Audit of Public Procurement

20 July 2023
Crowne Plaza Manila Galleria
LEARNING OBJECTIVES

• At the end of the session, the participants will be able to

identify the:
➢ Basic concepts and principles of government
procurement;
➢ Definition and Description of Internal Audit and External
Audit
➢ Few Audit Objectives together with the Procedures for
Government Procurement
➢ COA Documentary Requirements

COA Style Guide 2

Session Map
Open Forum
Internal and (15 minutes)
External Audit
(20 minutes)
Procurement 101 COA Documentary
(40 minutes) Requirements
(10 minutes)

Sample of Audit
DBM Budget Risks
Circular No. 2022 – (30 minutes)
1 dated February
11, 2022
(5 minutes)

COA Style Guide 3

Procurement 101
• Philippine Government Procurement Laws: Then and Now
• Principles of Public Procurement
• Key Concepts on Government Procurement
• Scope and Application of Republic Act No. 9184 and its
revised Implementing Rules and Regulations
• Procurement Actors
• Procurement Planning
• Modes of Procurement and Procurement Procedures

COA Style Guide 4

PROCUREMENT

• is defined as the acquisition

of goods, consulting services,
and the contracting for
infrastructure projects by
procuring entity
• include the lease of goods and real
estate
 (Updated as of 3 July 2023)

https://www.gppb.gov.ph/downloadables.php
 • REPUBLIC ACT NO. 9184
• THE 2016 REVISED
Table of Contents IMPLEMENTING RULES
AND REGULATIONS OF
REPUBLIC ACT NO. 9184
(Updated as of 3 July
2023
Republic Act No. 9184

The Government Procurement

Reform Act (GPRA)

Entitled: Modernization,
Standardization, and Regulation
of the Procurement Activities of
the Government
Enactment of the GPRA or Republic
Procurement ReformsAct No. 9184
GPRA
• Memorandum 10 January 2003
Circulars
Implementing rules and
• Administrative Regulations (IRR) Part A
Issuances 08 October 2003
• Executive Orders
• Implementing Rules Revised IRR
and Regulations 02 September 2009

Over 100 Procurement

Rules and Regulations 2016 Revised IRR
28 October 2016
 Procurement Reforms

CHALLENGES SOLUTIONS BROUGHT

BEFORE GPRA ABOUT BY GPRA
• Confusion Caused by • Enactment of the
fragmented legal system Government Procurement
• Inconsistent policies, Reform Act (GPRA)
rules, and regulations • Creation of Government
due to lack of standards Procurement Policy Board
• Lack of transparency (GPPB)
• Lack of check and • use of PhilGEPS
balance (Philippine Government
Electronic Procurement
System)
• Participation of civil
society
Procurement Reforms
R.A. 9184 applies to all branches and/or instrumentalities of the government:

National State Government Owned

Government Universities or Controlled
Agencies (NGAs) and Colleges Corporations (GOCCs)
(SUCs)

Government Local
Financial Government
Institutions Units (LGUs)
(GFIs)
 • Covers procurement of all
government agencies
• General Rule is
Public/Competitive Bidding
• Alternative Methods of
KEY FEATURES OF GPRA
Procurement allowed in
highly exceptional cases
• Use of the Approved Budget
for the Contract (ABC) as
ceiling for the bid price
 • Use of transparent,
objective, and non-
discretionary criteria
• Increased transparency in
KEY FEATURES OF GPRA
the procurement process
• Professionalization of
procurement officials
• Inclusion of Penal and Civil
Liabilities
 It shall apply to all
procurement activities
SCOPE AND COVERAGE involving:

• Goods and Services

• Infrastructure Projects
• Consulting Services
 Section 4, Revised IRR

• All fully domestically-

funded procurement
activities
• All foreign-funded
SCOPE AND COVERAGE procurement activities,
unless otherwise provided
in a treaty or
int’l/executive agreement
 Activities that are not considered as
procurement undertakings under R.A.
No. 9184 and its IRR
Direct financial or material
assistance given to beneficiaries
Participation to both local or foreign
scholarships, trainings, continuing
education, conferences, seminars or
SCOPE AND COVERAGE similar activities that are governed by
Commission on Audit, Civil Service
Commission, and Department of Budget
and Management rules.

Foreign Grants Acquisition of real Public-Private

covered by R.A. No. property which shall projects covered by
8182, as amended be governed by R.A. R.A. No. 6957, as
by R.A. No. 8555 No. 10752 amended by R.A. No.
7718
Governing Principles
Public Monitoring

Accountability

Competitiveness

Transparency

Streamlined Process

COA Style Guide 17

What is Goods?
Refer to all items, supplies, materials and general support
services, except Consulting Services and Infrastructure
Projects, which may be needed in the transaction of :
Personal and Non- Related or Analogous
Public Business or Personal Property or Services
Government Undertaking contractual Services
• Lease of Office Space
• Media Advertisements
• Equipment • Repair and Maintenance • Health Maintenance
• Furniture of Equipment and Services
• Stationery Furniture • Other services essential
• Materials for • Trucking to the operation of the
Construction • Hauling Procuring Entity
• Janitorial • SubscriptionS
• Security
What is Infrastructure Projects?
Include the construction, improvement, rehabilitation, demolition, repair, restoration or
maintenance of:

• IT Projects • Railways
• Irrigation • Water Supply
• Communication Facilities • Roads and Bridges
• Energy/ Power and Electrification • Sanitation, Sewerage, and Solid
Facilities Management
• Airports and Seaports • National School, Hospital Buildings
• Flood Control and Drainage • Shore Protection
What is Consulting Services?
Refer to services for infrastructure projects and other types of projects or activities
requiring adequate external technical and professional expertise that are beyond the
capability of the government to undertake:

Advisory and Review Construction and

Services Supervision

Pre-investment or Management
Feasibility Studies Services

Technical Services or
Design
Studies
What are the Procurement Methods?

