Pass law mandating gov’t financial institutions to respond to COA’s audit opinions

It seems a very significant issue that surfaced during the Senate hearings on PhilHealth’s alleged irregularities has not been given the appropriate attention: that the Commission on Audit (COA) issued a “Disclaimer of Audit Opinion” on the financial statements of PhilHealth for two consecutive years—2018 and 2019.

There has been no further discussion on the matter after a COA representative pinpointed the problem areas that led to the issuance of said “disclaimer,” and also after hearing the scanty and vague comments about it by now-resigned PhilHealth president and CEO Ricardo Morales.

As PhilHealth’s operations essentially involve financial matters, the significance of having financial statements that can stand the test of an independent audit is something that cannot be overemphasized. The management’s financial reports that cannot be subjected to an independent audit due to certain impediments is a very serious matter.

If such eventuality takes place in a private financial institution, one could readily imagine the board’s response. It is almost a certainty that the head of the president and CEO of the company will be immediately placed on the chopping block, to pave the way for a speedy and unobstructed investigation and to restore the trust and confidence of stakeholders. Such board action would also show the importance it gives to independent audits.

Had there been similar immediate and drastic action taken on the 2018 “Disclaimer of Audit Opinion” on the financial statements of PhilHealth, the terrible mess PhilHealth now finds itself in could have been averted. The ensuing investigation, after the sacking of the president and CEO, could have identified operational problems, particularly irregularities, and the people involved in them. Those problems and irregularities could have been addressed by this time.

More importantly, any prompt response to the COA’s audit opinion would underscore the importance of its role in curbing corruption and promoting good governance.

It is therefore imperative that the boards of government financial institutions be mandated, through an executive fiat or legislation, to immediately and appropriately respond to any adverse audit opinion by the COA. The board’s response should at least cover the sacking of the CEO or COO to pave the way for an unhampered investigation that would help the institution regain trust and confidence. It is also an indication of: The importance the board accords to the audit report.

The use of the audit as a tool to judge management performance, beginning with the CEO/COO. Sacking a company head is an administrative sanction. Criminal sanctions may follow depending on the results of the investigation.

The board’s adherence to the tenets of good governance—accountability, transparency, efficiency, etc.

And also, a wake-up call to other CEOs/COOs.

Immediate sacking of the CEO, and possibly the COO, may seem too harsh, but given the involvement of taxpayer money, it is not unjustified at all.

The absence of any response to its audit opinions will convert the COA into a “toothless people’s watchdog” in government operations. Even a “clean audit opinion” should trigger a response, such as commendations and promotions for deserving personnel.

Carlos C. Tan
[email protected]