Professionals needed

Title

Language

English

Source

The Republic I (6) 1-31 December 1975

Year

1975

Subject

Philippines -- Commission on Audit -- Appointments, promotions, salaries, etc.

Rights

In Copyright - Educational Use Permitted

Fulltext

10 1-31 December 1975 THE REPUBLIC Audit: before or after the act? by ARTURO V. BESANA Auditor, Commission on Audit A SUBJECT of debate these days is t whether the auditing function to control disbursements is best exercised before or after the transactions go through. The accountability of government, at all turns of fiscal administration, is today a necessary check on freedom of administrative function. The multifari ous acts of government—right through from their initial planning stage to their implementation and thereafter, and the appraisal of their results—need a broad and continuous process of control. Various forms of control exercised before the consummation of an act or series of acts of administration are pre audit, a priori control. Postaudit or a posteriori control is what takes place afterwards. The General Accounting Office of the United States, for example, exer cises essentially a postaudit function. The Comptroller General, however, re tains certain powers regarding proposed receipts and expenditures. He is required by law to render ad vance opinions on the legality of pro posed expenditures at the request of heads of departments and establish ments, disbursing officers and certifying officers. He likewise has the power to settle claims by and against the Govern ment. While these powers are not exer - cised automatically on the Comptroller’s own initiative, but only at the request of the parties interested, extensive use is in fact made of them. In many cases, disbursing officers, who are personally liable for their administrative actions, frequently seek to ascertain in advance the legality of proposed expenditures. The result is that each year thou sands of decisions are given on an ex tremely wide range of subjects, binding the administration and constituting an impressive code of precedent, guiding it in its future activities. In Russia, audit of government agen cies is subdivided as regards the time and way it is applied: into preaudit, cur rent audit or audit at the titne of per formance, and postaudit. Preaudit is done at the time of prep aration of the budget and during discus sion of allocations for projects, first of all, from the point of view of correct ness of allocation. Preaudit entails exam ining whether, and to what extent, allo cations accord with the plans and proj ects, and also their conformity to legal terms of reference. This form of audit also imposes examination of the correctness of cal culations and the necessity of each item of expenditure separately. Great im portance is attached to this form of au dit since every unit obtains for its bud get only such amount of expenditure as is approved by the audit service which can refuse to support allocations (hat are found to be unjustified or unneces sary. A specific category of preaudit which is of particular importance is the the audit of individual salaries in ac cordance with grading and of the final amount to be allocated for salary pur poses and for administration and man agement expenses. In this field the question of finan cial discipline is considered seriously, and government adopts a number of resolutions aimed at intensifying audit over expenditure on salaries and over administrative expenses. Budget funds for salaries are super vised most strictly and any violation involves financial penalties. The agen cies and institutions may only make use of allocations in accordance with the actual number of employees for each month individually, and not in accord ance with the initially authorized estab lishment. When any agencies wish to get funds for the payment of salaries, they are required to submit monthly a list of employees signed by the head of the agency and the chief accountant. The auditors examine the efficiency of the establishment, the need for the ed number of posts and the level of sala ries. This duty is to question unneces sary increase in staff. Current audit which is made at the time of performance has some element of preaudit. It is made in the agencies at the time when financial transactions are made or expenditures are incurred. Current audit is applied during the im plementation of the revenue and expen diture parts of the budget to make sure, through checking of accounts kept by agencies, that the expenditure from the budget keeps pace with the fulfillment of operating and production plans, and corresponds to the actual amount pro grammed for those establishments. Postaudit is used to examine the legality of financial operations. With the help of postaudit, the economic effi ciency of financial transactions and cor rect allocations of budget funds are verified and unused resources of govern ment institutions are conserved. This covers examination of balance sheets and financial reports and checking doc uments. In Austria, the system is postaudit. There are, however, specified exception al cases in which preaudit is exercised. In cases where expenditures are known co be against what is provided in the budget in amount or purpose, these ex penditures are examined by the audit or. Proposed expenditures of this kind are accordingly brought to the auditor’s attention before being entered into, un less the subject of special legislation or relating to a case of extreme urgency. In these cases, the auditor examines whether‘conditions justifying deviations from budgetary provisions are present and, if necessary, makes his observations to the management. The observations do not bind the management, and the auditor is not entitled to reject the pro posed expenditure but can only report the matter to the legislature. HAVING gained ideas on some audit ing systems in vogue in highly de veloped countries, we inevitably come to the point of asking: Should