General Rule Alternative

• Limited • Highly
Exceptional
Source
Competitive Cases
Bidding • To promote
Bidding
• Direct Economy
Contracting and
• Shopping Efficiency
• Negotiated • Justified by
Procurement conditions
STANDARD COMPETITIVE BIDDING PROCEDURE
FOR GOODS AND SERVICES
Pre-Procurement Advertisement Pre-Bid
Conference 7 Conference 1 cd
cd as
necessary

Opening of 1st Envelope –

Submission of Opening of 2nd Envelope –
Eligibility Documents &
Bids Financial Proposal
45 Technical Proposal

cd

Bid Evaluation Award

Post-qualification
and Ranking of Contract 15
7 cd 12/
45 cd cd
STANDARD COMPETITIVE BIDDING PROCEDURE
FOR INFRASTRUCTURE PROJECT
Pre-Procurement Advertisement Pre-Bid
Conference 7 Conference 1 cd
cd as
necessary

Opening of 1st Envelope –

Submission of Opening of 2nd Envelope –
Eligibility Documents &
Bids Financial Proposal
50 or Technical Proposal
65 cd

Bid Evaluation Award

Post-qualification
and Ranking of Contract 15
7 cd 12/
45 cd cd
Bidding Process for Consulting Services

Pre-Procurement
Advertisement and/or Eligibility and
Conference
Posting Shortlisting

Opening of Bids (QBE

Pre-bid Conferencel Bid Submission
or QCBE)

Post-Qualification
Bid Evaluation Contract Award
Negotiation
POSSIBLE PERIODS TO COMPLETE THE
PROCUREMENT ACTIVITY FOR GOODS

EARLIEST PERIOD MAXIMUM PERIOD

26 CDs 136 CDs

Excluding Approval of Higher Authority, if applicable

POSSIBLE PERIODS TO COMPLETE THE
PROCUREMENT ACTIVITY FOR INFRA PROJECTS
MAXIMUM PERIOD
EARLIEST PERIOD

156 MAXIMUM PERIOD

26 CDs CDs 141

CDs
Excluding Approval of Higher Authority, if applicable
 KNOWLEDGE
CHECK

COA Style Guide 27

Different periods provided by RA 9184
within which certain stages of the KNOWLEDGE
procurement process must be completed
is merely directory
CHECK
True

False

COA Style Guide 28

PERIOD TO COMPLETE PROCUREMENT PROCESS

G.R. No. 212381, 22 April 2015

In the case of Jacomille v. Abaya, et al., the petitioner contends that the
public respondents failed to comply with the periods provided by law,
specifically the 3-month period from the opening of the bids up to the
award of the contract under Section 38 of RA 9184. The Supreme Court
held that “[t]he different periods provided by RA 9184 within which
certain stages of the procurement process must be completed is not
merely directory but mandatory.”
Thus, it concluded that such irregularity rendered the procurement
process null and void.

COA Style Guide 29

Procurement Actors

Observer BAC HoPE

BAC Secretariat TWG End User

Observer

Allowed to access, free of Online Access

charge: • Through own facilities of PEs until
such time the modernized
• Minutes of BAC Meetings
PhilGEPS becomes operational`
• Abstract of Bids
• Post- Qualification Summary Report
In case, unable to provide the said
• APP and related PPMP
online access, PEs shall inform the
• Opened Proposals
GPPB-TSO in writing by emailing
observers@gppb.gov.ph.
subject to signing of Confidentiality
Agreement
Online Access to Observers

• Online monitoring for observers using the

mPhilGEPS
• PEs to provide online access to observers for
monitoring all stages of procurement using
the mPhilGEPS
• PEs to inform the GPPB-TSO via email
(observers@gppb.gov.ph) if online access
cannot be provided
 Procurement
101
• Philippine Procurement
Paradigm
•Challenges in Procurement
• Actors in Procurement
PROCUREMENT Planning
PLANNING • Preparation of PPMP and
APP
•Monitoring
 PHILIPPINE PROCUREMENT PARADIGM

Assess Procure
• Review studies • Post/Advertise opportunity
• Consolidate into APP • Open and evaluate bids
• Decide procurement method • Post-qualify
• Approve APP • Award and enter into
• Determine readiness contract

NEEDS SATISFACTION

Identify Implement
• Cost-benefit analysis • Oversee implementation
• Feasibility study
• Inspect and accept deliveries
• Market study
• PPMP • Release payment

34

COA Style Guide

WHY PROCUREMENT PLANNING

Procurement Planning ensures that the overall goal of a particular project

will be effectively and efficiently achieved.

Precludes occasions for unnecessary government purchases and

circumventions of the prescribed procurement procedures

• advance deliveries
• suki system
• unwarranted resort to alternative methods procurement

However, it must be done within budgetary context

Delays and Failures of Bidding

*Primary cause of delays and failure of bidding based on Agency Procurement Compliance and
Performance Indicators (APCPI) Confirmation Result of Participating Agencies.

This learning module was developed by the Government Procurement Policy Board – Technical Support Office, and any form of reproduction and distribution
without the author’s approval is prohibited.
Challenges in Procurement

2 ASSESS PROCURE 3
50% of Review feasibility/ market studies
Post/Advertise opportunity
Consolidate into Annual Procurement
Failure of Plan (APP)
Open and evaluate bids
bidding is Post-qualify
Decide procurement method
Award and enter into contract
attributed to Approve APP
POOR Determine readiness
PLANNING
1 IDENTIFY IMPLEMENT 4
Cost-benefit analysis Oversee implementation
Inspect and accept deliveries
Feasibility study
Release payment
Market study

PPMP

NEEDS SATISFACTION
This learning module was developed by the Government Procurement Policy Board – Technical Support Office, and any form of reproduction and distribution
without the author’s approval is prohibited.
 SECTION 7.1 OF IRR

Procurement Planning and Budgeting Linkage

• Within approved budget of procuring entity

• Judiciously done
• Consistent with government fiscal measures
• Considered crucial to the efficient discharge of governmental functions
➢Required for the day-to-day operations
➢In pursuit of the principal mandate of the procuring entity concerned
• The APP shall include provisions for foreseeable emergencies based on
historical records.
 SECTION 7.2 OF IRR

• No procurement unless in accordance with the Annual Procurement Plan (APP)

• Approval of the APP by the Head of Procuring Entity (HoPE) or designated

second-ranking official is mandatory
 ACTORS IN PROCUREMENT PLANNING

END USER BUDGET OFFICE/ TECHNICAL

WORKING GROUP
SK Treasurer

BIDS AND AWARDS COMMITTEE APPROVING

(BAC) & BAC SECRETARIAT AUTHORITY/ HoPE
 PREPARATION OF PPMP
During Budget Preparation/Budget Call

Budget Office/ SK Treasurer HOPE/Approving Body

Submit to Budget Submit Indicative
Office for APP and budget proposal
evaluation to HOPE/oversight body
for approval
01 02 03 04
End-User Unit BAC & Secretariat
Prepare Project Consolidation of PPMPs to
Procurement Indicative APP by BAC Sec
Management Plan and recommendation by
(PPMP) BAC of modality
PROJECT PROCUREMENT MANAGEMENT PLAN (PPMP)

Contracting
Arrangement

Estimated Type and

budget Objective

PPMP
Time Extent/
schedule size

Procuremen
t Methods
APPROVED BUDGET FOR THE CONTRACT (ABC)
• End user to conduct market study

• Market price, inflation and cost of money related to the

procurement time table must also be considered.

