Internal Control, Audit and Ethical Standards
Internal control
Internal control is the process that gives reasonable assurance over reliable reporting, compliance and safeguarding. Key controls are authorization, segregation of duties, custody of assets, recording, reconciliation and monitoring. The person who collects should not be the only person who records, deposits and reconciles. Preventive controls stop errors; detective controls find them; corrective controls fix them.
Audit and ethics
COA audits LGU accounts and issues notices of suspension, disallowance and charge. A suspension asks for documentation; a disallowance rejects the transaction; a charge holds the accountable officer liable. Ethics rules include RA 6713 on conduct, gifts and conflict of interest, RA 3019 on anti-graft, and confidentiality of taxpayer information. Treasury staff must not use their position for private gain.
Worked example
One clerk receives cash, issues receipts, prepares the deposit and reconciles the bank account. Audit finds a P20,000 shortage. The root cause is lack of segregation, not just the clerk's dishonesty. The fix: a second officer counts and acknowledges remittances, another official makes the deposit, and reconciliation is done independently.
Traps
- Relying on trust instead of controls.
- Ignoring a COA notice until it becomes a disallowance.
- Accepting gifts from suppliers or taxpayers.
- Letting the same person approve and reconcile.