MODULE ON FINANCIAL MANAGEMENT

Module 1: Budget Preparation (1)

I. Introduction

A. Definition of Budget Preparation

Budget preparation in the Philippine Government is the process of formulating and

designing a comprehensive national budget for a fiscal year. It involves the preparation,
evaluation, and allocation of financial resources to various government agencies and
programs based on their priorities and needs. The budget preparation process is guided
by the principles of transparency, accountability, and participation, and it aims to support
the government's development agenda by prioritizing spending on priority programs and
projects. The budget preparation process in the Philippines is mandated by law and is
overseen by the Department of Budget and Management (DBM).

B. Significance of Budget Preparation

Budget preparation is significant for the Philippine government for several reasons:

1. Allocation of resources - It allows the government to allocate resources based on its

priorities. This ensures that public funds are spent on programs and services that are
deemed essential for the welfare of the citizens.

2. Fiscal discipline - Preparing a budget forces the government to carefully examine its
spending patterns and identify areas where it can reduce costs and increase efficiency.
This promotes fiscal responsibility and accountability.

3. Planning and implementation - The budget serves as a blueprint for government

programs and projects, ensuring that they are planned, implemented, and evaluated
effectively. This also enables the government to track progress and make necessary
adjustments along the way.

4. Transparency - The budget provides transparency in government spending, giving

citizens access to information on how their tax money is being used.

II. Overview - Process of Budget Preparation

1. The Budget Call: The Department of Budget and Management (DBM) issues a
Budget Call to all national government agencies requesting them to submit their budget
proposals for the following year.

2. Agency Budget Proposal: Each agency submits its budget proposal to the DBM. The
proposal includes the agency's objectives, programs, activities, and projects and their
corresponding costs for the upcoming fiscal year.
3. Budget Review: The DBM reviews the budget proposals and conducts consultations
with the agencies to clarify and refine the proposals. The DBM may also adjust the
budget ceiling allocations for the agencies based on national priorities and available
resources.

4. Budget Preparation: The DBM prepares the National Expenditure Program (NEP),
which is the comprehensive budget proposal of the national government. The NEP
consolidates all the budget proposals of the agencies and includes the budgetary
requirements of the different branches of government.

5. Budget Approval: The NEP is submitted to the Office of the President for approval.
The President then submits the budget proposal to Congress for review and approval.

6. Budget Authorization: After thorough review and approval by Congress, the General
Appropriations Act (GAA) is signed into law by the President. The GAA authorizes the
national government to incur expenditures for the upcoming fiscal year.

7. Budget Execution: The agencies implement their respective programs, activities, and
projects within the approved budget allocation. The DBM monitors the agency’s budget
utilization and enforces measures to ensure that expenditures are within authorized
limits.

III. Challenges in Budget Preparation

A. Political Factors

1. Political instability: Changes in government leadership or frequent political unrest can

disrupt the budget preparation process and delay the approval of budgets.

2. Political interference: Sometimes, politicians can interfere in the budget preparation

process for their own personal or political gain, resulting in a distorted allocation of
funds.

3. Fiscal mismanagement: Government agencies that fail to manage their finances

efficiently may experience budget constraints and fiscal deficits, leading to difficulty in
budget preparation.

4. Bureaucratic red tape: The complex bureaucratic procedures and regulations involved
in the budget preparation process can make it difficult for government agencies to plan
and execute their budgets effectively.

5. Lack of transparency and accountability: A lack of transparency and accountability in

the budget preparation process can lead to corruption, misuse of funds, and other
irregularities, which can compromise the overall effectiveness of government spending.

B. Economic Factors
1. Inflation - Inflation can affect the value of money and the prices of goods and
services, which can impact the allocation of funds for programs and projects.
2. Economic growth - Economic growth is important as it can generate revenues for the
government. However, if it is slow, it can limit the government's ability to increase
spending on programs and projects.

