AUGUST 22, 2011

NR # 2503C

COA to pursue pre-audit of agencies with weak internal control system

The Commission on Audit (COA) will continue its pre-audit activities in selected government agencies particularly those with a weak internal control system like the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP). COA Chairperson Ma. Gracia Pulido Tan made the assurance during the hearing of the House Committee on Appropriations on the COAs proposed budget of P4.783 billion for 2012. The hearing was presided by Rep. Isidro Ungab (3rd District, Davao City), ViceChairman of the House panel. Tan said COA will continue its pre-audit program on various government agencies but on a risk-based approach and that part of the pre-audit is the assessment of the Internal Control System of agencies. During the hearing, Rep. Teddy Casio described as sweeping and premature the agencys decision to lift the pre-audit activities in government agencies through the issuance of Memorandum Circular 2009-002 last July 22, 2011. Casio said the COA should set clear criteria because lawmakers plan to institutionalize pre-audit through legislation. If we cannot pre-audit all agencies, then what are the tell tale signs that would require the pre-audit of certain agencies? Casio asked. The lifting of pre-audit is not total. Part of our pre-audit now will be assessing the Internal Control System of agencies. If an agency is assessed as having a good Internal Control System, then we will let the head of the agency assume fiscal responsibility, Tan said. Tan said the COA will conduct pre-audit on a case-to-case, agency-to-agency, and transaction-per-transaction basis. If we determine that the Internal Control System is weak, then we will pre-audit this way. We will be more effective by putting this sweeping system, Tan said. At present, Tan said the AFP and the PNP are the main agencies they have identified as having a weak Internal Control System. We are identifying agencies which were able to escape the net over the past years. They are those which are not being regularly audited or those not being audited meticulously, and also those agencies which year-to-year have adverse audit findings like the AFP and PNP. So there will still be pre-audit in these instances, said Tan.

COA Circular No. 2011-002 dated July 22, 2011 provides for the withdrawing of selective pre-audit under COA Circular No. 2009-002 and thereby lifts all pre-audit activities presently performed on financial transactions of the national government agencies, government owned and/or controlled corporations and local government units, except those required by existing law. Tan said there were several reasons for the withdrawal of the pre-audit system. One of these is that agencies are generally fiscally responsible as only one percent or less of the 500,000 transactions pre-audited by COA in the last two years was denied. This means that in the two years the system was in place, COA managed to save the government only about P5 billion according to her, Tan said. Tan also pointed out that international auditing and accounting standards require they do not involve in the internal affairs of the agencies that COA audits. COA is being obstructionist because a project cannot proceed without the agencys go signal. Pre-audit is using up a lot of the auditors time that could have been devoted to their regular audit work, Tan said. Meanwhile, Tan said compliance to Administrative Order 70 mandating offices to establish their Internal Audit Service (IAS) has been low so far. The DBM is taking measures to increase the compliance rate, and we are assisting to increase the awareness of this order, she said. (30) rbb