SECTION 1. There shall be a Commission on Audit composed of a and law.

The President appoints the Chairman and Commissioners

Chairman and two Commissioners, who shall be natural-born citizens with the consent of the Commission on Appointments, and their terms
of the Philippines and, at the time of their appointment, at least thirty- last for seven years without the possibility of reappointment or
five years of age, certified public accountants with not less than ten temporary appointment.
years of auditing experience, or members of the Philippine Bar who
have been engaged in the practice of law for at least ten years, and This structure of a multi-member body was established by the 1973
must not have been candidates for any elective position in the Constitution, which replaced the General Auditing Office (GAO) from
elections immediately preceding their appointment. At no time shall the 1935 Constitution. The shift from a single-headed office to a three-
all Members of the Commission belong to the same profession. person body was designed to enhance the independence of COA from
pressures by the legislative and executive branches, as well as other
The Chairman and the Commissioners shall be appointed by the government offices. This reform also addressed the growing
President with the consent of the Commission on Appointments for a complexity of COA's audit responsibilities, which now encompass all
term of seven years without reappointment. Of those first appointed, government agencies and activities.
the Chairman shall hold office for seven years, one Commissioner for
five years, and the other Commissioner for three years, without COA’s independence is safeguarded by its constitutional status,
reappointment. Appointment to any vacancy shall be only for the ensuring it is not subject to undue influence or political pressure. By
unexpired portion of the term of the predecessor. In no case shall any conducting audits and ensuring accountability, COA helps ensure that
Member be appointed or designated in a temporary or acting public funds are not misused, ultimately contributing to the integrity
capacity. and stability of government fiscal operations. Without such oversight,
there would be greater risk of improper handling of public funds,
The Commission on Audit (COA) plays a critical role in ensuring the which could destabilize the country, as has been seen in other regimes
proper handling of public funds, serving as an independent body to throughout history.
examine and verify whether government agencies have spent
appropriated funds in compliance with the law. Congress raises public The qualifications for COA members, including the requirement that
funds through its taxing power and allocates these funds through its they must be either CPAs or lawyers, are designed to ensure they have
appropriation power. It is the responsibility of various administrative the necessary expertise to carry out their duties efficiently. Their work
officials to collect, manage, and spend these funds while maintaining requires a deep understanding of both legal and financial principles,
accurate financial records. COA’s primary function is to audit these and the requirement that not all members share the same professional
records, ensuring expenditures are made in accordance with the law, background ensures a balanced approach to decision-making. The
and to take corrective action when necessary. This makes COA prohibition against appointing individuals who have run for elective
essential in allowing the public to verify whether government funds positions in the previous election further guarantees that COA is not
have been spent responsibly and for their intended purposes. influenced by political ambitions. This independence is crucial for
COA to fulfill its role as the watchdog of government financial
The COA is composed of a Chairman and two Commissioners, all of operations, allowing it to operate without bias or interference.
whom must be natural-born citizens of the Philippines, at least 35
years of age, and either certified public accountants with at least ten In conclusion, the Commission on Audit is a vital institution that
years of auditing experience or lawyers with a similar period of ensures transparency and accountability in the management of public
practice. However, at no point can all three members belong to the funds. Its structure and qualifications are specifically designed to
same profession, ensuring a balance of expertise in both accountancy protect its independence and effectiveness, enabling it to carry out its
constitutional mandate of safeguarding public money and preventing a. Examine and Audit All Forms of Government Revenues
mismanagement. and Expenditures