3. Tax collection - If tax collections are not enough, the government will have limited
resources to allocate for programs and projects.

4. Public debt - High public debt levels can limit the government's ability to spend, as a
significant portion of the budget may go towards servicing the debt.

5. External shocks - External shocks such as natural disasters, changes in global oil
prices, and geopolitical risks can affect the country's economy and impact the budget
planning process.

C. Social Factors

1. Political instability and unpredictability: Frequent changes in leadership or policies can

disrupt the budgetary planning process for government agencies.

2. Public opinion and pressure: Government officials may face pressure from interest
groups, civil society organizations, and the media to allocate resources to certain
programs or projects, which may not align with the agency’s priorities or funding
constraints.

3. Demographic changes: Changes in population, such as increasing urbanization, aging

population, or migration patterns may require adjustments in the budget allocations for
social services, healthcare, and infrastructure.

4. Economic conditions: Changes in economic growth, inflation rates, and market

instability can affect the availability of resources and revenue projections, which may
lead to changes in budgeting priorities.

5. Natural disasters and emergencies: Unpredictable events like natural calamities,

epidemics, or national security threats can require sudden and significant adjustments to
budget allocations.

IV. Solutions to Challenges in Budget Preparation

A. Improve Transparency

1. Publish budgets publicly - A key element of transparency is making the government's

budget readily available to the public. National government agencies can make their
budget documents understandable and accessible to the public by publishing them
online or in newspapers.

2. Engage citizens in the budget process - National government agencies can engage
citizens in the budget preparation process by soliciting feedback from them. This would
enable the government to understand the needs and desires of the people, and enable
the government to allocate funds accordingly.

3. Increase accountability - The government can increase accountability by clearly

indicating the purpose of each budget allocation and making sure that information on
budget spending is made public.

4. Use open data - By providing data in open formats, national government agencies can
encourage third-party developers to create new tools and applications that can analyze
and interpret the data in new ways.

5. Track performance metrics - The use of performance metrics is a key tool for
measuring the effectiveness of government programs. By tracking performance metrics,
it is possible to identify areas where money is being wasted and/or underutilized.

B. Strengthen Collaboration

1. Foster a culture of communication - Encourage open communication channels among

stakeholders, including agency heads, budget officers, and staff. This can be achieved
by organizing regular meetings, creating discussion forums, using collaborative tools
like online software, and being transparent about budget processes.

2. Establish shared goals - Develop shared goals for budgeting processes that align with
the mission of the agency. By establishing common objectives, it becomes easier for all
parties to work together towards a shared vision.

3. Identify individual responsibilities - Ensure that everyone involved in the budgeting

process understands their roles and how they contribute to the overall success of the
process.

4. Encourage data sharing - Data sharing is important for all parties to have access to
accurate and up-to-date information on budgets, expenditures, and outcomes. This
requires a shared platform where data can be easily accessed.

5. Encourage feedback - Allow all participants to provide feedback on the budget

proposal, including suggestions for improvement. This feedback is essential to ensure
that all issues are addressed, and everyone feels heard.

C. Enhance Capacity Building

1. Identify the specific challenges faced by the national government agencies in the
budget preparation process.

2. Develop and implement training programs aimed at improving the skills and
knowledge of the staff involved in the budget preparation process. This training could
cover areas such as budget analysis, forecasting, and strategic planning.

3. Provide resources such as software, databases, and other tools that will simplify the
budget preparation process.

4. Establish collaboration among national government agencies to share best practices

in budget preparation. This can be achieved through forums, workshops, and
conferences.

5. Encourage the adoption of modern technologies to streamline the budget preparation

process and improve communication among stakeholders.

6. Develop an evaluation mechanism to assess the effectiveness of capacity-building

programs and identify areas for improvement.

V. Conclusion

Understanding the budget preparation of government agencies is important for several

reasons. First, it provides transparency and accountability in how taxpayer money is
being spent. Citizens have a right to know how their taxes are being used and
understanding budget preparation can help them make informed decisions about
whether they support certain programs or initiatives.

