Republic of the Philippines

COMMISSION ON AUDIT
NATIONAL GOVERNMENT SECTOR
Cluster 8 Agriculture and Environment
Audit Group NGS 8-B, Team NCR-03
OFFICE OF THE AUDITOR
DA-PCAF Bldg., Department of Agriculture Compound
Elliptical Road, Diliman, Quezon City

ND No. : 2016-005-102 (10)

Date : May 23, 2016

NOTICE OF DISALLOWANCE (ND)

Engr. ARIEL T. CAYANAN

Executive Director
Philippine Council for Agriculture and Fisheries
Elliptical Road, Diliman, Quezon City

Attention: Ms. MERLYN R. GALDONEZ

Chief, Accounting Section

We have re-evaluated managements actions with regard to Notice of Suspension

No. 2011-02-102(10) dated February 23, 2011 which pertains to the payment to Basic IT
Solutions amounting to 1,028,746.09 for the supply and delivery of various Information
Technology (IT) equipment covered by check no. 556845 dated September 30, 2010.

The total amount of 7,095.00 is hereby disallowed in audit due to the advance payment
of items which were not delivered and which form an integral part of the items procured:

Quantity Particulars Unit Price Total Price

3 pcs. SD Memory Card, Stick Micro (M2) 4gb 899.00 2,697.00
for the voice recorded
2 pcs. Song Chip for Extreme Magic Sing 2,199.00 4,398.00
Total 7,095.00

Section 88 of Presidential Decree No. 1445 prohibits the advance payment of government
contracts and specifically states that Except with the prior approval of the President (Prime
Minister) the government shall not be obliged to make an advance payment for services not yet
rendered or for supplies and materials not yet delivered under any contract therefor. No
payment, partial or final, shall be made on any such contract except upon a certification by the
head of the agency concerned to the effect that the services or supplies and materials have been
rendered or delivered in accordance with the terms of the contract and have been duly inspected
and accepted.

Review of the supporting documents revealed that Check No. 556845 amounting to
1,028,746.09 for the payment of various IT equipment was prepared on September 30, 2010.
The same was issued and was received by the representative of Basic IT Solutions on March 18,
2011 as evidenced by their issuance of OR no. 0501. However, inspection and acceptance of the
said delivered items were only made on April 6-13, 2011 and April 18, 2011, respectively.
Therefore, this shows that payment was made 31 days prior to the inspection and acceptance of
the delivered goods contrary to the abovementioned provision of PD No. 1445.

What makes matters worse was that although there was delivery of the items, some were
not in accordance with the specifications agreed upon and some were incomplete. Two laptop
computers were found to be not in accordance with the specifications, hence, were rejected and
returned to the supplier for replacement. However, the supplier absconded which led NAFC
personnel to personally settle the amount of 102,000.00 under the following Notice of
Settlement of Suspension/Disallowance/Charges (NSSDCs):

NSSDC OR
Amount
No. Date No. Date
14-004 10/01/2014 17,000.00 2096458 01/30/2014
14-005 10/01/2014 17,000.00 2096457 01/30/2014
14-006 10/01/2014 17,000.00 2096459 01/30/2014
14-007 10/01/2014 17,000.00 2096461 01/30/2014
14-008 10/01/2014 17,000.00 2096460 01/30/2014
14-009 10/01/2014 17,000.00 2096462 01/30/2014
Total 102,000.00

However, two items were still undelivered to this date, hence, this disallowance, to wit:

Quantity Particulars Unit Price Total Price

3 pcs. SD Memory Card, Stick Micro (M2) 4gb 899.00 2,697.00
2 pcs. Song Chip 2,199.00 4,398.00
Total 7,095.00

The following persons have been determined to be liable for the transaction:

Name Position/Designation Nature of Participation in the Transaction

Eduardo C. Nolasco Former DA Assistant Secretary for Certified that supporting documents were complete
Finance even though there was no Inspection and
Acceptance Report
Noel A. Juliano Former OIC Executive Director As Head of the Procuring Entity and being the one
NAFC fiscally responsible for the agency

Please direct the aforementioned persons liable to settle immediately the said
disallowance. Audit disallowances not appealed within six (6) months from receipt hereof shall
become final and executory as prescribed under Sections 48 and 51 of P.D. 1445.

ANDREW T. GARCIA
State Auditor II
OIC Audit Team Leader

ELEANOR G. PANCHO
State Auditor IV
OIC - Supervising Auditor DA 2
 PROOF OF SERVICE OF COPIES OF ND TO PERSONS LIABLE

Received by
Name Position/Designation Date
(Print & Sign)
1. Eduardo C. Nolasco Former DA Assistant
Secretary for Finance

2. Noel A. Juliano OIC Executive Director

NAFC