COMMISSION ON AUDIT CIRCULAR NO.

77-59 August 31, 1977

TO : All Heads of Department, Bureaus, and Offices of Government including Local

Subdivisions ad Government- Owned and Controlled Corporations,
Administrative Officers, Chief Accountants, Property Officers and Auditors
concerned.

SUBJECT : Disallowing Payment of Claims for Freight and Handling Charges Based on a
Percentage of the Cost of Items Purchased and Delivered.

It has been brought to the attention of this Commission that the practice of adding 10%
of the cost of items purchased and delivered for freight and handling is rampant particularly in
the provinces, often resulting in excessive or unnecessary expenses on the part of the
government agencies. This practice is without any legal basis. The pertinent provision of
Section 862 of the Revised Manual of Instructions to Treasurers which is often cited as
justification, is quoted hereunder:

"x x x Local prices shall be arrived at by means of public bidding or

canvassing in conformity with the provisions of Executive Order No. 298, dated
August 12, 1940, the reasonableness of which shall be determined by the Local
Committee on Award, or by the provincial board under Section 2044(b) of the
Revised Administrative Code, which prices, however, should not exceed by more
than 10 percent of the price for similar article as compared with the Bureau of
Supply Price, excluding freight charges to the place where the purchase is made.
x x x"

Although the above provision allows a 10% deviation in prices, it would be

unconscionable and sheer abuse of this authority to provide for an across-the-board 10% mark-
up for freight and handling when these expenses could be determinable.

In view thereof, only payments for actual freight and handling charges properly
supported by official receipts of the carriers or brokerage firms concerned may be allowed.
Payments of freight and handling which were based on a percentage of the cost of items
delivered or purchased should be disallowed and the corresponding refunds from dealers
should be demanded. Henceforth, Requests for Bids/Quotations should carry the phrase "To be
delivered at jobsite or office" of the requisitioning agency.

This Circular shall take effect immediately.

(SGD.) FRANCISCO S. TANTUICO, JR., Acting Chairman