333 Phil. 222
VITUG, J.:
"1. More supplies and proper health care could have been provided to meet the needs of the hospitals patients had the Center systematically planned the beautification and sanitation program and economized on expenditures of at least P13.874 million, a big bulk of which are unnecessary, extravagant and/or excessive. While the incurrence of these expenditures made the physical surroundings pleasant, it left some basic hospitals needs unattended to or given minimal attention.On the basis of its findings and observations, the SAT made its recommendations which, in material portions, read:
"x x x x x x x x x
"2. The government spent an additional P2.85 million in its purchase of Ferchem brand of sanitation supplies worth P4.8 million thru exclusive distributor. Equivalent products of known quality/preferred brands at lower cost are available in the market. Furthermore, the purchase was covered by split requisitions, purchase orders and payments ranging from P63,000 to P99,000. each.
"3. Overpricing of P3.750 million ranging from 23.58% to 342.28% were noted in the purchase of various supplies and equipment.
"4. The steel railings installed in the hospital premises was short by 394.47 lineal meters and yet the order was paid in full resulting in an overpayment of P446,957.
"5 Services rendered to the in-patients treated do not warrant the purchase of expensive equipment such as a laser and seven units light cure machine worth P995,000 and P245,000, respectively.
"6. Prudence was not exercised in the purchase of equipment. Equipment worth P375,719 were either unused or unnecessary. An equipment purchased for P176,855 was used by the contractor for no charge at all.
"7. The procurement of beautification and sanitation supplies/materials and the execution of the contracts for the repair/rehabilitation works were tainted with irregularities,"[3]
"8. Prosecute and charge appropriately, concerned officials responsible in the disbursement of government funds involving the following acts or omissions, if warranted:The report was transmitted by the COA Chairman to the NCMHM, through Dr. Buenseda, for its notification and proper guidance.
"8.a Non-adherence to the provisions of COA Circular No. 85-55A and Executive Order No. 301 requiring public bidding in the procurement of supplies and materials; and the conduct of simulated sealed bidding.
"8.b Incurrence of unnecessary, extravagant and excessive expenditures in violation of COA Circular No.85-55A.
"8.c Splitting of purchase order and payments involving procurement of supplies and materials as well as in the repair projects.
"8.d Overpricing in the procurement of supplies and materials -
"8.e Non-adherence to the provisions of P.D. No. 1594 requiring public bidding for construction projects.
"8.f Alteration of dates of contracts, program of works, quotation, etc. punishable under Article 171(5) of the Revised Penal Code."[4]
"The first assigned error on ALLEGED OVERPRICING OF VARIOUS ITEMS, refer to the following purchases/or procured items;Unable to accept the decision, petitioners have lodged this petition for certiorari in which they impute grave abuse of discretion on the part of the COA. Petitioners also claim a denial of due process. Petitioners, in main, assert that the findings found in both questioned reports are not substantiated by evidence but predicated mainly on suspicion and that the findings and recommendations of the SAT have been made without fully appreciating the circumstances peculiarly attendant to the operation of the center.
1. Steel railings (3,000 lineal meters)
2. Street lights;
3. Wooden benches (843 pcs.), and steel/iron benches (448 pcs.)
4. Sanitation supplies;
5. Concrete benches (217 units);
6. Concrete pipes/wastebaskets (155 pairs);
7. Trash cans (240 pcs.); and
8. Various supplies and tools, etc.
and is reported on pages 55 to 82 of the SAO Report. Respondent-appellant’s contention in her Comment to the said SAO Report and in her Position Paper submitted on June 9, 1993, were already amply discussed and considered by the COA Review Panel. Evidently, no additional issues were raised in the appeal, except with respect to the alleged irregularity and immateriality of the evaluation by way of recomputation by the Technical Audit Specialist and the canvass conducted by the Price Evaluation Division, Technical Service Office (TSO), which is after the fact, i.e., after the submission of the SAO Report and after the hearing before the Review Panel. This commission did not find any irregularity in referring technical issues, subject of the Audit Report to experts, like the Technical Audit Analyst, for validation of the said audit findings. The TAS report is material and relevant in the resolution of the issue of overpricing. The cited Areola v. COA case (202 SCRA 147) is not applicable to the present case, for the simple reason that the herein respondent-appellant has ample access to source documents and records to satisfy NCMH management or the respondent-appellant that COA guidelines on unnecessary, irregular, excessive, extravagant or unconscionable expenditures have been observed. (Sec. 2(2) Article IX-D, 1987 Constitution; COA Circular 85-55-A, dated September 28, 1985). This is an official duty and function of the procurement or canvass committee of the agency. On this issue of over-pricing, the Commission hereby affirms the aforesaid audit finding.