Second, budget preparation helps ensure that government agencies are using resources
efficiently and effectively. By carefully analyzing expenditures, agencies can identify
areas where they may be overspending or underutilizing resources, which can result in
cost savings and better allocation of resources.

Third, understanding budget preparation is essential for forecasting future needs and
making informed decisions about policy and program development. By examining past
spending patterns and predicting future needs, agencies can allocate resources in a way
that supports their long-term objectives.

Overall, understanding budget preparation is important for ensuring transparency,

accountability, efficiency, and effectiveness in government operations.

Activity Questions
1. In your experience/observation, why is budget preparation difficult? Explain. 2.
Cite the current national government activities/efforts that promote transparency,
collaboration, and capacity building of national government agencies. Discuss each
cited activity/effort.
3. Do you think the activities/efforts are effective? Why?
Module 2: Budget Approval Process (2)

I. National government agencies and budget approval

process A. Department of Budget and Management

1. Introduction to the Department of Budget and Management

The DBM is a government agency in the Philippines that is responsible for the
management of the national budget. Its functions include:

1. Formulating the NEP which is an annual budget proposal submitted to

Congress.

2. Recommending appropriations, revenue measures, and other financial policies

to the President.

3. Implementing the approved national budget.

4. Providing technical assistance to government agencies in budget formulation

and execution.

5. Monitoring and evaluating the implementation of the national budget. 6.

Conducting research and analysis on fiscal and economic issues. 7. Ensuring

transparency and accountability in budget implementation. 8. Managing the

compensation and benefits system for government employees.

9. Administering the procurement process for goods and services needed by

government agencies.

2. Role of the Department of Budget and Management in the budget approval

process

The DBM plays a crucial role in the budget approval process in many countries. Its
primary responsibility is to assist the executive branch in formulating, implementing, and
evaluating government policies, plans, programs, and projects. More specifically, its role
in the budget approval process includes the following:

1. Preparation of the national budget - The DBM prepares the national budget based on
the priorities and policies set by the President and Congress. It coordinates and
consolidates the budget proposals of all government agencies to ensure that they are
aligned with the overall national development plan.
2. Submission of the budget proposal to Congress - The DBM submits the proposed
budget to Congress for approval. It presents and defends the budget proposal before the
congressional committees that review the budget.

3. Monitoring of budget execution - The DBM monitors the implementation of the budget
to ensure that public funds are used efficiently, effectively, and in accordance with the
law and the budget plan.

4. Evaluation of budget performance - The DBM evaluates the performance of the

budget at the end of the fiscal year and recommends improvements in its formulation,
implementation, and evaluation.

B. Role of Congress of the Philippines in the budget approval process

The Congress of the Philippines plays a vital role in the budget approval process of
national government agencies. The Constitution of the Philippines gives Congress the
power of the purse, which means that it has the exclusive power to make appropriations
for the government. This power is exercised through the passage of the GAA, which is
the annual budget of the government.

The GAA is a complex document that sets forth the spending authority of all government
agencies for the coming year. It is prepared by the DBM and submitted to Congress for
approval. Congress has the power to amend the GAA, and it often does so to reflect the
priorities of the legislative branch.

The budget approval process is a lengthy and time-consuming one. It typically begins in
the early months of the year, when the DBM begins to gather information from
government agencies about their spending needs for the coming year. The DBM then
prepares a draft GAA, which is submitted to Congress for review.

Congress holds hearings on the draft GAA, and it often makes changes to it. The
changes can be minor, such as adjusting the amount of money that is allocated to a
particular agency. They can also be more significant, such as adding new programs or
eliminating existing ones.

Once Congress has approved the GAA, it is sent to the President for signature. The
President has the power to veto the GAA, but he or she must return it to Congress with
specific objections. Congress can then override the veto with a two-thirds vote in both
houses.

