Structure and Functions of Internal Audit Service

Structure and Functions of Internal Audit Service
Presented by: ALBERTO A. BERNARDO, CPA, Esq., CESO I Deputy Executive Secretary, Office of the President Member, Presidential Anti-Graft Commission

O R D E R O F P R E S E N T A T I O N I. Creation of Internal Audit Service 1. Presidential Decree No. 1 abolished the IAS created under RA 3456 as amended by RA 4177 2. Application of the Admin. Code of 1987 3. Creation of IAS for Other Agencies Under AO 278 & AO 70 The Code of Conduct and Ethical Standards for Public Officials and Employees (RA 6713) NGICS/PGIAM vis–à–vis IIA/ISSPIA

O R D E R O F P R E S E N T A T I O N II. Internal Audit Functions
IAS assists the Department Secretary or the Governing Board 2. IAS functions delegated by the head of agency NGICS/PGIAM vis–à–vis IIA/ISSPIA Under the Administrative Code of 1987 4. Working Definition of Internal Audit IAS not to participate in activities and operations of another unit Internal Control to Ensure/Assure Relationship in a Three-Dimensional Matrix Relationship between the 4Es Internal Audit is part of Internal Control. Internal Audit in government is not an assurance service. Internal Audit in government is not a consulting service.

O R D E R O F P R E S E N T A T I O N III. Organization & Staffing of IAS Organizational Structure Head of IAS Reporting Line Staffing Internal audit studies, services, and seminars by private person or firms Consultancy Contracts for IAS/IAU NGICS/PGIAM vis–à–vis IIA/ISSPIA IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 1. Nature and Purpose of Review 2. Scope, Coverage and Frequency 3. Actions to be Taken 4. Organizational Chart of the Office of the Secretary 5. Organizational Chart of the Department Proper 6. Organizational Chart of the Operating Units 7. Organizational Chart of the IAS 8. Organizational Chart of the Provincial Office

I. Creation of Internal Audit Service (IAS)
The legal bases for the creation of Internal Audit Service (IAS) include Executive Order (EO) 292 s. 1987, or the “Administrative Code of 1987”; Administrative Order (AO) No. 278 s. 1992; AO 70 s. 2003; Department of Budget and Management-Civil Service Commission (DBM-CSC) Joint Resolution No. 1 s. 2007; and DBM Circular Letter Nos and

1. PD 1 abolished the IAS created under RA 3456 as amended by RA 4177 and transferred the function to Management Division 1.1. “Opinion is requested on the ‘legality and/or propriety’ of the claim of seven Auditing Examiners II, who were serving with the defunct Internal Audit Service, x x x.” [underscoring supplied] (Excerpts from DOJ Opinion No. 153 s. 1974, 27 September 1974) “x x x the Internal Audit Service was abolished by the Integrated Reorganization Plan under Presidential Decree No. 1.” [underscoring supplied] (ibid)

1. PD 1 abolished the IAS created under RA 3456 as amended by RA 4177 and transferred the function to Management Division “Pursuant to Item 3, Article IV, Chapter I, Part V of Presidential Decree No. 1 (Reorganizing the Executive Branch of the National Government), ‘the IAS and the Management Division in depart-ment were merged into a Management Division under the Financial and Management Service.’ ” [underscoring supplied] (DOJ Opinion No. 007 s. 2007, 29 January 2007)

1. PD 1 dated abolished the IAS created under RA 3456 as amended by RA 4177 and transferred the function to Management Division 1.3. “In particular, the creation, organization and operation in all government agencies of an Internal Audit Service as mandated by RA No is still mandated under PD No. 1 except that pursuant to Item 3, Article IV, Chapter I, Part V thereof ‘the IAS and the Management Division in departments were merged into a Management Division under the Financial and Management Service.’ x x x” [underscoring supplied,] (Paragraph 5, OGCC Opinion No. 099 s. 2007, 30 May 2007)

2. Application of the Admin. Code of 1987 “The Code is a general law and ‘incorporates in a unified document the major structural, functional and procedural principles of governance’ and ‘embodies changes in administrative structures and procedures designed to serve the people.’” [underscoring supplied] (3rd and 4th WHEREAS clauses of EO 292 s. 1987, the “Administrative Code of 1987” and Ople vs. Torres, et. al., G.R. No , 23 July 1998)

2. Application of the Admin. Code of 1987 “The Code covers both the internal administration of government, i.e, internal organization, personnel and recruitment, supervision and discipline, and the effects of the functions performed by administrative officials on private individuals or parties outside government.” [underscoring supplied] (Ople vs. Torres, et. al, Ibid)

