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Forensic Compliance Audit: An Introduction Presented by: ALBERTO A. BERNARDO, CPA, Esq., CESO I Deputy Executive Secretary, Office of the President 1 Association.

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Presentation on theme: "Forensic Compliance Audit: An Introduction Presented by: ALBERTO A. BERNARDO, CPA, Esq., CESO I Deputy Executive Secretary, Office of the President 1 Association."— Presentation transcript:

1 Forensic Compliance Audit: An Introduction Presented by: ALBERTO A. BERNARDO, CPA, Esq., CESO I Deputy Executive Secretary, Office of the President 1 Association of Government Internal Auditors, Inc. (AGIA) 10 October 2013

2 2 I. Audit Process II. Review and Compliance Procedure III. Assets, Expenses and/or Net Worth Manifestly Out of Proportion to Disposable Funds O R D E R O F P R E S E N T A T I O N IV.Relatives in Government V.Divestment VI.Public Access to SALN VII.Implied Repeal

3 3 1. Compliance Audit To determine the degree of compliance with (1) laws, regulations, (2) managerial policies, (3) systems and processes of government, including compliance with (4) accountability measures, (5) ethical standards and (4) contractual obligations. [Sec. 8., Ch. 3, Title V, Bk. IV, EO 292 s. 1987, the “Administrative Code 1987,” 25 July 1987 and DBM Circular Letter No , “National Guidelines on Internal Control Systems, 23 October 2008; Item 4.1, Chapter 1, Part I, DBM Circular Letter No , “Philippine Government Internal Audit Manual “(PGIAM), 19 May 2011, p.9; 270] Office of the President Internal Audit Office

4 4 Audit Engagement Planning Audit Execution Audit Follow-up Audit Reporting Office of the President Internal Audit Office

5 5 PLANNING What to Audit 1.Understanding the program and project, system and processes 2.Determine the audit objective, scope, criteria and evidence 3.Develop the audit plan and audit program 4.Determine the Key Performance Indicators (KPIs) 5.Determine the resources required for the audit EXECUTION REPORTING How to Audit FOLLOW-UP What to Follow-up What to Report 2. Audit Engagement Planning Office of the President Internal Audit Office

6 6 PLANNING EXECUTION 1.Entry Conference 2.Conduct compliance audit a. Gather and analyze evidence b. Compare conditions with criteria c. Determine probable cause(s) d. Prepare working papers 3.Conduct system/process audit a. Gather and analyze evidence b. Compare conditions with criteria c. Determine root cause(s) d. Prepare working papers 4.Exit conference REPORTING FOLLOW-UP What to Audit How to Audit What to Follow-up What and How to Report 3. Audit Execution Office of the President Internal Audit Office

7 7 PLANNING What to Audit REPORTING FOLLOW-UP EXECUTION How to Audit What and How to Report What to Follow-up 1. Develop audit findings a. Criteria (laws and standards) b. Condition (findings of facts) c. Conclusion (conclusion of facts) d. Cause (probable cause(s) or root cause(s)) 2. Develop audit recommendations 4. Audit Reporting Office of the President Internal Audit Office

8 Develop Audit Findings Criteria - The standards against which condition is compared; standards shall include, among others, laws, rules and regulations, policies, orders, guidelines, procedures, plans, targets and contractual obligations. [1.3.1(a), Chapter II, Part II, DBM Criteria - The standards against which condition is compared; standards shall include, among others, laws, rules and regulations, policies, orders, guidelines, procedures, plans, targets and contractual obligations. [1.3.1(a), Chapter II, Part II, DBM Circular Letter 4. Audit Reporting Office of the President Internal Audit Office No , “Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 126; 271]

9 Develop Audit Findings 4. Audit Reporting c)“Government policies, standards, guidelines, and regulatory issuances; Criteria, Hierarchy of Authority d) “Standards and other issuances of intergovernmental organizations such as the United Nations’ specialized committees and agencies; and... d) “Standards and other issuances of intergovernmental organizations such as the United Nations’ specialized committees and agencies; and... b)“Laws, rules, and regulations on public governance and accountability, and applicable jurisprudence; b)“Laws, rules, and regulations on public governance and accountability, and applicable jurisprudence; a) “Constitutional provisions; a) “Constitutional provisions; Office of the President Internal Audit Office

10 Develop Audit Findings Criteria, Hierarchy of Authority (continuation) 4. Audit Reporting e) “Relevant or applicable standards and best practices in governance, accountability, and operations, both local and international, such as the International Organization for Standardization (ISO) and other officially recognized organizations and associations.” [5.6, Chapter 1, Part I, DBM Circular Letter Letter No , Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p.25] Office of the President Internal Audit Office

11 Condition - A fact, supported by substantial evidence, (includes consequence, effects or impact); this is also referred to as the “findings of facts” Condition - A fact, supported by substantial evidence, (includes consequence, effects or impact); this is also referred to as the “findings of facts”. [1.2.2(a); (a); 1.3.1(b), Chapter II, Part II, 4.1. Develop Audit Findings 4. Audit Reporting DBM Circular Letter No , “Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 126; 271] Office of the President Internal Audit Office

12 Condition, Findings of Facts Condition, Findings of Facts 4.1. Develop Audit Findings 4. Audit Reporting a) “Similarly, it is a basic tenet of due process that the decision of a government agency must state the facts and the law on which the decision is based. x x x Facts and circumstances, as well as the why’s, the what’s and the how’s of the disallowance were patently missing, inaccurate or incomplete.” (underscoring supplied) [Albert vs. Gangan, G.R. No , 6 March 2001] a) “Similarly, it is a basic tenet of due process that the decision of a government agency must state the facts and the law on which the decision is based. x x x Facts and circumstances, as well as the why’s, the what’s and the how’s of the disallowance were patently missing, inaccurate or incomplete.” (underscoring supplied) [Albert vs. Gangan, G.R. No , 6 March 2001] Office of the President Internal Audit Office

13 13 a) “There has to be factual basis why the expenditure is alleged to be fraudulent or why was there a misrepresentation. Liability depends upon the wrong committed and not solely by reason of being the head of a government agency. x x x But as to why and how the disbursements of funds in this case was considered disadvantageous must be duly supported by findings of facts.” G.R. No , 6 March 2001] [underscoring supplied] [Albert vs. Gangan, G.R. No. G.R. No , 6 March 2001] Office of the President Internal Audit Office Condition, Findings of Facts (continuation) Condition, Findings of Facts (continuation) 4.1. Develop Audit Findings 4. Audit Reporting

14 b)“She accepted the secondhand typewriter, contrary to the requirement to buy brand new units, and allowed payment for them at the price of brand new units. She admitted that the specification for the typewriters should be brand new.” (Dugayon vs. People 4. Audit Reporting 4.1. Develop Audit Findings Condition, Findings of Facts 14 Office of the President Internal Audit Office of the Philippines, G.R. No , 12 August 2004)

15 c) “Thus, if there is an irregularity in the performance of this duty, they may be held liable for any loss that is incurred by the government as a consequence thereof. In this case, there was such irregularity when petitioner and other members of the Team attested to the 100% completion of the projects notwithstanding their undisputed deficiencies.” [Leycano vs. Commission on Audit, c) “Thus, if there is an irregularity in the performance of this duty, they may be held liable for any loss that is incurred by the government as a consequence thereof. In this case, there was such irregularity when petitioner and other members of the Team attested to the 100% completion of the projects notwithstanding their undisputed deficiencies.” [Leycano vs. Commission on Audit, 4. Audit Reporting 4.1. Develop Audit Findings 15 Office of the President Internal Audit Office Condition, Findings of Facts G.R. No , 10 February 2006]

16 a) “At the barest minimum, the evidence presented by the prosecution, in order to substantiate the allegation of overpricing, should have been identical to the walis tingting purchased in x x x because only then could a determination have been made to show that the disadvantage was so manifest and gross as to make public official liable under Section 3(g) of R.A. No ” (underscoring Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence supplied) [Caunan vs. People of the Philippines and Sandiganbayan, G.R. Nos & , 2 September 2009 and Joey P. Marquez vs. The Sandiganbayan-Fourth Division and People of the Philippines, G.R. Nos , 2 September 2009]

17 Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office a) “However, these conclusions were based on incompetent evidence. Most obvious would be the market price of walis tingting in Las Piñas City which was used as proof of overpricing in Parañaque City. The prosecution should have presented evidence of the actual price of the particular walis tingting purchased by petitioners and the other accused at the time of the audited transaction or, at the least, an approximation thereof.” (under- scoring supplied) [Caunan vs. People of the Philippines and Sandiganbayan, and Joey P. Marquez vs. The Sandiganbayan- Fourth Division and People of the Philippines, G.R. Nos , 2 September 2009] Condition, Evidence (continuation)

18 Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office a) “The audit team reached a conclusion of gross overpricing based on documents which, at best, would merely indicate the present market price of walis tingting of a different specification, purchased from a non-supplier of Parañaque City, and the price of walis tingting purchases in Las Piñas City. Effectively, the prosecution was unable to demonstarate the requisite burden of proof, i.e., proof beyond reasonable doubt, in order to overcome the presumption of innocence in favor of petitioners.” (emphasis from original) [Caunan vs. People of the Philippines and Sandiganbayan, and Joey P. Marquez vs. Sandiganbayan-Fourth Division and People of the Philippines] Condition, Evidence (continuation)

19 c) the specifications of the items which should match those involved in the finding of overpricing; c) the specifications of the items which should match those involved in the finding of overpricing; d)the purchase/contract terms and conditions which should be the same as those of the questioned transaction.” [Nava vs. Palattao, G.R. No , 28 August 2006 citing Commission on Audit Memorandum Order No , 31 March 1997] d)the purchase/contract terms and conditions which should be the same as those of the questioned transaction.” [Nava vs. Palattao, G.R. No , 28 August 2006 citing Commission on Audit Memorandum Order No , 31 March 1997] b) “a) the identities of the suppliers or sellers; b)the availability of stock sufficient in quantity to meet the requirements of the procuring agency; b)the availability of stock sufficient in quantity to meet the requirements of the procuring agency; Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence

20 b) “Anyway, the logical sequence of events was clearly indicated in the COA Report: ‘ Obtained samples of each laboratory tools and devices purchased x x x.’ ‘ Bought (sic) and presented these samples to reputable business establishments in Davao City x x x.’ Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence (continuation)

21 b) ‘ Available items which were exactly the same as the samples presented were purchased from AMESCO and Berovan Marketing Incorporated, the business establishments which quoted the lowest prices.’ x x x.” [Nava v. Palattao, x x x.” [Nava v. Palattao, Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence (continuation) G. R. No , 28 August 2006]

22 Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence (continuation) b)Item Purchased Unit Cost Recan- vassed Price + 10% Allow. Difference % of Over- pricing Quantity Purchased Total Amount of Overpricing Flask Brush made of Nylon P P 8.80 P ,175%400 P 41, Rest tube Glass Pyrex (18x50 mm) %3502, Graduated Cylinder Pyrex (100 ml) %324179, Glass Spirit Burner (alcohol lamp) %14418, Spring Balance (12.5 kg) Germany %10246, Iron Wire Gauge % Bunsen Burner %15091, P 380, Total P 380, [Nava v. Palattao, G. R. No , 28 August 2006] [Nava v. Palattao, G. R. No , 28 August 2006]