• In determining the ABC, the end-user unit, with the assistance of the
TWG (when necessary), must consider the different cost
components.
DETERMINING THE ABC
Cost Components which may be considered:

• Cost or market price of the product or service itself;

• Freight, insurance, taxes, and other incidental expenses (For goods only);

• Cost of money, to account for government agencies usually buying on credit terms;

• Inflationary factor (For goods only);

• Quantities, considering that buying in bulk usually means lower unit prices;

• Supply of spare parts and/or maintenance services, if part of the contract package (For goods
only);
DETERMINING THE ABC
Cost Components which may be considered:

• Cost for securing all types and forms of securities other than cash (e.g. premiums for surety
bond, bank fees and other charges to be incurred by the bidder in obtaining bid, performance
and warranty securities); and

• Currency valuation adjustment for contracts with foreign component.

• Acquisition Cost

• Operation Cost

• Replacement/Repair Cost

• Disposal Cost
DETERMINING THE ABC
Cost Components which may be considered:

• If the sum of the different cost components is lower than the appropriation for the
procurement, then the ABC should be equal to the sum of the cost components.

• If the resulting sum is higher than the appropriation, it is advisable to review the
technical specifications and the computation of the ABC. In any case, the ABC
should not exceed the appropriation.
LIFE CYCLE COSTING
• LCC – Life Cycle Costing
• “Cost” should consider all costs throughout the life-cycle
– acquisition cost, utility costs (energy/water
consumption, maintenance), and disposal costs.
• “Cradle to Grave” vis-à-vis “Cradle to Cradle”
 ANNUAL PROCUREMENT PLAN (APP)
• Legal Basis: Section 7 of the revised IRR of RA 9184

• Refers to the entirety of the procurement activities that will be

undertaken by the procuring Entity within the calendar year using the
prescribed format issued by the GPPB.

• Shall be consolidated by the BAC Secretariat from the PPMPs of end-

user units. The BAC shall take into consideration the following factors:

➢ One year planning perspective

➢ Emergency or Contingency Fund

➢ Schedule of Activities
 ANNUAL PROCUREMENT PLAN (APP)
• No procurement shall be undertaken unless in accordance with the approved APP

• All procurement should be meticulously and judiciously planned by procuring entity

• APP should be maintained and updated regularly

• In the consolidation of PPMPs, the BAC may adopt a strategy through where similar items of
procurement are packaged into one procurement undertaking.

• A review and updating of the individual PPMPs and the APP shall be done regularly, at least
once every 6 months or as often as necessary. The end-user or implementing units shall be
responsible for the changes to the PPMPs, while the BAC Secretariat shall be responsible for
the consolidation of these PPMPs into an APP
 PREPARATION OF PPMP
GAA, Corporate Budget or Appropriation Ordinance Becomes Final

End-User Unit HOPE/Approving Body

Finalize Project Approval of APP by
Procurement HOPE/ oversight body
Management Plans
01 02
(PPMPs) 03 04
Budget Office BAC & Secretariat
Provide comments on Consolidation of PPMPs to
Indicative PPMPs to APP by BAC Sec and
end-users recommendation by BAC
of modality
 REVISIONS ON APP

End-User Update/
Supplement
PPMP

BAC & Consolidate

PPMP/s to
BAC Updated/
Secretariat Supplemental APP
Approve
Updated
/Supplemental
HOPE APP
Documentary Requirements

• Authenticated
photocopy of the
approved APP and
any amendment
thereto
 Documentary Requirements
through Public Biddings
✓Approved contract supported by
the documents required under
COA Circular No. 2009-001 dated
February 12, 2009 and COA
Memorandum No. 2005-027 dated
February 28, 2005
 Documentary Requirements
through Public Biddings

INVITATION TO BID (IB)

54
 PURPOSE

The Invitation to Bid provides

information that enables potential
Bidders to decide whether to
participate in the procurement at hand.

55
 ESSENTIAL CONTENTS

1. Name of the contract to be bid and a brief description;

2. ABC and Source of Funding;

56
 ESSENTIAL CONTENTS

3. General statement on the criteria to be adopted in examination and

evaluation of bids, post-qualification and award of contract;

57
 ESSENTIAL CONTENTS
4. Period of availability of the Bid Docs, place where the Bid Docs may be
secured, website where the Bid Docs may be downloaded and, where
applicable, price of the Bid Documents
“acquired” by virtue of GPPB
Resolution Nos. 04 and 25-2012

58
 ESSENTIAL CONTENTS
5. Date, time, place of the deadline for the submission and receipt of bid
requirements, conduct of pre-bid conference, if any, submission and
receipt of bids and the opening of bids;
6. The deadline for the submission and receipt of bids from the last day of
posting of the Invitation to Bid

59
 Documentary Requirements
through Public Biddings

3 Bidding documents which includes a

complete set of approved
plans/drawings and specifications for
infrastructure projects, complete
technical specifications for goods,
and Terms of Reference (TOR) for
consulting services
 List of Documents

• Infrastructure Project
• Contract Plans –
i) Site development plan
ii) Plans and profile sheet
iii) Typical sections and details
iv) Drainage details where applicable
v) Structural plans at appropriate scales indicating all
details necessary in order that the complete
structure can be set out and constructed
vi) Other details which may be required by the head of
the agency
 Documentary Requirements
through Public Biddings

4. Minutes of Pre-Bid Conference, [Approved

Budget for the Contract (ABC) P1.0million
and above]
5. Agenda and/or Supplemental Bulletins, if
any
6. Bidders’ Eligibility Documents and
Financial Proposals
7. Minutes of Bid Opening
 Documentary Requirements
through Public Biddings

8. Abstract of Bids
9. Post-Qualification Report of
Technical Working Group
10. BAC Resolution declaring
winning Bidder
 Documentary Requirements
through Public Biddings

12.Notice of Post Qualification

13.BAC Resolution recommending
approval and approval by the Head of
the Procuring Entity of the
Resolution of the BAC recommending
award of contract
14.Notice of Award
 Documentary Requirements
through Public Biddings

12.Performance Security
13.Program of Work and Detailed Estimates
• Scope of works;
• Items of Works;
• Quantities;
• Unit Costs
12.Notice to Proceed, indicating the date of
receipt by the contractor
 Documentary Requirements
through Public Biddings

18.Approved Budget for the Contract and its Detailed

Breakdown and Unit Cost analysis
19. Copy of the Approved PERT/CPM Network Diagram and
detailed computations of contract time
20. Detailed Breakdown of the Contract Cost:
• Including the detailed breakdown of estimates and/or
unit cost analysis/derivation for each work item
expressed in volume/area/lump sum/lot for
infrastructure projects
 Documentary Requirements
through Public Biddings

