OTHER AUDIT OBSERVATIONS

OTHER AUDIT OBSERVATIONS

DISCUSSION:

Non-implementation of Executive Order No. 712 due to non-receipt of implementing guidelines.

Section 2 (1), (2), and (5) of Executive Order (EO) No. 712 dated March 11, 2008 provides that: The DILG shall, subject to existing laws, advise LGUs to suspend, to wit:

1. the establishment and operations of new and existing transportation terminals that charge fees and require compulsory use by public utility vehicles;

2. the enforcement of re-routing schemes that violate the authorized route as provided for the PUV franchises;

3. xxx

4. xxx

5. the implementation of local programs, projects and ordinances that have impact on the cost of operations of public utility vehicles without first coordinating and getting the approval of the DOTC to ensure that these programs, projects and ordinances do not prejudice public interest by way of higher fares.

Relevant to the impact on additional fares from the pier/town proper to the Bus Terminal, a sworn statement of two (2) regular travellers, who are personally aggrieved of the prevailing situation, have submitted to the team their notarized comments in particular are attached for record and reference purposes.

In reply to our letter dated August 6, 2008, requesting of the action taken, if there is any in so far as the above cited provision of EO No. 712, states that, relative to this: Please be informed that the Department is not yet implementing Section 2 of the subject EO, due to non-issuance of its implementing guidelines. Moreover, DILG and DOTC is in the process of formulating the implementing guidelines through a Joint Memorandum Circular to be issued soonest. Immediate implementation at their level is subject to receipt of said guidelines.

Notwithstanding the certification issued by the Municipal Engineer that the construction of Bulan Common Bus Terminal and abattoir under contract with S.R. Baldon Construction & Supply and Steven Construction & Supply, respectively, has been implemented, but construction of the said projects are still on-going as of July 24, 2007, which revealed probable liquidated damages to be determined by the TAS RTSO of COA Region V, Legaspi City.

Inspite of the Certificate of Acceptance and Turn-Over issued by the Hon. Helen C. De Castro dated December 4, 2007, contract review for the Integrated Bus Terminal and Slaughterhouse has not been rendered/submitted to the team by the Technical Service Office as of this date, November 5, 2008, when the exit conference is being undertaken by the Regional Cluster Director of LGS Cluster III Sub-Cluster II of COA RV Legaspi City at the Office of the Municipal Mayor of LGU Bulan, Sorsogon with several department heads. As regards to contract review, a final tracer under 5^th indorsement dated November 10, 2008 was forwarded to the Regional Cluster Director, Local Government Sector, Cluster III, Sub-Cluster II, both of COA Regional Office No. V, Rawis, Legaspi City, requesting immediate submission of the contract review of the aforementioned projects of LGU Bulan, Sorsogon.

A reply on our request dated September 18, 2008, was received by the team on November 12, 2008 from the BIR Revenue District No. 68, Sorsogon City stating among others that our request is a violation of Section 270 in relation to Section 71 of the National Internal Revenue Code, as amended and the requesting party is not included among the enumerated exception under Section 270 of the Tax Code in so far as our request for a Certification/Statement of taxes paid due the BIR covering the Deed of Donation executed by Mrs. Aniceta O. De Castro as the donor of a parcel of land situated at Barangay Fabrica, Municipality of Bulan, Province of Sorsogon in favour of LGU Bulan, consisting of an area of ten thousand square meters (10,000 sq. m.).

Income and revenue on operations of the LGU’s Heavy Equipment as recorded in the cashbook registered the following, to wit:

2006	2007	2008
		January to June
P85,000.00	P107,513.00	P35,300.00

Pending receipt by the team of monthly reports for official travel and the corresponding monthly reports of fuel consumption per equipment, the team cannot render an opinion on the recorded income, whether there was an under/over statement of income from the operation of the same.

An exit conference was conducted by Supervising Auditor, Tita B. Embestro, presided by the undersigned on November 5, 2008, with the presence of Hon. Mayor Helen C. De Castro, and other Department Heads at Municipal Hall of LGU Bulan, Sorsogon. As a consequence of said exit conference, a final tracer was issued under 5^th indorsement dated November 10, 2008, requesting immediate submission of contract review of the Integrated Bus Terminal and Slaughterhouse of LGU Bulan, Sorsogon.

Series of communication pertaining to the non-submission of contract review by RTSO, revealed that management failed to submit the required PERT/CPM of the twin projects abovementioned. Unnumbered memorandum to this effect was issued to the undersigned by Supervising Auditor Tita B. Embestro dated February 13, 2009, but it was only on March 5, 2009, when subject PERT/CPM was received by this end, under 1^st indorsement dated February 26, 2009 and March 4, 2009 from Hon. Mayor Helen C. De Castro of LGU Bulan, Sorsogon and Auditor Jose Rey Binamira of PAO Sorsogon, respectively.

On March 5, 2009, PERT/CPM of Bulan Integrated Bus Terminal was forwarded to the Regional Director , thru the Supervising Auditor, Cluster III, Sub-Cluster II, LGS both of COA Regional Office No. V, Rawis, Legaspi City, in compliance with unnumbered memorandum dated February 13, 2009.

