COMMISSION ON AUDIT MEMORANDUM NO.

84-372 January 12, 1984

TO : All COA Managers, Regional Directors, Unit Auditors and All others Concerned

SUBJECT : Prescribing the Guidelines for Non- Resident Auditing Units.

In line with the Commission's thrust of enhancing its independence as an external audit
institution, it has adopted an audit scheme to withdraw auditing units from residency, which has
been implemented since 1980.

To enable our unit auditors to efficiently and effectively discharge their functions under
this new audit scheme, it is necessary that the guidelines for non-resident auditing units be
issued.

It should be borne in mind that this guidelines is the product of a first effort and shall be
subject to further improvement, if found necessary. Comments and suggestions hereon shall be
submitted to the Manager, Corporate Audit Office. Until the proposed changes are instituted,
however, these guidelines should be followed.

(SGD.) FRANCISCO S. TANTUICO, JR., Chairman

 COMMISSION ON AUDIT

GUIDELINES

FOR

NON-RESIDENT AUDITING UNITS

 I. INTRODUCTION

A. RATIONALE

To stress the provision of Section 2 P.D. No. 1445 that fiscal responsibility shall rest
directly with the Chief or head of government agencies concerned, the Commission on
Audit has to veer away from the traditional pre-audit function wherein the auditor
participates in the fiscal administration of government agencies and instrumentalities.
Gradually, the Commission shifted from the pre-audit to post-audit functions with
the primary objective of determining whether or not resources of the government are
managed, expended or utilized in accordance with law and regulations, and
safeguarded against loss or wastage through illegal or improper disposition, with a view
to ensuring efficiently, economy and effectiveness in the operations of government.

Corollary to this, the Commission has developed new audit thrusts to further
enhance its independence as an external audit institution. Thus, the policy of the
withdrawal of resident auditing was adopted.

B. LIMITATIONS

B.1 Some constraints on the non-residency of auditors are enumerated in the following
provisions of P.D. No. 1445:

B.1.1 "There shall be in such agency of the government an auditing unit which
shall be provided by the audited agency with a suitable and sufficient
office space together with supplies, equipment, furniture, and other
necessary operating expenses for its proper maintenance, including
expenses for travel and transportation,"[Section 20(1)]

The Above provision means that, regardless of non- residency of audit

personnel, each government agency shall have a COA auditing unit. Its
personnel, however, need not be stationed in the auditee-agency as the
functions of auditing and reporting can be performed at the COA
Central/Regional Offices.

B.1.2 "The auditors in all auditing units shall have the custody, and be
responsible for the safekeeping and preservation of paid expense
vouchers, journal vouchers, stubs of treasury warrants or checks, reports
of collections and disbursements and similar documents, together with
their respective supporting papers, under regulations of the Commission."
[Section 43(4)]
 While the auditing unit is no longer in residence at the auditee-agency, all
records shall remain at the Agency under the custody of the designated
Records Officer until such time that the Commission can provide the
storage facilities.

B.1.3 "Auditor of all government agencies shall certify the balance arising in
the accounts settled by them to the Commission and to the proper
treasurer, collecting officer, or disbursing officer, in such form as the
Commission may prescribed, within sixty days from date of receipt of
those accounts from the treasurer, collecting officer or disbursing officer
concerned." [Section 81]

Regardless of their non-residence from the auditee- agency, it is still

incumbent upon the Unit Auditor to issue the Certificate of Settlement and
Balances (CSB) to the accountable officers concerned.

B.1.4 "xxx no contract involving the expenditure of public funds by any

government agency shall be entered into or authorized unless the proper
accounting official of the agency concerned shall have certified to the
officer entering into the obligation that funds have been duly appropriated
for the purpose and the amount necessary to cover the proposed contract
for the current fiscal year is available for expenditure on account thereof,
subject to verification by the auditor concerned. The certificate, signed by
the proper accounting official and the auditor who verified it, shall be
attached to and become an integral part of the proposed of the proposed
contract x x x." [Section 86]

A contract is deemed null and void unless accompanied by a Certificate of

Availability of funds certified to by the proper accounting official of the
auditee-agency and duly verified by the Unit Auditor.

