BATU, Indonesia. Photo by Jes Aznar

Wednesday, August 10, 2011

Reforming the Commission on Audit

My latest project for The Philippine Public Transparency Reporting Project: 

Time for change: The Commission on Audit would undergo the much needed reforms to live up to its role in anti-corruption and public accountability, says its current chair Gracia Pulido-Tan. JES AZNAR (
Time for change: The Commission on Audit would undergo the much needed reforms to live up to its role in anti-corruption and public accountability, says its current chair Gracia Pulido-Tan. JES AZNAR (
By any measure or program that aims to prevent or eliminate corruption, the role of audit is crucial.

The role of the Commission on Audit (COA) is thus very important if President Benigno Aquino III is to deliver on his program of good governance.

Aquino has appointed Ma. Gracia Pulido Tan as COA chairperson, a no non-sense accountant who previously had stints in government as Finance Undersecretary.

In an interview with the Philippine Public Transparency Reporting Project (PPTRP), Tan said she accepted the position with the aim of ensuring that COA would be what it is meant to be– to ensure that public funds would have full and proper accounting.

Tan said there is a long way to go in building the integrity of COA.

Tan shared with PPTRP her plans for the commission in the weeks and months ahead.


One main area of concern is the pre-audit. Pre-audit is the policy requiring government agencies to secure COA’s approval before they can embark on projects that will entail the use of public funds. Tan said this practice will be removed.

“While its [pre-audit] intentions were laudable, its implementation courted some dangers. For one, its very nature and purpose – which is essentially an approval process of a transaction before it can be carried out – gave rise to myriad reports that a quid pro quo between the agency and our auditors take place every now and then, for without COA’s approval, the transaction cannot proceed,” Tan said.

Pre-audit has also taken auditors’ time that would have otherwise been devoted to regular audits, she added.

Based on her review of pre-audit, the government has saved only a few billions of pesos, Tan claims.

“Our review reveals that in the almost two-year period that it has been in place, more than 500,000 transactions were pre-audited, involving an aggregate value of more than PhP 535 billion (USD 12.7 billion). About 87 percent of these were given outright approval; 11 percent were approved after compliance with auditor requirements and only about 1 per cent denied.”

Residency audit

Another possible reform is changing the practice of residency audit.

Tan says that the residency approach – where audit teams hold office in their assigned agencies – may be removed.

“Initial findings and the increasing number of complaints that we have received – strongly indicate that we may have to consider doing away completely with this approach and instead adopt a visitorial system,” Tan said.

She adds that this would mean recalling every resident auditor to the home office in Quezon City and scheduling field work similar to what happens in the private sector.

In the past, the COA failed to properly monitor multi-agency projects or transactions because audits were fragmented according to its new head.

“A good example would be the Metro Rail Transit which involves not only the Department of Transportation and Communications but the National Economic and Development Authority (NEDA), Department of Finance (DOF), Bureau of the Treasury (BTR), government financial institutions (GFIs) and government-owned and -controlled corporations (GOCCs),” Tan noted.

Another such project is the Malampaya funds which involved the Department of Energy as well as local government units (LGUs).

“I hope it would not only provide a complete picture of the transaction but also serve as a check and balance among our auditors.”

Strengthening prosecution

COA also intends to strengthen its coordination with the Office of the Ombudsman. Tan welcomed the appointment of Justice Conchita Carpio-Morales as the new Ombudsman.

She maintained that in the past, some big cases which had a “smoking gun” did not prosper because of technical or procedural errors.

“Hence, we shall strengthen and intensify cooperation and coordination with the Ombudsman. The appointment of Morales, who is well known for her probity and no non-sense stance, is certainly most welcome and we eagerly look forward to working with her,” Tan said.

Citizens’ participation

Another element reportedly includes citizen participation in the audit process.

“We are in the process of developing a comprehensive program that will integrate people’s organizations, the media, the clergy and business chambers, among others, in various aspects of the business process,” the COA chief says.