2. Application of the Admin. Code of 1987 2.1. Internal Audit Service at DPWH “Sec. 4 Organizational Structure – The Department shall be composed of: (1) The Department Proper consisting of the Office of the Secretary, the Offices of the Undersecretaries and Assistant Secretaries, the Internal Audit Service, Monitoring and Information Service, Planning Service, x x x.” [underscoring supplied] (Sec. 4, Ch. 1, Title V (DPWH), Book IV, EO 292 s. 1987, the “Administrative Code of 1987” )

2. Application of the Admin. Code of 1987 2.2. Internal audit at DOF “SEC. 12. Central Financial Management Office. — The Central Financial Management Office shall have the following functions: (1) Supervise Department - wide activities relating to budget preparation and management, department accounting, and internal audit;” [underscoring supplied] (Ch. 3, Title II (DOF), Book IV, EO 292 s. 1987, the “Administrative Code of 1987”)

3. Creation of IAS for Other Agencies Under AO 278 s & AO 70 s. 2003 “Section 1. Creation of Internal Audit Service – All heads of government offices, agencies, government-owned and/or controlled corporations, including government financial institutions, State Universities and Colleges (SUCs) and local government units, shall organize an Internal Audit Service (IAS) in their respective offices.” (AO 278 s. 1992, “Directing the Strengthening of the Internal Control Systems of Government Offices, Government Owned And/Or Controlled Corporations, Including Government Financial Institutions and Local Government Units, In Their Operations”, 28 April 1992 and AO 70 s. 2003, “Strengthening of the Internal Control Systems of Government Offices, Government Owned And/Or Controlled Corporations, Including Government Financial Institutions and Local Government Units”, 14 April 2003)

The Code of Conduct and Ethical Standards for Public Officials and Employees (RA 6713) “Section 1. These Rules shall cover all officials and employees in the government, elective and appointive, permanent or temporary, whether in the career or non-career service, including military and police personnel, whether or not they receive compensation, regardless of amount. [Rule I (Coverage), Rules Implementing the Code of Conduct and Ethical Standards for Public Officials and Employees, 21 April 1989]

NGICS/PGIAM vis–à–vis IIA/ISPPIA “1. Reference should be made to the Institute of Internal Auditors (IIA), the primary body for the internal audit profession. The IIA provides comprehensive guidance for the profession through its International Professional Practices Framework (IPPF). The IPPF comprises the official definition of internal auditing, the International Standards for the Professional Practice of Internal Auditing (the Standards), the Code of Ethics, x x x.” [underscoring supplied] (General Comments, Comments on the PGIAM, dated 23 June 2009, p.1)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “(I)f internal auditors are prohibited by laws or regulations from complying with certain parts of the Standards, they should comply with all other parts of the Standards and make appropriate disclosures.” (The Professional Practices Framework, ISPPIA Introduction, Institute of Internal Auditors, January 2004 Ed., p. 8)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “24. on penultimate paragraph – The phrase ‘. . . they should comply with all the other parts of the standards . . .’ deserves a second glance. Standard - setting organizations usually do not permit partial adoption of their standards. Their standards are generally adopted on this basis ‘all or nothing’.” [ emphasis supplied] (Item Hierarchy of Applicable Auditing Standards and Practices, Comments on the PGIAM, dated 23 June 2009, p.4)

II. Internal Audit Functions
Internal Audit Service (1) provides assistance to the Department Secretary or the governing body and (2) performs functions delegated by the head of agency. (Ch. 2, Bk. IV, EO 292 s. 1987, the “Administrative Code of 1987”, and Sec. 55(b), Vol. III, GAAM COA Circular No dated 19 December 1991) The Department Secretary or the governing body is not the internal auditor’s client, neither are the auditees its customers. Internal Audit Service is not an assurance and consulting service.