B.2 Existing laws require the signature/participation of the Unit Auditor on the following:

Applicable
To
------------

B.2.1 Withdrawal of trust deposits or other

funds in government depository banks
[Appropriation and other laws] NLC
 B.2.2 Requisitions over P10,000.00 and those
carried in stock regardless of amounts
[Sec. 7, P.D. No. 526]. L

B.2.3 Time deposits of excess municipal

funds [Sec. 11. P.D. No. 477]. L

B.2.4 Disposal of real property [Sec. 25,

P.D. No. 526]. L

B.2.5 Witnessing opening of bids [E.O. No.

289 series of 1940 and Sec 9, P.D. No.
526].

B.2.6 Participation in the Local Board of

Board of Assessment Appeals [Sec. 31,
P.D. No. 464]. L

The Unit Auditor shall be guided by provisions of the aforementioned laws.

C. OBJECTIVE OF THE GUIDELINES

Since 1980 the Commission has gradually withdrawn resident auditing from
the Agencies. However, it was observed that the non-resident auditing personnel
still devote most of their time in the agency, thus defeating the purpose of the
withdrawal scheme. It becomes necessary, therefore, that the adequate guidelines for
non-resident auditing units be formulated and adopted.

II. ADMINISTRATIVE REQUIREMENTS

Until otherwise excepted by the Chairman, all non-resident auditing units in the
National Capital Region shall be under the direct supervision of the operating offices
concerned (Corporate Audit Office) on both technical and administrative matters. In the
regional offices outside National Capital Region, non-resident auditing units shall be under
the direct supervision of the regional directors.

A. COORDINATION/INITIAL REPORTS

Within 90 days upon receipt of the order to withdraw, the Unit Auditor shall:

A.1 Coordinate with the operating/regional office concerned for assignment of office
space and scheduling of transfer/shipment of documents.
 A.2 Prepare and submit the following:

A.2.1 An inventory of records/documents as basis for turn-over of

accountabilities to the Records Officer.

A.2.2 An inventory of office furniture and equipment provided by the auditee-

agency to the Unit, identifying therein those that will be transferred
to the Central/Regional Office.

A.2.3 Approved annual budget of the auditing unit consisting of personal

services, maintenance and operating expenses and capital outlay.

B. RECORD OF ATTENDANCE

The Unit Auditor and his personal shall maintain separate bundy clock cards
- one at the Central Office/Regional Office and another at the auditee-agency. A
monthly Report of Attendance and Absences shall be submitted to the operating
manager/regional director concerned.

C. LOCATOR SLIP

Field work to the auditee-agency shall be authorized under a duly-accomplished

locator slip which shall be approved by the Unit Auditor in the case of his auditing
personnel and by the operating manager/regional director concerned in the case of the
Unit Auditors.

D. LOGISTIC

D.1 Procurement cast of supplies and materials for use by the non-resident auditing
units shall be chargeable against the Maintenance and Operating Expenses
(MOE) to be remitted by the auditee-agency to the COA.

D.2 Purchase of supplies and materials as well as other disbursements of non-

resident auditing units shall be submitted for approval by the operating
manager/regional director concerned.

D.3 For this purpose, the COA Central/Regional Office concerned shall maintain a
separate record of remittance and disbursements for each non-resident auditing
unit.

E. RECORDS OFFICER

E.1 A record Officer shall be designated to take charge of all records and
documents which will be left at the auditing unit of the auditee-agency.
He/She shall continue to be so designated until such time that a permanent
plantilla item shall have been created and filled. The Unit Auditor shall
recommend the number of personnel to be designated/assigned as Records
Officer depending upon the size and volume of records/documents.
 E.2 The Records Officer shall have the following duties and responsibilities:

E.2.1 Receive and determine completeness of all communications, vouchers,

reports and other documents submitted to the auditing unit;

E.2.2 Identify and segregate the vouchers and documents which are subject to
post-audit in accordance with the sampling procedures prescribed by the
Commission;

E.2.3 Prepare the documents for transfer/shipment to the COA Central/Regional

Office and receive the same after post-audit, for filing;

E.2.4 Deliver to agency personnel concerned all communications and documents

including CSBs.