23 Develop Audit Findings 4. Audit Reporting Office of the President Internal Audit Office Condition, Evidence (continuation) b) “These documents were included in the Formal Offer of Evidence submitted to the Sandiganbayan. Petitioner was likewise presented an opportunity to controvert the findings of the audit team during the exit conference held at the end of the audit x x x.” [Nava v s. Palattao, G.R. No , 28 August 2006]

24 Develop Audit Findings Conclusion - Evaluation of the criteria and the conditions to determine: (1) the degree of compliance or non- compliance with laws, regulations and policies; (2) the control effectiveness or ineffectiveness; and (3) the efficiency, effectiveness, ethicality, and economy of agency operations. [1.3.1(c), Chapter II, Part II, 4. Audit Reporting DBM Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 127] DBM Circular Letter No , “Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 127] Office of the President Internal Audit Office

25 Develop Audit Findings Conclusion, Conclusion of Facts 4. Audit Reporting a) “Conclusion of facts is defined as ‘an inference drawn from the subordinate or evidentiary fact.’” [Sixth Edition (1990), Black’s Law Dictionary, p. 290; (b); 1.3.1(c), Chapter II, Part II, DBM Circular Letter No , “Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 123;124;127; 271] Office of the President Internal Audit Office

26 Develop Audit Findings Conclusion, Conclusion of Facts 4. Audit Reporting b)“A conclusion of law is a determination by a judge or ruling authority regarding the law that applies in a particular case.” [Galeos vs. People of the Phil., G.R. Nos and Ong vs. People of the Phil., G.R. No , 9 February 2011] Office of the President Internal Audit Office

27 4.1. Develop Audit Findings Cause - The probable cause or root cause of the condition and the substantial evidence used as bases of audit recommendation. [1.3.1(d), Chapter II, Part II 4. Audit Reporting DBM Circular Letter No , “Philippine Government Internal Audit Manual” (PGIAM), 19 May 2011, p. 127; 271] Office of the President Internal Audit Office 27

28 Title XVII, Civil Code of the Philippines] a) “Art Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.” (underscoring supplied) [Chapter 2, 4.1. Develop Audit Findings Cause Cause, Proximate Cause 4. Audit Reporting Office of the President Internal Audit Office 28

29 4.1. Develop Audit Findings Cause Cause, Proximate Cause 4. Audit Reporting Office of the President Internal Audit Office 29 b) “Art x x x (Article 2180, Chapter 2, Title XVII, Civil Code of the Philippines) The State is responsible in like manner when it acts through a special agent, but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided is Article 2176 shall be applicable. x x x.” [underscoring supplied] x x x

30 4.1. Develop Audit Findings Cause Cause, Proximate Cause 4. Audit Reporting Office of the President Internal Audit Office 30 Title XVII, Civil Code of the Philippines) c) “Art x x x But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant’s lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.” [underscoring supplied] (Chapter 2,

31 4.1. Develop Audit Findings Cause Cause, Proximate Cause 4. Audit Reporting Office of the President Internal Audit Office 31 d) “One of the tests for determining the existence of proximate cause is the foreseeability test, viz.: Cooperative, Inc. vs. Balen, G.R. No , 25 November 2009) ‘x x x - Where the particular harm was reasonably foreseeable at the time of the defendant’s misconduct, his act or omission is the legal cause thereof. Foreseeability is the fundamental test of the law of negligence. x x x.’” (Agusan Del Norte

32 4.1. Develop Audit Findings Cause Cause, Proximate Cause 4. Audit Reporting Office of the President Internal Audit Office 32 e) “[T]he proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, x x x the final event in the chain immediately effecting the injury as a natural and probable result of the cause which first acted,...

33 4.1. Develop Audit Findings Cause Cause, Proximate Cause (continuation) 4. Audit Reporting Office of the President Internal Audit Office 33 supplied] (Dumayag vs. People, G.R. No , 26 November 2012) e) under such circumstances that the person responsible for the first event should, as an ordinary prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom.” [underscoring

34 4.1. Develop Audit Findings Cause Cause, Intervening Cause 4. Audit Reporting Office of the President Internal Audit Office 34 a)“’If the intervening cause is one which in ordinary human experience is reasonably to be anticipated or one which the defendant has reason to anticipate under the particular circumstances, the defendant may be negligence among other reasons, because of failure to guard against it; or the defendant may be negligent only for that reason.’” [italics in the original; underscoring supplied] (Phoenix Construction, Inc. vs. The Intermediate Appelate Court, G.R. No. L-65295, 10 March 1987)

35 4.1. Develop Audit Findings Cause Cause, Intervening Cause 4. Audit Reporting Office of the President Internal Audit Office 35 b) “’The risk created by the defendant may include the intervention of the foreseeable negligence of others. … [T]he standard or reasonable conduct may require the defendant to protect the plaintiff against ‘that occasional negligence which is one of the ordinary incidents of human life, and therefore to be anticipated.’” (italics in the original) [Phoenix Construction, Inc. vs. The Intermediate Appelate Court, G.R. No. L-65295, 10 March 1987]

36 4.1. Develop Audit Findings Cause Cause, Intervening Cause 4. Audit Reporting Office of the President Internal Audit Office 36 c)“What the Petitioner describes as an ‘intervening cause’ was no more than a foreseeable consequence of the risk created by the negligent manner in which the truck driver had parked the dump truck.” (Dy Teban Trading, Inc. vs. Ching, G.R. No , 4 February 2008 citing Phoenix Construction, Inc. vs. IAC)

37 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause a) “Firstly, a finding of probable cause needs only to rest on evidence showing that more likely than not a crime has been committed and there is enough reason to believe that it was committed by the accused. x x x A finding of probable cause merely binds over the suspect to stand trial. It is not a pronouncement of guilt.” (italics in the original; underscoring supplied) [Ganaden vs. Honorable Office of the Ombudsman, G.R. Nos , 1 June 2011; Galario vs. Office of the Ombudsman, et. al., G.R. No , 10 July 2007] Office of the President Internal Audit Office 37

38 b) “Logically, affidavits and evidence presented during a preliminary investigation must at least show these elements of the crime and the particular participation of each of the respondents in its commission. Otherwise, there would be no basis for a well-founded belief that a crime has been committed, and that the persons being charged are probably guilty thereof. (underscoring supplied) [Tan, Jr. vs. Matsuura and Tanjutco, G.R. No , Tan, Jr. vs. Cua, G.R. No , 9 January 2013] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

39 c)“All heads of offices have to rely to a reasonable extent on their subordinates and on the good faith of those who prepare bids, purchase supplies, or enter into negotiations. x x x There has to be some added reason why he should examine each voucher in such detail. x x x There should be other grounds than the mere signature or approval appearing on a voucher to sustain a conspiracy charge and conviction.” (underscoring supplied) [Arias vs. Sandiganbayan, G.R. No , 19 December 1989] 4. Audit Reporting 4.1. Develop Audit Findings 39 Office of the President Internal Audit Office Cause, Probable Cause

40 d) “Petitioner might have indeed been lax and administratively remiss in placing too much reliance on the official reports submitted by his subordinate (Engineer Enriquez), but for conspiracy to exist, it is essential that there must be a conscious design to commit an offense. Conspiracy is not the product of negligence but of intentionality on the part of cohorts.” [Magsuci vs. d) “Petitioner might have indeed been lax and administratively remiss in placing too much reliance on the official reports submitted by his subordinate (Engineer Enriquez), but for conspiracy to exist, it is essential that there must be a conscious design to commit an offense. Conspiracy is not the product of negligence but of intentionality on the part of cohorts.” [Magsuci vs. 4. Audit Reporting 4.1. Develop Audit Findings 40 Office of the President Internal Audit Office Sandiganbayan, G.R. No. L , 3 January 1995] Cause, Probable Cause

41 d) “Fairly evident, however, is the fact that the action taken by Magsuci involved the very functions he had to discharge in the performance of his official duties. There has been no intimation at all that he had foreknowledge of any irregularity committed by either or both Engr. Enriquez and Ancla.” (underscoring supplied) [Magsuci vs. Sandiganbayan, G.R. No. L , 3 January 1995] 4. Audit Reporting 4.1. Develop Audit Findings 41 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

42 d) “When, however, that infraction consists in the reliance in good faith, albeit misplaced, by a head of office on a subordinate upon whom the primary responsibility rests, absent a clear case of conspiracy, the Arias doctrine must be held to prevail.” [Magsuci vs. d) “When, however, that infraction consists in the reliance in good faith, albeit misplaced, by a head of office on a subordinate upon whom the primary responsibility rests, absent a clear case of conspiracy, the Arias doctrine must be held to prevail.” [Magsuci vs. Sandiganbayan, G.R. No. L , 3 January 1995] 4. Audit Reporting 4.1. Develop Audit Findings 42 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

43 e) “Petitioner, as head of the agency, cannot be held personally liable for the disallowance simply because he was the final approving authority of the transaction in question and that the officers/employees who processed the same were directly under his supervision.” (Albert vs. Gangan, G.R. No , 6 March 2001; Salva vs. Carague, G.R. No , 19 December 2006 ) 43 Office of the President Internal Audit Office 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

44 e)“He has to rely mainly on the certifications, recommendations and memoranda of his subordinates in approving the loan. The processing, review and evaluation of the loan application passes through the responsible and authorized officers of the CMP Task Force.” (underscoring supplied) Albert vs. Gangan, G.R. No , 6 March 2001] 4. Audit Reporting 4.1. Develop Audit Findings 44 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

45 e) “We have consistently held that every person who signs or initials documents in the course of transit through standard operating procedures does not automatically become a conspirator in a crime which transpired at the stage where he had no participation. His knowledge of the conspiracy and his active and knowing participation therein must be proved by positive evidence.” (underscoring supplied) [Albert vs. Gangan, G.R. No , 6 March 2001] 4. Audit Reporting 4.1. Develop Audit Findings 45 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

46 e) “In fact, petitioner immediately filed a complaint before the Ombudsman against the subordinate employees who appeared to be responsible for the fraud. He also directed the filing of a civil case against the originator and other persons responsible for misrepresentation. All these acts are indicative that he had no knowledge of the fraudulent scheme perpetrated by certain officials or employees of his agency.” (underscoring supplied) [Albert vs. Gangan, G.R. No , 6 March 2001] 4. Audit Reporting 4.1. Develop Audit Findings 46 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

47 f)“It should be noted that the disallowance fell under Mobilization and Demobilization, and Earthfill and Compaction expenses, as appearing in the Approved Agency Estimates (AAE) [now ABC]. x x x [P]etitioner had nothing to do with the preparation and the computation of the AAE. Therefore, she should not have been held liable for the amounts disallowed during the post-audit.” f)“It should be noted that the disallowance fell under Mobilization and Demobilization, and Earthfill and Compaction expenses, as appearing in the Approved Agency Estimates (AAE) [now ABC]. x x x [P]etitioner had nothing to do with the preparation and the computation of the AAE. Therefore, she should not have been held liable for the amounts disallowed during the post-audit.” (initial in bracket supplied; underscoring supplied) [Salva vs. (initial in bracket supplied; underscoring supplied) [Salva vs. Carague, G.R. No , 19 December 2006] 4. Audit Reporting 4.1. Develop Audit Findings 47 Office of the President Internal Audit Office Cause, Probable Cause