The budget approval process is an important one because it ensures that the
government has the resources it needs to operate effectively. It also gives Congress a
say in how the government spends its money.

Here are some of the specific roles that Congress plays in the budget approval process:
• Congress reviews and approves the President's proposed budget. •
Congress can amend the President's proposed budget.
• Congress can override the President's veto of the budget.

• Congress can conduct oversight of the government's spending.

The budget approval process is a complex and important one. It is a process that
ensures that the government has the resources it needs to operate effectively, and it is
a process that gives Congress a say in how the government spends its money.
II. Steps in the budget approval process - Submission and review of

budget A. Submission of budget to the DBM

When a proposed budget is submitted by a national government agency to the DBM in

the Philippines, it undergoes a process known as budget review.

The DBM reviews the proposed budget to ensure that it aligns with the national priorities
and policies set by the government. This review involves scrutinizing the agencies'
budget proposals, identifying any inconsistencies or discrepancies, and assessing the
feasibility of the projects or programs proposed.

Here are the specific steps that the DBM takes when reviewing a proposed budget:

• The DBM reviews the budget to make sure that it is in accordance with the
government's overall fiscal policy.
• The DBM reviews the budget to make sure that it is realistic and that the agency
has the capacity to implement it.
• The DBM may request additional information from the agency.

• The DBM may make recommendations to the agency on how to improve its
budget.
• The DBM may approve the budget or disapprove it.

Once the review is completed, the DBM may propose adjustments or revisions to the
agencies' budget proposals. The agency and DBM officials then engage in negotiations
to come up with a final budget proposal that will be submitted to Congress for approval.

B. Review of the final Budget Proposal by Congress

In the Philippines, the DBM first submits a proposed budget to Congress for the
upcoming fiscal year. The budget proposal is then reviewed by both houses of
Congress, starting with the House of Representatives, as mandated by the Constitution.

As a revenue bill, the annual General Appropriations Bill (GAB) is initiated by the House
of Representatives. The GAB is a detailed document that outlines the budget allocation
for each government agency. Upon receiving the proposed GAB, the House of
Representatives will deliberate, analyze, and scrutinize the proposed budget allocations
from the various departments and agencies.

If the House approves the GAB, it is then forwarded to the Senate for further review and
approval. During this process, Senators can propose amendments or revisions to the
GAB. After the Senate has approved the GAB, the bicameral conference committee is
convened.
The bicameral conference committee is composed of members from both houses of
Congress, tasked with reconciling any differences between the House and Senate
versions of the budget proposal. The committee reviews and agrees on the final version
of the GAB, which is then presented to both Houses of Congress for approval.

Once both the House of Representatives and the Senate approved the final version of
the GAB, it is transmitted to the President of the Philippines for signature and enactment
into law. The President may veto the GAB, in which case it is returned to Congress for
further deliberation and revision.

In conclusion, the Philippine Congress plays a critical role in reviewing, scrutinizing, and
approving the final budget proposal submitted by the DBM. The bicameral conference
committee ensures that the GAB reflects the national priorities and policies set by the
government while accommodating the interests of different sectors and stakeholders in
the country.

C. Approval of budget proposal by the President

The proposed budget is deemed approved and becomes law after it has been signed by
the President of the Philippines.

The Philippine Constitution provides that the President should sign the General
Appropriations Bill (GAB) within 30 days from receipt. If the President fails to act on the
GAB, it will automatically become law after the lapse of 30 days.

After the budget is enacted into law, it becomes the basis for the allocation of funds to
different government agencies and programs for the next fiscal year. The DBM then
releases the authorized budget to the respective implementing agencies based on the
approved program, project, and activity components of the GAB.

It is worth noting that the budget is subject to review and possible realignments during
execution by the President or through a reenacted budget in the absence of an
approved new budget. However, the GAB provides the initial framework for the
government's spending plan, which is crucial in ensuring the effective delivery of public
services and the realization of the country's development goals.