1. IAS assists the Department Secretary or Governing Body “The IAS shall be an integral part of the office and shall assist in the management and effective discharge of the responsibilities of the office, without intruding into the authority and mandate of the Commission on Audit (COA) granted under the Constitution. x x x.” [underscoring supplied] (Sec. 1, 2nd par., AO 70 s. 2003, “Strengthening of the Internal Control Systems of Government Offices, Government Owned And/Or Controlled Corporations, Including Government Financial Institutions and Local Government Units”, 14 April 2003)

1. IAS assists the Department Secretary or Governing Body 1.1. Authority of the Department Secretary “SEC. 6. Authority and Responsibility of the Secretary. – The authority and responsibility for the exercise of the mandate of the Department and for the discharge of its powers and functions shall be vested in the Secretary, who shall have supervision and control of the Department.” [underscoring supplied] (Ch. 2, Bk IV, EO 292 s. 1987, the “Administrative Code of 1987”)

1. IAS assists the Department Secretary or Governing Body 1.2. Authority of the Board “SECTION 23. The board of directors or trustees. — Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees x x x.” [underscoring supplied] (BP 68, “The Corporation Code of the Philippines,” 01 May 1980)

1. IAS assists the Department Secretary or Governing Body 1.3. Supervision and Control “(1) Supervision and Control. – Supervision and control shall include authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the execution of plans and programs; and prescribe standards, guidelines, plans and programs. x x x” [underscoring supplied] (Section 38, Chapter 7, Book IV, EO 292 s. 1987, the “Administrative Code of 1987”

1. IAS assists the Department Secretary or Governing Body 1.4. Conduct of Audit “(I)t can be placed under the control and supervision of the Secretary of National Defense, who consequently has the power to conduct an extensive management audit of petitioner corporation.” (The Veterans Federation of the Philippines vs. Reyes, G. R. No , 28 February 2006)

1. IAS assists the Department Secretary or Governing Body 1.4. Conduct of Audit “(2) Administrative Supervision. - x x x to generally oversee the operations of such agencies and to insure that they are managed effectively, efficiently and economically but without interference with day-to-day activities; or require the submission of reports and cause the conduct of management audit, performance evaluation and inspection to determine compliance with policies, standards and guidelines of the department; x x x” [underscoring supplied] (Sec. 38(2)(a), Ch. 7, Book IV, EO 292 s. 1987, the “Administrative Code of 1987”)

2. IAS function delegated by the head of agency Responsibility for Internal Control “Section 124. Installation. It shall be the direct responsibility of the agency head to install, implement and monitor a sound system of internal control.” (PD 1445, “Government Auditing Code of the Philippines”, as amended, 11 June 1978)

2. IAS function delegated by the head of agency 2.2. Responsibility for Monitoring of Internal Control “It is the primary responsibility of the head of the agency to monitor the system of internal control. This responsibility may be delegated by management to an internal audit department or office within the agency. x x x” (Section 55 (b), Title II-Internal Control System, Vol. III, GAAM COA Circular No dated 19 December 1991 and Sec. 8(5), Ch. 3, Title V, Book IV, EO 292 s. 1987, the “Administrative Code of 1987”)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “18. on the last paragraph – To achieve the objectivity and impartiality of the Internal Auditor, it should report not only to the Department Secretary (DS) or Head of Agency (HoA) but to a collegial body composed of the top three in the Department or agency.” [ underscoring supplied] (Item Objectivity and Impartiality, Comments on the PGIAM, dated 23 June 2009, p.3)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “31. on the 3rd paragraph – The statement regarding supervisor-subordinate relationship of the auditor with the DS/HOA or GBA/Audit Committee has to be clarified with regards (sic) to the operational independence of the IAS. [underscoring supplied] (Item Reporting Relationships, Comments on the PGIAM, dated 23 June 2009, p.5)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “45. on item a, 1st paragraph, last sentence ‘The final selection of internal audit topics is ultimately a matter of DS/HoA . . .’ – While this may impair the independence of the internal audit, this may create bias in the selection of audit thrust areas. As commented earlier, the internal audit should not be accountable to the DS or HoA alone, but it should be a collegial body in order to achieve independence and objectivity.” [underscoring supplied] (Item Developing a Good Internal Audit Annual Work Plan, Comments on the PGIAM, dated 23 June 2009, p.7)

3. Under the Administrative Code of 1987 “(1) Advise the Secretary [or the Governing Board thru the Audit Committee in the case of GOCCs/GFIs,] on all matters relating to management control and operations audit; (2) Conduct management and operations performance audit of Department [/ Agency/ GOCC/GFI] activities and units and determine the degree of compliance with established objectives [their mandate], policies, methods [systems] and procedures [/processes] government regulations, and contractual obligations of the Department;

3. Under the Administrative Code of 1987 (Continuation) (3) Review and appraise systems and procedures, organizational structure, assets management practices, accounting and other records [financial and management records], reports and performance standards (such as budgets and standards costs) of the Department Proper, Bureaus and Regional Offices [agencies/units covered];

3. Under the Administrative Code of 1987 (Continuation) (4) Analyze and evaluate management deficiencies and assist top management to solve the problems by recommending realistic courses of action; and (5) Perform such other related duties and responsibilities as may be assigned or delegated by the Secretary [or the Governing Board thru the Audit Committee,] or as may be required by law.” [underscoring supplied] (Sec. 8, Ch. 3, Title V (DPWH), Bk. IV, EO 292 s. 1987, The “Administrative Code 1987” and words in brackets are the terms added under DBM Circular Letter No , 14 April 2008).

