COA scores Comelec: P2.6-B contracts had no fund cover docs

(PCIJ) Good, sound procurement processes apparently do not define the Commission on Elections.

In truth, the poor planning, delivery delays, wastage, and other irregularities that marked the procurement of goods and services for the May 2019 elections had surfaced early on in the agency’s audit report the year prior.

The Commission on Audit, in its 2018 management letter on Comelec’s audit ending Dec. 31, 2017, had also taken issue with the 60 contracts worth P2.58 billion that the poll body had procured, despite the absence of the Certificate of Availability of Funds (CAF).

There’s more. COA said that Comelec continues to pay another state agency monthly rental for warehouse services without a valid contract; purchased supplies grossly in excess of the allowed three-months’ inventory per agency; and has a stock of copy paper, envelopes, cable wires, and metal seals that had been exposed to rain and the elements, and then left to rot and decay.

The CAF is supposed to serve as a confirmation that the agency is ready to undergo procurement. Signed by the agency’s accountant, the CAF should show that cash allocation is available and that the obligation incurred can be actually paid. 

Absent the CAF, there was no confirmation that the Comelec had money to pay for its purchases. In addition, without the required CAF, the P2.58-billion contracts should be deemed null and void, and the Comelec’s disbursements, illegal or contrary to law.

Entering into contracts without the CAF, according to COA, is contrary to various laws and guidelines such as Section 37, Chapter 2 of Government Accounting Manual (GAM), Volume I. It spells out that “no funds shall be disbursed, and no expenditures or obligations chargeable to any department, office or agency without first securing the certification of its Chief Accountant as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged.”

Section 85(1) of Presidential Decree No. 1445 states that “no contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free from other obligations, is sufficient to cover the proposed expenditure.”

Two more portions of the same decree are relevant. Its Section 86 says that the CAF 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.”

Its Section 87 is a stringent clause: “Any contract entered into contrary to the requirements of the above provisions 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.”

‘Pure, simple oversight’

In COA’s inquiry, Comelec’s Chief Accountant claimed that for the contested contracts, the Accounting Division had not issued a CAF. The Budget Officer meanwhile said that the CAF was only issued upon request. Upon verification, the certification signed by the Budget Officer and duly noted by the Finance Services Department (FSD) director was found to pertain only to the availability of allotment.

In a letter dated April 11, 2018, the FSD director said that Comelec management concurred with the audit recommendations and would strictly comply with the various provisions to ensure that funds are sufficient to cover the expenditures. The director also expressed apologies “for whatever apparent deficiency that has been found in the contract execution.”

The report said that what happened “was purely and simply an oversight brought about by various concerns faced by Comelec and FSD, in particular, after the conduct of a nationwide automated National and Local Elections in 2016.”

In its succeeding audit covering the 2018 fiscal year, COA noted that the poll body’s Bids and Awards Committee is now requesting the CAF from the FSD prior to contract signing.

In yet another observation, COA also flagged Comelec for inadequate procurement planning in the amount of P404,655.31. Supply purchases exceeded the agency’s three-month requirement, which later resulted in overstocking and exposure of the goods to risks of wastage and obsolescence because of the poor condition of Comelec’s warehouse.

Section 3.2.A.1 of COA Circular No. 85-55-A dated Sept. 8, 1985 states that the volume of purchases must be enough to fill the three month’s requirements of the agency, except when circumstances of the service would demand otherwise. Purchases made in excess of three month’s requirements should not, however, exceed the current year’s needs, except when allowed. The same Circular also states that the November/December purchases shall be limited to three months' supply only.

Too many clips

COA’s evaluation of the inventories showed that the existence of significant balance of available stock and the actual issuance/consumption of supplies and materials were not reviewed and considered, in the determining the quantity of succeeding procurements. Thus, Comelec’s procurement of some inventory items in 2017 exceeded the agency’s three months’ requirements by five to 30 months.