Conclusion:
Understanding the budget approval process in national government agencies in the
Philippines is essential in promoting good governance practices. It enables citizens to
hold their leaders accountable, which ultimately leads to better service delivery and
socio economic development.

Activity Questions
1. In your own words, briefly discuss the budget approval process. 2. Who do
you think are the current personalities that have an influence on the budget
approval process of your agency? Explain.
3. Are these influencing personalities positively/negatively affecting the budget
 process? Explain.
Module 3: Allotment Release (3)

Introduction:
Allotment release is a process by which national government agencies in the Philippines
are provided with funds for their programs and projects. In this lesson, we will discuss
the basics of allotment release, its purpose, and the steps involved in the process.

I. Definition of Allotment Release

Allotment release refers to the issuance of an authority to incur obligations or spend
funds for a particular program or project. It is a process by which national government
agencies are given access to funds allocated under the GAA for their operations.

II. Purpose of Allotment Release

The primary purpose of allotment release is to ensure that government agencies have
adequate resources to implement their programs and projects. This enables them to
provide essential services to the public, such as healthcare, education, infrastructure,
and social welfare.

III. Steps Involved in Allotment Release

There are several steps involved in the allotment release process:

1. Submission of Budget Proposal - The first step is the submission of budget proposals
by national government agencies to the DBM. The DBM reviews and consolidates the
proposals to come up with the NEP.

2. Approval of Proposed Budget - The NEP is submitted to the President for approval.
Once the proposed budget is approved, it is sent back to the DBM for allocation and
release.

3. Budget Allotment - The DBM then allocates the budget to each agency based on its
program, project, and activity components. The budget allotment includes the specific
amount authorized by Congress, which will be the basis for the release of funds.

4. Obligation of Funds - The implementing agency then obligates or commits the funds
for specific programs, projects, and activities through a contract or purchase order. This
is to ensure the implementation of projects and programs under its mandate.

5. Release of Funds - After obligating the funds, the implementing agency requests for
the release of funds from the DBM. The DBM then releases the authorized allotment to
the implementing agency based on the approved program, project, and activity
components of the General Appropriations Act.

6. Monitoring and Evaluation - The final step is the monitoring and evaluation of the use
of funds by the implementing agency to ensure that it is used for its intended purpose
and that it complies with government regulations and guidelines.
IV. Positive and Negative Outcomes
Allotment releases can have both positive and negative outcomes. Here are some of the
usual positive and negative outcomes of allotment releases:

Positive Outcomes:
1. Improved Public Services - Allotment releases can help fund public services like
health care, education, infrastructure, and social welfare programs, leading to their
improvement.

2. Economic Growth - Budget allocations for infrastructure projects can stimulate

economic growth by creating jobs, generating income, and attracting investments.

3. Poverty Reduction - Proper allocation of funds to social welfare programs can result in
poverty reduction by providing assistance to marginalized sectors of society.

4. Accountability and Transparency - The allotment release process ensures

accountability and transparency in the use of public funds, reducing corruption and
increasing public trust in government agencies.

Negative Outcomes:
1. Misuse of Funds - Improper usage of funds or corruption can occur during the
allotment and release process, leading to the wastage of public resources.

2. Delays in Project Implementation - Delayed release of funds can lead to delays in

project implementation, causing inconvenience to the public and hindering economic
growth.

3. Inequitable Distribution of Funds - Unequal allocation of funds among government

agencies and regions can worsen disparities in income and opportunities.

4. Limited Access to Public Services - Shortage of funds can limit access to essential
public services, especially in rural areas where access is already limited.

In summary, the effectiveness of allotment releases depends on a transparent and

accountable process, proper implementation, and equitable distribution of funds.

V. Conclusion
Allotment release is an essential process in the management of public finances in the
Philippines. It provides national government agencies with the resources they need to
implement their programs and projects and deliver critical public services. Understanding
the basics of allotment release is crucial for anyone involved in public finance
management or interested in the workings of the Philippine government.