4. Working Definition of Internal Audit Internal audit is the conduct of management and operations performance audit and determine the degree of compliance with laws, regulations, policies and contractual obligations. It is the appraisal of the plan of organization and all the coordinate methods and measures; and recommend courses of action to the head of agency on all matters relating to management control and operations audit. (Sec. 8, Ch. 3, Title V (DPWH), Bk. IV, EO 292 s. 1987, The “Administrative Code 1987” and Sec. 123, PD 1445 “Government Auditing Code of the Philippines”)

5. IAS not to participate in activities and operations of another unit “(I)t shall not be responsible for or required to participate in procedures which are essentially a part of regular operating activities or in operations which are the primary responsibility of another unit in the organization.” [underscoring supplied] (Sec. 2.0, AO 278 s. 1992, “Directing the Strengthening of the Internal Control Systems of Government Offices, Agencies, Government-Owned and/or Controlled Corporations, Including Government Financial Institutions and Local Government Units, in their Operations, 28 April 1992)

NGICS/PGIAM vis–à–vis IIA/ISPPIA “13. Consider adopting the definition of internal auditing developed by the IIA: Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organizations operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and gover-nance.” [underscoring supplied] (Item 1.1 Definition of Internal Auditing, Comments on the PGIAM, dated 23 June 2009, pp. 2-3)

NGICS/PGIAM vis–à–vis IIA/ISPPIA “28. x x x Consulting services – Advisory and related client services activities, the nature and scope of which are agreed upon with the client and which are intended to add value and improve an organization’s operations. The term ‘Advisory services’ is used for consulting services.” [underscoring supplied] (Item Types of Audits , Comments on the PGIAM, dated 23 June 2009, p.5)

NGICS/PGIAM vis–à–vis IIA/ISPPIA “28. x x x Assurance services – an objective examination of evidence for the purpose of providing an independent assessment on risk management, control, or governance processes of the organization. Assurance services are referred to as ‘audit services’ which services involve the internal auditor’s objective assessment of evidence to provide an independent opinion or conclusions regarding a process, system, or other subject matter. [underscoring supplied] (Item Types of Audits, Comments on the PGIAM, dated 23 June 2009, p.5)

II. Definition and Concept of Internal Control
6. Internal Control to Ensure/Assure 6.1. “Section 32. Definition of internal control. - Internal control comprises the plan of organization and all the methods and measures adopted within an agency to ensure that resources are used consistent with laws, regulations and policies; resources are safeguarded against loss, wastage and misuse; financial and non-financial information are reliable, accurate and timely; and operations are economical, efficient and effective.” [underscoring supplied] (Title 2- Internal Control System, Vol. III, GAAM COA Circular No , dated 19 December 1991, p. 63)

6. Internal Control to Ensure/Assure 6.2. “Internal control. Integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: ● effectiveness and efficiency of operations; ● reliability of financial reporting; and ● compliance with applicable laws and regulations.” [underscoring supplied] (US Government Accountability Office [formerly US General Accounting Office until renamed in 2004] “Standards for Internal Control in the Federal Government”, November 1999)

6. Internal Control to Ensure/Assure 6.3. “[T]he globality of the policies and procedures conceived and put in place by an organisation’s management to ensure the economic, efficient and effective achievement of its objectives; the adherence to external rules and to management policies and regulations; the safeguarding of assets and information; the prevention and detection of fraud and error, and the quality of accounting records and the timely production of reliable financial and management information”. [underscoring supplied] (Revision of the Internal Control Standards and the Underlying Framework –Strengthening Control Effectiveness-, 16 October 2007, Commission of the European Communities, citing the “The Reform White Paper of 2000”)

