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EXECUTIVE SUMMARY
The purpose of the audit is to add value to the oce by
determining the adequacy, eectiveness and eciency of existing
procedures to improve its operations. The internal audit team
performed an operational audit of City Budget Oce of Butuan.
The obectives of the audit are to! "a# understand established
organi$ational policies, procedures and operational %o&' "b# determine
&hether actual practices comply &ith oce(&ide established policies
procedures and operational %o&' "c# assess eciency and
eectiveness of operations' and "d# recommend actions for
improvement.
The audit &as based on the standards mandated by the
)nternational *tandards for the +rofessional +ractice of )nternal
uditing. To achieve these, the auditors relied on the information
gathered and presented to the audit team about the company.
The auditors relied on direct observations of the daily operations
in the oce, inquiry &ith the cting City Budget Ocer, -ead of every
ivision and their subordinates and also the &al/(through test
conducted.
The 0ndings of the audit are! "a# )nappropriate *egregation of
uties' "b# )nformation *ystem iscrepancies' and "c# 1xcess of
uthority of *ignatories and the auditors recommend that the client
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ma/e an oce manual that speci0es actual &or/ in the &or/place, and
to hire additional employees.
TABLE OF CONTENTS
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Background of the Co!an"
The City Budget Oce is a 5overnment gency under the City
5overnment of Butuan currently located in City -all, oongan, Butuan
City under the supervision of the cting City Budget Ocer 6r.
rmando . +ere$, *r.
The oce7s obectives are to prepare the annual and
supplemental budget of the City through systems and procedures and
eective management allocation and control of the City expenditures.
)t also controls the level of obligation, provides technical and sta
support to the oces of the City through consultative dialogue.
The function of the City Budget Oce includes Budget
+reparation, &hich studies and consolidates budget proposal of various
operating departments' the Budget uthori$ation, &hich approves the
annual budget' the Budget 1xecution, &hich studies and evaluate
allotment requests and prepares appropriate recommendations' the
Budget ccountability, &hich compares and evaluates reports of
various departments against measures of performances8standards' and
lastly, the Budget 9evie&, &hich determine &hether the ordinance has
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complied &ith the budgetary requirements and general limitations set
forth in the ;ocal 5overnment Code of 2e, the employees of the City Budget Oce, &ith the help of
lmighty ?ather, adheres to provide sound budgeting services &ith
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utmost dedication, determination and courage to serve the +ublic. *o
-elp As 5od.
#ISTORY
)n 2
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close proximity &ith each other. ;ast 6ay 4, 4EE:, all the oces &ere
transferred in one building &herein it has four %oors. They did this to
better accommodate the people7s concerns and to ma/e transactions
&ith dierent oces easier to access.
)n every department, there is an assigned Chief of Oce &ho
mandates and oversees the transactions of their respective
departments. )n the City Budget Oce, the very 0rst City Budget
Ocer &as 6r. +edro 6onton, follo&ed by 6r. 9oberto ?ortun(
Jillanueva, C+. fter 6r. Jillanueva7s retirement, in 2
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OR$ANI%ATIONAL C#ART
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INTERNAL AU&IT C#ARTER
M'(('on
The mission of City Budget Oce "CBO# )nternal udit Committee
")C# is to add value to the oce by helping improve its operations
through independent, obective assurance and consulting activities
designed to accomplish their obectives and evaluate the eectiveness
of ris/ management, control, and governance processes.
Sco!e of )ork
The scope of &or/ of CBO()C is to conduct a comprehensive audit
of the various Oce activities. )t shall have the follo&ing functions!
ctivities verifying the extent of compliance. This may involve
determining that accounting and budget procedures or other
policies are being follo&ed' operating procedures are
appropriately implemented' governmental rules and
regulations are being complied &ith' performance targets are
being achieved' and other contractual obligations are being
met' etermine the adequacy, eectiveness and eciency of
existing procedures and personnel'
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Jeri0cation and analysis of 0nancial and operations data to
ascertain if management information system generates
reports that are complete, accurate and valid' and
?unctions of a protective nature, such as prevention and
detection of fraud or dishonesty' revie& of cases involving
misuse of agency property' and chec/ing of transactions &ith
outside parties.
