MANILA, Philippines – The Commission on Audit (COA) demanded the refund of P139.46 million in rentals paid by the National Printing Office (NPO) to private printers in what were found as illegal lease agreements.

In a notice of disallowance dated September 6, 2018, COA said 294 disbursement vouchers worth P139.46 million which were paid to 12 private printers violated procurement rules.

“Records of the transactions, upon examination and review, disclosed that the payments made to the private printers under subcontracting is irregular, in violation of Section 4.6 of the Government Procurement Policy Board,” COA said.

State auditors held NPO Director Francisco Vales Jr  liable for the disallowed transactions, as well as the following:

• Winifredo Talla of the financial management division 
• Buenaventura Gonzales Jr and Ruben Dancel of the production, planning, and control division
• Leah dela Cruz of the budget section

The 12 private printing companies were also held liable.

COA said the NPO has not yet complied with or appealed the disallowance, as it has 6 months to respond to the notice.

Questionable lease agreements were reportedly the cause of “en masse resignation” in November 2016. Exchange of letters posted on the NPO website point to conflict among some NPO officials, with Vales allegedly putting “too much pressure” on the disgruntled officials for the lease contracts to be signed.

Vales was a former Davao City official.

The Presidential Communications Operations Office, where the NPO is an attached agency, started an investigation as early as November 2016.

Illegal contracts

The disallowed contracts are for the following private printers, all for the 1st quarter of 2017:

• Advance Computer Forms Incorporated – P2.4 million
• Bestforms Incorporated – P9.3 million
• Consolidated Paper Products Incorporated – P49,542
• Eastland Print Ink Incorporated – P6.8 million
• Holy Family Printing Corporation – P38 million
• JI Printers Incorporated – P12.7 million
• Mercury International Security Printing Corporation – P4 million
• Metrocolor Corporation – P1.5 million
• Nova Business Systems Incorporated – P28.5 million
• Tone Guide Press Incorporated – P1.9 million
• Triprint Corporation – P8.7 million
• Western Visayas Printing Corporation – P25.5 million

According to the 2017 audit report on the NPO, there was no valid legal basis to enter into joint venture agreements with the private printers.

State auditors said the National Economic and Development Authority (NEDA) only allows joint venture framework agreements (JVFAs) with government owned or controlled corporations, “which the NPO does not belong to,” according to COA.

COA said that instead of coming up with plans and programs so the NPO could acquire machines for the printing needs of the government, it instead continued to pay millions of pesos to private printers.

COA pointed out that under procurement rules, when government printers cannot accommodate orders, the NPO can “engage the services of private printers” but it cannot “subcontract” them.

State auditors found that of the P139.46 million in printing expenses, the NPO only earned 15%, which resulted in a loss of income for the agency.

“This is so because all project costs were expended by the private printers; thus, tantamount to subcontracting,” COA said.

As of December 30, 2017, COA also said P3.7 million worth of penalties have been incurred because of late deliveries due to the subcontracting.

Calling it a “scheme,” auditors said the contracts resulted in errors in financial statements, and exposed officials to litigation.

“NPO’s continuous accommodation, despite its printing limitation, of printing orders through the Equipment Lease Agreement and JVFAs is a clear violation,” said COA.

The NPO told COA during its exit interview that a special fund allowed the agency to enter into lease agreements. The NPO explained that because it has special funds, it is categorized among government instrumentalities with corporate powers and/or government corporate entities, which are allowed by NEDA to enter into JVFAs.

But COA disagreed and proceeded to issue a notice of disallowance, saying that “the mandates of NPO are not being realized as NPO is not able to provide majority of the printing services needed by government agencies and instrumentalities.” – Rappler.com