6. Internal Control to Ensure/Assure 6.4. “Internal control is an integral process that is effected by an entity’s management and personnel and is designed to address risks and to provide reasonable assurance that in pursuit of the entity’s mission, the following general objectives are being achieve: ● Executing orderly, ethical, economical, efficient and effective operations; ● Fulfilling accountability obligations; ● Complying with applicable laws and regulations; ● Safeguarding resources against loss, misuse and damage.” [underscoring supplied] (INTOSAI “Guidelines for Internal Control Standards for the Public Sector”, 2004, p. 6)

6. Internal Control to Ensure/Assure 6.5. “Title 2, Volume III of the Government Accounting and Auditing Manual (GAAM) deals with internal control system and provides guidelines therefor. However, these are not mandatory as they are simply advisory or suggested / recommended guidelines. x x x. The COA merely assesses the adequacy of the agency’s internal control system and may adopt measures that are deemed necessary and appropriate to correct the deficiencies of such system.” [underscoring supplied] (Letter to then AES Alberto A. Bernardo, from COA Assistant Commissioner Emma M. Espina, dated 26 March 2004)

7. Relationship in a Three-Dimensional Matrix
II. Definition and Concept of Internal Control 7. Relationship in a Three-Dimensional Matrix Internal Control Objectives Efficient and Effective Ensure Economical, Operations Reliability of Accounting Check Accuracy and Data Comply with Laws and Regulations Managerial Policies Adherence to Safeguarding Assets Public Service Organizations Internal Control Components Control Environment 1) Public Entity Risk Assessment 2) Private Entity Providing Public Services Control Activities Information and Communication Monitoring 43 43 4311

8. Relationship between the 4Es Minimum inputs to achieve a given quantity and quality of outputs Extent to which outputs/ outcomes match objectives or intended effects Efficient Effective Getting the right amount of resources, of the right quality, delivered at the right time and place, at the lowest cost Conforming to accepted standards and consistent with the Code of Conduct Economical Ethical Input Process Outputs Outcomes Input Process Output Outcome Evaluation Evaluation Evaluation Evaluation Policy, mandate, program, organization, staff, system, resources, and citizen’s needs Implementation, monitoring and compliance Products, services, or benefits Impact or change ’ Quality at Transformation Quality at Start Quality of Results

9. Internal Audit is part of Internal Control. “Sec. 33. Distinction from other systems within the organization. – Except for the Internal Audit Office which is part of the internal control system, internal controls are not separate specialized systems within an agency. They consists of control features interwoven into and made an integral part of each system that management uses to regulate and guide its operations. In this sense, internal controls are management controls.” [underscoring supplied] (Title II-Internal Control System, Vol. III, GAAM COA Circular No dated 19 December 1991, p. 64.)

10. Internal Audit in government is not an assurance service. “The internal audit function or appraisal activity as exercised by the internal audit office or unit constitutes a separate component of internal control the objective of which is to determine whether other internal controls are well designed and properly operated.” [underscoring supplied] (Sec. 8(3), Ch. 3, Title V, Book IV, EO 292 s. 1987, the “Administrative Code of 1987” and Section 55 (b), Title II-Internal Control System, Vol. III, GAAM COA Circular No dated 19 December 1991)

11. Internal Audit in government is not a consulting service. 11.1. “a. The contract covers lump sum work or services such as janitorial, security, or consultancy services where no employer-employee relationship exist; x x x c. The contracts of services and job orders are not covered by Civil Service Law, Rules and Regulations, but covered by COA rules; x x x” (Sec. 2, CSC MC No. 01 s. 2007, “Repeal of CSC Memorandum Circular Nos. 17 and 24, s. 2002”, 12 January 2007)

11. Internal Audit in government is not a consulting service. 11.2. “As a result of recent, high profile breakdowns in auditing and corporate governance, there has been widespread realization that, in many cases, it is not appropriate for an auditor to provide both audit and certain non-audit (consulting) services for the same client.” (US Government Accountability Office [formerly US General Accounting Office until renamed in 2004] Exposure Draft of Proposed New and Amended Standards for the Professional Practice of Internal Auditing, 30 May 2003)

11. Internal Audit in government is not a consulting service. 11.3. “GAGAS [generally accepted government auditing standards] define audit services as financial audits, attestation engagements, and performance audits. In nonaudit services, audit organizations perform tasks requested by management that directly support the entity’s operation.” [words in bracket supplied] (Item 10, Government Auditing Standards Answers to Independence Standards Questions, US Government Accountability Office [formerly US General Accounting Office until renamed in 2004] , July 2002)

11. Internal Audit in government is not a consulting service. 11.4. “3.29 Compliance with supplemental safeguards will not overcome independence impairments in this category. By their nature, certain nonaudit services directly support the entity’s operations and impair the audit organization’s ability to meet either or both of the overarching independence principles in paragraph 3.22 for certain types of audit work

