LGUs, AGENCIES TRUMPETED GRADING. The headline of the news story in Cebu City’s official website in July 2021 said in all caps: COA RENDERS HIGHEST AUDIT RATING TO CEBU CITY. Local newspapers picked up the city Public Information Office’s (PIO) story, including SunStar, which also reported last May 2022 that Liloan, Cebu earned “the highest audit rating anew, its fourth since 2017.” Also in 2021, Makati City trumpeted the story of its own rating, with the mayor saying it was given the honor for “an unprecedented fourth year.”
Not just local government units (LGUs). Department of Tourism (DOT) also crowed about getting the highest audit rating in 2021 for its financial statements in 2020, its second in a row.
Nothing wrong or unseemly about an LGU or government agency to tell the public about the Commission on Audit (COA) grade. If an irregularity or corruption rocks the LGU or agency, media scream the scandal, why deny it the right to brag about flattering news from COA?
[Related article: EXPLAINER: 7 questions you must’ve wanted to ask about COA’s ‘clean’ rating of Cebu City Government and findings in its audit of 2020 spending. The answers we have so far.]
MISUNDERSTOOD MEANING. The phrase “the highest COA audit rating” was used by some public officials to refute criticism of alleged unsound or corrupt spending.
In Cebu City, for example, amid the charges in social media that the City Government was misspending billions of pesos allotted by the City Council as response for the Covid-19 pandemic, the COA rating was used as certification of good financial health and prudent fiscal ways. One city official, in 2021 Facebook posts, smirked at social media chatter over unaccounted-for dressed chickens and rice and medical supplies bought allegedly from dubious sources -- and waved the COA rating in the critics’ faces.
‘HIGHEST RATING, UNMODIFIED OPINION.’ In a clarification published June 22, 2022 in its official website, COA noted the “misconception” that the use of the phrase “highest COA audit rating” may cause. It already has sowed disinformation that misled decision makers and the public. Media specialist Max T. Limpag commented Sunday, June 26 that COA should’ve clarified it last year. Or even earlier, since COA has been using the phrase in its grading system for a number of years now.
First, on how the rating must not be seen. COA says “highest COA audit rating” shouldn’t be “viewed as a rating, score or grade, with ranking of lowest to highest.”
It is an “audit opinion,” COA says, which pertains “only to the financial audit conducted regularly by COA auditors” on the LGU or government agency.
How about the COA tag of “unmodified (or unqualified) opinion,” which accompanied Cebu City’s and other LGUs’ “highest COA audit rating” ? It is unmodified or unqualified if the audited entity has complied with the requirements of financial reporting. Its financial statements must have been “prepared in all material respects in accordance with the applicable financial framework.” No “sabit” in the financial papers.
Thus, “unmodified or unqualified” tag -- on Cebu City, Liloan and others that got “the highest COA audit rating” -- is given if the LGU or agency audited (a) didn’t give any “material misstatement” or (b) didn’t give enough “audit evidence” that it is free from such “material misstatement.” In our understanding, when the audited party follows all the requirements of the financial audit.
A FEAT FOR AUDITED LGU. When Cebu City , or any other audited LGU or government agency, wants to beat its breast in self-congratulation after being accorded “the highest COA audit rating,” it can rightfully do so. After all, it accomplished the feat of submitting all the requirements, in proper order, with nothing amiss.
Besides, the language of the COA opinion is mainly what misleads: What else could “highest COA audit rating” mean to the public? It doesn’t say and connote that the LGU or agency is tops ONLY in submitting financial papers, does it? COA needed to clarify its language, albeit late, which admits fault in its communication.
WHAT THE RATING IS NOT. COA’s June 22 clarification is that the audit opinion represents only a “facet” of an LGU or agency. And the audit opinion, COA says --
[] Does not conclude on the audited LGU’s or agency’s compliance with laws or regulations; and
[] Does not show whether the LGU or agency was economical, efficient and effective in its operations.
Those matters, COA now says, are covered by the “compliance and performance audits.” Which are conducted, COA says, in addition to the financial audit. Results of the compliance and performance audits, COA says, are found in the “Annual Audit Reports,” which it uploads on its website.
What Cebu City and other LGUs have shown to the public pertain only to the submission of financial statements. The findings on compliance and performance – which must include violations of law or rule and possible misspending of resources – are not publicized by the audited entities. But, again, COA says those are found on its website.
COA MAY CHANGE TERMS. The agency can be technical in its language but it has to use plain words and phrases so as not to confuse or mislead the public. In this case though, simple language is used, only that “highest COA audit rating” means something else to COA.
Better still, instead of just clarifying, COA may have to rephrase or modify its rating remarks.