The COA is empowered to examine, audit, and settle all accounts

SECTION 2. The Commission on Audit shall have the power, pertaining to the revenue and receipts of the government and its
authority, and duty to examine, audit, and settle all accounts agencies. This includes auditing expenditures or uses of funds and
pertaining to the revenue and receipts of, and expenditures or uses of property owned or held in trust by the government. The COA's
funds and property, owned or held in trust by, or pertaining to, the responsibility extends to government-owned corporations, agencies,
Government, or any of its subdivisions, agencies, or instrumentalities, and instrumentalities, ensuring that funds are appropriately used and
including government-owned or controlled corporations with original legally accounted for. The Commission also oversees the auditing of
charters, and on a post-audit basis: (a) constitutional bodies, public utilities in connection with setting rates, enforcing proper
commissions and offices that have been granted fiscal autonomy under financial practices.
this Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations and their
subsidiaries; and (d) such non-governmental entities receiving subsidy Public funds are derived mainly from taxes, fines, and loans
or equity, directly or indirectly, from or through the Government, contracted by the government. All collections must be turned over to
which are required by law or the granting institution to submit to such the national treasury and accounted for in accordance with law and
audit as a condition of subsidy or equity. However, where the internal regulations. The Commission on Audit ensures this duty is duly
control system of the audited agencies is inadequate, the Commission performed by the officers receiving these collections.
may adopt such measures, including temporary or special pre-audit,
Once deposited with the Treasury, these funds cannot be released
as are necessary and appropriate to correct the deficiencies. It shall
except through an appropriation made by law. This appropriation may
keep the general accounts of the Government and, for such period as
come from the Constitution or from Congress. In the absence of such
may be provided by law, preserve the vouchers and other supporting
appropriation, the Commission on Audit must refuse to approve or
papers pertaining thereto.
disallow the disbursement of public funds. To secure the release of
The Commission shall have exclusive authority, subject to the funds from the Treasury, a warrant must be drawn by the proper
limitations in this Article, to define the scope of its audit and administrative official and countersigned by the Commission on Audit.
examination, establish the techniques and methods required therefor, According to Ynchausti v. Wright, this countersignature may be
and promulgate accounting and auditing rules and regulations, compelled if it can be shown that (1) the warrant has been legally
including those for the prevention and disallowance of irregular, drawn by the authorized officer, (2) an appropriation exists by law,
unnecessary, excessive, extravagant, or unconscionable expenditures, and (3) an unexpended balance is available. The duty to countersign in
or uses of government funds and properties. this case is ministerial.