Activity Problems
1. Explain how each negative outcome in allotment releases happens.
2. How does a politically motivated allotment release happen? What do you think
are the implications of these kinds of releases?
Module 4: Obligation and Disbursement (3)
Introduction:
In order to ensure a transparent and accountable government, it is important to have
clear rules and regulations when it comes to obligation and disbursement in national
government agencies in the Philippines. This lesson will cover the basics of these
processes, including contracts, purchases, and salaries, as well as the submission of
invoices, receipts, and other documents.

Part 1: Contracts
- A contract is a legally binding agreement between two parties.
- In national government agencies in the Philippines, contracts are usually awarded
through a public bidding process.
- The contract should contain all the necessary terms and conditions, including the
scope of work, payment terms, and completion date.
- Once the contract is signed, the agency is obligated to fulfill its end of the bargain, and
disbursements will be made accordingly.

Part 2: Purchases
- In national government agencies in the Philippines, purchases are usually made
through a procurement process.
- The procurement process should be transparent and competitive and should follow the
guidelines set by the government.
- Once a purchase is made, the agency must ensure that the item or service received is
in accordance with the specifications and requirements outlined in the purchase request.
- Invoices and receipts should be submitted promptly to ensure timely disbursement.

Part 3: Salaries
- National government agencies in the Philippines are required to follow the Salary
Standardization Law (SSL), which sets the minimum salary levels for government
employees.
- Salaries are usually disbursed on a bi-monthly basis and should be based on the
employee's position and years of service.
- Deductions for taxes, loans, and other obligations should also be taken into account.

Part 4: Submission of Invoices, Receipts, and Other Documents - Invoices and

receipts should be submitted promptly to ensure timely disbursement. - The government
has implemented the Electronic Procurement System (EPS) to streamline the
submission process for invoices and other documents. - Failure to submit these
documents on time may result in delayed disbursements or even penalties.

Conclusion:
Understanding the basics of obligation and disbursement in national government
agencies in the Philippines is essential for ensuring a transparent and accountable
government. By following the rules and regulations, including contracts, purchases, and
salaries, as well as the submission of invoices, receipts, and other documents, we can
work towards a more efficient and effective government.

Supplemental Readings:
 1. Civil Code of the Philippines (Book 4 Law on Contracts)
2. Implementing Rules and Regulations of Republic Act No. 9184
3. Salary Standardization Law

Activity Questions
1. Find some of the most recent government rules on the issuance of invoices,
receipts, and other similar documents. Discuss the main points of the issuance. 2.
Discuss the rationale for each of your cited issuance. Do you think the issuances are
fulfilling their purposes? Why?
Module 5: Financial Reporting and Accountability (4)

Introduction:
Financial reporting is an essential aspect of any organization, including national
government agencies in the Philippines. It refers to the process of presenting financial
information about an organization's financial activities to external stakeholders, such as
the COA and the DBM. In this lesson, we will discuss what financial reporting is, why it is
important, and the types of financial reports that are submitted to COA and DBM.

Content:

1. Importance of Financial Reporting and Accountability

- Ensures transparency and accountability in the use of public funds - Helps
identify areas where improvements can be made and resources allocated more
effectively
- Provides information for decision-making by internal and external stakeholders

2. Types of Financial Reports Submitted to COA and DBM

a. Balance Sheet
- A financial statement that shows the agency's assets, liabilities, and equity at a
specific point in time.
- It provides a snapshot of the agency's financial position at a specific
date. - The balance sheet is submitted annually to COA and DBM.

b. Income Statement
- A financial statement that shows the agency's revenues, expenses, and net
income or loss over a specific period.
- It provides an overview of the agency's financial performance during a particular
period.
- The income statement is submitted quarterly to COA and DBM.

c. Cash Flow Statement

- A financial statement that shows the agency's inflows and outflows of cash
during a specific period.
- It provides information about the agency's ability to generate cash and its cash
needs.
- The cash flow statement is submitted quarterly to COA and DBM.
 d. Other Important Financial Information
- In addition to the three main financial statements mentioned above, agencies
may also need to submit other financial reports, such as budget variance reports
or audit reports, to COA and DBM.

