Gacpa presentation 37th Annual national Convention (April 17, 2015) by: ATTY. ELIZABETH S. ZOSA Assistant Commissioner Commission on Audit

IMPROVING COMPLIANCE WITH AUDITING RULES AND REGUlaTIONS (minimizing AUDIT Disallowances)

DISCUSSION OUTLINE Appeals from Disallowances Legal Authority and Basic Concepts Communicating Audit Results IIUUEE Expenditures Determination of Persons Liable Acts Constituting Liability Appeals from Disallowances Nature of Liability for Disallowances Enforcement of Liability

LEGAL AUTHORITY AND BASIC CONCEPTS

COA’s AUDIT AUTHORITY: 1987 Constitution Art. IX D (1)- to examine, audit, and settle all accounts

To verify, validate, check, EXAMINE To verify, validate, check, compare, analyze, etc.

To determine legality/ propriety of use/receipt of funds/ property

SETTLE To determine the balance of the account audited

COA’s AUDIT AUTHORITY PD 1445 Sec. 81- to certify balances in the accounts of officers Sec 82- to notify in writing the officer whose accounts have been audited and settled

AUDIT ACTION Allow- no difference found; in order

AUDIT ACTION Defer- audit decision cannot yet be made; issue AOM

AUDIT ACTION Suspend- temporarily dis- approve and require justification (NS)

AUDIT ACTION Disallow- disapprove and require refund (ND)

AUDIT ACTION Charge- add to the accountability and require payment (NC)

COMMUNICATING AUDIT RESULTS

Notice to Persons Responsible 1. Audit Observation Memorandum (AOM) 2. Notice of Suspension (NS)

Notice to Persons Liable 3. Notice of Charge (NC) 4. Notice of Disallowance (ND)

AUDIT OBSERVATION MEMORANDUM (AOM) for documentation or information deficiencies Management to comply within 15 days

AUDIT OBSERVATION MEMORANDUM (AOM) Not a requirement before a disallowance Clear violation of law/ regulation Previous similar transaction was disallowed

AUDIT OBSERVATION MEMORANDUM (AOM) Auditor to evaluate management’s comments and reply to the agency by, either: allowing the transaction, or issuing an ND/NC

NOTICE OF SUSPENSION (NS) For transaction of doubtful legality/propriety; required to be justified or documented so as not to be disallowed Management to comply with requirements within 90 days

NOTICE OF SUSPENSION (NS) Compliance documents to be evaluated by Auditor who shall, either: Allow the transaction, or Issue an ND/NC

-for audit of revenue NOTICE OF CHARGE (NC) Non-collection Under-collection Under-assessment Under-appraisal

-for disbursement that is: NOTICE OF DISALLOWANCE (ND) -for disbursement that is: Illegal- I Irregular- I Unnecessary- U Unconscionable- U Excessive- E Extravagant- E

UPDATED GUIDELINES FOR THE PREVENTION of IUEEU Expenditures COA CIRCULAR No. 2012-003 (Oct 29, 2012) (amending CC 85-55A, 9/8/85)

ILLEGAL Expenditure -contrary to law -in violation of law Ex. -payment for contracts which are not bidded, in violation of RA 9184 -payment of allowances prohibited under the SSL

ILLEGAL Expenditure -supplementary retirement benefits (CA 186/RA 4968) - hazard pay (RA 7305) - use of funds for private purpose (PD 1445, etc)

ILLEGAL Expenditure - for contracts without appropriation (PD 1445) -for private lawyers by LGUs except as provided under RA 7160

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

IRREGULAR Expenditure -CNA signing bonus, or incentives charged to funds other than savings - attorneys’ fees without OSG/OGCC approval or COA concurrence

IRREGULAR Expenditure -purchases(not bidded) at prices in excess of 10% of COA evaluated price - repairs at prices in excess of 30% of CMV of same equipment

IRREGULAR Expenditure -EME of GOCC officers > COB provision and without ORs -purchase > requirements -payment for defective/ deficient projects

UNNECESSARY Expenditure Not essential Could be dispensed with Not supportive of mission and objectives of agency Non-responsive to exigency of the service

UNNECESSARY Expenditure Media advertisements not in furtherance of agency mission, etc. Luxurious furnishings Wines, liquors, cigars Meetings in expensive hotels, centers

UNNECESSARY Expenditure Replacement of serviceable equipment Hiring of consultants for regular and available work in the agency Purchase of high end model electronic gadgets

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

UNCONSCIONABLE Expenditure Payment for expired medicines Delivery of agricultural fertilizer usable only for flower plants Pesticides with potency below requirements

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

EXCESSIVE Expenditure Grant of cash advance in excess of requirements Purchase of seeds exceeding farmers’ needs Release of funds to NGOs above project requirements

