LEGAL BASES FOR INTERNAL AUDIT

RA No. 7160 The Local Government Code of 1991

Section 3 (b) Mandated the establishment of an accountable, efficient, and dynamic organizational structure and operating mechanisms for the LGUs

Section 76 Each LGU shall design and implement its own organizational structure and staffing pattern subject to service requirements, financial capability and CSC minimum standards

AO No. 278 dated 28 April 1992Directing and Strengthening of the Internal Control Systems of Government Financial Institutions (GFIs) and LGUs in their Operations

AO 119 dated March 29, 1989Mandatory Government entities to Strengthen their Internal Control System

DBM Circular Letter No. 2008-5 dated 14 April 2008Guidelines in the Organization and Staffing of IAUs andManagement Division/Unit in Departments/Agencies/GOCCs/GFIs concerned

AO No. 70 dated 14 April 2003Strengthening of the Internal Control Systems of Government Offices, GOCCs, including GFIs, State Universities and Colleges (SUCs) and LGUs

DBM Budget Circular No. 2004-4 dated 22 March 2004Guidelines on the Organization and Staffing of IAUs

DBM Circular Letter No. 2008-8 dated October 3, 2008National Guidelines in Internal Control System (NGICS)

LEGAL BASES FOR INTERNAL AUDIT

VALUE OF INTERNAL AUDIT

To instill public confidence in

the LGU’s ability to operate

effectively;

To improve effectiveness of risk

management, controls and

governance processes;

VALUE OF INTERNAL AUDIT

To strengthen the mechanism

for ensuring the

accountability of LGUs to

their respective constituents

To determine whether internal

controls are well designed and

properly operated

RELATIONSHIP OF INTERNAL AUDIT

SERVICE WITH KEY STAKEHOLDERS

LOCAL CHIEF EXECUTIVE

SANGGUNIAN COMMISSION ON AUDIT

LOCAL CHIEF EXECUTIVE INTERNAL AUDITOR

Superior-subordinate

Relationship

ADMINISTRATIVELY

Local

Chief

Executive

Internal

Auditor

OPERATIONALLY

LCE SP

IA

COMMISSION ON AUDIT

“Where the internal control system of the audited agencies is inadequate, the COA may adopt such measures, including temporary or special pre-audit, as necessary and appropriate to correct the deficiencies”

- 1987 Constitution

ORGANIZING THE

INTERNAL AUDIT

SERVICE/ UNIT

OFFICE OF LOCAL CHIEF EXECUTIVE

IAS/U

MANAGEMENT AUDIT DIVISION

OPERATIONSAUDIT DIVISION

ASSESSORS PLANNING ACCOUNTINGTREASURY OTHERS

IAS/U

MANAGEMENT AUDIT DIVISIONOPERATIONS

AUDIT DIVISION

Shall evaluate the control objectives which include:✓ Safeguarding of assets✓ Checking the accuracy & reliability of

accounting data✓ Adherence to managerial policies✓ Compliance with laws, rules and regulations

by utilizing internal auditing methods

Shall evaluate the:✓ Extent of compliance and ascertain the

effective, efficient, ethical and economical execution of operations by utilizing internal auditing methods

STAFFING THE INTERNALAUDIT SERVICE/ UNIT

DBM Budget Circular No. 2004-4 dated 22 March 2004

Guidelines on the Organization and Staffing of IAUs

LGUs may organize and staff its IAS/U as follows:

LOCAL GOVERNMENT UNITORGANIZATION STRUCTURE & HEAD OF

THE IAU

PROVINCIALMay be a department to be headed by a provincial government department head, SG-26

CITY GOVERNMENT SPECIAL CITY/ HIGHLY

URBANIZED CITY

SPECIAL CITY: May be a department to be headed by city government department head III, SG-27

HUC: May be headed by a city government department head II, SG-26

LGUs may organize and staff its IAS/U as follows:

LOCAL GOVERNMENT UNITORGANIZATION STRUCTURE & HEAD OF

THE IAU

COMPONENT CITYMay be a department to be headed by city government department head I, SG-25

MUNICIPAL (within Metro Manila)

May be a department to be headed by a municipal government department head II, SG-25

MUNICIPAL (outside Metro Manila)

