ENHANCING AUDIT
THRU POLICY
REFORMS
By
Hon. Juanito G. Espino Jr.
COA Commissioner
1
COMMISSION ON AUDIT
Principal MANDATE – 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.
2
7-point priority areas of the
commission on audit
3
7 - POLICY ISSUES
(COA RESOLUTION NO. 2008-008
DATED JUNE 25, 2008)
POLICY ISSUE
1. Risk-Based Audit Approach
2. Revisiting Pre-Audit
3. Organizational Restructuring
4. Assessment of e-NGAS Implementation
5. Settlement of Accounts
6. Intensified Fraud Audit
7. Keeping of the General Accounts
4
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
Risk-based audit approach
a. Actions taken:





Proposed changes to RBA Manual with
Simplification/
Customization
of
Templates. 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
Risk-based audit approach
As of 2008, the extent of RBA
Implementation in the three (3)
audit sectors is as follows:
Sector
Total No. of
auditees
%
LGS
1,905
74.20
CGS
123
65.85
NGS
3,323
93.62
7
Risk-based audit approach
b. For Implementation:
 On-going simplification of the Manual
 Customization/reduction of templates
 Harmonization of all sectors (National,
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
Revisiting pre-audit
Rationale –
 Present policy needs to be revisited
due to the following:
a) Rising incidents of irregular, illegal,
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
Notices of Disallowance Issued
Year
No.
Amount (PhP)
2006
397
193,944,465.00
2007
534
538,808,634.00
2008
186
1,496,427,893.00
Total
1,117
2,229,180,992.00
10
Notices of Charge Issued
Year
No.
Amount (PhP)
2006
6
173,728.00
2007
4
2,751,686.00
2008
4
7,425,298.00
Total
14
10,350,712.00
11
Unliquidated Cash Advances
CYs 2005 - 2008
Year
Amount in Billion
pesos
2005
16.311
2006
9.268
2007
13.819
2008
10.586
12
Revisiting pre-audit
a. Action taken:
 The Commission has issued COA
Circular No. 2009-002 dated May 18,
2009,
as
amended,
entitled
“Reinstituting Selective Pre-Audit on
Government Transactions”
• 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, last payment prior to
transfer, payment of terminal leave
13
Revisiting pre-audit
a. Action taken con’t.

Transactions covered con’t.:
 Payment of infrastructure projects
with respect to advance payment,
first payment of progress billings,
payment to variation orders which
exceeds the limit provided by RA
9184, and claim of contract price
variations. (With pre-determined
threshold limit as indicated in the
aforesaid Circular)
14
Revisiting pre-audit
a.
Action taken con’t.
Transactions covered con’t.:








All payments for road right- of- way
Payment for procurement of goods and
services which are over the threshold
amount.
Payment made thru ADA – (suspended)
Release of funds to NGOs/POs
Transfer of funds between gov’t. agencies
Disbursements from trust funds of LGUs
Disposal of real and unserviceable
property, which are over the threshold
amount.
15
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, 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
a. Actions taken:
 Issuance of Resolution No. 2008-012
dated October 10, 2008 directing the
reorganization of COA with the
following salient features:
 Reduction of no. of Clusters in the
operating sectors: NGS - from 8 to 4;
CGS – from 6 to 3; and LGS – from 6 to
1
 Creation of Departmental Scheme
 Reinstitution of Provincial Scheme
17
Organizational restructuring
a. Actions taken con’t.:
Salient features con’t.
 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
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
Organizational restructuring
a. Actions taken con’t.:




On November 11, 2008, Office Order No.
2008-256 was issued for the simultaneous
assumption to office in December 2008 of
Ascoms, Directors and Asst. 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, lawyers and
engineers
Constituted Audit Groups and Audit Teams
20
Organizational restructuring
b. 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
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. 2008-109 dated June
25, 2008 – a Technical Working Group (TWG) was
created to study the restoration of “keeping the
general accounts of the National Government
under the Government Accountancy Sector.”
22
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 under PD 1445 (Secs. 113, 117
and 119) prescribes obligation accounting
Under NGAS, the Budget Officer maintains registry
of 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, there is reservation whether COA is
complying with its constitutional mandate
23
Keeping of the general accounts & Assessment of
E-ngas
Salient Features –
a) Reconciliation of the appropriations,
allotments,
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
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
Status of compliance of NGAS with IPSAS
IPSAS
IPSAS
1
Presentation
Financial
Statements
NGAS
Status of
Compliance
– Secs. 4, 72-81 of Partially
of NGAS Manual for compliant
National
Gov’t.
Agencies (NGAs)
and Local Gov’t.
Units (LGUs)
IPSAS 2 – Cash Flow Sec. 79 of NGAS Substantially
Statements
Manual for NGAs compliant
and LGUs
26
Status of compliance of NGAS with IPSAS
IPSAS
IPSAS 5 –
Costs
NGAS
Status of
Compliance
Borrowing Sec. 4 of NGAS Substantially
Compliant
Manual
IPSAS 9 – Revenue from Secs. 16-24 of Substantially
Exchange Transactions NGAS
Manual Compliant
for
National
Government
Agencies
27
Status of compliance of NGAS with IPSAS
IPSAS
IPSAS 12 - Inventories
NGAS
Status of
Compliance
Secs. 43-44 of Substantially
NGAS Manual Compliant
for
National
Government
Agencies
IPSAS 17 – Property, Not compliant Substantially
Plant and Equipment
to
IPSAS
as compliant in
regards
to other policies
Public
Infrastructures
28
Status of compliance of NGAS with IPSAS
IPSAS
NGAS
Status of
Compliance
IPSAS 18 – Segment Under
the Partially
Reporting
NGAS, agencies Compliant
are required
IPSAS 19 – Provisions, NGAS Manual Compliant
Contingent Liabilities for NGAs, Vol. 1, with IPSAS
and Contingent Assets Chap. 2, Sec. 4.0
29
Status of compliance of NGAS with IPSAS
IPSAS
IPSAS 23 – Revenue
from
Non-Exchange
Transactions (Taxes and
Transfers)
NGAS
Status of
Compliance
The NGAS Manual Partially
Vol. III, Sec. 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
Treasury”
30
Status of compliance of NGAS with IPSAS
IPSAS
IPSAS
24
–
Presentation
of
Budget Information
in
Financial
Statements
NGAS
Status of
Compliance
NGAS
Vol.
1, Partially
Chapter 2, Sec. 4g, Compliant
Budgetary
accounts
are
taken up in the
registries
IPSAS
25
– No specific policy Partially
Employee Benefits
provided
Compliant
31
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 – 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
Settlement of Accounts
Action Taken
-
The Commission has issued COA Circular
No. 2009-006 dated September 15, 2009
re: “Prescribing the use of the Rules and
Regulations on Settlement of Accounts”
34
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 P9.918 billion
Issued 186 NDs (1.496B), 4 NCs
(P7.425M) and 30 NS (P24.583M)
Issued 68 FOAs (P263.550M) of
which 14 FOAs were settled
(P7.559M)
35
Intensified fraud audit
Rationale –
 This is in addition to temporary adoption of
pre-audit
 Created Fraud Audit and Investigation
Office (FAIO) – 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 –
 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
No. of
cases
Beginning Balance
100
Received
880
Total
980
Acted Upon **
528
Balance as of 12/31/08
452
38
Intensified fraud audit
**Actions taken:
Actions Taken
No. of
cases
Teams created to conduct audit
investigations
70
Evaluated/endorsed (not within
jurisdiction)
350
Forwarded to LAO/OGC
8
Forwarded to OMB
59
Filed (to records division/for archival)
39
Proposed for issuance of office order
creating a team
Total
2
528
39
OTHER POLICY REFORMS BEING
PURSUED BY COA
 Write-Off of Dormant Accounts (COA
Resolution No. 2003-02 dated January 30,
2003)
 Report of Unliquidated Cash Advances (COA
Memo No. 2005-001 dated January 5, 2005)
 Transfer of Funds to NGO/PO (COA Circular
No. 2007-001 dated October 25, 2007)
 Unbooked Valid Obligations (COA Memo
dated March 28, 2008 to DBM Secretary)
 Relief from Money/Property Accountability
(COA Resolution No. 2009 – 002 dated
January 22, 2009)
 Submission of Contracts/Purchase Orders
(COA Circular No. 2009-001 dated February
11, 2009)
40
1. Write-Off of Dormant Accounts


•
•
•
Authority to approve write-off –
To ASB- 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
2. Unliquidated Cash Advances
Submission
of
List
of
officials/employees with outstanding
cash advances: (a) P50,000 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
3. Transfer of Funds to NGO/PO
Gov’t. 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. Results
will be included in AAR, VFM,
Special Report.
43
4. Unbooked Valid Obligations
Under Sections 86 and 87 of PD
1445, COA could certify as to the
validity of prior years’ unbooked
obligations
Under the present practice, COA
may still adjudicate unbooked
obligations when claimant files a
money claim based on quantum
meruit on a case-to-case basis
(Sec. 26, PD 1445)
44
5. Relief from Money/Property
Accountability
To facilitate resolution, 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/
P50,000 below
Head of the Audit Group
Audit Cluster Director Over P50,000 up
or Regional Director
to P100,000
Adjudication
and Over P100,000 up
Settlement Board (ASB) to P1M
Commission Proper
Over P1M
45
6. 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. – within 5
working days from execution
 Auditorial review – within the same
period
46
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:
“Enhanced Audit Functions
Thru Policy Reforms”
• Tangible benefits
• Reforms can be achieved
through
many
different
ways
48
49