28. Evidence of Invitation of three observers in the

procurement process
 Documentary Requirements
Infrastructure
1. Letter request from contractors for advance payment/
progress/final payment of for substitution in case of
retention money
2. Common to progress/final payments
• Statement of Work Accomplished/Progress Billing
• Inspection Report by the Agency’s Authorized Engineer
• Results of Test Analysis, if applicable
• Statement of Time Elapsed
 Documentary Requirements

• Monthly Certificate of Payment

• Contractor’s Affidavit on payment of laborers and
materials
• Pictures, before, during and after construction of items
of work especially the embedded items
• Photocopy of vouchers of all previous payments
• Certificate of completion
 Documentary Requirements

Advance Payment (additional requirements)

• Irrevocable Standby Letter of Credit/Security Bond/
Bank Guarantee
• 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
 Documentary Requirements

Variation Order/Change Order/Extra Work Order

• Copy of the Approved Change Order (CO)/Extra Work
Order (EWO)
• Copy of the Approved Original plans indicating the
affected portion(s) of the project and duly revised
plans and specifications, if applicable, indicating the
changes made which shall be color coded
 Documentary Requirements

Variation Order/Change Order/Extra Work Order

• Copy of the agency’s reports establishing the
necessity/justification(s) for the need of such CO
and/or EWO which shall include: (a) the computation
as to the quantities of the additional works involved
per item indicating the specific stations where such
works are needed; (b) the date of inspection
conducted and the results of such inspection;
 Documentary Requirements

Variation Order/Change Order/Extra Work Order

• (c) a detailed estimate of t he unit cost of such items of
work for new unit costs including those expressed in
volume/area/lump-sum/lot
• Copy of the approved/revised PERT/CPM Network
Diagram which shall be color coded, reflecting the
effect of additional/deductive time on the contract
 Documentary Requirements

Variation Order/Change Order/Extra Work Order

• period and the corresponding detailed computations
for the additional/deductive time for the subject
Change Order/Extra Work Order
• Copy of the approved detailed breakdown of contract
cost of variation order
 Documentary Requirements
through Public Biddings
Variation Order/Change Order/Extra Work Order
• If the Variation Oder to be reviewed is not the 1st
Variation Order, all of the above requirements for all
previously approved Variation Orders
 Documentary Requirements

Variation Order/Change Order/Extra Work Order

• Additional performance security in the prescribed form
and amount if variation order exceeds 10 percent of
the original contract cost
• 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
 Documentary Requirements
through Public Biddings

Progress Payment

• Once a month, the contractor may submit a statement

of work accomplished (SWA) or progress billing and
corresponding request for progress payment for work
accomplished (Annex E of the Revised IRR of RA 9184)
 Documentary Requirements

Final Payment

• As-Built plans
• Clearance from the Provincial Treasurer that the
corresponding sand and gravel fees have been paid
(DPWH DO No. 109 s. 1993 dated May 4, 1993 and DO
No. 119 s. 1993 dated May 11, 1993)
 Documentary Requirements
through Public Biddings
Final Payment

• Copy of turn over documents/transfer of project and

facilities such as motor vehicle, laptops, other
equipment and furniture included in the contract to
concerned government agency
 Documentary Requirements

Release of Retention Money

• Any security in the form of cash, bank guarantee,

irrevocable standby letter of credit from a commercial
bank, GSIS or surety bond callable on demand
• Certification from the end-user that the project is
completed and inspected
Thank you!
COA Style Guide 81
2 KINDS OF AUDIT IN GOVERNMENT
1. Internal Audit
- An internal management function to evaluate
management controls and operating
performance

- To determine the degree of management

compliance with laws, regulations, managerial
policies, accountability measures, ethical
standards and contractual obligations

Commission on Audit and the 1

 2 KINDS OF AUDIT IN GOVERNMENT
1. Internal Audit
- Involves appraisal of the plan of organization
and all coordinated methods and measures
adopted to:
(1) safeguard assets;
(2) check accuracy and reliability of
accounting data; and
(3) encourage adherence to
prescribed managerial policies.

Commission on Audit and the 2

 2 KINDS OF AUDIT IN GOVERNMENT

2. External Audit
- an independent review/ examination of
transactions, operations, financial
statements/reports and operations of an
entity
- conducted regular intervals by a non-
affiliated independent party

Commission on Audit and the 3

Internal Audit by Entity

4
 INTERNAL CONTROL SYSTEM

Internal Control System(ICS) is management

responsibility pursuant to the following
legislation:
1. Section 124 of PD 1445 – it shall be direct
responsibility of agency head to install,
implement and monitor a sound system of
internal control;

Commission on Audit and the 5

 INTERNAL CONTROL SYSTEM

ICS is management responsibility pursuant to

the following legislation:
2. Section 1, Chapter 1, Subtitle B, Book V of the
Administrative Code of 1987 – all resources of govt.
shall be managed, expended or utilized in
accordance with law and regulations and
safeguarded against loss or wastage through illegal
or improper disposition to ensure
efficiency, economy and effectiveness
in govt operations; responsibility to
take care such policy is faithfully
adhered to rests directly with chief or
head of agency concerned; and
Commission on Audit and the 6
 INTERNAL CONTROL SYSTEM

ICS is management responsibility pursuant to

the following legislation:
3. Section 1 of AO 119 dated March 29, 1989 – the
responsibility for fiscal operations of offices and
agencies of government resides primarily with the
respective Heads of each office, agency, GOCC and
LGU; each and every office, agency, corporation and
local government unit is mandated to strengthen its
ICS and/or organize systems and
procedures in coordination with DBM

Commission on Audit and the 7

 Internal Control System

• A strong INTERNAL CONTROL SYSTEM

(ICS) as the Subject/Object of Internal
Audit

• Control in general is the process of

exercising or directing influence over
the activities of an object, organism or a
system.

Commission on Audit and the 8

 Internal Control System

• The goal of control is to prevent losses to

the organization arising from the
different hazards in government business
operations.

