COA-AGAP presentation responsive approach to audit observations and disallowances (Oct. 20, 2016) ELIZABETH S. ZOSA assistant commissioner GENERAL Counsel commission on audit

Theme: FINANCIAL MANAGEMENT PRACTITIONERS: RISING TO THE CHALLENGE OF CHANGE

Progress is impossible Cannot change anything. Without change, And those who cannot Change their minds Cannot change anything. George Bernard Shaw

COA as ENABLER Closer partnership with auditee Accountant Auditor Creates, keeps checks records maintains records Reports existing reports errors, data discrepancies Focuses on present focuses on past information information

COA as ENABLER Revision of outdated audit rules and regulations Dissemination and uniform application of audit rules, regulations, jurisprudence Expeditious resolution of audit issues and adjudication of cases

DISCUSSION OUTLINE The Commission on Audit Communicating Audit Results Disallowable Transactions Determination of Persons Liable Appeals from Disallowances Liability for Disallowances Enforcement of Liability

THE COMMISSION ON AUDIT (COA)

COA Constitutional body Articles IX-A, IX-D Cannot be abolished except by constitutional amendment Extensive powers and function Audit Adjudication Rule-making

COA Supreme Audit Institution (SAI) Exclusive external auditor Findings take precedence over result of audit of other bodies

COA A. Audit function To examine, audit and settle accounts pertaining to Revenue and receipts Expenditures and uses Funds Property

COA A. Audit function ALL government agencies Private entities NGA, LGU, GOCC Private entities Recipient of public funds Public utilities Rate audit

COA B. Adjudication function Decide cases on Appeals from disallowances Money claims against the gov’t Relief from accountability Condonation of claim/liability Private sale of gov’t assets

COA B. Adjudication function Decision appealable only to SC on petition for certiorari Grave abuse of discretion amounting to lack or excess of jurisdiction

COA C. Rule-making function Promulgate accounting and auditing rules and regulations Other rules including those for the prevention and disallowance of IUEEU expenditures

COA C. Rule-making function COA Circular 2012-003 COA Circular 85-55A Guidelines on the Prevention of IUEEU Expenditures

COMMUNICATING AUDIT RESULTS

Agency COA ATL Accountable Officer Agency official SA Reviews NS/ND/NC Submits receipt and disbursement records with DVs & supporting documents for the transactions or accounts ATL Accountant Examines & Audits a) issues AOM b) prepares NS/ND/NC Records in books Submits to ATL AOMNS NC ND Agency official SA Prepares comments Appeals ND/NC Reviews NS/ND/NC

COMMUNICATING AUDIT RESULTS to audit- verify accounts, transactions - approve/disapprove in whole or in part - certify the balance

COMMUNICATING AUDIT RESULTS Audit Notices Sec. 81, PD 1445- to certify balances in the accounts of officers Sec 82- to notify in writing the officer whose accounts have been audited and settled

COMMUNICATING AUDIT RESULTS Audit Observation Memorandum (AOM) Deficiencies with no pecuniary loss for documentation or information requirements

COMMUNICATING AUDIT RESULTS Notice of Suspension (NS) For transaction of doubtful legality/ propriety with pecuniary loss May be allowed/disallowed based on compliance documents

COMMUNICATING AUDIT RESULTS AOM, NS Persons Responsible To comply with the audit requirements

COMMUNICATING AUDIT RESULTS Notice of Charge (NC) -for uncollected revenue/receipt due to under assessment, under-collection, etc An addition to AO’s accountability

COMMUNICATING AUDIT RESULTS Notice of Disallowance (ND) -for disbursement that is: Illegal- I Irregular- I Unnecessary- U Unconscionable- U Excessive- E Extravagant- E

COMMUNICATING AUDIT RESULTS ND, NC Persons liable To refund the disallowed/ charged amount

DISALLOWABLE TRANSACTIONS (IIUUEE Expenditures)

DISALLOWABLE TRANSACTIONS Updated Guidelines On the Prevention of IUEEU Expenditures COA CIRCULAR No. 2012-003 (Oct 29, 2012) (amending CC 85-55A, 9/8/85)

DISALLOWABLE TRANSACTIONS A. ILLEGAL Expenditure -contrary to law Ex. -payment for contracts in violation of RA 9184 -payment of allowances prohibited under the SSL

DISALLOWABLE TRANSACTIONS A. ILLEGAL Expenditure - for contracts without appropriation [PD 1445, Secs 4(1), 85-87] -transfer of PDAF to NGOs in violation of GAA - use of public funds for private purpose

DISALLOWABLE TRANSACTIONS B. IRREGULAR Expenditure -incurred without adhering to established rules, regulations, principles or practices which have gained recognition in law