11. Internal Audit in government is not a consulting service. (continuation) Examples of the types of services under this category include the following: x x x i. developing an entity’s policies, procedures, and internal controls; x x x.” (Item 3.29, Chapter 3 General Standards, Government Auditing Standards, US Government Accountability Office [formerly US General Accounting Office until renamed in 2004], July 2007 Revisions, p. 38)

III. Organization and Staffing of IAS
“SEC. 4. Personnel Complement. Agencies without IAS shall immediately organize one. The head of the agency shall review the organizational structure and personnel complement and convert existing vacant positions and/or parallel positions of incumbents in the agency necessary for the creation/strengthening of the IAS. x x x.” (AO 70 s. 2003, “Strengthening of the Internal Control Systems of Government Offices, Agencies, Government-Owned and/or Controlled Corporations, Including Government Financial Institutions, State Universities and Colleges and Local Government Units”, 14 April 2003)

1. Organizational Structure 1.1. “Each Department of the Executive Branch is authorized to establish its own IAS to cover audit areas in the Office of the Secretary, bureaus, offices and agencies, including region/field offices, regulatory agencies, and other agencies under the supervision and control or administrative supervision of a Department consistent with the provisions of the Administrative Code of 1987 on administrative relationship” [underscoring supplied] (DBM-CSC Joint Resolution No. 1 s. 2006, Rationalization Program’s Organization and Staffing Standards and Guidelines, 12 May 2006 and Item 2.1, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned” 14 April 2008)

1. Organizational Structure 1.2. “In the case of regular agencies attached to a Department for policy and program coordination, their respective board/council shall deter-mine the propriety of establishing a separate unit for the purpose or the availment of the services of the IAS of the Department” (Item 2.6, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned”, 14 April 2008.)

2. Head of IAS 2.1. In departments covering Department-Proper, Bureaus, Regional Offices and Regulatory Agencies “It shall be headed by a Director IV or as may be provided by the Administrative Code of 1987 or other special laws. The Director IV shall be occupied by a career official with 3rd level eligibility.” (Item 2.5, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned”, 14 April 2008)

2. Head of IAS Attached agencies “The head of the IAU of a regular agency attached to a Department for policy and program coordination shall have the rank equivalent to the fourth ranking official of the agency.” (Item 2.6, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned”, 14 April 2008.)

2. Head of IAS In GOCCs “In case of GOCCs/GFIs, the IAU shall be a Department or its equivalent organizational unit which shall be headed by a Department Manager with a Salary Grade of 26 or its equivalent position.” (Item 2.7, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned”, 14 April 2008.)

2. Head of IAS 2.4. As may be provided by the Administrative Code a) “SEC. 7. Assistant Secretaries. – The Secretary shall be assisted by six (6) Assistant Secretaries appointed by the President of the Philippines upon recommendation of the Secretary; one (1) to be responsible for the Internal Audit Services; x x x” (Ch. 2, Title V-DPWH, Book IV, EO 292 s. 1987, the “Administrative Code of 1987”)

2. Head of IAS 2.5. As may be provided by the Administrative Code b) The President appointed the Deputy Executive Secretary for Internal Audit Service pursuant to the “Continuing Authority of the President to Reorganize His Office.” (Sec. 31, Ch. 10, Title III-Functions, Book III-Office of the President, EO 292 s. 1987, the “Administrative Code of 1987”)

3. Reporting Line 3.1. In departments covering Department-Proper, Bureaus, Regional Offices and Regulatory Agencies “The IAS of the Department shall report directly to the Department Secretary or his equivalent.” (Sec. 2.5, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned” 14 April 2008.)

3. Reporting Line 3.2. Attached agencies “The IAU shall report to the head of the agency.” (Sec. 2.6, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned” 14 April 2008.)

3. Reporting Line 3.3. In multi-headed attached agencies “In case of multi-headed attached agencies, said IAU may report directly to the governing body. The governing body may opt to organize an Audit Committee from among its members to which the IAU shall directly report.” (Sec. 2.6, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned” 14 April 2008.)

3. Reporting Line In GOCCs “The IAS/IAU of GOCCs/GFIs shall report to the respective Audit Committee of the Governing Board of the corporation.” (Sec. 2.7, DBM Circular Letter No , “Guidelines of the Organization and Staffing of an Internal Audit Service/Unit and Management Division/Unit in Departments/ Agencies/GOCCs/GFI Concerned” 14 April 2008.)

