NAVAL STATE UNIVERSITY

GRADUATE SCHOOL






CURRENT TRENDS AND ISSUES IN MANAGEMENT
DM 617







FINAL EXAMS
SUMMER 2014








FELITA B. DAYA
DM STUDENT







TEOFILA H. BROSAS, DM
PROFESSOR












Questions:
1. Discuss the essence of Internal Control on five issues in Philippine Governance.
2. In your own understanding, how can you help curb this error in our system of government.

My report: The Need for Reinforcing Internal Control Among LGUs necessitate that
there must be institutionalized necessary control measures to safeguard to make judicious of
their resources. (referring to LGU)
The following five (5) National Government and LGU issues being done which need to be
looked upon under Internal Control:
1. Preparing of travel documents (voucher and prepayment checks) to employees or
officials who ordered for official travel but in actual situation there was no travel
done but in the liquidation of cash advance, all supporting documents were present.
(Plane tickets, RER, Certificate of Appearance, etc.) To curb this practice in the
system, the LGU Finance, Budget, Accounting, Treasurer and Auditor must be
vigilant to do some checkpoints on this. In case of erroneous payments for travel,
the LCE may check with the agencies to be contacted by the traveling employee,
including all evidences of travel, like bus, boat, or airline tickets, signatures of
agency officials appearing on certificate of attendance.
In this regard , the Local Chief Executive and other local functionaries must be ready
act on these undesirable practices, not just to stop them, but primarily to hold those
corrupt personnel liable.
2. Disbursement of huge sum of public money to pay ghost projects. In certain LGUs
some corrupt LCEs requires financial assistance from senators and congressmen
infrastructure projects like water impounding , warehousing and drying for grains,
access municipal roads and bridges, and other poverty alleviation projects. Cases
have been uncovered wherein no constructions were even made, or if were not
completed, yet funds have been fully disbursed to contractors with such corrupt
LCEs.
Measures to Curb Ghost Transaction:
a. The LCE and other local functionaries must be ready to act on these
undesirable practices, not just to stop them but primarily to hold these
corrupt personnel liable.
b. For ghost repairs, the LCE may create a special team or committee to
require a pre-repair, in-repair, and post-repair and to report results thereof.
The members of such team or committee must rotate regularly to minimize
if not eliminate connivance among themselves.
c. In case of ghost delivery of materials and supplies, actual inspection of such
materials and supplies by a third party maybe required, either on the spot,
or few days after date of delivery. Since the recipient department and its
staff are suspected, they should not participate nor be informed of
unscheduled checks, so as not to allow the opportune time to conceal their
ghost transactions.

3. Overpricing, Overstatement, or Padding of Transactions. There are three (3)
instances where the outflows of funds are highly irregular. One is overpricing which
consists in placing an excessive amount on purchases when compared to prevailing
price levels. Second , is overstatement where the corrupt functionaries unduly
exaggerate entries and amounts in receipts to increase the amount to be paid by
the local government. Third, padding of transactions wherein ghost entries on
personnel employed or on number of transactions completed when there was none
to collect more than the actual price or amount spent for certain activity or
transaction.
Measures to solve irregular transactions:
a. The LCE shall require the treasury department to establish and periodically
update a price list, and compare the price stated on the receipt with such
list.
b. As regards overstatement of transactions, inspection of delivery of
designated materials and supplies maybe required. The number stated on
delivery receipt shall be matched with results of actual count. The supplier
or distributor involved may be randomly called for verification.
c. To check oh padded transactions, certain options are open. When payroll is
padded, the LCE may require on-the-spot head count of employees or
workers to be conducted by his representative. In padded transactions, each
entry on the suspected padded list shall be verified as to its validity and
accuracy. This must be accompanied by checking with persons named in the
payroll to have rendered services with the prescribed plantilla or authorized
local positions. Workers whose names do not correspond to authorized list
maybe called for specific identification. If disbursements have been made, a
signature check maybe conducted to uncover fake or ghost workers.

4. Exceeding Budget Limits. This undesirable practice covers some transactions
considered lawful on their face but fail short under accounts for which budget
allocation has been exhausted. Such transactions cannot be permitted or paid,
unless the particular account is provided additional appropriation through
supplemental budget or budget alignment. Most often, these consist of overdrafts
or significant unfavourable budget variances but already paid due to irregular fund
transfers under covert circumstances.

A mismanaged budget can provide occasions for illegal juggling of funds or technical
malversation, like manipulating description of certain transactions to qualify for
payments under accounts with sufficient balances other than their legitimate or
intended fund sources. In view of the systematic nature of budget limit violations,
involvement of several personnel in disbursement, accounting, treasury, and budget
is reasonably expected. They must be in collusion with suppliers, creditors, and
other payees of public money.

Measures to check excess in budget limits:
a. To check this nefarious practice, running balances of funds specified for
budget allocation to given programs, projects, or activities may be
maintained. The exact description, nature, and justification for each
transaction may be checked. Expenditure levels may be regularly monitored
by individual, office, or type of transaction. Investigations concerning
violations of budget ceilings must include the disbursing personnel, and
those in treasury, accounting, and budget. These employees are involved in
different stages of transactions which have gone beyond what is allowed by
the local budget. Pertinent findings must be reported promptly to the LCE
for appropriate administrative or court action.

5. Unauthorized cash advances. Local officials or employees who have access to cash
on hand or in safety boxes can borrow or withdraw from the vault for a short
period of time, without the knowledge or authorization of top management. Such
corrupt officials or employees may extend favour to others, often times for fees or
interests going to them for personal gain or benefit.

Measures to Check Unauthorized Cash Advances:
a. As response to these practices, periodic and/ or frequent cash counts must
be conducted by internal audit personnel on instructions of the LCE who has
suspected such anomalous employee practice and behaviour. Without prior
notice, spot visits to cashier and treasury personnel handling cash and
negotiable instruments considered as cash in financial transactions.