State Auditing

argona AUDITING IN THE PHILIPPINES Reported by MYRLA P. SEDENIO RUTH C. TACUJAN A. OBJECTIVES I. To Discuss the State canvass corpse 2. To Identify Issues and Limitations of Government analyseing 3. To Discuss the Measurement of Government procedure B. INTRODUCTION The Filipino Constitution emphasizes the importance of office in the presidential term. word XI simply and bluntly begins Public office is a unexclusive trust, before it adds that officials and employees should serve the people with responsibility, integrity, loyalty and efficiency. In the brass figure cycle, accountability is laid down by the need for presidency agencies and departments crouch to assert quarterly and monthly income statements statements of allotment, obligations and balances along with different financial subject fields and documents for scrutinise a airal process whereby the authenticity, accuracy and reliability of financial accounts or transactions ar checked and approved.There ar several kinds of scrutinise iodin is Financial scrutiniseing wherein financial transactions and accounts ar checked to check into the submitting organization execution has complied with the rules and regulations, specifically the pre-agreed and government activity account statement dodge. Another type is world presentation Auditing whereby one is looking at the systems of the agency to assess it has delivered on its institutional purpose and jurisprudence by linking the ciphers with results or results-establish budgets. An inbred take stock, as the sp blockade a penny suggests, an internal check on agency systems and processes.External Auditing involves an outside scrutinise frame being brought in to look at the agency. Pre- visiting refers to scrutiniseing by agencies before encomium of transactions while post- scrutiniseing is auditing by an indep oddmentent body after. The Philippine government has agencies mandated to ensure accountability and transpargonn cy on its boilersuit surgerys. These agencies ar The authority of the Ombudsman, Sandiganbayan, Presidential Anti-Graft direction, the Civil Service commission and primarily, for the purpose of this paper, the Commission on Audit. C. STATE AUDIT SYSTEMAuditing is the trial run of in put to puzzle outation by a third base party other than the prep ber or user with the intention of establishing its realibility, and the reporting of the results of this examination with the expectation of increasing the usefulness of the information to the user. Commission on Audit The Commission on Audit (COA) is the constitutional commission mandated to be the autonomous audit institution of the government. It has jurisdiction over national government agencies, local anesthetic government units, government- stupefy and authorityled corporations and non-government organizations receiving benefits and subsidies from the government.The Constitution identified the following functions for the C ommission 1. Examine, audit and settle down all accounts pertaining to the r up to nowue and receipts of, and expenditures or uses of pecuniary resource and property owned or held in trust by, or pertaining to, the government 2. Promulgate method of explanation and auditing rules and regulations including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures, or uses of government silver and properties 3.Submit yearly reports to the President and the copulation on the financial qualify and operation of the government 4. Recommend measures to improve the efficiency and military capability of government trading operations 5. Keep the general accounts of government and preserve the vouchers and juting papers pertaining to it 6. Decide any case brought before it within 60 geezerhood 7. Perform such(prenominal) other duties and functions as whitethorn be provided by law. COA, as the other constitutional comm issions are mandated, is headed by a professorship and two Commissioners appointed by the President and the Commission on Appointments of Congress.It excessively enjoys fiscal autonomy which meaning its appropriations must be released regularly and automatically. The Commission also deploys resident attendants in all national government agencies, local government units and government-owned and gibeled corporations pursuant to its mandate to review each agencys financial operations in a risk-based audit approach. The Commission on Audit (COA) has developed and introduced a risk-based audit approach (RBAA) that emphasizes the need for the auditors to tension on high-risk areas that are potential breeding grounds for transplant and corruption.Auditing plays an important role in public finance, the Auditing principle of the Philippines was promulgated in 1979 (P. D. 1445). As it proceeds mainly from the basic law, the Code amplifies, elaborates, specifies, and implements Under the annunciation of policy in the Auditing Code, it is stated that all resources of the government shall be managed, played out and utilized in accordance with law and regulations and safeguard against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, rescue and effectiveness in the operations of government.COA reports In order to perform its audit functions, COA produces take issueent kinds of reports. A study by the Philippine National work out monitor Project identified and explained each of these 1. Regular Annual Audit Report of each NGA, LGU and GOCC 2. Consolidated Annual Financial Report for NGAs, LGUs and GOCCs 3. superfluous Audit Reports 4. Circulars and other Issuances The Annual Audit Reports contain the results of the audit conducted on the financial statements submitted by agencies, local government units and government-owned and controlled corporations to COA auditors.The results are shown in the form of audit opinions indicating how the agencies faired with their financial statements at the end of each fiscal year. The types of audit opinions are Unqualified (U), Qualified (Q), Adverse (A) and disclaimer (D). An Unqualified flavour refers to the clean opinion or the agency reflected the results of the financial statements fairly, which means its operations and the financial presumption in a period of time based on existing government accounting standards, and in compliance with government laws, rules and regulations.A Qualified Opinion means that an agency reflected fairly except for several(prenominal) specific transactions and/or accounts that adjudge been found to be problematic, both