48 g)“[T]here was no inconsistency in alleging both the presence of conspiracy and gross inexcusable negligence, because the latter was not simple negligence. Rather the negligence involved a willful, intentional, and conscious indifference to the consequences of one’s actions or omissions.” [Bacasmas vs. Sandiganbayan, G.R. No. g)“[T]here was no inconsistency in alleging both the presence of conspiracy and gross inexcusable negligence, because the latter was not simple negligence. Rather the negligence involved a willful, intentional, and conscious indifference to the consequences of one’s actions or omissions.” [Bacasmas vs. Sandiganbayan, G.R. No , Gaviola vs. People of the Philippines, G.R. No , Cesa vs. People of the Philippines, G.R. No , 10 July 2013 citing Albert vs. Sandiganbayan, G.R. No , 26 February , Gaviola vs. People of the Philippines, G.R. No , Cesa vs. People of the Philippines, G.R. No , 10 July 2013 citing Albert vs. Sandiganbayan, G.R. No , 26 February 2009] 4. Audit Reporting 4.1. Develop Audit Findings 48 Office of the President Internal Audit Office Cause, Probable Cause

49 h)“Gross inexcusable negligence is negligence characterized by the want of even slight care; acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to consequences in so far as other persons may be affected.” 49 Office of the President Internal Audit Office (emphases in the original) [Jaca vs. People of the Philippines, G.R. No , Gaviola vs. People of the Philippines, G.R. No , Cesa vs. People of the Philippines, G.R. No , 28 January 2013] 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

50 h)“The duties and responsibilities that the occupancy of a public office carry and the degree of relationship of interdependence of the different offices involved here determine the existence of conspiracy where gross inexcusable negligence was the mode of commission of the offense.” (Jaca vs. People 50 Office of the President Internal Audit Office of the Philippines, G.R. No , January 2013; Gaviola vs. People of the Philippines, G.R. No , 28 January 2013; and Cesa vs. People of the Philippines, G.R. No , 28 January 2013) 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause (continuation)

51 h)“[F]ailure to inquire further before affixing his signature despite the absence of the ‘particulars of payment’ in the disbursement vouchers as negligence on his part, to additionally affix his signature despite the lack of supporting documents only shows a gross and inexcusable disregard of the consequences of his act as approving authority.” (Gaviola vs. People of the Philippines, G.R. Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause (continuation) No , 28 January 2013)

52 i) “[E]scara had foreknowledge of the irregularity attendant in the delivery of the lumber supplied by Guadines. In his letter (Exhibit “I”) dated January 23, 1993 x x x he acknowledged that the materials intended for the construction of the Navotas Bridge had been confiscated by the DENR officials. Such foreknowledge should have put him on alert and prompted him, x x x.” 4. Audit Reporting 4.1. Develop Audit Findings 52 Office of the President Internal Audit Office Cause, Probable Cause (underscoring supplied) [Escara vs. People of the Philippines, G.R. No , 8 July 2005]

53 i) “There was evident bad faith and manifest partiality when he signed the inspection report and the disbursement voucher because he had foreknowledge that the materials delivered by Guadines have already been confiscated by the DENR, which caused undue injury to the Government and gave unwarranted benefit to Guadines in the amount of P70, ” (underscoring supplied) [Escara vs. People of the Philippines, G.R. No , 8 July 2005] 4. Audit Reporting 4.1. Develop Audit Findings 53 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

54 j) “[T]he added reason contemplated in Arias which would have put petitioner on his guard and examine the check/s and vouchers with some degree of circumspection before signing the same was obtaining in this case. x x x The discrepancy between the names indicated in the checks on one hand, and those in the disbursement vouchers on the other, should have alerted the petitioner x x x.” (underscoring j) “[T]he added reason contemplated in Arias which would have put petitioner on his guard and examine the check/s and vouchers with some degree of circumspection before signing the same was obtaining in this case. x x x The discrepancy between the names indicated in the checks on one hand, and those in the disbursement vouchers on the other, should have alerted the petitioner x x x.” (underscoring 4. Audit Reporting 4.1. Develop Audit Findings 54 Office of the President Internal Audit Office Cause, Probable Cause supplied) [Cruz vs. Sandiganbayan, G.R. No , 16 August 2005]

55 k)“[I]t is not unreasonable to expect petitioner to exercise the necessary diligence in making sure at the very least that the proper formalities in the questioned transaction were observed – that a public bidding was conducted. This step does not entail delving into intricate details of product quality complete delivery for fair and accurate pricing.” (underscoring supplied) [Nava k)“[I]t is not unreasonable to expect petitioner to exercise the necessary diligence in making sure at the very least that the proper formalities in the questioned transaction were observed – that a public bidding was conducted. This step does not entail delving into intricate details of product quality complete delivery for fair and accurate pricing.” (underscoring supplied) [Nava vs. Palattao, et. al, G.R. No , 28 August 2006] 4. Audit Reporting 4.1. Develop Audit Findings 55 Office of the President Internal Audit Office Cause, Probable Cause

56 k)“Unlike other minute requirements in government procurement, compliance or non-compliance with the rules on public bidding is readily apparent; x x x The process of approval is not a ministerial duty of approving authorities to sign every document that comes across their desks, and then point to their subordinates as the parties responsible if something goes awry.” (underscoring supplied) k)“Unlike other minute requirements in government procurement, compliance or non-compliance with the rules on public bidding is readily apparent; x x x The process of approval is not a ministerial duty of approving authorities to sign every document that comes across their desks, and then point to their subordinates as the parties responsible if something goes awry.” (underscoring supplied) 4. Audit Reporting 4.1. Develop Audit Findings 56 Office of the President Internal Audit Office Cause, Probable Cause (continuation) [Nava vs. Palattao, et. al, G.R. No , 28 August 2006]

57 l) “In sum, petitioner’s signing the check, with full knowledge that it is to be drawn, as it in fact was, from the special account sourced from the donation, and that the proceeds of the check are to be used, as they in fact were, for the procurement of a vehicle, coupled with the fact that the purchase was effected without public bidding, x x x.” (underscoring l) “In sum, petitioner’s signing the check, with full knowledge that it is to be drawn, as it in fact was, from the special account sourced from the donation, and that the proceeds of the check are to be used, as they in fact were, for the procurement of a vehicle, coupled with the fact that the purchase was effected without public bidding, x x x.” (underscoring supplied) [Manhit vs. Office of the Ombudsman, G.R. No , 7 September 2007] 57 Office of the President Internal Audit Office 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

58 m) “The fact that the Maysilo estate has spawned conflicting claims of ownership which invariably reached the courts, a fact which petitioner cannot ignore on account of her long exposure and experience as a register of deeds, should have impelled petitioner to be more prudent even to the extent of deliberately holding action on the papers submitted to her relative to the estate until she shall have fully satisfied herself that everything was above board.” (underscoring supplied) [Alfonso vs. Office of the President, G.R. No , 2 April 2007] m) “The fact that the Maysilo estate has spawned conflicting claims of ownership which invariably reached the courts, a fact which petitioner cannot ignore on account of her long exposure and experience as a register of deeds, should have impelled petitioner to be more prudent even to the extent of deliberately holding action on the papers submitted to her relative to the estate until she shall have fully satisfied herself that everything was above board.” (underscoring supplied) [Alfonso vs. Office of the President, G.R. No , 2 April 2007] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

59 59 n) “The authority of the Head of Office to approve the Disbursement Voucher is dependent on the certifications of the Budget Officer, the Accountant and the Treasurer on the principle that it would be improbable for the Head of Office to check all the details and conduct physical inspection and verification of all papers considering the voluminous paperwork attendant to his office.” (underscoring supplied) [Roque vs. Court of Office of the President Internal Audit Office 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause Appeals, et. al., G.R. No , 23 July 2008 ]

60 o)“Nevertheless, ‘(t)he illegality of the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party claiming thereunder may recover what had been paid or delivered.’” (underscoring supplied o)“Nevertheless, ‘(t)he illegality of the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the party claiming thereunder may recover what had been paid or delivered.’” (underscoring supplied [Vigilar vs. Aquino, G.R. No , 18 January 2011] 4. Audit Reporting 4.1. Develop Audit Findings 60 Office of the President Internal Audit Office Cause, Probable Cause

61 p) “Section 48 of the Administrative Code of 1987 provides that ‘the officer or officers entering into the contract shall be liable to the Government or other contracting party for any consequent damage to the same extent as if the transaction had been wholly between private parties. Kanlaon could go after the officers who signed the contract and hold them personally liable.” (underscoring supplied) [Philippine National Railways vs. Kanlaon Construction Enterprises Co, Inc., G.R. No , 6 April 2011] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

62 q) “As pointed out in our Decision, records showed it was petitioner who ordered the reconstitution of the PBAC which nullified the previous bidding conducted in December He further secured the services of the DAP- TEC for technical evaluation and signed the agreement for the said technical assistance when it is already the duty of the PBAC Chairman.” (underscoring supplied) [Verzosa, Jr. vs. Carague, G.R. No , 7 February 2012] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

63 the original) [Office of the Ombudsman (Mindanao) vs. Cruzabra, G. R. No , 24 February 2010] r) “Respondent’s guilt of neglect of duty becomes more pronounced as note is taken of her admitted inaction upon learning of the irregularity. Her justification for such inaction – that to do so would subject her to a charge of falsification – reflects her indifference, to say the least, to her duties and functions.” (underscoring in r) “Respondent’s guilt of neglect of duty becomes more pronounced as note is taken of her admitted inaction upon learning of the irregularity. Her justification for such inaction – that to do so would subject her to a charge of falsification – reflects her indifference, to say the least, to her duties and functions.” (underscoring in 4. Audit Reporting 4.1. Develop Audit Findings 63 Office of the President Internal Audit Office Cause, Probable Cause

64 r)“That it is the duty and responsibility of respondent, as register of deeds, to direct and supervise the activities of her office can never be overemphasized. Whether respondent exercised prudence and vigilance in discharging her duties, she has not shown.” (underscoring and emphasis in the r)“That it is the duty and responsibility of respondent, as register of deeds, to direct and supervise the activities of her office can never be overemphasized. Whether respondent exercised prudence and vigilance in discharging her duties, she has not shown.” (underscoring and emphasis in the original)[Office of the Ombudsman (Mindanao) vs. Cruzabra, G.R. No , 24 February 2010] 4. Audit Reporting 4.1. Develop Audit Findings 64 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

65 s) “SEC. 38. Definition of Administrative Relationship. – x x x (1) x x x (1) x x x (2) Administrative Supervision. – (a) x x x to generally oversee the operations of such agencies and to insure that they are managed effectively, efficiently and economically but without interference with day-to-day activities;... (2) Administrative Supervision. – (a) x x x to generally oversee the operations of such agencies and to insure that they are managed effectively, efficiently and economically but without interference with day-to-day activities; Audit Reporting 4.1. Develop Audit Findings 65 Office of the President Internal Audit Office Cause, Probable Cause

66 s) or require the submission of reports and cause the conduct of management audit, performance evaluation and inspection to determine compliance with policies, standards and guidelines of the department; Audit Reporting 4.1. Develop Audit Findings 66 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

67 s) to take such actions as may be necessary for the proper performance of official functions, including rectification of violations, abuses and other forms of maladministration; and to review and pass upon budget proposals of such agencies but may not increase or add to them; x x x.” (underscoring supplied) x x x.” (underscoring supplied) [Section 38, Chapter 7, Book IV, Executive Order (EO) No. 292 s. 1987, the “Administrative Code of 1987,” as amended, 25 July 1987] 4. Audit Reporting 4.1. Develop Audit Findings 67 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