The Commission on Audit (COA) has several powers and functions However, the duty to pass a salary voucher is discretionary, as held in
that ensure proper management and accountability of government Gonzales v. Provincial Auditor of Iloilo. "The matter of passing a
finances. These powers are grounded in its constitutional mandate to salary voucher is not a ministerial function. The Auditor General
examine, audit, and settle accounts involving government revenues exercises a discretionary or quasi-judicial power when deciding
and expenditures, as well as to establish rules for financial governance. whether to pass a salary voucher."
Also considered discretionary is the duty of the Commission on Audit
to issue a certificate of clearance to any accountable officer seeking to Wright, the petitioner sought payment for services rendered as a
leave the Philippines. In Lamb v. Phipps, the Court held that a mere temporary clerk of the Senate. The Insular Auditor denied the claim,
rendition of accounts is not sufficient proof for demanding a certificate stating the services were unnecessary due to sufficient permanent staff.
of clearance. The Auditor may examine the funds and property The Supreme Court held that the Insular Auditor cannot decide how
represented by such accounts before issuing the certificate. many employees the Legislature should have or their compensation, as
this is within the Legislature’s responsibility.
The Commission on Audit acts as the central accounting agency of the
Government and has custody of all vouchers relating to government The Auditor General was upheld in Matute v. Hernandez when he
accounts. By virtue of this authority, it efficiently tracks all receipts refused to authorize payment under a contract that was novated
and disbursements of public funds and properties. without a second public bidding, as required by an executive order.
The Court noted that the Auditor General has the duty to bring to the
b. Settle Government Accounts attention of the proper officer expenditures that are irregular,
unnecessary, excessive, or extravagant.
The COA is tasked with settling liquidated accounts, which involve
determining the final status of financial transactions and fixing The apparent inconsistency between Riel and Matute can be
balances due to or from the government. Unlike private auditors, the reconciled. In Riel, the Auditor was questioning the necessity of an
COA's decisions are legally binding, not merely advisory. However, appropriation, a matter beyond his jurisdiction. In Matute, the Auditor
the COA’s authority is limited to liquidated claims and does not General was exercising his authority to review an unlawful
extend to unliquidated claims or matters requiring judgment beyond expenditure.
numerical calculations, such as unliquidated damages.
In Guevara v. Gimenez, the Supreme Court clarified the Auditor
c. Define the Scope and Techniques of Auditing Procedures General’s duty. The Court ruled that the Auditor General has a
ministerial duty to approve a voucher if a law appropriation exists, the
The COA has exclusive authority to define the scope and techniques of contract has been made by the authorized officer, the goods or services
its auditing procedures. This includes determining the methods of audit have been delivered, and payment has been authorized. If these
and the areas of focus. The goal is to apply the latest developments in conditions are met, the Auditor General must approve the payment,
auditing to elevate public sector financial oversight. Importantly, this without discretion to refuse it on the grounds that the contract is
exclusive authority prevents interference from the legislative or unwise or the amount unreasonable.
executive branches, ensuring independence in audit functions.
Despite this, some now argue that the Commission on Audit’s "critical
d. Promulgate Accounting and Auditing Rules function" under the current Constitution allows it to veto
appropriations. This is based on its power to disallow expenditures that
The COA is authorized to promulgate rules and regulations for the violate its own regulations. This view was affirmed in subsequent
prevention and disallowance of irregular, unnecessary, excessive, Supreme Court rulings. In Caltex Philippines, Inc. v. Commission on
extravagant, or unconscionable expenditures. This role makes the Audit, the Court ruled that the Commission on Audit has the authority
COA a guardian of the public treasury. Historically, while the Auditor to disallow illegal expenditures of funds or property, as outlined in the
General could only report irregularities, the current mandate allows the Government Auditing Code of the Philippines and the Administrative
COA to disallow such expenditures, ensuring government funds are Code of 1987. The Commission’s power to promulgate rules to
used wisely and in accordance with established rules. In Riel v. prevent irregular or excessive expenditures has been upheld.
 e. Decide Administrative Cases Involving Public Funds 3. Settling Accounts
Settling an account involves determining its final status. Once
The COA’s authority extends to deciding administrative cases related reviewed, an account is considered settled if it is found to be
to the expenditure of public funds. However, it does not have the accurate and legally compliant. Unlike private auditors, the
jurisdiction to rule on the criminal liability of public officials for COA has the authority to render decisions on the legality of
irregular expenditures. The Commission’s role is strictly claims, making its conclusions final and binding.
administrative, focusing on the legality and propriety of financial
transactions. For criminal aspects, such as potential fraud or misuse of SECTION 3. No law shall be passed exempting any entity of the
funds, the appropriate authorities, like the provincial fiscal, must Government or its subsidiary in any guise whatever, or any investment
investigate further. of public funds, from the jurisdiction of the Commission on Audit.

