Tuesday, July 7, 2009

Brief Outline on the Selective Pre-audit on Government Transactions (Part I)

There are two reasons why Selective Pre-audit on Government Transactions was reinstituted by the Commission on Audit:

1. Rising incidents of illegal, irregular, wasteful and anomalous disbursements of huge amounts of public funds
2.Marked inadequacies in internal controls as exemplified by anomalies uncovered or reported after assessment of risk-prone areas in government operations

Not all government agencies are subject to pre-audit.

Not all transactions of the government are subject to pre-audit - only 10 transactions are initially identified.

Pre-audit is the examination of documents supporting a transaction or series of transactions before these are paid for and recorded.

Pre-audit operates to-
- determine that the proposed expenditure is in compliance with appropriation law and other specific statutory authority and regulations
- assure that sufficient funds are available
- initially determine that the transaction is not illegal, irregular, extravagant, excessive, unconscionable or unnecessary
- determine that the transaction is approved by proper authority and supported by authentic underlying evidences

As used in the circular “initially determine” emphasize that determination of the auditor is not yet final and could be modified in post-audit
- In cases of technical matters, the auditor may possess some degree of competency in determining the reasonableness of price but still needs the assistance of a technical expert.

 Pre-audit is a review before a transaction is paid for or recorded. Post-audit refers to review after the transaction is recorded or consummated.

 Pre-audit is an upfront auditing procedure undertaken on the documents supporting a transaction prior to its payment or recording.

COVERAGE of the Selective Pre-audit on Government Transactions
Agencies - national government agencies, local government units and GOCCs with original charter
Exception: national high schools, GOCCs audited on an engagement basis and barangays

- cash advances
- payments of salaries and terminal leave benefits
- payments for infrastructure projects
- payments for road right-of-way
- procurement of capital assets, goods and services
- payments thru ADA
- releases of funds to NGOs/POs
- transfer of funds between government agencies
- disbursements from trust funds of LGUs
- disposal of real property and unserviceable property

Cash advances - all cash advances including those for foreign travel funded out of local funds

Exceptions: cash advances for payroll fund, intelligence funds, petty cash funds, revolving funds and local travel expenses

Payment of salaries and terminal leave benefits
- payment of first salary after appointment by transfer or reinstatement and last payment of salary prior to transfer
- all payments of terminal leave benefits
Infrastructure projects

- Only the advance payments to contractors and the first and last progress billings are subject to pre-audit
- First progress billing covers first collection on work accomplishment
- Pre-audit of last progress billing must consider all previous payments

Variation orders

 all first payments under variation orders related to contracts within the monetary threshold are subject to pre-audit
 First payment and last progress billing under variation orders which bring a contract within the monetary threshold are subject to pre-audit
Price escalation
 All claims for price escalations are subject to pre-audit

Infrastructure projects

National Government Agencies
- Dept./Bureau/Agency Main/Central/Head Offices,
- General Headquarters, PMOs – P 25M above
- Regional Offices or their equivalents – P 10M above
- Provincial/District/Satellite Offices or their equivalents – P 2M above
- Tertiary and/or specialized hospitals – P 5M above
Local Government Units
- Cities within MM, other highly urbanized cities, first class provinces – P 5M above
- Provinces/cities below first class – P 3M above
- Municipalities – P 1M above
- Head Offices, PMOs – P 25M above
- Regional/Provincial Branches/Field Offices – P 10M above
- Tertiary and/or specialized hospitals – P5M above

Payments for road right-of-way

 All claims for road right-of-way to be pre-audited based on its compliance with the requirements of RA No. 8974 and its implementing rules and regulations

Procurement of capital assets, goods and services
- capital assets (land and building)
- supplies, materials, general support services (rentals, janitorial, security, solid waste management) labor
- procurement of construction materials for projects implemented by administration
- only first payment for general support services is subject to pre-audit
Procurements subject to pre-audit:
- at least P 2M for NGAs, GOCCs, cities within MM, other highly urbanized cities and first class provinces
- at least P 1M for provinces/cities below first class
- at least P500,000 for municipalities

- Procurement between government agencies
- Procurement of life saving medicines, food and other items necessary to address natural calamities or emergencies

Payments thru ADA
All ADA payments are subject to pre-audit
 In instances where ADA is the mode of payment in transactions similarly covered by pre-audit such as payments for infrastructure projects or procurements, all payments shall be subject to pre-audit.
Releases to NGOs/POs
- All releases are subject to pre-audit taking into consideration the requirements and guidelines provided in COA Circular No. 2007-001 (October 25, 2007)

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