COA: P1.06-B NPO payments to private printers irregular

By Ben Rosario

Some P1.06 billion in payment made by the National Printing Office (NPO) to private printers has been categorized as “irregular expenditure” for violation of Republic Act No. 9184 or the Government Procurement Act, a Commission on Audit (COA) report revealed.

Commission on Audit (MANILA BULLETIN)
Commission on Audit (MANILA BULLETIN)

COA, in its 2018 annual audit report for the NPO, also lectured the state-owned printing office on how to maximize its printing capability by assessing the printing requirements of all government agencies in relation to its full capability to undertake them.

This will also guide the printing office to prepare for plans, programs, and assess the budget requirements for the continuous acquisition of printing equipment.

“The agency paid the private printers a total P1,064,579,059.54 on the basis of unauthorized JVFAs (joint venture framework agreements) entered into with them, having not obtained an exemption form the coverage of NEDA’s (National Economic and Development Authority’s) 2013 Revised Guidelines on JV Agreement; thus, irregular,” COA stated in the audit report released the other day.

Audit examiners said the JV transactions have not been recorded in accordance with the prescribed accounts under Volume III of the Government Auditing Manual.

They recalled that in 2017, the NPO entered into JVFAs with private printers to “reinforce its capabilities and enlarge its operations”, with the private sector infusing resources in the form of equipment, supplies, services and personnel” in order that the state-owned printing agency can augment its current potential.

Under the JVFA scheme, the NPO will assign printing jobs of its clients to the private printers which, on the other hand, will make available its equipment, manpower, supplies, and other resources under a Special Task Order Contract.

Profits of the parties will be divided between them.

But upon review of NEDA’s 2013 Revised Guidelines and Procedures for Entering into JV Agreement, auditors noted that such arrangements may only apply to government-owned and -controlled corporations (GOCC), government corporate entities (GCE), government instrumentalities with corporate powers (GICP), and state universities and colleges, pointing out that the NPO does not fall under any of the said categories.

Reacting to the audit observation, the NPO management insisted that it is either a GICP or a GCE because “it is administering special funds” by virtue of congressional action under the General Appropriations Act of 2014 which granted NPO a P78.35 million “seed money” for its operating expenses for the year.

But COA noted that the GAA has an NPO Special Provision on revolving fund that allows it to use the revolving fund derived from income from production and other printing activities.

“Thus, NPO being given a revolving fund does not categorize it as agency administering a special fund,” the audit agency explained.

COA recalled that in its 2017 audit recommendation, the NPO was asked to “rescind/stop” any JVFAs entered into with private firms, unless it is authorized by the president to do so through an executive order.

“However, although no EO was issued, the Agency continued its JV activities with the private printers,” the audit body noted.

In its Report of Checks issued for 2017 and 2018, the NPO paid a total P1.064 billion to private printers.

Audit examiners decried the joint venture scheme, noting that the NPO has been placed in a disadvantageous position under the provisions of the agreement.

Under the joint venture agreement, NPO shoulders the production costs that the private printers incur for the printing jobs they received from the NPO.

“In addition to the said costs, NPO also pays the private printers’ share (50 percent) of net profit from the JV,” auditors noted.

While the private printers are given a 50-percent share from the net profit, the NPO still shouldered the production costs.

COA said records of the JVFA transaction also confirmed that there is subcontracting of printing services with the NPO not directly undertaking the printing services.

The audit agency reiterated its previous recommendation for the NPO to obtain approval of the president to exempt it from the coverage of NEDA’s 2013 Revised Guidelines on JV Agreement.

Once a presidential executive order is issued to this effect, the NPO must prepare a JV agreement with guidelines that would not violate RA 9184.