Promulgation and Implementation of the Performance Evaluation Division (PED) Charter

January 20, 2014 REVENUE MEMORANDUM ORDER NO. 006-14 SUBJECT : Promulgation and Implementation of the Performance Evaluation Division (PED) Charter TO : All Internal Revenue Officials, Employees, and Other Concerned Stakeholders The call for good governance is reflective of a public service institution. The Bureau of Internal Revenue (BIR), one of the government agencies tasked to collect and manage national tax, is mandated to uphold at all times the Constitutional principle that, a public office is a public trust. It is incumbent upon all of its officers and employees to increase transparency in the conduct of program, activities and projects, and accountability to the public in providing tax-related services. The PED is established to assure the BIR process owners that internal controls are adequately designed, and operating as intended. These controls are evaluated to determine its weakness and strength in mitigating risks that impact process/functional objectives and agency strategic goals and objectives as well. This Charter defines the authority, independence, objectivity, and responsibility of the PED. Further, this Charter describes the organizational structure, reporting lines, and approach and methodology of PED in the delivery of evaluation and monitoring services. PED is a partner in the development of an improved and transparent processes. It is committed to develop accountable personnel in safeguarding the BIR resources. Importantly, for PED to be faithful to its mandate, and accomplishment of its goals and objectives, we enjoined all the internal and external stakeholders and the public to increase their awareness of the PED's roles and responsibilities through this Charter. The Charter will be published and posted in conspicuous places and channels to reach the general public. aSACED This Order shall take effect immediately. (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT Performance Evaluation Division Charter Table of Contents 1. Introduction 2. Objective and Mission 3. Independence and Objectivity 4. Authority and Confidentiality 5. PED Sections, Work Activities, and Methodology PED Sections Evaluation and Assessment Activities Approach and Methodology 6. Working with Others CITaSA 7. Standards of Practice Performance Evaluation Division (PED) SUBJECT: PED CHARTER 1. Introduction The establishment of a strong Performance Evaluation Division (PED) that is focused on the evaluation, monitoring and review of the results of operations (performance), and internal control effectiveness, and compliance with policies, plans and procedures, laws and regulations is part of the strengthening of public sector governance of the BIR. PED shall provide the Management Committee and Stakeholders that key organizational operations and support units are meeting the agreed performance measures, observing the established internal control systems, and complying with appropriate laws, rules and regulations, and policy issuances. The PED provides appraisal of the performance of the Bureau as a whole. Importantly, the creation of PED and its functions and responsibilities considered the recent development in government-wide internal audit and internal control initiatives. For example, the Department of Budget and Management issued Circular Letter No. 2008-5 series 2008 on the Internal Audit Function, which states that the internal audit unit shall reside at the Department-level and not at its component units, bureaus, regional offices, and attached agencies. The BIR top management, after a series of consultation and meetings with the DBM officials on the prohibition of creating an internal audit division at the Bureau-level, agreed to rename the IAD to PED and retain the internal audit functions and activities. BIR issued on September 16, 2011 a Revenue Administrative Order (RAO) which renamed the IAD to Performance Evaluation Division (PED). The RAO was aligned to the BIR Rationalization Program based on Executive Order No. 366 series of 2006. CHcETA The retention of the internal audit functions and activities to PED shows the importance of an independent unit to monitor the performance, compliance and internal control effectiveness of the Bureaus' operations and support units in achieving the tax assessment objectives and revenue collection target. BIR top management, who oversees the establishment and management of appropriate controls considered the importance of a strong monitoring PED functions to sustain governance initiatives throughout the Bureau offices. 2. Objective and Mission The purpose of PED is to provide independent and objective evaluation of the operations and support units' performance, management's control effectiveness, and degree of compliance with laws, regulations, managerial policies, accountability measures, ethical standards and contractual obligations. The key responsibility of the PED involves the evaluation of management controls and operations performance, and the determination of the degree of compliance with laws, regulations, managerial policies, accountability measures, ethical standards and contractual obligations. It involves the appraisal of the plan of organization and all the coordinated methods and measures, in order to recommend courses of action on matters relating to operations and management control. The Head of PED prepares recommendation to the Commissioner on all matters relating to the Bureau's operations and support units' performance, compliance, and control effectiveness, and assist the management in improving the Bureau's business performance through improvement of controls to mitigate risks and achieve the committed strategic revenue target. HTSAEa 3. Independence and Objectivity The need for independence and objectivity in the performance of evaluation and assessment is vital. The PED's knowledge and understanding of the Bureau assist in building effective relationships, and in evaluating and improving the effectiveness of risk management, internal control, and governance processes. By providing unbiased, objective evaluation of whether the Bureau's operations and resources are responsibly and effectively managed to achieve strategic goals and objectives, the PED can help the Bureau achieve accountability and integrity, improve operations, and instill good governance among internal stakeholders, such as management and personnel. The PED's reporting lines are defined, wherein the Head of PED reports directly to the Commissioner, all personnel of PED reports to the Head of PED, and the organization structure was designed for PED to be administratively and functionally accountable to the Office of the Commissioner. In this way, PED demonstrates that independence and objectivity are vital in ensuring that work performed was credible, factual and unbiased. 