Commission on Audit and the 9

 Internal Control System

Internal Control
• refer to an organization’s whole system
or network of methods, procedures, and
plans which govern its activities to
accomplish its goals and objectives

Commission on Audit and the 10

 Basic Requirements for Internal Control -
Procurement
1. Purchasing Unit should have established
written policies on recruitment and a well-
defined job description for each position.
2. The organizational structure of the agency
should be sound. There should be proper
delegation of responsibility and authorities
to determine proper segregation of duties
and functions.
 Basic Requirements for Internal Control -
Procurement
3. Procurement procedures should give
assurance that:
• All purchases are properly authorized and
included in the Annual Procurement Plan.
• Goods of satisfactory quality are acquired
at the lowest price.
 Basic Requirements for Internal Control -
Procurement
4. Procurement, receiving and paying functions
should not be performed by the same
individual.
5. Quantities ordered correspond with the
quantities invoiced and received.
6. All goods being paid for had been received
in good order.
7. Purchases of furniture and equipment are not
for stock purposes.
Basic Requirements for Internal Control -
Procurement
8. Procurement of supplies, materials and
equipment should be through competitive
public bidding, except as otherwise
provided.
9. Purchases of supplies, materials and
equipment parts should not exceed the
three months requirements except in
anticipation of cost increase or
requirements of a national emergency.
Basic Requirements for Internal Control -
Procurement
10. Inspection under the supervision of
qualified personnel for internal control
purposes, and in accordance with the
policy of the agency, shall be conducted in
all cases to determine conformity of
delivered items with specifications.
11. Payments to suppliers should be properly
approved.
 •Functions of IAS/IAU

1. Advise HoA or Governing Body/Audit

Committee on matters relating to
management control and operations audits
(including on internal management controls in
internal procurement process)

Commission on Audit and the 16

 •Functions of IAS/IAU
2. Conduct management and operations audits
of Dept/Agency/ GOCC/GFI functions,
programs, projects, activities with outputs, and
determine degree of compliance with
mandate, policies, government regulations,
established objectives, systems and
procedures/processes and contractual
obligations (include internal compliance audit
with RA 9184 and its IRR, agency procurement
policies)

Commission on Audit and the 17

 •Functions of IAS/IAU
3. Review and appraise systems and procedures,
organizational structures, asset management
practices, financial and management records,
reports and performance standards of
department proper, bureaus and regional
offices (include review of internal
procurement systems and structure)

(DBM Circular Letter No. 2008-05)

Commission on Audit and the 18

 •Functions of IAS/IAU

4. Analyze and evaluate management

deficiencies and assist top management by
recommending realistic courses of action
(what not to do, how) (including those related
to procurement if any)

(DBM Circular Letter No. 2008-05)

Commission on Audit and the 19

Sample Internal Control/Internal Audit Findings on
Procurement:

1. No formal training of staff and officers of the

Procurement Office, Accounting, Finance or Budget
Offices nor of the BAC, BAC TWG and BAC Secretariat
on the agency procurement policies procurement
systems;
2. The BAC Chair is also a designated approving official
for procurement contracts and payments;
3. The Regional Accountant is a member of the Regional
Office BAC

Commission on Audit and the 20

Sample Internal Control/Internal Audit Findings on
Procurement:
5. There is no policy on regular periodic rotation of the
membership in the BAC;

6. The BAC Office and files are not amply protected

against intrusion by unauthorized persons;

7. Bid envelopes submitted in advance of the opening

date are just left lying on top of the desk of the BAC
Secretariat Staff among other procurement records of
her Office;

Commission on Audit and the 21

II. EXTERNAL AUDIT

22
 Background

1987 Constitution:

The Commission on Audit (COA)

has the power, authority, and duty to examine,
audit, and settle all accounts pertaining to the
revenue and receipts of, and expenditures or
uses of funds and property, owned or held
in trust by, or pertaining to, the Government.
 Background
1987 Constitution:

The Commission on Audit has exclusive

authority to define the scope of its audit and
examination, establish the techniques and
methods required therefor, and promulgate
accounting and auditing rules and regulations,
including those for the prevention and
disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures or uses of government funds
and properties.
 Background
Policy of the State:
Fiscal Responsibility
“All resources of the government shall be managed,
expended or utilized in accordance with law and
regulations, and safeguarded against loss or wastage
through illegal or improper disposition, with a view to
ensuring efficiency, economy, and effectiveness in the
operations of government. The responsibility to take
care that such policy is faithfully adhered to rests
directly with the chief or head of the government
agency concerned.”
[Section 2, P.D. No. 1445 (Government Auditing Code of the Philippines)]
 Background
Shared fiscal responsibility:

“Fiscal responsibility shall, to the

greatest extent, be shared by all those
exercising authority over the financial
affairs, transactions, and operations of
the government agency”.
[Section 4, P.D. No. 1445 (Government Auditing Code of the Philippines)]
 Background

COA’s Objective:

“To determine whether or not the fiscal

responsibility has been properly and
effectively discharged”

[Section 25, P.D. No. 1445 (Government Auditing Code of the Philippines)]
Auditing Standards/Guidance
❑ Financial Audit (ISSAI 1000 -2000)
❑ Performance Audit (ISSAI 3000)
❑ Compliance Audit (ISSAI 4000)
❑ Specialized Type of Audit (ISSAI
5000)
Audit Methodology
Integrated Results and Risk-
Based Audit Methodology
per COA Resolution No. 2011-
009 dated October 20, 2011.
COA Audit Framework

Strategic Planning and Risk

Identification
Planning Delivery

Agency Audit
Conclusion
Planning and Audit
and
Risk Execution Reporting
Assessment

Monitoring

30
 COA Audit Framework
STRATEGIC PLANNING AND RISK
Strategic Planning and Risk IDENTIFICATION
Identification
-is the integration point wherein the types of
Planning Delivery COA audit services are considered
Agency
Planning Execution Conclusion Activities:
and Audit and
Risk Reporting
Assessment ► Perform Government Risk
Monitoring
Identification (GRI)
► Develop/update the Government Risk
Model (GRM)
► Identify government risks
► Report the results of GRI
Strategic Planning and Risk
Identification ► Conduct COA Strategic Planning
► Conduct Annual Planning Conference
Government Annual
Risk Strategic ► Develop Sector Strategic Action Plan
Identification Planning ► Develop Cluster/Regional Operation
Plan

31
 COA Audit Framework
PLANNING
Strategic Planning and Risk ► Agency Audit Planning and Risk
Identification
Assessment
Delivery
Planning
Agency
Activities:
Audit
Planning
Execution Conclusion
and
► Understand Audit Objective and
and Risk Reporting
Assessment Expectation
Monitoring ► Understand the Entity’s Procurement
Process
► Assess Risk and Internal Control
Planning System
Agency Planning and Audit Risk Assessment
Understand ► Identify Subject Matter
audit Understand Assess Risk
objective the Entity’s and Internal
and Procurement Control ► Determine Audit Criteria
Expectation Process System

Identify
Determine
Develop
Audit
► Develop Audit Program/Audit Plan
Subject
Audit Criteria Program/
Matter Plan

