Internal control practices in the local government units in the National Capital Region : basis for determining compliance to the internal control standards for the Philippine public sector / Angelita U. Alonzo. 6

Thesis (Ph.D.)-- Pamantasan ng Lungsod ng Maynila, 2021.;A dissertation paper presented to the College of Graduate School of Government in partial fulfillment of the requirements for the degree Doctor of Public Administration. 56

5

ABSTRACT: On the basis of the enactment of the Internal Audit Act on June 16, 1962, the various administrations of the Philippine government have initiated reforms to improve the public financial management system of the country for good governance which aimed to have greater fairness, transparency, accountability, and integrity. Good governance will likely lead to abundance, especially in terms of funds, to enable the government to provide the basic needs of the people and engage in economic improvement and development for the benefit of the Filipino people and the Philippines. Thus, it becomes imperative that check and balance should be initiated to find out if the said Act is properly implemented or not. This study is deemed very fitting and will serve a very great purpose as felt by the researcher and which prompted her to conduct the present study. The study aimed to determine the extent of attainment of the Internal Control Objectives and extent of compliance to the Internal Audit Manual for Local Government Units (LGUs) prescribed by the Department of Budget and Management (DBM) as assessed by the respondent-internal control unit staff in selected LGUs in the National Capital Region (NCR) where the researcher resides and works which influenced her interest and has the chance to convince the authorities being the Acting City Accountant. Specifically, it sought answers to the following questions: 1.

As assessed by the respondent-internal control unit staff in the LGUs in the NCR, what is the extent of the attainment of the Internal Control Objectives in terms of: 1.

Safeguarding assets; 2.

Check accuracy and reliability of accounting data; 3.

Adherence to managerial policies; 4.

Comply with laws and regulations; and 5.

Economical, efficient, effective, and ethical operations? 2.

As assessed by the respondent-internal control unit staff in the LGUs in the NCR, what is the extent of the compliance to the Internal Control Standards for the Philippine Public Sector in terms of: 1.

Risk assessment; 3.

Control activities; 4.

Information and communications; and 5.

Monitoring activities? 3.

Is there a significant difference in the assessment of the respondents-internal control unit staff in the selected LGUs in the NCR on the extent of compliance to the Internal Control Standards for Philippine Public Sector in terms of the variables mentioned in Problem Statement 4? 5.

What plan of actions can be recommended to improve the compliance by the selected LGUs in the NCR on the Internal Control Standards for the Philippine Public Sector? 6.

The following hypotheses were tested at a=0.05 level of significance: 1.

There is no significant difference in the assessment of the respondents-internal control unit staff in the selected LGUs in the NCR on the extent of the attainment of the Internal Control Objectives in terms of the variables mentioned in Problem Statement 3? 2.

There is no significant difference in the assessment of the respondents-internal control unit staff in the selected LGUs in the NCR on the extent of compliance to the Internal Control Standards for Philippine Public Sector in terms of the variables mentioned in Problem Statement 4? Descriptive-causal method was used for the study with the questionnaire as the main tool in gathering data. The respondents of the study were the 115 personnel in the Internal Control Units in the six (6) LGUs in the NCR such as Caloocan City, Makati City, Manila City, Marikina City, Pasig City and Quezon City which are in the top ten ranks among local government units in the Philippines in terms of assets. Frequency, percentage, ranking, standard deviation, weight mean, Analysis of Variance (ANOVA), and post-hoc ANOVA Test (Turkey's B) were adopted for the statistical treatment, analysis, and interpretation of the data. The results of the study show the following: (1) On safeguarding assets, there was greater extent in all domains given such as conducting of physical inventory assets annually, following the rule of thumb in disposing assets in a practical manner, and considering human resources as the heart of all assets of the LGUs to avoid corruption. However, it did not have a significant impact on people's understanding of Internal Control. (2) On checking the accuracy and reliability of accounting data, there was greater extent on workload at the end-of-year of the accounting period for accuracy measure and disclosing a consistent format of financial reports to figuratively understand the financial statements of the LGUs. There was also a significant difference in the practice of forced-balancing in the LGUs and there was also a significant impact on people's understanding of Internal Control. (3) On adherence to managerial policies, there was a greater extent in the number of authorized signatories from check payments, vouchers, and other documents and in the upward delegation of signatory in the absence of the authorized signatories to maintain the safety of the documents. There was a certain extent of awareness of the suppliers in terms of check payment collections to avoid confusion and discrepancies. There was also a significant impact on people's understanding of Internal Control. (4) On compliance with the laws and regulations, all domains earned greater extent and LGUs used procurement las as the basis in contracting service providers and used appropriate official receipts to the transacting public which are all regulated by the law. There was a significant impact on people's understanding of Internal Control. (5) On ensuring economical, efficient, effective, and ethical operations, all domains showed at a certain from conducting an annual strategic planning of LGUs involving 50 officials through out-of-town and 5-star hotel to have social gatherings and reviewed the previous performance made by different departments in the LGUs, celebrated the founding of respective LGUs without providing a big chunk of amount of money used for future events, for emergencies, and for personal requirements. There was also significant impact on people's understanding of Internal Control. (6) On control environment, there was a greater extent on issuing the necessary order in the creation of the law, on the functioning of Internal Control Unit (ICU) pursuant to the Internal Audit Manual developed by DBM, and on posting tarpaulins with guidelines to easily process transactions around the premises of the City Hall. It did not have significant impact on people's understanding of Internal Control. (7) On risk assessment, all domains showed greater extent on the requirement of wearing identification cards and preparing financial reports consolidated quarterly and on semester basis. (8) On semestral financial reports, Marikina City needed to be more acquainted with financial reports and did not have significant impact on people's understanding of Internal Control. (9) On control activities, all domains showed greater extent on cash or check payments and on regular rotation of personnel from high vulnerability to low vulnerability of front-line service to avoid familiarization of transactions which not all LGUs practice. (10) On information and communication, all domains showed greater extent in maintaining website for the public to get up-to-date information about LGUs, in improving public service to resolve issues or complaints from the transacting public, and in informing bidders in writing by the Chairperson of the Bids and Awards Committee of the results of the bidding to continually support LGUs future projects and to build better relationships with the participating bidders. Marikina City needed to be more acquainted with bidding activities. (11) On monitoring activities, all domains showed greater extent in the evaluation of the performance of individuals within their respective units by utilizing Civil Service Commission (CSC) prescribed performance evaluation system to improve quality of service in the LGUs and supervisors as the first-line of defense in combating corruption. Marikina City needed to be more acquainted with the utilization of CSC performance evaluation system. It did not show significant impact on people's understanding of Internal Control. No. of Pages: xxii, 336 pages.