Republic of the Philippines

Commission on Audit Center for International Trade

Commonwealth Avenue, Quezon City Expositions and Missions

September 19, 2017

Mr. CLAYTON H. TUGONON

Executive Director
CITEM, Pasay City

Attention: Ms. MA. LOURDES D. MEDIRAN

Deputy Executive Director/
Supervising DED

Atty. ANNA GRACE I. MARPURI

OIC, Corporate Services Department/
Bids and Awards Committee Chairperson

Dear Sir:

We have conducted an audit of the disbursement for the official contractor for aluminum
booth systems and venue enhancement re: Manila FAME October 2016 covered by
Disbursement Voucher (DV) No. MFO-16122224 amounting to P3,202,750.00, this amount
of which was paid to Exist Exhibit Systems Technology Corporation.

The following are the results of our observation:

1. The contract is not duly supported by Certificate of Availability of Funds and not duly
witnessed by Chief Accountant contrary to Section 86 of PD 1445, LOI No. 968 and
Section 46 of PD 1177.

Section 86 of PD 1445.

“ … no contract involving the expenditure of public funds by any government agency shall
be entered into or authorized unless the proper accounting official of the agency
concerned shall have certified to the officer entering into the obligation that funds
have been duly appropriated for the purpose and that the amount necessary to cover the
proposed contract for the current fiscal year is available for expenditure on account
thereof, subject to verification by the auditor concerned. The certificate signed by the
proper accounting official and the auditor who verified it, shall be attached to and
become an integral part of the proposed contract, and the sum so certified shall not
thereafter be available for expenditure for any other purpose until the obligation of the
government agency concerned under the contract is fully extinguished”.(emphasis ours)

Section 87 of the same law further provides that any contract entered into contrary to the
abovementioned requirement shall be void and the officer or officers entering into the
 contract shall be liable to the government or other contracting party for any consequent
damage to the same extent as if the transaction had been wholly between private parties.

LOI No. 968, ensuring that contracts are signed only when supported by available funds,
provides that “All contracts for capital projects and for the supply of commodities and
services, including equipment, maintenance contracts, and other agreements requiring
payment which are chargeable to agency current operating or capital expenditure funds,
shall be signed by agency heads or other duly authorized official only when there are
available funds. The Chief Accountant of the contracting agency shall sign such
contracts as witness and contracts without such witness shall be considered as null
and void”. (emphasis ours)

Section 46 of PD 1177, in addition, provides that “No funds shall be disbursed, and no
expenditure or obligations chargeable against any authorized allotment shall be incurred or
authorized in any department, office or agency without first securing the certification of its
Chief Accountant of Accounting Unit as to the availability of funds and the allotment to
which the expenditure or obligation may be properly charged…”

By checking the said DV and contract, certification that budget is available and fund
earmarked/obligated for the purpose can be found only in the Budget Utilization Request
(signed by OIC, Finance Division), but that certification cannot serve the purpose of
Certificate of Availability of Funds because BUS only comes after the perfection of the
contract and not before as required by law. Further, the only witness in the said contract
is the Department Manager of MARCOMM and no signature of Chief Accountant as
witness is affixed therein.

2. The subject contract is undated as to when it was perfected and when it was approved
by the Head of Procuring Entity (HoPE).

The date as to the perfection of the contract, as well as the date it was approved by
HoPE is important because these are the reckoning points in determining whether the
following procedural matters have been complied with properly.

a. Within five (5) working days from the execution of a contract by the government
or any of its subdivisions, agencies or instrumentalities, including government-owned
and controlled corporations and their subsidiaries, a copy of said contract and each
of all the documents forming part thereof by reference or incorporation shall be
furnished to the Auditor of the agency concerned. In case of agencies audited on an
engagement basis, submission of a copy of the contract and its supporting
documents shall be to the Auditor of the mother agency or parent company, as the
case may be. (COA Circular 2009-001, Clause 3.1)

b. The concerned Procuring Entity shall issue the Notice to Proceed together with a
copy or copies of the approved contract to the successful bidder within seven (7)
calendar days from the date of approval of the contract by the appropriate
government approving authority. All notices called for by the terms of the contract
shall be effective only at the time of receipt thereof by the successful bidder. (Section
37.4 of Revised IRR of RA 9184)

The contract has a date of notarization which is October 28, 2016, however, we cannot
assume that the same is the date of perfection and/or approval of the contract because it
is later than the term/scope of the contract which is from October 17, 2016 to October
 22, 2016 and is way later than the Notice to Proceed which is October 7, 2016. If we
assume otherwise, it will violate the provision as mentioned above that Notice to Proceed
shall be issued to contractor within 7 calendar days from date of approval of the contract.