improper, questionable or needs further explanations. Adverse opinion means that the financial statements did not fairly present its results of operations and financial condition of the agency, and are not in compliance with prescribed laws and applicable guidelines. Lastly, the Disclaimer opinion means t hat there is no sufficient basis to form any opinion for an agency does not keep or submit its records of financial accounts and transactions.An audit report has the following parts Audit Certificate, which shows the audit opinion, the Financial Statements, Major Findings and Observations which explains if there are defects in the compliance of accounting and auditing rules and policies, and Recommendations to the entities. In turn, COA checks if these measures were conformed by the entity on the next years yearbook audit report. The Consolidated Annual Financial Reports on the other pile show the financial performance of the public sector in general.Each aim has a volume of the consolidated financial report, one each for NGAs, LGUs and GOCCs. These are based on the audit reports of each entity. These reports contain the financial condition and highlights of agencies, local government units and government corporations. These reports also reflect the financial resources of the gov ernment, even the off-budget accounts or currency that are not subject to annual appropriations. Interestingly, these reports are the however source where one can be informed approximately funds that are not sourced out from appropriations.Special Audit Reports are on purpose for investigation, in response to a request by interested parties or by a directive from Congress. The Commission has already undergone special audit reports on the countrys outstanding debt and special purpose funds such as the Agriculture and Fisheries Modernization Act and procurement of the part of Public Works and Highways. GAFMIS The Government Accountancy and Financial counsel education System (GAFMIS) is a financial database which keeps the general accounts of the government.It is spearheaded by the COA so as to implement its mandated function. Thru this, the appropriations are verified and allotment releases to agencies are ensured not to hand the appropriations. From the Department of Budget Management (DBM), copies of Agency Budget Matrices (ABM) and Special apportionment release Orders (SARO) are submitted to GAFMIS and these make up the Registry of Appropriations and Allotments. The GAFMIS is also inwrought because it assists government agencies with the Electronic New Government Accounting System (e-NGAS).It is a computerized program of the New Government Accounting System wherein budget transactions, allotments and obligations are recorded and monitored electronically. It also helps in streamlining the New Government Accounting System which provides the new accounting policies in the government. Some of the basic features of the new system are the Accrual accounting and One-fund concept. Accrual accounting recognizes the income when earned and expenses when incurred as oppose to recognizing income when cash is earned and expenses when paid. internecine control and the internal control system cozy control is defined as a process naturalized by an organizations s tructure, work and authority flows, people and management information systems which are designed to help it accomplish its goals. It is a means by which an organizations resources are directed, monitored, and measured. It plays an important role in preventing and detecting fraud and protecting the organizations resources. Internal audit is an integral part of internal control. It maintains efficiency and effectiveness in operations.It looks at the reliability of financial transactions in reports by devising sure that they are in accordance with rules and regulations. Several provisions in the Philippines have signified the internal control in the government such as Section 123 of the amended Presidential Decree 1445, the Administrative Code 1987 and Government Accounting and Auditing Manual guided by worldwide standards thru the international Organization for Standardization (ISO) and International Organization for Supreme Audit Institutions (INTOSAI). The INTOSAI also formulated standards for the internal control systems in the public sector.It has emphasized that internal control systems shall be in line with the characteristics, values and context of the public organizations. In line with these provisions, the Government has formulated the National Government Internal Control System (NGICS) through the efforts of the DBM and resource and reference panels from various government agencies. It serves as a guide to government agencies in putting up internal control systems. It aims to strengthen accountability, safeguard assets, promote efficiency, economy and effectiveness in the operations and adhere with the policies of the organization. D.Issues and Problems of Government Auditing In her public budgeting and accounting class, the late professor Emilia Boncodin stressed some issues on COAs mandate and the accounting and auditing system of the government as follows 1. The audit system looks only on the agencies compliance with the accounting standards and l aws in the financial reports instead of decision if the agencies have properly allocated their appropriate budgets. 2. Reporting of the GOCCs entire budget What is reported in the government budget documents regarding the GOCCs are the budgetary support to government corporations or subsidies only.Yet, COA audits the corporate operating expenses on the entire budget of government corporations. 3. Lax in penalizing because COA is limited to recommendatory functions only Adverse/disclaimer audit opinions and recommendations by COA to government agencies do not have the corresponding penalties or sanctions if they are not acted upon and followed. An example is DPWHs audit report where it has been given an adverse opinion for the past 18 years. 