COA flags ‘illegal’ printing transactions of NPO

The Commission on Audit (COA) has questioned the multi-million-peso spending of the National Printing Office (NPO) last year for the rental of printing equipment due to various violations of auditing and procurement rules.

Based on its 2018 audit report, the COA said the NPO paid private companies a total of P121.69 million for the lease of printing equipment despite the lack of an existing agreement or the prior conduct of a public bidding.

The amount represents 249 work orders accepted and accomplished by the NPO from procuring entities under "leasing" transactions.

"The agency continued the engagement of private printers without any valid contract with them, thus illegal," the COA said.

"Review and examination of the printing operations of the NPO for 2018 disclosed that the equipment lease agreements of the agency with private printers had expired as of September 30, 2017. Despite the expiration, NPO continued its alleged lease of equipment without the benefit of competitive public bidding to the disadvantage of the government," it added.

The COA, thus, said the NPO failed to comply with Section 2 of the Implementing Rules and Regulations of the Government Procurement Reform Act, which requires  public bidding for the procurement of goods, infrastructure projects, and consulting services.

Subcontracting

Meanwhile, state auditors said the issuance of a notice of disallowance failed to prevent the NPO from pushing with the subcontracting of printing services.

Twelve private entities received P120.9 million last year as payment for the NPO's lease of printing equipment, according to the audit team.

The COA said this is considered "irregular" since the amount can already be tantamount to the production cost, thus a form of subcontracting, or the rendering of services pursuant to another contract, which is prohibited by the procurement law.

"NPO's accounting records for 'leasing' showed that no cost of production (raw materials, costs of conversion, labor and overhead, and other costs) aside from rental fee was expended by the NPO. The alleged rental fee therefore encompassed all costs of production," the COA said.

"Our review further revealed that the alleged rental fee was computed at 85 percent of the production cost estimate as indicated in the work order. A rental fee/expense is just a component of the manufacturing overhead; thus, paying 85 percent for rental of printing machines is grossly onerous," it added.

The COA said the 85-percent rate was the decision of the NPO head in 2012 and was adopted by succeeding leadership without any written supporting documents.

The COA directed the NPO to always conduct a public bidding for lease agreements and for the Production Planning and Control Division and the Finance Management Division to provide the breakdown of production costs in future transactions.

The NPO management gave no comment to the audit report during the exit conference. —LDF, GMA News