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| Reference Material |
| Re-inventing the Commission on Audit By Marcelo Tecson February 12, 2005 Mr. Antonio Abaya, Happily, you need not look far and wide to find the one person who can contribute practically half of the national effort against corruption, for he is right with your organization, a trustee of Tapatt Foundation Inc.-the Honorable Guillermo Carague, Chairman of the Commission on Audit. As such, he can mobilize the sleeping giant COA towards the assumption of a more active role in fraud prevention in the government, such as by partially restoring badly needed pre-audit in the disbursement of the national and local governments' staggering more than trillion-peso annual budget. As backgrounder, cases of graft and corruption maybe classified as to undocumented and documented. Undocumented cases, like bribery for underpayment or non-payment of dutiable goods in the Bureau of Customs, entail foregone government revenues that are unrecorded because diverted to private pockets and never collected by the government. The misappropriated amounts are without any audit trail or written record to go by. This makes their detection quite difficult, if not impossible, therefore they require more expertise and hard work from graft busters. Lately, lifestyle check has become in vogue, and it has been effective because this is the first time it has been done in earnest. However, now that grafters are forewarned, its efficacy will diminish in the future, so the government must find other indicators of undocumented cases of corruption. One way is to prepare detailed modus operandi in their execution, and from there possible crucial points-where preventive and detection measures can be instituted-may be identified. Documented acts of corruption, on the other hand, refer principally to anomalies in the disbursement of government funds previously collected, receipted, and recorded in government books of accounts. As such, the funds have fallen under the protective mantle of government control systems, the proper design and implementation of which can prevent anomalies in fund utilization. The anomalies may consist of violations of laws, regulations, and contracts governing government transactions, such as rigged biddings, ghost deliveries by suppliers, substandard infrastructure projects, and other irregularities. As all government disbursements are required to be covered by duly approved and supported disbursement vouchers, there are written records or audit trails that will show the validity or illegality of requested payments prior to actual release of funds. A no-nonsense pre-audit of high-amount vouchers can disclose possible attendant graft-and thereby prevent its consummation. Hence, control of documented graft is not hopeless. By and large, it can be done-but it can be done only if COA will perform its crucial role in doing it. The fight against corruption maybe classified as to punitive and preventive. Punitive action as indirect way of fighting corruption refers to the gathering of evidences and prosecution by lawyers of the Presidential Anti-Graft Commission (PAGC) and the Office of the Ombudsman of suspected grafters who already committed fraud in government transactions, which prosecution towards eventual imposition of punishment can discourage future grafters. Preventive system as direct mode of controlling corruption pertains to the implementation of new or strengthening of existing internal control systems in all government agencies and corporations, aimed at stopping anomalies before consummation, which has to be handled not by lawyers or other professionals but by CPA's or internal control experts. As can be seen, this preventive aspect, which may constitute half of the needed work against corruption in the government as it includes prevention of anomalies in the disbursement of the national and local governments' more than trillion-peso annual budget, is not yet properly done in the government despite its campaign against corruption since many years ago. As in war, government forces against corruption should attack the enemies wherever they are. They should institute anti-graft measures wherever irregularities are committed, or maybe committed. If PhP150 billion is lost yearly to graft out of the government's annual budget (Gil Cabacungan, Jr., "Private firms eye anti-corruption fund," Philippine Daily Inquirer, March 22, 2002, p. B1), then anomalies exist in government disbursements, which call for prompt action through institution of preventive measures in the disbursement process. The best way to do that is not by indirect measures like lifestyle checks and prosecution of grafters that take a long time to produce results, but through the direct way of immediately plugging the fund hemorrhage: first, by partially restoring COA pre-audit, and, second, by reviewing and determining the vulnerabilities to graft of all relevant rules, procedures, and control systems in government transactions that lead to disbursements, then promptly introducing reforms where necessary. The government has to commission an ad hoc high-caliber task force that will conduct the special review, which should be expanded to cover government operations involving generation of cash, as well as the new