COMMISSION ON AUDIT CIRCULAR NO.

81-169 November 11, 1981

TO : All Heads of Ministries and Managing Heads of Government-Owned and/or

Controlled Corporations; Chiefs of Bureaus and Offices of the National
Government; Chief Accountants; COA Managers/Regional Directors; Bureau and
Corporation Auditors; Governors, City/Municipal Mayors; Provincial/City Auditors;
and all Others Concerned.

SUBJECT : Conduct of Inspection

In order to facilitate and avoid delay in the processing of claims, the following guidelines
and procedures on inspection are hereby prescribed:

1. All transactions not subject to pre-audit pursuant to COA Circular No. 76-26, as
amended, shall not be subject to inspection. Likewise, repairs of equipment not
subject to pre-audit shall not be subject to pre-repair inspection. However, under
exceptional circumstances, the Auditor concerned may require inspection by COA
Technical Property Inspectors when reliable information has been received that the
transaction involved is irregular and detrimental to the interest of the government.

2. The inspection tasks required under COA Memorandum No. 81-112E shall apply to
procurement claims the value of which are subject to pre-audit and inspection
under COA Circular No. 76-26, as amended and paragraph no. 1, above.

3. Claims to be paid out of trust fund releases which by law are subject to pre-audit
may be inspected in accordance with COA Memorandum No. 81-112E upon
request by the Auditor concerned.

4. Claims covering payments for real properties such as land and road-right-of-way,
buildings, and improvements shall be subject to inspection by COA Technical
Property Inspectors if the amount exceeds P40,000.00, and by the authorized
auditing official for those below P40,000.00. Such claims below P40,000.00
although not subject to pre-audit per COA Circular No. 76-26, as amended, shall
still be subject to processing and approval by the COA Regional Director/Auditor
concerned in accordance with COA Memorandum No. 80-239.

5. Delivery of construction materials shall be subject to inspection by the auditing

official in charge of pre- audit, or his authorized representative, if the amount
involved exceeds P20,000.00 but not more than P40,000.00. If the materials
delivered are subject to test, the auditor concerned should require such test by the
nearest government testing facilities, if any. Deliveries of the aforesaid materials in
excess of P40,000.00 shall be inspected by COA Technical Property Inspectors.

6. Inspections of project covered by "pakyaw" contracts in excess of P40,000.00 shall

be undertaken by the COA Technical Property Inspectors. In no case, however,
shall "pakyaw" contracts exceed P50,000.00 per contract pursuant to P.D. 950.
 7. Paragraph 1, 2, and 3 of COA Circular No. 81-163 pertaining to projects
undertaken under the Barangay Roads Maintenance Program are hereby
amended, to read as follows:

1) Projects with contract amount not exceeding P40,000.00

shall not be subject to pre-audit and inspection.

2) Projects with contract amounts exceeding P40,000.00

shall be subject to pre-audit by the auditing official in
charge of pre-audit pursuant to COA Circular No. 81-
162.

3) Projects with contract amounts exceeding P40,000.00

shall be subject to inspection by COA Technical Property
Inspectors.

8. Claims representing payments for infrastructure projects in excess of 80%,

cumulative, of the original/adjusted contract cost are subject to pre-audit. However,
only the final payment shall be subject to inspection by the COA Technical Property
Inspector except when management or the auditor concerned requests for such
inspection for preceding claims. First partial billings are still subject to pre-audit and
inspection.

9. The contract amount referred to in this Memorandum shall be the original/adjusted

cost of each contract. The prohibition against splitting of contracts, job orders,
purchase orders, and payments as provided under COA Circular Nos. 76-41 and
79-94 shall be strictly observed.

10. Inspection and verification of loan collaterals and/or projects covered by housing or
business loans is the responsibility of the lending agency. Furthermore, loans are
financial transactions for which no pre-audit is required pursuant to COA Circular
No. 76-26. Pre-audit and inspection by COA Technical Property Inspectors in this
regard shall therefore not be required as a condition for releasing the loans, but
may be required by the Auditor in post-audit.

11. Inspection of damage caused by accident to motor vehicles insured with the
General Insurance Fund of the Government Service Insurance System (GSIS) is
the responsibility of GSIS Management. Inspection by COA Technical Property
Inspectors on accident damage to motor vehicles insured with GSIS shall therefore
not be required in audit.

All COA Circulars, Memoranda and regulations inconsistent herewith are hereby
deemed amended or superseded accordingly.

Strict compliance herewith is enjoined.

(SGD.) SILVESTRE D. SARMIENTO, Commissioner

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