Accounta*'+'t" and Re(!on('*'+'t"
2. 9ole of the Chief udit 1xecutive
The Chief udit 1xecutive "C1# shall be accountable to
management "CBO# and the 6ayor. -e is responsible to!
evelop a %exible annual audit plan using an appropriate ris/(
based methodology, including any ris/s or control concerns by
management. The said plan &ill be submitted to the CBO()C for
revie& and endorsement to the 6ayor7s Oce for approval prior
to its implementation' )mplements the annual audit plan, as approved by the City
Budget Ocer and the 6ayor. +rovide annually an evaluation on the ampleness and adequacy
of the oceKs procedures for controlling its activities and dealing
&ith its ris/s in the $ones put for&ard under the mission and
scope of &or/' )ssue periodic &ritten reports to the udit Committee and the
6ayor'
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9eport to the management and the 6ayor signi0cant issues
related to the procedures for controlling the activities of the
oce, including potential upgrades to those procedures, and give
data concerning such issues through resolution'
Coordinate &ith, and give oversight of, other compliance, control,
and monitoring functions'
6aintain an expert sta &ith adequate learning, s/ills,
experience, and expert accreditations to meet the requirements
of this charter by providing relevant trainings and continuing
professional education' and
*et up a quality armation program as basis of evaluation,
monitoring and improvement of all internal auditing activities
conducted.
4. 9ole of )nternal udit *ta
1ach internal audit sta is accountable to the Chief udit
1xecutive. -e is responsible to!
a. o the assigned audit tas/s and /eep regular reports and
updates to the Chief udit 1xecutive or at the earliest
opportunity as coordinated by the Chief udit 1xecutive'b. 6aintain independence and obectivity a priority in mind and
in appearance' andc. 9espect con0dentiality of the information gathered and8or
obtained on all audit and consulting activities.
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Inde!endence
To maintain independence and obectivity, the )C sta &ill
present their reports speci0cally to the Chief udit 1xecutive. The Chief
udit 1xecutive &ill revie& the &or/s of the sta &hich &ill then be
submitted practically to the )C for conclusive revie&. duplicate of
the report &ill also be given to the 6ayor7s Oce for reference.
Author't" and Acce((
The Chief udit 1xecutive and )C stas are authori$ed to!
-ave unrestricted access to all functions, records, property, and
personnel.
-ave full and free access to the udit Committees.
llocate resources, set frequencies, select subects, determine
scopes of &or/, and apply the techniques required to accomplish
audit obectives.
Obtain the necessary assistance of personnel in divisions of the
CBO &here they perform audits, as &ell as other speci0c
administration from &ithin or outside the oce.
The Chief udit 1xecutive and )C stas are not authori$ed to!
+erform any operational obligations for the oce or its aliates.
)nitiate or approve accounting transactions external to )C.
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irect the activities of any oce employee not employed by )C,
except to the extent such employees have been properly assigned
to auditing teams or to other&ise assist the internal auditors.
Record( O,ner(h'! and Retent'on
9ecords and documents and other information derived during the
engagement are o&ned by the internal audit committee of City Budget
Oce, therefore, this should remain under their control. ?or request for
access of the information by persons outside that committee, it should
be authori$ed by the Chief udit 1xecutive.
-ro.c'enc" and Tra'n'ng
The Chief udit 1xecutive shall routinely conduct trainings and
initiate seminars upon the approval of the management and the 6ayor.
These trainings and seminars &ill help maintain the internal audit
department7s competency and pro0ciency in the conduct of the audit
and consulting activities and to /eep at standard &ith the developing
&orld&ide practices in internal auditing and to consistently gro& in the
practice of the profession.
Standard( of Aud't -ract'ce
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The )nternal udit Committee shall conduct the audit in
conformity &ith )nternational *tandards for the +rofessional +ractice of
)nternal uditing.
E/ect'0't"
This charter shall ta/e eect on Luly 2, 4E2D on&ards.
1ndorsed for pproval!
111111111111111111111111111111111111111111
-ead of the udit Committee
pproved by!