We extend our thanks for the cooperation and support extended to us by the Honorable Mayor Helen C. De Castro, Municipal Treasurer, Accountant, Budget Officer and Other Official and Employees of LGU Bulan, Sorsogon, and the Audit Team Leader, Team I, LGS Province of Sorsogon during our special audit engagements.

Prepared and Submitted by:

(SGD.) ROSS A. OBEJAS

State Auditor IV

LGS – Province of Masbate

AUDIT OBSERVATION MEMORANDUM NO. 9

AUDIT OBSERVATION MEMORANDUM NO. 9. LGU of Bulan, Sorsogon failed to post a procurement opportunity with the PhilGEPS in violation of Section 8-IRR-A of Republic Act No. 9184.

DISCUSSION:

The Philippine Government Electronic Procurement System (PhilGEPS) has adopted a two-pronged approach to achieve the following, to wit:

a. Institutionalization of the PhilGEPS, which will be used for the procurement of common-use items and as repository of all Government procurement information, and

b. Use or engagement of electronic procurement service providers by the Individual Procurement Entities for procurement of non-common use items.

The Procurement System – Department of Budget and Management (PS-DBM) manages the PhilGEPS under the supervision of the Government Procurement Policy Board (GPPB). The PhilGEPS serves as the single portal and primary source of information on all government procurement.

All Procuring Entities shall utilize the PhilGEPS, through its Electronic Catalogue facility, for the procurement of common-use supplies. Moreover, all Invitation to Apply for Eligibility and to Bid (IAEB), notices of award, and all other procurement-related notices shall be posted in the PhilGEPS, regardless of the method of procurement used by the Procuring Entity.

The GPPB shall issue the necessary procedural guidelines covering procurement through the PhilGEPS.

The PhilGEPS shall have a centralized electronic bulletin board. Procuring Entities are required to post the following in the PhilGEPS Electronic Bulletin Board:

i. IAEB for competitive bidding and notices of other procurement opportunities using the alternative methods of procurement;

ii. Supplemental/Bid bulletins

iii. Contract awards, the corresponding Notices of Award, including the reasons for award of contract;

iv. Results of bidding and related information; and

v. Other notices, announcements, information for interested parties.

Failure to post a procurement opportunity will render the resulting contract null and void. Failure to post a Notice of Award shall render the erring government official/s administratively liable in accordance with R.A. 6713 and other pertinent laws, rules and regulations, and appropriate sanctions shall be imposed.

Posting of notices and other transactions shall be done through duly authorized personnel of the Procuring Entity. In accordance with Section 8.2.3 of the Implementing Rules and Regulations for Domestic Project (IRR-A), the Procuring Entity shall be required to designate its personnel who will be authorized to transact with the PhilGEPS. The internal procedures of PhilGEPS require that a Procuring Entity shall have at least one (1) but not more than two (2) such authorized personnel. For purposes of consistency with the prescribed procurement procedures, the Procuring Entity shall designate such personnel who is a member of the BAC Secretariat or assigned to the Procurement Unit/Office.

Posting the IAEB shall follow the guidelines in Section 21 of the IRR-A, Section 2, Part 1, Vol. 2, Section 3, Part 1, Vol. 3, and Section 3, Part 1, Vol. 4 of said Manual.

The PhilGEPS shall have a centralized electronic database of all manufacturers, suppliers, distributors, contractors and consultants registered under the system. Registration shall entail the submission of the requirements specified by the PS-DBM. Details of the requirements may be obtained from the PS-DBM website or PhilGEPS website.

Registration with the PhilGEPS is not tantamount to a finding of eligibility, nor is it a guaranty that a manufacturer, supplier, distributor, contractor or consultant may participate in a public bidding without first being determined to be eligible for that particular public bidding.

Procuring entities without internet access may avail of the PhilGEPS Public Access Terminals which shall be installed at DBM-designated locations in the provinces and in Metro Manila.

The PhilGEPS also feature the following:

Ø A Virtual Store that will enable the ordering of common-use and non-common use items online called a virtual store. This virtual store shall be open only to registered Procuring Entities and may not be accessed by suppliers.

Ø An Electronic Payment function that will allow the system to manage the generation of purchase orders and the payment of bids processed through the system. The focus of this feature is to facilitate the electronic transfer of funds from PS-DBM to and from Procuring Entities and suppliers, and from Procuring Entities to suppliers for bids managed directly by the Procuring Entity. This System will:

· Generate purchase orders from a bid notice, award notice or contract;

· Support approval process for purchase orders before any payment or fund transfer is processed;

· Have a process to submit request for payment upon delivery of goods and/or services and the completion of the approval process; and

· Have the ability to interface with the designated bank of the Procuring Entity and suppliers to support the electronic transfer of funds.

Ø An Electronic Bid Submission that will support the implementation of e-Bid submission process, which includes creation of electronic bid forms, creation of bid box, delivery of bid submissions, notification to supplier of receipt of bids, bids receiving and electronic bid evaluation. This facility will cover all types of procurement for goods, infrastructure projects and consulting services.

