3 - OAC General Audit Instructions For CY 2016 Audit

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
Corporate Government Sector
OFFICE OF THE ASSISTANT COMMISSIONER
MEMORANDUM
For
: All Cluster Directors, Supervising Auditors of

Government-Owned or Controlled Corporations
(GOCCs) Audit
Groups,
and
Audit
Team
Leaders/Members of GOCCs Audit Teams
This Commission
Subject
: Supplemental General Audit Instructions (GAI) for the

Conduct of the CY 2016 Audit of GOCCs
Date
: 02 August 2016
The following instructions are issued pursuant to COA Memorandum No.

2014-011 dated 21 October 2014 adopting the Unified/Integrated Audit Strategy,
and to ensure uniformity in the audit of common thrust areas in the conduct of the
CY 2016 audit of GOCCs.
I.
Audit Thrust Areas
In addition to the specific audit thrust areas already identified by the Cluster
Directors (CDs) and Supervising Auditors (SAs) as a result of their Audit Group
Planning, the following audit areas shall also be covered across the Sector for the
CY 2016 audit:
A. Audit Thrusts for Sector-Wide Implementation
1. Remittances of dividends by GOCCs to the National Government (NG)
particularly focusing on their compliance with the new computation of
dividends and other revisions under the REVISED IMPLEMENTING
RULES AND REGULATIONS TO REPUBLIC ACT NO. 7656, AN
ACT REQUIRING GOVERNMENT-OWNED OR -CONTROLLED
CORPORATIONS TO DECLARE DIVIDENDS UNDER CERTAIN
CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR
OTHER PURPOSES
2. Inter-agency fund transfers
The audit shall focus on:
3.
4.
5.
6.
a. Non-liquidation by implementing agencies of the fund

transferred from the source agencies;
b. Validation of the existence of the project; and
c. Verification/validation of the attainment of project objectives.
Investments
a. Validation of investible funds;
b. Rate of Return of invested funds; and
c. Process of selection of investment.
Loans receivables
a. Dormant Accounts; and
b. Receivables from COA employees.
General Insurance of Property, Plant, and Equipment (PPE) and other
insurable government properties with the Government Service
Insurance System (GSIS)
Validation of reported outputs/accomplishments of GOCCs through the
conduct of Performance Audit using their success indicators/
measurement criteria
B. Audit Thrusts for Selective Implementation of the Clusters (when

applicable)
1. Public-Private Partnerships (PPP)
For big ticket projects, the audit shall focus on:
a. Controls in the PPP agreement to protect the interest of
government and ensure that the government is not prejudiced;
b. Manner of Award, if solicited (Was there bidding pursuant to the
BOT law?);
c. Verification of the financial and technical capability of partners;
d. Reasonableness of rates/fees;
e. Verification of actual construction cost;
f. Duration of Concession Period (should not be beyond
Recoupment Period of the Private Investment/Construction
Cost);
g. Loop holes in the contract especially on the sharing of risks and
rewards. There should be fair sharing of risks and rewards
(additional income) between the government and private
partners; and
h. Presence or absence of guarantees (ideally, these should not be
granted in favor of the private partner)
a. Sovereign guaranty
b. Revenue guaranty
c. Demand guaranty
2
2. Concession agreements
a. Determination of how the concession was awarded;
b. Rate of concession fee given to the government focusing on:
Amount of upfront concession fee and the recording
thereof, if any; and
Provision in the contract for percentage share of the
income plus the fixed rental
c. Delinquent concessionaires;
d. Provisions for the termination of the concession agreements; and
e. Public safety issues (whether the contract includes public
safety measures).
3. Loading/Subsidy Funds
a. Propriety and correctness of the loading funds received from
the grantors; and
b. Utilization of the loading funds by the grantees.
4. Acquired Assets
a. Disposal;
b. Transfer of title to the government;
c. Foreclosure;
d. Occupancy by informal settlers; and
e. Other related issues.
5. Sale/Disposal of Government Property to Private Parties (may also be
the subject of Performance Audit)
6. Long term financial or operating lease of government assets to private
parties at minimal rental rates which is tantamount to a disposal
7. Subsidies from the National Government (NG)
a. Utilization of the funds;
b. Compliance with the following rules and regulations:
Section 3 (i) of Executive Order No. 518 dated 23 January
1979;
Section 5.2 of Joint Circular No. 1-82 dated 4 January
1982; and
Republic Act No. 10651 (FY 2015 General Appropriations
Act), Special Provision No. 1.
8. Special Accounts under the General Fund
a. The specific law creating the fund; and
b. Fund utilization.
II.
Transmittal of Annual Audit Reports (AARs)

3
In view of COAs commitment for the 100% transmittal of AARs on or before 30

June 2017, the CDs are enjoined to transmit the AARs in compliance with the
commitment and ensure that the requirement of the Public Expenditure and
Financial Accountability (PEFA) to publish at least 75% of the transmitted AARs
in the COA website as of June 30 is strictly observed.
III.
Preparation of the Report of Salaries and Allowances (ROSA)
1.
The CDs shall ensure the submission to OAC-CGS of the original hard
copies of the quarterly system-generated ROSA of the principal officers and
members of governing boards of GOCCs and their subsidiaries, after such
report have been duly verified and signed by them, and following the prescribed
timeline for submission, which is on or before the 30 th day of the following
month after each quarter.
2.
An annual ROSA, apart from the quarterly ROSA, shall be submitted
following the format prescribed in COA Memorandum No. 2016-011 dated 04
April 2016, and shall include as footnote the explanation of the variances noted
between the details and aggregate totals of the previously submitted quarterly
reports.
IV.
Preparation of the Annual Financial Report (AFR) for GOCCs for CY

2016
1. The CDs shall cause the submission to the Government Accountancy Office
(GAO), Government Accountancy Sector (GAS), the year-end financial
statements and other related financial reports/schedules in accordance with the
existing format, in printed and digital copies, as inputs to the AFR, pursuant to
COA Circular No. 2015-004 dated July 16, 2015.
2. The CDs and RDs shall submit to this Office on or before 15 July 2017 the data
for Part IV (a) Summary of audit opinions rendered; (b) Summary of
significant and common audit observations and corresponding
recommendations; (c) Suspensions, Disallowances and Charges; (d) Summary
of implementation of prior years recommendation; and (e) various annexes of
the AFR based on the transmitted AARs, for sector-level consolidation and
submission to GAS pursuant to the COA Memorandum issued by that Sector
dated June 4, 2015.
The Cluster Directors and Regional Directors are enjoined to enforce and
monitor compliance with the herein audit guidelines/instructions.
4
Winnie Rose H. Encallado

Assistant Commissioner
cc:
Chairperson MICHAEL G. AGUINALDO

Commissioner JOSE A. FABIA
Commissioner ISABEL D. AGITO
All of this Commission
CGS
WRHE/EUE/MRGA/SVS
GAI

3 - OAC General Audit Instructions For CY 2016 Audit

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Republic of the Philippines

: All Cluster Directors, Supervising Auditors of

: Supplemental General Audit Instructions (GAI) for the

The following instructions are issued pursuant to COA Memorandum No.

Audit Thrust Areas

a. Non-liquidation by implementing agencies of the fund

B. Audit Thrusts for Selective Implementation of the Clusters (when

Transmittal of Annual Audit Reports (AARs)

In view of COAs commitment for the 100% transmittal of AARs on or before 30

Preparation of the Report of Salaries and Allowances (ROSA)

Preparation of the Annual Financial Report (AFR) for GOCCs for CY

Winnie Rose H. Encallado

Chairperson MICHAEL G. AGUINALDO

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