1111111111111111111111111111111111111111
City 6ayor
udit Committee 6ember udit
Committee 6ember
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MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
udit Committee 6ember
AU&IT RE-ORT
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A2 Suar" of F'nd'ng(
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2. *ta of
dministration
ivision cannot
interfere &ith
the aairs of
5eneral
5overnment
*ervices
ivision,
1conomic
*ervices
ivision, and
*ocial *ervices
ivision. "Based
on )ntervie
1mployee of
dministration
ivision
interfered &ith
the aairs of
5eneral
5overnment
*ervicesivision last
ecember
4E2I. "Based on
Observation#
+ossibility of
?raud-igh +riority
4. Anauthori$ed
personnel
cannot input
data to the
?96 *ystem
li/e )*+.
"Based on
)ntervie
ue to lac/ of
employees,1mployee C
input data to
the ?96
*ystem
speci0cally
)*+ even
though that is
not part of their
division as long
as he8she has
the /no&ledge
about it. "Based
on Observation#
Anauthori$ed
ccess-igh +riority
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Belo& are the areas in the City Budget Oce &here the auditors 0nd
unsatisfactory!
:. >henever
the cting City
Budget Ocer
is absent, the
esignated
Chief Ocer of
a division is
limited only to
sign8approve
purchase
requests and
obligation
requests of up
to +IE,EEE.EE.
=o limitations
for payrolls.
"Based on
)ntervie& &ith
the cting City
Budget Ocer#
;ast ecember
4E2I, the
cting City
Budget Ocer
&as absent and
the esignated
Chief Ocer forthat day said
that he has no
limitations in
signing
purchase
requests,
obligation
requests and
payrolls. "Based
on )ntervie
Anauthori$ed
ccess
6oderate
+riority
@. 1mployee
entertains day(
to(day
documents li/e
purchase
requests,
obligation
requests and
;ast ecember
4E2I, Only the
Chief Ocer of
ivision B &as
present. The
Chief Ocer
too/ over the
preparations of
possibility of
fraud.
-igh +riority
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payrolls and at
the same time,
the Chief
Ocer of a
division put
his8her initials
on the prepared
documents.
"Based on
Observation#
documents li/e
purchase
requests,
obligation
requests and
payrolls. t the
same time,
he8she &as the
one &ho
initialed those
documents.
"Based on
)ntervie
I. )f an
employee is no
longer part of a
division, his8her
account should
be ta/en out of
the ?96
*ystem.
ccounts are
not deleted and
can be used
again. "*ee
attachment#
possibility of
fraud.
6oderate
+riority
D. The o&ner of
the accountcan only access
that account.
*ince
*eptember
4E2I, 1mployee
used the
account of
1mployee 1.
"Based on
Observation
and )ntervie
possibility offraud.
6oderate+riority
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B2 &eta'+ &'(cu(('on of the F'nd'ng(
A2 Ina!!ro!r'ate Segregat'on of &ut'e( #I$# -RIORITY
Observations Business )mpact
Cr'ter'a3 *ta of dministration
ivision cannot interfere &ith the
aairs of 5eneral 5overnment
*ervices ivision, 1conomic *ervices
ivision, and *ocial *ervices ivision.
Cond't'on3 1mployee of
dministration ivision input data to
the ?96 *ystem &hich is the tas/ of
5eneral 5overnment *ervices
ivision last ecember 4E2I.
2. Confusion of &or/.
4. Can get access to restricte
information.
:. Overlapping of &or/.
9ecommendations 6anagement 9esponse
2. -ire additional employees.
?inancial constraint. Better if th
vacant positions &ill be 0lled u
rather than hire additiona
employees.
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4.
To have a manual &hich states
the ob description of each
employee, to comply &ith that
policy, and to strictly implement
that manual.
uring appointment, there is alread
ob description. -o&ever, &e &i
apply this recommendation in ou
oce.
:.
n approval from the cting City
Budget Ocer should be made
prior to assigning that employee
to do the ob.
This is o/ay but in case the ctin
City Budget is absent, th
dministrative Ocer can do th
approval.
@.
proper endorsement of &or/
after that employee has done
his8her &or/ at the other
ivision.
>e agree to apply th
recommendation in our oce.
A2 Ina!!ro!r'ate Segregat'on of &ut'e(MO&ERATE
-RIORITY
Observations Business )mpact
Cr'ter'a3 *ubordinates of the Chief
Ocer entertains day(to(day
documents &hile the Chief Ocer
signi0es an initial for approval of
those documents.
