Republic of the Philippines

Commission on Audit Center for International Trade

Commonwealth Avenue, Quezon City Expositions and Missions

August 18, 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 audited the disbursement for the rental of venue (World Trade Center Metro Manila)
for the IFEX Philippines 2017, covered by DV No. IFEX-17010014 amounting to P3,399,372.96
which represents 40% (initial payment) of the total hiring charges being paid to Manila
Exposition Complex, Inc.

The following observations were the results thereof:

1. The subject contract and its supporting documents were not submitted to our office within five
(5) working days after their execution as required under COA Circular 2009-001dated Feb.
12, 2009.

In our previous AOM (AOM No. 2017-01-(16) dated Feb. 6, 2017) citing the same
circular, we required the CITEM management to submit to COA team the perfected contract
along with the required supporting documents within 5 working days upon its execution for
our auditorial review of the said contract. Based on our listing of the submitted contract, we
noted that the contract attached to the subject disbursement voucher was not submitted after
it has been executed. Nevertheless, by auditing the said DV, we simultaneously conducted
an auditorial review of the said contract and notice the following:

a. The contract is not duly supported by Certificate of Availability of Funds and not duly
witness by Chief Accountant in violation of 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”.

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”.

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, nowhere the required Certificate of

Availability of Funds (duly signed by Chief Accountant) can be found from its supporting
documents. The closest representation of this certification of funds availability is the
certification (that budget is available) signed by OIC, Finance Division in the Box B of
Budget Utilization Request. However, 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. Further, as can be gleaned from the contract, notwithstanding
that the same is merely in the form of letter from supplier (not the one prepared by
CITEM management) with just a conforme of Ms. Terrado, DTI Undersecretary of
Industry Promotion Group and Ms. Gaetos, CITEM former Executive Director, no
signature of Chief Accountant as witness is affixed in the said contract.
2. There is no Annual Procurement Plan (APP), no proof that posting requirements to
PhilGEPS were satisfied and no Request for Quotation, among others are attached to
the said contract and/or DV violating various rules and regulations particularly the
revised IRR of RA 9184, relevant GPPB Issuance and relevant COA Circular.

a. The DV and/or contract is not supported by approved APP, thus the provision under
Sec. 7.2 of the Revised IRR of RA 9184, Section 9.2 of COA Circular 2012-001 and
Section 5.4 of Annex A of GPPB Resolution No. 08-2009 were 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”.

Also, in Section 9.2 of COA Circular 2012-001 re: Procurement through

Alternative Modes, one of the basic requirements common to all
purchases/procurement under alternative mode is the Annual Procurement
Plan.

Section 5.4 of Annex A of GPPB Resolution No. 08-2009

“The Annual Procurement Plan of the procuring entity shall reflect the
proposed lease of real estate or venue specifying the approved mode of
procurement, the ABC, and the general description of the lease”.

Instead of the approved APP, it was only the Project Procurement

Management Plan that is attached to the DV. It is worthy to mention that these
two are different because the former is the consolidation of the latter and such
that the former needs to be submitted to GPPB in line with the following provision
from Annex H of the Revised IRR of RA 9184:

“Alternative Method of Procurement to be utilized by the Procuring Entity

shall be indicated in the APP to be approved by the HOPE.

If the original mode of procurement in the APP cannot ultimately pursued,

the BAC assisted by its Secretariat, the Technical Working Group, and by
the appropriate End-User or relevant office, as the case may be, shall
justify and recommend through a BAC Resolution such change in the
mode of procurement to be approved by the HOPE.

The changes in the mode of procurement must be reflected in APP and

submitted to the GPPB in accordance with Sec. 7.4 of the IRR of RA 9184
which states that changes to the individual PPMPs and the consolidated
APP may be undertaken every six (6) months or as often as may be
required by the HoPE. The respective end-user or implementing units of
the Procuring entity 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, which shall be subject to the approval of the
HoPE. Changes in the APP, if any, for the budget year shall be submitted
to the GPPB in July of the current budget year, and in January of the
following budget year.”

While according to the attached PPMP, the procurement method to be

utilized by CITEM is Public Bidding, the BAC Resolution to recommend
Negotiated Procurement (CITEM BAC Resolution No. (08)-0697 s. 2016) in its
fourth Whereas Clause states that APP was silent as to the mode of
procurement for the said requirement. From this, we can infer that there is
difference between the attached PPMP and the supposedly attached APP, in
which the latter prevails.

b. Proof that posting requirements to PhilGEPS are satisfied is not attached to the
subject DV.

“ All lease contracts with ABCs costing more than P50,000.00 shall be posted in
the PhilGEPS”. (Annex A of GPPB Resolution 08-2009 dated Nov. 3, 2009)

“ The BAC through its Secretariat shall post the Notice of Award (NOA),
Contract/PO, including the Notice to Proceed (NTP) if necessary, for information
purposes, in the PhilGEPS Website, the website of the Procuring Entity
concerned, if available, and at any conspicuous place reserved for this purpose
in the premises of the Procuring Entity within 10 days from their issuance, except
for contracts with ABC of P50,000 and below.” (Annex H of revised IRR of RA
9184, IV. General Guidelines, L. (2). Notice of Award; Contract Approval; Notice
to Proceed)

Except for the snapshot of Award Notice from the CITEM Website, there is no
attached proof that the other requirements were satisfied.

c. The subject DV is also lack of the following requirements:

1. Request for Quotation in which the BAC shall indicate at what stage of the
procurement process these requirements must be submitted, i.e., submission
of offer/s, evaluation of offer/s, before issuance of NOA or prior to payment.

For Lease of Real Property and Venue:

1. Mayor’s/Business Permit
2. PhilGEPS Registration Number
3. Income/Business Tax Return
(Annex H of Revised IRR of RA 9184, IV. General Guidelines, F.
Documentary Requirements)

2. Cost-Benefit Analysis to assess the feasibility of leasing a privately-owned

venue as against purchasing or leasing from a government-owned venue.
(GPPB Resolution No. 08-2009 dated Nov. 3, 2009)

3. Market Analysis of the prevailing rates of lease contracts within the vicinity of
the selected location/s in which the Approved Budget for the Contract (ABC)
 shall be set using the midpoint of the range obtained from the results of that
market analysis. (GPPB Resolution No. 08-2009 dated Nov. 3, 2009)

4. Statement of the prospective bidder that it is not blacklisted or barred from

bidding by the Government or any of its agencies, offices, corporations or
LGU ( Sec. 25.2. iv. 1. R-IRR of RA No. 9184; Section 9.2 of COA Circular
2012-001).

5. Sworn affidavit of the bidder that it is not related to the Head of Procuring
Entity (HoPE) by consanguinity or affinity up to the third civil degree (Sec. 47,
R-IRR of RA 9184; Section 9.2 of COA Circular 2012-001)

6. Certificate of PhilGEPS Registration of Lessor/Supplier (Sec. 8.2a and b;

8.2.2f; 54.3 of the Revised IRR of RA 9184)

May we have your comments on the foregoing audit observations within fifteen (15)
calendar days from receipt hereof. Early submission of the lacking documents to continue
our audit for this transaction will be appreciated.

Very truly yours,

CHONA U. GABRONINO
State Auditor IV
Audit Team Leader