DISALLOWABLE TRANSACTIONS B. IRREGULAR Expenditure -negotiated purchase at a price in excess of 10% of COA-evaluated price (CC 2012-003, 85-55A) - attorney’s fee without OSG/OGCC approval and COA concurrence (CC 86-255, 95-011)

DISALLOWABLE TRANSACTIONS C. UNNECESSARY Expenditure Not essential Not supportive of mission and objectives of agency Non-responsive to exigency of the service

DISALLOWABLE TRANSACTIONS C. UNNECESSARY Expenditure Media advertisements not in furtherance of agency mission, etc. (AO No. 103, DILG MC 2010-101) Hiring of consultants for regular work in the agency (CC 2012-003)

DISALLOWABLE TRANSACTIONS D. UNCONSCIONABLE Expenditure Unreasonable No man in his right sense would make Violates ethical and moral standards

DISALLOWABLE TRANSACTIONS D. UNCONSCIONABLE Expenditure Payment for expired medicines Delivery of agricultural fertilizer exceedingly below potency requirement

DISALLOWABLE TRANSACTIONS E. EXCESSIVE Expenditure Immoderate quantity Exorbitant price Exceeds what is normal or proper In excess of reasonable limits

DISALLOWABLE TRANSACTIONS E. EXCESSIVE Expenditure Grant of cash advance in excess of requirements Delivery of supplies beyond the agency consumption limits

DISALLOWABLE TRANSACTIONS F. EXTRAVAGANT Expenditure Without restraint, judiciousness, economy Exceeds the bounds of propriety Prodigal, lavish, luxurious

DISALLOWABLE TRANSACTIONS F. EXTRAVAGANT Expenditure Expensive wines, liquors, cigars Out-of-town conferences, meetings Rental of expensive halls

DETERMINATION OF PERSONS LIABLE

DETERMINATION OF PERSONS LIABLE CRITERIA Nature of the transaction Duties and responsibilities of officer/employee Extent of participation in the transaction

DETERMINATION OF PERSONS LIABLE In general Persons who participated in the transaction are liable Accountability vs liability Accountable officer- (Disbursing/Collecting Officer) not necessarily liable

DETERMINATION OF PERSONS LIABLE A. NATURE OF TRANSACTION Salaries and Allowances Incentives and other benefits Procurement Cash Advance

DETERMINATION OF PERSONS LIABLE EXTENT OF PARTICIPATION Liability up to the amount certified/ authorized/ approved Partial payment Progress billings

DETERMINATION OF PERSONS LIABLE C. DUTIES AND RESPONSIBILITIES OF OFFICER Appointment Accountant Cashier Designation Special Disbursing Officer Inspection & Acceptance Committee member

DETERMINATION OF PERSONS LIABLE 1. Custodian of government funds -for failure to safeguard funds against loss (robbery) -failure to ensure that funds are utilized or transferred in accordance with law and regulations (payment without DV)

DETERMINATION OF PERSONS LIABLE 2. Authorizing or certifying official - false certification; - certification issued in violation of law, rule or regulation False/wrongful authority

DETERMINATION OF PERSONS LIABLE Certifications: “Expenses necessary, lawful , incurred under my direct supervision.” “Supporting documents valid, proper and legal.” “Pre-audited; allowed for P__.”

DETERMINATION OF PERSONS LIABLE Certifications: “Deliveries are in accordance with quantity and specifications.” “Project is 100% accomplished in accordance with plans/POW.” “Funds available in the amount of P___.”

DETERMINATION OF PERSONS LIABLE 3. Approving officer -for negligence Arias vs Sandiganbayan Cruz vs Sandiganbayan Leycano vs COA

DETERMINATION OF PERSONS LIABLE 3. Approving Officer Arias vs Sandiganbayan, GR 81563 12/19/89) “All heads of offices have to rely to a reasonable extent on their subordinates and on their good faith xxx. There has to be some added reason why he should examine each voucher in such detail.”

DETERMINATION OF PERSONS LIABLE 3. Approving Officer Cruz vs Sandiganbayan, GR 134493 (8/16/05) “There exists an exceptional circumstance that should have prodded petitioner xxx to be curious and go beyond what his subordinates prepared or recommended.”

DETERMINATION OF PERSONS LIABLE 3. Approving Officer Leycano vs COA, GR 154665 (2/10/06) “Arias doctrine does not apply when the approving officer is not acting as head of office.”