Cond't'on3 n instance &here
subordinate &as absent and the Chief
Ocer of the ivision too/ over the
preparation of the documents and at
the same, he8she signi0es an initial
for approval.
2. Confusion of &or/.
4. )nconsistency of &or/.
:. +ossible mista/es or errors may no
be discovered and might bdisregarded.
9ecommendations 6anagement 9esponse
2. Before the subordinate may ta/e >e have this but only &hen it is
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his8her absence, he8she must
submit an excuse letter duly
approved by the dministrative
ivision.
vacation leave. This is a goo
recommendation so &e are going t
apply it in our oce.
4.
)n case of urgent absence, the
subordinate must inform the
Chief Ocer through text or call
and submit the letter after that
day.
>e &ill ta/e note of thi
recommendation because this is fo
record purposes of the dministrativ
ivision.
:.
The cting City Budget Ocer
must evaluate and reconcile the
documents prepared and
initialed by the Chief Ocer.
This is o/ay ho&ever it is case(to(cas
basis. The cting City Budget Oce
&ill evaluate and reconcile thos
documents only &hen it involves bi
amounts.
@. proper monitoring of
employees.
This is correct. This is the tas/ of th
dministrative Ocer.
B2 Inforat'on S"(te &'(cre!anc'e( #I$# -RIORITY
Observations Business )mpact
Cr'ter'a3 Anauthori$ed personnel
cannot input data to the ?96
*ystem li/e )*+.
Cond't'on3 ue to lac/ of
employees, 1mployee C input data tothe ?96 *ystem speci0cally )*+
&hich is not part of their division as
long as he8she has the /no&ledge
about it.
2. n alteration, changes, an
deletion of data may occur.
4. )nformation may be accessed b
unauthori$ed personnel.
:. Confusion of &or/.
9ecommendations 6anagement 9esponse
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2. -ire more employees.
?inancial constraint. Better if th
vacant positions &ill be 0lled u
rather than hire additiona
employees.
4.
)nformation system must have a
module in the ?96 *ystem that
restricts access to people from
inputting data and a module
&here people can input data li/e
)*+.
This is the original plan ho&ever, th
development of the soft&are8&ebsit
is still on(going.
:.irect supervision of the
employee &ho inputs data.
>e &ill apply this recommendation i
our oce.
@.
reconciliation that &hat are
recorded in the logboo/ &ere
also being input in the ?96
*ystem.
This is applicable but ho&ever &
disagree to this recommendatio
because this is time consuming.
I.
The Chief Ocer must monitor
the logboo/ and the data that
&as being input in the ?96
*ystem.
This is still applicable but tim
consuming to do.
B2 Inforat'on S"(te &'(cre!anc'e( #I$# -RIORITY
Observations Business )mpact
Cr'ter'a3 The o&ner of the account
can only access that account.
Cond't'on3 *ince *eptember 4E2I,
1mployee used the account of
2. n alteration, changes, an
deletion of data may occur.4. )nformation may be accessed b
unauthori$ed personnel.:. Confusion of &or/.
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1mployee 1.
@. Threats to con0dentiality.
I. possibility of fraud.
9ecommendations 6anagement 9esponse
2.)mplement policies that limit the
access to their system.
The development of the soft&are i
still on(going.
4.
There must be a proper approval
of authority to use someone
else7s account by the cting City
Budget Ocer.
>e agree to apply th
recommendation in our oc
because this is important for 0lin
purposes.
:.
+ass&ords must be changed at
least once a month or as often
as possible.
This is very good but the Chief Oce
must also /no& the pass&ord besid
the employee.
B2 Inforat'on S"(te &'(cre!anc'e(MO&ERATE
-RIORITY
Observations Business )mpact
Cr'ter'a3)f an employee is no longer
part of a division, his8her account
should be ta/en out of the ?96
*ystem.
Cond't'on3 ccounts are not deleted
and can be used again.
2. n alteration, changes, an
deletion of data may occur.
4. )nformation may be accessed b
unauthori$ed personnel.
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9ecommendations 6anagement 9esponse
2.
)T must delete these accounts to
avoid past employees gaining
access to their system.
The development of the soft&are i
still on(going.
4.