"x x x x x x x x x
"The third assigned error on ‘ALLEGED SPLITTING,’ pertains to the procurement of sanitation supplies, repairs and maintenance. No additional issue or argument has been raised on appeal respecting this error, except the allegation that the audit report did not state any damage to the Government. This is true, but definitely, there was unwarranted benefit to Rufina Fermin Marketing, Inc., the distributor and dealer of Ferchem Brand of sanitation supplies worth P40 Million perpetrated thru the manifest partially and evident bad faith on the part of NCMH Management headed by respondent-appellant. The cited Mison case (no citation on the appeal) that COA Circular No. 76-41 ‘is a prohibition against splitting of requisitions, purchase orders, vouchers, and others’ is not applicable herein because the 403 contracts entered into by NCMH and the series or phases of construction works in this case do not fall under this violation. It can be considered as a contract disadvantageous to the Government. This Commission finds no sufficient basis for reversing the finding of ‘splitting,’ hence will affirm this audit finding.
"Anent the fourth assigned error on ‘ALLEGED VIOLATION OF REGULATIONS OF PUBLIC BIDDING,’ respondent-appellant did not present any additional argument on appeal. This commission, therefore, affirms this audit finding on the legal necessity of canvass and public bidding required under Executive Order No. 301 and PD 1594, in case of infrastructure projects, although the funds involved in this case pertain to MOOE.
"The fifth assigned error on ‘ALLEGED UNNECESSARY, EXTRAVAGANT OR EXPENSIVE EXPENDITURES,’ refer to the procurement and purchase of the following:
"1. Curtains;
2. Accordion Dividers;
3. Steel Railings;
4. Street Lights;
5. Steel benches;
6. Wooden benches;
7. Concrete benches;
8. Concrete pipes and wastebaskets;
9. Dental laser equipments and light cure machine; and
10 Incinerator and compactor.
The justification for the procurement and purchase of the above-listed items are specially enumerated and discussed in the Position Paper of the respondent-appellant, supra. Although NCMH management has the absolute and/or sole discretion on matters affecting the use of its funds for a particular purpose, i.e., MOOE, as specifically stated in its budget, this must yield to the constitutionally mandated power of the Commission to prevent the incurrence of irregular, unnecessary, excessive, extravagant or unconscionable use of public funds. In the light of the operational definition of these expenses and the standard or list of situational cases indicated in COA Circular No. 85-55A, supra, the COA Review Panel has considered the explanations and justifications of respondent-appellant to be untenable. There being no additional issue or argument adduced in the appeal, this Commission hereby affirms this audit finding.
"The sixth assigned error on ‘ALLEGED UNLAWFUL ALTERATION OF DATES’ of contracts, program of works, quotation and other documents, due to alleged alterations and superimposition of dates in the covering contracts, program of works, quotation and others, to suit the normal sequence of processing, affect adversely the integrity of the pertinent documents. It is a settled jurisprudence, that the custodian or the person in possession of a spurious/falsified document is presumed to be the falsifier. There being no additional issue or argument adduced on this assigned error, this Commission likewise affirms this particular audit finding.[7]
"A more humane procedure, and totally conformable to the due process clause, is for the COA representative to allow the members of the Contracts Committee mandatory access to the COA source documents/canvass sheets. x x xPetitioners, it would seem, were furnished with copies of COA’s canvass only on certain but not on all contested items.