4. Authority and Confidentiality The PED has to perform its duties and responsibilities without restrictions free from interference or pressures from the areas being reviewed. Thus, subject to compliance with the Bureau's security policies, PED personnel are authorised to have full, free and unrestricted access to all functions, premises, assets, personnel, records, and other documentation and information that the Head of PED considers necessary to enable evaluation and assessment to meet its responsibilities. All records, documentation and information accessed in the course of undertaking internal audit activities are to be used solely for the conduct of these activities. The Head of PED and individual PED staff are responsible and accountable for maintaining the confidentiality of the information they receive during the course of their work. cIHCST 5. PED Sections, Work Activities, and Methodology The PED has four interrelated sections that are tasked to provide technical support to accomplish the mission and objective of the division. Each of the Sections shall determine whether the Bureau's operations and support units' performance measures, compliance with laws, policies and procedures, management of risks and controls, and governance processes are adequate and functioning as designed. PED Sections The PED mission is envisioned to be accomplished by an integrated team comprising of four interrelated sections, namely: Fiscal Operations Monitoring Section, acEHCD Performance Monitoring Section, Information System Evaluation Section, and Evaluation Results Monitoring Section. The teams are tasked to conduct performance, compliance and review of management controls as outlined in the PED annual work plan, as appropriate. Evaluation and Assessment Activities The kinds of evaluation and assessment are discussed in detail in the PED Manual which contains approach and methodology in the conduct of evaluation, namely: Compliance Evaluation, Performance Evaluation, and Control Assessment. As necessary, in the conduct of Control Assessment, the inclusion of Information Technology (IT) evaluation approach has to be part of the plan. This includes consideration of the general and application controls, and IT controls in general. The descriptions of the kinds of evaluation and review approaches are as follows: The covered areas for evaluation, monitoring and review of PED are broad and involve all matters relating to Bureau-wide compliance, performance and control effectiveness of the operations and support units. PED shall adopt the appropriate methodology, e.g. , risk-based approach, to cover areas prioritized by the Commissioner and the Management Committee members. Approach and Methodology The PED will adopt the risk-based approach in the conduct of their activities and the performance of its duties and responsibilities in evaluating and assessing the risk, controls and governance processes in the Bureau. The framework in Diagram 1 shows the three main components of the PED approach and methodology, such as Planning and Risk Assessment, Delivery (includes Execution and Conclusion and Reporting), and Monitoring. The details of the framework is discussed and presented in a separate procedures PED manual. The purpose of the adoption of the risk-based approach is to optimize the resources of PED in the conduct of evaluation and assessment of risk, controls and governance processes. IaDTES The PED intends to "do more with less" through focusing limited resources on essential areas of management concern in the achievement of strategic goals and objectives. The framework provides importance to planning and assessing risks of not meeting the committed goals and targets for a given period. Diagram 1: Risk-Based Performance Evaluation Framework This Risk-based Performance Evaluation Framework will serve as a structural frame of the methodology that will be adopted by PED in performing compliance evaluation ( e.g. , evaluation of the degree of adherence to laws, rules and regulations), performance evaluation ( e.g. , separate evaluation of the outcome, output, process and input), and control assessment ( e.g. , separate evaluation of the effectiveness of internal controls). 6. Working with Others The PED due to the complexity of work, demands of the stakeholders, and timeliness of reliable reports can facilitate the evaluation and review activities through the use of the reports of other related works. Using the work of others, ensure that PED evaluators are satisfied that there is an appropriate basis on which to rely on the work of others, and to rely on others only when it is appropriate to do so. Some of the units that PED can work with are as follows: Management Division (MD) and Internal Security Division (ISD) of the Bureau, and the Department of Finance (DoF) Internal Audit Division (IAD), and Commission on Audit, among others. DTEScI 7. Standards of Practice The PED refers to existing guidelines published by the Department of Budget and Management (DBM), such as National Guidelines on Internal Control Systems (NGICS), and (the Philippine Government Internal Audit Manual (PGIAM)) wherever applicable for compliance. Also, PED use applicable international standards on public sector such as: the INTOSAI Guidance for Good Governance (INTOSAI GOV), and the Institute of Internal Auditors publications on International Professional Practices Framework (IPPF). Further, the IT Audit team shall adhere to the Control Objectives for Information and related Technology (COBIT ) 1 for its specific and highly technical functions. Footnotes 1. COBIT is a framework designed by the IT Governance Institute and highly recommended by the Information Systems Audit and Control Association (ISACA) as benchmark for IT Best Practices in every organization having IT related functions. COBIT is a framework and supporting tool set that allow managers to bridge the gap with respect to control requirements, technical issues and business risks, and communicate that level of control to stakeholders. <ftp://ftp.bir.gov.ph/webadmin1/pdf/81768RMO%20No%206-2014.pdf> last visited March 4, 2014 .