68 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause t) “Although there is nothing in the petitioners’ annexes that would show that petitioners themselves personally approved and signed SPCDFI’s loan application, petitioners were the officers directly charged with the power of processing, reviewing and evaluating CMP loan documents.” (underscoring supplied) t) “Although there is nothing in the petitioners’ annexes that would show that petitioners themselves personally approved and signed SPCDFI’s loan application, petitioners were the officers directly charged with the power of processing, reviewing and evaluating CMP loan documents.” (underscoring supplied) [Olaguer vs. Domingo, G.R. No , 20 June 2001] Office of the President Internal Audit Office 68

69 4. Audit Reporting 4.1. Develop Audit Findings t) “In the exercise of the power to process, review and evaluate CMP loan applications, petitioners had the power to compel submission of documentary requirements x x x Notably, despite non-compliance with the documentary requirements, SPCDFI-AMAKA’s revised loan application which was submitted on October 3, 1989 was approved by the APED on October 5, in a span of only three (3) days.” [Olaguer vs. Domingo, G.R. No , 20 June 2001] Office of the President Internal Audit Office Cause, Probable Cause (continuation)

70 4. Audit Reporting 4.1. Develop Audit Findings t) “Petitioners also had the power to conduct surveys and ocular inspection on the subject property. x x x Indeed, there is nothing in the records that would show that petitioners conducted an actual physical inspection of the AMAKO site before or even after release of the loan proceeds.” [Olaguer vs. Domingo, G.R. No , 20 June 2001] Office of the President Internal Audit Office Cause, Probable Cause (continuation)

71 u) “Moreover, despite patent and glaring defects in the typewriters which could be determined by a reasonable inspection of the units, petitioner signed the Reports of Inspection that mentioned only that the delivered typewriters met the quantity ordered. The report was silent on the quality of the typewriters. x x x.” (underscoring u) “Moreover, despite patent and glaring defects in the typewriters which could be determined by a reasonable inspection of the units, petitioner signed the Reports of Inspection that mentioned only that the delivered typewriters met the quantity ordered. The report was silent on the quality of the typewriters. x x x.” (underscoring 4. Audit Reporting 4.1. Develop Audit Findings 71 Office of the President Internal Audit Office original) [Dugayon vs. People of the Philippines, G.R. No , 12 August 2004] Cause, Probable Cause

72 u) “Petitioner is an Assistant Regional Director, not the head of office or the final approving authority on whom the Arias doctrine is applicable.” [Dugayon vs. People of the u) “Petitioner is an Assistant Regional Director, not the head of office or the final approving authority on whom the Arias doctrine is applicable.” [Dugayon vs. People of the 4. Audit Reporting 4.1. Develop Audit Findings 72 Office of the President Internal Audit Office Philippines, G.R. No , 12 August 2004] Cause, Probable Cause (continuation)

73 v) “The flow chart clearly shows that, after the PROJECT IMPLEMENTATION stage, the project must be inspected by the PROJECT INSPECTORATE TEAM before there can be ACCEPTANCE/TURNOVER and thereafter, PAYMENT. x x x [I]t can be deduced from the flow chart that prior examination of the project by the Inspectorate Team is necessary before there can be acceptance or turnover of PSB projects and payment to the contractors concerned.” (emphasis and under- scoring original) [Leycano vs. Commission on Audit, G.R. No , 10 February 2006] 4. Audit Reporting 4.1. Develop Audit Findings 73 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

74 v) “Thus, petitioner should have perceived the anomaly in the existence of Acceptance Reports executed by DECS officials prior to the Inspectorate Team’s assessment of the projects and its issuance of a certificate of inspection. Strangely, rather than being alerted by this circumstance, petitioner even claims that these Acceptance Reports were among his bases for signing the Certificate of Inspection.” v) “Thus, petitioner should have perceived the anomaly in the existence of Acceptance Reports executed by DECS officials prior to the Inspectorate Team’s assessment of the projects and its issuance of a certificate of inspection. Strangely, rather than being alerted by this circumstance, petitioner even claims that these Acceptance Reports were among his bases for signing the Certificate of Inspection.” (underscoring in the original, emphasis supplied)[Leycano vs. Commission on Audit, G.R. No , 10 February 2006] 4. Audit Reporting 4.1. Develop Audit Findings 74 Office of the President Internal Audit Office Cause, Probable Cause (continuation)

75 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause (continuation) v)“To begin with, when petitioner signed the certificate of inspection, he was acting not in his capacity as treasurer but as a member of the Inspectorate Team. The function of inspecting PSP projects is not among the duties of a treasurer enumerated in Section 470 of the LGC. Since petitioner was not then acting as a head of office, Arias finds no application.” (underscoring in the original) [Leycano vs. Commission on Audit, G.R. No , 10 February 2006] 75 Office of the President Internal Audit Office

76 w) “By merely looking at Formal Entry and Internal Revenue Declaration No and the invoice, one can readily see the discrepancy between what are declared in the former and in the latter. In Formal Entry and Internal Revenue Declaration No , what were mentioned were men’s and ladies’ accessories. However, in the invoice, electronic equipment and appliances such as VHS, Betamax, television and the like were stated.” (underscoring supplied) [Francisco vs. People of the Philippines, G.R. No , 14 July 2009; Ojeda vs. People of the Philippines, G.R. No , 14 July 2009] w) “By merely looking at Formal Entry and Internal Revenue Declaration No and the invoice, one can readily see the discrepancy between what are declared in the former and in the latter. In Formal Entry and Internal Revenue Declaration No , what were mentioned were men’s and ladies’ accessories. However, in the invoice, electronic equipment and appliances such as VHS, Betamax, television and the like were stated.” (underscoring supplied) [Francisco vs. People of the Philippines, G.R. No , 14 July 2009; Ojeda vs. People of the Philippines, G.R. No , 14 July 2009] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

77 w) “From the entry and the invoice alone, one can definitely see something strange and irregular. His claim of good faith will not stand. As principal examiner and the superior of Francisco, his duty was to carefully review the evaluation made by his subordinate. This, he miserably failed to do. On the face of the documents, there were admittedly glaring discrepancies and suspicious entries that should have alerted him.” (underscoring supplied)[Francisco vs. People of the Philippines, G.R. No , 14 July 2009; Ojeda vs. People of the Philippines, G.R. No , 14 July 2009] w) “From the entry and the invoice alone, one can definitely see something strange and irregular. His claim of good faith will not stand. As principal examiner and the superior of Francisco, his duty was to carefully review the evaluation made by his subordinate. This, he miserably failed to do. On the face of the documents, there were admittedly glaring discrepancies and suspicious entries that should have alerted him.” (underscoring supplied)[Francisco vs. People of the Philippines, G.R. No , 14 July 2009; Ojeda vs. People of the Philippines, G.R. No , 14 July 2009] Office of the President Internal Audit Office Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause (continuation)

78 78 in parenthesis supplied] (Suarez vs. COA, G.R. No , 7 August 1998) x) “Clearly, petitioner’s participation in the PBAC does not render her liable for the disallowed amounts. As the solicitor general correctly argued, petitioner had nothing to do with the preparation and the computation of the AAE (now ABC) and, thus, should not have been held liable for the amounts disauthorized during the post-audit.” [underscoring and words Office of the President Internal Audit Office 4. Audit Reporting 4.1. Develop Audit Findings Cause, Probable Cause

79 4. Audit Reporting 4.1. Develop Audit Findings 79 Office of the President Internal Audit Office Cause, Probable Cause (continuation) y)“The essential element of bad faith is evident in Montano’s and Duran’s failure to prepare and submit the required documentation ordinarily attendant to procurement transactions and government expenditures, as mandated by Section 4(6) of P.D. No. 1445, which states that claims against government funds shall be supported by complete documentation. ” (underscoring supplied) [Luspo vs. People of the Philippines, G.R. No , Montano vs. Tugaoen, G.R. No ; Duran, Sr. vs. People of the Philippines, G.R. No , 14 February 2011]

80 4. Audit Reporting 4.1. Develop Audit Findings 80 Office of the President Internal Audit Office Cause, Probable Cause (continuation) y)“x x x that no document was submitted to the PNP Logistics Services relative to the procurement of P10 million worth of CCIE for North CAPCOM.” [ibid.] y)“x x x that no document was submitted to the PNP Logistics Services relative to the procurement of P10 million worth of CCIE for North CAPCOM.” [ibid.] y)“x x x that North CAPCOM did not officially receive the P10,000, ASAs issued by the ODC, supposedly intended for the purchase of CCIE.” [Luspo vs. People y)“x x x that North CAPCOM did not officially receive the P10,000, ASAs issued by the ODC, supposedly intended for the purchase of CCIE.” [Luspo vs. People of the Philippines, G.R. No , Montano vs. Tugaoen, G.R. No ; Duran, Sr. vs. People of the Philippines, G.R. No , 14 February 2011]

81 4. Audit Reporting 4.1. Develop Audit Findings 81 Office of the President Internal Audit Office Cause, Probable Cause (continuation) y)“x x x that the vouchers and allied documents pertaining to the procurement of Combat Clothing and Individual Equipment in the amount of P10,000, did not pass [the Chief Accountant North CAPCOM] office for appropriate action.” y)“x x x that the vouchers and allied documents pertaining to the procurement of Combat Clothing and Individual Equipment in the amount of P10,000, did not pass [the Chief Accountant North CAPCOM] office for appropriate action.” (words in bracket supplied)[Luspo vs. People of the Philippines, y)“x x x no records pertaining to the purchase of P10 million CCIE were forwarded to the COA.” [ibid.] y)“x x x no records pertaining to the purchase of P10 million CCIE were forwarded to the COA.” [ibid.] G.R. No , Montano vs. Tugaoen, G.R. No ; Duran, Sr. vs. People of the Philippines, G.R. No , 14 February 2011]

82 4. Audit Reporting 4.1. Develop Audit Findings 82 Office of the President Internal Audit Office Cause, Probable Cause (continuation) y) “The 100 checks were made payable to only 4 enterprises at 25 checks each. This should have sounded alarm bells in the mind of any reasonably judicious accountable officer, such as Duran, to inquire into the veracity of the transaction concerned. ” [Luspo vs. People of the Philippines, y) “The 100 checks were made payable to only 4 enterprises at 25 checks each. This should have sounded alarm bells in the mind of any reasonably judicious accountable officer, such as Duran, to inquire into the veracity of the transaction concerned. ” [Luspo vs. People of the Philippines, G.R. No ; Montano vs. Tugaoen, G.R. No ; Duran, Sr. vs. People of the Philippines, G.R. No , 14 February 2011]

83 4.1. Develop Audit Findings Cause, Root Cause 4. Audit Reporting 31010:2010 (ISO published 2009), the “Risk management – Risk assessment techniques,” 11 March Office of the President Internal Audit Office a) “The evaluation of causes often progresses from initially evident physical causes to human related causes and finally to underlying management or fundamental causes. Causal factors have to be able to be controlled or eliminated by involved parties in order for corrective action to be effective and worthwhile.” (Annex B, Clause B.12.4, PNS IEC/ISO

84 4.1. Develop Audit Findings Cause, Root Cause 4. Audit Reporting 84 Office of the President Internal Audit Office b)“Structured analysis techniques may consist of one of the following: (Annex B, Clause B.12.4, PNS IEC/ISO 31010:2010 (ISO published 2009), “Risk management – the Risk assessment techniques,” 11 March 2010) “‘5 whys’; i) “failure mode and effects analysis; ii) “fault tree analysis; iii) “Fishbone or Ishikawa diagrams; iv) “Pareto analysis; v) “root cause mapping.” vi)

