly
pension to Indigent Senior Citizens aged 65 and above.
• Supplemental Feeding - Provides food supplementation in the
form of Hot Meals to be served during the snack/meal time to
target children five (5) days a week for 120 days.
4.
Provide special child placement services such as
adoption, foster home care, legal guardianship and issuance of
travel clearances are exclusively DSWD regional functions.
The FO-NCR operates on a total appropriation of Php
4,336,225.00 for CY 2015, sourced from the National
Government and funds transferred from the DSWD Central
Office categorized as Centrally-Managed Funds. The agency
also received donations from local and foreign sources during
crisis/calamities and/or directly delivered/given to the
residential care facilities/centers.
•DSWD-Office of the Secretary
•DSWD FO-NCR management and employees
•Non-Government Organizations/People’s Organization
(NGOs/POs)
•Program Beneficiaries
•Donors – Foreign and Domestic
•Legislators
•Government – DOH/Philhealth/Department of
Education/LGUs/DBM-PS/NFA/PITC
The Philippine Public Sector Accounting Standards
(PPSAS), based on the International Public Sector
Accounting Standards (IPSAS), is the financial
reporting framework adopted by the DSWD, as
prescribed by the COA, for annual reporting periods
beginning January 1, 2014.
This means that the financial statements, consisting
of the following, are prepared and presented under the
accrual basis of accounting:
Statement of Financial Position;
Statement of Financial Performance;
Statement of Changes in Net Assets/Equity;
Statement of Cash Flows;
Statement of Comparison of Budget and Actual Amounts;
and
Notes to Financial Statements, comprising a summary of
significant accounting policies and other explanatory notes
The DSWD recognizes the effects of changes in
accounting policy retrospectively. The effects of
changes in accounting policy are applied prospectively
if retrospective application is impractical. The effects
of changes in accounting estimates are applied
prospectively by including in surplus or deficit. The
agency corrects material prior period errors
retrospectively in the first set of financial statements
authorized for issue after their discovery by restating
the comparative amounts for prior period(s) presented
in which the error occurred; or if the error occurred
before the earliest prior period presented, restating
the opening balances of assets, liabilities and net
assets/equity for the earliest prior period presented.
The following are the identified Business and Process risks of
DSWD assessed as High:
Cash Management (Financial/Control/Compliance Risk) Improper handling and recording of cash advances due to lack
of proper training in the discharge of duties as Accountable
Officers (AO).
Reconciliation (Financial Risk) - Risk that the Agency’s
financial statements might not be fairly presented due to the
delay in the preparation of reconciliation of accounts.
Procurement (Financial/Compliance Risk) - Failure to
identify and prevent legal risk posed by not complying with the
agency procurement reform act.\
PROCESS LEVEL RISKS:
- The agency might have purchases that are not included in the
Annual Purchase Plan (APP)
- The agency might have sent invitations to bid for unfunded
purchase request
- Multiple POs resulting to double payment to suppliers
- Unauthorized purchases
- Related assets, expenses and payable, if on account, might not
be recorded in the proper period.
GAD Requirements (Compliance Risk) - The risk that the
Agency may not set at least 5% of their total budget for Gender
and Development Programs.
Accounting for Donations (Business/Financial Risk)– risk
that the donation transactions might not have been accounted
properly due to weakness in internal controls that might put
the integrity of the agency at stake as a result of several
individuals rallying on DSWD.
Employee Fraud (Financial/Control Risk) - Possible loss or
misappropriation of unutilized cash advance, caused by non
appearance of the beneficiaries during the scheduled pay out,
still in the hands of the SDO due to late liquidation/refund of
unused fund.
Lack of Risk Assessment (Business/Control Risk) – Risk that
any business risks/control risks existing in the agency might
not be identified and properly responded that may result to
agency failure.
Internal Control Deficiency (Compliance/Control Risk) –
the agency might not be able to identify weaknesses in controls
and might not be in compliance with PD1445 for the
installation, implementation and monitoring of sound internal
control system
PROCESS LEVEL RISK:
- The amount of funds disbursed does not match with the
budget allotment
- Unauthorized disbursement
- Disbursement of fund might not be recorded in the proper
period
- Voucher may be paid twice
Also, as a result of understanding the Internal Control, it is
concluded that the entity’s control environment is not
conducive to a control reliant approach.