3. Elements of Each Financial Report

a. Balance Sheet
- Assets: Includes current assets (such as cash), long-term assets (such as
property and equipment), and intangible assets (such as patents).
- Liabilities: Includes current liabilities (such as accounts payable), long-term
liabilities (such as loans), and deferred revenue.
- Equity: Represents the residual interest in the assets of the agency after
deducting liabilities.

b. Income Statement
- Revenues: Includes all sources of income for the agency, such as fees, grants,
and appropriations.
- Expenses: Includes all costs incurred by the agency in generating revenues,
such as salaries, supplies, and capital expenditures.
- Net Income/Loss: Represents the difference between total revenues and total
expenses.

c. Cash Flow Statement

- Operating Activities: Includes cash inflows and outflows from day-to-day
operations, such as collections and payments.
- Investing Activities: Includes cash inflows and outflows from investments, such
as the purchase or sale of property and equipment.
- Financing Activities: Includes cash inflows and outflows from financing activities,
such as borrowing or repaying loans.

Conclusion:
In conclusion, financial reporting and accountability are crucial for national government
agencies in the Philippines. By submitting financial reports to COA and DBM, agencies
can ensure transparency and accountability in the use of public funds, identify areas
where improvements can be made, and provide information for decision-making by
internal and external stakeholders. The three main financial statements submitted to
COA and DBM include the balance sheet, income statement, and cash flow statement,
each providing important information about an agency's financial position, performance,
and liquidity.

Activity Problems
1. Cite some accountability problems that you observe among national government
agencies that may be reflected in their financial reports? Why are they considered
to be problems?
2. What can you recommend to eradicate or at least mitigate the cited accountability
problems?
Module 6: Auditing (4)
Introduction:
Auditing is an essential activity that ensures accountability, transparency, and good
governance in national government agencies in the Philippines. It plays a critical role in
ensuring that public funds are spent efficiently and effectively to achieve the
government's goals and objectives.

Importance of Auditing
Auditing in national government agencies is important for the following reasons:

• Ensures that public funds are used lawfully and for their intended purpose
• Provides assurance that financial statements are accurate and reliable •
Identifies weaknesses in internal controls and recommends improvements
• Promotes accountability, transparency, and good governance
• Enhances public trust and confidence in government institutions

Types of Audits Conducted

There are several types of audits conducted by national government agencies in the
Philippines. These include the following:

1. Financial Audit - This type of audit examines the financial statements of the agency to
determine whether they comply with generally accepted accounting principles and
identify any material misstatements or errors.
2. Performance Audit - This type of audit assesses the efficiency, effectiveness, and
economy of the agency's operations, programs, and activities.
3. Compliance Audit - This type of audit evaluates whether the agency complies with
laws, regulations, and policies governing its operations.
4. Special Audit - This type of audit is conducted when there are specific concerns or
issues that need to be addressed, such as fraud or misuse of public funds.

Roles and Responsibilities of Auditors

Auditors play a crucial role in ensuring accountability, transparency, and good
governance in national government agencies. Their responsibilities include:

• Planning and conducting audits in accordance with generally accepted auditing

standards
• Gathering and analyzing information to support audit findings and
recommendations • Communicating audit results to agency management and
stakeholders • Providing advice and guidance on improving internal controls and
operations • Maintaining independence and objectivity in the audit process.