procurement law, R.A. No. 9184, which made corruption-by way of rigged biddings through manipulated single complying bid and negotiated purchases through subtly induced emergency situations-easier to commit and defend. Without bidding, anybody qualified to bid but not invited owing to lack of bidding can complain that he had a better offer. COA's Role Should be Defined Based on What it Should Be, Not on What PD 1445 Says, Because Laws are Made for the People and Should be Amended If Need Be Despite the government's all-out war against corruption, as well as effort of Administration after Administration to eradicate it, corruption has thrived in our midst, so that even a former high COA official-who appeared part of COA management that dismantled pre-audit in prior years-noticed COA's obvious failure to "nip in the bud anomalous transactions." COA's failure is indicative that the government has missed all these years a most basic step in its fight against grafters-fully utilizing the sleeping giant COA by having it handle crucial fraud prevention work. In his letter to newspaper columnist retired Supreme Court Justice Isagani A. Cruz, former COA Commissioner Bartolome C. Fernandez asked: "Is not the COA betraying the trust of the people by its failure to stop or nip in the bud these anomalous transactions?" (Isagani A. Cruz, "Where was the COA?" Philippine Daily Inquirer, January 24, 2004, p. A10). In his subsequent column in the Philippine Daily Inquirer on February 28, 2004, Justice Cruz presented COA's rebuttal together with a reader's reaction on the matter. According to COA, it cannot be blamed for failure to stop irregular government transactions because it is no longer on pre-audit but on post audit basis since 1995, under a COA Circular issued pursuant to PD 1445, or the Government Auditing Code of the Philippines, which placed fiscal responsibility, including prevention of anomalies, on heads of audited agencies. On the other hand, a reader pointed out that COA should not be blamed for not preventing anomalous contracts, because it is required by the Constitution to operate on a post-audit basis, and that there was a reason for replacing pre-audit. Both responses implied that had there been pre-audit, anomalous disbursements could have been prevented, so, why was pre-audit abolished? Their answer is, both the Constitution and PD 1445 say so. The question remains: Why do the Constitution and PD 1445 say so? Actually, the Constitution does not provide for post audit of all government disbursements. This is quite evident in the case of government corporations, where the Constitution made a distinction in mode of audit between those with original charters and those created under the Corporation Law. In fact, bulk of government expenditures, especially those under the national budget, can be pre-audited. Under Article IX, D, Section 2 (1) of the existing Constitution, COA "shall audit all accounts.(of) the Government, or any of its subdivisions, agencies, or instrumentalities, including government corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity from the Government.." If so, regular line government agencies spending the national budget and not enjoying fiscal autonomy (like the Departments of National Defense, Energy, Public Works and Highways, etc., including their bureaus), which are not included in the enumeration of post-audit coverage, are deemed excluded from it, so why are they not subjected to at least partial pre-audit pursuant to such constitutional exclusion and distinction? Moreover, in case of government units subject to post-audit, COA can still conduct pre-audit if the internal control system is weak, such as when COA's annual audit discloses adverse findings. As for PD 1445, why should COA hold sacred and invoke a law drafted by COA itself (COA centennial supplement, Manila Bulletin, May 4, 1999, p. 16), done with conflict of interest on its part, decreed without benefit of public hearing during martial law, and runs in conflict with the foregoing audit provision of the present Constitution? COA Officials Have to Think More of What is Good for the Nation-Partial Pre-Audit and Fraud Prevention in the Government-Rather than of Keeping Themselves Out of Harm's Way After the "massacre" of some very high government officials, including the head of the government's general auditing office, through announcement by then President Ferdinand Marcos during an occasion that he was accepting their resignations (meaning, he was firing them), the succeeding COA Chairman Francisco Tantuico, Jr. announced during the national convention of the Association of Government Accountants of the Philippines (AGAP), held in Quezon City on November 11-13, 1981, that COA would abolish pre-audit so that its auditors would no longer be involved in graft cases in the government. Of course, Chairman Tantuico had a point-the less number of people involved in government transactions, the less number of people tempted to commit graft. However, it has a downside. Abolition of pre-audit was designed merely to stop COA auditors' involvement in anomalies-and thereby remove the sword of Damocles hanging over the heads of COA Commissioners during martial law years-but not to stop anomalies. On the contrary, it meant that anomalies would consequently