For example, Comelec made a procurement of 12,000 pieces of backfold clips even though there was available stock of 5,508 pieces – sufficient for nine months’ consumption, based on the agency’s average monthly consumption of 591.5 pieces. 

The non-monitoring of the movement of stocks and the failure of the supply officer to consider the stocks on hand prior to the procurement resulted to overstocking, COA noted. The situation has triggered more adverse results, COA said: possible wastage and obsolescence of the materials due to the poor condition of the Philippine Postal Corporation (PhilPost) warehouse (where supplies and materials for distribution are stored), and additional manpower cost.

During the 2017 Physical Count of Supplies and Materials, COA found holes in the PhilPost warehouse’s roof that enabled rainwater to drip through the roof and into the stockroom where the supplies and materials were stored. Paper, envelopes, cable wires, and metal seals were soaked with rainwater. Animal wastes were also found on top of various supplies because the stockrooms were not properly secured, allowing animals such as cats to enter. The stockrooms were not properly maintained as well. Supplies were covered with dust, crumpled, and in disarray. Usability of these materials remained doubtful, COA said.

COA found that the supply officer’s failure to exert due diligence over the supplies and materials stored in the warehouse led to the deterioration and wastage of paper, envelopes, cable wires, metal seals amounting to P918,869.40. 

Repairs at the warehouse were supposedly undertaken, COA noted in its succeeding report. 

No rent contract

Issues with Comelec’s contract with PhilPost where its warehouse is located were also noted.  The two agencies have no contract. Payments that were made to PhilPost in the amount of P10.95 million for the use of the warehouse from January to September 2016 were not supported with a copy of a contract.

COA found that the disbursement vouchers issued were supported only with the billing statements for the rental of the warehouse. These billing statements were in turn based on a Memorandum of Agreement (MOA) entered into by Comelec and PhilPost dated Sept. 2, 2009. 

The MOA showed that Comelec and PhilPost signed on to a lease agreement for the poll body to use the entire second floor, portions of the ground floor, first-floor mezzanine, and second-floor mezzanine of PhilPost’s FSMDC Building, for a monthly rental of P1,216,437.60 for a period of six months, and renewable every six months thereafter. 

But the latest MOA from Comelec that COA obtained was dated Feb. 4, 2012, which stated a six-month lease period. It included a stipulation that it was renewable every six months, but COA found that agreement had yet to be renewed pending Comelec’s discussions with PhilPost, which had planned to increase the monthly rental fees. In gist, Comelec has been paying Philpost monthly rental practically without a contract, COA noted.

In COA’s subsequent report for funds spent in 2018, the MOA between Comelec and PhilPost has already been signed by PhilPost’s representative and transmitted to the Bids and Awards Committee on Jan. 21, 2019. The contract between the two agencies is automatically renewed, COA noted.

Unused notebooks

In another instance, COA took issue with the P1.96 million Comelec paid to Consolidated Paper Products, Inc. for the delivery of 300,250 spiral notebooks intended for the use of the Technical Working Committee in connection with the May 9, 2016 National and Local Elections. The procurement was not included in Comelec’s 2015 Annual Procurement Plan or Supplemental Procurement Plans for 2016.

The spiral notebooks that the supplier delivered did not comply with the specifications enrolled in the contract. Up to 95 percent or 284,580 notebooks remained unused as of Dec. 31, 2017. 

Due to lack of planning, too, the P72.3-million printing services for the Voter’s Information and Instruction Sheet (VIIS) used in the 2013 election were secured through “shopping,” instead of public bidding. Comelec, COA said, thus failed to secure the most advantageous price for the project.

COA advised the Comelec management to require the Property Officer to improve the implementation of procurement policies, guidelines, and practices to ensure that:

• the procurement of goods and services is made on a competitive basis to the maximum practical extent to encourage full and free competition and avail itself of the best offer; and
• all purchases are properly authorized and made part of the updated Annual Procurement Plan, which should include provisions for foreseeable emergencies based on historical records, for the efficient use of funds and availability of supplies when needed. — Philippine Center for Investigative Journalism