4. Pre-Audit vs. Post audit Each type of audit has its own problems.Postaudit is disadvantageous because it involves drop dead evaluation of financial transaction that is after the funds have already been disbursed. Pre-audit however, ironica lly defeats the overall essential purpose of auditing because financial transactions are assessed beforehand. In the past, COA had been operating on post audit basis since 1995-2009 when COA poster 2009-002 reinstituted the selective pre-auditing due to rising incidents and anomalous disbursements. However, Circular 2009-003 in June 16 2009 suspended some of the provisions in the earlier circular to ensure uniformity and consistency in its implementation.On COA reports The Philippine National Budget Monitoring Project has identified the following limitations that affect the importance of COA reports in ensuring accountability 1. Timeliness COAs deadline on the submission of reports is not parallel to the memorandum of budget preparation. Audit and financial reports must be submitted by end of September while budget preparation time ends in July when the Congress session opens. The timings would thus work best if reversed since the reports should serve as aids in reviewing the agen cies budgets in time for budget legislation.Given the reality, the value of COAs reports being used as tools to determine the status of government entities in terms of financial performance and compliance with rules are nullified. 2. Completeness Audit reports of agencies are not completed on time due to inability of power and time constraints. In effect, this puts problems in reviewing the budget and in devising the annual financial reports. 3. Availability Although COAs website is useful in terms of the reports posted, many reports from agencies including those from LGUs and GOCCs are currently missing. 4. Contestability of findingsThere are issues on COAs findings on its reports. graduation is that the some of the past findings have not been resolved yet or the so-called hereditary balance sheets. An example is the disallowances that must be deducted by agencies to employees. However, these have not been resolved even if some personnel have already left the service or died. S econdly, there is the inconsistency of audit rules by resident auditors. In some agencies, the rules of past auditors and new auditors differ like deductions that were not present in the past have already been installed at the time the new auditor comes to office.The third issue is the inconclusive application of rules and regulations in auditing. Some expenses are disallowed even if it yields good results. The last issue is the inability of auditors to understand the situation of agencies operations. The operations have complexities that emergencies sound inevitable and it is hard for them to look at the reasons for the issues in operations. 5. feasibility of recommendations The COAs recommendations on reports are not always being followed by agencies and these are already beyond the control of the institution. 6. Conflict of interestCOA auditors are still considered as mere mortals that may experience biases, influences and errors in judgment. There are oftentimes claims that some auditors are complicit in bribery and graft. On internal control and the internal control system The NGICS has identified the following limitations of internal control Human error, i. e. , errors in judgment such as internal auditors biases/conflict of interest, negligence, misunderstanding, fatigue, distraction, collusion, abuse, etc. 1. Shifts in government policies or programs 2. imagination constraints 3. Organizational changes and 4. Management attitudeE. Measurement of Government death penalty Under COA response No. 2002-005 dated May 17, 2002, the Special Audit Office was renamed Management Services to expand its services to include a. breeding of Value-For-Money audits and related operations review activities. b. Provide management consultancy services to other government agencies in such areas as * Organization * Strategy Formulation * Financial Feasibility * Strategic Planning * Other related areas c. Coordinate with all offices of the Commission for the purpose of establishing feedback mechanisms on implemented innovations. d.Formulate recommendations to the Chairman on the adoption of the most appropriate systems for the enhancement of operations. e. Perform such other functions as may be assigned. Recently, the Office is assigned to conduct Rate and Levy audits. The functions Conduct of Value-For-Money (VFM) Audit This audit is concerned with the review of management efficiency with the end in view of eliminating waste and promoting efficient use of public funds and resources and the ascertainment of the agencys effectiveness by determining whether desired results have been achieved and programs have accomplished their purposes and objectives.Approaches in the conduct of VFM audits Agency-based approach An audit of a particular program, project or activity of a selected agency. Government-wide and Sectoral Performance Audits Government-wide and Sectoral Performance Audits are new approaches adopted by the Commission under COA dissolver No . 98-005 dated March 3, 1998. While these types of audits were introduced in 1998, it was only in 2002 that these approaches were operationalized under the COA-UNDP AusAID Project entitled Enhancing the Public Accountability Programme of the Philippine Commission on Audit.Government-wide audit is the simultaneous examination of a management function or activity in a form of government agencies which is expected to provide * basic data for comparing practices and operations between and among government agencies in the same sector or with the square government * collated data of practices in various government agencies that could show the order or insignificance of deficiencies in the system * audit criteria which are supported by best practices * awareness on the part of auditors and the auditees of how their agency compares with other government agencies in terms of objectives, functions, operations, internal and administrative controls, and output and * opportunities to the audi ted agency for benchmarking with other government agencies.On the other hand, the Sectoral Audit refers to an audit of programs or activities that are delivered by more than one government agency and is expected to provide * an overall picture of how various segments of a program are implemented and by chance lead to the identification of areas where improvements can be introduced * audit criteria or benchmark for future audits of government programs by various government agencies * basis for auditors to image that program difficulties may not lie with a single agency but possibly with the way the agencies involved in the program work together * an arena for airing program difficulties by audited agencies and * opportunity for making changes in the program, if necessary.