"x x x x x x x x x
"By having access to source documents, petitioners could then satisfy themselves that COA guidelines/rules on excessive expenditures had been observed. The transparency would also erase any suspicion that the rules had been utilized to terrorize and/or work injustice, instead of ensuring a ‘working partnership’ between COA and the government agency, for the conservation and protection of government funds, which is the main rationale for COA audit." (Italics supplied.)[9]
SAT’s findings of overpricing were subsequently referred for evaluation to the COA’s Technical Audit Analyst/Civil Engineer of the Technical Services Office which, in turn, relied on a cost comparison based in unit cost furnished by the Price Evaluation Division of the Technical Services Office. The result of the recomputation on the supposed overpricing on six[11] out of the eight items evaluated showed the following figures; viz:
"Discussion as to IUEE in Finding No. Items Quantity Purchase Per Canvass Overpricing % 0f Over pricing base on Canvass 1.b Steel Railings 1,960.63 P2,230,457.79 (at P1,133) P504,303.95 P1,726,153.84 342.28% Steel Lights 162 units 1,157,582.34 393,660.00 763,992.34 194.06% 1.d Steel Benches 448 pcs. 659,456.00 229,017.23 275,947.62 101.78% 1.e Plant Wooden Fence 843 pcs. 547,064.85 271,117.23 275,947.62 101.78% 1.g Concrete Benches 217 pcs. 321,811.00 260,400.00 61,411.00 23.58% 1.l Trash Cans 240 pcs. 170,400.00 115,200.00 55,200.00 47.92% 1.h Concrete Pipes & Wastebaskets 155pcs. 258,385.00 163,445.95 94,939.05 58.09% Totals P5,345,156.98 P1,937,144.73 P3,408,012.25 175.93%
It would be difficult to concede to the quoted summary of overpricing made by the Technical Audit Analyst to be a final basis for an out-and-out rejection of agency disbursements/cost estimates in the absence of actual advance sheets and/or price quotations from identified suppliers.
Items Quantity Purchase Unit Cost Evaluation Overpricing % of Overpricingf Steel Railings 1,958.58 P2,230,752.79 460.45 P906,475.36 P1,323,982.43 146.06% Steel Lights 162 units 1,156,582.34 6,682.25 1,083,496.50 74,085.84 6.84% Steel Benches 448 pcs. 659,456.00 1,044.30 467,846.40 191,609.60 40.95 Plant Wooden Fence 843 pcs. 547,064.85 314.83 265,401.69 281,663.16 106.12% ConcreteBenches 217 pcs. 321,811.00 1,125.70 244,276.90 77,543.10 31.74% Trash Cans 240 pcs. 170,460.00 Concrete Pipes 155 pcs. 170,500.00 900.00 139,500.00 31,000.00 22.22% Wastebaskets 155 pcs. 87,885.00 Total P5,345,216.98 Add: Result of Canvass by the Price Evaluation Division 341,747.50 P2,321,622.63[12]
"The third assigned error on ‘ALLEGED SPLITTING,’ pertains to the procurement of sanitation supplies, repairs and maintenance. No additional issue or argument has been raised on appeal respecting this error, except the allegation that the audit report did not state any damage to the Government. This is true, but definitely, there was unwarranted benefit to Rufina Fermin Marketing, Inc., the distributor and dealer of Ferchem Brand of sanitation supplies worth P40 Million perpetrated thru the manifest partiality and evident bad faith on the part of NCMH Management headed by respondent-appellant. The cited Mison case (no citation on the appeal) that COA Circular No. 76-41 ‘is a prohibition against splitting of requisitions, purchase orders, vouchers, and others’ is not applicable herein because the 403 contracts entered into by NCHM and the series or phases of construction works in this case do not fall under this violation. It can be considered as a contract disadvantageous to the Government. This Commission finds no sufficient basis for reversing the finding of ‘splitting,’ hence will affirm this audit finding."[14]Public respondent discarded rather hastily, if not unfairly, the factors that were actually taken into account by petitioners before the purchases were effected; hence: First, the chemicals ordered by NCMHM were water-based which had been tested to be not only more effective than the kerosene-based chemicals, but most importantly (considering the mental condition of its patients), to be non-toxic and harmless even if taken internally; second, all previous purchases of the chemicals had received the approval of the Review and Evaluation Committee of the Department of Health; third, the price paid by NCMHM had remained constant since 1984; fourth, there had been no suitable substitute with the same quality in the local market; and, fifth, the chemicals (Ferchem) used by NCMHM had passed the tests conducted by the National Institute of Science and Technology Administration ("NISTA"). It might additionally be pointed out that the purchase of sanitation supplies for the year 1988 not only covered varied items but also made at obviously different times.