3. The DV and/or contract is not supported by approved Annual Procurement Plan (APP),
thus the provision under Sec. 7.2 of the Revised IRR of RA 9184 is not satisfied.

Section 7.2 of the Revised IRR of RA 9184

“No procurement shall be undertaken unless it is in accordance with the approved

APP, including approved changes thereto. The APP must be consistent with the duly
approved yearly budget of the Procuring Entity and shall bear the approval of the HoPE
or second-ranking official designated by the HoPE to act on his behalf”.

Instead of the approved APP, only Project Procurement Management Plan (PPMP) is
attached to the DV and/or Contract. PPMP supposedly support APP, but in case of
inconsistencies between the two, the latter is more conclusive because it is the one
being submitted to GPPB as the revised IRR of RA 9184 provides “The APP shall be
submitted to the GPPB on or before the end of January of the budget year, and shall be
posted in accordance with E.O. 662, series of 2007, as amended”.

We cannot accept PPMP alone because of the following noted inconsistencies:

a. The highlighted amount totaling P4,159,500.00 in the PPMP (comprises of various

items) does not coincide with the Approved Budget for the Contract (ABC) which is
P3,943,500.00.

b. Per PPMP, the mode of procurement for this project (comprises with various items)
are Public Bidding and Small Value Procurement, but per BAC Resolution to award
(CITEM BAC Resolution/A No. (10)-0820 s. 2016), the project is no longer comprised
of various items, they just lumped into one project and was subjected only to Public
Bidding as the mode of Procurement.

4. The subject contract was submitted to our office (Resident Auditor’s Office) on
November 9, 2016 for the purpose of auditorial and legal review, but aside from the
contract itself, there is no any other documents attached therein, in violation of COA
Circular 2009-001 which states that:

Within five (5) working days from the execution of a contract by the government
or any of its subdivisions, agencies or instrumentalities, including government-owned
and controlled corporations and their subsidiaries, a copy of said contract and each of
all the documents forming part thereof by reference or incorporation shall be furnished
to the Auditor of the agency concerned…

The copies of documents required to be submitted shall include but

not limited to the following:

a. Invitation to Apply for Eligibility and to Bid;

b. Letter of Intent;
c. Eligibility Documents and Eligibility Data Sheet;
d. Eligibility Requirements;
e. Results of Eligibility Check/Screening;
f. Bidding Documents (Sec. 17.1, IRR-A, RA 9184);
g. Minutes of Pre-bid Conference, if applicable;
h. Agenda and/or Supplemental Bid Bulletins, if any;
i. Bidders Technical and Financial Proposals;
j. Minutes of Bid Opening;
 k. Abstract of Bids;
1. Post Qualification Report of Technical Working Group;
m. BAC Resolution declaring winning bidder;
n. Notice of Post Qualification;
o. BAC Resolution recommending approval;
p. Notice of Award;
q. Contract Agreement;
r. Performance Security;
s. Program of Work and Detailed Estimates;
t. Certificate of Availability of Funds, Obligation Request;
u. Notice to Proceed
v. Such other documents peculiar to the contract and/or to the mode of procurement
and considered necessary in the auditorial review and in the technical evaluation
thereof.

Any unjustified failure of the officials and employees concerned to comply with the
requirements herein imposed shall be subject to the administrative disciplinary action
provided in (a) Section 127 of Presidential Decree No. 1445; (b) Section 55, Title I-B,
Book V of the Revised Administrative Code of 1987; and (c) Section 11 of Republic
Act No. 6713.

Upon receipt of information or discovery by the auditor of such failure by

management to comply with the required submission, an Audit Observation
Memorandum shall be issued by him calling the attention of the latter, and requesting
compliance, else the transactions covered by the unsubmitted documents be
suspended in audit and the penalty prescribed by law under 4.1 be enforced.
(COA Circular 2009-001 dated Feb. 12, 2009, Clauses 3.1, 4.1 and 4.2)

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof so we can consider the same in the continuation of
audit for the said transaction.

Very truly yours,

CHONA U. GABRONINO
State Auditor IV
Audit Team Leader