85 4.1. Develop Audit Findings Cause, Root Cause 4. Audit Reporting 85 Office of the President Internal Audit Office c) “RCA is applied in various contexts with the following broad areas of usage: “safety-based RCA is used for accident investigations and occupational health and safety; i) “failure analysis is used in technological systems related to reliability and maintenance; ii) “process-based RCA is focused on business processes;... iii)

86 4.1. Develop Audit Findings Cause, Root Cause 4. Audit Reporting 86 Office of the President Internal Audit Office c) “Root Cause Analysis (continuation) “production-based RCA is applied in the field of quality control for industrial manufacturing; “system-based RCA has developed as a combination of the previous areas to deal with complex systems with application in change management, risk management and systems analysis.” (Annex B, Clause B.12.2, PNS IEC/ISO 31010:2010 (ISO published 2009), the “Risk management – Risk assessment techniques,” 11 March 2010) iv) v)

87 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 87 Office of the President Internal Audit Office a)“Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable might conceivably opine otherwise.” (Montemayor Bundalian, G.R. No ,1 July 2003; Office of the Ombudsman (Mindanao) vs. Cruzabra, G.R. No , 24 February 2010) vs. Bundalian, G.R. No , 1 July 2003; Office of the Ombudsman (Mindanao) vs. Cruzabra, G.R. No , 24 February 2010)

88 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 88 Office of the President Internal Audit Office b)“This Court, in such cases, differentiated the reasonable and prudent man from ‘a person with training in the law such as a prosecutor or a judge,’ and identified him as ‘the average man on the street,’ who weighs facts and circumstances without resorting to the calibrations of our technical rules of evidence of which his knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men have in abundance.” (underscoring supplied) [SEC vs. Interport Resources Corporation, G.R. No , 6 October 2008]

89 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 89 Office of the President Internal Audit Office c)“Rather, for purpose of administrative proceeding where the quantum of evidence required is substantive evidence and not proof beyond reasonable doubt, it is sufficient that the two respondents by their own respective acts have participated in the realization of the fraudulent and unlawful object and without such collusion the objective could not have been accomplished.” [underscoring supplied] (Office of the Court Administrator vs. Nobleza, A.M. No. P , 24 April 2009)

90 d)“The finding of the Sandiganbayan that the ASAs were issued over and above the approved P 6,000, CCIE budget for calendar year 1992 was not supported by evidence on record. The prosecution did not present any document showing the PNP or the North CAPCOM’s budgetary program for 1992.” [Luspo vs. People of the Philippines, G.R. No , Montano vs. Tugaoen, G.R. No ; Duran, Sr. vs. People of the Philippines, G.R. No , 14 February 2011] 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 90 Office of the President Internal Audit Office

91 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 91 Office of the President Internal Audit Office e)“ (underscoring supplied) [Caoili vs. e)“Being a public document, it is a prima facie evidence of the facts therein stated. It may be presented without further proof, the certificate of acknowledgment being prima facie evidence of the execution of the instrument or document involved. Exhibit "B" being a notarized document has in its favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant.” (underscoring supplied) [Caoili vs. Court of Appeals, Court of Appeals, G.R. No , 14 September 1999)

92 4. Audit Reporting 4.1. Develop Audit Findings 92 Office of the President Internal Audit Office Cause, Evidence f)“Consequently, where there is a defect in the notarization of a document, the clear and convincing evidentiary standard normally attached to a duly- notarized document is dispensed with, and the measure to test the validity of such document is preponderance of evidence.” (underscoring supplied) [Meneses vs. f)“Consequently, where there is a defect in the notarization of a document, the clear and convincing evidentiary standard normally attached to a duly- notarized document is dispensed with, and the measure to test the validity of such document is preponderance of evidence.” (underscoring supplied) [Meneses vs. Venturozo, G.R. No , 19 Venturozo, G.R. No , 19 October 2011]

93 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 93 Office of the President Internal Audit Office g) “SEC. 1. Preponderance of evidence, how determined. (underscoring supplied) [Rule 133, g) “SEC. 1. Preponderance of evidence, how determined.- x x x the witnesses’ manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility x x x.” (underscoring supplied) [Rule 133, Revised Rules on Evidence Evidence, Rules of Court, as amended by AM No SC, 27 December 2007)

94 4. Audit Reporting 4.1. Develop Audit Findings 94 Office of the President Internal Audit Office Cause, Evidence h)“The actions taken by petitioner involved the very functions he had to discharge in the performance of official duties. x x x Inasmuch as no evidence was presented to show that petitioner acted in bad faith and with gross negligence in the performance of his official duty, he is presumed to have acted in the regular performance of his official duty.” (underscoring supplied) [Albert vs. Gangan h)“The actions taken by petitioner involved the very functions he had to discharge in the performance of official duties. x x x Inasmuch as no evidence was presented to show that petitioner acted in bad faith and with gross negligence in the performance of his official duty, he is presumed to have acted in the regular performance of his official duty.” (underscoring supplied) [Albert vs. Gangan G.R. No , 6 March 2001]

95 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 95 Office of the President Internal Audit Office i)“The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to perform a duty. The presumption, however, prevails until it is overcome by no less than clear and convincing evidence to the contrary. Thus, unless the presumption is rebutted, it becomes conclusive.” (underscoring supplied) [Bustillo vs. People of the Philippines, G.R. No , 12 May 2010]

96 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 96 Office of the President Internal Audit Office j) “ (Chiang Yia j) “The person who alleges fraud or negligence must prove it, because the general presumption is that men act with care and prudence. Good faith is always presumed and it is the burden of the party claiming otherwise to adduce clear and convincing evidence to the contrary.” (Chiang Yia Min vs. Court of Appeals, Min vs. Court of Appeals, G.R. No , 28 March 2001)

97 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 97 Office of the President Internal Audit Office k) “Stated otherwise, in situations of fallible discretion, good faith is nonetheless appreciated when the document relied upon and signed shows no palpable nor patent, no definite nor certain defects or when the public officer’s trust and confidence in his subordinates upon whom the duty primarily lies within parameters of tolerable judgment and permissible margins of error.” (underscoring supplied) [Sistoza k) “Stated otherwise, in situations of fallible discretion, good faith is nonetheless appreciated when the document relied upon and signed shows no palpable nor patent, no definite nor certain defects or when the public officer’s trust and confidence in his subordinates upon whom the duty primarily lies within parameters of tolerable judgment and permissible margins of error.” (underscoring supplied) [Sistoza vs. Desierto, G.R. No , 2 September 2002]

98 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 98 Office of the President Internal Audit Office l)“In truth, good faith in situations of infallible discretion inheres only within the parameters of tolerable judgment and does not apply where the issues are so simple and the applicable legal principle evident and basic as to be beyond permissible margins of error.” (underscoring supplied) [Mactan Cebu International Airport vs. Hantanosas, A.M. No. RTJ , 25 October 2004 citing Poso vs. Mijares, A.M. No. RTJ , 21 August 2002]

99 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 99 Office of the President Internal Audit Office m)“The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather, even if the grant of the incentive award were not for a dishonest purpose as they claimed, the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof.” (underscoring in the original) [Casal vs. Commission On Audit, G.R. No , 30 November 2006] m)“The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather, even if the grant of the incentive award were not for a dishonest purpose as they claimed, the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof.” (underscoring in the original) [Casal vs. Commission On Audit, G.R. No , 30 November 2006]

100 4.1. Develop Audit Findings Cause, Evidence 4. Audit Reporting 100 Office of the President Internal Audit Office n)“Petitioner’s actual knowledge of the absence of supporting legal documents for the lumber she contracted to deliver to the provincial government -- which resulted in its confiscation by the CENR personnel -- belies her claim of good faith in receiving the payment for the said lumber.” (underscoring supplied) [Guadines vs. n)“Petitioner’s actual knowledge of the absence of supporting legal documents for the lumber she contracted to deliver to the provincial government -- which resulted in its confiscation by the CENR personnel -- belies her claim of good faith in receiving the payment for the said lumber.” (underscoring supplied) [Guadines vs. Sandiganbayan and People of the Philippines, G.R. No , 5 June 2011]

101 4.1.Develop Audit Findings Cause, Evidence 4. Audit Reporting 101 Office of the President Internal Audit Office o) “x x x ‘good faith’ is ordinarily used to describe that state of mind denoting ‘honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry ; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.’” (emphasis in the original) [Civil o) “x x x ‘good faith’ is ordinarily used to describe that state of mind denoting ‘honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry ; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.’” (emphasis in the original) [Civil Service Commission vs. Maala, G.R. No , 18 August 2005; and Philippine Economic Zone Authority (PEZA) vs. Commission on Audit, G.R. No , 3 July 2012]

102 102 Office of the President Internal Audit Office “ Section 7. Authority to Establish Compliance Procedure The following shall have the authority to establish compliance procedures for the review of statements to determine whether said statements have been properly accomplished: ( a) x x x (b) In the case of the Executive Department, the heads of department, offices and agencies insofar as their respective departments, offices and agencies are concerned subject to the approval of the Secretary of Justice. (c) x x x.” [CSC MC No. 10 dated 17 April 2006, “Review and Compliance Procedure in the Filing and Submission of Statement of Assets, Liabilities and Networth and Disclosure of Business Interests and Financial Connections”, as amended by CSC MC No. 3, dated 24 January 2013, “Amendment to the Review and Compliance Procedure in the Filing and Submission of the Statement of Assets, Liabilities and Net Worth and Disclosure of Business interests and Financial Connections”]

103 103 Office of the President Internal Audit Office 1. Internal Procedure 1.1. “If a head of office finds that the SALN of a certain subordinate is incomplete or not in the proper form, then the head of office must inform the subordinate concerned and direct him to take corrective action. Unquestionably, it is an internal procedure limited within the office concerned.” [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007]

104 104 Office of the President Internal Audit Office 1. Internal Procedure 1.2. “But this procedure is an internal office matter. Whether or not the head of office has taken such step with respect to a particular subordinate cannot bar the Office of the Ombudsman from investigating the latter.” [Carabeo vs. Sandiganbayan G.R. Nos , 21 February 2011]

105 105 Office of the President Internal Audit Office 2. Formal Defects 2.1. “The notice and correction referred to in Section 10 are intended merely to ensure that SALNs are ‘submitted on time, are complete, and are in proper form.’ Obviously, these refer to formal defects in the SALNs. The charges against Carabeo, however, are for falsification of the assets side of his SALNs and for declaring a false net worth.” [Carabeo vs. Sandiganbayan, G.R , 21 February 2011] Nos , 21 February 2011]

106 2.2. “The Court cannot accept the view that the review required of the Committee refers to the substance of what is stated in the SALN, i.e., the truth and accuracy of the answers stated in it, for the following reasons: Office of the President Internal Audit Office 106 original) [PAGC vs. Pleyto G.R. No , 23 March 2011] 2. Formal Defects “ First. x x x Any falsity in the SALN makes him liable for falsification of public documents under Article 172 of the Revised Penal Code. “ Second. The law will not require the impossible, namely, that the Committee must ascertain the truth of all the information that the public officer or employee stated or failed to state in his SALN and remind him of it. x x x” (emphasis in the

107 107 Office of the President Internal Audit Office 3. For RA “While Section 10 of RA 6713 indeed allows for corrective measures, Carabeo is charged not only with violation of RA 6713, but also with violation of the Revised Penal Code, RA 1379, and RA 3019, as amended, x x x.” [Carabeo vs. Court of Appeals, G.R. Nos and , 4 December 2009]

