Republic of the Philippines

COMMISSION ON AUDIT
Regional Office No. IV-B (MIMAROPA)
Local Government Sector Oriental Mindoro Province
Office of the Auditor - Audit Team No. 3
Provincial Capitol Complex, Calapan City

AOM No.: 2017-018 (Pinamalayan)

Date: March 6, 2017

AUDIT OBSERVATION MEMORANDUM (AOM)

For: Hon. ARISTEO A. BALDOS, JR.

Municipal Mayor
Municipality of Pinamalayan

Attention: The MPDC

The BAC Chairman
The Municipal Accountant
The HRMO

We have audited the payment for Venue, Accommodation and Food & Snacks for the
Annual Agency Performance Appraisal for CY 2016, and observed the following:

The Expenditures on the Annual Agency Performance Appraisal (AAPA) CY 2016 in

Tagaytay City totaling P846,589.65 are considered unnecessary expenditures under
COA Circular No. 2012-003 dated October 29,2012.

As defined in COA Circular No. 2012-003, unnecessary expenses areexpenditures

which could not pass the test of prudence or the obligation of a good father of a family,
thereby non-responsiveness to the exigencies of the service. Unnecessary expenditures are
those not supportive of the implementation of the objectives and mission of the agency
relative to the nature of its operation. This could also include incurrence of expenditure not
dictated by the demands of good government, and those the utility of which cannot be
ascertained as a specific time. An expenditure that is not essential or that which can be
dispensed with or without loss or damage to property is considered unnecessary. The
mission and thrusts of the agency incurring the expenditure must be considered in
determining whether or not the expenditure is necessary.

Republic Act No. 9184, otherwise known as the Government Procurement Reform
Act, prescribes the rules and regulations for the modernization, standardization, and
regulation of the procurement activities of the Government of the Philippines.
 On June 19-25,2016, the Municipality conducted an Annual Agency Performance
Appraisal (AAPA) Live-In Seminar at the Splash Suites Hotel at Barangay BagongTubig,
Tagaytay City. The said activity was participated by 55 Municipal Officials and employees
including the Municipal Mayor, Vice Mayor and Sangguniang Bayan and representatives
from National Agency and Civil Society Organizations broken down as follows:

Municipal Elective Officials 11

Municipal Department Heads 11
Chiefs-of-Office/Division 9
National Agency Representatives 3
Civil Society Organization Representatives 3
Executive Staff 6
Legislative Staff 2
Appraisal Focal/Activity Management 10
Total 55

The activity is conducted to enable the municipal government to determine its

capabilities and limitations as an organization in the delivery of public services during the
immediate preceding performance year. The primary goal of the activity is to provide a
proper forum to present, discuss, assess and deliberate on the level of LGU performance for
the reported year the first semester of the current year, determine the state of development of
the Municipality and more significantly to find solutions to development gaps and hindrances
on the implementation of local plans and programs.

The activity held outside Oriental Mindoro Province purposely to focus on the
activity by way of avoiding distractions from local transactions, devoting time and effort as
required in the methodology and observing organizational protocol and ethics considering the
sensitivity of the purpose.

The estimated Budgetary Requirement for the seminar amounting to P850,00.00

comprises the Venue, Accommodation, Food and Snacks of Participants, Office Supplies and
Materials, Polo Shirts and Service Van Rental charged under the Mayors Office
Appropriation in the Annual Budget for CY 2016 as shown below:

Activity Amount
Venue, Accommodation, Food and Snacks (Package Deal for P 720,000.00
55 persons)
Office Supplies and Materials 75,000.00
Polo Shirt with embroidered print (55 pcs) 20,000.00
Vehicle Service Rental (Package Deal) 35,000.00
Total P 850,000.00
a. Venue, Accommodation, Meals and Snacks

The Municipality entered into a Contract of Service Agreement with Splash Suites
Tagaytay on June 16, 2016. The contract amounting P717,600.00 was for the provision of
hotel and accommodation to 55 participants for the period of June 19-25,2016.The method of
procurement was thru Negotiated Procurement with Resolution No. 33A-2016 adopted May
27,2016 because of two-failed biddings on May 6,2016 and May 27,2016 by reasons that no
bidder submitted letter of intent and application for eligibility and the bidders failed to pass
the eligibility requirements, respectively.

