The Republic of the Philippines is composed of 17 Regions, which were created primarily for administrative and political purposes. The territorial and political subdivisions of the Republic of the Philippines are the provinces (81), cities (147), municipalities (1491), and barangays (42,049)^[1]. By virtue of Republic Act (R.A.) No. 10742, a Sangguniang Kabataan (42,049)^[2] 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 17 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.

 

^[1] In accordance with Article X of the 1987 Constitution of the Philippines.

^[2] Community Council that represents youth in a barangay in the Philippines.

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 any agency of the government with principal offices or place of operations within the region, including the National Assembly (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 Commission 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 are used by Audit Groups/Teams in the formulation of their respective Audit Plans in the conduct of Financial and Compliance Audit.

Audit Types:

• SAI Philippines conducts financial, performance and compliance audits separately the results of which are covered by a separate audit report. 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 audits: citizen participatory audit (civil society organizations assist the auditors in the auditing), fraud audit (performed if fraud or corruption indicators are identified in government programs, projects and transactions). Other types of engagements performed by Special Audits Office are visitorial audit (when the Government granted subsidy to a private entity), 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, results of audit and financial statements are ultimately submitted by RDs to the Government Accountancy Sector (GAS) of SAI Philippines for the preparation of the Annual Financial Reports (AFRs) of LGUs.

Once the AFRs are finalized, the GAS submits the same to the President of the Philippines, Senate President and Speaker of the House of Representatives, and likewise uploaded to the COA website. The oversight bodies/committees are provided with copies of these Reports, i.e. local legislative body concerned, the Department concerned (for LGUs, the Department of the Interior and Local Government), the Libraries of the University of the Philippines and the 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 when there is underassessment or under-collections of revenue or income; Notice of Disallowance when there are illegal, irregular, unnecessary, unconscionable, excessive, extravagant expenditures of public funds; and Notice of Suspension when the expenditure is of doubtful legality and validity. When accounts are settled by the person/s liable a Notice of Settlement of Suspension/Disallowance or Charges shall be issued.

After the transmittal of the Audit Report to the LGU, an Action Plan^[6] is required to be submitted by the LGU 60 days from receipt of the Report from the Audit Group/Team, who validates the same. Thereafter, a Monitoring Plan^[7] is submitted to the RD.

Aside from the audit function and processes mentioned above, the SAI Philippines also exercises quasi-judicial powers. Notice of Disallowance (ND) is issued on illegal, irregular, unnecessary, unconscionable, excessive and extravagant expenditures of public funds. While Notice of Suspension (NS) is issued for expenditures of doubtful validity that needs further explanation or justification for its incurrence. On the other hand, Notice of Charge is (ND) issued for under-collection or under remittance of revenue or income. Appeals from ND/NS/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.

^[6] Agency Action Plan and Status of Implementation (AAPSI).

^[7] Action Plan Monitoring Tool (APMT).