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CoA: Govt printing jobs illegally subcontracted

The National Printing Office (NPO) violated procurement laws by subcontracting jobs to private firms in the guise of equipment rentals, the Commission on Audit (CoA) said.

This file photo taken on February 09, 2019 shows Commission on Elections Spokesman James Jimenez during the start of the printing of ballots for the midterm elections at the National Printing Office in Quezon City. PHOTO BY ROGER RAÑADA

The deals, which did not undergo public bidding and were thus “without any valid contract,” totaled a little over P121 million last year.

“Review and examination of the printing operations of the NPO for CY (calendar year) 2018 disclosed that the equipment lease agreements of the agency with private partners had expired as of Sept. 30, 2017,” the CoA noted in a report.

“Despite the expiration, NPO continued its alleged lease of equipment without the benefit of competitive bidding prescribed under Rule 14, Section 46 of the IRR (implementing rules and regulations) of RA (Republic Act) 9184 to the disadvantage of the government,” it added.

The agency was said to have “accepted from procuring entities and accomplished 249 work orders for the printing of accountable forms under ‘Leasing’ amounting to P121,691,215.37.”

“However, based on records, NPO did not have any valid lease or rental agreement for CY 2018, nor did it conduct public bidding for the lease of printing equipment; thus, the work orders under ‘Leasing’ amounting to P121,691,215.37 were illegal,” the CoA said.

This is not the first time that the NPO has been charged with failing to meet government regulations. Just recently, the Commission on Elections(Comelec) said it would withhold payment of P244 million to the NPO as it had subcontracted the printing of voters’ information sheets (VIS) for the May 13 midterm polls in violation of CoA rules.

The Comelec, which had halted the distribution of the VIS, also said the subcontractee committed mistakes that could have disenfranchised voters.

Representatives of the NPO and its parent, the Presidential Communications Operations Office, were not immediately available for comment. By law, the NPO is mandated to provide printing services to government agencies, particularly the Comelec and the Office of the President.

Similar violations were flagged by the CoA in a 2017 audit report, but despite these and the issuance of notices of disallowance for allegedly “irregular payments” to private printers for the leased machines/equipment, the NPO “continued subcontracting its printing services in the guise of ‘Leasing’ and recording the transactions in its books as ‘Leasing.’”

A review of checks issued last year showed that the NPO paid 12 private printers a total of P120,927,408 last year for alleged equipment rental fees, but the amount, the CoA said, was “tantamount to the production cost” and was, thus, an “irregular” subcontracting arrangement.

“NPO’s accounting records for ‘Leasing’ showed that no cost of production (raw materials, costs of conversion — i.e., materials, labor and overhead — and other costs incurred in bringing the inventories to their present location and condition) aside from rental fee was expended…

The alleged rental fee therefore encompassed all costs of production,” it added.

The supposed rental fee was also “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.”

The decision to set the 85-percent rate was said to have been made in 2012 by the then-NPO chief, “but without any written guidelines” and was subsequently adopted by the agency.

“It is of note that NPO was unable to present the breakdown of the costs of production to assert that, indeed, 85 percent of it pertain to rental fee,” the CoA also said.

State auditors urged the NPO to follow procurement procedures by staging competitive biddings for equipment leases, and also

recommended that certifications or waivers be issued if the agency finds itself unable to meet the government’s printing requirements.

In particular, the NPO’s Finance and Production, Planning and Control divisions were told to compute and record all production costs, from raw materials to logistics expenses, to ensure that revenues and cost of goods sold were “correctly and fairly represented.”

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