Review of the supporting documents of the paid disbursement voucher revealed the
following:

1. Date of suppliers conforme in Purchase Order No. 392-2016 dated June 14, 2016
was not indicated. Likewise, place and terms of delivery was not stated, thus casting
difficulty in determining the period of effectivity of the contract;

2. The Inspection and Acceptance Report (AIR) made reference to Invoice No. 1254
dated September 29, 2016 which is actually the Official Receipt No. dated September
27,2016. Thus, the Invoice was not attached. Moreover, date of inspection and receipt
was not indicated.

3. No mode of procurement was indicated in the AIP. Moreover, the total budget for the
project as indicated in the Annual Budget and AIP for 2016 amounted to
P850,000.00, however, Certificate of Availability of Funds certified by the Municipal
Accountant dated May 2, 2016 amounted to only P846,000.00 resulting in a
deficiency of P4,000.00;

4. The Check No. 495035 for P679,157.15 drawn payable to Splash Suites Tagaytay
was dated June 23, 2016, which was during the conduct of the seminar. Although the
Official Receipt No. 1254 was dated September 27, 2016, the drawing of the check
during the seminar is contrary to Section 88 of P.D. 1445 prohibiting advanced
payment for government contracts and Section 4.5. of Annex D of IRR of RA 9184
(the advance payment can only be up to 50% of the bill);

5. For the contract of service procured thru Negotiated Procurement, the following
documents were not attached:
i. Copy of the registry of suppliers maintained by the Procuring Entity as per
Section 53.1.2.2 IRR of RA 9184;
ii. Bidding Documents prescribed by Section 17.1 of IRR 9184;
iii. Report on the mandatory review of the terms, conditions and specifications in
the Bid Documents, including cost estimates as per Section 35 and 53.1.1 of
IRR of RA 9184;
iv. Copy of letter/document inviting manufacturers/suppliers/distributors to engage
in negotiation as per Section 53.1.1 of IRR of RA 9184;
 v. Proof that responding manufacturers/suppliers/distributors are technically,
legally and financially capable to enter into a contract with the government as
per Section 53 of IRR of RA 9184;
vi. Statement of the prospective manufacturer/supplier/distributor that it is not
blacklisted or barred from bidding by the Government or any of its agencies,
offices, corporations of LGUs as per Section 25.2.iv.1of IRR of RA 9184;
vii. Sworn affidavit of the manufacturer/supplier/distributor that it is not related to
the HOPE by consanguinity or affinity up to civil degree as per Section 47 of
IRR of RA 9184;
viii. Certificate of PhilGEPS Registration of supplier as per Section 8.2 a and b;
8.2.2 f; 54.3 of IRR of RA 9184
ix. Proof of posting in PhilGEPS of the Request for Submission of Price Quotations
continuously for seven (7) calendar days starting on the date of posting as per
Section 54.2 of IRR of RA 9184;
x. Certification from the BAC Secretariat the Request for Submission of Price
Quotations has been posted continuously at any conspicuous places for seven
(7) calendar days starting on the date of posting as per Section 54.2 of IRR of
RA 9184;
xi. Bid security as per Section 54.4 IRR of RA 9184;
xii. Post qualification report as per Section 34 of IRR of RA 9184;
xiii. BAC resolution recommending and justifying to the HOPE the use of
alternative method of procurement and approval by the HOPE of the BAC
Resolution recommending award of contract;
xiv. Notice of Award as per Section 37.1.3 of IRR of RA 9184 and its evidence of
posting in PhilGEPS as per Sections 37.1.6 and 54.3 of IRR of RA 9184; and
xv. Performance security as per Sections 54.5 IRR of RA 9184.

The above observations raised doubt as to regularity of the procurement procedure of

the Municipality.

b. Office Supplies and Materials

The Municipality procured office supplies and materials amounting P73,990.00 from
AR EM General Merchandise thru Check No. 494548 dated May 18,2016.