May be a department to be headed by a municipal government department head I, SG-24

ROLES AND RESPONSIBILITIES

Local Chief Executiveo Direct responsibility to install, implement and monitor a

sound system of internal controlo Disseminates managerial policies through the issuance of

guidelines and standards

Sangguniano Legislate the establishment of IAS/U through the

enactment of an ordinance and by providing funding support

o Exercises operational responsibility over IAS/U in that the Head of the IA reports his finding to the Sanggunian

Municipalities

27

117

PRESENCE OF INTERNAL AUDIT IN LOCAL GOVERNMENT UNITS OF REGION VI

PRESENCE OF INTERNAL AUDIT IN LOCAL GOVERNMENT UNITS OF REGION VI

Highly Urbanized Cities

22

Cities

1114

Provinces

46

78 provinces

81 provinces

PHILIPPINESWITH

IAS

Why implement the Seal?

influences good governance behavior and localdecision making

complements the Philippine Development Plan

upgrades governance standards

Ang gobyernong may Malasakit patungo sa Pagbabagoat Patuloy na Pagunlad

✓Citizen-centered, Clean and Efficient Delivery of Public Goods and Services

✓Promoting Philippine Culture and Values✓Expanding Economic Opportunities in Industry✓Building Resiliency of Individuals and Families✓Security and Public Order✓Ensure Ecological Integrity, Clean and Healthy Environment

The Seal and the Philippine Development Plan

The SGLG is a progressiveassessment system

LGU Capacity‘ability of the LGUs to deliver’

• Structure• System• Mechanism• Plan and budget

LGU Performance• Accomplishment against

plans, Fund utilization rate & physical accomplishment

• Frontline services

Focus Areas

Governance PrinciplesTransparency, Participation and Accountability

Tourism, Culture and the Arts

Implementation Schedule

Activity Timeline

Regional AssessmentData gathering, Regional validation and certification, online data

entry, and provincial and regional calibration

May - Jun

National ValidationData Processing and Quality Check, and Cross-regional validation

Jul - Aug

Final Selection and Indorsement 1st – 2nd week of September

Announcement of Results Oct

Recognition & Incentive Packages

Awardees / Non-AwardeesRecognition and/or Incentive to be Received

Marker PCF Certificate of Recognition

SGLG Awardees √ √

SGLG Non-Awardees Recognizing Particular Areas Passed

√

0

50

100

150

200

250

300

350

400

450

2015 2016 2017

SGLG number of awardees

SGLG number of awardees

3 YEAR SGLG Implementation

254306

448

SGLG Thematic Areas

The practice of LGU accountability and transparencyby adherence to accounting and auditing standards

and compliance with:

• Full Disclosure Policy (Good Financial Housekeeping)• Sound management of resources (Financial Performance)• Optimal utilization of available mechanisms and resourcesto support local development (Financing Development)

Financial Administration

Financial AdministrationCY 2017 criteria

• COA Opinion• Full Disclosure Policy• GSIS Loans and Premiums• ADM Fund Utilization• LDC Functionality

• 20% Local Development Fund• 70% Component of LDRRM Fund• Local Revenue Growth

LGU Performance on Financial Administration, 2015-2017(as component of the Seal of Good Local Governance)

ALL LGUs (1,715)

Indicator 2015 2016 2017

Financial Administration* 1,517 (88.4%) 796 (46.4%) 939 (54.7%)

20% Local Development Fund - - 1,067 (62.2%)

LDRRM Fund - - 858 (50%)

Local Revenue Growth - 1,410 (82.2%) 1,540 (89.7%)

*The decrease is due to the upgrading of the indicators

LGU Performance on Financial Administration, 2015-2017

(as component of the Seal of Good Local Governance)

1715

81

145

1489

P M P C M P C M

Financial Administration* 74 (91%) 1307 (87.7%) 50 (61.7%) 84 (57.9%) 662 (44.5%) 58 (71.6%) 97 (66.9%) 784 (52.7%)

20% Local Development Fund - - - - - 71 (87.6%) 100 (68.9%) 896 (60.1%)

LDRRM Fund - - - - - 42 (51.8%) 63 (43.4%) 753 (50.6%)