E.2.5 Take custody and safeguard all communication/vouchers/documents/

reports filed in the storeroom of the auditing unit at the auditee-agency;
and

E.2.6 Perform audit functions and other activities as may be assigned by the
Unit Auditor/Superiors from time to time.

F. DOCUMENTS TRANSPORT SERVICE

F.1 For the transfer of all documents for post-audit to and from the auditee-agency and
the COA Central/Regional Offices, a documents transport service shall be provided
with safety boxes for the convenience of the users. Scheduling of trips shall be
prepared by the operating/regional offices, in coordination with the Unit Auditors
concerned.

F.2 To ensure protection of documents from pilferage and security, each safety box
shall be placed under lock and key. One set of key(s) shall be under the custody of
the Records Officer and the duplicate set shall be with the Unit Auditor or his
duly authorized personnel. Under this arrangement, said boxes can be opened
only by these duly designated key keepers.

G. DOCUMENTS CUSTODIANSHIP

G.1 The Records Officer shall be responsible for the custody and safekeeping of all
records and documents of the Auditing Unit in the auditee-agency.

G.2 When records have been withdrawn for storage in the Central/Regional Office,
an Administrative Unit shall be created to take responsibility for the safekeeping
and storage thereof.
 III. GENERAL GUIDELINES

A. AUDIT AREAS/ACTIVITIES

Generally, the following audit areas/activities shall be covered by the non-resident

auditing units.

A.1 Financial and Compliance Audits. These consist of reviewing/examining/ verifying

accounts, transactions and records, as well as determining the adequacy of
supporting documents of vouchers and reports; assessing the degree of
compliance to existing laws, rules and regulations; and analyzing the financial
statements to determine whether they are fairly presented pursuant to generally
accepted accounting principles and whether the financial operations and
procedures are properly performed. Non-resident auditing units shall adopt the
sampling technique as prescribed by the Commission.

Among others, the activities covered under this audit area are:

A.1.1 Post-Audit of Transactions. Collection, disbursements and other

transactions shall be post-audited within thirty (30) days from receipt
thereof, pursuant to Sections 64 and 100 of Presidential Decree No.
1445.

A.1.2 Cash Examination. Cash examination of accountable officers of the

agencies shall be conducted once every semester, unless otherwise
required by existing regulations and whenever the situation warrants.

A.1.3 Property Inspection. Inspection by the Unit Auditor or the COA Technical
Property Inspection of selected deliveries, repairs done and projects
accomplished shall be conducted preferably immediately after the
delivery/repair/project accomplishment has been effected/completed and
accepted by the auditee-agency.

A.1.4 Review of bank/treasury reconciliation statements. The verification of the

bank and treasury reconciliation statements shall be done within thirty
(30) days from date of receipt of the statements from the Chief Accountant
of the auditee-agency.

A.1.5 Verification Reconciliation and Analyses of Accounts in the trial balances.

The Unit Auditor shall conduct a year-round verification and analysis of
the trial balance and financial statements. It shall include tests of the
mathematical accuracy of the accounts, compliance aspects and
substantiation of their balances by means of audit techniques such as
count and inspection, confirmation, analysis, comparison, vouching,
reconciliation, and such other audit techniques and procedures as may be
necessary to accomplish the audit objectives.
 A.1.6 Certificate of Settlement and Balances. The issuance of the Certificate
of Settlement and Balances (CSB) as provided under COA Circular No.
81-156 dated January 19, 1981 shall continue to be enforced.

A.2 Performance Audit. Audit of the efficiency, economy an effectiveness of the

auditee-agency's operations shall be conducted annually pursuant to COA
Resolution No. 83-56.