Procuring Entities may hire service providers who will provide electronic procurement systems and/or services for the procurement of non-common use supplies, infrastructure projects and consulting services.

The Procuring Entity shall conduct a public bidding for this service.

Electronic procurement service providers must meet the following minimum requirements to qualify as a service provider to a Procuring Entity:

1. The system must comply with the provisions of R.A. 9184, its IRR-A, R.A. 8792 (Electronic Commerce Act);

2. The system must be linked to the PhilGEPS, particularly with regard to the posting of all bid opportunities and awards;

3. The system must allow parallel manual submission of bids to the Procuring Entity;

4. The system must ensure that the BAC shall have the complete control of the bidding process, and that the BAC’s sole authority to open bids is strictly observed;

5. The system must be virus-resilient and the infrastructure must provide sufficient security which is at least equivalent to that employed by the PhilGEPS, such as, but not limited to firewall and encryption devices;

6. Must provide for use of electronic signatures and other current electronic authentication devices;

7. The service provider must have sufficient redundant back-up facilities;

8. The system must have provisions for linkage to the Procuring Entity’s Financial Management Information System, and other internal information systems that may interact with the procurement process; and

9. Electronic payment facilities, if used, shall comply with all laws, rules and regulations issued by the Government.

The GPPB shall determine and certify compliance with the above requirements. However, it may delegate this task to technically capable agencies/offices of the Government. For this purpose, it shall issue the necessary Guidelines.

Our audit disclosed that LGU Bulan, Sorsogon failed to register with the PhilGEPS and as a consequence the following information were not posted in the PhilGEPS Electronic Bulletin Board as Procuring Entities required to post the abovementioned information to the PhilGEPS Electronic Bulletin Board.

Moreover, analysis of the comparative results of bid prices under BAC Resolution Nos. 12 and 13 for Bus Terminal and Slaughterhouse, respectively, revealed that comparative analysis results were not also posted in the G-EPS Bulletin Board for their information records and reference purposes, as shown hereunder to wit:

CONSTRUCTION OF BULAN BUS TERMINAL
Name of Bidder		Bid Price		Difference		Ave. Difference		Remarks
						P11,100.00
S.R. Baldon Construction & Supply		P32,984,700.00						winning/lowest bidder
BSB Construction & Supply		P32,993,200.00		P8,500.00				2nd lowest bidder
CTC Builders & Supply		P32,998,400.00		P13,700.00				3rd lowest bidder
CONSTRUCTION OF SLAUGHTERHOUSE
Name of Bidder		Bid Price		Difference		Ave. Difference		Remarks
						P3,500.00
Steven Construction & Supply		P4,991,800.00						winning/lowest bidder
Muntopar Builders		P4,994,400.00		P2,600.00				2nd lowest bidder
Necen Builders		P4,996,200.00		P4,400.00				3rd lowest bidder

The above cited schedule of Contractor’s Bids and analysis of the result of the Lowest Calculated Responsive Bid (LCRB) as recommended by BAC Resolution Nos. 12 and 13 revealed that, as if there was no competitive public bidding that took place or had transpired which registered the lowest average difference of P11,100.00 over the other two bidders for the Bus Terminal project while, it likewise registered the least average difference of P3,500.00 over the other two bidders for the Slaughterhouse project.

An in-depth analysis of post-evaluation activity of the bidding process was not seriously undertaken by BAC which showed that the difference of two projects bidded were minimal. This cast doubt on the results of bidding procedures made by the BAC as shown on the table abovementioned.

COA’S RECOMMENDATION:

Require the duly authorized personnel, designated/assigned to the procurement office to explain in writing why they failed to register the Procuring Entity/LGU with the PhilGEPS that likewise resulted in the failure to post the same in the PhilGEPS centralized electronic bulletin board pursuant to Section 8-IRR-A of R.A. No. 9184.

LGU’S COMMENT:

The procurement opportunity for the implementation of the twin projects was posted in a newspaper of national circulation. Due to the recurring technical problems plaguing the fledgling internet industry in the area at the time, posting with PhilGEPS was inadvertently omitted by the BAC. The recent observation of the commission is a wake-up call that was immediately addressed by the LCE. The BAC Chairman was directed to coordinate with concerned agencies for the immediate and proper training of BAC members and support personnel. The LCE also tasked the body to immediately enrol the LGU with PhilGEPS.

COA’S REJOINDER:

The diligence of a good father of a family was not exercised by the procuring entity pursuant to Section 8-IRR-A of R.A. No. 9184. Procuring entities without internet access may avail of the PhilGEPS Public Access Terminals which shall be installed at DBM-designated locations in the provinces and in Metro Manila.

Failure to post a procurement opportunity will render the resulting contract null and void. Likewise, failure to post a Notice of Award shall render the erring government officials administratively liable in accordance with R.A. 6713 and other pertinent laws, rules and regulations, and appropriate sanctions shall be imposed.