108 108 Office of the President Internal Audit Office 3. For RA “Significantly, Carabeo failed to show any requirement under RA 3019 that prior notice of the non-completion of the SALN and its correction precede the filing of charges for violation of its provisions. Neither are these measures needed for the charges of dishonesty and grave misconduct, which Carabeo presently faces.” (Carabeo vs. Court of Appeals, G.R. Nos and , 4 December 2009)

109 1.Assets to Disposable Fund Analysis 1.1. This method is used to compare property, business interests and financial connections acquired by the public official or employee against his salary and disposable funds. Office of the President Internal Audit Office 109

110 1.Assets to Disposable Fund Analysis 1.2. “SEC. 7. Statement of Assets and Liabilities. - Every public officer, x x x, shall prepare and file x x x, a true and detailed sworn statement of assets and liabilities, including a statement of the amounts and sources of his income, the amount of his personal and family expenses and the amount of income taxes paid for the next preceding calendar year: x x x.” (underscoring supplied) [Republic Act (RA) 3019 or the “Anti-Graft and Corrupt Practices Act”, as amended, 17 August 1960; and Morfe vs. Mutuc, L-20387, 31 January 1968] Office of the President Internal Audit Office 110

111 1.Assets to Disposable Fund Analysis 1.3..” (underscoring supplied) [RA “SEC. 8. Prima Facie Evidence of and Dismissal Due to Unexplained Wealth. - If in accordance with the provisions of Republic Act Numbered One Thousand Three Hundred Seventy-Nine, a public official has been found to have acquired during his incumbency, whether in his name or in the name of other persons, an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, x x x.” (underscoring supplied) [RA 3019 or the “Anti-Graft and Corrupt Practices “Act”, as amended, 17 August 1960] Office of the President Internal Audit Office 111

112 1.Assets to Disposable Fund Analysis 1.4..” (underscoring supplied) 1.4. “ Section 2. Filing of petition. Whenever any public officer or employee has acquired during his incumbency an amount of property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x x.” (underscoring supplied) [RA 1379 or “An Act Declaring Forfeiture in Favor of the State any Property Found to Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Procedure Therefor”, 18 June, 1955] Office of the President Internal Audit Office 112

113 1.Assets to Disposable Fund Analysis (underscoring supplied) 1.5. “(b) ‘Other legitimately acquired property’ means any real or personal property, money or securities which the respondent has at any time acquired by inheritance and the income thereof, or by gift inter vivos before his becoming a public officer or employee, or any property (or income thereof) already pertaining to him when he qualified for public office or employment, or the fruits and income of the exclusive property of the respondent's spouse. x x x.” (underscoring supplied) [Section 1, RA 1379 or “An Act DeclaringForfeiture inFavor of the State Any Property Found to Have Been Unlawfully Acquired By Any Public Officer or Employee and Providing for the Proceedings Therefore”, 18 June 1955] [Section 1, RA 1379 or “An Act Declaring Forfeiture in Favor of the State Any Property Found to Have Been Unlawfully Acquired By Any Public Officer or Employee and Providing for the Proceedings Therefore”, 18 June 1955] Office of the President Internal Audit Office 113

114 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “ (emphasis supplied) [Section 8, RA 6713 or the 1.6. “(A) Statements of Assets and Liabilities and Financial Disclosure. – All public officials and employees, except those who serve in an honorary capacity, laborers and casual or temporary workers, shall file under oath their Statements of Assets, Liabilities and Net Worth and a Disclosure of Business Interests and Financial connections and those of their spouses and unmarried children under eighteen (18) years of age living in their households. (emphasis supplied) [Section 8, RA 6713 or the “Code of Conduct and Ethical Standards for Public Officials and Employees”, 20 February 1989]

115 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “ ” (Section 8, RA 6713 or 1.7. “(B) Identification and Disclosure of Relatives. – It shall be the duty of every public official or employee to identify and disclose to the best of his knowledge and information, his relatives in the Government in the form, manner and frequency prescribed by the Civil Service Commission.” (Section 8, RA 6713 or the “Code of Conduct and Ethical Standards for Public Officials and Employees”, 20 February 1989)

116 1.Assets to Disposable Fund Analysis 1.8.“In ascertaining the value of respondent's properties and shareholdings, it is not the fair market value, as claimed by the petitioner, that should be made as basis thereof. Rather, as correctly held by the Sandiganbayan, it is the acquisition cost thereof, since it was the actual amount of money shelled out by respondent in acquiring them. It is the acquisition cost that must be charged against respondent's lawful income and funds.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan and Bugarin, GR No , 30 January 2002] Office of the President Internal Audit Office 116

117 1.Assets to Disposable Fund Analysis 1.9.“‘Acquisition Cost’ for newly acquired machinery not yet depreciated and appraised within the year of its purchase, refers to the actual cost of the machinery to its present owner, plus the cost of transportation, handling and installation at the present site;” (underscoring supplied) [Section 199(a), Chapter 1, Title II, Book II, RA 7160 or the “Local Government Code of 1991”, 1 January 1992] Office of the President Internal Audit Office 117

118 1.Assets to Disposable Fund Analysis 1.10.“5. x x x [H]e constructed a two-hectare fish cage in January 1989 by obtaining a loan in the amount of P300, However, an examination of the SAL of respondent for 1989 and 1991 reveals that he failed to declare either his ownership of or his financial interests in the said fish pens.” [Concerned Taxpayer vs. Doblada, A.M. No. 1342, 1.10.“5. x x x [H]e constructed a two-hectare fish cage in January 1989 by obtaining a loan in the amount of P300, However, an examination of the SAL of respondent for 1989 and 1991 reveals that he failed to declare either his ownership of or his financial interests in the said fish pens.” [Concerned Taxpayer vs. Doblada, A.M. No. 1342, P-99-8, June 2005] Office of the President Internal Audit Office 118

119 1.Assets to Disposable Fund Analysis “He claims that his ownership of the said fish pen was acquired in However, a perusal of his SAL for 1993 shows that while respondent declared his being a fish pen operator as part of his business interests, he failed to include said fish pen among his assets. ” (underscoring supplied) [Concerned “He claims that his ownership of the said fish pen was acquired in However, a perusal of his SAL for 1993 shows that while respondent declared his being a fish pen operator as part of his business interests, he failed to include said fish pen among his assets. It was only in 1995 that he began to declare the fish pen as part of his assets.” (underscoring supplied) [Concerned Taxpayer vs. Doblada, A.M. No. P , 8 June 2005] Office of the President Internal Audit Office 119

120 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “3. With respect to his fish pens, the fact that they were destroyed by a typhoon or that they were not yet completed or operational does not excuse respondent from declaring them as part of his assets during the years that they were constructed, considering that these assets have considerable value.” [Concerned Taxpayer vs. Doblada, Jr., P , 20 September 2005]

121 1.Assets to Disposable Fund Analysis “Notably, the acquisition value of the 2001 Ford Expedition was P1,599, is significantly greater than the amount declared by Montemayor under ‘machinery/ equipment’ worth P1,321, , acquired by him as of December 31, 2001, and to the P1,251, worth of ‘machinery/ equipment’ acquired by him as of December 31, 2002.” (underscoring supplied) [Flores vs. Montemayor, G. R. No , 25 August 2010] Office of the President Internal Audit Office 121

122 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “The law requires that the SSAL be accomplished truthfully and in detail without distinction as to how the property was acquired. Montemayor, therefore, cannot escape liability by arguing that the ownership of the 2001 Ford Expedition has not yet passed to him on the basis of a lame excuse that the said vehicle was acquired only on installment basis sometime in July 3, 2001.” (underscoring supplied supplied) [Flores vs. Montemayor, G.R. No , 25 August 2010]

123 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “Since the issue of sufficiency of income was raised by no less than the respondent himself, he should have been barred from questioning the authority and jurisdiction of the Ombudsman in resolving said issue, what with the familiar rule that a party who has invoked the jurisdiction of a court or tribunal is estopped from challenging that jurisdiction after the court or tribunal had decided the cast against him.” (underscoring supplied) [Ombudsman vs. Valeroso, G.R. No , 2 April 2007]

124 1.Assets to Disposable Fund Analysis 1.16.“[W] (emphasis in the original) [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007] 1.16.“[W]hether petitioner and his wife had the financial capacity to acquire the real properties. To answer this question, the relevant valuation would be the acquisition cost of the real properties vis- à-vis, the financial capacity of the petitioner and his wife at the time of their acquisition. Any appreciation (or depreciation) in the value of the real properties after their acquisition until present has no bearing herein.” (emphasis in the original) [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007] Office of the President Internal Audit Office 124

125 1.Assets to Disposable Fund Analysis 1.17.In His Name or in the Name of Other Persons 1.17.In His Name or in the Name of Other Persons “ ” “Moreover, it is futile for the Office of the Ombudsman to require the petitioner to present the net disposable income of his children when the PNP-CIDG failed to establish the acquisition costs of these properties. x x x Without the acquisition costs of the properties, there are no figures that may be measured against the earning capacity of petitioner’s children at the time they acquired their properties.” (underscoring supplied) [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007] Office of the President Internal Audit Office 125

126 1.Assets to Disposable Fund Analysis 1.17.In His Name or in the Name of Other Persons 1.17.In His Name or in the Name of Other Persons “ ” (emphasis supplied) [Pleyto vs. PNP “The burden is upon the PNP-CIDG, as the complainant against petitioner, to establish that these properties are actually owned by petitioner by proving first that his children had no financial means to acquire the said properties.” (emphasis supplied) [Pleyto vs. PNP- CIDG, G.R. No , 23 November 2007] Office of the President Internal Audit Office 126

127 1.Assets to Disposable Fund Analysis 1.17.In His Name or in the Name of Other Persons 1.17.In His Name or in the Name of Other Persons “Petitioner admitted that the Grant Deed over the property was in his name. He never denied the existence and due execution of the Grant Deed and the Special Power of Attorney he conferred to Estela Fajardo with respect to the acquisition of the Burbank property. With these admissions, the burden of proof was shifted to petitioner to prove non- ownership of the property.” (underscoring supplied) [Montemayor vs. Bundalian, GR No , 1 July 2003] Office of the President Internal Audit Office 127

128 1.Assets to Disposable Fund Analysis 1.18.“ ” (underscoring supplied) [Republic of 1.18.“The rental income of P1,748,640, which the Sandiganbayan included as part of his disposable funds, were for the period from 1981 to Thus, such income could not have been used by respondent in financing the purchase of his real properties and shareholdings in various companies prior to Besides, x x x considering that the properties from which such income was derived were not wholly funded by lawful income.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan and Bugarin, G.R. No , 30 January 2002] Office of the President Internal Audit Office 128

129 1.Assets to Disposable Fund Analysis “[T]he Sandiganbayan excluded the allowances from the DDB, Napolcom and Central Bank on the ground that they were given to Bugarin in the nature of reimbursement, which would imply that they had been spent for the purpose for which they were earmarked and could not have therefore been used in purchasing the subject properties.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan and Bugarin, GR No , 30 January 2002 ] Office of the President Internal Audit Office 129

130 1.Assets to Disposable Fund Analysis 1.20.“At most, it would subject him to the administrative penalty provided in the Civil Service Rules had the proper charge been files against him.. ” (underscoring supplied) [Republic 1.20.“At most, it would subject him to the administrative penalty provided in the Civil Service Rules had the proper charge been files against him. Such violation did not amount to a crime or graft and corrupt practice as defined by law. Hence, we are of the opinion that his professional fees should be included in the computation of his lawful income.” (underscoring supplied) [Republic vs. Sandiganbayan and Bugarin, GR No , 30 January 2002] Office of the President Internal Audit Office 130