Review of the supporting documents of the paid disbursement vouchers revealed the
following:

1. The purchase included among others:

14 pcs. of toner and ink totaling P40,485.00
40 reams of bond papers of different sizes totaling P11,530.00
One (1) box and 6 pcs. of batteries totaling P2,370.00
22 packs of photo paper totaling P8,800.00
2 boxes DVD+R
2 boxes sign pen
 58 pcs. Ball pen
2 boxes whiteboard marker
55 pcs. notebook;

2. Biostar Comp. Ent. and Tanengz.com Internet Shop did not quote on the ID
Lamination and ID Holder. Moreover, the photo paper was not quoted by
Tanengz.com because it was out-of-stock;

3. Date of suppliers conforme in Purchase Order No. 301-2016 dated May 11, 2016
was not indicated. Likewise, place and terms of delivery was not stated, thus casting
difficulty in determining the period of effectivity of the contract;

4. Date of Inspection was not indicated in the IAR; and

5. Review of the Budgetary Requirement and the Quotation of Tagaytay Suites

indicated that the package deal includes not only venue, accommodation, meals and
snacks but also writing materials (Paper and Pencil) and whiteboard with marker and
eraser.

The procurement of office supplies and materials was unnecessary especially the
purchase of ball pen, sign pen, notebook and whiteboard marker as these supplies is already
included in the package deal contracted with Tagaytay Suites. Moreover, the purchase of
toner and ink, photo paper and bond paper was rather excessive as this will be technically
used by only 55 persons. More so, the use/utility of batteries and DVDs could not be
ascertained.

c. Polo shirt with embroidered print (55 pcs.)

The Municipality procured 55 pcs of polo shirts with embroidered print amounting
P19,999.65 from Salud Dry Goods and Footwear thru Check No. 494543 dated May
18,2016.

Review of the supporting documents of the paid disbursement vouchers revealed the
following:

1. Date of suppliers conforme in Purchase Order No. 300-2016 dated May 11, 2016
was not indicated. Likewise, place and terms of delivery was not stated, thus casting
difficulty in determining the period of effectivity of the contract;

2. Date of Inspection and Receipt was not indicated in the IAR; and

3. Design of the polo shirt was not attached.

 The purchase and use of the polo shirts is unnecessary as its utility could not be
ascertained, is not essential and can be dispensed with. If the reason is for the ready
identification of participants, the IDs is sufficient, thus the polo shirts can be dispensed with.

d. Vehicle service rental

The Municipality contracted one (1) unit service van for the transport of IT
equipment, training equipment, supplies, materials, kits, reports, reference documents, forms,
etc. and standby service amounting P35,000.00 from Peter Shield L. Alcedo thru Check No.
495036 dated June 23,2016.

Review of the supporting documents of the paid disbursement vouchers revealed the
following:

1. The Check No. 495036 drawn payable to Peter Shield L. Alcedo was dated June 23,
2016, which was during the conduct of the seminar contrary to Section 88 of P.D.
1445 prohibiting advanced payment for government contracts and Section 4.5. of
Annex D of IRR of RA 9184. Moreover, June 16,2016 was the payees date of receipt
of payment indicated in the DV;

2. Quotations as per Abstract of Quotation of Canvass were altered without countersign;

3. Date of suppliers conforme in Purchase Order No. 327-2016 dated May 17, 2016
was not indicated. Likewise, place and terms of delivery was not stated, thus casting
difficulty in determining the period of effectivity of the contract;

4. Date of Inspection and Receipt was not indicated in the IAR; and

5. Amount received in the Reimbursement Expense Receipt (RER) indicated the gross
amount of the van rental.

The rental was unnecessary and should have been avoided had the Municipality
conducted the AAPA seminar at a nearer venue.

The audit team believes that the venue do not in any way hinder the attainment of
goals of the AAPA, thus, the activity could be held within the vicinity of the Municipality or
the Province. Moreover, the expenditures for the venue, accommodation and van rental could
have been avoided or minimized had this activity was held at a nearer venue.

We commend the Management for conducting these activities which ultimately

geared towards improving the delivery of basic services and promote the general welfare of
its constituents. However, prudence should still be exercised in the use of public funds and
thereby there is a need to ascertain the cost and benefits of holding similar activities that
these would ultimately redound to the benefit of the entire Municipality of Pinamalayan.
 We recommend that:

a. Management provide explanation on the incurrence of the above expenditures;

b. The BAC Chairman explain the above noted observations about the
procurement and implementation of the projects; and

c. The Municipal Accountant and the BAC Chairman submit all the lacking
documents pertaining to the procurement to avoid suspension in audit.

May we have your comments on the foregoing audit observations within five (5)
calendar days from receipt hereof.

JOSEPH ALLAN MARK L. PAJILA

OIC - Audit Team Leader

MARISSA ORCULLO BAYOT

Supervising Auditor