4.1. Notice of Organization, Staffing and Compensation Action (NOSCA) (DBM Budget Circular No dated 22 March 2004 and DBM Circular Letter No dated 14 April 2008) 4.2. Qualifications Standards (QS) (Rule IV, CSC Omnibus Rules Implementing Book V of EO 292 s. 1987, the “Administrative Code of 1987”, 14 February 1992; CSC MC 12 s. 2006, “Qualification Standards for IAS Positions)

5. Internal audit studies, services, and seminars by private persons or firms “It is hereby reiterated that no government agency shall enter into a contract with any private person or firm to undertake studies and/or render services pertaining to government auditing, including the internal audit services, much less disburse public funds pertaining thereto, unless the Commission on Audit shall have certified in writing its prior decision not to undertake such contract. Payment for contracts entered into without the required certification shall be disallowed in audit.” [underscoring supplied] (COA Circular no A, “Government Contracts for Internal Audit Services,” 4 March 1993; COA Circular No , dated 8 September 1983)

6. Consultancy Contracts for IAS/IAU “In view thereof, the Supervising Auditors and Audit Team Leaders are required to submit to their respective Cluster Directors or Regional Directors all consultancy contracts for the establishment/strengthening of IAS/IAU under their audit jurisdictions for purposes of evaluating their appropriateness and monitoring the extent of the implementation of the said DBM Circular Letters. x x x.” [underscoring supplied] (COA Memorandum No , “Submission of Consultancy Contracts pursuant to DBM Circular Letter Nos and dated April 14, 2008 and October 23, 2008, respectively”, dated 26 March 2009)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “30. Paragraph 2 states that IAS shall perform functions delegated by the DS/HOA or GB/Audit Committee. The standards prescribed that the functions, authority and responsibility of internal audit activity should be prescribed in a charter. [underscoring supplied] (Item Reporting Relationships Comments on the PGIAM, dated 23 June 2009, p.5)

NGICS/PGIAM vis–à–vis IIA/ISSPIA “If a question should arise, the charter also provides a formal, written agreement with management and the board about the role and responsibilities of the internal audit activity within the organization.” [emphasis supplied] (Practice Advisory : Internal Audit Charter, Interpretation of Standard 1000 from the International Standards for the Professional Practice of Internal Auditing (ISPPIA), p. 13 )

1. Nature and Purpose of Review
IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 1. Nature and Purpose of Review Operating Units, Bureaus, Regional and Field Offices Management Division Internal Audit Service 1) Performance review and improvement of opera-tions, processes and activities; and 2) Compliance review and improvement of operations, processes and activities. 1) Review whether in-ternal controls are applied at all levels within and across the agency and sector; and 2) Recommend mea-sures for manage-ment improvement. 1) Appraise whether controls are well designed and pro-perly implemen-ted; and 2) Appraise the ade-quacy of internal control or whether it is achieving the objectives.

2. Scope, Coverage and Frequency
IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 2. Scope, Coverage and Frequency Operating Units, Bureaus, Regional and Field Offices Management Division Internal Audit Service 1) Performance is reviewed on a regular basis. If actual accomplishments do not meet established objectives or standards, the processes and activities established to achieve the objectives should be reviewed to determine if improve-ments are needed; and Organizational struc-ture, manpower, and operations; 2)Existing methods, sys-tems and processes; 3)Develop new and im-proved management system and staffing standards; Management and operations perfor-mance audit and determine the deg-ree of compliance; 2) Determine the con-trol effectiveness of operating systems and support systems for a specific period or date;

2. Scope, Coverage and Frequency (Continuation)
IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 2. Scope, Coverage and Frequency (Continuation) Operating Units, Bureaus, Regional and Field Offices Management Division Internal Audit Service 2) Operations, proces-ses and activities are periodically reviewed to ensure that they are in compliance with current regulations, policies and other requirements. 4) On-going and re-curring activities; and 5) Ingrained in the operations 3) Determine whether operations are con-ducted effectively, efficiently, ethically, and economically; and 4) Takes place “after the fact” and covers a complete cycle of operations.

