COA should undertake sp’l pre-audit

The Commission on Audit (COA), as “watchdog of the Treasury,” is mandated to review financial transactions to ferret out and correct fiscal anomalies, identify violators and initiate charges, settle accounts and safeguard government funds and property. To achieve these, COA gives primacy to post-audit.

Observers, however, noted COA post-audit has failed to deter irregularities. In fact, fiscal anomalies seem to have increased in number due to contract flaws and management deficiencies. Perpetrators brave risks of discovery and penalties when thinking of munificent spoils of malfeasance.

With post-audit, government transactions may be questioned or disallowed, but when services have already rendered, supplies and equipment delivered and payment made. Thus, fund recovery suffers not only because of time lapse but also officials concerned may have retired or, in the case of elected officials, may have completed their terms of office.

World Bank studies confirm there is less fraud attendant in government operations where there is effective internal control, proper contract review, compliance with fiscal and audit requirements and commitment of top management.

The Constitution of the Philippines provides the basis for remedial action, as indicated in Article IX-D, Section 2: “Where internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies.”

The constitutional provision targets agencies with inadequate internal control systems. This fault, unfortunately, offers opportunities for anomalies and provides loopholes for malpractices. Thus, auditors must undertake an annual review of internal control systems. This review determines the extent of reliance that can be placed on the internal controls for project costs and results and the need for and extent of substantive testing based on observed strengths or weaknesses of the agency’s system.

Thereafter, COA auditors should undertake special pre-audit and focus on special programs, projects or contracts with time-phased appropriations. With guidance of legal officers, they also should review contract clauses to determine specific requirements for each contract to be utilized in determining allowability, allocability and reasonableness of costs billed to the government.

We note that Department of Budget and Management (DBM)) releases funds to agencies needed for special activities, such as fertilizer or swine dispersal programs, computerization, etc. Reports of malpractices are dismaying. However, details and the extent of these anomalies have yet to be determined and only after a scheduled post-audit. Someone asked: Why get excited now to close the gate when all the horses have long gone away?