f. Post-Audit Authority and Oversight of Government- Exemption of Government Entities: The Constitution mandates that
Owned Corporations all government entities and subsidiaries, including those with public
investments, are subject to COA’s audit and examination. This
The COA has post-audit authority over various government entities, requirement is unambiguous: any law exempting such entities or
including constitutional bodies, autonomous agencies, state investments from COA’s jurisdiction is unconstitutional. This
universities, and government-owned corporations (GOCCs). However, provision was introduced as a direct reaction to abuses during the
its authority over GOCCs is limited to those with an original charter. Marcos regime, when certain government entities were exempted from
The Commission may adopt pre-audit measures only when the internal audit, allowing for the misappropriation of public funds. Section 3
controls of the audited entities are insufficient. This ensures that the serves to prevent such practices by ensuring that no entity can avoid
Commission can take corrective actions when necessary, even for the COA’s scrutiny, regardless of the circumstances or intent.
entities that typically only undergo post-audit.
The Philippine Coconut Producers Federation, Inc. Case: In the
Concept of Examination, Auditing, and Settlement of Accounts landmark case of Philippine Coconut Producers Federation, Inc. v.
Republic of the Philippines, the Court reinforced COA’s jurisdiction
1. Congress as the Fund-Raising Authority over public funds, specifically coconut levy funds. The issue at hand
Congress is responsible for raising public funds through was whether the purchase of shares in a private banking corporation
taxation, bonds, and other means. Once raised, these funds are using these funds was subject to COA's audit jurisdiction. The
deposited in the government treasury, where they are subject to Supreme Court ruled affirmatively, underscoring that COA has the
examination and audit by the COA. The Commission reviews responsibility to examine, audit, and settle accounts related to public
records, verifies receipts, and audits financial transactions to funds. The Court further emphasized that while the coconut levy funds
ensure accuracy and compliance with laws. were initially considered public funds, their conversion into private
2. Auditing Defined ownership through the purchase of shares in a private bank effectively
Auditing refers to the formal examination of accounts or books removed them from COA's jurisdiction. This conversion was found to
to verify their correctness. For the COA, auditing involves not undermine COA’s constitutional role, as it deprived the Commission
just verifying numerical accuracy but also assessing the legality of its authority to audit and regulate the use of those funds.
and appropriateness of financial activities. The COA acts as the
sole external auditor for government agencies, ensuring The Court's decision aligns with earlier rulings, such as in Gaston v.
financial transparency. Republic Planters Bank and Osmeña v. Orbos, where it was affirmed
that even special public funds, segregated from the general fund and operation of the Government, its subdivisions, agencies, and
held in trust accounts, are still subject to COA’s review. These rulings instrumentalities. This includes government-owned or -controlled
support the view that any fund, regardless of its specific designation or corporations and nongovernmental entities subject to COA’s audit.
handling, remains within the domain of COA’s audit jurisdiction as
long as it is public in nature. Recommendations for Improvement: COA is also required to
recommend measures to improve the effectiveness and efficiency of
Unconstitutional Provisions of P.D. Nos. 961 and 1468: The the government and its agencies, and to offer recommendations for
Supreme Court also struck down provisions in P.D. Nos. 961 and improving governance and financial operations.
1468 that allowed the conversion of public funds into private funds,
thus circumventing COA’s audit authority. By transforming the Additional Reports: COA must submit any additional reports that
coconut levy funds into private property, the government effectively may be required by law
shielded the funds from public scrutiny. The Court found this
unconstitutional because it undermined COA’s independence and
authority to oversee public funds. The conversion of these special
funds into private ownership was seen as a deliberate attempt to
bypass COA’s constitutional mandate, and thus, any provision
allowing such actions was deemed invalid.

In conclusion, the constitutional mandate that no government entity or

its subsidiary is exempt from COA’s jurisdiction is a cornerstone of
public accountability. The Supreme Court’s rulings in these cases
reinforce COA’s role as the independent auditor of public funds,
ensuring that all government-related entities, regardless of their
structure or funding, remain subject to its scrutiny. Any attempt to
circumvent COA’s oversight, such as through the conversion of public
funds into private ownership, is unconstitutional and must be struck
down.

SECTION 4. The Commission shall submit to the President and

Congress, within the time fixed by law, an annual report covering the
financial condition and operation of the Government, its subdivisions,
agencies, and instrumentalities, including government-owned or
controlled corporations, and non-governmental entities subject to its
audit, and recommend measures necessary to improve their
effectiveness and efficiency. It shall submit such other reports as may
be required by law.

Annual Report: COA is mandated to submit an annual report to the

President and Congress covering the financial condition and