Audits and the ‘myth’ of disallowance


THIS REFERS to Sancho Caceres’ letters under the headings “Strengthen pre-audit mechanism” (Inquirer, 9/7/12) and “Pre-audit best way to safeguard people’s money” (Inquirer, 10/24/12).

From the constitutional perspective, the audit being undertaken by Commission on Audit is deemed as a most potent tool in eliminating waste in the use of government funds and in ensuring rigorous public accountability. It is a mechanism for the effective enforcement of fiscal accountability.

For the purpose, COA has been equipped by the Constitution with the active, not merely passive, power to prevent, abort, forestall, suspend or disallow outright financial transactions that are found in the course of audit to be illegal, irregular or improper. This is known as the auditing veto power over government fiscal operations. It goes without saying that COA can be a more effective enforcer of fiscal accountability if the audit that it conducts is more meaningful and effective. And it can be so only if the audit is the preventive, not merely curative, type.

Supreme Court decisions nullifying government contracts found to be violative of the Constitution, law and regulations and public policy highlight the need for COA to be more aggressive, vigilant and assertive in thwarting upfront the execution and implementation of illegal and void contracts involving huge expenditures of public funds—through pre-audit, i.e., before payments are effected and the contracts consummated. It is lamentable that it takes the Supreme Court to do the job for COA in declaring and striking down these transactions and contracts as null and void.

My experience as a COA functionary for 34 years has taught me that pre-audit is the more meaningful and effective auditing technique. It provides flesh and substance to the preventive aspect of state audit within the contemplation of the Constitution. It enables COA to function as a truly effective watchdog of the public treasury. It poses a much more pronounced deterrent to irregular, unnecessary, excessive, extravagant or unconscionable expenditures or uses of government funds or property.

Evidently, post-audit is inconsistent or in conflict with or antagonistic to the preventive scheme of COA audit. By this technique, COA essentially reviews a completed transaction after payment has been effected. It would, indeed, be too late in the day for COA to really cure or correct flaws in a consummated transaction because there would by then a diminution or depletion in the funds of the audited agency. In auditing parlance, there would already be a “disturbance of the fiscal posture.” Thus any “disallowance” that COA might determine in its post-audit report would be a misnomer of sorts simply because there is really nothing at that stage to prevent and disallow.

In sum, the audit that COA should conduct must be of the preventive type. Only then may so-called scams and scandals in government financial transactions be forestalled.


5431 Curie St., Palanan, Makati City

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