COA Directions During Critical Times in the Philippine Economy


By: Guillermo N. Carague, Chairman, Commission on Audit

Speech delivered during the conference of the
Philippine Computer Society (PCS), and
Philippine State Universities and Colleges Computer Education and Sytems Society (PSUCCESS)
AIM Conference Center
October 2, 2003

As of today, I have been with the Commission on Audit (COA) for a period of two years and eight months. I would like to speak to you, therefore, not only about the topic of government accounting, but of the wider topic concerning COA as a whole.
Thus, I have captioned my speech, “COA Directions During these Critical Times in the Philippine Economy”. Indeed, our economy is undergoing a critical period. For sometime now we have been bombarded with news about coups, military adventurism, terrorism, political opportunism, accusations and counter-accusations, finger-pointing, one-upmanship and all kinds of destabilizing and unsavory news which have gradually sapped our people’s hope and turned it into despair. One is reminded of the late Ambassador and Vice President Emmanuel Pelaez’s question, “What is happening to our country?”

All of these headline-grabbing and tele-novela like controversies which I simplistically call “Jose Pidal controversies”, and which were originally triggered by the “Trillanes-Oakwood adventure”, have highlighted to my mind, two disturbing aspects of Philippine society.

Corruption
One is the corruption, not only in the military but in many government agencies. Sometime last month, a newspaper columnist asked the question, “But what is COA doing?” He was referring to corruption in the military as revealed by Navy Lt. Antonio Trillanes of the Oakwood fame.

In a paper that he wrote, Trillanes claims to have interviewed thirty (30) suppliers who claimed that in addition to bribing military officials, they also had to shell out additional 1% to 2% for COA auditors.

I responded to the columnist and said that on the other hand, many of our auditors complain that in most cases, they are simply used as convenient scapegoats by unscrupulous agency personnel who make the suppliers believe that 1% to 2% had to be added for the auditors when the truth is, they just pocket such additional amounts. I myself was a victim of this dastardly tactic some years back, when I was Secretary of Budget and Management.

I wish to point out that starting in May 1995, COA completely lifted pre-audit in all financial transactions of government agencies, precisely to preserve the independence of our auditors. We have now shifted to post-audit, reviewing transactions only after their consummation. Thus, NOWHERE in the procurement process is there any direct participation by COA auditors. No prior approval from COA is necessary to consummate any transaction.

Had Mr. Trillanes conducted a more thorough study, he would have discovered that as far back as during his schooldays, COA had already been disclosing anomalies committed by government officials, military officers and men included. We have cases pending at the Ombudsman and Sandiganbayan resulting from COA adverse audit findings.

One specific example is the COA Special Audit Report No. 94-98 pertaining to the audit of Philippine Navy transactions particularly on the procurement of construction materials and other supplies involving hundreds of millions of pesos. This audit report is the subject of Criminal Case No. 25679-80 and OMB 4-97-0965 filed against top naval officers and men now pending at the Office of the Ombudsman.

COA reports are replete with citations of anomalies in various branches of government. But this is as far as we can go. It is up to other people in authority to rid their offices of dishonest people.

No matter how much COA tries to expose anomalies, the truly effective way to eliminate or minimize corruption in the bureaucracy is to appoint honest people to financially sensitive positions, such as procurement.

In fact, even without COA reports, a good agency manager ought to know anomalies, happening under his very nose, especially those running into millions of pesos, and more so if these are repeatedly committed over many years. Otherwise, he has no business being there.

Corruption is a serious problem. But COA is only part of the cure. Other government agencies and officials in authority have to do their part, especially after COA has done its job of reporting these anomalies.

Political Divisiveness
The other disturbing aspect is the intense political divisiveness and bickerings that have virtually transformed many of our so-called political leaders into actors in a tragi-comedy stage play with the entire Filipino people as the captive audience.

At least in a real stage play, if you find the drama too disgusting and the auditorium too hot and suffocating, you can always walk out and refresh yourself and have peace of mind.

In the political drama that is unfolding in our midst, not only are we a captive audience; whether we like it or not, our very lives and those of our children and succeeding generations are affected in no small measure by what the political actors are doing.

The intense political bickerings and mudslinging seem to have so consumed the minds of our so-called political leaders that the real substantive issues that need to be addressed to improve our economy and uplift the well-being of our people have been brushed aside.

The political bickerings remind me of the eruption of Mt. Pinatubo in June of 1991. Their similarity lies in the fact that they have brought our country widespread damage. But while in 1991 our political leaders were united in repairing the devastation from the volcanic eruption, today we are at a loss on how we can control the damage. The political leaders on whom we should be relying for deliverance are the very people embroiled in this controversy. As each day goes by, the situation seems to worsen and our people can only dream of better times as our neighboring countries pass us by on the road to progress. When we will wake up from this nightmare is anybody’s guess.

What COA is Doing
In the midst of all these turmoil, we at COA are working quietly to do our little part in promoting good governance. Very few people are aware of the critical part played by COA personnel in the following instances:

  1. The unraveling of the more than P50 million in unremitted tax collections at the NAIA Customhouse;
  2. The audit of the multi-million peso PIATCO deal which resulted in the voiding of the contract by the Supreme Court;
  3. The review of the contracts of independent power producers (IPP); and
  4. The audit of the Meralco which became the basis of the Supreme Court decision, ordering the refund of over P28 billion it overcharged its millions of power consumers.

The Commission on Audit is a silent partner in the fight against graft and corruption and in the promotion of the welfare of our people.