A.3 Evaluation of the Internal Control System. A continuous appraisal and evaluation
of the internal control system of the auditee-agency shall be undertaken to
determine its adequacy and the extent it can be relied upon to ensure compliance
with prescribed procedures and to provide for efficient, economical and effective
operations.

B. WORK AND AUDIT PROGRAM

B.1 Section 45 of P.D. No. 1445 provides:

"Each auditor who is the head of an auditing unit shall develop and devise an
annual work program and the necessary audit program for his unit in accordance
with regulation of the Commission.

B.2 To implement this provision, the Commission required the preparation and
submission of a Revised Work Program/Accomplishment Report on or before
January 31 and July 31 of each year and the annual AMORE Commitment on or
before December 15 of every year.

B.3 The non-resident auditing unit shall be guided essentially by the above
requirements. However, a new form (Annex A) was devised to consolidate in one
form the Work Program and the Audit Program, with the following
information:

B.3.1 Audit Objectives

B.3.2 Audit Procedures

B.3.3 Estimated Man-hours (time segregated for work to be done at COA and
those to be done at the auditee-agency)

B.3.4 To be done by/date (personnel assigned and dates to accomplish the

assignment)

B.4 Likewise, the forms for the Accomplishment Report (Annex B) was revised to
contain the following information:

B.4.1 Responsibility Area/Activity/Audit Procedures

 B.4.2 Work Unit

B.4.3 Actual Workload

B.4.4 Man-hours Used at COA and auditee-agency

B.4.5 Done by and date

C. REPORTING SYSTEM

All reports shall be submitted directly to the operating manager/regional director

concerned who shall review, summarize/consolidate and transmit the same to the
proper authorities. These reports are:

C.1 Annual Audit Report

C.1.1 As required under Section 43 par. 2 of Presidential Decree No. 1445, the
annual audit report shall be submitted to the Commission on or before
February 24 of the following year. The report on the financial condition
and result of operations shall include recommendations to improve the
economy, efficiency and effectiveness of agency operations.

C.1.2 The Unit Auditor shall issue an audit certificate in the Annual Audit
Report expressing an opinion on the fairness of presentation of the
accounts in the financial statements. The certificate shall also state the
scope and extent of audit made, observance of generally accepted
accounting principles and standards consistently applied.

C.2 Special Reports. The Unit Auditor is also required to submit special report on
significant audit findings and such other reports as may be necessary to bring
immediately to the attention of management any matter resulting from the
post-audit work, inspection of deliveries/projects/repairs and cash examinations.

C.3 Administrative Reports. Administrative reports are periodic reports used by the
Commission to determine the planned activities, the progress of on-going activities
and the accomplishments of each auditing unit/personnel. The forms to be used
and the specific instructions to accomplish the forms are contained in various
issuances. These reports and their corresponding dates of submissions are:

Name of Report Due Date

C.3.1 Monthly Report of Attendance on or before the 5th day of

(COA Memorandum No. 75-5 and every month
76-30)

C.3.2 Bi-Monthly Report of Post- on or before the 5th day of

Audit and Issuance of the the month following the
Certificate of Settlement report period
 and Balances (COA Memorandum
81-156)

C.3.3 Semi-Annual Work and Audit on or before January 31

Program/Accomplishment Re- and July 31 of each year.
port (COA Memorandum No.78-
132A)

C.3.4 Performance Appraisal Report on or before January 31

(COA Memorandum No. 80-232) and July 31 of each year.

C.3.5 Annual Audit Report (COA Cir- on or before February

cular No. 78-89, as amended) 24 of each year.

C.3.6 AMORE Commitment on or before December 15

of each year

D. AUDIT VENUE

The venue of audit shall be at the COA Central/Regional Offices and at the auditee-
agency. Thus, it is necessary to identify the situs of the various procedures/steps of
each activity in the Work and Audit Program. For this purpose, a list of audit activities
and procedures indicating the situs of audit is shown in the attached Annex C.