32
 COA Audit Framework
PLANNING
Strategic Planning and Risk ► Agency Audit Planning and Risk
Identification
Assessment
Planning Delivery
Agency
Activities:
Audit
Planning
Execution Conclusion
and
► Understand Audit Objective and
and Risk Reporting
Assessment Expectation
Monitoring ► Understand the Entity’s Procurement
Process
► Assess Risk and Internal Control
Planning System
Agency Planning and Audit Risk Assessment
Understand ► Identify Subject Matter
audit Understand Assess Risk
objective the Entity’s and Internal
and Procurement Control ► Determine Audit Criteria
Expectation Process System

Identify
Determine
Develop
Audit
► Develop Audit Program/Audit Plan
Subject
Audit Criteria Program/
Matter Plan

33
 COA Audit Framework
DELIVERY
Strategic Planning and Risk
Identification Activities:
Planning Delivery
Execution – Performing the Audit
Agency
Conclusion
Planning
and Audit
Execution
and ► Conduct Entrance Conference
Risk Reporting
Assessment
► Execute Audit Program – apply
Monitoring tools/techniques in gathering audit
evidence

Delivery - Execution ► Evaluate Audit Results

Develop Audit
► Develop Audit Findings and
Conduct Entrance
Conference
Findings and
Recommendations
Recommendations

Communicate Audit
► Communicate Audit Results
Execute Audit Tests Results
► Conduct Exit Conference
Evaluate Audit Conduct Exit
Results Conference

3
4
 COA Audit Framework
DELIVERY
Strategic Planning and Risk
Identification Activities:
Planning Delivery ► Conclusion and Reporting
Agency
Planning Execution Conclusion
and Audit
Risk
and
Reporting ► Summarize Audit Results
Assessment
► Prepare Audit Report
Monitoring
► Perform over-all audit review
► Wrap-up and archive the engagement
Delivery – Conclusion and
(Organize audit working paper file)
Reporting
► Follow-up agency action plan
Summarize Audit Wrap-up and archive
Results the engagement

Prepare Audit Report

Follow-up Agency
Action Plan
Perform Overall
Audit Review
3
5
IRRBA Framework

Strategic Planning and Risk

MONITORING
Identification
Activity:
Planning Delivery

Agency
Planning
and Audit
Execution Conclusion
and
► Monitor quality control on audit
Reporting
Risk
Assessment
services
❑ Engagement Quality Control
Monitoring
Review
❑ Quality Assurance Review

Monitoring
(Monitor quality control)

36
 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective
1. Items procured • To verify that only • Understand the program, project or
may not be items crucial and activity – its nature and objectives
necessary or not necessary are • Understand the agency mandate
crucial to the included in the • Analyse if the items procured are
mandate and PPMPs and the crucial and necessary to the
operations of APP. attainment of the PE’s mandate/
the PE, or to the mission/ operations/ objectives of the
objectives of the program/project
program/ • Take note of items that are not crucial
project. or unnecessary, if any and obtain the
reasons for their acquisition.

Commission on Audit and the 1

 Procurement Audit
Sample Procurement Risks
Sample Risk Statement
2. Technical requirements for
the detailed engineering of
the infrastructure project
may not be sound and
adequately compliant with
the prescribed rules for
establishing the technical
requirements for the
conduct of all required
detailed engineering
activities including the
preparation of bid
documents as required by
lawCommission
. on Audit and the
Sample Audit
Sample Audit Objective
Procedures
▪ To verify and ascertain • Review detailed
the soundness and engineering
adequacy of the detailed documents to
engineering and the determine that they
preparation of bid comply with
documents for the standards
infrastructure project as established by the
required by law. PE, and Annex “A” of
the IRR of RA 9184.
• Take note of
discrepancies, if any.
2
 Procurement Audit
Sample Procurement Risks
Sample Risk Statement Sample Audit Objective Sample Audit Procedures
3. Specifications ▪ To verify whether • Review specifications for
prepared by the PE specifications for the the goods or works to be
may unfairly restrict procurement of goods/ procured and ascertain
competition. infrastructure are based on that they comply with
relevant characteristics Section 18 of the IRR of
and/or performance RA 9184.
requirements and no
reference to brand names • Take note of deviations, if
are made/allowed. any.

Commission on Audit and the 3

 Procurement Audit
Sample Procurement Risks
Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement
4. The Approved • To verify whether the a) Review the ABC and determine if it is
Budget for the Approved Budget for reasonable;
Contract (ABC) the Contract (ABC) is b) Ascertain that the ABC (and its supporting
may be reasonable and Quantity and Cost Estimates) accurately
excessive. whether it has been and consistently reflects the requirements
prepared in as collectively described in the (1)plans,
accordance with (2)specifications, (3)Program of Work
existing laws and PE (4) proposed construction schedule, and
guidelines. (5) estimated manpower and equipment
requirements, and reflects reasonable
prevailing unit costs of construction inputs
(materials, labor, equipment rental or
operating rates, consumables, and the
like).
Commission on Audit and the 4
 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective
c) Take note of deviations if any, which
result in an excessive ABC,
d) In the case of LGUs and other agencies
which do not adopt DPWH D.O. 72, and
whose provisions for direct or indirect
costs in the ABC are deemed excessive,
request the PE to explain and justify the
valid administrative, empirical and
rational basis for these estimated
costs and re-evaluate the
reasonableness of the ABC.
e) Take note of baseless, arbitrary,
inconsistent and erroneous
computations or assumptions in the
cost estimates which result in an
Commission on Audit and the unreasonable and excessive ABC. 5
 Procurement Audit
Sample Procurement Risks
Sample Audit
Sample Risk Statement Sample Audit Procedures
Objective
5.Bidding documents • To verify whether • Request the PE for
or parts thereof the PE adopts documentation of its
maybe divulged or adequate procedures and controls to
released prior to procedures to see see to it that in all stages of
their official release to it that in all the preparation of the Bidding
to prospective stages of the Documents, equal access to
bidders, or persons preparation of the information is ensured, in
having direct or Bidding accordance with Section 19
indirect interest in Documents, equal of the IRR of RA 9184;
the project to be access to
procured, or to any information is • Take note of any lack of
party, except those ensured. controls or inadequacies, if
officially authorized any.
in the handling of
the Commission
documents.on Audit and the 6
 Procurement Audit
Sample Procurement Risks
Sample Risk Statement Sample Audit Objective Sample Audit Procedures
6. Transparency of the • To verify if the BAC • From the BAC Secretariat, obtain a
procurement process implements a procedure copy of the policy on the mechanism
may be compromised for ensuring that that the for identifying/selecting the group
since the PE lacks the two (2) independent (professional organizations; non-
procedure for the observers from a private governmental organizations) from
identification and group in a sector or which Observers were invited;
selection of observers discipline relevant to the • Review the policy and compare its
from professional procurement at hand, provisions with the requirements of
organizations and and the NGO do not have Section 13 of the IRR of RA No. 9184
NGOs, to ensure that a conflict of interest in pertaining to the selection of
they are the procurement at hand. Observers;
knowledgeable and • Obtain and evaluate documents from
independent. the BAC Secretariat evidencing
implementation of the selection policy;
• Take note of deviations or cases of non-
compliance, if any.
Commission on Audit and the 7