EXTRAVAGANT Expenditure Without restraint, judiciousness, economy Exceeds the bounds of propriety Prodigal, lavish, luxurious

EXTRAVAGANT Expenditure Expensive decorative lamp posts Out-of-town conferences, meetings Rental of expensive halls

DETERMINATION OF PERSONS LIABLE

CRITERIA To Determine Persons Liable Nature of the transaction Duties and responsibilities of officer/employee Extent of participation in the transaction

Nature of the Transaction Honoraria RATA, Traveling expenses Procurement Cash Advances Terminal leave benefits

Nature of the Transaction Fund transfer to NGO Hiring of private lawyer EME Retirement Benefit Salary, Step Increment, Overtime Pay

Nature of the Transaction Allowances and Other Benefits CNA Hazard duty pay YEB and cash gift PIB

Duties and Responsibilities Appointment Cashier General Services Officer Chief Engineer Accountant Budget Officer Board of Directors

Duties and Responsibilities Designation Inspection and Acceptance Committee Bids and Award Committee Special Disbursing Officer Property Inventory Committee

Acts Constituting Liability 1. Custodian of government funds- for failure to safeguard funds against loss, or to ensure that they are utilized or transferred in accordance with law and regulations

Acts Constituting Liability 2. Authorizing or certifying official- for false, non- legitimate authority/ certification; or certification issued in violation of law, rule or regulation

Acts Constituting Liability Certifications: “Expenses necessary, lawful , incurred under my direct supervision.” “Supporting documents complete, proper and legal.” “Pre-audited; allowed for P__.”

Acts Constituting Liability Certifications: “Deliveries are in accordance with quantity and specifications.” “Project is 100% accomplished in accordance with plans/POW.”

Acts Constituting Liability Certifications: “Cost reasonable, estimate within allowable limits” “After due evaluation, XYZ Co. was found to be the Lowest Complying Bidder”

Acts Constituting Liability 3. Approving officer -for negligence Arias vs Sandiganbayan Cruz vs Sandiganbayan Leycano vs COA

Arias vs Sandiganbayan, GR 81563 (12/19/89) 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.”

Cruz vs Sandiganbayan, Approving Officer 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.”

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

Acts Constituting Liability 4.Payee-for receipt of payment (liability is only up to the amount received) Good faith vs “Solutio Indebiti”

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;

Extent of Participation Liability up to the amount certified/ authorized/ approved -Partial payment -Progress billings

Acts done by subordinate under direction of superior- Sec 106,PD 1445 Extent of Participation 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.

Extent of Participation Conspiracy – “the act of one is the act of all” (liability is solidary)

“A conspiracy need not be proved by direct evidence of the acts charged but may and generally must be proven by a number of indefinite acts, conditions and circumstances.”

APPEALS FROM DISALLOWANCES

APPEAL FROM ND/NC To COA Director Regular audit- Director with audit supervision over agency audited

APPEAL FROM ND/NC To COA Commission Proper FAO audit SAO audit ICFAU audit

days) from receipt of ND/NC APPEAL FROM ND/NC Period to appeal- within 6 months (180 days) from receipt of ND/NC

of the 6 months (180 days) period from receipt of ND/NC APPEAL FROM Director’s Decision To CP thru ComSec Period to appeal- within the remaining of the 6 months (180 days) period from receipt of ND/NC

Sample Computation of Appeal Period Date of receipt of ND- 1/12/15 Appeal to CD- 3/15/15 Date of receipt of CD decision- 4/1/15 Deadline to file petition review - 7/28/15 -62 days 118 days

plus research fee (1% appeal fee not> P200 FILING FEE 1/10 of 1%, not >P20,000 plus research fee (1% appeal fee not> P200 appeal from ND/NC/Auditor’s decision request for relief from accountability or appeal from denial thereof, write-off, condonation Petition for review of Director’s decision

Request for approval of private sale FILING FEE 1/10 of 1%, not >P50,000 plus research fee- 1% appeal fee, not>P200 Money claim Request for approval of private sale

Per appeal/petition basis Charged to the person liable FILING FEE Per appeal/petition basis Charged to the person liable Appeal Petition for review Money claim Request for relief from accountability

FILING FEE Charged to the agency Write-off condonation (between government agencies) Approval of private sale

NATURE OF LIABILITY FOR DISALLOWANCE

Solidary or “One for All” NATURE of Liability To Government joint and several “One for All”

proceed against one, or some or all debtors simultaneously NATURE of Liability To Government Art. 1216, NCC- creditor may proceed against one, or some or all debtors simultaneously until debt is fully collected

NATURE of Liability To Government 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

NATURE of Liability To Government 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.

NATURE of Liability Among Persons Liable 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)

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

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

Other Remedies to Enforce ND/NC Criminal action- violation of related criminal laws Administrative Charges- violation of civil service law and regulations Deceased officer- claim against the estate

THANK YOU!