131 1.Assets to Disposable Fund Analysis 1.21.“His averment that he received retirement benefits from the SGV was understandably disregarded because the only supporting document he presented then was the certification of the controller of SGV to the effect that he received such benefits. Ong was likewise unable to substantiate his claim that he had money market placements as he did not present any document evidencing such placements.” (underscoring 1.21.“His averment that he received retirement benefits from the SGV was understandably disregarded because the only supporting document he presented then was the certification of the controller of SGV to the effect that he received such benefits. Ong was likewise unable to substantiate his claim that he had money market placements as he did not present any document evidencing such placements.” (underscoring supplied) [Ong vs. Sandiganbayan, GR No , 16 September 2005] Office of the President Internal Audit Office 131

132 1.Assets to Disposable Fund Analysis 1.22.“ (underscoring 1.22.“Petitioner merely presented NPPS’ Certificate of Registration of Business Name secured by his wife Lourdes B. Racho. Yet, said certificate did not operate as a license to engage in any kind of business, much more a proof of its establishment and operation. Even assuming that said businesses exist, petitioner should have similarly reported his interests therein in his SALN.” (underscoring supplied) [Racho vs. Miro, G.R. No , 30 September 2008] Office of the President Internal Audit Office 132

133 1.Assets to Disposable Fund Analysis 1.23.“ (underscoring supplied) [Office of the Ombudsman vs. Racho, G.R. No , 31 January 2011] 1.23.“Although Racho presented the SEC Certificate of Registration of Angelsons, the business that he supposedly put up with his relatives, he showed no other document to confirm that the business is actually existing and operating. He likewise tried to show that his wife built a business of her own but he did not bother to explain how the business grew and merely presented a Certificate of Registration of Business Name from the DTI.” (underscoring supplied) [Office of the Ombudsman vs. Racho, G.R. No , 31 January 2011] Office of the President Internal Audit Office 133

134 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office “It also took against petitioner his refusal to submit his SALN and ITR despite the undertaking made by his counsel which raised the presumption that evidence willfully suppressed would be adverse if produced. The PCAGC concluded that as petitioner’s acquisition of the subject property was manifestly out of proportion to his salary, it has been unlawfully acquired. Thus, it recommended petitioner’s dismissal from service pursuant to Section 8 of R.A. No ” (underscoring supplied) [Montemayor vs. Bundalian, G.R. No , 1 July 2003]

135 1.25.“ ” (underscoring supplied) [Pleyto vs. PNP-CIDG, 1.25.“Also considering that the information the Court of Appeals was looking for could actually be deduced and computed from the income tax returns and financial statements already submitted by petitioner, this Court finds it arbitrary for the appellate court to simply brush aside petitioner’s evidence just because it was not presented in the form that it expected.” (underscoring supplied) [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007] 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 135

136 1.26.“ ” (underscoring supplied) [Pleyto vs. PNP-CIDG, 1.26.“The figures in the business income column were derived from the income statements of Miguela Pleyto, annexed to her income tax returns, x x x. The business income figures are already net of business expenses and provisions for income taxes, but include the amounts of depreciation of buildings, equipment and furniture/ fixtures.” (underscoring supplied) [Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007] 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 136

137 1.27. “x x x – fairness dictates that what must be considered as lawful income should only be the accumulated salaries of the spouses and what are shown in the public documents they submitted, such as their Income Tax Return (ITR) and their Balance Sheets.” [underscoring supplied] (Marcos vs. Republic of the 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 137 Philippines, G.R. No , 25 April 2012)

138 1.28. “Spouses Marcos did not declare any income from any deposits that may be subject to a 5% withholding tax, nor did they file any capital gains tax returns from 1960 to The Bureau of Internal Revenue attested that there are no records pertaining to the tax transactions of the spouses in Baguio City, Manila, Quezon City, and Tacloban.” [underscoring supplied] (Marcos 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 138 vs. Republic of the Philippines, G.R. No , 25 April 2012)

139 1.29. “The Balance Sheet attached to the couple’s ITR for 1965 indicates an ending net worth of Php 120,000, which covered the year immediately preceding their ascendancy to the presidency. As previously mentioned, the combined salaries of the spouses for the period 1966 to 1986, or in the two decades that they stayed in power, totaled only USD 304, ” (undersocring supplied) [Marcos vs. Republic 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 139 of the Philippines, G.R. No , 25 April 2012]

140 1.30. “In stark contrast, as shown by Schedule D, computations establish the total net worth of the spouses for the years 1965 until 1984 in the total amount of USD 957,487.75, assuming that the income from legal practice is real and valid. The combined salaries make up only 31.79% of the spouses’ total net worth from 1965 to This means petitioners are unable to account for or explain more than two-thirds of the total net worth of the Marcos spouses from 1965 to 1984.” (emphasis in the original) (Marcos vs. Republic of the Philippines, G.R. No , 25 April 2012) 1.Assets to Disposable Fund Analysis Office of the President Internal Audit Office 140

141 1.Assets to Disposable Fund Analysis 1.31.“It is unquestionable that the outstanding loan balance of respondent's obligation to the GSIS in the amount of P775, as of 28 February 1989 did not constitute as respondent's "income" in the strict sense of the word. The same, however, formed part of the disposable funds used by him in capitalizing his property acquisition and business investments.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan and Bugarin, G.R. No , 30 January 2002 ] Office of the President Internal Audit Office 141

142 1.Assets to Disposable Fund Analysis “[T] ” (underscoring supplied) “[T]he loan from the GSIS in the sum of P995, was granted only on 20 May We cannot, therefore, sustain respondent's claim that it was his source of fund in the construction of his house in Greenhills, San Juan, which was undertaken in 1980, there being no competent evidence that he obtained other loans to initially finance such construction and that the GSIS loan proceeds were in fact used by him in repaying such loans.” (underscoring supplied) [Republic vs. Sandiganbayan and Bugarin, GR No , 30 January 2002] [Republic vs. Sandiganbayan and Bugarin, GR No , 30 January 2002] Office of the President Internal Audit Office 142

143 1.Assets to Disposable Fund Analysis 1.33.“Further, apart from a certification from the corporate secretary of Allied Bank to the effect that he obtained a loan from the said bank, no other document, e.g., loan application, credit investigation report, loan approval, schedule of loans releases, real estate mortgage documents, promissory notes, cancelled checks, receipts for amortization payments, and statement of account, was presented to support the claim.” (underscoring supplied) [Ong vs. Sandiganbayan, G.R. No , 16 September 2005] Office of the President Internal Audit Office 143

144 1.Assets to Disposable Fund Analysis “Yet in her SALN, (underscoring supplied) “Yet in her SALN, she did not declare any cash in bank; nor is there any indication in her previous ( ) SALNs that she had property which she may have sold (and which is no longer declared in her 1993 and 1994 SALNs) or any business interest from which to draw funds to be able to afford to acquire the said four pieces of property; nor did her liabilities increase (to show, for example, that she took a loan for the purchase of these properties); nor did she inherit said properties; nor was she a donee thereof, x x x.” (underscoring supplied) Office of the President Internal Audit Office 144 [Ombudsman vs. Peliño, G.R. No , 14 April 2008]

145 1.Assets to Disposable Fund Analysis Computation Computation Real and personal property P xxx Business interests and financial connection xxx Total Assets acquired by public officer during the year Pxxx Less: Salary Less: SalaryPxxx Income from legitimately acquired Income from legitimately acquired property and other lawful income property and other lawful incomexxx Other cash/fund inflow(i.e. loans and credits) Other cash/fund inflow(i.e. loans and credits)xxx Disposable funds Disposable fundsxxx DiscrepancyPxxx Office of the President Internal Audit Office 145

146 2.Expenses to Disposable Fund Analysis 2.1. Under this method, the personal and family expenses, reduction in liabilities, cash and bank deposits, when allowed, of the public official during the year is compared with his salary and disposable funds during the same year Under this method, the personal and family expenses, reduction in liabilities, cash and bank deposits, when allowed, of the public official during the year is compared with his salary and disposable funds during the same year. Office of the President Internal Audit Office 146

147 2.2. “SEC. 7. Statement of Assets and Liabilities. - Every public officer, x x x, shall prepare and file x x x, a true and detailed sworn statement of assets and liabilities, including a statement of the amounts and sources of his income, the amount of his personal and family expenses and the amount of income taxes paid for the next preceding calendar year: x x x.” (underscoring supplied) [Republic Act (RA) 3019 or the “Anti-Graft and Corrupt Practices Act”, as amended, 17 August 1960; and Morfe vs. Mutuc, L-20387, 31 January 1968] 2.Expenses to Disposable Fund Analysis Office of the President Internal Audit Office 147

148 2.Expenses to Disposable Fund Analysis [RA 3019 or the 2.3. “SEC. 8. Prima Facie Evidence of and Dismissal Due to Unexplained Wealth. - x x x. Bank deposits in the name of or manifestly excessive expenditures incurred by the public official, his spouse or any of their dependents including but not limited to activities in any club or association or any ostentatious display of wealth including frequent travel abroad of a non- official character by any public official when such activities entail expenses evidently out of proportion to legitimate income, x x x.” (underscoring supplied) [RA 3019 or the “Anti-Graft and Corrupt Practices Act”, 17 August 1960, as amended by BP 195, 16 March 1982] Office of the President Internal Audit Office 148

149 2.4. “ ” (underscoring supplied) 2.4. “[T]he proceeds of the loan granted to him by the GSIS in 1983 and the rental income from 1981 to 1986, as well as the proceeds of the sale of his real property in 1984, could not have been utilized by him as his funds for the real properties and investments he acquired in 1980 and in the preceding years. x x x. This gross disparity would all the more be emphasized had there been evidence of his actual family and personal expenses and tax payments.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan; Bugarin, GR No , 30 January 2002 and Bugarin vs. Republic of the Phiippines, G.R. No , 6 August 2012] Office of the President Internal Audit Office Expenses to Disposable Fund Analysis

150 2.5.“ ” (Republic of the Philippines vs. 2.5.“[T]he Sandiganbayan declared as chargeable against his lawful income and disposable funds the amount of P497,094 representing tax payments made by the respondent from 1981 to 1986, as well as P310,000 representing family and personal expenses, x x x.” (Republic of the Philippines vs. Sandiganbayan and Bugarin, G.R. No , 30 January 2002) Office of the President Internal Audit Office 150

151 2.Expenses to Disposable Fund Analysis 2.6. “ ” 2.6. “Owing to the inflation and consequent decline of the purchasing power of the Philippine peso throughout the period in question, Bugarin's total family and personal expenses, as conceded by the Sandiganbayan, was extremely a conservative one. But, just like the Sandiganbayan, we can neither come up with a greater amount in the absence of any other evidence in support thereof.” (underscoring supplied) [Republic of the Philippines vs. Sandiganbayan and Bugarin, GR No , 30 January 2002] Office of the President Internal Audit Office 151

152 2.Expenses to Disposable Fund Analysis 2.7.“.” (Pleyto vs. PNP-CIDG, G.R. No , “The investigating officers, in fixing the amount of all the foreign trips at P100, each, offered no explanation or substantiation for the same. x x x. Without a reasonable estimation of the costs of the foreign travels of petitioner and his wife, there is no way to determine whether these were within their lawful income.” (Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007) Office of the President Internal Audit Office 152