)f it can7t be deleted, the )T must
bloc/ those accounts that are
o&ned by past employees.
>e &ill inform the )T of thi
recommendation because &e &ant t
apply this in our oce.
:.
Constant monitoring of
electronic logs for transactions
entered, altered, or deleted.
This is the ideal thing to do ho&eve
it is very time consuming.
C2 E4ce(( of Author't" of S'gnator'e(MO&ERATE
-RIORITY
Observations Business )mpact
Cr'ter'a3 The esignated Chief
Ocer of a division is limited only tosign8approve purchase requests and
obligation requests of up to
+IE,EEE.EE in case of the absence of
the cting City Budget Ocer and no
2. pproval of request &hich ar
beyond his limitations or to thauthority given to him.
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limitations for payrolls.
Cond't'on3 ;ast ecember (22,
4E2I, the cting City Budget Ocer
&as absent and the esignated Chief
Ocer for that day said that he has
no limitations in signing purchase
requests, obligation requests and
payrolls.
4. pproval of requests that lac/s
necessary requirements.
9ecommendations 6anagement 9esponse
2.
9eorient the esignated Chief
Ocer about his authority andlimitations.
>e &ill apply this recommendation.
4.
The manual must also include
the limitations and authority of
esignated Chief Ocer in case
the cting City Budget Ocer is
absent. *trict implementation of
the manual.
>e &ill ta/e note of thi
recommendation and apply it in ou
oce.
:.
noti0cation to the cting City
Budget Ocer and an urget
response by him.
This is o/ay. >e &ill apply this in ou
oce.
AU&IT -LAN
The internal audit team &ill perform an operational audit of City
Budget Oce of Butuan from =ovember 4D, 4E2I to Lanuary 4, 4E2D.
The purpose of the audit is to add value to the oce by determining
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the adequacy, eectiveness and eciency of existing procedures and
personnel and helping improve its operations.
Background of the Co!an"
The City Budget Oce is a 5overnment gency under the City
5overnment of Butuan currently located in City -all, oongan, Butuan
City under the supervision of the cting City Budget Ocer 6r.
rmando . +ere$, *r. The oce7s obectives are to prepare the annual
and supplemental budget of the City through systems and procedures
and eective management allocation and control of the City
expenditures. )t also controls the level of obligation, provides technical
and sta support to the oces of the City through consultative
dialogue.
The function of the City Budget Oce includes Budget
+reparation, &hich studies and consolidates budget proposal of various
operating departments' the Budget uthori$ation, &hich approves the
annual budget' the Budget 1xecution, &hich studies and evaluate
allotment requests and prepares appropriate recommendations' the
Budget ccountability, &hich compares and evaluates reports of
various departments against measures of performances8standards' and
lastly, the Budget 9evie&, &hich determine &hether the ordinance has
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complied &ith the budgetary requirements and general limitations set
forth in the ;ocal 5overnment Code of 2
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To achieve the above obectives, the auditors relied on the
information gathered about the company( their Jision and 6ission,
5oals and Obectives, +olicies and +rocedures, ?lo&chart and
Organi$ational Chart.
The auditors also relied on direct observations of the day(to(day
operations in the City Budget Oce, inquiry &ith the cting City
Budget Ocer, -ead of every ivision and some of their subordinates
and also to the &al/(through test that &as being conducted.
Sco!e of the Aud't
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Aud't T'e Ta*+e
6Intro7
Aud't -rocedure( Ste!(T'e
Schedu+e
A(('gned
Aud'tor(
Reark
($ather Inforat'on
Jision and 6ission 5oals and
Obectives
+olicies and
+rocedures ?lo&chart
Organi$ationalChart
=ovember
4D, 4E2I
Lonn
Lanica
9achel
Complied
Bra'n(tor'ngecember
I, 4E2Ill Complied
O*(er0e
1mployee
Operation 8 *ystem
"manual and
computeri$ed# Other relevant
persons
ecember
7/25/2019 Final Audit Paper
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&al/through test
Fo++o,9u! 'nter0'e,(
Lanuary 2@,
4E(42,
4E2D
Lonarissa
6arorie
Lanena
9ica
Complied
&raft'ng the
O!erat'ona+ Aud't
Re!ort
Lanuary 4(
4< and
?ebruary
2(2
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