Local Revenue Growth - - 72 (88.9%) 137 (94.5%) 1,201 (80.7%) 74 (91.4%) 138 (95.2%) 1,328 (89.2%)

*The decrease is due to the upgrading of the indicators

Total no. of LGUs

2015 2016 2017Indicator

Province ( P )

City ( C )

Municipality ( M )BY PCM

Top/Bottom Performing RegionsCompliance with Financial Administration, CY 2017

Region No. of PCMNo. of PCM

Complied% of Compliance

1 129 107 82.95

3 137 96 70.07

11 54 37 68.52

10 98 66 67.35

CAR 83 55 66.27

12 54 35 64.81

4A 147 89 60.54

13 78 47 60.26

NCR 17 10 58.82

6 139 80 57.55

2 98 52 53.06

MIMAROPA 78 39 50.00

8 149 72 48.32

7 136 58 42.65

9 75 31 41.33

5 120 38 31.67

ARMM 123 27 21.95

2017

TOP 50%

BOTTOM50%

Top/Bottom Performing Provinces Compliance with Financial Administration, CY 2017

PROVINCENo. of

PCM

No. of

PCM

Complied

%

Compliance

La Union 20 20 100.00

Siquijor 6 6 100.00

Pangasinan 48 45 93.75

Pampanga 22 20 90.91

Davao del Sur 11 10 90.91

Masbate 21 5 23.81

Sorsogon 15 3 20.00

Sulu 19 3 15.79

Lanao del Sur 40 4 10.00

Tawi-Tawi 11 0 0.00

2017

TOP 5

BOTTOM5

Utilization of 20% LDF

Indicates effective management of available financial resources to help LGUs implement

priority development initiatives contained in its local development plans and Annual Investment Program

though its Development Fund.

Benchmark: Prov -54%; City – 61%; Mun- 45%

Top/Bottom Performing RegionsUtilization of 20% LDF, CY 2017

Region No. of PCMNo. of PCM

Complied

% of

Compliance

ARMM 123 104 84.55

NCR 17 13 76.47

11 54 40 74.07

4A 147 108 73.47

3 137 94 68.61

1 129 87 67.44

2 98 60 61.22

13 78 47 60.26

6 139 82 58.99

CAR 83 48 57.83

5 120 69 57.50

8 149 84 56.38

10 98 55 56.12

9 75 42 56.00

MIMAROPA 78 41 52.56

12 54 28 51.85

7 136 65 47.79

2017

TOP 50%

BOTTOM50%

Average Local Revenue Growth

Indicates the LGU’s financial capacity as shown in the annual change (increase or decrease) in

local revenue collection over the past 3 years

Top/Bottom Performing RegionsLocal Revenue Growth, CY 2017

Region No. of PCMNo. of PCM

Complied

% of

Compliance

NCR 17 17 100.00

7 136 131 96.32

11 54 52 96.30

10 98 94 95.92

4A 147 138 93.88

1 129 121 93.80

13 78 73 93.59

3 137 128 93.43

CAR 83 76 91.57

MIMAROPA 78 71 91.03

9 75 68 90.67

6 139 126 90.65

2 98 86 87.76

8 149 130 87.25

12 54 47 87.04

5 120 100 83.33

ARMM 123 82 66.67

2017

TOP 50%

BOTTOM50%

Utilization of the 70% Component ofLDRRM Fund

70% component of the LDRRMF that isallocated for disaster prevention

and mitigation, preparedness, response, rehabilitation and recovery

Benchmark- 45%

Top/Bottom Performing RegionsUtilization of the LDRRM Fund, CY 2017

Region No. of PCMNo. of PCM

Complied

% of

Compliance

ARMM123 104 84.55

NCR 17 13 76.47

11 54 40 74.07

4A 147 108 73.47

3 137 94 68.61

1 129 87 67.44

2 98 60 61.22

13 78 47 60.26

6 139 82 58.99

CAR 83 48 57.83

5 120 69 57.50

8 149 84 56.38

10 98 55 56.12

9 75 42 56.00

MIMAROPA 78 41 52.56

12 54 28 51.85

7 136 65 47.79

2017

TOP 50%

BOTTOM50%

“Growth is never by mere chance; it is the result of forces working together.”

- James Cash Penney