The Republic of the Philippines is composed of 18 Regions, including the Negros Island Region as established under Republic Act (R.A.) No. 12000.  These Regions were created primarily for administrative and political purposes.  The territorial and political subdivisions of the Republic of the Philippines are the provinces (82), cities (149), municipalities (1488), and barangays (42,061). By virtue of R.A. No. 10742, a Sangguniang Kabataan is created in every barangay. Local Government Units (LGUs) enjoy autonomy in terms of legislative powers and the administration/management of its own resources.

One of the 18 Regions, the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), which was established in view of the ratification of R.A. No. 11054, differs from the others.

The BARMM has the right to exercise self-governance, with a democratic political system under a parliamentary form of government. The BARMM also enjoys autonomy in terms of legislative powers and the administration/management of its own resources.

The National Capital Region (NCR), where the capital of the Philippines
is located, is the only Region that has no province, but subdivided into 17 LGUs, which is comprised of 16 cities and one municipality.  Regulatory and supervisory authority over the delivery of metro-wide services within the NCR is exercised by the Metro Manila Development Authority (MMDA), pursuant to R.A. No. 7924.  The MMDA is tasked to perform planning, monitoring and coordinative functions, without diminution of the autonomy of the LGUs concerning purely local matters.

Public audit at the local level is conducted by Commission on Audit (SAI) Regional Offices, and the Audit Groups/Teams of SAI Philippines. All governments agencies in the regions, including LGUs, i.e. provinces, cities, municipalities, barangays, and SKs, are audited.

SAI Philippines exercises control and supervision over the Regional Offices. The Commission Proper[1] of SAI Philippines determines their structure and staffing, subject to the review and budgeting requirements of the Department of Budget and Management (DBM). Commission Proper may delegate to the Regional Directors authority on internal administration concerning personnel, planning, financial (budgetary and accounting), and legal matters pertaining to the region.

Each Regional Office performs the following functions:

• Exercises supervision and control over the implementation of auditing rules and regulations in all agencies of the government with principal offices or place of operations within the region, including the Senate and House of Representatives

• Reviews, analyzes and consolidates local, national and corporate audit reports pertaining to the region

• Upon delegation by the Commission Proper, exercises authority on internal administration on personnel, planning, financial (budgetary and accounting), and legal matters pertaining to the region

• Performs such other related functions as may be assigned by the Chairman.

The audit planning process involves several stages:

• Officials of the Central Office of the SAI Philippines[2] come up with its medium-term Strategic Plan
• Audit Sectors[3] develop operating/audit strategic plans in the form
• of General Audit Instructions (GAIs)[4].
• In the Local Government Audit Sector, the GAIs are cascaded down to the Regional Directors (RDs)[5], who in turn will issue their Specific Audit Instructions (SAIs) based on the GAI, after careful planning and assessment, which is also conducted annually

• SAIs serve as the basis and guiding framework for Audit Groups/Teams in the formulation of their respective Audit Plans for the conduct of Financial and Compliance Audits.

Audit Types:

• SAI Philippines conducts financial, performance, and compliance audits separately, with the results of which being covered by separate audit reports. There are instances where financial and compliance audit are combined in one inspection. At present, performance audit is conducted by the Performance Audit Office of SAI Philippines. However, there is a plan to capacitate the Audit Groups/Teams in the regions on performance audit.

• SAI Philippines also undertakes special audit engagements. These include the Citizen Participatory Audit, where civil society organizations assist auditors in the audit process; Fraud Audits, which are conducted when indicators of fraud or corruption are identified in government programs, projects, or transactions; and other audits handled by the Special Audits Office, such as visitorial audit when private entities receive government subsidies, tariff rate audit on public utilities, and levy audit.

Audit Outcome

Annual Audit Reports (AARs) are submitted by the Audit Groups/Teams to the RDs, and thereafter transmitted to the Local Chief Executives of the LGUs. Based on the consolidated reports, the audit results and financial statements are ultimately submitted by the RDs to the Government Accountancy Sector (GAS) of SAI Philippines for the preparation of the Consolidated Annual Financial Reports (AFRs) of LGUs.

Once finalized, the Consolidated AFRs are submitted by the GAS to the President of the Philippines, the Senate President, and the Speaker of the House of Representatives, and are likewise uploaded to the COA website. Copies thereof are furnished to the appropriate oversight bodies and committees, including the concerned local legislative bodies, the relevant departments (for LGUs, the Department of the Interior and Local Government), as well as the libraries of the University of the Philippines and SAI Philippines.

Follow-up Audit

The SAI Philippines has a unique system in-placed because of the settlement of accounts. The Auditors may issue a Notice of Charge (NC) when there is underassessment or under-collections of revenue or income; Notice of Disallowance (ND) when expenditures of public funds are found to be illegal, irregular, unnecessary, unconscionable, excessive, extravagant; and Notice of Suspension (NS) when the expenditure is found to be of doubtful legality or validity, pending the submission of sufficient explanation or justification for its incurrence. When accounts are settled by the person/s liable, a Notice of Settlement of Suspension/Disallowance or Charges shall be issued. Appeals from ND/NS/NC issued by the Audit Groups/Teams are decided upon by the RDs/CDs, and the Commission Proper.

Upon transmittal of the Annual Audit Report (AAR) to the LGU, the latter concerned shall submit an Action Plan within sixty (60) days from receipt thereof. The submitted Action Plan shall be reviewed and validated by the Audit Group/Team. Thereafter, a Monitoring Plan shall be prepared and submitted to the Regional Director (RD) for appropriate action.

Aside from the audit function and processes mentioned above, the SAI Philippines also exercises quasi-judicial powers. Appeals from ND/NC issued by the Audit Groups/Teams are decided upon by the RDs/CDs, and the Commission Proper.

 

[1] Chairman and the two Commissioners shall together be known as the Commission Proper

[2] Chairperson, the two Commissioners (collectively known as the Commission Proper), the Sector Heads, and Office / Cluster Directors (CDs)

[3] Local Government Audit Sector, Corporate Government Audit Sector, and the National Government Audit Sector

[4] GAIs are the instructions cascaded down to the level of Cluster/Regional Directors as their guide in the audit of accounts and operations of their respective auditees.

[5] Heads a Regional Office of SAI Philippines.