3. Actions To Be Taken Operating Units,
IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 3. Actions To Be Taken Operating Units, Bureaus, Regional and Field Offices Management Division Internal Audit Service 1) Institute improvements to meet objectives or standards to achieve efficiency and effectiveness in operations; and Report management review to the Financial & Manage-ment Service (FMS) Head; 2) Submit recommenda-tions for management improvement to the FMS Head, as necessary; and 1) Submit an Internal Audit Report to the Head of Agency or Audit Committee of the Governing Board; 2) Advise the Depart-ment Secretary or the Audit Committee of the Governing Board on all matters relating to management con-trol and operations audit; and

3. Actions To Be Taken (Continuation)
IV. Functions Related to Internal Control Among the Operating Units, Management Division and the Internal Audit Service 3. Actions To Be Taken (Continuation) Operating Units, Bureaus, Regional and Field Offices Management Division Internal Audit Service 2) Institute improvements to achieve compliance with regulations, policies and other requirements in operations. 3) Conduct trainings on the application of improvements; and provide staff supervision over the implementa-tion of manage-ment improve-ments. 3) Analyze and eva-luate management control deficiencies and assist top management by re-commending rea-listic courses of ac-tion.

4. ORGANIZATIONAL CHART OF THE OFFICE OF THE SECRETARY
Internal Audit Service Undersecretaries Undersecretaries Asst. Secretaries Asst. Secretaries “SECTION 3. Department Proper. — (1) Unless otherwise provided in this Code or by law, the Department proper shall include the Office of the Secretary and the staff units directly under it. The Office of the Secretary shall consist of the Secretary and the Undersecretary or Undersecretaries, together with the personnel in their immediate offices; x x x (3) Whenever necessary, Assistant Secretary position or positions may be created to form part of the Department proper;” (Ch. 1, Bk IV, EO 292 s. 1987, the “Administrative Code of 1987”)

5. ORGANIZATIONAL CHART OF THE DEPARTMENT PROPER
Office of the Secretary Internal Audit Service Planning Service Financial and Management Service Admin. Service Technical Service Legal Service “(4) In the absence of special provisions, the major staff units of each department shall be the services which shall include: the Planning Service, the Financial and Management Service, the Administrative Service, and when necessary, the Technical and Legal Services. [underscoring supplied] (Sec. 3, Ch. 1, Bk IV, EO 292 s. 1987, the “Administrative Code of 1987”) “Except as otherwise provided for by law, each Department may have units which shall perform planning, financial, management and administrative services, internal audit, and other support to operations functions.” [underscoring supplied] (DBM-CSC Joint Resolution No. 1 dated 12 May 2006, p.5)

6. ORGANIZATIONAL CHART OF THE OPERATING UNITS
Office of the Secretary Internal Audit Service Planning Service Financial and Management Service Admin. Service Technical Service Legal Service Bureaus/ Offices Department Wide Regional/Field Offices Regional Offices “The core/major/vital functions of a department shall be performed by its operations units. These operations units may include line and staff bureaus and field units.” (DBM-CSC Joint Resolution No. 1 dated 12 May 2006, p. 5)

7. ORGANIZATIONAL CHART OF THE INTERNAL AUDIT SERVICE
Office of the Secretary Internal Audit Service Planning Service Financial and Management Service Admin. Service Technical Service Legal Service Bureaus/ Offices Department Wide Regional/Field Offices Regional Offices “The IAS of the Department shall report directly to the Department Secretary. It shall be headed by a Director IV or as may be provided by the Administrative Code of 1987 or other special laws. The Director IV shall be occupied by a career official with 3rd level eligibility. The IAS of the Department shall have two (2) divisions, an Operations Audit Division and a Management Audit Division, which shall each be headed by and Internal Auditor V (SG 24).” (Item 2.5., DBM Circular Letter No , 14 April 2008)

8. ORGANIZATIONAL CHART OF THE PROVINCIAL OFFICE
Office of the Governor Office of the Vice Governor Sangguniang Panlalawigan Administrator Office of the Secretary to the Sanggunian Panlalawigan Budget Office Accounting Office Planning& Dev’t. Office Office of the Treasurer Provincial Health Office Office of the Provincial Engineer Office of the Provincial Agriculturist Social Welfare & Dev’t. Office Office of the Assessor Legal Office General Service Office Office of the Provincial Veterenarian Env’t. & Natural Resources Office Information Office Component Cities/ Municipalities Barangays

Thank you!

Structure and Functions of Internal Audit Service

Similar presentations

Presentation on theme: "Structure and Functions of Internal Audit Service"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Structure and Functions of Internal Audit Service

Similar presentations

Presentation on theme: "Structure and Functions of Internal Audit Service"— Presentation transcript:

Similar presentations

About project

Feedback