the auditing body perform both preaudit and post audit? Should preaudit be exercised by the audit body or should it be based on internal checks within the management itself? Which system would best be ap plied in the Philippines? A combination of postaudit and preaudit should be adopted in the Phil ippines. There is no doubt that postaudit has its advantages. It does not inter fere with administration in the way pre audit often does. An auditor under the postaudit system can exercise his func tion independently and objectively and avoid being blamed for red tape if he slows down operations. The efficacy of postaudit as a wea pon for detecting irregularities, and pre cluding them, has been proven by pro gram auditing, which is a comprehensive type of postaudit. In view, however, of the values and orientation of our public administrators at this stage of development, it is felt that the administration of some govern ment agencies is not yet ready for its full adoption. The need for some form of preaudit is widely recognized and accepted. Italy, Greece, Romania, Venezuela, Belgium, Russia and most of the Socialist states make extensive use of preaudit. Austria, the Netherlands, United States, France, West Germany, Spain, Britain, Israel, Japan and Norway adopt postaudit. As a general rule, every adminis trative act should be subject to the prior examination of two independent factors: The executive agency directly respon sible for implementation; and An ex ternal factor, acting primarily as a re straining influence and concerned, in par ticular, with legal, financial and admin istrative regularity of the proposed act. There is no reason why this latter function should not be entrusted to the management itself. If it is imposed on the auditing service to have an active role in the ad ministrative process to disallow or dis approve decisions of the executive pow er, it thereby bears in effect some of the responsibility for administration. □ HEADQUARTERS of the Commission on Audit in Quezon City. Professionals needed IN reorganizing the Commission on Audit, qualified, honest and develop ment-oriented personnel must be found as a priority, according to Macario G. Sevilla, the new Secretary to the Com mission. Of the task ahead, he says: The goal of professionalizing the audit service will require that approved positions qualification standards be close ly adhered to. Comprehensive Training programs will be undertaken to upgrade the technical competence of employees who, although without the requisite formal educational background for the jobs they now occupy, have proven by past performance that some formal training will help them meet the de mands of their positions. Many may have to be shifted to positions for which their formal education has pre pared them. The major reason for the ineffec tiveness of the Commission is the sim ple fact that most of those holding audit ing positions are not Certified Public Accountants. This situation must be changed radically. Beyond the need for developing technical expertise, the Commission perceives the necessity to re-orient the thinking and attitudes of all its officials and employees. The Commission must be perceived not as a mere continuation of the Gen eral Auditing Office, but as a complete ly new personality with well defined goals and objectives. Every official and employee of the Commission must be imbued with the realization that while the Commission must be imbued with the realization that while the Commission does in fact in dependently appriase the operations of all government agencies, the primary purpose of the evaluation function is not fault-finding; it is rather to assist government to achieve more efficient and economical operations, and for mulate and implement programs that will most effectively attain the avowed social and economic development goals of the country. GOVERNMENT accounting and re porting systems are to be studied thoroughly so that accounting reports will become more useful for economic planning and program implementation. Accounting principles, rules, and regulations which might have served their purposes well twenty years ago need to be examined closely, recast, and restructured to meet the develop mental thrust of government operations. The timeliness of these reports is of vital concern to government users. Systematic evaluation and revision of government accounting and report ing systems will require the cooperative efforts of the executive branch, the leg islature, local government units, and the Commission. Auditing rules and regulations have been criticized as unwieldy, onerous, and impractical. In a lot of cases they are, because the formulation of rules has been principally control-oriented with an almost coinplete disregard for the needs of government agencies to speed up their operations. Rules and regulations are never meant to fetter the hands of agency management; they are intended instead to provide management with an accept able degree of assurance that agency operations are being conducted in ac cordance with management's plans and policies. A complete reexamination of exist ing auditing rules and regulations will be undertaken by the Commission in con sultation with the heads of government agencies. THE overall objective is to enable the Commission, more efficiently and effectively, to attain its goals and to keep abreast of the accelerated social and economic development goals of the country. More specifically, the reorganiza tion plan aims: 1. To restructure the Commission on Audit so that its organization, pol icies, rules, and regulations are develop ment-oriented ; 2. To enable the Commission to plan and implement its programs with a greater degree of effectiveness, effi ciency, and economy; and 3. To strengthen and intensify the decentralization of the Commission to make’lt more responsive to the demands for organized auditing services in all areas. □

pages

10

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