become more rampant with the abolition of pre-audit-for, definitely, there are more good COA auditors than bad ones who would no longer be pre-auditing even large government disbursements. In which case, why perpetuate the abolition of pre-audit, intended primarily to protect COA Commissioners, when they are secure now in their tenure and no longer at the mercy of the appointing power? Let them assume some risk of blame under partial pre-audit, so that the many honest and patriotic COA auditors can serve better the nation. Specifically, COA's 100% abolition of pre-audit is not right for these reasons: It was an abdication of COA's constitutional mandate to act as the last line of defense in government disbursements, as may be inferred from Article IX, D, Section 2 (1) of the Constitution, which excluded government agencies being funded by the national budget and not enjoying fiscal autonomy from the enumeration of government units and entities subject to post audit. In other words, for regular government departments, bureaus, etc., the Constitution demands the conduct of independent audit by COA auditors before multi-million-peso payments are made. COA unilaterally dispensed with this crucial check when it totally abolished pre-audit. In effect, to free itself from blame, it self-servingly decided on its own to remove responsibility from itself on a matter quite important to Filipinos-the safeguarding of their hard-earned money that is better spent in service to the people than lost to some crooks in government. But, why make COA blameless at the sacrifice of its service to the nation? � What is called for is not 100% pre-audit that would unduly burden COA auditors, but only a highly selective partial pre-audit focusing on graft-prone huge transactions that COA used to do up to the 1980's, such as first payments only on infrastructure contracts. If partial pre-audit did not work perfectly in the past, the solution is to improve it, not eliminate it. � With pre-audit, a few dishonest COA auditors cannot prevent anomalous disbursements, all right, but many honest ones can. Without pre-audit, even the most honest COA auditors cannot prevent anomalous payments. COA blamed its self-imposed 100% post audit system for its failure to audit and stop irregular transactions before consummation-a case of COA seeking refuge in its own rule for its failure. In essence, COA's change in audit rule as to timing of its audit of government disbursements promotes the payment of irregular expenditures, therefore it is the exact opposite-and hence a violation-of the constitutional mandate to COA to promulgate auditing rules for the prevention of irregular expenditures. (Under Article IX, D, Section 2 (2) of the present Constitution, COA is mandated t "promulgate. auditing rules. for the prevention of irregular. expenditures..") Going against specialization in functions, PD 1445 has heaped upon government agency heads the fraud prevention burden, instead of on the internal control specialist COA. This decree has to be amended because it is too one-sided in favor of COA that drafted it and had it approved. It is flawed because it places the highly specialized fraud prevention function exclusively upon agency heads, whose already demanding role is line operations, and indirectly releases from responsibility the highest COA officials, whose mission is precisely the safeguarding of government assets and prevention of anomalies. This scheme is not right because, firstly, as laymen on internal control, agency heads cannot do a really good job of preventing fraud, and, secondly, they can be tempted to have a field day on corruption because COA is not mandated to closely watch them. Thus, PD 1445 should be changed to make COA equally responsible for the prevention of irregularities in the government, subject to proper delineation of responsibilities. Meantime, the fraud prevention mission is not properly attended to in many government offices. With its never-ending budget problem, the national government cannot create internal audit units in all government agencies. Therefore, as part of the government, the behemoth COA ought to do what needs to be done-assume part of the responsibility for fraud prevention in the government. COA may not want its resident auditors to handle fraud prevention in government agencies because their doing so will eventually entail auditing their own work and undermine COA's audit function. This valid objection can be remedied by creating a small team of, say, 10 to 20 highly skilled COA systems and control specialists. They will work exclusively on the implementation and monitoring of fraud prevention systems in the government, and will not audit their own work. This special team has to be maintained in COA as it is an independent body, it has a pool of more qualified personnel from whom the needed experts can be drawn, and, as previously stated, it will be very expensive to create, train, and maintain this special group in every government agency. It is better constituted in the COA head office so that its collective experience, advanced training, professional expertise, specialization, and wisdom can be applied to all government agencies. MARCELO L. TECSON, [email protected] Quezon City and San Miguel, Bulacan February 12, 2005 |