Conclusion:
Auditing is a critical function that ensures accountability, transparency, and good
governance in national government agencies in the Philippines. Auditors play a vital role
in identifying weaknesses in internal controls, promoting efficiency and effectiveness,
and
enhancing public trust and confidence in government institutions. It is essential for
government agencies to take auditing seriously and to implement recommendations for
improvement to achieve their goals and objectives.
Overall, the government of the Philippines follows a strict process for finance
management among national agencies to ensure the proper use of public funds and
maintain transparency and accountability.

Activity Problems:
1. Cite some poor auditing practices that you observe among national government
agencies or even COA that affect the transparency and efficiency in rendering
government services? Why are they considered to be problems?
2. What can you recommend to eradicate or at least mitigate the problem with the
poor practice?
Module 7: Irregular, Unnecessary, Excessive, Extravagant, and Unconscionable
Expenditures (4)

Introduction:
The Commission on Audit (COA) of the Philippines is responsible for examining,
auditing, and settling all accounts and expenditures of government agencies. COA has
set rules and regulations to ensure that public funds are spent in a lawful, efficient, and
effective manner. Irregular, unnecessary, excessive, extravagant, and unconscionable
expenditures are strictly prohibited by COA as they waste public funds and may lead to
corruption.

What are Irregular, Unnecessary, Excessive, Extravagant, and Unconscionable

Expenditures?

1. Irregular expenditures - These are expenses that do not comply with existing laws,
rules, and regulations. Examples include payments made without proper documentation,
unauthorized purchases, or transactions that lack transparency.

2. Unnecessary expenditures - These are expenses that are not essential to the
operations or functions of an agency or project. Examples include purchasing high-end
office equipment when cheaper alternatives are available or paying for travel expenses
that are not related to official duties.

3. Excessive expenditures - These are expenses that go beyond what is reasonable or

necessary. Examples include extravagant gifts or bonuses given to officials or
employees, excessive spending on conferences or seminars, or building structures that
are overly luxurious or grandiose.

4. Extravagant expenditures - These are expenses that are beyond what is appropriate
or reasonable for the intended purpose. Examples include purchasing luxury vehicles or
expensive jewelry using public funds or organizing lavish events that have no direct
benefit to the public.

5. Unconscionable expenditures - These are expenses that are clearly unreasonable or

unfair. Examples include paying for personal expenses of officials or employees using
public funds, or awarding contracts to friends or family members without fair competition.
Discussion:
Irregular, unnecessary, excessive, extravagant, and unconscionable expenditures have
long been a problem in the Philippines. The misuse of public funds has led to corruption,
waste, inefficiency, and delayed development. To address this problem, COA has set
strict rules and regulations to ensure that public officials and employees are held
accountable for their actions.

One way to avoid irregularities is to strictly follow existing laws, rules, and regulations in
all transactions. This means ensuring that all documents are complete, properly
authorized, and recorded. All purchases should be made through competitive bidding
processes to ensure transparency and fairness in decision-making.

To avoid unnecessary expenses, agencies should prioritize essential functions and

services. Expenses should be carefully reviewed and evaluated to ensure that they are
necessary and beneficial to the public.

Excessive, extravagant, and unconscionable expenses can be avoided by setting

reasonable limits and standards. Agencies should benchmark against industry standards
to ensure that expenses are appropriate and serve the intended purpose. It is also
important to conduct regular audits and investigations to identify irregularities and
prevent them from happening.

Conclusion:
Irregular, unnecessary, excessive, extravagant, and unconscionable expenditures are
prohibited under COA rules and regulations. Adhering to these guidelines can help
ensure that public funds are spent lawfully, efficiently, and effectively. By avoiding these
types of expenses, agencies can promote transparency, accountability, and better
governance.

Activity Questions:
1. Give/search one case each of Irregular, Unnecessary, Excessive, Extravagant,
and Unconscionable Expenditures. Discuss.
2. What are ghost procurements? Discuss.
3. Distinguish malversation from technical malversation. How are malversation and
technical malversation related to Irregular, Unnecessary, Excessive, Extravagant,
and Unconscionable Expenditures.