The Philippines' Commission on Audit (COA) has been conducting performance audits of different government agencies since the .mid-part of the 1980s. Those audits were conducted pursuant to the constitutional mandate of the Commission that requires it to "recommend measures1 necessary to improve their (agency) efficiency and effectiveness." However; the planning of these audits were based largely on the evaluation of the system, and controls prevailing within the audited entity without considering the ultimate accomplishments of the organization in terms of its objectives.
My. experience with the OAG through the CCAF-sponsored program has convinced me that there is still another approach in terms of audit planning In conducting performance or value-for-money audits that will, also yield; productive results to the audit commission the audited organization and other clients. This approach the results-based approach to VFM audits, is the subject of this strategy paper and it is my plan to recommend its adoption in the future audits of the Commission on Audit.
Auditing the finances of the government as a means of instituting financial control over public administration in the Philippines was established in Manila sometime in 1583. It was celled a Royal Audiencia as the country was; still under the Spanish rule. Under the American regime, the Office of the' Auditor for the Islands was formally established on May 8, 1899. After the establishment of the Commonwealth of the Philippines in 1935, the General Auditing Office (GAO) came into existence as provided for by the Constitution. When the 1973 Constitution took effect, the Commission on Audit (COA) was created with the GAO serving as its nucleus. The 1987 Constitution merely reiterated the 1973 Constitutional provisions on the COA.
The Chairperson of the COA is the chief executive officer of the Commission and as such is responsible for the general administration of the Office. He is assisted by two Commissioners, and together they constitute the Commission Proper that is the highest policy making body in the COA.
The Commission has 15 departments in the Central Office and 14 Regional Offices.
The authority to audit the accounts of the government is vested in the -Commission on Audit, the supreme audit institution of the Philippines. As the highest governmental audit body it exercises externah public and independent audit. To it is' entrusted the authority and responsibility, for paramount financial control of state resources.
The Commission on Audit derives its mandate from the Constitution Under Section 2, Article VIII of the 1987 Constitution, the Commission shall have the following:
The COA Vision affirms the Office's commitment to support the pursuit of progress and better life for the Filipino people. In fulfilling this promise, the COA endeavours to:
The Chairman of the COA issued on 15 May 1995 Memorandum No.95-076 that defined the strategies is. of the Commission to achieve Its visions through improved operations. To do so, the Commission believes that it must conduct quality, timely and responsive audits. Among these strategies is the Implementation of value for money audits in selected programs of government offices. To attain this objective, the Commission plans to send some of its staff for VFM audit training to equip them with the necessary skills. These personnel will then apply the new experiences both for in-house training courses and actual conduct of the audits.
As the COA tries to redirect its audit from the standards of regularity to standards of value for money spent, there is a need to shift the focus from the procedure-based (also referred to as system based) approach to the. results-based approach in audit planning. The need to focus on results or the accomplishment of the expected outputs is consistent-with the Offices belief that speed and efficiency should not be hindered by technicalities and adherence to narrow interpretation of procedural rules." This is the only way the state audit service can match the results orientation of our developing republic.
Likewise, as the COA is constitutionally mandated to recommend measures to improve the efficiency and effectiveness of government agencies, its audit efforts must be directed not only to examining financial Operations for compliance with rules and regulations. More importantly, the audit must determine whether resources are being utilized for their intended purposes in an effective, efficient and economical manner.
As value-for-money audits are intended to serve management they need to identify operational weaknesses and recommend improvements. Unfortunately no matter how the audit function is described or titled, it will be looked upon as an investigation or inspection whose primary objective is to find fault with operations and operators. To avoid this negative connotation, the audit office should attempt to convey the following philosophy throughout the entities being audited:
In the results-based approach, the process starts with determining the defined objectives of the audited organization The attainment of these objectives must then be translated into expected results as defined the audited entity. In this approach emphasis is placed on identifying the critical results or products to be achieved by a programme/process/activity/function. These results may take the form of outcomes produced in relation to those intended, products delivered, or immediate goals to be achieved for the programme or process to be a success. Once these critical results have been identified, the audit examines them to determine whether or not they have been achieved. The examination will also identify weaknesses that cause the non-attainment of the expected results. The audit may assess whether the products or results produced are those that are supposed to be produced according to the program mandate. Alternatively the audit may assess whether a program or process is producing products to appropriate standards of quality and timeliness, and in an economical and efficient way. The purpose of results-based audit is to identify weaknesses in the results of the program or process and to trace these weaknesses and audit the set of procedures and activities that may be their cause.