Sample Procurement Risks
Sample Risk
Statement
7. Transparency of the
procurement process
may be compromised if
independent observers
are not invited, or if
invited are not present
Commission on Audit
Procurement Audit
Sample Audit
Sample Audit Procedures
Objective
• To verify whether • From the Minutes of the BAC meeting on
invitations were issued the selection of the Observer from the
and duly received by “pool”, check for information on the BAC’s
independent observers as evaluation in regard to:
required by Section 13 of o the selection of the organization from
RA 9184 and its IRR. which the Observer will be invited;
o knowledge, experience or expertise in
procurement or in the subject matter of
the contract to be bid;
o no actual or potential conflict of interest in
the contract to be bid; and
o Conformity with other relevant criteria
determined by the BAC.
• From certified copies of the invitations to
the Observers with evidence of receipt,
compare the date of receipt with the 5-
day minimum requirement under the
2016 IRR of RA 9184.
• Take note of deviations or cases of non-
and the compliance, if any. 8
 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective
8. Independent • To verify if the BAC • Request the PE for a documentation of BAC
observers from implements a procedures for ensuring absence of conflict of
professional procedure for ensuring interest by the 2 independent Observers from the
organizations or that that the two (2) private sector and the NGO in the procurement at
CSOs may have independent observers
hand
conflict of interest. from the private sector
• Verify whether the BAC’s procedures require the
and the NGO do not
have a conflict of
two (2) Observers from the private sector and the
interest in the NGO to accomplish and submit a “Conflict of
procurement at hand. Interest Form” or similar statement, indicating,
among others, the areas of conflict, if any. The
BAC should prepare the Conflict of Interest Form.
If the BAC does not prepare a Conflict of Interest
Form, the CSO Observer may prepare one, in
order to comply with Section 13.4(c) of the IRR
of RA 9184.
• Take note of cases of non-compliance, if any.
Commission on Audit and the 9
 Procurement Audit
Sample Procurement Risks
Sample Risk Statement
9. Issuance of different work
requirements (plans,
specifications, contract
duration, Bill of Quantities) and
exclusively providing vital
information to favor a particular
prospective bidder.
Examples:
• location of acceptable
sources of materials may
be purposely withheld from
other prospective bidders;
or
• work quantities may be
bloated or excessively
estimated and this
information is only
confidentially provided to
theCommission
favoured on
bidder
Audit
Sample Audit Objective Sample Audit Procedures
• To verify whether the PE has • Request the PE for a document
safeguards or controls to outlining mandatory safeguards
ensure that all prospective and controls for ensuring equal
bidders receive exactly the access to information as
same set of approved bidding required under Section 19 -
documents containing Access to Information of the IRR
exactly the same information of RA 9184, if any.
required for the preparation • Assess compliance with and
of a responsive bid, including
effectiveness of these
safeguards, if any.
but not limited to the
• Take note of any lack of
description of technical
procedures or cases of non-
requirements for goods and
compliance with established
the different works procedures.
requirements (plans,
specifications, contract
duration, Bill of Quantities)
for infrastructure projects
and potential sources of
indigenous materials.
and the 10
 Procurement Audit
Sample Procurement Risks
Sample Audit
Sample Risk Statement Sample Audit Procedures
Objective
10. Bid Security offered may • To verify if the Bid • Verify if the bid security is of the
patently not be of the Security is of the prescribed form, and the amount and
prescribed form, amount and prescribed form, validity period is in accordance with
validity period, or maybe fake. amount and validity Section 27 of the IRR of RA 9184.
period.
11. There may be “ghost • To verify that there • Verify the legal identity of all bidders
bidders” who do not legally are no participating who have responded.
exist, but are indicated in the “ghost bidders” who (NOTE; The legal existence of losing
documentation of the do not legally exist. bidders may also be confirmed after
procurement process as award of the contract through their
bona-fide bidders in order to acknowledged receipt of registered
give a semblance of mail containing the notices by the BAC
competition. of the decision to award the contract to
the successful bidder.

• Notification of all losing bidders is

required under Section 37.1.2. of the
IRR of RA 9184.
Commission on Audit and the 11
 Procurement Audit
Sample Procurement Risks
Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement
12. Bids may • To verify if the prescribed • Observe the stages on
have been conditions and Submission and Receipt of
unsealed procedures in the Bids, and Bid Evaluation
prior to submission and receipt
of bids were followed • Review the Minutes of the Bid
their being
Opening to determine
opened in
compliance with the
public.
requirements under Rule VIII
(Sections 23 to 29) and Rule
IX (Sections 30 to 33) of the
IRR of RA 9184.
• Take note of discrepancies or
cases of any non-compliance

Commission on Audit and the 12


Sample Procurement Risks
Sample Risk
Sample Audit Objective
Statement
13. The BAC may • To verify if the BAC
recommend award to a
bidder who is not
technically or financially
capable to successfully
complete the project, or
to a bidder who has
submitted fraudulent
statements of eligibility
(Example: insufficient
contracting capacity,
track record, conflict of
interest)
Commission on Audit
Procurement Audit
Sample Audit Procedures
• Observe the Post-Qualification
complied with the process and/or review the:
required conditions and
₋ BAC Resolution declaring the
procedures in the
conduct of post-
bidder with the LCB
qualification ₋ Minutes of the BAC meetings
on post-qualification
₋ Other ancillary reports on
the Post-Qualification
conducted.
• Determine compliance with Rule
X – on Post-Qualification.
• Take note of deviations or cases
of non-compliance, if any.
and the 13
 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective
14. The BAC may • To verify and • Observe all stages of the procurement
declare a validate the process and/or verify from the Minutes
failure of reasons for the of BAC meetings and other records to
bidding twice declaration of determine the reasons for declaration of
without a failure of a failure of bidding.
justifiable bidding, either • Validate the reasons of the BAC and the
cause, in by the BAC or HOPE for declaring a failure of bidding
order to the HOPE. and determine whether these are in
resort to accordance with Sections 35 and 41 of
negotiated the IRR of RA 9184.
procurement. • Take note of instances of non-
compliance, if any.

