Lifting of Pre-audit of Government Transactions

August 16, 2011 DOF MEMORANDUM FOR : Heads of Offices This Department Heads of Bureaus/Attached Agencies Department of Finance SUBJECT : Lifting of Pre-audit of Government Transactions Attached for information and guidance is a copy of COA Circular No. 2011-002 dated July 22, 2011 from Chairperson Ma. Gracia M. Pulido Tan, Commission on Audit, on the above-captioned subject. (SGD.) LOURDES Z. SANTIAGO Director IV Central Administration Office ATTACHMENT July 22, 2011 COA CIRCULAR NO. 002-11 TO : All Heads of Departments, Bureaus, Offices, Agencies and Instrumentalities of the National Government; Managing Heads of Government-Owned and/or Controlled Corporations and Government Financial Institutions and their Subsidiaries; Heads of Local Government Units; COA Assistant Commissioners, Directors, Auditors; and All Others Concerned SUBJECT : Lifting of Pre-audit of Government Transactions The 1987 Constitution vests in the Commission on Audit the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations; and where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. (Section 2 [1] Article IX-D) HSTCcD Likewise, Section 2 (2) Article IX-D of the 1987 Constitution empowers the Commission to have the exclusive authority to define the scope of its audit and examination and establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties. Pursuant to such constitutional authority, this Commission, under COA Circular No. 2009-002 dated May 18, 2009 re-instituted pre-audit of selected government transactions, which it perceived to be an effective, although temporary remedy, against irregularities and anomalies in government operations. Subsequent developments however have shown the heightened vigilance by government agencies in safeguarding their resources. After an evaluation thereof and a re-assessment of COA Circular No. 2009-002, this Commission has resolved to re-affirm the concept that fiscal responsibility resides with agency management. Such concept is clearly provided in Section 2 of Presidential Decree No. 1445, the Government Auditing Code of the Philippines, thus: "all resources of government shall be managed, expended or utilized in accordance with law or regulations and safeguarded against loss or wastage resulting from illegal or improper disposition with a view to ensuring efficiency, economy and effectiveness in the operations of government. The primary responsibility for faithful adherence to this policy rests with the chief or head of the government agency concerned." Guided by the foregoing, and in order to accelerate the delivery of public services and ensure facilitation of government transactions, this Commission hereby withdraws selective pre-audit under COA Circular No. 2009-002 and thereby lifts all pre-audit activities presently being performed on financial transactions of the national government agencies, government owned and/or controlled corporations and local government units, except those required by existing law. HIAcCD Pre-audit activities shall henceforth be the responsibility of the agencies concerned as part of their accounting and fiscal control processes. All agencies shall establish and maintain an adequate internal control system in order to achieve economy, efficiency and effectiveness in the management and utilization of their resources, and prevent illegal, irregular, unnecessary, excessive, extravagant and unconscionable expenditures and uses of funds and property and ensure the legality and propriety of collection of what is due the government. However, whenever circumstances warrant, such as where the internal control system of a government agency is inadequate, this Commission may re-institute pre-audit or adopt such other control measures as are necessary and appropriate to protect the funds and property of the government. Likewise, this Commission shall intensify the evaluation of internal control systems of government agencies to ensure that government resources are safeguarded against loss or wastage, and that government operations are efficient, economical and effective. All transactions submitted for or otherwise pending pre-audit by this Commission as of July 22, 2011 shall no longer be pre-audited and shall be returned to the agency concerned for its appropriate action. This Circular shall take effect immediately. Quezon City, Philippines. ScHAIT (SGD.) MA. GRACIA M. PULIDO TAN Chairperson (SGD.) JUANITO G. ESPINO, JR. Commissioner (SGD.) HEIDI L. MENDOZA Commissioner