Based on COA guidelines:
OVERALL MATERIALITY: P67,700,281.59 based on ½ of 1% of
total assets
PERFORMANCE MATERIALITY: P40,620,168.95 based on
60% of overall materiality
Please refer to Annex 1 – Materiality Template in Template 2
(Overall Audit Strategy) for details of the computation.
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Test of Details:
Bank Confirmation – Bank confirmation letters will be sent
to all bank accounts for balances as at December 31, 2015
(Existence; Valuation and Allocation; Rights and Obligation).
.
Bank reconciliations – Examine the entity’s bank
reconciliations as of period end, including cash-in-transit
accounts, (e.g., in subledgers) to verify the proper
reconciliation of bank statements and general ledger accounts.
Investigate any unusual items and test other reconciling items
based on the established threshold (Existence; Valuation and
Allocation).
Cash cutoff – Test cutoff of cash receipts and cash
disbursements for transfers between different bank accounts at
the balance sheet date (Valuation and Allocation).
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Test of Details:
Cash Count – Surprised count shall be performed before
yearend and rollforward procedures will be done to account for
transactions from cash count date up to December 31, 2015
(Existence).
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Test of Details:
Agreement of subledger and general ledger - Agree
receivables subledger to the general ledger control account.
Investigate any unusual items and test other reconciling items
based on the established testing threshold (Existence;
Valuation and Allocation)
Verification of existence – Verify the existence of receivables
through confirmation or, when appropriate, examination of
subsequent cash receipts, or examination of other supporting
documentation (Existence; Valuation and allocation)
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Test of Details:
Observation of physical inventories - Evaluate
management’s instructions and procedures for recording and
controlling the results of the entity’s physical inventory
counting. Observe the performance of the entity’s count
procedures and perform test counts. Trace test counts to the
entity’s inventory compilation and determine that the
inventory compilation accurately reflects actual inventory
count results (Existence; Valuation and Allocation; Rights and
Obligation).
.
Confirmation of inventories held by others - If significant,
confirm inventories held by others at the physical inventory
date and trace confirmed quantities to the inventory
compilation; consider observing these physical inventories as
well (Existence; Rights and Obligation).
Reconciliation of inventory compilation with general
ledger - Review the reconciliation of the valued physical
inventory compilation with the general ledger account balances
and the perpetual inventory records. Investigate any unusual
items and test other reconciling items based on the established
testing threshold (Valuation and Allocation).
Valuation in accordance with accounting policies - Test
the valuation of inventory to verify that it is performed in
accordance with the entity’s accounting policies and
applicable financial reporting framework (Valuation and
Allocation).
Net realizable value testing - Test the provisions to
reduce the valuation of inventory to net realizable value,
(e.g., obsolescence and other reserves) and verify that
appropriate adjustments are made in accordance with the
entity's accounting policies and applicable financial
reporting framework (Valuation and Allocation).
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Test of Details:
Agreement of subledgers with general ledger - Obtain a
schedule of property, plant and equipment, including
capitalized leases, and related additions, disposals,
reclassifications and
depreciation,
depletion and/or
amortization (PPE subledger) and agree balances to the
respective general ledger accounts (Existence; Valuation and
Allocation).
Additions and disposals - For significant additions
(including capitalized labor, borrowing costs and other
acceptable costs) and disposals during the period, examine
invoices, capital expenditure authorizations, leases and
other data that support these additions and disposals
(Existence; Valuation and Allocation; Rights and
Obligation).
Depreciation Testing - Test depreciation expense in a
manner responsive to our combined risk assessment with
reference to the entity’s accounting policy and applicable
financial reporting framework (Valuation and Allocation).
Impairments of property, plant and equipment - Use
information obtained during the audit in determining
whether management has identified appropriate indicators
of impairment and verify that appropriate adjustments are
made in accordance with the entity's accounting policies
and applicable financial reporting framework (Valuation
and Alocation).
Substantive Analytical Procedures:
Trend Analysis - Compare Prior year and Current Year
balances and further investigations shall be made for unusual
significant movement
Substantive Analytical Procedures:
Test
of
Transactions
–
Identify
key
items/transactions and traced to supporting
documents and check the appropriateness of dates of
recording (Cutoff; Occurrence).
Based upon the risk assessment procedures, further audit
procedures have been designed that are sufficient and
appropriate to carry out the audit.