Commission on Audit and the 14

 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective
15. The posted • To verify that the • Verify from the record of receipt of the BAC
Performance performance the actual date of posting of the performance
Security may security was security and determine compliance with
Section 37.2.1 of the IRR of RA 9184.
not be in posted within
accordance the specified • Determine compliance of the amount,
with the period after currency, form, issuing agency and validity
conditions of receipt of the period of the performance security with the
the contract. Notice of Award, requirements of Section 39 of the IRR of RA
in the right form, 9184.
amount,
• Take note of cases of non-compliance, if any.
currency, issuing
entity and
validity period.

Commission on Audit and the 15

 Procurement Audit
Sample Procurement Risks
Sample Risk Statement Sample Audit Objective Sample Audit Procedures
16. The alternative method • To verify the • Determine the
of procurement resorted existence of the reasons and the
to may not be justified conditions/ circumstances
and the setting aside of circumstances prevailing when the
stringent competition prescribed by law to BAC decided to depart
requirements is to favor justify the use of the from the standard
certain suppliers or alternative mode of mode of procurement
contractors. procurement.

Commission on Audit and the 16

 Procurement Audit
Sample Procurement Risks
Sample Risk Statement
17. Splitting of contracts may
be resorted to as a
contrived justification for
the alternative method of
procurement in order to
circumvent the
requirement for public
bidding or approval of
higher authorities.
Commission on Audit and the
Sample Audit Objective Sample Audit Procedures
• To verify that the PE • Analyse if one or
has not resorted to more similar
splitting of contracts procurement by their
for the purpose of nature and timing
evading or actually constitute
circumventing the
one and the same
requirements of public
procurement and if
bidding or the approval
there are indications
of higher authorities
of avoidance of the
approval of higher
authority or
motivation to evade
public bidding 17
 Procurement Audit
Sample Procurement Risks
Sample Audit
Sample Risk Statement Sample Audit Procedures
Objective
18. Payment may be • To determine that • Review progress payments ;
made for work that all payments made
has not been under the contract • Inspect and validate work
accomplished in are in accordance accomplished;
accordance with the with the contract
plans and terms and that work • Adopt “GEOTAGGING” to further
specifications. paid for under the document and validate
contract are findings;
existent at the
prescribed location, • Take note of discrepancies
in the prescribed between actual work as
dimensions and on verified and the work reported
the basis of an in the Statement of Work
actual accurate Accomplished (SWA) and
measurement of progress billings.
Commission on Audit
quantities.
and the 18
 Procurement Audit
Sample Procurement Risks
Sample Audit
Sample Risk Statement Sample Audit Procedures
Objective
19. There may be • To determine that • Conduct inspection to verify
unnecessary and all payments for the need or justification for
over-priced additional work the variation orders;
additive variation made under the • Review and validate
orders. contract are in additional/deductive work
accordance with quantities and costs;
contract terms, • Use “GEOTAGGING” to
and that Variation further document and
Orders are validate findings;
justified, • Take note of unnecessary
necessary, duly and over-priced variation
approved and the orders, and other
costs are discrepancies if any.
reasonable.
Commission on Audit and the 19
 Procurement Audit
Sample Procurement Risks
Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement
20. There may be • To determine • Review suspension orders,
issuance/ grant whether contract time extensions and
of unjustified suspension of the additional contract time granted
suspension of work, contract time (or deducted) due to variation
work or contract extensions due to orders and determine whether
time extensions. unforeseen delays these are justified under Sections
and additional 9 and 10 of Annex “E” (Contract
work are Implementation Guidelines for
reasonable and the Procurement of Infrastructure
justified. Projects )

• Take note of any suspension of

work or contract time extensions
that are not justified or
reasonable.
Commission on Audit and the 20
 Procurement Audit
Sample Procurement Risks
Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement
21. Liquidated • To determine whether • Determine the new intended
damages may not completion of the completion date for the project
be imposed in spite work under the based on the NTP and the contract
of substantial contract is delayed to time, plus any time extension duly
delays in the warrant the granted;
prosecution and imposition of • Verify the actual work
completion of the liquidated damages accomplishment as of the intended
work. and/or rescission of completion date;
the contract. • Determine whether completion of
work is delayed and whether the PE
has imposed the correct amount of
liquidated damages as specified
under Section 68, and Section 8 of
Annex “E”, of the IRR. Take note of
instances of failure to impose
liquidated damages, if any.
Commission on Audit and the 21
 Procurement Audit
Sample Procurement Risks
Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement
22. Unnecessary, • To determine that • Validate justifications and
excessive contract all adjustments to review computations for the
price adjustments the contract price contract price
or escalation may and any contract adjustment/escalation to
be granted by the price escalation determine whether these are in
PE. are reasonable accordance with Section 61 -
and calculated Contract Prices, and Appendix 9
according to the - Revised Guidelines for
terms of the Contract Price Escalation, of the
contract. IRR of RA 9184;

• Take note of incidents of non-

compliance with contract terms
and/or any discrepancy, if any.
Commission on Audit and the 22
 Procurement Audit
Sample Procurement Risks

Sample Risk
Sample Audit Objective Sample Audit Procedures
Statement

23. Subcontractors • To determine whether the • Request for a list of all subcontracts
may have PE has ensured that approved by the PE including the eligibility
conflict of conditions of the contract
documents required to be submitted by
interest and/or with regard to sub-
have not been contracting are complied subcontractors under ITB Clause 12 for the
approved to with. infrastructure contract being implemented
work on the and the total amount of all and determine whether the subcontractors
project, and the subcontracts do not comply with the eligibility criteria in the BDS.
total amount of exceed 50% of the value of (NOTE: To validate that the list includes all
all subcontracts the contracted works.) subcontractors, or as an alternative in case the PE does
may exceed not cooperate, the Auditor may invoke or cite Clause
50% of the 34.3. of the GCC which states: “The Contractor shall
value of the permit the Funding Source named in the SCC to inspect
contracted the Contractor’s accounts and records relating to the
performance of the Contractor and to have them audited
works)
by auditors appointed by the Funding Source, if so
required by the Funding Source.”)
Commission on Audit and the 23
 Procurement Audit
Sample Procurement Risks
Sample Risk Sample Audit
Sample Audit Procedures
Statement Objective

24. The Contractor • To determine • Review contract completion and

may fail to issue a whether the turnover documents to
warranty against Contractor issued determine compliance.
Structural Defects or a warranty
Failures, after final against • Take note of incidents of non-
acceptance of the Structural compliance with contract terms
Works. Defects or and/or any discrepancy, if any.
Failures, after
final acceptance
of the Works by
the Procuring
Entity.

Commission on Audit and the 24