153 2.Expenses to Disposable Fund Analysis 2.8. Computation 2.8. Computation Personal and family expenses P xxx Cash on hand and in bank (increase) x x x Reduction in liabilities xxx TotalPxxx Less: Salary Pxxx Income from legitimately acquired Income from legitimately acquired property and other lawful income property and other lawful incomexxx Other cash/fund inflow(i.e. loans and credits) Other cash/fund inflow(i.e. loans and credits)xxx Disposable funds Disposable fundsxxx DiscrepancyPxxx Office of the President Internal Audit Office 153

154 3.Net Worth to Disposable Fund Analysis 3.1. This is a method of reconstructing net worth based on the theory that if the public official or employee’s net worth has increased in a given year in an amount larger than his reported salary and disposable fund, the difference may give rise to findings for further investigation of the public official or employee This is a method of reconstructing net worth based on the theory that if the public official or employee’s net worth has increased in a given year in an amount larger than his reported salary and disposable fund, the difference may give rise to findings for further investigation of the public official or employee. Office of the President Internal Audit Office 154

155 3.Net Worth to Disposable Fund Analysis 3.2. “[T]he ‘net-worth-to-income-discrepancy analysis,’ may be effective only as an initial evaluation tool meant to raise warning bells as to possible unlawful accumulation of wealth by a public officer or employee, but it is far from being conclusive proof of the same.” [Pleyto vs. PNP-CIDG, GR No , 23 November 2007] Office of the President Internal Audit Office 155

156 3.Net Worth to Disposable Fund Analysis 3.3.“ ” (underscoring supplied) [Pleyto vs. PNP-CIDG, GR No , 23 November 2007] 3.3.“An increase in net worth in the succeeding year may not always be due to the acquisition of more properties by purchase. Many factors may account for the increase in net worth, such as the reduction or payment of liabilities in the succeeding year resulting in an increase in net worth even though the assets remain constant; or a donation or inheritance which may significantly increase the assets without any or with very minimal corresponding liability.” (underscoring supplied) [Pleyto vs. PNP-CIDG, GR No , 23 November 2007] Office of the President Internal Audit Office 156

157 3.Net Worth to Disposable Fund Analysis 3.4. Computation 3.4. Computation Assets (Real, personal and other properties) P xxx Less: Liabilities xxx Networth for the Stated Year Pxxx Less: Networth over Previous Year xxx Increase(Decrease) in Networth Pxxx Less: Salary Less: SalaryPxxx Income from legitimately acquired Income from legitimately acquired property and other lawful income property and other lawful incomexxx Other cash/fund inflow (i.e. loans and credits) Other cash/fund inflow (i.e. loans and credits)xxx Disposable funds Disposable fundsxxx DiscrepancyPxxx Office of the President Internal Audit Office 157

158 4.Funds Flow Analysis 4.1. Proceeds on the theory that where the amount of money which the public official or employee spends during a given year exceeds his reported salary and disposable funds, and the source of such fund is otherwise unexplained, the difference may give rise to findings for further investigation of the public official or employee Proceeds on the theory that where the amount of money which the public official or employee spends during a given year exceeds his reported salary and disposable funds, and the source of such fund is otherwise unexplained, the difference may give rise to findings for further investigation of the public official or employee. Office of the President Internal Audit Office 158

159 4.Funds Flow Analysis 4.2. This is a modification of the Expenditure Method provided by RMO 15-95, as amended, where cash outlays, other than expenses, are included in the computation to arrive at the total sources of funds and cash receipts, other than those from income, are included to arrive at the total application of funds This is a modification of the Expenditure Method provided by RMO 15-95, as amended, where cash outlays, other than expenses, are included in the computation to arrive at the total sources of funds and cash receipts, other than those from income, are included to arrive at the total application of funds. Office of the President Internal Audit Office 159

160 4.Funds Flow Analysis 4.3. Computation 4.3. Computation Sources of Funds Declared compensation income per SALN P xxx Business income (add back non-cash expenses e.g. bad debts, depreciation) xxx Income of spouse xxx Non-taxable receipts such as prizes, royalties xxx Receipts subject to final tax (i.e. dividends, donations and inheritance) xxx Other cash/fund inflow (i.e. loans or credit) xxx Cash at the beginning of the period xxx Total Sources of Funds Pxxx Office of the President Internal Audit Office 160

161 4.Funds Flow Analysis 4.3. Computation (continuation) 4.3. Computation (continuation) Less: Application of Funds Personal and family expenses P xxx Payments of debts, payables, accruals, and other liabilities xxx Payment of taxes xxx Acquisition of assets – real, personal and other assets xxx Other cash/funds outflow (i.e. donation) xxx Total Application of Funds xxx Discrepancyxxx Office of the President Internal Audit Office 161

162 Office of the President Internal Audit Office “Contrary to petitioner’s assertion, statements concerning relationship may be proved as to its truth or falsity, and thus do not amount to expression of opinion. When a government employee is required to disclose his relatives in the government service, such information elicited therefore qualifies as a narration of facts contemplated under Article 171 (4) of the Revised Penal Code, as amended.” (underscoring original) [Galeos vs. People of the Philippines, G.R. No , 9 February 2011]

163 Office of the President Internal Audit Office “PELIÑO claims she is not CUAKI’s biological parent; and that in 1983, or two years before CUAKI was born, she had her uterus surgically removed. x x x This is, however, a matter of defense which is appropriately threshed out during trial. As against her self-serving denials, the boy’s certificate of live birth prevails.” [Ombudsman vs. Peliño, G.R. No , 14 April 2008]

164 Office of the President Internal Audit Office “Her explanations that she only hid the fact of her marriage out of necessity and practical purposes, as would have been impractical for her husband to fly over the Philippines should the need for his signature in official documents arise, is simply unacceptable.” [Faelnar vs. Palabrica, A.M. No. P , 20 January 2009]

165 Office of the President Internal Audit Office 165 “The requirement for public officers, in general, to divest themselves of business interests upon assumption of a public office is prompted by the need to avoid conflict of interests. x x x A court, generally, is not engaged in the regulation of a public market, nor does it concern itself with the activities thereof.” [Rabe vs. Flores, AM No. P , 14 May 1997]

166 Office of the President Internal Audit Office “[C]ustodians of public documents must not concern themselves with the motives, reasons and objects of the persons seeking access to the records. The moral or material injury which their misuse might inflict on others is the requestor’s responsibility and lookout. Any publication is made subject to the consequences of the law.” [Re: Request for Copy of 2008 Statement of Assets, Liabilities and Networth [SALN] and Personal Data Sheet or Curriculum Vitae of the Justices of the Supreme Court and Officers and Employees of the Judiciary, A.M. No SC; Re: Request of Philippine Center for Investigative Journalism [PCIJ] for the 2008 Statement of Assets, Liabilities and Networth [SALN] and Personal Data Sheets of the Court of Appeals Justices, A.M. No CA, 13 June 2012]

167 Office of the President Internal Audit Office “While public officers in the custody or control of public records have the discretion to regulate the manner in which records may be inspected, examined or copied by interested persons, such discretion does not carry with it the authority to prohibit access, inspection, examination, or copying of the records.” [Re: Request for Copy of 2008 Statement of Assets, Liabilities and Networth [SALN] and Personal Data Sheet or Curriculum Vitae of the Justices of the Supreme Court and Officers and Employees of the Judiciary, A.M. No SC; Re: Request of Philippine Center for Investigative Journalism [PCIJ] for the 2008 Statement of Assets, Liabilities and Networth [SALN] and Personal Data Sheets of the Court of Appeals Justices, A.M. No CA, 13 June 2012]

168 Office of the President Internal Audit Office “Between RA No which was promulgated on August 17, 1960 and RA No which was promulgated on February 20, 1989, the latter law should prevail. In so far as the SALN is concerned, RA No impliedly repealed the provisions on SALN embodied in RA No ” [CSC Q & A on the SALN, Answer to Question No. 8, p.3]

169 Office of the President Internal Audit Office “[W]e are guided by the principle that in order to effect a repeal by implication, the later statute must be so irreconcilably inconsistent with and repugnant to the existing law that they cannot be reconciled and made to stand together. The clearest case of inconsistency must be made before the inference of implied repeal can be drawn, for inconsistency is never presumed.” (underscoring supplied) [Lledo vs. Lledo, A.M. No. P , 9 February 2010]

170 Office of the President Internal Audit Office “Both Section 7 of the Anti-Graft and Corrupt Practices Act and Section 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees require the accomplishment and submission of a true, detailed and sworn statement of assets and liabilities. Petitioner was negligent for failing to comply with his duty to provide a detailed list of his assets and business interests in his SALN.” [PAGC vs. Pleyto, G.R. No March 2011 citing Pleyto vs. PNP-CIDG, G.R. No , 23 November 2007]

171 Office of the President Internal Audit Office 171 diganbayan, 4. “RA 7080 is a penal statute x x x aims to penalize the act of any public officer who by himself or in connivance with members of his family amasses, accumulates or acquires ill-gotten wealth in the aggregate amount of at least PhP 50 million. x x x RA 1379 is not penal in nature, x x x aims to enforce the right of the State to recover the properties which were not lawfully acquired by the officer.” [Garcia vs. Sandiganbayan, G.R. Nos and , 12 October 2008]

172 Office of the President Internal Audit Office “The purpose of R.A is ‘to promote a high standard of ethics in public service. Public officials and employees shall at all times be accountable to the people and shall discharge their duties with utmost responsibility, integrity, competence, and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest.’“ (underscoring supplied) [PAGC vs. Pleyto, G.R. No , 23 March 2011]

173 Office of the President Internal Audit Office “[T]his construction would be in consonance with the announced purpose for which Republic Act (No.) 3019 was enacted, which is the repression of certain acts of public officers and private persons constituting graft or corrupt practices or which may lead thereto. Note that the law does not merely contemplate repression of acts that are unlawful or corrupt per se, but even of those that may lead to or result in graft and corruption.” (underscoring supplied) [Dans vs. People of the Philippines, G.R. No , 29 January 1998]

174 Office of the President Internal Audit Office “Sec. 8. Prima Facie Evidence of and Dismissal Due to Unexplained Wealth. – If in accordance with the provisions of Republic Act Numbered One Thousand Three Hundred Seventy-Nine, a public official has been found to have acquired during his incumbency, whether in his name or in the name of other persons, an amount of property and/or money manifestly out of proportion to his salary and to his other lawful income, that fact shall be ground for dismissal or removal. x x x.” (underscoring supplied) and [Ombudsman vs. Valencia, Carabeo vs. Court of Appeals, and Ombudsman vs. Racho, citing Section 8 of RA 3019, Anti-Graft and Corrupt Practices Act, 17 August 1960]

175 Office of the President Internal Audit Office “Section 8 above, speaks of unlawful acquisition of wealth, the evil sought to be suppressed and avoided, and Section 7, which mandates full disclosure of wealth in the SALN, is a means of preventing said evil and is aimed particularly at curtailing and minimizing, the opportunities for official corruption and maintaining a standard of honesty in the public service. ‘Unexplained’ matter normally results from ‘non-disclosure’ or non-concealment of vital facts.” (underscoring supplied) [Ombudsman vs. Valencia citing Carabeo vs. CA and Ombudsman vs. Valeroso]

176 Office of the President Internal Audit Office “ 9. “While it is true that the Court en banc exercises no appellate jurisdiction over its Divisions, Justice Minerva Gonzaga-Reyes opined in Firestone and concededly recognized that ‘[t]he only constraint is that any doctrine or principle of law laid down by the Court, either rendered en banc or in division, may be overturned or reversed only by the Court sitting en banc.’” [Lu vs. Lu YM, Sr., G.R. No , 15 February 2011]

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