In the years 1998 and 2001, we lost three (3) of our dedicated young auditors who were gunned down by unknown killers, simply because they were brave enough to expose the anomalies committed by some people in power.

COA Plans and Programs
From the time I assumed office in February 2001, we have undertaken the following programs:

  1. We have replaced the fifty-year old government accounting system with a new one called “NGAS” (Short for New Government Accounting System);
  2. We have developed a complete and integrated accounting application software called “e-NGAS”;
  3. We have given emphasis to financial audit which was practically ignored in the past when COA basically concentrated on compliance audit;
  4. We have undergone an organizational restructuring that has finally put in place the audit team approach which COA had been trying in vain to implement for the past twenty (20) years;
  5. We have introduced participative management by delegating authority over a number of functions and decisions that used to be concentrated on the COA Chairman in a highly centralized organization;
  6. To strengthen our audit independence, we have stopped the practice of some COA auditors receiving stipend and other allowances or emoluments from other government agencies;
  7. We have introduced a single, unified and integrated audit report for each government agency;
  8. We have strengthened our professional development programs and constructed a separate building devoted primarily to professional training and development;
  9. We have improved our physical facilities and provided our personnel with much better working conditions; and
  10. We have won an unprecedented six-year term as auditors of the United Nations and related international agencies around the world.

New Government Accounting System (NGAS)
Our people at COA are proud of the fact that the new government accounting system is entirely of their own making, without the intervention of any outside consultant. Thus, instead of costing the government millions of pesos, its design, development and implementation was virtually for free, except for a few cups of coffee and some biscuits.

The new government accounting system (NGAS) is accrual based, follows internationally accepted accounting principles and is similar to private corporate accounting. It also incorporates features of management accounting such as responsibility accounting, activity based accounting and project accounting. It is easy to understand even by non-accountants or lay people.

Computerization
The corresponding accounting application software (e-NGAS) was also developed in-house by COA. However, we augmented our ICT personnel with twenty-seven (27) computer faculty members from the Polytechnic University of the Philippines (PUP), which is also a government entity.

We have actually developed not one, not two, but three separate application programs, each one representing a complete accounting application software package. These are all Windows based: one using foxpro and two using visual basic programming.

The software packages are user friendly and can generate financial statements and other reports monthly or as often as may be desired.


They also contain safeguards against certain errors such as entering a transaction where your debits and your credits are not balanced, or failure to post to the appropriate subsidiary ledger when called for by the transaction. It also ensures that the subsidiary ledgers are in agreement with their respective control accounts in the general ledger.

The trial balance, financial statements and other reports can be generated basically by the mere click of the mouse.

The e-NGAS will not only facilitate the recording of transactions, but will also save the government tons of paper over time.

We will start installing the software packages within the remaining months of this year, initially with a handful of government agencies. We expect to gain momentum as we train more people in COA and among the recipient government agencies.

Tremendous Savings for the Government
There are about 1,700 local government units (provinces, cities and municipalities) and over 3,500 national government offices all over the Philippines; a total of more than 5,000 users of the e-NGAS. For all of these users, our software development cost has so far reached only about P30 million.

The government budget deficit has grown to over P200 billion annually. Our in-house development of the accounting software package is our way of generating savings so that government can truly partake of the benefits of information and communication technology without the attendant financial burden.

Financial Audit
The new accounting system and our recent emphasis on financial audit has brought to light a number of findings. An example of these were bank accounts of government agencies purportedly containing several millions of pesos and carried as such in the books over a number of years. Our confirmation with the banks revealed that the accounts contained zero balances.

There were also various assets carried in the books and amounting to billions of pesos but which, upon verification, were found to be no longer existing. Likewise, liabilities were being recorded in the books and reported in financial statements even before they were incurred, in violation of internationally accepted accounting principles. These things have now been rectified.

Integrated Audit Report per Agency
One significant development resulting from the COA organizational restructuring is the preparation of a single, unified and integrated audit report for each government agency. Prior to this, an agency with a central office in Metro Manila and branch offices in each of the country’s fifteen (15) regions, did not have a single set of audited financial statements. Instead the central office and each of the fifteen regional branches were treated as sixteen different and independent agencies, each with its own independent audit report. Consolidations, if any, were done by mere arithmetical additions, without the required eliminating journal entries.

Audit of United Nations
In the year 2001, during my first year as COA Chairman, we were elected to an unprecedented six-year term as auditors of the United Nations as well as related agencies located in New York and in other parts of the world, including Europe, Africa, Middle East, Central and South America and, of course, Asia. We send out about one hundred (100) auditors for periods of thirty to forty-five days during the months of February to November of each year. These are our ambassadors of goodwill. Our auditors enjoy a good reputation for professional competence since they are carefully selected from among eight or nine thousand COA auditors all over the Philippines. As they say, “Join COA and see the world”.

Conclusion
We are doing all these improvements and contributions to good governance without the accompanying bells and whistles and banner headlines. We have deliberately kept a low profile. I agreed to share them with you in the spirit of experience sharing and professional development because ICT plays a very major role in almost everything that we do in COA nowadays.

And so, in the midst of the despair gripping our people on account of the corruption and political degeneration, we at COA are doing our small part in promoting good governance.

But COA is not alone in this endeavor. In my stint in government service starting way back in 1986, I have seen a number of government offices doing their part and serving our country well, albeit in an unheralded fashion. The Philippine government landscape is not all dark and gloomy. If you look closely, you will notice quite a number of good people and good agencies. These are the candles in the dark, providing us with glow, warmth and hope for a better tomorrow.

Thank you.

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