"a. Whenever the supplies are urgently needed to meet an emergency which may involve the loss of, or danger to, life and/or property;While the items for renovation and improvement of the center, on the surface, might seem not too urgent in nature, petitioners, however, did plausibly come out with the fact that the questioned transactions were indeed long overdue. The delay made it most compelling to fast track what had been felt to be essential in providing due and proper treatment and care for the center’s patients.
"b. Whenever the supplies are to be used in connection with a project or project or activity which cannot be delayed without causing detriment to the public service;
"c. Whenever the materials are sold by an exclusive distributor or manufacturer who does not have subdealers selling at lower prices and for which no suitable substitute can be obtained elsewhere at more advantageous terms to the government;
"d. Whenever the supplies under procurement have been unsuccessfully placed on bid for at least two consecutive times, either due to lack of bidders or the offers received in each instance were exorbitant or non-conforming to specifications;
"e. in cases where it is apparent that the requisition of the needed supplies through negotiated purchase is most advantageous to the government to be determined by the Department Head concerned; and
"f. Whenever the purchase is made from an agency of the government."
"x x x to expenditures which could not pass the test of prudence or the obligation of a good father of a family, thereby non-responsiveness to the exigencies of the service. Unnecessary expenditures are those not supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation. This could also include incurrence of expenditure not dictated by the demands of good government, and those the utility of which cannot be ascertained at a specific time. An expenditure that is not essential or that which can be dispensed with without loss or damage to property is considered unnecessary. The mission and thrust of the agency incurring the expenditure must be considered in determining whether or not the expenditure is necessary (COA Cir. 88-55A, supra).The purchase of curtains may have amounted to P5.26 million; considering, however, the more than a hundred[19] pavilions and buildings in the center’s vast compound, the amount cannot be said to be all that extravagant. Petitioners have explained that the curtains are made of thick fabric in order to guard against patients easily stripping or destroying the materials. The purchase by NCMHM of 462 truckloads of garden soil and filling materials has been made because of the need to fill up the low areas within the compound for the safety of patients and to solve, at the same time, the drainage problem. The repair of street lights, besides being a safety measure, is designed to prevent the escape , as well as the unauthorized movements, of patients from the different wards of the hospital. The purchase of incinerator, vibration compacts and two hundred forty (240) trash cans for the proper disposal of garbage, particularly because the center’s patients could be so oblivious to proper sanitation, hardly can be categorized as unnecessary.
"x x x x x x x x x
"The term ‘extravagant expenditures’ signifies those incurred without restraint, judiciousness and economy. Extravagant expenditures exceed the bounds of propriety. These expenditures are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive, and injudicious (COA Cir. 88-55A, supra),"
COA Circular 88-55-A states:In passing, nothing before us suggests, even remotely, that the disbursements have been made for personal or selfish ends.
"2.2 The service mission, size, systems, structure, strategy, skills, style, spirit and financial performance of government agency are the primary considerations in determining whether or not their expenditures are irregular, unnecessary, excessive or extravagant."[20]
Then COA Chairman Francisco Tantuico, Jr.,[21] comments:
"The terms ’irregular,’ ‘unnecessary,’ ‘excessive,’ and ‘extravagant,’ when used in reference to expenditure of funds or uses of property, are relative. The determination of which expenditures of funds or use of property belongs to this or that type is situational. Circumstances of time and place, behavioral and ecological factors, as well as political, social and economic conditions, would influence any such determination. Viewed from this perspective, transactions under audit are to be judged on the basis of not only the standards of legality but also those of regularity, necessity, reasonableness and moderation,"[22]