For our discussion, it may be advisable to point out some distinction between the systems-based and the results based approaches. These are:
The adoption of the results-based approach does not mean that the COA will totally veer away from the systems-based approach of conducting VFM audits. There will only be a shift of audit focus from systems to results In the area of planning the audit. Once the results have been identified as weak or not in conformity with the predetermined outcomes, the weaknesses will be traced back to the set of procedure's and activities that may be the cause(s).
There will be no change in the mandate of the COA to protect government resources through identifying malpractice or abuse in the use of funds and property. Once such practices have been identified, the same will be referred to the Special Audit Office (SAO), the COA unit mandated to conduct fraud audits.
It is my belief that to properly implement the results based approach to VFM audits, there should be a mix of theoretical learning and hands-on experience. To achieve this mix-l plan to perform the following:
Uses of discussion groups
There is a need to conduct a series of meetings with the Office's top management to discuss the better approach and how it can beet serve the purposes of the COA. To ensure enthusiastic support from management! it will be reiterated and emphasized that the result based approach is not an entirely new concept. It is only In the area of audit planning where the adoption of this approach is being recommended. Furthermore, it will be stressed that the adoption of this approach will be initially experimental When supported by management, a gradual Implementation should ensue.
It is desirable that the first meeting be convened as early as possible after the completion of this fellowship training. The frequency of the succeeding meetings will depend on the progress attained in the first meeting. However it is preferred that a monthly meeting be held until a definite and concrete strategy is adopted by the audit Office.
Two of the major decisions facing the Office in the conduct of the result based approach are the possibility of hiring consultants to assist the Office in the audit and the creation of an audit advisory committee. It is worthy to mention that the use of consultants and audit committees for the conduct of audits has never been practiced in the COA. This is therefore, a novel idea. The first decision, if approved will mean extra funding or cost, and therefore must come from top management. Further a system of securing the services of these consultants needs to be established. Likewise, the creation of an audit advisory committee requires top level approval. I suggest that this committee be composed of people knowledgeable in the areas of the respective audit and not connected with the audited entity. The utilization of consultants and audit committee Will undoubtedly require additional resources. However, the Office will benefit more from the quality of audits to be produced.
Training
With the existing audit manuals in the audit office and my experiences gained from the fellowship program, the training department will develop a modified training manual for the results-based approach VFM audit. The revised manual will contain the methodology for the conduct of a results-based audit, including sample case problems studies and suggested solutions to assist training participants.
A training course for a results-based approach will be conducted initially on a pilot basis and for selected participants only. For this part, the number of trainees should not exceed ten. They should be occupying at least a supervisory position and must be recommended by the heads of the operating departments. To save on training costs, participants will come from the Central Office. The theoretical aspect of the training will be contained in the training manual. This will be complemented by a hands-on experience (on-the job-training) wherein participants will be constituted into an audit team to conduct results-based VFM audits. The audit team will be supervised by the OCAF fellow.
A committee composed of the participants in the initial training group and staff of the training department will meet to consider further refinements in the conduct of the training and the training manual itself, if necessary. The committee will also solicit suggestions from the heads of the operating departments to ascertain their views on the conduct of the training. It is desirable that a revised training manual be prepared for the succeeding training courses for the results-based VFM audit.
The duration of the course will be determined by the training department.
Conduct of results-based VFM audit
After the series of training for results-based VFM audits have been conducted it is assumed that the operating departments of the audit office will be implementing the same approach in their audits. Nevertheless, the training department with the co-ordination of the various line departments involved will still continue to monitor the conduct of the audits to ascertain if there are gaps or deficiencies that should be corrected. If needed, further training will bearranged.
The results-based approach is not an entirely new concept In terms of audit planning but a strategy that has not been met with enough enthusiasm and therefore not fully embraced by the audit office. It is the purpose of this paper to represent to the audit institution this concept and its advantages.
I believe that convincing the Office to shift its focus to the results based approach will not happen overnight. It may come months or years from now. The important thing is to make the Office aware of the need for such change. The shift to the results-based approach has never been more timely than before as the audit office tries to match the results orientation of the nation. For me, presenting this approach at this time is an opportunity and a challenge to contribute, even in a small way, to positive changes - changes that will have an impact on the organisation, the audited agency, other branches of the government and stakeholders. Now is the time to make a difference