As part of this, there will reportedly be information campaigns and training on procurement rules, implementation of budgets, disbursements, basic accounting and education around financial reports,” Tan said.

To be able to implement all these reforms will be a huge challenge, the COA chief admits.

Increasing manpower, mapping culture of integrity

All the necessary changes will require a large new intake of people into COA. “We need at least 1,500 accountants, lawyers, IT personnel, engineers and other technical professionals by next year --not only because of our intensified work program but to address the rapidly aging population of staff in COA,” Tan told PPTRP.

She likewise said there is a need to put in place a culture of integrity in the commission to be able to sustain the reforms. “A culture of integrity is truly a formidable and inclusive process. It requires the active cooperation and involvement of all stakeholders. Each of them must want it and accept and own their respective roles in both the vision and the process. The ultimate responsibility of the leader is to lead by example,” she said.

Lessons from the AFP

In the past, the COA has been mired in controversies including its roll in alleged corruption within the Armed Forces of the Philippines (AFP).

The commission was put under the spotlight late last year after COA auditor-turned-commissioner Heidi Mendoza and several former officials of the AFP revealed alleged corruption within the COA and AFP.

Some military officials reportedly bribed COA auditors to spare army intelligence funds from scrutiny.

And former military budget officer Lt. Col. George Rabusa testified to a Congressional Hearing in February that he gave former COA Commissioner Raul Flores at least PhP 200,000 (USD 4,672) whenever asked for it.

Five-year plan and public service

Tan said under her leadership, COA is now preparing for a major strategic planning plan to map out the commission’s course in the next five years.

“I think that what we need is a long term plan, at least a five year plan which would be subject to review. We will involve not just the higher echelons but I also want to hear from the ground what is going on,” Tan said.

The program would stress the values of integrity, transparency and professionalism in the agency, she said. Tan has also ordered auditors to come up with a list of reports completed in the past and what actions were done as a result of these reports as well as a list of non-compliant agencies.

“I want a list of non-compliant government agencies. On the other hand, we also want to have a hall of fame to determine who the compliant ones are,” Tan told PPTRP.

Tan’s promises are big and many are pinning hopes that all the reforms can actually be accomplished.

Pillars of anti-corruption

Former Budget Secretary Benjamin Diokno says the COA plays a very important role in ensuring openness and frugality in the use of public funds.

That said, Diokno maintains the agency has constantly failed to do its job.

He admits though that the plan to remove pre-audit is a laudable one: “Pre-audit slows program and project execution makes management dependent on COA auditors who could then be a source of corruption,” Diokno told PPTRP.

He agreed too with the plan to remove the resident auditor system believing that it too has only helped to facilitate graft and poor public accounting.

“The current system breeds camaraderie between the auditor and the agency being the subject of audit. In some cases, the auditor is provided offices, cars, allowances and other benefits given to the staff of the agency being audited. This system breeds corruption. Some auditors fail to do their jobs appropriately. A sounder and fiscally responsible approach is to have a select audit team, unknown to the agency and based in the COA, to do the audit. This is a better use of COA manpower. It will also lead to more honest utilization of public funds,” Diokno notes.

Separately, several allegations of corruption within regional resident COA offices have been made to PPTRP by citizens and newly set up watchdog groups across the country.

Another basic reform Diokno is urging COA to undertake is for it to make its reports more accessible and understandable to the public.

“The COA should also strive to write reports that are easily understood. That's transparency -- when reports are not only made available to but also understandable and readable to the man on the street,” Diokno told PPTRP.

He said COA and the Office of the Ombudsman are two of the most important pillars of the government’s anti-corruption program.

For Finance Undersecretary Jeremias Paul, Jr. whose work involves monitoring GOCCs and GFIs, COA is important “because they’re the ones who make sure that GOCCs comply with the rules. They’re the ones who see the details.”

The role of the COA is important in ensuring that corrupt officials are not allowed to squander public funds. Hopes are high that the current leadership of the commission will be able to meet the substantial challenges facing it. Philippine Public Transparency Reporting Project