DETERMINATION OF PERSONS LIABLE 4.Payee -for receipt of payment - Up to the amount received For employee allowances and benefits Good faith vs “Solutio Indebiti”

ACTS CONSTITUTING LIABILITY Good faith “Good faith connotes an honest intention to abstain from taking unconscientious advantage of another;  it is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged by actual or fancied token or signs.” (PNB vs Heirs of Estanislao Militar, et al. GR No. 164801, June 30, 2006)

“Solutio Indebiti”  if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises (Art 2154, NCC); the person who has no right to receive such payment becomes obligated to return the same;

DETERMINATION OF PERSONS LIABLE EXEMPTION FROM LIABILITY Acts done by subordinate under direction of superior Sec 106,PD 1445

Section 106 Section 106. Liability for acts done by direction of superior officer. No accountable officer shall be relieved from liability by reason of his having acted under the direction of a superior officer in paying out, applying, or disposing of the funds or property with which he is chargeable, unless prior to that act, he notified the superior officer in writing of the illegality of the payment, application, or disposition. The officer directing any illegal payment or disposition of the funds or property shall be primarily liable for the loss, while the accountable officer who fails to serve the required notice shall be secondarily liable.

Appeals from Disallowances

APPEAL FROM DISALLOWANCE To Whom? COA Director Except: Fraud/special audit – Commission Proper (CP)

APPEAL FROM DISALLOWANCE By Whom? Aggrieved party Person liable or counsel, or representative Disallowance- personal liability Agency head representing the agency is not an aggrieved party

APPEAL FROM DISALLOWANCE When? within 6 months (180 days) from receipt of Notice

APPEAL FROM DISALLOWANCE Why? Disallowance is not proper Transaction is legal/proper Appellant is not liable (even if disallowance is proper) Justification for exclusion

APPEAL FROM DISALLOWANCE Contents of Appeal Statement on Timeliness, proof of service to auditor, payment of filing fee Discussion of facts, issues, arguments, prayer

APPEAL FROM DISALLOWANCE A decision of the Director is appealable to the Commission Proper Petition for review To Commission Secretariat Within the remaining of the 6 months period Payment of filing fee

APPEAL FROM DISALLOWANCE FILING FEE 1/10 of 1% of amount of disallowance, not >P20,000 plus research fee (1% appeal fee not> P200) - charged to appellant/person liable

APPEAL FROM DISALLOWANCE One MR of the decision of the CP is allowed Within 30 days from receipt of decision Based on new and material evidence, or if the decision is not supported by law and regulations

APPEAL FROM DISALLOWANCE A final decision of the CP is appealable to the SC on a petition for certiorari (Rule 65 in relation to Rule 64 of the Rules of Court) Within 30 days from receipt of CP decision

ENFORCEMENT OF LIABILITY

ENFORCEMENT OF LIABILITY NATURE of Liability To Government Solidary or Joint and several “One for All”

ENFORCEMENT OF LIABILITY Art. 1216, NCC- creditor may proceed against one, or some or all debtors simultaneously until debt is fully collected

ENFORCEMENT OF LIABILITY Why solidary? Art 1207, NCC the law provides for solidarity

[T]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.

ENFORCEMENT OF LIABILITY Laws providing for solidary obligation for disallowances: Sec 43, Ch 5, Book 6, RAC Section 49, PD 1177 Sec 347, RA 7160

Section 43. Liability for Illegal Expenditures Section 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.

Section 49. Liability for Illegal Expenditure Section 49. Liability for Illegal Expenditure. Every expenditure or obligation authorized or incurred in violation of the provisions of this Decree or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received.

SEC. 347. Rendition of Accounts SEC. 347. Rendition of Accounts. - Local treasurers, accountants and other local accountable officers shall render their accounts within such time, in such form, style, and content and under such regulations as the Commission on Audit may prescribe. Provincial, city, and municipal auditors shall certify the balances arising in the accounts settled by them to the Chairman of the Commission on Audit and to the local treasurer, accountant, and other accountable officers. Copies of the certification shall be prepared and furnished other local officers who may be held jointly and severally liable for any loss or illegal, improper or unauthorized use or misappropriation of local funds or property.

ENFORCEMENT OF LIABILITY Among themselves, persons liable are Joint Debtors Art 1217, NCC -debtor may claim from co-debtors the share which corresponds to each

ENFORCEMENT of Liability COA ORDER OF EXECUTION (COE)

-deduct from salary and ENFORCEMENT of LIABILITY Officer/employee in the service -deduct from salary and other benefits Contractor/Private person- -withhold money due him from agency or file collection suit

ENFORCEMENT of LIABILITY Officer/employee out of service -file collection suit Deceased officer - claim against the estate

ENFORCEMENT of LIABILITY Payment by installment Only for disallowed benefits or allowances Approved by the OGC- COA Payment period not > 2 years graduated according to amount Full payment demandable upon separation from the service

Criminal action- violation of ENFORCEMENT of LIABILITY Other Remedies Criminal action- violation of related criminal laws Administrative Charges- violation of civil service law and regulations

THANK YOU!